# GOODYEAR TIRE & RUBBER CO /OH/ (GT) FY 2021 MD&A Verbatim Item 7 Management's Discussion and Analysis from GOODYEAR TIRE & RUBBER CO /OH/'s 10-K for fiscal year 2021. SEC filing source: https://www.sec.gov/Archives/edgar/data/42582/000095017022001201/gt-20211231.htm Accession: 0000950170-22-001201 Filing date: 2022-02-14 Report date: 2021-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/GT/ All MD&A years: /company/GT/mda/ Next year: /company/GT/mda/fy2022/ (FY 2022) ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW The Goodyear Tire & Rubber Company is one of the world’s leading manufacturers of tires, with one of the most recognizable brand names in the world and operations in most regions of the world. We have a broad global footprint with 57 manufacturing facilities in 23 countries, including the United States. We operate our business through three operating segments representing our regional tire businesses: Americas; Europe, Middle East and Africa; and Asia Pacific. This management's discussion and analysis provides comparisons of material changes in the consolidated financial statements for the years ended December 31, 2021 and 2020. For a comparison of the years ended December 31, 2020 and 2019, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2020. Cooper Tire Acquisition On June 7, 2021, we completed our acquisition of Cooper Tire pursuant to the terms of the Agreement and Plan of Merger, dated February 22, 2021 (the “Merger Agreement”), by and among Goodyear, Vulcan Merger Sub Inc., a direct, wholly owned subsidiary of Goodyear (“Merger Sub”), and Cooper Tire. Goodyear acquired Cooper Tire by way of the merger of Merger Sub with and into Cooper Tire (the “Merger”), with Cooper Tire surviving the Merger as a wholly owned subsidiary of Goodyear. In accordance with the terms of the Merger Agreement, upon closing of the transaction, Cooper Tire stockholders received $41.75 per share in cash and a fixed exchange ratio of 0.907 shares of Goodyear common stock per share of Cooper Tire common stock (the "Merger Consideration"). The cash component of the Merger Consideration totaled $2,155 million and the stockholders of Cooper Tire received 46.1 million shares of Goodyear common stock valued at $942 million, based on the closing market price of Goodyear common stock on the last trading day prior to the Closing Date. For further information, refer to Note to the Consolidated Financial Statements No. 2, Cooper Tire Acquisition. The descriptions of, and references to, the Merger Agreement included in this Annual Report on Form 10-K are qualified in their entirety by the full text of the Merger Agreement, which is attached as Exhibit 2.1 to our Current Report on Form 8-K filed on February 25, 2021. On May 18, 2021, we issued $850 million in aggregate principal amount of 5% senior notes due 2029 and $600 million in aggregate principal amount of 5.25% senior notes due July 2031. The net proceeds from these notes, together with cash and cash equivalents and borrowings under our first lien revolving credit facility, were used to fund the cash component of the Merger Consideration and related transaction costs. On June 7, 2021, we amended and restated our $2.0 billion first lien revolving credit facility. Changes to the facility include extending the maturity to June 8, 2026 and increasing the amount of the facility to $2.75 billion. The interest rate for loans under the facility decreased by 50 basis points to LIBOR plus 125 basis points. The results of Cooper Tire’s operations have been included in our consolidated financial statements since the Closing Date. Transaction and other costs related to the acquisition of Cooper Tire totaled $56 million during the year ended December 31, 2021, of which $50 million ($42 million after-tax and minority) of these costs were included in Other (Income) Expense and $6 million ($4 million after-tax and minority) were included in Cost of Goods Sold ("CGS") and Selling, General and Administrative Expense ("SAG"). The Merger Consideration was allocated on a provisional basis to the estimated fair value of the assets acquired and liabilities assumed from Cooper Tire as of the Closing Date. Certain of these fair value estimates, including those related to Property, Plant and Equipment, certain liabilities and Goodwill, are preliminary and subject to change as management completes further analyses and studies. For further information, refer to Note to the Consolidated Financial Statements No. 2, Cooper Tire Acquisition, and "Critical Accounting Policies". Results of Operations During 2021, our operating results significantly improved compared to 2020, as the overall negative impacts of the COVID-19 pandemic on tire industry demand, auto production, miles driven and our tire volume moderated and continued to improve, compared to the severe global economic disruption experienced throughout much of 2020, particularly in the first half of the year. Nonetheless, our 2021 results continued to be negatively influenced by the direct and indirect macroeconomic effects of the ongoing pandemic. Our global businesses are experiencing varying stages of recovery, as national and local efforts in many countries to contain the spread of COVID-19, including renewed stay-at-home orders, continue to impact economic conditions. Increased demand for consumer products and supply chain disruptions as a result of the pandemic and other global events, 25 Table of Contents including port congestion and container shortages, has led to inflationary cost pressures, including higher costs for certain raw materials, higher transportation costs and higher energy costs, as well as shortages of certain automobile parts, such as semiconductors, which have affected OE manufacturers’ ability to produce consumer and commercial vehicles consistently. Most of our global tire manufacturing facilities are operating at or near full capacity to meet current demand, as well as to increase the level of our finished goods inventory as we continue to restock in order to fulfill anticipated near-term demand. However, like many companies, we are experiencing shortages of qualified and reliable workers, particularly in the U.S. Absenteeism, a tight labor supply and elevated turnover are resulting in manufacturing inefficiencies, increased training costs and higher wages. To address this issue, we have accelerated hiring, increased training capacity and started to adjust future investment plans to consider not just the cost, but also the availability of qualified workers. Our decisions to change production levels in the future will be based on an evaluation of market demand signals and inventory and supply levels, as well as the availability of sufficient qualified labor and our ability to continue to safeguard the health of our associates. We continue to monitor the pandemic on a local basis, taking actions to protect the health and wellbeing of our associates, customers and communities, which remain our top priority. We also continue to follow guidance from the Centers for Disease Control and Prevention, which include preventative measures at our facilities as appropriate, including limiting visitor access and business travel, remote and hybrid working, masking and social distancing practices, and frequent disinfection. In addition, during the first quarter of 2021, a severe winter storm in the U.S. caused temporary shutdowns of three of our chemical facilities, limited production at three tire manufacturing facilities, and impacted more than 170 consumer and commercial retail locations. We estimate that the negative impact on our 2021 earnings, primarily in Americas, was approximately $54 million ($44 million after-tax and minority). Our results for 2021 include a 34.3% increase in tire unit shipments compared to 2020, reflecting the addition of Cooper Tire's operations, as well as the pandemic-related recovery noted above. Year-over-year cost savings, including the impact of temporary fixed cost reductions in 2020, were $49 million, compared to inflationary cost pressures of $209 million during 2021. Net sales were $17,478 million in 2021, compared to $12,321 million in 2020. Net sales increased in 2021 primarily due to the addition of Cooper Tire's net sales of $2,126 million, higher global tire volume, improvements in price and product mix, higher sales in other tire-related businesses, driven by increased third-party chemical, retail and retread sales in Americas and increased Fleet Solutions sales in EMEA, and favorable foreign currency translation, primarily in EMEA and Asia Pacific. Goodyear net income in 2021 was $764 million, or $2.89 per share, compared to a net loss of $1,254 million, or $5.35 per share, in 2020. The favorable change in Goodyear net income (loss) was primarily due to higher segment operating income, lower income tax expense, a decrease in goodwill and other asset impairment charges and lower rationalization expense, partially offset by higher interest expense. Lower income tax expense was primarily attributable to the reduction in 2021 of valuation allowances totaling $325 million on certain U.S. deferred tax assets for foreign tax credits that were established in 2020, partially offset by the impact of higher pre-tax income in 2021. Our total segment operating income for 2021 was $1,288 million, compared to an operating loss of $14 million in 2020. The $1,302 million favorable change was primarily due to global improvements in price and product mix of $1,010 million, higher global tire volume of $367 million, lower conversion costs of $320 million, primarily due to favorable overhead absorption as a result of higher global factory utilization, and the addition of Cooper Tire's operating income of $181 million. These improvements in segment operating income were partially offset by higher raw material costs of $484 million and higher SAG of $172 million. Refer to "Results of Operations — Segment Information" for additional information. Liquidity At December 31, 2021, we had $1,088 million of Cash and Cash Equivalents as well as $4,345 million of unused availability under our various credit agreements, compared to $1,539 million and $3,881 million, respectively, at December 31, 2020. The decrease in cash and cash equivalents of $451 million was primarily due to payment of the $1,856 million cash component of the Merger Consideration, net of cash and restricted cash acquired, and capital expenditures of $981 million, partially offset by net borrowings of $1,406 million, which includes $1,450 million of new senior notes used to fund the Cooper Tire acquisition and repayment of our $400 million second lien term loan facility due 2025, and cash flows provided by operating activities of $1,062 million. Cash provided by operating activities reflects net income for the year of $780 million, which includes a non-cash tax benefit of $325 million related to the reduction of valuation allowances on certain U.S. deferred tax assets for foreign tax credits, non-cash charges for depreciation and amortization of $883 million, an inventory fair value step-up adjustment of $110 million related to the Cooper Tire acquisition and rationalization charges of $93 million, partially offset by cash used for working capital of $359 million and rationalization payments of $197 million. Refer to "Liquidity and Capital Resources" for additional information. 26 Table of Contents Outlook While the global economy continues to recover from the COVID-19 pandemic, we face uncertainty in several countries as governmental measures to slow the pandemic have the potential to reduce economic activity and mobility. OE manufacturers also continue to be affected by shortages of components and materials, which are limiting vehicle production. Additionally, our ability to ship products, including to locations where we do not have manufacturing as well as from certain Cooper Tire consumer and commercial manufacturing locations, may continue to be impacted by ongoing disruptions in global logistics. In spite of these challenges, we expect our volume in the first quarter of 2022 to be above the prior year’s level, including the impact of Cooper Tire which sold 8.7 million units in the first quarter of 2021. For the first half of 2022, we expect our raw material costs to increase $700 million to $800 million, including the benefit of raw material cost saving measures. This expectation excludes raw material cost increases related to Cooper Tire. Natural and synthetic rubber prices and other commodity prices historically have been volatile, and this estimate could change significantly based on future cost fluctuations and changes in foreign exchange rates. In addition, our raw material costs reflect the impacts of wage, energy and transportation inflation impacting our suppliers. We continue to focus on opportunities to further improve price and product mix, to substitute lower cost materials where possible, to work to identify additional substitution opportunities, to reduce the amount of material required in each tire, and to pursue alternative raw materials to minimize the impact of higher costs. However, we are also balancing these priorities with the goal of increasing certainty of our supply. In the first half of 2022, we expect the benefits of price and product mix will continue to exceed the impact of higher raw material costs. In addition to the impact of higher raw material costs, we expect to experience continued inflationary pressures from incremental transportation, labor and energy costs in 2022, as well as increased manufacturing costs related to elevated associate turnover in 2021 resulting in the need to train newly hired staff. As a result, we anticipate the need to find additional opportunities to improve price and product mix to manage the impact of these additional cost pressures. The combined impact of these higher costs is expected to negatively impact our first quarter 2022 when compared to the fourth quarter 2021. During 2022, we expect to reinvest approximately $300 million in working capital as we continue to build our inventory levels to meet customer demand and support service levels. We expect our capital expenditures to be between $1.3 billion and $1.4 billion. Beyond expenditures required to sustain our facilities, capital expenditures in 2022 will increase capacity to address supply constraints and address growing demand, including for more complex tire designs. We expect our cash flows from operating activities less capital expenditures to be breakeven in 2022. Our results in 2022 will also be impacted by approximately $40 million of amortization of intangible assets related to the Cooper Tire acquisition. Refer to “Item 1A. Risk Factors” for a discussion of the factors that may impact our business, results of operations, financial condition or liquidity and “Forward-Looking Information — Safe Harbor Statement” for a discussion of our use of forward-looking statements. 