<PAGE> 1
==============================================================================
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 SEPTEMBER 30, 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)
(330) 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 September 30, 1996: 155,363,615
==============================================================================
<PAGE> 2
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Unaudited
<TABLE>
<CAPTION>
(Dollars in millions, except per share) Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ - ----- ------
<S> <C> <C> <C> <C>
NET SALES $ 3,267.7 $ 3,305.1 $ 9,842.7 $ 9,899.2
Cost of Goods Sold 2,519.5 2,558.4 7,560.5 7,596.4
Selling, Administrative and General Expense 461.4 470.0 1,401.5 1,431.6
Interest Expense 33.2 33.2 100.6 101.5
Other (Income) Expense (10.6) 6.7 (20.9) 16.3
Foreign Currency Exchange (0.7) (5.6) 5.9 22.3
Minority Interest in Net Income of Subsidiaries 10.9 10.9 34.1 27.1
--------- --------- --------- ---------
Income before Income Taxes 254.0 231.5 761.0 704.0
United States and Foreign Taxes on Income 83.8 74.0 251.1 239.4
--------- --------- --------- ---------
NET INCOME $ 170.2 $ 157.5 509.9 464.6
========= =========
Retained Earnings at Beginning of Period 2,661.0 2,194.5
CASH DIVIDENDS 116.1 106.3
--------- ---------
Retained Earnings at End of Period $ 3,054.8 $ 2,552.8
========= =========
PER SHARE OF COMMON STOCK:
Net Income $ 1.09 $ 1.03 $ 3.29 $ 3.06
========= ========= ========= =========
Cash Dividends $ 0.25 $ 0.25 $ 0.75 $ 0.70
========= ========= ========= =========
AVERAGE SHARES OUTSTANDING 155,269,889 152,295,197 154,835,921 151,845,157
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 1 -
<PAGE> 3
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Unaudited
<TABLE>
<CAPTION>
(Dollars in millions) September 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 324.3 $ 268.3
Accounts and notes receivable, less allowance
(1996-$62.5, 1995-$56.2) 1,972.4 1,615.0
Inventories:
Raw materials 314.4 309.8
Work in process 86.7 75.4
Finished product 1,490.0 1,380.0
--------- ---------
1,891.1 1,765.2
Prepaid expenses and other current assets 200.5 193.1
--------- ---------
TOTAL CURRENT ASSETS 4,388.3 3,841.6
Investments in Affiliates, at equity 135.4 183.8
Long Term Accounts and Notes Receivable 237.3 252.0
Deferred Charges 840.2 793.3
Other Assets 171.6 157.7
Properties and Plants, less accumulated depreciation
(1996-$5,047.0, 1995-$4,788.7) 4,730.2 4,561.2
--------- ---------
TOTAL ASSETS $10,503.0 $ 9,789.6
========= =========
LIABILITIES
Current Liabilities:
Accounts payable- trade $ 1,008.2 $ 1,170.7
Compensation and benefits 773.9 711.9
Other current liabilities 261.2 263.9
United States and foreign taxes 392.6 363.1
Notes payable to banks 582.4 211.1
Long term debt due within one year 23.0 15.6
--------- ---------
TOTAL CURRENT LIABILITIES 3,041.3 2,736.3
Long Term Debt and Capital Leases 1,235.3 1,320.0
Compensation and Benefits 1,999.8 1,976.5
Other Long Term Liabilities 278.3 312.2
Minority equity in subsidiaries 237.0 162.9
--------- ---------
TOTAL LIABILITIES 6,791.7 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 155,363,615 (153,524,311 in 1995)
after deducting 40,315,053 treasury shares (42,154,357 in 1995) 155.4 153.5
Capital Surplus 1,037.8 975.2
Retained Earnings 3,054.8 2,661.0
Foreign Currency Translation Adjustment (511.9) (481.7)
Minimum Pension Liability Adjustment (24.8) (26.3)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 3,711.3 3,281.7
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,503.0 $ 9,789.6
========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 2 -
<PAGE> 4
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
(Dollars in millions) Nine Months Ended
September 30,
1996 1995
Cash Flows from Operating Activities: ------ ------
<S> <C> <C>
NET INCOME $509.9 $464.6
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation 355.2 321.2
Accounts and notes receivable (362.0) (380.5)
Inventories (121.3) (347.1)
Accounts payable-trade (159.0) 14.7
Other assets and liabilities 122.1 (93.6)
------ ------
Total adjustments (165.0) (485.3)
------ ------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 344.9 (20.7)
Cash Flows from Investing Activities:
Capital expenditures (405.4) (373.5)
Other transactions (116.5) 16.9
------ ------
NET CASH USED IN INVESTING ACTIVITIES (521.9) (356.6)
Cash Flows from Financing Activities:
Short term debt incurred 476.9 625.2
Short term debt paid (141.3) (222.8)
Long term debt incurred 8.9 127.9
Long term debt and capital leases paid (33.2) (98.1)
Common stock issued 64.5 29.0
Dividends paid (116.1) (106.3)
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 259.7 354.9
Effect of Exchange Rate Changes on Cash and Cash Equivalents (26.7) (5.3)
------ ------
Net Change in Cash and Cash Equivalents 56.0 (27.7)
Cash and Cash Equivalents at Beginning of the Period 268.3 250.9
------ ------
Cash and Cash Equivalents at End of the Period $324.3 $223.2
====== ======
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 3 -
<PAGE> 5
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION ABOUT NONCASH INVESTING AND FINANCING ACTIVITIES
- ------------------------------------------------------------
In 1995 the Company acquired, for cash, 32.7 percent 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 the first quarter of 1996, the Company purchased original issue shares of
this tire manufacturer, bringing its ownership to 50.8 percent. 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.
