The Goodyear Tire & Rubber Company

The site's on hold. We appreciate your patience and please continue to stand by. Your program will begin shortly. Thank you. Thank you. Thank you. Please stand by. Your program is about to begin. If you need audio assistance during your conference today, please press star zero. Good morning. My name is Katherine, and I will be your conference operator today. At this time, I would like to welcome everyone to the Goodyear fourth quarter 2021 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. I will now hand the program over to Christian Gedzinski, Senior Director, Investor Relations.

Thank you, Catherine, and thank you, everyone, for joining us for Goodyear's fourth quarter 2021 earnings call. I'm joined here today by Rich Kramer, Chairman and Chief Executive Officer, Darren Wells, Executive Vice President and Chief Financial Officer, and Christina Zamoro, Vice President, Finance and Treasurer. The supporting presentation for today's call can be found on our website at investor.goodyear.com, and a replay of this call will be available later today. Replay instructions were included in our earnings release issued earlier this morning. If I can now draw your attention to the Safe Harbor Statement on slide two, I would like to remind participants on today's call that our presentation includes some forward-looking statements about Goodyear's future performance. Actual results could differ materially from those suggested by our comments today. The most significant factors that could affect future results are outlined in Goodyear's filings with the SEC and in our earnings release. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Our financial results are presented on a GAAP basis, and in some cases, a non-GAAP basis. The non-GAAP financial measures discussed in the call are reconciled to the U.S. GAAP equivalent as part of the appendix to the slide presentation. And with that, I will now turn the call over to Rich.

