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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
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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
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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 18, 1997, determined using the per
share closing price thereof on the New York Stock Exchange Composite
Transactions tape of $54.25 on that date, was approximately $8,508,782,443.00
------------------------------------
SHARES OF COMMON STOCK, WITHOUT PAR VALUE, OUTSTANDING AT FEBRUARY 18, 1997:
156,873,953
------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE:
PORTIONS OF REGISTRANT'S DEFINITIVE PROXY STATEMENT, DATED FEBRUARY 26,
1997, FOR ITS 1997 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, 1996
TABLE OF CONTENTS
ITEM PAGE
NUMBER NUMBER
- --------- ----------
PART I
1 Business ............................................................ 1
2 Properties .......................................................... 12
3 Legal Proceedings ................................................... 13
4 Submission of Matters to a Vote of Security Holders ................. 16
4(A) Executive Officers of Registrant .................................... 16
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 ............................ 52
PART III
10 Directors and Executive Officers of the Registrant ................. 52
11 Executive Compensation ............................................. 52
12 Security Ownership of Certain Beneficial Owners and
Management ...................................................... 52
13 Certain Relationships and Related Transactions. .................... 52
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K ........................................................ 53
Signatures ...................................................... 55
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 1996,
Goodyear's net sales were $13.1 billion and net income was $101.7 million. Net
income in 1996 included net after-tax charges of $573.0 million for the
writedown of the All American Pipeline System and related assets and other
rationalizations. Goodyear's worldwide employment averaged 91,310 during 1996.
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 other products for the transportation
industry and various other industrial and consumer markets and numerous
rubber-related chemicals for various applications, provides automotive repair
and other services at retail and commercial outlets 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 approximately 1,225
miles from two points along the California coast to McCamey, Texas, which
transports offshore and onshore California crude oil to various system outlet
stations in California and in Texas.
RECENT DEVELOPMENTS IN GOODYEAR'S BUSINESS
During 1996, Goodyear introduced the Eagle F1 GS, a high performance
passenger tire with enhanced handling and wet traction capabilities, to the
North American replacement market. The Unisteel 300 Series of commercial truck
tires was expanded and new fleet maintenance services were introduced in North
America. In Europe, the Company introduced several new tires, including the
Eagle F1 GS-D2 and Eagle F1 GS-Fiorano high performance passenger tires, the
Ultra Grip 5 winter tire and the Vector 3 all-season tire. In Latin America, the
Eagle NCT 3 was introduced in Brasil and Venezuela and will be available
throughout the region in 1997. The G386 Unisteel drive and traction medium
radial truck tire and new tires in the Wrangler light truck tire line were
introduced in Brasil.
In February 1996, Goodyear introduced the Infinitred, a premium radial
passenger tire featuring enhanced wet traction and extended tread life, to the
North American replacement passenger tire market. The Infinitred 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 March 1996, the Company purchased original issue shares of the capital
stock of T CDebica, a manufacturer of passenger tires located in Poland, for
approximately $60 million. As a result of this purchase and the Company's prior
acquisition of 32.7% of the capital stock of T C Debica from the State Treasury
of Poland at a cost of $55 million, Goodyear owns approximately 50.8% of the
capital stock of T C Debica.
In April 1996, the Company acquired a tire plant near Manila, Philippines,
formerly owned by Sime Darby for approximately $63 million. The plant
manufactures passenger, light truck, medium truck and other tires.
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Effective January 1, 1997, the Company re-entered the South African market
by acquiring a 60% equity interest in the tire and industrial rubber products
businesses of Contred for approximately $121 million including loans assumed.
The businesses acquired include the tire and engineered products manufacturing
facilities sold by Goodyear to Consol Limited in 1989 which have been updated, a
chain of retail tire outlets and the largest retreader in South Africa.
In February 1997, Goodyear entered into a four year commitment to produce
tires for Dunlop Tire Corporation and the OHTSU Tire & Rubber Co., Ltd,
affiliates of Sumitomo Rubber Industries Ltd., in North America and Sumitomo
Rubber agreed to produce tires for Nippon Goodyear in Japan during the same
four-year period.
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 Carolina.
Goodyear continued its program to enhance production capacity and
efficiency through plant modernization and expansion projects. Expansion of the
Company's Gadsden, Alabama, Topeka, Kansas, Bogor, Indonesia, Valleyfield,
Quebec, and Bangkok, Thailand tire plants were completed during 1996. The
Company also substantially completed construction of a new tire mold plant in
Statesville, North Carolina. Significant plant modernization and expansion
projects are presently underway at the Company's Napanee, Ontario, Valleyfield,
Quebec, Americana, Brasil, Freeport, Illinois, Fayetteville, North Carolina, and
Debica, Poland tire 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, 1996 appears in Note 17
captioned "Business Segments", and in the tabulation captioned "Industry
Segments" at Note 17, 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, 1996:
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
------ ------ ------
Tires Segment sales ............................ 85.5% 85.5% 85.5%
Tire sales ............................... 77.1% 76.7% 76.7%
Tires Segment operating income ................. 243.8%(1) 81.9% 84.7%
Note: (1) If determined before giving effect to the $755.6 million writedown of the assets of
the Oil Transportation Segment, Tires Segment operating income represented 79.6% of
Goodyear's total operating income in 1996.
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,
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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 enhanced wet traction tire
line, the Eagle performance touring tire lines, and the Eagle Gatorback and
Eagle Aquatred high performance tire lines. The major lines of Goodyear-brand
radial light truck tires offered in the United States are the Wrangler and
Workhorse. 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 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 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 group ("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, DISTRIBUTION AND 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, Kelly-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 85% of all light and medium truck tires sold by the Company in the
United States during 1996 were radial. Approximately 91% of all passenger tires
and approximately 46% of all light and medium truck tires sold by the Company
outside the United States during 1996 were radial. Demand for high performance
passenger tires has increased significantly during recent years. Approximately
31% of passenger tires sold in the United States during 1996 were high
performance tires, up from 30% in 1995, 28% in 1994 and 10% in 1988.
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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 reputation 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 877 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 152 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 TBC Corporation, 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 5.3%
of Goodyear's consolidated net sales during 1996, 1995 or 1994. Worldwide,
Goodyear's annual net sales to its ten largest customers, including their
respective affiliates, represented less than 20.7% of consolidated net sales for
each of 1996, 1995 or 1994. No customer or group of affiliated customers
accounted for as much as 4.1% of Tires Segment sales during 1996, 1995 or 1994.
The ten largest customers of the Tires Segment represented less than 21.0% of
Tire Segment sales for 1996.
Based on a composite of industry sources and information published by the
Rubber Manufacturers Association (the "RMA"), it is estimated that approximately
232 million passenger tires were sold in the United States during 1996 compared
to approximately 224 million in
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1995. Based on current economic forecasts, Goodyear expects the total
market for passenger tires in the United States in 1997 to increase
approximately 2.1% compared to 1996, with 1997 passenger tire demand up
approximately 3.2% in the original equipment and 1.7% in the replacement market.
Based on a composite of industry sources and information published by the
RMA, it is estimated that approximately 50 million light and medium highway
truck tires were sold in the United States during 1996. Goodyear estimates that
demand for light and medium highway truck tires in the United States during 1997
will be substantially the same as during 1996.
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
1996 vs 1995 1995 vs 1994
-------------- --------------
United States ......................... (.7)% (3.3)%
Foreign ............................... 12.6% 3.3%
Worldwide ....................... 5.4% (.4)%
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 1996, 1995 and 1994.
Related products and services, including automotive parts, automotive
maintenance and repair services and associated merchandise, are sold in the
United States through approximately 1,029 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
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
Goodyear does not consider its Tires Segment business to be seasonal to
any significant degree. Goodyear maintains a significant inventory of new tires
in order to rationalize produc-
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tion schedules and assure prompt delivery 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 Europe and Latin America during most of
1996 were higher than planned, due primarily 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 91% of capacity during 1996, 95% of
capacity during 1995 and 92% of capacity during 1994. Goodyear's worldwide tire
capacity utilization was approximately 89% during 1996, 93% during 1995 and 90%
during 1994. In order to maintain its competitive position, respond to changing
market conditions and optimize production efficiencies, Goodyear has a
continuing program for rationalizing production, eliminating inefficient
capacity and 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,
the Philippines, Poland and South Africa. Continued high levels of capacity
utilization by the tire industry during 1997 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
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 per centage of Goodyear's net sales and
operating income attributable to the General Products Segment for each of the
three years ended December 31, 1996:
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
------ ------ ------
General Products Segment sales .............................. 13.6% 13.5% 13.8%
General Products Segment operating income ................... 44.5%(1) 13.6% 14.3%
Note: (1) If determined before giving effect to the $755.6 million writedown of the assets of the Oil
Transportation Segment, General Products Segment operating income represented 14.5% of Goodyear's
total operating income in 1996.
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.
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CHEMICAL PRODUCTS. Goodyear produces a broad line of synthetic rubber,
latices, resins and organic chemicals used in rubber and plastic processing.
SHOE 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.
MARKETS AND DISTRIBUTION -- OTHER INFORMATION
Most products of the General Products Segment are sold directly to
manufacturers or through independent wholesale distributors. During 1996, the
five largest customers of the General Products Segment accounted for
approximately 24.5% of General Products Segment sales and no customer accounted
for more than 16% 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, 1996:
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
------ ------ ------
Oil Transportation Segment sales ............................ .9% 1.0% .7%
Oil Transportation Segment operating income (loss) .......... (188.3%)(1) 4.5% 1.0%
Note: (1) If determined before giving effect to the $755.6 million writedown of Oil Transportation
Segment assets, Oil Transportation Segment operating income represented 5.9% of Goodyear's
total operating income in 1996.
All American Pipeline Company, a wholly-owned subsidiary of Registrant
("All American"), owns and operates a heated crude oil pipeline system which
extends from the California Coast to central Texas (the "All American System").
Celeron Gathering Company, a wholly-owned subsidiary of Registrant ("Celeron
Gathering"), owns and operates a crude oil gathering pipeline in the San Joaquin
Valley, California (the "Celeron Gathering System"). Celeron Trading &
Transportation Company, a wholly-owned subsidiary of Registrant, engages in
various crude oil exchanging, purchasing and selling activities.
ALL AMERICAN 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 along the California Coast 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
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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 System outlet stations in California for delivery through
other pipelines to refineries in the Los Angeles Basin and in the greater San
Francisco area and to System outlet stations in Wink and McCamey, Texas, for
delivery via other pipelines to refineries in the Mid-continent region and along
the Texas Gulf Coast. The All American System in the past has also transported
Alaska North Slope crude oil ("ANS Crude Oil") received from other pipelines
from insert points in central California to terminals located near McCamey,
Texas.
Several producers of OCS Crude Oil have entered into transportation
agreements with the All American System for the transport of available
quantities of OCS Crude Oil at specified tariff rates. An average of
approximately 140,090 barrels per day of OCS Crude Oil were transported by the
All American System during 1996. Approximately 63.1% of the OCS Crude Oil
tendered was transported by the All American System to 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
System outlet stations in Wink and 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 1997 the average number of barrels per day
of OCS Crude Oil tendered for shipment will be significantly lower than during
1996 and that a higher percentage of the OCS Crude Oil tendered will be for
delivery to refineries in California.
The average volume of crude oil transported by the All American System was
approximately 207,000 barrels per day in 1996, 217,000 barrels per day in 1995
and 185,000 barrels per day in 1994. The average tariff per barrel of crude oil
transported by the All American System during 1996 was $1.65, compared to $1.76
during 1995 and $1.38 during 1994. The All American System transported crude oil
tendered for shipment an average distance of 627 miles in 1996, 791 miles in
1995, and 652 miles in 1994. It is anticipated that during 1997 the All American
System will, on an average daily volume basis, transport significantly lower
quantities of OCS Crude Oil and higher quantities of California Crude Oil than
in 1996. During 1997, it is expected that the volume of crude oil transported by
the All American System within California will be higher than in 1996, while the
volume of crude oil transported to locations outside California will be
significantly lower than in 1996.
As a result of industry developments indicating that the quantities of OCS
Crude Oil, California Crude Oil and ANS Crude Oil expected to be tendered in the
future to the All American System for transportation will be lower than
previously estimated and that the volumes of crude oil expected to be
transported by the All American System to markets outside California in the
future are estimated to be significantly lower than previously anticipated,
management determined in December 1996 that the cash flows expected to be
generated by the All American System would be less than its carrying value of
$1.176 billion. In accordance with Statement of Financial Accounting Standards
No. 121, the carrying value of the assets of the All American System was reduced
to $420 million and a charge of $755.6 million ($499.3 million after tax) was
recorded in the fourth quarter of 1996.
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. The major portion of crude oil acquired is ultimately sold to or
exchanged with refiners located in, or shippers transporting crude oil to, 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.
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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 1997 in respect of its activities during 1996. The All American System
is also subject to the jurisdiction of the California Public Utilities
Commission (the "Cal PUC") in respect of certain of its California intrastate
transportation services. The Celeron Gathering System is a proprietary
intrastate gathering pipeline system and, as such, is not subject to the general
jurisdiction of the FERC or to the jurisdiction of the Cal PUC.
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
54% of all rubber consumed by Goodyear worldwide during 1996, 1995 and 1994. 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 1996, Goodyear anticipates the
continued availability (subject to possible spot shortages) of all such
materials during 1997.
Goodyear uses substantial quantities of chemicals and fuels in the
production of tires and other rubber products, synthetic rubber and latex and
other products. Supplies of chemicals and fuels have been and are expected to
continue to be adequate for the Company's manufacturing plants.
Natural rubber and other raw material prices decreased somewhat during
1996. In general, the Company does not anticipate significant changes in raw
material prices during 1997, although most commodity materials are likely to
continue to be subject to some price volatility.
PATENTS AND TRADEMARKS
Goodyear owns approximately 1,608 patents issued by the United States
Patent Office and approximately 6,946 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 434 applications for United States Patents
pending and approximately 3,832 patent applications on file in other countries
around the world. While Goodyear
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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 1,040 different trademarks, including
several using the word "Goodyear". These trademarks are protected by
approximately 7,030 registrations worldwide. Goodyear also has approximately
1,170 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.
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 1996 under contracts or
subcontracts which were subject to termination at the election of the United
States Government amounted to approximately 1.1% of Goodyear's consolidated net
sales for 1996 and .6% for 1995 and 1994.
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 prod ucts 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, 1996, 1995, 1994, 1993 and 1992,
Goodyear expended, directly or indirectly, $374.5 million, $369.3 million,
$341.3 million, $320.0 million and $325.9 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 $375 million for research and
development activities during 1997.