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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
INDUSTRY SEGMENTS
<S> <C> <C> <C> <C>
Sales to Unaffiliated Customers:
Tires $2,517.7 $2,543.2 $7,560.5 $7,568.6
Related products and services 279.0 307.4 839.0 883.0
-------- -------- -------- --------
Total Tires 2,796.7 2,850.6 8,399.5 8,451.6
General products 440.3 422.3 1,346.3 1,353.5
Oil transportation 30.7 32.2 96.9 94.1
-------- -------- -------- --------
NET SALES $3,267.7 $3,305.1 $9,842.7 $9,899.2
======== ======== ======== ========
Income:
Tires $ 248.7 $ 250.7 $ 749.5 $ 759.6
General products 49.6 34.9 142.6 129.2
Oil transportation 15.3 16.1 50.7 38.9
-------- -------- -------- --------
TOTAL OPERATING INCOME 313.6 301.7 942.8 927.7
Exclusions from operating income (59.6) (70.2) (181.8) (223.7)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES $ 254.0 $ 231.5 $ 761.0 $ 704.0
======== ======== ======== ========
GEOGRAPHIC SEGMENTS
Sales to Unaffiliated Customers:
United States $1,783.0 $1,835.6 $5,301.8 $5,503.2
Europe 727.5 706.0 2,257.5 2,094.1
Latin America 378.9 376.8 1,150.7 1,178.8
Asia 211.3 216.9 629.5 610.3
Canada 167.0 169.8 503.2 512.8
-------- -------- -------- --------
NET SALES $3,267.7 $3,305.1 $9,842.7 $9,899.2
======== ======== ======== ========
Operating Income:
United States $ 136.4 $ 143.3 $ 396.7 $ 427.9
Europe 88.1 79.3 254.8 232.0
Latin America 60.6 48.2 199.0 179.2
Asia 23.0 24.4 74.2 66.5
Canada 5.5 6.5 18.1 22.1
-------- -------- -------- --------
TOTAL $ 313.6 $ 301.7 $ 942.8 $ 927.7
======== ======== ======== ========
</TABLE>
- 5 -
<PAGE> 7
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
CONSOLIDATED
- ------------
Sales in the third quarter of 1996 were $3.27 billion, decreasing 1.1% from
$3.31 billion in the 1995 quarter. Net income in the quarter was $170.2 million
($1.09 per share), increasing 8.1% from net income of $157.5 million ($1.03 per
share) in 1995.
In the nine months, sales of $9.84 billion decreased .6% from $9.90 billion
in 1995. Net income of $509.9 million ($3.29 per share) increased 9.7% from net
income of $464.6 million ($3.06 per share) in the 1995 period.
Revenues decreased in both periods due primarily to the strengthening of
the U.S. dollar in 1996 versus various foreign currencies and continued
competitive pricing pressures. Worldwide tire unit sales in the quarter and nine
months increased 6.1% and 4.8%, respectively, from 1995's levels, and sales of
other automotive and industrial rubber products were higher in both periods.
Original equipment volume and replacement pricing remained soft in North
America, and competitive pricing pressures in North America are expected to
continue during 1996 and into 1997.
Cost of goods sold in the third quarter of 1996 decreased to 77.1% of sales
from 77.4% in the 1995 quarter, and in the nine months was 76.8% compared to
76.7% in 1995. Both 1996 periods benefited from lower raw material costs and the
effects of currency translation compared to the prior year, although reductions
in production schedules in North America and Europe to align inventory with
market requirements adversely affected manufacturing costs in 1996.
Costs of goods sold in 1996 included third quarter expenses related to
worldwide consolidations and acquisitions totaling $10.7 million ($7.2 million
after tax or $.05 per share), and second quarter expenses totaling $25.5 million
($17.5 million after tax or $.11 per share) resulting from the closure of the
Greece tire manufacturing facility, the discontinuance of PVC production at
Niagara Falls and other workforce reductions.
