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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
Commission File Number: 1-1927
THE GOODYEAR TIRE & RUBBER COMPANY
(Exact name of Registrant as specified in its charter)
Ohio 34-0253240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1144 East Market Street, Akron, Ohio 44316-0001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 796-2121
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each Class which registered
------------------------------- --------------------------
Common Stock, Without Par Value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
___________________________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
___________________________
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein or in the definitive
proxy statement incorporated by reference in Part III of this Form 10-K.
[ ].
___________________________
The aggregate market value of Registrant's outstanding Common Stock held
by nonaffiliates of the Registrant on February 16, 1996, determined using the
per share closing price thereof on the New York Stock Exchange Composite
Transactions tape of $49.125 on that date, was approximately $7,579,681,795.12.
___________________________
SHARES OF COMMON STOCK, WITHOUT PAR VALUE, OUTSTANDING AT FEBRUARY 16, 1996:
154,471,026
___________________________
DOCUMENTS INCORPORATED BY REFERENCE:
PORTIONS OF REGISTRANT'S DEFINITIVE PROXY STATEMENT, DATED FEBRUARY 27,
1996, FOR ITS 1996 ANNUAL MEETING OF SHAREHOLDERS ARE INCORPORATED BY REFERENCE
INTO PART III.
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THE GOODYEAR TIRE & RUBBER COMPANY
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
TABLE OF CONTENTS
ITEM PAGE
NUMBER NUMBER
------ ------
PART I
1 Business .............................................. 1
2 Properties ............................................ 11
3 Legal Proceedings ..................................... 14
4 Submission of Matters to a Vote of Security Holders ... 17
4(A) Executive Officers of Registrant ...................... 17
PART II
5 Market for Registrant's Common Equity and Related
Stockholder Matters ................................... 21
6 Selected Financial Data ............................... 22
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations ................... 23
8 Financial Statements and Supplementary Data ........... 30
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ................... 51
PART III
10 Directors and Executive Officers of the Registrant .... 51
11 Executive Compensation ................................ 51
12 Security Ownership of Certain Beneficial Owners and
Management ............................................ 51
13 Certain Relationships and Related Transactions ........ 51
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K .............................................. 52
Signatures ............................................ 54
Index to Financial Statement Schedules ................ FS-1
Index of Exhibits ..................................... X-1
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THE GOODYEAR TIRE & RUBBER COMPANY
PART I
ITEM 1. BUSINESS.
BUSINESS OF GOODYEAR
The Goodyear Tire & Rubber Company is an Ohio corporation organized in
1898. Its principal offices are located at 1144 East Market Street, Akron, Ohio
44316-0001. Its telephone number is (330) 796-2121. The term "Registrant"
wherever used herein refers solely to The Goodyear Tire & Rubber Company. The
terms "Goodyear" and the "Company" wherever used herein refer to The Goodyear
Tire & Rubber Company together with all of its domestic and foreign subsidiary
companies, unless the context indicates to the contrary.
Goodyear is one of the world's leading manufacturers of tires and rubber
products, engaging in operations in most regions of the world. In 1995,
Goodyear's net sales were $13.2 billion and net income was $611.0 million.
Goodyear's worldwide employment averaged 88,790 during 1995.
Goodyear's principal business is the development, manufacture,
distribution and sale of tires for most applications. Goodyear also
manufactures and markets several lines of rubber and reinforced plastic
products for the transportation industry and various industrial and consumer
markets and numerous rubber-related chemicals for various applications,
provides automotive repair and other services and sells various other products.
Registrant's Celeron subsidiaries engage in various crude oil
transportation, gathering, purchasing and selling activities. The All American
Pipeline System is a heated crude oil pipeline extending from two points along
the California coast to McCamey, Texas, which transports offshore California
crude oil from Las Flores and Gaviota, California, and onshore California and
Alaska North Slope crude oil from other points in California, to various other
system terminals in California and to McCamey, Texas.
RECENT DEVELOPMENTS IN GOODYEAR'S BUSINESS
During 1995, the Aquatred(R) II radial passenger tire, a second
generation of enhanced wet traction tire offering longer tread life, and the
Wrangler(R) Aquatred(R) for light trucks, sport-utility vehicles and vans were
introduced by Goodyear in North America. Other passenger tire lines introduced
in 1995 include the high performance Eagle #1(TM) in North America, the Eagle
Aquatred and the high-performance Eagle F-1(TM) in Europe and the Aquatred in
Latin America. New truck tires and farm tires were introduced in North America
and Europe, including the Unisteel(R) G357 tire for steer axles. A new premium
radial passenger tire, the GPS2, was introduced in Latin America.
In February 1996, Goodyear introduced the Infinitred(TM), a premium
radial passenger tire featuring enhanced wet traction and extended tread life,
to the North American replacement passenger tire market. The Infinitred(TM) is
offered with a lifetime treadlife limited warranty, which will be in effect as
long as the purchaser owns the car on which the tires are first mounted and the
tires are maintained as specified by the limited warranty.
In December 1995, the Company acquired 32.7% of the capital stock of
TCDebica, a manufacturer of passenger tires located in Poland, from the State
Treasury of Poland for approximately $55 million, and agreed to purchase
original issue shares of such capital stock from T C Debica in March 1996 for
approximately $60 million. Upon completion of the purchase of such additional
shares, Goodyear will own approximately 50.8% of the capital stock of T C
Debica.
In 1995, Goodyear introduced a new line of Plylon(R) Plus conveyor belts
to the industrial market and the Gatorback(R) serpentine Poly-V(R) belts to the
automotive replacement market. On March 1, 1996, Goodyear acquired the assets
of Belt Concepts of America, Inc, a manufacturer of lightweight conveyor
belting for various commercial applications located in Spring Hope, North
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Carolina. During 1995, Goodyear also acquired the assets of an air spring
manufacturer in Brazil and increased to 100% its interest in a conveyor belting
manufacturing facility in Australia.
Goodyear continued its program to enhance production capacity and
efficiency through plant modernization and expansion projects. Expansion of the
Company's Danville, Virginia, Topeka, Kansas, and Americana, Brasil, tire
plants and Beaumont, Texas, and Houston, Texas, synthetic rubber plants were
completed during 1995. The Company began construction of a new tire mold plant
in Statesville, North Carolina, which is scheduled to be completed in 1996.
Significant plant modernization and expansion projects are presently underway
at the Company's Gadsden, Alabama, Topeka, Kansas, Napanee, Ontario,
Valleyfield, Quebec, Americana, Brazil, Bogor, Indonesia, and Bangkok, Thailand
tire plants. Modernization and expansion projects were also completed at the
Lincoln, Nebraska, Owen Sound, Ontario, Norfolk, Nebraska, and Logan, Ohio
plants.
FINANCIAL INFORMATION ABOUT GOODYEAR'S INDUSTRY SEGMENTS
Financial information relating to Goodyear's "Industry Segments" for each
of the three years in the period ended December 31, 1995 appears in Note 16
captioned "Business Segments", and in the tabulation captioned "Industry
Segments" at Note 16, of the Notes to Financial Statements set forth in Item 8
of this Annual Report, at pages 46 and 47, respectively, and is incorporated
herein by specific reference.
DESCRIPTION OF GOODYEAR'S BUSINESS -- INDUSTRY SEGMENTS
TIRES
Goodyear's principal Industry Segment is the development, manufacture,
distribution and sale of tires and related products and services (the "Tires
Segment"). The principal class of products in the Tires Segment is tires for
most applications. No other class of products or services in the Tires Segment
accounted for as much as 10% of Goodyear's sales in any of the last three
years. The table below sets forth the percentage of Goodyear's net sales and
operating income attributable to the Tires Segment, and the percentage of
Goodyear's sales attributable to tires, for each of the three years ended
December 31, 1995:
Year Ended December 31, 1995
-------------------------------
1995 1994 1993
------ ------ ------
Tires Segment sales ..................... 85.5% 85.5% 85.6%
Tire Sales ........................ 76.7% 76.7% 76.0%
Tires Segment operating income .......... 81.9% 84.7% 85.7%
The products and services comprising the Tires Segment include:
TIRES. Goodyear manufactures and markets in most regions of the world a
broad line of rubber tires for automobiles, trucks, buses, tractors, farm
implements, earthmoving equipment, aircraft, industrial equipment and various
other applications, in each case for sale to original equipment manufacturers
and in the replacement market.
Goodyear offers two basic constructions of tires, radial and bias-ply.
Various belting and reinforcing materials are used, including nylon and
polyester tire cord and steel.
A variety of Goodyear-brand radial passenger tire lines are sold in the
United States, including the all season Aquatred(R) enhanced wet traction tire
line, the Eagle(R) performance touring tire lines, and the Eagle(R)
"Gatorback"(R) and Eagle(R) Aquatred(R) high performance tire lines. The major
lines of Goodyear-brand radial light truck tires offered in the United States
are the Wrangler(R) and Workhorse(R). Goodyear manufactures and sells several
lines of radial passenger and light truck tires in Europe, led by the Eagle and
the Eagle Aquatred passenger tire
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lines and the Wrangler light truck tire line. In Asia and Latin America, both
radial and bias-ply Goodyear-brand passenger and light truck tires are
manufactured and sold, led by the Eagle Aquatred in Asia and the GPS2 in Latin
America.
Goodyear manufactures and markets a full line of all-steel cord and belt
construction radial medium truck tires, the Unisteel(R) series, for
applications ranging from line-haul highway use to off-road service. Goodyear
also offers a full line of bias-ply medium truck tires. Goodyear produces
several lines of tires for other applications, including radial and bias-ply
tires for farm machinery, heavy equipment and aircraft, and inner tubes for
truck tires and various other applications. Goodyear manufactures and sells new
and retreaded aircraft tires in the United States, Europe, Latin America and
Asia.
The Kelly-Springfield Tire Company, a division of Registrant
("Kelly-Springfield"), manufactures and markets numerous lines of radial and
bias-ply passenger and truck tires in the United States replacement market and
sells various lines of Kelly-brand tires in the replacement markets in Canada
and certain other countries. Brad Ragan, Inc., a 74.5% owned subsidiary of
Registrant, is a tire retailing and commercial tire sales, retreading and
service chain with operations in various regions of the United States.
RELATED PRODUCTS AND SERVICES. Goodyear also retreads truck, aircraft and
heavy equipment tires, primarily as a service to its commercial customers, and
manufactures and sells tread rubber and other tire retreading materials for
various applications. Additional products and services in the Tires Segment
include: automotive repair services provided by Goodyear through its retail
outlets; the sale to dealers and consumers of automotive repair and maintenance
items, automotive equipment and accessories and other items; the operation of
three rubber plantations and the processing and sale of natural rubber; and
miscellaneous other products and services.
MARKETS AND DISTRIBUTION -- COMPETITION
The Company offers a broad line of tires for most applications and for
all classes of customers. In the United States and many other countries, the
Company sells Goodyear-brand tires to vehicle manufacturers for use as original
equipment on vehicles they produce. In the United States and most other
countries, the Company sells Goodyear-brand, other house brand and private
brand tires through various channels of distribution for sale to vehicle owners
for replacement purposes. Worldwide, the Company's sales of passenger, truck
and farm tires to the replacement market substantially exceed its sales of
passenger, truck and farm tires to original equipment manufacturers.
All passenger tires (except bias-ply temporary spare tires) and
approximately 89% of all light and medium truck tires sold by the Company in
the United States during 1995 were radial. Approximately 94% of all passenger
tires and approximately 51% of all light and medium truck tires sold by the
Company outside the United States during 1995 were radial.
Demand for high performance passenger tires has increased significantly
during recent years. High performance tires constituted approximately 30% of
the United States passenger tire market during 1995, up from 28% in 1994, 26%in
1993 and 10% in 1988.
Goodyear's tires are sold under highly competitive conditions. On a
worldwide basis, Goodyear has two major competitors: Bridgestone (based in
Japan) and Michelin (based in France). Goodyear also competes worldwide with
several other major foreign based tire manufacturing concerns, including
Continental, Pirelli, Sumitomo, Toyo, Yokohama and several Korean tire
companies. Goodyear's principal competitors with operations in the United
States are Bridgestone, The Firestone Tire & Rubber Company (acquired by
Bridgestone in 1988), Michelin, Uniroyal-Goodrich Tire Company (acquired by
Michelin in 1990), Continental, General Tire Inc. (acquired by Continental in
1987) and Cooper Tire & Rubber Company.
Goodyear competes with other tire manufacturers on the basis of price,
warranty, service, consumer convenience and product design, performance and
reputation. The Company believes Goodyear-brand tires enjoy a high recognition
factor throughout the world and have a reputa-
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tion for high quality and value. Kelly-brand and various other house-brand tire
lines offered by the Company compete primarily on the basis of price and
performance.
Goodyear is a major supplier, on a direct sale basis, of tires to most
manufacturers of automobiles, trucks, farm and construction equipment and other
vehicles, both in the United States and numerous other countries. Goodyear
sells tires to the major automobile and truck manufacturers located in the
United States: Ford, General Motors, Chrysler, Toyota, Nissan, Honda,
Diamond-Star, NUMMI, AAI, Navistar, Mack Truck, Freightliner, Peterbilt and
Kenworth. Goodyear supplies tires to several European manufacturers, including
Fiat, Daimler-Benz, Volkswagen, Volvo, Ferrari, BMW, Peugeot, Alfa Romeo and
Renault, to six Japanese manufacturers, Nissan, Mazda, Toyota, Honda,
Mitsubishi and Isuzu, and to subsidiaries of General Motors, Ford and Chrysler
throughout the world. Goodyear also supplies major manufacturers of
construction and agricultural equipment, including Caterpillar, J. I. Case,
John Deere, Massey-Ferguson and New Holland N.V.
Goodyear-brand tires for the United States replacement market are sold
through various channels of distribution. The principal method of distribution
is a large network of independent dealers and franchisees. Goodyear-brand tires
are also sold to several regional and national retail marketing firms,
including Sears Roebuck & Co., Wal-Mart, Penske Auto Centers and Montgomery
Ward. In addition, approximately 958 retail outlets (including auto service
centers, commercial tire & service centers and leased space in department
stores) are operated by the Registrant under the Goodyear name or under various
other trade styles and approximately 158 retail and commercial tire sales
outlets are operated by subsidiaries of the Registrant.
Several lines of Kelly-brand and various other house brand passenger and
truck tires are marketed through independent dealers. Private brand and
associate brands of tires are also sold to independent dealers, to national and
regional wholesale marketing organizations, including TBCCorporation, to retail
chain marketers, including Wal-Mart, Discount Tire, Sears Roebuck & Co. and
Big-O, to service stations and to various other retail marketers.
Goodyear sells tires outside the United States to original equipment
manufacturers and in the replacement market through independent wholesale
distributors, its own wholesale distribution organizations, and, in some
countries, its own retail stores. In certain countries Goodyear contracts for
the manufacture by others of Goodyear-brand tires.
No customer or group of affiliated customers accounted for as much as
5.4% of Goodyear's consolidated net sales during 1995, 1994 or 1993. Worldwide,
Goodyear's annual net sales to its ten largest customers, including their
respective affiliates, represented less than 21.0% of consolidated net sales
for each of 1995, 1994 or 1993. No customer or group of affiliated customers
accounted for as much as 4.1% of Tires Segment sales during 1995, 1994 or 1993.
The ten largest customers of the Tires Segment represented less than 21.1% of
Tire Segment sales for 1995.
Based on a composite of industry sources and information published by the
Rubber Manufacturers Association (the "RMA"), it is estimated that
approximately 224 million passenger tires were sold in the United States during
1995. The following table indicates the percentage change in annual unit sales
of passenger tires in the United States:
TOTAL UNITED STATES PASSENGER TIRE MARKET --
PERCENTAGE INCREASE (DECREASE) IN ANNUAL UNIT SALES
1995 VS 1994 1995 VS 1993
------------ ------------
Replacement ................................... (1.7%) 1.0%
Original Equipment ............................ (2.5%) 8.8%
Total U.S. Passenger Tire Market ........ (1.9%) 2.9%
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Based on current economic forecasts, Goodyear expects the total market
for passenger tires in the United States in 1996 to increase approximately 3.0%
compared to 1995. Goodyear estimates that demand for original equipment
passenger tires in the United States during 1996 will be approximately 1.1%
higher than in 1995 and that demand for passenger tires in the United States
replacement market during 1996 will be approximately 3.7% higher than in 1995.
Based on a composite of industry sources and information published by the
RMA, it is estimated that approximately 49 million light and medium highway
truck tires were sold in the United States during 1995, which is approximately
2.2% more than during 1994 and 12.8% more than during 1993. Goodyear estimates
that demand for light and medium highway truck tires in the United States
during 1996 will decrease by approximately 2 million units.
The following table indicates the percentage change in Goodyear's annual
unit sales of passenger, truck and farm tires worldwide:
GOODYEAR WORLDWIDE UNIT SALES OF PASSENGER, TRUCK AND FARM TIRES--
PERCENTAGE INCREASE (DECREASE) IN ANNUAL UNIT SALES
1995 VS 1994 1995 VS 1993
------------ ------------
United States ................................... (3%) 3%
Foreign ......................................... 3% 11%
Worldwide ................................. -- 7%
Based on information available from various industry and other sources
and information published by the RMA, the Company sells more tires in the
United States than any other tire manufacturer and, on the basis of annual net
sales, is the third largest tire manufacturer in the world. Based on various
industry and other sources, it is estimated that the Company's share of the
worldwide auto, truck and farm tire markets was approximately 18% in 1995, 1994
and 1993.
Related products and services, including automotive parts, automotive
maintenance and repair services and associated merchandise, are sold in the
United States through approximately 1,116 retail outlets operated by the
Company. Automotive repair and maintenance items, automotive equipment and
accessories and other items, which are purchased for resale by the Company, are
distributed to many of the Company's tire dealers and franchisees. Related
products are sold principally in the United States and Canada under highly
competitive conditions.
GOVERNMENT REGULATIONS -- TIRES
The National Highway Traffic Safety Administration ("NHTSA"), under
authority granted to it by the National Traffic and Motor Vehicle Safety Act of
1966, as amended, has established various standards and regulations relating to
motor vehicle safety, some of which apply to tires sold in the United States
for highway use. The NHTSA has the authority to order the recall of automotive
products, including tires, having defects deemed to present a significant
safety risk.
NHTSA has issued "Tire Registration" regulations, which require the
registration of tires for the purpose of identification in the event of a
product recall, and "Uniform Tire Quality Grading" regulations, which require
the grading of passenger tires for treadwear, traction and temperature
resistance pursuant to prescribed testing procedures and the molding of such
grades into the sidewall of each tire. Passenger and highway truck tires are
required to be identified by ten-digit manufacturing identification codes
molded on the sidewall of each tire. The effect of compliance with these
regulations on Goodyear's sales and profits cannot be determined. However,
these regulations have increased the cost of producing and marketing passenger
tires in the United States.
OTHER INFORMATION REGARDING TIRES SEGMENT
Goodyear does not consider its Tires Segment business to be seasonal to
any significant
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degree. Goodyear maintains a significant inventory of new tires and
certain other products in order to rationalize production schedules and assure
prompt availability of such products to its customers. Goodyear manages its
inventory in order to minimize working capital requirements and avoid
unnecessary increases in unit production costs while balancing production
schedules with fluctuations in demand. New tire inventory levels in North
America and in certain countries in Latin America are currently, and during
most of 1995 were, higher than planned due to lower than anticipated demand.
Goodyear offers its customers various financing and extended payment
programs from time to time. Goodyear does not believe these programs, when
considered in the aggregate, require an unusual amount of working capital
relative to the volume of sales involved and the prevailing practices in the
tire industry.
Goodyear's radial passenger and truck tire plants in North America and
Europe were operated at approximately 95% of capacity during 1995 and 92% of
capacity during 1994 and 1993. Goodyear's worldwide tire capacity utilization
was approximately 93% during 1995 and 90% during 1994 and 1993. In order to
maintain its competitive position, respond to changing market conditions and
optimize production efficiencies, Goodyear has a continuing program for
modernizing and increasing the capacity of its radial passenger and truck tire
facilities. Goodyear has expansion projects planned or underway at several of
its existing tire plants and certain other tire manufacturers are building, or
have announced plans to install, additional capacity for passenger tires and
light and medium truck tires over the next few years. Goodyear has also
acquired, or is in the process of installing, acquiring or obtaining access to,
new tire manufacturing capacity in various markets, including China, India and
Poland. Continued high levels of capacity utilization by the tire industry
during 1996 will be dependent on continued high production levels by the
original equipment manufacturers in the United States and growth in the
original equipment markets in Europe, Asia and Latin America, coupled with
continued high levels of demand in the replacement markets in the United States
and throughout the world.
GENERAL PRODUCTS
Another Industry Segment is the development, manufacture, distribution
and sale of numerous rubber, chemical and plastic products (the "General
Products Segment"). No class of products or services in the General Products
Segment accounted for as much as 10% of Goodyear's net sales in any of the last
three years. The table below sets forth the percentage of Goodyear's net sales
and operating income attributable to the General Products Segment for each of
the three years ended December 31, 1995:
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993
---- ---- ----
General Products Segment Sales ................ 13.5% 13.8% 13.9%
General Products Segment Operating Income ..... 13.6% 14.3% 15.3%
The products and services comprising the General Products Segment
include:
VEHICLE COMPONENTS. Goodyear manufactures automotive belts and hoses, air
springs, engine mounts, instrument panels, rubber tracks and various body and
chassis parts for motor vehicles made of rubber and reinforced plastics.
INDUSTRIAL RUBBER PRODUCTS. Goodyear produces various industrial rubber
products, including: conveyor and power transmission belts; air, steam, oil,
water, gasoline, materials handling and hydraulic hose for industrial
applications; and various rubber engineered products, including tank tracks and
molded products.
CHEMICAL PRODUCTS. Goodyear produces a broad line of synthetic rubber,
rubber latices, organic chemicals used in rubber and plastic processing and
vinyl resins and latices.
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SHOE AND GRAPHIC PRODUCTS. Goodyear, utilizing products obtained under
offtake agreements, markets heels, soles and strips for new shoes and shoe
repair made of rubber and other synthetic materials. Goodyear manufactures gum
for graphic products for the printing industry.
MARKETS AND DISTRIBUTION -- OTHER INFORMATION
Most products of the General Products Segment are sold directly to
manufacturers or through independent wholesale distributors. During 1995, the
five largest customers of the General Products Segment accounted for
approximately 23.6% of General Products Segment sales and no customer accounted
for more than 15% of General Products Segment sales. Goodyear does not maintain
a significant inventory when considered in relation to the volume of business
transacted.
