The Goodyear Tire & Rubber Company 10-K
UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2007
Commission File
Number: 1-1927
THE
GOODYEAR TIRE & RUBBER COMPANY
(Exact name of Registrant as
specified in its charter)
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Ohio
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34-0253240
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1144 East Market Street, Akron, Ohio
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44316-0001
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(Address of principal executive
offices)
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(Zip Code)
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Registrants
telephone number, including area code:
(330) 796-2121
Securities
registered pursuant to Section 12(b) of the Act:
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Name of
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Each Exchange
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On Which
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Title of Each Class
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Registered
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Common Stock, Without Par Value
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New York Stock Exchange
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Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.
Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act.
Yes o No þ
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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check One):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Act).
Yes o No þ
The aggregate market value of the common stock held by
nonaffiliates of the registrant, computed by reference to the
last sales price of such common stock as of the closing of
trading on June 29, 2007, was approximately $7,296,666,000.
Shares of
Common Stock, Without Par Value, outstanding at
January 31, 2008:
DOCUMENTS
INCORPORATED BY REFERENCE:
Portions of the Companys Proxy Statement for the Annual
Meeting of Shareholders to be held on April 8, 2008 are
incorporated by reference in Parts II and III.
THE
GOODYEAR TIRE & RUBBER COMPANY
Annual Report on
Form 10-K
For the Fiscal Year Ended December 31, 2007
Table of Contents
PART I.
BUSINESS
OF GOODYEAR
The Goodyear Tire & Rubber Company (the
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 terms Goodyear, Company and
we, us or our wherever used
herein refer to the Company together with all of its
consolidated domestic and foreign subsidiary companies, unless
the context indicates to the contrary.
We are one of the worlds leading manufacturers of tires,
engaging in operations in most regions of the world. Our
2007 net sales were approximately $20 billion, and we
had net income in 2007 of $602 million, of which
$139 million represents income from continuing operations.
Together with our U.S. and international subsidiaries and
joint ventures, we develop, manufacture, market and distribute
tires for most applications. We also manufacture and market
rubber-related chemicals for various applications. We are one of
the worlds largest operators of commercial truck service
and tire retreading centers. In addition, we operate more than
1,800 tire and auto service center outlets where we offer our
products for retail sale and provide automotive repair and other
services. We manufacture our products in 64 manufacturing
facilities in 25 countries, including the United States, and we
have marketing operations in almost every country around the
world. We employ approximately 72,000 associates worldwide.
AVAILABLE
INFORMATION
We make available free of charge on our website,
http://www.goodyear.com,
our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those reports as soon as reasonably
practicable after we file or furnish such reports to the
Securities and Exchange Commission (the SEC). The
information on our website is not a part of this Annual Report
on
Form 10-K.
RECENT
DEVELOPMENTS
New
Strategic Business Unit
Effective February 1, 2008, we formed a new strategic
business unit, Europe, Middle East and Africa
(EMEA), by combining our former European Union and
Eastern Europe, Middle East and Africa business units. The new
EMEA strategic business unit will be our largest in terms of
geography and our second largest, after North American Tire, in
terms of annual net sales. Annual combined net sales for the two
former business units were approximately $7.2 billion for
the year ended December 31, 2007. The financial results
included herein are presented on the basis of the five operating
segments in place at December 31, 2007. We will reflect the
new segment presentation coincident with the first quarter of
2008, and all prior segment reporting will be restated to
reflect this combination.
Note
Redemption
On February 1, 2008, we issued notices of redemption to the
holders of our $650 million senior secured notes due 2011.
As provided in the notices to the holders, on March 3,
2008, we will redeem $450 million in aggregate principal
amount of our 11% senior secured notes due 2011 at a
redemption price of 105.5% of the principal amount thereof and
$200 million in aggregate principal amount of our floating
rate senior secured notes due 2011 at a redemption price of 104%
of the principal amount thereof, plus in each case accrued and
unpaid interest to the redemption date.
Exchange
Offer for Convertible Notes
On November 6, 2007, we commenced an offer to exchange our
outstanding 4% convertible senior notes for a cash payment
and shares of our common stock. The exchange offer allowed
holders of convertible notes to receive the same number of
shares of our common stock as they would have received upon
conversion of the convertible notes
1
in accordance with their existing terms, a cash payment of
$48.30 for each $1,000 in principal amount of convertible notes,
and accrued and unpaid interest. The exchange offer was
consummated on December 10, 2007 and resulted in the
issuance of approximately 28.7 million shares of common
stock, a total cash payment, including accrued and unpaid
interest, of approximately $23 million, and a reduction of
debt of approximately $346 million.
DESCRIPTION
OF GOODYEARS BUSINESS
General
Segment Information
For the year ended December 31, 2007, we operated our
business through five operating segments representing our
regional tire businesses: North American Tire; European Union
Tire; Eastern Europe, Middle East and Africa Tire (Eastern
Europe Tire); Latin American Tire; and Asia Pacific Tire.
As a result of our sale of substantially all of our Engineered
Products business on July 31, 2007, we have reported
results of that segment as discontinued operations.
Financial
Information About Our Segments
Financial information related to our operating segments for the
three year period ended December 31, 2007 appears in the
Note to the Consolidated Financial Statements No. 16,
Business Segments.
General
Information Regarding Our Segments
Our principal business is the development, manufacture,
distribution and sale of tires and related products and services
worldwide. We manufacture and market numerous lines of rubber
tires for:
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automobiles
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trucks
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buses
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aviation
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motorcycles
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farm implements
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earthmoving equipment
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industrial equipment, and
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various other applications.
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In each case, our tires are offered for sale to vehicle
manufacturers for mounting as original equipment
(OE) and in replacement markets worldwide. We
manufacture and sell tires under the Goodyear brand, the Dunlop
brand, the Kelly brand, the Fulda brand, the Debica brand, the
Sava brand and various other Goodyear owned house
brands, and the private-label brands of certain customers. In
certain geographic areas we also:
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retread truck, aviation and heavy equipment tires,
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manufacture and sell tread rubber and other tire retreading
materials,
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provide automotive repair services and miscellaneous other
products and services, and
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manufacture and sell flaps for truck tires and other types of
tires.
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Our principal products are new tires for most applications.
Approximately 88.6% of our sales in 2007 were for new tires,
which is consistent with 88.6% in both 2006 and 2005. The
percentages of each segments sales attributable to new
tires during the periods indicated were:
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Year Ended December 31,
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Sales of New Tires By
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2007
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2006
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2005
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North American Tire
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87.1
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%
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87.4
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%
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87.8
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%
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European Union Tire
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90.7
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89.7
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89.5
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Eastern Europe Tire
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93.9
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95.3
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95.0
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Latin American Tire
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90.4
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91.6
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92.2
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Asia Pacific Tire
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80.5
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81.0
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80.7
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2
Each segment exports tires to other segments. The financial
results of each segment exclude sales of tires exported to other
segments, but include operating income derived from such
transactions. The financial results of each segment include
sales and operating income derived from the sale of tires
imported from other segments. Sales to unaffiliated customers
are attributed to the segment that makes the sale to the
unaffiliated customer.
Goodyear does not include motorcycle, all terrain vehicle or
consigned tires in reporting tire unit sales.
Tire unit sales for each segment during the periods indicated
were:
GOODYEARS
ANNUAL TIRE UNIT SALES SEGMENT
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Year Ended December 31,
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(In millions of tires)
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2007
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2006
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2005
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North American Tire
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81.3
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90.9
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101.9
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European Union Tire
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59.4
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63.5
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64.3
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Eastern Europe Tire
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20.2
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20.0
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19.7
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Latin American Tire
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21.8
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21.2
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20.4
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Asia Pacific Tire
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19.0
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19.4
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20.1
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Goodyear tire units
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201.7
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215.0
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226.4
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Our replacement and OE tire unit sales during the periods
indicated were:
GOODYEARS
ANNUAL TIRE UNIT SALES REPLACEMENT AND OE
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Year Ended December 31,
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(In millions of tires)
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2007
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2006
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2005
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Replacement tire units
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141.9
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152.0
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162.0
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OE tire units
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59.8
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63.0
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64.4
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Goodyear tire units
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201.7
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215.0
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226.4
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New tires are sold under highly competitive conditions
throughout the world. On a worldwide basis, we have two major
competitors: Bridgestone (based in Japan) and Michelin (based in
France). Other significant competitors include Continental,
Cooper, Hankook, Kumho, Pirelli, Toyo, Yokohama and various
regional tire manufacturers.