EMPLOYEES
At December 31, 1996, Goodyear employed approximately 88,903 people
throughout the world. Of the approximately 41,218 persons employed in the United
States at December 31, 1996, approximately 11,601 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, and approximately 8,930 were covered by other contracts with the
USWA and various other unions.
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
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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 1996, 1995, 1994, 1993 and 1992,
Goodyear made capital expenditures aggregating approximately $12.5 million,
$17.4 million, $11.7 million, $13.4 million, and $13.7 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 $15.0 million during
1997 and approximately $19.1 million during 1998. In addition, Goodyear expended
approximately $74.2 million during 1996, and Goodyear estimates that it will
expend approximately $76.3 million during 1997 and approximately $73.8 million
during 1998, to maintain and operate its pollution control facilities and
conduct its other environmental 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, 1996, Goodyear had reserved $92.6
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.
INFORMATION ABOUT GEOGRAPHICS SEGMENTS
AND INTERNATIONAL OPERATIONS
Financial information relating to Goodyear's "Geographic Segments" for
each of the three years in the period ended December 31, 1996 appears in Note
17, captioned "Business Segments", and in the tabulation captioned "Geographic
Segments" at Note 17 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 27 foreign countries. Foreign sales represented approximately 47%,
45% and 42% of total sales and foreign operating income represented
approximately 181% (59% if determined before giving effect to the $755.6 million
writedown of the Oil Transportation Segment assets), 56%, and 50% of total
operating income in 1996, 1995 and 1994, 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.
Goodyear and Pacific Dunlop Limited each have a 50% equity interest in South
Pacific Tyres, an Australian partnership, and South Pacific Tyres N.Z. Limited,
a New Zealand company, which entities operate five tire manufacturing plants, 21
retread plants and a chain of approximately 520 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 South
Asia Tires Limited, which owns a tire manufacturing facility under construction
near Bombay, India, 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.
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ITEM 2. PROPERTIES.
Goodyear manufactures its products in 81 manufacturing facilities located
around the world. There are 34 plants in the United States and 47 plants in 27
other countries.
TIRES SEGMENT MANUFACTURING FACILITIES. The Company owns (or leases with
the right to purchase at a nominal price) and operates the following
manufacturing facilities used by the Tires Segment.
UNITED STATES: Manufacturing facilities having an aggregate of 17.6
million square feet of floor space, as follows: (1) Tire plants at Akron, Ohio;
Danville, Virginia; Fayetteville, North Carolina; Freeport, Illinois; Gadsden
Alabama; Lawton, Oklahoma; Topeka, Kansas; Tyler, Texas; and Union City,
Tennessee; (2) Steel tire wire plant at Asheboro, North Carolina; (3) Textile
mills at Cartersville, Georgia; and Decatur, Alabama; (4) Tread rubber plants at
Greenville, Texas; Radford, Virginia; and Spartanburg, South Carolina; and (5)
tire molds plants at Statesville, North Carolina; and Stow, Ohio.
CANADA: Tire plants having an aggregate of 1.9 million square feet of
floor space located at Medicine Hat, Alberta; Napanee, Ontario; and Valleyfield,
Quebec.
EUROPE: Manufacturing facilities having an aggregate of 12.1 million
square feet of floor space: (1) Tire plants at Amiens, France; Fulda and
Phillippsburg, Germany; Cisterna di Latina, Italy; Colmar-Berg, Luxembourg;
Casablanca, Morocco; Adapazari and Ismit, Turkey; Wolverhampton, England;
Debica, Poland; and Uitenhage, South Africa; and (2) three plants at
Colmar-Berg, Luxembourg, for the the manufacture of tire fabric, steel tire cord
and molds and machines.
LATIN AMERICA: Tire plants having an aggregate of approximately 8.1
million square feet of floor space located at: Buenos Aires, Argentina;
Americana and Sao Paulo, Brazil (also tubes, tire fabric and fabric dipping);
Santiago, Chile (also tubes and batteries); Cali, Columbia; Guatemala City,
Guatemala; Morant Bay, Jamacia; Mexico City, Mexico; Lima, Peru; and Valencia,
Venezuela.
ASIA: Tire plants having an aggregate of approximately 3.1 million square
feet of floor space located at: Dalian, China; New Delhi, India; Bogor,
Indonesia; Kuala Lumpur, Malaysia; Manila and Marikina, Philippines; Taipei,
Taiwan; and Bangkok, Thailand.
GENERAL PRODUCTS SEGMENT MANUFACTURING FACILITIES. The Company owns (or
leases with the right to purchase at a nominal price) and operates the following
manufacturing facilities having an aggregate of approximately 6.5 million square
feet of floor space:
UNITED STATES: Synthetic rubber and rubber chemicals plants at Akron Ohio;
Bayport, Beaumont, and Houston, Texas; and Niagara Falls, New York; Hose
products plants at Hannibal, Missouri; Lincoln, Nebraska (also power
transmission belts); Mt Pleasant, Iowa; Norfolk, Nebraska; and Sun Prairie,
Wisconsin; Conveyor belt plants at Marysville, Ohio; and Spring Hope, North
Carolina; Air springs plant at Green, Ohio; Molded rubber products plant at St.
Marys, Ohio; Latex plant at Calhoun, Georgia; and Automotive parts plants at
Jackson and Logan, Ohio.
CANADA: Hose products plants at Collingwood, Ontario; and St. Alphonse de
Granby, Quebec; Conveyor belt plant at Bowmanville, Ontario; Power transmission
belt plant at Owen Sound, Ontario; and a molded and extruded rubber products
plant at Quebec City, Quebec.
EUROPE: Chemical plant at LaHarve, France; and Conveyor and power
transmission belts plant at Uitenhage, South Africa.
LATIN AMERICA: Industrial rubber products plants at Sao Paulo, Brazil;
Santiago, Chile; and Valencia, Venezuela; Films plant at Americana, Brazil; Air
springs plant at Maua, Brazil; and Hose products and air springs plant at San
Luis Potosi, Mexico.
ASIA: Conveyor belt plant at Bayswater, Australia; and Hose products plant
at Qingdao, China.
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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 $617.5 million in
1996, $615.6 million in 1995 and $523.0 million in 1994. Of said amounts, $301.4
million in 1996, $347.9 million in 1995 and $281.6 million in 1994 were expended
on facilities located in the United States. The Company estimates that its
capital expenditures during 1997 will total approximately $675.0 million.
During 1996, Goodyear's worldwide tire production facilities were operated
at approximately 89% of rated capacity and its other manufacturing facilities
were operated at approximately 87% of rated capacity. 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 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), India (tires),
Japan (earthmover tires) and New Zealand (tires and retreading). The Company
also 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 1,029 retail outlets for the sale of
its tires to consumers in the United States and approximately 284 retail outlets
in other countries. Worldwide, the Company also operates approximately 92
retread plants and approximately 209 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 6, "Properties and
Plants," and Note 8, "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 brief description of,
and other information regarding, the All American System and the Celeron
Gathering System.
ITEM 3. LEGAL PROCEEDINGS.
At March 15, 1997, 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"), formerly a
wholly-owned subsidiary of Registrant, 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, 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
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. On March 5, 1997,
the court granted Registrant's motion for summary judgment and issued an Order
and Judgment dismissing all of these civil actions with prejudice.
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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, therefore,
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
$7,000,000 through March 1, 1997) 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) 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
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fraud. The plaintiffs are seeking unspecified compensatory damages, exemplary
damages equal to the greater of $230 million or 10% of Registrant's net worth
and injunctive and other relief.
(F) 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 G. Gibara, now Chairman of the Board, Chief Executive Officer and
President of Registrant, John M. Ross, formerly a Vice President and the General
Counsel of Registrant, and Clark Sprang, now a Vice President of Registrant, and
two other employees of Goodyear by Orion Tire Corporation ("Orion"), a
California corporation, China Tire Holdings Limited, a Bermuda corporation
("China Tire"), and China Strategic Holdings Limited, a Hong Kong corporation
("China Strategic"). The plaintiffs alleged, among other things, that, in
connection with Registrant's acquisition of a 75% interest in a tire
manufacturing facility (the "Dalian Facility") in Dalian, People's Republic of
China in 1994, Registrant and GIC engaged in tortious interference with certain
contractual relationships involving the Dalian 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 certain 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 were 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. On motion made by
Registrant, the court dismissed all individual defendants from the proceeding
for lack of jurisdiction, dismissed with prejudice all claims made by China
Strategic and certain claims made by Orion and China Tire, and dismissed certain
other claims of Orion and China Tire with leave to refile. On April 19, 1996, an
amended complaint was filed against Registrant and GIC by Orion and China Tire.
The remaining claims of Orion and China Tire are: (i) that Registrant and GIC
allegedly engaged in conduct which constituted tortious interference with the
prospective economic advantage of Orion by allegedly wrongfully obstructing and
interfering with Orion's alleged prospective business ventures involving the
Dalian Facility and by tortuous interference with Orion's prospective
contractual relationships with the Dalian Facility regarding the supply of tires
and a purported option to purchase an equity interest in the Dalian Facility,
and (ii) that Registrant and GIC allegedly committed trade libel and defamation
in respect of Orion and China Tire by knowingly publishing untrue statements
regarding Orion and China Tire to various officials of the Dalian Facility and
various governmental bodies in the People's Republic of China. The plaintiffs
are seeking an aggregate of at least $1.085 billion in actual damages and $3.255
billion in exemplary damages from Registrant and GIC, and such further relief as
the court may deem appropriate.
(G) 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.
(H) 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, 1997, 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 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.
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Registrant, based on available information, has determined with respect to
each legal proceeding pending against Registrant and its subsidiaries at March
15, 1997, either that it is not reasonably possible that Goodyear has incurred
liability in respect thereof (or, if reasonably possible, that the nature and
amount thereof has been disclosed in Note 18 to the Financial Statements set
forth at Item 8 to, at page 49 of, this Annual Report) or that any liability
ultimately incurred will not exceed the amount, if any, recorded in respect of
such proceeding at December 31, 1996 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, 1996.
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,
1997, (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
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SAMIR G. GIBARA CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER 57
AND PRESIDENT AND DIRECTOR
Mr. Gibara served in various managerial capacities after joining Goodyear
in 1966. He was Chairman of the Board of a European subsidiary of Registrant
from December 1, 1990 until September 30, 1992, when he was appointed a Vice
President of the Registrant . Mr. Gibara was elected a Vice President of
Registrant on October 6, 1992, serving in that capacity as the executive officer
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, and Chairman of the Board, Chief Executive Officer and President effective
July 1, 1996. Mr. Gibara is the principal executive officer of Registrant. Mr.
Gibara has been a director of Registrant since April 15, 1995.
WILLIAM J. SHARP PRESIDENT, GLOBAL SUPPORT OPERATIONS 55
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 sup ply, 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.
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NAME POSITION(S) HELD AGE
------- ------------------ -----
ROBERT W. TIEKEN EXECUTIVE VICE PRESIDENT 57
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 58
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.
NISSIM CALDERON VICE PRESIDENT 63
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.
JAMES BOYAZIS VICE PRESIDENT AND SECRETARY 60
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 57
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, employment
practices and systems. Mr. Williams has been an employee of Goodyear since 1962.
JOHN P. PERDUYN VICE PRESIDENT 57
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.
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NAME POSITION(S) HELD AGE
------- ------------------ -----
RICHARD P. ADANTE VICE PRESIDENT 50
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 57
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 50
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.
MIKE L. BURNS VICE PRESIDENT 55
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 49
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 a Vice President and
the Comptroller of Registrant from September 1, 1993 to May 31, 1996. Since June
1, 1996, Mr. Strickler has served as a Vice President of Registrant and is the
executive officer of Registrant responsible for the financial functions of
Goodyear's North American Tires Operations. Mr. Strickler has been an employee
of Goodyear since 1969.
JAMES C. WHITELEY VICE PRESIDENT 49
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.
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NAME POSITION(S) HELD AGE
------- ------------------ -----
RICHARD W. HAUMAN VICE PRESIDENT AND TREASURER 50
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
worldwide treasury operations, risk management activities and pension asset
management. Mr. Hauman has been an employee of Goodyear since 1968.
RICHARD J. STEICHEN VICE PRESIDENT 52
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 53
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.
LEE N. FIEDLER VICE PRESIDENT 55
Mr. Fiedler served in various chemical sales and marketing positions and
managerial posts until October 1, 1989, when he was appointed Vice President and
General Manager of the Company's Chemical Division. Mr. Fiedler served as
President and Chief Executive Officer of The Kelly-Springfield Tire Company,
formerly a wholly-owned subsidiary of Registrant from October 1, 1991 to
December 31, 1995. Since January 1, 1996, he has served as the President of the
Kelly-Springfield Division. He was elected a Vice President of Registrant on
November 5, 1996 and is the executive officer of Registrant responsible for
Kelly-brand and private-brand tire operations. Mr. Fiedler has been an employee
of Goodyear since 1963.
SYLVAIN G. VALENSI VICE PRESIDENT 54
Mr. Valensi served in various finance, sales and marketing positions until
1985, when he was appointed Director of Sales and Marketing for the European
region. In November 1993, he was named President and Chief Executive Officer of
Goodyear France S.A., a wholly-owned subsidiary of Registrant. On February 1,
1996, Mr. Valensi was appointed Vice President of Goodyear's European region. On
November 5, 1996, Mr. Valensi was elected a Vice President of Registrant and in
that capacity serves as the executive officer of Registrant responsible for the
Goodyear's operations in Europe, Africa and the Middle East. Mr. Valensi has
been an employee of Goodyear since 1965.
JOSEPH M. GINGO VICE PRESIDENT 52
Mr. Gingo served in various research and development and managerial posts
until November 1, 1987, when he was appointed Vice President and General Manager
of Goodyear's Aviation Products. He was elected a Vice President of Registrant
effective November 1, 1992, serving in that capacity as the executive officer of
Registrant responsible for Goodyear's worldwide tire technology activities until
January 1, 1995, when he was appointed Vice President of Goodyear's Asia region.
On November 5, 1996, Mr. Gingo was elected a Vice President of Registrant and in
that capacity is the executive officer of Registrant responsible for Goodyear's
operations in Asia. Mr. Gingo has been an employee of Goodyear since 1966.
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NAME POSITION(S) HELD AGE
------- ------------------ -----
JOHN C. POLHEMUS VICE PRESIDENT 52
Mr. Polhemus served in various managerial positions in Goodyear's
international operations until June 1, 1991, when he was appointed Managing
Director and President of Goodyear do Brasil Produtos de Borracha Ltda, a
wholly-owned subsidiary of Registrant. On April 10, 1995, Mr. Polhemus was
appointed Vice President for the Latin America region. On November 5, 1996, Mr.