27 Table of Contents RESULTS OF OPERATIONS — CONSOLIDATED All per share amounts are diluted and refer to Goodyear net income (loss). Goodyear net income in 2021 was $764 million, or $2.89 per share, compared to a net loss of $1,254 million, or $5.35 per share, in 2020. The favorable change in Goodyear net income (loss) was primarily due to higher segment operating income, lower income tax expense, a decrease in goodwill and other asset impairment charges and lower rationalization expense, partially offset by higher interest expense. Lower income tax expense was primarily attributable to the reduction in 2021 of valuation allowances totaling $325 million on certain U.S. deferred tax assets for foreign tax credits that were established in 2020, partially offset by the impact of higher pre-tax income in 2021. Net Sales Net sales in 2021 of $17,478 million increased $5,157 million, or 41.9%, compared to $12,321 million in 2020, primarily due to the addition of Cooper Tire's net sales of $2,126 million, higher global tire volume of $1,699 million, improvements in price and product mix of $715 million, higher sales in other tire-related businesses of $486 million, driven by increased third-party chemical, retail and retread sales in Americas and increased Fleet Solutions sales in EMEA, and favorable foreign currency translation of $164 million, primarily in EMEA and Asia Pacific. Goodyear worldwide tire unit net sales were $14,917 million and $10,339 million in 2021 and 2020, respectively. Consumer and commercial net sales were $11,118 million and $3,702 million in 2021, respectively. Consumer and commercial net sales were $7,190 million and $2,636 million in 2020, respectively. The following table presents our tire unit sales for the periods indicated: [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(In millions of tires)","","2021","","","2020","","","% Change"],["Replacement Units"],["United States","","","55.3","","","","31.4","","","","76.1","%"],["International","","","78.8","","","","63.6","","","","23.9","%"],["Total","","","134.1","","","","95.0","","","","41.2","%"],["OE Units"],["United States","","","9.6","","","","9.3","","","","3.2","%"],["International","","","25.6","","","","21.7","","","","18.0","%"],["Total","","","35.2","","","","31.0","","","","13.2","%"],["Goodyear worldwide tire units","","","169.3","","","","126.0","","","","34.3","%"]] [[/GREPCENT_TABLE]] The increase in worldwide tire unit sales of 43.3 million units, or 34.3%, compared to 2020, included an increase of 39.1 million replacement tire units, or 41.2%, primarily due to the addition of Cooper Tire's units and continued recovery from the macroeconomic impacts of the COVID-19 pandemic. OE tire units increased by 4.2 million units, or 13.2%, primarily due to the addition of Cooper Tire's units and higher vehicle production globally compared to 2020, despite more recent supply chain disruptions and shortages that negatively impacted vehicle production in 2021. Consumer and commercial unit sales in 2021 were 154.2 million and 13.1 million, respectively. Consumer and commercial unit sales in 2020 were 113.8 million and 10.6 million, respectively. Cost of Goods Sold CGS was $13,692 million in 2021, increasing $3,355 million, or 32.5%, from $10,337 million in 2020. CGS was 78.3% of sales in 2021 compared to 83.9% of sales in 2020. CGS in 2021 increased primarily due to the addition of Cooper Tire's CGS of $1,732 million, which includes $110 million ($82 million after-tax and minority) of amortization related to a fair value step-up adjustment to the Closing Date inventory that was acquired by Goodyear, higher global tire volume of $1,332 million, higher raw material costs of $484 million, higher costs in other tire-related businesses of $367 million, driven by higher third-party chemical sales in Americas, foreign currency translation of $119 million, primarily in EMEA and Asia Pacific, and higher transportation costs of $62 million, primarily in Americas and EMEA. These increases were partially offset by lower conversion costs of $320 million, primarily due to favorable overhead absorption as a result of higher global factory utilization and savings from rationalization plans, lower costs related to product mix of $295 million, primarily in Americas, a favorable indirect tax ruling in Brazil of $69 million, of which $66 million ($43 million after-tax and minority) related to prior years, and $26 million of pandemic-related work in process inventory write-offs in 2020, primarily in Americas and EMEA. CGS in 2021 included pension expense of $21 million compared to $16 million in 2020. CGS in 2021 also included a favorable adjustment of $20 million ($15 million after-tax and minority) due to a reduction in certain U.S. duty rates on various commercial tires from China imported into the U.S. during 2019. CGS in 2020 included accelerated depreciation of $105 million ($81 million after-tax and minority), primarily related to the permanent closure of our Gadsden, Alabama tire manufacturing facility ("Gadsden"). CGS in 2020 also included an unfavorable indirect tax settlement in Mexico of $6 million 28 Table of Contents ($5 million after-tax and minority). CGS in 2021 included incremental savings from rationalization plans of $63 million compared to $107 million in 2020. Selling, Administrative and General Expense SAG was $2,699 million in 2021, increasing $507 million, or 23.1%, from $2,192 million in 2020. SAG was 15.4% of sales in 2021 compared to 17.8% of sales in 2020. SAG increased primarily due to the addition of Cooper Tire's SAG of $239 million, higher wages and benefits of $132 million, including higher incentive compensation, and higher advertising expense of $22 million, both reflecting pandemic-related actions taken in 2020, and foreign currency translation of $43 million, primarily in EMEA and Asia Pacific. The remainder of the increase in 2021 was driven by inflationary cost pressures. SAG in 2021 and 2020 included pension expense of $18 million for each period. SAG in 2021 and 2020 also included incremental savings from rationalization plans of $9 million and $6 million, respectively. Goodwill and Other Asset Impairments Our annual impairment analysis for 2021, including the acquisition of Cooper Tire, indicated no impairment of goodwill or intangible assets with indefinite lives. In 2020, we recorded non-cash impairment charges of $182 million ($178 million after-tax and minority) related to goodwill of our EMEA reporting unit and $148 million ($113 million after-tax and minority) related to our investment in TireHub. Rationalizations We recorded net rationalization charges of $93 million ($82 million after-tax and minority) in 2021. Net rationalization charges include $38 million in Americas, primarily related to the permanent closure of Gadsden, $29 million related to a plan to reduce SAG headcount in EMEA and $26 million related to the plan to modernize two of our manufacturing facilities in Germany. We recorded net rationalization charges of $159 million ($127 million after-tax and minority) in 2020. Net rationalization charges include $94 million in Americas, primarily related to the permanent closure of Gadsden, and $59 million in EMEA, primarily related to additional termination benefits for associates at the closed Amiens, France manufacturing facility. Upon completion of new plans initiated in 2021, we estimate that annual segment operating income (primarily SAG) will improve by approximately $12 million. The savings realized in 2021 from rationalization plans totaled $72 million ($63 million CGS and $9 million SAG). For further information, refer to the Note to the Consolidated Financial Statements No. 4, Costs Associated with Rationalization Programs. Interest Expense Interest expense was $387 million in 2021, increasing $63 million from $324 million in 2020. The increase was primarily due to a higher average interest rate of 5.33% in 2021 compared to 4.99% in 2020 and a higher average debt balance of $7,267 million in 2021 compared to $6,495 million in 2020. Interest expense in 2021 includes a $6 million ($5 million after-tax and minority) charge to write off deferred financing fees primarily related to the redemption of our $1.0 billion 5.125% senior notes due 2023. Other (Income) Expense Other (Income) Expense was $94 million and $119 million of expense in 2021 and 2020, respectively. The $25 million decrease was primarily due to interest income of $48 million ($44 million after-tax and minority) related to a favorable indirect tax ruling in Brazil, net gains on asset and other sales in 2021 of $12 million ($8 million after-tax and minority), primarily related to the sale of land in Hanau, Germany, compared to a $2 million ($2 million after-tax and minority) loss on asset sales in 2020, and a favorable insurance settlement of $10 million ($8 million after-tax and minority) in 2021. These decreases were partially offset by charges of $50 million for transaction and other costs related to the acquisition of Cooper Tire. Non-service related pension and other postretirement benefits expense of $92 million in 2021 includes pension settlement charges of $43 million ($32 million after-tax and minority). Non-service related pension and other postretirement benefits expense of $110 million in 2020 includes net pension settlement and curtailment charges of $18 million ($14 million after-tax and minority). Other (Income) Expense in 2021 also includes an out of period adjustment of $7 million ($7 million after-tax and minority) of expense related to foreign currency exchange in Americas. Other (Income) Expense in 2020 also includes a charge of $3 million ($2 million after-tax and minority) for non-asbestos legal claims related to discontinued products. For further information, refer to the Note to the Consolidated Financial Statements No. 6, Other (Income) Expense. 29 Table of Contents Income Taxes Income tax benefit in 2021 was $267 million on income before income taxes of $513 million. In 2021, income tax benefit includes net discrete benefits totaling $409 million ($409 million after minority interest), including a reduction in our valuation allowances of $340 million for certain U.S. deferred tax assets for foreign tax credits and state tax loss carryforwards, a $39 million benefit to adjust our deferred tax assets in England for a second quarter enacted change in the tax rate, a $21 million benefit to reflect an increase in our estimated state tax rate used in calculating our U.S. net deferred tax assets as a result of a change in the overall mix of our earnings by state after including the impact of the acquisition of Cooper Tire, an $8 million benefit related to a favorable court ruling in Brazil, and a net benefit of $1 million for various other items. Income tax expense in 2020 was $110 million on a loss before income taxes of $1,140 million. In 2020, income tax expense was unfavorably impacted by net discrete tax expense totaling $305 million ($305 million after minority interest), including the establishment of a $295 million valuation allowance on certain deferred tax assets for foreign tax credits during the first quarter of 2020. Discrete tax expense also includes a net charge of $10 million, including a $15 million charge related to a U.S. valuation allowance for state tax loss carryforwards, a $13 million benefit to adjust our deferred tax assets in England for a third quarter enacted change in the tax rate, and various other net charges totaling $8 million. At both December 31, 2021 and 2020, we had approximately $1.2 billion of U.S. federal, state and local net deferred tax assets, net of valuation allowances totaling $26 million in 2021, primarily for state tax loss carryforwards with limited lives, and $368 million in 2020, primarily for foreign tax credits with limited lives. The increase in our U.S. net deferred tax assets as a result of the reduction in valuation allowances during 2021 was largely offset by the establishment of deferred tax liabilities related to the Cooper Tire acquisition. In the U.S., we have a cumulative loss for the three-year period ending December 31, 2021. However, as the three-year cumulative loss in the U.S. is driven by business disruptions created by the COVID-19 pandemic, primarily in 2020, and only include the favorable impact of the Cooper Tire acquisition since the Closing Date, we also considered other objectively verifiable information in assessing our ability to utilize our net deferred tax assets, including recent favorable recovery trends in the tire industry and our tire volume as well as expected continued improvement. In addition, the Cooper Tire acquisition has generated significant incremental domestic earnings since the Closing Date and provides opportunities for cost and other operating synergies to further improve our U.S. profitability. At December 31, 2021, our U.S. net deferred tax assets include approximately $339 million of foreign tax credits with limited lives, net of valuation allowances of $3 million. At December 31, 2020, our U.S. net deferred tax assets include $133 million of foreign tax credits with limited lives, net of valuation allowances of $328 million. Our earnings and forecasts of future profitability, taking into consideration recent trends, along with three significant sources of foreign income provide us sufficient positive evidence that we will be able to utilize our foreign tax credits that expire through 2030. Our sources of foreign income are (1) 100% of our domestic profitability can be re-characterized as foreign source income under current U.S. tax law to the extent domestic losses have offset foreign source income in prior years, (2) annual net foreign source income, exclusive of dividends, primarily from royalties, and (3) tax planning strategies, including capitalizing research and development costs, accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, and reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, all of which would increase our domestic profitability. During the fourth quarter of 2021, we completed an intercompany sale of certain intellectual property. As a result of this transaction, U.S. taxable income for 2021 includes approximately $1.5 billion of accelerated income. External specialists assisted management with this transaction. The federal tax charge of $315 million related to this accelerated income was fully offset by the utilization of existing deferred tax assets, including $205 million related to tax loss carryforwards, which were primarily generated in 2020 as a result of a significant tax loss in the U.S. driven by the macroeconomic impacts of the COVID-19 pandemic, and $110 million of foreign tax credits. Tax loss carryforwards must be utilized prior to foreign tax credits and other tax assets for tax purposes. Considering the magnitude of tax loss carryforwards that were utilized by this transaction, together with our earnings and other sources of income described above, we concluded that it is more likely than not that we will be able to utilize, prior to their expiration, certain U.S. tax assets. Accordingly, during the fourth quarter of 2021, we reduced U.S. valuation allowances by $325 million related to foreign tax credits and $15 million related to state tax loss carryforwards. We consider our current forecasts of future profitability in assessing our ability to realize our deferred tax assets, including our foreign tax credits. As noted above, these forecasts include the impact of recent trends, including various macroeconomic factors such as the impact of the COVID-19 pandemic, on our profitability, as well as the impact of tax planning strategies. Macroeconomic factors, including the impact of the COVID-19 pandemic, possess a high degree of volatility and can significantly impact our profitability. As such, there is a risk that future earnings will not be sufficient to fully utilize our U.S. net deferred tax assets, including our foreign tax credits. However, we believe our forecasts of future profitability along with the three significant sources of foreign income described above provide us sufficient positive, objectively verifiable evidence 30 Table of Contents to conclude that it is more likely than not that, at December 31, 2021, our U.S. net deferred tax assets, including our foreign tax credits, net of valuation allowances, will be fully utilized. At both December 31, 2021 and 2020, we also had approximately $1.3 billion of foreign net deferred tax assets, and valuation allowances of $1.0 billion and $1.1 billion, respectively. Our losses in various foreign taxing jurisdictions in recent periods represented sufficient negative evidence to require us to maintain a full valuation allowance against certain of these net foreign deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of approximately $885 million on all of our net deferred tax assets. Each reporting period, we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize these existing deferred tax assets. We do not believe that sufficient positive evidence required to release valuation allowances having a significant impact on our financial position or results of operations will exist within the next twelve months. For further information regarding income taxes and the realizability of our deferred tax assets, including our foreign tax credits, refer to "Critical Accounting Policies" and Note to the Consolidated Financial Statements No. 7, Income Taxes. Minority Shareholders’ Net Income Minority shareholders’ net income was $16 million in 2021, compared to $4 million in 2020. The increase in 2021 was primarily related to minority shareholders' interests in EMEA, driven by the recovery from the COVID-19 pandemic, as well as the addition of Cooper Tire's minority shareholders' interest in Asia. Minority shareholders' net income in 2021 includes $3 million ($3 million after-tax) related to a settlement with a minority interest in Turkey. 