<PAGE> 1
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
COMMISSION FILE NUMBER: 1-1927
THE GOODYEAR TIRE & RUBBER COMPANY
(Exact name of registrant as specified in its charter)
OHIO 34-0253240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1144 EAST MARKET STREET, AKRON, OHIO 44316-0001
(Address of principal executive offices, including Zip Code)
(216) 796-2121
(Registrant's telephone number, including area code)
___________________________________
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 the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Number of Shares of Common Stock,
Without Par Value, Outstanding at July 31, 1995: 152,337,949
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<PAGE> 2
<TABLE>
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Statement of Income and Retained Earnings
Unaudited
(Dollars in millions, except per share)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Sales $3,350.8 $3,052.3 $6,594.1 $5,961.9
Cost of Goods Sold 2,550.6 2,260.4 5,038.0 4,455.8
Selling, Administrative and General Expense 478.1 477.8 961.6 948.2
Interest Expense 36.3 34.5 68.3 67.7
Other (Income) and Expense 6.7 (21.4) 9.6 (31.6)
Foreign Currency Exchange 3.0 48.8 27.9 79.8
Minority Interest in Net Income of Subsidiaries 8.7 5.0 16.2 9.2
----------- ----------- ----------- -----------
Income before Income Taxes 267.4 247.2 472.5 432.8
United States and Foreign Taxes on Income 93.6 84.0 165.4 153.6
----------- ----------- ----------- -----------
Net Income $173.8 $163.2 307.1 279.2
=========== ===========
Retained Earnings at Beginning of Period 2,194.5 1,740.9
----------- -----------
2,501.6 2,020.1
Cash Dividends on Common Stock 68.2 52.9
----------- -----------
Retained Earnings at End of Period $2,433.4 $1,967.2
=========== ===========
Per Share of Common Stock $1.15 $1.08 $2.03 $1.85
Dividends per Share $0.25 $0.20 $0.45 $0.35
Average Shares Outstanding 151,741,845 151,240,702 151,613,546 151,080,621
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
1.
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<TABLE>
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Unaudited
(Dollars in millions)
<CAPTION>
June 30, December 31,
1995 1994
------ --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $241.0 $250.9
Accounts and notes receivable, less
allowance 1995-$60.5, 1994- $54.0 1,918.5 1,524.7
Inventories
Raw materials 385.2 269.9
Work in process 88.3 69.8
Finished product 1,340.9 1,085.4
--------- ---------
1,814.4 1,425.1
Prepaid expenses 507.6 422.0
--------- ---------
TOTAL CURRENT ASSETS 4,481.5 3,622.7
OTHER ASSETS:
Investments in affiliates, at equity 114.7 133.4
Long term accounts and notes receivable 249.7 208.5
Deferred charges and other miscellaneous assets 785.7 775.9
--------- ---------
1,150.1 1,117.8
PROPERTIES AND PLANTS, less accumulated depreciation
1995-$4,717.7, 1994- $4,486.3 4,431.1 4,382.8
--------- ---------
$10,062.7 $9,123.3
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable- trade $1,023.6 $1,013.9
Compensation and benefits 781.7 745.2
Other current liabilities 291.7 259.8
United States and foreign taxes 340.4 326.2
Notes payable to banks and overdrafts 509.5 213.0
Long term debt due within one year 92.3 13.9
--------- ---------
TOTAL CURRENT LIABILITIES 3,039.2 2,572.0
LONG TERM DEBT AND CAPITAL LEASES 1,278.9 1,108.7
COMPENSATION AND BENEFITS 2,193.7 2,173.4
OTHER LONG TERM LIABILITIES 329.3 322.1
MINORITY EQUITY IN SUBSIDIARIES 151.8 143.9
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 152,024,039 (151,407,285 in 1994)
after deducting 43,654,629 treasury shares (44,271,227 in 1994) 152.0 151.4
Capital surplus 935.7 918.5
Retained earnings 2,433.4 2,194.5
--------- ---------
3,521.1 3,264.4
Foreign currency translation adjustment (411.2) (421.7)
Minimum pension liability adjustment (40.1) (39.5)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 3,069.8 2,803.2
--------- ---------
$10,062.7 $9,123.3
========= =========
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
2.
