<PAGE> 1
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
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 June 30, 1997: 155,974,736
==============================================================================
<PAGE> 2
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Unaudited
<TABLE>
<CAPTION>
(In millions, except per share)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $ 3,315.5 $ 3,329.5 $ 6,548.7 $ 6,575.0
Cost of Goods Sold 2,532.8 2,534.3 4,993.8 5,015.5
Selling, Administrative and General Expense 463.3 463.4 930.3 934.4
Interest Expense 32.5 35.4 63.5 67.4
Other (Income) Expense 3.3 6.9 10.9 20.9
Foreign Currency Exchange (3.1) 4.7 (6.2) 6.6
Minority Interest in Net Income of Subsidiaries 11.7 11.3 23.2 23.2
--------- --------- --------- ---------
Income before Income Taxes 275.0 273.5 533.2 507.0
United States and Foreign Taxes on Income 82.8 85.6 170.6 167.3
--------- --------- --------- ---------
NET INCOME $ 192.2 $ 187.9 362.6 339.7
========= =========
Retained Earnings at Beginning of Period 2,603.0 2,661.0
CASH DIVIDENDS (87.6) (77.4)
--------- ---------
Retained Earnings at End of Period $ 2,878.0 $ 2,923.3
========= =========
PER SHARE OF COMMON STOCK:
NET INCOME $ 1.23 $ 1.22 $ 2.32 $ 2.20
========= ========= ========= =========
CASH DIVIDENDS $ 0.28 $ 0.25 $ 0.56 $ 0.50
========= ========= ========= =========
Average Shares Outstanding 155.8 155.1 156.1 154.6
</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)
June 30, December 31,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 240.7 $ 238.5
Accounts and notes receivable,
less allowance (1997-$54.1, 1996-$58.1) 1,985.3 1,706.0
Inventories:
Raw materials 311.3 288.4
Work in process 80.2 77.2
Finished product 1,481.1 1,408.6
--------- ---------
1,872.6 1,774.2
Prepaid expenses and other current assets 314.6 306.3
--------- ---------
Total Current Assets 4,413.2 4,025.0
Investments in Affiliates, at equity 125.5 140.3
Long Term Accounts and Notes Receivable 192.8 216.2
Deferred Charges 1,166.0 1,059.4
Other Assets 178.0 163.0
Properties and Plants,
less accumulated depreciation (1997-$5,031.7, 1996-$4,935.8) 4,075.2 4,067.9
--------- ---------
TOTAL ASSETS $10,150.7 $ 9,671.8
========= =========
LIABILITIES:
Current Liabilities:
Accounts payable - trade $ 1,111.9 $ 1,096.7
Compensation and benefits 757.6 742.5
Other current liabilities 290.7 300.4
United States and foreign taxes 411.3 382.1
Notes payable to banks 497.0 218.1
Long term debt due within one year 33.5 26.4
--------- ---------
Total Current Liabilities 3,102.0 2,766.2
Compensation and Benefits 1,955.7 1,988.1
Long Term Debt 1,084.2 1,132.2
Other Long Term Liabilities 234.6 264.9
Minority Equity in Subsidiaries 282.1 241.3
--------- ---------
TOTAL LIABILITIES 6,658.6 6,392.7
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 155,974,736 (156,049,974 in 1996)
after deducting 39,703,932 treasury shares (39,628,694 in 1996) 156.0 156.1
Capital Surplus 1,033.4 1,059.4
Retained Earnings 2,878.0 2,603.0
Foreign Currency Translation and Other Adjustments (575.3) (539.4)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 3,492.1 3,279.1
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,150.7 $ 9,671.8
========= =========
</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>
(In millions) Six Months Ended
June 30,
1997 1996
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $362.6 $339.7
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation 237.4 226.0
Accounts and notes receivable (279.4) (425.4)
Inventories (72.6) (187.0)
Accounts payable-trade (32.5) (114.3)
Other assets and liabilities 33.2 98.0
------ ------
Total adjustments (113.9) (402.7)
------ ------
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES 248.7 (63.0)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (230.7) (267.9)
Other transactions (99.3) (75.0)
------ ------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (330.0) (342.9)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term debt incurred 343.5 595.2
Short term debt paid (70.5) (102.8)
Long term debt incurred 7.7 6.3
Long term debt paid (72.8) (33.2)
Common stock issued 52.3 53.7
Common stock purchased (78.4) --
Dividends paid (87.6) (77.4)
------ ------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 94.2 441.8
Effect of Exchange Rate Changes on Cash and Cash Equivalents (10.7) (25.5)
------ ------
Net Change in Cash and Cash Equivalents 2.2 10.4
Cash and Cash Equivalents at Beginning of the Period 238.5 268.3
------ ------
Cash and Cash Equivalents at End of the Period $240.7 $278.7
====== ======
</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
NON-CONSOLIDATED OPERATIONS - SOUTH PACIFIC TYRE
- ------------------------------------------------
In addition to its consolidated operations in the Asia region, the Company
also owns a 50% interest in South Pacific Tyres Ltd (SPT), a partnership with
Pacific Dunlop Ltd of Australia. SPT is the largest tire manufacturer, marketer
and exporter in Australia and New Zealand. The Company is required to use the
equity method to account for its interest in the results of operations and
financial position of SPT.
The following table presents sales and operating income of the Company's
consolidated Asian operations and 100% of the operations of SPT:
<TABLE>
<CAPTION>
(In millions) THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
-------------------------- ------------------------
Asia Asia
Segment SPT Total Segment SPT Total
------- --- ----- ------- --- -----
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
1997 $209.4 $204.2 $413.6 $408.7 $387.8 $796.5
1996 215.2 209.1 424.3 418.2 402.9 821.1
OPERATING PROFIT:
1997 $ 22.8 $ 20.3 $ 43.1 $ 50.3 $ 35.1 $ 85.4
1996 25.7 21.5 47.2 51.2 39.0 90.2
</TABLE>
SUPPLEMENTAL INFORMATION ABOUT NONCASH INVESTING ACTIVITIES
- -----------------------------------------------------------
In the first quarter of 1997 the Company acquired a 60% equity interest in
a South African tire and industrial rubber products business, and assumed $29
million of debt under the terms of the purchase agreement.
In the first quarter of 1996, the Company increased its ownership of a
Polish tire manufacturer from 32.7% to 50.8% by purchasing original issue shares
of this tire manufacturer. This investment, which had been accounted for using
the equity method, is now accounted for as a consolidated subsidiary.
Information in the Consolidated Statement of Cash Flows is presented net of
the effects of these transactions.
PER SHARE OF COMMON STOCK
- -------------------------
Per share amounts have been computed based on the average number of common
shares outstanding.
ADJUSTMENTS
- -----------
All adjustments, consisting of normal recurring adjustments, necessary for
a fair statement of the results of these unaudited interim periods have been
included.
RECLASSIFICATION
- ----------------
Certain items previously reported in specific financial statement captions
have been reclassified to conform with the 1997 presentation.
- 4 -
<PAGE> 6
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
Unaudited
<TABLE>
<CAPTION>
(In millions) Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
INDUSTRY SEGMENTS
- -----------------
<S> <C> <C> <C> <C>
Sales to Unaffiliated Customers:
Tires $2,570.9 $2,549.8 $5,112.4 $5,090.0
Related products and services 258.2 279.2 468.8 512.8
-------- -------- -------- --------
Total Tires 2,829.1 2,829.0 5,581.2 5,602.8
General Products 460.8 466.2 917.4 906.0
Oil Transportation 25.6 34.3 50.1 66.2
-------- -------- -------- --------
NET SALES $3,315.5 $3,329.5 $6,548.7 $6,575.0
======== ======== ======== ========
Income:
Tires $ 265.1 $ 248.4 $ 532.0 $ 500.8
General Products 58.5 51.3 104.8 93.0
Oil Transportation 15.6 18.7 31.4 35.4
-------- -------- -------- --------
OPERATING INCOME 339.2 318.4 668.2 629.2
Exclusions from operating income (64.2) (44.9) (135.0) (122.2)
-------- -------- -------- --------
Income before Income Taxes $ 275.0 $ 273.5 $ 533.2 $ 507.0
======== ======== ======== ========
GEOGRAPHIC SEGMENTS
- -------------------
Sales to Unaffiliated Customers:
United States $1,720.4 $1,788.1 $3,432.6 $3,518.8
Europe 805.3 766.2 1,569.8 1,530.0
Latin America 401.9 390.4 785.0 771.8
Asia 209.4 215.2 408.7 418.2
Canada 178.5 169.6 352.6 336.2
-------- -------- -------- --------
NET SALES $3,315.5 $3,329.5 $6,548.7 $6,575.0
======== ======== ======== ========
Income:
United States $ 138.6 $ 131.8 $ 280.8 $ 260.3
Europe 91.7 87.3 171.3 166.7
Latin America 71.8 67.2 140.1 138.4
Asia 22.8 25.7 50.3 51.2
Canada 14.3 6.4 25.7 12.6
-------- -------- -------- --------
OPERATING INCOME $ 339.2 $ 318.4 $ 668.2 $ 629.2
======== ======== ======== ========
</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 second quarter of 1997 were $3.32 billion, compared to $3.33
billion in the 1996 quarter. Net income in the quarter was $192.2 million ($1.23
per share), increasing 2.3% from net income of $187.9 million ($1.22 per share)
in 1996.
In the six months, sales were $6.55 billion, compared to $6.57 billion in
1996. Net income of $362.6 million ($2.32 per share) increased 6.7% from net
income of $339.7 million ($2.20 per share) in the 1996 period.
Worldwide tire unit sales in the second quarter and six months increased
4.4% and 4.0%, respectively, from 1996's levels, and unit sales of other
automotive and industrial rubber products were higher in both periods. Worldwide
original equipment volume increased significantly in both periods, although
replacement volume and pricing remained soft. Revenues in both periods reflected
continued worldwide competitive pricing pressures, a shift in sales mix towards
original equipment tires and the strengthening of the U.S. dollar in 1997 versus
European and Asian currencies. In addition, results were adversely affected by a
strike against the Company by the United Steel Workers of America,
A.F.L.-C.I.O.-C.L.C. (USWA), as discussed below, and other strikes against
various U.S. original equipment manufacturers. Competitive pricing pressures are
expected to continue throughout 1997.
Cost of goods sold in the second quarter of 1997 increased to 76.4% of
sales from 76.1% in the 1996 quarter, and was 76.3% of sales in the first six
months of 1997 and 1996. Both 1997 periods benefited from lower raw material
costs and the effects of currency translation compared to the prior year. Costs
in 1997 were adversely affected by an 18-day strike against the Company by the
USWA at 10 U.S. tire and engineered products manufacturing facilities, which
costs were not fully recovered through productivity gains.
-6-
<PAGE> 8
Other (income) and expense in the first six months of 1997 decreased versus
last year's six months due primarily to the inclusion in the 1996 period of a
$6.5 million charge related to improvements in manufacturing efficiencies in
Brazil. In addition, the second quarter of 1996 included a net pretax gain of
$1.6 million, comprised of charges totaling $31.2 million related to
rationalizations and other provisions and a gain of $32.8 million on the sale of
business property in Asia.
