The Goodyear Tire & Rubber Company

We appreciate your patience and continue to stand by. Music Music Please stand by. Your program is about to begin. If you should need any audio assistance during your call today, please press star and zero. Good morning. My name is Ashley, and I will be your conference operator today. At this time, I would like to welcome everyone to the Goodyear First Quarter 2022 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 Gadzinski, Senior Director, Investor Relations. Please go ahead.

Thank you, Ashley, and thank you, everyone, for joining us for Goodyear's first quarter 2022 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 Zamaro, Vice President, Finance, and Treasurer. The supporting slide 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 could 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. Thank you, Christian, and good morning, everyone. I'm pleased to be with you today as we cover our results for the first quarter, which underscore the continued momentum of our business amidst the challenges our world is facing. Before jumping into the business performance, I'd like to take a few moments to recognize the current events that are impacting our customers, associates, and communities around the globe. The latest wave of COVID lockdowns in China is a reminder that the pandemic is very much still with us. Our hearts and minds are with our associates and others dealing with the related impacts of the virus there and elsewhere. At the same time, we share concern for those impacted by the war in Ukraine. It's heartening to see our Goodyear associates around the world responding to humanitarian aid efforts including associates in countries neighboring Ukraine who have offered housing, meals, medical attention, and legal services to those in need. Our response to this volatile situation embodies the Goodyear culture and the Goodyear spirit. We thank all of our associates for their selfless efforts and we hope for the health and safety of everyone affected. Moving on to our business results, I'm very pleased with our sales and earnings performance in the quarter. The results are a testament to the strength of our value proposition and solid execution by our teams. While the world continues to experience new levels of uncertainty, we remain focused on delivering our strategy. During the quarter, we continued to grow consumer market share globally and delivered price mix in a market that grew 4%. And while industry recovery from the pandemic hasn't been predictable, we have the technology, the brands, and the aligned distribution to win with customers and consumers in the market. We're also benefiting from our robust product lineup and our ability to have the right tire at the right place at the right time thanks to the tireless efforts of our sales and supply chain teams. Their contributions may never have been more important. Similarly, our global commercial business grew share over half a point in our legacy Goodyear business, including advances in both the replacement and OE channels. This momentum in our sales helped to drive significant year over year earnings growth. When including the addition of Cooper Tire and the benefit of strong pricing actions across our key markets, our merger adjusted segment operating income grew nearly 40%. And while inflation remained a significant factor in the quarter, it was otherwise in line with the expectations we described on our fourth quarter call. It's clear from our results that we continue to execute strategies to offset inflation with our teams driving a 17% increase in our revenue per tire during the quarter. Our data analytics enable us to evaluate day-to-day movement in end market pricing for ourselves and our competitors, giving us a clear picture of where we are relative to the market and maximizing our ability to capture value for our business. As I turn to discuss the results in our segments, I'll note that in the Americas Business Unit, we more than covered raw material and other cost inflation in the quarter. This dynamic in our home market, where we are the leading player, is a competitive advantage as we navigate this inflationary environment. Business in the U.S. market and in key markets throughout the Americas remained robust. America's revenue in the quarter was up over 60% year on year. While Cooper was a key driver, organic sales grew more than 20%. This increase reflects the strength of our value proposition in an expanding replacement market, which is now above pre-pandemic levels. And with the addition of Cooper, we expanded our operating profit margin in the Americas by a full point compared to the same period last year. In early April, Tire Hub, our national distributor, began to stock Cooper products, which means that these tires are now available for sale through Goodyear's extensive network of company-owned auto service centers throughout the United States. This expands our portfolio of product offerings greatly, just as we intended. Similarly, we have begun to tap the national reach of our in-house commercial tire and service centers to better meet the needs of existing fleet customers and access new ones with the Cooper commercial truck tire lineup. These moves give our distribution points an enriched product lineup that not only meets the needs of our premium buyers, but also those looking for additional offerings in the mid-tier and economy segments. At the same time, we're also bringing new products to market that highlight our capabilities to increase tire sustainability and take advantage of emerging EV trends. With the fuel-efficient FuelMax RSA and the electric drive-ready endurance RSA ultralight truck tire, Goodyear's first tire equipped for the higher load capacity of electric commercial vehicles, Goodyear is