<PAGE> 4
<TABLE>
THE GOODYEAR TIRE & RUBBER COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
<CAPTION>
(Dollars in millions) Six Months Ended
June 30,
1995 1994
------ ------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 307.1 $ 279.2
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation 212.8 197.6
Accounts and notes receivable (346.9) (284.1)
Inventories (359.0) (78.5)
Accounts payable-trade (8.8) 8.1
Domestic pension funding (133.0) (30.0)
Other assets and liabilities 86.5 103.3
-------- --------
Total adjustments (548.4) (83.6)
-------- --------
Net cash (used in) provided by operating activities (241.3) 195.6
Cash Flows from Investing Activities:
Capital expenditures (225.1) (202.8)
Short term securities acquired (11.1) (205.4)
Short term securities redeemed 21.7 193.1
Other transactions 4.0 (6.0)
-------- --------
Net cash used in investing activities (210.5) (221.1)
Cash Flows from Financing Activities:
Short term debt incurred 617.1 369.5
Short term debt paid (178.2) (173.6)
Long term debt incurred 84.3 6.4
Long term debt and capital leases paid (29.1) (61.5)
Common stock issued 17.8 21.3
Dividends paid (68.2) (52.9)
-------- --------
Net cash provided by financing activities 443.7 109.2
Effect of Exchange Rate Changes on Cash and Cash Equivalents (1.8) (3.0)
-------- --------
Net Change in Cash and Cash Equivalents (9.9) 80.7
Cash and Cash Equivalents at Beginning of the Period 250.9 188.5
-------- --------
Cash and Cash Equivalents at End of the Period $ 241.0 $ 269.2
======== ========
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
3.
<PAGE> 5
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ADJUSTMENTS
-----------
All adjustments, consisting of normal recurring adjustments,
necessary for a fair statement of the results of these unaudited
interim periods have been included.
PER SHARE OF COMMON STOCK
-------------------------
Per share amounts have been computed based on the average number
of common shares outstanding.
4.
<PAGE> 6
The Goodyear Tire & Rubber Company and Subsidiaries
Segment Information
Unaudited
<TABLE>
<CAPTION>
(Dollars in millions) Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INDUSTRY SEGMENTS
SALES TO UNAFFILIATED CUSTOMERS
Tires $2,532.3 $2,313.9 $5,025.4 $4,539.9
Related products and services 329.7 284.1 575.6 543.9
-------- -------- -------- --------
Tires 2,862.0 2,598.0 5,601.0 5,083.8
General products 457.5 434.9 931.2 845.2
Oil transportation 31.3 19.4 61.9 32.9
-------- -------- -------- --------
NET SALES $3,350.8 $3,052.3 $6,594.1 $5,961.9
======== ======== ======== ========
INCOME
Tires $262.2 $295.3 $508.9 $531.2
General products 51.5 59.1 94.3 101.7
Oil transportation 14.9 3.2 22.8 (1.6)
-------- -------- -------- --------
OPERATING INCOME 328.6 357.6 626.0 631.3
-------- -------- -------- --------
Exclusions from operating income (61.2) (110.4) (153.5) (198.5)
-------- -------- -------- --------
Income before income taxes $267.4 $247.2 $472.5 $432.8
======== ======== ======== ========
GEOGRAPHIC SEGMENTS
SALES TO UNAFFILIATED CUSTOMERS
United States $1,857.6 $1,783.0 $3,667.6 $3,518.1
Europe 715.2 561.5 1,388.1 1,075.0
Latin America 395.0 365.4 802.0 723.8
Asia 212.1 181.4 393.4 337.4
Canada 170.9 161.0 343.0 307.6
-------- -------- -------- --------
$3,350.8 $3,052.3 $6,594.1 $5,961.9
======== ======== ======== ========
OPERATING INCOME
United States $162.1 $180.7 $284.6 $315.1
Europe 84.5 57.4 152.7 107.2
Latin America 53.9 87.0 131.0 157.7
Asia 18.7 22.0 42.1 37.3
Canada 9.4 10.5 15.6 14.0
-------- -------- -------- --------
$328.6 $357.6 $626.0 $631.3
======== ======== ======== ========
</TABLE>
5.
<PAGE> 7
Management's Discussion and Analysis
of Financial Condition and Results of Operations
RESULTS OF OPERATIONS
---------------------
CONSOLIDATED
------------
SECOND QUARTER: Sales for the second quarter of 1995 were $3.35 billion,
increasing 9.8 percent from sales of $3.05 billion in the 1994 period. Net
income was $173.8 million or $1.15 per share in the second quarter of 1995,
increasing 6.5 percent from net income of $163.2 million or $1.08 per share in
the 1994 period.
The Company's tire unit sales volume rose 1.1 percent from 1994's second
quarter, with increases in the original equipment markets in Europe, the U.S.,
Asia and Latin America and in the replacement markets in Latin America and
Europe. Tire unit sales in the North American (U.S. and Canada) original
equipment market increased slightly.
Tire revenue growth of 9.4 percent over the second quarter of 1994
exceeded tire unit sales growth, due primarily to higher average selling prices
resulting from both worldwide pricing improvements and the favorable effect of
the strengthening of various European currencies versus the U.S. dollar.