We compete with other tire manufacturers on the basis of product
design, performance, price, reputation, warranty terms, customer
service and consumer convenience. Goodyear brand and Dunlop
brand tires enjoy a high recognition factor and have a
reputation for performance and quality. Kelly brand, Debica
brand, Sava brand and various other house brand tire lines
offered by us, and tires manufactured and sold by us to private
brand customers, compete primarily on the basis of value and
price.
We do not consider our tire businesses to be seasonal to any
significant degree.
Global
Alliance
In 1999, we entered into a global alliance with Sumitomo Rubber
Industries, Ltd. (SRI). Under the global alliance
agreements, we acquired 75%, and SRI acquired 25%, of Goodyear
Dunlop Tires Europe B.V., a Netherlands holding company.
Concurrently, the holding company acquired substantially all of
SRIs tire businesses in Europe and most of our tire
businesses in Europe. We also acquired 75%, and SRI acquired
25%, of Goodyear Dunlop Tires North America, Ltd., a holding
company that purchased SRIs tire manufacturing operations
in North America and certain of its related tire sales and
distribution operations. The global alliance involved other
transactions, including our acquisition of 100% of the balance
of SRIs Dunlop Tire replacement distribution and sales
operations in North America. In Japan, we own 25%, and SRI owns
75%, of two companies, one for the sale of Goodyear-brand
passenger and truck tires in the Japanese replacement market and
the other for the sale of Goodyear-brand and Dunlop-brand tires
to vehicle manufacturers in Japan. We also own 51%, and SRI owns
49%, of a company that coordinates and disseminates both
commercialized tire technology and non-commercialized technology
among Goodyear and SRI, the joint ventures and their respective
affiliates, and we own 80%, and SRI owns 20%, of a
3
global purchasing company. The global alliance agreements also
provided for the investment by Goodyear and SRI in the common
stock of the other.
North
American Tire
North American Tire, our largest segment in terms of revenue,
develops, manufactures, distributes and sells tires and related
products and services in the United States and Canada. North
American Tire manufactures tires in eight plants in the United
States and two plants in Canada. Certain Dunlop brand related
businesses of North American Tire are conducted by Goodyear
Dunlop Tires North America, Ltd., which is 75% owned by Goodyear
and 25% owned by SRI.
Tires. North American Tire manufactures
and sells tires for automobiles, trucks, motorcycles, buses,
earthmoving equipment, commercial and military aviation and
industrial equipment, and for various other applications.
Goodyear brand radial passenger tire lines sold in the United
States and Canada are Assurance, including Assurance featuring
ComforTred Technology and TripleTred Technology for the luxury
market; Eagle, including Eagle featuring ResponsEdge Technology
for the high performance market, and Run on Flat extended
mobility technology (EMT) tires. The major lines of Goodyear
brand radial tires offered in the United States and Canada for
sport utility vehicles and light trucks are Wrangler and
Fortera, including Fortera featuring TripleTred Technology and
SilentArmor Technology. Goodyear also offers Dunlop brand radial
passenger tire lines including Signature and SP Sport
performance tires, and Dunlop brand radials for light trucks
such as the Rover and Grandtrek lines. Additionally, North
American Tire also manufactures and sells several lines of Kelly
brand, Republic brand, Remington brand and Fierce brand, as well
as house and private brand radial passenger and light truck
tires in the United States and Canada.
A full line of Goodyear brand all-steel cord and belt
construction medium radial truck tires, the Unisteel series, is
manufactured and sold for various applications, including long
haul highway use and off-road service. In addition, various
lines of Dunlop brand, Kelly brand, and other house brand radial
truck tires are sold in the United States and Canada.
Related
Products and
Services. North
American Tire also:
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retreads truck, aviation and heavy equipment tires, primarily as
a service to its commercial customers,
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manufactures tread rubber and other tire retreading materials
for trucks, heavy equipment and aviation,
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provides automotive maintenance and repair services at
approximately 815 owned retail outlets,
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provides trucking fleets with new tires, retreads, mechanical
service, preventative maintenance and roadside assistance from
185 Goodyear operated Wingfoot Commercial Centers,
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sells automotive repair and maintenance items, automotive
equipment and accessories and other items to dealers and
consumers,
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sells chemical products to Goodyears other business
segments and to unaffiliated customers, and
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provides miscellaneous other products and services.
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Markets
and Other Information
North American Tire distributes and sells tires throughout the
United States and Canada. Tire unit sales to replacement
customers and to OE customers served by North American Tire
during the periods indicated were:
NORTH
AMERICAN TIRE UNIT SALES REPLACEMENT AND
OE
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Year Ended December 31,
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(In millions of tires)
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2007
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2006
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2005
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Replacement tire units
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55.7
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61.6
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71.2
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OE tire units
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25.6
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29.3
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30.7
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Total tire units
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81.3
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90.9
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101.9
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North American Tire is a major supplier of tires to most
manufacturers of automobiles, motorcycles, trucks and aircraft
that have production facilities located in North America.
4
North American Tires primary competitors are Bridgestone
and Michelin. Other significant competitors include Continental,
Cooper and several Asian manufacturers.
Goodyear brand, Dunlop brand and Kelly brand tires are sold in
the United States and Canada through several channels of
distribution. The principal channel for Goodyear brand tires is
a large network of independent dealers. Goodyear brand, Dunlop
brand and Kelly brand tires are also sold to numerous national
and regional retail marketing firms in the United States. North
American Tire also operates approximately 1,000 retail outlets
(including auto service centers, commercial tire and service
centers and leased space in department stores) under the
Goodyear name or under the Wingfoot Commercial Tire Systems,
Allied or Just Tires trade styles. Several lines of house brand
tires and private label brand tires are sold to independent
dealers, national and regional wholesale marketing organizations
and various other retail marketers.
We are subject to regulation by the National Highway Traffic
Safety Administration (NHTSA), which has established
various standards and regulations applicable to tires sold in
the United States for highway use. NHTSA has the authority to
order the recall of automotive products, including tires, having
safety defects related to motor vehicle safety. In addition, the
Transportation Recall Enhancement, Accountability, and
Documentation Act (the TREAD Act) imposes numerous
requirements with respect to tire recalls. The TREAD Act also
requires tire manufacturers to, among other things, remedy tire
safety defects without charge for five years and comply with
revised and more rigorous tire standards.
European
Union Tire
European Union Tire, our second largest segment in terms of
revenue, develops, manufactures, distributes and sells tires for
automobiles, motorcycles, trucks, farm implements and
construction equipment in Western Europe, exports tires to other
regions of the world and provides related products and services.
European Union Tire manufactures tires in 11 plants in England,
France, Germany and Luxembourg. Substantially all of the
operations and assets of European Union Tire are owned and
operated by Goodyear Dunlop Tires Europe B.V., a 75% owned
subsidiary of Goodyear that is 25% owned by SRI. European Union
Tire:
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manufactures and sells Goodyear brand, Dunlop brand and Fulda
brand and other house brand passenger, truck, motorcycle, farm
and heavy equipment tires,
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sells Debica brand and Sava brand passenger, truck and farm
tires manufactured by Eastern Europe Tire,
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sells new aviation tires, and manufactures and sells retreaded
aviation tires,
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provides various retreading and related services for truck and
heavy equipment tires, primarily for its commercial truck tire
customers,
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offers automotive repair services at owned retail
outlets, and
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provides miscellaneous related products and services.