Foreign currency exchange expense was lower in the six months due primarily
to the favorable impact of the strengthening of the U.S. dollar on the Company's
net currency exposures. Net income in the second quarter and six months also
benefited from a lower effective tax rate compared to the 1996 periods.
SEGMENT INFORMATION
- -------------------
Segment operating income in the second quarter of 1997 was $339.2 million,
increasing 6.5% from $318.4 million in the 1996 quarter. Segment operating
margin rose to 10.2% of sales from 9.6% in the 1996 period.
In the six months, segment operating income was $668.2 million, increasing
6.2% from $629.2 million in the 1996 period. Segment operating margin rose to
10.2% of sales from 9.6% in the 1996 six months.
INDUSTRY SEGMENTS
- -----------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Segment Contribution
to Consolidated Sales:
Tires 85.3% 85.0% 85.2% 85.2%
General Products 13.9 14.0 14.0 13.8
Oil Transportation .8 1.0 .8 1.0
Segment Operating Margin:
Tires 9.4% 8.8% 9.5% 8.9%
General Products 12.7 11.0 11.4 10.3
Oil Transportation 60.9 54.5 62.7 53.5
Consolidated 10.2 9.6 10.2 9.6
</TABLE>
- 7 -
<PAGE> 9
TIRES
- -----
Sales in the second quarter of 1997 of $2.83 billion were flat compared to
the 1996 period. In the six months, sales of $5.58 billion decreased slightly
from $5.60 billion in 1996.
Unit sales in both the quarter and six months increased in all
international regions, and were higher in the U.S. in the six months. Revenues
reflected worldwide competitive pricing pressures, a shift in worldwide unit
sales mix towards original equipment tires, the strengthening of the U.S. dollar
versus currencies in Europe and Asia and reduced demand in the U.S. resulting
from strikes against original equipment manufacturers.
The following table presents changes in tire unit sales:
Increase (Decrease) in Company Tire Unit Sales-1997 vs. 1996
------------------------------------------------------------
<TABLE>
<CAPTION>
Second Quarter Six Months
-------------- ----------
<S> <C> <C>
U.S. (.8)% 1.2%
International 9.8 6.8
Worldwide 4.4 4.0
</TABLE>
Tire segment operating income in the second quarter of 1997 was $265.1
million, increasing 6.7% from $248.4 million in the 1996 period. In the six
months, operating income of $532.0 million increased 6.2% from $500.8 million in
1996.
Operating income in both the quarter and six months reflected lower raw
material costs, but was adversely affected by increased costs and lower revenues
resulting from the previously discussed strike against the Company. Operating
income in the 1996 quarter and six months was reduced by charges totaling $26.9
million and $32.5 million, respectively, related to rationalizations and other
provisions and improvements in manufacturing efficiencies.
GENERAL PRODUCTS
- ----------------
Sales in the second quarter of 1997 were $460.8 million, decreasing 1.1%
from $466.2 million in the 1996 period. In the six months, sales of $917.4
million increased 1.3% from $906.0 million in 1996.
Sales increased in the quarter and six 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.
- 8 -
<PAGE> 10
Operating income in the second quarter was $58.5 million, increasing 14.2%
from $51.3 million in the 1996 period. In the six months, operating income of
$104.8 million increased 12.7% from $93.0 million in 1996.
Operating income increased in the quarter and six months in engineered
products due to lower raw material costs and ongoing cost containment measures.
Chemical operating income increased in both periods due primarily to lower
manufacturing costs and a more favorable product mix.
Operating income in the 1996 quarter and six months was reduced by charges
totaling $4.3 million and $5.2 million, respectively, related to
rationalizations and other provisions and improvements in manufacturing
efficiencies.
OIL TRANSPORTATION
- ------------------
Sales in the second quarter of 1997 were $25.6 million, decreasing 25.4%
from $34.3 million in the 1996 period. In the six months, sales were $50.1
million, decreasing 24.4% from $66.2 million in 1996.
Operating income in the second quarter was $15.6 million, decreasing 16.7%
from $18.7 million in the 1996 period. In the six months, operating income was
$31.4 million, decreasing 11.4% from $35.4 million in 1996.
Sales and operating income decreased in the quarter and six months due
primarily to lower throughput and reduced spreads in purchasing, selling and
exchanging activities. Margins were favorably impacted by lower depreciation
expense resulting from the writedown of the All American Pipeline System and
related assets in the fourth quarter of 1996.
- 9 -
<PAGE> 11
GEOGRAPHIC SEGMENTS
- -------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Segment Contribution
to Consolidated Sales:
United States 51.9% 53.7% 52.4% 53.5%
Europe 24.3 23.0 24.0 23.3
Latin America 12.1 11.7 12.0 11.7
Asia 6.3 6.5 6.2 6.4
Canada 5.4 5.1 5.4 5.1
Segment Operating Margin:
United States 8.1% 7.4% 8.2% 7.4%
Europe 11.4 11.4 10.9 10.9
Latin America 17.9 17.2 17.8 17.9
Asia 10.9 11.9 12.3 12.2
Canada 8.0 3.8 7.3 3.7
Consolidated 10.2 9.6 10.2 9.6
</TABLE>
In the United States, sales in the second quarter of 1997 were $1.72
billion, decreasing 3.8% from $1.79 billion in the 1996 period. In the six
months, sales of $3.43 billion decreased 2.4% from $3.52 billion in 1996.
Unit sales of tires and engineered products in the U.S. decreased in the
quarter but were higher in the six months. Revenues decreased in both periods
due primarily to competitive tire pricing pressures, reduced volume in chemical
products, lower revenues in oil transportation operations and the effects of the
strike against the Company and strikes against U.S. original equipment
manufacturers.
U.S. operating income in the second quarter of 1997 was $138.6 million,
increasing 5.3% from $131.8 million in the 1996 period. In the six months,
operating income of $280.8 million increased 7.9% from $260.3 million in 1996.
Operating income in the quarter and six months reflected lower raw material
costs, lower SAG and the effects of cost containment measures, but was adversely
affected in both periods by the previously mentioned strikes. Operating income
in both the 1996 quarter and six months was reduced by charges totaling $12.6
million related to rationalizations and other provisions.
In Europe, sales in the second quarter of 1997 were $805.3 million,
increasing 5.1% from $766.2 million in the 1996 period. In the six months, sales
of $1.57 billion increased 2.6% from $1.53 billion in 1996.
- 10 -
<PAGE> 12
Second quarter operating income in Europe was $91.7 million, increasing
5.0% from $87.3 million in the 1996 period. In the six months, operating income
of $171.3 million increased 2.7% from $166.7 million in 1996. Operating income
in both the second quarter and six months of 1996 was reduced by a $15.0 million
charge related to rationalizations and other provisions.
Sales and operating income in Europe were favorably impacted in both 1997
periods by the acquisition of a majority interest in tire and engineered
products manufacturing and distribution operations in South Africa. Revenues
were adversely affected by currency translation and competitive pricing
pressures. Operating income benefited from lower raw material costs and
productivity improvements.
In Latin America, sales in the second quarter of 1997 were $401.9 million,
increasing 3.0% from $390.4 million in the 1996 period. In the six months, sales
of $785.0 million increased 1.7% from $771.8 million in 1996.
Second quarter operating income in Latin America was $71.8 million,
increasing 6.7% from $67.2 million in the 1996 period. In the six months,
operating income of $140.1 million increased 1.2% from $138.4 million in 1996.
Operating income in the 1996 quarter and six months was reduced by charges
totaling $3.6 million and $10.1 million, respectively, related to
rationalizations and other provisions and improvements in manufacturing
efficiencies.
Sales and operating income in Latin America were favorably impacted in the
quarter and six months by higher unit sales of tires and engineered products,
lower raw material costs and the effects of ongoing cost containment measures.
Results were adversely affected by competitive pricing pressures.
In Asia, sales in the second quarter of 1997 were $209.4 million,
decreasing 2.7% from $215.2 million in the 1996 period. In the six months, sales
of $408.7 million decreased 2.3% from $418.2 million in 1996.
Second quarter operating income in Asia was $22.8 million, decreasing 11.6%
from $25.7 million in the 1996 period. In the six months, operating income of
$50.3 million decreased 1.9% from $51.2 million in 1996.
Tire unit sales in Asia increased and operating income in the Asian tire
business was higher in both the second quarter and six months, reflecting lower
raw material costs and the effects of cost containment and productivity measures
on manufacturing costs and SAG. Sales and operating income in the segment
decreased in both periods due primarily to the strengthening of the U.S. dollar
versus Asian currencies and lower results in natural rubber operations.
- 11 -
<PAGE> 13
Sales and operating income of the Asia segment reflect the results of the
Company's majority-owned tire business and other operations in the region,
principally the engineered products and natural rubber businesses. In addition,
the Company owns a 50% interest in South Pacific Tyres Ltd (SPT), the largest
tire manufacturer, marketer and exporter in Australia and New Zealand. Results
of operations of SPT are not reported in segment results, and are reflected in
the Company's consolidated statement of income using the equity method.
The following table presents the sales and operating income of the
Company's Asian segment together with 100% of the sales and operating income of
SPT:
<TABLE>
<CAPTION>
(In millions) Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales:
Asia Segment $ 209.4 $ 215.2 $ 408.7 $ 418.2
SPT 204.2 209.1 387.8 402.9
-------- -------- -------- --------
Total $ 413.6 $ 424.3 $ 796.5 $ 821.1
Operating Income:
Asia Segment $ 22.8 $ 25.7 $ 50.3 $ 51.2
SPT 20.3 21.5 35.1 39.0
-------- -------- -------- --------
Total $ 43.1 $ 47.2 $ 85.4 $ 90.2
</TABLE>
In Canada, sales in the second quarter of 1997 were $178.5 million,
increasing 5.3% from $169.6 million in the 1996 period. In the six months, sales
of $352.6 million increased 4.9% from $336.2 million in 1996.
Second quarter operating income in Canada was $14.3 million, compared to
$6.4 million in the 1996 period. In the six months, operating income of $25.7
million increased from $12.6 million in 1996.
Sales and operating income in Canada increased in both periods, reflecting
higher unit sales of tires and engineered products due in part to the USWA
strike in the U.S., and lower raw material costs.
- 12-
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash provided by operating activities was $248.7 million during the
first six months of 1997, as reported on the Consolidated Statement of Cash
Flows. Working capital requirements increased for accounts receivable and
inventories, yet remained significantly lower than requirements in 1996.
Net cash used in investing activities was $330.0 million during the first
six months of 1997. Capital expenditures were $230.7 million, primarily for
plant modernizations and expansions and new tire molds, and are expected to
total $675 million in 1997.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(In millions) 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Capital Expenditures $ 136.3 $ 140.0 $ 230.7 $ 267.9
Depreciation 121.3 114.4 237.4 226.0
</TABLE>
Other investing activities included the Company's first quarter acquisition
of a majority ownership interest in tire and engineered products manufacturing
and distribution operations in South Africa.
Net cash provided by financing activities was $94.2 million during the
first six months of 1997.