Cost of goods sold rose to 76.1 percent of sales from 74.1 percent in
1994's second quarter, primarily as a result of higher raw material and labor
costs. Raw material costs are not expected to increase significantly for the
balance of 1995 but are expected to remain higher than in 1994. Manufacturing
costs were favorably impacted by productivity improvements, efficiencies
resulting from continued high levels of capacity utilization and the effects of
ongoing cost containment measures.
Selling, administrative and general expense decreased to 14.3 percent of
sales from 15.7 percent in 1994's second quarter, reflecting efficiencies
achieved through increased sales and the effects of ongoing cost containment
measures. Other income and expense was adversely impacted by lower interest
income on time deposits, but foreign currency exchange expense was
significantly lower, both of which were due primarily to the effects of a
Brazilian economic plan.
Effective July 1, 1994, the Brazilian government implemented a new
economic plan (the Real plan) designed to reduce inflation. The Real plan did
not adversely affect net income in Brazil or unit sales in either Brazil or its
export markets. However, while sales increased, segment operating income in
Brazil decreased due in part to lower interest income on time deposits
resulting in part from the effects of the Real plan. In addition, raw material
costs were higher and increased labor costs could not be fully recovered due
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<PAGE> 8
to governmental controls on pricing. Operations in Brazil accounted for
approximately 5 percent of consolidated sales and 5 percent of consolidated
operating income in the second quarter of 1995, compared to approximately 5
percent and 16 percent, respectively, in the 1994 period. Due to the potential
volatility of Brazil's economy, it is uncertain if this level of contribution
will continue in future periods.
SIX MONTHS: Sales for the first six months of 1995 were $6.59 billion,
increasing 10.6 percent from sales of $5.96 billion in the 1994 period. Net
income was $307.1 million or $2.03 per share in the first six months of 1995,
increasing 10.0 percent from net income of $279.2 million or $1.85 per share in
the 1994 period.
The Company's tire unit sales volume increased 1.8 percent from 1994's
first six months. Original equipment volume increased in all regions, and
replacement tire unit sales increased in Europe, Latin America and Canada.
Tire revenue growth of 10.7 percent over the first six months of 1994
exceeded tire unit sales growth, due primarily to higher average selling prices
resulting from both worldwide pricing improvements and the favorable effect of
the strengthening of various European currencies versus the U.S. dollar.
Cost of goods sold rose to 76.4 percent of sales from 74.7 percent in
1994's first six months, primarily as a result of higher raw material and labor
costs. Manufacturing costs were favorably impacted by productivity
improvements, efficiencies resulting from continued high levels of capacity
utilization and the effects of ongoing cost containment measures.
Selling, administrative and general expense decreased to 14.6 percent of
sales from 15.9 percent in 1994's first six months, reflecting efficiencies
achieved through increased sales and the effects of ongoing cost containment
measures. Other income and expense was adversely impacted by lower interest
income on time deposits, but foreign currency exchange expense was
significantly lower, both of which were due primarily to the effects of the
previously mentioned Brazilian economic plan.
Operations in Brazil accounted for approximately 6 percent of consolidated
sales and 9 percent of consolidated operating income in the first six months of
1995, compared to approximately 5 percent and 16 percent, respectively, in the
1994 period. Due to the potential volatility of Brazil's economy, it is
uncertain if this level of contribution will continue in future periods.
7
<PAGE> 9
SEGMENT INFORMATION
-------------------
Segment operating income in the second quarter of 1995 was $328.6 million,
decreasing 8.1 percent from $357.6 million in the 1994 period. Segment
operating income decreased to 9.8 percent of sales in the second quarter of
1995 from 11.7 percent in the 1994 period. The decrease in segment operating
margin was due primarily to higher raw material and labor costs and lower
interest income in Brazil.
Segment operating income in the first six months of 1995 was $626.0
million, decreasing slightly from $631.3 million in the 1994 period. Segment
operating income decreased to 9.5 percent of sales in the first six months of
1995 from 10.6 percent in the 1994 period.
INDUSTRY SEGMENTS
-----------------
Tires
-----
SECOND QUARTER: Sales of $2.86 billion increased 10.2 percent from $2.59
billion in the 1994 period. Operating income of $262.2 million decreased 11.2
percent from $295.3 million in the 1994 period.
Sales increased due primarily to higher average selling prices, resulting
from both worldwide pricing improvements and the favorable effect of the
strengthening of various European currencies versus the U.S. dollar. Sales
also increased due to higher unit sales volume.