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Markets
and Other Information
European Union Tire distributes and sells tires throughout
Western Europe. Replacement and OE tire unit sales for European
Union Tire during the periods indicated were:
EUROPEAN
UNION TIRE UNIT SALES REPLACEMENT AND OE
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Year Ended December 31,
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(In millions of tires)
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2007
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2006
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2005
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Replacement tire units
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41.6
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46.0
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46.0
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OE tire units
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17.8
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17.5
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18.3
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Total tire units
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59.4
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63.5
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64.3
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European Union Tire is a significant supplier of tires to most
manufacturers of automobiles, trucks and farm and construction
equipment located in Western Europe.
European Union Tires primary competitor in Western Europe
is Michelin. Other significant competitors include Bridgestone,
Continental, Pirelli, several regional tire producers and
imports from other regions, primarily Eastern Europe and Asia.
5
Goodyear brand and Dunlop brand tires are sold in several
replacement markets served by European Union Tire through
various channels of distribution, principally independent
multi-brand tire dealers. In some markets, Goodyear brand tires,
as well as Dunlop brand, Fulda brand, Debica brand and Sava
brand tires, are distributed through independent dealers,
regional distributors and retail outlets, of which approximately
250 are owned by Goodyear.
Eastern
Europe, Middle East And Africa Tire
Our Eastern Europe, Middle East and Africa Tire segment
manufactures and sells passenger, truck, farm and construction
equipment tires in Eastern Europe, the Middle East and Africa.
Eastern Europe Tire manufactures tires in five plants in Poland,
Slovenia, South Africa and Turkey. Eastern Europe Tire:
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maintains sales operations in most countries in Eastern Europe
(including Russia), the Middle East and Africa,
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exports tires for sale in Western Europe, North America and
other regions of the world,
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provides related products and services in certain markets,
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manufactures and sells Goodyear brand, Debica brand, Sava brand
and Fulda brand tires and sells Dunlop brand tires manufactured
by European Union Tire,
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sells new and retreaded aviation tires,
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provides various retreading and related services for truck and
heavy equipment tires,
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sells automotive parts and accessories, and
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provides automotive repair services at owned retail outlets.
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Markets
and Other Information
Eastern Europe Tire distributes and sells tires in most
countries in Eastern Europe, the Middle East and Africa.
Replacement and OE tire unit sales by Eastern Europe Tire during
the periods indicated were:
EASTERN
EUROPE TIRE UNIT SALES REPLACEMENT AND OE
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Year Ended December 31,
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(In millions of tires)
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2007
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2006
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2005
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Replacement tire units
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17.2
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16.4
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15.8
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OE tire units
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3.0
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3.6
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3.9
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Total tire units
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20.2
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20.0
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19.7
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Eastern Europe Tire has a significant share of each of the
markets it serves and is a significant supplier of tires to
manufacturers of automobiles, trucks, and farm and construction
equipment in Poland, South Africa and Turkey. Its major
competitors are Bridgestone, Continental, Michelin and Pirelli.
Other competition includes regional and local tire producers and
imports from other regions, primarily Asia.
Goodyear brand tires are sold by Eastern Europe Tire in the
various replacement markets primarily through independent tire
dealers and wholesalers who sell several brands of tires. In
some countries, Goodyear brand, Dunlop brand, Fulda brand,
Debica brand and Sava brand tires are sold through regional
distributors and multi-brand dealers. In the Middle East and
most of Africa, tires are sold primarily to regional
distributors for resale to independent dealers. In South Africa
and sub-Saharan Africa, tires are also sold through a chain of
approximately 160 retail stores operated by Goodyear primarily
under the trade name Trentyre.
Latin
American Tire
Our Latin American Tire segment manufactures and sells
automobile, truck and farm tires throughout Central and South
America and in Mexico, sells tires to various export markets,
retreads and sells commercial truck, aviation
6
and heavy equipment tires, and provides other products and
services. Latin American Tire manufactures tires in six
facilities in Brazil, Chile, Colombia, Peru and Venezuela.
Latin American Tire manufactures and sells several lines of
passenger, light and medium truck and farm tires. Latin American
Tire also:
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manufactures and sells pre-cured treads for truck tires,
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retreads, and provides various materials and related services
for retreading, truck and aviation tires,
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manufactures other products, including off-the-road tires,
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manufactures and sells new aviation tires, and
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provides miscellaneous other products and services.
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Markets
and Other Information
Latin American Tire distributes and sells tires in most
countries in Latin America. Replacement and OE tire sales by
Latin American Tire during the periods indicated were:
LATIN
AMERICAN TIRE UNIT SALES REPLACEMENT AND
OE
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Year Ended December 31,
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(In millions of tires)
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2007
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2006
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2005
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Replacement tire units
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14.7
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14.9
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15.0
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OE tire units
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7.1
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6.3
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5.4
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Total tire units
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21.8
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21.2
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20.4
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Latin American Tire is a significant supplier of tires to most
manufacturers of automobiles, trucks and tractors located in the
region. Goodyear brand tires are sold in the replacement market
primarily through independent dealers. Significant competitors
include Pirelli, Bridgestone, Michelin and Continental.
Asia
Pacific Tire
Our Asia Pacific Tire segment manufactures and sells tires for
automobiles, light and medium trucks, farm and construction
equipment and the aviation industry throughout the Asia Pacific
markets. Asia Pacific Tire manufactures tires in 10 plants in
Australia, China, India, Indonesia, Japan, Malaysia,
Philippines, Taiwan and Thailand. Asia Pacific Tire also:
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retreads truck and aviation tires,
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manufactures tread rubber and other tire retreading materials
for truck and aviation tires, and
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provides automotive maintenance and repair services at retail
outlets.
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Markets
and Other Information
Asia Pacific Tire distributes and sells tires in most countries
in the Asia Pacific region. Tire sales to replacement and OE
customers served by Asia Pacific Tire during the periods
indicated were:
ASIA
PACIFIC TIRE UNIT SALES REPLACEMENT AND OE
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Year Ended December 31,
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(In millions of tires)
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2007
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2006
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2005
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Replacement tire units
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12.7
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13.1
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13.9
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OE tire units
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6.3
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6.3
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6.2
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Total tire units
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19.0
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19.4
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20.1
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Asia Pacific tire has a significant share of each of the markets
it serves. Its major competitors are Bridgestone and Michelin
along with many other global brands present in different
markets, including Continental, Dunlop, Yokohama, Pirelli, and a
large number of regional and local tire producers.
7
Asia Pacific sells primarily Goodyear branded tires throughout
the region and also sells the Dunlop brand in Australia and New
Zealand. Other brands of tires are sold in smaller quantities
such as Kelly, Fulda and Sava. Tires are sold through a network
of licensed or franchised stores and multi-brand retailers
through a network of wholesale dealers. In Australia and New
Zealand, we also operate a network of approximately
420 company-owned retail stores under the Beaurepaires and
Frank Allen brands.
GENERAL
BUSINESS INFORMATION
Sources
and Availability of Raw Materials
The principal raw materials used by Goodyear are synthetic and
natural rubber. We purchase all of our requirements for natural
rubber in the world market. Synthetic rubber typically accounts
for slightly more than half of all rubber consumed by us on an
annual basis. Our plants located in Beaumont, and Houston,
Texas, supply the major portion of our synthetic rubber
requirements in North America. We purchase a significant amount
of our synthetic rubber requirements outside North America from
third parties.
Significant quantities of steel cord are used for radial tires,
a portion of which we produce. Other important raw materials we
use are carbon black, fabrics and petrochemical-based
commodities. Substantially all of these raw materials are
purchased from independent suppliers, except for certain
chemicals we manufacture. We purchase most raw materials in
significant quantities from several suppliers, except in those
instances where only one or a few qualified sources are
available. We anticipate the continued availability of all raw
materials we will require during 2008, subject to spot shortages
and unexpected disruptions caused by natural disasters such as
hurricanes and other similar events.
Substantial quantities of fuel and other petrochemical-based
commodities are used in the production of tires, synthetic
rubber and other products. Supplies of such fuels and
commodities have been and are expected to continue to be
available to us in quantities sufficient to satisfy our
anticipated requirements, subject to spot shortages.