(Dollars in millions) 6/30/97 12/31/96 6/30/96
------- -------- -------
Consolidated Debt $1,614.7 $1,376.7 $1,995.6
Debt/Debt+Equity 31.6% 29.6% 35.9%
During the second quarter of 1997, 478,200 shares of Common Stock of the
Company were repurchased under the Company's $600 million three-year repurchase
program, at an average cost of $51.93. At June 30, 1997, 1,478,200 shares have
been repurchased under the February 1997 plan at an average cost of $53.06.
The Company actively manages its fixed and floating rate debt mix, within
defined limitations, using refinancings and unleveraged interest rate swaps. The
Company enters into fixed and floating interest rate swaps to alter its exposure
to the impact of changing interest rates. At June 30, 1997 the interest rate on
53% of the Company's debt was fixed by either the nature of the obligation or
through the interest rate swaps.
- 13 -
<PAGE> 15
Interest rate swaps in place and related weighted average interest rates
follow:
<TABLE>
<CAPTION>
(Dollars in millions) Fixed Rate Floating Rate
Contracts Contracts
---------- --------------
June 30, 1997:
<S> <C> <C>
- - Notional principal amount $ 150.0 $ 110.0
- - Pay fixed rate 7.16% --
- - Receive variable LIBOR 5.87 --
- - Pay variable LIBOR -- 5.75%
- - Receive fixed rate -- 6.24
- - Average years to maturity 2.7 6.2
- - Fair value: favorable (unfavorable) $ (0.2) $ 1.3
- - Carrying amount: asset (liability) (0.5) 1.0
Second quarter - Rate paid 7.52% 5.64%
- Rate received 5.72 6.24
Six months - Rate paid 7.75 5.61
- Rate received 5.67 6.24
</TABLE>
Fixed rate contracts with notional principal amounts totaling $100 million
matured in the second quarter of 1997.
Substantial short term and long term credit sources are available to the
Company globally under normal commercial practices. At June 30, 1997 the Company
had short term uncommitted credit arrangements totaling $1.53 billion, of which
$789 million were unused. The Company also had available long term credit
arrangements at June 30, 1997 totaling $2.07 billion, of which $1.2 billion were
unused.
In order to reduce the impact of changes in foreign exchange rates on
consolidated results of operations and future foreign currency denominated cash
flows, the Company was a party to various forward exchange contracts at June 30,
1997. These contracts reduce exposure to currency movements affecting existing
foreign currency denominated assets, liabilities and firm commitments. The
contract maturities match the maturities of the currency positions. The future
value of these contracts and the related currency positions are subject to
offsetting market risk resulting from foreign currency exchange rate volatility.
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
FORWARD-LOOKING INFORMATION - SAFE HARBOR STATEMENT
Certain information set forth herein (other than historical data and
information) may constitute forward-looking statements regarding events and
trends which may affect the Company's future operating results and financial
position. The words "estimate," "expect," "intend" and "project," as well as
other words or expressions of similar meaning, are intended to identify
forward-looking statements. Readers are cautioned not to place undue reliance
on forward-looking statements, which speak only as of the date of this
quarterly report. Such statements are inherently uncertain, are subject to
risks and should be viewed with caution. Actual results and experience may
differ materially from the forward-looking statements as a result of many
factors, including: changes in economic conditions in the various markets
served by the Company's operations; increased competitive activity;
fluctuations in raw material and energy prices; changes in the monetary
policies of various countries where the Company has significant operations; and
other unanticipated events and conditions. It is not possible to foresee or
identify all such factors. The Company makes no commitment to update any
forward-looking statement, or to disclose any facts, events or circumstances
after the date hereof that may affect the accuracy of any forward-looking
statement.
- 15 -
<PAGE> 17
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, 1996 (the
"Annual Report"), wherein at Item 3, pages 13, 14, 15, and 16, the Company
reported certain legal proceedings. The Company reports the following
developments in respect of one of the legal proceedings described at Item 3 of
the Annual Report.
As reported at paragraph (C) of Item 3 of the Annual Report, in
September of 1990, a civil action, Eastman Kodak Company, et al. v. Goodyear, et
al. (No. CIV-2-90-221), was filed by Eastman in the United States District Court
for the Eastern District of Tennessee, Northeastern Division, whereunder Eastman
alleged infringement of a patent, which expired in December of 1994, in respect
of certain processes used in the manufacture of polyester resin on ten
production lines at the Pt. Pleasant, West Virginia polyester resin plant owned
and operated by the Company until December 18, 1992, when it was sold to Shell
Oil Company. Eastman sought monetary damages trebled for alleged willfulness,
interest and costs. The Company counterclaimed against Eastman alleging, among
other things, antitrust law violations, which counterclaims were dismissed by
the trial court. The trial court also ruled that the patent did not cover the
processes used in eight of the plant's production lines and, therefore,
dismissed all infringement claims except with respect to two of the plant's
production lines. On April 28, 1995, a jury rendered a verdict finding liability
and assessing damages, having decided that the Company and Shell had infringed
the patent in the operation of said two production lines but that such
infringement was not willful. A judgment of $12,000,000, plus prejudgment and
postjudgment interest thereon (approximately $8,500,000 through June 30, 1997)
and court costs, was entered against the Company. The Company and Eastman
appealed to the Court of Appeals, Federal Circuit, which affirmed the decisions
of the trial court on May 26, 1997, except that the Company's tort claim was
reinstated. On June 3, 1997, the Company petitioned the Court of Appeals for
Rehearing In Banc, which appeal was denied on July 2, 1997. The Company is in
the process of determining whether to appeal to the United States Supreme Court,
pursue the tort claim in the District Court, or both, or to terminate its
defense of this action. Review of this civil action by the Supreme Court would
be at its discretion.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
The Annual Meeting of Shareholders of the Company was held on April 14,
1997 (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 the Company, dated February
26, 1997, for the Annual Meeting (the "Proxy Statement"), filed with the
Securities and Exchange Commission, and said four nominees were elected.
The following matters were acted upon by the shareholders of the
Company at the Annual Meeting, at which 135,627,556 shares of the Common Stock,
without par value, of the Company (the
-16-
<PAGE> 18
"Common Stock", the only class of voting securities of the Company outstanding),
or approximately 86.456 percent of the 156,873,882 shares of Common Stock
outstanding and entitled to vote at the Annual Meeting, were present in person
or by proxies:
1. ELECTION OF DIRECTORS. Four persons were nominated by the Board of
Directors of Registrant for election as directors of the Company. Thomas H.
Cruikshank, Steven A. Minter and Agnar Pytte were nominated as Class III
directors, each to hold office for a three year term expiring at the Company's
2000 Annual Meeting of Shareholders and until his successor shall have been duly
elected and qualified. Gertrude G. Michelson was nominated as a Class II
director, to hold office for a one year term expiring at the Company's 1998
Annual Meeting of Shareholders and until her 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 were as follows:
<TABLE>
<CAPTION>
Shares of Common Shares of Common Stock
Name of Director Stock Voted For Withheld or Abstained
---------------- --------------- ---------------------
Class III Directors
-------------------
<S> <C> <C>
Thomas H. Cruikshank 129,194,455 6,433,101
Steven A. Minter 129,210,107 6,417,449
Agnar Pytte 129,176,681 6,450,875
Class II Director
-----------------
Gertrude G. Michelson 129,165,497 6,462,059
</TABLE>
The seven directors whose terms of office continue after the Annual Meeting are:
(A) John G. Breen, William E. Butler, George H. Schofield, whose terms expire in
1998; and (B) Samir G. Gibara, William J. Hudson, Jr., William C. Turner and
Martin D. Walker, whose terms expire in 1999.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS. A resolution
proposed by the Board of Directors of the Company that the shareholders ratify
the action of the Board of Directors in selecting and appointing Price
Waterhouse LLP as independent accountants for the Company for the year ending
December 31, 1997 was submitted to, and voted upon by, the shareholders of
Registrant. There were 134,921,695 shares of Common Stock voted in favor of, and
322,429 shares of Common Stock voted against, said resolution. The holders of
383,432 shares of Common Stock abstained. There were no "broker non-votes". The
resolution, having 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, was adopted and the appointment of Price Waterhouse LLP as the
independent accountants for the Company for 1997 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.
3. APPROVAL OF ADOPTION OF 1997 PERFORMANCE INCENTIVE PLAN. A
resolution proposed by
-17-
<PAGE> 19
the Board of Directors of the Company that the shareholders approve the 1997
Performance Incentive Plan of The Goodyear Tire & Rubber Company (the "Plan"),
which had been adopted by the Board of Directors on February 4, 1997 subject to
shareholder approval, was submitted to, and voted upon by, the shareholders of
the Company at the Annual Meeting. The Plan provides, among other things, for
the granting of incentive stock options, non-qualified stock options, stock
appreciation rights, restricted stock grants and awards, performance grants and
awards and other stock-based grants and awards relating to or in respect of
shares of the Common Stock of the Company to employees of the Company and its
subsidiaries. There were 84,952,669 votes case in favor of, and 35,449,889 votes
cast against, said resolution. The holders of 4,553,815 shares of Common Stock
abstained and there were "broker non-votes" in respect of 10,671,183 shares of
Common Stock. Accordingly, the resolution received the affirmative vote of the
holders of a majority of the Common Stock outstanding and entitled to vote at
the Annual Meeting and, therefore, the resolution was adopted and the Plan was
approved by the shareholders. The resolution and information relating to the
Plan are set forth at pages 7 through 12, inclusive, of the Proxy Statement. The
Plan is set forth in its entirety as Appendix A to, at pages A-1 through A-12
of, the Proxy Statement. A copy of the Plan as adopted by the Board of Directors
and approved by the Shareholders is filed with this Quarterly Report as Exhibit
10.1 and incorporated herein by specific reference.
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 June 30, 1997.
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: July 22, 1997 By /s/ John W Richardson
---------------------------------
John W Richardson,
Vice President
(Signing on behalf of
Registrant as a duly
authorized officer of
Registrant and signing as
the Principal Accounting
Officer of Registrant.)
-18-
<PAGE> 20
THE GOODYEAR TIRE & RUBBER COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
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 of Registrant, 3.1
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 Company, 3.2
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. 333-1995).
4 INSTRUMENTS DEFINING
THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
-------------------------------------------------------------------
Conformed copy of Rights Agreement, dated as of June 4, 1996, 4.1
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).
</TABLE>
- ------------------------
- - Pursuant to Item 601 of Regulation S-K.
E-1
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------- -------
TABLE ITEM NO. Description of Exhibit NUMBER PAGE
-------------- ---------------------- -----------
<S> <C> <C>
Specimen nondenominational Certificate for shares of the Common 4.2
Stock, Without Par Value, of Registrant; First Chicago Trust
Company of New York as transfer agent and registrar (incorporated
by reference, filed with the Securities and Exchange Commission
as Exhibit 4.3 to Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, File No. 1-1927).
Conformed copy of Revolving Credit Facility Agreement, dated as 4.3
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 Agreement, dated as 4.4
of July 15, 1996, among Registrant, the Lenders named therein and
The Chase Manhattan Bank (formerly Chemical Bank), as Agent
(incorporated by reference, file as Exhibit 4.5 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, File 1-1927).
