-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H47jXIsTSm7Wx8nfKHbsxbskV9uIsIRv9+jCm9/oI48Sr0UYYwqLck4EUqqv1/JP Gmpk085PQP+qaXG5mWBmuA== 0000950152-96-001068.txt : 19960321 0000950152-96-001068.hdr.sgml : 19960321 ACCESSION NUMBER: 0000950152-96-001068 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960320 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOODYEAR TIRE & RUBBER CO /OH/ CENTRAL INDEX KEY: 0000042582 STANDARD INDUSTRIAL CLASSIFICATION: TIRES AND INNER TUBES [3011] IRS NUMBER: 340253240 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01927 FILM NUMBER: 96536625 BUSINESS ADDRESS: STREET 1: 1144 E MARKET ST CITY: AKRON STATE: OH ZIP: 44316 BUSINESS PHONE: 2167962121 MAIL ADDRESS: STREET 1: 1144 E MARKET ST CITY: AKRON STATE: OH ZIP: 44316 10-K 1 GOODYEAR TIRE & RUBBER COMPANY 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1995 Commission File Number: 1-1927 THE GOODYEAR TIRE & RUBBER COMPANY (Exact name of Registrant as specified in its charter) Ohio 34-0253240 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1144 East Market Street, Akron, Ohio 44316-0001 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (330) 796-2121 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each Class which registered ------------------------------- -------------------------- Common Stock, Without Par Value New York Stock Exchange Chicago Stock Exchange Pacific Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange Chicago Stock Exchange Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None ___________________________ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- ___________________________ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein or in the definitive proxy statement incorporated by reference in Part III of this Form 10-K. [ ]. ___________________________ The aggregate market value of Registrant's outstanding Common Stock held by nonaffiliates of the Registrant on February 16, 1996, determined using the per share closing price thereof on the New York Stock Exchange Composite Transactions tape of $49.125 on that date, was approximately $7,579,681,795.12. ___________________________ SHARES OF COMMON STOCK, WITHOUT PAR VALUE, OUTSTANDING AT FEBRUARY 16, 1996: 154,471,026 ___________________________ DOCUMENTS INCORPORATED BY REFERENCE: PORTIONS OF REGISTRANT'S DEFINITIVE PROXY STATEMENT, DATED FEBRUARY 27, 1996, FOR ITS 1996 ANNUAL MEETING OF SHAREHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III. 2 THE GOODYEAR TIRE & RUBBER COMPANY ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 TABLE OF CONTENTS
ITEM PAGE NUMBER NUMBER ------ ------ PART I 1 Business .............................................. 1 2 Properties ............................................ 11 3 Legal Proceedings ..................................... 14 4 Submission of Matters to a Vote of Security Holders ... 17 4(A) Executive Officers of Registrant ...................... 17 PART II 5 Market for Registrant's Common Equity and Related Stockholder Matters ................................... 21 6 Selected Financial Data ............................... 22 7 Management's Discussion and Analysis of Financial Condition and Results of Operations ................... 23 8 Financial Statements and Supplementary Data ........... 30 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................... 51 PART III 10 Directors and Executive Officers of the Registrant .... 51 11 Executive Compensation ................................ 51 12 Security Ownership of Certain Beneficial Owners and Management ............................................ 51 13 Certain Relationships and Related Transactions ........ 51 PART IV 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K .............................................. 52 Signatures ............................................ 54 Index to Financial Statement Schedules ................ FS-1 Index of Exhibits ..................................... X-1
3 THE GOODYEAR TIRE & RUBBER COMPANY PART I ITEM 1. BUSINESS. BUSINESS OF GOODYEAR The Goodyear Tire & Rubber Company is an Ohio corporation organized in 1898. Its principal offices are located at 1144 East Market Street, Akron, Ohio 44316-0001. Its telephone number is (330) 796-2121. The term "Registrant" wherever used herein refers solely to The Goodyear Tire & Rubber Company. The terms "Goodyear" and the "Company" wherever used herein refer to The Goodyear Tire & Rubber Company together with all of its domestic and foreign subsidiary companies, unless the context indicates to the contrary. Goodyear is one of the world's leading manufacturers of tires and rubber products, engaging in operations in most regions of the world. In 1995, Goodyear's net sales were $13.2 billion and net income was $611.0 million. Goodyear's worldwide employment averaged 88,790 during 1995. Goodyear's principal business is the development, manufacture, distribution and sale of tires for most applications. Goodyear also manufactures and markets several lines of rubber and reinforced plastic products for the transportation industry and various industrial and consumer markets and numerous rubber-related chemicals for various applications, provides automotive repair and other services and sells various other products. Registrant's Celeron subsidiaries engage in various crude oil transportation, gathering, purchasing and selling activities. The All American Pipeline System is a heated crude oil pipeline extending from two points along the California coast to McCamey, Texas, which transports offshore California crude oil from Las Flores and Gaviota, California, and onshore California and Alaska North Slope crude oil from other points in California, to various other system terminals in California and to McCamey, Texas. RECENT DEVELOPMENTS IN GOODYEAR'S BUSINESS During 1995, the Aquatred(R) II radial passenger tire, a second generation of enhanced wet traction tire offering longer tread life, and the Wrangler(R) Aquatred(R) for light trucks, sport-utility vehicles and vans were introduced by Goodyear in North America. Other passenger tire lines introduced in 1995 include the high performance Eagle #1(TM) in North America, the Eagle Aquatred and the high-performance Eagle F-1(TM) in Europe and the Aquatred in Latin America. New truck tires and farm tires were introduced in North America and Europe, including the Unisteel(R) G357 tire for steer axles. A new premium radial passenger tire, the GPS2, was introduced in Latin America. In February 1996, Goodyear introduced the Infinitred(TM), a premium radial passenger tire featuring enhanced wet traction and extended tread life, to the North American replacement passenger tire market. The Infinitred(TM) is offered with a lifetime treadlife limited warranty, which will be in effect as long as the purchaser owns the car on which the tires are first mounted and the tires are maintained as specified by the limited warranty. In December 1995, the Company acquired 32.7% of the capital stock of TCDebica, a manufacturer of passenger tires located in Poland, from the State Treasury of Poland for approximately $55 million, and agreed to purchase original issue shares of such capital stock from T C Debica in March 1996 for approximately $60 million. Upon completion of the purchase of such additional shares, Goodyear will own approximately 50.8% of the capital stock of T C Debica. In 1995, Goodyear introduced a new line of Plylon(R) Plus conveyor belts to the industrial market and the Gatorback(R) serpentine Poly-V(R) belts to the automotive replacement market. On March 1, 1996, Goodyear acquired the assets of Belt Concepts of America, Inc, a manufacturer of lightweight conveyor belting for various commercial applications located in Spring Hope, North 1 4 Carolina. During 1995, Goodyear also acquired the assets of an air spring manufacturer in Brazil and increased to 100% its interest in a conveyor belting manufacturing facility in Australia. Goodyear continued its program to enhance production capacity and efficiency through plant modernization and expansion projects. Expansion of the Company's Danville, Virginia, Topeka, Kansas, and Americana, Brasil, tire plants and Beaumont, Texas, and Houston, Texas, synthetic rubber plants were completed during 1995. The Company began construction of a new tire mold plant in Statesville, North Carolina, which is scheduled to be completed in 1996. Significant plant modernization and expansion projects are presently underway at the Company's Gadsden, Alabama, Topeka, Kansas, Napanee, Ontario, Valleyfield, Quebec, Americana, Brazil, Bogor, Indonesia, and Bangkok, Thailand tire plants. Modernization and expansion projects were also completed at the Lincoln, Nebraska, Owen Sound, Ontario, Norfolk, Nebraska, and Logan, Ohio plants. FINANCIAL INFORMATION ABOUT GOODYEAR'S INDUSTRY SEGMENTS Financial information relating to Goodyear's "Industry Segments" for each of the three years in the period ended December 31, 1995 appears in Note 16 captioned "Business Segments", and in the tabulation captioned "Industry Segments" at Note 16, of the Notes to Financial Statements set forth in Item 8 of this Annual Report, at pages 46 and 47, respectively, and is incorporated herein by specific reference. DESCRIPTION OF GOODYEAR'S BUSINESS -- INDUSTRY SEGMENTS TIRES Goodyear's principal Industry Segment is the development, manufacture, distribution and sale of tires and related products and services (the "Tires Segment"). The principal class of products in the Tires Segment is tires for most applications. No other class of products or services in the Tires Segment accounted for as much as 10% of Goodyear's sales in any of the last three years. The table below sets forth the percentage of Goodyear's net sales and operating income attributable to the Tires Segment, and the percentage of Goodyear's sales attributable to tires, for each of the three years ended December 31, 1995:
Year Ended December 31, 1995 ------------------------------- 1995 1994 1993 ------ ------ ------ Tires Segment sales ..................... 85.5% 85.5% 85.6% Tire Sales ........................ 76.7% 76.7% 76.0% Tires Segment operating income .......... 81.9% 84.7% 85.7%
The products and services comprising the Tires Segment include: TIRES. Goodyear manufactures and markets in most regions of the world a broad line of rubber tires for automobiles, trucks, buses, tractors, farm implements, earthmoving equipment, aircraft, industrial equipment and various other applications, in each case for sale to original equipment manufacturers and in the replacement market. Goodyear offers two basic constructions of tires, radial and bias-ply. Various belting and reinforcing materials are used, including nylon and polyester tire cord and steel. A variety of Goodyear-brand radial passenger tire lines are sold in the United States, including the all season Aquatred(R) enhanced wet traction tire line, the Eagle(R) performance touring tire lines, and the Eagle(R) "Gatorback"(R) and Eagle(R) Aquatred(R) high performance tire lines. The major lines of Goodyear-brand radial light truck tires offered in the United States are the Wrangler(R) and Workhorse(R). Goodyear manufactures and sells several lines of radial passenger and light truck tires in Europe, led by the Eagle and the Eagle Aquatred passenger tire 2 5 lines and the Wrangler light truck tire line. In Asia and Latin America, both radial and bias-ply Goodyear-brand passenger and light truck tires are manufactured and sold, led by the Eagle Aquatred in Asia and the GPS2 in Latin America. Goodyear manufactures and markets a full line of all-steel cord and belt construction radial medium truck tires, the Unisteel(R) series, for applications ranging from line-haul highway use to off-road service. Goodyear also offers a full line of bias-ply medium truck tires. Goodyear produces several lines of tires for other applications, including radial and bias-ply tires for farm machinery, heavy equipment and aircraft, and inner tubes for truck tires and various other applications. Goodyear manufactures and sells new and retreaded aircraft tires in the United States, Europe, Latin America and Asia. The Kelly-Springfield Tire Company, a division of Registrant ("Kelly-Springfield"), manufactures and markets numerous lines of radial and bias-ply passenger and truck tires in the United States replacement market and sells various lines of Kelly-brand tires in the replacement markets in Canada and certain other countries. Brad Ragan, Inc., a 74.5% owned subsidiary of Registrant, is a tire retailing and commercial tire sales, retreading and service chain with operations in various regions of the United States. RELATED PRODUCTS AND SERVICES. Goodyear also retreads truck, aircraft and heavy equipment tires, primarily as a service to its commercial customers, and manufactures and sells tread rubber and other tire retreading materials for various applications. Additional products and services in the Tires Segment include: automotive repair services provided by Goodyear through its retail outlets; the sale to dealers and consumers of automotive repair and maintenance items, automotive equipment and accessories and other items; the operation of three rubber plantations and the processing and sale of natural rubber; and miscellaneous other products and services. MARKETS AND DISTRIBUTION -- COMPETITION The Company offers a broad line of tires for most applications and for all classes of customers. In the United States and many other countries, the Company sells Goodyear-brand tires to vehicle manufacturers for use as original equipment on vehicles they produce. In the United States and most other countries, the Company sells Goodyear-brand, other house brand and private brand tires through various channels of distribution for sale to vehicle owners for replacement purposes. Worldwide, the Company's sales of passenger, truck and farm tires to the replacement market substantially exceed its sales of passenger, truck and farm tires to original equipment manufacturers. All passenger tires (except bias-ply temporary spare tires) and approximately 89% of all light and medium truck tires sold by the Company in the United States during 1995 were radial. Approximately 94% of all passenger tires and approximately 51% of all light and medium truck tires sold by the Company outside the United States during 1995 were radial. Demand for high performance passenger tires has increased significantly during recent years. High performance tires constituted approximately 30% of the United States passenger tire market during 1995, up from 28% in 1994, 26%in 1993 and 10% in 1988. Goodyear's tires are sold under highly competitive conditions. On a worldwide basis, Goodyear has two major competitors: Bridgestone (based in Japan) and Michelin (based in France). Goodyear also competes worldwide with several other major foreign based tire manufacturing concerns, including Continental, Pirelli, Sumitomo, Toyo, Yokohama and several Korean tire companies. Goodyear's principal competitors with operations in the United States are Bridgestone, The Firestone Tire & Rubber Company (acquired by Bridgestone in 1988), Michelin, Uniroyal-Goodrich Tire Company (acquired by Michelin in 1990), Continental, General Tire Inc. (acquired by Continental in 1987) and Cooper Tire & Rubber Company. Goodyear competes with other tire manufacturers on the basis of price, warranty, service, consumer convenience and product design, performance and reputation. The Company believes Goodyear-brand tires enjoy a high recognition factor throughout the world and have a reputa- 3 6 tion for high quality and value. Kelly-brand and various other house-brand tire lines offered by the Company compete primarily on the basis of price and performance. Goodyear is a major supplier, on a direct sale basis, of tires to most manufacturers of automobiles, trucks, farm and construction equipment and other vehicles, both in the United States and numerous other countries. Goodyear sells tires to the major automobile and truck manufacturers located in the United States: Ford, General Motors, Chrysler, Toyota, Nissan, Honda, Diamond-Star, NUMMI, AAI, Navistar, Mack Truck, Freightliner, Peterbilt and Kenworth. Goodyear supplies tires to several European manufacturers, including Fiat, Daimler-Benz, Volkswagen, Volvo, Ferrari, BMW, Peugeot, Alfa Romeo and Renault, to six Japanese manufacturers, Nissan, Mazda, Toyota, Honda, Mitsubishi and Isuzu, and to subsidiaries of General Motors, Ford and Chrysler throughout the world. Goodyear also supplies major manufacturers of construction and agricultural equipment, including Caterpillar, J. I. Case, John Deere, Massey-Ferguson and New Holland N.V. Goodyear-brand tires for the United States replacement market are sold through various channels of distribution. The principal method of distribution is a large network of independent dealers and franchisees. Goodyear-brand tires are also sold to several regional and national retail marketing firms, including Sears Roebuck & Co., Wal-Mart, Penske Auto Centers and Montgomery Ward. In addition, approximately 958 retail outlets (including auto service centers, commercial tire & service centers and leased space in department stores) are operated by the Registrant under the Goodyear name or under various other trade styles and approximately 158 retail and commercial tire sales outlets are operated by subsidiaries of the Registrant. Several lines of Kelly-brand and various other house brand passenger and truck tires are marketed through independent dealers. Private brand and associate brands of tires are also sold to independent dealers, to national and regional wholesale marketing organizations, including TBCCorporation, to retail chain marketers, including Wal-Mart, Discount Tire, Sears Roebuck & Co. and Big-O, to service stations and to various other retail marketers. Goodyear sells tires outside the United States to original equipment manufacturers and in the replacement market through independent wholesale distributors, its own wholesale distribution organizations, and, in some countries, its own retail stores. In certain countries Goodyear contracts for the manufacture by others of Goodyear-brand tires. No customer or group of affiliated customers accounted for as much as 5.4% of Goodyear's consolidated net sales during 1995, 1994 or 1993. Worldwide, Goodyear's annual net sales to its ten largest customers, including their respective affiliates, represented less than 21.0% of consolidated net sales for each of 1995, 1994 or 1993. No customer or group of affiliated customers accounted for as much as 4.1% of Tires Segment sales during 1995, 1994 or 1993. The ten largest customers of the Tires Segment represented less than 21.1% of Tire Segment sales for 1995. Based on a composite of industry sources and information published by the Rubber Manufacturers Association (the "RMA"), it is estimated that approximately 224 million passenger tires were sold in the United States during 1995. The following table indicates the percentage change in annual unit sales of passenger tires in the United States: TOTAL UNITED STATES PASSENGER TIRE MARKET -- PERCENTAGE INCREASE (DECREASE) IN ANNUAL UNIT SALES
1995 VS 1994 1995 VS 1993 ------------ ------------ Replacement ................................... (1.7%) 1.0% Original Equipment ............................ (2.5%) 8.8% Total U.S. Passenger Tire Market ........ (1.9%) 2.9%
4 7 Based on current economic forecasts, Goodyear expects the total market for passenger tires in the United States in 1996 to increase approximately 3.0% compared to 1995. Goodyear estimates that demand for original equipment passenger tires in the United States during 1996 will be approximately 1.1% higher than in 1995 and that demand for passenger tires in the United States replacement market during 1996 will be approximately 3.7% higher than in 1995. Based on a composite of industry sources and information published by the RMA, it is estimated that approximately 49 million light and medium highway truck tires were sold in the United States during 1995, which is approximately 2.2% more than during 1994 and 12.8% more than during 1993. Goodyear estimates that demand for light and medium highway truck tires in the United States during 1996 will decrease by approximately 2 million units. The following table indicates the percentage change in Goodyear's annual unit sales of passenger, truck and farm tires worldwide: GOODYEAR WORLDWIDE UNIT SALES OF PASSENGER, TRUCK AND FARM TIRES-- PERCENTAGE INCREASE (DECREASE) IN ANNUAL UNIT SALES
1995 VS 1994 1995 VS 1993 ------------ ------------ United States ................................... (3%) 3% Foreign ......................................... 3% 11% Worldwide ................................. -- 7%
Based on information available from various industry and other sources and information published by the RMA, the Company sells more tires in the United States than any other tire manufacturer and, on the basis of annual net sales, is the third largest tire manufacturer in the world. Based on various industry and other sources, it is estimated that the Company's share of the worldwide auto, truck and farm tire markets was approximately 18% in 1995, 1994 and 1993. Related products and services, including automotive parts, automotive maintenance and repair services and associated merchandise, are sold in the United States through approximately 1,116 retail outlets operated by the Company. Automotive repair and maintenance items, automotive equipment and accessories and other items, which are purchased for resale by the Company, are distributed to many of the Company's tire dealers and franchisees. Related products are sold principally in the United States and Canada under highly competitive conditions. GOVERNMENT REGULATIONS -- TIRES The National Highway Traffic Safety Administration ("NHTSA"), under authority granted to it by the National Traffic and Motor Vehicle Safety Act of 1966, as amended, has established various standards and regulations relating to motor vehicle safety, some of which apply to tires sold in the United States for highway use. The NHTSA has the authority to order the recall of automotive products, including tires, having defects deemed to present a significant safety risk. NHTSA has issued "Tire Registration" regulations, which require the registration of tires for the purpose of identification in the event of a product recall, and "Uniform Tire Quality Grading" regulations, which require the grading of passenger tires for treadwear, traction and temperature resistance pursuant to prescribed testing procedures and the molding of such grades into the sidewall of each tire. Passenger and highway truck tires are required to be identified by ten-digit manufacturing identification codes molded on the sidewall of each tire. The effect of compliance with these regulations on Goodyear's sales and profits cannot be determined. However, these regulations have increased the cost of producing and marketing passenger tires in the United States. OTHER INFORMATION REGARDING TIRES SEGMENT Goodyear does not consider its Tires Segment business to be seasonal to any significant 5 8 degree. Goodyear maintains a significant inventory of new tires and certain other products in order to rationalize production schedules and assure prompt availability of such products to its customers. Goodyear manages its inventory in order to minimize working capital requirements and avoid unnecessary increases in unit production costs while balancing production schedules with fluctuations in demand. New tire inventory levels in North America and in certain countries in Latin America are currently, and during most of 1995 were, higher than planned due to lower than anticipated demand. Goodyear offers its customers various financing and extended payment programs from time to time. Goodyear does not believe these programs, when considered in the aggregate, require an unusual amount of working capital relative to the volume of sales involved and the prevailing practices in the tire industry. Goodyear's radial passenger and truck tire plants in North America and Europe were operated at approximately 95% of capacity during 1995 and 92% of capacity during 1994 and 1993. Goodyear's worldwide tire capacity utilization was approximately 93% during 1995 and 90% during 1994 and 1993. In order to maintain its competitive position, respond to changing market conditions and optimize production efficiencies, Goodyear has a continuing program for modernizing and increasing the capacity of its radial passenger and truck tire facilities. Goodyear has expansion projects planned or underway at several of its existing tire plants and certain other tire manufacturers are building, or have announced plans to install, additional capacity for passenger tires and light and medium truck tires over the next few years. Goodyear has also acquired, or is in the process of installing, acquiring or obtaining access to, new tire manufacturing capacity in various markets, including China, India and Poland. Continued high levels of capacity utilization by the tire industry during 1996 will be dependent on continued high production levels by the original equipment manufacturers in the United States and growth in the original equipment markets in Europe, Asia and Latin America, coupled with continued high levels of demand in the replacement markets in the United States and throughout the world. GENERAL PRODUCTS Another Industry Segment is the development, manufacture, distribution and sale of numerous rubber, chemical and plastic products (the "General Products Segment"). No class of products or services in the General Products Segment accounted for as much as 10% of Goodyear's net sales in any of the last three years. The table below sets forth the percentage of Goodyear's net sales and operating income attributable to the General Products Segment for each of the three years ended December 31, 1995:
YEAR ENDED DECEMBER 31, -------------------------- 1995 1994 1993 ---- ---- ---- General Products Segment Sales ................ 13.5% 13.8% 13.9% General Products Segment Operating Income ..... 13.6% 14.3% 15.3%
The products and services comprising the General Products Segment include: VEHICLE COMPONENTS. Goodyear manufactures automotive belts and hoses, air springs, engine mounts, instrument panels, rubber tracks and various body and chassis parts for motor vehicles made of rubber and reinforced plastics. INDUSTRIAL RUBBER PRODUCTS. Goodyear produces various industrial rubber products, including: conveyor and power transmission belts; air, steam, oil, water, gasoline, materials handling and hydraulic hose for industrial applications; and various rubber engineered products, including tank tracks and molded products. CHEMICAL PRODUCTS. Goodyear produces a broad line of synthetic rubber, rubber latices, organic chemicals used in rubber and plastic processing and vinyl resins and latices. 6 9 SHOE AND GRAPHIC PRODUCTS. Goodyear, utilizing products obtained under offtake agreements, markets heels, soles and strips for new shoes and shoe repair made of rubber and other synthetic materials. Goodyear manufactures gum for graphic products for the printing industry. MARKETS AND DISTRIBUTION -- OTHER INFORMATION Most products of the General Products Segment are sold directly to manufacturers or through independent wholesale distributors. During 1995, the five largest customers of the General Products Segment accounted for approximately 23.6% of General Products Segment sales and no customer accounted for more than 15% of General Products Segment sales. Goodyear does not maintain a significant inventory when considered in relation to the volume of business transacted. The General Products Segment consists of a large number of product lines in respect of which several manufacturers produce some, but not all, of the products manufactured by Goodyear. There are numerous suppliers of automotive belts and hose products and other rubber and plastic components for motor vehicles, more than 50 major producers of industrial rubber products, and numerous firms participating in the engineered products market. Goodyear is a major producer of synthetic rubber, rubber chemicals and latex. Several major firms are significant suppliers of one or more chemical products similar to those manufactured by Goodyear. These markets are highly competitive, with quality, service and price being the most significant factors to most customers. Goodyear believes the products offered by the General Products Segment are generally considered to be high quality and competitive in service and price. OIL TRANSPORTATION Goodyear's crude oil transportation and related activities (the "Oil Transportation Segment") are conducted by the Celeron group of companies ("Celeron"). The table below sets forth the percentage of Goodyear's net sales and operating income (or loss), attributable to the Oil Transportation Segment for each of the three years ended December 31, 1995:
Year Ended December 31, ----------------------- 1995 1994 1993 ---- ---- ---- Oil Transportation Segment Sales ................... 1.0% .7% .5% Oil Transportation Segment Operating Income (Loss).. 4.5% 1.0% (1.0%)
All American Pipeline Company, a wholly-owned subsidiary of Registrant ("All American"), owns and operates a heated crude oil pipeline system which extends approximately 1,225 miles from the California Coast in the Santa Barbara Channel -- Santa Maria Basin area to central Texas (the "All American System"). Celeron Gathering Company, a wholly-owned subsidiary of Registrant ("Celeron Gathering"), engages in the gathering, exchanging, purchasing and selling of crude oil and, in that connection, owns and operates a 43-mile crude oil gathering pipeline in the San Joaquin Valley, California (the "Celeron Gathering System"). Celeron Trading & Transportation Company, a wholly-owned subsidiary of Registrant, is engaged in various crude oil exchanging, purchasing and selling activities. ALL AMERICAN CRUDE OIL PIPELINE SYSTEM The All American System is a heated crude oil pipeline system, consisting of a 1,225 mile mainline segment extending from Gaviota, California, to McCamey, Texas, an 11 mile segment extending from Las Flores to Gaviota, and related terminal and oil storage facilities. The All American System is capable of transporting up to 300,000 barrels per day of heavy crude oils, 450,000 barrels per day of lighter crude oils or lower daily volumes of combinations of heavy crude oils (which may require heating) from fields on the outer continental shelf along the California coast in the Santa Barbara Channel -- Santa Maria Basin area ("OCS Crude Oil") and lighter crude oils (which do not require heating) from various onshore California fields ("California Crude Oil") or other sources to McCamey, Texas, for delivery through other pipelines to refineries in the Mid-continent region and along the Texas Gulf Coast. 