Polhemus was elected a Vice President of Registrant and in that capacity he is
the executive officer of Registrant responsible for Goodyear's Latin American
operations. Mr. Polhemus has been an employee of Goodyear since 1969.
TERRY L. PERSINGER VICE PRESIDENT 52
Mr. Persinger joined Goodyear in 1966, serving in various research and
development and managerial positions until May 16, 1989, when he was appointed
Vice President and General Manager of the Polyester Division. He served in that
capacity until December 1992, when the Polyester Division was sold to Shell Oil
Company. Mr. Persinger left Goodyear and joined Shell at that time. He rejoined
Goodyear effective January 1, 1995, when he was appointed Vice President and
General Manager of Engineered Products. On November 5, 1996, Mr. Persinger was
elected a Vice President of Registrant and serves in that capacity as the
executive officer of Registrant responsible for Goodyear's Engineered Products
operations.
DENNIS E. DICK VICE PRESIDENT 57
Mr. Dick served in various research and development and production posts
until elected a Vice President of Registrant on April 9, 1984, serving as the
executive officer of Registrant responsible for Goodyear's technology management
activities worldwide until October 1991, when he was appointed Vice President
and General Manager of Goodyear's Chemical Division. On November 5, 1996, Mr.
Dick was elected a Vice President of Registrant and in that capacity the
executive officer of Registrant responsible for Goodyear's Chemical Division.
Mr. Dick has been an employee of Goodyear since 1964.
JOHN W. RICHARDSON VICE PRESIDENT 51
Mr. Richardson served in various financial management posts until he was
appointed General Manager and Finance Director of Goodyear Great Britain Limited
on November 1, 1990. Mr. Richardson was appointed General Auditor of Goodyear on
February 1, 1993, serving in that post until appointed Vice President and
Comptroller on June 1, 1996. He was elected Vice President Corporate Finance of
Registrant on November 5, 1996 and in that capacity is the principal accounting
officer of Registrant. Mr. Richardson has been an employee of Goodyear since
1967.
CLARK E. SPRANG VICE PRESIDENT 54
Mr. Sprang served in various financial posts until appointed Finance
Director for Europe on July 1, 1990, serving in that post until September 1,
1993, when he was appointed Vice President Business Development. Mr. Sprang was
elected a Vice President of Registrant on November 5, 1996 and in that capacity
is the executive officer of Registrant responsible for Goodyear's business
development activities. Mr. Sprang has been an employee of Goodyear since 1966.
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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 14, 1997.
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, Paris and Swiss Stock Exchanges.
Information relating to the high and low sale prices of Registrant's
Common Stock and the dividends paid on such shares during 1996 and 1995 appears
under the caption "Quarterly Data and Market Price Information" in Item 8 of
this Annual Report, at page 51, and is incorporated herein by specific
reference. The first quarter 1997 cash dividend, paid on March 17, 1997 to
shareholders of record at February 18, 1997, was $.28 per share.
At February 18, 1997, there were 30,262 record holders of the 156,873,953
shares of the Common Stock of Registrant then outstanding. Approximately
8,304,069 shares of the Common Stock of Registrant were beneficially owned by
approximately 35,815 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) ......... 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
Net Sales ............................... $13,112.8 $13,165.9 $12,288.2 $11,643.4 $11,784.9
Income before Extraordinary
Items and Cumulative Effect of
Accounting Changes .................... 101.7 611.0 567.0 488.7 367.3
Extraordinary Items --
Early Extinguishment of Debt .......... -- -- -- (14.6) (15.3)
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) ....................... $ 101.7 $ 611.0 $ 567.0 $ 387.8 $ (658.6)
========= ========= ========= ========= =========
Per Share of Common Stock:
Income before Extraordinary
Items and Cumulative Effect of
Accounting Changes ................... $ .66 $ 4.02 $ 3.75 $ 3.33 $ 2.57
Extraordinary Items--
Early Extinguishment of Debt ......... -- -- -- (.10) (.11)
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) $ .66 $ 4.02 $ 3.75 $ 2.64 $ (4.61)
========= ========= ========= ========= =========
Dividends Per Share ................... $ 1.03 $ .95 $ .75 $ .575 $ .275
Total Assets .......................... $ 9,671.8 $ 9,789.6 $ 9,123.3 $ 8,436.1 $ 8,563.7
Long Term Debt and Capital
Leases .............................. $ 1,132.2 $ 1,320.0 $ 1,108.7 $ 1,065.9 $ 1,471.1
Shareholders' Equity .................. $ 3,279.1 $ 3,281.7 $ 2,803.2 $ 2,300.8 $ 1,930.3
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.
(3) Net Income in 1996 included net after-tax charges of $573.0 million, or $3.69 per share, for
the writedown of the All American Pipeline System and related assets and other rationalizations.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
CONSOLIDATED
Sales in 1996 were $13.11 billion, decreasing slightly from $13.17 billion
in 1995 but increasing 6.7% from $12.29 billion in 1994.
Net income in 1996 was $101.7 million or $.66 per share, compared to
$611.0 million or $4.02 per share in 1995 and $567.0 million or $3.75 per share
in 1994. Net income in 1996 included net after-tax charges of $573.0 million or
$3.69 per share related to the writedown of the All American Pipeline System and
related assets and other rationalization actions, as discussed below.
Worldwide tire unit sales were 5.4% higher than 1995 and 5.0% higher than
1994, and sales of other automotive and industrial rubber products were higher
in both 1996 and 1995. Tire unit sales in 1996 rose on higher volume in Europe
and Asia, although original equipment volume decreased in North America and
Latin America. In 1995, tire unit sales reflected higher original equipment
volume, primarily in Europe, but were adversely affected by lower replacement
auto market volume in the U.S.
Revenues in 1996 decreased despite higher tire unit sales, due primarily
to continued competitive pricing pressures worldwide and the strengthening of
the U.S. dollar in 1996 versus various foreign currencies. Competitive pricing
pressures are expected to continue worldwide during 1997. Revenues in 1995
increased due to higher average selling prices and the favorable impact of the
strengthening of European currencies in 1995 versus the U.S. dollar.
Cost of goods sold in 1996 was 76.5% of sales, compared to 76.7% in 1995
and 75.5% in 1994. Raw material costs in 1996 decreased from the level reached
after 1995's significant increase in natural rubber prices, and worldwide raw
material costs are not expected to increase significantly in 1997. Labor costs
increased in both 1996 and 1995, due in part to the 1994 U.S. wage agreements
which provided for wage and benefit improvements. Future labor costs are
uncertain due to the expiration of these agreements in 1997. Manufacturing costs
in 1996 and 1995 benefited from efficiencies achieved as a result of ongoing
cost containment measures, but were adversely affected in 1996 by lower levels
of capacity utilization resulting from reductions in production schedules in
North America and Europe to align inventory with market requirements.
The Company's research and development expenditures, all of which were
included in cost of sales, were $374.5 million, $369.3 million and $341.3
million in 1996, 1995 and 1994, respectively. Research and development
expenditures in 1997 are expected to approximate 1996 levels.
Selling, administrative and general expense (SAG) in 1996 was 14.4% of
sales, compared to 14.7% in 1995 and 15.9% in 1994. The improvement as a percent
to sales in each year reflected lower employment levels which reduced
compensation and benefit costs in the U.S., and the benefits of ongoing cost
containment measures.
In December 1996, industry developments occurred indicating that the
quantities of off-shore California, onshore California and Alaska North Slope
crude oil expected to be tendered in the future to the All American Pipeline
System and related assets (the System) for transportation would be below prior
estimates and that volumes of crude oil expected to be tendered to the System
for transportation to markets outside of California in the future would be
significantly lower than previously anticipated. As a result, management
determined that the future cash flows expected to be generated by the System
would be less than its carrying value. In accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the
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26
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," the Company reduced the carrying value of the System to $420 million,
determined using the present value of expected future cash flows from the
System, and recorded a charge of $755.6 million ($499.3 million after tax or
$3.21 per share).
Other rationalization actions undertaken in 1996 to reduce costs and focus
on the core tire and general products businesses included the closure of the
Greece tire manufacturing facility, the discontinuance of PVC production at
Niagara Falls, New York, and other worldwide consolidations and workforce
reductions. Charges related to these actions totaled $148.5 million ($95.3
million after tax or $.62 per share).
Additionally in 1996, the Company recorded net gains totaling $32.1
million ($21.6 million after tax or $.14 per share) related to the sale of
business property in Asia, a portion of an investment in an Asian plantation and
the loss on the anticipated sale of a U.S. manufacturing facility.
Other income and expense in 1996 and 1995 reflected lower interest income
compared to 1994, which resulted in substantial part from lower levels of time
deposits and lower inflation and interest rates in Brazil.
Foreign currency exchange expense in 1996 was $7.4 million, compared to
$17.4 million in 1995 and $77.6 million in 1994. The improvement in 1996
reflected the strengthening of the U.S. dollar versus various European
currencies, and in 1995 resulted primarily from the effects of Brazil's
inflation control plan.
The Company's effective tax rate was 12.5%, 32.7% and 33.6% in 1996, 1995
and 1994, respectively. The substantial reduction in 1996 was caused primarily
by the writedown of the All American Pipeline System and related assets.
Additionally, each year reflected the effect of foreign rate benefits. For
further information, refer to the note to the financial statements No. 15,
Income Taxes.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." This statement provides
new accounting and reporting standards for the sale, securitization, and
servicing of receivables and other financial assets and extinguishments of
liabilities, and is effective for transactions occurring after December 31,
1996. The Company's current sale of receivables program conforms to the
requirements of this statement. Accordingly, the adoption of this statement is
not expected to affect the Company's results of operations, financial position
or liquidity.
The Company early adopted in 1996 the American Institute of Certified
Public Accountants' Statement of Position No. 96-1, "Accounting for
Environmental Remediation Liabilities." This statement provides guidance on
accounting issues present in the recognition, measurement, display and
disclosure of these liabilities, and is effective for fiscal years beginning
after December 15, 1996. The adoption of this statement did not affect the
Company's results of operations, financial position or liquidity.
SEGMENT INFORMATION
Segment operating income was $366.4 million, $1,221.1 million and $1,193.3
million and segment operating margin was 2.8%, 9.3% and 9.7% of sales in 1996,
1995 and 1994, respectively. Segment operating income in 1996 included the
previously mentioned charges of $755.6 million related to the asset writedown
and $158.7 million related to workforce reductions, consolidation of operations
and the closure and sale of manufacturing facilities.
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INDUSTRY SEGMENTS
TIRES
Sales in 1996 were $11.20 billion, decreasing slightly from $11.26 billion
in 1995 but increasing 6.6% from $10.51 billion in 1994.
Revenues decreased in 1996 despite higher tire unit sales, due primarily
to reduced unit sales to original equipment vehicle manufacturers in North
America and Latin America, competitive pricing pressures worldwide and
unfavorable translation due to the strengthening of the U.S. dollar versus
various foreign currencies. Additionally, revenues were adversely affected by
lower sales in natural rubber operations due to lower market prices, and lower
service and other sales at Company-owned retail outlets. Revenues in 1995
increased due to higher average selling prices and the favorable impact of the
strengthening of currencies in Europe versus the dollar.
The following table presents changes in tire unit sales:
INCREASE (DECREASE) IN COMPANY TIRE UNIT SALES FOR THE YEAR
1996 vs. 1995 1995 vs. 1994
-------------------------------------------------------------------------
U.S. (.7)% (3.3)%
International 12.6 3.3
Worldwide 5.4 (.4)
--------------------------------------------------------------------------
Unit sales in the U.S. decreased in 1996 due to lower original equipment
unit volume, although replacement unit sales increased. International unit sales
reflected year-to-year improvement in 1996 and 1995 in both the original
equipment and replacement markets. Both original equipment and replacement unit
sales in the U.S. in 1995 were lower compared to 1994.
Operating income in 1996 of $893.3 million decreased 10.7% from $1,000.2
million in 1995 and 11.6% from $1,010.6 million in 1994. Operating income in
1996 included $131.9 million of rationalization charges.
Operating income in 1996 was favorably impacted by higher tire unit sales,
lower raw material costs and lower SAG, but was adversely affected by lower
revenues and increased costs resulting from lower levels of capacity utilization
to reduce inventory. In 1995, operating income decreased despite pricing
improvements, due primarily to higher raw material and labor costs, competitive
market conditions and lower interest income in Brazil.
GENERAL PRODUCTS
Sales in 1996 of $1.78 billion were unchanged from 1995 but increased 4.7%
from $1.70 billion in 1994.
Sales in engineered products increased in 1996 on higher unit volume of
automotive and industrial rubber products and the acquisition of a lightweight
conveyor belting manufacturer, and were higher in 1995 due primarily to pricing
improvements and increased demand from original equipment manufacturers. Sales
in chemical products decreased in 1996 due to lower selling prices and reduced
volume, but were higher in 1995 due to pricing improvements.
Operating income in 1996 of $162.9 million decreased 1.6% from $165.6
million in 1995 and 4.7% from $170.9 million in 1994. Operating income in 1996
included $26.8 million of rationalization charges.
Operating income in engineered products increased in 1996 despite $15.2
million of rationalization charges, due primarily to higher unit volume and
ongoing cost containment measures. Engineered products operating income
decreased in 1995 compared to 1994 due to higher raw material and labor costs
and lower interest income in Brazil. Operating income in chemical products
decreased in 1996 due primarily to $11.6 million of rationalization charges, but
was favor-
25
28
ably affected by lower raw material prices. Chemical operating income
increased in 1995 compared to 1994 due to pricing improvements.
OIL TRANSPORTATION
Sales in 1996 were $127.2 million, compared to $126.8 million in 1995 and
$79.1 million in 1994. 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.
An operating loss of $689.8 million was recorded in 1996, compared to
operating income of $55.3 million in 1995 and $11.8 million in 1994. The
operating loss in 1996 was due to a charge of $755.6 million resulting from the
previously discussed writedown of the carrying value of the System and related
assets.
Sales increased and operating income was favorably affected in 1996 by
improved results in crude oil purchasing, selling and exchanging activities,
which resulted in part from higher market prices. Results in 1995 improved due
primarily to higher throughput and tariff revenues, which resulted from an
increased percentage of crude oil being transferred to Central Texas for
delivery to refineries in the Mid-Continent region and along the Texas Gulf
Coast. Operating income in 1995 included a charge of $5.0 million for the
writedown of surplus construction pipe, material and equipment.
