On June 7, 2021, we completed our acquisition of all of the outstanding shares of common stock of Cooper Tire pursuant to the terms of the Merger Agreement. Cooper Tire’s results of operations have been included in our consolidated financial statements since the Closing Date. 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") as consideration pursuant to the terms of the Merger Agreement, which amounted to approximately $3.1 billion. The acquisition will expand Goodyear’s product offering by combining two portfolios of complementary brands.

We used the net proceeds from the issuance of new senior notes with an aggregate principal amount of $1.45 billion, together with cash on hand and borrowings under our first lien revolving credit facility, to finance the cash component of the Merger Consideration and related transaction costs. For further information regarding the new senior notes and the first lien revolving credit facility, refer to Note to the Consolidated Financial Statements No. 9, Financing Arrangements and Derivative Financial Instruments.

The calculation of the Merger Consideration is as follows:


(In millions, except share and per share amounts)	Shares		Per Share (4)		Total
Cash paid for Cooper Tire Shares(1)					$	2,121
Cash paid for other Cooper Tire incentive compensation awards(2)						34
Cash component of the Merger Consideration					$	2,155
Shares of Goodyear Common Stock issued to Cooper Tire Stockholders(3)		46,060,349	$	20.46		942
Merger Consideration					$	3,097

(1)

The cash component of the Merger Consideration is computed based on 100% of the outstanding shares of Cooper Tire common stock as of the Closing Date, including shares issuable pursuant to the conversion of certain equity-based awards outstanding under Cooper Tire’s equity-based incentive compensation plans (“Cooper Tire Shares”), being exchanged, in part, for the per share cash amount of $41.75. Awards outstanding under Cooper Tire equity-based incentive compensation plans that were converted include Cooper Tire restricted stock units and Cooper Tire performance stock units. These Cooper Tire equity-based awards were canceled and each share equivalent unit was converted, as appropriate, into the Merger Consideration.


(In millions, except share and per share amounts)	Shares		Per Share		Total
Shares of Cooper Tire Common Stock outstanding		50,523,922
Shares issuable pursuant to conversion of share units outstanding under Cooper Tire equity-based compensation plans		269,238
Cooper Tire Shares		50,793,160	$	41.75	$	2,121

(2)

Cash consideration for the settlement of outstanding Cooper Tire stock options, Cooper Tire performance cash units and Cooper Tire notional deferred stock units, all of which were cancelled at the Closing Date and paid in cash.

(3)

The stock component of the Merger Consideration is computed based on a fixed exchange ratio of 0.907 shares of Goodyear common stock per Cooper Tire Share being exchanged. Shares issued of 46,060,349 are comprised of 45,824,480 of newly issued shares and 235,869 of shares issued from treasury.


	Shares		Exchange Ratio		Total
Cooper Tire Shares		50,793,160
Less: Cooper Tire Shares settled in cash(5)		9,975
		50,783,185		0.907		46,060,349

(4)

Represents the closing market price of our common stock as of June 4, 2021, the last trading day prior to the Closing Date.

(5)

Represents fractional and certain other shares that were settled in cash.

The Consolidated Statements of Cash Flows are presented net of the stock component of the Merger Consideration, which represents a non-cash transaction.

Under the acquisition method of accounting, the Merger Consideration is allocated, as of the Closing Date, to the identifiable assets acquired and liabilities assumed of Cooper Tire, which are recognized and measured at fair value based on management’s estimates, available information, and supportable assumptions that management considers reasonable. The determination of the fair values of certain assets acquired, including Property, Plant and Equipment, Goodwill and Intangible Assets, are preliminary and are dependent upon completion of further fair value analysis by the Company. The determination of the fair values of certain liabilities assumed are also preliminary and dependent upon completion of certain actuarial and other valuations and studies. Given the complex nature of the related valuations and analyses to be completed and the timing of the acquisition, the preliminary purchase price allocation is subject to change. The final valuation of assets acquired and liabilities assumed may be materially different from the estimated values shown below.

During the third quarter of 2021, progress was made in completing certain of our additional valuations and analyses. As such, we updated our initial allocation of the Merger Consideration that was completed during the second quarter of 2021. Principle changes include (i) decreasing the value attributed to customer relationships primarily to reflect updated assumptions related to customer attrition rates, (ii) increasing the value attributed to indefinite-lived trade names to reflect our long-term view of how each acquired brand fits into the overall product portfolio of the combined company and the appropriate royalty rate to value each acquired brand based on expected profitability, and (iii) decreasing the value attributed to Property, Plant and Equipment primarily to reflect updated assumptions related to the remaining expected useful lives of certain assets acquired. These adjustments were recorded net of adjustments to Deferred Tax Liabilities with the corresponding offset recorded to Goodwill.