7 10 The All American System transports California Crude Oil produced in the San Joaquin Valley area of California and Alaska North Slope crude oil ("ANS Crude Oil") received from other pipelines from insert points in central California to terminals located near McCamey, Texas. The All American System also transports OCS Crude Oil from Las Flores and Gaviota, California, to other system outlets in California for delivery through other pipelines to refineries in the Los Angeles Basin and in the greater San Francisco area and to McCamey, Texas, for delivery via other pipelines to refineries in the Mid-continent region and along the Texas Gulf Coast. In August of 1993, several producers of OCS Crude Oil entered into transportation agreements with the All American System whereunder the producers have agreed to transport available quantities of OCS Crude Oil at specified tariff rates. During 1995, approximately 51% of the OCS Crude Oil tendered pursuant to the transportation agreements was transported from Las Flores and Gaviota to All American System outlet stations in central California for delivery via other pipelines to refineries in the Los Angeles Basin or the San Francisco Bay area, with the balance transported to McCamey, Texas, for delivery via other pipelines to refineries in the Mid-continent region and along the Texas Gulf Coast. It is anticipated that during 1996 the volume of OCS Crude Oil tendered to the All American System pursuant to the transportation agreements will be substantially the same as during 1995. The average daily volume of crude oil transported by the All American System was approximately 217,000 barrels per day in 1995 and 185,000 barrels per day in 1994 and 1993. The average tariff per barrel of oil transported during 1995 was $1.73, compared to $1.29 during 1994 and $1.03 during 1993. The All American System transported oil tendered for shipment an average distance of 791 miles in 1995, 652 miles in 1994 and 725 miles in 1993. It is anticipated that during 1996 the All American System will, on an average daily volume basis, transport substantially the same quantities of crude oil as it transported in 1995. CELERON GATHERING SYSTEM Celeron Gathering owns and operates the Celeron Gathering System, a 43-mile crude oil gathering pipeline system, which has a design capacity of up to 100,000 barrels per day. Celeron Gathering uses the Celeron Gathering System in connection with its gathering, exchanging, purchasing and selling of crude oil produced in the South Belridge and Midway Sunset areas of the San Joaquin Valley. Celeron Gathering sells or exchanges substantially all of the crude oil it acquires in the San Joaquin Valley, the major portion of which is ultimately sold to or exchanged with refiners located in the Mid-continent and Texas Gulf Coast areas. Celeron Gathering also trades crude oil in California, most of which is used by refiners located in the Los Angeles Basin or in Northern California. GOVERNMENT REGULATION The All American System is a common carrier pipeline system and, as such, under current law is subject to the general jurisdiction of the Federal Energy Regulatory Commission (the "FERC"). Pursuant to the Interstate Commerce Act, the All American System is subject to FERC regulation as to tariffs, annual reporting requirements and other operating matters. In accordance with current laws and the regulations of the FERC, the All American System has filed with the FERC tariffs for transportation services being offered to shippers desiring to transport crude oil through the All American System or portions thereof. The All American System will file an Annual Report on FERC Form No. 6 with the FERC in March of 1996 in respect of its activities during 1995. The Celeron Gathering System is a proprietary intrastate gathering pipeline system and, as such, is not subject to the general jurisdiction of the FERC. 8 11 GENERAL BUSINESS INFORMATION SOURCES AND AVAILABILITY OF RAW MATERIALS The principal raw materials used in Goodyear's products are synthetic and natural rubber. Goodyear purchases substantially all of its requirements for natural rubber in the world market. Synthetic rubber accounted for approximately 56% of all rubber consumed by Goodyear worldwide during 1995, compared to 54% in 1994 and 61% in 1993. The Company's plants located in Beaumont and Houston, Texas, supply the major portion of its synthetic rubber requirements in the United States. The major portion of the synthetic rubber used by Goodyear outside the United States is supplied by third parties. The principal raw materials used in the production of synthetic rubber are butadiene and styrene purchased from independent suppliers and isoprene purchased from independent suppliers or produced by Goodyear from purchased materials. Nylon and polyester yarn, substantial quantities of which are processed in Goodyear's textile mills, and wire for radial tires, a portion of which is produced by Goodyear, are used in significant quantities by Goodyear. Other important raw materials used by Goodyear are carbon black, pigments, chemicals and bead wire. Substantially all of these raw materials are purchased from independent suppliers, except for certain chemicals which Goodyear manufactures. Goodyear purchases most of the materials and supplies it uses in significant quantities from several suppliers, except in those instances where only one or a few qualified sources are available. As in 1995, Goodyear anticipates the continued availability (subject to possible spot shortages) of all such materials during 1996. Goodyear uses substantial quantities of petrochemical feedstocks and fuels in the production of tires and other rubber products, synthetic rubber and latex and other products. Supplies of petrochemical feedstocks, petroleum and natural gas based fuels have been and are expected to continue to be adequate for the Company's manufacturing plants. Petrochemical feedstock, natural rubber and other raw material prices increased significantly during the first half of 1995. In general, the Company does not anticipate significant increases in raw material prices during 1996, although commodity materials are likely to continue to be subject to price volatility. PATENTS AND TRADEMARKS Goodyear owns approximately 1,562 patents issued by the United States Patent Office and approximately 6,478 patents issued or granted in other countries around the world, and also has licenses under numerous patents of others, covering various improvements in the design and manufacture of its products and in processes and equipment for the manufacture of its products. Goodyear also has approximately 392 patent applications currently on file with the United States Patent Office and approximately 3,432 patent applications on file in other countries around the world. While Goodyear considers that such patents, patent applications and licenses as a group are of material importance, it does not consider any one patent, patent application or license, or any related group of them, to be of such importance that the loss or expiration thereof would materially affect its business considered as a whole or the business of any of its Industry Segments. Goodyear owns and uses approximately 1,010 different trademarks, including several using the word "Goodyear". These trademarks are protected by approximately 6,400 registrations worldwide. Goodyear also has approximately 950 trademark applications pending in the United States and other jurisdictions. While Goodyear believes such trademarks as a group are of importance, the only trademarks Goodyear considers material to its business are those using the word "Goodyear". Goodyear believes all of its significant trademarks are valid and will have unlimited duration as long as they are adequately protected and appropriately used. 9 12 BACKLOG Goodyear does not consider its backlog of orders to be material to, or a significant factor in, evaluating and understanding any of its Industry Segments or its business considered as a whole. GOVERNMENT BUSINESS The total amount of Goodyear's business during 1995 under contracts or subcontracts which were subject to termination at the election of the United States Government amounted to approximately .6% of Goodyear's consolidated net sales for 1995 and 1994 and .9% for 1993. RESEARCH AND DEVELOPMENT Goodyear expends significant amounts each year on research for the development of new, and the improvement of existing, products and manufacturing processes and equipment. Goodyear maintains substantial research and development centers for tires and related products in Akron, Ohio, and Colmar-Berg, Luxembourg; tire technical centers in Cumberland, Maryland, and Tsukuba, Japan; and tire proving grounds in Akron, Ohio, San Angelo, Texas, Mireval, France, and Colmar-Berg, Luxembourg. Goodyear operates substantial research and development facilities for other products in Akron, Ohio, and Orsay, France. During the years ended December 31, 1995, 1994, 1993, 1992 and 1991, Goodyear expended, directly or indirectly, $369.3 million, $341.3 million, $320.0 million, $325.9 million and $330.0 million, respectively, on research, development and certain engineering activities relating to the design, development, improvement and modification of new and existing products and services and to the formulation and design of new manufacturing processes and equipment and improvements on existing processes and equipment. Goodyear estimates that it will expend approximately $380.0 million for research and development activities during 1996. EMPLOYEES At December 31, 1995, Goodyear employed approximately 87,930 people throughout the world. Of the approximately 44,258 persons employed in the United States at December 31, 1995, approximately 12,497 were covered by a master collective bargaining agreement, dated July 20, 1994, with the United Steel Workers of America, A.F.L.-C.I.O.-C.L.C ("USWA"), which agreement will expire on April 19, 1997. Of the remaining employees at December 31, 1995, approximately 9,435 were covered by other contracts with the USWA and various other unions and approximately 22,326 were not represented by any union. COMPLIANCE WITH ENVIRONMENTAL REGULATIONS Goodyear is subject to extensive regulation under environmental and occupational health and safety laws and regulations concerning, among other things, air emissions, discharges to waters and the generation, handling, storage, transportation and disposal of waste materials and hazardous substances. Goodyear has a continuing program to ensure its compliance with Federal, State and local environmental and occupational safety and health laws and regulations. During 1995, 1994, 1993, 1992 and 1991, Goodyear made capital expenditures aggregating approximately $17.4 million, $11.7 million, $13.4 million, $13.7 million and $9.6 million, respectively, for environmental improvement and occupational safety and health compliance projects in respect of its facilities worldwide. Goodyear presently estimates that it will make capital expenditures for pollution control facilities and occupational safety and health projects of approximately $12.3 million during 1996 and approximately $21.0 million during 1997. In addition, Goodyear expended approximately $74.9 million during 1995, and Goodyear estimates that it will expend approximately $78.6 million during 1996 and approximately $81.2 million during 1997, to maintain and operate its pollution control facilities and conduct its other environmen- 10 13 tal and occupational safety and health activities, including the control and disposal of hazardous substances, which amounts are expected to be sufficient to comply with applicable existing environmental and occupational safety and health laws and regulations and are not expected to have a material adverse effect on Goodyear's competitive position in the industries in which it participates. At December 31, 1995, Goodyear had reserved $91.4 million for anticipated costs associated with the remediation of numerous waste disposal sites and certain other properties and related environmental activities. In the future Goodyear may incur increased costs and additional charges associated with environmental compliance and cleanup projects necessitated by the identification of new waste sites, the impact of new and increasingly stringent environmental laws, such as the Clean Air Act, and regulatory standards and the availability of new technologies. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES Financial information relating to Goodyear's "Geographic Segments" for each of the three years in the period ended December 31, 1995 appears in Note 16, captioned "Business Segments", and in the tabulation captioned "Geographic Segments" at Note 16 of the Notes to Financial Statements set forth in Item 8 of this Annual Report, at pages 46 and 48, respectively, and is incorporated herein by specific reference. The Company, through its foreign subsidiaries, engages in manufacturing or sales operations in most countries in the world, including manufacturing operations in 26 foreign countries. Foreign sales represented approximately 45%, 42% and 42% of total sales and foreign operating income represented approximately 56%, 50% and 49% of total operating income in 1995, 1994 and 1993, respectively. Goodyear's foreign manufacturing operations consist primarily of the production of tires. Industrial rubber and certain other products are also manufactured in certain of the Company's foreign plants. Goodyear also participates in joint ventures in various countries. In 1987, Goodyear and Pacific Dunlop Limited established South Pacific Tyres, an Australian partnership, and South Pacific Tyres N.Z. Limited, a New Zealand company, in each of which Goodyear and Pacific Dunlop Limited each have a 50% equity interest, which entities operate five tire manufacturing plants, 21 retread plants and a chain of approximately 506 retail outlets in Australia, New Zealand and Papua - New Guinea. Other joint venture interests of the Company include: (1) a 50% interest in Nippon Giant Tire Co., Ltd., which manufactures earthmover tires in Japan; and (2) a 50% (40.4% net equity) interest in a tire manufacturing facility under construction near Bombay, which is scheduled to be completed in 1997. In addition to the ordinary risks of the marketplace, the Company's foreign operations and the results thereof in some countries are affected by price controls, import controls, labor regulations, tariffs, extreme inflation or fluctuations in currency values. Furthermore, in certain countries where Goodyear operates (primarily countries located in Central and South America), transfers of funds from foreign operations are generally or periodically subject to the availability of foreign exchange in the host country and other related restrictive governmental regulations. ITEM 2. PROPERTIES. Goodyear manufactures its products in 77 manufacturing facilities located around the world. There are 33 plants at 32 locations in 16 states of the United States and 44 plants at 39 locations in 26 other countries. 11 14 The following table identifies by location each of the Company's 77 manufacturing facilities, indicates the principal product or products manufactured therein and sets forth the approximate number of square feet of usable floor space. In addition, each Industry Segment using the facility is indicated after the products manufactured therein with the following references: (A), which indicates use by the Tires Segment; and (B), which indicates use by the General Products Segment. Except as indicated in the Notes to the following table of Manufacturing Facilities, Goodyear owns the land, buildings and manufacturing equipment comprising each facility. MANUFACTURING FACILITIES
APPROXIMATE FLOOR SPACE PRODUCT(S) MANUFACTURED (IN THOUSANDS PLANT LOCATION INDUSTRY SEGMENT(S) OF SQUARE FEET) -------------- ----------------------- --------------- UNITED STATES Akron, Ohio (2 Plants) Tires and Chemicals (A) and (B) 1,116 Asheboro, North Carolina Tire Wire Cord (A) 293 Bayport, Texas Rubber Processing Chemicals (A) and (B) 42 Beaumont, Texas Synthetic Rubber, Rubber Chemicals and 631 Hydrocarbon Resins (A) and (B) Calhoun, Georgia Latex (B) 61 Cartersville, Georgia Textile Mill (A) and (B) 659 Danville, Virginia Tires (A) 2,107 Decatur, Alabama Textile Mill (A) 656 Fayetteville, North Carolina Tires (A) 2,017 Freeport, Illinois Tires (A) 1,194 Gadsden, Alabama (1) Tires (A) 2,829 Green, Ohio Air Springs (B) 127 Greenville, Texas Tread Rubber (A) 24 Hannibal, Missouri (2) Hose Products (B) 30 Houston, Texas Synthetic Rubber (A) and (B) 704 Jackson, Ohio (2) Automotive and Commercial Engineered 222 Composites (B) Lawton, Oklahoma (2) Tires (A) 1,840 Lincoln, Nebraska Power Transmission Belts and Hose 950 Products (B) Logan, Ohio (2) Automotive Interior Trim Products (B) 340 Marysville, Ohio Conveyor Belts (B) 374 Mt Pleasant, Iowa Hose Products (B) 116 Niagara Falls, New York Chemicals and Vinyl Resins (A) and (B) 313 Norfolk, Nebraska Hose Products (B) 259 Radford, Virginia Tread Rubber (A) 55 St Marys, Ohio Molded Rubber Products (B) 829 Spartanburg, South Carolina (3) Tread Rubber (A) 102 Spring Hope, North Carolina Conveyor Belts (B) 120 Stow, Ohio (3) Tire Molds (A) 132 Sun Prairie, Wisconsin Hose Products (B) 175 Topeka, Kansas Tires (A) 2,940 Tyler, Texas Tires (A) 1,313 Union City, Tennessee Tires (A) 2,069 CANADA Bowmanville, Ontario Conveyor Belts (B) 323 Collingwood, Ontario Hose Products (B) 205 Medicine Hat, Alberta Tires (A) 115 Napanee, Ontario Tires (A) 748 Owen Sound, Ontario Power Transmission Belts and Graphic 108 Products (B) Quebec City, Quebec Molded Products and Tread Rubber (A) and 172 and (B) St. Alphonse de Granby, Hose Products (B) 163 Quebec Valleyfield, Quebec Tires (A) 1,002
12 15
APPROXIMATE FLOOR SPACE PRODUCT(S) MANUFACTURED (IN THOUSANDS PLANT LOCATION INDUSTRY SEGMENT(S) OF SQUARE FEET) -------------- ----------------------- --------------- EUROPE FRANCE-- Amiens Tires (A) 715 LeHavre (3) Chemicals (B) 274 GERMANY-- Fulda(3) Tires (A) 1,363 Philippsburg Tires (A) 984 GREECE-- Salonika Tires (A) 268 ITALY-- Cisterna di Latina Tires (A) 550 LUXEMBOURG Colmar-Berg (4 Plants) (3) Tires, Fabrics, Steel Tire Cord, 2,253 Tire Molds and Machines (A) MOROCCO--Casablanca Tires (A) 243 TURKEY-- Adapazari Tires (A) 665 Izmit Tires and Tubes (A) 380 UNITED KINGDOM Wolverhampton, England Tires (A) 1,843 LATIN AMERICA ARGENTINA-- Buenos Aires Tires (A) 957 BRAZIL-- Americana Tires, Fabric Dipping and Films 1,621 (A) and (B) Sao Paulo (3 Plants) Tires, Tubes, Industrial Rubber Products 1,244 and Fabric (A) and (B) CHILE-- Santiago Tires, Tubes, Industrial Rubber 812 Products and Batteries (A) and (B) COLOMBIA-- Cali Tires (A) 496 GUATEMALA-- Guatemala City Tires (A) 344 JAMAICA-- Morant Bay Tires (A) 157 MEXICO-- Mexico City Tires (A) 1,354 San Luis Potosi Hose Products and Air Sleeves (B) 92 PERU-- Lima Tires (A) 411 VENEZUELA-- Valencia Tires and Industrial Rubber 792 Products (A) and (B) ASIA AUSTRALIA-- Bayswater Conveyor Belts (B) 75 CHINA-- Dalian Tires (A) 479 Qingdao Hose Products (B) 135 INDIA-- New Delhi Tires (A) 699 INDONESIA-- Bogor (4) Tires (A) 842 MALAYSIA-- Kuala Lumpur (5) Tires (A) 417 PHILIPPINES-- Manila (6) Tires and Tubes (A) 392 TAIWAN-- Taipei Tires (A) 250 THAILAND-- Bangkok Tires (A) 423 NOTES: (1) Portion of facility is leased by Goodyear and may be purchased pursuant to the terms of the lease at a nominal option price. (2) Facility is leased by Goodyear. The lease provides that the Company has the option to purchase the facility at the expiration of the initial term at an option price which is either nominal or highly favorable to Goodyear. It is anticipated that such option will be exercised at the appropriate time if such facility is then needed in Goodyear's manufacturing operations or its acquisition would otherwise be advantageous to Goodyear. (3) Portion of facility is leased by Goodyear. (4) Facility is situated on land held under a use right which expires in 1997. It is not possible to obtain fee title under Indonesian law. (5) Facility is situated on land held under the terms of a land lease which expires in 2072. It is not possible to obtain fee title to land under Malaysian law. (6) Facility is situated on land held under the terms of a land lease having 5 years remaining, with a 25-year renewal option.
13 16 The manufacturing facilities of Goodyear are, when considered in the aggregate, modern and adequately maintained. Goodyear's capital expenditures for new plant and equipment and for expansion, modernization and replacement of existing plants and equipment and related assets aggregated $615.6 million in 1995, $523.0 million in 1994 and $432.3 million in 1993. Of said amounts, $347.9 million in 1995, $281.6 million in 1994 and $277.9 million in 1993 were expended on facilities located in the United States. The Company estimates that its capital expenditures during 1996 will aggregate approximately $675.0 million. During 1995, Goodyear's worldwide tire production facilities were operated at approximately 93% of rated capacity. The Company's other manufacturing facilities were operated at approximately 90% of rated capacity during 1995. Giving effect to plant expansions and modernizations recently completed or presently underway or planned, the Company's manufacturing facilities are generally expected to have production capacity sufficient to satisfy existing and presently anticipated demand for the Company's tires and other products. In addition to its manufacturing facilities, the Company owns and operates rubber plantations in Indonesia and Guatemala. Goodyear also owns substantial interests in plants located in Australia (tires and retreading), Poland (passenger tires), Japan (earthmover tires) and New Zealand (tires and retreading). The Company owns and operates research and development facilities and technical centers in Akron, Ohio, Colmar-Berg, Luxembourg, and Orsay, France and tire proving grounds in Akron, Ohio (82 acres), Mireval, France (450 acres), and San Angelo, Texas (7,243 acres). The Company also operates tire technical centers in Cumberland, Maryland, and Tsukuba, Japan, and a tire proving ground in Colmar-Berg, Luxembourg. The Company operates approximately 1,116 retail outlets for the sale of its tires to consumers in the United States and approximately 347 retail outlets in other countries. Worldwide, the Company also operates approximately 88 retread plants and approximately 205 warehouse and distribution facilities. Substantially all of these facilities are leased. The Company does not consider any one of these leased properties to be material to its operations. For additional information regarding leased properties, see Note 5, "Properties and Plants," and Note 7, "Leased Assets," of the Notes to Financial Statements set forth in Item 8 of this Annual Report at pages 37 and 41, respectively. Reference is made to the information set forth in Item 1 under the caption "Oil Transportation" beginning at page 7, which includes a description of, and other information regarding, the All American System, and the Celeron Gathering System. ITEM 3. LEGAL PROCEEDINGS. At March 15, 1996, Goodyear was a party to the following material legal proceedings, as defined in the Instructions to Item 103 of Regulation S-K: (A) Since January 19, 1990, a series of 65 civil actions have been filed against Registrant in the United States District Court for the District of Maryland relating to the development of lung disease, cancer and other diseases by former employees of The Kelly-Springfield Tire Company ("Kelly-Springfield"), a wholly-owned subsidiary of Registrant until it became a division of Registrant effective January 1, 1996, alleged to be the result of exposure to allegedly toxic substances, including asbestos and certain chemicals, while working at the Cumberland, Maryland tire plant of Kelly-Springfield, which was closed in 1987. The plaintiffs allege, among other things, that Registrant, as the manufacturer or seller of certain materials, negligently failed to warn Kelly-Springfield employees of the health risks associated with their employment at the Cumberland plant and failed to implement procedures to preserve their health and safety. The plaintiffs in these civil actions are seeking an aggregate of $650 million in compensatory damages and $6.46 billion in punitive damages. 14 17 (B) On June 7, 1990, a civil action, Teresa Boggs, et al. v. Divested Atomic Corporation, et al., was filed in United States District Court for the Southern District of Ohio by Teresa Boggs and certain other named Plaintiffs on behalf of themselves and a class comprised of certain other persons who reside near the Portsmouth Uranium Enrichment Complex, a facility owned by the United States Government as a part of the United States Department of Energy ("DOE") and located in Pike County, Ohio (the "Portsmouth Plant"), against Divested Atomic Corporation ("DAC"), the successor by merger of Goodyear Atomic Corporation ("GAC"), Registrant and Martin Marietta Energy Systems, Inc. ("MMES"). GAC had operated the Portsmouth Plant pursuant to a series of contracts with the DOE for several years until November 16, 1986, when MMES assumed operation of the Portsmouth Plant. The Plaintiffs allege that the past and present operators of the Portsmouth Plant, GAC (then a wholly-owned subsidiary of Registrant) and MMES, contaminated certain areas near the Portsmouth Plant with radioactive or other hazardous materials, or both, causing property damage and emotional distress. Plaintiffs seek $300 million in compensatory damages, $300 million in punitive damages and unspecified amounts for medical monitoring and cleanup costs. (C) In September of 1990, a civil action, Eastman Kodak Company, et al. v. Goodyear, et al. (No. CIV-2-90-221), was filed by Eastman in the United States District Court for the Eastern District of Tennessee, Northeastern Division, whereunder Eastman alleges infringement of a patent, which expired in December of 1994, in respect of certain processes used in the manufacture of polyester resin on ten production lines at the Pt. Pleasant, West Virginia polyester resin plant owned and operated by Registrant until sold to Shell Oil Company on December 18, 1992. Eastman is seeking monetary damages trebled for alleged willfulness, interest and costs. Goodyear has counterclaimed against Eastman alleging antitrust law violations, which counterclaims were dismissed by the trial court. The trial court also ruled that the patent did not cover the processes used in eight of the plant's production lines and, therefor, dismissed all infringement claims except with respect to two of the plant's production lines. On April 28, 1995, a jury rendered a verdict finding liability and assessing damages, having decided that Goodyear and Shell had infringed the patent in the operation of said two production lines but that such infringement was not willful. A judgment of $12,000,000, plus interest thereon (approximately $6,000,000 through March 1, 1996) and court costs, was entered against Goodyear. Goodyear and Eastman have appealed to the Court of Appeals, Federal Circuit. (D) In December of 1993, certain civil actions filed against Registrant and numerous other defendants in Judicial District Court, Galveston, Texas, by 72 individual plaintiffs were consolidated into a single action (Whalen, et al. v. AES, Inc., et al., Cause No. 93-CV0211). Certain plaintiffs have withdrawn or been dismissed from these cases and 30 of the plaintiffs entered into a settlement with Registrant and other defendants (at a cost to Registrant of approximately $5,600). The remaining 24 plaintiffs allege that they suffered personal injuries and property damage as the result of Registrant and other named defendants (the owners and operators of the site and several other corporations also alleged to be generators of wastes) allegedly depositing hazardous wastes at the McGinnis Waste Disposal Site located at Hall's Bayou Ranch, Texas. The plaintiffs allege, among other things, that the defendants were grossly negligent and committed fraud and are seeking an aggregate of $2 billion in actual damages, $13 billion in punitive damages and such further relief as may be appropriate. (E) In July of 1994, a civil action, Taylor Tire Company, et al. vs. Goodyear (Cause No. 94-1050K), was filed in the United States District Court for the Southern District of California against Registrant on behalf of a class of plaintiffs consisting of the four named tire dealers who are customers of Registrant and all tire retailers located in the State of California who are, or were at December 31, 1991 or at any time thereafter, contract dealers of Registrant and leased or are leasing a facility from Registrant or are, or were at any time after December 31, 1991, franchisees of Registrant. The complaint alleges that, in the course of Registrant's commercial relationships and dealings with the members of the class, Registrant, among other things, breached its fiduciary duty and the implied covenants of good faith and fair dealing with respect 15 18 to all members of the class, engaged in unfair business practices in violation of the California Business and Professions Code with respect to all members of the class, violated the California Franchise Investment Law and the California Corporation Code with respect to certain members of the class and breached the franchise agreements it entered into with certain members of the class. The plaintiffs are seeking unspecified actual and punitive damages, recision of all contracts, and injunctive and other relief. (F) On January 13, 1995, a civil action, Gregory Tire, et al. v. Goodyear, et al. (Cause No. 95-00409), was filed in the 192nd Judicial District Court, Dallas County, Texas, against Registrant (and two employees of Registrant) by 22 tire dealers located in Texas who are customers of Registrant, either as independent dealers or franchisees. The complaint alleges, among other things, that in the course of Registrant's commercial relationships and dealings with the plaintiffs, Registrant violated the Texas Business Opportunities Act and the Texas Deceptive Trade Practices Act, breached its fiduciary duty to the plaintiffs, breached its covenants of good faith and fair dealings with the plaintiffs, violated the Texas Free Enterprise Act, violated the Texas Antitrust Act, breached certain contracts with the plaintiffs and committed common law fraud. The plaintiffs are seeking unspecified compensatory damages, exemplary damages equal to the greater $230 million or 10% of Registrant's net worth and injunctive and other relief. (G) On March 15, 1995, a civil action, Orion Tire Corporation, et al. vs. Goodyear, et al. (Cause No. SA CV 95-221), was filed in the United States District Court for the Central District of California, against Registrant, Goodyear International Corporation, a wholly-owned subsidiary of Registrant ("GIC"), Samir F. Gibara, President and Chief Executive Officer of Registrant, John M. Ross, formerly Vice President and General Counsel of Registrant, and three other employees of Registrant by Orion Tire Corporation, a California corporation, China Tire Holdings Limited, a Bermuda corporation, and China Strategic Holdings Limited, a Hong Kong corporation. The plaintiffs allege, among other things, that, in connection with Goodyear's acquisition in 1994 of a 75% interest in a tire manufacturing facility in Dalian, People's Republic of China, Registrant and GIC engaged in tortious interference with certain contractual relationships involving said facility the plaintiffs had allegedly theretofore established with the entities which owned the Dalian tire manufacturing facility (which entities are controlled by the Dalian municipal government), committed tortious interference with prospective economic advantages of the plaintiffs, violated the California Cartwright Act by engaging in an unlawful combination and conspiracy in restraint of trade and committed trade libel and defamation by making oral defamatory and written libelous statements concerning the plaintiffs to various parties. In addition, all defendants are alleged to have engaged in a civil conspiracy to induce the entities which owned the Dalian facility to breach their contracts with the plaintiffs and to have engaged in civil racketeering. The plaintiffs are seeking an aggregate of at least $1.086 billion in actual damages from the defendants and an aggregate of $3.256 billion in exemplary damages from Registrant and GIC, plus exemplary damages of up to 10% of the net worth of each individual defendant, and such further relief as may be appropriate. (H) In April of 1995, Goodyear received a subpoena issued in connection with an industry-wide investigation being conducted by the Cleveland, Ohio, office of the Antitrust Division of the United States Department of Justice into possible violations of Section 1 of the Sherman Act by tire manufacturers. The subpoena calls for the production of documents to a Federal grand jury sitting in Cleveland. Goodyear has substantially completed its response to the subpoena and is cooperating fully with the Department of Justice in the investigation. (I) In addition to the legal proceedings described above, various other legal actions, claims and governmental investigations and proceedings covering a wide range of matters were pending against Registrant and its subsidiaries at March 15, 1996, including claims and proceedings relating to several waste disposal sites that have been identified by the USEPA and similar agencies of various States for remedial investigation and cleanup, which sites were allegedly used by Goodyear in the past for the disposal of industrial waste materials. Registrant, based 16 19 on available information, does not consider any such action, claim, investigation or proceeding to be material, within the meaning of that term as used in Item 103 of Regulation S-K and the instructions thereto. Registrant, based on available information, has determined with respect to each legal proceeding pending against Registrant and its subsidiaries at March 15, 1996, either that it is not reasonably possible that Goodyear has incurred liability in respect thereof or that any liability ultimately incurred will not exceed the amount, if any, recorded in respect of such proceeding at December 31, 1995 by an amount which would be material relative to the consolidated financial position, results of operations or liquidity of Goodyear, although in the event of an unanticipated adverse final determination of certain proceedings, Goodyear's consolidated net income in the period in which such determination occurs could be materially affected. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted to a vote of the security holders of the Registrant during the calendar quarter ended December 31, 1995. ITEM 4(A). EXECUTIVE OFFICERS OF REGISTRANT. Set forth below, in accordance with Instruction 3 to Item 401(b) of Regulation S-K, are: (1) the names and ages of all executive officers (including executive officers who are also directors) of the Registrant as of March 15, 1996, (2) all positions with the Registrant presently held by each such person and (3) the positions held by, and principal areas of responsibility of, each such person during the last five years. NAME POSITION(S) HELD AGE ---- ---------------- --- STANLEY C. GAULT CHAIRMAN OF THE BOARD AND DIRECTOR 70 Mr. Gault served as Chairman of the Board and Chief Executive Officer of Registrant from June 4, 1991 through December 31, 1995, when he retired as Chief Executive Officer. He is Chairman of the Board and an employee of Registrant. Mr. Gault was Chairman of the Board and Chief Executive Officer of Rubbermaid Incorporated from May 1, 1980 to May 1, 1991, when he retired. Prior to 1980, Mr. Gault was an employee of General Electric Company for 31 years, serving in various executive capacities. Mr. Gault has been a director of Registrant since February 14, 1989. SAMIR F. GIBARA PRESIDENT AND CHIEF EXECUTIVE OFFICER 56 AND DIRECTOR Mr. Gibara served in various managerial capacities after joining Goodyear in 1966. He served as the President and Chief Executive Officer of Goodyear Canada Inc., a subsidiary of Registrant, from October 1, 1989 through November 30, 1990. He was Chairman of the Board of a European subsidiary of Registrant from December 1, 1990 until September 30, 1992. Mr. Gibara was appointed a Vice President of the Registrant on September 1, 1992. Mr. Gibara was elected a Vice President of Registrant on October 6, 1992, serving in that capacity as the executive officer of Registrant responsible for strategic planning and business development and as the acting Vice President of Finance and the principal financial officer of Registrant. On May 3, 1994, Mr. Gibara was elected an Executive Vice President of Registrant and, in such capacity, was the executive officer responsible for the North American Tire Operations of Registrant. Effective April 15, 1995, Mr. Gibara was elected President and Chief Operating Officer of Registrant. Mr. Gibara was elected President and Chief Executive Officer of Registrant effective January 1, 1996. Mr. Gibara is the principal executive officer of Registrant. Mr. Gibara has been a director of Registrant since April 15, 1995. 17 20 NAME POSITION(S) HELD AGE ---- ---------------- --- WILLIAM J. SHARP PRESIDENT, GLOBAL SUPPORT OPERATIONS 54 Mr. Sharp served in various tire production posts until elected a Vice President of Registrant on January 6, 1987, serving in such capacity as the executive officer of Registrant responsible for Goodyear's worldwide tire manufacturing operations. Effective April 1, 1991, Mr. Sharp was elected an Executive Vice President of Registrant for worldwide product supply, and, in such capacity, was the executive officer of the Registrant responsible for Goodyear's tire manufacturing and distribution operations and research, development and engineering activities until October 1, 1992, when he became the executive officer of Registrant responsible for the operations of Registrant's subsidiaries in Europe. Effective January 1, 1996, Mr. Sharp was elected Registrant's President, Global Support Operations, and, as such, he is the executive officer of Registrant having corporate responsibility for Goodyear's research and development, manufacturing, purchasing, materials management, quality assurance, and environmental and health and safety improvement activities worldwide. Mr. Sharp has been an employee of Goodyear since 1964. ROBERT W. TIEKEN EXECUTIVE VICE PRESIDENT 56 AND CHIEF FINANCIAL OFFICER Mr. Tieken joined Goodyear on May 3, 1994, when he was elected an Executive Vice President and the Chief Financial Officer of Registrant. Prior to joining Goodyear, Mr. Tieken had been employed by the General Electric Company for 32 years, serving in various financial management posts, including Vice President, Finance and Information Technology of General Electric Aerospace from 1988 to April of 1993. From April of 1993 through April of 1994, Mr. Tieken was the Vice President of Finance of Martin Marietta Corporation, which acquired General Electric Aerospace in April of 1993. Mr. Tieken is the principal financial officer of Registrant. EUGENE R. CULLER, JR EXECUTIVE VICE PRESIDENT 57 Mr. Culler served in various capacities until November of 1986, when he was elected a Vice President of Registrant, in which capacity he served as the executive officer of Registrant responsible for worldwide tire marketing until January 1, 1987, when he became the executive officer of Registrant responsible for Goodyear's worldwide original equipment tire sales. On August 2, 1988, Mr. Culler was elected an Executive Vice President of Registrant, in which capacity he served as the executive officer of Registrant responsible for Goodyear's North American Tire Operations until September 30, 1990. Mr. Culler was the President of Goodyear Canada, Inc., a wholly-owned subsidiary of Registrant, from October 1, 1990 to April 15, 1995. Mr. Culler was elected an Executive Vice President of Registrant effective April 15, 1995, and, in such capacity, is the executive officer responsible for Goodyear's North American Tire Operations. Mr. Culler has been an employee of Goodyear since 1961. JAMES W. BARNETT VICE PRESIDENT 65 Mr. Barnett served in various posts in Goodyear's replacement tire sales organization until elected a Vice President of Registrant on September 6, 1984, serving in such capacity as the executive officer of Registrant responsible for Registrant's replacement tires sales and marketing in the United States until August 15, 1988. Since August 15, 1988, Mr. Barnett has served as the executive officer of Registrant responsible for Goodyear's worldwide original equipment tire sales. Mr. Barnett has been an employee of Goodyear since 1950. NISSIM CALDERON VICE PRESIDENT 62 Dr. Calderon served in various research management posts until April 7, 1986, when he was elected a Vice President of Registrant. He is the executive officer of Registrant responsible for Goodyear's research programs. Dr. Calderon has been an employee of Goodyear since 1962. 