The following table presents changes in tire unit sales:
Increase (Decrease) in Company Tire Unit Sales - - Second Quarter
-----------------------------------------------------------------
1995 vs. 1994
-------------
U.S. (0.7) %
International 3.2 %
Worldwide 1.1 %
Unit sales increased in the original equipment markets in Europe, the
U.S., Asia and Latin America and in the replacement markets in Latin America
and Europe. Unit sales in the North American (U.S. and Canada) original
equipment market increased slightly. The Company expects demand in the
original equipment market in North America during 1995 to be approximately the
same as during 1994.
Operating income decreased due primarily to higher raw material and labor
costs and lower interest income in Brazil. Operating income was favorably
impacted by worldwide pricing improvements, increased tire unit sales volume,
productivity
8
<PAGE> 10
improvements, efficiencies resulting from continued high levels of capacity
utilization and the effects of ongoing cost containment measures.
Tire operations in Brazil accounted for approximately 5 percent of tire
segment sales and 4 percent of tire segment operating income in the second
quarter of 1995, compared to approximately 5 percent and 13 percent,
respectively, in the 1994 period. The decrease was due primarily to higher raw
material and labor costs and lower interest income.
SIX MONTHS: Sales of $5.60 billion increased 10.2 percent from $5.08
billion in the 1994 period. Operating income of $508.9 million decreased 4.2
percent from $531.2 million in the 1994 period.
Sales increased due primarily to higher average selling prices, resulting
from both worldwide pricing improvements and the favorable effect of the
strengthening of various European currencies versus the U.S. dollar. Sales
also increased due to higher unit sales volume.
The following table presents changes in tire unit sales:
Increase (Decrease) in Company Tire Unit Sales - - Six Months
-------------------------------------------------------------
1995 vs. 1994
-------------
U.S. (2.9) %
International 8.0 %
Worldwide 1.8 %
Original equipment volume increased in all regions, and replacement tire
unit sales increased in Europe, Latin America and Canada.
Operating income decreased due primarily to higher raw material and labor
costs and lower interest income in Brazil. Operating income was favorably
impacted by worldwide pricing improvements, increased tire unit sales volume,
productivity improvements, efficiencies resulting from continued high levels of
capacity utilization and the effects of ongoing cost containment measures.
Tire operations in Brazil accounted for approximately 6 percent of tire
segment sales and 8 percent of tire segment operating income in the first six
months of 1995, compared to approximately 5 percent and 13 percent,
respectively, in the 1994 period.
9
<PAGE> 11
General Products
----------------
SECOND QUARTER: Sales of $457.5 million increased 5.2 percent from $434.9
million in the 1994 period. Operating income of $51.5 million decreased 12.9
percent from $59.1 million in the 1994 period.
Sales in engineered products increased due primarily to higher volume, but
operating income was lower as a result of higher raw material and labor costs
and lower interest income in Brazil. Sales in chemical products rose and
operating income was higher due primarily to increased volume and pricing
improvements, although raw material costs were higher.
Operations in Brazil accounted for approximately 7 percent of general
products segment sales and 12 percent of general products segment operating
income in the second quarter of 1995, compared to approximately 8 percent and
34 percent, respectively, in the 1994 period. The decrease was due primarily
to higher raw material and labor costs and lower interest income.
SIX MONTHS: Sales of $931.2 million increased 10.2 percent from $845.2
million in the 1994 period. Operating income of $94.3 million decreased 7.3
percent from $101.7 million in the 1994 period.
Sales in engineered products increased due primarily to higher volume, but
operating income was lower as a result of higher raw material and labor costs
and lower interest income in Brazil. Sales in chemical products rose and
operating income was higher due primarily to increased volume and pricing
improvements, although raw material costs were higher.
Operations in Brazil accounted for approximately 7 percent of general
products segment sales and 16 percent of general products segment operating
income in the first six months of 1995, compared to approximately 7 percent and
30 percent, respectively, in the 1994 period.
Oil Transportation
------------------
SECOND QUARTER: Sales of $31.3 million increased from $19.4 million in
the 1994 period. Operating income of $14.9 million increased from $3.2 million
in the 1994 period. The improvement was due primarily to increased throughput
in the All American Pipeline System, higher average tariffs and the effects of
ongoing cost containment measures.
SIX MONTHS: Sales of $61.9 million increased from $32.9 million in the
1994 period. Operating income was $22.8 million, compared to an operating loss
of $1.6 million in the 1994 period. The improvement was due primarily to
increased throughput in the
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<PAGE> 12
All American Pipeline System, higher average tariffs and the effects of ongoing
cost containment measures. Operating income in the 1995 period included a
charge of $5.0 million for the writedown of surplus construction pipe, material
and equipment.
The Company anticipates that quarterly revenue in the oil transportation
segment for the remainder of 1995 will be at substantially the same level as
the second quarter and annual revenue in 1996 will be substantially the same as
in 1995.