In 2007, raw material costs increased by approximately 3.5% in
our tire businesses compared to 2006, primarily driven by an
increase in the cost of natural and synthetic rubber. Based on
our current projections, we expect raw material costs to
increase by approximately 7% to 9% in 2008. However, natural
rubber prices and petrochemical-based commodities have
experienced significant volatility, and this estimate could
change significantly based on fluctuations in the cost of these
and other key raw materials.
Patents
and Trademarks
We own approximately 2,520 product, process and equipment
patents issued by the United States Patent Office and
approximately 4,770 patents issued or granted in other countries
around the world. We also have licenses under numerous patents
of others. We have approximately 520 applications for United
States patents pending and approximately 2,500 patent
applications on file in other countries around the world. While
such patents, patent applications and licenses as a group are
important, we do not consider any 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
Goodyear or any business segment.
We own or control or use approximately 1,680 different
trademarks, including several using the word
Goodyear or the word Dunlop.
Approximately 10,250 registrations and 1,080 pending
applications worldwide protect these trademarks. While such
trademarks as a group are important, the only trademarks we
consider material to our business, or to the business of any of
our segments, are those using the word Goodyear, and
with respect to certain of our international business segments,
those using the word Dunlop. We believe our
trademarks are valid and most are of unlimited duration as long
as they are adequately protected and appropriately used.
Backlog
Our backlog of orders is not considered material to, or a
significant factor in, evaluating and understanding any of our
business segments or our businesses considered as a whole.
8
Research
and Development
Our direct and indirect expenditures on research, development
and certain engineering activities relating to the design,
development and significant modification of new and existing
products and services and the formulation and design of new, and
significant improvements to existing, manufacturing processes
and equipment during the periods indicated were:
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Year Ended December 31,
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(In millions)
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2007
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2006
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2005
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Research and development expenditures
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$
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372
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$
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342
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$
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346
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Employees
At December 31, 2007, we employed approximately
72,000 people throughout the world, including approximately
28,000 persons in the United States. Approximately 11,900
of our employees in the United States are covered by a master
collective bargaining agreement with the United Steelworkers
(USW), which expires in July 2009. In addition,
approximately 1,000 of our employees in the United States were
covered by other contracts with the USW and various other
unions. Unions represent the major portion of our employees in
Europe, Latin America and Asia.
Compliance
with Environmental Regulations
We are subject to extensive regulation under environmental and
occupational health and safety laws and regulations. These laws
and regulations relate to, among other things, air emissions,
discharges to surface and underground waters and the generation,
handling, storage, transportation and disposal of waste
materials and hazardous substances. We have several continuing
programs designed to ensure compliance with federal, state and
local environmental and occupational safety and health laws and
regulations. We expect capital expenditures for pollution
control facilities and occupational safety and health projects
will be approximately $65 million during 2008 and
approximately $54 million during 2009.
We expended approximately $58 million during 2007, and
expect to expend approximately $59 million during both 2008
and 2009 to maintain and operate our pollution control
facilities and conduct our other environmental activities,
including the control and disposal of hazardous substances.
These expenditures are expected to be sufficient to comply with
existing environmental laws and regulations and are not expected
to have a material adverse effect on our competitive position.
In the future we 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 environmental laws and regulatory standards,
or the availability of new technologies. Compliance with
federal, state and local environmental laws and regulations in
the future may require a material increase in our capital
expenditures and could adversely affect our earnings and
competitive position.
INFORMATION
ABOUT INTERNATIONAL OPERATIONS
We engage in manufacturing
and/or sales
operations in most countries in the world, often through
subsidiary companies. We have manufacturing operations in 25
countries, including the United States. Most of our
international manufacturing operations are engaged in the
production of tires. Certain other products are also
manufactured in plants located outside the United States.
Financial information related to our geographic areas for the
three year period ended December 31, 2007 appears in the
Note to the Consolidated Financial Statements No. 16,
Business Segments, and is incorporated herein by reference.
In addition to the ordinary risks of the marketplace, in some
countries our operations are affected by price controls, import
controls, labor regulations, tariffs, extreme inflation
and/or
fluctuations in currency values. Furthermore, in certain
countries where we operate, transfers of funds into or out of
such countries are generally or periodically subject to various
restrictive governmental regulations.
9
EXECUTIVE
OFFICERS OF THE REGISTRANT
Set forth below are: (1) the names and ages of all
executive and certain other officers of the Company at
February 14, 2008, (2) all positions with the Company
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.
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Name
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Position(s) Held
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Age
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Robert J. Keegan
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Chairman of the Board, Chief Executive Officer
and President
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60
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Mr. Keegan joined Goodyear on October 1,
2000. He was elected President and Chief Operating
Officer and a Director of the Company on October 3, 2000,
and President and Chief Executive Officer of the Company
effective January 1, 2003. Effective June 30, 2003, he
became Chairman. He is the principal executive officer of the
Company. Prior to joining Goodyear, Mr. Keegan held various
marketing, finance and managerial positions at Eastman Kodak
Company from 1972 through September 2000, including Vice
President from July 1997 to October 1998, Senior Vice President
from October 1998 to July 2000 and Executive Vice President from
July 2000 to September 2000.
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Richard J. Kramer
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President, North American Tire
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44
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Mr. Kramer joined Goodyear on March 6, 2000, when he
was appointed a Vice President for corporate finance. On
April 10, 2000, Mr. Kramer was elected Vice
President Corporate Finance, serving in that
capacity as the Companys principal accounting officer
until August 6, 2002, when he was elected Vice President,
Finance North American Tire. Effective
August 28, 2003, he was appointed and, on October 7,
2003, he was elected Senior Vice President, Strategic Planning
and Restructuring. He was elected Executive Vice President and
Chief Financial Officer on June 1, 2004. Mr. Kramer
was elected President, North American Tire on March 14,
2007 and continued to serve as Chief Financial Officer until
Mr. Schmitzs election to that position on
August 7, 2007. Prior to joining Goodyear, Mr. Kramer
was with PricewaterhouseCoopers LLP for 13 years, including
two years as a partner.
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Arthur de Bok
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President, Europe, Middle East and Africa
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45
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Mr. de Bok was appointed President, European Union Business on
September 16, 2005, and was elected to that position on
October 4, 2005. After joining Goodyear on
December 31, 2001, Mr. de Bok served in various managerial
positions in Goodyears European operations. Prior to
joining Goodyear, Mr. de Bok served in various marketing and
managerial posts for The Proctor & Gamble Company from
1989 to 2001. Mr. de Bok is the executive officer responsible
for Goodyears tire operations in Western Europe and,
effective February 1, 2008, became President, Europe,
Middle East and Africa, the new operating segment created by the
combination of European Union Tire and Eastern Europe Tire.
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Eduardo A. Fortunato
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President, Latin American Region
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54
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Mr. Fortunato served in various international managerial,
sales and marketing posts with Goodyear until he was elected
President and Managing Director of Goodyear Brazil in 2000. On
November 4, 2003, Mr. Fortunato was elected President,
Latin American Region. Mr. Fortunato is the executive
officer responsible for Goodyears tire operations in
Mexico, Central America and South America. He has been a
Goodyear employee since 1975.
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Pierre Cohade
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President, Asia Pacific Region
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46
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Mr. Cohade joined Goodyear in October 2004 and was elected
President, Asia Pacific Region on October 5, 2004.
Mr. Cohade is the executive officer responsible for
Goodyears tire operations in Asia, Australia and the
Western Pacific. Prior to joining Goodyear, Mr. Cohade
served in various finance and managerial posts with the Eastman
Kodak Company from 1985 to 2001, including chairman of Eastman
Kodaks Europe, Africa, Middle East and Russian Region from
2001 to 2003. From February 2003 to April 2004, Mr. Cohade
served as the Executive Vice President of Groupe Danones
beverage division.