Conformed copy of First Amendment to Replacement and Restatement 4.5 X-4.5-1
Agreement, dated as of March 31, 1997, among Registrant, the
Lenders named therein and The Chase Manhattan Bank (formerly
Chemical Bank), as Agent.
</TABLE>
- -------------------
- -Pursuant to Item 601 of Regulation S-K.
E-2
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------- -------
TABLE ITEM NO. Description of Exhibit NUMBER PAGE
-------------- ---------------------- -----------
<S> <C> <C>
4 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, 1997. 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 June 30, 1997 which relate to
securities having an aggregate principal amount less
than 10% of the consolidated assets of Registrant and
its Subsidiaries (other than the agreement set forth
at Exhibit 4.5 to this Quarterly Report) 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.
10 MATERIAL CONTRACTS
------------------
1997 Performance Incentive Plan of The Goodyear Tire & Rubber 10.1 X-10.1-1
Company, as adopted by the Board of Directors of Registrant on
February 4, 1997 and approved by the shareholders of Registrant
on April 14, 1997.
11 STATEMENT RE COMPUTATION OF
PER SHARE EARNINGS
---------------------------
Statement setting forth the computation of Per Share Earnings. 11 X-11-1
12 STATEMENT RE COMPUTATION
OF RATIOS
------------------------
Statement setting forth the computation of Ratio of Earnings to 12 X-12-1
Fixed Charges.
27 FINANCIAL DATA SCHEDULE 27 X-27-1
-----------------------
</TABLE>
E-3
<PAGE> 1
EXHIBIT 4.5
FIRST AMENDMENT
TO
REPLACEMENT AND RESTATEMENT AGREEMENT
THIS FIRST AMENDMENT TO REPLACEMENT AND RESTATEMENT AGREEMENT is made
and entered into as of March 31, 1997, among THE GOODYEAR TIRE & RUBBER COMPANY,
an Ohio Corporation (the "Borrower"), the undersigned lenders (the "Lenders")
and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent for the
Lenders (in such capacity, the "Agent").
WHEREAS, the parties hereto desire to amend the definition of "Leverage
Ratio" set forth in that certain Replacement and Restatement Agreement, dated as
of July 15, 1996, among the Borrower, the Lenders and the Agent (herein the
"Agreement"), which replaced and restated that certain Revolving Credit Facility
Agreement, dated as of July 15, 1994;
NOW, THEREFORE, for and in consideration of the premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree, on the terms and subject to the
conditions set forth herein, as follows:
1. Effective as of March 31, 1997, the definition of "LEVERAGE RATIO"
in Section 1.01 of the Agreement is deleted and replaced by inserting the
following:
""LEVERAGE RATIO" shall mean, as at the end of any fiscal
quarter in respect of which a determination thereof is being or to be
made, the quotient (expressed as a percentage) of (a) the sum of (i)
"notes payable to banks and overdrafts", PLUS (ii) "long term debt due
within one year", PLUS (iii) "long term debt and capital leases" (as
each such item is reported on the Consolidated balance sheet of the
Borrower and the Subsidiaries as at the end of such fiscal quarter),
PLUS (iv) the net proceeds from the sale of domestic accounts
receivable outstanding at the end of such fiscal quarter (determined in
a manner consistent with that used in preparing the Borrower's 1993
Annual Report on Form 10-K), DIVIDED BY (b) the sum of (i) Consolidated
Net Worth (without giving effect to the exclusion contained in clause
(ii) of the definition of the term "Consolidated Net Worth" and without
giving effect to the $499.3 million after-tax writedown of the
Borrower's Oil Transportation Segment assets in December of 1996), PLUS
(ii) the sum obtained pursuant to clause (a) above."
2. This First Amendment To Replacement and Restatement Agreement shall
become effective when the Agent shall have received counterparts of this First
Amendment To Replacement
1 X-4.5-1
<PAGE> 2
and Restatement Agreement executed on behalf of the Borrower and the
Majority Lenders (as defined in the Agreement).
3. This First Amendment to Replacement and Restatement Agreement may be
executed in two or more counterparts, any one of which need not contain the
signatures of more than one party, but all which taken together will constitute
one and the same agreement.
4. THIS FIRST AMENDMENT TO REPLACEMENT AND RESTATEMENT AGREEMENT SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the Borrower, the Agent and the Majority Lenders
have caused this Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
THE GOODYEAR TIRE & RUBBER COMPANY
By: /s/ R W Tieken
----------------------------------------
Name: R W Tieken
Title: Executive Vice President
ATTEST: /s/ P A Kemph
---------------------------------
Assistant Secretary
THE CHASE MANHATTAN BANK,
individually and as Agent
By: /s/ Julie S Long
----------------------------------------
Name: Julie S Long
Title: Vice President
2 X-4.5-2
<PAGE> 3
BANQUE NATIONALE DE PARIS, CHICAGO BRANCH
By: /s/ Arnaud Collin du Bocage
----------------------------------------
Name: Arnaud Collin du Bocage
Title: Executive Vice President
and General Manager
CIBC INC.
By: /s/ Stephanie E Johnson
----------------------------------------
Name: Stephanie E Johnson
Title: Authorized Signatory
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH
By: /s/ John C. Kissinger
----------------------------------------
Name: John C. Kissinger
Title: Joint General manager
COMMERZBANK AG
By: /s/ J. Timothy Shortly
----------------------------------------
Name: J. Timothy Shortly
Title: Sr. Vice President
By: /s/William J. Binder
----------------------------------------
Name: William J. Binder
Title: Vice President
BANK OF AMERICA ILLINOIS
By: /s/ Lynn W Stetson
----------------------------------------
Name: Lynn W Stetson
Title: Managing Director
3 X-4.5-3
<PAGE> 4
ABN AMRO BANK, N.V.
By: /s/ J. M. Janovsky
----------------------------------------
Name: J. M. Janovsky
Title: Group Vice President
By: /s/ Kathryn C. Toth
----------------------------------------
Name: Kathryn C. Toth
Title: Group Vice President and
Operational Manager
BANK OF MONTREAL
By: /s/ Edward P. McGuire
----------------------------------------
Name: Edward P. McGuire
Title: Director
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Friedrich N. Wilms
----------------------------------------
Name: Friedrich N. Wilms
Title: Vice President
BARCLAYS BANK PLC
By: /s/ L. Peter Yetman
----------------------------------------
Name: L. Peter Yetman
Title: Associate Director
4 X-4.5-4
<PAGE> 5
\
CITIBANK, N.A.
By: /s/ Robert J. Harriety, Jr.
----------------------------------------
Name: Robert J. Harriety, Jr.
Title: Vice President
Citibank, N.A.
Attorney-In-Fact
CREDIT LYONNAIS, CHICAGO BRANCH
By: /s/ Michel Buysschaert
----------------------------------------
Name: Michel Buysschaert
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/ Graham Hunt
----------------------------------------
Name: Graham Hunt
Title: Vice President
By: /s/ Kristinn R. Kristinsson
----------------------------------------
Name: Kristinn R. Kristinsson
Title: Associate
THE DAI - ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By: /s/ Ryoichi Yamauchi
----------------------------------------
Name: Ryoichi Yamauchi
Title: Senior Vice President
5 X-4.5-5
<PAGE> 6
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By: /s/ William W. McGinty
----------------------------------------
Name: William W. McGinty
Title: Director
By: /s/ Robert Wood
----------------------------------------
Name: Robert Wood
Title: Director
DRESDNER BANK LUXEMBOURG S.A.
By: /s/ K. Diederich
----------------------------------------
Name: K. Diederich
Title: Assistant Manager Loans
By: /s/ F. Audrimont
----------------------------------------
Name: F. Audrimont
Title: Authorized Signature
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Robert L. Jackson
----------------------------------------
Name: Robert L. Jackson
Title: Authorized Agent
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Hiroki Yamada
----------------------------------------
Name: Hiroki Yamada
Title: General Manager
6 X-4.5-6
<PAGE> 7
ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A.
By: /s/ Carlo Persico William De Angelo
--------------------------------------------------
Name: Carlo Persico William De Angelo
Title: Deputy G.M. First Vice President
KEY BANK
By: /s/ Karen A. Lee
--------------------------------------------------
Name: Karen A. Lee
Title: Vice President
NATIONAL CITY BANK
By: /s/ Jeffrey C. Douglas
--------------------------------------------------
Name: Jeffrey C. Douglas
Title: Vice President
NATIONSBANK, N.A.
By: /s/ Philip S. Durand
--------------------------------------------------
Name: Philip S. Durand
Title: Vice President
THE NORTHERN TRUST COMPANY
By: /s/ S. Biff Bowman
--------------------------------------------------
Name: S. Biff Bowman
Title: Vice President
7 X-4.5-7
<PAGE> 8
ROYAL BANK OF CANADA
By: /s/ Patrick K. Shields
--------------------------------------------------
Name: Patrick K. Shields
Title: Manager
THE SANWA BANK, LIMITED, CHICAGO BRANCH
By: /s/ James P. Byrnes
--------------------------------------------------
Name: James P. Byrnes
Title: First Vice President
SOCIETE GENERALE, CHICAGO BRANCH
By: /s/ Gilles Demeulenaere
--------------------------------------------------
Name: Gilles Demeulenaere
Title: Vice President
UNION BANK OF SWITZERLAND
By: /s/ Jan Buettgen
--------------------------------------------------
Name: Jan Buettgen
Title: Vice President Corporate Banking
By: /s/ Samuel Azizo
--------------------------------------------------
Name: Samuel Azizo
Title: Vice President
THE YASUDA TRUST & BANKING CO., LTD.
CHICAGO BRANCH
By: /s/ Joseph C. Meek
--------------------------------------------------
Name: Joseph C. Meek
Title: Deputy General Manager
8 X-4.5-7
<PAGE> 1
EXHIBIT 10.1
1997 PERFORMANCE INCENTIVE PLAN
of
THE GOODYEAR TIRE & RUBBER COMPANY
1. PURPOSE.
The purposes of the 1997 Performance Incentive Plan of The Goodyear Tire
& Rubber Company (the "Plan") are to advance the interests of the Company and
its shareholders by strengthening the ability of the Company to attract, retain
and reward highly qualified officers and other employees, to motivate officers
and other selected employees to achieve business objectives established to
promote the long-term growth, profitability and success of the Company, and to
encourage ownership of the Common Stock of the Company by participating officers
and other selected employees. The Plan authorizes performance-based stock and
cash incentive compensation in the form of stock options, stock appreciation
rights, restricted stock, performance grants and awards, and other stock-based
grants and awards.
2. DEFINITIONS.
For the purposes of the Plan, the following terms shall have the
following meanings:
(a) "ADJUSTED NET INCOME" means, with respect to any calendar or other
fiscal year of the Company, the amount reported as "Net Income" in the audited
Consolidated Income Statement of the Company and Subsidiaries for such year (as
set forth in the Company's Annual Report to Shareholders for such year),
adjusted to exclude any of the following items: (i) extraordinary items (as
described in Accounting Principles Board Opinion No. 30); (ii) gains or losses
on the disposition of discontinued operations; (iii) the cumulative effects of
changes in accounting principles; (iv) the writedown of any asset; and (v)
charges for restructuring and rationalization programs.