Selling, administrative and general expense (SAG) in the third quarter of
1996 decreased to 14.1% of sales from 14.2% in the 1995 quarter, and in the nine
months was 14.2% compared to 14.5% in 1995. The improvement in each period
resulted primarily from
- 6 -
<PAGE> 8
ongoing cost containment measures and the effects of currency translations. SAG
included second quarter expenses totaling $5.7 million ($3.9 million after tax
or $.03 per share) resulting from the consolidation of distribution and other
facilities in North America.
Other income and expense in 1996 included a third quarter gain of $9.6
million ($6.4 after tax or $.04 per share) resulting from the sale of a portion
of the Company's investment in an Asian plantation. The 1996 second quarter also
included a gain of $32.8 million ($21.3 million after tax or $.14 per share)
resulting from the sale of other business property in Asia.
Foreign currency exchange expense in the nine months decreased
significantly compared to 1995, during which time European currencies had
strengthened versus the U.S. dollar. Net income in the quarter was adversely
affected by a higher effective tax rate compared to the 1995 period.
Year-to-date net income continued to benefit from a lower estimated annual
effective tax rate resulting primarily from lower U.S. taxes on foreign source
income.
SEGMENT INFORMATION
- -------------------
Segment operating income in the third quarter of 1996 was $313.6 million,
increasing 3.9% from $301.7 million in the 1995 period. Segment operating margin
rose to 9.6% of sales from 9.1%.
In the nine months, segment operating income was $942.8 million, increasing
1.6% from $927.7 million in the 1995 period. Segment operating margin rose to
9.6% of sales from 9.4% in the 1995 period.
INDUSTRY SEGMENTS
- -----------------
Tires
- -----
Sales in the third quarter of 1996 were $2.80 billion, decreasing 1.9% from
$2.85 billion in the 1995 period. In the nine months, sales of $8.40 billion
decreased .6% from $8.45 billion in 1995.
Sales in the quarter and nine months reflected increased tire unit volume
in Europe and Asia. Sales and tire unit volume in Latin America increased in the
quarter. Revenues in both periods were adversely affected by reduced sales to
original equipment vehicle manufacturers in North America, competitive pricing
pressures in the North American replacement market and unfavorable translation
due to the strengthening of the U.S. dollar versus various foreign currencies.
- 7 -
<PAGE> 9
The following table presents changes in tire unit sales:
<TABLE>
<CAPTION>
Increase (Decrease) in Company Tire Unit Sales-1996 vs. 1995
------------------------------------------------------------
Third Quarter Nine Months
------------- -----------
<S> <C> <C>
U.S. 0.1 % (1.7) %
International 12.9 % 12.6 %
Worldwide 6.1 % 4.8 %
</TABLE>
Worldwide original equipment tire unit sales increased in the quarter but
remained lower in the nine months, increasing in both periods in Europe and Asia
and in the quarter in Latin America. Original equipment tire unit sales were
lower in both periods in North America. Worldwide replacement tire unit sales
were higher in both periods, increasing in the United States, Europe, Asia and
Canada, and also increased in the nine months in Latin America.
Tire segment operating income in the third quarter of 1996 was $248.7
million, decreasing .8% from $250.7 million in the 1995 period. In the nine
months, operating income of $749.5 million decreased 1.3% from $759.6 million in
1995.
Operating income decreased in both the quarter and nine months due in part
to lower revenues and increased costs resulting from reductions in production
schedules. Operating income in both periods was favorably impacted by higher
tire unit sales in Europe and Asia, lower raw material costs and lower SAG.
Operating income in 1996 was reduced by the previously mentioned third quarter
consolidation and acquisition costs of $10.7 million and first half plant
closure and other expenses totaling $32.5 million.
General Products
- ----------------
Sales in the third quarter of 1996 were $440.3 million, increasing 4.3%
from $422.3 million in the 1995 period. In the nine months, sales were $1.35
billion in both 1996 and 1995.
Sales increased in the quarter and nine months in engineered products on
higher unit volume of automotive and industrial rubber products. Sales in
chemical products decreased in both periods due to lower selling prices and
reduced volume.
Operating income in the third quarter was $49.6 million, increasing 42.4%
from $34.9 million in the 1995 period. In the nine months, operating income of
$142.6 million increased 10.4% from $129.2 million in 1995.
Operating income increased in the quarter and nine months in engineered
products due to higher unit volume and ongoing cost containment measures.
Chemical operating income increased in both periods due primarily to lower raw
material prices. Chemical operating income was reduced by first half charges of
$5.2 million
- 8 -
<PAGE> 10
related to the previously mentioned discontinuance of PVC production and other
workforce reductions.
Oil Transportation
- ------------------
Sales in the third quarter of 1996 were $30.7 million, decreasing 4.8% from
$32.2 million in the 1995 period. In the nine months, sales were $96.9 million,
increasing 2.9% from $94.1 million in 1995.