18 21 NAME POSITION(S) HELD AGE ---- ---------------- --- JAMES BOYAZIS VICE PRESIDENT AND SECRETARY 59 Mr. Boyazis joined Goodyear in 1963, serving in various posts until June 2, 1987, when he was elected a Vice President and the Secretary of Registrant. He is also the Associate General Counsel of Registrant. JESSE T. WILLIAMS, SR. VICE PRESIDENT 56 Mr. Williams served in various human resources posts until August 2, 1988, when he was elected a Vice President of Registrant. Mr. Williams was responsible for corporate compliance with equal employment opportunity laws and regulations until July 1, 1991, when he became the executive officer of Registrant responsible for Goodyear's human resources, diversity, safety and workers' compensation activities and for compliance with the various equal employment opportunity, workplace safety and other employment laws and regulations. Mr. Williams was the executive officer of Registrant responsible for Goodyear's compensation and employment practices from March 1, 1993 through October 31, 1995. Effective November 1, 1995, Mr. Williams became the executive officer of Registrant responsible for Goodyear's human resources policy and employment practices. Mr. Williams has been an employee of Goodyear since 1962. JOHN P. PERDUYN VICE PRESIDENT 56 Mr. Perduyn served in various public relations posts until appointed Director of Public Information in 1980, serving in that post until June 1, 1989. Mr. Perduyn was elected a Vice President of Registrant effective June 1, 1989, and is the executive officer of Registrant responsible for Goodyear's public affairs activities. Mr. Perduyn has been an employee of Goodyear since 1970. RICHARD P. ADANTE VICE PRESIDENT 49 Mr. Adante served in various engineering and management posts until appointed Production Director of Deutsche Goodyear GmbH, a wholly-owned subsidiary of Registrant, in August of 1988, serving in that capacity until April of 1990, when he was appointed Vice President of merchandise distribution and control. Mr. Adante was elected a Vice President effective April 1, 1991 and is the executive officer of Registrant responsible for materials management. Mr. Adante has been an employee of Goodyear since 1966. H. CLAY ORME VICE PRESIDENT 56 Mr. Orme served in various manufacturing management posts until he was appointed Director of Tire Manufacturing in 1987. Mr. Orme was elected a Vice President of Registrant effective September 1, 1992, and, in such capacity, is the executive officer of the Registrant responsible for Goodyear's worldwide manufacturing, corporate engineering and product distribution operations. Mr. Orme has been an employee of Goodyear since 1962. GARY A. MILLER VICE PRESIDENT 49 Mr. Miller served in various management and research and development posts until appointed Director of Tire Value and Competitive Analysis in April of 1989, serving in that post until October 1, 1990, when he was appointed General Manager of Specialty Tires. Mr. Miller was elected a Vice President of Registrant effective November 1, 1992. He is the executive officer of Registrant responsible for Goodyear's purchasing operations. Mr. Miller has been an employee of Goodyear since 1967. 19 22 NAME POSITION(S) HELD AGE ---- ---------------- --- MIKE L. BURNS VICE PRESIDENT 54 Mr. Burns served in various human resources posts until appointed Director of Organization Development and Training in 1986. He was elected a Vice President of Registrant effective March 1, 1993. He is the executive officer of Registrant responsible for Goodyear's human resources and total quality systems. Mr. Burns has been an employee of Goodyear since 1965. GEORGE E. STRICKLER VICE PRESIDENT AND COMPTROLLER 48 Mr. Strickler served in various accounting, treasury and financial posts until he was elected an Assistant Comptroller of the Registrant on April 9, 1984, in which capacity he served as the principal financial officer for the General Products Division until August of 1988 when he became the principal financial officer of the Tire Division. Mr. Strickler was elected a Vice President and the Comptroller of Registrant effective September 1, 1993. Mr. Strickler is the executive officer of Registrant responsible for business unit financial functions, corporate accounting and taxes and is the principal accounting officer of Registrant. Mr. Strickler has been an employee of Goodyear since 1969. JAMES C. WHITELEY VICE PRESIDENT 48 Mr. Whiteley served in various quality control and quality assurance managerial posts until appointed Director of Tire Quality Assurance on June 1, 1990. He was elected a Vice President of Registrant on November 2, 1993, serving as the executive officer of Registrant responsible for product quality and safety. Effective July 1, 1995, Mr. Whiteley became the executive officer of Registrant responsible for product quality and safety and environmental and occupational health and safety improvement and compliance programs. Mr. Whiteley has been an employee of Goodyear since 1969. RICHARD W. HAUMAN VICE PRESIDENT AND TREASURER 49 Mr. Hauman served in various financial management posts around the world until he was elected an Assistant Treasurer of Registrant on August 15, 1988. He was elected a Vice President and the Treasurer of Registrant on October 4, 1994. Mr. Hauman is the executive officer of Registrant responsible for Goodyear's treasury operations, risk management activities and pension and medical benefits administration. Mr. Hauman has been an employee of Goodyear since 1968. RICHARD J. STEICHEN VICE PRESIDENT 51 Dr. Steichen joined Goodyear in 1973 as a research chemist and served in various research and development posts until May 16, 1989, when he was appointed Director of Polyester Research and Development. On August 1, 1991, he was appointed Director of Technology Management. On November 1, 1992, Dr. Steichen was appointed the General Manager of Technology and Quality Assurance of South Pacific Tyres, a joint venture company 50% owned by Goodyear, serving in that capacity until November 30, 1994. Dr. Steichen was elected a Vice President of Registrant effective December 1, 1994. Dr. Steichen is the executive officer of Registrant responsible for Goodyear's worldwide tire technology activities. C. THOMAS HARVIE VICE PRESIDENT AND GENERAL COUNSEL 52 Mr. Harvie joined Goodyear on July 1, 1995 as a Vice President and the General Counsel of Registrant. Prior to joining Goodyear, Mr. Harvie was a Vice President and the Associate General Counsel of TRW Inc. from 1989 through June 1995. Mr. Harvie had been employed by TRW Inc. for 20 years in various capacities in the TRW Inc. law department. 20 23 No family relationship exists between any of the above named executive officers or between said executive officers and any other director or nominee for director of Registrant. Each executive officer is elected by the Board of Directors at its annual meeting to a term of one year or until his or her successor is duly elected, except in those instances where the person is elected at other than an annual meeting of the Board of Directors in which event such person's tenure will expire at the next annual meeting of the Board of Directors unless such person is reelected. The next annual meeting of the Board of Directors is scheduled to be held on April 15, 1996. PART II. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The principal market for Registrant's Common Stock is the New York Stock Exchange (Stock Exchange Symbol GT). Registrant's Common Stock is also listed on the Chicago Stock Exchange and The Pacific Stock Exchange. Overseas listings include the Amsterdam, Basel, Geneva, Paris and Zurich Stock Exchanges. Information relating to the high and low sale prices of Registrant's Common Stock and the dividends paid on such shares during 1995 and 1994 appears under the caption "Quarterly Data and Market Price Information" in Item 8 of this Annual Report, at page 50, and is incorporated herein by specific reference. The first quarter 1996 cash dividend, paid on March 15, 1996 to shareholders of record at February 16, 1996, was $.25 per share. At February 16, 1996, there were 31,748 record holders of the 154,471,026 shares of the Common Stock of Registrant then outstanding. Approximately 8,724,862 shares of the Common Stock of Registrant were beneficially owned by approximately 36,498 participants in four Employee Savings Plans sponsored by the Registrant and certain of its subsidiaries. The Northern Trust Company is the Trustee for said Employee Savings Plans. 21 24 ITEM 6. SELECTED FINANCIAL DATA.
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- (IN MILLIONS, EXCEPT PER SHARE) 1995 1994 1993 1992 1991 --------- --------- --------- --------- --------- Net Sales ................................... $13,165.9 $12,288.2 $11,643.4 $11,784.9 $10,906.8 Income before Extraordinary Items and Cumulative Effect of Accounting Changes ........................ 611.0 567.0 488.7 367.3 74.5 Extraordinary Items -- Early Extinguishment of Debt .............. -- -- (14.6) (15.3) -- Tax Benefit of Loss Carryovers ............ -- -- -- -- 22.1 Cumulative Effect of Change in Accounting for Postemployment Benefits ................... -- -- (86.3) -- -- Transition Effect of Change in Accounting for Non-pension Postretirement Benefits ................... -- -- -- (1,065.7) -- Cumulative Effect of Change in Accounting for Income Taxes ............... -- -- -- 55.1 -- --------- --------- --------- --------- --------- Net Income (loss) ........................... $ 611.0 $ 567.0 $ 387.8 $ (658.6) $ 96.6 ========= ========= ========= ========= ========= Per Share of Common Stock: Income before Extraordinary Items and Cumulative Effect of Accounting Changes ........................ $ 4.02 $ 3.75 $ 3.33 $ 2.57 $ .62 Extraordinary Items-- Early Extinguishment of Debt .............. -- -- (.10) (.11) -- Tax Benefit of Loss Carryovers ............ -- -- -- -- .19 Cumulative Effect of Change in Accounting for Postemployment Benefits ................... -- -- (.59) -- -- Transition Effect of Change in Accounting for Non-pension Postretirement Benefits ................... -- -- -- (7.46) -- Cumulative Effect of Change in Accounting for Income Taxes ............... -- -- -- .39 -- --------- --------- --------- --------- --------- Net Income (loss) ........................... $ 4.02 $ 3.75 $ 2.64 $ (4.61) $ .81 ========= ========= ========= ========= ========= Dividends Per Share ......................... $ .95 $ .75 $ .575 $ .275 $ .20 Total Assets ................................ $ 9,789.6 $ 9,123.3 $ 8,436.1 $ 8,563.7 $ 8,510.5 Long Term Debt and Capital Leases .................................... $ 1,320.0 $ 1,108.7 $ 1,065.9 $ 1,471.1 $ 2,038.1 Shareholders' Equity ........................ $ 3,281.7 $ 2,803.2 $ 2,300.8 $ 1,930.3 $ 2,731.1 Notes: (1) See "Principles of Consolidation" at Note 1 ("Accounting Policies") to the Financial Statements at page 35. (2) Per share amounts reflect the two-for-one split of the Company's Common Stock, distributed on May 4, 1993 in the form of a dividend of one share of Common Stock on each share of Common Stock outstanding at the close of business on April 30, 1993.
22 25 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS CONSOLIDATED Sales in 1995 were $13.2 billion, increasing 7.1 percent from $12.3 billion in 1994 and 13.1 percent from $11.6 billion in 1993. Net income was $611.0 million or $4.02 per share in 1995, increasing 7.8 percent from $567.0 million or $3.75 per share in 1994 and 57.6 percent from $387.8 million or $2.64 per share in 1993. Worldwide tire unit sales were unchanged from 1994 but were 7 percent higher than in 1993. Tire unit sales in 1995 reflected higher original equipment volume, primarily in Europe, but were adversely affected by lower replacement auto market volume in the U.S. In 1994, tire unit sales rose on increased demand worldwide in both the original equipment and replacement markets, with increases recorded in all regions. [FIGURE] CONSOLIDATED NET INCOME (Dollars in millions) 93 $387.8 94 $567.0 95 $611.0 Although competitive pricing conditions continued from 1994, revenues in 1995 increased due to higher average selling prices, and revenues in both 1995 and 1994 were favorably affected by the strengthening of European currencies versus the dollar. Tire revenue growth in 1994 did not keep pace with tire unit sales growth in that year, reflecting lower average selling prices compared to 1993 and a shift in worldwide unit sales mix. Cost of goods sold in 1995 of $10.1 billion increased 8.9 percent from 1994 and 15.9 percent from 1993. These costs amounted to 76.7 percent, 75.5 percent and 74.8 percent of sales in 1995, 1994 and 1993, respectively. Worldwide raw material costs were higher in both 1995 and 1994, but are not expected to increase significantly in 1996. Labor costs also increased in each year, due in part to new U.S. wage agreements in 1994 which provided wage and benefit improvements to approximately 20,000 U.S. employees. Costs in both 1995 and 1994 were favorably impacted by efficiencies achieved as a result of sustained high levels of capacity utilization and ongoing cost containment measures. The Company's research and development expenditures, all of which were included in cost of sales, were $369.3 million, $341.3 million and $320.0 million in 1995, 1994 and 1993, respectively. Research and development expenditures in 1996 are expected to approximate 1995's level. There were no charges for environmental cleanup projects included in cost of sales in 1995, compared to charges of $22.8 million and $29.7 million in 1994 and 1993, respectively. At December 31, 1995, the Company's reserve for environmental cleanup costs had decreased to $91.4 million from $116.4 million at December 31, 1994, reflecting payments made for site restoration. Environmental compliance costs may increase in future periods as a result of new and increasingly stringent laws and regulatory standards. Funding for environmental cleanup costs is expected to be provided from operations. For further discussion, refer to the note to the financial statements No. 17, Commitments and Contingent Liabilities. Selling, administrative and general expense in 1995 of $1.9 billion decreased 1.1 percent from 1994 but increased slightly from 1993. These expenses amounted to 14.7 percent, 15.9 percent and 16.5 percent of sales in 1995, 1994 and 1993, respectively. The improvement as a percent to sales in each year reflected the benefits of increased sales and ongoing cost containment measures. Interest expense in 1995 of $135.0 million increased 4.3 percent from 1994 due primarily to higher debt levels resulting from increased working capital requirements, but decreased 16.9 percent from 1993 due to lower average debt levels and an increase in the proportion of total domestic variable rate short term debt. 23 26 Other income and expense decreased in 1995 due primarily to lower interest income, which resulted in part from lower levels of time deposits and the effects of the Real plan in Brazil, as discussed below. Other income and expense in 1994 decreased due primarily to the inclusion of gains on asset sales totaling $24.7 million ($15.0 million after tax or $.10 per share) in 1993, resulting from the sale of the laminated films business, the Air Treads subsidiary's wheel and brake division and a miscellaneous investment. Foreign currency exchange expense in 1995 was $17.4 million, compared to $77.6 million in 1994 and $113.1 million in 1993. The improvement in each year also reflected the effects of Brazil's Real plan. Effective July 1, 1994, the Brazilian government implemented the Real plan, an economic plan designed to reduce inflation. The Real plan did not adversely affect unit sales in 1995 or 1994 in either Brazil or its export markets, and it did not have a material effect on the net income contributed by the Company's operations in Brazil in those years, as lower interest income on time deposits was substantially offset by lower expenses, primarily foreign currency exchange. The contribution of the Company's operations in Brazil to segment operating income, however, was adversely affected by the lower interest income, in addition to higher raw material and labor costs. Operations in Brazil accounted for 5.0 percent, 5.2 percent and 4.8 percent of sales and 7.1 percent, 14.0 percent and 15.2 percent of operating income in 1995, 1994 and 1993, respectively. It is difficult to forecast future levels of contribution due to, among other things, Brazil's current economic downturn and the general volatility of its economy. The Company's effective tax rate was 32.7 percent, 33.6 percent and 36.5 percent in 1995, 1994 and 1993, respectively. The improvement in each year resulted primarily from a more efficient mix of international and U.S. taxes on international earnings and additionally in 1994, higher U.S. earnings and the utilization of foreign loss carryovers. For further discussion, refer to the note to the financial statements No. 15, Income Taxes. Net income in 1993 was reduced by a one-time non-cash charge of $86.3 million or $.59 per share resulting from the cumulative effect of adopting Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits." For further discussion, refer to the note to the financial statements No. 11, Postretirement Health Care, Life Insurance and Postemployment Benefits. Additionally in 1993, after-tax charges totaling $14.6 million or $.10 per share were recorded related to the early retirement of certain long term debt obligations, which were accounted for as extraordinary items. The Company early adopted in 1995 Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement, which is effective for all companies in 1996, requires companies to review certain assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable, in which case the asset generally would be written down to fair value. The adoption of this standard did not affect the Company's results of operations, financial position or liquidity. The Company also early adopted in 1995 Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." This statement, which is also effective for all companies in 1996, encourages, but does not require the recording of compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation under the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Accordingly, the adoption of this standard did not affect the Company's results of operations, financial position or liquidity. For further discussion, refer to the notes to the financial statements No. 1, Accounting Policies and No. 8, Stock Compensation Plans. 24 27 SEGMENT INFORMATION Segment operating income was $1,221.1 million, $1,193.3 million and $1,164.7 million and segment operating margin was 9.3 percent, 9.7 percent and 10.0 percent in 1995, 1994 and 1993, respectively. Despite pricing improvements in 1995, segment operating margin in both 1995 and 1994 was adversely impacted by competitive pricing conditions, higher raw material and labor costs and reduced interest income on time deposits. Competitive pricing pressures are expected to continue in 1996. INDUSTRY SEGMENTS TIRES Sales in 1995 were $11.3 billion, increasing 7.2 percent from 1994 and 13.0 percent from 1993. Although competitive pricing conditions continued from 1994, revenues in 1995 increased due to higher average selling prices, and sales in both 1995 and 1994 were favorably affected by the strengthening of currencies in Europe versus the dollar. Sales in 1994 rose on higher unit volume, although average selling prices were lower compared to 1993 as a result of pricing pressures and a shift in worldwide unit sales mix. [FIGURE] TIRE SALES (Dollars in millions) 93 $9,963.5 94 $10,508.2 95 $11,262.3 [FIGURE] TIRE OPERATING INCOME (Dollars in millions) 93 $998.5 94 $1,010.6 95 $1,000.2 The following table presents changes in tire unit sales: INCREASE (DECREASE) IN COMPANY TIRE UNIT SALES FOR THE YEAR
1995 VS 1994 1995 VS 1993 ------------ ------------ U.S. ..................................... (3)% 3% International ............................ 3 % 11% Worldwide ................................ -- % 7%
Unit sales in the U.S. were adversely affected in 1995 by weak conditions in the North American auto market, although demand there is expected to increase somewhat in 1996. Replacement unit sales in the U.S. in 1995 were lower than in 1994 and unchanged from 1993. Original equipment unit sales in the U.S. in 1995 decreased from 1994, although they remained higher than in 1993. International unit sales reflected improvement compared to 1994 and 1993 in both the original equipment and replacement markets, primarily in Europe and Asia. Operating income in 1995 of $1,000.2 million decreased slightly from $1,010.6 million in 1994 but increased slightly from $998.5 million in 1993. Despite pricing improvements, operating income in 1995 was lower due primarily to higher raw material and labor costs, competitive market conditions and lower interest income in Brazil. Operating income in 1994 increased, despite higher raw material and labor costs. Operating income in both 1995 and 1994 was favorably impacted by efficiencies resulting from a sustained high rate of capacity utilization and ongoing cost containment measures. Operations in Brazil accounted for 4.9 percent, 5.0 percent and 4.7 percent of tire segment sales and 6.2 percent, 12.0 percent and 14.1 percent of tire segment operating income in 1995, 1994 and 1993, respectively. GENERAL PRODUCTS Sales in 1995 were $1.8 billion, increasing 4.5 percent from 1994 and 9.8 percent from 1993. Operating income in 1995 of $165.6 million decreased 3.1 percent from $170.9 million in 1994 and 25 28 6.9 percent from $177.8 million in 1993. Operating income in 1993 included a $9.1 million gain on the sale of the laminated films business. Sales in engineered products in 1995 were higher due primarily to pricing improvements and increased demand from original equipment manufacturers, but operating income decreased because of higher raw material and labor costs and lower interest income in Brazil. Sales and operating income in 1994 rose due primarily to increased demand, principally in Brazil. [FIGURE] GENERAL PRODUCTS SALES (Dollars in millions) 93 $1,618.0 94 $1,700.9 95 $1,776.8 [FIGURE] GENERAL PRODUCTS OPERATING INCOME (Dollars in millions) 93 $177.8 94 $170.9 95 $165.6 Sales and operating income in chemical products increased in 1995 due to pricing improvements, and sales in 1994 reflected increased demand. Operating income in each year was adversely affected by higher raw material costs, and in 1994 was flat compared to 1993 due to the additional effect of competitive pricing pressures. General products operations in Brazil accounted for 6.3 percent, 6.5 percent and 5.7 percent of general products segment sales and 15.2 percent, 26.9 percent and 20.7 percent of general products segment operating income in 1995, 1994 and 1993, respectively. OIL TRANSPORTATION Sales of $126.8 million, $79.1 million and $61.9 million were recorded for 1995, 1994 and 1993, respectively. Operating income in 1995 was $55.3 million, compared to $11.8 million in 1994 and an operating loss of $11.6 million in 1993. Sales for this segment consist of tariffs charged by the All American Pipeline System (the System) and revenues, net of acquisition costs, resulting from various crude oil gathering, purchasing and selling activities. Tariff revenues increased due to a higher percentage of crude oil being transferred to Central Texas for delivery to refineries in the Mid-Continent region and along the Texas Gulf Coast, in addition to increased oil shipments through the System. [FIGURE] OIL TRANSPORTATION OPERATING INCOME (Dollars in millions) 93 ($11.6) 94 $11.8 95 $55.3 The improvement in operating income in each year was due primarily to the previously mentioned higher tariff revenues, increased throughput and the effects of cost containment measures. Operating income in 1995 included a charge of $5.0 million for the writedown of surplus construction pipe, material and equipment. The Company anticipates that sales and operating income in the oil transportation segment in 1996 will be at substantially the same level as in 1995. Acquisition costs associated with gathering, purchasing and selling activities amounted to $496 million, $598 million and $655 million in 1995, 1994 and 1993, respectively. Lower levels of crude oil purchasing and selling activities were undertaken in 1995, due primarily to market conditions. GEOGRAPHIC SEGMENTS U.S. OPERATIONS Sales in 1995 were $7.2 billion, increasing 1.7 percent from 1994 and 7.0 percent from 1993. 26 29 Operating income for 1995 of $543.9 million decreased 8.0 percent from $591.5 million in 1994 and 7.8 percent from $590.1 million in 1993. Sales in 1995 increased due primarily to higher average selling prices in tires, increased throughput and higher average tariffs in the All American Pipeline System and improved pricing and volume in general products. Despite these improvements, operating income in 1995 decreased due primarily to increased raw material and labor costs and competitive conditions in the tire market. [FIGURE] U.S. OPERATIONS PERCENT OF CONSOLIDATED SALES 93 58.2% 94 58.0% 95 55.1% [FIGURE] U.S. OPERATIONS PERCENT OF CONSOLIDATED OPERATING INCOME 93 50.7% 94 49.6% 95 44.5% Sales and operating income in 1994 were higher due to increased unit sales of tires, increased chemical volume and higher tariff revenues in the All American Pipeline System. Operating income in 1994 was adversely affected by higher raw material and labor costs, and average tire selling prices were lower due to pricing pressures and a change in mix. Operating income in both 1995 and 1994 was favorably impacted by efficiencies resulting from continued high levels of capacity utilization and ongoing cost containment measures. U.S. operations accounted for 55.1 percent, 58.0 percent and 58.2 percent of consolidated sales and 44.5 percent, 49.6 percent and 50.7 percent of consolidated operating income in 1995, 1994 and 1993, respectively. The decrease in the U.S. contribution reflected the Company's growth in international markets and a decline in U.S. operating income. INTERNATIONAL OPERATIONS Sales in 1995 were $5.9 billion, increasing 14.7 percent from 1994 and 21.6 percent from 1993. Operating income for 1995 of $677.2 million increased 12.5 percent from $601.8 million in 1994 and 17.9 percent from $574.6 million in 1993. [FIGURE] INTERNATIONAL OPERATIONS PERCENT OF CONSOLIDATED SALES 93 41.8% 94 42.0% 95 44.9% [FIGURE] INTERNATIONAL OPERATIONS PERCENT OF CONSOLIDATED OPERATING INCOME 93 49.3% 94 50.4% 95 55.5% In Europe, sales in 1995 of $2.9 billion increased 25.2 percent from 1994 and 27.8 percent from 1993. Operating income for 1995 of $317.2 million increased 49.6 percent from $212.0 million in 1994 and 43.2 percent from $221.5 million in 1993. Sales and operating income in 1995 increased due to pricing improvements, the effects of currency translations and higher tire unit sales. Operating income in 1995 also benefited from high levels of capacity utilization and improved productivity, although raw material costs were higher. Sales in 1994 increased due to higher tire unit sales, improved mix and the effects of currency translations. Operating income in 1994 decreased due primarily to competitive pricing conditions in the region and adverse economic conditions in Turkey. In Latin America, sales in 1995 of $1.5 billion increased 2.0 percent from 1994 and 9.9 percent from 1993. Operating income for 1995 of $238.8 million decreased 14.1 percent from $278.2 million in 1994 and 11.9 percent from $271.1 million in 1993. Despite lower original equipment tire unit sales, sales in 1995 increased due primarily to pricing improvements. Operating income in 1995 was lower due to increased raw material and labor 27 30 costs and lower interest income. Sales and operating income in 1994 increased due primarily to higher tire unit sales and improved results in engineered products, which offset the adverse impact of higher labor costs and lower interest income in Brazil. In Asia, sales in 1995 of $833.2 million increased 17.1 percent from 1994 and 29.2 percent from 1993. Operating income for 1995 of $90.1 million increased 10.9 percent from $81.3 million in 1994 and 28.8 percent from $70.0 million in 1993. Sales and operating income in 1995 increased due primarily to improved results in natural rubber operations, pricing improvements and higher tire unit sales. Operating income also benefited from improved productivity, although raw material costs were higher. Sales and operating income in 1994 increased due primarily to increased tire unit sales. In Canada, sales in 1995 of $686.5 million increased 5.0 percent from 1994 and 17.5 percent from 1993. Operating income for 1995 of $31.1 million increased 2.4 percent from $30.3 million in 1994 and 159.2 percent from $12.0 million in 1993. Sales and operating income in 1995 increased due primarily to improved pricing and mix and higher unit sales of engineered products, although raw material costs were higher. Sales and operating income in 1994 were higher due primarily to increased volume. International operations accounted for 44.9 percent, 42.0 percent and 41.8 percent of consolidated sales and 55.5 percent, 50.4 percent and 49.3 percent of consolidated operating income in 1995, 1994 and 1993, respectively. The increase in the international contribution reflected the Company's growth in international markets and a decline in U.S. operating income. For further information relating to industry and geographic segments, refer to the note to the financial statements No. 16, Business Segments. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities was $652.8 million during 1995, as reported on the Consolidated Statement of Cash Flows. Working capital requirements increased for inventories, reflecting increased finished goods quantities and higher raw material and labor costs. In addition, cash was used for pension funding, as discussed on the following page. [FIGURE] CAPITAL EXPENDITURES (Dollars in millions) 93 $432.3 94 $523.0 95 $615.6 Cash used in investing activities was $684.0 million during 1995, which consisted primarily of capital expenditures for plant modernizations and expansions and new tire molds totaling $615.6 million. In addition, cash was used for the Company's investment in a tire manufacturer in Poland. At December 31, 1995, the Company had binding commitments for land, buildings and equipment of $150.6 million. Capital expenditures are expected to total $675 million in 1996. Cash provided by financing activities was $82.8 million during 1995, primarily to support the previously mentioned increased working capital requirements. Consolidated debt at December 31, 1995 was $1,546.7 million and amounted to 32.0 percent of debt and equity, compared to $1,335.6 million and 32.3 percent, respectively, at the end of 1994. Net debt, which consists of consolidated debt less cash and cash equivalents, was $1,278.4 million at December 31, 1995, an increase of $193.7 million from December 31, 1994. In order to reduce the impact of changes in variable interest rates on consolidated results of operations and future cash outflows for interest, the Company has entered into various interest rate contracts. These contracts limit the effect of market fluctuations on the interest cost of floating rate debt. At December 31, 1995, the interest rate on 56 percent of the Company's debt was fixed by either the nature of the obligation or through the interest rate contracts. A summary of contracts in place and related weighted average interest rates follows: 28 31
FIXED RATE FLOATING RATE (Dollars in millions) CONTRACTS CONTRACT - ----------------------------------------------------------------------------- December 31, 1995: Notional principal amount $395.0 $50.0 Pay fixed rate 8.95% -- Receive variable LIBOR 5.81% -- Pay variable LIBOR -- 5.81% Receive fixed rate -- 6.69% Average years to maturity .83 2.23 Fair value: (unfavorable) favorable $(11.3) $ 1.5 Average rate paid during the year 8.95% 6.06% Average rate received during the year 6.23% 6.69% - ------------------------------------------------------------------------------