It is anticipated that volumes of crude oil expected to be tendered to the
System for transportation to markets outside of California in the future will be
significantly lower than previously anticipated.
Acquisition costs associated with gathering, purchasing and selling
activities amounted to $808 million, $496 million and $598 million in 1996, 1995
and 1994, respectively. Crude oil purchasing and selling activities increased in
1996, due primarily to higher prices and other market conditions.
GEOGRAPHIC SEGMENTS
U.S. OPERATIONS
U.S. sales in 1996 were $7.01 billion, decreasing 3.3% from $7.25 billion
in 1995 and 1.7% from $7.13 billion in 1994.
Sales decreased in 1996 due primarily to reduced unit sales to original
equipment vehicle manufacturers and competitive tire pricing pressures in the
replacement market. Sales of engineered products increased in 1996, although
sales of chemical products in the period were lower. 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 engineered and chemical products.
[Graph]
U.S. OPERATIONS PERCENT OF CONSOLIDATED SALES
1994 58.0%
1995 55.1%
1996 53.5%
An operating loss of $296.7 million was recorded in 1996, compared to
operating income of $543.9 million in 1995 and $591.5 million in 1994. Operating
income in 1996 included charges of $845.3 million related to the writedown of
the All American Pipeline System and other rationalization charges.
Operating income in 1996 was adversely affected by lower original
equipment tire unit sales and pricing pressures in the replacement tire market,
but was favorably impacted by improved volume in engineered products, lower raw
material costs, lower SAG and improved trading results in oil transportation
activities. Operating income in 1995 decreased due primarily to increased raw
material and labor costs and competitive conditions in the tire market.
26
29
INTERNATIONAL OPERATIONS
International sales in 1996 were $6.1 billion, increasing 3.2% from $5.9
billion in 1995 and 18.3% from $5.2 billion in 1994. International operating
income in 1996 was $663.1 million, decreasing 2.1% from $677.2 million in 1995
but increasing 10.2% from $601.8 million in 1994. Operating income in 1996
included $69.0 million of rationalization charges.
In Europe, sales in 1996 of $3.1 billion increased 7.2% from $2.9 billion
in 1995 and 34.2% from $2.3 billion in 1994. Operating income in 1996 was $302.0
million, decreasing 4.8% from $317.2 million in 1995 but increasing 42.5% from
$212.0 million in 1994. Operating income in 1996 included $29.4 million of
rationalization charges.
Sales in Europe increased in 1996 due primarily to higher tire unit sales
and the acquisition of a majority ownership interest in a tire manufacturing
facility in Poland, but were adversely affected by competitive pricing pressures
and the strengthening of the U.S. dollar versus European currencies. Sales
increased in 1995 due to pricing improvements, the effects of currency
translations and higher tire unit sales.
[Graph]
INTERNATIONAL OPERATIONS PERCENT
OF CONSOLIDATED SALES
1994 42.0%
1995 44.9%
1996 46.5%
Operating income in Europe decreased in 1996 due to the previously
mentioned ratio nalization charges, but was favorably affected by increased
revenues, lower raw material costs, and productivity improvements. Operating
income increased in 1995 due to increased revenues, high levels of capacity
utilization and improved productivity, although raw material costs were higher.
In Latin America, sales in 1996 were $1.53 billion, compared to $1.54
billion in 1995 and $1.51 billion in 1994. Operating income in 1996 was $246.0
million, increasing 2.9% from $238.8 million in 1995 but decreasing 11.6% from
$278.2 million in 1994. Operating income in 1996 was reduced by $24.0 million of
rationalization charges, and also included costs totaling $6.5 million related
to improvements in manufacturing efficiencies.
Sales in Latin America decreased slightly in 1996, reflecting competitive
pricing pressures and unchanged tire unit sales. Sales increased in 1995 due
primarily to pricing improvements.
Operating income in Latin America increased in 1996 due primarily to lower
raw material costs and improved productivity. Operating income in 1995 decreased
due to increased raw material and labor costs and lower interest income.
In Asia, sales in 1996 of $845.4 million increased 1.5% from $833.2
million in 1995 and 18.8% from $711.6 million in 1994. Operating income in Asia
in 1996 was $99.3 million, increasing 10.2% from $90.1 million in 1995 and 22.1%
from $81.3 million in 1994.
Sales in Asia increased in 1996 due primarily to higher tire unit sales,
but were adversely affected by competitive pricing pressures, lower price levels
realized by the natural rubber operations and the strengthening of the U.S.
dollar versus Asian currencies. Sales increased in 1995 due primarily to high
market price levels for natural rubber and higher tire unit sales and pricing.
Operating income in Asia increased in 1996 due to lower raw material costs
and improved productivity. Operating income increased in 1995 due to increased
revenues and improved productivity, although raw material costs were higher.
In Canada, sales in 1996 of $670.2 million decreased 2.4% from $686.5
million in 1995 but increased 2.5% from $653.8 million in 1994. Operating income
for 1996 of $15.8 million decreased 49.2% from $31.1 million in 1995 and 47.8%
from $30.3 million in 1994. Operating income in 1996 was reduced by $13.8
million of rationalization charges.
27
30
Sales in Canada decreased in 1996 due primarily to lower tire unit sales
volume. Operating income decreased in 1996 due primarily to the previously
mentioned rationalization charges. Sales and operating income increased in 1995
due primarily to improved pricing and mix and higher unit sales of engineered
products, although raw material costs were higher.
For further information relating to industry and geographic segments, refer
to the note to the financial statements No. 17, Business Segments.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased to $897.5 million in 1996
from $652.8 million in 1995, due primarily to reduced cash outflows for
inventory made possible by production rationalizations to align inventory with
market requirements, and lower levels of pension funding. Working capital
requirements for accounts receivable increased, reflecting a worldwide shift in
sales mix towards replacement tires.
Cash used in investing activities was $690.9 million during 1996. Capital
expenditures were $617.5 million, of which amount $356.7 million was used on
projects to increase capacity and improve productivity and the balance was used
for tire molds and various other projects. Capital expenditures are expected to
total $675 million in 1997. At December 31, 1996, the Company had binding
commitments for land, buildings and equipment of $119.9 million.
(In millions) 1996 1995 1994
----------------------------------------------------------
Capital Expenditures $617.5 $615.6 $523.0
Depreciation 460.8 434.9 410.3
----------------------------------------------------------
Other investing activities in 1996 included the purchase of tire
manufacturing assets in the Philippines, the acquisition of a lightweight
conveyor belting manufacturer in the United States and an investment in a retail
tire chain in Sweden. Additionally, in January 1997 the Company acquired a 60%
ownership interest in a South African tire manufacturing and distribution
operation for $92.4 million.
[Graph]
CAPITAL EXPENDITURES
(in millions)
1994 $523.0
1995 $615.6
1996 $617.5
Cash used in financing activities was $206.8 million during 1996. Debt
levels decreased, reflecting in part the increased cash provided by operating
activities.
(Dollars in millions) 1996 1995 1994
-----------------------------------------------------------
Consolidated Debt $1,376.7 $1,546.7 $1,335.6
-----------------------------------------------------------
Debt/Debt+Equity 29.6% 32.0% 32.3%
-----------------------------------------------------------
The Company actively manages its fixed and floating rate debt mix, within
defined limitations, using refinancings and unleveraged interest rate swaps. The
Company will enter into fixed and floating interest rate swaps to alter its
exposure to the impact of changing interest rates on consolidated results of
operations and future cash outflows for interest. Fixed rate swaps are used to
reduce the Company's risk of increased interest costs during periods of rising
interest rates. Floating rate swaps are used to convert the fixed rates of long
term borrowings into short term variable rates. Interest rate swap contracts are
thus used by the Company to separate interest rate risk management from the debt
funding decision. At December 31, 1996, the interest rate on 62% of the
Company's debt was fixed by either the nature of the obligation or through the
interest rate contracts, compared to 56% at December 31, 1995.
Contracts in place and related weighted average interest rates follow:
28
31
FIXED RATE FLOATING RATE
(Dollars in millions) CONTRACTS CONTRACTS
------------------------------------------------------------
December 31, 1996:
Notional principal amount $275.0 $110.0
Pay fixed rate 8.00% --
Receive variable LIBOR 5.63 --
Pay variable LIBOR -- 5.57%
Receive fixed rate -- 6.24
Average years to maturity 1.87 6.67
Fair value: unfavorable $ (3.0) $ (.9)
Average rate paid during the year 8.85% 5.52%
Average rate received during the year 5.66 6.41
-------------------------------------------------------------
Current market pricing models were used to estimate the fair values of
interest rate swap contracts. The fair value of the fixed rate contracts
improved from $11.3 million unfavorable at December 31, 1995, due primarily to
the absence of contracts which matured in 1996. The Company estimates that a 100
basis point decrease in interest rates at December 31, 1996 would have adversely
affected the fair value of the fixed rate contracts by $3.6 million and improved
the fair value of the floating rate contracts by $5.4 million at that date.
Throughout 1996, 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, 1996 and 1995, the outstanding balance of receivables
sold under these agreements amounted to $550 million.
Substantial short term and long term credit sources are available to the
Company globally under normal commercial practices. At December 31, 1996, there
were worldwide credit sources totaling $3.48 billion, of which $2.10 billion or
60% were unused. In addition, during 1996 the Company initiated a new commercial
paper program, whereunder the Company may have outstanding up to $550 million at
any time.
The Company amended two existing credit facility agreements in 1996, and
now is a party to two credit facility agreements with 28 domestic and
international banks, consisting of a $900 million five year revolving credit
facility and a $300 million 364-day revolving credit facility. The $900 million
five year revolving credit facility agreement provides that the Company may
borrow at any time until July 15, 2001, when the commitment terminates and any
outstanding loans mature. The Company pays a commitment fee ranging from 7.5 to
15 basis points on the entire amount of the commitment and a usage fee of 15 to
30 basis points on amounts borrowed. The $300 million 364-day credit facility
agreement provides that the Company may borrow until July 14, 1997, 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 currently a commitment fee of 8 basis
points on the entire amount of the commitment and would pay a usage fee of 22
basis points on amounts borrowed. There were no borrowings outstanding under
these agreements at December 31, 1996.
For further discussion of financing activities, refer to the note to the
financial statements No. 7, Financing Arrangements and Financial Instruments.
The Company's domestic pension funding practice since 1993 has been to
fund, from operations, amounts in excess of the requirements of federal laws and
regulations. During the four years ended December 31, 1996, the Company funded a
total of $646.3 million, resulting in the major domestic pension plans being
fully funded at that date.
For further discussion of pensions, refer to the note to the financial
statements No. 11, 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, 1996, 1995 and 1994 ................................ 31
Consolidated Balance Sheet-- December 31, 1996 and 1995 ........... 32
Consolidated Statement of Shareholders' Equity -- years ended
December 31, 1996, 1995 and 1994 ................................ 33
Consolidated Statement of Cash Flows -- years ended
December 31, 1996, 1995 and 1994 ................................ 34
Notes to Financial Statements ..................................... 35
Supplementary Data (unaudited) .................................... 51
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, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, 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.
PRICE WATERHOUSE LLP
/s/ Price Waterhouse LLP
Cleveland, Ohio
February 3, 1997
30
33
CONSOLIDATED STATEMENT OF INCOME
- --------------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
(Dollars in millions, except per share)
Year Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
Net Sales $13,112.8 $13,165.9 $12,288.2
Cost of Goods Sold 10,026.7 10,093.6 9,271.4
Selling, Administrative and General Expense 1,890.1 1,936.9 1,958.2
Asset Writedown and Other Rationalizations (Note 2) 872.0 -- --
Interest Expense (Note 13) 128.6 135.0 129.4
Other (Income) and Expense (Note 3) 22.6 21.0 (37.9)
Foreign Currency Exchange 7.4 17.4 77.6
Minority Interest in Net Income of Subsidiaries 43.1 36.2 23.8
- ----------------------------------------------------------------------------------------------------------
Income before Income Taxes 122.3 925.8 865.7
United States and Foreign Taxes on Income (Note 15) 20.6 314.8 298.7
- ----------------------------------------------------------------------------------------------------------
Net Income $ 101.7 $ 611.0 $ 567.0
==========================================================================================================
- ----------------------------------------------------------------------------------------------------------
Net Income Per Share $ .66 $ 4.02 $ 3.75
==========================================================================================================
Average Shares Outstanding 155,051,802 152,118,861 151,203,885
==========================================================================================================
The accompanying notes are an integral part of this financial statement.
31
34
CONSOLIDATED BALANCE SHEET
- --------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
(Dollars in millions)
December 31, 1996 1995
- ---------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 238.5 $ 268.3
Accounts and notes receivable (Note 4) 1,706.0 1,615.0
Inventories (Note 5) 1,774.2 1,765.2
Prepaid expenses and other current assets 306.3 193.1
- ---------------------------------------------------------------------------------
Total Current Assets 4,025.0 3,841.6
Investments in Affiliates, at equity 140.3 183.8
Long Term Accounts and Notes Receivable 216.2 252.0
Deferred Charges 1,059.4 793.3
Other Assets 163.0 157.7
Properties and Plants (Note 6) 4,067.9 4,561.2
- ---------------------------------------------------------------------------------
Total Assets $ 9,671.8 $ 9,789.6
================================================================================
LIABILITIES
Current Liabilities:
Accounts payable-- trade $ 1,096.7 $ 1,170.7
Compensation and benefits 742.5 711.9
Other current liabilities 300.4 263.9
United States and foreign taxes 382.1 363.1
Notes payable to banks (Note 7A) 218.1 211.1
Long term debt due within one year 26.4 15.6
- ---------------------------------------------------------------------------------
Total Current Liabilities 2,766.2 2,736.3
Long Term Debt (Note 7B) 1,132.2 1,320.0
Compensation and Benefits 1,988.1 1,976.5
Other Long Term Liabilities 264.9 312.2
Minority Equity in Subsidiaries 241.3 162.9
- ---------------------------------------------------------------------------------
Total Liabilities 6,392.7 6,507.9
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, 156,049,974 (153,524,311 in 1995) 156.1 153.5
Capital Surplus 1,059.4 975.2
Retained Earnings 2,603.0 2,661.0
Foreign Currency Translation and Other Adjustments (539.4) (508.0)
--------------------------------------------------------------------------------
Total Shareholders' Equity 3,279.1 3,281.7
- ---------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 9,671.8 $ 9,789.6
================================================================================
The accompanying notes are an integral part of this financial statement.
