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Financing Arrangements and Derivative Financial Instruments | 9 Months Ended
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Sep. 30, 2023
Financing Arrangements And Derivative Financial Instruments [Abstract] |
Financing Arrangements and Derivative Financial Instruments | NOTE 8. FINANCING ARRANGEMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS At September 30, 2023, we had total credit arrangements o f $11,624 million, of which $3,077 million were unused. At that date, approximately 30% of our debt was at variable interest rates averaging 6.99%. Notes Payable and Overdrafts, Long Term Debt and Finance Leases due Within One Year and Short Term Financing Arrangements At September 30, 2023, we had short term committed and uncommitted credit arrangements totaling $668 million, of which $303 million were unused. These arrangements are available primarily to certain of our foreign subsidiaries throug h various banks at quoted market interest rates. The following table presents amounts due within one year:
|  | September 30, |  |  | December 31, |
(In millions) |  | 2023 |  |  | 2022 |
Chinese credit facilities |  | $ | 15 |  |  | $ | 26 |
Other foreign and domestic debt |  |  | 307 |  |  |  | 369 |
Notes Payable and Overdrafts |  | $ | 322 |  |  | $ | 395 |
Weighted average interest rate |  |  | 9.06 | % |  |  | 5.75 | %
Chinese credit facilities |  | $ | 88 |  |  | $ | 136 |
Other foreign and domestic debt (including finance leases) |  |  | 189 |  |  |  | 92 |
Long Term Debt and Finance Leases due Within One Year |  | $ | 277 |  |  | $ | 228 |
Weighted average interest rate |  |  | 6.69 | % |  |  | 3.88 | %
Total obligations due within one year |  | $ | 599 |  |  | $ | 623 |
Long Term Debt and Finance Leases and Financing Arrangements At September 30, 2023, we had long term credit arrangements totaling $10,956 million, of which $2,774 mil lion were unused. The following table presents long term debt and finance leases, net of unamortized discounts, and interest rates:
|  | September 30, 2023 |  |  | December 31, 2022 |
|  |  |  |  | Interest |  |  |  |  |  | Interest |
(In millions) |  | Amount |  |  | Rate |  |  | Amount |  |  | Rate |
Notes: |  |  |  |  |  |  |  |  |  |  |  |
9.5% due 2025 |  | $ | 801 |  |  |  |  |  | $ | 802 |  |  |  |
5% due 2026 |  |  | 900 |  |  |  |  |  |  | 900 |  |  |  |
4.875% due 2027 |  |  | 700 |  |  |  |  |  |  | 700 |  |  |  |
7.625% due 2027 |  |  | 129 |  |  |  |  |  |  | 131 |  |  |  |
7% due 2028 |  |  | 150 |  |  |  |  |  |  | 150 |  |  |  |
2.75% Euro Notes due 2028 |  |  | 424 |  |  |  |  |  |  | 427 |  |  |  |
5% due 2029 |  |  | 850 |  |  |  |  |  |  | 850 |  |  |  |
5.25% due April 2031 |  |  | 550 |  |  |  |  |  |  | 550 |  |  |  |
5.25% due July 2031 |  |  | 600 |  |  |  |  |  |  | 600 |  |  |  |
5.625% due 2033 |  |  | 450 |  |  |  |  |  |  | 450 |  |  |  |
Credit Facilities: |  |  |  |  |  |  |  |  |  |  |  |
First lien revolving credit facility due 2026 |  |  | 790 |  |  |  | 6.65 | % |  |  | — |  |  |  | — |
European revolving credit facility due 2028 |  |  | 530 |  |  |  | 5.23 | % |  |  | 374 |  |  |  | 3.39 | %
Pan-European accounts receivable facility |  |  | 260 |  |  |  | 5.69 | % |  |  | 267 |  |  |  | 3.77 | %
Mexican credit facility |  |  | 200 |  |  |  | 7.27 | % |  |  | 200 |  |  |  | 6.29 | %
Chinese credit facilities |  |  | 216 |  |  |  | 3.95 | % |  |  | 235 |  |  |  | 4.23 | %
Other foreign and domestic debt(1) |  |  | 581 |  |  |  | 7.62 | % |  |  | 650 |  |  |  | 6.58 | %
|  |  | 8,131 |  |  |  |  |  |  | 7,286 |  |  |  |
Unamortized deferred financing fees |  |  | (39 | ) |  |  |  |  |  | (46 | ) |  |  |
|  |  | 8,092 |  |  |  |  |  |  | 7,240 |  |  |  |
Finance lease obligations(2) |  |  | 252 |  |  |  |  |  |  | 255 |  |  |  |
|  |  | 8,344 |  |  |  |  |  |  | 7,495 |  |  |  |
Less portion due within one year |  |  | (277 | ) |  |  |  |  |  | (228 | ) |  |  |
|  | $ | 8,067 |  |  |  |  |  | $ | 7,267 |  |  |  |
(1) Interest rates are weighted average interest rates primarily related to various foreign credit facilities with customary terms and conditions. (2) Includes $2 million of non-cash financing additions during the nine months ended September 30, 2023, and $20 million of non-cash financing additions during the twelve months ended December 31, 2022. NOTES At September 30, 2023, we ha d $5,554 mi llion o f outstanding notes, compared to $5,560 million at December 31, 2022. CREDIT FACILITIES $2.75 billion Amended and Restated First Lien Revolving Credit Facility due 2026 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. Subject to the consent of the lenders whose commitments are to be increased, we may request that the facility be increased by up to $250 million. Our obligations under the facility are guaranteed by most of our wholly-owned U.S. and Canadian subsidiaries. Our obligations under the facility and our subsidiaries' obligations under the related guarantees are secured by first priority security interests in a variety of collateral. 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, (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. 