31 Table of Contents RESULTS OF OPERATIONS — SEGMENT INFORMATION Segment information reflects our strategic business units ("SBUs"), which are organized to meet customer requirements and global competition and are segmented on a regional basis. Since the Closing Date, Cooper Tire's operating results have been incorporated into each of our SBUs. We expect to discuss the impact of Cooper Tire's net sales and operating income within each SBU until the periods presented are fully comparable. Results of operations are measured based on net sales to unaffiliated customers and segment operating income. Each segment exports tires to other segments. The financial results of each segment exclude sales of tires exported to other segments, but include operating income derived from such transactions. Segment operating income is computed as follows: Net Sales less CGS (excluding asset write-off and accelerated depreciation charges) and SAG (including certain allocated corporate administrative expenses). Segment operating income also includes certain royalties and equity in earnings of most affiliates. Segment operating income does not include net rationalization charges (credits), asset sales, goodwill and other asset impairment charges and certain other items. Total segment operating income in 2021 was $1,288 million, compared to total segment operating loss of $14 million in 2020. Total segment operating margin (segment operating income (loss) divided by segment sales) in 2021 was 7.4% compared to (0.1)% in 2020. Management believes that total segment operating income is useful because it represents the aggregate value of income created by our SBUs and excludes items not directly related to the SBUs for performance evaluation purposes. Total segment operating income is the sum of the individual SBUs’ segment operating income. Refer to the Note to the Consolidated Financial Statements No. 9, Business Segments, for further information and for a reconciliation of total segment operating income to Income (Loss) before Income Taxes. Americas [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(In millions)","","2021","","","2020","","","2019"],["Tire Units","","","85.9","","","","56.7","","","","70.4"],["Net Sales","","$","10,051","","","$","6,556","","","$","7,922"],["Operating Income","","","914","","","","9","","","","550"],["Operating Margin","","","9.1","%","","","0.1","%","","","6.9","%"]] [[/GREPCENT_TABLE]] Americas unit sales in 2021 increased 29.2 million units, or 51.3%, to 85.9 million units. Replacement tire volume increased 28.2 million units, or 63.4%, primarily due to the addition of Cooper Tire's units and an increase in our consumer business in the United States and Brazil, driven by continued recovery from the macroeconomic impacts of the COVID-19 pandemic. OE tire volume increased 1.0 million units, or 7.7%, primarily due to an increase in our consumer business in Brazil and the addition of Cooper Tire's units. Consumer OE tire volume continued to be negatively affected by impacts to vehicle production driven by global supply chain disruptions, including shortages of key manufacturing components, such as semiconductors. Net sales in 2021 were $10,051 million, increasing $3,495 million, or 53.3%, compared to $6,556 million in 2020. The increase in net sales was driven by the addition of Cooper Tire’s net sales of $1,862 million, higher tire volume of $918 million, higher sales in other tire-related businesses of $388 million, primarily due to an increase in third-party sales of chemical products and higher retail, retread and aviation sales, and favorable price and product mix of $356 million, driven by price increases. These increases were partially offset by $34 million ($26 million after-tax and minority) for a favorable one-time legal settlement in 2020. We estimate that the severe winter storm in the U.S. negatively impacted Americas net sales in 2021 by approximately $35 million. Operating income in 2021 was $914 million, increasing $905 million from $9 million in 2020. The increase in operating income was due to improvements in price and product mix of $640 million, which more than offset higher raw material costs of $258 million, lower conversion costs of $171 million, primarily due to favorable overhead absorption as a result of higher factory utilization, Cooper Tire's operating income of $165 million, higher tire volume of $162 million, higher earnings in other tire-related businesses of $92 million, primarily due to an increase in third-party sales of chemical products and higher retail and aviation sales, the favorable indirect tax ruling in Brazil of $69 million, a $13 million ($10 million after-tax and minority) charge in 2020 for an environmental remediation liability at a closed facility, and $13 million of pandemic-related work in process inventory write-offs in 2020. These increases were partially offset by higher SAG of $71 million, primarily due to higher wages and benefits reflecting pandemic-related actions taken in 2020, inflation and higher warehousing costs, increased transportation costs of $39 million, a $34 million favorable one-time legal settlement in 2020 and the net impact of out of period adjustments in 2021 totaling $6 million ($6 million after-tax and minority) of expense primarily related to inventory and accrued freight charges. Conversion costs and SAG include incremental savings from rationalization plans of $57 million and $6 million, respectively, primarily related to Gadsden. Price and product mix includes TireHub equity income of $4 million in 32 Table of Contents 2021 compared to a loss of $36 million in 2020. We estimate that the severe winter storm in the U.S. and the national strike in Colombia that occurred in the first half of 2021 negatively impacted Americas operating income in 2021 by approximately $42 million and $9 million ($9 million after-tax and minority), respectively. Operating income in 2021 excluded rationalization charges of $38 million, primarily related to the permanent closure of Gadsden, and a net gain on asset sales of $1 million. Operating income in 2020 excluded the TireHub non-cash impairment charge of $148 million, accelerated depreciation and asset write-offs of $103 million and rationalization charges of $94 million, primarily related to the permanent closure of Gadsden. Americas' results are highly dependent upon the United States, which accounted for 84% and 82% of Americas' net sales in 2021 and 2020, respectively. Results of operations in the United States are expected to continue to have a significant impact on Americas' future performance. Europe, Middle East and Africa [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(In millions)","","2021","","","2020","","","2019"],["Tire Units","","","52.7","","","","44.5","","","","55.1"],["Net Sales","","$","5,243","","","$","4,020","","","$","4,708"],["Operating Income (Loss)","","","239","","","","(72",")","","","202"],["Operating Margin","","","4.6","%","","","(1.8",")%","","","4.3","%"]] [[/GREPCENT_TABLE]] Europe, Middle East and Africa unit sales in 2021 increased 8.2 million units, or 18.4%, to 52.7 million units. Replacement tire volume increased 7.7 million units, or 22.8%, primarily in our consumer business, reflecting increased industry demand due to continued recovery from the macroeconomic impacts of the COVID-19 pandemic and the partial recovery of volume lost in 2020 as a result of our ongoing initiative to align distribution in Europe. OE tire volume increased 0.5 million units, or 4.2%, reflecting share gains driven by new consumer fitments, partially offset by the negative impact on vehicle production of global supply chain disruptions, including shortages of key manufacturing components, such as semiconductors. Net sales in 2021 were $5,243 million, increasing $1,223 million, or 30.4%, compared to $4,020 million in 2020. Net sales increased primarily due to higher tire volume of $571 million, improvements in price and product mix of $316 million, the addition of Cooper Tire's net sales of $142 million, higher sales in other tire-related businesses of $101 million, primarily due to growth in our Fleet Solutions business and increased retread, motorcycle and racing tire sales, and favorable foreign currency translation of $93 million, driven by a stronger euro, South African rand and British pound, partially offset by a weaker Turkish lira. Operating income in 2021 was $239 million, a change of $311 million, from an operating loss of $72 million in 2020. The increase in operating income was primarily due to improvements in price and product mix of $289 million, which more than offset higher raw material costs of $148 million, higher tire volume of $153 million, lower conversion costs of $108 million, primarily due to favorable overhead absorption as a result of higher factory utilization, higher earnings in other tire-related businesses of $16 million, primarily due to increases in aviation, racing and retread sales, and $12 million of pandemic-related work in process inventory write-offs in 2020. These increases were partially offset by higher SAG of $72 million, primarily related to higher wages and benefits and higher advertising expenses, both reflecting pandemic-related actions taken in 2020 as well as inflation, higher transportation costs of $21 million, and higher plant industrialization costs of $15 million. Conversion costs and SAG include incremental savings from rationalization plans of $6 million and $3 million, respectively. Operating income in 2021 excluded net rationalization charges of $49 million, a net gain on asset sales of $13 million, and accelerated depreciation and asset write-offs of $1 million. Operating loss in 2020 excluded a non-cash goodwill impairment charge of $182 million, net rationalization charges of $59 million, net losses on asset sales of $2 million, and accelerated depreciation and asset write-offs of $2 million. EMEA’s results are highly dependent upon Germany, which accounted for 15% and 18% of EMEA’s net sales in 2021 and 2020, respectively. Results of operations in Germany are expected to continue to have a significant impact on EMEA’s future performance. 33 Table of Contents Asia Pacific [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(In millions)","","2021","","","2020","","","2019"],["Tire Units","","","30.7","","","","24.8","","","","29.8"],["Net Sales","","$","2,184","","","$","1,745","","","$","2,115"],["Operating Income","","","135","","","","49","","","","193"],["Operating Margin","","","6.2","%","","","2.8","%","","","9.1","%"]] [[/GREPCENT_TABLE]] Asia Pacific unit sales in 2021 increased 5.9 million units, or 24.0%, to 30.7 million units. Replacement tire volume increased 3.2 million units, or 19.7%. OE tire volume increased 2.7 million units, or 32.8%. These increases were primarily due to continued recovery from the macroeconomic impacts of the COVID-19 pandemic and the addition of Cooper Tire’s units, partially offset by the impact on vehicle production of global supply chain disruptions, including shortages of key manufacturing components, such as semiconductors. Net sales in 2021 were $2,184 million, increasing $439 million, or 25.2%, from $1,745 million in 2020. Net sales increased due to higher tire volume of $210 million, the addition of Cooper Tire’s net sales of $122 million, favorable foreign currency translation of $66 million, primarily related to a stronger Chinese yuan and Australian dollar, and favorable price and product mix of $43 million. Operating income in 2021 was $135 million, increasing $86 million, or 175.5%, from $49 million in 2020. The increase in operating income was primarily due to favorable price and product mix of $81 million, which more than offset higher raw material costs of $78 million, higher tire volume of $52 million, lower conversion costs of $41 million, primarily due to favorable overhead absorption as a result of higher factory utilization, higher earnings in other tire-related businesses of $11 million, primarily due to higher aviation sales, and the addition of Cooper Tire's operating income of $11 million. These increases were partially offset by higher SAG of $29 million, primarily related to higher wages and benefits and higher advertising expenses, both reflecting pandemic-related actions taken in 2020, as well as higher warehousing costs. Operating income in 2020 excluded net rationalization charges of $4 million. Asia Pacific’s results are highly dependent upon China and Australia. China accounted for 29% and 25% of Asia Pacific's net sales in 2021 and 2020, respectively. Australia accounted for 24% and 27% of Asia Pacific’s net sales in 2021 and 2020, respectively. Results of operations in China and Australia are expected to continue to have a significant impact on Asia Pacific's future performance. 