32
35
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- ----------------------------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
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, 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
Net income for 1996 101.7 101.7
Cash dividends 1996 -- $1.03 per share (159.7) (159.7)
Common stock issued (including
2,525,663 treasury shares):
Dividend Reinvestment and
Stock Purchase Plan 91,310 .1 4.3 4.4
Stock compensation plans 2,434,353 2.5 79.9 82.4
Foreign currency translation adjustment (26.7) (26.7)
Minimum pension liability adjustment (4.7) (4.7)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996
(after deducting 39,628,694 treasury shares) 156,049,974 $ 156.1 $1,059.4 $ 2,603.0 $ (508.4) $ (31.0) $ 3,279.1
================================================================================================================================
The accompanying notes are an integral part of this financial statement.
33
36
CONSOLIDATED STATEMENT OF CASH FLOWS
- ------------------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
(Dollars in millions)
Year Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 101.7 $ 611.0 $ 567.0
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 460.8 434.9 410.3
Deferred tax provision (238.5) 58.0 99.8
Asset writedown 755.6 -- --
Rationalizations and other provisions 110.0 -- --
Asset sales (32.1) -- --
Accounts and notes receivable (106.2) (84.4) (192.4)
Inventories (5.5) (344.3) (63.9)
Accounts payable-- trade (66.3) 159.5 139.7
Domestic pension funding (72.8) (252.5) (238.8)
Other assets and liabilities (9.2) 70.6 42.9
- ---------------------------------------------------------------------------------------------
Total adjustments 795.8 41.8 197.6
- ---------------------------------------------------------------------------------------------
Cash provided by operating activities 897.5 652.8 764.6
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (617.5) (615.6) (523.0)
Short term securities acquired (97.2) (30.6) (287.1)
Short term securities redeemed 86.2 41.4 310.6
Asset dispositions 45.9 8.9 19.0
Other transactions (108.3) (88.1) (15.7)
- ---------------------------------------------------------------------------------------------
Cash used in investing activities (690.9) (684.0) (496.2)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term debt incurred 195.5 542.3 385.6
Short term debt paid (606.6) (414.3) (395.7)
Long term debt incurred 312.4 141.5 52.9
Long term debt and capital leases paid (35.2) (101.0) (166.4)
Common stock issued 86.8 58.8 41.4
Dividends paid (159.7) (144.5) (113.4)
- ---------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities (206.8) 82.8 (195.6)
Effect of Exchange Rate Changes on Cash and Cash Equivalents (29.6) (34.2) (10.4)
- ---------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (29.8) 17.4 62.4
Cash and Cash Equivalents at Beginning of the Period 268.3 250.9 188.5
- ---------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 238.5 $ 268.3 $ 250.9
=============================================================================================
Information about Noncash Investing Activities--In 1995 the Company acquired,
for cash, 32.7% of the outstanding shares of a Polish tire manufacturer from the
Polish government and agreed to purchase original issue shares. The investment
was accounted for using the equity method. In 1996, the Company purchased
original issue shares of this tire manufacturer, bringing its ownership to
50.8%. This investment is now accounted for as a consolidated subsidiary.
Information in the Consolidated Statement of Cash Flows is presented net of the
effects of the consolidation.
The accompanying notes are an integral part of this financial statement.
34
37
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
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 using 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.
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 5.
Properties and Plants
Properties and plants are stated at cost, with the exception of the All American
Pipeline System and related assets, which are stated at fair value as of
December 31, 1996. Depreciation is computed using the straight line method.
Accelerated depreciation is used for income tax purposes, where permitted. Refer
to Note 6.
Derivative Financial Instruments
Derivative financial instrument contracts are utilized by the Company to manage
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. Company policy prohibits holding or issuing derivative financial
instruments for trading purposes.
To qualify for hedge accounting, the terms of the contracts must result in
cash flows and financial statement effects which substantially offset those of
the position being hedged. Amounts receivable or payable under derivative
financial instrument contracts, when recognized, are reported on the
Consolidated Balance Sheet as both current and long term receivables or
liabilities.
Interest Rate Contracts--The differentials to be received or paid are
recognized in income over the life of the contracts as adjustments to Interest
Expense.
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 not recognized until included in the
measurement of the related foreign currency transaction.
Gains and losses on terminations of hedge contracts are recognized as
Other (Income) and Expense when terminated in conjunction with the termination
of the hedged position, or to the extent that such position remains outstanding,
deferred as Prepaid Expenses or Deferred Charges and amortized to Interest
Expense or Foreign Currency Exchange over the remaining life of that position.
Derivative financial instruments that the Company temporarily continues to hold
after the early termination of a hedged position, or that otherwise no longer
qualify for hedge accounting, are marked-to-market, with gains and losses
recognized in income as Other (Income) and Expense. Refer to Note 7.
Stock-Based Compensation
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 9.
35
38
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
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 18.
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.
Use of Estimates
The preparation of financial statements in conformity 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.
Per Share of Common Stock
Per share amounts have been computed based on the average number of common
shares outstanding.
Reclassification
Certain items previously reported in specific financial statement captions have
been reclassified to conform with the 1996 presentation.
NOTE 2. ASSET WRITEDOWN AND OTHER
RATIONALIZATIONS
(In millions) 1996 1995 1994
- -----------------------------------------------------------------
Asset writedown $ 755.6 $-- $--
Rationalizations and other provisions 148.5 -- --
Asset sales (32.1) -- --
- -----------------------------------------------------------------
$ 872.0 $-- $--
=================================================================
Asset writedown--In December 1996, industry developments occurred indicating
that the quantities of off-shore California, onshore California and Alaska North
Slope crude oil expected to be tendered in the future to the All American
Pipeline System and related assets (the System) for transportation would be
below prior estimates and that volumes of crude oil expected to be tendered to
the System for transportation to markets outside of California in the future
would be significantly lower than previously anticipated. As a result,
management determined that the future cash flows expected to be generated by the
System would be less than its carrying value. In accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company
reduced the carrying value of the System to $420 million, determined using the
present value of expected future cash flows from the System, and recorded a
charge of $755.6 million ($499.3 million after tax or $3.21 per share).
Rationalizations and other provisions--As part of a rationalization plan
the Company recorded charges totaling $148.5 million ($95.3 million after tax or
$.62 per share) related to worldwide workforce reductions, consolidation of
operations and the closing of manufacturing facilities. At December 31, 1996 the
remaining balance of these provisions totaled $110.0 million and was recorded in
Current Liabilities.
Asset sales--During 1996 the Company recorded net gains totaling $32.1
million ($21.6 million after tax or $.14 per share) related to the sale of
business property in Asia, a portion of an investment in an Asian plantation and
the loss on the anticipated sale of a U.S. manufacturing facility.
36
39
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
NOTE 3. OTHER (INCOME) AND EXPENSE
(In millions) 1996 1995 1994
- --------------------------------------------------------------------------------
Interest income $(28.5) $(27.3) $(76.3)
Financing fees and
financial instruments 39.7 48.3 38.4
Miscellaneous 11.4 -- --
- --------------------------------------------------------------------------------
$ 22.6 $ 21.0 $(37.9)
================================================================================
Interest income consists of amounts earned on deposits, primarily from funds
invested in time deposits in Latin America and Europe, 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 and financial instruments consists primarily of fees paid
under the Company's domestic accounts receivable continuous sale programs.
Refer to Note 4.
NOTE 4. ACCOUNTS AND NOTES RECEIVABLE
(In millions) 1996 1995
- --------------------------------------------------------------------------------
Accounts and notes receivable $1,764.1 $1,671.2
Allowance for doubtful accounts (58.1) (56.2)
- --------------------------------------------------------------------------------
$1,706.0 $1,615.0
================================================================================
Throughout the year, the Company sold certain domestic accounts receivable under
a continuous sale program. Under the program, undivided interests in designated
receivable pools were sold to the purchaser with recourse limited to the
receivables purchased. At December 31, 1996 and 1995, the level of net proceeds
from sales under the program was $550 million. The balance of the uncollected
portion of receivables sold under that and other agreements was $569.9 million
and $566.4 million at December 31, 1996 and 1995, respectively. Fees paid by the
Company under these agreements are based on certain variable market rate indices
and are recorded as Other (Income) and Expense.
NOTE 5. INVENTORIES
(In millions) 1996 1995
- --------------------------------------------------------------
Raw materials and supplies $ 288.4 $ 309.8
Work in process 77.2 75.4
Finished product 1,408.6 1,380.0
- --------------------------------------------------------------
$1,774.2 $1,765.2
===============================================================
The cost of inventories using the last-in, first-out (LIFO) method
(approximately 37.6% of consolidated inventories in 1996 and 41.1% in 1995) was
less than the approximate current cost of inventories by $406.9 million at
December 31, 1996 and $425.9 million at December 31, 1995.
NOTE 6.PROPERTIES AND PLANTS
1996 1995
- ---------------------------------------------------------------------------------------------------------
Capital Capital
(In millions) Owned Leases Total Owned Leases Total
- ---------------------------------------------------------------------------------------------------------
Properties and plants, at cost:
Land and improvements $ 308.2 $ 3.7 $ 311.9 $ 302.1 $ 3.7 $ 305.8
Buildings and improvements 1,331.5 37.3 1,368.8 1,277.9 39.2 1,317.1
Machinery and equipment 6,251.4 58.8 6,310.2 5,785.7 58.2 5,843.9
Pipeline 503.1 -- 503.1 1,429.4 -- 1,429.4
Construction in progress 509.7 -- 509.7 453.7 -- 453.7
- ---------------------------------------------------------------------------------------------------------
8,903.9 99.8 9,003.7 9,248.8 101.1 9,349.9
Accumulated depreciation (4,856.0) (79.8) (4,935.8) (4,711.1) (77.6) (4,788.7)
- ---------------------------------------------------------------------------------------------------------
$4,047.9 $ 20.0 $ 4,067.9 $ 4,537.7 $ 23.5 $4,561.2
==========================================================================================================
The All American Pipeline System and related assets were written down to fair
value at December 31, 1996. Refer to Note 2.
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
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
NOTE 7. FINANCING ARRANGEMENTS
AND FINANCIAL INSTRUMENTS
A. Short Term Debt and Financing Arrangements
At December 31, 1996, the Company had short term uncommitted credit arrangements
totaling $1.33 billion, of which $.90 billion 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.
In addition, a new commercial paper program was initiated in 1996, whereunder
the Company may have up to $550 million at any one time outstanding. No
commercial paper was outstanding at December 31, 1996.
A short term credit facility agreement is available whereunder the Company
may from time to time borrow and have outstanding until December 31, 1997 up to
U.S. $50 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 European and
Asian currencies. Borrowings are discounted at rates equivalent to 12.5 basis
points over a three month reserve adjusted LIBOR. A commitment fee of 8 basis
points is paid on the $50 million commitment (whether or not borrowed). There
were no borrowings outstanding under this agreement at December 31, 1996. The
average amount outstanding under a similar agreement during 1996 was $25
million.
The Company had outstanding short term debt amounting to $428.1 million at
December 31, 1996. Domestic short term debt represented $210.0 million of this
total with a weighted average interest rate of 6.46% at December 31, 1996, and
was reclassified o long term, as discussed below. The remaining $218.1 million
was short term debt of international subsidiaries with a weighted average
interest rate of 6.68% at December 31, 1996.
B. Long Term Debt and Financing Arrangements
At December 31, 1996, the Company had long term credit arrangements totaling
$2.15 billion, of which $1.20 billion were unused.
The following table presents long term debt and capital leases at December
31:
(In millions) 1996 1995
- --------------------------------------------------------------------
Promissory notes:
12.15% due 1997 - 2000 $ 10.0 $ 20.0
10.26% due 1999 118.4 118.4
Swiss franc bonds:
5.375% due 2000 124.0 145.5
5.375% due 2006 116.8 137.2
6 5/8% Notes due 2006 249.0 --
Bank term loans due 1997 - 2001 218.0 168.0
Other domestic debt 210.0 653.3
International subsidiary debt 98.5 77.5
- --------------------------------------------------------------------
1,144.7 1,319.9
Capital lease obligations 13.9 15.7
- --------------------------------------------------------------------
1,158.6 1,335.6
Less portion due within one year 26.4 15.6
- --------------------------------------------------------------------
Long term debt and capital leases $1,132.2 $1,320.0
====================================================================
At December 31, 1996, the fair value of the Company's long term debt amounted to
$1,174.9 million, compared to the carrying amount of $1,144.7 million ($1,349.8
million and $1,319.9 million, respectively, at December 31, 1995). The
difference was attributable primarily to the promissory notes and the Swiss
franc bonds in both 1996 and 1995. The fair value was estimated using quoted
market prices or discounted future cash flows.
The interest rate on the 10.26% promissory notes due 1999 has been modified
by floating interest rate swap contracts with notional amounts totaling $50
million.
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, 1996 and 1995. The Company is entitled to purchase
Swiss francs 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
amount of these foreign currency exchange agreements was included in Long Term
Accounts and Notes Receivable on the Consolidated Balance Sheet. Additional
information related to the Swiss franc bonds follows:
1996 1995
---------------------------------------------
Foreign U.S. Foreign U.S.
(In millions) Currency Dollars Currency Dollars
- -------------------------------------------------------------------------------
Carrying amount of bonds 325.7 $240.8 325.7 $282.7
Contract amount of currency
exchange agreements 325.7 $147.8 325.7 $147.8
Carrying amount of currency
exchange agreements -- $ 93.0 -- $134.9
- --------------------------------------------------------------------------------
38
41
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
In addition to the principal amounts shown in the table on the previous page,
the currency exchange agreements also cover annual coupon payments. At December
31, 1996, the fair value of the currency exchange agreements, based on quoted
market prices, was estimated at $87.9 million, in favor of the Company,
including the cover for both principal and coupon payments ($118.1 million at
December 31, 1995).
The 6 5/8% Notes due 2006 have a face amount of $250 million and are
reported net of unamortized discount of $1.0 million. The interest rate on these
notes has been modified by floating interest rate swap contracts with notional
amounts totaling $60 million.
The bank term loans due 1997 through 2001 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, 1996 was 5.83%.
The Company is a party to two revolving credit facility agreements, each
with 28 domestic and international banks, consisting of a $900 million five year
revolving credit facility and a $300 million 364-day revolving credit facility.