(b) "ANNUAL NET INCOME PER SHARE" means, with respect to any calendar or
other fiscal year of the Company in respect of which a determination thereof is
being or to be made, the Adjusted Net Income for such year divided by the
average number of shares of Common Stock outstanding during such year.
(c) "AWARD" means any payment or settlement in respect of a grant made
pursuant to the Plan, whether in the form of shares of Common Stock or in cash,
or in any combination thereof.
(d) "BOARD OF DIRECTORS" means the Board of Directors of the Company.
(e) "CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute thereto, together with the
published rulings, regulations and interpretations duly promulgated thereunder.
(f) "COMMITTEE" means the committee of the Board of Directors established
and constituted as provided in Section 5 of the Plan.
(g) "COMMON STOCK" means the common stock, without par value, of the
Company, or any security issued by the Company in substitution or exchange
therefor or in lieu thereof.
(h) "COMMON STOCK EQUIVALENT" means a Unit (or fraction thereof, if
authorized by the Committee) substantially equivalent to a hypothetical share of
Common Stock, credited to a Participant and having a value at any time equal to
the Fair Market Value of a share of Common Stock (or such fraction thereof) at
such time.
(i) "COMPANY" means The Goodyear Tire & Rubber Company, an Ohio
corporation, or any successor corporation.
(j) "COVERED EMPLOYEE" means any person who is a "covered employee"
within the meaning of Section 162(m) of the Code.
-1-
X-10-1-1
<PAGE> 2
(k) "CUMULATIVE NET INCOME" means, in respect of any Performance Period,
the aggregate cumulative amount of the Adjusted Net Income for the calendar or
other fiscal years of the Company during such Performance Period.
(l) "CUMULATIVE NET INCOME PER SHARE" means, in respect of any Performance
Period, the aggregate cumulative amount of the Annual Net Income Per Share for
the calendar or other fiscal years of the Company during such Performance
Period.
(m) "DIVIDEND EQUIVALENT" means, in respect of a Common Stock Equivalent
and with respect to each dividend payment date for the Common Stock, an amount
equal to the cash dividend on one share of Common Stock payable on such dividend
payment date.
(n) "EMPLOYEE" means any individual, including any officer of the Company,
who is on the active payroll of the Company or a Subsidiary at the relevant
time.
(o) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, including all rules and regulations promulgated
thereunder.
(p) "FAIR MARKET VALUE" means, in respect of any date on or as of which a
determination thereof is being or to be made, the average of the high and low
per share sale prices of the Common Stock reported on the New York Stock
Exchange Composite Transactions tape on such date, or, if the Common Stock was
not traded on such date, on the next preceding day on which sales of shares of
the Common Stock were reported on the New York Stock Exchange Composite
Transactions tape.
(q) "INCENTIVE STOCK OPTION" means any option to purchase shares of Common
Stock granted pursuant to the provisions of Section 6 of the Plan that is
intended to be and is specifically designated as an "incentive stock option"
within the meaning of Section 422A of the Code.
(r) "NON-QUALIFIED STOCK OPTION" means any option to purchase shares of
Common Stock granted pursuant to the provisions of Section 6 of the Plan that is
not an Incentive Stock Option.
(s) "PARTICIPANT" means any Employee of the Company or a Subsidiary who
receives a grant or Award under the Plan.
(t) "PERFORMANCE GRANT" means a grant made pursuant to Section 9 of the
Plan, the Award of which is contingent on the achievement of specific
Performance Goals during a Performance Period, determined using a specific
Performance Measure, all as specified in the grant agreement relating thereto.
(u) "PERFORMANCE GOALS" mean, with respect to any applicable grant made
pursuant to the Plan, the one or more targets, goals or levels of attainment
required to be achieved in terms of the specified Performance Measure during the
specified Performance Period, all as set forth in the related grant agreement.
(v) "PERFORMANCE MEASURE" means, with respect to any applicable grant made
pursuant to the Plan, one or more of the criteria identified at Section 9(c) of
the Plan selected by the Committee for the purpose of establishing, and
measuring attainment of, Performance Goals for a Performance Period in respect
of such grant, as provided in the related grant agreement.
(w) "PERFORMANCE PERIOD" means, with respect to any applicable grant made
pursuant to the Plan, the one or more periods of time, which may be of varying
and overlapping durations, as the Committee may select during which the
attainment of one or more Performance Goals will be measured to determine
whether, and the extent to which, a Participant is entitled to receive payment
of an Award pursuant to such grant.
(x) "PLAN" means this 1997 Performance Incentive Plan of the Company, as
set forth herein and as hereafter amended from time to time in accordance with
the terms hereof.
(y) "RESTRICTED STOCK" means shares of Common Stock issued pursuant to a
Restricted Stock Grant under Section 8 of the Plan so long as such shares remain
subject to the restrictions and conditions specified in the grant agreement
pursuant to which such Restricted Stock Grant is made.
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(z) "RESTRICTED STOCK GRANT" means a grant made pursuant to the
provisions of Section 8 of the Plan.
(aa) "STOCK APPRECIATION RIGHT" means a grant in the form of a right to
benefit from the appreciation of the Common Stock made pursuant to Section 7 of
the Plan.
(bb) "STOCK OPTION" means and includes any Non-Qualified Stock Option and
any Incentive Stock Option granted pursuant to Section 6 of the Plan.
(cc) "SUBSIDIARY" means any corporation or entity in which the Company
directly or indirectly owns or controls 50% or more of the equity securities
issued by such corporation or entity having the power to vote for the election
of directors.
(dd) "UNIT" means a bookkeeping entry used by the Company to record and
account for the grant, settlement or, if applicable, deferral of an Award until
such time as such Award is paid, canceled, forfeited or terminated, as the case
may be, which, except as otherwise specified by the Committee, shall be equal to
one Common Stock Equivalent.
3. EFFECTIVE DATE; TERM.
(a) EFFECTIVE DATE. The Plan shall be effective on April 14, 1997, upon
approval by the shareholders of the Company at the 1997 annual meeting of
shareholders or any adjournments thereof.
(b) TERM. The Plan shall remain in effect until December 31, 2001, unless
sooner terminated by the Board of Directors. Termination of the Plan shall not
affect grants and Awards then outstanding.
4. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) MAXIMUM NUMBER OF SHARES AVAILABLE FOR ISSUANCE UNDER THE PLAN. The
maximum aggregate number of shares of Common Stock which may be issued pursuant
to the Plan, subject to adjustment as provided in Section 4(b) of the Plan,
shall be fifteen million, plus (i) any shares of Common Stock issued under the
Plan that are forfeited back to the Company or are canceled, and (ii) any shares
of Common Stock that are tendered, whether by physical delivery or by
attestation, to the Company by a Participant as full or partial payment of the
exercise price of any Stock Option granted pursuant to the Plan, in connection
with the payment or settlement of any other grant or Award made pursuant to the
Plan, or in payment of any applicable withholding for federal, state, city,
local or foreign income, payroll or other taxes incurred in connection with the
exercise of any Stock Option or Stock Appreciation Right granted under the Plan
or the receipt or settlement of any other grant or Award under the Plan. The
shares of Common Stock which may be issued under the Plan may be authorized and
unissued shares or issued shares which have been reacquired by the Company. No
fractional share of the Common Stock shall be issued under the Plan. Awards of
fractional shares of the Common Stock, if any, shall be settled in cash.
(b) ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the event of any
change in the capital structure, capitalization or Common Stock of the Company
such as a stock dividend, stock split, recapitalization, merger, consolidation,
split-up, combination or exchange of shares or other form of reorganization, or
any other change affecting the Common Stock, such proportionate adjustments, if
any, as the Board of Directors in its discretion may deem appropriate to reflect
such change shall be made with respect to: (i) the maximum number of shares of
Common Stock which may be (1) issued pursuant to the Plan, (2) the subject of
any type of grant or Award under the Plan, and (3) granted, Awarded or issued to
any Participant pursuant to any provision of the Plan; (ii) the number of shares
of Common Stock subject to any outstanding Stock Option, Stock Appreciation
Right or other grant or Award made to any Participant under the Plan; (iii) the
per share exercise price in respect of any outstanding Stock Options and Stock
Appreciation Rights; (iv) the number of shares of Common Stock and the number of
Units or the value of such Units, as the case may be, which are the subject of
other grants and Awards then outstanding under the Plan; and (v) any other term
or condition of any grant affected by any such change.
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5. ADMINISTRATION.
(a) THE COMMITTEE. The Plan shall be administered by the Committee to be
appointed from time to time by the Board of Directors and comprised of not less
than three of the then members of the Board of Directors who qualify as
"non-employee directors" within the meaning of Rule 16(b)-3 promulgated under
the Exchange Act and as "outside directors" within the meaning of Section 162(m)
of the Code. Members of the Committee shall serve at the pleasure of the Board
of Directors. The Board of Directors may from time to time remove members from,
or add members to, the Committee. A majority of the members of the Committee
shall constitute a quorum for the transaction of business and the acts of a
majority of the members present at any meeting at which a quorum is present
shall be the acts of the Committee. Any one or more members of the Committee may
participate in a meeting by conference telephone or similar means where all
persons participating in the meeting can hear and speak to each other, which
participation shall constitute presence in person at such meeting. Action
approved in writing by a majority of the members of the Committee then serving
shall be fully as effective as if the action had been taken by unanimous vote at
a meeting duly called and held. The Company shall make grants and effect Awards
under the Plan in accordance with the terms and conditions specified by the
Committee, which terms and conditions shall be set forth in grant agreements
and/or other instruments in such forms as the Committee shall approve.
(b) COMMITTEE POWERS. The Committee shall have full power and authority to
operate and administer the Plan in accordance with its terms. The powers of the
Committee include, but are not limited to, the power to: (i) select Participants
from among the Employees of the Company and Subsidiaries; (ii) establish the
types of, and the terms and conditions of, all grants and Awards made under the
Plan, subject to any applicable limitations set forth in, and consistent with
the express terms of, the Plan; (iii) make grants and pay or otherwise effect
Awards subject to, and consistent with, the express provisions of the Plan; (iv)
establish Performance Goals, Performance Measures and Performance Periods,
subject to, and consistent with, the express provisions of the Plan; (v) reduce
the amount of any grant or Award; (vi) prescribe the form or forms of grant
agreements and other instruments evidencing grants and Awards under the Plan;
(vii) pay and to defer payment of Awards on such terms and conditions, not
inconsistent with the express terms of the Plan, as the Committee shall
determine; (viii) direct the Company to make conversions, accruals and payments
pursuant to the Plan; (ix) construe and interpret the Plan and make any
determination of fact incident to the operation of the Plan; (x) promulgate,
amend and rescind rules and regulations relating to the implementation,
operation and administration of the Plan; (xi) adopt such modifications,
procedures and subplans as may be necessary or appropriate to comply with the
laws of other countries with respect to Participants or prospective Participants
employed in such other countries; (xii) delegate to other persons the
responsibility for performing administrative or ministerial acts in furtherance
of the Plan; (xiii) engage the services of persons and firms, including banks,
consultants and insurance companies, in furtherance of the Plan's activities;
and (xiv) make all other determinations and take all other actions as the
Committee may deem necessary or advisable for the administration and operation
of the Plan.