GEOGRAPHIC SEGMENTS
-------------------
U.S. Operations
---------------
SECOND QUARTER: Sales of $1.86 billion increased 4.2 percent from $1.78
billion in the 1994 period. Operating income of $162.1 million decreased 10.3
percent from $180.7 million in the 1994 period.
Sales increased and operating income was favorably affected by pricing
improvements, higher throughput and average tariffs in the All American
Pipeline System and increased unit sales volume of engineered and chemical
products.
Despite productivity improvements, efficiencies resulting from continued
high levels of capacity utilization and the effects of ongoing cost containment
measures, operating income decreased due primarily to higher raw material and
labor costs and lower tire unit sales volume.
SIX MONTHS: Sales of $3.67 billion increased 4.2 percent from $3.52
billion in the 1994 period. Operating income of $284.6 million decreased 9.7
percent from $315.1 million in the 1994 period.
Sales were higher and operating income was favorably affected by pricing
improvements, increased unit sales volume of engineered and chemical products
and higher throughput and average tariffs in the All American Pipeline System.
Despite productivity improvements, efficiencies resulting from continued
high levels of capacity utilization and the effects of ongoing cost containment
measures, operating income decreased due primarily to increased raw material
and labor costs and lower tire unit sales volume.
International Operations
------------------------
SECOND QUARTER: Sales of $1.49 billion increased 17.6 percent from $1.27
billion in the 1994 period. Operating income of $166.5 million decreased 5.9
percent from $176.9 million in the 1994 period.
11
<PAGE> 13
In Europe, sales and operating income increased due primarily to pricing
improvements, the favorable impact of currency translations and improved tire
unit sales volume. Operating income also benefited from improved productivity,
although manufacturing costs, primarily for raw materials, were higher.
In Latin America, sales increased, especially in Brazil, due primarily to
higher tire unit sales volume and pricing improvements. Operating income was
lower despite productivity improvements, due primarily to increased raw
material and labor costs and lower interest income in Brazil.
In Asia, sales increased due primarily to improved results in natural
rubber operations, pricing improvements and higher tire unit sales volume.
Operating income decreased as a result of higher raw material costs, although
productivity improved.
In Canada, sales increased due primarily to pricing improvements.
Operating income decreased due primarily to higher raw material costs and lower
tire unit sales volume.
SIX MONTHS: Sales of $2.92 billion increased 19.8 percent from $2.44
billion in the 1994 period. Operating income of $341.4 million increased 8.0
percent from $316.2 million in the 1994 period.
In Europe, sales and operating income increased due primarily to the
favorable impact of currency translations, improved tire unit sales volume and
pricing improvements. Operating income benefited from improved productivity,
although manufacturing costs, primarily for raw materials, were higher.
In Latin America, sales increased, especially in Brazil, due primarily to
higher tire unit sales volume and pricing improvements. Operating income was
lower despite productivity improvements, due primarily to increased raw
material and labor costs and lower interest income in Brazil.
In Asia, sales and operating income increased due primarily to improved
results in natural rubber operations, pricing improvements, higher tire unit
sales volume and productivity improvements. Operating income was adversely
impacted by higher raw material costs.
In Canada, sales and operating income increased due primarily to higher
tire unit sales volume and lower selling, administrative and general expenses,
although raw material costs were higher.
12
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash used in operating activities was $241.3 million during the first
six months of 1995, as reported on the Consolidated Statement of Cash Flows.
Working capital requirements increased for accounts receivable, reflecting
higher selling prices and increased unit sales volume, and inventories,
reflecting higher raw material costs and increased finished goods quantities.
Cash was also used for pension funding.
Net cash used in investing activities was $210.5 million during the first
six months of 1995. Capital expenditures of $225.1 million were the primary
use of cash for investing activities. Capital expenditures were primarily for
plant modernizations and expansions and new tire molds and are expected to
total approximately $650 million in 1995.
Net cash provided by financing activities was $443.7 million during the
first six months of 1995. Additional debt was incurred in the period to
support the previously mentioned increased working capital requirements,
capital expenditures and pension funding. Consolidated debt at June 30, 1995
was $1,880.7 million, an increase of $545.1 million from December 31, 1994.
Consolidated debt represents 38.0 percent of total debt plus shareholders'
equity, compared to 32.3 percent at December 31, 1994.
In order to reduce the impact of changes in variable interest rates on
consolidated results of operations and future cash outflows for interest, the
Company has entered into various interest rate contracts. At June 30, 1995
interest rate swap contracts totaling $395 million in notional principal amount
were in place whereunder the Company pays a fixed amount and receives a
variable amount equivalent to LIBOR. The interest rate contracts fix the
effective interest cost of floating rate debt and, at June 30, 1995, had an
average life to maturity of 1.33 years, a weighted average stated fixed rate of
8.95 percent and would cost an estimated $18.2 million to sell or unwind.