The $900 million five year credit facility agreement provides that the Company
may borrow at any time until July 15, 2001, when the commitment terminates and
any outstanding loans mature. The Company pays a commitment fee ranging from 7.5
to 15 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 15 to 30 basis points. These fees may
fluctuate within these ranges quarterly based upon the Company's performance as
measured by defined ranges of leverage. During 1996 commitment and usage fees
averaged 12.77 and 22.67 basis points and at December 31, 1996 were 10 and 20
basis points, respectively. The $300 million 364-day credit facility agreement
provides that the Company may borrow until July 14, 1997, 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 8 basis points on the
entire amount of the commitment (whether or not borrowed) and a usage fee of 22
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, 1996.
Other domestic debt consisted of the previously mentioned $210.0 million of
domestic short term bank borrowings. These debt obligations, which by their
terms are due within one year, are classified as long term at December 31, 1996,
along with current maturities of long term debt totaling $43.3 million. Such
obligations are supported by the availability under the previously discussed
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
7.50% at December 31, 1996.
The Company actively manages its fixed and floating rate debt mix, within
defined limitations, using refinancings and unleveraged interest rate swaps. The
Company will enter into fixed and floating interest rate swaps to alter its
exposure to the impact of changing interest rates on consolidated results of
operations and future cash outflows for interest. Fixed rate swaps are used to
reduce the Company's risk of increased interest costs during periods of rising
interest rates. Floating rate swaps are used to convert the fixed rates of long
term borrowings into short term variable rates. Interest rate swap contracts are
thus used by the Company to separate interest rate risk management from the debt
funding decision. At December 31, 1996, the interest rate on 62% of the
Company's debt was fixed by either the nature of the obligation or through the
interest rate contracts, compared to 56% at December 31, 1995.
39
42
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
Contract information and weighted average interest rates follow:
DECEMBER 31, DECEMBER 31,
(Dollars in millions) 1995 NEW MATURED SOLD 1996
- ---------------------------------------------------------------------------------------------------------------------------
Fixed rate swap contracts:
Notional principal amount $395.0 $100.0 $220.0 -- $275.0
Pay fixed rate 8.95% 6.17% 8.88% -- 8.00%
Receive variable LIBOR 5.81 5.53 5.80 -- 5.63
Average years to maturity .83 1.87
Fair value:(unfavorable) $(11.3) $ (3.0)
Carrying amount:(liability) (1.9) (1.2)
Floating rate swap contracts:
Notional principal amount $ 50.0 $130.0 -- $70.0 $110.0
Pay variable LIBOR 5.81% 5.37% -- 5.78% 5.57%
Receive fixed rate 6.69 6.35 -- 6.76 6.24
Average years to maturity 2.23 6.67
Fair value:(un)favorable $ 1.5 $ (.9)
Carrying amount:asset 0.1 1.0
- ---------------------------------------------------------------------------------------------------------------------------
Current market pricing models were used to estimate the fair values of interest
rate swap contracts. The fair value of the fixed rate contracts improved from
December 31, 1995 due primarily to the absence of contracts which matured in
1996. The Company estimates that a 100 basis point decrease in market interest
rates would have adversely affected the fair value of the fixed rate contracts
by $3.6 million and improved the fair value of the floating rate contracts by
$5.4 million at December 31, 1996.
Weighted average information during the years 1996, 1995 and 1994 follows:
(Dollars in millions) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Fixed rate contracts:
Pay fixed rate 8.85% 8.95% 9.09%
Receive variable LIBOR 5.66 6.23 4.44
Notional principal $244 $416 $660
Floating rate contracts:
Pay variable LIBOR 5.52% 6.06% 4.34%
Receive fixed rate 6.41 6.69 6.69
Notional principal $144 $ 50 $ 50
- ---------------------------------------------------------------------------------------------------------------------------
The annual aggregate maturities of long term debt and capital leases for the
five years subsequent to 1996 are presented below. Maturities of debt supported
by the availability of 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) 1997 1998 1999 2000 2001
- -----------------------------------------------------------------------------------------------------------------
Debt incurred under or supported by revolving credit agreements $ -- $ -- $ -- $ -- $253.5
Other 26.4 93.0 142.3 218.6 52.1
- -----------------------------------------------------------------------------------------------------------------
$26.4 $93.0 $142.3 $218.6 $305.6
=================================================================================================================
Refer to Note 8, Leased Assets for additional information on capital lease
obligations.
40
43
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
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, 1996 and 1995. 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 maturities match the
maturities 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 amounts of these
contracts totaled $14.7 million recorded in Accounts and Notes Receivable at
December 31, 1996, compared to $24.6 million in Other Current Liabilities at
December 31, 1995.
A summary of forward exchange contracts in place at December 31 follows:
1996 1995
- ---------------------------------------------------------------
Fair Contract Fair Contract
(In millions) Value Amount Value Amount
- ---------------------------------------------------------------
Buy currency:
U.S. dollar $44.4 $44.5 $112.2 $112.0
Belgian franc -- -- 87.0 74.5
Polish zloty -- -- 60.3 60.3
All other 35.9 36.5 39.1 39.2
- ---------------------------------------------------------------
$80.3 $81.0 $298.6 $286.0
===============================================================
Contract maturity 1/97 - 7/97 1/96 - 1/97
===============================================================
Sell currency:
Belgian franc $231.5 $243.4 $346.6 $311.8
German mark 136.5 140.4 150.5 145.1
U.S. dollar 33.4 33.4 66.1 65.5
All other 92.8 92.4 104.1 103.7
- ---------------------------------------------------------------
$494.2 $509.6 $667.3 $626.1
===============================================================
Contract maturity 1/97 - 7/97 1/96 - 1/97
===============================================================
Current market pricing models were used to estimate the fair values of foreign
currency forward contracts. The Company estimates that a 1% change in U.S.
dollar value of the above currencies would result in a $3.8 million change in
the fair value of the related forward exchange contracts at December 31, 1996.
The counterparties to the Company's interest rate swap, currency exchange
and forward exchange 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.
NOTE 8. LEASED ASSETS
Rental expense charged to income follows:
(In millions) 1996 1995 1994
- --------------------------------------------------------------
Gross rental expense $258.4 $281.1 $300.8
Sublease rental income (49.6) (50.0) (51.9)
- --------------------------------------------------------------
Net rental expense $208.8 $231.1 $248.9
==============================================================
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 1997, 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.
Estimated minimum future lease payments, net of anticipated sublease
revenue, follow:
CAPITAL OPERATING SUBLEASE
(In millions) LEASES LEASES REVENUE
- ------------------------------------------------------------------------
1997 $ 2.4 $162.3 $ 44.3
1998 2.3 120.7 38.2
1999 2.3 92.2 31.1
2000 2.1 70.3 22.6
2001 2.0 56.4 14.0
2002 and thereafter 12.5 214.8 25.1
- ------------------------------------------------------------------------
Total $23.6 $716.7 $175.3
- ------------------------------------------------------------------------
Present value of net minimum lease payments $13.0 $544.3
========================================================================
41
44
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
NOTE 9. 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 granted in tandem 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 grant from time to time to officers
and other key employees of the Company and subsidiaries incentive and
non-qualified 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 by its terms on December
31, 1998, except with respect to awards then outstanding.
Stock options and related SARs granted during 1996 generally have a maximum
term of ten years and vest over four years. Performance equity units (PEUs)
granted during 1996 are based on cumulative earnings per share over a three year
performance period. To the extent earned, 50% of the PEUs will be paid in cash
(subject to deferral under certain circumstances) and 50% will be automatically
deferred for at least 5 years in the form of units equivalent to shares of the
Company's Common Stock and in each case will be payable in cash, shares of the
Company's Common Stock or a combination thereof at the election of the
participant. Assuming that there will be full utilization of the shares of the
Company's 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 the
Company's Common Stock outstanding would occur during the term of the 1989 Plan,
approximately 21,500,000 shares of the Company's Common Stock would be available
for the grant of awards through December 31, 1998.
Stock-based compensation activity for the years 1996, 1995 and 1994 follows:
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Shares SARs Shares SARs Shares SARs
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding at January 1 7,327,626 793,371 7,749,660 782,446 6,838,965 705,834
Options granted 3,388,041 538,780 1,731,725 229,200 1,694,150 211,600
Options without SARs exercised (2,212,106) -- (1,857,190) -- (781,263) --
Options with SARs exercised (189,359) (189,359) (86,325) (86,325) (18,850) (18,850)
SARs exercised (82,700) (82,700) (62,950) (62,950) (96,138) (96,138)
Options without SARs expired (25,113) -- (49,100) -- (21,125) --
Options with SARs expired (7,293) (7,293) (4,700) (4,700) (3,000) (3,000)
SARs expired -- -- (900) (64,300) -- (17,000)
Restricted stock granted -- -- 10,000 -- 1,800 --
Restricted stock issued -- -- (10,000) -- (1,800) --
Performance equity units granted 148,650 -- 8,963 -- 161,250 --
Performance equity shares issued (43,753) -- (64,591) -- -- --
Performance equity units cancelled (26,304) -- (36,966) -- (24,329) --
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31 8,277,689 1,052,799 7,327,626 793,371 7,749,660 782,446
===========================================================================================================================
Exercisable at December 31 3,733,699 361,963 5,033,729 482,296 5,079,369 456,021
===========================================================================================================================
Available for grant at December 31 1,055,957 2,908,914 2,990,448
===========================================================================================================================
Weighted average option exercise price information for the years 1996, 1995 and
1994 follows:
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding at January 1 $33.96 $31.34 $27.43
Granted during the year 47.05 34.75 44.25
Exercised during the year 31.27 29.71 26.23
Outstanding at December 31 40.22 33.96 31.34
Exercisable at December 31 35.25 32.30 26.93
===========================================================================================================================
Significant option groups outstanding at December 31, 1996 and related weighted
average price and life information follows:
GRANT OPTIONS OPTIONS EXERCISE REMAINING
DATE OUTSTANDING EXERCISABLE PRICE LIFE (YEARS)
- ---------------------------------------------------------------------------------------------------------------------------
12/3/96 1,737,951 -- $50.000 10
1/9/96 1,623,290 97,540 44.000 9
1/4/95 1,369,361 363,639 34.750 8
1/4/94 1,357,970 1,357,970 44.250 7
1/5/93 855,385 855,385 34.375 6
All other 1,021,172 997,695 23.710 4
- ---------------------------------------------------------------------------------------------------------------------------
42
45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
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.
Weighted average fair values at date of grant for grants in 1996, 1995 and
1994, determined as set forth below, follow:
1996 1995 1994
- ----------------------------------------------------------------
Options $18.58 $17.17 $19.45
Performance equity units 47.02 34.75 44.25
- ----------------------------------------------------------------
The above fair value of options at date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:
1996 1995 1994
- ----------------------------------------------------------------
Expected life (years) 5 5 5
Interest rate 5.69% 7.80% 5.27%
Volatility 33.6 43.0 40.9
Dividend yield 1.65 2.34 2.70
- ----------------------------------------------------------------
The fair value of performance equity units at date of grant was equal to the
market value of the Company's common stock at that date.
Stock-based compensation costs reduced (increased) income as follows:
(In millions, except per share) 1996 1995 1994
- ----------------------------------------------------------------
Pretax income $6.8 $8.7 $(3.4)
Net income 4.1 5.2 (2.1)
Net income per share .03 .03 (.01)
- ----------------------------------------------------------------
Stock-based compensation costs would have been increased by $12.5 million ($10.7
million after tax or $.07 per share) in 1996 and $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 those years 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 1996 and 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.
NOTE 10. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE 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) 1996 1995 1994
- -------------------------------------------------------------------------------------
Service cost - benefits earned during the period $ 22.9 $ 21.2 $ 23.6
Interest cost 155.2 152.7 144.0
Net amortization 5.0 (1.7) (1.5)
- -------------------------------------------------------------------------------------
Net periodic benefit cost $183.1 $172.2 $166.1
- -------------------------------------------------------------------------------------
The following table sets forth the funded status and amounts recognized on the
Company's Consolidated Balance Sheet at December 31, 1996 and 1995:
(In millions) 1996 1995
- --------------------------------------------------------------------
Actuarial present value of accumulated
benefit obligation:
Retirees $(1,303.4) $(1,255.4)
Vested active plan participants (516.4) (473.2)
Other active plan participants (259.1) (270.1)
- --------------------------------------------------------------------
Accumulated benefit obligation in excess
of plan assets (2,078.9) (1,998.7)
Unrecognized net loss 286.2 215.8
Unrecognized prior service cost 6.1 7.7
====================================================================
Accrued benefit cost recognized
on the Consolidated Balance Sheet $(1,786.6) $(1,775.2)
- --------------------------------------------------------------------
1996 1995
----------------------------------------------------
Assumptions: U.S. International U.S. International
- ------------------------------------------------------------------------------
Discount rate 7.75% 5.0% - 8.5% 7.75% 5.0% - 9.0%
Rate of increase
in compensation levels 4.5 2.5 - 5.75 4.5 2.5 - 5.75
- ------------------------------------------------------------------------------
An 8.25% annual rate of increase in the cost of health care benefits for
retirees under 65 years of age and a 6.0% annual rate of increase for retirees
65 years and older is assumed in 1997. This rate gradually decreases to 5% in
2010 and remains at that level thereafter. To illustrate the significance of a
1% increase in the assumed health care cost trend, the accumulated benefit
obligation would increase by $24.2 million at December 31, 1996, and the
aggregate service and interest cost by $2.4 million for the year then ended.
43
46
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
NOTE 11. 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. During the four
years ended December 31, 1996, the Company funded $646.3 million to its domestic
pension plans, which were fully funded at that date.
Net periodic pension cost follows:
(In millions) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Service cost-benefits earned during the period $ 92.7 $ 83.2 $ 91.8
Interest cost on projected benefit obligations 237.2 221.1 202.6
Actual return on plan assets (402.9) (427.8) (.9)
Net amortization and deferrals 208.0 279.3 (125.3)
- ---------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 135.0 $ 155.8 $ 168.2
===========================================================================================================================
The following table sets forth the funded status and amounts recognized on
the Company's Consolidated Balance Sheet at December 31, 1996 and 1995. At the
end of 1996 and 1995, 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.