(c) COMMITTEE'S DECISIONS FINAL. Any determination, decision or action of
the Committee in connection with the construction, interpretation,
administration or application of the Plan, and of any grant agreement, shall be
final, conclusive and binding upon all Participants, and all persons claiming
through Participants, affected thereby.
(d) ADMINISTRATIVE ACCOUNTS. For the purpose of accounting for Awards
deferred as to payment, the Company shall establish bookkeeping accounts
expressed in Units bearing the name of each Participant receiving such Awards.
Each account shall be unfunded, unless otherwise determined by the Committee in
accordance with Section 15(d) of the Plan.
(e) CERTIFICATIONS. In respect of each grant under the Plan to a Covered
Person which the Committee intends to be "performance based compensation" under
Section 162(m) of the Code, the provisions of the Plan and the related grant
agreement shall be construed to confirm such intent, and to conform to the
requirements of Section 162(m) of the Code, and the Committee shall certify in
writ-
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<PAGE> 5
ing (which writing may include approved minutes of a meeting of the Committee)
that the applicable Performance Goal(s), determined using the Performance
Measure specified in the related grant agreement, was attained during the
relevant Performance Period at a level that equaled or exceeded the level
required for the payment of such Award in the amount proposed to be paid and
that such Award does not exceed any applicable Plan limitation.
6. STOCK OPTIONS.
(a) IN GENERAL. Options to purchase shares of Common Stock may be granted
under the Plan and may be Incentive Stock Options or Non-Qualified Stock
Options. All Stock Options shall be subject to the terms and conditions of this
Section 6 and shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Committee shall
determine. Stock Options may be granted in addition to, or in tandem with or
independent of Stock Appreciation Rights or other grants and Awards under the
Plan. The Committee may grant Stock Options that provide for the automatic grant
of a replacement Stock Option if payment of the exercise price and/or any
related withholding taxes is made by tendering (whether by physical delivery or
by attestation) shares of Common Stock or by having shares of Common Stock
withheld by the Company. The replacement Stock Option would cover the number of
shares of Common Stock tendered or withheld, would have a per share exercise
price equal to at least 100% of the Fair Market Value of a share of Common Stock
on the date of the exercise of the original Stock Option, and would have such
other terms and conditions as may be specified by the Committee and set forth in
the related grant agreement.
(b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other
Employee of the Company or a Subsidiary may be granted Stock Options. The
Committee shall determine, in its discretion, the Employees to whom Stock
Options will be granted, the timing of such grants, and the number of shares of
Common Stock subject to each Stock Option granted; provided, that (i) the
maximum aggregate number of shares of Common Stock which may be issued and
delivered upon the exercise of Non-Qualified Stock Options granted under the
Plan shall be fourteen million, (ii) the maximum aggregate number of shares of
Common Stock which may be issued and delivered upon the exercise of Incentive
Stock Options shall be five million, (iii) the maximum number of shares of
Common Stock in respect of which Stock Options may be granted to any Employee
during any calendar year shall be 500,000, and (iv) in respect of Incentive
Stock Options, the aggregate Fair Market Value (determined as of the date the
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which an Incentive Stock Option becomes exercisable for the first time by a
Participant during any calendar year shall not exceed $100,000, or such other
limit as may be required by the Code, except that, if authorized by the
Committee and provided for in the related grant agreement, any portion of any
Incentive Stock Option that cannot be exercised as such because of this
limitation may be converted into and exercised as a Non-Qualified Stock Option.
In no event shall any Stock Option or Stock Appreciation Right be granted to a
Participant in exchange for the Participant's agreement to the cancellation of
one or more Stock Options or Stock Appreciation Rights then held by such
Participant if the exercise price of the new grant is lower than the exercise
price of the grant to be cancelled and in no event shall any Stock Option or
Stock Appreciation Right be amended to reduce the option price, except as
contemplated by Section 4(b) of the Plan.
(c) OPTION EXERCISE PRICE. The per share exercise price of each Stock
Option granted under the Plan shall be determined by the Committee prior to or
at the time of grant, but in no event shall the per share exercise price of any
Stock Option be less than 100% of the Fair Market Value of the Common Stock on
the date of the grant of such Stock Option.
(d) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee; except that in no event shall the term of any Incentive Stock Option
exceed ten years after the date such Incentive Stock Option is granted.
(e) EXERCISABILITY. A Stock Option shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at the date of grant; provided, however,
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that no Stock Option shall be exercisable during the first six months after the
date such Stock Option is granted. No Stock Option may be exercised unless the
holder thereof is at the time of such exercise an Employee and has been
continuously an Employee since the date such Stock Option was granted, except
that the Committee may permit the exercise of any Stock Option for any period
following the Participant's termination of employment not in excess of the
original term of the Stock Option on such terms and conditions as it shall deem
appropriate and specify in the related grant agreement.
(f) METHOD OF EXERCISE. A Stock Option may be exercised, in whole or in
part, by giving written notice of exercise to the Company specifying the number
of shares of Common Stock to be purchased. Such notice shall be accompanied by
payment in full of the purchase price, plus any required withholding taxes, in
cash or, if permitted by the terms of the related grant agreement or otherwise
approved in advance by the Committee, in shares of Common Stock already owned by
the Participant valued at the Fair Market Value of the Common Stock on the date
of exercise. The Committee may also permit Participants, either on a selective
or aggregate basis, to simultaneously exercise Stock Options and sell the shares
of Common Stock thereby acquired pursuant to a brokerage or similar arrangement
approved in advance by the Committee and to use the proceeds from such sale to
pay the exercise price and withholding taxes.
7. STOCK APPRECIATION RIGHTS.
(a) IN GENERAL. Stock Appreciation Rights in respect of shares of Common
Stock may be granted under the Plan alone, in tandem with, in addition to or
independent of a Stock Option or other grant or Award under the Plan. A Stock
Appreciation Right entitles a Participant to receive an amount equal to the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise over the Fair Market Value of a share of Common Stock on the date of
grant of the Stock Appreciation Right, or such other higher price as may be set
by the Committee, multiplied by the number of shares of Common Stock with
respect to which the Stock Appreciation Right shall have been exercised.
(b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other
Employee of the Company or a Subsidiary selected by the Committee may be granted
Stock Appreciation Rights. The Committee shall determine, in its discretion, the
Employees to whom Stock Appreciation Rights will be granted, the timing of such
grants and the number of shares of Common Stock in respect of which each Stock
Appreciation Right is granted; provided that (i) the maximum aggregate number of
shares of Common Stock in respect of which Stock Appreciation Rights may be
granted shall be six million, (ii) the maximum aggregate number of shares of
Common Stock which may be issued and delivered in payment or settlement of Stock
Appreciation Rights shall be three million, and (iii) the maximum number of
shares of Common Stock in respect of which Stock Appreciation Rights may be
granted to any Employee during any calendar year shall be 250,000.
(c) EXERCISABILITY; EXERCISE; FORM OF PAYMENT. A Stock Appreciation Right
may be exercised by a Participant at such time or times and in such manner as
shall be authorized by the Committee and set forth in the related grant
agreement, except that in no event shall a Stock Appreciation Right be
exercisable within the first six months after the date of grant. The Committee
may provide that a Stock Appreciation Right shall be automatically exercised on
one or more specified dates. No Stock Appreciation Right may be exercised unless
the holder thereof is at the time of exercise an Employee and has been
continuously an Employee since the date the Stock Appreciation Right was
granted, except that the Committee may permit the exercise of any Stock
Appreciation Right for any period following the Participant's termination of
employment not in excess of the original term of the Stock Appreciation Right on
such terms and conditions as it shall deem appropriate and specify in the
related grant agreement. A Stock Appreciation Right may be exercised, in whole
or in part, by giving the Company a written notice specifying the number of
shares of Common Stock in respect of which the Stock Appreciation Right is to be
exercised. Stock Appreciation Rights may be paid upon exercise in cash, in
shares of Common Stock, or in any combination of cash and shares of Common Stock
as determined by the Committee.
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8.RESTRICTED STOCK GRANTS AND AWARDS.
(a) IN GENERAL. A Restricted Stock Grant is the issue of shares of Common
Stock in the name of an Employee, which issuance is subject to such terms and
conditions as the Committee shall deem appropriate, including, without
limitation, restrictions on the sale, assignment, transfer or other disposition
of such shares and the requirement that the Employee forfeit such shares back to
the Company (i) upon termination of employment for specified reasons within a
specified period of time, or (ii) if any specified Performance Goals are not
achieved during a specified Performance Period, or (iii) if such other
conditions as the Committee may specify are not satisfied.
(b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other
key Employee of the Company or a Subsidiary selected by the Committee may
receive a Restricted Stock Grant. The Committee, in its sole discretion, shall
determine whether a Restricted Stock Grant shall be made, the Employee to
receive the Restricted Stock Grant, and the conditions and restrictions imposed
on the Restricted Stock Grant. The maximum number of shares of Common Stock
which may be issued as Restricted Stock under the Plan shall be two million. The
maximum number of shares of Common Stock which may be issued to any Employee as
Restricted Stock during any calendar year shall not exceed 200,000. The maximum
amount any Employee may receive as a Restricted Stock Grant in any calendar year
shall not exceed $10 million, determined using the Fair Market Value of such
Restricted Stock Grant as at the date of the grant thereof.
(c) RESTRICTION PERIOD. Restricted Stock Grants shall provide that in order
for a Participant to receive shares of Common Stock free of restrictions, the
Participant must remain in the employment of the Company or its Subsidiaries,
subject to such exceptions as the Committee shall deem appropriate and specify
in the related grant agreement, for a period of not less than three years
commencing on the date of the grant and ending on such later date or dates as
the Committee may designate at the time of the grant (the "Restriction Period").
The Committee, in its sole discretion, may provide for the lapse of restrictions
in installments during the Restriction Period. The Committee may also establish
one or more Performance Goals that are required to be achieved during one or
more Performance Periods within the Restriction Period as a condition to the
lapse of the restrictions.
(d) RESTRICTIONS. The following restrictions and conditions shall apply to
each Restricted Stock Grant during the Restriction Period: (i) the Participant
shall not be entitled to delivery of the shares of the Common Stock; (ii) the
Participant may not sell, assign, transfer, pledge, hypothecate, encumber or
otherwise dispose of or realize on the shares of Common Stock subject to the
Restricted Stock Grant; and (iii) the shares of the Common Stock issued as
Restricted Stock shall be forfeited to the Company if the Participant for any
reason ceases to be an Employee prior to the end of the Restriction Period,
except due to circumstances specified in the related grant agreement or
otherwise approved by the Committee. The Committee may in, its sole discretion,
include such other restrictions and conditions as it may deem appropriate.
(e) PAYMENT. Upon expiration of the Restriction Period and if all
conditions have been satisfied and any applicable Performance Goals attained,
the shares of the Restricted Stock will be made available to the Participant,
subject to satisfaction of applicable withholding tax requirements, free of all
restrictions; provided, that the Committee may, in its discretion, require (i)
the further deferral of any Restricted Stock Grant beyond the initially
specified Restriction Period, (ii) that the Restricted Stock be retained by the
Company, and (iii) that the Participant receive a cash payment in lieu of
unrestricted shares of Common Stock.