34 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Overview Our primary sources of liquidity are cash generated from our operating and financing activities. Our cash flows from operating activities are driven primarily by our operating results and changes in our working capital requirements and our cash flows from financing activities are dependent upon our ability to access credit or other capital. In 2021, we completed several financing actions to provide funding for the acquisition of Cooper Tire and to improve our debt maturity profile. On April 6, 2021, we issued $550 million of 5.25% senior notes due April 2031 and $450 million of 5.625% senior notes due 2033. The net proceeds from these notes, together with cash and cash equivalents, were used to redeem our $1.0 billion 5.125% senior notes due 2023 on May 6, 2021 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest to the redemption date. On May 18, 2021, we issued $850 million of 5% senior notes due 2029 and $600 million of 5.25% senior notes due July 2031. The net proceeds from these notes, together with cash and cash equivalents and borrowings under our first lien revolving credit facility, were used to fund the cash portion of the Merger Consideration and related transaction costs. On June 7, 2021, we amended and restated our $2.0 billion first lien revolving credit facility. Changes to the facility include extending the maturity to June 8, 2026, increasing the amount of the facility to $2.75 billion, and including Cooper Tire's accounts receivable and inventory in the borrowing base for the facility. The interest rate for loans under the facility decreased by 50 basis points to LIBOR plus 125 basis points. Following the Cooper Tire acquisition and at December 31, 2021, $117 million aggregate principal amount of Cooper Tire's 7.625% senior notes due 2027 were outstanding. These notes also included a $19 million fair value step-up, which is being amortized against interest expense over the remaining life of the notes. Amortization since the Closing Date was approximately $1 million. On September 28, 2021, we issued €400 million in aggregate principal amount of Goodyear Europe B.V. (“GEBV”) 2.75% senior notes due 2028. A portion of the net proceeds from these notes were used to redeem GEBV's €250 million 3.75% senior notes due 2023 on October 28, 2021. On December 15, 2021, we repaid in full our $400 million second lien term loan facility due 2025. At December 31, 2021, we had $1,088 million of Cash and Cash Equivalents, compared to $1,539 million at December 31, 2020. The decrease in cash and cash equivalents of $451 million was primarily due to payment of the $1,856 million cash component of the Merger Consideration, net of cash and restricted cash acquired, and capital expenditures of $981 million, partially offset by net borrowings of $1,406 million, which includes $1,450 million of new senior notes used to fund the Cooper Tire acquisition and repayment of our $400 million second lien term loan facility due 2025, and cash flows provided by operating activities of $1,062 million. Cash provided by operating activities reflects net income for the year of $780 million, which includes a non-cash tax benefit of $325 million related to the reduction of valuation allowances on certain U.S. deferred tax assets for foreign tax credits, non-cash charges for depreciation and amortization of $883 million, an inventory fair value step-up adjustment of $110 million related to the Cooper Tire acquisition and rationalization charges of $93 million, partially offset by cash used for working capital of $359 million and rationalization payments of $197 million. At December 31, 2021 and 2020, we had $4,345 million and $3,881 million, respectively, of unused availability under our various credit agreements. The table below provides unused availability by our significant credit facilities as of December 31: [[GREPCENT_TABLE]] [["(In millions)","","2021","","","2020"],["First lien revolving credit facility","","$","2,314","","","$","1,535"],["European revolving credit facility","","","908","","","","982"],["Chinese credit facilities","","","374","","","","297"],["Mexican credit facility","","","42","","","","48"],["Other foreign and domestic debt","","","147","","","","380"],["Short term credit arrangements","","","560","","","","639"],["","","$","4,345","","","$","3,881"]] [[/GREPCENT_TABLE]] We expect our 2022 cash flow needs to include capital expenditures of $1.3 billion to $1.4 billion. We also expect interest expense to be $450 million to $475 million; rationalization payments to be approximately $100 million; income tax payments to be $150 million to $200 million, excluding one-time items; and contributions to our funded pension plans to be $25 million to $50 million. We expect working capital to be a use of cash for the full year of 2022 of approximately $300 million. We expect our cash flows from operating activities less capital expenditures to be breakeven in 2022. 35 Table of Contents We are continuing to actively monitor our liquidity and intend to operate our business in a way that allows us to address our cash flow needs with our existing cash and available credit if they cannot be funded by cash generated from operating or other financing activities. We believe that our liquidity position is adequate to fund our operating and investing needs and debt maturities for the next twelve months and to provide us with the ability to respond to further changes in the business environment. Our ability to service debt and operational requirements is also dependent, in part, on the ability of our subsidiaries to make distributions of cash to various other entities in our consolidated group, whether in the form of dividends, loans or otherwise. In certain countries where we operate, such as China, South Africa, Serbia and Argentina, transfers of funds into or out of such countries by way of dividends, loans, advances or payments to third-party or affiliated suppliers are generally or periodically subject to certain requirements, such as obtaining approval from the foreign government and/or currency exchange board before net assets can be transferred out of the country. In addition, certain of our credit agreements and other debt instruments limit the ability of foreign subsidiaries to make distributions of cash. Thus, we would have to repay and/or amend these credit agreements and other debt instruments in order to use this cash to service our consolidated debt. Because of the inherent uncertainty of satisfactorily meeting these requirements or limitations, we do not consider the net assets of our subsidiaries, including our Chinese, South African, Serbian and Argentinian subsidiaries, which are subject to such requirements or limitations to be integral to our liquidity or our ability to service our debt and operational requirements. At December 31, 2021, approximately $1,006 million of net assets, including approximately $179 million of cash and cash equivalents, were subject to such requirements. The requirements we must comply with to transfer funds out of China, South Africa, Serbia and Argentina have not adversely impacted our ability to make transfers out of those countries. Cash Position At December 31, 2021, significant concentrations of cash and cash equivalents held by our international subsidiaries included the following amounts: • $320 million or 29% in Americas, primarily Chile, Mexico, Brazil and Canada ($384 million or 25% at December 31, 2020), • $317 million or 29% in Asia Pacific, primarily China, Japan and India ($387 million or 25% at December 31, 2020), and • $161 million or 15% in EMEA, primarily England and Poland ($387 million or 25% at December 31, 2020). We have deposited our cash and cash equivalents and entered into various credit agreements and derivative contracts with financial institutions that we considered to be substantial and creditworthy at the time of such transactions. We seek to control our exposure to these financial institutions by diversifying our deposits, credit agreements and derivative contracts across multiple financial institutions, by setting deposit and counterparty credit limits based on long term credit ratings and other indicators of credit risk such as credit default swap spreads, and by monitoring the financial strength of these financial institutions on a regular basis. We also enter into master netting agreements with counterparties when possible. By controlling and monitoring exposure to financial institutions in this manner, we believe that we effectively manage the risk of loss due to nonperformance by a financial institution. However, we cannot provide assurance that we will not experience losses or delays in accessing our deposits or lines of credit due to the nonperformance of a financial institution. Our inability to access our cash deposits or make draws on our lines of credit, or the inability of a counterparty to fulfill its contractual obligations to us, could have a material adverse effect on our liquidity, financial condition or results of operations in the period in which it occurs. Operating Activities Net cash provided by operating activities was $1,062 million in 2021, decreasing $53 million compared to net cash provided by operating activities of $1,115 million in 2020. The decrease in net cash provided by operating activities was driven by (i) a net increase in cash used for working capital of $1,230 million, (ii) an increase in cash income tax payments of $156 million, primarily as a result of higher earnings in 2021 and the receipt of certain tax refunds in 2020, (iii) cash paid for transaction and other costs related to the Cooper Tire acquisition of $42 million, and (iv) higher pension contributions and direct payments of $35 million. These uses of cash were partially offset by higher segment operating income of $1,302 million, which includes a non-cash charge of $110 million for an inventory fair value step-up adjustment related to the Cooper Tire acquisition. The net increase in cash used for working capital reflects increases in cash used for Inventory of $1,695 million and Accounts Receivable of $432 million, partially offset by an increase in cash provided by Accounts Payable - Trade of $897 million. These changes were driven by our continued recovery from the impacts of the COVID-19 pandemic, which include higher sales volume and an increase in finished goods inventory as we continue to restock in order to meet anticipated near-term demand, as well as the impact of current year inflationary cost pressures on our manufacturing operations and our pricing. 36 Table of Contents Investing Activities Net cash used for investing activities was $2,793 million in 2021, compared to $667 million in 2020. The increase in cash used for investing activities primarily relates to the $1,856 million cash component of the Merger Consideration, net of cash and restricted cash acquired. Capital expenditures were $981 million in 2021, increasing $334 million, compared to $647 million in 2020, primarily due to prior year actions to preserve cash in response to the COVID-19 pandemic and the addition of Cooper Tire's capital expenditures. Beyond expenditures required to sustain our facilities, capital expenditures in 2021 and 2020 primarily related to investments in high value-added capacity and capability around the world. Financing Activities Net cash provided by financing activities was $1,309 million in 2021, compared to net cash provided by financing activities of $203 million in 2020. The $1,106 million year-over-year change reflects an increase in net borrowings of $1,156 million, primarily used to fund a portion of the Cooper Tire acquisition. Debt related costs and other transactions increased $93 million during 2021 due to the various financing actions described above. No cash dividends were paid in 2021, compared to $37 million of dividend payments in 2020, as a result of the suspension of the quarterly dividend on our common stock on April 16, 2020. Credit Sources In aggregate, we had total credit arrangements of $11,628 million available at December 31, 2021, of which $4,345 million were unused, compared to $9,707 million available at December 31, 2020, of which $3,881 million were unused. At December 31, 2021, we had long term credit arrangements totaling $10,624 million, of which $3,785 million were unused, compared to $8,632 million and $3,242 million, respectively, at December 31, 2020. At December 31, 2021, we had short term committed and uncommitted credit arrangements totaling $1,004 million, of which $560 million were unused, compared to $1,075 million and $639 million, respectively, at December 31, 2020. The continued availability of the short term uncommitted arrangements is at the discretion of the relevant lender and may be terminated at any time. Outstanding Notes At December 31, 2021, we had $5,591 million of outstanding notes, compared to $3,860 million at December 31, 2020. The increase from December 31, 2020 was primarily due to the issuance of $1.45 billion of senior notes to fund a portion of the acquisition of Cooper Tire, the issuance of €400 million of GEBV senior notes, an increase of €150 million over the prior €250 million of senior notes, and $135 million of Cooper Tire senior notes. $2.75 Billion Amended and Restated First Lien Revolving Credit Facility due 2026 On June 7, 2021, we amended and restated our $2.0 billion first lien revolving credit facility. Changes to the facility include extending the maturity to June 8, 2026, increasing the amount of the facility to $2.75 billion, and including Cooper Tire's accounts receivable and inventory in the borrowing base of the facility. The interest rate for loans under the facility decreased by 50 basis points to LIBOR plus 125 basis points, based on our current liquidity described below. Our amended and restated first lien revolving credit facility is available in the form of loans or letters of credit. Up to $800 million in letters of credit and $50 million of swingline loans are available for issuance under the facility. Availability under the facility is subject to a borrowing base, which is based on (i) eligible accounts receivable and inventory of The Goodyear Tire & Rubber Company and certain of its U.S. and Canadian subsidiaries, after adjusting for customary factors that are subject to modification from time to time by the administrative agent or the majority lenders at their discretion (not to be exercised unreasonably), (ii) the value of our principal trademarks in an amount not to exceed $400 million, (iii) the value of eligible machinery and equipment, and (iv) certain cash in an amount not to exceed $275 million. Modifications are based on the results of periodic collateral and borrowing base evaluations and appraisals. To the extent that our eligible accounts receivable, inventory and other components of the borrowing base decline in value, our borrowing base will decrease and the availability under the facility may decrease below $2.75 billion. In addition, if the amount of outstanding borrowings and letters of credit under the facility exceeds the borrowing base, we are required to prepay borrowings and/or cash collateralize letters of credit sufficient to eliminate the excess. As of December 31, 2021, our borrowing base, and therefore our availability, under this facility was $417 million below the facility's stated amount of $2.75 billion. At December 31, 2021, we had no borrowings and $19 million of letters of credit issued under the revolving credit facility. At December 31, 2020, we had no borrowings and $11 million of letters of credit issued under the revolving credit facility. At December 31, 2021, we had $257 million in letters of credit issued under bilateral credit agreements. Amended and Restated Second Lien Term Loan Facility due 2025 On December 15, 2021, we repaid in full our $400 million second lien term loan facility due 2025. 