Operating income in the third quarter was $15.3 million, decreasing 5.1%
from $16.1 million in the 1995 period. In the nine months, operating income was
$50.7 million, increasing 30.2% from $38.9 million in 1995.
Sales and operating income decreased in the quarter due primarily to lower
throughput. Both 1996 periods were favorably impacted by improved results in
crude oil purchasing, selling and exchanging activities, which resulted in part
from higher market prices. Operating income in 1995 was reduced by a first
quarter charge of $5.0 million for the writedown of surplus pipe and equipment.
GEOGRAPHIC SEGMENTS
- -------------------
U.S. Operations
- ---------------
Sales in the third quarter of 1996 were $1.78 billion, decreasing 2.9% from
$1.84 billion in the 1995 period. In the nine months, sales were $5.30 billion,
decreasing 3.7% from $5.50 billion in 1995.
Sales decreased in both the quarter and nine months due primarily to
reduced unit sales to original equipment vehicle manufacturers and competitive
tire pricing pressures in the replacement market. Sales of engineered products
were higher in both periods, while sales of chemical products were lower. Oil
transportation revenues were lower in the third quarter.
U.S. operating income in the third quarter of 1996 was $136.4 million,
decreasing 4.8% from $143.3 million in the 1995 period. In the nine months,
operating income of $396.7 million decreased 7.3% from $427.9 million in 1995.
Operating income decreased in the quarter and nine months due primarily to
the lower original equipment tire unit sales and pricing pressures in the
replacement tire market. Operating income was favorably impacted in both
periods by improved results in engineered products and chemical products, lower
raw material costs and lower SAG. Additionally, in the nine months
operating income
- 9 -
<PAGE> 11
benefited from improved results in oil transportation activities (which in the
1995 period were affected by the aforesaid $5.0 million charge) due primarily to
improved trading results. Operating income in 1996 was reduced by $6.8 million
of the previously mentioned third quarter consolidation charges and $12.6
million of first half facility consolidation and other expenses.
U.S. Contribution to Consolidated Segment Results
-------------------------------------------------
<TABLE>
<CAPTION>
3rd Quarter Nine Months
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales 54.6% 55.5% 53.9% 55.6%
Operating Income 43.5% 47.5% 42.1% 46.1%
</TABLE>
International Operations
- ------------------------
In Europe, sales in the third quarter of 1996 were $727.5 million,
increasing 3.0% from $706.0 million in the 1995 period. In the nine months,
sales were $2.26 billion, increasing 7.8% from $2.09 billion in 1995.
Sales in Europe increased in the quarter and nine months due primarily to
higher tire unit sales and the acquisition of a majority ownership interest in a
tire manufacturing facility in Poland. Revenues in both 1996 periods were
adversely affected by the strengthening of the U.S. dollar in 1996 versus
European currencies.
Third quarter operating income in Europe was $88.1 million, increasing
11.0% from $79.3 million in the 1995 period. In the nine months, operating
income of $254.8 million increased 9.8% from $232.0 million in 1995.
Operating income in Europe increased in the quarter and nine months due to
increased revenues, lower raw material costs and productivity improvements.
Operating income was reduced by a $15.0 million charge in the first half of 1996
related to the closure of the Greece tire manufacturing facility.
In Latin America, sales in the third quarter of 1996 were $378.9 million,
increasing .6% from $376.8 million in the 1995 period. In the nine months, sales
were $1.15 billion, decreasing 2.4% from $1.18 billion in 1995.
Sales in Latin America increased in the quarter due primarily to higher
tire unit sales, although revenues and tire unit sales in the nine months
remained below 1995's levels.
- 10 -
<PAGE> 12
Third quarter operating income in Latin America was $60.6 million,
increasing 25.5% from $48.2 million in the 1995 period. In the nine months,
operating income of $199.0 million increased 11.0% from $179.2 million in 1995.
Operating income in Latin America increased in both the quarter and nine
months due primarily to lower raw material costs and improved productivity.
Operating income in 1996 was reduced by $2.1 million of the previously mentioned
third quarter consolidation charges and $10.1 million of first half workforce
reduction and other expenses.
In Asia, sales in the third quarter of 1996 were $211.3 million, decreasing
2.6% from $216.9 million in the 1995 period. In the nine months, sales were
$629.5 million, increasing 3.1% from $610.3 million in 1995.
Third quarter operating income in Asia was $23.0 million, decreasing 5.9%
from $24.4 million in the 1995 period. In the nine months, operating income of
$74.2 million increased 11.6% from $66.5 million in 1995.