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10
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Name
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Position(s) Held
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Age
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Lawrence D. Mason
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President, Consumer Tires, North American Tire
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47
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Mr. Mason joined Goodyear on October 7, 2003 and was
elected President, North American Tire Consumer Business
effective October 13, 2003. Mr. Mason is the executive
officer responsible for the business activities of
Goodyears consumer tire business in North America. Prior
to joining Goodyear, Mr. Mason was employed by
Huhtamaki Americas as Division President of
North American Foodservice and Retail Consumer Products from
2002 to 2003. From 1983 to 2001, Mr. Mason served in
various sales and managerial posts with The Procter &
Gamble Company.
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Michel Rzonzef
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President, Eastern Europe, Middle East and Africa Countries,
Europe, Middle East and Africa
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44
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Mr. Rzonzef served in various managerial, sales and
marketing, and engineering posts until December 1, 2002
when he was appointed Vice President, Sales and Marketing for
our former Eastern Europe, Middle East and Africa strategic
business unit. Effective February 1, 2008, Mr. Rzonzef
was appointed President, Eastern Europe, Middle East and Africa
Countries within our newly formed Europe, Middle East and Africa
strategic business unit. He has been a Goodyear employee since
1988.
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W. Mark Schmitz
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Executive Vice President and Chief Financial Officer
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56
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Mr. Schmitz was elected Executive Vice President and Chief
Financial Officer effective August 7, 2007. Prior to
joining Goodyear, Mr. Schmitz was Vice President and Chief
Financial Officer for Tyco Internationals Fire and
Security Segment, a provider of electronic security services and
fire protection contracting and services, since 2003. From 2001
to 2003, he served as Vice President and Chief Financial Officer
of Plug Power Inc., a designer, developer and manufacturer of
on-site
energy systems. Prior to 2001, he held various positions with
General Motors Corporation. Mr. Schmitz is the principal
financial officer of the Company.
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C. Thomas Harvie
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Senior Vice President, General Counsel and
Secretary
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64
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Mr. Harvie joined Goodyear on July 1, 1995, when he
was elected a Vice President and the General Counsel. Effective
July 1, 1999, Mr. Harvie was appointed and, on
August 3, 1999, he was elected, Senior Vice President and
General Counsel. He was elected Senior Vice President, General
Counsel and Secretary effective June 16, 2000.
Mr. Harvie is the chief legal officer and is the executive
officer responsible for the government relations activities of
Goodyear.
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Christopher W. Clark
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Senior Vice President, Global Sourcing
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56
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Mr. Clark served in various managerial and financial posts
until October 1, 1996, when he was appointed managing
director of P.T. Goodyear Indonesia Tbk, a subsidiary of
Goodyear. On September 1, 1998, he was appointed managing
director of Goodyear do Brasil Productos de Borracha Ltda, a
subsidiary of Goodyear. On August 1, 2000, he was elected
President, Latin American Tire. On November 4, 2003,
Mr. Clark was named Senior Vice President, Global Sourcing.
Mr. Clark is the executive officer responsible for
coordinating Goodyears supply activities worldwide. He has
been a Goodyear employee since 1973.
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Kathleen T. Geier
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Senior Vice President, Human Resources
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51
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Ms. Geier served in various managerial and human resources
posts until July 1, 2002 when she was appointed, and later
elected, Senior Vice President, Human Resources. Ms. Geier
is the executive officer responsible for Goodyears human
resources activities worldwide. She has been a Goodyear employee
since 1978.
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Charles L. Sinclair
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Senior Vice President, Global Communications
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56
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Mr. Sinclair served in various public relations and
communications positions until 2002, when he was named Vice
President, Public Relations and Communications for North
American Tire. Effective June 16, 2003, he was appointed
and, on August 5, 2003, he was elected Senior Vice
President, Global Communications. Mr. Sinclair is the
executive officer responsible for Goodyears worldwide
communications activities. He has been a Goodyear employee since
1984.
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11
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Name
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Position(s) Held
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Age
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Darren R. Wells
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Senior Vice President, Finance and Strategy
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42
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Mr. Wells joined Goodyear on August 1, 2002 and was
elected Vice President and Treasurer on August 6, 2002. On
May 11, 2005, Mr. Wells was named Senior Vice
President, Business Development and Treasurer, and on
March 14, 2007 was named Senior Vice President, Finance and
Strategy. Mr. Wells is the executive officer responsible
for Goodyears finance, business development and strategy
development activities. Prior to joining Goodyear,
Mr. Wells served in various financial posts with Ford Motor
Company units from 1989 to 2000 and was the Assistant Treasurer
of Visteon Corporation from 2000 to July 2002.
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Jean-Claude Kihn
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Senior Vice President and Chief Technical Officer
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48
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Mr. Kihn served in various managerial and technical posts,
most recently as General Director of Goodyears Technical
Center in Akron, Ohio, prior to his appointment, effective
January 1, 2008, as Senior Vice President and Chief
Technical Officer. Mr. Kihn is the executive officer
responsible for Goodyears research and tire technology
development, engineering and product quality worldwide. He has
been a Goodyear employee since 1988.
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Thomas A. Connell
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Vice President and Controller
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59
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Mr. Connell joined Goodyear on September 1, 2003 and
was elected Vice President and Controller on October 7,
2003. Mr. Connell serves as Goodyears principal
accounting officer. Prior to joining Goodyear, Mr. Connell
served in various financial positions with TRW Inc. from 1979 to
June 2003, most recently as its Vice President and Corporate
Controller. From 1970 to 1979, Mr. Connell was an audit
supervisor with the accounting firm of Ernst & Whinney.
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William M. Hopkins
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Vice President
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63
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Mr. Hopkins served in various tire technology and
managerial posts until appointed Director of Tire Technology for
North American Tire effective June 1, 1996. He was elected
a Vice President effective May 19, 1998. He served as the
executive officer responsible for Goodyears worldwide tire
technology activities until August 1, 1999, and as the
executive officer responsible for Goodyears worldwide
product marketing and technology planning activities until
December 31, 2007. Effective January 1, 2008,
Mr. Hopkins is the executive officer responsible for
advanced concepts related to the development of innovative
product and process technologies. He has been a Goodyear
employee since 1967.
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Isabel H. Jasinowski
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Vice President
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59
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Ms. Jasinowski served in various government relations posts
until she was appointed Vice President of Government Relations
in 1995. On April 2, 2001, Ms. Jasinowski was elected
Vice President, Government Relations, serving as the executive
officer primarily responsible for Goodyears governmental
relations and public policy activities. She has been a Goodyear
employee since 1981.
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Mark Purtilar
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Vice President
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47
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Mr. Purtilar was elected Vice President and Chief
Procurement Officer effective September 17, 2007. He is the
executive officer primarily responsible for Goodyears
global procurement activities. Prior to joining Goodyear,
Mr. Purtilar held various positions at ArvinMeritor, a
global supplier of automotive parts, from 1994 until 2002, was
chief executive officer of Auto Body Panels Inc., a supplier of
automotive parts, from 2002 until 2004, and rejoined
ArvinMeritor in 2004 as vice president of global procurement for
commercial vehicle systems.
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No family relationship exists between any of the above executive
officers or between the executive officers and any director of
the Company.
Each executive officer is elected by the Board of Directors of
the Company at its annual meeting to a term of one year or until
his or her successor is duly elected. In those instances where
the person is elected at other than an annual meeting, such
persons term will expire at the next annual meeting.
12
You should carefully consider the risks described below and
other information contained in this Annual Report on
Form 10-K
when considering an investment decision with respect to our
securities. Additional risks and uncertainties not presently
known to us, or that we currently deem immaterial, may also
impair our business operations. Any of the events discussed in
the risk factors below may occur. If they do, our business,
results of operations or financial condition could be materially
adversely affected. In such an instance, the trading price of
our securities could decline, and you might lose all or part of
your investment.
If we
do not achieve projected savings from various cost reduction
initiatives or successfully implement other strategic
initiatives our operating results and financial condition may be
materially adversely affected.