Current market pricing models were used to estimate the fair values of interest rate swap contracts. The fair value of the fixed rate contracts decreased from $7.1 million unfavorable at December 31, 1994, due primarily to lower interest rates. The Company estimates that an additional one percent decrease in interest rates at December 31, 1995 would have lowered the fair value of the fixed rate contracts by $2.3 million at that date. Throughout 1995, the Company sold certain domestic accounts receivable under continuous sale programs whereby, as these receivables were collected, new receivables were sold. Under these agreements, undivided interests in designated receivable pools are sold to purchasers with recourse limited to the receivables purchased. At December 31, 1995 and 1994, the outstanding balance of receivables sold under these agreements amounted to $550 million. The net cumulative proceeds from sales of accounts and notes receivable under these and other agreements totaled $4.1 billion, $4.2 billion and $4.0 billion during 1995, 1994 and 1993, respectively. Substantial short term and long term credit sources are available to the Company globally under normal commercial practices. At December 31, 1995 there were worldwide credit sources totaling $3.4 billion, of which $1.9 billion or 55 percent were unused. The Company is a party to two credit facility agreements with several domestic and international banks, consisting of a $900 million five year revolving credit facility and a $294 million 364-day revolving credit facility. The $900 million five year credit facility agreement is with 31 banks and provides that the Company may borrow from time to time until July 15, 1999, when the commitment terminates and any outstanding loans mature. The $294 million 364-day credit facility agreement is with 30 banks and provides that the Company may borrow until July 12, 1996, on which date the facility commitment terminates, except as it may be extended on a bank by bank basis. If a bank does not extend its commitment if requested to do so, the Company may obtain from such bank a two year term loan up to the amount of such bank's commitment. There were no borrowings outstanding under these agreements at December 31, 1995. For further discussion of financing activities, refer to the note to the financial statements No. 6, Financing Arrangements and Financial Instruments. The Company maintains two major domestic pension plans for its hourly and salaried associates. At December 31, 1995, the discount rate for these and other domestic plans was lowered from 8.5% to 7.75%, which added $164.8 million to the accumulated benefit obligation and $176.6 million to the projected benefit obligation at that date. The Company's domestic funding practice since 1993 has been to fund, from operations, amounts in excess of the requirements of federal laws and regulations. In 1995, 1994 and 1993, the Company funded a total of $573.5 million, which resulted in the domestic plans being fully funded at December 31, 1995. Accordingly, the Company does not anticipate any significant excess pension funding in 1996. For further discussion of pensions, refer to the note to the financial statements No. 9, Pensions. Funds generated by operations, together with funds available under existing credit arrangements, are expected to exceed the Company's currently anticipated cash requirements. 29 32 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX CONSOLIDATED FINANCIAL STATEMENTS--FINANCIAL STATEMENT SCHEDULES
PAGE ---- Report of Independent Accountants ...................................... 30 Consolidated Statement of Income-- years ended December 31, 1995, 1994 and 1993 ........................................................ 31 Consolidated Balance Sheet-- December 31, 1995 and 1994 ................ 32 Consolidated Statement of Shareholders' Equity-- years ended December 31, 1995, 1994 and 1993 ..................................... 33 Consolidated Statement of Cash Flows-- years ended December 31, 1995, 1994 and 1993 ..................................... 34 Notes to Financial Statements .......................................... 35 Supplementary Data (unaudited) ......................................... 50 Financial Statement Schedules .......................................... FS-1
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of The Goodyear Tire & Rubber Company In our opinion, the consolidated financial statements listed in the index on this page present fairly, in all material respects, the financial position of The Goodyear Tire & Rubber Company and Subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 11 to the consolidated financial statements, the Company changed its method of accounting for postemployment benefits, effective January 1, 1993. /s/ Price Waterhouse PRICE WATERHOUSE LLP Cleveland, Ohio February 1, 1996 30 33 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
(Dollars in millions, except per share) Year Ended December 31, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Net Sales $13,165.9 $12,288.2 $11,643.4 Cost of Goods Sold 10,093.6 9,271.4 8,713.0 Selling, Administrative and General Expense 1,936.9 1,958.2 1,922.1 Interest Expense (Note 12) 135.0 129.4 162.4 Other (Income) and Expense (Note 2) 21.0 (37.9) (79.1) Foreign Currency Exchange 17.4 77.6 113.1 Minority Interest in Net Income of Subsidiaries 36.2 23.8 27.0 - ------------------------------------------------------------------------------------------------------------------------------------ Income before Income Taxes, Extraordinary Item and Cumulative Effect of Accounting Change 925.8 865.7 784.9 United States and Foreign Taxes on Income (Note 15) 314.8 298.7 296.2 - ------------------------------------------------------------------------------------------------------------------------------------ Income before Extraordinary Item and Cumulative Effect of Accounting Change 611.0 567.0 488.7 Extraordinary Item - Early Extinguishment of Debt (net of tax of $6.1) -- -- (14.6) Cumulative Effect of Change in Accounting for Postemployment Benefits (net of tax of $55.2) (Note 11) -- -- (86.3) - ------------------------------------------------------------------------------------------------------------------------------------ Net Income $ 611.0 $ 567.0 $ 387.8 ==================================================================================================================================== Per Share of Common Stock: Income before Extraordinary Item and Cumulative Effect of Accounting Change $ 4.02 $ 3.75 $ 3.33 Extraordinary Item - Early Extinguishment of Debt -- -- (.10) Cumulative Effect of Change in Accounting for Postemployment -- -- (.59) Benefits - ------------------------------------------------------------------------------------------------------------------------------------ Net Income $ 4.02 $ 3.75 $ 2.64 ==================================================================================================================================== Average Shares Outstanding 152,118,861 151,203,885 147,086,828 ====================================================================================================================================
The accompanying notes are an integral part of this financial statement. 31 34 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
(Dollars in millions) December 31, 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Current Assets: Cash and cash equivalents $ 268.3 $ 250.9 Accounts and notes receivable (Note 3) 1,615.0 1,524.7 Inventories (Note 4) 1,765.2 1,425.1 Prepaid expenses and other current assets 193.1 166.8 - ------------------------------------------------------------------------------------------------------------------------------------ Total Current Assets 3,841.6 3,367.5 Investments in Affiliates, at equity 183.8 133.4 Long Term Accounts and Notes Receivable 252.0 208.5 Deferred Charges 793.3 905.3 Other Assets 157.7 125.8 Properties and Plants (Note 5) 4,561.2 4,382.8 - ------------------------------------------------------------------------------------------------------------------------------------ Total Assets $ 9,789.6 $ 9,123.3 ==================================================================================================================================== LIABILITIES Current Liabilities: Accounts payable - trade $ 1,170.7 $ 1,013.9 Compensation and benefits 711.9 745.2 Other current liabilities 263.9 259.8 United States and foreign taxes 363.1 326.2 Notes payable to banks (Note 6A) 211.1 213.0 Long term debt due within one year 15.6 13.9 - ------------------------------------------------------------------------------------------------------------------------------------ Total Current Liabilities 2,736.3 2,572.0 Long Term Debt and Capital Leases (Note 6B) 1,320.0 1,108.7 Compensation and Benefits 1,976.5 2,173.4 Other Long Term Liabilities 312.2 322.1 Minority Equity in Subsidiaries 162.9 143.9 - ------------------------------------------------------------------------------------------------------------------------------------ Total Liabilities 6,507.9 6,320.1 SHAREHOLDERS' EQUITY Preferred stock, no par value: Authorized, 50,000,000 shares, unissued -- -- Common stock, no par value: Authorized, 300,000,000 shares Outstanding shares, 153,524,311 (151,407,285 in 1994) 153.5 151.4 Capital surplus 975.2 918.5 Retained earnings 2,661.0 2,194.5 Foreign currency translation adjustment (481.7) (421.7) Minimum pension liability adjustment (Note 9) (26.3) (39.5) - ------------------------------------------------------------------------------------------------------------------------------------ Total Shareholders' Equity 3,281.7 2,803.2 - ------------------------------------------------------------------------------------------------------------------------------------ Total Liabilities and Shareholders' Equity $ 9,789.6 $ 9,123.3 ====================================================================================================================================
The accompanying notes are an integral part of this financial statement. 32 35 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Foreign Minimum Common Stock Currency Pension Total ------------------ Capital Retained Translation Liability Shareholders' (Dollars in millions, except per share) Shares Amount Surplus Earnings Adjustment Adjustment Equity - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1992 after deducting 50,747,423 treasury shares 72,244,461 $ 72.2 $688.5 $1,510.6 $(341.0) $ -- $1,930.3 Net income for 1993 387.8 387.8 Cash dividends 1993 - $.575 per share (84.9) (84.9) Stock dividend 1993 72,689,064 72.6 (72.6) -- Common stock issued (including 5,584,285 treasury shares): Dividend Reinvestment and Stock Purchase Plan 66,589 .1 3.0 3.1 Stock compensation plans 2,605,544 2.7 74.8 77.5 Conversion of debentures 2,909,716 2.9 111.7 114.6 Foreign currency translation adjustment (81.4) (81.4) Minimum pension liability adjustment (46.2) (46.2) - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1993 after deducting 45,163,138 treasury shares 150,515,374 150.5 878.0 1,740.9 (422.4) (46.2) 2,300.8 Net income for 1994 567.0 567.0 Cash dividends 1994 - $.75 per share (113.4) (113.4) Common stock issued (including 891,911 treasury shares): Dividend Reinvestment and Stock Purchase Plan 96,691 .1 3.5 3.6 Stock compensation plans 795,220 .8 37.0 37.8 Foreign currency translation adjustment .7 .7 Minimum pension liability adjustment 6.7 6.7 - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1994 after deducting 44,271,227 treasury shares 151,407,285 151.4 918.5 2,194.5 (421.7) (39.5) 2,803.2 Net income for 1995 611.0 611.0 Cash dividends 1995 - $.95 per share (144.5) (144.5) Common stock issued (including 2,116,870 treasury shares): Dividend Reinvestment and Stock Purchase Plan 105,028 .1 4.2 4.3 Stock compensation plans 2,011,998 2.0 52.5 54.5 Foreign currency translation adjustment (60.0) (60.0) Minimum pension liability adjustment 13.2 13.2 - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1995 after deducting 42,154,357 treasury shares 153,524,311 $153.5 $975.2 $2,661.0 $(481.7) $(26.3) $3,281.7 ====================================================================================================================================
The accompanying notes are an integral part of this financial statement. 33 36 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions) Year Ended December 31, 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 611.0 $ 567.0 $ 387.8 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 434.9 410.3 392.9 Deferred tax provision 58.0 99.8 (36.3) Accounts and notes receivable (84.4) (192.4) (10.9) Inventories (344.3) (63.9) (100.2) Accounts payable - trade 159.5 139.7 (48.1) Domestic pension funding (252.5) (238.8) (82.2) Other assets and liabilities 70.6 42.9 117.8 Accounting changes -- -- 86.3 Asset sales -- -- (24.7) Early extinguishment of debt -- -- 20.7 - --------------------------------------------------------------------------------------------------------------------------- Total adjustments 41.8 197.6 315.3 - --------------------------------------------------------------------------------------------------------------------------- Cash provided by operating activities 652.8 764.6 703.1 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (615.6) (523.0) (432.3) Asset dispositions 8.9 19.0 83.6 Short term securities acquired (30.6) (287.1) (157.5) Short term securities redeemed 41.4 310.6 214.2 Other transactions (88.1) (15.7) 9.8 - --------------------------------------------------------------------------------------------------------------------------- Cash used in investing activities (684.0) (496.2) (282.2) CASH FLOWS FROM FINANCING ACTIVITIES: Short term debt incurred 542.3 385.6 324.8 Short term debt paid (414.3) (395.7) (487.6) Long term debt incurred 141.5 52.9 6.8 Long term debt and capital leases paid (101.0) (166.4) (385.8) Common stock issued 58.8 41.4 195.2 Dividends paid (144.5) (113.4) (84.9) - --------------------------------------------------------------------------------------------------------------------------- Cash provided by (used in) financing activities 82.8 (195.6) (431.5) Effect of Exchange Rate Changes on Cash and Cash Equivalents (34.2) (10.4) (8.4) - --------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 17.4 62.4 (19.0) Cash and Cash Equivalents at Beginning of the Period 250.9 188.5 207.5 - --------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 268.3 $ 250.9 $ 188.5 ===========================================================================================================================
The accompanying notes are an integral part of this financial statement. 34 37 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Finanical Statements NOTE 1. ACCOUNTING POLICIES A summary of the significant accounting policies used in the preparation of the accompanying financial statements follows: PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of all majority-owned subsidiaries. All significant intercompany transactions have been eliminated. The Company's investments in 20% to 50% owned companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for on the equity method. Accordingly, the Company's share of the earnings of these companies is included in consolidated net income. Investments in other companies are carried at cost. REVENUE RECOGNITION Substantially all revenues are recognized when finished products are shipped to unaffiliated customers or services have been rendered with appropriate provision for uncollectible accounts. In conformance with oil industry practice, revenues resulting from sales of crude oil purchased from third parties are recognized net of the related acquisition costs. FOREIGN CURRENCY TRANSLATION Financial statements of international subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for each period for revenues, expenses, gains and losses. Where the local currency is the functional currency, translation adjustments are recorded as a separate component of Shareholders' Equity. Where the U.S. dollar is the functional currency, translation adjustments are recorded in income. PER SHARE OF COMMON STOCK Per share amounts have been computed based on the average number of common shares outstanding. CONSOLIDATED STATEMENT OF CASH FLOWS Cash and cash equivalents include cash on hand and in the bank as well as all short term securities held for the primary purpose of general liquidity. Such securities normally mature within three months from the date of acquisition. Cash flows associated with items intended as hedges of identifiable transactions or events are classified in the same category as the cash flows from the items being hedged. INVENTORY PRICING Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for a significant portion of domestic inventories and the first-in, first-out (FIFO) method or average cost method for other inventories. Refer to Note 4. PROPERTIES AND PLANTS Properties and plants are stated at cost. Depreciation is computed on the straight line method. Accelerated depreciation is used for income tax purposes, where permitted. Refer to Note 5. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are utilized by the Company to reduce interest rate and foreign exchange risks. The Company has established a control environment which includes policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. The Company does not hold or issue derivative financial instruments for trading purposes. Interest Rate Contracts - The differentials to be received or paid under contracts designated as hedges are recognized in income over the life of the contracts as adjustments to Interest Expense. Gains and losses on terminations of interest rate contracts are recognized as Other (Income) and Expense when terminated in conjunction with the retirement of associated debt. Gains and losses are deferred and amortized to Interest Expense over the remaining life of the associated debt to the extent that such debt remains outstanding. Foreign Exchange Contracts - Gains and losses on contracts designated as hedges of existing assets and liabilities are recognized in income as exchange rates change as Foreign Currency Exchange. Gains and losses on contracts designated as hedges of net investments in foreign subsidiaries are recognized in Shareholders' Equity as exchange rates change as Foreign currency translation adjustment. Gains and losses on contracts designated as hedges of identifiable foreign currency firm commitments are deferred and included in the measurement of the related foreign currency transaction. Refer to Note 6. 35 38 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) STOCK-BASED COMPENSATION Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. Compensation cost for stock appreciation rights and performance equity units is recorded annually based on the quoted market price of the Company's stock at the end of the period. Refer to Note 8. ADVERTISING COSTS Costs incurred for producing and communicating advertising are generally expensed when incurred. Costs incurred under the Company's domestic cooperative advertising program with dealers and franchisees are recorded subsequent to the first time the advertising takes place, as related revenues are recognized. Refer to Note 14. INCOME TAXES Income taxes are recognized during the year in which transactions enter into the determination of financial statement income, with deferred taxes being provided for temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. Refer to Note 15. ENVIRONMENTAL CLEANUP MATTERS The Company expenses environmental expenditures related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible. Expenditures which extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. The Company determines its liability on a site by site basis and records a liability at the time when it is probable and can be reasonably estimated. The Company's estimated liability is reduced to reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of the relevant costs. The estimated liability of the Company is not discounted or reduced for possible recoveries from insurance carriers. Refer to Note 17. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to financial statements. Changes in such estimates may affect amounts reported in future periods. RECLASSIFICATION Certain items previously reported in specific financial statement captions have been reclassified to conform with the 1995 presentation. NOTE 2. OTHER (INCOME) AND EXPENSE
(In millions) 1995 1994 1993 - ----------------------------------------------------------- Interest income $(27.3) $(76.3) $(80.3) Financing fees 48.3 38.4 31.0 Asset sales -- -- (24.7) Miscellaneous -- -- (5.1) - ----------------------------------------------------------- $ 21.0 $(37.9) $(79.1) ===========================================================
Interest income consists of amounts earned on deposits, primarily from funds invested in time deposits in Latin America, pending remittance or reinvestment in the region. Interest income decreased in 1995 due primarily to lower levels of deposits in Latin America and the effects of the Real plan in Brazil, an economic plan designed to reduce inflation. Financing fees increased in 1995 due primarily to higher average interest rates during the year. The Company sold an investment during the second quarter of 1993. A gain of $12.5 million ($7.9 million after tax or $.05 per share) was recorded. The Company sold its laminated films subsidiary during the third quarter of 1993. A gain of $9.1 million ($5.2 million after tax or $.03 per share) was recorded. The Company's Air Treads subsidiary sold its wheel and brake division during the fourth quarter of 1993. A gain of $3.1 million ($1.9 million after tax or $.02 per share) was recorded. 36 39 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) NOTE 3. ACCOUNTS AND NOTES RECEIVABLE
(In millions) 1995 1994 - ----------------------------------------------------------- Accounts and notes receivable $1,671.2 $1,578.7 Allowance for doubtful accounts (56.2) (54.0) - ----------------------------------------------------------- $1,615.0 $1,524.7 ===========================================================
Throughout the year, the Company sold certain domestic accounts receivable under continuous sale programs. Under these programs, undivided interests in designated receivable pools are sold to purchasers with recourse limited to the receivables purchased. The level of net proceeds from sales under these programs was $550.0 million at December 31, 1995 and 1994. Fees paid by the Company under these agreements are based on certain variable market rate indices and are recorded as Other (Income) and Expense. The Company sold accounts and notes receivable under these and other agreements, the net cumulative proceeds of which totaled approximately $4.1 billion, $4.2 billion and $4.0 billion during 1995, 1994 and 1993, respectively. At December 31, 1995 and 1994, the balance of the uncollected portion of these receivables was $566.4 million and $598.4 million, respectively. NOTE 4. INVENTORIES
(In millions) 1995 1994 - ----------------------------------------------------------- Raw materials and supplies $ 309.8 $ 269.9 Work in process 75.4 69.8 Finished product 1,380.0 1,085.4 - ----------------------------------------------------------- $1,765.2 $1,425.1 ===========================================================
The cost of inventories using the last-in, first-out (LIFO) method (approximately 41.1% of consolidated inventories in 1995 and 38.9% in 1994) was less than the approximate current cost of inventories by $425.9 million at December 31, 1995 and $371.1 million at December 31, 1994. NOTE 5. PROPERTIES AND PLANTS
1995 1994 - --------------------------------------------------------------------------------------------------------- Capital Capital (In millions) Owned Leases Total Owned Leases Total - --------------------------------------------------------------------------------------------------------- Properties and plants, at cost: Land and improvements $ 302.1 $ 3.7 $ 305.8 $ 284.4 $ 3.7 $ 288.1 Buildings and improvements 1,277.9 39.2 1,317.1 1,215.6 42.7 1,258.3 Machinery and equipment 5,785.7 58.2 5,843.9 5,508.7 58.6 5,567.3 Pipeline 1,429.4 -- 1,429.4 1,432.4 -- 1,432.4 Construction in progress 453.7 -- 453.7 323.0 -- 323.0 - --------------------------------------------------------------------------------------------------------- 9,248.8 101.1 9,349.9 8,764.1 105.0 8,869.1 Accumulated depreciation (4,711.1) (77.6) (4,788.7) (4,407.1) (79.2) (4,486.3) - --------------------------------------------------------------------------------------------------------- $4,537.7 $23.5 $4,561.2 $4,357.0 $25.8 $4,382.8 =========================================================================================================
The amortization for capital leases included in the depreciation provision for 1995, 1994 and 1993 was $3.0 million, $3.4 million and $5.0 million, respectively. The weighted average useful lives of property used in arriving at the annual amount of depreciation provided are as follows: buildings and improvements, 18 years; machinery and equipment, 11 years; pipeline, 37 years. 37 40 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) NOTE 6. FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS A. SHORT TERM DEBT AND FINANCING ARRANGEMENTS At December 31, 1995, the Company had short term uncommitted credit arrangements totaling $1,469.6 million, of which $629.2 million were unused. These arrangements are available to the Company or certain of its international subsidiaries through various international banks at quoted market interest rates. There are no commitment fees or compensating balances associated with these arrangements. A short term credit facility agreement is available whereunder the Company may from time to time borrow and have outstanding until December 31, 1996 up to U.S. $30 million at any one time with an international bank. Under the terms of the agreement, the Company may repay U.S. dollar borrowings in either U.S. dollars or a predetermined equivalent amount of certain available foreign currencies. Available currencies are Belgian francs, German marks, French francs and British pounds. Borrowings are discounted at rates equivalent to 12.5 basis points over a three month reserve adjusted LIBOR. A commitment fee of 10 basis points is paid on the $30 million commitment (whether or not borrowed). There were no borrowings outstanding under this agreement at December 31, 1995. The average amount outstanding under a similar agreement during 1995 was $21 million. The Company had outstanding short term debt amounting to $840.4 million at December 31, 1995. Domestic short term debt represented $629.3 million of this total with a weighted average interest rate of 5.55% at December 31, 1995, and was reclassified to other domestic debt, as discussed below. The remaining $211.1 million was international subsidiary short term debt with a weighted average interest rate of 6.72% at December 31, 1995. B. LONG TERM DEBT, CAPITAL LEASES AND FINANCING ARRANGEMENTS At December 31, 1995, the Company had long term credit arrangements totaling $1,906.6 million, of which $1,200.3 million were unused. The following table presents long term debt and capital leases at December 31:
(In millions) 1995 1994 - ------------------------------------------------------------ Promissory notes: 12.15% due 1996 - 2000 $ 20.0 $ 30.0 10.26% due 1999 118.4 118.4 Swiss franc bonds: 5.375% due 2000 145.5 130.3 5.375% due 2006 137.2 127.3 Bank term loans due 1997 - 2000 168.0 118.0 Other domestic debt 653.3 524.7 International subsidiary debt 77.5 57.7 - ------------------------------------------------------------ 1,319.9 1,106.4 Capital lease obligations 15.7 16.2 - ------------------------------------------------------------ 1,335.6 1,122.6 Less portion due within one year 15.6 13.9 - ------------------------------------------------------------ Long term debt and capital leases $1,320.0 $1,108.7 ============================================================
At December 31, 1995, the fair value of the Company's long term debt amounted to $1,349.8 million, compared to the carrying amount of $1,319.9 million ($1,098.3 million and $1,106.4 million, respectively, at December 31, 1994). The difference was attributable primarily to the promissory notes and the Swiss franc bonds in 1995 and to the Swiss franc bonds in 1994. The fair value was estimated using quoted market prices or discounted future cash flows. In order to reduce exposure to the effects of changing exchange rates on consolidated results of operations and future foreign currency denominated cash flows, the Swiss franc bonds were completely hedged by foreign currency exchange agreements at December 31, 1995 and 1994. The Company is entitled to purchase the respective foreign currencies at fixed contract rates as described in the table below. The effect of market fluctuations on the carrying amount of these agreements offsets the effect of market fluctuations on the carrying amount of the bonds. The carrying amounts of these foreign currency exchange agreements totaled $134.9 million and $103.8 million at December 31, 1995 and 1994, respectively, and were included in Long Term Accounts and Notes Receivable on the Consolidated Balance Sheet.
1995 1994 - --------------------------------------------------------------------- Foreign U.S. Foreign U.S. (In millions) Currency Dollars Currency Dollars - --------------------------------------------------------------------- Carrying value of debt: Swiss franc, maturing 2000 - 2006 325.7 $282.7 338.4 $257.6 Contract amounts of foreign currency exchange agreements: Swiss franc, maturing 2000 - 2006 325.7 $147.8 338.4 $153.8 Receivables related to foreign currency exchange agreements: Swiss franc -- $134.9 -- $103.8 =====================================================================
38 41 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) In addition to the principal amounts shown in the table on the previous page, the Swiss franc currency exchange agreements also cover annual coupon payments. At December 31, 1995, the fair value of the Swiss franc currency exchange agreements, based on quoted market prices, was estimated at $118.1 million, including the cover for both principal and coupon payments ($81.3 million at December 31, 1994). In each case the fair value was favorable. The bank term loans due 1997 through 2000 consist of various agreements which provide for interest at floating rates based upon LIBOR plus a fixed spread. The weighted average rate in effect under the terms of these agreements at December 31, 1995 was 6.03%. The Company is a party to two revolving credit facility agreements, consisting of a $900 million five year revolving credit facility and a $294 million 364-day revolving credit facility. The $900 million five year credit facility agreement is with 31 domestic and international banks and provides that the Company may borrow at any time until July 15, 1999, when the commitment terminates and any outstanding loans mature. The Company pays a commitment fee ranging from 8 to 25 basis points on the entire amount of the commitment (whether or not borrowed) and a usage fee on amounts borrowed (other than on a competitive bid or prime rate basis) ranging from 22 to 30 basis points, which may fluctuate quarterly based upon the Company's performance as measured by defined ranges of leverage. During 1995 commitment and usage fee rates averaged 17.1 and 26.1 basis points, respectively. The $294 million 364-day credit facility agreement is with 30 domestic and international banks and provides that the Company may borrow until July 12, 1996, on which date the facility commitment terminates, except as it may be extended on a bank by bank basis. If a bank does not extend its commitment if requested to do so, the Company may obtain from such bank a two year term loan up to the amount of such bank's commitment. The Company pays a commitment fee of 10 basis points on the entire amount of the commitment (whether or not borrowed) and a usage fee of 35 basis points on amounts borrowed (other than on a competitive bid or prime rate basis). Under both the five year and the 364-day credit facility agreements, the Company may obtain loans bearing interest at reserve adjusted LIBOR or a defined certificate of deposit rate, plus in each case the applicable usage fee. In addition, the Company may obtain loans based on the prime rate or at a rate determined on a competitive bid basis. The facility agreements each contain certain covenants which, among other things, require the Company to maintain at the end of each fiscal quarter a minimum consolidated net worth and a defined minimum interest coverage ratio and establishes a limit on the aggregate amount of consolidated debt the Company and its subsidiaries may incur. There were no borrowings outstanding under these agreements at December 31, 1995. Other domestic debt consisted primarily of the previously mentioned $629.3 million of domestic short term bank borrowings, and current maturities of long term debt. These debt obligations, amounting to $645.9 million at December 31, 1995 ($567.4 million at December 31, 1994), which by their terms are due within one year, are classified as long term. Such obligations are supported by the availability under the revolving credit agreements, and it is the Company's intent to maintain them as long term.International subsidiary debt consisted primarily of an interest free Canadian dollar loan maturing in 1998, and floating and fixed rate U.S. dollar bank term loans maturing in 1997-2000 with a weighted average interest rate of 7.62% at December 31, 1995. Refer to Note 7, Leased Assets for additional information on capital lease obligations. In order to reduce the impact of changes in variable interest rates on consolidated results of operations and future cash outflows for interest, the Company was a party to various interest rate swap contracts at December 31, 1995 and 1994. These contracts limit the effect of market fluctuations on the interest cost of floating rate debt. The carrying amounts of these contracts totaled $1.8 million and $2.9 million at December 31, 1995 and 1994, respectively, substantially all of which were recorded as Other current liabilities on the Consolidated Balance Sheet. Contracts in place and weighted average interest rates at December 31 follow:
(Dollars in millions) 1995 1994 - ------------------------------------------------------------ Fixed rate swap contracts: Notional principal amount $ 395.0 $ 445.0 Pay fixed rate 8.95% 8.95% Receive variable LIBOR 5.81% 6.04% Average years to maturity .83 1.69 Fair value: (unfavorable) $ (11.3) $ (7.1) Floating rate swap contract: Notional principal amount $ 50.0 $ 50.0 Pay variable LIBOR 5.81% 5.50% Receive fixed rate 6.69% 6.69% Average years to maturity 2.23 3.23 Fair value: favorable (unfavorable) $ 1.5 $ (1.9) ============================================================
39 42 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) A $50 million notional principal contract matured in 1995. At December 31, 1995, the interest rate on 56 percent of the Company's debt was fixed by either the nature of the obligation or through the interest rate contracts, compared to 66 percent at December 31, 1994. Current market pricing models were used to estimate the fair values of interest rate swap contracts. The fair value of the fixed rate contracts decreased at December 31, 1995 due primarily to lower interest rates. The Company estimates that an additional one percent decrease in interest rates would have lowered the fair value of the fixed rate contracts by $2.3 million and increased the fair value of the floating rate contracts by $.9 million at December 31, 1995. Weighted average information during the years 1995, 1994 and 1993 follows:
(Dollars in millions) 1995 1994 1993 - ----------------------------------------------------------- Fixed rate contracts: Pay fixed rate 8.95% 9.09% 9.20% Receive variable LIBOR 6.23% 4.44% 3.47% Notional principal $416 $660 $692 Floating rate contracts: Pay variable LIBOR 6.06% 4.34% 3.36% Receive fixed rate 6.69% 6.69% 6.69% Notional principal $ 50 $ 50 $ 50 ===========================================================
The annual aggregate maturities of long term debt and capital leases for the five years subsequent to 1995 are presented below. Maturities of debt supported by the availability under the revolving credit agreements have been reported on the basis that the commitments to lend under these agreements will be terminated effective at the end of their current terms.