Sales and operating income in Asia decreased in the quarter and were
adversely affected in the nine months by the impact of lower price levels
realized by the natural rubber operations. Revenues in both periods were also
adversely affected by the strengthening of the U.S. dollar in 1996 versus Asian
currencies. Sales and operating income in the Asian tire business increased in
the quarter and nine months due to higher tire unit sales, lower raw material
costs and improved productivity. Operating income in 1996 was reduced by $1.8
million of the previously mentioned third quarter acquisition costs.
In Canada, sales in the third quarter of 1996 were $167.0 million, compared
to $169.8 million in the 1995 period. In the nine months, sales were $503.2
million, compared to $512.8 million in 1995.
Third quarter operating income in Canada was $5.5 million, compared to $6.5
million in the 1995 period. In the nine months, operating income was $18.1
million, compared to $22.1 million in 1995.
Sales and operating income in Canada decreased in the quarter despite
higher tire unit sales, due primarily to a change to a lower value product mix.
In the nine months, sales and operating income decreased due primarily to lower
tire unit sales volume.
- 11 -
<PAGE> 13
International Contribution to Consolidated Segment Results
----------------------------------------------------------
<TABLE>
<CAPTION>
3rd Quarter Nine Months
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales 45.4% 44.5% 46.1% 44.4%
Operating Income 56.5% 52.5% 57.9% 53.9%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash provided by operating activities was $344.9 million during the
first nine months of 1996. Working capital requirements increased for accounts
receivable, reflecting a worldwide shift in sales mix towards replacement tires.
Working capital requirements also increased due to higher quantities of finished
goods inventories compared to December 31, 1995, although finished goods
quantities decreased somewhat from June 30, 1996.
Net cash used in investing activities was $521.9 million during the first
nine months of 1996. Capital expenditures were $405.4 million, of which amount
$241.4 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 $665 million in 1996.
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.
<TABLE>
<CAPTION>
3rd Quarter Nine Months
(In millions) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Capital Expenditures $137.5 $148.4 $405.4 $373.5
Depreciation $129.2 $108.4 $355.2 $321.2
</TABLE>
Net cash provided by financing activities was $259.7 million during the
first nine months of 1996, primarily to support a portion of the previously
mentioned operating and investing activities.
<TABLE>
<CAPTION>
(Dollars in millions) 9/30/96 12/31/95 9/30/95
------- -------- -------
<S> <C> <C> <C>
Consolidated Debt $1,840.7 $1,546.7 $1,814.4
Debt/Debt+Equity 33.2% 32.0% 36.3%
</TABLE>
- 12 -
<PAGE> 14
The Company enters into interest rate contracts domestically in order to
manage the impact of fluctuations in interest rates on consolidated results of
operations and future cash outflows for interest. A summary of contracts in
place and related weighted average interest rates follows:
<TABLE>
<CAPTION>
(Dollars in millions) Fixed Rate Floating Rate
Contracts Contracts
--------- ---------
At September 30, 1996:
<S> <C> <C>
- Notional principal amount $ 175.0 $180.0
- Pay fixed rate 9.05 % -
- Receive variable LIBOR 5.71 % -
- Pay variable LIBOR - 5.66 %
- Receive fixed rate - 6.44 %
- Average years to maturity 0.8 5.7
- Fair value: (unfavorable) $ (4.4) $ (2.2)
Third quarter - Rate paid 9.05 % 5.53 %
- Rate received 5.57 % 6.44 %
Nine months - Rate paid 8.95 % 5.49 %
- Rate received 5.73 % 6.44 %
</TABLE>
Substantial short term and long term credit sources are available to the
Company globally under normal commercial practices. At September 30, 1996 the
Company had short term uncommitted credit arrangements totaling $2.3 billion, of
which $1.1 billion were unused, and long term credit arrangements totaling $1.9
billion, of which $1.2 billion were unused. In the third quarter, the Company
initiated a new commercial paper program, whereunder the Company may have
outstanding up to $550 million at any time.
In July 1996, the Company's revolving credit facility agreements,
consisting of a $900 million five year revolving credit facility and a $294
million 364-day revolving credit facility, were renegotiated primarily to extend
maturities and lower commitment and usage fees. Each facility agreement was
amended effective July 15, 1996 and is with 28 domestic and international banks.
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 commitment fee paid on the
entire amount of the commitment (whether or not borrowed) has been lowered to a
range of 7.5 to 15 basis points from 8 to 25 basis points. The usage fee on
amounts borrowed (other than on a competitive bid or prime rate basis) has been
lowered to a range of 15 to 30 basis points from 22 to 30 basis points. The
commitment and usage fees may fluctuate within these ranges quarterly based upon
the Company's performance as measured by defined ranges of leverage, and
currently are 10 and 20 basis points, respectively. Commitments under the $294
million 364-day credit facility agreement have been increased to $300
- 13 -
<PAGE> 15
million and are available until July 14, 1997, on which date this 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 commitment fee paid on the entire amount of the commitment
(whether or not borrowed) has been lowered to 8 basis points from 10 basis
points. The usage fee on amounts borrowed (other than on a competitive bid or
prime rate basis) has been lowered to 22 basis points from 35 basis points.