The General Products Segment consists of a large number of product lines
in respect of which several manufacturers produce some, but not all, of the
products manufactured by Goodyear. There are numerous suppliers of automotive
belts and hose products and other rubber and plastic components for motor
vehicles, more than 50 major producers of industrial rubber products, and
numerous firms participating in the engineered products market. Goodyear is a
major producer of synthetic rubber, rubber chemicals and latex. Several major
firms are significant suppliers of one or more chemical products similar to
those manufactured by Goodyear. These markets are highly competitive, with
quality, service and price being the most significant factors to most
customers. Goodyear believes the products offered by the General Products
Segment are generally considered to be high quality and competitive in service
and price.
OIL TRANSPORTATION
Goodyear's crude oil transportation and related activities (the "Oil
Transportation Segment") are conducted by the Celeron group of companies
("Celeron"). The table below sets forth the percentage of Goodyear's net sales
and operating income (or loss), attributable to the Oil Transportation Segment
for each of the three years ended December 31, 1995:
Year Ended December 31,
-----------------------
1995 1994 1993
---- ---- ----
Oil Transportation Segment Sales ................... 1.0% .7% .5%
Oil Transportation Segment Operating Income (Loss).. 4.5% 1.0% (1.0%)
All American Pipeline Company, a wholly-owned subsidiary of Registrant
("All American"), owns and operates a heated crude oil pipeline system which
extends approximately 1,225 miles from the California Coast in the Santa
Barbara Channel -- Santa Maria Basin area to central Texas (the "All American
System"). Celeron Gathering Company, a wholly-owned subsidiary of Registrant
("Celeron Gathering"), engages in the gathering, exchanging, purchasing and
selling of crude oil and, in that connection, owns and operates a 43-mile crude
oil gathering pipeline in the San Joaquin Valley, California (the "Celeron
Gathering System"). Celeron Trading & Transportation Company, a wholly-owned
subsidiary of Registrant, is engaged in various crude oil exchanging,
purchasing and selling activities.
ALL AMERICAN CRUDE OIL PIPELINE SYSTEM
The All American System is a heated crude oil pipeline system, consisting
of a 1,225 mile mainline segment extending from Gaviota, California, to
McCamey, Texas, an 11 mile segment extending from Las Flores to Gaviota, and
related terminal and oil storage facilities. The All American System is capable
of transporting up to 300,000 barrels per day of heavy crude oils, 450,000
barrels per day of lighter crude oils or lower daily volumes of combinations of
heavy crude oils (which may require heating) from fields on the outer
continental shelf along the California coast in the Santa Barbara Channel --
Santa Maria Basin area ("OCS Crude Oil") and lighter crude oils (which do not
require heating) from various onshore California fields ("California Crude
Oil") or other sources to McCamey, Texas, for delivery through other pipelines
to refineries in the Mid-continent region and along the Texas Gulf Coast.
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The All American System transports California Crude Oil produced in the
San Joaquin Valley area of California and Alaska North Slope crude oil ("ANS
Crude Oil") received from other pipelines from insert points in central
California to terminals located near McCamey, Texas. The All American System
also transports OCS Crude Oil from Las Flores and Gaviota, California, to other
system outlets in California for delivery through other pipelines to refineries
in the Los Angeles Basin and in the greater San Francisco area and to McCamey,
Texas, for delivery via other pipelines to refineries in the Mid-continent
region and along the Texas Gulf Coast.
In August of 1993, several producers of OCS Crude Oil entered into
transportation agreements with the All American System whereunder the producers
have agreed to transport available quantities of OCS Crude Oil at specified
tariff rates. During 1995, approximately 51% of the OCS Crude Oil tendered
pursuant to the transportation agreements was transported from Las Flores and
Gaviota to All American System outlet stations in central California for
delivery via other pipelines to refineries in the Los Angeles Basin or the San
Francisco Bay area, with the balance transported to McCamey, Texas, for
delivery via other pipelines to refineries in the Mid-continent region and
along the Texas Gulf Coast. It is anticipated that during 1996 the volume of
OCS Crude Oil tendered to the All American System pursuant to the
transportation agreements will be substantially the same as during 1995.
The average daily volume of crude oil transported by the All American
System was approximately 217,000 barrels per day in 1995 and 185,000 barrels
per day in 1994 and 1993. The average tariff per barrel of oil transported
during 1995 was $1.73, compared to $1.29 during 1994 and $1.03 during 1993. The
All American System transported oil tendered for shipment an average distance
of 791 miles in 1995, 652 miles in 1994 and 725 miles in 1993. It is
anticipated that during 1996 the All American System will, on an average daily
volume basis, transport substantially the same quantities of crude oil as it
transported in 1995.
CELERON GATHERING SYSTEM
Celeron Gathering owns and operates the Celeron Gathering System, a
43-mile crude oil gathering pipeline system, which has a design capacity of up
to 100,000 barrels per day. Celeron Gathering uses the Celeron Gathering System
in connection with its gathering, exchanging, purchasing and selling of crude
oil produced in the South Belridge and Midway Sunset areas of the San Joaquin
Valley. Celeron Gathering sells or exchanges substantially all of the crude oil
it acquires in the San Joaquin Valley, the major portion of which is ultimately
sold to or exchanged with refiners located in the Mid-continent and Texas Gulf
Coast areas. Celeron Gathering also trades crude oil in California, most of
which is used by refiners located in the Los Angeles Basin or in Northern
California.
GOVERNMENT REGULATION
The All American System is a common carrier pipeline system and, as such,
under current law is subject to the general jurisdiction of the Federal Energy
Regulatory Commission (the "FERC"). Pursuant to the Interstate Commerce Act,
the All American System is subject to FERC regulation as to tariffs, annual
reporting requirements and other operating matters. In accordance with current
laws and the regulations of the FERC, the All American System has filed with
the FERC tariffs for transportation services being offered to shippers desiring
to transport crude oil through the All American System or portions thereof. The
All American System will file an Annual Report on FERC Form No. 6 with the FERC
in March of 1996 in respect of its activities during 1995. The Celeron
Gathering System is a proprietary intrastate gathering pipeline system and, as
such, is not subject to the general jurisdiction of the FERC.
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GENERAL BUSINESS INFORMATION
SOURCES AND AVAILABILITY OF RAW MATERIALS
The principal raw materials used in Goodyear's products are synthetic and
natural rubber. Goodyear purchases substantially all of its requirements for
natural rubber in the world market. Synthetic rubber accounted for
approximately 56% of all rubber consumed by Goodyear worldwide during 1995,
compared to 54% in 1994 and 61% in 1993. The Company's plants located in
Beaumont and Houston, Texas, supply the major portion of its synthetic rubber
requirements in the United States. The major portion of the synthetic rubber
used by Goodyear outside the United States is supplied by third parties. The
principal raw materials used in the production of synthetic rubber are
butadiene and styrene purchased from independent suppliers and isoprene
purchased from independent suppliers or produced by Goodyear from purchased
materials.
Nylon and polyester yarn, substantial quantities of which are processed
in Goodyear's textile mills, and wire for radial tires, a portion of which is
produced by Goodyear, are used in significant quantities by Goodyear. Other
important raw materials used by Goodyear are carbon black, pigments, chemicals
and bead wire. Substantially all of these raw materials are purchased from
independent suppliers, except for certain chemicals which Goodyear
manufactures. Goodyear purchases most of the materials and supplies it uses in
significant quantities from several suppliers, except in those instances where
only one or a few qualified sources are available. As in 1995, Goodyear
anticipates the continued availability (subject to possible spot shortages) of
all such materials during 1996.
Goodyear uses substantial quantities of petrochemical feedstocks and
fuels in the production of tires and other rubber products, synthetic rubber
and latex and other products. Supplies of petrochemical feedstocks, petroleum
and natural gas based fuels have been and are expected to continue to be
adequate for the Company's manufacturing plants.
Petrochemical feedstock, natural rubber and other raw material prices
increased significantly during the first half of 1995. In general, the Company
does not anticipate significant increases in raw material prices during 1996,
although commodity materials are likely to continue to be subject to price
volatility.
PATENTS AND TRADEMARKS
Goodyear owns approximately 1,562 patents issued by the United States
Patent Office and approximately 6,478 patents issued or granted in other
countries around the world, and also has licenses under numerous patents of
others, covering various improvements in the design and manufacture of its
products and in processes and equipment for the manufacture of its products.
Goodyear also has approximately 392 patent applications currently on file with
the United States Patent Office and approximately 3,432 patent applications on
file in other countries around the world. While Goodyear considers that such
patents, patent applications and licenses as a group are of material
importance, it does not consider any one patent, patent application or license,
or any related group of them, to be of such importance that the loss or
expiration thereof would materially affect its business considered as a whole
or the business of any of its Industry Segments.
Goodyear owns and uses approximately 1,010 different trademarks,
including several using the word "Goodyear". These trademarks are protected by
approximately 6,400 registrations worldwide. Goodyear also has approximately
950 trademark applications pending in the United States and other
jurisdictions. While Goodyear believes such trademarks as a group are of
importance, the only trademarks Goodyear considers material to its business are
those using the word "Goodyear". Goodyear believes all of its significant
trademarks are valid and will have unlimited duration as long as they are
adequately protected and appropriately used.
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BACKLOG
Goodyear does not consider its backlog of orders to be material to, or a
significant factor in, evaluating and understanding any of its Industry
Segments or its business considered as a whole.
GOVERNMENT BUSINESS
The total amount of Goodyear's business during 1995 under contracts or
subcontracts which were subject to termination at the election of the United
States Government amounted to approximately .6% of Goodyear's consolidated net
sales for 1995 and 1994 and .9% for 1993.
RESEARCH AND DEVELOPMENT
Goodyear expends significant amounts each year on research for the
development of new, and the improvement of existing, products and manufacturing
processes and equipment. Goodyear maintains substantial research and
development centers for tires and related products in Akron, Ohio, and
Colmar-Berg, Luxembourg; tire technical centers in Cumberland, Maryland, and
Tsukuba, Japan; and tire proving grounds in Akron, Ohio, San Angelo, Texas,
Mireval, France, and Colmar-Berg, Luxembourg. Goodyear operates substantial
research and development facilities for other products in Akron, Ohio, and
Orsay, France.
During the years ended December 31, 1995, 1994, 1993, 1992 and 1991,
Goodyear expended, directly or indirectly, $369.3 million, $341.3 million,
$320.0 million, $325.9 million and $330.0 million, respectively, on research,
development and certain engineering activities relating to the design,
development, improvement and modification of new and existing products and
services and to the formulation and design of new manufacturing processes and
equipment and improvements on existing processes and equipment. Goodyear
estimates that it will expend approximately $380.0 million for research and
development activities during 1996.
EMPLOYEES
At December 31, 1995, Goodyear employed approximately 87,930 people
throughout the world. Of the approximately 44,258 persons employed in the
United States at December 31, 1995, approximately 12,497 were covered by a
master collective bargaining agreement, dated July 20, 1994, with the United
Steel Workers of America, A.F.L.-C.I.O.-C.L.C ("USWA"), which agreement will
expire on April 19, 1997. Of the remaining employees at December 31, 1995,
approximately 9,435 were covered by other contracts with the USWA and various
other unions and approximately 22,326 were not represented by any union.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
Goodyear is subject to extensive regulation under environmental and
occupational health and safety laws and regulations concerning, among other
things, air emissions, discharges to waters and the generation, handling,
storage, transportation and disposal of waste materials and hazardous
substances. Goodyear has a continuing program to ensure its compliance with
Federal, State and local environmental and occupational safety and health laws
and regulations. During 1995, 1994, 1993, 1992 and 1991, Goodyear made capital
expenditures aggregating approximately $17.4 million, $11.7 million, $13.4
million, $13.7 million and $9.6 million, respectively, for environmental
improvement and occupational safety and health compliance projects in respect
of its facilities worldwide. Goodyear presently estimates that it will make
capital expenditures for pollution control facilities and occupational safety
and health projects of approximately $12.3 million during 1996 and
approximately $21.0 million during 1997. In addition, Goodyear expended
approximately $74.9 million during 1995, and Goodyear estimates that it will
expend approximately $78.6 million during 1996 and approximately $81.2 million
during 1997, to maintain and operate its pollution control facilities and
conduct its other environmen-
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tal and occupational safety and health activities, including the control and
disposal of hazardous substances, which amounts are expected to be sufficient
to comply with applicable existing environmental and occupational safety and
health laws and regulations and are not expected to have a material adverse
effect on Goodyear's competitive position in the industries in which it
participates. At December 31, 1995, Goodyear had reserved $91.4 million for
anticipated costs associated with the remediation of numerous waste disposal
sites and certain other properties and related environmental activities. In the
future Goodyear may incur increased costs and additional charges associated
with environmental compliance and cleanup projects necessitated by the
identification of new waste sites, the impact of new and increasingly stringent
environmental laws, such as the Clean Air Act, and regulatory standards and the
availability of new technologies.
FINANCIAL INFORMATION ABOUT FOREIGN AND
DOMESTIC OPERATIONS AND EXPORT SALES
Financial information relating to Goodyear's "Geographic Segments" for
each of the three years in the period ended December 31, 1995 appears in Note
16, captioned "Business Segments", and in the tabulation captioned "Geographic
Segments" at Note 16 of the Notes to Financial Statements set forth in Item 8
of this Annual Report, at pages 46 and 48, respectively, and is incorporated
herein by specific reference.
The Company, through its foreign subsidiaries, engages in manufacturing
or sales operations in most countries in the world, including manufacturing
operations in 26 foreign countries. Foreign sales represented approximately
45%, 42% and 42% of total sales and foreign operating income represented
approximately 56%, 50% and 49% of total operating income in 1995, 1994 and
1993, respectively. Goodyear's foreign manufacturing operations consist
primarily of the production of tires. Industrial rubber and certain other
products are also manufactured in certain of the Company's foreign plants.
Goodyear also participates in joint ventures in various countries. In
1987, Goodyear and Pacific Dunlop Limited established South Pacific Tyres, an
Australian partnership, and South Pacific Tyres N.Z. Limited, a New Zealand
company, in each of which Goodyear and Pacific Dunlop Limited each have a 50%
equity interest, which entities operate five tire manufacturing plants, 21
retread plants and a chain of approximately 506 retail outlets in Australia,
New Zealand and Papua - New Guinea. Other joint venture interests of the
Company include: (1) a 50% interest in Nippon Giant Tire Co., Ltd., which
manufactures earthmover tires in Japan; and (2) a 50% (40.4% net equity)
interest in a tire manufacturing facility under construction near Bombay, which
is scheduled to be completed in 1997.
In addition to the ordinary risks of the marketplace, the Company's
foreign operations and the results thereof in some countries are affected by
price controls, import controls, labor regulations, tariffs, extreme inflation
or fluctuations in currency values. Furthermore, in certain countries where
Goodyear operates (primarily countries located in Central and South America),
transfers of funds from foreign operations are generally or periodically
subject to the availability of foreign exchange in the host country and other
related restrictive governmental regulations.
ITEM 2. PROPERTIES.
Goodyear manufactures its products in 77 manufacturing facilities located
around the world. There are 33 plants at 32 locations in 16 states of the
United States and 44 plants at 39 locations in 26 other countries.
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The following table identifies by location each of the Company's 77
manufacturing facilities, indicates the principal product or products
manufactured therein and sets forth the approximate number of square feet of
usable floor space. In addition, each Industry Segment using the facility is
indicated after the products manufactured therein with the following
references: (A), which indicates use by the Tires Segment; and (B), which
indicates use by the General Products Segment. Except as indicated in the Notes
to the following table of Manufacturing Facilities, Goodyear owns the land,
buildings and manufacturing equipment comprising each facility.
MANUFACTURING FACILITIES
APPROXIMATE
FLOOR SPACE
PRODUCT(S) MANUFACTURED (IN THOUSANDS
PLANT LOCATION INDUSTRY SEGMENT(S) OF SQUARE FEET)
-------------- ----------------------- ---------------
UNITED STATES
Akron, Ohio (2 Plants) Tires and Chemicals (A) and (B) 1,116
Asheboro, North Carolina Tire Wire Cord (A) 293
Bayport, Texas Rubber Processing Chemicals (A) and (B) 42
Beaumont, Texas Synthetic Rubber, Rubber Chemicals and 631
Hydrocarbon Resins (A) and (B)
Calhoun, Georgia Latex (B) 61
Cartersville, Georgia Textile Mill (A) and (B) 659
Danville, Virginia Tires (A) 2,107
Decatur, Alabama Textile Mill (A) 656
Fayetteville, North Carolina Tires (A) 2,017
Freeport, Illinois Tires (A) 1,194
Gadsden, Alabama (1) Tires (A) 2,829
Green, Ohio Air Springs (B) 127
Greenville, Texas Tread Rubber (A) 24
Hannibal, Missouri (2) Hose Products (B) 30
Houston, Texas Synthetic Rubber (A) and (B) 704
Jackson, Ohio (2) Automotive and Commercial Engineered 222
Composites (B)
Lawton, Oklahoma (2) Tires (A) 1,840
Lincoln, Nebraska Power Transmission Belts and Hose 950
Products (B)
Logan, Ohio (2) Automotive Interior Trim Products (B) 340
Marysville, Ohio Conveyor Belts (B) 374
Mt Pleasant, Iowa Hose Products (B) 116
Niagara Falls, New York Chemicals and Vinyl Resins (A) and (B) 313
Norfolk, Nebraska Hose Products (B) 259
Radford, Virginia Tread Rubber (A) 55
St Marys, Ohio Molded Rubber Products (B) 829
Spartanburg, South Carolina (3) Tread Rubber (A) 102
Spring Hope, North Carolina Conveyor Belts (B) 120
Stow, Ohio (3) Tire Molds (A) 132
Sun Prairie, Wisconsin Hose Products (B) 175
Topeka, Kansas Tires (A) 2,940
Tyler, Texas Tires (A) 1,313
Union City, Tennessee Tires (A) 2,069
CANADA
Bowmanville, Ontario Conveyor Belts (B) 323
Collingwood, Ontario Hose Products (B) 205
Medicine Hat, Alberta Tires (A) 115
Napanee, Ontario Tires (A) 748
Owen Sound, Ontario Power Transmission Belts and Graphic 108
Products (B)
Quebec City, Quebec Molded Products and Tread Rubber (A) and 172
and (B)
St. Alphonse de Granby, Hose Products (B) 163
Quebec Valleyfield, Quebec Tires (A) 1,002
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APPROXIMATE
FLOOR SPACE
PRODUCT(S) MANUFACTURED (IN THOUSANDS
PLANT LOCATION INDUSTRY SEGMENT(S) OF SQUARE FEET)
-------------- ----------------------- ---------------
EUROPE
FRANCE-- Amiens Tires (A) 715
LeHavre (3) Chemicals (B) 274
GERMANY-- Fulda(3) Tires (A) 1,363
Philippsburg Tires (A) 984
GREECE-- Salonika Tires (A) 268
ITALY-- Cisterna di Latina Tires (A) 550
LUXEMBOURG
Colmar-Berg (4 Plants) (3) Tires, Fabrics, Steel Tire Cord, 2,253
Tire Molds and Machines (A)
MOROCCO--Casablanca Tires (A) 243
TURKEY-- Adapazari Tires (A) 665
Izmit Tires and Tubes (A) 380
UNITED KINGDOM
Wolverhampton, England Tires (A) 1,843
LATIN AMERICA
ARGENTINA-- Buenos Aires Tires (A) 957
BRAZIL-- Americana Tires, Fabric Dipping and Films 1,621
(A) and (B)
Sao Paulo (3 Plants) Tires, Tubes, Industrial Rubber Products 1,244
and Fabric (A) and (B)
CHILE-- Santiago Tires, Tubes, Industrial Rubber 812
Products and Batteries (A) and (B)
COLOMBIA-- Cali Tires (A) 496
GUATEMALA-- Guatemala City Tires (A) 344
JAMAICA-- Morant Bay Tires (A) 157
MEXICO-- Mexico City Tires (A) 1,354
San Luis Potosi Hose Products and Air Sleeves (B) 92
PERU-- Lima Tires (A) 411
VENEZUELA-- Valencia Tires and Industrial Rubber 792
Products (A) and (B)
ASIA
AUSTRALIA-- Bayswater Conveyor Belts (B) 75
CHINA-- Dalian Tires (A) 479
Qingdao Hose Products (B) 135
INDIA-- New Delhi Tires (A) 699
INDONESIA-- Bogor (4) Tires (A) 842
MALAYSIA-- Kuala Lumpur (5) Tires (A) 417
PHILIPPINES-- Manila (6) Tires and Tubes (A) 392
TAIWAN-- Taipei Tires (A) 250
THAILAND-- Bangkok Tires (A) 423
NOTES:
(1) Portion of facility is leased by Goodyear and may be purchased pursuant to the terms of the lease at a nominal option price.
(2) Facility is leased by Goodyear. The lease provides that the Company has the option to purchase the facility at the expiration
of the initial term at an option price which is either nominal or highly favorable to Goodyear. It is anticipated that such
option will be exercised at the appropriate time if such facility is then needed in Goodyear's manufacturing operations or its
acquisition would otherwise be advantageous to Goodyear.
(3) Portion of facility is leased by Goodyear.
(4) Facility is situated on land held under a use right which expires in 1997. It is not possible to obtain fee title under
Indonesian law.
(5) Facility is situated on land held under the terms of a land lease which expires in 2072. It is not possible to obtain fee
title to land under Malaysian law.
(6) Facility is situated on land held under the terms of a land lease having 5 years remaining, with a 25-year renewal option.
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The manufacturing facilities of Goodyear are, when considered in the
aggregate, modern and adequately maintained. Goodyear's capital expenditures
for new plant and equipment and for expansion, modernization and replacement of
existing plants and equipment and related assets aggregated $615.6 million in
1995, $523.0 million in 1994 and $432.3 million in 1993. Of said amounts,
$347.9 million in 1995, $281.6 million in 1994 and $277.9 million in 1993 were
expended on facilities located in the United States. The Company estimates that
its capital expenditures during 1996 will aggregate approximately $675.0
million.
During 1995, Goodyear's worldwide tire production facilities were
operated at approximately 93% of rated capacity. The Company's other
manufacturing facilities were operated at approximately 90% of rated capacity
during 1995. Giving effect to plant expansions and modernizations recently
completed or presently underway or planned, the Company's manufacturing
facilities are generally expected to have production capacity sufficient to
satisfy existing and presently anticipated demand for the Company's tires and
other products.
In addition to its manufacturing facilities, the Company owns and
operates rubber plantations in Indonesia and Guatemala. Goodyear also owns
substantial interests in plants located in Australia (tires and retreading),
Poland (passenger tires), Japan (earthmover tires) and New Zealand (tires and
retreading).
The Company owns and operates research and development facilities and
technical centers in Akron, Ohio, Colmar-Berg, Luxembourg, and Orsay, France
and tire proving grounds in Akron, Ohio (82 acres), Mireval, France (450
acres), and San Angelo, Texas (7,243 acres). The Company also operates tire
technical centers in Cumberland, Maryland, and Tsukuba, Japan, and a tire
proving ground in Colmar-Berg, Luxembourg.