During the second quarter and first six months of 1995, the Company paid under
these contracts a weighted average fixed rate of 8.95 percent and 8.42 percent,
respectively, and received various LIBOR rates equivalent to a weighted average
of 6.55 percent and 6.17 percent, respectively. The Company was also party to
an interest rate contract of $50 million in notional principal amount at June
30, 1995 whereunder the Company pays a variable rate based on LIBOR and
receives a fixed rate. At June 30, 1995 this contract had a life to maturity
of 2.71 years, a stated fixed rate of 6.69 percent and would yield an estimated
$1.2 million if sold or unwound. During the second quarter and first six
months of 1995, the Company paid under this contract a variable rate averaging
6.44 percent and 6.03 percent, respectively, and received a fixed rate of 6.69
percent. At June 30, 1995, the interest rate on approximately 56.3 percent of
the Company's debt was fixed by either the nature of the
13
<PAGE> 15
obligation or through the interest rate contracts, compared to 73 percent at
December 31, 1994.
Substantial short term and long term credit sources are available to the
Company globally under normal commercial practices. At June 30, 1995 the
Company had short term credit lines and overdraft arrangements totaling $1.6
billion, of which $480.4 million were unused. The Company also had available
long term credit sources at June 30, 1995 totaling $1.9 billion, of which $1.2
billion were unused.
Funds generated by operations, together with funds available under
existing credit arrangements, are expected to be sufficient to meet currently
anticipated funding requirements.
14
<PAGE> 16
PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
---------------------------
Reference is made to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994 (the "Annual Report") and to Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 (the
"Quarterly Report"), wherein Registrant reported certain legal proceedings at
Item 3, pages 14, 15 and 16, of the Annual Report and at Item 1, page 12, of
the Quarterly Report.
A. Registrant reports the following developments in respect of
certain of the legal proceedings described at Item 3 of the Annual Report:
As reported at paragraph (A) of Item 3, at page 14, of the Annual
Report, Registrant is the defendant in 61 civil actions in the United States
District Court for the District of Maryland ("Maryland District Court")
relating to the development of lung disease, cancer and other diseases by
former employees of The Kelly-Springfield Tire Company ("Kelly"), 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 (the "Cumberland
Plant"), which was closed in 1987. The plaintiffs in the 61 civil actions are
seeking an aggregate of $570 million of compensatory damages and $5.66 billion
of punitive damages.
Four new civil actions have been filed in the Maryland District Court
against Registrant alleging exposure by former Kelly employees at the
Cumberland Plant. As in the previously reported 61 civil actions currently
pending before the Maryland District Court, the plaintiffs allege that they
have contracted certain diseases as the result of exposure to allegedly toxic
substances at the Cumberland Plant and that, among other things, Registrant, as
the manufacturer or seller of certain allegedly toxic materials used at the
Cumberland Plant, negligently failed to warn Kelly employees of the health
risks associated with their employment and failed to implement procedures to
preserve their health and safety. The plaintiffs in the four new civil actions
are seeking a total of $80 million of compensatory damages and $800 million of
punitive damages.
The plaintiffs in the 65 civil actions pending before the Maryland
District Court referred to above are seeking an aggregate of $650 million of
compensatory damages and $6.46 billion of punitive damages.
B. Registrant also reports the following new legal proceeding:
In April of 1995, the Company 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
- 15 -
<PAGE> 17
documents to a Federal grand jury sitting in Cleveland. The Company is in the
process of responding to the subpoena and is cooperating fully with the
Department of Justice in the investigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
-------------------------------------------------------------
The Annual Meeting of Shareholders of The Goodyear Tire & Rubber
Company (the "Registrant") was held on April 10, 1995 (the "Annual Meeting").
Proxies for the Annual Meeting were solicited pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Act"), there was no
solicitation in opposition to the four nominees of the Board of Directors
listed in the Proxy Statement of Registrant, dated February 27, 1995, for the
Annual Meeting (the "Proxy Statement"), filed with the Securities and Exchange
Commission pursuant to Regulation 14A under the Act, and each of the four
nominees of the Board of Directors was elected at the Annual Meeting to a three
year term. The four directors elected at the Annual Meeting were: (1) John G
Breen, (2) William E Butler, (3) Stanley C Gault, and (4) George H Schofield.
The seven directors whose terms of office as directors continued after the
meeting were: (A) Gertrude G Michelson, Charles W Parry, William C Turner, and
Hoyt M Wells, whose terms expire in 1996, and (B) Thomas H Cruikshank, Steven A
Minter and Agnar Pytte, whose terms expire in 1997.