Great. Good morning, and thank you for joining today's call. Before we begin, I'd like to take a moment to welcome Christian Gedzinski as our new Senior Director of Investor Relations. Christian is a long-time member of both our finance and North American business teams, and I know he's already familiar to a number of you. Welcome, Christian. Great to have you back on the team. I also want to mention that we're including Goodyear's updated strategy roadmap in today's slide presentation. Well, not something that we're going to have time to go through in detail today. We're sharing it to point out that it includes some important updates to reflect the inclusion of Cooper Tire and the increased importance we're putting on both sustainability and mobility. As you saw in our press release issued earlier today, we continue to have solid momentum in our business. Our fourth quarter sales increased nearly 40% to just over $5 billion, reflecting both the addition of Cooper Tire and the benefit of higher selling prices, particularly in the U.S. This marks our highest fourth quarter revenue in nearly 10 years. This robust sales performance helped us overcome significant cost inflation and deliver strong earnings growth. We generated $398 million of merger-adjusted segment operating income during the quarter, significantly higher than last year and over 60% higher than fourth quarter 2019. These were simply excellent results for our teams, who stuck to our strategy in an environment of rising costs. Like last quarter, our consumer business outperformed the industry globally. We're benefiting from new product launches, actions to strengthen distribution, and recent OE fitment wins, including robust growth in EV tire deliveries. In all, we added more than one-half of a percentage point of organic consumer market share during the quarter. This performance is a great example of all our components of our connected business model at work. At the same time, our commercial business is also performing well, reflecting strong fundamentals in the trucking industry, our best-in-class products, and the strength of our fleet solutions offering. We've gained nearly a percentage point of market share since the fourth quarter of 2019 by doing our part to keep commercial vehicles road-ready and operating efficiently. These mobility solutions give us tremendous advantage in today's rising cost environments. To provide some perspective on costs, our raw materials increased more than $300 million in the quarter, or 31%, a significant acceleration from earlier in the year. As with most companies, inflation is impacting more than just our raw materials. We are seeing these impacts throughout our cost base. To address cost pressures and supply chain challenges, we've remained agile. During 2021, we've implemented a series of price increases. We're also adding new suppliers, substituting materials when possible, and optimizing distribution costs. I'm really pleased with how our team has been aggressively responding in this environment, looking for opportunities to minimize the impact of inflation while increasing the certainty of our supply. Looking ahead, we expect cost pressures to persist over the next several quarters. As you would expect, we remain focused on executing strategies to capture value and drive efficiencies while prudently managing our costs. At its core, our connected business model is about winning with our brands in the marketplace. It's where we create value for our customers and consumers that in turn enables us to differentiate our products and services. As we executed on our strategies in 2021, we also expanded our scope. As you know, in June of last year, we took an important strategic step to strengthen the breadth of our product portfolio, enhance our value proposition with the acquisition of Cooper Tire. We continue to be pleased with the transaction and the opportunities we have going forward as a combined company. During the fourth quarter, Cooper contributed $156 million to merger-adjusted segment operating income, and we continue to make good progress toward our synergy targets. Moreover, I'm confident that with the combination, we have positioned our business to deliver strong organic sales and earnings growth over the long term. In summary, our business is performing well in an environment marked by volatility. We are growing our market share while capturing more value in the marketplace. We're making progress with our integration while maintaining our focus on customers and consumers. And you can see these elements of these successes in each of our SBUs. In the Americas, our U.S. consumer replacement business grew market share for the fourth consecutive quarter. Our premium volume, or our 17-inch and larger rim-sized tires, increased 9% despite supply constraints, including low inventory levels. While we're winning in the market today, we're also readying our business for tomorrow. To this end, we launched our first North America replacement tire tuned specifically for EVs during the quarter. The Goodyear Electric Drive GT, which incorporates our proprietary sound comfort technology, is an ultra-high-performance all-season tire designed to deliver long-lasting tread wear and a quiet ride. We're excited to offer today's high-performance EV owners this best-in-class, fit-for-purpose tire. We're also working hard to keep our Cooper product line current. Now, more than ever, today's value-minded light truck and SUV owners want functional performance and rugged tread patterns at attractive prices. With industry-leading mid-tier products, such as the Discover Rugged Trek all-terrain tire, Cooper is meeting consumers' needs and profitably growing share. Turning to our U.S. commercial business, with diesel and driver costs surging, we continue to see strong demand from fleets looking to leverage our premium tires and mobility solutions to improve their operational costs. Cost per mile is as critical today as it ever has been, and this feeds into our strengths in technology. In this environment, our commercial replacement volume was well ahead of pre-pandemic levels, and as we discussed in the past, if not for supply constraints, our commercial results could have been even stronger. As we look outside the U.S., our business in Latin America is performing well in a challenging environment. The replacement market continues to recover with both consumer and commercial industries approaching pre-pandemic levels. Throughout last year, our Latin American team has consistently demonstrated a commitment to our connected business model by expanding aligned distribution, driving the value of our brand, and successfully executing our product roadmap. We've also remained intensely focused on meeting the needs of our customers, enabling them to continue winning in the marketplace through best-in-class products and services. I couldn't be more pleased with the performance of our Latin American business in 2021, which is a testament to the experience of our leadership team and their ability to successfully navigate through volatility while remaining focused on executing our strategy and delivering value for our customers. Moving on to EMEA, we're seeing continued share recovery in our consumer business, reflecting the impact of last year's actions to strengthen distribution. We're also benefiting in the mid-tier and the economy segments from the current impact of fewer imports into the region. These dynamics are particularly evident in the EU, where we are winning in both the premium and value segments. Overall, we grew our consumer replacement volume 22% organically, or about 8 percentage points faster than the industry. By having the right tires for the right season, we're gaining market share in both summer and winter tire categories, a testament to the strength and breadth of our product portfolio. Turning to EMEA's commercial business, we continue to benefit from our innovations to support our customer transition to a greener future without adding complexity. By developing fuel-efficient products, such as the FuelMax Endurance, and easy-to-use solutions that meet customers' sustainability and efficiency needs, we've been able to grow our volume nearly 10% since 2019. Our suite of products and services for fleets was designed to capitalize on these growing trends. With 80% of fleets expected to have sustainability KPIs in place by year end, our Goodyear Total Mobility offering will afford us significant competitive advantage in the years ahead. In our Asia-Pacific business, we experienced better industry demand than in the third quarter, reflecting less COVID-related disruptions in China and several ASEAN markets. Again, the improving backdrop of our legacy Asia-Pacific business delivered its highest consumer replacement volume on record. With lockdowns and mobility restrictions easing, OE demand was more consistent, but it remained below pre-pandemic levels due to the continued impact of semiconductor shortages. In this environment, we grew our consumer OE volume 6% organically compared to the prior year as the benefit of new fitments more than offset the impact of reduced auto production. In our consumer replacement business, we dramatically outpaced the industry again with organic volume increasing 4% in a relatively flat market. We're benefiting from the continued distribution expansion in India, particularly in rural areas, which resulted in consumer replacement volume growth of nearly 40% in the quarter. In China, the digital tools rolling out make it easier for consumers and customers to choose Goodyear. For example, our app-based direct-to-retail distribution model has been instrumental in expanding dealers' access to our product portfolio and driving share gains. We plan to complete the rollout and add additional functionality this year, further strengthening our competitive position. While we've been focused on execution in today's volatile environment, our goals include advancing our technology and capabilities as well. This work includes various forms of information sharing, co-development, and testing through partnerships with traditional and emerging mobility companies alike. We are continually innovating and collaborating to drive the tire industry's evolution to the next level of performance. So with this as our strategy, our tire intelligence team launched a new test vehicle during the quarter equipped with proprietary algorithms and tire sensors powered by Goodyear Sightline. We're harvesting the power of rapidly prototyping hardware and vehicle data to enhance our ability to analyze tire and road conditions in real time. Mastering these challenges will enable next-generational vehicle control systems and advanced fleet monitoring solutions. This new capability, when coupled with our industry-leading tire technology, will be a core differentiator over the long term. While staying on the cutting edge of tire intelligence will benefit consumers and commercial customers, we're also focused on building a more sustainable business so Goodyear remains the world's preferred tire brand. To this end, we announced our goal to achieve net-zero greenhouse gas emissions by 2050 with minimal reliance on offsets. In support of this ambition, we established new intermediate-term emissions reduction targets aligned with SBTI standards. We understand the importance of reducing our carbon footprint, and our new goals demonstrate our pledge to combat climate change. As an industry leader, we're also committed to using more sustainable materials in our tires to help protect our planet for future generations. As a result, we're working diligently to develop a 100% sustainable material tire by the end of the decade, and the focus is paying off. In January, less than two years after setting the goal, our scientists and engineers constructed a demonstration tire with 70% sustainable material content. 13 featured ingredients are used during construction, including technical-grade polyester sourced from recycled plastic bottles. While we're building the scientific and engineering capabilities to work with these new materials, we're also developing new supply chains to support the transition over time. We're off to a fantastic start, and I look forward to updating you on our progress in the future. As I reflect on 2021, our business is performing exceptionally well. Uncertainty around inflationary cost pressures and industry demand remains, but we're well positioned to deal with these challenges. U.S. inflation gauges are at 40-year highs, reflecting the impact of higher labor, transportation, energy, and commodities. We're committed to taking the steps necessary to counter the impact of these higher costs. The supply of semiconductors is improving, but auto production remains well below consumer demand. While this dynamic creates uncertainty for our OE volume in the near term, our robust OE pipeline positions us for continued share gains regardless of the level of auto production this year. So taken together, our business is performing at a high level despite a challenging macroeconomic environment. We're recovering share while improving margins. The Cooper integration is off to a strong start, and we're driving the innovation necessary to ensure we continue leading our industry through the mobility revolution and beyond. So now I'm going to turn the call over to Darren. Thanks, Rich.