1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
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 $(2,463.6) $(225.7) $(2,283.5) $(232.3)
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation $(2,709.4) $(270.6) $(2,500.0) $(268.6)
- -----------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation $(2,838.8) $(340.0) $(2,626.4) $(332.1)
Plan assets 3,021.4 60.8 2,643.1 59.2
- -----------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation less than (in excess of) plan assets 182.6 (279.2) 16.7 (272.9)
Unrecognized net (gain) loss (1.6) 79.2 108.2 61.3
Unrecognized prior service cost 344.6 (.6) 378.0 (1.7)
Unrecognized net (asset) obligation at transition (7.3) 21.7 (8.2) 27.0
Adjustment required to recognize minimum liability -- (55.0) -- (50.0)
- -----------------------------------------------------------------------------------------------------------------------------
Pension asset (liability) recognized on the Consolidated Balance Sheet $ 518.3 $(233.9) $ 494.7 $(236.3)
=============================================================================================================================
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
Assumptions: U.S. International U.S. International U.S. International
- ----------------------------------------------------------------------------------------------------------------------------------
Discount rate 7.75% 3.0% - 12.0% 7.75% 3.0% - 12.0% 8.5% 2.0% - 12.0%
Rate of increase in compensation levels 4.5 0 - 10.5 4.5 0 - 10.5 4.5 0 - 10.5
Expected long term rate of return on plan assets 9.0 5.0 - 12.0 9.0 5.0 - 12.0 9.0 5.5 - 12.0
==================================================================================================================================
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 $31.0 million at December 31, 1996, compared
to $26.3 million at December 31, 1995.
Certain international subsidiaries maintain unfunded plans consistent with
local practices and requirements and at December 31, 1996, these plans accounted
for $76.6 million of the Company's accumulated benefit obligation, $88.2 million
of its projected benefit obligation and $23.4 million of its minimum pension
liability adjustment ($102.4 million, $120.4 million and $16.5 million,
respectively, at December 31, 1995).
44
47
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
NOTE 12. EMPLOYEES' SAVINGS PLANS
Substantially all domestic associates are eligible to participate in one of the
Company's six savings plans. Under these plans associates elect to contribute a
percentage of their pay. In 1996, most plans provided for the Company's matching
of these contributions (up to a maximum of 6% of the associate's annual pay or,
if less, $9,500) at the rate of 50%. Company contributions were $38.0 million,
$38.2 million and $31.7 million for 1996, 1995 and 1994, respectively.
NOTE 13. INTEREST EXPENSE
Interest expense includes interest and amortization of debt discount and expense
less amounts capitalized as follows:
(In millions) 1996 1995 1994
- -------------------------------------------------------------------------
Interest expense before capitalization $134.0 $140.1 $135.1
Less capitalized interest 5.4 5.1 5.7
- -------------------------------------------------------------------------
$128.6 $135.0 $129.4
=========================================================================
The Company made cash payments for interest in 1996, 1995 and 1994 of $141.0
million, $136.4 million and $147.6 million, respectively.
NOTE 14. ADVERTISING COSTS
Advertising costs for 1996, 1995 and 1994 were $249.8 million, $246.7 million
and $248.2 million, respectively.
NOTE 15. INCOME TAXES
The components of Income before Income Taxes, adjusted for Minority Interest in
Net Income of Subsidiaries, follow:
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------------
U.S. $(569.0) $271.4 $294.4
Foreign 691.3 654.4 571.3
- ------------------------------------------------------------------------------------
122.3 925.8 865.7
Minority Interest in Net Income of Subsidiaries 43.1 36.2 23.8
- ------------------------------------------------------------------------------------
$165.4 $962.0 $889.5
====================================================================================
A reconciliation of Federal income taxes at the U.S. statutory rate to income
taxes provided follows:
(Dollars in millions) 1996 1995 1994
- ---------------------------------------------------------------------------
U.S. Federal income tax at the
statutory rate of 35% $ 57.9 $336.7 $311.3
Adjustment for foreign income taxed
at different rates (23.7) (21.3) (20.9)
Other (13.6) (.6) 8.3
- ---------------------------------------------------------------------------
United States and Foreign Taxes on Income $ 20.6 $314.8 $298.7
===========================================================================
Effective tax rate 12.5% 32.7% 33.6%
===========================================================================
The components of the provision for income taxes by taxing jurisdiction follow:
(In millions) 1996 1995 1994
- ---------------------------------------------------------------------------
Current:
Federal $ 23.5 $ 42.1 $ 51.2
Foreign income and withholding taxes 230.4 219.3 169.9
State 5.2 (4.6) (22.2)
- ---------------------------------------------------------------------------
259.1 256.8 198.9
Deferred:
Federal (254.1) 19.8 74.6
Foreign 20.3 32.9 7.9
State (4.7) 5.3 17.3
- ---------------------------------------------------------------------------
(238.5) 58.0 99.8
- ---------------------------------------------------------------------------
United States and Foreign Taxes on Income $ 20.6 $314.8 $298.7
===========================================================================
Temporary differences and carryforwards which give rise to deferred tax assets
and liabilities at December 31, 1996 and 1995 follow:
(In millions) 1996 1995
- ---------------------------------------------------------------------------
Postretirement benefits other than pensions $ 700.4 $ 687.2
Accrued environmental liabilities 38.2 38.2
General and product liability 56.5 70.4
Alternative minimum tax credit carryforwards 55.0 94.9
Operating loss carryforwards 19.8 18.6
Workers' compensation 54.8 64.3
Vacation and sick pay 73.0 74.3
Other 126.6 115.3
- ---------------------------------------------------------------------------
1,124.3 1,163.2
Valuation allowance (21.4) (29.7)
- ---------------------------------------------------------------------------
Total deferred tax assets 1,102.9 1,133.5
Total deferred tax liabilities - depreciation (445.6) (711.3)
- pensions (184.8) (190.8)
- ---------------------------------------------------------------------------
Total deferred taxes $ 472.5 $ 231.4
===========================================================================
The decrease in the deferred tax liability for depreciation was due primarily to
the writedown of the All American Pipeline System and related assets. Refer to
Note 2.
The Company made net cash payments for income taxes in 1996, 1995 and 1994
of $238.5 million, $243.8 million and $234.6 million, respectively.
No provision for Federal income tax or foreign withholding tax on retained
earnings of international subsidiaries of $1,785.0 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.
NOTE 16. RESEARCH AND DEVELOPMENT
Research and development costs for 1996, 1995 and 1994 were $374.5 million,
$369.3 million and $341.3 million, respectively.
45
48
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
NOTE 17. BUSINESS SEGMENTS
The Tires segment is the principal industry segment, which involves the
development, manufacture, distribution and sale of tires and related products 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 $808 million, $496 million and $598 million for 1996,
1995 and 1994, 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.
Portions of the items describe in Note 2, Asset Writedown and Other
Rationalizations were charged to the operating income of both the industry and
geographic segments in 1996 as follows:
INDUSTRY SEGMENTS
GENERAL OIL
(In millions) TIRES PRODUCTS TRANSPORTATION TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
Asset writedown $ -- $ -- $755.6 $755.6
Rationalizations and other provisions 131.9 16.6 -- 148.5
Asset sales -- 10.2 -- 10.2
- ---------------------------------------------------------------------------------------------------------------------------
$131.9 $26.8 $755.6 $914.3
===========================================================================================================================
GEOGRAPHIC SEGMENTS
UNITED LATIN
(In millions) STATES EUROPE AMERICA ASIA CANADA TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
Asset writedown $755.6 $ -- $ -- $ -- $ -- $755.6
Rationalizations and other provisions 79.5 29.4 24.0 1.8 13.8 148.5
Asset sales 10.2 -- -- -- -- 10.2
- ---------------------------------------------------------------------------------------------------------------------------
$845.3 $29.4 $24.0 $1.8 $13.8 $914.3
===========================================================================================================================
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, 1996, $99.8 million or 39.3% ($110.2 million or 40.4% at
December 31, 1995) of the Company's cash, cash equivalents and short term
securities were concentrated in Latin America, primarily Brazil, and
additionally in 1995, in Venezuela.
Dividends received by the Company and domestic subsidiaries from its
international operations for 1996, 1995 and 1994 were $158.7 million, $139.0
million and $151.8 million, respectively.
46
49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
INDUSTRY SEGMENTS
(In millions) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Sales to Unaffiliated Customers
Tires $10,113.5 $10,104.5 $ 9,427.6
Related products and services 1,090.8 1,157.8 1,080.6
- ---------------------------------------------------------------------------------------------------------------------------
Total Tires 11,204.3 11,262.3 10,508.2
General products 1,781.3 1,776.8 1,700.9
Oil transportation 127.2 126.8 79.1
- ---------------------------------------------------------------------------------------------------------------------------
Net Sales $13,112.8 $13,165.9 $12,288.2
===========================================================================================================================
Income (loss)
Tires $ 893.3 $ 1,000.2 $ 1,010.6
General products 162.9 165.6 170.9
Oil transportation (689.8) 55.3 11.8
- ---------------------------------------------------------------------------------------------------------------------------
Total operating income 366.4 1,221.1 1,193.3
Interest expense (128.6) (135.0) (129.4)
Foreign currency exchange (7.4) (17.4) (77.6)
Equity in net income of affiliates 19.1 19.0 25.7
Minority interest in net income of subsidiaries (43.1) (36.2) (23.8)
Corporate revenues and expenses (84.1) (125.7) (122.5)
- ---------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes $ 122.3 $ 925.8 $ 865.7
===========================================================================================================================
Assets
Tires $ 6,270.6 $ 6,050.8 $ 5,386.2
General products 815.1 791.7 740.9
Oil transportation 605.6 1,356.3 1,398.6
- ---------------------------------------------------------------------------------------------------------------------------
Total identifiable assets 7,691.3 8,198.8 7,525.7
Corporate assets 1,840.2 1,407.0 1,464.2
Investments in affiliates, at equity 140.3 183.8 133.4
- ---------------------------------------------------------------------------------------------------------------------------
Assets at December 31 $ 9,671.8 $ 9,789.6 $ 9,123.3
===========================================================================================================================
Capital Expenditures
Tires $ 500.6 $ 494.5 $ 425.4
General products 112.9 116.4 90.2
Oil transportation 4.0 4.7 7.4
- ---------------------------------------------------------------------------------------------------------------------------
For the year $ 617.5 $ 615.6 $ 523.0
===========================================================================================================================
Depreciation
Tires $ 351.6 $ 329.6 $ 309.4
General products 63.1 59.1 55.1
Oil transportation 46.1 46.2 45.8
- ---------------------------------------------------------------------------------------------------------------------------
For the year $ 460.8 $ 434.9 $ 410.3
===========================================================================================================================
47
50
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
GEOGRAPHIC SEGMENTS
(In millions) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Sales to Unaffiliated Customers
United States $ 7,009.9 $ 7,249.6 $ 7,130.5
Europe 3,059.8 2,853.7 2,279.8
Latin America 1,527.5 1,542.9 1,512.5
Asia 845.4 833.2 711.6
Canada 670.2 686.5 653.8
- ---------------------------------------------------------------------------------------------------------------------------
Net Sales $13,112.8 $13,165.9 $12,288.2
===========================================================================================================================
Inter-Geographic Sales
United States $ 359.3 $ 408.4 $ 373.9
Europe 59.2 90.1 92.5
Latin America 170.2 172.5 159.2
Asia 674.1 815.9 490.7
Canada 316.8 297.3 269.1
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 1,579.6 $ 1,784.2 $ 1,385.4
===========================================================================================================================
Revenue
United States $ 7,369.2 $ 7,658.0 $ 7,504.4
Europe 3,119.0 2,943.8 2,372.3
Latin America 1,697.7 1,715.4 1,671.7
Asia 1,519.5 1,649.1 1,202.3
Canada 987.0 983.8 922.9
Adjustments and eliminations (1,579.6) (1,784.2) (1,385.4)
- ---------------------------------------------------------------------------------------------------------------------------
Total $13,112.8 $13,165.9 $12,288.2
===========================================================================================================================
Operating Income
United States $ (296.7) $ 543.9 $ 591.5
Europe 302.0 317.2 212.0
Latin America 246.0 238.8 278.2
Asia 99.3 90.1 81.3
Canada 15.8 31.1 30.3
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 366.4 $ 1,221.1 $ 1,193.3
===========================================================================================================================
Assets
United States $ 3,915.6 $ 4,703.6 $ 4,478.4
Europe 1,800.0 1,719.9 1,452.5
Latin America 765.1 683.0 637.6
Asia 688.6 576.9 490.3
Canada 522.0 515.4 466.9
- ---------------------------------------------------------------------------------------------------------------------------
Total identifiable assets 7,691.3 8,198.8 7,525.7
Corporate assets 1,840.2 1,407.0 1,464.2
Investments in affiliates, at equity 140.3 183.8 133.4
- ---------------------------------------------------------------------------------------------------------------------------
Assets at December 31 $ 9,671.8 $ 9,789.6 $ 9,123.3
===========================================================================================================================
48
51
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
NOTE 18. COMMITMENTS
AND CONTINGENT LIABILITIES
At December 31, 1996, the Company had binding commitments for investments in
land, buildings and equipment of $119.9 million and off-balance-sheet financial
guarantees written of $77.4 million.
At December 31, 1996, the Company had recorded liabilities aggregating
$92.6 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 $91.4 million for such
costs at December 31, 1995. 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, 1996, the Company had recorded liabilities aggregating
$165.3 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 $191.4 million for such matters at December
31, 1995. 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 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.
The Company is a party to several related lawsuits involving employment
matters. There exists a reasonable possibility that the Company will not prevail
in these cases. Although sufficient uncertainties exist in these cases to
prevent the Company from determining the amount of its liability, if any, the
ultimate exposure is not expected to exceed $85 million at December 31, 1996.
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,
1996 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.
49
52
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------
The Goodyear Tire & Rubber Company and Subsidiaries
NOTE 19. 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 (the
"1986 Rights") issued under the Preferred Stock Purchase Rights Plan adopted in
July 1986. The 1986 Rights expired without being exercisable on July 28, 1996,
and no shares of Series A Preferred were issued.
In June 1996, the Company authorized 7,000,000 shares of Series B Preferred
Stock ("Series B Preferred") issuable only upon the exercise of rights (the
"1996 Rights") issued under the Preferred Stock Purchase Rights Plan adopted on,
and set forth in the Rights Agreement dated, June 4, 1996. Each share of Series
B Preferred issued would be non-redeemable, non-voting and entitled to (i)
cumulative quarterly dividends equal to the greater of $25.00 or, subject to
adjustment, 100 times the per year amount of dividends declared on the Common
Stock during the preceding quarter and (ii) a liquidation preference.
Under the 1996 Rights Plan, each shareholder of record on July 29, 1996
received a dividend of one 1996 Right per share of the Common Stock. Each 1996
Right, when exercisable, will entitle the registered holder thereof to purchase
from the Company one one-hundredth of a share of Series B Preferred Stock of the
Company at a price of $250 (the "Purchase Price"), subject to adjustment. The
Rights will expire on July 29, 2006, unless earlier redeemed at $.001 per Right.