(In millions) 1996 1997 1998 1999 2000 - ------------------------------------------------------------------ Debt incurred under or supported by revolving credit agreements $ -- $ -- $ -- $645.9 $ -- Other 15.6 66.6 82.3 145.9 230.2 - ------------------------------------------------------------------ $15.6 $66.6 $82.3 $791.8 $230.2 ==================================================================
C. FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS In order to reduce the impact of changes in foreign exchange rates on consolidated results of operations and future foreign currency denominated cash flows, the Company was a party to various forward exchange contracts at December 31, 1995 and 1994. These contracts reduce exposure to currency movements affecting existing foreign currency denominated assets, liabilities and firm commitments resulting primarily from trade receivables and payables, equipment acquisitions and intercompany loans. The contract durations match the duration of the currency positions. The future value of these contracts and the related currency positions are subject to offsetting market risk resulting from foreign currency exchange rate volatility. The carrying amount of these contracts totaled $24.6 million at December 31, 1995 and was recorded as Other current liabilities on the Consolidated Balance Sheet, compared to $.8 million recorded in both current and long term Accounts and notes receivable at December 31, 1994. A summary of contracts in place at December 31 follows:
1995 1994 - ------------------------------------------------------------- Fair Contract Fair Contract (In millions) Value Amount Value Amount - ------------------------------------------------------------- Forward contracts: Buy currency $298.6 $286.0 $ 99.5 $ 92.4 Sell currency 667.3 626.1 504.4 492.8 Contract duration 1/96 - 1/97 1/95 - 9/96 =============================================================
Current market pricing models were used to estimate the fair values of foreign currency forward contracts. The counterparties to the Company's derivative financial instrument contracts are substantial and creditworthy multinational commercial banks or other financial institutions which are recognized market makers. Neither the risks of counterparty nonperformance nor the economic consequences of counterparty nonperformance associated with these contracts are considered by the Company to be material. 40 43 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) NOTE 7. LEASED ASSETS Rental expense charged to income follows:
(In millions) 1995 1994 1993 - ------------------------------------------------------------ Gross rental expense $281.1 $300.8 $303.5 Sublease rental income (50.0) (51.9) (52.3) - ------------------------------------------------------------ Net rental expense $231.1 $248.9 $251.2 ============================================================
The Company enters into capital and operating leases primarily for its vehicles, data processing equipment and its wholesale and retail distribution facilities under varying terms and conditions, including the Company's sublease of some of its domestic retail distribution network to independent dealers. Many of the leases provide that the Company will pay taxes assessed against leased property and the cost of insurance and maintenance. While substantially all subleases and some operating leases are cancelable for periods beyond 1996, management expects that in the normal course of its business nearly all of its independent dealer distribution network will be actively operated. As leases and subleases for existing locations expire, the Company would normally expect to renew the leases or substitute another more favorable retail location. The estimated minimum future lease payments for capital leases and operating leases are presented below, and are reported net of the anticipated sublease revenue in the column at the right.
Capital Operating Sublease (In millions) Leases Leases Revenue - -------------------------------------------------------------------------- 1996 $ 2.6 $175.5 $ 42.8 1997 2.5 140.4 36.7 1998 2.4 102.5 30.7 1999 2.4 84.1 24.0 2000 2.1 64.7 16.8 2001 and thereafter 15.1 265.1 23.2 - -------------------------------------------------------------------------- Total minimum lease payments $27.1 $832.3 $174.2 ========================================================================== Present value of net minimum lease obligations $14.7 $641.4 ==========================================================================
NOTE 8. STOCK COMPENSATION PLANS The Company's 1982 and 1987 Employees' Stock Option Plans and the 1989 Goodyear Performance and Equity Incentive Plan provide for the granting of stock options and stock appreciation rights (SARs). For options previously granted with SARs, the exercise of a SAR cancels the stock option; conversely, the exercise of the stock option cancels the SAR. The 1982 and 1987 Plans expired on December 31, 1986 and April 10, 1989, respectively, except for options and SARs then outstanding. The 1989 Plan empowers the Company to award or grant from time to time to officers and other key employees of the Company and subsidiaries incentive, non-qualified and deferred compensation stock options, SARs, restricted stock and restricted unit grants, performance equity and performance unit grants and other stock-based awards authorized by the Compensation Committee of the Board of Directors, which administers the 1989 Plan. The 1989 Plan will expire on December 31, 1998, except with respect to awards then outstanding. Stock options and related SARs granted during 1995 generally have a maximum term of ten years and vest over four years. Performance equity units granted during 1995 are based on cumulative earnings per share over a three year performance period. They are payable in 50 percent Goodyear common stock and 50 percent cash, and generally are earned at the end of that period. Assuming that there will be full utilization of the shares of common stock available for awards during the term of the 1989 Plan, and that no other increases or decreases in the number of shares of common stock outstanding would occur during the term of the 1989 Plan, approximately 21,500,000 shares of the common stock would be available for the grant of awards through December 31, 1998. 41 44 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) Stock-based compensation activity for the years 1995, 1994 and 1993 follows:
1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------- Shares SARs Shares SARs Shares SARs - --------------------------------------------------------------------------------------------------------------------------- Outstanding at January 1 7,749,660 782,446 6,838,965 705,834 8,155,280 964,520 Options granted 1,731,725 229,200 1,694,150 211,600 2,064,979 269,900 Options without SARs exercised (1,857,190) -- (781,263) -- (2,967,748) -- Options with SARs exercised (86,325) (86,325) (18,850) (18,850) (148,300) (148,300) SARs exercised (62,950) (62,950) (96,138) (96,138) (251,486) (251,486) Options without SARs expired (49,100) -- (21,125) -- (48,200) -- Options with SARs expired (4,700) (4,700) (3,000) (3,000) (15,300) (15,300) SARs expired (900) (64,300) -- (17,000) (2,100) (113,500) Restricted stock granted 10,000 -- 1,800 -- -- -- Restricted stock issued (10,000) -- (1,800) -- -- -- Performance equity units granted 8,963 -- 161,250 -- 57,350 -- Performance equity shares issued (64,591) -- -- -- -- -- Performance equity units cancelled (36,966) -- (24,329) -- (5,510) -- - --------------------------------------------------------------------------------------------------------------------------- Outstanding at December 31 7,327,626 793,371 7,749,660 782,446 6,838,965 705,834 - --------------------------------------------------------------------------------------------------------------------------- Exercisable at December 31 5,033,729 482,296 5,079,369 456,021 3,789,240 330,608 - --------------------------------------------------------------------------------------------------------------------------- Available for grant at December 31 2,908,914 2,990,448 3,194,138 ===========================================================================================================================
Weighted average option exercise price information for the years 1995, 1994 and 1993 follows:
1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------- Outstanding at January 1 $31.34 $27.43 $23.33 Granted during the year $34.75 $44.25 $34.38 Exercised during the year $29.71 $26.23 $21.27 Outstanding at December 31 $33.96 $31.34 $27.43 Exercisable at December 31 $32.30 $26.93 $23.63 ===========================================================================================================================
Significant option groups outstanding at December 31, 1995 and related weighted average price and life information follows:
Grant Options Options Exercise Remaining Date Outstanding Exercisable Price Life (Years) - --------------------------------------------------------------------------------------------------------------------------- 1/4/95 1,661,525 229,250 $34.750 9 1/4/94 1,638,900 996,225 $44.250 8 1/5/93 1,538,935 1,538,935 $34.375 7 1/7/92 859,726 859,726 $26.875 6 All other 1,281,872 1,281,872 $23.710 4 ===========================================================================================================================
Options in the `All other' category were outstanding at prices ranging from $11.25 to $45.25. All options and SARs were granted at an exercise price equal to the fair market value of the Company's common stock at the date of grant. The weighted average fair value at date of grant for options granted during 1995, 1994 and 1993 was $17.17, $19.45 and $13.75 per option, respectively. The fair value of options at date of grant was estimated using the Black-Scholes model with the following weighted average assumptions:
1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------------- Expected life (years) 5 5 5 Interest rate 7.80% 5.27% 5.97% Volatility 43.0% 40.9% 33.2% Dividend yield 2.34% 2.70% 3.00% ==========================================================================================================================
The fair value at date of grant for performance equity units granted during 1995, 1994 and 1993 was $34.75, $44.25 and $34.38 per unit, respectively, which in each case was equal to the market value of the Company's common stock at the date of grant. Stock-based compensation costs reduced (increased) pretax income by $8.7 million ($5.2 million after tax or $.03 per share), $(3.4) million ($2.1 million after tax or $.01 per share) and $13.5 million ($8.1 million after tax or $.05 per share) in 1995, 1994 and 1993, respectively. In addition, these costs would have been increased by $6.0 million ($5.2 million after tax or $.03 per share) in 1995 had the fair values of options and the stock-based portion of performance equity units granted in that year been recognized as compensation expense on a straight line basis over the vesting period of the grant. The pro forma effect on net income for 1995 is not representative of the pro forma effect on net income in future years because it does not take into consideration pro forma compensation expense related to grants made prior to 1995. 42 45 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) Note 9. Pensions The Company and its subsidiaries provide substantially all associates with pension benefits. The principal domestic hourly plan provides benefits based on length of service. The principal domestic plans covering salaried associates provide benefits based on career average earnings formulas. Associates making voluntary contributions to these plans receive higher benefits. Other plans provide benefits similar to the principal domestic plans as well as termination indemnity plans at certain international subsidiaries. The Company's domestic funding practice since 1993 has been to fund amounts in excess of the requirements of Federal laws and regulations. From 1993 to 1995, the Company funded $573.5 million to its domestic pension plans, which were fully funded at December 31, 1995. This has resulted in a significant increase in prepaid pension costs over that period, which are recorded as Deferred Charges on the Consolidated Balance Sheet. Additionally, the fully funded status of these plans has significantly lowered the Company's minimum pension liability and related intangible asset, which are recorded as long term Compensation and Benefits and Deferred Charges, respectively, on the Consolidated Balance Sheet.
Net periodic pension cost follows: (In millions) 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------- Service cost-benefits earned during the period $ 83.2 $ 91.8 $ 68.9 Interest cost on projected benefit obligations 221.1 202.6 179.0 Actual return on plan assets (427.8) (.9) (273.1) Net amortization and deferrals 279.3 (125.3) 158.5 - ----------------------------------------------------------------------------------------------------------------------------- Net periodic pension cost $ 155.8 $ 168.2 $ 133.3 =============================================================================================================================
The following table sets forth the funded status and amounts recognized on the Company's Consolidated Balance Sheet at December 31, 1995 and 1994. At the end of 1995 and 1994, assets exceeded accumulated benefits in certain plans and accumulated benefits exceeded assets in others. Plan assets are invested primarily in common stocks and fixed income securities.
1995 1994 - ----------------------------------------------------------------------------------------------------------------------------- Assets Exceed Accumulated Assets Exceed Accumulated Accumulated Benefits Accumulated Benefits (In millions) Benefits Exceed Assets Benefits Exceed Assets - ----------------------------------------------------------------------------------------------------------------------------- Actuarial present value of benefit obligations: Vested benefit obligation $ (2,283.5) $ (232.3) $ (852.4) $ (1,291.4) ============================================================================================================================= Accumulated benefit obligation $ (2,500.0) $ (268.6) $ (871.8) $ (1,500.8) ============================================================================================================================= Projected benefit obligation $ (2,626.4) $ (332.1) $ (977.8) $ (1,551.7) Plan assets 2,643.1 59.2 939.9 1,140.1 - ----------------------------------------------------------------------------------------------------------------------------- Projected benefit obligation less than (in excess of) plan assets 16.7 (272.9) (37.9) (411.6) Unrecognized net loss 108.2 61.3 121.8 51.4 Unrecognized prior service cost 378.0 (1.7) 172.1 263.8 Unrecognized net (asset) obligation at transition (8.2) 27.0 (9.5) 27.6 Adjustment required to recognize minimum liability -- (50.0) -- (313.8) - ----------------------------------------------------------------------------------------------------------------------------- Pension asset (liability) recognized on the Consolidated Balance Sheet $ 494.7 $ (236.3) $ 246.5 $ (382.6) =============================================================================================================================
1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------- Assumptions: U.S. International U.S. International U.S.International - ----------------------------------------------------------------------------------------------------------------------------- Discount rate 7.75% 0% - 12.0% 8.5% 0% - 12.0% 7.75% 2.0% - 10.0% Rate of increase in compensation levels 4.5% 0% - 10.5% 4.5% 0% - 10.5% 4.5% 0% - 9.0% Expected long term rate of return on 9.0% 5.0% - 12.0% 9.0% 5.5% - 12.0% 9.0% 5.0%- 11.0% plan assets =============================================================================================================================
For plans that are not fully funded, the Company is required to offset the adjustment required to recognize minimum liability on the Consolidated Balance Sheet with an intangible asset, up to the amount of unrecognized prior service cost plus unrecognized obligations at transition that remain at December 31 of each year. Liability amounts in excess of these two items are offset by a separate reduction in Shareholders' Equity, net of tax. Accordingly, Shareholders' Equity was reduced by $26.3 million at December 31, 1995, compared to $39.5 million at December 31, 1994. Certain international subsidiaries maintain unfunded plans consistent with local practices and requirements and at December 31, 1995, these plans accounted for $102.4 million of the Company's accumulated benefit obligation, $120.4 million of its projected benefit obligation and $16.5 million of its minimum pension liability adjustment ($140.4 million, $162.6 million and $7.5 million, respectively, at December 31, 1994). 43 46 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) NOTE 10. EMPLOYEES' SAVINGS PLANS Substantially all domestic associates are eligible to participate in savings plans. Under these plans associates elect to contribute a percentage of their pay. In 1995, most plans provided for the Company's matching of these contributions (up to a maximum of 6 percent of the associate's annual pay or, if less, $9,240) at the rate of 50 percent. Company contributions were $38.2 million, $31.7 million and $29.4 million for 1995, 1994 and 1993, respectively. Note 11. POSTRETIREMENT HEALTH CARE, LIFE INSURANCE AND POSTEMPLOYMENT BENEFITS The Company and its subsidiaries provide substantially all domestic associates and associates at certain international subsidiaries with health care and life insurance benefits upon retirement. The life insurance and certain health care benefits are provided by insurance companies through premiums based on expected benefits to be paid during the year. Substantial portions of the health care benefits for domestic retirees are not insured and are paid by the Company.
Net periodic benefit cost follows: (In millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Service cost - benefits earned during the period $ 21.2 $ 23.6 $ 18.5 Interest cost 152.7 144.0 134.8 Net amortization (1.7) (1.5) (5.0) - -------------------------------------------------------------------------------- Net periodic benefit cost $ 172.2 $ 166.1 $ 148.3 ================================================================================
The following table sets forth the funded status and amounts recognized on the Company's Consolidated Balance Sheet at December 31, 1995 and 1994.
(In millions) 1995 1994 - ------------------------------------------------------------------------------------ Actuarial present value of accumulated benefit obligation: Retirees $ (1,255.4) $ (1,150.4) Vested active plan participants (473.2) (441.5) Other active plan participants (270.1) (246.8) - ------------------------------------------------------------------------------------- Accumulated benefit obligation in excess of plan assets (1,998.7) (1,838.7) Unrecognized net loss 215.8 96.6 Unrecognized prior service cost 7.7 11.9 - ------------------------------------------------------------------------------------- Accrued benefit cost recognized on the Consolidated Balance Sheet $ (1,775.2) $ (1,730.2) =====================================================================================
1995 1994 ------------------------------------------------------ Assumptions: U.S. International U.S. International - ------------------------------------------------------------------------------------- Discount rate 7.75% 5.0% - 9.0% 8.5% 5.0% - 9.5% Rate of increase in compensation levels 4.5% 2.5% - 5.75% 4.5% 2.5% - 5.75% - -------------------------------------------------------------------------------------
An 8.5 percent annual rate of increase in the cost of health care benefits for retirees under 65 years of age and a 6.25 percent annual rate of increase for retirees 65 years and older is assumed in 1996. This rate gradually decreases to 5 percent in 2010 and remains at that level thereafter. To illustrate the significance of a one percent increase in the assumed health care cost trend, the accumulated benefit obligation would increase by $23.9 million at December 31, 1995, and the aggregate service and interest cost by $2.4 million for the year then ended. The Company adopted Statement of Financial Accounting Standards No. 112, (SFAS 112), "Employers' Accounting for Postemployment Benefits," effective January 1, 1993. SFAS 112 requires the accrual of benefit costs for former or inactive employees, their beneficiaries and covered dependents, after employment but before retirement. The cumulative effect of adopting SFAS 112 at January 1, 1993 resulted in a charge of $86.3 million or $.59 per share, net of related taxes of $55.2 million. 44 47 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) NOTE 12. INTEREST EXPENSE Interest expense includes interest and amortization of debt discount and expense less amounts capitalized as follows:
(In millions) 1995 1994 1993 - ------------------------------------------------------------------------------ Interest expense before capitalization $140.1 $135.1 $167.4 Less capitalized interest 5.1 5.7 5.0 - ------------------------------------------------------------------------------ $135.0 $129.4 $162.4 ==============================================================================
The Company made cash payments for interest in 1995, 1994 and 1993 of $136.4 million, $147.6 million and $181.1 million, respectively. NOTE 13. RESEARCH AND DEVELOPMENT Research and development costs for 1995, 1994 and 1993 were $369.3 million, $341.3 million and $320.0 million, respectively. NOTE 14. ADVERTISING COSTS Advertising costs for 1995, 1994 and 1993 were $246.7 million, $248.2 million and $248.2 million, respectively. NOTE 15. INCOME TAXES The components of income before income taxes, extraordinary item and the cumulative effect of accounting change, adjusted for minority interest in net income of subsidiaries, follow:
(In millions) 1995 1994 1993 - ------------------------------------------------------------------------------- U.S $271.4 $294.4 $286.6 Foreign 654.4 571.3 498.3 - ------------------------------------------------------------------------------- 925.8 865.7 784.9 Minority Interest in Net Income of Subsidiaries 36.2 23.8 27.0 - ------------------------------------------------------------------------------- $962.0 $889.5 $811.9 ===============================================================================
A reconciliation of Federal income taxes at the U.S. statutory rate to income taxes provided follows:
(Dollars in millions) 1995 1994 1993 - ------------------------------------------------------------------------- U.S. Federal income tax at the statutory rate of 35% $336.7 $311.3 $284.1 Adjustment for foreign taxes at different rates (8.6) (12.6) 8.7 Other (13.3) -- 3.4 - -------------------------------------------------------------------------- United States and foreign taxes on income (before extraordinary item and cumulative effect of accounting change) $314.8 $298.7 $296.2 - -------------------------------------------------------------------------- Effective tax rate 32.7% 33.6% 36.5% ==========================================================================
The components of the provision for income taxes by taxing jurisdiction follow:
(In millions) 1995 1994 1993 - ------------------------------------------------------------------------ Current: Federal $ 42.1 $ 51.2 $ 92.7 Foreign income and withholding taxes 219.3 169.9 206.2 State (4.6) (22.2) 33.6 - ----------------------------------------------------------------------- 256.8 198.9 332.5 Deferred: Federal 19.8 74.6 (18.8) Foreign 32.9 7.9 (3.3) State 5.3 17.3 (14.2) - ----------------------------------------------------------------------- 58.0 99.8 (36.3) United States and foreign taxes on income (before extraordinary item and cumulative effect of accounting change) $314.8 $298.7 $296.2 =======================================================================
Temporary differences and carryforwards which give rise to deferred tax assets and liabilities at December 31, 1995 and 1994 follow:
(In millions) 1995 1994 - ---------------------------------------------------------------------- Postretirement benefits other than pensions $ 687.2 $ 685.2 Accrued environmental liabilities 38.2 47.0 General and product liability 70.4 57.7 Alternative minimum tax credit carryforwards 94.9 96.2 Operating loss carryforwards 18.6 21.8 Workers' compensation 64.3 62.2 Vacation and sick pay 74.3 72.1 Other 115.3 157.1 - ---------------------------------------------------------------------- 1,163.2 1,199.3 Valuation allowance (29.7) (68.9) - ---------------------------------------------------------------------- Total deferred tax assets 1,133.5 1,130.4 Total deferred tax liabilities - depreciation (711.3) (702.3) - pensions (190.8) (165.2) - ---------------------------------------------------------------------- Total deferred taxes $ 231.4 $ 262.9 ======================================================================
The decrease in the valuation allowance was due primarily to the realization of loss carryforwards and other benefits which are reflected in the 1995 provision. The Company made net cash payments for income taxes in 1995, 1994 and 1993 of $243.8 million, $234.6 million and $266.0 million, respectively. No provision for Federal income tax or foreign withholding tax on retained earnings of international subsidiaries of $1,385.0 million is required because this amount has been or will be reinvested in properties and plants and working capital. It is not practicable to calculate the deferred taxes associated with the remittance of these investments. 45 48 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) NOTE 16. BUSINESS SEGMENTS The Tires segment is the principal industry segment, which involves the development, manufacture, distribution and sale of tires in original equipment and replacement markets throughout most regions of the world. Related products and services include tubes, retreads, automotive repair services and merchandise purchased for resale. The General products segment involves the manufacture and sale of various engineered rubber and chemical products throughout most regions of the world, principally in the U.S., Latin America and Europe. These products include belts, hose, molded products, foam cushioning accessories, tank tracks, organic chemicals used in rubber and plastic processing, synthetic rubber and rubber latices and other products. The Oil transportation segment consists primarily of the All American Pipeline System, a common carrier crude oil pipeline extending from California to Texas. This segment, which also includes a crude oil gathering pipeline in California, crude oil storage facilities, linefill and related assets, also engages in various crude oil gathering, purchasing and selling activities. Segment sales consist of tariffs charged by the All American Pipeline System and revenues, net of acquisition costs, resulting from various crude oil gathering, purchasing and selling activities. Acquisition costs associated with these activities amounted to $496 million, $598 million and $655 million for 1995, 1994 and 1993, respectively. Operating income for each industry and geographic segment consists of total revenues less applicable costs and expenses. Transfers between industry segments were not material. Inter-geographic sales were at cost plus a negotiated mark up. The following items have been excluded from the determination of operating income: interest expense, foreign currency exchange, equity in net income of affiliates, minority interest in net income of subsidiaries, corporate revenues and expenses and income taxes. Corporate revenues and expenses were those items not identifiable with the operations of a segment. Corporate revenues were primarily from the sale of miscellaneous assets. Corporate expenses were primarily central administrative expenses. Identifiable assets of industry and geographic segments represent those assets that were associated with the operations of each segment. Corporate assets consist of cash and cash equivalents, prepaid expenses and other current assets, long term accounts and notes receivable, deferred charges and other assets. At December 31, 1995, $110.2 million or 40.4 percent ($112.4 million or 42.2 percent at December 31, 1994) of the Company's cash, cash equivalents and short term securities were concentrated in Latin America, primarily Venezuela and Brazil. Certain business assets, which were part of the General products segment, were sold in 1993. Refer to Note 2, Other (Income) and Expense. Results of operations of the General products industry segment and the U.S. geographic segment were reduced because of the dispositions of these business assets. Sales and operating income, respectively, of the businesses sold, excluding any gains recorded on the sales, amounted to $28.9 million and $.1 million in 1993. Dividends received by the Company and domestic subsidiaries from its international operations for 1995, 1994 and 1993 were $139.0 million, $151.8 million and $239.8 million, respectively. 46 49 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued)
Industry Segments (In millions) 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------- Sales to Unaffiliated Customers Tires $10,104.5 $ 9,427.6 $ 8,853.3 Related products and services 1,157.8 1,080.6 1,110.2 - --------------------------------------------------------------------------------------------------------------------------- Total Tires 11,262.3 10,508.2 9,963.5 General products 1,776.8 1,700.9 1,618.0 Oil transportation 126.8 79.1 61.9 - --------------------------------------------------------------------------------------------------------------------------- Net Sales $13,165.9 $12,288.2 $11,643.4 ============================================================================================================================ Income (loss) Tires $ 1,000.2 $ 1,010.6 $ 998.5 General products 165.6 170.9 177.8 Oil transportation 55.3 11.8 (11.6) - --------------------------------------------------------------------------------------------------------------------------- Total operating income 1,221.1 1,193.3 1,164.7 Interest expense (135.0) (129.4) (162.4) Foreign currency exchange (17.4) (77.6) (113.1) Equity in net income of affiliates 19.0 25.7 17.6 Minority interest in net income of subsidiaries (36.2) (23.8) (27.0) Corporate revenues and expenses (125.7) (122.5) (94.9) - --------------------------------------------------------------------------------------------------------------------------- Income before income taxes, extraordinary item and cumulative effect of accounting change $ 925.8 $ 865.7 $ 784.9 ============================================================================================================================ Assets Tires $ 6,050.8 $ 5,386.2 $ 5,023.6 General products 791.7 740.9 671.2 Oil transportation 1,356.3 1,398.6 1,413.2 - --------------------------------------------------------------------------------------------------------------------------- Total identifiable assets 8,198.8 7,525.7 7,108.0 Corporate assets 1,407.0 1,464.2 1,220.9 Investments in affiliates, at equity 183.8 133.4 107.2 - --------------------------------------------------------------------------------------------------------------------------- Assets at December 31 $ 9,789.6 $ 9,123.3 $ 8,436.1 =========================================================================================================================== Capital Expenditures Tires $ 494.5 $ 425.4 $ 356.5 General products 116.4 90.2 67.7 Oil transportation 4.7 7.4 8.1 - --------------------------------------------------------------------------------------------------------------------------- For the year $ 615.6 $ 523.0 $ 432.3 =========================================================================================================================== Depreciation Tires $ 329.6 $ 309.4 $ 305.0 General products 59.1 55.1 47.5 Oil transportation 46.2 45.8 40.4 - --------------------------------------------------------------------------------------------------------------------------- For the year $ 434.9 $ 410.3 $ 392.9 ===========================================================================================================================
47 50 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued)
Geographic Segments (In millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Sales to Unaffiliated Customers United States $ 7,249.6 $ 7,130.5 $ 6,777.4 Europe 2,853.7 2,279.8 2,233.3 Latin America 1,542.9 1,512.5 1,403.5 Asia 833.2 711.6 644.9 Canada 686.5 653.8 584.3 - -------------------------------------------------------------------------------- Net Sales $13,165.9 $12,288.2 $11,643.4 ================================================================================ Inter-Geographic Sales United States $ 408.4 $ 373.9 $ 296.9 Europe 90.1 92.5 78.4 Latin America 172.5 159.2 107.7 Asia 815.9 490.7 346.6 Canada 297.3 269.1 233.6 - -------------------------------------------------------------------------------- Total $ 1,784.2 $ 1,385.4 $ 1,063.2 ================================================================================ Revenue United States $ 7,658.0 $ 7,504.4 $ 7,074.3 Europe 2,943.8 2,372.3 2,311.7 Latin America 1,715.4 1,671.7 1,511.2 Asia 1,649.1 1,202.3 991.5 Canada 983.8 922.9 817.9 Adjustments and eliminations (1,784.2) (1,385.4) (1,063.2) - -------------------------------------------------------------------------------- Total $13,165.9 $12,288.2 $11,643.4 ================================================================================ Operating Income United States $ 543.9 $ 591.5 $ 590.1 Europe 317.2 212.0 221.5 Latin America 238.8 278.2 271.1 Asia 90.1 81.3 70.0 Canada 31.1 30.3 12.0 - -------------------------------------------------------------------------------- Total $ 1,221.1 $ 1,193.3 $ 1,164.7 ================================================================================ Assets United States $ 4,703.6 $ 4,478.4 $ 4,314.8 Europe 1,719.9 1,452.5 1,335.0 Latin America 683.0 637.6 647.9 Asia 576.9 490.3 356.4 Canada 515.4 466.9 453.9 - -------------------------------------------------------------------------------- Total identifiable assets 8,198.8 7,525.7 7,108.0 ================================================================================ Corporate assets 1,407.0 1,464.2 1,220.9 Investments in affiliates, at equity 183.8 133.4 107.2 - -------------------------------------------------------------------------------- Assets at December 31 $ 9,789.6 $ 9,123.3 $ 8,436.1 ================================================================================