Our business continues to be impacted by trends that have
negatively affected the tire industry in general, including,
industry overcapacity, which limits pricing power, increased
competition from low-cost manufacturers, uncertain economic
conditions in various parts of the world, high raw material and
energy costs, weakness in the North American auto industry, and
weakness in demand for consumer replacement tires in the
U.S. and Europe. To the extent that increases in gas prices
or other factors cause consumers to drive fewer miles there
could be a reduction in demand for replacement tires, which, if
significant, could harm our business. Unlike most other tire
manufacturers, we also face the continuing burden of legacy
pension and postretirement benefit costs. In order to offset the
impact of these trends, we continue to implement various cost
reduction initiatives and expect to achieve between
$1.8 billion and $2.0 billion in aggregate gross cost
savings from 2006 through 2009 through our four-point cost
savings plan which includes expected savings from continuous
improvement processes, increased low-cost country sourcing,
high-cost capacity reductions and reduced selling,
administrative and general expenses. Included in these savings
is approximately $300 million of expected ongoing savings
by 2009 as a result of our master labor agreement with the USW.
Our performance is also dependent on our ability to continue to
improve the proportion, or mix, of higher margin tires we sell.
In order to continue this improvement, we must be successful in
marketing and selling products that offer higher margins such as
the Assurance, Eagle and Fortera lines of tires and in
developing additional higher margin tires that achieve broad
market acceptance in North America and elsewhere.
We cannot assure you that these cost reduction and other
initiatives will be successful. If not, we may not be able to
achieve or sustain future profitability, which would impair our
ability to meet our debt and other obligations and would
otherwise negatively affect our financial condition and results
of operations.
A
significant aspect of our master labor agreement with the USW is
subject to court approval, which, if not received, could result
in the termination and renegotiation of the
agreement.
On December 28, 2006, members of the USW ratified the terms
of a new master labor agreement ending a strike that began on
October 5, 2006. In connection with the master labor
agreement, we also entered into a memorandum of understanding
with the USW regarding the establishment of an independent
Voluntary Employees Beneficiary Association
(VEBA) intended to provide healthcare benefits for
current and future USW retirees. As a result, we expect to be
able to eliminate our postretirement healthcare
(OPEB) liability related to such benefits. At
December 31, 2007, this OPEB liability was approximately
$1.2 billion. The establishment of the VEBA is conditioned
upon U.S. District Court approval of a settlement of a
declaratory judgment action. On July 3, 2007, the USW and
several retirees filed a required class action lawsuit regarding
the establishment of the VEBA in the U.S. District Court
for the Northern District of Ohio. On October 29, 2007, the
parties filed the signed settlement agreement with the District
Court, and on December 14, 2007, the District Court
preliminarily approved the settlement agreement and established
the date for a hearing regarding the settlement. We have
committed to contribute $1 billion to the VEBA. We plan to
make our contributions to the VEBA entirely in cash following
the District Courts approval of the settlement. Despite
our contributions to the VEBA, we will not be able to remove our
liability for USW retiree healthcare benefits from our balance
sheet until this settlement has received final judicial approval
(including the exhaustion of all appeals, if any). If the VEBA
is funded but we are unable to remove this liability from our
balance sheet (e.g., approval of the District Court is reversed
on appeal), we will not be able to terminate the VEBA and
recover our contributions; rather, the funds in the VEBA will be
used to pay for
13
USW retiree health and other permissible benefits and we will
remain liable to pay those benefits. If the VEBA is not approved
by the District Court (or if the approval of the District Court
is subsequently reversed), the master labor agreement may be
terminated by either us or the USW, and negotiations may be
reopened on the entirety of the master labor agreement. If
negotiations are reopened, we might be unable to achieve the
cost reductions we expect to receive from the master labor
agreement.
We
face significant global competition and our market share could
decline.
New tires are sold under highly competitive conditions
throughout the world. We compete with other tire manufacturers
on the basis of product design, performance, price and terms,
reputation, warranty terms, customer service and consumer
convenience. On a worldwide basis, we have two major
competitors, Bridgestone (based in Japan) and Michelin (based in
France), that have large shares of the markets of the countries
in which they are based and are aggressively seeking to maintain
or improve their worldwide market share. Other significant
competitors include Continental, Cooper, Hankook, Kumho,
Pirelli, Toyo, Yokohama and various regional tire manufacturers.
Our competitors produce significant numbers of tires in low-cost
countries. Our ability to compete successfully will depend, in
significant part, on our ability to reduce costs by such means
as reduction of excess capacity, leveraging global purchasing,
improving productivity, elimination of redundancies and
increasing production at low-cost supply sources. If we are
unable to compete successfully, our market share may decline,
materially adversely affecting our results of operations and
financial condition.
The
underfunding levels of our pension plans and our pension
expenses could materially increase.
Substantially all of our U.S. and many of our
non-U.S. employees
participate in defined benefit pension plans. In previous
periods, we have experienced declines in interest rates and
pension asset values. Future declines in interest rates or the
market values of the securities held by the plans, or certain
other changes, could materially increase the underfunded status
of our plans and affect the level and timing of required
contributions in 2009 and beyond. The unfunded amount of the
projected benefit obligation for our U.S. and
non-U.S. pension
plans was $649 million and $813 million at
December 31, 2007, respectively, and we currently estimate
that we will be required to make contributions to our domestic
pension plans of approximately $200 million to
$225 million in 2008, and $150 million to
$175 million in 2009. A material increase in the
underfunded status of the plans could significantly increase our
required contributions and pension expenses and impair our
ability to achieve or sustain future profitability.
Higher
raw material and energy costs may materially adversely affect
our operating results and financial condition.
Raw material costs increased significantly over the past few
years driven by increases in prices of petrochemical-based
commodities and natural rubber. Market conditions may prevent us
from passing these increased costs on to our customers through
timely price increases. Additionally, higher raw material costs
around the world may offset our efforts to reduce our cost
structure. As a result, higher raw material and energy costs
could result in declining margins and operating results.
Pricing
pressures from vehicle manufacturers may materially adversely
affect our business.
Approximately 30% of the tires we sell are sold to vehicle
manufacturers for mounting as OE. Pricing pressure from vehicle
manufacturers has been a characteristic of the tire industry in
recent years. Many vehicle manufacturers have policies of
seeking price reductions each year. Although we have taken steps
to reduce costs and resist price reductions, current and future
price reductions could materially adversely impact our sales and
profit margins. If we are unable to offset future price
reductions through improved operating efficiencies and cost
reductions, those price reductions may result in declining
margins and operating results.
14
Pending
litigation relating to our 2003 restatement could have a
material adverse effect on our financial position, cash flows
and results of operation.
Following the announcement of a restatement of our financial
statements in October 2003, several lawsuits were filed in the
U.S. District Court for the Northern District of Ohio
against Goodyear and current
and/or
former officers, directors and associates of Goodyear asserting
breach of fiduciary duty claims under the Employee Retirement
Income Security Act of 1974 (ERISA) on behalf of a
putative class of participants in our Employee Savings Plan for
Bargaining Unit Employees and our Savings Plan for Salaried
Employees. All of these actions were consolidated into a
separate action in the U.S. District Court for the Northern
District of Ohio. In July 2006, the Court denied the
defendants motion to dismiss the breach of fiduciary duty
claims under ERISA. We have entered into a settlement agreement
with the plaintiffs, which is subject to court approval, in
order to eliminate the ongoing cost and distraction of the
litigation. If the settlement agreement is not approved by the
court, we will continue to vigorously defend these claims. We
cannot currently predict or determine the outcome or resolution
of this proceeding or the timing for its resolution. The final
resolution of this action could have a material adverse effect
on our financial position, cash flows and results of operations.
Our
long term ability to meet our obligations and to repay maturing
indebtedness is dependent on our ability to access capital
markets in the future and to improve our operating
results.
The adequacy of our liquidity depends on our ability to achieve
an appropriate combination of operating improvements, financing
from third parties, access to capital markets and asset sales.
Although we have completed several significant transactions, we
may undertake additional financing actions in the capital
markets in order to ensure that our future liquidity
requirements are addressed. These actions may include the
issuance of additional debt or equity.