The following matters were acted upon by the shareholders of
Registrant at the Annual Meeting, at which 133,094,533 shares of the Common
Stock, without par value, of Registrant (the "Common Stock", the only class of
voting securities of Registrant outstanding), or approximately 87.85 percent of
the 151,498,048 shares of Common Stock outstanding and entitled to vote at the
Annual Meeting, were present in person or by proxies:
<TABLE>
1. ELECTION OF DIRECTORS. Four persons were nominated by the Board
of Directors of Registrant for election as directors of Registrant, each to
hold office for a three year term expiring at the 1998 Annual Meeting of
Shareholders and until his successor shall have been duly elected and
qualified. Each nominee was an incumbent director. No other person was
nominated. Each nominee was elected. The votes cast for, or withheld or
abstained with respect to, each nominee are as follows:
<CAPTION>
Name of Director Shares Voted For Shares Withheld or Abstained
---------------- ---------------- ----------------------------
<S> <C> <C>
John G Breen 126,694,683 6,399,850
William E Butler 132,033,301 1,061,232
Stanley C Gault 132,016,168 1,078,365
George H Schofield 132,064,326 1,030,207
</TABLE>
(2) RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS. A
resolution proposed by the Board of Directors of Registrant that the
shareholders ratify the action of the Board of Directors in selecting and
appointing Price Waterhouse as independent accountants for Registrant for the
year ending December 31, 1995 was submitted to, and voted upon by, the
- 16 -
<PAGE> 18
shareholders of Registrant. There were 132,330,210 votes cast in favor of, and
335,193 votes cast against, said resolution. The holders of 429,130 shares
abstained. There were no "broker nonvotes". Accordingly, the resolution
received the affirmative vote of the holders of a majority of the shares of
Common Stock outstanding and entitled to vote at the Annual Meeting and,
therefore, said resolution was adopted and the appointment of Price Waterhouse
as the independent accountants for Registrant for 1995 was ratified by the
shareholders. The resolution and related information are set forth under the
caption "Ratification of Appointment of Independent Accountants" at page 7 of
the Proxy Statement.
[The information set forth above in Response to Item 4 of Part II was
also set forth at Item 4 of Part II of Registrant's Quarterly Report
on Form 10-Q for its fiscal quarter ended March 31, 1995.]
Effective April 15, 1995, Mr Samir F Gibara was elected a director
and President and Chief Operating Officer of Registrant by the Board of
Directors of Registrant to fill the vacancy which resulted from the retirement
of Mr Wells effective April 14, 1995. Mr Charles W Parry retired from the
Board of Directors on April 11, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
(a) EXHIBITS. See the Index of Exhibits at page E-1, which is by
specific reference incorporated into and made a part of this Quarterly Report
on Form 10-Q.
(b) REPORTS ON FORM 8-K. No Current Report on Form 8-K was filed by
Registrant during the quarter ended June 30, 1995.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GOODYEAR TIRE & RUBBER COMPANY
(Registrant)
Date: August 14, 1995 By /s/ George E Strickler
------------------------------------
George E Strickler,
Vice President and
Comptroller
(Signing on behalf of Registrant as a
duly authorized officer of Registrant
and signing as the Principal Accounting
Officer of Registrant.)
- 17 -
<PAGE> 19
<TABLE>
THE GOODYEAR TIRE & RUBBER COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995
INDEX OF EXHIBITS (1)
<CAPTION>
EXHIBIT EXHIBIT
------------- -------------
Table
Item
No. (2) No. Description of Exhibit Letter Page
------- ---- ----------------------------------------------------------------- ------ ----
<S> <C> <C> <C> <C>
4 INSTRUMENTS DEFINING
THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
------------------------------------------------
4.1 Certificate of Amended Articles of Incorporation of Registrant, dated
December 20, 1954, and Certificate of Amendment to Amended Articles of
Incorporation of Registrant, dated April 6, 1993, two documents comprising
Registrant's Articles of Incorporation as amended to date (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, 1993).
4.2 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 as Exhibit 4.1(B) to Registrant's
Registration Statement on Form S-3, File No. 33-43144).
<FN>
-------------
(2) Pursuant to Item 601 of Regulation S-K
</TABLE>
E-1
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------------- -------------
Table
Item
No. (2) No. Description of Exhibit Letter Page
------- ---- ----------------------------------------------------------------- ------ ----
<S> <C> <C> <C> <C>
4.3 Conformed Copy of Rights Agreement, dated as of July 2, 1986, between
Registrant and Manufacturers Hanover Trust Company, Rights Agent and a
copy of the Appointment of Successor Rights Agent, dated March 21,
1990, whereunder Registrant appointed First Chicago Trust Company
of New York as the Successor Rights Agent under the Rights Agreement
(incorporated by reference, filed with the Securities and Exchange Commission
as Exhibit 4.3 to Registrant's Registration Statement on Form S-3,
File No. 33-43144).