(f) RIGHTS AS A SHAREHOLDER. A Participant shall have, with respect to
shares of Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the shares and receive any cash dividends paid
thereon. Stock dividends distributed with respect to shares of Restricted Stock
shall be treated as additional shares under the Restricted Stock Grant and shall
be subject to the restrictions and other terms and conditions set forth therein.
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9.PERFORMANCE GRANTS AND AWARDS.
(a) ELIGIBILITY AND TERMS. The Committee may grant to officers of the
Company and other key Employees of the Company and its Subsidiaries the
prospective contingent right, expressed in Units, to receive payments of shares
of Common Stock, cash or any combination thereof, with each Unit equivalent in
value to one share of Common Stock, or equivalent to such other value or
monetary amount as may be designated or established by the Committee
("Performance Grants"), based upon Company performance over a specified
Performance Period. The Committee shall, in its sole discretion, determine the
officers of the Company and other key Employees eligible to receive Performance
Grants. At the time each Performance Grant is made, the Committee shall
establish the Performance Period, the Performance Measure and the targets to be
attained relative to such Performance Measure (the "Performance Goals") in
respect of such Performance Grant. The number of shares of Common Stock and/or
the amount of cash earned and payable in settlement of a Performance Grant shall
be determined at the end of the Performance Period (a "Performance Award").
(b) LIMITATIONS ON GRANTS AND AWARDS. The maximum number of shares of
Common Stock which may be issued pursuant to Performance Grants shall be three
million. The maximum number of shares which may be the subject of Performance
Grants made to any Participant in respect of any Performance Period or during
any calendar year shall be 100,000. The maximum amount any Participant may
receive during any calendar year as Performance Awards pursuant to Performance
Grants shall not exceed $15 million, determined using the Fair Market Value of
such Performance Awards as at the last day of the applicable Performance Period
or Periods or as at date or dates of the payment thereof, whichever is higher.
(c) PERFORMANCE GOALS, PERFORMANCE MEASURES AND PERFORMANCE PERIODS. Each
Performance Grant shall provide that, in order for a Participant to receive an
Award of all or a portion of the Units subject to such Performance Grant, the
Company must achieve certain Performance Goals over a designated Performance
Period having a minimum duration of one year, with attainment of the Performance
Goals determined using a specific Performance Measure. The Performance Goals and
Performance Period shall be established by the Committee in its sole discretion.
The Committee shall establish a Performance Measure for each Performance Period
for determining the portion of the Performance Grant which will be earned or
forfeited based on the extent to which the Performance Goals are achieved or
exceeded. In setting Performance Goals, the Committee may use a Performance
Measure based on any one, or on any combination, of the following Company
performance factors as the Committee deems appropriate: (i) Cumulative Net
Income Per Share; (ii) Cumulative Net Income; (iii) return on sales; (iv) total
shareholder return; (v) return on assets; (vi) economic value added; (vii) cash
flow; (viii) return on equity; and (ix) cumulative operating income (which shall
equal consolidated sales minus cost of goods sold and selling, administrative
and general expense). Performance Goals may include minimum, maximum and target
levels of performance, with the size of Performance Award based on the level
attained. Once established by the Committee and specified in the grant
agreement, and if and to the extent provided in or required by the grant
agreement, the Performance Goals and the Performance Measure in respect of any
Performance Grant (or any Restricted Stock Grant or Stock-Based Grant that
requires the attainment of Performance Goals as a condition to the Award) shall
not be changed. The Committee may, in its discretion, eliminate or reduce (but
not increase) the amount of any Performance Award (or Restricted Stock or
Stock-Based Award) that otherwise would be payable to a Participant upon
attainment of the Performance Goal(s).
(d) FORM OF GRANTS. Performance Grants may be made on such terms and
conditions not inconsistent with the Plan, and in such form or forms, as the
Committee may from time to time approve. Performance Grants may be made alone,
in addition to in tandem with, or independent of other grants and Awards under
the Plan. Subject to the terms of the Plan, the Committee shall, in its
discretion, determine the number of Units subject to each Performance Grant made
to a Participant and the Committee may impose different terms and conditions on
any particular Performance Grant made to any Participant. The Performance Goals,
the Performance Period or Periods, and the Performance Measure applicable to a
Performance Grant shall be set forth in the relevant grant agreement.
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(e) PAYMENT OF AWARDS. Each Participant shall be entitled to receive
payment in an amount equal to the aggregate Fair Market Value (if the Unit is
equivalent to a share of Common Stock), or such other value as the Committee
shall specify, of the Units earned in respect of such Performance Award. Payment
in settlement of a Performance Award may be made in shares of Common Stock, in
cash, or in any combination of Common Stock and cash, and at such time or times,
as the Committee, in its discretion, shall determine.
10. OTHER STOCK-BASED GRANTS AND AWARDS.
(a) IN GENERAL. The Committee may make other grants and Awards pursuant to
which Common Stock is, or in the future may be, acquired by Participants, and
other grants and Awards to Participants denominated in Common Stock Equivalents
or other Units ("Stock-Based Grants"). Such Stock-Based Grants may be granted
alone or in addition to, in tandem with, or independent of any other grant made
or Award effected under the Plan.
(b) ELIGIBILITY AND TERMS. The Committee may make Stock-Based Grants to
officers of the Company and other key Employees of the Company and its
Subsidiaries. Subject to the provisions of the Plan, the Committee shall have
authority to determine the Employees to whom, and the time or times at which,
Stock-Based Grants will be made, the number of shares of Common Stock, if any,
to be subject to or covered by each Stock-Based Grant, and any and all other
terms and conditions of each Stock-Based Grant.
(c) LIMITATIONS. The aggregate number of shares of Common Stock issued to
Participants pursuant to Stock-Based Grants made and Awards effected pursuant to
this Section 10 shall not exceed three million. No Participant shall receive
more than 100,000 shares of Common Stock in settlement of Stock-Based Awards
during any calendar year. The maximum amount any Participant may receive in
Stock-Based Awards during any calendar year shall not exceed $5 million,
determined using the Fair Market Value of any shares of Common Stock delivered
in payment of the Stock-Based Awards on the date or dates of the payment
thereof.
(d) FORM OF GRANTS; PAYMENT OF AWARDS. Stock-Based Grants may be made in
such form or forms and on such terms and conditions, including the attainment of
specific Performance Goals, as the Committee, in its discretion, shall approve.
Payment of Stock-Based Awards may be made in cash, in shares of Common Stock, or
in any combination of cash and shares of Common Stock, and at such time or
times, as the Committee shall determine.
11. DEFERRALS.
The Committee may, whether at the time of grant or at anytime thereafter
prior to payment or settlement, require a Participant to defer, or permit
(subject to such conditions as the Committee may from time to time establish) a
Participant to elect to defer, receipt of all or any portion of any payment of
cash or shares of Common Stock that would otherwise be due to such Participant
in payment or settlement of any Award under the Plan. If any such deferral is
required by the Committee (or is elected by the Participant with the permission
of the Committee), the Committee shall establish rules and procedures for such
payment deferrals. The Committee may provide for the payment or crediting of
interest, at such rate or rates as it shall in its discretion deem appropriate,
on such deferred amounts credited in cash and the payment or crediting of
dividend equivalents in respect of deferred amounts credited in Common Stock
Equivalents. Deferred amounts may be paid in a lump sum or in installments in
the manner and to the extent permitted, and in accordance with rules and
procedures established, by the Committee.
12. NON-TRANSFERABILITY OF GRANTS AND AWARDS.
No grant or Award under the Plan, and no right or interest therein, shall be
(i) assignable, alienable or transferable by a Participant, except by will or
the laws of descent and distribution, or (ii) subject to any obligation, or the
lien or claims of any creditor, of any Participant, or (iii) subject to any
lien, encum-
-9-
X-10-1-9
<PAGE> 10
brance or claim of any party made in respect of or through any Participant,
however arising. During the lifetime of a Participant, Stock Options and Stock
Appreciation Rights are exercisable only by, and shares of Common Stock issued
upon the exercise of Stock Options and Stock Appreciation Rights or in
settlement of other Awards will be issued only to, and other payments in
settlement of any Award will be payable only to, the Participant or his or her
legal representative. The Committee may, in its sole discretion, authorize
written designations of beneficiaries and authorize Participants to designate
beneficiaries with the authority to exercise Stock Options and Stock
Appreciation Rights granted to a Participant in the event of his or her death.
Notwithstanding the foregoing, the Committee may, in its sole discretion and on
and subject to such terms and conditions as it shall deem appropriate, which
terms and conditions shall be set forth in the related grant agreement: (i)
authorize a Participant to transfer all or a portion of any Non-Qualified Stock
Option or Stock Appreciation Right, as the case may be, granted to such
Participant; provided, that in no event shall any transfer be made to any person
or persons other than such Participant's spouse, children or grandchildren, or a
trust for the exclusive benefit of one or more such persons, which transfer must
be made as a gift and without any consideration; and (ii) provide for the
transferability of a particular grant or Award pursuant to a qualified domestic
relations order. All other transfers and any retransfer by any permitted
transferee are prohibited and any such purported transfer shall be null and
void. Each Stock Option or Stock Appreciation Right which becomes the subject of
permitted transfer (and the Participant to whom it was granted by the Company)
shall continue to be subject to the same terms and conditions as were in effect
immediately prior to such permitted transfer. The Participant shall remain
responsible to the Company for the payment of all withholding taxes incurred as
a result of any exercise of such Stock Option or Stock Appreciation Right. In no
event shall any permitted transfer of a Stock Option or Stock Appreciation Right
create any right in any party in respect of any Stock Option, Stock Appreciation
Right or other grant or Award, other than the rights of the qualified transferee
in respect of such Stock Option or Stock Appreciation Right specified in the
related grant agreement.
13. CHANGE IN CONTROL.
(a) EFFECT ON GRANTS. In the event of a Change in Control (as defined
below) of the Company, except as the Board of Directors comprised of a majority
of Continuing Directors may expressly provide otherwise, and notwithstanding any
other provision of the Plan to the contrary: (i) all Stock Options and Stock
Appreciation Rights then outstanding shall become fully exercisable as of the
date of the Change in Control, whether or not then exercisable; (ii) all
restrictions and conditions in respect of all Restricted Stock Grants then
outstanding shall be deemed satisfied as of the date of the Change in Control;
and (iii) all Performance Grants and other Stock-Based Grants shall be deemed to
have been fully earned, at the maximum amount of the award opportunity specified
in the grant agreement, as of the date of the Change in Control.
