GOODYEAR ANNOUNCES TRANSFORMATION PLAN: GOODYEAR FORWARD

Gross proceeds in excess of $2 billion from portfolio optimization

Top line and cost reduction actions totaling $1.3 billion by end of 2025

Segment operating income margin doubling to 10% by end of 2025

Net leverage of 2.0x – 2.5x by end of 2025

AKRON, Ohio, Nov. 15, 2023 /PRNewswire/ -- The Goodyear Tire & Rubber Company (NASDAQ:GT) ("Goodyear" or the "Company") today announced a transformation plan – "Goodyear Forward" – to optimize its portfolio, deliver significant margin expansion and reduce leverage to drive sustainable and substantial shareholder value creation. This plan follows a comprehensive evaluation by the Strategic and Operational Review Committee (the "Review Committee") of the Board of Directors to evaluate all strategic, operational and financial opportunities to maximize value.

"Our transformation plan represents a clear path to create a more profitable and focused Goodyear," said Goodyear Chairman, CEO and President Richard J. Kramer. "The Review Committee explored all value maximizing opportunities and identified specific, detailed initiatives to streamline our portfolio, expand margins and fortify our balance sheet, and do so with expediency. Building on our strengths, this plan will enable Goodyear to enhance and expand our leadership position, deliver profitable growth across markets, create significant value for our shareholders and – ultimately – lay the foundation for success for the next 125 years."

"This plan is the result of a comprehensive, bottom-up assessment of Goodyear's business, led by the Review Committee," said Laurette T. Koellner, Independent Lead Director of Goodyear's Board. "The full Board supports this plan and is confident it will deliver substantial and durable value creation for shareholders. We appreciate the constructive input of our shareholders throughout this process."

On behalf of Elliott Investment Management, one of Goodyear's largest investors, Senior Portfolio Manager Marc Steinberg and Portfolio Manager Austin Camporin said, "We believe the 'Goodyear Forward' transformation plan represents a significant set of steps toward a stronger and more profitable Goodyear. We thank Rich for his leadership and the Review Committee for its collaborative engagement, and we look forward to continuing our dialogue with the Company as it implements these initiatives and works to deliver the substantial upside value that we see for all Goodyear shareholders."

The Review Committee consisted of five directors, including two new independent directors appointed in July 2023. Over the course of 16 weeks, the Review Committee engaged in deep analysis and deliberation with assistance from industry-leading financial advisors and consultants. The review culminated in a detailed and actionable plan to streamline the business, accelerate growth and enhance competitive positioning. The full Board will oversee the execution of the Goodyear Forward plan and remains committed to the ongoing assessment of value-enhancing opportunities. The Company will provide regular updates to shareholders on its progress executing the plan.

Goodyear Forward will deliver:

• Gross proceeds in excess of $2 billion from portfolio optimization. Following a comprehensive assessment of all assets, Goodyear has determined to actively pursue strategic alternatives for its Chemical business, the Dunlop brand and the Off-the-Road equipment tire business.
• Cost reduction actions driving an annual, run-rate benefit of $1 billion by the end of 2025. The Company has initiated a specific and actionable cost reduction plan encompassing footprint actions and plant optimization; purchasing; SAG; supply chain; and R&D. With many unique workstreams, Goodyear has a clear line-of-sight to 100% of the cost savings.
• Top line actions driving an annual, run-rate benefit of $300 million by the end of 2025. The Company has identified opportunities in North America to optimize brand and tier positioning, rationalize SKUs, increase customer and channel profitability and enhance coverage in premium product lines.
• Segment operating income margin doubling to 10% by the end of 2025. With the benefits of cost reduction and top line actions, and net of the impact of expected asset sales and inflation, the Company expects segment operating margin to double from approximately 5% in 2023 to 10% by the fourth quarter of 2025.
• Net leverage of 2.0x – 2.5x by the end of 2025. Goodyear will strengthen its financial profile through enhanced earnings, cash flow generation and debt reduction, moving the Company closer toward an investment-grade rating. The Company expects debt reduction of approximately $1.5 billion, net of approximately $1.1 billion for restructuring.

Evercore, Lazard and Goldman Sachs acted as financial advisors to Goodyear.

Investor Conference Call

Goodyear will host an investor call on Wednesday, Nov. 15, at 8:30 a.m. EST to discuss the transformation. The Company will also publish a related presentation on its investor relations website: http://investor.goodyear.com.  Participating in the conference call will be Richard J. Kramer, chairman, chief executive officer and president; and Christina L. Zamarro, executive vice president and chief financial officer.