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 the Annual Report of The Goodyear Tire & Rubber
Company (the "Company") on Form 10-K for the year ended December 31, 1995 (the
"Annual Report"), wherein at Item 3, pages 14, 15, 16 and 17, the Company
reported certain legal proceedings. Reference is also made to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 (the "First
Quarter Report") and to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 (the "Second Quarter Report"). In the First Quarter
Report, at Item 1 of Part II, pages 12 and 13, the Company reported certain
developments regarding the legal proceedings described at paragraph (G) of Item
3 of the Annual Report. In the Second Quarter Report, at Item 1 of Part II, page
15, the Company reported additional information regarding the legal proceedings
described at paragraph (E) of Item 3 of the Annual Report.
The Company reports the following developments in respect of the legal
proceedings described at paragraph (E) of Item 3 of the Annual Report, as
supplemented by the Second Quarter Report:
On September 30, 1996, the Company entered into a settlement agreement
with the plaintiffs in Taylor Tire Company, et al. vs. Goodyear, a civil action
in the United States District Court for the Southern District of California
filed in July of 1994 against the Company on behalf of a class of plaintiffs
consisting of four named tire dealers who are customers of the Company and 253
other retailers located in the State of California who are, or were during the
relevant period, contract dealers or franchisees of the Company. As previously
reported in the Second Quarter Report, all claims made by 189 members of the
class were dismissed by the Court. The claims remaining relate to the failure of
the Company to file for an available exemption from registration as a franchisor
under the California Franchise Investment Law in respect of all 68 remaining
members of the class and a claim that the Company breached certain pricing
provisions of the franchise agreements between the Company and 36 of the members
of the class.
Pursuant to the terms of the settlement agreement, the plaintiff class
will release all claims against the Company and the Company, among other things,
will pay $600,000 into a settlement fund, implement an anticipated growth
discount program for all California contract dealers and franchisees for the
year 1997, provide each California Goodyear Franchise Tire Center the
opportunity to terminate its franchise and enter into a Goodyear Dealer Contract
without any penalty, and make various other commercial concessions relating to
the lease of real property and the time allowed for payments in respect of
certain past due amounts. The settlement is subject to the approval of the
Court.
- 15 -
<PAGE> 17
ITEM 2. CHANGES IN SECURITIES.
- ------- ----------------------
COMMON STOCK, WITHOUT PAR VALUE, OF THE GOODYEAR TIRE & RUBBER COMPANY
(THE "COMPANY"). On June 4, 1996, the Company adopted a new Preferred Stock
Purchase Rights Plan and declared a dividend distribution of one Preferred Stock
Purchase Right (the "Rights") on each share of the Common Stock, Without Par
Value, of the Company (the "Common Stock") to all shareholders of record at the
close of business on July 29, 1996, as previously reported at Item 5 of the
Company's Current Report on Form 8-K dated June 4, 1996 (the "Current Report").
The terms of the Rights are set forth in a Rights Agreement, dated June 4, 1994,
between the Company and First Chicago Trust Company (the "Rights Agreement").
Rights distributed pursuant to a rights agreement dated July 2, 1986 expired
without becoming exercisable on July 28, 1996.
Each 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 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 percent or more of the Common Stock. In the event
that any acquiring person or group acquires 15 percent or more of the Common
Stock, each 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. The Rights will expire on July 29, 2006, unless earlier redeemed
at $.001 per Right.
A copy of the Rights Agreement was filed as Exhibit 4(a) to the Current
Report and as Exhibit 1 to the Company's Registration Statement on Form 8-A
dated June 11, 1996 (File No. 1-1927) in respect of the Rights, which was
declared effective by the Securities and Exchange Commission on July 31, 1996. A
summary of the Rights, the form of which is included as Exhibit C to the Rights
Agreement, was mailed to each shareholder of record at July 29, 1996.
In connection with the adoption of the Preferred Stock Purchase Rights
Plan, on June 4, 1996, the Board of Directors of the Company amended the
Articles of Incorporation of the Company to fix certain of the terms of a
series of 7,000,000 shares of preferred stock, designated as Series B Preferred
Stock, Without Par Value. A copy of the Certificate of Amendment to the Amended
Articles of Incorporation of the Company, dated June 4, 1996, which sets forth
certain of the terms of said Series B Preferred Stock was filed as Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996.
- 16 -
<PAGE> 18
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 The
Goodyear Tire & Rubber Company during the quarter ended September 30, 1996.
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: October 23, 1996 By /s/ Robert W Tieken
------------------------------------
Robert W Tieken,
Executive Vice President
(Signing on behalf of Registrant as a duly
authorized officer of Registrant and signing
as the Principal Financial Officer of
Registrant.)