(b) CHANGE IN CONTROL DEFINED. A "Change in Control" of the Company shall
occur when: (i) any Acquiring Person (other than the Company, any Subsidiary,
any employee benefit plan of the Company or of any Subsidiary, or any person or
entity organized, appointed or established by the Company or a Subsidiary for or
pursuant to the terms of any such plans), alone, or together with its Affiliates
and Associates, shall become the beneficial owner of fifteen percent (15%) or
more of the shares of Common Stock then outstanding (except pursuant to an offer
for all outstanding shares of Common Stock at a price and upon such terms and
conditions as a majority of the Continuing Directors determines to be in the
best interest of the Company and its shareholders); or (ii) the shareholders of
the Company approve a definitive agreement for a merger or consolidation
involving the Company which would result in the Common Stock outstanding
immediately prior to such merger or consolidation continuing to represent
(whether by remaining outstanding or by being converted into voting securities
of the surviving entity) less than fifty percent of the combined voting power of
the Company and such other entity outstanding immediately after such merger or
consolidation; or (iii) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or other
disposition of all or substantially all of the assets of the Company; or (iv)
the Continuing Directors no longer constitute a majority of the Board of
Directors. "Acquiring Person" means any person (any indi-
-10-
X-10-1-10
<PAGE> 11
vidual, firm, corporation or other entity) who or which, together with all its
Affiliates and Associates, shall be the beneficial owner of a substantial block
of Common Stock. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Exchange Act. "Continuing
Director" means any individual who is a member of the Board of Directors, while
such individual is a member of the Board of Directors, who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, or a representative
or nominee of an Acquiring Person or of any such Affiliate or Associate, and was
a member of the Board of Directors prior to the occurrence of a Change in
Control, and any successor of a Continuing Director, while such successor is a
member of the Board of Directors, who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, or representative or nominee of
an Acquiring Person or of any such Affiliate or Associate, and is recommended or
elected to succeed the Continuing Director by a majority of the Continuing
Directors.
14. AMENDMENT AND TERMINATION.
The Board of Directors may at any time terminate the Plan, except with
respect to grants then outstanding. The Board of Directors may amend the Plan at
any time and from time to time in such respects as the Board of Directors may
deem necessary or appropriate without approval of the shareholders, unless such
approval is necessary in order to comply with applicable laws, including the
Exchange Act and the Code. In no event may the Board of Directors amend the Plan
without the approval of the shareholders to (i) increase the maximum number of
shares of Common Stock which may be issued pursuant to the Plan, (ii) increase
any limitation set forth in the Plan on the number of shares of Common Stock
which may be issued, or the aggregate value of Awards which may be made, in
respect of any type of grant to all Participants during the term of the Plan or
to any Participant during any specified period, (iii) reduce the minimum
exercise price for Stock Options and Stock Appreciation Rights, or (iv) change
the Performance Measure criteria identified at Section 9(c) of the Plan.
15. MISCELLANEOUS.
(a) WITHHOLDING TAXES. All Awards under the Plan will be made subject to
any applicable withholding for taxes of any kind. The Company shall have the
right to deduct from any amount payable under the Plan, including delivery of
shares of Common Stock to be made under the Plan, all federal, state, city,
local or foreign taxes of any kind required by law to be withheld with respect
to such payment and to take such other actions as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of such taxes.
If shares of Common Stock are used to satisfy withholding taxes, such shares
shall be valued based on the Fair Market Value thereof on the date when the
withholding for taxes is required to be made. The Company shall have the right
to require a Participant to pay cash to satisfy withholding taxes as a condition
to the payment of any amount (whether in cash or shares of Common Stock) under
the Plan.
(b) NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the making
of any grant or Award shall confer upon any Employee any right to continued
employment with the Company or any Subsidiary, nor shall it interfere in any way
with the right of the Company or any Subsidiary to terminate the employment of
any Employee at any time, with or without cause.
(c) UNFUNDED PLAN. The Plan shall be unfunded and the Company shall not be
required to segregate any assets that may at any time be represented by Awards
under the Plan. Any liability of the Company to any person with respect to any
Award under the Plan shall be based solely upon any contractual obligations that
may be effected pursuant to the Plan. No such obligation of the Company shall be
deemed to be secured by any pledge of, or other encumbrance on, any property of
the Company.
(d) PAYMENTS TO TRUST. The Committee is authorized to cause to be
established a trust agreement or several trust agreements whereunder the
Committee may make payments of amounts due or to become due to Participants in
the Plan.
(e) ENGAGING IN COMPETITION WITH COMPANY. In the event a Participant
terminates his or her employment with the Company or a Subsidiary for any reason
whatsoever, and within eighteen (18) months after the date thereof accepts
employment with any competitor of, or otherwise engages in com-
-11-
X-10-1-11
<PAGE> 12
petition with, the Company, the Committee, in its sole discretion, may require
such Participant to return, or (if not received) to forfeit, to the Company the
economic value of any Award which is realized or obtained (measured at the date
of exercise, vesting or payment) by such Participant (i) at any time after the
date which is six months prior to the date of such Participant's termination of
employment with the Company or (ii) during such other period as the Committee
may determine.
(f) OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments and other
benefits received by a Participant under an Award made pursuant to the Plan
shall not be deemed a part of a Participant's regular, recurring compensation
for purposes of any termination indemnity or severance pay law of any country
and shall not be included in, nor have any effect on, the determination of
benefits under any pension or other employee benefit plan or similar arrangement
provided by the Company or any Subsidiary, unless (i) expressly so provided by
such other plan or arrangement or (ii) the Committee expressly determines that
an Award or a portion thereof should be included as recurring compensation.
Nothing contained in the Plan shall prohibit the Company or any Subsidiary from
establishing other special awards, incentive compensation plans, compensation
programs and other similar arrangements providing for the payment of
performance, incentive or other compensation to Employees. Payments and benefits
provided to any Employee under any other plan, including, without limitation,
any stock option, stock award, restricted stock, deferred compensation, savings,
retirement or other benefit plan or arrangement, shall be governed solely by the
terms of such other plan.
(g) SECURITIES LAW RESTRICTIONS. In no event shall the Company be obligated
to issue or deliver any shares of Common Stock if such issuance or delivery
shall constitute a violation of any provisions of any law or regulation of any
governmental authority or securities exchange. No shares of Common Stock shall
be issued under the Plan unless counsel for the Company shall be satisfied that
such issuance will be in compliance with all applicable Federal and state
securities laws and regulations and all requirements of any securities exchange
on which the Common Stock is listed.
(h) GRANT AGREEMENTS. Each Participant receiving a grant under the Plan
shall enter into a grant agreement with the Company in a form specified by the
Committee agreeing to the terms and conditions of the grant and such related
matters as the Committee shall, in its sole discretion, determine.
(1) SEVERABILITY. In the event any provision of the Plan shall be held to
be invalid or unenforceable for any reason, such invalidity or unenforceability
shall not affect the remaining provisions of the Plan.
(j) TRANSITION - 1989 PLAN. The Plan replaces and supersedes the 1989
Goodyear Performance and Equity Incentive Plan (the "1989 Plan") and the 1989
Plan shall automatically terminate when the Plan becomes effective, except that
such termination shall not affect any grants or awards then outstanding under
the 1989 Plan.
(k) GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of Ohio.
-12-
X-10-1-12
<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.
<TABLE>
<CAPTION>
(In millions, except per share) Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------- ------- ------- -------
PRIMARY:
<S> <C> <C> <C> <C>
Net Income $192.2 $187.9 $362.6 $339.7
Adjusted average number of
shares outstanding 157.7 157.1 157.9 156.6
PRIMARY EARNINGS PER SHARE $ 1.22 $ 1.20 $ 2.30 $ 2.17
FULLY DILUTED:
Net Income $192.2 $187.9 $362.6 $339.7
Adjusted average number
of shares outstanding 158.2 157.1 158.5 156.6
FULLY DILUTED EARNINGS PER SHARE $ 1.21 $ 1.20 $ 2.29 $ 2.17
</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 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 Note 19, 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, 1996 at page 50.
X-11-1
<PAGE> 1
EXHIBIT 12
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
(Dollars in millions)
6 Months
Ended
06/30/97 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
Income before income taxes, extraordinary
items and cumulative effect of accounting changes $533.2 $122.3 $ 925.8 $ 865.7 $ 784.9 $629.9
Add:
Amortization of previously capitalized interest $ 5.5 $ 11.6 $ 11.7 $ 10.2 $ 10.1 $ 9.6
Minority interest in net income of
consolidated subsidiaries with fixed charges 24.1 45.9 30.1 16.9 19.0 14.2
Proportionate share of fixed charges of investees
accounted for by the equity method 3.2 6.2 6.3 5.0 4.7 6.9
Proportionate share of net loss of investees
accounted for by the equity method 0.8 2.7 0.5 0.2 0.3 2.2
--------------------------------------------------------------
Total additions $ 33.6 $ 66.4 $ 48.6 $ 32.3 $ 34.1 $ 32.9
Deduct:
Capitalized interest $ 3.5 $ 5.4 $ 5.1 $ 5.7 $ 5.0 $ 4.0
Minority interest in net loss of consolidated subsidiaries 1.8 4.4 3.3 0.3 0.3 1.8
Undistributed proportionate share of net income
of investees accounted for by the equity method -- -- 0.2 7.2 4.0 0.9
--------------------------------------------------------------
Total deductions $ 5.3 $ 9.8 $ 8.6 $ 13.2 $ 9.3 $ 6.7
TOTAL EARNINGS $561.5 $178.9 $ 965.8 $ 884.8 $ 809.7 $656.1
==============================================================
FIXED CHARGES
Interest expense $ 63.5 $128.6 $ 135.0 $ 129.4 $ 162.4 $232.9
Capitalized interest 3.5 5.4 5.1 5.7 5.0 4.0
Amortization of debt discount, premium or expense -- 0.3 0.4 0.7 0.4 1.0
Interest portion of rental expense 34.8 69.5 77.0 83.0 83.7 87.6
Proportionate share of fixed charges of investees
accounted for by the equity method 3.2 6.2 6.4 5.0 4.7 6.9
--------------------------------------------------------------
TOTAL FIXED CHARGES $105.0 $210.0 $ 223.9 $ 223.8 $ 256.2 $332.4
==============================================================
TOTAL EARNINGS BEFORE FIXED CHARGES $666.5 $388.9 $1,189.7 $1,108.6 $ 1,065.9 $988.5
==============================================================
RATIO OF EARNINGS TO FIXED CHARGES 6.35 1.85 5.31 4.95 4.16 2.97
</TABLE>
Supplemental information - Income before income taxes, extraordinary items
and cumulative effect of accounting changes in 1996 was reduced by a charge of
$755.6 million related to the writedown of the All American Pipeline System and
related assets. Excluding this charge, the ratio of earnings to fixed charges
for 1996 would have been 5.45.
X - 12 - 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.
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 241
<SECURITIES> 0
<RECEIVABLES> 1,985
<ALLOWANCES> 54
<INVENTORY> 1,873
<CURRENT-ASSETS> 4,413
<PP&E> 9,107
<DEPRECIATION> 5,032
<TOTAL-ASSETS> 10,151
<CURRENT-LIABILITIES> 3,102
<BONDS> 1,084
<COMMON> 156
0
0
<OTHER-SE> 3,336
<TOTAL-LIABILITY-AND-EQUITY> 10,151
<SALES> 6,549
<TOTAL-REVENUES> 6,549
<CGS> 4,994
<TOTAL-COSTS> 4,994
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64
<INCOME-PRETAX> 533
<INCOME-TAX> 171
<INCOME-CONTINUING> 363
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 363
<EPS-PRIMARY> 2.32
<EPS-DILUTED> 0
</TABLE>