37 Table of Contents €800 Million Amended and Restated Senior Secured European Revolving Credit Facility due 2024 Our amended and restated European revolving credit facility consists of (i) a €180 million German tranche that is available only to Goodyear Germany GmbH and (ii) a €620 million all-borrower tranche that is available to GEBV, Goodyear Germany and Goodyear Operations S.A. Up to €175 million of swingline loans and €75 million in letters of credit are available for issuance under the all-borrower tranche. Amounts drawn under this facility will bear interest at LIBOR plus 150 basis points for loans denominated in U.S. dollars, EURIBOR plus 150 basis points for loans denominated in euros, and SONIA plus 150 basis points for loans denominated in pounds sterling. Undrawn amounts under the facility are subject to an annual commitment fee of 25 basis points. Subject to the consent of the lenders whose commitments are to be increased, we may request that the facility be increased by up to €200 million. At December 31, 2021 and 2020, there were no borrowings and no letters of credit outstanding under the European revolving credit facility. Each of our first lien revolving credit facility and our European revolving credit facility have customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our business or financial condition since December 31, 2020 under the first lien facility and December 31, 2018 under the European facility. Accounts Receivable Securitization Facilities (On-Balance Sheet) On October 11, 2021, GEBV and certain other of our European subsidiaries amended and restated the definitive agreements for our pan-European accounts receivable securitization facility, extending the term through 2027. The terms of the facility provide the flexibility to designate annually the maximum amount of funding available under the facility in an amount of not less than €30 million and not more than €450 million. For the period from October 16, 2020 through October 18, 2021, the designated maximum amount of the facility was €280 million. For the period from October 19, 2021 through October 19, 2022, the designated maximum amount of the facility was increased to €300 million. The facility involves an ongoing daily sale of substantially all of the trade accounts receivable of certain GEBV subsidiaries. These subsidiaries retain servicing responsibilities. Utilization under this facility is based on eligible receivable balances. The funding commitments under the facility will expire upon the earliest to occur of: (a) October 19, 2027, (b) the non-renewal and expiration (without substitution) of all of the back-up liquidity commitments, (c) the early termination of the facility according to its terms (generally upon an Early Amortisation Event (as defined in the facility), which includes, among other things, events similar to the events of default under our first lien revolving credit facility; certain tax law changes; or certain changes to law, regulation or accounting standards), or (d) our request for early termination of the facility. The facility’s current back-up liquidity commitments will expire on October 19, 2022. At December 31, 2021, the amounts available and utilized under this program totaled $279 million (€246 million). At December 31, 2020, the amounts available and utilized under this program totaled $291 million (€237 million). The program does not qualify for sale accounting, and accordingly, these amounts are included in Long Term Debt and Finance Leases. Accounts Receivable Factoring Facilities (Off-Balance Sheet) We have sold certain of our trade receivables under off-balance sheet programs. For these programs, we have concluded that there is generally no risk of loss to us from non-payment of the sold receivables. At December 31, 2021, the gross amount of receivables sold was $605 million, compared to $451 million at December 31, 2020. The increase from December 31, 2020 is primarily due to the increase in our accounts receivable base as a result of the Cooper Tire acquisition and higher sales in our legacy business. Supplier Financing We have entered into payment processing agreements with several financial institutions. Under these agreements, the financial institutions act as our paying agents with respect to accounts payable due to our suppliers. These agreements also allow our suppliers to sell their receivables to the financial institutions at the sole discretion of both the supplier and the financial institution on terms that are negotiated between them. We are not always notified when our suppliers sell receivables under these programs. Our obligations to our suppliers, including the amounts due and scheduled payment dates, are not impacted by our suppliers' decisions to sell their receivables under the program. Agreements for such supplier financing programs totaled up to $630 million and $500 million at December 31, 2021 and 2020, respectively. The increase from December 31, 2020 is primarily due to the overall increase in our cost base as a result of the Cooper Tire acquisition. Further Information On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR (“IBA”), confirmed its previously announced plans to cease publication of USD LIBOR on December 31, 2021 for only the one week and two month USD 38 Table of Contents LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors. In addition, the IBA ceased publication of all tenors of euro and Swiss franc LIBOR and most tenors of Japanese yen and British pound LIBOR on December 31, 2021. In the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference Rates Committee that has been convened by the Federal Reserve Board and the Federal Reserve Bank of New York to encourage market participants’ use of the Secured Overnight Financing Rate, known as SOFR. Additionally, the International Swaps and Derivatives Association, Inc. published amendments to its definition book to incorporate new benchmark fallbacks for derivative contracts that reference certain interbank offered rates, including LIBOR. We cannot currently predict the effect of the discontinuation of, or other changes to, LIBOR or any establishment of alternative reference rates in the United States, the United Kingdom, the European Union or elsewhere on the global capital markets. The uncertainty regarding the future of LIBOR, as well as the transition from LIBOR to any alternative reference rate or rates, could have adverse impacts on floating rate obligations, loans, deposits, derivatives and other financial instruments that currently use LIBOR as a benchmark rate. We have identified and evaluated our financing obligations and other contracts that refer to LIBOR and expect to be able to transition those obligations and contracts to an alternative reference rate upon the discontinuation of LIBOR. Our first lien revolving credit facility and our European revolving credit facility, which constitute the most significant of our LIBOR-based debt obligations, contain “fallback” provisions that address the discontinuation of LIBOR and facilitate the adoption of an alternate rate of interest. We have not issued any long term floating rate notes. Our first lien revolving credit facility also contains express provisions for the use, at our option, of an alternative base rate (the higher of (a) the prime rate, (b) the federal funds effective rate or the overnight bank funding rate plus 50 basis points or (c) LIBOR plus 100 basis points). We do not believe that the discontinuation of LIBOR, or its replacement with an alternative reference rate or rates, will have a material impact on our results of operations, financial position or liquidity. For a further description of the terms of our outstanding notes, first lien revolving credit facility, European revolving credit facility and pan-European accounts receivable securitization facility, refer to Note to the Consolidated Financial Statements No. 16, Financing Arrangements and Derivative Financial Instruments. Covenant Compliance Our first lien revolving credit facility and some of the indentures governing our notes contain certain covenants that, among other things, limit our ability to incur additional debt or issue redeemable preferred stock, pay dividends, repurchase shares or make certain other restricted payments or investments, incur liens, sell assets, incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us, enter into affiliate transactions, engage in sale and leaseback transactions, and consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications. Our first lien revolving credit facility and the indentures governing our notes also have customary defaults, including cross-defaults to material indebtedness of Goodyear and its subsidiaries. We have an additional financial covenant in our first lien revolving credit facility that is currently not applicable. We only become subject to this financial covenant when certain events occur. This financial covenant and the related events are as follows: • We become subject to the financial covenant contained in our first lien revolving credit facility when the aggregate amount of our Parent Company (The Goodyear Tire & Rubber Company) and guarantor subsidiaries cash and cash equivalents (“Available Cash”) plus our availability under our first lien revolving credit facility is less than $275 million. If this were to occur, our ratio of EBITDA to Consolidated Interest Expense may not be less than 2.0 to 1.0 for the most recent period of four consecutive fiscal quarters. As of December 31, 2021, our unused availability under this facility of $2,314 million plus our Available Cash of $259 million totaled $2,573 million, which is in excess of $275 million. In addition, our European revolving credit facility contains non-financial covenants similar to the non-financial covenants in our first lien revolving credit facility that are described above and a financial covenant applicable only to GEBV and its subsidiaries. This financial covenant provides that we are not permitted to allow GEBV’s ratio of Consolidated Net GEBV Indebtedness to Consolidated GEBV EBITDA for a period of four consecutive fiscal quarters to be greater than 3.0 to 1.0 at the end of any fiscal quarter. Consolidated Net GEBV Indebtedness is determined net of the sum of cash and cash equivalents in excess of $100 million held by GEBV and its subsidiaries, cash and cash equivalents in excess of $150 million held by the Parent Company and its U.S. subsidiaries, and availability under our first lien revolving credit facility if the ratio of EBITDA to Consolidated Interest Expense described above is not applicable and the conditions to borrowing under the first lien revolving credit facility are met. Consolidated Net GEBV Indebtedness also excludes loans from other consolidated Goodyear entities. This financial covenant is also included in our pan-European accounts receivable securitization facility. At December 31, 2021, we were in compliance with this financial covenant. Our credit facilities also state that we may only incur additional debt or make restricted payments that are not otherwise expressly permitted if, after giving effect to the debt incurrence or the restricted payment, our ratio of EBITDA to Consolidated Interest Expense for the prior four fiscal quarters would exceed 2.0 to 1.0. Certain of our senior note indentures have 39 Table of Contents substantially similar limitations on incurring debt and making restricted payments. Our credit facilities and indentures also permit the incurrence of additional debt through other provisions in those agreements without regard to our ability to satisfy the ratio-based incurrence test described above. We believe that these other provisions provide us with sufficient flexibility to incur additional debt necessary to meet our operating, investing and financing needs without regard to our ability to satisfy the ratio-based incurrence test. Covenants could change based upon a refinancing or amendment of an existing facility, or additional covenants may be added in connection with the incurrence of new debt. As of December 31, 2021, we were in compliance with the currently applicable material covenants imposed by our principal credit facilities and indentures. The terms “Available Cash,” “EBITDA,” “Consolidated Interest Expense,” “Consolidated Net GEBV Indebtedness” and “Consolidated GEBV EBITDA” have the meanings given them in the respective credit facilities. Potential Future Financings In addition to our previous financing activities, we may seek to undertake additional financing actions which could include restructuring bank debt or capital markets transactions, possibly including the issuance of additional debt or equity. Given the inherent uncertainty of market conditions, access to the capital markets cannot be assured. Our future liquidity requirements may make it necessary for us to incur additional debt. However, a substantial portion of our assets are already subject to liens securing our indebtedness. As a result, we are limited in our ability to pledge our remaining assets as security for additional secured indebtedness. In addition, no assurance can be given as to our ability to raise additional unsecured debt. Dividends and Common Stock Repurchase Program Under our primary credit facilities and some of our note indentures, we are permitted to pay dividends on and repurchase our capital stock (which constitute restricted payments) as long as no default will have occurred and be continuing, additional indebtedness can be incurred under the credit facilities or indentures following the payment, and certain financial tests are satisfied. During 2020 and 2019, we paid cash dividends of $37 million and $148 million, respectively, on our common stock. This excludes dividends earned on stock based compensation plans of $1 million and $2 million for the years 2020 and 2019, respectively. On April 16, 2020, we announced that we have suspended the quarterly dividend on our common stock. From time to time, we repurchase shares of our common stock under programs approved by the Board of Directors. During 2021, 2020 and 2019, we did not repurchase any shares of our common stock under such programs. The restrictions imposed by our credit facilities and indentures are not expected to affect our ability to pay dividends or repurchase our capital stock in the future. Asset Dispositions The restrictions on asset sales imposed by our material indebtedness have not affected our ability to divest non-core businesses, and those divestitures have not affected our ability to comply with those restrictions. Supplemental Guarantor Financial Information Certain of our subsidiaries, which are listed on Exhibit 22.1 to this Annual Report on Form 10-K and are generally holding or operating companies, have guaranteed our obligations under the $800 million outstanding principal amount of 9.5% senior notes due 2025, the $900 million outstanding principal amount of 5% senior notes due 2026, the $700 million outstanding principal amount of 4.875% senior notes due 2027, the $850 million outstanding principal amount of 5% senior notes due 2029, the $550 million outstanding principal amount of 5.25% senior notes due April 2031, the $600 million outstanding principal amount of 5.25% senior notes due July 2031 and the $450 million outstanding principal amount of 5.625% senior notes due 2033 (collectively, the “Notes”). The Notes have been issued by The Goodyear Tire & Rubber Company (the “Parent Company”) and are its senior unsecured obligations. The Notes rank equally in right of payment with all of our existing and future senior unsecured obligations and senior to any of our future subordinated indebtedness. The Notes are effectively subordinated to our existing and future secured indebtedness to the extent of the assets securing that indebtedness. The Notes are fully and unconditionally guaranteed on a joint and several basis by each of our wholly-owned U.S. and Canadian subsidiaries that also guarantee our obligations under our first lien revolving credit facility (such guarantees, the “Guarantees”; and, such guaranteeing subsidiaries, the “Subsidiary Guarantors”). The Guarantees are senior unsecured obligations of the Subsidiary Guarantors and rank equally in right of payment with all existing and future senior unsecured obligations of our Subsidiary Guarantors. The Guarantees are effectively 40 Table of Contents subordinated to existing and future secured indebtedness of the Subsidiary Guarantors