48 51 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Notes to Financial Statements (Continued) NOTE 17. COMMITMENTS AND CONTINGENT LIABILITIES At December 31, 1995, the Company had binding commitments for investments in land, buildings and equipment of $150.6 million and off-balance-sheet financial guarantees written of $38.8 million. At December 31, 1995, the Company had recorded contingent liabilities aggregating $91.4 million for anticipated costs, including legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring and related activities, related to various environmental matters, primarily the remediation of numerous waste disposal sites and certain properties sold by the Company. The Company had recorded $116.4 million for such costs at December 31, 1994. There were no charges recorded in 1995 for such costs, compared to $22.8 million and $29.7 million in 1994 and 1993, respectively. The amount of the Company's ultimate liability in respect of these matters may be affected by several uncertainties, primarily the ultimate cost of required remediation and the extent to which other responsible parties contribute, and is expected to be paid over several years. Refer to Note 1, Accounting Policies, Environmental Cleanup Matters for additional information. At December 31, 1995, the Company had recorded contingent liabilities aggregating $191.4 million for potential product liability and other tort claims, including related legal fees expected to be incurred, presently asserted against the Company. The Company had recorded $183.1 million for such matters at December 31, 1994. Charges for such potential liabilities were $29.5 million, $30.0 million and $31.9 million in 1995, 1994 and 1993, respectively. The amount recorded was determined on the basis of an assessment of potential liability using an analysis of pending claims, historical experience and current trends. The Company has concluded that in respect of any of the above described contingent liabilities, it is not reasonably possible that it would incur a loss exceeding the amount already recognized with respect thereto which would materially affect the Company's financial condition, results of operations or liquidity. Various other legal actions, claims and governmental investigations and proceedings covering a wide range of matters are pending against the Company and its subsidiaries. Management, after reviewing available information relating to such matters and consulting with the Company's General Counsel, has determined with respect to each such matter either that it is not reasonably possible that the Company has incurred liability in respect thereof or that any liability ultimately incurred will not exceed the amount, if any, recorded at December 31, 1995 in respect thereof which would be material relative to the consolidated financial position, results of operations or liquidity of the Company. However, in the event of an unanticipated adverse final determination in respect of certain matters, the Company's consolidated net income for the period in which such determination occurs could be materially affected. NOTE 18. PREFERRED STOCK PURCHASE RIGHTS PLAN In 1986, the Company authorized 3,000,000 shares of Series A $10.00 Preferred Stock ("Series A Preferred") issuable only upon the exercise of rights ("Rights") issued under the Preferred Stock Purchase Rights Plan adopted in July 1986. Each share of Series A Preferred issued would be non-redeemable, non-voting and entitled to cumulative quarterly dividends equal to the greater of $10.00 or, subject to adjustment, 100 times the per share amount of dividends declared on Goodyear common stock during the preceding quarter, and would also be entitled to a liquidation preference. Under the Rights Plan, each shareholder of record on July 28, 1986 received a dividend of one Right per share of Goodyear common stock. When exercisable, each Right entitles the holder to buy one two-hundredth of a share of Series A Preferred at an exercise price of $50. The Rights will be exercisable only after 10 days following the earlier of a public announcement that a person or group has acquired 20 percent or more of Goodyear common stock or the commencement of a tender offer for 20 percent or more of Goodyear common stock by a person or group. The Rights are non-voting and may be redeemed by the Company at $.05 per Right under certain circumstances. If not redeemed or exercised, the Rights will expire on July 28, 1996. If a person or group accumulates 35 percent or more of Goodyear common stock, or a merger takes place with an acquiring person or group and the Company is the surviving corporation, or an acquiring person or group engages in certain self-dealing transactions, each Right (except those held by such acquiring person or group) will entitle the holder to purchase Goodyear common stock having a market value then equal to two times the exercise price. If the Company is acquired or a sale or transfer of 50 percent or more of the Company's assets or earning power is made, each Right (except those held by the acquiring person or group) will entitle the holder to purchase common stock of the acquiring entity having a market value then equal to two times the exercise price. 49 52 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES Supplementary Data (Unaudited)
Quarterly Data and Market Price Information (In millions, except per share) Quarter --------------------------------------------------------------------------------- 1995 First Second Third Fourth Year - --------------------------------------------------------------------------------------------------------------------------- Net Sales $3,243.3 $3,350.8 $3,305.1 $3,266.7 $13,165.9 Gross Profit 755.9 800.2 746.7 769.5 3,072.3 Net Income $ 133.3 $ 173.8 $ 157.5 $ 146.4 $ 611.0 - --------------------------------------------------------------------------------------------------------------------------- Per Share of Common Stock: Net Income $ .88 $ 1.15 $ 1.03 $ .96 $ 4.02 - -------------------------------------------------------------------------------------------------------------------------- Average Shares Outstanding 151.5 151.7 152.3 152.9 152.1 Price Range of Common Stock:* High $ 38 3/4 $ 43 3/8 $ 45 1/8 $ 47 1/2 $ 47 1/2 Low 33 36 5/8 38 1/8 37 33 Dividends Paid .20 .25 .25 .25 .95 ============================================================================================================================
Quarter ------------------------------------------------------------------------------ 1994 First Second Third Fourth Year - --------------------------------------------------------------------------------------------------------------------------- Net Sales $2,909.6 $3,052.3 $3,115.8 $3,210.5 $12,288.2 Gross Profit 714.2 791.9 753.4 757.3 3,016.8 Net Income $ 116.0 $ 163.2 $ 151.3 $ 136.5 $ 567.0 - --------------------------------------------------------------------------------------------------------------------------- Per Share of Common Stock: Net Income $ .77 $ 1.08 $ 1.00 $ .90 $ 3.75 =========================================================================================================================== Average Shares Outstanding 151.0 151.2 151.3 151.4 151.2 Price Range of Common Stock:* High $ 49 1/4 $ 42 1/2 $ 37 1/4 $ 36 1/2 $ 49 1/4 Low 39 1/4 35 3/4 31 5/8 31 3/4 31 5/8 Dividends Paid .15 .20 .20 .20 .75 =========================================================================================================================== *New York Stock Exchange - Composite Transactions
50 53 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information required by Item 401 of Regulation S-K in respect of directors of Registrant is, pursuant to General Instruction G(3) to Form 10-K, incorporated herein by specific reference to the text set forth under the caption "Election of Directors" at pages 3 through 6, inclusive, of Registrant's Proxy Statement, dated February 27, 1996, for its Annual Meeting of Shareholders to be held on April 15, 1996 (the "Proxy Statement"). For information regarding the executive officers of Registrant, reference is made to Part I, Item 4(A), at pages 17 through 21, inclusive, of this Annual Report. Based solely on a review of copies of reports on Forms 3, 4 and 5 received by Registrant, or on written representations from certain directors and officers that no updating Section 16(a) forms were required to be filed by them, Registrant believes that no director or officer of Registrant filed a late report or failed to file a required report under Section 16(a) of the Exchange Act during or in respect of the year ended December 31, 1995, except that Mr. E. R. Culler, Jr., an Executive Vice President of Registrant, filed an amendment to his Form 3, and to one Form 4, to correct an administrative error in the initial reporting of his holdings of Registrant's Common Stock and Mr. R. P. Adante, a Vice President of Registrant, amended Form 4 filings made in 1991, 1992, 1993 and 1994 to report shares acquired during the period through the reinvestment of dividends on Registrant's Common Stock pursuant to the Goodyear Dividend Reinvestment and Stock Purchase Plan not previously reported due to administrative error. To the knowledge of Registrant, no person owned 10% or more of any class of Registrant's equity securities registered under the Exchange Act. ITEM 11. EXECUTIVE COMPENSATION. Information required by Item 402 of Regulation S-K in respect of management of Registrant is, pursuant to General Instruction G(3) to Form 10-K, incorporated herein by specific reference to the text set forth in the Proxy Statement under the captions "Executive Officer Compensation", "Compensation Committee Report on Executive Compensation" and "Performance Graph", at pages 11 through 24, inclusive, of the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information required by Item 403 of Regulation S-K relating to the ownership of Registrant's Common Stock by certain beneficial owners and management is, pursuant to General Instruction G(3) to Form 10-K, incorporated herein by specific reference to the text set forth in the Proxy Statement under the caption "Beneficial Ownership of Common Stock" at pages 9 and 10 of the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information required by Item 404 of Regulation S-K relating to certain transactions by and relationships of management is, pursuant to General Instruction G(3) to Form 10-K, incorporated herein by specific reference to the text set forth in the Proxy Statement under the caption "Executive Officer Compensation" at pages 11 through 20, inclusive, of the Proxy Statement. 51 54 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. A. LIST OF DOCUMENTS FILED AS PART OF THIS REPORT: 1. FINANCIAL STATEMENTS: See Index on page 30 of this Annual Report. 2. FINANCIAL STATEMENT SCHEDULES: See Index To Financial Statement Schedules attached to this Annual Report at page FS-1. The Financial Statement Schedule at page FS-1 is by specific reference hereby incorporated into and made a part of this Annual Report. 3. EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF REGULATION S-K: See the Index of Exhibits at pages X-1 through X-8, inclusive, which is by specific reference hereby incorporated into and made a part of this Annual Report. The following exhibits, each listed in the Index of Exhibits, are or relate to compensation plans and arrangements of Registrant:
EXHIBIT DESCRIPTION FILED AS EXHIBIT 10(a) 1994 Performance Recognition Plan E to Form 10-K for year ended December 31, 1993 10(b) Form of Performance Equity Grant F to Form 10-K for Agreement for 1994 under 1989 Plan year ended December 31, 1993 10(c) 1995 Performance Recognition Plan E to Form 10-K for year ended December 31, 1994 10(d) Performance Recognition Plan 10.1 to this Annual Report adopted as of January 1, 1996 on Form 10-K 10(e) Form of Stock Option Grant Agreement E to Form 8-K dated under 1989 Plan February 17, 1993 10(f) 1982 Employees' Stock Option Plan A-II to Form 10-K for (as amended) year ended December 31, 1985 10(g) Form of Stock Option Grant Agreement G to Form 10-K for year under 1989 Plan in respect of options ended December 31, 1993 granted January 4, 1994 10(h) 1987 Employees' Stock Option Plan B to Form 10-Q for quarter ended March 31, 1987 10(i) 1989 Goodyear Performance and Equity A to Form 10-Q for Incentive Plan ("1989 Plan") quarter ended March 31, 1989 10(j) Goodyear Supplementary Pension Plan A to Form 10-Q for (as amended) quarter ended March 31, 1990 10(k) Form of Performance Equity Grant F to Form 10-K for year Agreement for 1995 under 1989 Plan ended December 31, 1994 10(l) Retirement Plan for Outside Directors F to Form 8-K dated (as amended) March 20, 1987 10(m) Goodyear Employee Severance Plan A-II to Form 10-K for year ended December 31, 1988
52 55
EXHIBIT DESCRIPTION FILED AS EXHIBIT 10(n) Form of Performance Equity Grant C to Form 8-K dated Agreement for 1992 under 1989 Plan February 17, 1993 10(o) Form of Performance Equity Grant D to Form 8-K dated Agreement for 1993 under 1989 Plan February 17, 1993 10(p) Forms of Stock Option Grant G to Form 10-K for year Agreements under 1989 Plan in ended December 31, 1994 respect of options and SARs granted January 4, 1995 10(z) Employment Agreement and related C to Form 10-Q for Stock Purchase Agreement, each quarter ended June 30, 1991 dated August 6, between Registrant and S. C. Gault 10(aa) Amendment, dated December 3, 1991, A to Form 8-K to Stock Purchase Agreement, dated dated December 18, 1991 August 6, 1991, between Registrant and S. C. Gault 10(bb) Amendment, dated April 5, 1993, to C to Form 8-K Employment Agreement and to Stock dated April 22, 1993 PurchaseAgreement, each dated August 6, 1991, between Registrant and S. C. Gault 10(cc) Deferred Compensation Plan for B to Form 10-Q for Executives quarter ended September 30, 1994 10(dd) 1994 Restricted Stock Award Plan B to Form 10-Q for for Non-employee Directors quarter ended June 30, 1994 10(ee) Amendment, dated May 3, 1994, to A to Form 10-Q for Employment Agreement and to quarter ended June 30, 1994 Stock Purchase Agreement, each dated August 6, 1991, between Registrant and S. C. Gault 10(ff) Form of Performance Equity Grant 10.2 to this Annual Report Agreement for 1996 under 1989 Plan on Form 10-K 10(gg) Forms of Stock Option Grant Agreements 10.3 to this Annual Report under 1989 Plan in respect on Form 10-K of options and SARs granted January 9, 1996 10(hh) Amendment Agreement, dated as of 10.4 to this Annual Report December 5, 1995, relating on Form 10-K to Stock Purchase Agreement dated August 6, 1991, between Registrant and S. C. Gault 10(ii) Outside Directors' Equity 10.5 to this Annual Report Participation Plan on Form 10-K
B. REPORTS ON FORM 8-K: No Current Report on Form 8-K was filed by Registrant with the Securities and Exchange Commission during the quarter ended December 31, 1995. 53 56 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS ANNUAL REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. THE GOODYEAR TIRE & RUBBER COMPANY (Registrant) Date: March 20, 1996 By /s/ SAMIR F. GIBARA --------------------------------------- Samir F. Gibara, President and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS ANNUAL REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. Date: March 20, 1996 /s/ SAMIR F. GIBARA ----------------------------------------- Samir F. Gibara, President and Chief Executive Officer and Director (Principal Executive Officer) Date: March 20, 1996 /s/ ROBERT W. TIEKEN ----------------------------------------- Robert W. Tieken, Executive Vice President (Principal Financial Officer) Date: March 20, 1996 /s/ GEORGE E. STRICKLER ----------------------------------------- George E. Strickler, Vice President and Comptroller (Principal Accounting Officer) JOHN G. BREEN, Director WILLIAM E. BUTLER, Director THOMAS H. CRUIKSHANK, Director By /s/ ROBERT W. TIEKEN STANLEY C. GAULT, Director ---------------------------- Date: March 20, 1996 WILLIAM J. HUDSON, JR., Director Robert W. Tieken, GERTRUDE G. MICHELSON, Director Signing as Attorney-in-Fact STEVEN A. MINTER, Director for the directors whose AGNAR PYTTE, Director names appear opposite. GEORGE H. SCHOFIELD, Director WILLIAM C. TURNER, Director
A Power of Attorney, dated January 9, 1996, authorizing Robert W. Tieken to sign this Annual Report on Form 10-K for the fiscal year ended December 31, 1995 on behalf of certain of the directors of the Registrant is filed as Exhibit D to this Annual Report. 54 57 FINANCIAL STATEMENT SCHEDULES ITEMS 8 AND 14(a)(2) OF FORM 10-K FOR CORPORATIONS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 ------------------ INDEX TO FINANCIAL STATEMENT SCHEDULES FINANCIAL STATEMENT SCHEDULES: SCHEDULE NO. PAGE NUMBER ------------ ----------- Valuation and Qualifying Accounts.................. II FS-1 All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. INDEX TO FINANCIAL STATEMENT SCHEDULES: Financial statement and schedules relating to 50 percent or less owned companies, the investments in which are accounted for by the equity method, have been omitted as permitted because, considered in the aggregate as a single subsidiary, these companies would not constitute a significant subsidiary.
==================================================================================================================================== SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS YEAR ENDED DECEMBER 31, ==================================================================================================================================== (IN MILLIONS) 1995 - ----------------------------------------------------------------------------------------------------------------------------------- Additions Translation Balance at charged Deductions adjustment Balance beginning (credited) from during at end of Description of period to income reserves period period - ----------------------------------------------------------------------------------------------------------------------------------- Deducted from accounts and notes receivable: For doubtful accounts $ 54.0 $ 19.5 $ (17.5) (a) $ .2 $ 56.2 Valuation allowance -- deferred tax assets 68.9 (34.7) (4.5) -- 29.7 1994 - ----------------------------------------------------------------------------------------------------------------------------------- Deducted from accounts and notes receivable: For doubtful accounts $ 50.6 $ 26.5 $ (23.3) (a) $ .2 $ 54.0 Valuation allowance -- deferred tax assets 96.4 (27.1) (.4) -- 68.9 1993 - ----------------------------------------------------------------------------------------------------------------------------------- Deducted from accounts and notes receivable: For doubtful accounts $ 55.8 $ 26.2 $ (25.8) (a) $ (5.6) $ 50.6 Valuation allowance -- deferred tax assets 231.2 (25.6) (109.2) -- 96.4 - ---------- Note:(a) Accounts and notes receivable charged off.
FS-1 58 THE GOODYEAR TIRE & RUBBER COMPANY Annual Report on Form 10-K For Year Ended December 31, 1995 INDEX OF EXHIBITS(1)
Exhibit Table Exhibit Item Letter/ No. (2) Description of Exhibit Number Page ------- ---------------------- ------- ---- 3 ARTICLES OF INCORPORATION AND BY-LAWS (a) Certificate of Amended Articles of Incorporation of The Goodyear Tire & Rubber Company, dated December 20, 1954, and Certificate of Amendment to Amended Articles of Incorporation of The Goodyear Tire & Rubber Company, dated April 6, 1993 (two documents comprising Registrant's Articles of Incorporation as amended through March 27, 1995) (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit 4.1(A) to Registrant's Registration Statement on Form S-8, File No. 33-65187). (b) Code of Regulations of The Goodyear Tire & Rubber Company, adopted November 22, 1955, and amended April 5, 1965, April 7, 1980, April 6, 1981 and April 13, 1987 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit 4.1(B) to Registrant's Registration Statement on Form S-8, File No. 33-65187). 4 Instruments defining the rights of security holders, including indentures (a) Conformed copy of Rights Agreement, dated as of July 2, 1986, between Registrant and Manufacturers Hanover Trust Company, Rights Agent (filed with the Securities and Exchange Commission as Exhibit 4(a) to Registrant's Current Report on Form 8-K, dated July 2, 1986, and as Exhibit 2(a) to Registrant's Registration Statement on Form 8-A, dated July 3, 1986, File No. 1-1927), as amended by that certain Amendment to Rights Agreement dated as of April 6, 1993 between Registrant and First Chicago Trust Company of New York, the successor Rights Agent (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit 4.3 to Registrant's Registration Statement on Form S- 8, File No. 33-65187). - --------------- (1) See Part IV, Item 14, Part A.3. (2) Pursuant to Item 601 of Regulation S-K.
X-1 59
Exhibit Table Exhibit Item Letter/ No. (2) Description of Exhibit Number Page ------- ---------------------- ------- ---- 4 (b) Specimen nondenominational Certificate for shares of the Common Stock, Without Par Value, of the Registrant; one certificate, First Chicago Trust Company of New York as transfer agent and registrar (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit 4.2 to Registrant's Registration Statement on Form S-8, File No. 033-65187). (c) Conformed Copy of Revolving Credit Facility Agreement, dated as of July 15, 1994, among Registrant, the Lenders named therein and Chemical Bank, as Agent (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit A to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, File No. 1-1927). Information concerning Goodyear's long-term debt is set forth at Note 6, captioned "Financing Arrangements and Financial Instruments", at the sub-caption "B. Long Term Debt and Capital Leases", in the Financial Statements set forth at Item 8 of this Annual Report, beginning at page 38, and is incorporated herein by specific reference. No other instrument defining the rights of holders of long-term debt relates to securities having an aggregate principal amount in excess of 10% of the consolidated assets of Registrant and its subsidiaries. In accordance with paragraph (iii) to Part 4 of Item 601 of Regulation S-K, the agreements and instruments defining the rights of holders of long term debt of Registrant in respect of which the total amount of securities authorized thereunder does not exceed 10% of the consolidated assets of Registrant and its subsidiaries are not filed herewith. The Registrant hereby agrees to furnish a copy of any such agreement or instrument to the Securities and Exchange Commission upon request. - --------------- (2) Pursuant to Item 601 of Regulation S-K.
X-2 60
Exhibit Table Exhibit Item Letter/ No. (2) Description of Exhibit Number Page - -------- ---------------------- ------- ---- 10 MATERIAL CONTRACTS (a) Performance Recognition Plan of Registrant adopted effective January 1, 1994 for calendar year 1994 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit E to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-1927). (b) Form of Performance Equity Grant Agreement in respect of awards granted in 1994 under the 1989 Goodyear Performance and Equity Incentive Plan (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit F to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-1927). (c) Performance Recognition Plan of Registrant adopted effective January 1, 1995 for calendar year 1995 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit E to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-1927). (d) Performance Recognition Plan of Registrant adopted effec- 10.1 X-10.1-1 tive January 1, 1996. (e) Form of Stock Option Grant Agreement under the 1989 Goodyear Performance and Equity Incentive Plan in respect of options granted in 1992 and 1993 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit E to Registrant's Current Report on Form 8-K dated February 17, 1993, File No. 1-1927). (f) 1982 Employees' Stock Option Plan of Registrant, as amended effective April 7, 1986 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit A-II to Registrant's Annual Report on Form 10-K for the year ended December 31, 1985, File No. 1-1927). (g) Form of Stock Option Grant Agreement under the 1989 Goodyear Performance and Equity Incentive Plan in respect of options granted January 4, 1994 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit G to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-1927). - --------------- (2) Pursuant to Item 601 of Regulation S-K.
X-3 61
Exhibit Table Exhibit Item Letter/ No. (2) Description of Exhibit Number Page - -------- ---------------------- ------- ---- 10 (h) 1987 Employees' Stock Option Plan of Registrant, as adopted by the Board of Directors of Registrant on February 10, 1987, and approved by Registrant's shareholders on April 13, 1987 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit B to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1987, File No. 1-1927). (i) 1989 Goodyear Performance and Equity Incentive Plan of Registrant, as adopted by the Board of Directors of Registrant on December 6, 1988, and approved by the shareholders of Registrant on April 10, 1989 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit A to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1989, File No. 1-1927). (j) Goodyear Supplementary Pension Plan, as amended May 1, 1990 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit A to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1990, File No. 1-1927). (k) Performance Equity Grant Agreement in respect of awards granted in December of 1994 in respect of 1995 under the 1989 Goodyear Performance and Equity Incentive Plan (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit F to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-1927). (l) The Goodyear Tire & Rubber Company Retirement Plan for Outside Directors, adopted December 6, 1983, as amended November 13, 1986 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit F to Registrant's Current Report on Form 8-K, dated March 20, 1987, File No. 1-1927). (m) Goodyear Employee Severance Plan, as adopted by the Board of Directors of Registrant on February 14, 1989 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit A-II to Registrant's Annual Report on Form 10-K for the year ended December 31, 1988, File No. 1-1927). (n) Form of Performance Equity Grant Agreement in respect of awards in 1992 under the 1989 Goodyear Performance and Equity Incentive Plan (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit C to Registrant's Current Report on Form 8-K dated February 17, 1993, File No. 1-1927). - --------------- (2) Pursuant to Item 601 of Regulation S-K.
X-4 62
Exhibit Table Exhibit Item Letter/ No. (2) Description of Exhibit Number Page - -------- ---------------------- ------- ---- 10 (o) Form of Performance Equity Grant Agreement in respect of awards in 1993 under the 1989 Goodyear Performance and Equity Incentive Plan (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit D to Registrant's Current Report on Form 8-K dated February 17, 1993, File No. 1-1927). (p) Forms of Stock Option Grant Agreements in respect ofoptions and SARs granted January 4, 1995 under the 1989 Goodyear Performance and Equity Incentive Plan; Part I, Form of Agreement for Incentive Stock Options, Part II, Form of Agreement for Non-Qualified Stock Options, and Part III, Form of Agreement for Non-Qualified Stock Options and tandem Stock Appreciation Rights (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit G to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1- 1927). (q) Conformed copy of Receivables Sale Agreement [$200,000,000 Facility], dated as of December 12, 1989, among Registrant, Asset Securitization Cooperative Corporation ("ASCC") and Canadian Imperial Bank of Commerce ("CIBC") (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit D to Registrant's Current Report on Form 8-K, dated March 22, 1990, File No. 1-1927). (r) Conformed copy of Receivables Sale Agreement [$400,000,000 Facility], dated as of June 15, 1990, among Registrant, ASCC and CIBC (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit A to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990, File No. 1-1927). (s) Conformed copy of Amendment to Receivables Sale Agreement [$200,000,000 Facility], dated as of March 14, 1991, among Registrant, ASCC and CIBC, amending the Receivables Sale Agreement [$200,000,000 Facility], dated as of December 12, 1989, among Registrant, ASCC and CIBC (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit A to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, File No. 1-1927). (t) Conformed copy of Amendment to Receivables Sale Agreement [$400,000,000 Facility], dated as of March 14, 1991, among Registrant, ASCC and CIBC, amending the Receivables Sale Agreement [$400,000,000 Facility], dated as of June 15, 1990, among Registrant, ASCC and CIBC (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit B to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, File No. 1-1927). - --------------- (2) Pursuant to Item 601 of Regulation S-K.
X-5 63
Exhibit Table Exhibit Item Letter/ No. (2) Description of Exhibit Number Page - -------- ---------------------- ------- ---- 10 (u) Conformed copy of Second Amendment to Receivables Sale Agreement [$400,000,000 Facility], dated as of September 15, 1991, among Registrant, ASCC and CIBC, amending the Receivables Sale Agreement [$400,000,000 Facility], dated as of June 15, 1990, as amended by amendment dated as of March 14, 1991, among Registrant, ASCC and CIBC (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit A to Registrant's Quarterly Report on Form 10-Q for the Quarter ended September 30, 1991, File No. 1-1927). (v) Conformed copy of Second Amendment to Receivables Sale Agreement [$200,000,000 Facility] dated as of June 25, 1992, among Registrant, ASCC and CIBC, amending the Receivables Sale Agreement [$200,000,000 Facility], dated as of December 12, 1989, among Registrant, ASCC and CIBC (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit B to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992, File No. 1-1927). (w) Conformed copy of Third Amendment to Receivables Sale Agreement [$200,000,000 Facility] dated as of July 23, 1992, among Registrant, ASCC and CIBC, amending the Receivables Sale Agreement [$200,000,000 Facility], dated as of December 12, 1989, among Registrant, ASCC and CIBC (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit C to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992, File No. 1-1927). (x) Conformed copy of Third Amendment to Receivables Sale Agreement [$400,000,000 Facility] dated as of July 28, 1992, among Registrant, ASCC and CIBC, amending the Receivables Sale Agreement [$400,000,000 Facility], dated as of June 15, 1990, among Registrant, ASCC and CIBC (incorporation by reference, filed with the Securities and Exchange Commission as Exhibit D to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992, File No. 1-1927). (y) Conformed copy of Fourth Amendment to Receivables Sale Agreement [$400,000,000 Facility] dated as of January 27, 1993, among Registrant, ASCC and CIBC, amending the Receivables Sale Agreement [$400,000,000 Facility], dated as of June 15, 1990, among Registrant, ASCC and CIBC (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit A to Registrant's Current Report on Form 8-K dated February 17, 1993, File No. 1-1927). - --------------- (2) Pursuant to Item 601 of Regulation S-K.
X-6 64
Exhibit Table Exhibit Item Letter/ No. (2) Description of Exhibit Number Page - -------- ---------------------- ------- ---- 10 (z) Conformed Copy of Employment Agreement, dated August 6, 1991, and related Stock Purchase Agreement, dated August 6, 1991, each between Registrant and Stanley C. Gault, the Chairman of the Board and Chief Executive Officer of Registrant (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit C to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, File No. 1-1927). (aa) Conformed copy of Amendment Agreement, dated December 3, 1991, between Registrant and Stanley C. Gault, Chairman of the Board and Chief Executive Officer of Registrant, amending that certain Stock Purchase Agreement dated August 6, 1991 between Registrant and Stanley C. Gault (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit A to Registrant's Current Report on Form 8-K, dated December 18, 1991, File No. 1-1927). (bb) Amendment, dated April 5, 1993, to Employment Agreement and to Stock Purchase Agreement, each dated August 6, 1991, between Registrant and S C Gault (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit C to Registrant's Current Report on Form 8-K dated April 22, 1993, File No. 1-1927). (cc) The Goodyear Tire & Rubber Company Deferred Compensation Plan for Executives, as adopted effective October 4, 1994 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit B to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, File No. 1-1927). (dd) 1994 Restricted Stock Award Plan for nonemployee Directors of Registrant, as adopted effective June 1, 1994 (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit B to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, File No. 1-1927). (ee) Amendment, dated May 3, 1994, to Employment Agreement and to Stock Purchase Agreement, each dated August 6, 1991, between Registrant and S. C. Gault (incorporated by reference, filed with the Securities and Exchange Commission as Exhibit A to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, File No. 1-1927). - --------------- (2) Pursuant to Item 601 of Regulation S-K.
X-7 65
Exhibit Table Exhibit Item Letter/ No. (2) Description of Exhibit Number Page - -------- ---------------------- ------- ---- 10 (ff) Form of Performance Equity Grant Agreement for 1996 10.2 X-10.2-1 under the 1989 Goodyear Performance and Equity Incentive Plan (gg) Forms of Stock Option Grant Agreement granted January 10.3 X-10.3-1 9, 1996 under the 1989 Goodyear Performance and Equity Incentive Plan; Part I, Form of Agreement for Incentive Stock Options, Part II, Form of Agreement for Non-qualified Stock Options, and Part III, Form of Agreement for Non-qualified Stock Options and tandem Stock Appreciation Rights. (hh) Amendment Agreement, dated as of December 5, 1995, 10.4 X-10.4-1 relating to Stock Purchase Agreement dated August 6, 1991, between Registrant and S C Gault. (ii) Outside Directors' Equity Participation Plan, adopted by 10.5 X-10.5-1 by the Board of Directors on February 2, 1996. 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS A (a) Computation of Earnings Per Share (11) X-11-1 21 SUBSIDIARIES B (a) List of subsidiaries of Registrant at March 15, 1996. (21) X-21-1 23 CONSENTS OF EXPERTS AND COUNSEL C (a) Consent of Price Waterhouse LLP, independent accoun- (23) X-23-1 tants, to incorporation by reference of their report set forth on page 30 of this Annual Report in certain Registration Statements on Forms S-3 and S-8. 24 POWER OF ATTORNEY D (a) Power of Attorney, dated January 9, 1996, authorizing (24) X-24-1 Robert W. Tieken, C. Thomas Harvie, George E. Strickler, Richard W. Hauman, James Boyazis, or any one or more of them, to sign this Annual Report on behalf of certain directors of Registrant. 27 FINANCIAL DATA SCHEDULE (27) X-27-1 99 ADDITIONAL EXHIBITS (a) Registrant's definitive Proxy Statement dated February 27, 1996 (portions incorporated by reference, filed with the Securities and Exchange Commission, File No. 1-1927). - --------------- (2) Pursuant to Item 601 of Regulation S-K.