- 17 -
<PAGE> 19
THE GOODYEAR TIRE & RUBBER COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX OF EXHIBITS (1)
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------- -------
Table Item No.* Description of Exhibit Number Page
- --------------- ---------------------- ------ ----
<S> <C> <C>
3 ARTICLES OF INCORPORATION AND BY-LAWS
-------------------------------------
Certificate of Amended Articles of Incorporation 3.1
of Registrant, dated December 20, 1954, and
Certificate of Amendment to Amended Articles of
Incorporation of Registrant, 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
(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).
Code of Regulations of The Goodyear Tire & Rubber 3.2
Company, adopted November 22, 1955, as 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. 333- 1955).
4 INSTRUMENTS DEFINING
THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
--------------------
Conformed copy of Rights Agreement, dated as of 4.1
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, as amended by that
certain Amendment to Rights Agreement dated as of
April 6, 1993 between
- ----------
<FN>
*Pursuant to Item 601 of Regulation S-K.
</TABLE>
E-1
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------- -------
Table Item No.* Description of Exhibit Number Page
- --------------- ------------------------------------------------------ ------ ----
<S> <C> <C>
4 Registrant and First Chicago Trust Company of
New York, which Agreement expired on July 28, 1996
(incorporated by reference, filed as Exhibit 4.3 to
Registrant's Registration Statement on Form S-8, File
No. 33-65187).
Conformed copy of Rights Agreement, dated as of June 4.2
4, 1996, between Registrant and First Chicago Trust
Company of New York, Rights Agent (incorporated by
reference, filed 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).
Specimen nondenominational Certificate for shares of 4.3 X-4.3-1
the Common Stock, Without Par Value, of Registrant;
First Chicago Trust Company of New York as transfer
agent and registrar.
Conformed copy of Revolving Credit Facility 4.4
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).
Conformed copy of Replacement and Restatement 4.5
Agreement, dated as of July 15, 1996, among
Registrant, the Lenders named therein and The Chase
Manhattan Bank (formerly Chemical Bank), as Agent
(incorporated by reference, filed as Exhibit 4.5 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, File 1-1927).
- ----------
<FN>
*Pursuant to Item 601 of Regulation S-K.
</TABLE>
E-2
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------- -------
Table Item No.* Description of Exhibit Number Page
- --------------- ------------------------------------------------------ ------ ----
<S> <C> <C>
4 No other 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 September
30, 1996. In accordance with paragraph (iii) to Part 4
of Item 601 of Regulation S-K, agreements and
instruments defining the rights of holders of long
term debt entered into during the quarter ended
September 30, 1996 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.
11 STATEMENT RE COMPUTATION OF
PER SHARE EARNINGS
----------------------------------------------------
Statement setting forth the computation of per 11 X-11-1
share earnings.
27 FINANCIAL DATA SCHEDULE 27 X-27-1
----------------------------------------------------
- ----------
<FN>
*Pursuant to Item 601 of Regulation S-K.
</TABLE>
E-3
<PAGE> 1
EXHIBIT 4.3
COMMON STOCK COMMON STOCK
M NUMBER SHARES
[ GOODYEAR LOGO ]
INCORPORATED UNDER THE LAWS OF THE STATE OF OHIO
THE GOODYEAR TIRE & RUBBER COMPANY
THIS CERTIFICATE IS TRANSFERABLE IN THE CITY OF NEW YORK.
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 382550 10 1
This is to Certify that
is the owner of
FULL-PAID AND NON-ASSESSABLE SHARES WITHOUT PAR VALUE OF THE COMMON STOCK OF
The Goodyear Tire & Rubber Company transferable on the books of the Corporation
in person or by duly authorized attorney upon surrender of this certificate
properly endorsed. This certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.
Witness the seal of the Corporation and the signatures of its duly
authorized officers.
Dated The Goodyear Tire & Rubber Company.
/s/ James Boyazis /s/ Samir Gibara
SECRETARY CHAIRMAN OF THE BOARD
COUNTERSIGNED AND REGISTERED:
FIRST CHICAGO TRUST COMPANY
OF NEW YORK TRANSFER AGENT
BY AND REGISTRAR.
AUTHORIZED SIGNATURE.
X-4.3-1
<PAGE> 2
THE GOODYEAR TIRE & RUBBER COMPANY
THE GOODYEAR TIRE & RUBBER COMPANY WILL MAIL, WITHOUT CHARGE, TO THE
REGISTERED HOLDER OF THIS CERTIFICATE A COPY OF THE EXPRESS TERMS (AS SET FORTH
IN THE ARTICLES OF INCORPORATION AND THE CODE OF REGULATIONS OF THE
CORPORATION) OF THE SHARES OF THE COMMON STOCK OF THE CORPORATION AND OF OTHER
CLASSES OR SERIES OF SHARES, IF ANY, WHICH THE CORPORATION IS AUTHORIZED TO
ISSUE WITHIN FIVE DAYS AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR, ADDRESSED
TO THE SECRETARY OF THE CORPORATION, AKRON, OHIO 44316.