The Company operates approximately 1,116 retail outlets for the sale of
its tires to consumers in the United States and approximately 347 retail
outlets in other countries. Worldwide, the Company also operates approximately
88 retread plants and approximately 205 warehouse and distribution facilities.
Substantially all of these facilities are leased. The Company does not consider
any one of these leased properties to be material to its operations. For
additional information regarding leased properties, see Note 5, "Properties and
Plants," and Note 7, "Leased Assets," of the Notes to Financial Statements set
forth in Item 8 of this Annual Report at pages 37 and 41, respectively.
Reference is made to the information set forth in Item 1 under the
caption "Oil Transportation" beginning at page 7, which includes a description
of, and other information regarding, the All American System, and the Celeron
Gathering System.
ITEM 3. LEGAL PROCEEDINGS.
At March 15, 1996, Goodyear was a party to the following material legal
proceedings, as defined in the Instructions to Item 103 of Regulation S-K:
(A) Since January 19, 1990, a series of 65 civil actions have been filed
against Registrant in the United States District Court for the District of
Maryland relating to the development of lung disease, cancer and other diseases
by former employees of The Kelly-Springfield Tire Company
("Kelly-Springfield"), a wholly-owned subsidiary of Registrant until it became
a division of Registrant effective January 1, 1996, alleged to be the result of
exposure to allegedly toxic substances, including asbestos and certain
chemicals, while working at the Cumberland, Maryland tire plant of
Kelly-Springfield, which was closed in 1987. The plaintiffs allege, among
other things, that Registrant, as the manufacturer or seller of certain
materials, negligently failed to warn Kelly-Springfield employees of the health
risks associated with their employment at the Cumberland plant and failed to
implement procedures to preserve their health and safety. The plaintiffs in
these civil actions are seeking an aggregate of $650 million in compensatory
damages and $6.46 billion in punitive damages.
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(B) On June 7, 1990, a civil action, Teresa Boggs, et al. v. Divested
Atomic Corporation, et al., was filed in United States District Court for the
Southern District of Ohio by Teresa Boggs and certain other named Plaintiffs on
behalf of themselves and a class comprised of certain other persons who reside
near the Portsmouth Uranium Enrichment Complex, a facility owned by the United
States Government as a part of the United States Department of Energy ("DOE")
and located in Pike County, Ohio (the "Portsmouth Plant"), against Divested
Atomic Corporation ("DAC"), the successor by merger of Goodyear Atomic
Corporation ("GAC"), Registrant and Martin Marietta Energy Systems, Inc.
("MMES"). GAC had operated the Portsmouth Plant pursuant to a series of
contracts with the DOE for several years until November 16, 1986, when MMES
assumed operation of the Portsmouth Plant. The Plaintiffs allege that the past
and present operators of the Portsmouth Plant, GAC (then a wholly-owned
subsidiary of Registrant) and MMES, contaminated certain areas near the
Portsmouth Plant with radioactive or other hazardous materials, or both,
causing property damage and emotional distress. Plaintiffs seek $300 million in
compensatory damages, $300 million in punitive damages and unspecified amounts
for medical monitoring and cleanup costs.
(C) In September of 1990, a civil action, Eastman Kodak Company, et al.
v. Goodyear, et al. (No. CIV-2-90-221), was filed by Eastman in the United
States District Court for the Eastern District of Tennessee, Northeastern
Division, whereunder Eastman alleges infringement of a patent, which expired in
December of 1994, in respect of certain processes used in the manufacture of
polyester resin on ten production lines at the Pt. Pleasant, West Virginia
polyester resin plant owned and operated by Registrant until sold to Shell Oil
Company on December 18, 1992. Eastman is seeking monetary damages trebled for
alleged willfulness, interest and costs. Goodyear has counterclaimed against
Eastman alleging antitrust law violations, which counterclaims were dismissed
by the trial court. The trial court also ruled that the patent did not cover
the processes used in eight of the plant's production lines and, therefor,
dismissed all infringement claims except with respect to two of the plant's
production lines. On April 28, 1995, a jury rendered a verdict finding
liability and assessing damages, having decided that Goodyear and Shell had
infringed the patent in the operation of said two production lines but that
such infringement was not willful. A judgment of $12,000,000, plus interest
thereon (approximately $6,000,000 through March 1, 1996) and court costs, was
entered against Goodyear. Goodyear and Eastman have appealed to the Court of
Appeals, Federal Circuit.
(D) In December of 1993, certain civil actions filed against Registrant
and numerous other defendants in Judicial District Court, Galveston, Texas, by
72 individual plaintiffs were consolidated into a single action (Whalen, et al.
v. AES, Inc., et al., Cause No. 93-CV0211). Certain plaintiffs have withdrawn
or been dismissed from these cases and 30 of the plaintiffs entered into a
settlement with Registrant and other defendants (at a cost to Registrant of
approximately $5,600). The remaining 24 plaintiffs allege that they suffered
personal injuries and property damage as the result of Registrant and other
named defendants (the owners and operators of the site and several other
corporations also alleged to be generators of wastes) allegedly depositing
hazardous wastes at the McGinnis Waste Disposal Site located at Hall's Bayou
Ranch, Texas. The plaintiffs allege, among other things, that the defendants
were grossly negligent and committed fraud and are seeking an aggregate of $2
billion in actual damages, $13 billion in punitive damages and such further
relief as may be appropriate.
(E) In July of 1994, a civil action, Taylor Tire Company, et al. vs.
Goodyear (Cause No. 94-1050K), was filed in the United States District Court
for the Southern District of California against Registrant on behalf of a class
of plaintiffs consisting of the four named tire dealers who are customers of
Registrant and all tire retailers located in the State of California who are,
or were at December 31, 1991 or at any time thereafter, contract dealers of
Registrant and leased or are leasing a facility from Registrant or are, or were
at any time after December 31, 1991, franchisees of Registrant. The complaint
alleges that, in the course of Registrant's commercial relationships and
dealings with the members of the class, Registrant, among other things,
breached its fiduciary duty and the implied covenants of good faith and fair
dealing with respect
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to all members of the class, engaged in unfair business practices in
violation of the California Business and Professions Code with respect to all
members of the class, violated the California Franchise Investment Law and the
California Corporation Code with respect to certain members of the class and
breached the franchise agreements it entered into with certain members of the
class. The plaintiffs are seeking unspecified actual and punitive damages,
recision of all contracts, and injunctive and other relief.
(F) On January 13, 1995, a civil action, Gregory Tire, et al. v.
Goodyear, et al. (Cause No. 95-00409), was filed in the 192nd Judicial District
Court, Dallas County, Texas, against Registrant (and two employees of
Registrant) by 22 tire dealers located in Texas who are customers of
Registrant, either as independent dealers or franchisees. The complaint
alleges, among other things, that in the course of Registrant's commercial
relationships and dealings with the plaintiffs, Registrant violated the Texas
Business Opportunities Act and the Texas Deceptive Trade Practices Act,
breached its fiduciary duty to the plaintiffs, breached its covenants of good
faith and fair dealings with the plaintiffs, violated the Texas Free Enterprise
Act, violated the Texas Antitrust Act, breached certain contracts with the
plaintiffs and committed common law fraud. The plaintiffs are seeking
unspecified compensatory damages, exemplary damages equal to the greater $230
million or 10% of Registrant's net worth and injunctive and other relief.
(G) On March 15, 1995, a civil action, Orion Tire Corporation, et al. vs.
Goodyear, et al. (Cause No. SA CV 95-221), was filed in the United States
District Court for the Central District of California, against Registrant,
Goodyear International Corporation, a wholly-owned subsidiary of Registrant
("GIC"), Samir F. Gibara, President and Chief Executive Officer of Registrant,
John M. Ross, formerly Vice President and General Counsel of Registrant, and
three other employees of Registrant by Orion Tire Corporation, a California
corporation, China Tire Holdings Limited, a Bermuda corporation, and China
Strategic Holdings Limited, a Hong Kong corporation. The plaintiffs allege,
among other things, that, in connection with Goodyear's acquisition in 1994 of
a 75% interest in a tire manufacturing facility in Dalian, People's Republic of
China, Registrant and GIC engaged in tortious interference with certain
contractual relationships involving said facility the plaintiffs had allegedly
theretofore established with the entities which owned the Dalian tire
manufacturing facility (which entities are controlled by the Dalian municipal
government), committed tortious interference with prospective economic
advantages of the plaintiffs, violated the California Cartwright Act by
engaging in an unlawful combination and conspiracy in restraint of trade and
committed trade libel and defamation by making oral defamatory and written
libelous statements concerning the plaintiffs to various parties. In addition,
all defendants are alleged to have engaged in a civil conspiracy to induce the
entities which owned the Dalian facility to breach their contracts with the
plaintiffs and to have engaged in civil racketeering. The plaintiffs are
seeking an aggregate of at least $1.086 billion in actual damages from the
defendants and an aggregate of $3.256 billion in exemplary damages from
Registrant and GIC, plus exemplary damages of up to 10% of the net worth of
each individual defendant, and such further relief as may be appropriate.
(H) In April of 1995, Goodyear received a subpoena issued in connection
with an industry-wide investigation being conducted by the Cleveland, Ohio,
office of the Antitrust Division of the United States Department of Justice
into possible violations of Section 1 of the Sherman Act by tire manufacturers.
The subpoena calls for the production of documents to a Federal grand jury
sitting in Cleveland. Goodyear has substantially completed its response to the
subpoena and is cooperating fully with the Department of Justice in the
investigation.
(I) In addition to the legal proceedings described above, various other
legal actions, claims and governmental investigations and proceedings covering
a wide range of matters were pending against Registrant and its subsidiaries at
March 15, 1996, including claims and proceedings relating to several waste
disposal sites that have been identified by the USEPA and similar agencies of
various States for remedial investigation and cleanup, which sites were
allegedly used by Goodyear in the past for the disposal of industrial waste
materials. Registrant, based
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on available information, does not consider any such action, claim,
investigation or proceeding to be material, within the meaning of that term as
used in Item 103 of Regulation S-K and the instructions thereto.
Registrant, based on available information, has determined with respect
to each legal proceeding pending against Registrant and its subsidiaries at
March 15, 1996, either that it is not reasonably possible that Goodyear has
incurred liability in respect thereof or that any liability ultimately incurred
will not exceed the amount, if any, recorded in respect of such proceeding at
December 31, 1995 by an amount which would be material relative to the
consolidated financial position, results of operations or liquidity of
Goodyear, although in the event of an unanticipated adverse final determination
of certain proceedings, Goodyear's consolidated net income in the period in
which such determination occurs could be materially affected.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the security holders of the
Registrant during the calendar quarter ended December 31, 1995.
ITEM 4(A). EXECUTIVE OFFICERS OF REGISTRANT.
Set forth below, in accordance with Instruction 3 to Item 401(b) of
Regulation S-K, are: (1) the names and ages of all executive officers
(including executive officers who are also directors) of the Registrant as of
March 15, 1996, (2) all positions with the Registrant presently held by each
such person and (3) the positions held by, and principal areas of
responsibility of, each such person during the last five years.
NAME POSITION(S) HELD AGE
---- ---------------- ---
STANLEY C. GAULT CHAIRMAN OF THE BOARD AND DIRECTOR 70
Mr. Gault served as Chairman of the Board and Chief Executive Officer of
Registrant from June 4, 1991 through December 31, 1995, when he retired as
Chief Executive Officer. He is Chairman of the Board and an employee of
Registrant. Mr. Gault was Chairman of the Board and Chief Executive Officer of
Rubbermaid Incorporated from May 1, 1980 to May 1, 1991, when he retired. Prior
to 1980, Mr. Gault was an employee of General Electric Company for 31 years,
serving in various executive capacities. Mr. Gault has been a director of
Registrant since February 14, 1989.
SAMIR F. GIBARA PRESIDENT AND CHIEF EXECUTIVE OFFICER 56
AND DIRECTOR
Mr. Gibara served in various managerial capacities after joining Goodyear
in 1966. He served as the President and Chief Executive Officer of Goodyear
Canada Inc., a subsidiary of Registrant, from October 1, 1989 through November
30, 1990. He was Chairman of the Board of a European subsidiary of Registrant
from December 1, 1990 until September 30, 1992. Mr. Gibara was appointed a Vice
President of the Registrant on September 1, 1992. Mr. Gibara was elected a Vice
President of Registrant on October 6, 1992, serving in that capacity as the
executive officer of Registrant responsible for strategic planning and business
development and as the acting Vice President of Finance and the principal
financial officer of Registrant. On May 3, 1994, Mr. Gibara was elected an
Executive Vice President of Registrant and, in such capacity, was the executive
officer responsible for the North American Tire Operations of Registrant.
Effective April 15, 1995, Mr. Gibara was elected President and Chief Operating
Officer of Registrant. Mr. Gibara was elected President and Chief Executive
Officer of Registrant effective January 1, 1996. Mr. Gibara is the principal
executive officer of Registrant. Mr. Gibara has been a director of Registrant
since April 15, 1995.
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20
NAME POSITION(S) HELD AGE
---- ---------------- ---
WILLIAM J. SHARP PRESIDENT, GLOBAL SUPPORT OPERATIONS 54
Mr. Sharp served in various tire production posts until elected a Vice
President of Registrant on January 6, 1987, serving in such capacity as the
executive officer of Registrant responsible for Goodyear's worldwide tire
manufacturing operations. Effective April 1, 1991, Mr. Sharp was elected an
Executive Vice President of Registrant for worldwide product supply, and, in
such capacity, was the executive officer of the Registrant responsible for
Goodyear's tire manufacturing and distribution operations and research,
development and engineering activities until October 1, 1992, when he became
the executive officer of Registrant responsible for the operations of
Registrant's subsidiaries in Europe. Effective January 1, 1996, Mr. Sharp was
elected Registrant's President, Global Support Operations, and, as such, he is
the executive officer of Registrant having corporate responsibility for
Goodyear's research and development, manufacturing, purchasing, materials
management, quality assurance, and environmental and health and safety
improvement activities worldwide. Mr. Sharp has been an employee of Goodyear
since 1964.
ROBERT W. TIEKEN EXECUTIVE VICE PRESIDENT 56
AND CHIEF FINANCIAL OFFICER
Mr. Tieken joined Goodyear on May 3, 1994, when he was elected an
Executive Vice President and the Chief Financial Officer of Registrant. Prior
to joining Goodyear, Mr. Tieken had been employed by the General Electric
Company for 32 years, serving in various financial management posts, including
Vice President, Finance and Information Technology of General Electric
Aerospace from 1988 to April of 1993. From April of 1993 through April of 1994,
Mr. Tieken was the Vice President of Finance of Martin Marietta Corporation,
which acquired General Electric Aerospace in April of 1993. Mr. Tieken is the
principal financial officer of Registrant.
EUGENE R. CULLER, JR EXECUTIVE VICE PRESIDENT 57
Mr. Culler served in various capacities until November of 1986, when he
was elected a Vice President of Registrant, in which capacity he served as the
executive officer of Registrant responsible for worldwide tire marketing until
January 1, 1987, when he became the executive officer of Registrant responsible
for Goodyear's worldwide original equipment tire sales. On August 2, 1988, Mr.
Culler was elected an Executive Vice President of Registrant, in which capacity
he served as the executive officer of Registrant responsible for Goodyear's
North American Tire Operations until September 30, 1990. Mr. Culler was the
President of Goodyear Canada, Inc., a wholly-owned subsidiary of Registrant,
from October 1, 1990 to April 15, 1995. Mr. Culler was elected an Executive
Vice President of Registrant effective April 15, 1995, and, in such capacity,
is the executive officer responsible for Goodyear's North American Tire
Operations. Mr. Culler has been an employee of Goodyear since 1961.
JAMES W. BARNETT VICE PRESIDENT 65
Mr. Barnett served in various posts in Goodyear's replacement tire sales
organization until elected a Vice President of Registrant on September 6, 1984,
serving in such capacity as the executive officer of Registrant responsible for
Registrant's replacement tires sales and marketing in the United States until
August 15, 1988. Since August 15, 1988, Mr. Barnett has served as the executive
officer of Registrant responsible for Goodyear's worldwide original equipment
tire sales. Mr. Barnett has been an employee of Goodyear since 1950.
NISSIM CALDERON VICE PRESIDENT 62
Dr. Calderon served in various research management posts until April 7,
1986, when he was elected a Vice President of Registrant. He is the executive
officer of Registrant responsible for Goodyear's research programs. Dr.
Calderon has been an employee of Goodyear since 1962.
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21
NAME POSITION(S) HELD AGE
---- ---------------- ---
JAMES BOYAZIS VICE PRESIDENT AND SECRETARY 59
Mr. Boyazis joined Goodyear in 1963, serving in various posts until June
2, 1987, when he was elected a Vice President and the Secretary of Registrant.
He is also the Associate General Counsel of Registrant.
JESSE T. WILLIAMS, SR. VICE PRESIDENT 56
Mr. Williams served in various human resources posts until August 2,
1988, when he was elected a Vice President of Registrant. Mr. Williams was
responsible for corporate compliance with equal employment opportunity laws and
regulations until July 1, 1991, when he became the executive officer of
Registrant responsible for Goodyear's human resources, diversity, safety and
workers' compensation activities and for compliance with the various equal
employment opportunity, workplace safety and other employment laws and
regulations. Mr. Williams was the executive officer of Registrant responsible
for Goodyear's compensation and employment practices from March 1, 1993 through
October 31, 1995. Effective November 1, 1995, Mr. Williams became the executive
officer of Registrant responsible for Goodyear's human resources policy and
employment practices. Mr. Williams has been an employee of Goodyear since 1962.
JOHN P. PERDUYN VICE PRESIDENT 56
Mr. Perduyn served in various public relations posts until appointed
Director of Public Information in 1980, serving in that post until June 1,
1989. Mr. Perduyn was elected a Vice President of Registrant effective June 1,
1989, and is the executive officer of Registrant responsible for Goodyear's
public affairs activities. Mr. Perduyn has been an employee of Goodyear since
1970.
RICHARD P. ADANTE VICE PRESIDENT 49
Mr. Adante served in various engineering and management posts until
appointed Production Director of Deutsche Goodyear GmbH, a wholly-owned
subsidiary of Registrant, in August of 1988, serving in that capacity until
April of 1990, when he was appointed Vice President of merchandise distribution
and control. Mr. Adante was elected a Vice President effective April 1, 1991
and is the executive officer of Registrant responsible for materials
management. Mr. Adante has been an employee of Goodyear since 1966.
H. CLAY ORME VICE PRESIDENT 56
Mr. Orme served in various manufacturing management posts until he was
appointed Director of Tire Manufacturing in 1987. Mr. Orme was elected a Vice
President of Registrant effective September 1, 1992, and, in such capacity, is
the executive officer of the Registrant responsible for Goodyear's worldwide
manufacturing, corporate engineering and product distribution operations. Mr.
Orme has been an employee of Goodyear since 1962.
GARY A. MILLER VICE PRESIDENT 49
Mr. Miller served in various management and research and development
posts until appointed Director of Tire Value and Competitive Analysis in April
of 1989, serving in that post until October 1, 1990, when he was appointed
General Manager of Specialty Tires. Mr. Miller was elected a Vice President of
Registrant effective November 1, 1992. He is the executive officer of
Registrant responsible for Goodyear's purchasing operations. Mr. Miller has
been an employee of Goodyear since 1967.
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22
NAME POSITION(S) HELD AGE
---- ---------------- ---
MIKE L. BURNS VICE PRESIDENT 54
Mr. Burns served in various human resources posts until appointed
Director of Organization Development and Training in 1986. He was elected a
Vice President of Registrant effective March 1, 1993. He is the executive
officer of Registrant responsible for Goodyear's human resources and total
quality systems. Mr. Burns has been an employee of Goodyear since 1965.
GEORGE E. STRICKLER VICE PRESIDENT AND COMPTROLLER 48
Mr. Strickler served in various accounting, treasury and financial posts
until he was elected an Assistant Comptroller of the Registrant on April 9,
1984, in which capacity he served as the principal financial officer for the
General Products Division until August of 1988 when he became the principal
financial officer of the Tire Division. Mr. Strickler was elected a Vice
President and the Comptroller of Registrant effective September 1, 1993. Mr.
Strickler is the executive officer of Registrant responsible for business unit
financial functions, corporate accounting and taxes and is the principal
accounting officer of Registrant. Mr. Strickler has been an employee of
Goodyear since 1969.
JAMES C. WHITELEY VICE PRESIDENT 48
Mr. Whiteley served in various quality control and quality assurance
managerial posts until appointed Director of Tire Quality Assurance on June 1,
1990. He was elected a Vice President of Registrant on November 2, 1993,
serving as the executive officer of Registrant responsible for product quality
and safety. Effective July 1, 1995, Mr. Whiteley became the executive officer
of Registrant responsible for product quality and safety and environmental and
occupational health and safety improvement and compliance programs. Mr.
Whiteley has been an employee of Goodyear since 1969.
RICHARD W. HAUMAN VICE PRESIDENT AND TREASURER 49
Mr. Hauman served in various financial management posts around the world
until he was elected an Assistant Treasurer of Registrant on August 15, 1988.
He was elected a Vice President and the Treasurer of Registrant on October 4,
1994. Mr. Hauman is the executive officer of Registrant responsible for
Goodyear's treasury operations, risk management activities and pension and
medical benefits administration. Mr. Hauman has been an employee of Goodyear
since 1968.
RICHARD J. STEICHEN VICE PRESIDENT 51
Dr. Steichen joined Goodyear in 1973 as a research chemist and served in
various research and development posts until May 16, 1989, when he was
appointed Director of Polyester Research and Development. On August 1, 1991, he
was appointed Director of Technology Management. On November 1, 1992, Dr.
Steichen was appointed the General Manager of Technology and Quality Assurance
of South Pacific Tyres, a joint venture company 50% owned by Goodyear, serving
in that capacity until November 30, 1994. Dr. Steichen was elected a Vice
President of Registrant effective December 1, 1994. Dr. Steichen is the
executive officer of Registrant responsible for Goodyear's worldwide tire
technology activities.
C. THOMAS HARVIE VICE PRESIDENT AND GENERAL COUNSEL 52
Mr. Harvie joined Goodyear on July 1, 1995 as a Vice President and the
General Counsel of Registrant. Prior to joining Goodyear, Mr. Harvie was a Vice
President and the Associate General Counsel of TRW Inc. from 1989 through June
1995. Mr. Harvie had been employed by TRW Inc. for 20 years in various
capacities in the TRW Inc. law department.
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23
No family relationship exists between any of the above named executive
officers or between said executive officers and any other director or nominee
for director of Registrant.
Each executive officer is elected by the Board of Directors at its annual
meeting to a term of one year or until his or her successor is duly elected,
except in those instances where the person is elected at other than an annual
meeting of the Board of Directors in which event such person's tenure will
expire at the next annual meeting of the Board of Directors unless such person
is reelected. The next annual meeting of the Board of Directors is scheduled to
be held on April 15, 1996.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal market for Registrant's Common Stock is the New York Stock
Exchange (Stock Exchange Symbol GT). Registrant's Common Stock is also listed
on the Chicago Stock Exchange and The Pacific Stock Exchange. Overseas listings
include the Amsterdam, Basel, Geneva, Paris and Zurich Stock Exchanges.