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. As of September 30, 2023, our borrowing base was above the facility's stated amount of $2.75 billion. The facility has 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. The facility also has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries. If Available Cash (as defined in the facility) plus the availability under the facility is greater than $750 million, amounts drawn under the facility will bear interest, at our option, at (i) 125 basis points over SOFR or (ii) 25 basis points over an alternate 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) SOFR for a one month interest period plus 100 basis points). If Available Cash plus the availability under the facility is equal to or less than $750 million, then amounts drawn under the facility will bear interest, at our option, at (i) 150 basis points over SOFR or (ii) 50 basis points over an alternate base rate. Based on our current liquidity, amounts drawn under this facility bear interest at SOFR plus 125 basis points. Undrawn amounts under the facility are subject to an annual commitment fee of 25 basis points. At September 30, 2023, we had $790 million of borrowings and $1 million of letters of credit issued under the revolving credit facility. At December 31, 2022, we had no borrowings and $3 million of letters of credit issued under the revolving credit facility. €800 million Amended and Restated Senior Secured European Revolving Credit Facility due 2028 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 Goodyear Europe B.V. ("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. 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. Amounts drawn under this facility will bear interest at SOFR 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. GEBV and certain of its subsidiaries in the United Kingdom, Luxembourg, France and Germany provide guarantees to support the facility. The German guarantors secure the German tranche on a first-lien basis and the all-borrower tranche on a second-lien basis. GEBV and its other subsidiaries that provide guarantees secure the all-borrower tranche on a first-lien basis and generally do not provide collateral support for the German tranche. The Company and its U.S. and Canadian subsidiaries that guarantee our U.S. first lien revolving credit facility described above also provide unsecured guarantees in support of the facility. The facility has 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, 2021. The facility also has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries. At September 30, 2023, there were $191 million (€180 million) of borrowings outstanding under the German tranche, $339 million (€320 million) of borrowings outstanding under the all-borrower tranche and no letters of credit outstanding under the European revolving credit facility. At December 31, 2022, there were no borrowings outstanding under the German tranche, $374 million (€350 million) of borrowings outstanding under the all-borrower tranche and no letters of credit outstanding under the European revolving credit facility. Accounts Receivable Securitization Facilities (On-Balance Sheet) GEBV and certain other of our European subsidiaries are parties to a pan-European accounts receivable securitization facility that expires in 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 20, 2022 through October 18, 2023, the designated maximum amount of the facility was €300 million. For the period from October 19, 2023 through October 16, 2024, the designated maximum amount of the facility will remain €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 16, 2024. At September 30, 2023, the amounts available and utilized under this program totaled $260 million (€245 million). At December 31, 2022, the amounts available and utilized under this program totaled $267 million (€250 million). The program does not qualify for sale accounting, and accordingly, these amounts are included in Long Term Debt and Finance Leases. For a description of the collateral securing the credit facilities described above as well as the covenants applicable to them, refer to Note to the Consolidated Financial Statements No. 16, Financing Arrangements and Derivative Financial Instruments, in our 2022 Form 10-K. 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 September 30, 2023, the gross amount of receivables sold was $621 million, compared to $744 million at December 31, 2022. Other Foreign Credit Facilities A Mexican subsidiary and a U.S. subsidiary have a revolving credit facility in Mexico. At September 30, 2023 and December 31, 2022, the amounts available and utilized under this facility were $200 million. The facility ultimately matures on November 22, 2024, has covenants relating to the Mexican and U.S. subsidiaries, and has customary representations and warranties and defaults relating to the Mexican and U.S. subsidiaries’ ability to perform their respective obligations under the facility. Our Chinese subsidiaries have several financing arrangements in China. These facilities contain covenants relating to these Chinese subsidiaries and have customary representations and warranties and defaults relating to these Chinese subsidiaries' ability to perform their respective obligations under these facilities. These facilities are also available for other off-balance sheet utilization, such as letters of credit and bank acceptances. The following table presents the total amounts available and utilized under the Chinese financing arrangements:
|  | September 30, |  |  | December 31, |
(In millions) |  | 2023 |  |  | 2022 |
Total available |  | $ | 900 |  |  | $ | 852 |
Amounts utilized: |  |  |  |  |  |
Notes Payable and Overdrafts |  | $ | 15 |  |  | $ | 26 |
Long Term Debt due Within One Year |  |  | 88 |  |  |  | 136 |
Long Term Debt |  |  | 128 |  |  |  | 99 |