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between THE GOODYEAR TIRE &
RUBBER COMPANY and FIRST CHICAGO TRUST COMPANY OF NEW YORK, as Rights Agent,
dated as of June 4, 1996 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on file at the
principal executive offices of THE GOODYEAR TIRE & RUBBER COMPANY. Under
certain circumstances, as set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced by this
certificate. THE GOODYEAR TIRE & RUBBER COMPANY will mail to the holder of this
certificate a copy of the Rights Agreement (as in effect on the date of mailing)
without charge promptly after a receipt of a written request therefor. Under
certain circumstances, Rights which are or were beneficially owned by Acquiring
Persons or their Affiliates or Associates (as such terms are defined in the
Rights Agreement), and any subsequent holder of such Rights, may become null
and void.
Explanation of Abbreviations:
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM as tenants in common JT TEN as joint tenants with right
TEN ENT as tenants by the entireties of survivorship and not as
tenants in common
UNIF GIFT
MIN ACT Uniform Gifts to Minors Act
Additional abbreviations may also be used though not in the above list.
==============================================================================
ASSIGNMENT
For value received, ________hereby sell, assign and transfer unto
(Please Print or Type Name and Address of Assignee)
Name Insert here Social Security or Other
Identifying Number of Assignee
------------------------------------
| |
- ------------------------------------------------------------------------------
Street
----------
| SHARES |
- ------------------------------------------------------------------------------
City, State and Zip Code | |
| |
==============================================================================
(Please Print or Type Name and Address of Assignee)
Name Insert here Social Security or Other
Identifying Number of Assignee
------------------------------------
| |
- ------------------------------------------------------------------------------
Street
----------
| SHARES |
- ------------------------------------------------------------------------------
City, State and Zip Code | |
| |
==============================================================================
of the capital stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ___________________________________________
__________________________________________ Attorney to transfer the said stock
on the books of the within named Corporation with full power of substitution in
the premises.
----------
Issue certificate to the same owner as shown on the face | SHARES |
of this certificate for any shares not assigned above. ----------
| |
----------
Dated ______________________
X ___________________________________________________
(The signature here must correspond with the name as
written upon the face of the certificate in every
particular, without alteration or enlargement or
any change whatever.)
SIGNATURE GUARANTEED:
X-4.3-2
<PAGE> 1
EXHIBIT 11
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.
(Dollars in millions, except per share)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary:
Net Income $170.2 $157.5 $509.9 $464.6
Adjusted average number of
shares outstanding 156,719,165 154,286,528 156,626,470 153,593,401
PRIMARY EARNINGS PER SHARE $1.09 $1.02 $3.26 $3.03
Fully Diluted:
Net Income $170.2 $157.5 $509.9 $464.6
Adjusted average number
of shares outstanding 156,742,932 154,286,528 156,626,470 153,836,488
FULLY DILUTED EARNINGS PER SHARE $1.09 $1.02 $3.26 $3.02
</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 (which were distributed as a dividend to shareholders of
record on July 29, 1996) become exercisable and any shares of either Series
B Preferred Stock or the Common Stock of Registrant are issued upon the
exercise of, or in exchange for, such Rights.
Reference is made to Registrant's Registration Statement on Form 8-A (File
No. 2-1927) dated June 11, 1996 relating to Registrant's Preferred Stock
Purchase Rights and the related Rights Agreement dated as of June 4, 1996,
regarding the currently effective Rights Plan. Reference is also made to Note
18, captioned "Preferred Stock Purchase Rights Plan", in the Notes to Financial
Statements set forth in Item 8 of Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995 at page 49, in respect of the Preferred Stock
Purchase Rights which expired without becoming exercisable on July 28, 1996.
X - 11 - 1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information abstracted 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
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 324
<SECURITIES> 0
<RECEIVABLES> 2,035
<ALLOWANCES> 63
<INVENTORY> 1,891
<CURRENT-ASSETS> 4,388
<PP&E> 9,777
<DEPRECIATION> 5,047
<TOTAL-ASSETS> 10,503
<CURRENT-LIABILITIES> 3,041
<BONDS> 1,235
0
0
<COMMON> 155
<OTHER-SE> 3,556
<TOTAL-LIABILITY-AND-EQUITY> 10,503
<SALES> 9,843
<TOTAL-REVENUES> 9,843
<CGS> 7,560
<TOTAL-COSTS> 7,560
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> 761
<INCOME-TAX> 251
<INCOME-CONTINUING> 510
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 510
<EPS-PRIMARY> 3.29
<EPS-DILUTED> 0
</TABLE>