Information relating to the high and low sale prices of Registrant's
Common Stock and the dividends paid on such shares during 1995 and 1994 appears
under the caption "Quarterly Data and Market Price Information" in Item 8 of
this Annual Report, at page 50, and is incorporated herein by specific
reference. The first quarter 1996 cash dividend, paid on March 15, 1996 to
shareholders of record at February 16, 1996, was $.25 per share.
At February 16, 1996, there were 31,748 record holders of the 154,471,026
shares of the Common Stock of Registrant then outstanding. Approximately
8,724,862 shares of the Common Stock of Registrant were beneficially owned by
approximately 36,498 participants in four Employee Savings Plans sponsored by
the Registrant and certain of its subsidiaries. The Northern Trust Company is
the Trustee for said Employee Savings Plans.
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ITEM 6. SELECTED FINANCIAL DATA.
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
(IN MILLIONS, EXCEPT PER SHARE) 1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
Net Sales ................................... $13,165.9 $12,288.2 $11,643.4 $11,784.9 $10,906.8
Income before Extraordinary
Items and Cumulative Effect of
Accounting Changes ........................ 611.0 567.0 488.7 367.3 74.5
Extraordinary Items --
Early Extinguishment of Debt .............. -- -- (14.6) (15.3) --
Tax Benefit of Loss Carryovers ............ -- -- -- -- 22.1
Cumulative Effect of
Change in Accounting for
Postemployment Benefits ................... -- -- (86.3) -- --
Transition Effect of Change in
Accounting for Non-pension
Postretirement Benefits ................... -- -- -- (1,065.7) --
Cumulative Effect of Change in
Accounting for Income Taxes ............... -- -- -- 55.1 --
--------- --------- --------- --------- ---------
Net Income (loss) ........................... $ 611.0 $ 567.0 $ 387.8 $ (658.6) $ 96.6
========= ========= ========= ========= =========
Per Share of Common Stock:
Income before Extraordinary
Items and Cumulative Effect of
Accounting Changes ........................ $ 4.02 $ 3.75 $ 3.33 $ 2.57 $ .62
Extraordinary Items--
Early Extinguishment of Debt .............. -- -- (.10) (.11) --
Tax Benefit of Loss Carryovers ............ -- -- -- -- .19
Cumulative Effect of
Change in Accounting for
Postemployment Benefits ................... -- -- (.59) -- --
Transition Effect of Change in
Accounting for Non-pension
Postretirement Benefits ................... -- -- -- (7.46) --
Cumulative Effect of Change in
Accounting for Income Taxes ............... -- -- -- .39 --
--------- --------- --------- --------- ---------
Net Income (loss) ........................... $ 4.02 $ 3.75 $ 2.64 $ (4.61) $ .81
========= ========= ========= ========= =========
Dividends Per Share ......................... $ .95 $ .75 $ .575 $ .275 $ .20
Total Assets ................................ $ 9,789.6 $ 9,123.3 $ 8,436.1 $ 8,563.7 $ 8,510.5
Long Term Debt and Capital
Leases .................................... $ 1,320.0 $ 1,108.7 $ 1,065.9 $ 1,471.1 $ 2,038.1
Shareholders' Equity ........................ $ 3,281.7 $ 2,803.2 $ 2,300.8 $ 1,930.3 $ 2,731.1
Notes: (1) See "Principles of Consolidation" at Note 1 ("Accounting Policies") to the Financial Statements at page 35.
(2) Per share amounts reflect the two-for-one split of the Company's Common Stock, distributed on May 4, 1993 in the
form of a dividend of one share of Common Stock on each share of Common Stock outstanding at the close of business
on April 30, 1993.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
CONSOLIDATED
Sales in 1995 were $13.2 billion, increasing 7.1 percent from $12.3
billion in 1994 and 13.1 percent from $11.6 billion in 1993. Net income was
$611.0 million or $4.02 per share in 1995, increasing 7.8 percent from $567.0
million or $3.75 per share in 1994 and 57.6 percent from $387.8 million or
$2.64 per share in 1993.
Worldwide tire unit sales were unchanged from 1994 but were 7 percent
higher than in 1993. Tire unit sales in 1995 reflected higher original
equipment volume, primarily in Europe, but were adversely affected by lower
replacement auto market volume in the U.S. In 1994, tire unit sales rose on
increased demand worldwide in both the original equipment and replacement
markets, with increases recorded in all regions.
[FIGURE]
CONSOLIDATED NET INCOME
(Dollars in millions)
93 $387.8
94 $567.0
95 $611.0
Although competitive pricing conditions continued from 1994, revenues in
1995 increased due to higher average selling prices, and revenues in both 1995
and 1994 were favorably affected by the strengthening of European currencies
versus the dollar. Tire revenue growth in 1994 did not keep pace with tire unit
sales growth in that year, reflecting lower average selling prices compared to
1993 and a shift in worldwide unit sales mix.
Cost of goods sold in 1995 of $10.1 billion increased 8.9 percent from
1994 and 15.9 percent from 1993. These costs amounted to 76.7 percent, 75.5
percent and 74.8 percent of sales in 1995, 1994 and 1993, respectively.
Worldwide raw material costs were higher in both 1995 and 1994, but are not
expected to increase significantly in 1996. Labor costs also increased in each
year, due in part to new U.S. wage agreements in 1994 which provided wage and
benefit improvements to approximately 20,000 U.S. employees. Costs in both 1995
and 1994 were favorably impacted by efficiencies achieved as a result of
sustained high levels of capacity utilization and ongoing cost containment
measures.
The Company's research and development expenditures, all of which were
included in cost of sales, were $369.3 million, $341.3 million and $320.0
million in 1995, 1994 and 1993, respectively. Research and development
expenditures in 1996 are expected to approximate 1995's level.
There were no charges for environmental cleanup projects included in cost
of sales in 1995, compared to charges of $22.8 million and $29.7 million in
1994 and 1993, respectively. At December 31, 1995, the Company's reserve for
environmental cleanup costs had decreased to $91.4 million from $116.4 million
at December 31, 1994, reflecting payments made for site restoration.
Environmental compliance costs may increase in future periods as a result of
new and increasingly stringent laws and regulatory standards. Funding for
environmental cleanup costs is expected to be provided from operations. For
further discussion, refer to the note to the financial statements No. 17,
Commitments and Contingent Liabilities.
Selling, administrative and general expense in 1995 of $1.9 billion
decreased 1.1 percent from 1994 but increased slightly from 1993. These
expenses amounted to 14.7 percent, 15.9 percent and 16.5 percent of sales in
1995, 1994 and 1993, respectively. The improvement as a percent to sales in
each year reflected the benefits of increased sales and ongoing cost
containment measures.
Interest expense in 1995 of $135.0 million increased 4.3 percent from
1994 due primarily to higher debt levels resulting from increased working
capital requirements, but decreased 16.9 percent from 1993 due to lower average
debt levels and an increase in the proportion of total domestic variable rate
short term debt.
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Other income and expense decreased in 1995 due primarily to lower
interest income, which resulted in part from lower levels of time deposits and
the effects of the Real plan in Brazil, as discussed below. Other income and
expense in 1994 decreased due primarily to the inclusion of gains on asset
sales totaling $24.7 million ($15.0 million after tax or $.10 per share) in
1993, resulting from the sale of the laminated films business, the Air Treads
subsidiary's wheel and brake division and a miscellaneous investment.
Foreign currency exchange expense in 1995 was $17.4 million, compared to
$77.6 million in 1994 and $113.1 million in 1993. The improvement in each year
also reflected the effects of Brazil's Real plan.
Effective July 1, 1994, the Brazilian government implemented the Real
plan, an economic plan designed to reduce inflation. The Real plan did not
adversely affect unit sales in 1995 or 1994 in either Brazil or its export
markets, and it did not have a material effect on the net income contributed by
the Company's operations in Brazil in those years, as lower interest income on
time deposits was substantially offset by lower expenses, primarily foreign
currency exchange.
The contribution of the Company's operations in Brazil to segment
operating income, however, was adversely affected by the lower interest income,
in addition to higher raw material and labor costs. Operations in Brazil
accounted for 5.0 percent, 5.2 percent and 4.8 percent of sales and 7.1
percent, 14.0 percent and 15.2 percent of operating income in 1995, 1994 and
1993, respectively. It is difficult to forecast future levels of contribution
due to, among other things, Brazil's current economic downturn and the general
volatility of its economy.
The Company's effective tax rate was 32.7 percent, 33.6 percent and 36.5
percent in 1995, 1994 and 1993, respectively. The improvement in each year
resulted primarily from a more efficient mix of international and U.S. taxes on
international earnings and additionally in 1994, higher U.S. earnings and the
utilization of foreign loss carryovers. For further discussion, refer to the
note to the financial statements No. 15, Income Taxes.
Net income in 1993 was reduced by a one-time non-cash charge of $86.3
million or $.59 per share resulting from the cumulative effect of adopting
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." For further discussion, refer to the note to the
financial statements No. 11, Postretirement Health Care, Life Insurance and
Postemployment Benefits. Additionally in 1993, after-tax charges totaling $14.6
million or $.10 per share were recorded related to the early retirement of
certain long term debt obligations, which were accounted for as extraordinary
items.
The Company early adopted in 1995 Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This statement, which is effective for
all companies in 1996, requires companies to review certain assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of these assets may not be recoverable, in which case the asset
generally would be written down to fair value. The adoption of this standard
did not affect the Company's results of operations, financial position or
liquidity.
The Company also early adopted in 1995 Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." This statement,
which is also effective for all companies in 1996, encourages, but does not
require the recording of compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based compensation under the provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations. Accordingly, the adoption of this standard did not affect the
Company's results of operations, financial position or liquidity. For further
discussion, refer to the notes to the financial statements No. 1, Accounting
Policies and No. 8, Stock Compensation Plans.
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SEGMENT INFORMATION
Segment operating income was $1,221.1 million, $1,193.3 million and
$1,164.7 million and segment operating margin was 9.3 percent, 9.7 percent and
10.0 percent in 1995, 1994 and 1993, respectively. Despite pricing improvements
in 1995, segment operating margin in both 1995 and 1994 was adversely impacted
by competitive pricing conditions, higher raw material and labor costs and
reduced interest income on time deposits. Competitive pricing pressures are
expected to continue in 1996.
INDUSTRY SEGMENTS
TIRES
Sales in 1995 were $11.3 billion, increasing 7.2 percent from 1994 and
13.0 percent from 1993. Although competitive pricing conditions continued from
1994, revenues in 1995 increased due to higher average selling prices, and
sales in both 1995 and 1994 were favorably affected by the strengthening of
currencies in Europe versus the dollar. Sales in 1994 rose on higher unit
volume, although average selling prices were lower compared to 1993 as a result
of pricing pressures and a shift in worldwide unit sales mix.
[FIGURE] TIRE SALES
(Dollars in millions)
93 $9,963.5
94 $10,508.2
95 $11,262.3
[FIGURE] TIRE OPERATING INCOME
(Dollars in millions)
93 $998.5
94 $1,010.6
95 $1,000.2
The following table presents changes in tire unit sales:
INCREASE (DECREASE) IN COMPANY TIRE UNIT SALES FOR THE YEAR
1995 VS 1994 1995 VS 1993
------------ ------------
U.S. ..................................... (3)% 3%
International ............................ 3 % 11%
Worldwide ................................ -- % 7%
Unit sales in the U.S. were adversely affected in 1995 by weak conditions
in the North American auto market, although demand there is expected to
increase somewhat in 1996. Replacement unit sales in the U.S. in 1995 were
lower than in 1994 and unchanged from 1993. Original equipment unit sales in
the U.S. in 1995 decreased from 1994, although they remained higher than in
1993. International unit sales reflected improvement compared to 1994 and 1993
in both the original equipment and replacement markets, primarily in Europe and
Asia.
Operating income in 1995 of $1,000.2 million decreased slightly from
$1,010.6 million in 1994 but increased slightly from $998.5 million in 1993.
Despite pricing improvements, operating income in 1995 was lower due primarily
to higher raw material and labor costs, competitive market conditions and lower
interest income in Brazil. Operating income in 1994 increased, despite higher
raw material and labor costs. Operating income in both 1995 and 1994 was
favorably impacted by efficiencies resulting from a sustained high rate of
capacity utilization and ongoing cost containment measures.
Operations in Brazil accounted for 4.9 percent, 5.0 percent and 4.7
percent of tire segment sales and 6.2 percent, 12.0 percent and 14.1 percent of
tire segment operating income in 1995, 1994 and 1993, respectively.
GENERAL PRODUCTS
Sales in 1995 were $1.8 billion, increasing 4.5 percent from 1994 and 9.8
percent from 1993. Operating income in 1995 of $165.6 million decreased 3.1
percent from $170.9 million in 1994 and
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28
6.9 percent from $177.8 million in 1993. Operating income in 1993 included a
$9.1 million gain on the sale of the laminated films business.
Sales in engineered products in 1995 were higher due primarily to pricing
improvements and increased demand from original equipment manufacturers, but
operating income decreased because of higher raw material and labor costs and
lower interest income in Brazil. Sales and operating income in 1994 rose due
primarily to increased demand, principally in Brazil.
[FIGURE] GENERAL PRODUCTS SALES
(Dollars in millions)
93 $1,618.0
94 $1,700.9
95 $1,776.8
[FIGURE] GENERAL PRODUCTS OPERATING INCOME
(Dollars in millions)
93 $177.8
94 $170.9
95 $165.6
Sales and operating income in chemical products increased in 1995 due to
pricing improvements, and sales in 1994 reflected increased demand. Operating
income in each year was adversely affected by higher raw material costs, and in
1994 was flat compared to 1993 due to the additional effect of competitive
pricing pressures.
General products operations in Brazil accounted for 6.3 percent, 6.5
percent and 5.7 percent of general products segment sales and 15.2 percent,
26.9 percent and 20.7 percent of general products segment operating income in
1995, 1994 and 1993, respectively.
OIL TRANSPORTATION
Sales of $126.8 million, $79.1 million and $61.9 million were recorded
for 1995, 1994 and 1993, respectively. Operating income in 1995 was $55.3
million, compared to $11.8 million in 1994 and an operating loss of $11.6
million in 1993.
Sales for this segment consist of tariffs charged by the All American
Pipeline System (the System) and revenues, net of acquisition costs, resulting
from various crude oil gathering, purchasing and selling activities. Tariff
revenues increased due to a higher percentage of crude oil being transferred to
Central Texas for delivery to refineries in the Mid-Continent region and along
the Texas Gulf Coast, in addition to increased oil shipments through the
System.
[FIGURE] OIL TRANSPORTATION OPERATING INCOME
(Dollars in millions)
93 ($11.6)
94 $11.8
95 $55.3
The improvement in operating income in each year was due primarily to the
previously mentioned higher tariff revenues, increased throughput and the
effects of cost containment measures. Operating income in 1995 included a
charge of $5.0 million for the writedown of surplus construction pipe, material
and equipment. The Company anticipates that sales and operating income in the
oil transportation segment in 1996 will be at substantially the same level as
in 1995.
Acquisition costs associated with gathering, purchasing and selling
activities amounted to $496 million, $598 million and $655 million in 1995,
1994 and 1993, respectively. Lower levels of crude oil purchasing and selling
activities were undertaken in 1995, due primarily to market conditions.
GEOGRAPHIC SEGMENTS
U.S. OPERATIONS
Sales in 1995 were $7.2 billion, increasing 1.7 percent from 1994 and 7.0
percent from 1993.
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Operating income for 1995 of $543.9 million decreased 8.0 percent from $591.5
million in 1994 and 7.8 percent from $590.1 million in 1993.
Sales in 1995 increased due primarily to higher average selling prices in
tires, increased throughput and higher average tariffs in the All American
Pipeline System and improved pricing and volume in general products. Despite
these improvements, operating income in 1995 decreased due primarily to
increased raw material and labor costs and competitive conditions in the tire
market.
[FIGURE] U.S. OPERATIONS
PERCENT OF
CONSOLIDATED SALES
93 58.2%
94 58.0%
95 55.1%
[FIGURE] U.S. OPERATIONS
PERCENT OF CONSOLIDATED OPERATING INCOME
93 50.7%
94 49.6%
95 44.5%
Sales and operating income in 1994 were higher due to increased unit
sales of tires, increased chemical volume and higher tariff revenues in the All
American Pipeline System. Operating income in 1994 was adversely affected by
higher raw material and labor costs, and average tire selling prices were lower
due to pricing pressures and a change in mix.
Operating income in both 1995 and 1994 was favorably impacted by
efficiencies resulting from continued high levels of capacity utilization and
ongoing cost containment measures.
U.S. operations accounted for 55.1 percent, 58.0 percent and 58.2 percent
of consolidated sales and 44.5 percent, 49.6 percent and 50.7 percent of
consolidated operating income in 1995, 1994 and 1993, respectively. The
decrease in the U.S. contribution reflected the Company's growth in
international markets and a decline in U.S. operating income.
INTERNATIONAL OPERATIONS
Sales in 1995 were $5.9 billion, increasing 14.7 percent from 1994 and
21.6 percent from 1993. Operating income for 1995 of $677.2 million increased
12.5 percent from $601.8 million in 1994 and 17.9 percent from $574.6 million
in 1993.
[FIGURE] INTERNATIONAL OPERATIONS
PERCENT OF
CONSOLIDATED SALES
93 41.8%
94 42.0%
95 44.9%
[FIGURE] INTERNATIONAL OPERATIONS
PERCENT OF CONSOLIDATED
OPERATING INCOME
93 49.3%
94 50.4%
95 55.5%
In Europe, sales in 1995 of $2.9 billion increased 25.2 percent from 1994
and 27.8 percent from 1993. Operating income for 1995 of $317.2 million
increased 49.6 percent from $212.0 million in 1994 and 43.2 percent from $221.5
million in 1993.
Sales and operating income in 1995 increased due to pricing improvements,
the effects of currency translations and higher tire unit sales. Operating
income in 1995 also benefited from high levels of capacity utilization and
improved productivity, although raw material costs were higher. Sales in 1994
increased due to higher tire unit sales, improved mix and the effects of
currency translations. Operating income in 1994 decreased due primarily to
competitive pricing conditions in the region and adverse economic conditions in
Turkey.
In Latin America, sales in 1995 of $1.5 billion increased 2.0 percent
from 1994 and 9.9 percent from 1993. Operating income for 1995 of $238.8
million decreased 14.1 percent from $278.2 million in 1994 and 11.9 percent
from $271.1 million in 1993.
Despite lower original equipment tire unit sales, sales in 1995 increased
due primarily to pricing improvements. Operating income in 1995 was lower due
to increased raw material and labor
27
30
costs and lower interest income. Sales and operating income in 1994
increased due primarily to higher tire unit sales and improved results in
engineered products, which offset the adverse impact of higher labor costs and
lower interest income in Brazil.
In Asia, sales in 1995 of $833.2 million increased 17.1 percent from 1994
and 29.2 percent from 1993. Operating income for 1995 of $90.1 million
increased 10.9 percent from $81.3 million in 1994 and 28.8 percent from $70.0
million in 1993.
Sales and operating income in 1995 increased due primarily to improved
results in natural rubber operations, pricing improvements and higher tire unit
sales. Operating income also benefited from improved productivity, although raw
material costs were higher. Sales and operating income in 1994 increased due
primarily to increased tire unit sales.
In Canada, sales in 1995 of $686.5 million increased 5.0 percent from
1994 and 17.5 percent from 1993. Operating income for 1995 of $31.1 million
increased 2.4 percent from $30.3 million in 1994 and 159.2 percent from $12.0
million in 1993.
Sales and operating income in 1995 increased due primarily to improved
pricing and mix and higher unit sales of engineered products, although raw
material costs were higher. Sales and operating income in 1994 were higher due
primarily to increased volume.
International operations accounted for 44.9 percent, 42.0 percent and
41.8 percent of consolidated sales and 55.5 percent, 50.4 percent and 49.3
percent of consolidated operating income in 1995, 1994 and 1993, respectively.
The increase in the international contribution reflected the Company's growth
in international markets and a decline in U.S. operating income.
For further information relating to industry and geographic segments,
refer to the note to the financial statements No. 16, Business Segments.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $652.8 million during 1995, as
reported on the Consolidated Statement of Cash Flows. Working capital
requirements increased for inventories, reflecting increased finished goods
quantities and higher raw material and labor costs. In addition, cash was used
for pension funding, as discussed on the following page.
[FIGURE] CAPITAL EXPENDITURES
(Dollars in millions)
93 $432.3
94 $523.0
95 $615.6
Cash used in investing activities was $684.0 million during 1995, which
consisted primarily of capital expenditures for plant modernizations and
expansions and new tire molds totaling $615.6 million. In addition, cash was
used for the Company's investment in a tire manufacturer in Poland. At December
31, 1995, the Company had binding commitments for land, buildings and equipment
of $150.6 million. Capital expenditures are expected to total $675 million in
1996.
Cash provided by financing activities was $82.8 million during 1995,
primarily to support the previously mentioned increased working capital
requirements. Consolidated debt at December 31, 1995 was $1,546.7 million and
amounted to 32.0 percent of debt and equity, compared to $1,335.6 million and
32.3 percent, respectively, at the end of 1994. Net debt, which consists of
consolidated debt less cash and cash equivalents, was $1,278.4 million at
December 31, 1995, an increase of $193.7 million from December 31, 1994.
In order to reduce the impact of changes in variable interest rates on
consolidated results of operations and future cash outflows for interest, the
Company has entered into various interest rate contracts. These contracts limit
the effect of market fluctuations on the interest cost of floating rate debt.
At December 31, 1995, the interest rate on 56 percent of the Company's debt was
fixed by either the nature of the obligation or through the interest rate
contracts. A summary of contracts in place and related weighted average
interest rates follows:
28
31
FIXED RATE FLOATING RATE
(Dollars in millions) CONTRACTS CONTRACT
- -----------------------------------------------------------------------------
December 31, 1995:
Notional principal amount $395.0 $50.0
Pay fixed rate 8.95% --
Receive variable LIBOR 5.81% --
Pay variable LIBOR -- 5.81%
Receive fixed rate -- 6.69%
Average years to maturity .83 2.23
Fair value: (unfavorable) favorable $(11.3) $ 1.5
Average rate paid during the year 8.95% 6.06%
Average rate received during the year 6.23% 6.69%
- ------------------------------------------------------------------------------
Current market pricing models were used to estimate the fair values of
interest rate swap contracts. The fair value of the fixed rate contracts
decreased from $7.1 million unfavorable at December 31, 1994, due primarily to
lower interest rates. The Company estimates that an additional one percent
decrease in interest rates at December 31, 1995 would have lowered the fair
value of the fixed rate contracts by $2.3 million at that date.