X-8 EX-10.D 2 EXHIBIT 10(D) 1 EXHIBIT 10.1 PERFORMANCE RECOGNITION PLAN of THE GOODYEAR TIRE & RUBBER COMPANY Effective January 1, 1996 (hereinafter called the "Plan") I. PURPOSE AND POLICY It is the declared policy of the Board of Directors of The Goodyear Tire & Rubber Company ("Goodyear"), in order to provide incentive for extra effort, that key personnel of the Company shall be compensated in addition to their fixed compensation by participation in a performance recognition plan. Such key personnel shall be selected, as hereinafter provided, from the elected officers and other key employees of the Company. The Plan is designed to reinforce participant effort and responsibility towards achieving the total Company business objectives, the objectives of specific business units and objectives established for individual participants. Awards to participants provided under this Plan will vary to the extent these goals and objectives are attained. The basic intent is to tie awards directly to results that reflect Company growth and success achieved through customer satisfaction, quality products and enhanced shareholder value. The Plan shall be subject to discontinuance, or amendment by the Board of Directors, at any time. II. DEFINITIONS For purposes of the Plan, the following terms shall have the following meanings: A) Award. Cash payments approved by the Committee and made pursuant to the objectives established pursuant to the Plan in respect of any Plan year. B) Company. The Goodyear Tire & Rubber Company or any of its subsidiaries and affiliates. C) Participant. With respect to any Plan year, a salaried employee of the Company who has been selected by the Committee to receive an award under the Plan for such Plan year subject to the attainment of the established goals and objectives. D) Plan Year. Each period of one year beginning January 1 and ending December 31, commencing January 1, 1996. III. THE COMMITTEE The "Committee," hereinafter referred to, is the Compensation Committee of the Board of Directors of Goodyear and shall from time to time be comprised of all persons who then are members of the Board of Directors and who are not participants in the Plan; and no member of the Committee shall be eligible for participation in the Plan while he is serving on the Committee. Action by the Committee pursuant to any provision of the Plan may be taken at any meeting held upon not less than five days' notice of its time, place and purpose given to each member, at which meeting a quorum of not less than four members is present. If less than a majority of the whole Committee is present, such action must be by the unanimous vote of those present, otherwise by a majority vote. The minutes of such meeting (signed by its secretary) evidencing such action, shall constitute authority for Goodyear to proceed in accordance therewith. X-10.1-1 2 IV. TARGET BONUS Each participant in a Plan year is granted a target bonus with respect to such Plan year which is subject to adjustment between zero percent and 150 percent, depending upon the extent to which the business goal or goals established for the participant for such Plan year are achieved. V. SELECTION OF PARTICIPANTS A) With respect to each Plan year, after consultation with the Chief Executive Officer of Goodyear (or, if he be unavailable, with the next ranking officer of Goodyear who may be available), the Committee shall determine the participants and establish their respective target bonuses for such Plan year. The Committee shall also review and approve the goals established for the participants for such Plan year. As to such determination, the Committee may rely, to the extent it deems available, upon any information and recommendations obtained from the officer so consulted. As soon as practicable after the selection of participants for a Plan year, Goodyear shall notify them of their participation and target bonuses for such Plan year. Participants are not eligible for any other annual Company bonus or incentive plan during such Plan year. B) A list, certified by the Committee (or by the officers as to action pursuant to subparagraph A above), shall evidence the determination of those persons who are participants in the Plan for such Plan year and their respective target bonuses and goals therein. C) With respect to employees who are not officers of Goodyear, the Chairman of the Board of Goodyear may add such employees as participants in the Plan during a Plan year and report such additional participants to the Committee from time to time. VI. PAYMENT The Committee, at its sole discretion, shall determine if a payment shall be made to participants in respect of any Plan year notwithstanding the fact that the established goals and objectives may have been achieved. If the Committee determines that there will be a payment in respect of a Plan year, payment of awards due participants with respect to the Plan will be made after the close of such Plan year once the achievement of the performance goals have been determined. All awards are contingent upon the achievement of the stated performance goals for the Plan year and a determination by the Committee that a payment shall be distributed to participants in respect of such Plan year. All awards shall be in cash. There shall be deducted from each award under the Plan the amount of any tax required by governmental authority to be withheld and paid over by the Company to such government for the account of a participant entitled to an award. VII. CHANGE IN PARTICIPANT'S STATUS A) Any participant who is not an employee of the Company on December 31 of a Plan year forfeits his or her participation for such Plan year unless employment termination was due to the employee's death or retirement (other than pursuant to a deferred vested pension) under the Retirement Plan for Salaried Employees (or a comparable plan of a Goodyear subsidiary or affiliate). B) Any participant whose employment terminates during a Plan year due to retirement shall be entitled only to a pro rata portion of the target bonus for such Plan year, subject to the adjustment as provided for in Section IV hereof. Such pro rata bonus is calculated by multiplying the percentage of days actually worked of the year (ie, number of days worked divided by 365) by the target bonus. Notwithstanding the above, a participant who, after retirement, enters into a relationship either as an employee, consultant, agent or in any manner whatsoever with an entity that sells products in competition with products sold by Goodyear and its subsidiaries, forfeits the right to receive a distribution under this Plan in respect of such Plan year. In the event such participant enters into such a relationship with a competitor within six months from a distribution under this Plan during such Plan year, the participant agrees to refund to The Goodyear Tire & Rubber Company any such distribution the participant had received. X-10.1-2 3 C) Any participant whose employment status changes during a Plan year due to layoff, leave of absence or disability shall be entitled only to a pro rata portion of the target bonus, subject to the adjustment as provided for in Section IV hereof. Such pro rata bonus is calculated by multiplying the percentage of days actually worked during the Plan year (ie, number of days worked divided by 365) by the target bonus for such Plan year. D) A participant whose employment terminates during a Plan year due to death shall be entitled only to a pro rata portion of a target bonus for such Plan year and the target bonus shall not be adjusted under Section IV hereof. Such pro rata bonus is based on days actually worked during such Plan year and calculated in the same manner as if the participant had retired and distribution of the bonus shall be made to the participating employee's executors, administrators, or such other person or persons as shall, by specific bequest under the last will and testament of the participating employee, be entitled thereto. VIII. MISCELLANEOUS CONDITIONS The Plan and all participation therein shall be subject to the following conditions: A) For all purposes of the Plan, termination of a participant's employment shall be deemed to have occurred whenever he or she is no longer employed by the Company. B) Nothing in the Plan shall obligate the Company with respect to tenure of office or duration of employment of any participant or to provide for or continue participation in the Plan by any participant in the Plan for any Plan year in respect of any subsequent Plan year. C) All right, title and interest in the Plan shall be personal to the participant and not subject to voluntary or involuntary alienation, hypothecation, assignment or transfer, except that participation is subject to forfeiture as provided in Section VII hereof. D) The Committee shall have power finally to interpret any of the provisions of the Plan and to lay down any regulations not inconsistent herewith for its administration. E) Nothing in the Plan shall prevent or interfere with any recapitalization or reorganization of Goodyear or its merger or consolidation with any corporation. In any such case, the recapitalized, reorganized, merged, or consolidated company shall assume the obligations of Goodyear under the Plan or such modification hereof as, in the judgment of the Board of Directors, shall be necessary to adapt it to the changed situation and shall provide substantially equivalent benefits to the participants. F) Goodyear may terminate, suspend, amend, modify or otherwise act in respect of the Plan at any time and from time to time. X-10.1-3 EX-10.FF 3 EXHIBIT 10.FF 1 EXHIBIT 10.2 THE GOODYEAR TIRE & RUBBER COMPANY GRANT AGREEMENT PERFORMANCE EQUITY GRANT TOM TIRE 000-00-0000 Corporate Officer 3 Eagle Drive Akron, OH 12345 Dear Tom: The Directors of The Goodyear Tire & Rubber Company (the "Company") desire to encourage and facilitate ownership of the Company's Common Stock by key employees and to provide for additional compensation based on the appreciation of the Company's Common Stock, thereby providing incentive to promote the continued growth and success of the Company's business. Accordingly, the 1989 Goodyear Performance and Equity Incentive Plan was adopted effective April 10, 1989 (the "Plan"). A copy of the Plan is attached. At the meeting of the Compensation Committee of the Board of Directors, you were awarded a Performance Equity Grant (each Unit equivalent in value to one share of Common Stock of the Company) as follows: Date of Grant 1-9-96 Number of Equity Units Granted ------ Performance Period 1-1-96 through 12-31-98 The number of Performance Equity Grant Units specified above (the "Units") which you will earn at the end of the three-year Performance Period specified above (the "Performance Period") will be determined by and contingent upon the extent to which Performance Goals are achieved. The number of Units actually earned may be adjusted between 0 and 150% of the number of Units stated above, depending on the level of achievement of Performance Goals. Performance Units earned will be paid in cash and shares of the Common Stock of the Company at the rate of 50 percent in cash and 50 percent in shares for each unit earned in February, 1999 (unless you elect to defer payment). The Performance Goals and earn out criteria for the Performance Period for your Performance Equity Grant are described at Annex A. - -------------------------------------- For The Goodyear Tire & Rubber Company January 9, 1996 Receipt of this Grant Agreement acknowledged: Date: - --------------------------------------------- ------------------------ Grantee X-10.2-1 2 Grant Agreement (Cont'd) The Performance Equity Grant for the number of Units specified on the preceding page is granted to you under, and governed by the terms and conditions of, the Plan and this Grant Agreement. Your execution and return of the enclosed copy of this Grant Agreement acknowledging receipt of the Units granted herewith constitutes your agreement to, and acceptance of, all terms and conditions of the Plan and this Grant Agreement. You also agree that you have read and understand the provisions of the Plan, this Grant Agreement and Annex A. Units earned will be determined at the end of the three-year Performance Period and will be paid in cash and shares of Common Stock of the Company. Shares of the Common Stock of the Company and cash earned in respect of the Units, whether received immediately or deferred in whole or in part, will be subject to withholding taxes as appropriate. Any cash payment and certificates for shares of Common Stock of the Company earned will be deliverable to you or your agent, duly accredited to the satisfaction of the Company, at the principal office of the Company in Akron, Ohio, or at such other place acceptable to the Company as may be designated by you. All rights conferred upon you under the provisions of this Grant Agreement are personal to you and, except under the provisions of paragraph 14 of the Plan, no assignee, transferee or other successor in interest shall acquire any rights or interests whatsoever under this Grant Agreement, which is made exclusively for the benefit of you and the Company. As further consideration for the Units granted to you hereunder, you must remain in the continuous employ of the Company or one or more of its subsidiaries until December 31, 1997, the end of the Performance Period. Any Units earned will be prorated in the event of your death, Retirement (as defined in the Plan) or Disability (as defined in the Plan) or layoff prior to completion of the Performance Period. Any proration is based on the last date the participant worked. Nothing contained herein shall restrict the right of the Company or any of its subsidiaries to terminate your employment at any time, with or without cause. If you are entitled to a proration of units earned due to your retirement, disability or layoff prior to completion of the performance period, you will forfeit the right to receive any distribution or payment under this Grant if you enter into a relationship either as an employee, consultant, agent or in any manner whatsoever with an entity that sells products in competition with products sold by Goodyear and its subsidiaries. In the event you enter into such a relationship with a competitor within six months of a distribution or payment under this Grant, you agree to refund to Goodyear any such distribution or payment you received. Any notice to you under this Grant Agreement shall be sufficient if in writing and if delivered to you or mailed by registered mail directed to you at the address on record in the Executive Compensation Department. Any notice to the Company under this Grant Agreement shall be sufficient if in writing and if Grant delivered to the Chairman of the Board of the Company or mailed by registered mail directed to the Company for the attention of said officer at 1144 East Market Street, Akron, Ohio 44316-0001. Either you or the Company may, by written notice, change the address. X-10.2-2 3 ANNEX A PERFORMANCE GOALS Performance Goals are based on the aggregate earnings per share of Goodyear Common Stock for the period January 1, 1996 through December 31, 1998. MINIMUM PERFORMANCE GOAL FOR PAYMENT In order for there to be a distribution under this Grant, the aggregate earnings per share shall be at least $12.25 for the three-year period beginning January 1, 1996. PERFORMANCE UNIT DISTRIBUTION SCHEDULE Unit distributions are payable 50 percent in shares of the Company's Common Stock and 50 percent in cash. Aggregate Earnings % of Per Share Unit Distribution 1/1/96 -- 12/31/98 Based on Grant -------------------- ------------------ $14.25 150% 14.00 140 13.75 130 13.50 120 13.25 110 13.00 100 12.75 90 12.50 85 12.25 80 <12.25 0 X-10.2-3 EX-10.GG 4 EXHIBIT 10.GG 1 EXHIBIT 10.3 (PART I) THE GOODYEAR TIRE & RUBBER COMPANY INCENTIVE STOCK OPTION GRANT AGREEMENT TOM B TIRE 111-11-1111 Key Employee 1 Eagle Drive Akron, OH 12345 Dear Tom: The Directors of The Goodyear Tire & Rubber Company (the "Company") desire to encourage and facilitate ownership of the Company's Common Stock by key employees and to provide for additional compensation based on appreciation of the Company's Common Stock, thereby providing incentive to promote continued growth and success of the Company's business. Accordingly, the Goodyear 1989 Performance and Equity Incentive Plan (the "Plan") was adopted effective April 10, 1989. A copy of the Plan is attached. You have been granted Incentive Stock Options for the purchase of Common Stock as follows: Incentive Stock Option Grant 950000 Stock Option Plan 1989 Plan Date of Grant 01/09//96 Option Price per Share $00.00 Total Number of Shares Granted -0- Your option shares become exercisable as follows: ____on January 4, 1997 25% ____on January 4, 1999 75% ____on January 4, 1998 50% ____on January 4, 2000 100% - ---------------------------------- The Goodyear Tire & Rubber Company January 9, 1996 - ---------------------------------- ------------- Optionee Date X-10.3-1 2 ISO Grant Agreement (Cont'd) January 9, 1996 1. These Incentive Stock Options for the number of shares of Common Stock of the Company indicated on the preceding page (the "Options") are granted to you under and are governed by the terms and conditions of the Plan and this Grant Agreement. Your execution and return of the enclosed copy of page one of this Grant Agreement acknowledging receipt of the Options granted herewith constitutes your agreement to and acceptance of all terms and conditions of the Plan and this Grant Agreement. You also agree that you have read and understand this Grant Agreement. 2. You may exercise the Options granted pursuant to this Grant Agreement through (1) a cash payment in the amount of the full option exercise price of the shares being purchased (the "cash exercise"), (2) a payment in full shares of the Common Stock of the Company having a market value on the date of exercise equal to the full option exercise price of the shares being purchased (the "share swap exercise"), or (3) a combination of the cash exercise and share swap exercise methods. Any exercise of these Options shall be by written notice to the Company stating the number of shares to be purchased and the exercise method, accompanied with the payment, or proper proof of ownership if the share swap exercise method is used. You shall be required to meet the tax withholding obligations arising from any exercise of these Options in accordance with any procedures and rules adopted by the Compensation Committee of the Board (the "Committee"). 3. Certificates for shares purchased will be deliverable to you or your agent, duly accredited to the satisfaction of the Company, at the principal office of the Company in Akron, Ohio, or at such other place acceptable to the Company as may be designated by you. 4. As further consideration for the Options granted to you hereunder, you must remain in the continuous employ of the Company or one or more of its subsidiaries for a period up to the date or dates the Options become exercisable as set forth on page one of this Grant Agreement before you will be entitled to exercise the Options granted. The Options you have been granted shall not in any event be exercisable after your termination of employment except for Retirement, death, or Disability. 5. In the event of your Retirement, death or Disability (as defined in the Plan) during the exercise period on any date which is more than six (6) months after the Date of Grant specified on the first page of the Grant Agreement, the Options shall become immediately exercisable. In the event of your Retirement, the Options shall remain exercisable for the first three months following the date of your Retirement as Incentive Stock Options and an additional 6 years and 9 months as Non-Qualified Stock Options. In the event of your death, the Options may be exercised up to one year after death as described in paragraph 6 below. In the event of your Disability, the Options shall be exercisable by you during the then remaining portion of the aforesaid exercise period. 6. The Options terminate automatically and shall not be exercisable by you from and after the date on which you cease to be an employee of the Company or one of its subsidiaries for any reason other than your death, Retirement or Disability. In the event of your death during the exercise period, the Options may be exercised up to one year after date of death by the person or persons to whom your rights in the Options passed by your will or according to the laws of descent and distribution. Nothing contained herein shall restrict the right of the Company or any of its subsidiaries to terminate your employment at any time, with or without cause. 7. The Incentive Stock Options you have been granted shall not in any event be exercisable after the expiration of ten years from the Date of Grant, specified on the first page of this Grant Agreement, and to the extent not exercised shall terminate at the end of such ten-year period. 8. In the event you Retire or otherwise terminate your employment with the Company or a subsidiary and within 18 months after such termination date you accept employment with a competitor of the Company or a subsidiary, you may forfeit the benefits of the option grantedhereunder. If such a competitive situation occurs, the Committee, in its sole discretion, may require you to return to the Company the economic value of the stock option which you have X-10.3-2 3 ISO Grant Agreement (Cont'd) January 9, 1996 realized or obtained by your exercise of the option granted hereunder at any time during the period beginning on that date which is six months prior to the date of your termination of employment with the Company. Additionally, if you have retired from the Company, all stock options which are granted to you hereunder and which you have not exercised prior to your competitive engagement shall be automatically cancelled. 9. Each Option granted is not transferable by you otherwise than by will or the laws of descent and distribution, and is exercisable during your lifetime only by you. 10. All rights conferred upon you under the provisions of this Grant Agreement are personal and, except under the provisions of paragraph 14 of the Plan, no assignee, transferee or other successor in interest shall acquire any rights or interests whatsoever under this Grant Agreement, which is made exclusively for the benefit of you and the Company. 11. Any notice to you under this agreement shall be sufficient if in writing and if delivered to you or mailed to you at the address on record in the Executive Compensation Department. Any notice to the Company under this agreement shall be sufficient if in writing and if delivered to the Chairman of the Board of the Company or mailed by registered mail directed to the Company for the attention of said officer at 1144 East Market Street, Akron, Ohio 44316-0001. Either you or the Company may, by written notice, change the address. This agreement shall be construed and shall take effect in accordance with the laws of the State of Ohio. 12. Each Option may be exercised only at the times and to the extent, and is subject to all of the terms and conditions, set forth in this Grant Agreement, and in the Plan, including any rule or regulation adopted by the Committee. X-10.3-3 4 EXHIBIT 10.3 (PART II) THE GOODYEAR TIRE & RUBBER COMPANY NON-QUALIFIED STOCK OPTION AND GRANT AGREEMENT TOM B TIRE 111-11-1111 Key Employee 1 Eagle Drive Akron, OH 12345 The Directors of The Goodyear Tire & Rubber Company (the "Company") desire to encourage and facilitate ownership of the Company's Common Stock by key employees and to provide for additional compensation based on appreciation of the Company's Common Stock, thereby providing incentive to promote continued growth and success of the Company's business. Accordingly, the 1989 Goodyear Performance and Equity Incentive Plan (the "Plan") was adopted effective April 10, 1989. A copy of the Plan is attached. You have been granted Non-Qualified Stock Options for the purchase of Common Stock as follows: Stock Option Plan 1989 Plan Non-Qualified Stock Option Grant 960000 Date of Grant 01/09/96 Option Price $00.00 Total Number of Shares Granted -0- Your option shares become exercisable as follows: ____on January 9, 1997 25% ____on January 9, 1999 75% ____on January 9, 1998 50% ____on January 9, 2000 100% - ---------------------------------- The Goodyear Tire & Rubber Company January 9, 1996 - ---------------------------------- --------- Optionee Date X-10.3-4 5 ISO Grant Agreement (Cont'd) January 9, 1996 1. These Non-Qualified Stock Options for the number of shares of Common Stock of the Company indicated on the preceding page (the "Options") are granted to you under and are governed by the terms and conditions of the Plan and this Grant Agreement. Your execution and return of the enclosed copy of page one of this Grant Agreement acknowledging receipt of the Options granted herewith constitutes your agreement to and acceptance of all terms and conditions of the Plan and this Grant Agreement. You also agree that you have read and understand this Grant Agreement. 2. You may exercise the Options granted pursuant to this Grant Agreement through (1) a cash payment in the amount of the full option exercise price of the shares being purchased (the "cash exercise"), (2) a payment in full shares of the Common Stock of the Company having a market value on the date of exercise equal to the full option exercise price of the shares being purchased (the "share swap exercise"), or (3) a combination of the cash exercise and share swap exercise methods. Any exercise of these Options shall be by written notice to the Company stating the number of shares to be purchased and the exercise method, accompanied with the payment, or proper proof of ownership if the share swap exercise method is used. You shall be required to meet the tax withholding obligations arising from any exercise of these Options in accordance with any procedures and rules adopted by the Compensation Committee of the Board (the "Committee"). 3. Certificates for shares purchased will be deliverable to you or your agent, duly accredited to the satisfaction of the Company, at the principal office of the Company in Akron, Ohio, or at such other place acceptable to the Company as may be designated by you. 4. As further consideration for the Options granted to you hereunder, you must remain in the continuous employ of the Company or one or more of its subsidiaries for a period up to the date or dates the Options become exercisable as set forth on page one of this Grant Agreement before you will be entitled to exercise the Options granted. The Options you have been granted shall not in any event be exercisable after your termination of employment except for Retirement, death, or Disability. 5. In the event of your Retirement, death or Disability (as defined in the Plan) during the exercise period on any date which is more than six (6) months after the Date of Grant specified on the first page of the Grant Agreement, the Options shall become immediately exercisable. In the event of your Retirement, the Options shall remain exercisable for seven full years following the date of your Retirement. In the event of your death, the Options may be exercised up to one year after death as described in paragraph 6 below. In the event of your Disability, the Options shall be exercisable by you during the then remaining portion of the aforesaid exercise period. 6. The Options terminate automatically and shall not be exercisable by you from and after the date on which you cease to be an employee of the Company or one of its subsidiaries for any reason other than your death, Retirement or Disability. In the event of your death during the exercise period, the Options may be exercised up to one year after date of death by the person or persons to whom your rights in the Options passed by your will or according to the laws of descent and distribution. Nothing contained herein shall restrict the right of the Company or any of its subsidiaries to terminate your employment at any time, with or without cause. 7. The Non-Qualified Stock Options you have been granted shall not in any event be exercisable after the expiration of ten years from the Date of Grant, specified on the first page of this Grant Agreement, and to the extent not exercised shall terminate at the end of such ten-year period. 8.In the event you Retire or otherwise terminate your employment with the Company or a subsidiary and within 18 months after such termination date you accept employment with a competitor of the Company or a subsidiary, you may forfeit the benefits of the option granted hereunder. If such a competitive situation occurs, the Committee, in its sole discretion, may require you to return to the Company the economic value of the stock option which you have X-10.3-5 6 ISO Grant Agreement (Cont'd) January 9, 1996 realized or obtained by your exercise of the option granted hereunder at any time during the period beginning on that date which is six months prior to the date of your termination of employment with the Company. Additionally, if you have retired from the Company, all stock options which are granted to you hereunder and which you have not exercised prior to your competitive engagement shall be automatically cancelled. 9. Each Option granted is not transferable by you otherwise than by will or the laws of descent and distribution, and is exercisable during your lifetime only by you. 10. All rights conferred upon you under the provisions of this Grant Agreement are personal and, except under the provisions of paragraph 14 of the Plan, no assignee, transferee or other successor in interest shall acquire any rights or interests whatsoever under this Grant Agreement, which is made exclusively for the benefit of you and the Company. 11. Any notice to you under this agreement shall be sufficient if in writing and if delivered to you or mailed to you at the address on record in the Executive Compensation Department. Any notice to the Company under this agreement shall be sufficient if in writing and if delivered to the Chairman of the Board of the Company or mailed by registered mail directed to the Company for the attention of said officer at 1144 East Market Street, Akron, Ohio 44316-0001. Either you or the Company may, by written notice, change the address. This agreement shall be construed and shall take effect in accordance with the laws of the State of Ohio. 12. Each Option may be exercised only at the times and to the extent, and is subject to all of the terms and conditions, set forth in this Grant Agreement, and in the Plan, including any rule or regulation adopted by the Committee. X-10.3-6 7 EXHIBIT 10.3 (PART III) THE GOODYEAR TIRE & RUBBER COMPANY NON-QUALIFIED STOCK OPTION/TANDEM STOCK APPRECIATION RIGHTS GRANT AGREEMENT TOM TIRE 000-00-0000 Key Employee 1 Eagle Drive Akron, OH 12345 The Directors of The Goodyear Tire & Rubber Company (the "Company") desire to encourage and facilitate ownership of the Company's Common Stock by key employees and to provide for additional compensation based on appreciation of the Company's Common Stock, thereby providing incentive to promote continued growth and success of the Company's business. Accordingly, the 1989 Goodyear Performance and Equity Incentive Plan (the "Plan") was adopted effective April 10, 1989. A copy of the Plan is attached. You have been granted Non-Qualified Stock Options for the purchase of Goodyear Common Stock and tandem Stock Appreciation Rights as follows: Stock Option Plan 1989 Plan Non-Qualified Stock Option Grant 960000 Date of Grant 01/09/96 Option Price $00.00 Total Number of Shares Granted -0- The Company shall determine whether or not you may exercise the Stock Option or the SARs at the time you notify the Company of your intent to exercise all or part of this grant. Your option shares become exercisable as follows: ____on January 9, 1997 25% ____on January 9, 1999 75% ____on January 9, 1998 50% ____on January 9, 2000 100% - ---------------------------------- The Goodyear Tire & Rubber Company January 9, 1996 - ---------------------------------- --------- Optionee Date X-10.3-7 8 ISO Grant Agreement (Cont'd) January 9, 1996 1. These Non-Qualified Stock Options for the number of shares of Common Stock of the Company indicated on the preceding page (the "Options") and the Stock Appreciation Rights granted in tandem with the Options (the "SARs") are granted to you under and are governed by the terms and conditions of the Plan and this Grant Agreement. Your execution and return of the enclosed copy of this Grant Agreement acknowledging receipt of Options and SARs granted herewith constitutes your agreement to and acceptance of all terms and conditions of the Plan and this Grant Agreement, including a recognition of the Company's right to specify whether or not you may exercise either the stock options or the SARs at the time you notify the Company of your intent to exercise. You also agree that you have read and understand this Grant Agreement. 2. If the Company approves the exercise of a stock option, each exercise of the Options granted pursuant to this Grant Agreement shall be by written notice to the Company stating the number of shares of the Common Stock of the Company being purchased, together with a cash payment in the amount of the full option exercise price of such shares or payment in full shares of the Common Stock of the Company having a market value on the date of exercise equal to the full purchase price of the shares being purchased. Withholding tax obligations shall be satisfied upon any Option exercise. 3. If the Company approves the exercise of the SARs, written notice must be given to the Company stating the number of shares in the Options in respect of which the SARs are being exercised. In due course, you will receive payment in cash in an amount equal to the difference between the Fair Market Value (as defined in the Plan) of one share of the Common Stock of the Company on the date of exercise of the SARs and the Option Exercise Price per Share specified in respect of the Options times the number of shares in respect of which the SARs shall have been exercised. Such payment shall also be subject to reduction for withholding taxes. 4. Certificates for shares purchased will be deliverable to you or your agent, duly accredited to the satisfaction of the Company, at the principal office of the Company in Akron, Ohio, or at such other place acceptable to the Company as may be designated by you. 5. Your purchase of shares of Common Stock of the Company pursuant to the Options shall automatically reduce by a like number the shares subject to the SARs and, conversely, your exercise of any SARs shall automatically reduce by a like number the shares of the Common Stock available for purchase by you under the Options. 6. The Options and SARs you have been granted shall not in any event be exercis-able after the expiration of ten years from the Date of Grant specified on the first page of this Grant Agreement and, to the extent not exercised, shall terminate at the end of such ten-year period. 