positioned to win in the growing last mile delivery segment by supporting the cost savings and sustainability goals of fleet customers. We're also adding to our consumer portfolio in the U.S. as we've expanded our lineup of the Eagle Exhilarate, our premium ultra-high performance all-season product, which features exceptional handling, traction, and enhanced braking for vehicles like the BMW 5 Series and the Mercedes E-Class. In EMEA, the consumer replacement industry returned to pre-pandemic volumes during the quarter. We outperformed, thanks to our actions over the last two years to strengthen distribution and continued success with our industry-leading product offerings. Our consumer replacement volume grew nearly 25% in the quarter, driven by the EU, where we gained share across multiple brands for summer, all season, and winter applications. This impressive performance translated to a full point share gain over the last year, continuing a trend we saw throughout 2021. While there's a lot of disruption in the Europe market right now, this performance reflects a combination of factors, including first rate execution by our manufacturing and supply chain teams to avoid supply disruptions, a consistent focus on delivering improvements in our distribution, and leveraging our Western European footprint. We also recently added to our long list of credentials, claiming multiple new product awards. During the quarter, several influential European auto magazines awarded the new Goodyear Eagle F1 Asymmetric and the Efficient Grip II SUV exemplary ratings. This recognition not only acknowledges our product and innovation leadership, but also our commitment to sustainability. The leading German trade publication, AutoBuild, recognized our product excellence and future-oriented sustainability when it named Goodyear Summer Tire Manufacturer of the Year. We're very proud of this recognition. Our EMEA commercial business also continues its trend of outstanding performance. Our proactive solutions business, a full suite of database solutions featuring advanced telematics and predictive analytics, is another way we're adding value for our fleet customers. These solutions, along with our industry-leading products, help contribute to continued commercial replacement volume growth in the quarter, now nearly 20% above pre-pandemic levels. Turning to Asia Pacific, we're focused on addressing near-term challenges while building for the future. Recently, lockdowns in China have resulted in disruptions at our factories in Poland and in Kunshan, as the country deals with the highest number of COVID cases it has experienced since 2020. Despite these challenges, our Asia-Pacific consumer replacement volume was a record, driven by the addition of Cooper Tire and growth in our legacy Goodyear business. During the quarter, we added three new territories under our direct-to-retail distribution initiative, which we've discussed previously, and at the same time, we continue to add new points of distribution. Our consumer OE business also saw significant improvement in volume, although industry demand remains below 2019 levels. In the quarter, we won a record number of Fitment nominations to secure future business many in the fast-growing EV segment. While our own volume trends have been positive in Asia Pacific, we have work to do to improve our margin. Asia Pacific generally sees the impact of higher raw material costs faster than our mature businesses, given lower inventories and proximity to material supply. Our near-term profitability in Asia Pacific is, to a great degree, dependent on the level of COVID-related disruptions in China. In the meantime, as you would expect, we're working to address cost increases with our OE customers and adjusting pricing for replacement products. We continue to believe in the long-term earnings power of Asia Pacific, now stronger with the addition of Cooper Tire. Our strong OE portfolio positions us for future pull-through and growth in replacement. We also continue to shape our business for tomorrow. Our technical teams continue to cultivate partnerships to grow our technology and capabilities for new mobility. In April, we announced a multi-year program supported by the U.S. Department of Defense, the Air Force Research Lab, and BioMADE to develop a domestic source of natural rubber for a specific type of dandelion. The partnership supports our continued work around sustainable tire materials. Another example of the progress we're making on tire sustainability comes from our commercial business, where we released our first city transit tire made with a sustainable soybean oil compound. This enables Goodyear, as well as our fleet customers, to achieve common sustainability goals. Moving beyond the tire itself, we also entered into a partnership with Nova Labs, a company that provides a unique decentralized data connectivity solution. This partnership will help expand the possibilities for future adoption and scaling of intelligent tires. Our technical organization, our business teams, and our venture arm are demonstrating Goodyear leadership within the evolving tire technology space and with the emergence of changes to mobility. Taken together, our business is performing at a high level amidst a world that is changing rapidly and more often than not, unpredictably. In that environment, we are executing on both short and long-term opportunities across our markets. As challenges arise, we leverage the strength of and compete on our technology and service offerings to win with customers and consumers. The result is stronger earnings despite much higher costs. We remain focused on delivering consistently today while at the same time laying the foundation for greater success in the future. Now with that, I'll turn the call over to Darren.