Throughout 1995, the Company sold certain domestic accounts receivable
under continuous sale programs whereby, as these receivables were collected,
new receivables were sold. Under these agreements, undivided interests in
designated receivable pools are sold to purchasers with recourse limited to the
receivables purchased. At December 31, 1995 and 1994, the outstanding balance
of receivables sold under these agreements amounted to $550 million. The net
cumulative proceeds from sales of accounts and notes receivable under these and
other agreements totaled $4.1 billion, $4.2 billion and $4.0 billion during
1995, 1994 and 1993, respectively.
Substantial short term and long term credit sources are available to the
Company globally under normal commercial practices. At December 31, 1995 there
were worldwide credit sources totaling $3.4 billion, of which $1.9 billion or
55 percent were unused.
The Company is a party to two credit facility agreements with several
domestic and international banks, consisting of a $900 million five year
revolving credit facility and a $294 million 364-day revolving credit facility.
The $900 million five year credit facility agreement is with 31 banks and
provides that the Company may borrow from time to time until July 15, 1999,
when the commitment terminates and any outstanding loans mature. The $294
million 364-day credit facility agreement is with 30 banks and provides that
the Company may borrow until July 12, 1996, on which date the facility
commitment terminates, except as it may be extended on a bank by bank basis. If
a bank does not extend its commitment if requested to do so, the Company may
obtain from such bank a two year term loan up to the amount of such bank's
commitment. There were no borrowings outstanding under these agreements at
December 31, 1995.
For further discussion of financing activities, refer to the note to the
financial statements No. 6, Financing Arrangements and Financial Instruments.
The Company maintains two major domestic pension plans for its hourly and
salaried associates. At December 31, 1995, the discount rate for these and
other domestic plans was lowered from 8.5% to 7.75%, which added $164.8 million
to the accumulated benefit obligation and $176.6 million to the projected
benefit obligation at that date.
The Company's domestic funding practice since 1993 has been to fund, from
operations, amounts in excess of the requirements of federal laws and
regulations. In 1995, 1994 and 1993, the Company funded a total of $573.5
million, which resulted in the domestic plans being fully funded at December
31, 1995. Accordingly, the Company does not anticipate any significant excess
pension funding in 1996.
For further discussion of pensions, refer to the note to the financial
statements No. 9, Pensions.
Funds generated by operations, together with funds available under
existing credit arrangements, are expected to exceed the Company's currently
anticipated cash requirements.
29
32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX
CONSOLIDATED FINANCIAL STATEMENTS--FINANCIAL STATEMENT SCHEDULES
PAGE
----
Report of Independent Accountants ...................................... 30
Consolidated Statement of Income-- years ended December 31, 1995,
1994 and 1993 ........................................................ 31
Consolidated Balance Sheet-- December 31, 1995 and 1994 ................ 32
Consolidated Statement of Shareholders' Equity-- years ended
December 31, 1995, 1994 and 1993 ..................................... 33
Consolidated Statement of Cash Flows-- years ended
December 31, 1995, 1994 and 1993 ..................................... 34
Notes to Financial Statements .......................................... 35
Supplementary Data (unaudited) ......................................... 50
Financial Statement Schedules .......................................... FS-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The Goodyear Tire & Rubber Company
In our opinion, the consolidated financial statements listed in the index
on this page present fairly, in all material respects, the financial position
of The Goodyear Tire & Rubber Company and Subsidiaries at December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 11 to the consolidated financial statements, the
Company changed its method of accounting for postemployment benefits, effective
January 1, 1993.
/s/ Price Waterhouse
PRICE WATERHOUSE LLP
Cleveland, Ohio
February 1, 1996
30
33
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Dollars in millions, except per share)
Year Ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Net Sales $13,165.9 $12,288.2 $11,643.4
Cost of Goods Sold 10,093.6 9,271.4 8,713.0
Selling, Administrative and General Expense 1,936.9 1,958.2 1,922.1
Interest Expense (Note 12) 135.0 129.4 162.4
Other (Income) and Expense (Note 2) 21.0 (37.9) (79.1)
Foreign Currency Exchange 17.4 77.6 113.1
Minority Interest in Net Income of Subsidiaries 36.2 23.8 27.0
- ------------------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes, Extraordinary Item
and Cumulative Effect of Accounting Change 925.8 865.7 784.9
United States and Foreign Taxes on Income (Note 15) 314.8 298.7 296.2
- ------------------------------------------------------------------------------------------------------------------------------------
Income before Extraordinary Item
and Cumulative Effect of Accounting Change 611.0 567.0 488.7
Extraordinary Item - Early Extinguishment of Debt
(net of tax of $6.1) -- -- (14.6)
Cumulative Effect of Change in Accounting for
Postemployment Benefits (net of tax of $55.2) (Note 11) -- -- (86.3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 611.0 $ 567.0 $ 387.8
====================================================================================================================================
Per Share of Common Stock:
Income before Extraordinary Item
and Cumulative Effect of Accounting Change $ 4.02 $ 3.75 $ 3.33
Extraordinary Item - Early Extinguishment of Debt -- -- (.10)
Cumulative Effect of Change in Accounting for Postemployment -- -- (.59)
Benefits
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 4.02 $ 3.75 $ 2.64
====================================================================================================================================
Average Shares Outstanding 152,118,861 151,203,885 147,086,828
====================================================================================================================================
The accompanying notes are an integral part of this financial statement.
31
34
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
December 31, 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 268.3 $ 250.9
Accounts and notes receivable (Note 3) 1,615.0 1,524.7
Inventories (Note 4) 1,765.2 1,425.1
Prepaid expenses and other current assets 193.1 166.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current Assets 3,841.6 3,367.5
Investments in Affiliates, at equity 183.8 133.4
Long Term Accounts and Notes Receivable 252.0 208.5
Deferred Charges 793.3 905.3
Other Assets 157.7 125.8
Properties and Plants (Note 5) 4,561.2 4,382.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 9,789.6 $ 9,123.3
====================================================================================================================================
LIABILITIES
Current Liabilities:
Accounts payable - trade $ 1,170.7 $ 1,013.9
Compensation and benefits 711.9 745.2
Other current liabilities 263.9 259.8
United States and foreign taxes 363.1 326.2
Notes payable to banks (Note 6A) 211.1 213.0
Long term debt due within one year 15.6 13.9
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 2,736.3 2,572.0
Long Term Debt and Capital Leases (Note 6B) 1,320.0 1,108.7
Compensation and Benefits 1,976.5 2,173.4
Other Long Term Liabilities 312.2 322.1
Minority Equity in Subsidiaries 162.9 143.9
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 6,507.9 6,320.1
SHAREHOLDERS' EQUITY
Preferred stock, no par value:
Authorized, 50,000,000 shares, unissued -- --
Common stock, no par value:
Authorized, 300,000,000 shares
Outstanding shares, 153,524,311 (151,407,285 in 1994) 153.5 151.4
Capital surplus 975.2 918.5
Retained earnings 2,661.0 2,194.5
Foreign currency translation adjustment (481.7) (421.7)
Minimum pension liability adjustment (Note 9) (26.3) (39.5)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 3,281.7 2,803.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 9,789.6 $ 9,123.3
====================================================================================================================================
The accompanying notes are an integral part of this financial statement.
32
35
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Foreign Minimum
Common Stock Currency Pension Total
------------------ Capital Retained Translation Liability Shareholders'
(Dollars in millions, except per share) Shares Amount Surplus Earnings Adjustment Adjustment Equity
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1992
after deducting 50,747,423 treasury shares 72,244,461 $ 72.2 $688.5 $1,510.6 $(341.0) $ -- $1,930.3
Net income for 1993 387.8 387.8
Cash dividends 1993 - $.575 per share (84.9) (84.9)
Stock dividend 1993 72,689,064 72.6 (72.6) --
Common stock issued (including
5,584,285 treasury shares):
Dividend Reinvestment and
Stock Purchase Plan 66,589 .1 3.0 3.1
Stock compensation plans 2,605,544 2.7 74.8 77.5
Conversion of debentures 2,909,716 2.9 111.7 114.6
Foreign currency translation adjustment (81.4) (81.4)
Minimum pension liability adjustment (46.2) (46.2)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993
after deducting 45,163,138 treasury shares 150,515,374 150.5 878.0 1,740.9 (422.4) (46.2) 2,300.8
Net income for 1994 567.0 567.0
Cash dividends 1994 - $.75 per share (113.4) (113.4)
Common stock issued (including
891,911 treasury shares):
Dividend Reinvestment and
Stock Purchase Plan 96,691 .1 3.5 3.6
Stock compensation plans 795,220 .8 37.0 37.8
Foreign currency translation adjustment .7 .7
Minimum pension liability adjustment 6.7 6.7
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994
after deducting 44,271,227 treasury shares 151,407,285 151.4 918.5 2,194.5 (421.7) (39.5) 2,803.2
Net income for 1995 611.0 611.0
Cash dividends 1995 - $.95 per share (144.5) (144.5)
Common stock issued (including
2,116,870 treasury shares):
Dividend Reinvestment and
Stock Purchase Plan 105,028 .1 4.2 4.3
Stock compensation plans 2,011,998 2.0 52.5 54.5
Foreign currency translation adjustment (60.0) (60.0)
Minimum pension liability adjustment 13.2 13.2
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995
after deducting 42,154,357 treasury shares 153,524,311 $153.5 $975.2 $2,661.0 $(481.7) $(26.3) $3,281.7
====================================================================================================================================
The accompanying notes are an integral part of this financial statement.
33
36
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
Year Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 611.0 $ 567.0 $ 387.8
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 434.9 410.3 392.9
Deferred tax provision 58.0 99.8 (36.3)
Accounts and notes receivable (84.4) (192.4) (10.9)
Inventories (344.3) (63.9) (100.2)
Accounts payable - trade 159.5 139.7 (48.1)
Domestic pension funding (252.5) (238.8) (82.2)
Other assets and liabilities 70.6 42.9 117.8
Accounting changes -- -- 86.3
Asset sales -- -- (24.7)
Early extinguishment of debt -- -- 20.7
- ---------------------------------------------------------------------------------------------------------------------------
Total adjustments 41.8 197.6 315.3
- ---------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 652.8 764.6 703.1
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (615.6) (523.0) (432.3)
Asset dispositions 8.9 19.0 83.6
Short term securities acquired (30.6) (287.1) (157.5)
Short term securities redeemed 41.4 310.6 214.2
Other transactions (88.1) (15.7) 9.8
- ---------------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (684.0) (496.2) (282.2)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term debt incurred 542.3 385.6 324.8
Short term debt paid (414.3) (395.7) (487.6)
Long term debt incurred 141.5 52.9 6.8
Long term debt and capital leases paid (101.0) (166.4) (385.8)
Common stock issued 58.8 41.4 195.2
Dividends paid (144.5) (113.4) (84.9)
- ---------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities 82.8 (195.6) (431.5)
Effect of Exchange Rate Changes on Cash and Cash Equivalents (34.2) (10.4) (8.4)
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 17.4 62.4 (19.0)
Cash and Cash Equivalents at Beginning of the Period 250.9 188.5 207.5
- ---------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 268.3 $ 250.9 $ 188.5
===========================================================================================================================
The accompanying notes are an integral part of this financial statement.
34
37
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Finanical Statements
NOTE 1. ACCOUNTING POLICIES
A summary of the significant accounting policies used in the preparation of the
accompanying financial statements follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all
majority-owned subsidiaries. All significant intercompany transactions have
been eliminated.
The Company's investments in 20% to 50% owned companies in which it has the
ability to exercise significant influence over operating and financial policies
are accounted for on the equity method. Accordingly, the Company's share of the
earnings of these companies is included in consolidated net income. Investments
in other companies are carried at cost.
REVENUE RECOGNITION
Substantially all revenues are recognized when finished products are shipped to
unaffiliated customers or services have been rendered with appropriate
provision for uncollectible accounts. In conformance with oil industry
practice, revenues resulting from sales of crude oil purchased from third
parties are recognized net of the related acquisition costs.
FOREIGN CURRENCY TRANSLATION
Financial statements of international subsidiaries are translated into U.S.
dollars using the exchange rate at each balance sheet date for assets and
liabilities and a weighted average exchange rate for each period for revenues,
expenses, gains and losses. Where the local currency is the functional
currency, translation adjustments are recorded as a separate component of
Shareholders' Equity. Where the U.S. dollar is the functional currency,
translation adjustments are recorded in income.
PER SHARE OF COMMON STOCK
Per share amounts have been computed based on the average number of common
shares outstanding.
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash and cash equivalents include cash on hand and in the bank as well as all
short term securities held for the primary purpose of general liquidity. Such
securities normally mature within three months from the date of acquisition.
Cash flows associated with items intended as hedges of identifiable
transactions or events are classified in the same category as the cash flows
from the items being hedged.
INVENTORY PRICING
Inventories are stated at the lower of cost or market. Cost is determined using
the last-in, first-out (LIFO) method for a significant portion of domestic
inventories and the first-in, first-out (FIFO) method or average cost method
for other inventories. Refer to Note 4.
PROPERTIES AND PLANTS
Properties and plants are stated at cost. Depreciation is computed on the
straight line method. Accelerated depreciation is used for income tax purposes,
where permitted. Refer to Note 5.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are utilized by the Company to reduce interest
rate and foreign exchange risks. The Company has established a control
environment which includes policies and procedures for risk assessment and the
approval, reporting and monitoring of derivative financial instrument
activities. The Company does not hold or issue derivative financial instruments
for trading purposes.
Interest Rate Contracts - The differentials to be received or paid under
contracts designated as hedges are recognized in income over the life of the
contracts as adjustments to Interest Expense. Gains and losses on terminations
of interest rate contracts are recognized as Other (Income) and Expense when
terminated in conjunction with the retirement of associated debt. Gains and
losses are deferred and amortized to Interest Expense over the remaining life
of the associated debt to the extent that such debt remains outstanding.
Foreign Exchange Contracts - Gains and losses on contracts designated as
hedges of existing assets and liabilities are recognized in income as exchange
rates change as Foreign Currency Exchange. Gains and losses on contracts
designated as hedges of net investments in foreign subsidiaries are recognized
in Shareholders' Equity as exchange rates change as Foreign currency
translation adjustment. Gains and losses on contracts designated as hedges of
identifiable foreign currency firm commitments are deferred and included in the
measurement of the related foreign currency transaction. Refer to Note 6.
35
38
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," encourages, but does not require companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related Interpretations. Accordingly, compensation cost for stock options
is measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock. Compensation cost for stock appreciation rights and performance
equity units is recorded annually based on the quoted market price of the
Company's stock at the end of the period. Refer to Note 8.
ADVERTISING COSTS
Costs incurred for producing and communicating advertising are
generally expensed when incurred. Costs incurred under the Company's domestic
cooperative advertising program with dealers and franchisees are recorded
subsequent to the first time the advertising takes place, as related revenues
are recognized. Refer to Note 14.
INCOME TAXES
Income taxes are recognized during the year in which transactions enter into
the determination of financial statement income, with deferred taxes being
provided for temporary differences between amounts of assets and liabilities
for financial reporting purposes and such amounts as measured by tax laws.
Refer to Note 15.
ENVIRONMENTAL CLEANUP MATTERS
The Company expenses environmental expenditures related to existing conditions
resulting from past or current operations and from which no current or future
benefit is discernible. Expenditures which extend the life of the related
property or mitigate or prevent future environmental contamination are
capitalized. The Company determines its liability on a site by site basis and
records a liability at the time when it is probable and can be reasonably
estimated. The Company's estimated liability is reduced to reflect the
anticipated participation of other potentially responsible parties in those
instances where it is probable that such parties are legally responsible and
financially capable of paying their respective shares of the relevant costs.
The estimated liability of the Company is not discounted or reduced for
possible recoveries from insurance carriers. Refer to Note 17.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and
related notes to financial statements. Changes in such estimates may affect
amounts reported in future periods.
RECLASSIFICATION
Certain items previously reported in specific financial statement captions have
been reclassified to conform with the 1995 presentation.
NOTE 2. OTHER (INCOME) AND EXPENSE
(In millions) 1995 1994 1993
- -----------------------------------------------------------
Interest income $(27.3) $(76.3) $(80.3)
Financing fees 48.3 38.4 31.0
Asset sales -- -- (24.7)
Miscellaneous -- -- (5.1)
- -----------------------------------------------------------
$ 21.0 $(37.9) $(79.1)
===========================================================
Interest income consists of amounts earned on deposits, primarily from funds
invested in time deposits in Latin America, pending remittance or reinvestment
in the region. Interest income decreased in 1995 due primarily to lower levels
of deposits in Latin America and the effects of the Real plan in Brazil, an
economic plan designed to reduce inflation. Financing fees increased in 1995
due primarily to higher average interest rates during the year.
The Company sold an investment during the second quarter of 1993. A gain of
$12.5 million ($7.9 million after tax or $.05 per share) was recorded. The
Company sold its laminated films subsidiary during the third quarter of 1993. A
gain of $9.1 million ($5.2 million after tax or $.03 per share) was recorded.
The Company's Air Treads subsidiary sold its wheel and brake division during
the fourth quarter of 1993. A gain of $3.1 million ($1.9 million after tax or
$.02 per share) was recorded.
36
39
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
NOTE 3. ACCOUNTS AND NOTES RECEIVABLE
(In millions) 1995 1994
- -----------------------------------------------------------
Accounts and notes receivable $1,671.2 $1,578.7
Allowance for doubtful accounts (56.2) (54.0)
- -----------------------------------------------------------
$1,615.0 $1,524.7
===========================================================
Throughout the year, the Company sold certain domestic accounts receivable
under continuous sale programs. Under these programs, undivided interests in
designated receivable pools are sold to purchasers with recourse limited to the
receivables purchased. The level of net proceeds from sales under these
programs was $550.0 million at December 31, 1995 and 1994. Fees paid by the
Company under these agreements are based on certain variable market rate
indices and are recorded as Other (Income) and Expense.
The Company sold accounts and notes receivable under these and other
agreements, the net cumulative proceeds of which totaled approximately $4.1
billion, $4.2 billion and $4.0 billion during 1995, 1994 and 1993,
respectively. At December 31, 1995 and 1994, the balance of the uncollected
portion of these receivables was $566.4 million and $598.4 million,
respectively.
NOTE 4. INVENTORIES
(In millions) 1995 1994
- -----------------------------------------------------------
Raw materials and supplies $ 309.8 $ 269.9
Work in process 75.4 69.8
Finished product 1,380.0 1,085.4
- -----------------------------------------------------------
$1,765.2 $1,425.1
===========================================================
The cost of inventories using the last-in, first-out (LIFO) method
(approximately 41.1% of consolidated inventories in 1995 and 38.9% in 1994) was
less than the approximate current cost of inventories by $425.9 million at
December 31, 1995 and $371.1 million at December 31, 1994.
NOTE 5. PROPERTIES AND PLANTS
1995 1994
- ---------------------------------------------------------------------------------------------------------
Capital Capital
(In millions) Owned Leases Total Owned Leases Total
- ---------------------------------------------------------------------------------------------------------
Properties and plants, at cost:
Land and improvements $ 302.1 $ 3.7 $ 305.8 $ 284.4 $ 3.7 $ 288.1
Buildings and improvements 1,277.9 39.2 1,317.1 1,215.6 42.7 1,258.3
Machinery and equipment 5,785.7 58.2 5,843.9 5,508.7 58.6 5,567.3
Pipeline 1,429.4 -- 1,429.4 1,432.4 -- 1,432.4
Construction in progress 453.7 -- 453.7 323.0 -- 323.0
- ---------------------------------------------------------------------------------------------------------
9,248.8 101.1 9,349.9 8,764.1 105.0 8,869.1
Accumulated depreciation (4,711.1) (77.6) (4,788.7) (4,407.1) (79.2) (4,486.3)
- ---------------------------------------------------------------------------------------------------------
$4,537.7 $23.5 $4,561.2 $4,357.0 $25.8 $4,382.8
=========================================================================================================
The amortization for capital leases included in the depreciation provision for
1995, 1994 and 1993 was $3.0 million, $3.4 million and $5.0 million,
respectively. The weighted average useful lives of property used in arriving at
the annual amount of depreciation provided are as follows: buildings and
improvements, 18 years; machinery and equipment, 11 years; pipeline, 37 years.
37
40
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
NOTE 6. FINANCING ARRANGEMENTS
AND FINANCIAL INSTRUMENTS
A. SHORT TERM DEBT AND FINANCING ARRANGEMENTS
At December 31, 1995, the Company had short term uncommitted credit
arrangements totaling $1,469.6 million, of which $629.2 million were unused.
These arrangements are available to the Company or certain of its international
subsidiaries through various international banks at quoted market interest
rates. There are no commitment fees or compensating balances associated with
these arrangements.
A short term credit facility agreement is available whereunder the Company
may from time to time borrow and have outstanding until December 31, 1996 up to
U.S. $30 million at any one time with an international bank. Under the terms of
the agreement, the Company may repay U.S. dollar borrowings in either U.S.
dollars or a predetermined equivalent amount of certain available foreign
currencies. Available currencies are Belgian francs, German marks, French
francs and British pounds. Borrowings are discounted at rates equivalent to
12.5 basis points over a three month reserve adjusted LIBOR. A commitment fee
of 10 basis points is paid on the $30 million commitment (whether or not
borrowed). There were no borrowings outstanding under this agreement at
December 31, 1995. The average amount outstanding under a similar agreement
during 1995 was $21 million.
The Company had outstanding short term debt amounting to $840.4 million at
December 31, 1995. Domestic short term debt represented $629.3 million of this
total with a weighted average interest rate of 5.55% at December 31, 1995, and
was reclassified to other domestic debt, as discussed below. The remaining
$211.1 million was international subsidiary short term debt with a weighted
average interest rate of 6.72% at December 31, 1995.
B. LONG TERM DEBT, CAPITAL LEASES AND FINANCING ARRANGEMENTS
At December 31, 1995, the Company had long term credit arrangements totaling
$1,906.6 million, of which $1,200.3 million were unused.
The following table presents long term debt and capital leases at December
31:
(In millions) 1995 1994
- ------------------------------------------------------------
Promissory notes:
12.15% due 1996 - 2000 $ 20.0 $ 30.0
10.26% due 1999 118.4 118.4
Swiss franc bonds:
5.375% due 2000 145.5 130.3
5.375% due 2006 137.2 127.3
Bank term loans due 1997 - 2000 168.0 118.0
Other domestic debt 653.3 524.7
International subsidiary debt 77.5 57.7
- ------------------------------------------------------------
1,319.9 1,106.4
Capital lease obligations 15.7 16.2
- ------------------------------------------------------------
1,335.6 1,122.6
Less portion due within one year 15.6 13.9
- ------------------------------------------------------------
Long term debt and capital leases $1,320.0 $1,108.7
============================================================
At December 31, 1995, the fair value of the Company's long term debt amounted
to $1,349.8 million, compared to the carrying amount of $1,319.9 million
($1,098.3 million and $1,106.4 million, respectively, at December 31, 1994).