The following table sets forth measurement period changes during the third quarter of 2021, as well as the updated and initial preliminary allocation of the Merger Consideration to the estimated fair value of the identifiable tangible and intangible assets acquired and liabilities assumed of Cooper Tire, with the excess recorded to Goodwill as of the Closing Date:


(In millions)	Updated Preliminary Purchase Price Allocation		Measurement Period Changes			Initial Preliminary Purchase Price Allocation
Cash and Cash Equivalents	$	231	$	—		$	231
Accounts Receivable		626		5			621
Inventories		683		(10	)		693
Property, Plant and Equipment		1,341		(31	)		1,372
Goodwill		626		151			475
Intangible Assets		926		(160	)		1,086
Other Assets		354		(8	)		362
		4,787		(53	)		4,840

Accounts Payable — Trade		464		—			464
Compensation and Benefits		385		(1	)		386
Debt, Finance Leases and Notes Payable and Overdrafts		151		—			151
Deferred Tax Liabilities, net		298		(49	)		347
Other Liabilities		371		(3	)		374
Minority Equity		21		—			21
		1,690		(53	)		1,743
Merger Consideration	$	3,097	$	—		$	3,097

The estimated value of Inventory includes adjustments totaling $220 million, comprised of $110 million, primarily to adjust inventory valued on a last-in, first-out ("LIFO") basis to a current cost basis, and $110 million to step-up inventory to estimated fair value. The fair value step-up was amortized to Cost of Goods Sold ("CGS") as the related inventory was sold, which negatively impacted the third quarter and first nine months of 2021 by $72 million and $110 million, respectively. We have eliminated the LIFO reserve on Cooper Tire’s U.S. inventories as we predominately determine the value of our inventory using the first-in, first-out ("FIFO") method. To estimate the fair value of inventory, we considered the components of Cooper Tire’s inventory, as well as estimates of selling prices and selling and distribution costs that were based on Cooper Tire’s historical experience.

The estimated value of Property, Plant and Equipment includes adjustments totaling $141 million to increase the net book value of $1,200 million to the preliminary fair value estimate of $1,341 million. This estimate is based on a combination of cost and market approaches, including appraisals, and preliminary expectations as to the duration of time we expect to realize benefits from those assets, as we continue to assess the underlying condition of Cooper Tire’s fixed assets.

The estimated fair values of identifiable intangible assets acquired were prepared using an income valuation approach, which requires a forecast of expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method. The estimated useful lives are based on our historical experience and expectations as to the duration of time we expect to realize benefits from those assets. The estimated fair values of the identifiable intangible assets acquired, their weighted average estimated useful lives and the related valuation methodology are as follows:


(In millions, except years)	Updated Preliminary Fair Value		Measurement Period Changes			Initial Preliminary Fair Value		Weighted Average Useful Lives	Valuation Methodology
Trade names (indefinite-lived)	$	520	$	210		$	310	N/A	Relief-from-royalty
Trade names (definite-lived)		10		(30	)		40	14 years	Relief-from-royalty
Customer relationships		390		(340	)		730	12 years	Multi-period excess earnings
Non-compete and other		6		—			6	2 years	Discounted cash flow
	$	926	$	(160	)	$	1,086

At the Closing Date, all of the calculated Goodwill of $626 million was allocated to our Americas segment. The goodwill consists of expected future economic benefits that will arise from expected future product sales, operating efficiencies and other synergies that may result from the Merger, including income tax synergies, and is not deductible for tax purposes.

Net sales and earnings related to Cooper Tire’s operations that have been included in our Consolidated Statements of Operations for the period from the Closing Date through September 30, 2021 are as follows:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(In millions)	2021		2021
Net Sales	$	907	$	1,163
Income (Loss) before Income Taxes		41		21
Goodyear Net Income (Loss)		30		24

During the nine months ended September 30, 2021, we incurred transaction and other costs in connection with the Merger totaling $55 million, including $10 million for a commitment fee related to a bridge term loan facility that was not utilized to finance the transaction and $6 million related to the post-combination settlement of certain Cooper Tire incentive compensation awards during the second quarter of 2021. For the nine months ended September 30, 2021, $49 million of these costs are included in Other (Income) Expense, with the remainder included in CGS and Selling, Administrative and General Expense ("SAG") in our Consolidated Statements of Operations. There were no transaction costs related to the Merger during the third quarter of 2021.

The following table summarizes, on a pro forma basis, the combined results of operations of Goodyear and Cooper Tire as though the acquisition and the related financing had occurred as of January 1, 2020. The pro forma results are not necessarily indicative of either the actual consolidated results had the acquisition of Cooper Tire occurred on January 1, 2020, nor are they indicative of future consolidated operating results.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2021		2020		2021		2020
Net Sales	$	4,934	$	4,246	$	13,678	$	10,499
Income (Loss) before Income Taxes		255		145		606		(1,462	)
Goodyear Net Income (Loss)		183		115		426		(1,474	)