to the extent of the assets securing that indebtedness. The Notes are structurally subordinated to all of the existing and future debt and other liabilities, including trade payables, of our subsidiaries that do not guarantee the Notes (the “Non-Guarantor Subsidiaries”). The Non-Guarantor Subsidiaries will have no obligation, contingent or otherwise, to pay amounts due under the Notes or to make funds available to pay those amounts. Certain Non-Guarantor Subsidiaries are limited in their ability to remit funds to us by means of dividends, advances or loans due to required foreign government and/or currency exchange board approvals or limitations in credit agreements or other debt instruments of those subsidiaries. The Subsidiary Guarantors, as primary obligors and not merely as sureties, jointly and severally irrevocably and unconditionally guarantee on a senior unsecured basis the performance and full and punctual payment when due of all obligations of the Parent Company under the Notes and the related indentures, whether for payment of principal of or interest on the Notes, expenses, indemnification or otherwise. The Guarantees of the Subsidiary Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions. Although the Guarantees provide the holders of Notes with a direct unsecured claim against the assets of the Subsidiary Guarantors, under U.S. federal bankruptcy law and comparable provisions of U.S. state fraudulent transfer laws, in certain circumstances a court could cancel a Guarantee and order the return of any payments made thereunder to the Subsidiary Guarantor or to a fund for the benefit of its creditors. A court might take these actions if it found, among other things, that when the Subsidiary Guarantors incurred the debt evidenced by their Guarantee (i) they received less than reasonably equivalent value or fair consideration for the incurrence of the debt and (ii) any one of the following conditions was satisfied: • the Subsidiary Guarantor was insolvent or rendered insolvent by reason of the incurrence; • the Subsidiary Guarantor was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or • the Subsidiary Guarantor intended to incur, or believed (or reasonably should have believed) that it would incur, debts beyond its ability to pay as those debts matured. In applying the above factors, a court would likely find that a Subsidiary Guarantor did not receive fair consideration or reasonably equivalent value for its Guarantee, except to the extent that it benefited directly or indirectly from the issuance of the Notes. The determination of whether a guarantor was or was not rendered “insolvent” when it entered into its guarantee will vary depending on the law of the jurisdiction being applied. Generally, an entity would be considered insolvent if the sum of its debts (including contingent or unliquidated debts) is greater than all of its assets at a fair valuation or if the present fair salable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts, including contingent or unliquidated debts, as they mature. Under Canadian federal bankruptcy and insolvency laws and comparable provincial laws on preferences, fraudulent conveyances or other challengeable or voidable transactions, the Guarantees could be challenged as a preference, fraudulent conveyance, transfer at undervalue or other challengeable or voidable transaction. The test to be applied varies among the different pieces of legislation, but as a general matter these types of challenges may arise in circumstances where: • such action was intended to defeat, hinder, delay, defraud or prejudice creditors or others; • such action was taken within a specified period of time prior to the commencement of proceedings under Canadian bankruptcy, insolvency or restructuring legislation in respect of a Subsidiary Guarantor, the consideration received by the Subsidiary Guarantor was conspicuously less than the fair market value of the consideration given, and the Subsidiary Guarantor was insolvent or rendered insolvent by such action and (in some circumstances, or) such action was intended to defraud, defeat or delay a creditor; • such action was taken within a specified period of time prior to the commencement of proceedings under Canadian bankruptcy, insolvency or restructuring legislation in respect of a Subsidiary Guarantor and such action was taken, or is deemed to have been taken, with a view to giving a creditor a preference over other creditors or, in some circumstances, had the effect of giving a creditor a preference over other creditors; or • a Subsidiary Guarantor is found to have acted in a manner that was oppressive, unfairly prejudicial to or unfairly disregarded the interests of any shareholder, creditor, director, officer or other interested party. In addition, in certain insolvency proceedings a Canadian court may subordinate claims in respect of the Guarantees to other claims against a Subsidiary Guarantor under the principle of equitable subordination if the court determines that (1) the holder of Notes engaged in some type of inequitable or improper conduct, (2) the inequitable or improper conduct resulted in injury 41 Table of Contents to other creditors or conferred an unfair advantage upon the holder of Notes and (3) equitable subordination is not inconsistent with the provisions of the relevant solvency statute. If a court canceled a Guarantee, the holders of Notes would no longer have a claim against that Subsidiary Guarantor or its assets. Each Guarantee is limited, by its terms, to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Guarantee, as it relates to that Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Each Subsidiary Guarantor is a consolidated subsidiary of the Parent Company at the date of the balance sheet presented. The following tables present summarized financial information for the Parent Company and the Subsidiary Guarantors on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Company and the Subsidiary Guarantors and (ii) equity in earnings from and investments in any Non-Guarantor Subsidiary. On July 2, 2021, Cooper Tire and certain of its subsidiaries were added as Subsidiary Guarantors. [[GREPCENT_TABLE]] [["","","Summarized Balance Sheet"],["(In millions)","","December 31, 2021"],["Total Current Assets(1)","","$","5,161"],["Total Non-Current Assets","","","8,406"],["Total Current Liabilities","","$","2,932"],["Total Non-Current Liabilities","","","8,967"]] [[/GREPCENT_TABLE]] (1) Includes receivables due from Non-Guarantor Subsidiaries of $1,618 million as of December 31, 2021. [[GREPCENT_TABLE]] [["","","Summarized Statement of Operations"],["(In millions)","","Year Ended December 31, 2021"],["Net Sales","","$","9,549"],["Cost of Goods Sold","","","7,623"],["Selling, Administrative and General Expense","","","1,457"],["Rationalizations","","","37"],["Interest Expense","","","322"],["Other (Income) Expense","","","(93",")"],["Income before Income Taxes(2)","","$","203"],["Net Income","","$","542"],["Goodyear Net Income","","$","542"]] [[/GREPCENT_TABLE]] (2) Includes income from intercompany transactions with Non-Guarantor Subsidiaries of $588 million for the year ended December 31, 2021, primarily from royalties, dividends, interest and intercompany product sales. 42 Table of Contents COMMITMENTS AND CONTINGENT LIABILITIES Contractual Obligations The following table presents our contractual obligations and commitments to make future payments as of December 31, 2021: [[GREPCENT_TABLE]] [["(In millions)","","Total","","","2022","","","2023","","","2024","","","2025","","","2026","","","Beyond 2026"],["Debt Obligations(1)","","$","7,176","","","$","730","","","$","232","","","$","329","","","$","823","","","$","903","","","$","4,159"],["Finance Lease Obligations(2)","","","255","","","","17","","","","4","","","","3","","","","3","","","","2","","","","226"],["Interest Payments(3)","","","2,697","","","","386","","","","357","","","","352","","","","298","","","","237","","","","1,067"],["Operating Lease Obligations(4)","","","1,313","","","","255","","","","212","","","","171","","","","137","","","","110","","","","428"],["Pension Benefits(5)","","","345","","","","70","","","","65","","","","65","","","","65","","","","80","","","NA"],["Other Postretirement Benefits(6)","","","248","","","","26","","","","26","","","","25","","","","25","","","","25","","","","121"],["Workers\u2019 Compensation(7)","","","248","","","","38","","","","21","","","","16","","","","13","","","","10","","","","150"],["Binding Commitments(8)","","","2,836","","","","1,887","","","","473","","","","180","","","","132","","","","118","","","","46"],["Uncertain Income Tax Positions(9)","","","17","","","","4","","","","8","","","","1","","","","4","","","","\u2014","","","","\u2014"],["","","$","15,135","","","$","3,413","","","$","1,398","","","$","1,142","","","$","1,500","","","$","1,485","","","$","6,197"]] [[/GREPCENT_TABLE]] (1) Debt obligations include Notes Payable and Overdrafts, and excludes the impact of deferred financing fees, unamortized discounts, and a fair value step-up related to the Cooper Tire acquisition. (2) The minimum lease payments for finance lease obligations are $780 million. (3) These amounts represent future interest payments related to our existing debt obligations and finance leases based on fixed and variable interest rates specified in the associated debt and lease agreements. The amounts provided relate only to existing debt obligations and do not assume the refinancing or replacement of such debt or future changes in variable interest rates. (4) Operating lease obligations have not been reduced by minimum sublease rentals of $10 million, $8 million, $6 million, $5 million, $2 million and $3 million in each of the periods above, respectively, for a total of $34 million. Payments, net of minimum sublease rentals, total $1,279 million. The present value of the net operating lease payments, including sublease rentals, is $992 million. The operating leases relate to, among other things, real estate, vehicles, data processing equipment and miscellaneous other assets. No asset is leased from any related party. (5) The obligation related to pension benefits is actuarially determined and is reflective of obligations as of December 31, 2021. Although subject to change, the amounts set forth in the table represent the mid-point of the range of our expected contributions for funded U.S. and non-U.S. pension plans, plus expected cash funding of direct participant payments to our U.S. and non-U.S. pension plans. We made significant contributions to fully fund our U.S. pension plans in 2013 and 2014. We have no minimum funding requirements for our funded U.S. pension plans under current ERISA law or the provisions of our USW collective bargaining agreement, including a provision which requires us to maintain an annual ERISA funded status for the Goodyear hourly U.S. pension plan of at least 97%. Future U.S. pension contributions will be affected by our ability to offset changes in future interest rates with returns from our asset portfolios and any changes to ERISA law. For further information on the U.S. pension investment strategy, refer to Note to the Consolidated Financial Statements No. 18, Pension, Other Postretirement Benefits and Savings Plans. Future non-U.S. contributions are affected by factors such as: • future interest rate levels, • the amount and timing of asset returns, and • how contributions in excess of the minimum requirements could impact the amount and timing of future contributions. (6) The payments presented above are expected payments for the next 10 years. The payments for other postretirement benefits reflect the estimated benefit payments of the plans using the provisions currently in effect. Under the relevant summary plan descriptions or plan documents we have the right to modify or terminate the plans. The obligation related to other postretirement benefits is actuarially determined on an annual basis. (7) The payments for workers’ compensation obligations are based upon recent historical payment patterns on claims. The present value of anticipated claims payments for workers’ compensation is $194 million. (8) Binding commitments are for raw materials, capital expenditures, utilities, and various other types of contracts. The obligations to purchase raw materials include supply contracts at both fixed and variable prices. Those with variable prices are based on index rates for those commodities at December 31, 2021. 43 Table of Contents (9) These amounts primarily represent expected payments with interest for uncertain income tax positions as of December 31, 2021. We have reflected them in the period in which we believe they will be ultimately settled based upon our experience with these matters. Additional other long term liabilities include items such as general and product liabilities, environmental liabilities and miscellaneous other long term liabilities. These other liabilities are not contractual obligations by nature. We cannot, with any degree of reliability, determine the years in which these liabilities might ultimately be settled. Accordingly, these other long term liabilities are not included in the above table. In addition, pursuant to certain long term agreements, we will purchase varying amounts of certain raw materials and finished goods at agreed upon base prices that may be subject to periodic adjustments for changes in raw material costs and market price adjustments, or in quantities that may be subject to periodic adjustments for changes in our or our suppliers' production levels. These contingent contractual obligations, the amounts of which cannot be estimated, are not included in the table above. We do not engage in the trading of commodity contracts or any related derivative contracts. We generally purchase raw materials and energy through short term, intermediate and long term supply contracts at fixed prices or at formula prices related to market prices or negotiated prices. We may, however, from time to time, enter into contracts to hedge our energy costs. At December 31, 2021, we had an agreement to provide a revolving loan commitment to TireHub of up to $100 million. As of December 31, 2021, no funds were drawn on this commitment. Off-Balance Sheet Arrangements An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has: • made guarantees, • retained or held a contingent interest in transferred assets, • undertaken an obligation under certain derivative instruments, or • undertaken any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in leasing, hedging or research and development arrangements with the company. We have entered into certain arrangements under which we have provided guarantees that are off-balance sheet arrangements. Those guarantees totaled $34 million at December 31, 2021. For further information about our guarantees, refer to Note to the Consolidated Financial Statements No. 20, Commitments and Contingent Liabilities. 