7. Each Option and SAR are not transferable by you otherwise than by will or the laws of descent and distribution, and are exercisable during your lifetime only by you. 8. All rights conferred upon you under the provisions of this Grant Agreement are personal and, except under the provisions of paragraph 14 of the Plan, no assignee, transferee or other successor in interest shall acquire any rights or interests whatsoever under this Grant Agreement, which is made exclusively for the benefit of you and the Company. 9. As further consideration for the Options and SARs granted to you hereunder, you must remain in the continuous employ of the Company or one or more of its subsidiaries for a period up to the date or dates they become exercisable as set forth on page one of this Grant Agreement before you will be entitled to exercise the Options granted. 10. In the event of your death, Retirement (as defined in the Plan) or Disability (as defined in the Plan) during the ten-year exercise period on any date which is more than six (6) months after the Date of Grant specified on the first page of this Grant Agreement, the Options and SARs shall become immediately exercisable and, except as provided below in the event of your death, shall be exercisable by you for seven (7) full years following the date of your Retirement X-10.3-8 9 ISO Grant Agreement (Cont'd) January 9, 1996 or Disability. In the event of your death during the ten-year exercise period, the Options and SARs may be exercised up to one year after date of death by the person or persons to whom your rights in the options passed by your will or according to the laws of descent and distribution. The Options and SARs terminate automatically and shall not be exercisable by you from and after the date on which you cease to be an employee of the Company or one of its subsidiaries for any reason other than your death, Retirement or Disability. Nothing contained herein shall restrict the right of the Company or any of its subsidiaries to terminate your employment at any time, with or without cause. 11. In the event you Retire or otherwise terminate your employment with the Company or a subsidiary and within 18 months after such termination date you accept employment with a competitor of the Company or a subsidiary, you may forfeit the benefits of the option or stock appreciation right granted hereunder. If such a competitive situation occurs, the Committee, in its sole discretion, may require you to return to the Company the economic value of the stock option or stock appreciation right which you have realized or obtained by your exercise of the option or stock appreciation right granted hereunder at any time during the period beginning on that date which is six months prior to the date of your termination of employment with the Company. Additionally, if you have retired from the Company, all stock options or stock appreciation rights which are granted to you hereunder and which you have not exercised prior to your competitive engagement shall be automatically cancelled. 12. In agreeing to acceptance of this grant, you clearly acknowledge that The Goodyear Tire & Rubber Company assumes no responsibility for any regulatory or tax consequences that arise from either the grant or exercise of the options or the SARs, whether they be the consequences of U.S. or foreign tax rules, legislation or tax treaties. 13. Prior to the exercise of an option or SAR, notice must be given to the Company of your intent to exercise. The Company will then advise you whether or not you may exercise a Stock Option or an SAR and upon receiving such advice you may then exercise the Stock Option or the SAR. 14. Any notice to you under this agreement shall be sufficient if in writing and if delivered to you or mailed to you at the address on record in the Executive Compen-sa-tion Department. Any notice to the Company under this agreement shall be sufficient if in writing and if delivered to the Chairman of the Board of the Company or mailed by registered mail directed to the Company for the attention of said officer at 1144 East Market Street, Akron, Ohio 44316-0001. Either you or the Company may, by written notice, change the address. 15. This agreement shall be construed and shall take effect in accordance with the laws of the State of Ohio. 16. Each Option and/or SAR may be exercised only at the times and to the extent, and is subject to all of the terms and conditions, set forth in this Grant Agreement, and in the Plan, including any rule or regulation adopted by the Committee. X-10.3-9 EX-10.HH 5 EXHIBIT 10.HH 1 EXHIBIT 10.4 AMENDMENT AGREEMENT THIS AMENDMENT AGREEMENT is made and entered into as of the 5th day of December, 1995, between THE GOODYEAR TIRE & RUBBER COMPANY, an Ohio corporation (the "Company") and STANLEY C. GAULT, who resides at 407 West Wayne Avenue, Wooster, Ohio ("Gault"). WHEREAS, the Company and Gault are parties to that certain Stock Purchase Agreement dated August 6, 1991, as amended (the "Agreement"); and WHEREAS, the Compensation Committee of the Board of Directors approved and directed the Company to enter into, and Gault agreed to the provisions of, this amendment to the Agreement on December 5, 1995, as described in the minutes of the meeting of the Compensation Committee held on that date; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Gault do hereby agree as follows: 1. Effective as of December 5, 1995, Section Two of the Agreement is amended by changing the date set forth in Section 2.1 from "through December 31, 1995" to "through December 31, 1996". 2. Effective as of December 5, 1995, Section Four of the Agreement is amended by changing: (a) the date set forth therein from "through December 31, 1995" to "through December 31, 1996" and (b) by deleting the balance of said section beginning with the clause "unless the shares". IN WITNESS WHEREOF, the parties have executed this Amendment Agreement effective on and as of the date first above written. THE GOODYEAR TIRE & RUBBER COMPANY By /s/ M. L. BURNS --------------------------------- M. L. Burns, Vice President Attest /s/ JAMES BOYAZIS ----------------------------- James Boyazis, Secretary /s/ STANLEY C. GAULT ----------------------------------- Stanley C. Gault X-10.4-1 EX-10.II 6 EXHIBIT 10.11 1 EXHIBIT 10.5 THE GOODYEAR TIRE & RUBBER COMPANY OUTSIDE DIRECTORS' EQUITY PARTICIPATION PLAN (AS ADOPTED FEBRUARY 2, 1996) 1. PURPOSE. The purpose of the Plan is to enable The Goodyear Tire & Rubber Company (the "Company") to (a) attract and retain outstanding individuals to serve as non-employee directors of the Company, (b) further align the interests of non-employee directors with the interests of the other shareholders of the Company by making the amount of the compensation of non-employee directors dependent in part on the value and appreciation over time of the Common Stock of the Company, and (c) permit each non-employee director to defer receipt of all or a portion of his or her annual retainer until after retirement from the Board of Directors of the Company. 2. DEFINITIONS. As used in the Plan, the following words and phrases shall have the meanings specified below: "ACCOUNT" means any of, and "ACCOUNTS" means all of, the Equity Participation Accounts and the Retainer Deferral Accounts maintained on the records of the Company for Participants. "ACCRUAL" means any dollar amount credited to an Account, including Special Accruals, Quarterly Accruals, Retainer Deferral Accruals, Dividend Equivalents and Interest Equivalents. "BENEFICIARY" means the person or persons designated by a Participant pursuant to Section 12. "BOARD" means the Board of Directors of the Company. "COMMITTEE" means the Compensation Committee of the Board. "COMMON STOCK" means the Common Stock, without par value, of the Company. "CONVERSION DATE" means, with respect to each Account of each Retired Outside Director, the later of (i) the first business day of the seventh month following the month during which such Retired Outside Director for any reason terminated his or her service as a member of the Board, or (ii) the fifth business day of the calendar year following the calendar year during which such Retired Outside Director for any reason terminated his or her service as a member of the Board. "DIVIDEND EQUIVALENT" means, with respect to each dividend payment date for the Common Stock, an amount equal to the cash dividend per share of Common Stock which is payable on such dividend payment date. "EQUITY PARTICIPATION ACCOUNT" means a bookkeeping account maintained by the Company for a Participant to which Quarterly Accruals and Dividend Equivalents are credited in respect of Outside Directors through the Conversion Date (and, with respect to each Outside Director serving as a Director on February 2, 1996, a Special Accrual will be credited) and Interest Equivalents are credited subsequent to the Conversion Date, which Account shall be denominated in Units until the Conversion Date and, thereafter, shall be denominated in dollars. "FAIR MARKET VALUE OF THE COMMON STOCK" 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 on the New York Stock Exchange Composite Transaction Tape on such date. X-10.5-1 2 "INTEREST EQUIVALENT" has the meaning assigned in Section 11(c). "OUTSIDE DIRECTOR" means and includes each person who, at the time any determination thereof is being made, is a member of the Board and who is not and never has been an employee of the Company or any subsidiary or affiliate of the Company. "PARTICIPANT" means and includes, at the time any determination thereof is being made, each Outside Director and each Retired Outside Director who has a balance in his or her Accounts. "RETAINER" means with respect to each Outside Director the retainer fee payable to such Outside Director by the Company, plus all meeting attendance fees payable by the Company to such Outside Director, in respect of a calendar quarter. "RETAINER DEFERRAL ACCOUNT" means a bookkeeping account maintained by the Company for a Participant to which Retainer Accruals and Dividend Equivalents are credited through the Conversion Date and Interest Equivalents are credited subsequent to the Conversion Date, which Account shall be denominated in Units until the Conversion Date and, thereafter, shall be denominated in dollars. "RETIRED OUTSIDE DIRECTOR" means an Outside Director who for any reason has terminated his or her service as a member of the Board and is entitled to receive distribution of the cash balance of his or her Account or Accounts as provided in Section 10. "PLAN" means The Goodyear Tire & Rubber Company Outside Directors' Equity Participation Plan, the provisions of which are set forth herein. "QUARTERLY ACCRUAL" has the meaning assigned in Section 7. "RETAINER DEFERRAL ACCRUAL" has the meaning assigned in Section 8. "SPECIAL ACCRUAL" has the meaning assigned in Section 7. "UNIT" means an equivalent to a hypothetical share of Common Stock, which is the denomination into which all dollar Accruals (other than Interest Equivalents) to any Account are to be translated. Upon the Accrual of any dollar amount to any Account on or prior to the Conversion Date in respect of such Account, such dollar amount shall be translated into Units (and fractions, if any, thereof) by dividing the dollar amount of such Accrual by the Fair Market Value of the Common Stock on the day on or as of which such Accrual to the Account is made or, if not made on a trading day, on the trading day next following the date the Accrual is made. Units, and the translation thereof from dollars, shall be calculated and recorded on the Accounts rounded to the fourth decimal place. "YEAR OF SERVICE" means, with respect to each Outside Director, the twelve month period commencing with the date of the individuals' election as an Outside Director or any anniversary thereof. 3. EFFECTIVE DATE. The Plan is adopted on, and is effective on and after, February 2, 1996. 4. ELIGIBILITY. Each person who serves as an Outside Director at any time subsequent to February 1, 1996 is eligible to participate in the Plan. 5. ADMINISTRATION. Except with respect to matters expressly reserved for action by the Board pursuant to the provisions of the Plan, the Plan shall be administered by the Committee, which shall have the exclusive authority except as aforesaid to take any action necessary or appropriate for the proper administration of the Plan, including the full power and authority to interpret the Plan and to adopt such rules, regulations and procedures consistent with the terms of the Plan as the Committee deems necessary or appropriate. The Committee's interpretation of the Plan, and all actions taken within the scope of its authority, shall be final and binding on the Company and the Participants. X-10.5-2 3 6. EQUITY PARTICIPATION ACCOUNTS. There shall be established and maintained by the Company an Equity Participation Account with respect to each Outside Director to which Accruals shall be made from time to time in accordance with the provisions of the Plan. 7. ACCRUALS TO EQUITY PARTICIPATION ACCOUNTS. (A) QUARTERLY ACCRUALS. On the first day of each calendar quarter, commencing April 1, 1996, the Company shall credit $2,000 to the Equity Participation Account of each Outside Director who is then a member of the Board and served as a member of the Board for the entire calendar quarter ended immediately prior to such day (each a "Quarterly Accrual"). (B) SPECIAL ACCRUALS. On February 2, 1996, the Company shall credit to the Equity Participation Account of each Outside Director then serving as a member of the Board a special, one-time credit (a "Special Accrual"), the amount of which shall be determined in respect of each such Outside Director in accordance with the following formula: N SP = [FRPA - FQC] / 1.01943 where, SP is the dollar amount of the Special Accrual in respect of a participating Outside Director at February 2, 1996; FRPA is the future value of an annuity at age 70 under the Retirement Plan for Outside Directors (as provided by Watson Wyatt and based on the UP-1984 mortality table) that would be needed to provide a lifetime annuity at age 70 assuming the benefit increases 3% per year starting in 1997. FQC is the future value of quarterly accruals, calculated on the value at age 70 of $2,000 quarterly accruals to the Equity Participation Account of the participating Outside Director starting April 1, 1996, assuming a compound annual growth rate of 8%. N is the number of full quarters until the annual meeting of shareholders of the Company next following the date the Outside Director attains age 70. (C) TRANSLATION OF ACCRUALS INTO UNITS. Each Accrual (other than Accruals of Interest Equivalents) to an Equity Participation Account shall be translated into Units by dividing the dollar amount of such Accrual by the Fair Market Value of the Common Stock on the day on or as of which such Accrual is made, or, if the date on or as of which such Accrual is made is not a trading day, on the next following trading day. Upon such translation of an Accrual into Units, the resulting number of Units shall be credited to the relevant Equity Participation Account (in lieu of the dollar amount of such Accrual) and such Accrual shall continue to be denominated in such number of Units until the Conversion Date for such Account, when the Units will be converted into a dollar amount equal to the product of (i) the number of Units credited to such Account on such Conversion Date, multiplied by (ii) the Fair Market Value of the Common Stock on such Conversion Date. 8. RETAINER DEFERRAL ACCOUNTS. Each Outside Director may, at his or her sole election, defer receipt of 25%, 50%, 75% or 100% of his or her Retainer payable in respect of and during any calendar year by electing to have such amount credited to his or her Retainer Deferral Account (herein referred to as a "Retainer Account Accrual"). Each deferral election, if any, by an Outside Director shall be (i) made annually, (ii) effective in respect of an entire calendar year, and (iii) made not later than June 30th of the year prior to the calendar year in respect of which such election is being made. The dollar amount of each Retainer Account Accrual shall be translated (in the manner specified in Section 7(C)) into Units on the date such Retainer Account Accrual is credited to the relevant Retainer Deferral Account, which shall be the day on which the payment of such portion of the Retainer would have been made absent the election of the Outside Director to defer the payment of all or a portion thereof. Upon such translation into Units, the resulting number of Units shall be credited to the relevant Retainer Deferral Account (in lieu of the dollar amount of such Accrual) and such Accrual shall continue to be denominated in such number of Units until the Conversion Date for such Account, when the Units will be converted into a dollar amount equal to the X-10.5-3 4 product of (i) the number of Units credited to such Retainer Deferral Account on such Conversion Date, multiplied by (ii) the Fair Market Value of the Common Stock on such Conversion Date. 9. DIVIDEND EQUIVALENTS. With respect to each Account and through the Conversion Date for such Account, on each date on which cash dividends are paid on shares of the Common Stock such Account shall be credited with one Dividend Equivalent for each Unit credited to such Account (and each fraction of a Unit shall be credited with a like fraction of a Dividend Equivalent) on such date. Dividend Equivalents (and fractions, if any, thereof) credited to each Account shall be automatically translated into Units by dividing the dollar amount of such Dividend Equivalents by the Fair Market Value of the Common Stock on the date the relevant Dividend Equivalent is accrued to such Account. The number of Units (and fraction, if any, thereof) resulting shall be credited to such Account (in lieu of the dollar amount of such Accrual) and such Accrual shall be denominated in Units until the Conversion Date. 10. ELIGIBILITY FOR BENEFITS. (A) EQUITY PARTICIPATION ACCOUNTS. Each Retired Outside Director shall be entitled to receive the balance of his or her Equity Participation Account in accordance with the provisions of Section 11 of the Plan, unless the Board of Directors acts to reduce the amount of, or to deny the payment of, the Equity Participation Account of such Retired Outside Director; provided, however, that the Board of Directors shall not have the authority to reduce the amount of, or to deny the payment of, the Equity Participation Account of any Outside Director who terminates his or her service on the Board of Directors if (i) prior to such termination of service, the Retired Outside Director either (x) had five or more Years of Service and had attained age 70, or (y) had ten or more Years of Service and had attained age 65, or (ii) such termination was due to the death of the Outside Director. Notwithstanding the foregoing, the Board may at any time deny the payment of, or reduce the amount of, the Equity Participation Account of any Participant if, in the opinion of the Board, such Participant has engaged in an act of misconduct or otherwise engaged in conduct contrary to the best interests of the Company. (B) RETAINER DEFERRAL ACCOUNTS. Each Retired Outside Director shall be entitled to receive the balance, if any, of his or her Retainer Deferral Account in accordance with Section 11 and the other applicable provisions of the Plan. 11. PAYMENT OF ACCOUNTS. (a) All distributions of Equity Participation Accounts and Retainer Deferral Accounts to Participants shall be made in cash. (b) In the case of each Retired Outside Director, the Units credited to his or her Equity Participation Account and Retainer Deferral Account, respectively, shall, on the Conversion Date for such Retired Outside Director, be converted to a dollar denominated amount by multiplying the number of Units in each of the Accounts by the Fair Market Value of the Common Stock on such Conversion Date. (c) From and after the Conversion Date until paid, the balance (expressed in dollars) of the Equity Participation Account, and, if any, of the Retainer Deferral Account, of each Retired Outside Director shall be credited at the end of each calendar month until paid with "Interest Equivalents", which shall be equal to one twelfth (1/12th) of the product of (x) the dollar balance of each such Account, multiplied by (y) the sum (expressed as a decimal to six places) of the rate equivalent to the prevailing annual yield of United States Treasury obligations having a maturity of ten years (or, if not exactly ten years, as close to ten years as possible without exceeding ten years) at the Conversion Date for such Accounts, plus one percent (1%). (d) The Accounts of each Retired Outside Director will be paid in ten (10) annual installments commencing on the fifth business day following the Conversion Date for such Accounts, and thereafter on each anniversary of such Conversion Date; each installment to be in an amount equal to the total dollar balance of such Accounts on the fifth business day prior to the date such annual installment is due and payable divided by the number of installments remaining (including the annual installment then being calculated for payment) to be paid. X-10.5-4 5 (e) The Committee may, in its sole discretion, elect to pay the Equity Participation Account or the Retainer Deferral Account, or both, of any Retired Outside Director in a lump sum or in fewer than ten installments. In the event that the Committee shall elect to make a lump sum payment of an Account of any Retired Outside Director (or to make payment thereof in fewer than ten annual installments), the payment of such lump sum shall be made (or such installments shall commence) on the fifth business day following the Conversion Date in respect of such Retired Outside Director or on such subsequent date or dates as the Committee shall determine. (f) In the event of the death of an Outside Director, the entire balance of his or her Accounts shall be eligible for payment, which shall be made in a lump sum on the fifth business day following the Conversion Date for such Accounts. (g) In the event of the death of a Retired Outside Director, the entire balance of his or her Account(s) shall be paid on the fifth business day following the Conversion Date for such Accounts (if it has not occurred at the date of death), or on the next occurring anniversary thereof. 12. DESIGNATION OF BENEFICIARY. A Participant may designate a person or persons (the "Beneficiary") to receive, after the Participant's death, any remaining benefits payable under the Plan. Such designation shall be made by the Participant on a form prescribed by the Committee. The Participant may at any time change or revise such designation by filing a new form with the Company. The person or persons named as beneficiary in the designation of beneficiary form duly completed and filed with the Company bearing the most recent date will be the Beneficiary. All payments due under the Plan after the death of a Participant shall be made to his or her Beneficiary, except that (i) if the Participant does not designate a Beneficiary or the Beneficiary predeceases the Participant, any remaining benefits payable under the Plan after the Participant's death shall be paid to the Participant's estate, and (ii) if the Beneficiary survives the Participant but dies prior to receiving the benefits payable under the Plan, the benefits under the Plan shall be paid to the Beneficiary's estate. 13. AMENDMENT AND TERMINATION. The Board may at any time, or from time to time, amend or terminate the Plan; provided, however, that no such amendment or termination shall reduce Plan benefits which accrued prior to such amendment or termination without the prior written consent of each person entitled to receive benefits under the Plan who is adversely affected by such action; and, provided further, that the Plan shall not be amended more frequently than once every six months, other than to comply with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules promulgated thereunder. 14. PLAN UNFUNDED, RIGHTS UNSECURED. The Plan is unfunded. Each Account under the Plan represents only a general contractual conditional obligation of the Company to pay in cash the balance thereof in accordance with the provisions of the Plan. 15. ASSIGNABILITY. All payments under the Plan shall be made only to the Participant or his or her duly designated Beneficiary (in the event of his or her death). Except pursuant to Section 12 or the laws of descent and distribution and except as may be required by law, the right to receive payments under the Plan may not be assigned or transferred by, and are not subject to the claims of creditors of, any Participant or his or her Beneficiary during his or her lifetime. 16. CHANGE IN THE COMMON STOCK. In the event of any stock dividend, stock split, recapitalization, merger, split-up, spin-off or other change affecting the Common Stock of the Company, the Units in each Account shall be adjusted in the same manner and proportion as the change to the Common Stock. X-10.5-5 6 17. QUARTERLY STATEMENTS OF ACCOUNTS - VALUATION. Each calendar quarter the Company will prepare and send to each Participant a statement reporting the status of his or her Account or Accounts as of the close of business on the last business day of the prior calendar quarter. To the extent an Account is denominated in Units, the value of the Units will be reported at the Fair Market Value of the Common Stock on the relevant valuation date. 18. NO OTHER RIGHTS. Neither the establishment of the Plan, nor any action taken thereunder, shall in any way obligate the Company to nominate an Outside Director for re-election or continue to retain an Outside Director on the Board or confer upon any Outside Director any other rights in respect of the Company. 19. SUCCESSORS OF THE COMPANY. The Plan shall be binding upon any successor to the Company, whether by merger, acquisition, consolidation or otherwise. 20. LAW GOVERNING. The Plan shall be governed by the laws of the State of Ohio. X-10.5-6 EX-11 7 EXHIBIT 11 1 EXHIBIT A (11) 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 for each of the three years ended December 31, 1995, 1994 and 1993, respectively:
(DOLLARS IN MILLIONS, EXCEPT PER SHARE) 1995 1994 1993 ----------- ----------- ------------- Primary: Net Income $611.0 $567.0 $387.8 Adjusted average number of common shares outstanding 153,949,022 153,133,492 149,895,685 Primary earnings per share $3.97 $3.70 $2.59 Fully Diluted: Net Income $611.0 $567.0 $387.8 Add after-tax interest expense applicable to 6.875% Convertible Debentures due 2003 -- -- 3.4 ----------- ----------- ------------- Adjusted Net Income $611.0 $567.0 $391.2 Adjusted average number of shares outstanding 154,215,273 153,133,492 151,773,777 Fully diluted earnings per share $3.96 $3.70 $2.58
The foregoing computations do not reflect any significant potentially dilutive effect Registrant's Preferred Stock Purchase Rights Plan could have in the event such Rights become exercisable and any shares of either Series A Preferred Stock or Common Stock of Registrant are issued upon the exercise of such Rights. Reference is made to the Note 18, captioned "Preferred Stock Purchase Rights Plan", in the Notes to Financial Statements set forth in Item 8 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995, at page 49. X-11-1 EX-21 8 EXHIBIT 21 1 EXHIBIT B (21) SUBSIDIARIES OF THE REGISTRANT (1)(2)(3) The subsidiary companies of The Goodyear Tire & Rubber Company at March 15, 1996, and the places of incorporation or organization thereof, are:
Place of Incorporation Name of Subsidiary or Organization ------------------ --------------- All American Pipeline Company Texas Belt Concepts of America, Inc. Delaware Brad Ragan, Inc North Carolina Celeron Corporation Delaware Celeron Gathering Corporation Delaware Celeron Trading & Transportation Company Delaware Cosmoflex, Inc. Delaware Divested Atomic Corporation Delaware Divested Companies Holding Company Delaware Divested Litchfield Park Properties, Inc. Arizona Goodyear International Corporation Delaware The Goodyear Rubber Plantations Company Ohio Goodyear Western Hemisphere Corporation Delaware Lee Tire & Rubber Company Ohio Murphy's Inc., Sales and Service California Wingfoot Corporation Delaware Wingfoot Ventures Seven Inc. Delaware Wingfoot Ventures Eight Inc. Delaware Wingfoot Ventures Nine Inc. Delaware Wingfoot Ventures Ten Inc. Delaware Wingfoot Ventures Eleven Inc. Delaware Compania Anonima Goodyear de Venezuela Venezuela Compania Goodyear del Peru, S.A. Peru Companhia Goodyear do Brasil Produtos de Borracha Ltda Brazil Compania Hulera Goodyear--Oxo, S.A. de C.V. Mexico Corporacion Industriales Mercurio, S.A. de C.V. Mexico Deutsche Goodyear Holdings GmbH Germany Deutsche Goodyear GmbH Germany Goodyear Australia Limited Australia Goodyear Canada Inc. Canada Goodyear Chemicals, Europe S.A. France Goodyear Dalian Ltd. People's Republic of China Goodyear de Chile S.A.I.C. Chile Goodyear de Colombia S.A. Colombia Goodyear Broker's Limited Bermuda Goodyear Espanola S.A. Spain Goodyear Export, S.A. Bermuda Goodyear Export Sales Corporation Barbados Goodyear France (Pneumatiques) S.A. France Goodyear Finance Holding S.A. Luxembourg Goodyear Great Britain Limited England Goodyear Hellas S.A.I.C. Greece Goodyear Holding Co. Venezuela
X-21-1 2
Place of Incorporation Name of Subsidiary or Organization ------------------ --------------- Goodyear India Limited India Goodyear Italiana S.p.A. Italy Goodyear Jamaica Limited Jamaica Goodyear Lastikleri Turk Anonim Sirketi Turkey Goodyear Malaysia Berhad Malaysia Goodyear Maroc S.A. Morocco Goodyear (Nederland) B.V. Netherlands Goodyear New Zealand, Ltd. New Zealand The Goodyear Orient Company Pte Limited Singapore Goodyear Portuguesa, Limited Portugal Goodyear Philippines Inc. Philippines Goodyear Qingdao Engineered Elastomers Company Ltd. People's Republic of China Goodyear S.A. France Goodyear S.A. Luxembourg Goodyear Singapore Pte Limited Singapore Goodyear (Suisse), S.A. Switzerland Goodyear Taiwan Limited Republic of China Goodyear (Thailand) Limited Thailand Goodyear Zimbabwe (Private) Limited Zimbabwe Gran Industria de Neumaticos Centroamericana, S.A. Guatemala Granford Manufacturing, Inc. Canada Gummiwerke Fulda GmbH Germany Neumaticos Goodyear S.A. Argentina Nippon Goodyear Kabushiki Kaisha Japan Philippine Rubber Project Company, Inc. Philippines P.T. Goodyear Indonesia Indonesia P.T. Goodyear Sumatra Plantations Indonesia S.A. Goodyear N.V. Belgium Svenska Goodyear Aktiebolag Sweden - --------------- (1) Each of the 72 subsidiaries named in the foregoing list conducts its business under its corporate name and, in a few instances, under a shortened form of its corporate name or in combination with a trade name. (2) Each of the 72 subsidiaries named in the foregoing list is directly or indirectly wholly-owned by Registrant, except that in respect of each of the following subsidiaries Registrant owns the indicated percentage of such subsidiary's equity capital: Brad Ragan, Inc. 74.5%; Compania Goodyear del Peru S.A., 78%; Goodyear Dalian Ltd., 75%; Goodyear India Limited, 59.9%; Goodyear Jamaica Limited, 60%; Goodyear Lastikleri Turk Anonim Sirketi, 50.8%; Goodyear Malaysia Berhad, 51%; Goodyear Maroc S.A., 55%; Goodyear Qingdao Engineered Elastomers Company Ltd., 60%; Goodyear Taiwan Limited, 75.5%; Goodyear (Thailand) Limited, 53.5%; Gran Industria de Neumaticos Centroamericana, S.A., 75.8%; P.T. Goodyear Indonesia, 85%; and Goodyear Philippines Inc., 69%. (3) In accordance with paragraph (ii) of Part 22 of Item 601(b) of Regulation S-K, the names of approximately 84 subsidiaries have been omitted from the foregoing list. The unnamed subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary, as defined in the applicable regulations.
X-21-2 EX-23 9 EXHIBIT 23 1 EXHIBIT C (23) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 33-8111) and in the Registration Statements on Forms S-8 (Nos. 33-65187, 33-65185, 33-65183, 33-65181, 33-31530, 33-17963, 2-79437 and 2-47905) of The Goodyear Tire & Rubber Company of our report dated February 1, 1996 appearing on page 30 of this Form 10-K. /s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Cleveland, Ohio March 20, 1996 X-23-1 EX-24 10 EXHIBIT 24 1 EXHIBIT D (24) THE GOODYEAR TIRE & RUBBER COMPANY POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of THE GOODYEAR TIRE & RUBBER COMPANY, a corporation organized and existing under the laws of the State of Ohio (the "Company"), hereby constitute and appoint ROBERT W. TIEKEN, C. THOMAS HARVIE, GEORGE E. STRICKLER, RICHARD W. HAUMAN and JAMES BOYAZIS, and each of them, their true and lawful attorneys-in-fact and agents, each one of them with full power and authority to sign the names of the undersigned directors to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for its fiscal year ended December 31, 1995, and to any and all amendments, supplements and exhibits thereto and any other instruments filed in connection therewith; provided, however, that said attorneys-in-fact shall not sign the name of any director unless and until the Annual Report shall have been duly executed by the officers of the Company then serving as the chief executive officer of the Company, the principal financial officer of the Company and the principal accounting officer of the Company; and each of the undersigned hereby ratifies and confirms all that the said attorneys-in-fact and agents, or any one of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have subscribed these presents this 9th day of January, 1996. /s/ John G. Breen /s/ Gertrude G. Michelson - --------------------------------- ------------------------------------- John G. Breen, Director Gertrude G. Michelson, Director /s/ William E. Butler /s/ Steven A. Minter - --------------------------------- ------------------------------------- William E. Butler, Director Steven A. Minter, Director /s/ Thomas H. Cruikshank /s/ Agnar Pytte - --------------------------------- ------------------------------------- Thomas H. Cruikshank, Director Agnar Pytte, Director /s/ Stanley C. Gault /s/ George H. Schofield - --------------------------------- ------------------------------------- Stanley C. Gault, Director George H. Schofield, Director /s/ William J. Hudson, Jr. /s/ William C. Turner - --------------------------------- ------------------------------------- William J. Hudson, Jr., Director William C. Turner, Director X-24-1 EX-27 11 EXHIBIT 27 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 This schedule contains summary financial information extracted from the Consolidated Statement of Income and the Consolidated Balance Sheet and is qualified in its entirety by reference to such financial statements: 1,000,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 268 0 1,671 56 1,765 3,842 9,350 4,789 9,790 2,736 1,320 154 0 0 3,128 [TOTAL-LIABILITIES-AND-EQUITY] 9,790 13,166 13,166 10,094 10,094 0 0 135 926 315 611 0 0 0 611 4.02 0.00 This schedule shall not be deemed filed for purposes of Section 11 of the Securities Act or Section 18 of the Securities Exchange Act.
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