4.4 Conformed Copy of Amendment to Rights Agreement dated as of April 6, 1993
between Registrant and First Chicago Trust Company of New York (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, 1993).
4.5 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, effective for issuances of new certificates on or
after May 4, 1993 (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 March 31, 1993).
<FN>
-------------
(2) Pursuant to Item 601 of Regulation S-K
</TABLE>
E-2
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------------- -------------
Table
Item
No. (2) No. Description of Exhibit Letter Page
------- ---- ----------------------------------------------------------------- ------ ----
<S> <C> <C> <C> <C>
4.6 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 as Exhibit A to Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1994,
File No. 1-1927).
No instrument defining the rights of holders of long-term debt which relates to
securities having an aggregate principal amount in excess of 10% of the
consolidated assets of Registrant and its subsidiaries was entered into during
the quarter ended June 30, 1995.
In accordance with paragraph (iii) to Part 4 of Item 601 of Regulation S-K,
agreements and instruments, if any, defining the rights of holders of long term
debt entered into during the quarter ended June 30, 1995 which relate to
securities having an aggregate principal amount less than 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 agreements or instruments to the
Securities and Exchange Commission upon request.
<FN>
-------------
(2) Pursuant to Item 601 of Regulation S-K
</TABLE>
E-3
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------------- --------------
Table
Item
No. (2) No. Description of Exhibit Letter Page
------- ---- ----------------------------------------------------------------- ------ ----
<S> <C> <C> <C> <C>
11 STATEMENT RE COMPUTATION OF
PER SHARE EARNINGS
--------------------------------------------
Statement setting forth the computation of per share earnings. A X-A-1
27 FINANCIAL DATA SCHEDULE B X-B-1
-----------------------
28 ADDITIONAL EXHIBITS
-------------------
28.1 Registrant's definitive Proxy Statement, dated February 27, 1995
(incorporated by reference, filed with the Securities and
Exchange Commission, File No. 1-1927).
<FN>
-------------
(2) Pursuant to Item 601 of Regulation S-K
</TABLE>
E-4
<PAGE> 23
EXHIBIT A
THE GOODYEAR TIRE & RUBBER COMPANY
AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Set forth below are computations, on a primary basis and on a fully
diluted basis in accordance with subparagraph (b) (11) of Item 601 of
Regulation S-K of the Securities and Exchange Commission, of earnings per
share of the Common Stock, without par value, of Registrant.
<TABLE>
<CAPTION>
(Dollars in millions,
except per share) Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C>
Primary:
Net Income $173.8 $163.2 $307.1 $279.2
Adjusted average number of
shares outstanding 153,773,661 153,093,264 153,240,246 153,310,286
Primary earnings per $1.13 $1.07 $2.00 $1.82
share
Fully Diluted:
Net Income $173.8 $163.2 $307.1 $279.2
Adjusted average number
of shares outstanding 153,868,214 153,093,264 153,739,915 153,310,286
Fully diluted earnings
per share $1.13 $1.07 $2.00 $1.82
</TABLE>
The foregoing computations do not reflect any significant potentially
dilutive effect Registrant's Preferred Stock Purchase Rights Plan could have in
the event such Rights become exercisable and any shares of either Series A
Preferred Stock or Common Stock of Registrant are issued upon the exercise of
such Rights. Reference is made to the Note captioned " Preferred Stock
Purchase Rights Plan" in the Notes to Financial Statements set forth in Item 8
of the Registrant's Annual Report on form 10-K for the year ended December 31,
1994 at page 49.
X - A - 1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Income and Retained Earnings and the Consolidated
Balance Sheet and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 241
<SECURITIES> 0
<RECEIVABLES> 1,979
<ALLOWANCES> 60
<INVENTORY> 1,814
<CURRENT-ASSETS> 4,482
<PP&E> 9,149
<DEPRECIATION> 4,718
<TOTAL-ASSETS> 10,063
<CURRENT-LIABILITIES> 3,039
<BONDS> 1,279
<COMMON> 152
0
0
<OTHER-SE> 2,918
<TOTAL-LIABILITY-AND-EQUITY> 10,063
<SALES> 6,594
<TOTAL-REVENUES> 6,594
<CGS> 5,038
<TOTAL-COSTS> 5,038
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68
<INCOME-PRETAX> 472
<INCOME-TAX> 165
<INCOME-CONTINUING> 307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 307
<EPS-PRIMARY> 2.03
<EPS-DILUTED> 0<F1>
<FN>
<F1>This schedule shall not be deemed filed for purposes of Section 11 of the
Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934.
</FN>
</TABLE>