The investor call can be accessed on the website or via telephone by calling either (800) 579-2543 or (785) 424-1789 before 8:25 a.m. EST and providing the conference ID "Goodyear." A replay will be available by calling (888) 567-0679 or (402) 530-0421. The replay will also remain available on the website.

About The Goodyear Tire & Rubber Company

Goodyear is one of the world's largest tire companies. It employs about 74,000 people and manufactures its products in 57 facilities in 23 countries around the world. Its two Innovation Centers in Akron, Ohio, and Colmar-Berg, Luxembourg, strive to develop state-of-the-art products and services that set the technology and performance standard for the industry. For more information about Goodyear and its products, go to www.goodyear.com/corporate.

Forward-Looking Statements

Certain information contained in this news release constitutes forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. There are a variety of factors, many of which are beyond our control, that affect our operations, performance, business strategy and results and could cause our actual results and experience to differ materially from the assumptions, expectations and objectives expressed in any forward-looking statements. These factors include, but are not limited to: our ability to implement successfully our cost reduction and rationalization actions and other strategic initiatives, including any initiatives resulting from the strategic and operational review of our business that are discussed in this news release or may be announced in the future; a prolonged economic downturn or period of economic uncertainty; increases in the prices paid for raw materials and energy; inflationary cost pressures; delays or disruptions in our supply chain or the provision of services to us; changes in tariffs, trade agreements or trade restrictions; actions and initiatives taken by both current and potential competitors; deteriorating economic conditions or an inability to access capital markets; a labor strike, work stoppage, labor shortage or other similar event; financial difficulties, work stoppages, labor shortages or supply disruptions at our suppliers or customers; the adequacy of our capital expenditures; foreign currency translation and transaction risks; our failure to comply with a material covenant in our debt obligations; potential adverse consequences of litigation involving the company; as well as the effects of more general factors such as changes in general market, economic or political conditions or in legislation, regulation or public policy. Additional factors are discussed in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

Use of Forward-Looking Non-GAAP Measures

This news release includes non-GAAP financial measures, including Total Segment Operating Margin and Net Leverage, which are important financial measures for the company but are not financial measures defined by U.S. GAAP, and should not be construed as alternatives to corresponding financial measures presented in accordance with U.S. GAAP.

Total Segment Operating Income is the sum of the individual strategic business units' (SBUs') Segment Operating Income as determined in accordance with U.S. GAAP. Total Segment Operating Margin is Total Segment Operating Income divided by Net Sales as determined in accordance with U.S. GAAP. Management believes that Total Segment Operating Income and Margin are useful because they represent the aggregate value of income created by the company's SBUs and exclude items not directly related to the SBUs for performance evaluation purposes. The most directly comparable U.S. GAAP financial measures to Total Segment Operating Income and Margin are Goodyear Net Income (Loss) and Return on Net Sales (which is calculated by dividing Goodyear Net Income (Loss) by Net Sales).

Net Leverage is the company's total debt less cash and cash equivalents as determined in accordance with U.S. GAAP divided by Adjusted EBITDA, calculated as Net Income (Loss), as determined in accordance with U.S. GAAP (the most directly comparable U.S. GAAP financial measure to Adjusted EBITDA), before interest expense, income tax expense, depreciation and amortization expense, rationalization charges, and other (income) and expense. Management believes that the ratio of net debt to Adjusted EBITDA, or similar ratios, are widely used by investors as a means of evaluating the company's leverage.

It should be noted that other companies may calculate similarly-titled non-GAAP financial measures differently and, as a result, the measures presented herein may not be comparable to such similarly-titled measures reported by other companies.

We are unable to present a quantitative reconciliation of our forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures because management cannot reliably predict all of the necessary components of those U.S. GAAP financial measures without unreasonable effort. Those forward-looking non-GAAP financial measures, or components thereof, would be reconciled to Net Income (Loss), which includes several significant items that are not included in the comparable non-GAAP financial measures, such as rationalization charges, other (income) and expense, pension curtailments and settlements, and income taxes. The decisions and events that typically lead to the recognition of these and other similar non-GAAP adjustments, such as a decision to exit part of our business, acquisitions and dispositions, capital expenditures, foreign currency exchange gains and losses, financing fees, actions taken to manage our pension liabilities, and the recording or release of tax valuation allowances, are inherently unpredictable as to if or when they may occur. The inability to provide a reconciliation is due to that unpredictability and the related difficulty in assessing the potential financial impact of the non-GAAP adjustments. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to our future financial results.

 

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