The 1996 Rights will be exercisable only in the event that an acquiring person
or group purchases, or makes -- or announces its intention to make -- a tender
offer for, 15% or more of the Common Stock. In the event that any acquiring
person or group acquires 15% or more of the Common Stock, each 1996 Right will
entitle the holder to purchase that number of shares of Common Stock (or in
certain circumstances, other securities, cash or property) which at the time of
such transaction would have a market value of two times the Purchase Price.
If the Company is acquired or a sale or transfer of 50% or more of the
Company's assets or earnings power is made after the Rights become exercisable,
each Right (except those held by an 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 Purchase Price. In addition, when exercisable the
Rights under certain circumstances may be exchanged by the Company at the ratio
of one share of Common Stock (or the equivalent thereof in other securities,
property or cash) per Right, subject to adjustment.
50
53
SUPPLEMENTARY DATA (UNAUDITED)
- ------------------
The Goodyear Tire & Rubber Company and Subsidiaries
QUARTERLY DATA AND MARKET PRICE INFORMATION
(In millions, except per share)
Quarter
-------------------------------------------------------------
1996 First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------------------------
Net Sales $3,245.5 $3,329.5 $3,267.7 $3,270.1 $13,112.8
Gross Profit 764.3 795.2 758.9 767.7 3,086.1
Net Income $ 151.8 $ 187.9 $ 170.2 $ (408.2) $ 101.7
===========================================================================================================================
Net Income Per Share $ .98 $ 1.22 $ 1.09 $ (2.63) $ .66
===========================================================================================================================
Average Shares Outstanding 154.3 155.1 155.3 155.7 155.1
Price Range of Common Stock:*
High $ 53 $ 53 $ 49 1/8 $ 52 1/4 $ 53
Low 42 3/4 46 7/8 41 1/2 43 1/8 41 1/2
Dividends Per Share .25 .25 .25 .28 1.03
===========================================================================================================================
The 1996 fourth quarter included a net after-tax charge of $572.2 million or
$3.68 per share from the writedown of the All American Pipeline System and
related assets and other rationalizations.
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
===========================================================================================================================
Net Income Per Share $ .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 Per Share .20 .25 .25 .25 .95
===========================================================================================================================
*New York Stock Exchange - Composite Transactions
51
54
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 26, 1997, for its Annual Meeting of Shareholders
to be held on April 14, 1997 (the "Proxy Statement"). For information regarding
the executive officers of Registrant, reference is made to Part I, Item 4(A), at
pages 16 through 21, inclusive, of this Annual Report.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1996 except that Mr. D.
E. Dick, a Vice President of Registrant, filed an amendment, dated January 8,
1997, to his Form 3 dated November 6, 1996 to correct an administrative error in
the initial reporting of his holdings of the Common Stock of Registrant. 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 caption "Executive Officer Compensation", at pages 14
through 23, 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 12 and 13 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 14 through 23, inclusive, of the Proxy Statement.
52
55
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-7, 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) 1997 Performance Incentive Plan of 10.1 to this Annual Report
The Goodyear Tire & Rubber Company on Form 10-K
10(b) Form of Performance Equity Grant 10.2 to this Annual Report
Agreement for 1994 under 1989 Plan on Form 10-K
(as amended December 3, 1996)
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 Form 10-K for year
adopted as of January 1, 1996 ended December 31, 1995
10(e) Form of Stock Option Grant Agreement E to Form 8-K dated
under 1989 Plan February 17, 1993
10(f) Forms of Stock Option Grant Agreements 10.3 to this Annual Report
under 1989 Plan in respect of options and on Form 10-K
SARs granted December 3, 1996
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 quarter
Incentive Plan ("1989 Plan") ended March 31, 1989
10(j) Goodyear Supplementary Pension Plan A to Form 10-Q for quarter
(as amended) ended March 31, 1990
10(k) Form of Performance Equity Grant 10.4 to this Annual Report
Agreement for 1995 under 1989 Plan on Form 10-K
(as amended December 3, 1996)
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
53
56
EXHIBIT DESCRIPTION FILED AS EXHIBIT
------- ----------- -----------------
10(n) Form of Performance Equity Grant 10.5 to this Annual Report
Agreement for 1996 under 1989 Plan on Form 10-K
(as amended December 3, 1996)
10(o) Form of Performance Equity Grant 10.6 to this Annual Report
Agreement for 1997 under 1989 Plan on Form 10-K
10(p) Forms of Stock Option Grant Agreements G to Form 10-K for year
under 1989 Plan in respect of options and ended December 31, 1994
SARs granted January 4, 1995
10(r) Employment Agreement and related Stock C to Form 10-Q for quarter
Purchase Agreement, each dated August 6, ended June 30, 1991
1991, between Registrant and S. C. Gault
10(s) Amendment, dated December 3, 1991, to A to Form 8-K
Stock Purchase Agreement, dated August 6, dated December 18, 1991
1991, between Registrant and S. C. Gault
10(t) Amendment, dated April 5, 1993, to C to Form 8-K
Employment Agreement and to Stock dated April 22, 1993
Purchase Agreement, each dated
August 6, 1991, between Registrant
and S. C. Gault
10(u) Deferred Compensation Plan for Executives B to Form 10-Q for quarter
ended September 30, 1994
10(v) 1994 Restricted Stock Award Plan for B to Form 10-Q for quarter
Non-employee Directors ended June 30, 1994
10(w) Amendment, dated May 3, 1994, to A to Form 10-Q for quarter
Employment Agreement and to Stock ended June 30, 1994
Purchase Agreement, each dated August 6,
1991, between Registrant and S. C. Gault
10(x) Forms of Stock Option Grant Agreements 10.3 to Form 10-K for year
under 1989 Plan in respect of options and ended December 31, 1995
SARs granted January 9, 1996
10(y) Amendment Agreement, dated as of 10.4 to Form 10-K for year
December 5, 1995, relating to Stock ended December 31, 1995
Purchase Agreement dated August 6,
1991, between Registrant and S. C. Gault
10(z) Outside Directors' Equity 10.5 to Form 10-K for year
Participation Plan ended December 31, 1995
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, 1996.
54
57
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 24, 1997 By /s/ SAMIR G. GIBARA
-------------------------------------------------------
Samir G. Gibara, Chairman of the Board, Chief Executive
Officer and President
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 24, 1997 /s/ SAMIR G. GIBARA
-------------------------------------------------------
Samir G. Gibara, Chairman of the Board, Chief
Executive Officer and President and Director
(Principal Executive Officer)
Date: March 24, 1997 /s/ ROBERT W. TIEKEN
-------------------------------------------------------
Robert W. Tieken, Executive Vice President
(Principal Financial Officer)
Date: March 24, 1997 /s/ JOHN W. RICHARDSON
-------------------------------------------------------
John W. Richardson, Vice President
(Principal Accounting Officer)
( JOHN G. BREEN, Director )
( WILLIAM E. BUTLER, Director )
( THOMAS H. CRUIKSHANK, Director )
( WILLIAM J. HUDSON, JR., Director ) By /s/ ROBERT W. TIEKEN
Date: March 24, 1997 < GERTRUDE G. MICHELSON, Director > ----------------------------
( STEVEN A. MINTER, Director ) Robert W. Tieken, Signing as
( AGNAR PYTTE, Director ) Attorney-in-Fact for the directors
( GEORGE H. SCHOFIELD, Director ) whose names appear opposite.
( WILLIAM C. TURNER, Director )
Martin D. Walker, Director
A Power of Attorney, dated December 3, 1996, authorizing Robert W. Tieken
to sign this Annual Report on Form 10-K for the fiscal year ended December 31,
1996 on behalf of certain of the directors of the Registrant is filed as Exhibit
24 to this Annual Report.
55
58
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, 1996
--------------------
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.
Financial statements 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) 1996
- ---------------------------------------------------------------------------------------------------------------------------
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........................ $ 56.2 $ 19.3 $ (18.9)(a) $ 1.5 $ 58.1
Valuation allowance -- deferred
tax assets................................... 29.7 (8.3) -- -- 21.4
1995
- ---------------------------------------------------------------------------------------------------------------------------
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
- ----------
Note:(a) Accounts and notes receivable charged off.
FS-1
59
THE GOODYEAR TIRE & RUBBER COMPANY
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1996
INDEX OF EXHIBITS(1)
EXHIBIT
TABLE
ITEM EXHIBIT
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, and
Certificate of Amendment to Amended Articles of Incorporation of
Registrant dated June 4, 1996, three documents comprising
Registrant's Articles of Incorporation as amended through
March 24, 1997 (incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit 3.1 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, File No. 1-1927).
(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-3, File No. 333-1955).
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
(a) Conformed copy of Rights Agreement, dated as of June 4, 1996,
between Registrant and First Chicago Trust Company of New York,
Rights Agent (incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit 1 to Registrant's
Registration Statement on Form 8-A dated June 11, 1996 and as
Exhibit 4(a) to Registrant's Current Report on Form 8-K dated
June 4, 1996, File No. 1-1927).
(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 4.3 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996,
File No. 1-1927).
---------------
(1) See Part IV, Item 14, Part A.3.
(2) Pursuant to Item 601 of Regulation S-K.
X-1
60
EXHIBIT
TABLE
ITEM EXHIBIT
NO. (2) DESCRIPTION OF EXHIBIT NUMBER PAGE
------- ---------------------- ------ ----
4 (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).
(d) Conformed Copy of Replacement and Restatement Agreement, dated
as of July 15, 1996, among Registrant, the Lenders named therein
and The Chase Manhattan Bank (formerly Chemical Bank), as Agent,
relating to the Revolving Credit Facility Agreement dated as of
July 15, 1994 among Registrant, the Lenders named therein and
Chemical Bank (incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit 4.5 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, File No. 1-1927).
(e) Form of Indenture, dated as of March 15, 1996, between
Registrant and Chemical Bank (now The Chase Manhattan Bank), as
Trustee (incorporated by reference, filed with the Securities
and Exchange Commission as Exhibit 4.2 to Registrant's
Registration Statement on Form S-3, File 333-1955).
(f) Form of 6-5/8% Note Due 2006, dated December 9, 1996, issued by 4.1 X-4.1-1
Registrant in aggregate principal of $250,000,000,00.
Information concerning Goodyear's long-term debt is set forth at
Note 7, captioned "Financing Arrangements and Financial
Instruments", at the sub-caption "B. Long Term Debt and
Financing Arrangements", 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
61
EXHIBIT
TABLE
ITEM EXHIBIT
NO. (2) DESCRIPTION OF EXHIBIT NUMBER PAGE
------- ---------------------- ------ ----
10 MATERIAL CONTRACTS
(a) 1997 Performance Incentive Plan of The Goodyear Tire & Rubber 10.1 X-10.1-1
Company, as adopted by the Board of Directors on February 4,
1997, subject to shareholders approval.
(b) Form of Performance Equity Grant Agreement in respect of grants 10.2 X-10.2-1
made on January 4, 1994 under the 1989 Goodyear Performance and
Equity Incentive Plan (as amended December 3, 1996).
(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 effective
January 1, 1996 (incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit 10.1 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 1-1927).
(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) Forms of Stock Option Grant Agreements in respect of options and 10.3 X-10.3-1
SARs granted December 3, 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.
(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).
(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).
---------------
(2) Pursuant to Item 601 of Regulation S-K.
X-3
62
EXHIBIT
TABLE
ITEM EXHIBIT
NO. (2) DESCRIPTION OF EXHIBIT NUMBER PAGE
------- ---------------------- ------ ----
10 (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 grants made on 10.4 X-10.4-1
December 6, 1994 in respect of 1995 under the 1989 Goodyear
Performance and Equity Incentive Plan (as amended December 3,
1996).
(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 grants
made January 9, 1996 under the 1989 Goodyear Performance and 10.5 X-10.5-1
Equity Incentive Plan (as amended December 3, 1996).
(o) Form of Performance Equity Grant Agreement in respect of grants
made on December 3, 1996 in respect of 1997 under the 1989
Goodyear Performance and Equity Incentive Plan. 10.6 X-10.6-1
---------------
(2) Pursuant to Item 601 of Regulation S-K.
X-4
63
EXHIBIT
TABLE
ITEM EXHIBIT
NO. (2) DESCRIPTION OF EXHIBIT NUMBER PAGE
------- ---------------------- ------ ----
10 (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 Consolidated Receivables Sale Agreement 10.7 X-10.7
[$550,000,000 Facility], dated as of November 15, 1996, among
Registrant, Asset Securitization Cooperative Corporation and
Canadian Imperial Bank of Commerce.
(r) 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).
(s) 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).
(t) 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).
(u) 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).
---------------
(2) Pursuant to Item 601 of Regulation S-K.
X-5
64
EXHIBIT
TABLE
ITEM EXHIBIT
NO. (2) DESCRIPTION OF EXHIBIT NUMBER PAGE
------- ---------------------- ------ ----
10 (v) 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).
(w) 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).
(x) Forms of Stock Option Grant Agreement granted January 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 (incorporated by reference, filed with
the Securities and Exchange Commission as Exhibit 10.3 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 1-1927).
(y) Amendment Agreement, dated as of December 5, 1995, relating to
Stock Purchase Agreement dated August 6, 1991, between
Registrant and S C Gault (incorporated by reference, filed with
the Securities and Exchange Commission as Exhibit 10.4 to
Registrant's Annual Report Form 10-K for the year ended December
31, 1995, File No. 1-1927).
(z) Outside Directors' Equity Participation Plan, adopted by by the
Board of Directors on February 2, 1996 (incorporated by
reference, filed with the Securities and Exchange Commission as
Exhibit 10.5 to Registrant's Annual Report Form 10-K for the
year ended December 31, 1995, File No. 1-1927).
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS.
(a) Statement setting forth the Computation of Earnings 11 X-11-1
Per Share.
12 STATEMENT RE COMPUTATION OF RATIOS.
(a) Statement setting forth the Computation of Ratio of 12 X-12-1
Earnings to Fixed Charges.
---------------
(2) Pursuant to Item 601 of Regulation S-K.
X-6
65
EXHIBIT
TABLE
ITEM EXHIBIT
NO. (2) DESCRIPTION OF EXHIBIT NUMBER PAGE
------- ---------------------- ------ ----
21 SUBSIDIARIES
(a) List of subsidiaries of Registrant at March 15, 1997. 21 X-21-1
23 CONSENTS OF EXPERTS AND COUNSEL
(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
(a) Power of Attorney, dated December 3, 1996, authorizing 24 X-24-1
Robert W. Tieken, C. Thomas Harvie, John W. Richardson,
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 26, 1997
(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-7