Letters of credit, bank acceptances and other utilization |  |  | 81 |  |  |  | 75 |
Total utilized |  | $ | 312 |  |  | $ | 336 |
Maturities |  | 11/23-8/28 |  |  | 1/23-8/25 |
Certain of these facilities can only be used to finance the expansion of one of our manufacturing facilities in China and, at September 30, 2023, the unused amount available under these facilities was $92 million, compared to $63 million at December 31, 2022. DERIVATIVE FINANCIAL INSTRUMENTS We utilize derivative financial instrument contracts and nonderivative instruments to manage interest rate, foreign exchange and commodity price risks. We have established a control environment that includes policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. We do not hold or issue derivative financial instruments for trading purposes. Foreign Currency Contracts We enter into foreign currency contracts in order to manage the impact of changes in foreign exchange rates on our consolidated results of operations and future foreign currency-denominated cash flows. These contracts may be used to reduce exposure to currency movements affecting existing foreign currency-denominated assets, liabilities, firm commitments and forecasted transactions resulting primarily from trade purchases and sales, equipment acquisitions, intercompany loans and royalty agreements. Contracts hedging short term trade receivables and payables normally have no hedging designation. The following table presents the fair values for foreign currency hedge contracts that do not meet the criteria to be accounted for as cash flow hedging instruments:
|  | September 30, |  |  | December 31, |
(In millions) |  | 2023 |  |  | 2022 |
Fair Values — Current asset (liability): |  |  |  |  |  |
Accounts receivable |  | $ | 32 |  |  | $ | 4 |
Other current liabilities |  |  | (14 | ) |  |  | (10 | )
At September 30, 2023 and December 31, 2022, these outstanding foreign currency derivatives had notional amounts of $1,711 million and $1,197 million, respectively, and were primarily related to intercompany loans. Other (Income) Expense included net transaction gains on derivatives of $26 million and $30 million for the three and nine months ended September 30, 2023. Other (Income) Expense included net transaction gains on derivatives of $20 million and $54 million for the three and nine months ended September 30, 2022, respectively. These amounts were substantially offset in Other (Income) Expense by the effect of changing exchange rates on the underlying currency exposures. The following table presents fair values for foreign currency hedge contracts that meet the criteria to be accounted for as cash flow hedging instruments:
|  | September 30, |  |  | December 31, |
(In millions) |  | 2023 |  |  | 2022 |
Fair Values — Current asset (liability): |  |  |  |  |  |
Accounts receivable |  | $ | 1 |  |  | $ | 1 |
Other current liabilities |  |  | (3 | ) |  |  | (3 | )
At September 30, 2023 and December 31, 2022, these outstanding foreign currency derivatives had notional amounts o f $50 million and $71 million, respectively, and primarily related to U.S. dollar denominated intercompany transactions. Based on our current forecasts, we believe that it is probable that the underlying hedge transactions will occur within an appropriate time frame in order to continue to qualify for cash flow hedge accounting treatment. We enter into master netting agreements with counterparties. The amounts eligible for offset under the master netting agreements are not material and we have elected a gross presentation of foreign currency contracts in the Consolidated Balance Sheets. The following table presents the classification of changes in fair values of foreign currency contracts that meet the criteria to be accounted for as cash flow hedging instruments (before tax and minority):
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(In millions) |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Amount of gains (losses) deferred to Accumulated Other Comprehensive Loss ("AOCL") |  | $ | — |  |  | $ | 2 |  |  | $ | (4 | ) |  | $ | 3 |
Reclassification adjustment for amounts recognized in Cost of Goods Sold ("CGS") |  |  | 1 |  |  |  | — |  |  |  | 1 |  |  |  | (1 | )
The estimated net amount of deferred losses at September 30, 2023 that are expected to be reclassified to earnings within the next twelve months i s $3 mi llion. The counterparties to our foreign currency contracts were considered by us to be substantial and creditworthy financial institutions that were recognized market makers at the time we entered into those contracts. We seek to control our credit exposure to these counterparties by diversifying across multiple counterparties, by setting counterparty credit limits based on long term credit ratings and other indicators of counterparty credit risk such as credit default swap spreads and default probabilities, and by monitoring the financial strength of these counterparties on a regular basis. We also enter into master netting agreements with counterparties when possible. By controlling and monitoring exposure to counterparties in this manner, we believe that we effectively manage the risk of loss due to nonperformance by a counterparty. However, the inability of a counterparty to fulfill its contractual obligations to us could have a material adverse effect on our liquidity, financial position or results of operations in the period in which it occurs.

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