44 Table of Contents CRITICAL ACCOUNTING POLICIES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to the financial statements. On an ongoing basis, management reviews its estimates, based on currently available information. Changes in facts and circumstances may alter such estimates and affect our results of operations and financial position in future periods. Our critical accounting policies relate to: • acquisitions, • general and product liability and other litigation, • workers’ compensation, • goodwill and intangible assets, • deferred tax asset valuation allowances and uncertain income tax positions, and • pensions and other postretirement benefits. Acquisitions. We allocate the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess value of the purchase price for an acquired business over the estimated fair value of the assets acquired and liabilities assumed is recognized as goodwill. The valuation of the acquired assets and liabilities will impact the determination of future operating results. We use a variety of information sources to determine the fair value of acquired assets and liabilities including: third-party appraisers for the values and lives of property, identifiable intangibles and inventories; and actuaries and other third-party specialists for defined benefit pension plans, workers' compensation and general and product liabilities. Goodwill is assigned to reporting units as of the date of the related acquisition. If goodwill is assigned to more than one reporting unit, we utilize a method that is consistent with the manner in which the amount of goodwill in a business combination is determined. Transaction costs related to the acquisition of a business are expensed as incurred. We estimate the fair value of acquired customer relationships using the multi-period excess earnings method. Fair value is estimated as the present value of the benefits anticipated from ownership of the asset, in excess of the returns required on the investment in contributory assets which are necessary to realize those benefits. The intangible asset’s operating margins are determined as the residual earnings after quantifying operating margins from contributory assets. Assumptions used in these calculations are considered from a market participant perspective and include revenue growth rates, operating margins, contributory asset charges, customer attrition rates and discount rates. We estimate the fair value of trade names (definite and indefinite) using the relief from royalty method, which calculates the cost savings associated with owning rather than licensing the assets. Assumed royalty rates are applied to projected revenue for the remaining useful lives of the assets to estimate the royalty savings. Assumptions used in the determination of the fair value of a trade name include revenue growth rates, including a terminal growth rate, the royalty rate and the discount rate. While we use our best estimates and assumptions, fair value estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Any adjustments required after the measurement period are recorded in the consolidated statement of operations. Future changes in the judgments, assumptions and estimates that are used in our acquisition valuations and intangible asset and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year. General and Product Liability and Other Litigation. We have recorded liabilities totaling $390 million, including related legal fees expected to be incurred, for potential product liability and other tort claims, including asbestos claims, at December 31, 2021. General and product liability and other litigation liabilities are recorded based on management’s assessment that a loss arising from these matters is probable. If the loss can be reasonably estimated, we record the amount of the estimated loss. If the loss is estimated within a range and no point within the range is more probable than another, we record the minimum amount in the range. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Loss ranges are based upon the specific facts of each claim or class of claims and are determined after review by counsel. Court rulings on our cases or similar cases may impact our assessment of the probability and our estimate of the loss, which may have an impact on our reported results of operations, financial position and liquidity. We record receivables for insurance recoveries related to our litigation claims when it is probable that we will receive reimbursement from the insurer. Specifically, we are a defendant in numerous lawsuits alleging various asbestos-related personal injuries purported to result from alleged exposure to asbestos in certain products previously manufactured by us or present in certain of our facilities. Typically, these lawsuits have been brought against multiple defendants in federal and state courts. 45 Table of Contents We periodically, and at least annually, update, using actuarial analyses, our existing reserves for pending claims, including a reasonable estimate of the liability associated with unasserted asbestos claims, and estimate our receivables from probable insurance recoveries. In determining the estimate of our asbestos liability, we evaluated claims over the next ten-year period. Due to the difficulties in making these estimates, analysis based on new data and/or changed circumstances arising in the future may result in an increase in the recorded obligation, and that increase may be significant. We had recorded gross liabilities for both asserted and unasserted asbestos claims, inclusive of defense costs, totaling $131 million at December 31, 2021. We maintain certain primary and excess insurance coverage under coverage-in-place agreements, and also have additional excess liability insurance with respect to asbestos liabilities. We record a receivable with respect to such policies when we determine that recovery is probable and we can reasonably estimate the amount of a particular recovery. This determination is based on consultation with our outside legal counsel and takes into consideration agreements with certain of our insurance carriers, the financial viability and legal obligations of our insurance carriers, and other relevant factors. As of December 31, 2021, we recorded a receivable related to asbestos claims of $77 million, and we expect that approximately 60% of asbestos claim related losses would be recoverable through insurance through the period covered by the estimated liability. Of this amount, $12 million was included in Current Assets as part of Accounts Receivable at December 31, 2021. The recorded receivable consists of an amount we expect to collect under coverage-in-place agreements with certain primary and excess insurance carriers as well as an amount we believe is probable of recovery from certain of our other excess insurance carriers. Although we believe these amounts are collectible under primary and certain excess policies today, future disputes with insurers could result in significant charges to operations. Workers’ Compensation. We have recorded liabilities, on a discounted basis, of $194 million for anticipated costs related to U.S. workers’ compensation claims at December 31, 2021. The costs include an estimate of expected settlements on pending claims, defense costs and a provision for claims incurred but not reported. These estimates are based on our assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and current cost trends. The amount of our ultimate liability in respect of these matters may differ from these estimates. We periodically, and at least annually, update our loss development factors based on actuarial analyses. The liability is discounted using the risk-free rate of return. For further information on general and product liability and other litigation, and workers’ compensation, refer to Note to the Consolidated Financial Statements No. 20, Commitments and Contingent Liabilities. Goodwill and Intangible Assets. Goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if an indicator of impairment is present. Intangible assets subject to amortization are tested only if a triggering event would require evaluation. Goodwill and Intangible Assets totaled $1,004 million and $1,039 million, respectively, at December 31, 2021. We test goodwill and indefinite-lived intangible assets for impairment on at least an annual basis, with the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit or intangible asset to its carrying amount. Under the qualitative assessment, an entity is not required to calculate the fair value of a reporting unit or intangible asset unless the entity determines that it is more likely than not (defined as a likelihood of more than 50%) that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit or intangible asset is less than its carrying amount, then an impairment loss will be recorded for the difference between the carrying value and the fair value. At October 31, 2021, after considering changes to assumptions used in our most recent quantitative annual testing for each reporting unit and indefinite-lived intangible asset, results of recent fair value valuations related to the acquisition of Cooper Tire, the capital markets environment, economic conditions, tire industry competition and trends, changes in our results of operations, the magnitude of the excess of fair value over the carrying amount of each reporting unit and indefinite-lived intangible asset as determined in our most recent quantitative annual testing, and other factors, we concluded that it was not more likely than not that the fair values of our reporting units or indefinite-lived intangible assets were less than their respective carrying values and, therefore, did not perform a quantitative analysis. Deferred Tax Asset Valuation Allowances and Uncertain Income Tax Positions. At December 31, 2021, our valuation allowances on certain of our U.S. federal, state and local net deferred tax assets totaled $26 million and our valuation allowances on our foreign net deferred tax assets totaled $1.0 billion. At December 31, 2020, our valuation allowances on certain of our U.S. federal, state and local net deferred tax assets totaled $368 million and our valuation allowances on our foreign net deferred tax assets totaled $1.1 billion. We record a reduction to the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not such assets will not be realized. The valuation of deferred tax assets requires judgment in assessing future profitability by year, including the impact of tax planning strategies, relative to the expiration dates, if any, of the assets. 46 Table of Contents We consider both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable evidence. We give operating results during the most recent three-year period a significant weight in our analysis. We typically only consider forecasts of future profitability when positive cumulative operating results exist in the most recent three-year period. We perform scheduling exercises to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration. We also consider prudent tax planning strategies (including an assessment of their feasibility) to accelerate taxable income if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that, in our judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized. At both December 31, 2021 and 2020, we had approximately $1.2 billion of U.S. federal, state and local net deferred tax assets, net of valuation allowances totaling $26 million in 2021, primarily for state tax loss carryforwards with limited lives, and $368 million in 2020, primarily for foreign tax credits with limited lives. The increase in our U.S. net deferred tax assets as a result of the reduction in valuation allowances during 2021 was largely offset by the establishment of deferred tax liabilities related to the Cooper Tire acquisition. In the U.S., we have a cumulative loss for the three-year period ending December 31, 2021. However, as the three-year cumulative loss in the U.S. is driven by business disruptions created by the COVID-19 pandemic, primarily in 2020, and only include the favorable impact of the Cooper Tire acquisition since the Closing Date, we also considered other objectively verifiable information in assessing our ability to utilize our net deferred tax assets, including recent favorable recovery trends in the tire industry and our tire volume as well as expected continued improvement. In addition, the Cooper Tire acquisition has generated significant incremental domestic earnings since the Closing Date and provides opportunities for cost and other operating synergies to further improve our U.S. profitability. At December 31, 2021, our U.S. net deferred tax assets include approximately $339 million of foreign tax credits with limited lives, net of valuation allowances of $3 million. At December 31, 2020, our U.S. net deferred tax assets include $133 million of foreign tax credits with limited lives, net of valuation allowances of $328 million. Our earnings and forecasts of future profitability, taking into consideration recent trends, along with three significant sources of foreign income provide us sufficient positive evidence that we will be able to utilize our foreign tax credits that expire through 2030. Our sources of foreign income are (1) 100% of our domestic profitability can be re-characterized as foreign source income under current U.S. tax law to the extent domestic losses have offset foreign source income in prior years, (2) annual net foreign source income, exclusive of dividends, primarily from royalties, and (3) tax planning strategies, including capitalizing research and development costs, accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, and reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, all of which would increase our domestic profitability. During the fourth quarter of 2021, we completed an intercompany sale of certain intellectual property. As a result of this transaction, U.S. taxable income for 2021 includes approximately $1.5 billion of accelerated income. External specialists assisted management with this transaction. The federal tax charge of $315 million related to this accelerated income was fully offset by the utilization of existing deferred tax assets, including $205 million related to tax loss carryforwards, which were primarily generated in 2020 as a result of a significant tax loss in the U.S. driven by the macroeconomic impacts of the COVID-19 pandemic, and $110 million of foreign tax credits. Tax loss carryforwards must be utilized prior to foreign tax credits and other tax assets for tax purposes. Considering the magnitude of tax loss carryforwards that were utilized by this transaction, together with our earnings and other sources of income described above, we concluded that it is more likely than not that we will be able to utilize, prior to their expiration, certain U.S. tax assets. Accordingly, during the fourth quarter of 2021, we reduced U.S. valuation allowances by $325 million related to foreign tax credits and $15 million related to state tax loss carryforwards. We consider our current forecasts of future profitability in assessing our ability to realize our deferred tax assets, including our foreign tax credits. As noted above, these forecasts include the impact of recent trends, including various macroeconomic factors such as the impact of the COVID-19 pandemic, on our profitability, as well as the impact of tax planning strategies. Macroeconomic factors, including the impact of the COVID-19 pandemic, possess a high degree of volatility and can significantly impact our profitability. As such, there is a risk that future earnings will not be sufficient to fully utilize our U.S. net deferred tax assets, including our foreign tax credits. However, we believe our forecasts of future profitability along with the three significant sources of foreign income described above provide us sufficient positive, objectively verifiable evidence to conclude that it is more likely than not that, at December 31, 2021, our U.S. net deferred tax assets, including our foreign tax credits, net of valuation allowances, will be fully utilized. At both December 31, 2021 and 2020, we also had approximately $1.3 billion of foreign net deferred tax assets, and valuation allowances of $1.0 billion and $1.1 billion, respectively. Our losses in various foreign taxing jurisdictions in recent periods represented sufficient negative evidence to require us to maintain a full valuation allowance against certain of these net foreign 47 Table of Contents deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of approximately $885 million on all of our net deferred tax assets. Each reporting period, we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize these existing deferred tax assets. We do not believe that sufficient positive evidence required to release valuation allowances having a significant impact on our financial position or results of operations will exist within the next twelve months. We recognize the effects of changes in tax rates and laws on deferred tax balances in the period in which legislation is enacted. We remeasure existing deferred tax assets and liabilities considering the tax rates at which they will be realized. We also consider the effects of enacted tax laws in our analysis of the need for valuation allowances. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations, including those for transfer pricing. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We also recognize income tax benefits to the extent that it is more likely than not that our positions will be sustained when challenged by the taxing authorities. We derecognize income tax benefits when, based on new information, we determine that it is no longer more likely than not that our position will be sustained. To the extent we prevail in matters for which liabilities have been established, or determine we need to derecognize tax benefits recorded in prior periods, our results of operations and effective tax rate in a given period could be materially affected. An unfavorable tax settlement would require use of our cash, and lead to recognition of expense to the extent the settlement amount exceeds recorded liabilities, resulting in an increase in our effective tax rate in the period of resolution. To reduce our risk of an unfavorable transfer price settlement, the Company applies consistent transfer pricing policies and practices globally, supports pricing with economic studies and seeks advance pricing agreements and joint audits to the extent possible. A favorable tax settlement would be recognized as a reduction of expense to the extent the settlement amount is lower than recorded liabilities and, in the case of an income tax settlement, would result in a reduction in our effective tax rate in the period of resolution. We report interest and penalties related to uncertain income tax positions as income tax expense. For additional information regarding uncertain income tax positions, tax planning and valuation allowances, refer to Note to the Consolidated Financial Statements No. 7, Income Taxes. Pensions and Other Postretirement Benefits. We have recorded liabilities for pension and other postretirement benefits of $270 million and $406 million, respectively, at December 31, 2021. Our recorded liabilities and net periodic costs for pensions and other postretirement benefits are based on a number of assumptions, including: • life expectancies, • retirement rates, • discount rates, • long term rates of return on plan assets, • inflation rates, • future compensation levels, • future health care costs, and • maximum company-covered benefit costs. Certain of these assumptions are determined with the assistance of independent actuaries. Assumptions about life expectancies, retirement rates, future compensation levels and future health care costs are based on past experience and anticipated future trends. The discount rate for our U.S. plans is based on a yield curve derived from a portfolio of corporate bonds from issuers rated AA or higher by established rating agencies as of December 31 and is reviewed annually. Our expected benefit payment cash flows are discounted based on spot rates developed from the yield curve. The mortality assumption for our U.S. plans is based on actual historical experience or published actuarial tables, an assumed long term rate of future improvement based on published actuarial tables, and current government regulations related to lump sum payment factors. The long term rate of return on U.S. plan assets is based on estimates of future long term rates of return similar to the target allocation of substantially all fixed income securities. Actual U.S. pension fund asset allocations are reviewed on a monthly basis and the pension fund is rebalanced to target ranges on an as-needed basis. These assumptions are reviewed regularly and revised when appropriate. Changes in one or more of them may affect the amount of our recorded liabilities and net periodic costs for these benefits. Other assumptions involving demographic factors such as retirement age and turnover are evaluated periodically and are updated to reflect our experience and expectations for the future. If actual experience differs from expectations, our financial position, results of operations and liquidity in future periods may be affected. 48 Table of Contents The weighted average discount rate used in estimating the total liability for our U.S. pension and other postretirement benefit plans was 2.82% and 2.87%, respectively, at December 31, 2021, compared to 2.42% and 2.34%, respectively, at December 31, 2020. The increase in the discount rate at December 31, 2021 was due primarily to higher yields on highly rated corporate bonds. Interest cost included in our U.S. net periodic pension cost was $94 million in 2021, compared to $126 million in 2020 and $173 million in 2019. Interest cost included in our worldwide net periodic other postretirement benefits cost was $9 million in 2021, compared to $8 million in 2020 and $11 million in 2019. The following table presents the sensitivity of our U.S. projected pension benefit obligation and accumulated other postretirement benefits obligation to the indicated increase/decrease in the discount rate: [[GREPCENT_TABLE]] [["","","","","+ / \u2212 Change at December 31, 2021"],["(Dollars in millions)","","Change","","PBO/ABO","","","Annual Expense"],["Assumption:"],["Pensions","","+/- 0.5%","","$","309","","","$","4"],["Other Postretirement Benefits","","+/- 0.5%","","","15","","","","1"]] [[/GREPCENT_TABLE]] Changes in general interest rates and corporate (AA or better) credit spreads impact our discount rate and thereby our U.S. pension benefit obligation. Our U.S. pension plans are invested in a portfolio of substantially all fixed income securities designed to offset the impact of future discount rate movements on liabilities for these plans. If corporate (AA or better) interest rates increase or decrease in parallel (i.e., across all maturities), the investment portfolio described above is designed to mitigate a substantial portion of the expected change in our U.S. pension benefit obligation. For example, if corporate (AA or better) interest rates increased or decreased by 0.5%, the investment portfolio described above would be expected to mitigate approximately 85% of the expected change in our U.S. pension benefit obligation. At December 31, 2021, our net actuarial loss included in Accumulated Other Comprehensive Loss ("AOCL") related to global pension plans was $2,625 million, $2,160 million of which related to our U.S. pension plans. The net actuarial loss included in AOCL related to our U.S. pension plans is primarily due to declines in U.S. discount rates and plan asset losses that occurred prior to 2015, plus the impact of prior increases in estimated life expectancies. For purposes of determining our 2021 U.S. pension total benefits cost, we recognized $148 million of the net actuarial losses in 2021. We will recognize approximately $105 million of net actuarial losses in 2022 U.S. net periodic pension cost. If our future experience is consistent with our assumptions as of December 31, 2021, actuarial loss recognition over the next few years will remain at an amount near that to be recognized in 2022 before it begins to gradually decline. In addition, if annual lump sum payments from a pension plan exceed annual service and interest cost for that plan, accelerated recognition of net actuarial losses will be required through a settlement in total benefits cost. The actual rate of return on our U.S. pension fund was 1.80%, 13.20% and 15.90% in 2021, 2020 and 2019, respectively, as compared to the expected rate of 3.74%, 4.22% and 5.25% in 2021, 2020 and 2019, respectively. We use the fair value of our pension assets in the calculation of pension expense for all of our U.S. pension plans. The weighted average amortization period for our U.S. pension plans is approximately 16 years. Service cost of pension plans was recorded in CGS, as part of the cost of inventory sold during the period, or SAG in our Consolidated Statements of Operations, based on the specific roles (i.e., manufacturing vs. non-manufacturing) of employee groups covered by each of our pension plans. In 2021, 2020 and 2019, the amount of service cost included in CGS and SAG is approximately equal. Non-service related net periodic pension costs were recorded in Other (Income) Expense. Globally, we expect our 2022 net periodic pension cost to be $70 million to $80 million, including approximately $40 million of service cost, compared to $77 million in 2021, which included $39 million of service cost. Though we experienced an increase in our U.S. discount rate at the end of 2021, a large portion of the $7 million net actuarial loss included in AOCL for our worldwide other postretirement benefit plans as of December 31, 2021 is a result of the overall decline in U.S. discount rates over time. For purposes of determining 2021 worldwide net periodic other postretirement benefits cost, we recognized $3 million of net actuarial losses in 2021. We will recognize approximately $2 million of net actuarial losses in 2022. If our future experience is consistent with our assumptions as of December 31, 2021, actuarial loss recognition over the next few years will remain at an amount near that to be recognized in 2022. For further information on pensions and other postretirement benefits, refer to Note to the Consolidated Financial Statements No. 18, Pension, Other Postretirement Benefits and Savings Plans. 49 Table of Contents FORWARD-LOOKING INFORMATION — SAFE HARBOR STATEMENT Certain information in this Annual Report on Form 10-K (other than historical data and information) may constitute forward-looking statements regarding events and trends that may affect our future operating results and financial position. The words “estimate,” “expect,” “intend” and “project,” as well as other words or expressions of similar meaning, are intended to identify forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. Such statements are based on current expectations and assumptions, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including: • there are risks and uncertainties regarding our acquisition of Cooper Tire and our ability to achieve the expected benefits of such acquisition; • our future results of operations, financial condition and liquidity may be adversely impacted by the COVID-19 pandemic, and that impact may be material; • raw material cost increases may materially adversely affect our operating results and financial condition; • we are experiencing inflationary cost pressures, including with respect to wages, benefits, transportation and energy costs, that may materially adversely affect our operating results and financial condition; • delays or disruptions in our supply chain or in the provision of services, including utilities, to us could result in increased costs or disruptions in our operations; • changes to tariffs, trade agreements or trade restrictions may materially adversely affect our operating results; • if we do not successfully implement our strategic initiatives, our operating results, financial condition and liquidity may be materially adversely affected; • we face significant global competition and our market share could decline; • deteriorating economic conditions in any of our major markets, or an inability to access capital markets or third-party financing when necessary, may materially adversely affect our operating results, financial condition and liquidity; • if we experience a labor strike, work stoppage, labor shortage or other similar event at the Company or its joint ventures, our business, results of operations, financial condition and liquidity could be materially adversely affected; • financial difficulties, work stoppages, labor shortages, supply disruptions or economic conditions affecting our major OE customers, dealers or suppliers could harm our business; • our capital expenditures may not be adequate to maintain our competitive position and may not be implemented in a timely or cost-effective manner; • our international operations have certain risks that may materially adversely affect our operating results, financial condition and liquidity; • we have foreign currency translation and transaction risks that may materially adversely affect our operating results, financial condition and liquidity; • our long term ability to meet our obligations, to repay maturing indebtedness or to implement strategic initiatives may be dependent on our ability to access capital markets in the future and to improve our operating results; • we have a substantial amount of debt, which could restrict our growth, place us at a competitive disadvantage or otherwise materially adversely affect our financial health; • any failure to be in compliance with any material provision or covenant of our debt instruments, or a material reduction in the borrowing base under our revolving credit facility, could have a material adverse effect on our liquidity and operations; • our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly; • we have substantial fixed costs and, as a result, our operating income fluctuates disproportionately with changes in our net sales; • we may incur significant costs in connection with our contingent liabilities and tax matters; 50 Table of Contents • our reserves for contingent liabilities and our recorded insurance assets are subject to various uncertainties, the outcome of which may result in our actual costs being significantly higher than the amounts recorded; • environmental issues, including climate change, or legal, regulatory or market measures to address environmental issues, may negatively affect our business and operations and cause us to incur significant costs; • we are subject to extensive government regulations that may materially adversely affect our operating results; • we may be adversely affected by any disruption in, or failure of, our information technology systems due to computer viruses, unauthorized access, cyber-attack, natural disasters or other similar disruptions; • we may not be able to protect our intellectual property rights adequately; • if we are unable to attract and retain key personnel, our business could be materially adversely affected; and • we may be impacted by economic and supply disruptions associated with events beyond our control, such as war, acts of terror, political unrest, public health concerns, labor disputes or natural disasters. It is not possible to foresee or identify all such factors. We will not revise or update any forward-looking statement or disclose any facts, events or circumstances that occur after the date hereof that may affect the accuracy of any forward-looking statement. 51 Table of Contents