The difference was attributable primarily to the promissory notes and the Swiss
franc bonds in 1995 and to the Swiss franc bonds in 1994. The fair value was
estimated using quoted market prices or discounted future cash flows.
In order to reduce exposure to the effects of changing exchange rates on
consolidated results of operations and future foreign currency denominated cash
flows, the Swiss franc bonds were completely hedged by foreign currency
exchange agreements at December 31, 1995 and 1994. The Company is entitled to
purchase the respective foreign currencies at fixed contract rates as described
in the table below. The effect of market fluctuations on the carrying amount of
these agreements offsets the effect of market fluctuations on the carrying
amount of the bonds. The carrying amounts of these foreign currency exchange
agreements totaled $134.9 million and $103.8 million at December 31, 1995 and
1994, respectively, and were included in Long Term Accounts and Notes
Receivable on the Consolidated Balance Sheet.
1995 1994
- ---------------------------------------------------------------------
Foreign U.S. Foreign U.S.
(In millions) Currency Dollars Currency Dollars
- ---------------------------------------------------------------------
Carrying value of debt:
Swiss franc, maturing
2000 - 2006 325.7 $282.7 338.4 $257.6
Contract amounts of foreign
currency exchange agreements:
Swiss franc, maturing
2000 - 2006 325.7 $147.8 338.4 $153.8
Receivables related to foreign
currency exchange agreements:
Swiss franc -- $134.9 -- $103.8
=====================================================================
38
41
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
In addition to the principal amounts shown in the table on the previous page,
the Swiss franc currency exchange agreements also cover annual coupon payments.
At December 31, 1995, the fair value of the Swiss franc currency exchange
agreements, based on quoted market prices, was estimated at $118.1 million,
including the cover for both principal and coupon payments ($81.3 million at
December 31, 1994). In each case the fair value was favorable.
The bank term loans due 1997 through 2000 consist of various agreements
which provide for interest at floating rates based upon LIBOR plus a fixed
spread. The weighted average rate in effect under the terms of these agreements
at December 31, 1995 was 6.03%.
The Company is a party to two revolving credit facility agreements,
consisting of a $900 million five year revolving credit facility and a $294
million 364-day revolving credit facility. The $900 million five year credit
facility agreement is with 31 domestic and international banks and provides
that the Company may borrow at any time until July 15, 1999, when the
commitment terminates and any outstanding loans mature. The Company pays a
commitment fee ranging from 8 to 25 basis points on the entire amount of the
commitment (whether or not borrowed) and a usage fee on amounts borrowed (other
than on a competitive bid or prime rate basis) ranging from 22 to 30 basis
points, which may fluctuate quarterly based upon the Company's performance as
measured by defined ranges of leverage. During 1995 commitment and usage fee
rates averaged 17.1 and 26.1 basis points, respectively. The $294 million
364-day credit facility agreement is with 30 domestic and international banks
and provides that the Company may borrow until July 12, 1996, on which date the
facility commitment terminates, except as it may be extended on a bank by bank
basis. If a bank does not extend its commitment if requested to do so, the
Company may obtain from such bank a two year term loan up to the amount of such
bank's commitment. The Company pays a commitment fee of 10 basis points on the
entire amount of the commitment (whether or not borrowed) and a usage fee of 35
basis points on amounts borrowed (other than on a competitive bid or prime rate
basis). Under both the five year and the 364-day credit facility agreements,
the Company may obtain loans bearing interest at reserve adjusted LIBOR or a
defined certificate of deposit rate, plus in each case the applicable usage
fee. In addition, the Company may obtain loans based on the prime rate or at a
rate determined on a competitive bid basis. The facility agreements each
contain certain covenants which, among other things, require the Company to
maintain at the end of each fiscal quarter a minimum consolidated net worth and
a defined minimum interest coverage ratio and establishes a limit on the
aggregate amount of consolidated debt the Company and its subsidiaries may
incur. There were no borrowings outstanding under these agreements at December
31, 1995.
Other domestic debt consisted primarily of the previously mentioned $629.3
million of domestic short term bank borrowings, and current maturities of long
term debt. These debt obligations, amounting to $645.9 million at December 31,
1995 ($567.4 million at December 31, 1994), which by their terms are due within
one year, are classified as long term. Such obligations are supported by the
availability under the revolving credit agreements, and it is the Company's
intent to maintain them as long term.International subsidiary debt consisted
primarily of an interest free Canadian dollar loan maturing in 1998, and
floating and fixed rate U.S. dollar bank term loans maturing in 1997-2000 with
a weighted average interest rate of 7.62% at December 31, 1995.
Refer to Note 7, Leased Assets for additional information on capital lease
obligations.
In order to reduce the impact of changes in variable interest rates on
consolidated results of operations and future cash outflows for interest, the
Company was a party to various interest rate swap contracts at December 31,
1995 and 1994. These contracts limit the effect of market fluctuations on the
interest cost of floating rate debt. The carrying amounts of these contracts
totaled $1.8 million and $2.9 million at December 31, 1995 and 1994,
respectively, substantially all of which were recorded as Other current
liabilities on the Consolidated Balance Sheet.
Contracts in place and weighted average interest rates at December 31
follow:
(Dollars in millions) 1995 1994
- ------------------------------------------------------------
Fixed rate swap contracts:
Notional principal amount $ 395.0 $ 445.0
Pay fixed rate 8.95% 8.95%
Receive variable LIBOR 5.81% 6.04%
Average years to maturity .83 1.69
Fair value: (unfavorable) $ (11.3) $ (7.1)
Floating rate swap contract:
Notional principal amount $ 50.0 $ 50.0
Pay variable LIBOR 5.81% 5.50%
Receive fixed rate 6.69% 6.69%
Average years to maturity 2.23 3.23
Fair value: favorable (unfavorable) $ 1.5 $ (1.9)
============================================================
39
42
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
A $50 million notional principal contract matured in 1995.
At December 31, 1995, the interest rate on 56 percent of the Company's debt was
fixed by either the nature of the obligation or through the interest rate
contracts, compared to 66 percent at December 31, 1994.
Current market pricing models were used to estimate the fair values of
interest rate swap contracts. The fair value of the fixed rate contracts
decreased at December 31, 1995 due primarily to lower interest rates. The
Company estimates that an additional one percent decrease in interest rates
would have lowered the fair value of the fixed rate contracts by $2.3 million
and increased the fair value of the floating rate contracts by $.9 million at
December 31, 1995.
Weighted average information during the years 1995, 1994 and 1993 follows:
(Dollars in millions) 1995 1994 1993
- -----------------------------------------------------------
Fixed rate contracts:
Pay fixed rate 8.95% 9.09% 9.20%
Receive variable LIBOR 6.23% 4.44% 3.47%
Notional principal $416 $660 $692
Floating rate contracts:
Pay variable LIBOR 6.06% 4.34% 3.36%
Receive fixed rate 6.69% 6.69% 6.69%
Notional principal $ 50 $ 50 $ 50
===========================================================
The annual aggregate maturities of long term debt and capital
leases for the five years subsequent to 1995 are presented below. Maturities of
debt supported by the availability under the revolving credit agreements have
been reported on the basis that the commitments to lend under these agreements
will be terminated effective at the end of their current terms.
(In millions) 1996 1997 1998 1999 2000
- ------------------------------------------------------------------
Debt incurred
under or
supported by
revolving credit
agreements $ -- $ -- $ -- $645.9 $ --
Other 15.6 66.6 82.3 145.9 230.2
- ------------------------------------------------------------------
$15.6 $66.6 $82.3 $791.8 $230.2
==================================================================
C. FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS
In order to reduce the impact of changes in foreign exchange rates
on consolidated results of operations and future foreign currency denominated
cash flows, the Company was a party to various forward exchange contracts at
December 31, 1995 and 1994. These contracts reduce exposure to currency
movements affecting existing foreign currency denominated assets, liabilities
and firm commitments resulting primarily from trade receivables and payables,
equipment acquisitions and intercompany loans. The contract durations match the
duration of the currency positions. The future value of these contracts and the
related currency positions are subject to offsetting market risk resulting from
foreign currency exchange rate volatility. The carrying amount of these
contracts totaled $24.6 million at December 31, 1995 and was recorded as Other
current liabilities on the Consolidated Balance Sheet, compared to $.8 million
recorded in both current and long term Accounts and notes receivable at
December 31, 1994. A summary of contracts in place at December 31 follows:
1995 1994
- -------------------------------------------------------------
Fair Contract Fair Contract
(In millions) Value Amount Value Amount
- -------------------------------------------------------------
Forward contracts:
Buy currency $298.6 $286.0 $ 99.5 $ 92.4
Sell currency 667.3 626.1 504.4 492.8
Contract duration 1/96 - 1/97 1/95 - 9/96
=============================================================
Current market pricing models were used to estimate the fair values of foreign
currency forward contracts.
The counterparties to the Company's derivative financial instrument
contracts are substantial and creditworthy multinational commercial banks or
other financial institutions which are recognized market makers. Neither the
risks of counterparty nonperformance nor the economic consequences of
counterparty nonperformance associated with these contracts are considered by
the Company to be material.
40
43
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
NOTE 7. LEASED ASSETS
Rental expense charged to income follows:
(In millions) 1995 1994 1993
- ------------------------------------------------------------
Gross rental expense $281.1 $300.8 $303.5
Sublease rental income (50.0) (51.9) (52.3)
- ------------------------------------------------------------
Net rental expense $231.1 $248.9 $251.2
============================================================
The Company enters into capital and operating leases primarily for
its vehicles, data processing equipment and its wholesale and retail
distribution facilities under varying terms and conditions, including the
Company's sublease of some of its domestic retail distribution network to
independent dealers. Many of the leases provide that the Company will pay taxes
assessed against leased property and the cost of insurance and maintenance.
While substantially all subleases and some operating leases are cancelable
for periods beyond 1996, management expects that in the normal course of its
business nearly all of its independent dealer distribution network will be
actively operated. As leases and subleases for existing locations expire, the
Company would normally expect to renew the leases or substitute another more
favorable retail location. The estimated minimum future lease payments for
capital leases and operating leases are presented below, and are reported net
of the anticipated sublease revenue in the column at the right.
Capital Operating Sublease
(In millions) Leases Leases Revenue
- --------------------------------------------------------------------------
1996 $ 2.6 $175.5 $ 42.8
1997 2.5 140.4 36.7
1998 2.4 102.5 30.7
1999 2.4 84.1 24.0
2000 2.1 64.7 16.8
2001 and thereafter 15.1 265.1 23.2
- --------------------------------------------------------------------------
Total minimum lease payments $27.1 $832.3 $174.2
==========================================================================
Present value of net minimum lease obligations $14.7 $641.4
==========================================================================
NOTE 8. STOCK COMPENSATION PLANS
The Company's 1982 and 1987 Employees' Stock Option Plans and
the 1989 Goodyear Performance and Equity Incentive Plan provide for the
granting of stock options and stock appreciation rights (SARs). For options
previously granted with SARs, the exercise of a SAR cancels the stock option;
conversely, the exercise of the stock option cancels the SAR. The 1982 and 1987
Plans expired on December 31, 1986 and April 10, 1989, respectively, except for
options and SARs then outstanding.
The 1989 Plan empowers the Company to award or grant from
time to time to officers and other key employees of the Company and
subsidiaries incentive, non-qualified and deferred compensation stock options,
SARs, restricted stock and restricted unit grants, performance equity and
performance unit grants and other stock-based awards authorized by the
Compensation Committee of the Board of Directors, which administers the 1989
Plan. The 1989 Plan will expire on December 31, 1998, except with respect to
awards then outstanding.
Stock options and related SARs granted during 1995 generally have a maximum
term of ten years and vest over four years. Performance equity units granted
during 1995 are based on cumulative earnings per share over a three year
performance period. They are payable in 50 percent Goodyear common stock and 50
percent cash, and generally are earned at the end of that period. Assuming that
there will be full utilization of the shares of common stock available for
awards during the term of the 1989 Plan, and that no other increases or
decreases in the number of shares of common stock outstanding would occur
during the term of the 1989 Plan, approximately 21,500,000 shares of the common
stock would be available for the grant of awards through December 31, 1998.
41
44
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
Stock-based compensation activity for the years 1995, 1994 and 1993 follows:
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Shares SARs Shares SARs Shares SARs
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding at January 1 7,749,660 782,446 6,838,965 705,834 8,155,280 964,520
Options granted 1,731,725 229,200 1,694,150 211,600 2,064,979 269,900
Options without SARs exercised (1,857,190) -- (781,263) -- (2,967,748) --
Options with SARs exercised (86,325) (86,325) (18,850) (18,850) (148,300) (148,300)
SARs exercised (62,950) (62,950) (96,138) (96,138) (251,486) (251,486)
Options without SARs expired (49,100) -- (21,125) -- (48,200) --
Options with SARs expired (4,700) (4,700) (3,000) (3,000) (15,300) (15,300)
SARs expired (900) (64,300) -- (17,000) (2,100) (113,500)
Restricted stock granted 10,000 -- 1,800 -- -- --
Restricted stock issued (10,000) -- (1,800) -- -- --
Performance equity units granted 8,963 -- 161,250 -- 57,350 --
Performance equity shares issued (64,591) -- -- -- -- --
Performance equity units cancelled (36,966) -- (24,329) -- (5,510) --
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31 7,327,626 793,371 7,749,660 782,446 6,838,965 705,834
- ---------------------------------------------------------------------------------------------------------------------------
Exercisable at December 31 5,033,729 482,296 5,079,369 456,021 3,789,240 330,608
- ---------------------------------------------------------------------------------------------------------------------------
Available for grant at December 31 2,908,914 2,990,448 3,194,138
===========================================================================================================================
Weighted average option exercise price information for the years 1995, 1994 and
1993 follows:
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding at January 1 $31.34 $27.43 $23.33
Granted during the year $34.75 $44.25 $34.38
Exercised during the year $29.71 $26.23 $21.27
Outstanding at December 31 $33.96 $31.34 $27.43
Exercisable at December 31 $32.30 $26.93 $23.63
===========================================================================================================================
Significant option groups outstanding at December 31, 1995 and related weighted
average price and life information follows:
Grant Options Options Exercise Remaining
Date Outstanding Exercisable Price Life (Years)
- ---------------------------------------------------------------------------------------------------------------------------
1/4/95 1,661,525 229,250 $34.750 9
1/4/94 1,638,900 996,225 $44.250 8
1/5/93 1,538,935 1,538,935 $34.375 7
1/7/92 859,726 859,726 $26.875 6
All other 1,281,872 1,281,872 $23.710 4
===========================================================================================================================
Options in the `All other' category were outstanding at prices ranging from
$11.25 to $45.25. All options and SARs were granted at an exercise price equal
to the fair market value of the Company's common stock at the date of grant.
The weighted average fair value at date of grant for options granted during
1995, 1994 and 1993 was $17.17, $19.45 and $13.75 per option, respectively. The
fair value of options at date of grant was estimated using the Black-Scholes
model with the following weighted average assumptions:
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
Expected life (years) 5 5 5
Interest rate 7.80% 5.27% 5.97%
Volatility 43.0% 40.9% 33.2%
Dividend yield 2.34% 2.70% 3.00%
==========================================================================================================================
The fair value at date of grant for performance equity units granted during
1995, 1994 and 1993 was $34.75, $44.25 and $34.38 per unit, respectively, which
in each case was equal to the market value of the Company's common stock at the
date of grant.
Stock-based compensation costs reduced (increased) pretax income by $8.7
million ($5.2 million after tax or $.03 per share), $(3.4) million ($2.1
million after tax or $.01 per share) and $13.5 million ($8.1 million after tax
or $.05 per share) in 1995, 1994 and 1993, respectively. In addition, these
costs would have been increased by $6.0 million ($5.2 million after tax or $.03
per share) in 1995 had the fair values of options and the stock-based portion
of performance equity units granted in that year been recognized as
compensation expense on a straight line basis over the vesting period of the
grant. The pro forma effect on net income for 1995 is not representative of the
pro forma effect on net income in future years because it does not take into
consideration pro forma compensation expense related to grants made prior to
1995.
42
45
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
Note 9. Pensions
The Company and its subsidiaries provide substantially all associates with
pension benefits. The principal domestic hourly plan provides benefits based on
length of service. The principal domestic plans covering salaried associates
provide benefits based on career average earnings formulas. Associates making
voluntary contributions to these plans receive higher benefits. Other plans
provide benefits similar to the principal domestic plans as well as termination
indemnity plans at certain international subsidiaries.
The Company's domestic funding practice since 1993 has been to fund amounts
in excess of the requirements of Federal laws and regulations. From 1993 to
1995, the Company funded $573.5 million to its domestic pension plans, which
were fully funded at December 31, 1995. This has resulted in a significant
increase in prepaid pension costs over that period, which are recorded as
Deferred Charges on the Consolidated Balance Sheet. Additionally, the fully
funded status of these plans has significantly lowered the Company's minimum
pension liability and related intangible asset, which are recorded as long term
Compensation and Benefits and Deferred Charges, respectively, on the
Consolidated Balance Sheet.
Net periodic pension cost follows:
(In millions) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
Service cost-benefits earned during the period $ 83.2 $ 91.8 $ 68.9
Interest cost on projected benefit obligations 221.1 202.6 179.0
Actual return on plan assets (427.8) (.9) (273.1)
Net amortization and deferrals 279.3 (125.3) 158.5
- -----------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 155.8 $ 168.2 $ 133.3
=============================================================================================================================
The following table sets forth the funded status and amounts recognized
on the Company's Consolidated Balance Sheet at December 31, 1995 and 1994. At
the end of 1995 and 1994, assets exceeded accumulated benefits in certain
plans and accumulated benefits exceeded assets in others. Plan assets are
invested primarily in common stocks and fixed income securities.
1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
(In millions) Benefits Exceed Assets Benefits Exceed Assets
- -----------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefit obligation $ (2,283.5) $ (232.3) $ (852.4) $ (1,291.4)
=============================================================================================================================
Accumulated benefit obligation $ (2,500.0) $ (268.6) $ (871.8) $ (1,500.8)
=============================================================================================================================
Projected benefit obligation $ (2,626.4) $ (332.1) $ (977.8) $ (1,551.7)
Plan assets 2,643.1 59.2 939.9 1,140.1
- -----------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation less than (in excess of) plan assets 16.7 (272.9) (37.9) (411.6)
Unrecognized net loss 108.2 61.3 121.8 51.4
Unrecognized prior service cost 378.0 (1.7) 172.1 263.8
Unrecognized net (asset) obligation at transition (8.2) 27.0 (9.5) 27.6
Adjustment required to recognize minimum liability -- (50.0) -- (313.8)
- -----------------------------------------------------------------------------------------------------------------------------
Pension asset (liability) recognized on the Consolidated Balance Sheet $ 494.7 $ (236.3) $ 246.5 $ (382.6)
=============================================================================================================================
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
Assumptions: U.S. International U.S. International U.S.International
- -----------------------------------------------------------------------------------------------------------------------------
Discount rate 7.75% 0% - 12.0% 8.5% 0% - 12.0% 7.75% 2.0% - 10.0%
Rate of increase in compensation levels 4.5% 0% - 10.5% 4.5% 0% - 10.5% 4.5% 0% - 9.0%
Expected long term rate of return on 9.0% 5.0% - 12.0% 9.0% 5.5% - 12.0% 9.0% 5.0%- 11.0%
plan assets
=============================================================================================================================
For plans that are not fully funded, the Company is required to offset the
adjustment required to recognize minimum liability on the Consolidated Balance
Sheet with an intangible asset, up to the amount of unrecognized prior service
cost plus unrecognized obligations at transition that remain at December 31 of
each year. Liability amounts in excess of these two items are offset by a
separate reduction in Shareholders' Equity, net of tax. Accordingly,
Shareholders' Equity was reduced by $26.3 million at December 31, 1995,
compared to $39.5 million at December 31, 1994.
Certain international subsidiaries maintain unfunded plans consistent with
local practices and requirements and at December 31, 1995, these plans
accounted for $102.4 million of the Company's accumulated benefit obligation,
$120.4 million of its projected benefit obligation and $16.5 million of its
minimum pension liability adjustment ($140.4 million, $162.6 million and $7.5
million, respectively, at December 31, 1994).
43
46
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
NOTE 10. EMPLOYEES' SAVINGS PLANS
Substantially all domestic associates are eligible to participate in savings
plans. Under these plans associates elect to contribute a percentage of their
pay. In 1995, most plans provided for the Company's matching of these
contributions (up to a maximum of 6 percent of the associate's annual pay or,
if less, $9,240) at the rate of 50 percent. Company contributions were $38.2
million, $31.7 million and $29.4 million for 1995, 1994 and 1993, respectively.
Note 11. POSTRETIREMENT HEALTH CARE, LIFE INSURANCE
AND POSTEMPLOYMENT BENEFITS
The Company and its subsidiaries provide substantially all domestic associates
and associates at certain international subsidiaries with health care and life
insurance benefits upon retirement. The life insurance and certain health care
benefits are provided by insurance companies through premiums based on expected
benefits to be paid during the year. Substantial portions of the health care
benefits for domestic retirees are not insured and are paid by the Company.
Net periodic benefit cost follows:
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------
Service cost - benefits earned during the period $ 21.2 $ 23.6 $ 18.5
Interest cost 152.7 144.0 134.8
Net amortization (1.7) (1.5) (5.0)
- --------------------------------------------------------------------------------
Net periodic benefit cost $ 172.2 $ 166.1 $ 148.3
================================================================================
The following table sets forth the funded status and amounts recognized on the
Company's Consolidated Balance Sheet at December 31, 1995 and 1994.
(In millions) 1995 1994
- ------------------------------------------------------------------------------------
Actuarial present value of accumulated benefit obligation:
Retirees $ (1,255.4) $ (1,150.4)
Vested active plan participants (473.2) (441.5)
Other active plan participants (270.1) (246.8)
- -------------------------------------------------------------------------------------
Accumulated benefit obligation in excess
of plan assets (1,998.7) (1,838.7)
Unrecognized net loss 215.8 96.6
Unrecognized prior service cost 7.7 11.9
- -------------------------------------------------------------------------------------
Accrued benefit cost recognized
on the Consolidated Balance Sheet $ (1,775.2) $ (1,730.2)
=====================================================================================
1995 1994
------------------------------------------------------
Assumptions: U.S. International U.S. International
- -------------------------------------------------------------------------------------
Discount rate 7.75% 5.0% - 9.0% 8.5% 5.0% - 9.5%
Rate of increase
in compensation levels 4.5% 2.5% - 5.75% 4.5% 2.5% - 5.75%
- -------------------------------------------------------------------------------------
An 8.5 percent annual rate of increase in the cost of health care benefits for
retirees under 65 years of age and a 6.25 percent annual rate of increase for
retirees 65 years and older is assumed in 1996. This rate gradually decreases
to 5 percent in 2010 and remains at that level thereafter. To illustrate the
significance of a one percent increase in the assumed health care cost trend,
the accumulated benefit obligation would increase by $23.9 million at December
31, 1995, and the aggregate service and interest cost by $2.4 million for the
year then ended.