Our access to the capital markets cannot be assured and is
dependent on, among other things, the degree of success we have
in implementing our cost reduction plans and improving the
results of our North American Tire segment. Future liquidity
requirements also may make it necessary for us to incur
additional debt. A substantial portion of our assets is subject
to liens securing our indebtedness. As a result, we are limited
in our ability to pledge our remaining assets as security for
additional secured indebtedness. Our failure to access the
capital markets or incur additional debt in the future could
have a material adverse effect on our liquidity and operations,
and could require us to consider further measures, including
deferring planned capital expenditures, reducing discretionary
spending, selling additional assets and restructuring existing
debt.
We
have a substantial amount of debt, which could restrict our
growth, place us at a competitive disadvantage or otherwise
materially adversely affect our financial health.
We have a substantial amount of debt. As of December 31,
2007, our debt (including capital leases) on a consolidated
basis was approximately $4.7 billion. Our substantial
amount of debt and other obligations could have important
consequences. For example, it could:
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make it more difficult for us to satisfy our obligations;
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impair our ability to obtain financing in the future for working
capital, capital expenditures, research and development,
acquisitions or general corporate requirements;
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increase our vulnerability to general adverse economic and
industry conditions;
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limit our ability to use operating cash flow in other areas of
our business because we would need to dedicate a substantial
portion of these funds for payments on our indebtedness;
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limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate; and
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place us at a competitive disadvantage compared to our
competitors that have less debt.
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The agreements governing our debt, including our credit
agreements, limit, but do not prohibit, us from incurring
additional debt and we may incur a significant amount of
additional debt in the future, including additional secured
debt. If new debt is added to our current debt levels, our
ability to satisfy our debt obligations may become more limited.
15
Our ability to make scheduled payments on, or to refinance, our
debt and other obligations will depend on our financial and
operating performance, which, in turn, is subject to our ability
to implement our cost reduction initiatives and other
strategies, prevailing economic conditions and certain
financial, business and other factors beyond our control. If our
cash flow and capital resources are insufficient to fund our
debt service and other obligations, including required pension
contributions, we may be forced to reduce or delay expansion
plans and capital expenditures, sell material assets or
operations, obtain additional capital or restructure our debt.
We cannot assure you that our operating performance, cash flow
and capital resources will be sufficient to pay our debt
obligations when they become due. We cannot assure you that we
would be able to dispose of material assets or operations or
restructure our debt or other obligations if necessary or, even
if we were able to take such actions, that we could do so on
terms that were acceptable to us.
Any
failure to be in compliance with any material provision or
covenant of our debt instruments could have a material adverse
effect on our liquidity and operations.
The indentures and other agreements governing our secured credit
facilities, senior secured notes, senior unsecured notes and our
other outstanding indebtedness impose significant operating and
financial restrictions on us. These restrictions may affect our
ability to operate our business and may limit our ability to
take advantage of potential business opportunities as they
arise. These restrictions limit our ability to, among other
things:
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incur additional debt or issue redeemable preferred stock;
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make certain restricted payments or investments;
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incur liens;
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sell certain assets;
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incur restrictions on the ability of our subsidiaries to pay
dividends to us;
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enter into affiliate transactions;
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engage in sale/leaseback transactions; and
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engage in certain mergers or consolidations and transfers of
substantially all of our assets.
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Our ability to comply with these covenants may be affected by
events beyond our control, and unanticipated events could
require us to seek waivers or amendments of covenants or
alternative sources of financing or to reduce expenditures. We
cannot assure you that such waivers, amendments or alternative
financing could be obtained, or if obtained, would be on terms
acceptable to us.
A breach of any of the covenants or restrictions contained in
any of our existing or future financing agreements, including
the financial covenants in our secured credit facilities, could
result in an event of default under those agreements. Such a
default could allow the lenders under our financing agreements,
if the agreements so provide, to discontinue lending, to
accelerate the related debt as well as any other debt to which a
cross-acceleration or cross-default provision applies,
and/or to
declare all borrowings outstanding thereunder to be due and
payable. In addition, the lenders could terminate any
commitments they have to provide us with further funds. If any
of these events occur, we cannot assure you that we will have
sufficient funds available to pay in full the total amount of
obligations that become due as a result of any such
acceleration, or that we will be able to find additional or
alternative financing to refinance any such accelerated
obligations. Even if we obtain additional or alternative
financing, we cannot assure you that it would be on terms that
would be acceptable to us.
We cannot assure you that we will be able to remain in
compliance with the covenants to which we are subject in the
future and, if we fail to do so, that we will be able to obtain
waivers from our lenders or amend the covenants.
Our
capital expenditures may not be adequate to maintain our
competitive position and may not be implemented in a timely or
cost-effective manner.
Our capital expenditures are limited by our liquidity and
capital resources and the amount we have available for capital
spending is limited by the need to pay our other expenses and to
maintain adequate cash reserves and borrowing capacity to meet
unexpected demands that may arise. We believe that our ratio of
capital expenditures to sales is lower than the comparable ratio
for our principal competitors.
Productivity improvements through process re-engineering, design
efficiency and manufacturing cost improvements may be required
to offset potential increases in labor and raw material costs
and competitive price
16
pressures. In addition, as part of our strategy to increase the
percentage of tires that are produced at our lower-cost
production facilities and to increase our capacity to produce
higher margin tires, we may need to modernize or expand our
facilities. We may not have sufficient resources to implement
planned capital expenditures with minimal disruption to our
existing manufacturing operations, or within desired time frames
and budgets. Any disruption to our operations, delay in
implementing capital improvements or unexpected costs may
materially adversely affect our business and results of
operations.
If we are unable to make sufficient capital expenditures, or to
maximize the efficiency of the capital expenditures we do make,
we may be unable to achieve productivity improvements, which may
harm our competitive position. In addition, plant modernizations
may temporarily disrupt our manufacturing operations and lead to
temporary increases in our costs.
Our
variable rate indebtedness subjects us to interest rate risk,
which could cause our debt service obligations to increase
significantly.
Certain of our borrowings are at variable rates of interest and
expose us to interest rate risk. If interest rates increase, our
debt service obligations on the variable rate indebtedness would
increase even though the amount borrowed remained the same,
which would require us to use more of our available cash to
service our indebtedness. There can be no assurance that we will
be able to enter into swap agreements or other hedging
arrangements in the future, or that existing or future hedging
arrangements will offset increases in interest rates. As of
December 31, 2007, we had approximately $2.6 billion
of variable rate debt outstanding.
We may
incur significant costs in connection with asbestos
claims.
We are among many defendants named in legal proceedings
involving claims of individuals relating to alleged exposure to
asbestos. At December 31, 2007, approximately 117,000
claims were pending against us alleging various asbestos-related
personal injuries purported to have resulted from alleged
exposure to asbestos in certain rubber encapsulated products or
aircraft braking systems manufactured by us in the past or to
asbestos in certain of our facilities. We expect that additional
claims will be brought against us in the future. Our ultimate
liability with respect to such pending and unasserted claims is
subject to various uncertainties, including the following:
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the number of claims that are brought in the future;
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the costs of defending and settling these claims;
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the risk of insolvencies among our insurance carriers;
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the possibility that adverse jury verdicts could require us to
pay damages in amounts greater than the amounts for which we
have historically settled claims;
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the risk of changes in the litigation environment or Federal and
state law governing the compensation of asbestos
claimants; and
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the risk that the bankruptcies of other asbestos defendants may
increase our costs.
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Because of the uncertainties related to such claims, it is
possible that we may incur a material amount in excess of our
current reserve for such claims. In addition, if any of the
foregoing risks were to materialize, the resulting costs could
have a material adverse impact on our liquidity, financial
position and results of operations in future periods.
We may
be required to deposit cash collateral to support an appeal bond
if we are subject to a significant adverse judgment, which may
have a material adverse effect on our liquidity.