The Company adopted Statement of Financial Accounting Standards No. 112,
(SFAS 112), "Employers' Accounting for Postemployment Benefits," effective
January 1, 1993. SFAS 112 requires the accrual of benefit costs for former or
inactive employees, their beneficiaries and covered dependents, after
employment but before retirement. The cumulative effect of adopting SFAS 112 at
January 1, 1993 resulted in a charge of $86.3 million or $.59 per share, net of
related taxes of $55.2 million.
44
47
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
NOTE 12. INTEREST EXPENSE
Interest expense includes interest and amortization of debt discount and
expense less amounts capitalized as follows:
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------------
Interest expense before capitalization $140.1 $135.1 $167.4
Less capitalized interest 5.1 5.7 5.0
- ------------------------------------------------------------------------------
$135.0 $129.4 $162.4
==============================================================================
The Company made cash payments for interest in 1995, 1994 and 1993 of $136.4
million, $147.6 million and $181.1 million, respectively.
NOTE 13. RESEARCH AND DEVELOPMENT
Research and development costs for 1995, 1994 and 1993 were $369.3 million,
$341.3 million and $320.0 million, respectively.
NOTE 14. ADVERTISING COSTS
Advertising costs for 1995, 1994 and 1993 were $246.7 million, $248.2 million
and $248.2 million, respectively.
NOTE 15. INCOME TAXES
The components of income before income taxes, extraordinary item and the
cumulative effect of accounting change, adjusted for minority interest in net
income of subsidiaries, follow:
(In millions) 1995 1994 1993
- -------------------------------------------------------------------------------
U.S $271.4 $294.4 $286.6
Foreign 654.4 571.3 498.3
- -------------------------------------------------------------------------------
925.8 865.7 784.9
Minority Interest in Net Income of Subsidiaries 36.2 23.8 27.0
- -------------------------------------------------------------------------------
$962.0 $889.5 $811.9
===============================================================================
A reconciliation of Federal income taxes at the U.S. statutory rate to income
taxes provided follows:
(Dollars in millions) 1995 1994 1993
- -------------------------------------------------------------------------
U.S. Federal income tax at the
statutory rate of 35% $336.7 $311.3 $284.1
Adjustment for foreign taxes
at different rates (8.6) (12.6) 8.7
Other (13.3) -- 3.4
- --------------------------------------------------------------------------
United States and foreign taxes on income
(before extraordinary item and
cumulative effect of accounting change) $314.8 $298.7 $296.2
- --------------------------------------------------------------------------
Effective tax rate 32.7% 33.6% 36.5%
==========================================================================
The components of the provision for income taxes by taxing jurisdiction follow:
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------
Current:
Federal $ 42.1 $ 51.2 $ 92.7
Foreign income and withholding taxes 219.3 169.9 206.2
State (4.6) (22.2) 33.6
- -----------------------------------------------------------------------
256.8 198.9 332.5
Deferred:
Federal 19.8 74.6 (18.8)
Foreign 32.9 7.9 (3.3)
State 5.3 17.3 (14.2)
- -----------------------------------------------------------------------
58.0 99.8 (36.3)
United States and foreign taxes on income
(before extraordinary item and
cumulative effect of accounting change) $314.8 $298.7 $296.2
=======================================================================
Temporary differences and carryforwards which give rise to deferred tax assets
and liabilities at December 31, 1995 and 1994 follow:
(In millions) 1995 1994
- ----------------------------------------------------------------------
Postretirement benefits other than pensions $ 687.2 $ 685.2
Accrued environmental liabilities 38.2 47.0
General and product liability 70.4 57.7
Alternative minimum tax credit carryforwards 94.9 96.2
Operating loss carryforwards 18.6 21.8
Workers' compensation 64.3 62.2
Vacation and sick pay 74.3 72.1
Other 115.3 157.1
- ----------------------------------------------------------------------
1,163.2 1,199.3
Valuation allowance (29.7) (68.9)
- ----------------------------------------------------------------------
Total deferred tax assets 1,133.5 1,130.4
Total deferred tax liabilities - depreciation (711.3) (702.3)
- pensions (190.8) (165.2)
- ----------------------------------------------------------------------
Total deferred taxes $ 231.4 $ 262.9
======================================================================
The decrease in the valuation allowance was due primarily to the realization of
loss carryforwards and other benefits which are reflected in the 1995
provision.
The Company made net cash payments for income taxes in 1995, 1994 and
1993 of $243.8 million, $234.6 million and $266.0 million, respectively.
No provision for Federal income tax or foreign withholding tax on
retained earnings of international subsidiaries of $1,385.0 million is required
because this amount has been or will be reinvested in properties and plants
and working capital. It is not practicable to calculate the deferred taxes
associated with the remittance of these investments.
45
48
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
NOTE 16. BUSINESS SEGMENTS
The Tires segment is the principal industry segment, which involves the
development, manufacture, distribution and sale of tires in original equipment
and replacement markets throughout most regions of the world. Related products
and services include tubes, retreads, automotive repair services and
merchandise purchased for resale.
The General products segment involves the manufacture and sale of various
engineered rubber and chemical products throughout most regions of the world,
principally in the U.S., Latin America and Europe. These products include
belts, hose, molded products, foam cushioning accessories, tank tracks, organic
chemicals used in rubber and plastic processing, synthetic rubber and rubber
latices and other products.
The Oil transportation segment consists primarily of the All American
Pipeline System, a common carrier crude oil pipeline extending from California
to Texas. This segment, which also includes a crude oil gathering pipeline in
California, crude oil storage facilities, linefill and related assets, also
engages in various crude oil gathering, purchasing and selling activities.
Segment sales consist of tariffs charged by the All American Pipeline System
and revenues, net of acquisition costs, resulting from various crude oil
gathering, purchasing and selling activities. Acquisition costs associated with
these activities amounted to $496 million, $598 million and $655 million for
1995, 1994 and 1993, respectively.
Operating income for each industry and geographic segment consists of total
revenues less applicable costs and expenses. Transfers between industry
segments were not material. Inter-geographic sales were at cost plus a
negotiated mark up.
The following items have been excluded from the determination of operating
income: interest expense, foreign currency exchange, equity in net income of
affiliates, minority interest in net income of subsidiaries, corporate revenues
and expenses and income taxes. Corporate revenues and expenses were those items
not identifiable with the operations of a segment. Corporate revenues were
primarily from the sale of miscellaneous assets. Corporate expenses were
primarily central administrative expenses.
Identifiable assets of industry and geographic segments represent those
assets that were associated with the operations of each segment. Corporate
assets consist of cash and cash equivalents, prepaid expenses and other current
assets, long term accounts and notes receivable, deferred charges and other
assets. At December 31, 1995, $110.2 million or 40.4 percent ($112.4 million or
42.2 percent at December 31, 1994) of the Company's cash, cash equivalents and
short term securities were concentrated in Latin America, primarily Venezuela
and Brazil.
Certain business assets, which were part of the General products segment,
were sold in 1993. Refer to Note 2, Other (Income) and Expense. Results of
operations of the General products industry segment and the U.S. geographic
segment were reduced because of the dispositions of these business assets.
Sales and operating income, respectively, of the businesses sold, excluding any
gains recorded on the sales, amounted to $28.9 million and $.1 million in 1993.
Dividends received by the Company and domestic subsidiaries from its
international operations for 1995, 1994 and 1993 were $139.0 million, $151.8
million and $239.8 million, respectively.
46
49
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
Industry Segments
(In millions) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Sales to Unaffiliated Customers
Tires $10,104.5 $ 9,427.6 $ 8,853.3
Related products and services 1,157.8 1,080.6 1,110.2
- ---------------------------------------------------------------------------------------------------------------------------
Total Tires 11,262.3 10,508.2 9,963.5
General products 1,776.8 1,700.9 1,618.0
Oil transportation 126.8 79.1 61.9
- ---------------------------------------------------------------------------------------------------------------------------
Net Sales $13,165.9 $12,288.2 $11,643.4
============================================================================================================================
Income (loss)
Tires $ 1,000.2 $ 1,010.6 $ 998.5
General products 165.6 170.9 177.8
Oil transportation 55.3 11.8 (11.6)
- ---------------------------------------------------------------------------------------------------------------------------
Total operating income 1,221.1 1,193.3 1,164.7
Interest expense (135.0) (129.4) (162.4)
Foreign currency exchange (17.4) (77.6) (113.1)
Equity in net income of affiliates 19.0 25.7 17.6
Minority interest in net income of subsidiaries (36.2) (23.8) (27.0)
Corporate revenues and expenses (125.7) (122.5) (94.9)
- ---------------------------------------------------------------------------------------------------------------------------
Income before income taxes, extraordinary item
and cumulative effect of accounting change $ 925.8 $ 865.7 $ 784.9
============================================================================================================================
Assets
Tires $ 6,050.8 $ 5,386.2 $ 5,023.6
General products 791.7 740.9 671.2
Oil transportation 1,356.3 1,398.6 1,413.2
- ---------------------------------------------------------------------------------------------------------------------------
Total identifiable assets 8,198.8 7,525.7 7,108.0
Corporate assets 1,407.0 1,464.2 1,220.9
Investments in affiliates, at equity 183.8 133.4 107.2
- ---------------------------------------------------------------------------------------------------------------------------
Assets at December 31 $ 9,789.6 $ 9,123.3 $ 8,436.1
===========================================================================================================================
Capital Expenditures
Tires $ 494.5 $ 425.4 $ 356.5
General products 116.4 90.2 67.7
Oil transportation 4.7 7.4 8.1
- ---------------------------------------------------------------------------------------------------------------------------
For the year $ 615.6 $ 523.0 $ 432.3
===========================================================================================================================
Depreciation
Tires $ 329.6 $ 309.4 $ 305.0
General products 59.1 55.1 47.5
Oil transportation 46.2 45.8 40.4
- ---------------------------------------------------------------------------------------------------------------------------
For the year $ 434.9 $ 410.3 $ 392.9
===========================================================================================================================
47
50
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
Geographic Segments
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------
Sales to Unaffiliated Customers
United States $ 7,249.6 $ 7,130.5 $ 6,777.4
Europe 2,853.7 2,279.8 2,233.3
Latin America 1,542.9 1,512.5 1,403.5
Asia 833.2 711.6 644.9
Canada 686.5 653.8 584.3
- --------------------------------------------------------------------------------
Net Sales $13,165.9 $12,288.2 $11,643.4
================================================================================
Inter-Geographic Sales
United States $ 408.4 $ 373.9 $ 296.9
Europe 90.1 92.5 78.4
Latin America 172.5 159.2 107.7
Asia 815.9 490.7 346.6
Canada 297.3 269.1 233.6
- --------------------------------------------------------------------------------
Total $ 1,784.2 $ 1,385.4 $ 1,063.2
================================================================================
Revenue
United States $ 7,658.0 $ 7,504.4 $ 7,074.3
Europe 2,943.8 2,372.3 2,311.7
Latin America 1,715.4 1,671.7 1,511.2
Asia 1,649.1 1,202.3 991.5
Canada 983.8 922.9 817.9
Adjustments and eliminations (1,784.2) (1,385.4) (1,063.2)
- --------------------------------------------------------------------------------
Total $13,165.9 $12,288.2 $11,643.4
================================================================================
Operating Income
United States $ 543.9 $ 591.5 $ 590.1
Europe 317.2 212.0 221.5
Latin America 238.8 278.2 271.1
Asia 90.1 81.3 70.0
Canada 31.1 30.3 12.0
- --------------------------------------------------------------------------------
Total $ 1,221.1 $ 1,193.3 $ 1,164.7
================================================================================
Assets
United States $ 4,703.6 $ 4,478.4 $ 4,314.8
Europe 1,719.9 1,452.5 1,335.0
Latin America 683.0 637.6 647.9
Asia 576.9 490.3 356.4
Canada 515.4 466.9 453.9
- --------------------------------------------------------------------------------
Total identifiable assets 8,198.8 7,525.7 7,108.0
================================================================================
Corporate assets 1,407.0 1,464.2 1,220.9
Investments in affiliates, at equity 183.8 133.4 107.2
- --------------------------------------------------------------------------------
Assets at December 31 $ 9,789.6 $ 9,123.3 $ 8,436.1
================================================================================
48
51
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
NOTE 17. COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 1995, the Company had binding commitments for investments in
land, buildings and equipment of $150.6 million and off-balance-sheet financial
guarantees written of $38.8 million.
At December 31, 1995, the Company had recorded contingent liabilities
aggregating $91.4 million for anticipated costs, including legal and consulting
fees, site studies, the design and implementation of remediation plans,
post-remediation monitoring and related activities, related to various
environmental matters, primarily the remediation of numerous waste disposal
sites and certain properties sold by the Company. The Company had recorded
$116.4 million for such costs at December 31, 1994. There were no charges
recorded in 1995 for such costs, compared to $22.8 million and $29.7 million in
1994 and 1993, respectively. The amount of the Company's ultimate liability in
respect of these matters may be affected by several uncertainties, primarily
the ultimate cost of required remediation and the extent to which other
responsible parties contribute, and is expected to be paid over several years.
Refer to Note 1, Accounting Policies, Environmental Cleanup Matters for
additional information. At December 31, 1995, the Company had recorded
contingent liabilities aggregating $191.4 million for potential product
liability and other tort claims, including related legal fees expected to be
incurred, presently asserted against the Company. The Company had recorded
$183.1 million for such matters at December 31, 1994. Charges for such
potential liabilities were $29.5 million, $30.0 million and $31.9 million in
1995, 1994 and 1993, respectively. The amount recorded was determined on the
basis of an assessment of potential liability using an analysis of pending
claims, historical experience and current trends. The Company has concluded
that in respect of any of the above described contingent liabilities, it is not
reasonably possible that it would incur a loss exceeding the amount already
recognized with respect thereto which would materially affect the Company's
financial condition, results of operations or liquidity.
Various other legal actions, claims and governmental investigations and
proceedings covering a wide range of matters are pending against the Company
and its subsidiaries. Management, after reviewing available information
relating to such matters and consulting with the Company's General Counsel, has
determined with respect to each such matter either that it is not reasonably
possible that the Company has incurred liability in respect thereof or that any
liability ultimately incurred will not exceed the amount, if any, recorded at
December 31, 1995 in respect thereof which would be material relative to the
consolidated financial position, results of operations or liquidity of the
Company. However, in the event of an unanticipated adverse final determination
in respect of certain matters, the Company's consolidated net income for the
period in which such determination occurs could be materially affected.
NOTE 18. PREFERRED STOCK PURCHASE RIGHTS PLAN
In 1986, the Company authorized 3,000,000 shares of Series A $10.00 Preferred
Stock ("Series A Preferred") issuable only upon the exercise of rights
("Rights") issued under the Preferred Stock Purchase Rights Plan adopted in
July 1986. Each share of Series A Preferred issued would be non-redeemable,
non-voting and entitled to cumulative quarterly dividends equal to the greater
of $10.00 or, subject to adjustment, 100 times the per share amount of
dividends declared on Goodyear common stock during the preceding quarter, and
would also be entitled to a liquidation preference.
Under the Rights Plan, each shareholder of record on July 28, 1986 received
a dividend of one Right per share of Goodyear common stock. When exercisable,
each Right entitles the holder to buy one two-hundredth of a share of Series A
Preferred at an exercise price of $50. The Rights will be exercisable only
after 10 days following the earlier of a public announcement that a person or
group has acquired 20 percent or more of Goodyear common stock or the
commencement of a tender offer for 20 percent or more of Goodyear common stock
by a person or group. The Rights are non-voting and may be redeemed by the
Company at $.05 per Right under certain circumstances. If not redeemed or
exercised, the Rights will expire on July 28, 1996. If a person or group
accumulates 35 percent or more of Goodyear common stock, or a merger takes
place with an acquiring person or group and the Company is the surviving
corporation, or an acquiring person or group engages in certain self-dealing
transactions, each Right (except those held by such acquiring person or group)
will entitle the holder to purchase Goodyear common stock having a market value
then equal to two times the exercise price. If the Company is acquired or a
sale or transfer of 50 percent or more of the Company's assets or earning power
is made, each Right (except those held by the acquiring person or group) will
entitle the holder to purchase common stock of the acquiring entity having a
market value then equal to two times the exercise price.
49
52
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
Supplementary Data
(Unaudited)
Quarterly Data and Market Price Information
(In millions, except per share)
Quarter
---------------------------------------------------------------------------------
1995 First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------------------------
Net Sales $3,243.3 $3,350.8 $3,305.1 $3,266.7 $13,165.9
Gross Profit 755.9 800.2 746.7 769.5 3,072.3
Net Income $ 133.3 $ 173.8 $ 157.5 $ 146.4 $ 611.0
- ---------------------------------------------------------------------------------------------------------------------------
Per Share of Common Stock:
Net Income $ .88 $ 1.15 $ 1.03 $ .96 $ 4.02
- --------------------------------------------------------------------------------------------------------------------------
Average Shares Outstanding 151.5 151.7 152.3 152.9 152.1
Price Range of Common Stock:*
High $ 38 3/4 $ 43 3/8 $ 45 1/8 $ 47 1/2 $ 47 1/2
Low 33 36 5/8 38 1/8 37 33
Dividends Paid .20 .25 .25 .25 .95
============================================================================================================================
Quarter
------------------------------------------------------------------------------
1994 First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------------------------
Net Sales $2,909.6 $3,052.3 $3,115.8 $3,210.5 $12,288.2
Gross Profit 714.2 791.9 753.4 757.3 3,016.8
Net Income $ 116.0 $ 163.2 $ 151.3 $ 136.5 $ 567.0
- ---------------------------------------------------------------------------------------------------------------------------
Per Share of Common Stock:
Net Income $ .77 $ 1.08 $ 1.00 $ .90 $ 3.75
===========================================================================================================================
Average Shares Outstanding 151.0 151.2 151.3 151.4 151.2
Price Range of Common Stock:*
High $ 49 1/4 $ 42 1/2 $ 37 1/4 $ 36 1/2 $ 49 1/4
Low 39 1/4 35 3/4 31 5/8 31 3/4 31 5/8
Dividends Paid .15 .20 .20 .20 .75
===========================================================================================================================
*New York Stock Exchange - Composite Transactions
50
53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by Item 401 of Regulation S-K in respect of
directors of Registrant is, pursuant to General Instruction G(3) to Form 10-K,
incorporated herein by specific reference to the text set forth under the
caption "Election of Directors" at pages 3 through 6, inclusive, of
Registrant's Proxy Statement, dated February 27, 1996, for its Annual Meeting
of Shareholders to be held on April 15, 1996 (the "Proxy Statement"). For
information regarding the executive officers of Registrant, reference is made
to Part I, Item 4(A), at pages 17 through 21, inclusive, of this Annual Report.
Based solely on a review of copies of reports on Forms 3, 4 and 5
received by Registrant, or on written representations from certain directors
and officers that no updating Section 16(a) forms were required to be filed by
them, Registrant believes that no director or officer of Registrant filed a
late report or failed to file a required report under Section 16(a) of the
Exchange Act during or in respect of the year ended December 31, 1995, except
that Mr. E. R. Culler, Jr., an Executive Vice President of Registrant, filed
an amendment to his Form 3, and to one Form 4, to correct an administrative
error in the initial reporting of his holdings of Registrant's Common Stock and
Mr. R. P. Adante, a Vice President of Registrant, amended Form 4 filings made
in 1991, 1992, 1993 and 1994 to report shares acquired during the period
through the reinvestment of dividends on Registrant's Common Stock pursuant to
the Goodyear Dividend Reinvestment and Stock Purchase Plan not previously
reported due to administrative error. To the knowledge of Registrant, no person
owned 10% or more of any class of Registrant's equity securities registered
under the Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by Item 402 of Regulation S-K in respect of
management of Registrant is, pursuant to General Instruction G(3) to Form 10-K,
incorporated herein by specific reference to the text set forth in the Proxy
Statement under the captions "Executive Officer Compensation", "Compensation
Committee Report on Executive Compensation" and "Performance Graph", at pages
11 through 24, inclusive, of the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by Item 403 of Regulation S-K relating to the
ownership of Registrant's Common Stock by certain beneficial owners and
management is, pursuant to General Instruction G(3) to Form 10-K, incorporated
herein by specific reference to the text set forth in the Proxy Statement under
the caption "Beneficial Ownership of Common Stock" at pages 9 and 10 of the
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by Item 404 of Regulation S-K relating to certain
transactions by and relationships of management is, pursuant to General
Instruction G(3) to Form 10-K, incorporated herein by specific reference to the
text set forth in the Proxy Statement under the caption "Executive Officer
Compensation" at pages 11 through 20, inclusive, of the Proxy Statement.
51
54
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
A. LIST OF DOCUMENTS FILED AS PART OF THIS REPORT:
1. FINANCIAL STATEMENTS: See Index on page 30 of this Annual Report.
2. FINANCIAL STATEMENT SCHEDULES: See Index To Financial Statement
Schedules attached to this Annual Report at page FS-1. The Financial
Statement Schedule at page FS-1 is by specific reference hereby
incorporated into and made a part of this Annual Report.
3. EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF REGULATION S-K: See the
Index of Exhibits at pages X-1 through X-8, inclusive, which is by
specific reference hereby incorporated into and made a part of this
Annual Report. The following exhibits, each listed in the Index of
Exhibits, are or relate to compensation plans and arrangements of
Registrant:
EXHIBIT DESCRIPTION FILED AS EXHIBIT
10(a) 1994 Performance Recognition Plan E to Form 10-K for year
ended December 31, 1993
10(b) Form of Performance Equity Grant F to Form 10-K for
Agreement for 1994 under 1989 Plan year ended December 31, 1993
10(c) 1995 Performance Recognition Plan E to Form 10-K for year
ended December 31, 1994
10(d) Performance Recognition Plan 10.1 to this Annual Report
adopted as of January 1, 1996 on Form 10-K
10(e) Form of Stock Option Grant Agreement E to Form 8-K dated
under 1989 Plan February 17, 1993
10(f) 1982 Employees' Stock Option Plan A-II to Form 10-K for
(as amended) year ended December 31, 1985
10(g) Form of Stock Option Grant Agreement G to Form 10-K for year
under 1989 Plan in respect of options ended December 31, 1993
granted January 4, 1994
10(h) 1987 Employees' Stock Option Plan B to Form 10-Q for
quarter ended March 31,
1987
10(i) 1989 Goodyear Performance and Equity A to Form 10-Q for
Incentive Plan ("1989 Plan") quarter ended March 31,
1989
10(j) Goodyear Supplementary Pension Plan A to Form 10-Q for
(as amended) quarter ended March 31,
1990
10(k) Form of Performance Equity Grant F to Form 10-K for year
Agreement for 1995 under 1989 Plan ended December 31, 1994
10(l) Retirement Plan for Outside Directors F to Form 8-K dated
(as amended) March 20, 1987
10(m) Goodyear Employee Severance Plan A-II to Form 10-K for
year ended December 31,
1988
52
55
EXHIBIT DESCRIPTION FILED AS EXHIBIT
10(n) Form of Performance Equity Grant C to Form 8-K dated
Agreement for 1992 under 1989 Plan February 17, 1993
10(o) Form of Performance Equity Grant D to Form 8-K dated
Agreement for 1993 under 1989 Plan February 17, 1993
10(p) Forms of Stock Option Grant G to Form 10-K for year
Agreements under 1989 Plan in ended December 31, 1994
respect of options and
SARs granted January 4, 1995
10(z) Employment Agreement and related C to Form 10-Q for
Stock Purchase Agreement, each quarter ended June 30, 1991
dated August 6, between Registrant
and S. C. Gault
10(aa) Amendment, dated December 3, 1991, A to Form 8-K
to Stock Purchase Agreement, dated dated December 18, 1991
August 6, 1991, between Registrant
and S. C. Gault
10(bb) Amendment, dated April 5, 1993, to C to Form 8-K
Employment Agreement and to Stock dated April 22, 1993
PurchaseAgreement, each dated
August 6, 1991, between Registrant
and S. C. Gault
10(cc) Deferred Compensation Plan for B to Form 10-Q for
Executives quarter ended September 30, 1994
10(dd) 1994 Restricted Stock Award Plan B to Form 10-Q for
for Non-employee Directors quarter ended June 30, 1994
10(ee) Amendment, dated May 3, 1994, to A to Form 10-Q for
Employment Agreement and to quarter ended June 30, 1994
Stock Purchase Agreement, each dated
August 6, 1991, between Registrant and
S. C. Gault
10(ff) Form of Performance Equity Grant 10.2 to this Annual Report
Agreement for 1996 under 1989 Plan on Form 10-K
10(gg) Forms of Stock Option Grant Agreements 10.3 to this Annual Report
under 1989 Plan in respect on Form 10-K
of options and SARs
granted January 9, 1996
10(hh) Amendment Agreement, dated as of 10.4 to this Annual Report
December 5, 1995, relating on Form 10-K
to Stock Purchase Agreement dated
August 6, 1991, between Registrant
and S. C. Gault
10(ii) Outside Directors' Equity 10.5 to this Annual Report
Participation Plan on Form 10-K
B. REPORTS ON FORM 8-K:
No Current Report on Form 8-K was filed by Registrant with the
Securities and Exchange Commission during the quarter ended December 31, 1995.
53
56
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS ANNUAL REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
THE GOODYEAR TIRE & RUBBER COMPANY
(Registrant)
Date: March 20, 1996 By /s/ SAMIR F. GIBARA
---------------------------------------
Samir F. Gibara, President and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
ANNUAL REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
Date: March 20, 1996 /s/ SAMIR F. GIBARA
-----------------------------------------
Samir F. Gibara, President and Chief
Executive Officer and Director (Principal
Executive Officer)
Date: March 20, 1996 /s/ ROBERT W. TIEKEN
-----------------------------------------
Robert W. Tieken, Executive Vice President
(Principal Financial Officer)
Date: March 20, 1996 /s/ GEORGE E. STRICKLER
-----------------------------------------
George E. Strickler, Vice President and
Comptroller (Principal Accounting Officer)
JOHN G. BREEN, Director
WILLIAM E. BUTLER, Director
THOMAS H. CRUIKSHANK, Director By /s/ ROBERT W. TIEKEN
STANLEY C. GAULT, Director ----------------------------
Date: March 20, 1996 WILLIAM J. HUDSON, JR., Director Robert W. Tieken,
GERTRUDE G. MICHELSON, Director Signing as Attorney-in-Fact
STEVEN A. MINTER, Director for the directors whose
AGNAR PYTTE, Director names appear opposite.
GEORGE H. SCHOFIELD, Director
WILLIAM C. TURNER, Director
A Power of Attorney, dated January 9, 1996, authorizing Robert W. Tieken
to sign this Annual Report on Form 10-K for the fiscal year ended December 31,
1995 on behalf of certain of the directors of the Registrant is filed as
Exhibit D to this Annual Report.
54
57
FINANCIAL STATEMENT SCHEDULES ITEMS 8
AND 14(a)(2) OF FORM 10-K
FOR CORPORATIONS
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------
INDEX TO FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES:
SCHEDULE NO. PAGE NUMBER
------------ -----------
Valuation and Qualifying Accounts.................. II FS-1
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
INDEX TO FINANCIAL STATEMENT SCHEDULES:
Financial statement and schedules relating to 50 percent or less owned
companies, the investments in which are accounted for by the equity method,
have been omitted as permitted because, considered in the aggregate as a single
subsidiary, these companies would not constitute a significant subsidiary.
====================================================================================================================================
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31,
====================================================================================================================================
(IN MILLIONS) 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Additions Translation
Balance at charged Deductions adjustment Balance
beginning (credited) from during at end of
Description of period to income reserves period period
- -----------------------------------------------------------------------------------------------------------------------------------
Deducted from accounts and notes
receivable:
For doubtful accounts $ 54.0 $ 19.5 $ (17.5) (a) $ .2 $ 56.2
Valuation allowance -- deferred
tax assets 68.9 (34.7) (4.5) -- 29.7
1994
- -----------------------------------------------------------------------------------------------------------------------------------
Deducted from accounts and notes
receivable:
For doubtful accounts $ 50.6 $ 26.5 $ (23.3) (a) $ .2 $ 54.0
Valuation allowance -- deferred
tax assets 96.4 (27.1) (.4) -- 68.9
1993
- -----------------------------------------------------------------------------------------------------------------------------------
Deducted from accounts and notes
receivable:
For doubtful accounts $ 55.8 $ 26.2 $ (25.8) (a) $ (5.6) $ 50.6
Valuation allowance -- deferred
tax assets 231.2 (25.6) (109.2) -- 96.4
- ----------
Note:(a) Accounts and notes receivable charged off.
FS-1
58
THE GOODYEAR TIRE & RUBBER COMPANY
Annual Report on Form 10-K
For Year Ended December 31, 1995
INDEX OF EXHIBITS(1)
Exhibit
Table
Exhibit
Item Letter/
No. (2) Description of Exhibit Number Page
------- ---------------------- ------- ----
3 ARTICLES OF INCORPORATION AND BY-LAWS
(a) Certificate of Amended Articles of Incorporation
of The Goodyear Tire & Rubber Company, dated
December 20, 1954, and Certificate of Amendment
to Amended Articles of Incorporation of The
Goodyear Tire & Rubber Company, dated April 6,
1993 (two documents comprising Registrant's
Articles of Incorporation as amended through
March 27, 1995) (incorporated by reference,
filed with the Securities and Exchange Commission
as Exhibit 4.1(A) to Registrant's Registration
Statement on Form S-8, File No. 33-65187).
(b) Code of Regulations of The Goodyear Tire &
Rubber Company, adopted November 22, 1955, and
amended April 5, 1965, April 7, 1980, April 6,
1981 and April 13, 1987 (incorporated by
reference, filed with the Securities and Exchange
Commission as Exhibit 4.1(B) to Registrant's
Registration Statement on Form S-8, File No.
33-65187).
4 Instruments defining the rights of security holders,
including indentures
(a) Conformed copy of Rights Agreement, dated as of
July 2, 1986, between Registrant and Manufacturers
Hanover Trust Company, Rights Agent (filed with
the Securities and Exchange Commission as Exhibit
4(a) to Registrant's Current Report on Form 8-K,
dated July 2, 1986, and as Exhibit 2(a) to
Registrant's Registration Statement on Form 8-A,
dated July 3, 1986, File No. 1-1927), as amended
by that certain Amendment to Rights Agreement
dated as of April 6, 1993 between Registrant and
First Chicago Trust Company of New York, the
successor Rights Agent (incorporated by reference,
filed with the Securities and Exchange Commission
as Exhibit 4.3 to Registrant's Registration
Statement on Form S- 8, File No. 33-65187).
- ---------------
(1) See Part IV, Item 14, Part A.3.
(2) Pursuant to Item 601 of Regulation S-K.
X-1
59
Exhibit
Table
Exhibit
Item Letter/
No. (2) Description of Exhibit Number Page
------- ---------------------- ------- ----
4 (b) Specimen nondenominational Certificate for
shares of the Common Stock, Without Par Value, of the
Registrant; one certificate, First Chicago Trust
Company of New York as transfer agent and registrar
(incorporated by reference, filed with the Securities
and Exchange Commission as Exhibit 4.2 to
Registrant's Registration Statement on Form S-8, File
No. 033-65187).
(c) Conformed Copy of Revolving Credit Facility
Agreement, dated as of July 15, 1994, among
Registrant, the Lenders named therein and Chemical
Bank, as Agent (incorporated by reference, filed with
the Securities and Exchange Commission as Exhibit A
to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994, File No. 1-1927).
Information concerning Goodyear's long-term debt is
set forth at Note 6, captioned "Financing
Arrangements and Financial Instruments", at the
sub-caption "B. Long Term Debt and Capital Leases",
in the Financial Statements set forth at Item 8 of
this Annual Report, beginning at page 38, and is
incorporated herein by specific reference. No other
instrument defining the rights of holders of
long-term debt relates to securities having an
aggregate principal amount in excess of 10% of the
consolidated assets of Registrant and its
subsidiaries. In accordance with paragraph (iii) to
Part 4 of Item 601 of Regulation S-K, the agreements
and instruments defining the rights of holders of
long term debt of Registrant in respect of which the
total amount of securities authorized thereunder does
not exceed 10% of the consolidated assets of
Registrant and its subsidiaries are not filed
herewith. The Registrant hereby agrees to furnish a
copy of any such agreement or instrument to the
Securities and Exchange Commission upon request.
- ---------------
(2) Pursuant to Item 601 of Regulation S-K.
X-2
60
Exhibit
Table
Exhibit
Item Letter/
No. (2) Description of Exhibit Number Page
- -------- ---------------------- ------- ----
10 MATERIAL CONTRACTS
(a) Performance Recognition Plan of Registrant
adopted effective January 1, 1994 for calendar year
1994 (incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit E to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993, File No. 1-1927).
(b) Form of Performance Equity Grant Agreement in
respect of awards granted in 1994 under the 1989
Goodyear Performance and Equity Incentive Plan
(incorporated by reference, filed with the Securities
and Exchange Commission as Exhibit F to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 1-1927).
(c) Performance Recognition Plan of Registrant
adopted effective January 1, 1995 for calendar year
1995 (incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit E to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994, File No. 1-1927).
(d) Performance Recognition Plan of Registrant adopted effec- 10.1 X-10.1-1
tive January 1, 1996.
(e) Form of Stock Option Grant Agreement under the
1989 Goodyear Performance and Equity Incentive Plan
in respect of options granted in 1992 and 1993
(incorporated by reference, filed with the Securities
and Exchange Commission as Exhibit E to Registrant's
Current Report on Form 8-K dated February 17, 1993,
File No. 1-1927).
(f) 1982 Employees' Stock Option Plan of
Registrant, as amended effective April 7, 1986
(incorporated by reference, filed with the Securities
and Exchange Commission as Exhibit A-II to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1985, File No. 1-1927).
(g) Form of Stock Option Grant Agreement under the
1989 Goodyear Performance and Equity Incentive Plan
in respect of options granted January 4, 1994
(incorporated by reference, filed with the Securities
and Exchange Commission as Exhibit G to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 1-1927).
- ---------------
(2) Pursuant to Item 601 of Regulation S-K.
X-3
61
Exhibit
Table
Exhibit
Item Letter/
No. (2) Description of Exhibit Number Page
- -------- ---------------------- ------- ----
10 (h) 1987 Employees' Stock Option Plan of
Registrant, as adopted by the Board of Directors of
Registrant on February 10, 1987, and approved by
Registrant's shareholders on April 13, 1987
(incorporated by reference, filed with the Securities
and Exchange Commission as Exhibit B to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1987, File No. 1-1927).
(i) 1989 Goodyear Performance and Equity Incentive
Plan of Registrant, as adopted by the Board of
Directors of Registrant on December 6, 1988, and
approved by the shareholders of Registrant on April
10, 1989 (incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit A to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1989, File No. 1-1927).
(j) Goodyear Supplementary Pension Plan, as
amended May 1, 1990 (incorporated by reference, filed
with the Securities and Exchange Commission as
Exhibit A to Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990, File No.
1-1927).
(k) Performance Equity Grant Agreement in respect
of awards granted in December of 1994 in
respect of 1995 under the 1989 Goodyear Performance
and Equity Incentive Plan (incorporated by reference,
filed with the Securities and Exchange Commission as
Exhibit F to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994, File No.
1-1927).
(l) The Goodyear Tire & Rubber Company Retirement
Plan for Outside Directors, adopted December 6, 1983,
as amended November 13, 1986 (incorporated by
reference, filed with the Securities and Exchange
Commission as Exhibit F to Registrant's Current
Report on Form 8-K, dated March 20, 1987, File No.
1-1927).
(m) Goodyear Employee Severance Plan, as adopted
by the Board of Directors of Registrant on February
14, 1989 (incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit A-II to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1988, File No. 1-1927).
(n) Form of Performance Equity Grant Agreement in
respect of awards in 1992 under the 1989 Goodyear
Performance and Equity Incentive Plan (incorporated
by reference, filed with the Securities and Exchange
Commission as Exhibit C to Registrant's Current
Report on Form 8-K dated February 17, 1993, File No.
1-1927).
- ---------------
(2) Pursuant to Item 601 of Regulation S-K.
X-4
62
Exhibit
Table
Exhibit
Item Letter/
No. (2) Description of Exhibit Number Page
- -------- ---------------------- ------- ----
10 (o) Form of Performance Equity Grant Agreement in
respect of awards in 1993 under the 1989 Goodyear
Performance and Equity Incentive Plan
(incorporated by reference, filed with the Securities
and Exchange Commission as Exhibit D to Registrant's
Current Report on Form 8-K dated February 17, 1993,
File No. 1-1927).
(p) Forms of Stock Option Grant Agreements in
respect ofoptions and SARs granted January 4, 1995
under the 1989 Goodyear Performance and Equity
Incentive Plan; Part I, Form of Agreement for
Incentive Stock Options, Part II, Form of Agreement
for Non-Qualified Stock Options, and Part III, Form
of Agreement for Non-Qualified Stock Options and
tandem Stock Appreciation Rights (incorporated by
reference, filed with the Securities and Exchange
Commission as Exhibit G to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994,
File No. 1- 1927).
(q) Conformed copy of Receivables Sale Agreement
[$200,000,000 Facility], dated as of December 12,
1989, among Registrant, Asset Securitization
Cooperative Corporation ("ASCC") and Canadian
Imperial Bank of Commerce ("CIBC") (incorporated by
reference, filed with the Securities and Exchange
Commission as Exhibit D to Registrant's Current
Report on Form 8-K, dated March 22, 1990, File No.
1-1927).
(r) Conformed copy of Receivables Sale Agreement
[$400,000,000 Facility], dated as of June 15, 1990,
among Registrant, ASCC and CIBC (incorporated by
reference, filed with the Securities and Exchange
Commission as Exhibit A to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1990, File No. 1-1927).
(s) Conformed copy of Amendment to Receivables
Sale Agreement [$200,000,000 Facility], dated as of
March 14, 1991, among Registrant, ASCC and CIBC,
amending the Receivables Sale Agreement [$200,000,000
Facility], dated as of December 12, 1989, among
Registrant, ASCC and CIBC (incorporated by reference,
filed with the Securities and Exchange Commission as
Exhibit A to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991, File No.
1-1927).
(t) Conformed copy of Amendment to Receivables
Sale Agreement [$400,000,000 Facility], dated as of
March 14, 1991, among Registrant, ASCC and CIBC,
amending the Receivables Sale Agreement [$400,000,000
Facility], dated as of June 15, 1990, among
Registrant, ASCC and CIBC (incorporated by reference,
filed with the Securities and Exchange Commission as
Exhibit B to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991, File No.
1-1927).
- ---------------
(2) Pursuant to Item 601 of Regulation S-K.
X-5
63
Exhibit
Table
Exhibit
Item Letter/
No. (2) Description of Exhibit Number Page
- -------- ---------------------- ------- ----
10 (u) Conformed copy of Second Amendment to
Receivables Sale Agreement [$400,000,000 Facility],
dated as of September 15, 1991, among Registrant,
ASCC and CIBC, amending the Receivables Sale
Agreement [$400,000,000 Facility], dated as of June
15, 1990, as amended by amendment dated as of March
14, 1991, among Registrant, ASCC and CIBC
(incorporated by reference, filed with the Securities
and Exchange Commission as Exhibit A to Registrant's
Quarterly Report on Form 10-Q for the Quarter ended
September 30, 1991, File No. 1-1927).
(v) Conformed copy of Second Amendment to
Receivables Sale Agreement [$200,000,000 Facility]
dated as of June 25, 1992, among Registrant, ASCC and
CIBC, amending the Receivables Sale Agreement
[$200,000,000 Facility], dated as of December 12,
1989, among Registrant, ASCC and CIBC (incorporated
by reference, filed with the Securities and Exchange
Commission as Exhibit B to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1992, File No. 1-1927).
(w) Conformed copy of Third Amendment to
Receivables Sale Agreement [$200,000,000 Facility]
dated as of July 23, 1992, among Registrant, ASCC and
CIBC, amending the Receivables Sale Agreement
[$200,000,000 Facility], dated as of December 12,
1989, among Registrant, ASCC and CIBC (incorporated
by reference, filed with the Securities and Exchange
Commission as Exhibit C to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1992, File No. 1-1927).
(x) Conformed copy of Third Amendment to
Receivables Sale Agreement [$400,000,000 Facility]
dated as of July 28, 1992, among Registrant, ASCC and
CIBC, amending the Receivables Sale Agreement
[$400,000,000 Facility], dated as of June 15, 1990,
among Registrant, ASCC and CIBC (incorporation by
reference, filed with the Securities and Exchange
Commission as Exhibit D to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1992, File No. 1-1927).
(y) Conformed copy of Fourth Amendment to
Receivables Sale Agreement [$400,000,000 Facility]
dated as of January 27, 1993, among Registrant, ASCC
and CIBC, amending the Receivables Sale Agreement
[$400,000,000 Facility], dated as of June 15, 1990,
among Registrant, ASCC and CIBC (incorporated by
reference, filed with the Securities and Exchange
Commission as Exhibit A to Registrant's Current
Report on Form 8-K dated February 17, 1993, File No.
1-1927).
- ---------------
(2) Pursuant to Item 601 of Regulation S-K.
X-6
64
Exhibit
Table
Exhibit
Item Letter/
No. (2) Description of Exhibit Number Page
- -------- ---------------------- ------- ----
10 (z) Conformed Copy of Employment Agreement, dated
August 6, 1991, and related Stock Purchase Agreement,
dated August 6, 1991, each between Registrant and
Stanley C. Gault, the Chairman of the Board and Chief
Executive Officer of Registrant (incorporated by
reference, filed with the Securities and Exchange
Commission as Exhibit C to Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30,
1991, File No. 1-1927).
(aa) Conformed copy of Amendment Agreement,
dated December 3, 1991, between Registrant and
Stanley C. Gault, Chairman of the Board and Chief
Executive Officer of Registrant, amending that
certain Stock Purchase Agreement dated August 6, 1991
between Registrant and Stanley C. Gault (incorporated
by reference, filed with the Securities and Exchange
Commission as Exhibit A to Registrant's Current
Report on Form 8-K, dated December 18, 1991, File No.
1-1927).
(bb) Amendment, dated April 5, 1993, to
Employment Agreement and to Stock Purchase Agreement,
each dated August 6, 1991, between Registrant and S C
Gault (incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit C to
Registrant's Current Report on Form 8-K dated April
22, 1993, File No. 1-1927).
(cc) The Goodyear Tire & Rubber Company
Deferred Compensation Plan for Executives, as adopted
effective October 4, 1994 (incorporated by reference,
filed with the Securities and Exchange Commission as
Exhibit B to Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994, File
No. 1-1927).
(dd) 1994 Restricted Stock Award Plan for
nonemployee Directors of Registrant, as adopted
effective June 1, 1994 (incorporated by reference,
filed with the Securities and Exchange Commission as
Exhibit B to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994, File No.
1-1927).
(ee) Amendment, dated May 3, 1994, to
Employment Agreement and to Stock Purchase Agreement,
each dated August 6, 1991, between Registrant and S.
C. Gault (incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit A to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, File No. 1-1927).
- ---------------
(2) Pursuant to Item 601 of Regulation S-K.
X-7
65
Exhibit
Table
Exhibit
Item Letter/
No. (2) Description of Exhibit Number Page
- -------- ---------------------- ------- ----
10 (ff) Form of Performance Equity Grant Agreement for 1996 10.2 X-10.2-1
under the 1989 Goodyear Performance and Equity
Incentive Plan
(gg) Forms of Stock Option Grant Agreement granted January 10.3 X-10.3-1
9, 1996 under the 1989 Goodyear Performance and Equity
Incentive Plan; Part I, Form of Agreement for Incentive
Stock Options, Part II, Form of Agreement for Non-qualified
Stock Options, and Part III, Form of Agreement for
Non-qualified Stock Options and tandem Stock Appreciation
Rights.
(hh) Amendment Agreement, dated as of December 5, 1995, 10.4 X-10.4-1
relating to Stock Purchase Agreement dated August 6,
1991, between Registrant and S C Gault.
(ii) Outside Directors' Equity Participation Plan, adopted by 10.5 X-10.5-1
by the Board of Directors on February 2, 1996.
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS A
(a) Computation of Earnings Per Share (11) X-11-1
21 SUBSIDIARIES B
(a) List of subsidiaries of Registrant at March 15, 1996. (21) X-21-1
23 CONSENTS OF EXPERTS AND COUNSEL C
(a) Consent of Price Waterhouse LLP, independent accoun- (23) X-23-1
tants, to incorporation by reference of their report set
forth on page 30 of this Annual Report in certain
Registration Statements on Forms S-3 and S-8.
24 POWER OF ATTORNEY D
(a) Power of Attorney, dated January 9, 1996, authorizing (24) X-24-1
Robert W. Tieken, C. Thomas Harvie, George E. Strickler,
Richard W. Hauman, James Boyazis, or any one or more
of them, to sign this Annual Report on behalf of certain
directors of Registrant.
27 FINANCIAL DATA SCHEDULE (27) X-27-1
99 ADDITIONAL EXHIBITS
(a) Registrant's definitive Proxy Statement dated February
27, 1996 (portions incorporated by reference, filed with the
Securities and Exchange Commission, File No. 1-1927).
- ---------------
(2) Pursuant to Item 601 of Regulation S-K.
X-8