We are subject to various legal proceedings. If we wish to
appeal any future adverse judgment in any of these proceedings,
we may be required to post an appeal bond with the relevant
court. We may be required to issue a letter of credit to the
surety posting the bond. We may issue up to an aggregate of
$800 million in letters of credit under our
$1.5 billion U.S. senior secured first lien credit
facility. As of December 31, 2007, we had approximately
$526 million in letters of credit issued under this
facility. If we are subject to a significant adverse judgment
and do not have sufficient availability under our credit
facilities to issue a letter of credit to support an appeal
bond, we may be required to pay down borrowings under the
facilities or deposit cash collateral in order to stay the
enforcement of the judgment pending an appeal. A significant
deposit of cash collateral may have a material adverse effect on
our liquidity. If we are unable to post cash collateral, we may
be unable to stay enforcement of the judgment.
17
We are
subject to extensive government regulations that may materially
adversely affect our operating results.
We are subject to regulation by the Department of Transportation
through the National Highway Traffic Safety Administration, or
NHTSA, which has established various standards and regulations
applicable to tires sold in the United States and tires sold in
a foreign country that are identical or substantially similar to
tires sold in the United States. NHTSA has the authority to
order the recall of automotive products, including tires, having
safety-related defects.
NHTSAs regulatory authority was expanded in November 2000
as a result of the enactment of the Transportation Recall
Enhancement, Accountability, and Documentation Act, or TREAD
Act. The TREAD Act imposes numerous requirements with respect to
the early warning reporting of warranty claims, property damage
claims, and bodily injury and fatality claims and also requires
tire manufacturers, among other things, to conform with revised
and more rigorous tire testing standards, once the revised
standards are implemented. Compliance with the TREAD Act
regulations has increased and will continue to increase the cost
of producing and distributing tires in the United States. In
addition, while we believe that our tires are free from design
and manufacturing defects, it is possible that a recall of our
tires, under the TREAD Act or otherwise, could occur in the
future. A substantial recall could have a material adverse
effect on our reputation, operating results and financial
position.
In addition, as required by the enactment of an omnibus energy
bill in December 2007, NHTSA will establish a national tire fuel
efficiency consumer information program. While the new federal
law will pre-empt state tire fuel efficiency laws adopted after
January 1, 2006, we may become subject to additional tire
fuel efficiency legislation, either in the United States or
other countries, which might require us to alter or increase our
capital spending and research and development plans or cease
production of certain tires.
Compliance with these and other foreign, Federal, state and
local laws and regulations in the future may require a material
increase in our capital expenditures and could materially
adversely affect our earnings and competitive position.
Our
international operations have certain risks that may materially
adversely affect our operating results.
We have manufacturing and distribution facilities throughout the
world. Our international operations are subject to certain
inherent risks, including:
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exposure to local economic conditions;
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adverse changes in the diplomatic relations of foreign countries
with the United States;
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hostility from local populations and insurrections;
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adverse currency exchange controls;
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withholding taxes and restrictions on the withdrawal of foreign
investment and earnings;
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labor regulations;
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expropriations of property;
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the potential instability of foreign governments;
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risks of renegotiation or modification of existing agreements
with governmental authorities;
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export and import restrictions; and
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other changes in laws or government policies.
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The likelihood of such occurrences and their potential effect on
us vary from country to country and are unpredictable. Certain
regions, including Latin America, Asia, the Middle East and
Africa, are inherently more economically and politically
volatile and as a result, our business units that operate in
these regions could be subject to significant fluctuations in
sales and operating income from quarter to quarter. Because a
significant percentage of our operating income in recent years
has come from these regions, adverse fluctuations in the
operating results in these regions could have a disproportionate
impact on our results of operations in future periods.
We
have foreign currency translation and transaction risks that may
materially adversely affect our operating results.
The financial position and results of operations of our
international subsidiaries are reported in various foreign
currencies and then translated into U.S. dollars at the
applicable exchange rate for inclusion in our financial
statements. As a result, the appreciation of the
U.S. dollar against these foreign currencies has a negative
impact on our reported sales and
18
operating margin (and conversely, the depreciation of the
U.S. dollar against these foreign currencies has a positive
impact). For year ended December 31, 2007, we estimate that
foreign currency translation favorably impacted sales and
segment operating income by approximately $833 million and
$115 million, respectively, compared to the year ended
December 31, 2006. The volatility of currency exchange
rates may materially adversely affect our operating results.
The
terms and conditions of our global alliance with Sumitomo Rubber
Industries, Ltd. provide for certain exit rights available to
SRI upon the occurrence of certain events, which could require
us to make a substantial payment to acquire SRIs interest
in certain of their joint venture alliances.
In 1999, we entered into a global alliance with SRI. Under the
Umbrella Agreement between us and SRI, SRI has the right to
require us to purchase from SRI its ownership interests in the
European and North American joint ventures in September 2009 if
certain triggering events have occurred. In addition, the
occurrence of certain other events enumerated in the Umbrella
Agreement, including certain bankruptcy events or changes in
control of Goodyear, could provide SRI with the right to require
us to repurchase these interests immediately. While we have not
done any current valuation of these businesses, our cost of
acquiring an interest in these businesses in 1999 was
approximately $1.2 billion. Any payment required to be made
to SRI pursuant to an exit under the terms of the global
alliance agreements could be substantial. We cannot assure you
that our operating performance, cash flow and capital resources
would be sufficient to make such a payment or, if we were able
to make the payment, that there would be sufficient funds
remaining to satisfy our other obligations. The withdrawal of
SRI from the global alliance could also have other adverse
effects on our business.
If we
are unable to attract and retain key personnel our business
could be materially adversely affected.
Our business substantially depends on the continued service of
key members of our management. The loss of the services of a
significant number of members of our management could have a
material adverse effect on our business. Our future success will
also depend on our ability to attract and retain highly skilled
personnel, such as engineering, marketing and senior management
professionals. Competition for these employees is intense, and
we could experience difficulty from time to time in hiring and
retaining the personnel necessary to support our business. If we
do not succeed in retaining our current employees and attracting
new high quality employees, our business could be materially
adversely affected.
Work
stoppages, financial difficulties or supply disruptions
affecting our major OE customers could harm our
business.
Although sales to our OE customers account for less than 20% of
our net sales, demand for our products in the OE segment and
production levels at our facilities are directly related to
automotive vehicle production. Automotive production can be
affected by labor relations issues, financial difficulties or
other supply disruptions. Our OE customers could experience a
disruption in supply resulting from their own or supplier labor
or financial difficulties. Such events may cause an OE customer
to reduce or suspend vehicle production. In such an event, the
affected OE customer could halt or significantly reduce
purchases of our products, which would increase our production
costs and harm our results of operations and financial condition.
We may
be impacted by economic and supply disruptions associated with
events beyond our control, such as war, acts of terror,
political unrest, public health concerns, labor disputes or
natural disasters.
We manage businesses and facilities worldwide. Our facilities
and operations, and the facilities and operations of our
suppliers and customers, could be disrupted by events beyond our
control, such as war, acts of terror, political unrest, public
health concerns, labor disputes or natural disasters. Any such
disruption could cause delays in the production and distribution
of our products and the loss of sales and customers. We may not
be insured against all such potential losses and, if insured,
the insurance proceeds that we receive may not adequately
compensate us for all of our losses.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS.
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None.
19
We manufacture our products in 64 manufacturing facilities
located around the world. There are 20 plants in the United
States and 44 plants in 24 other countries.
North American Tire
Manufacturing Facilities. North American
Tire owns (or leases with the right to purchase at a nominal
price) and operates 23 manufacturing facilities in the United
States and Canada.
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10 tire plants (8 in the United States and 2 in Canada),
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1 steel tire wire cord plant,
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4 chemical plants,
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1 tire mold plant,
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3 tire retread plants,
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2 aviation retread plants, and
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2 mix plants (1 in the United States and 1 in Canada).
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These facilities have floor space aggregating approximately
24.9 million square feet.
European Union Tire
Manufacturing Facilities. European Union
Tire owns and operates 15 manufacturing facilities in 5
countries, including:
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11 tire plants,
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1 steel tire wire cord plant,
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1 tire mold and tire manufacturing machines facility,
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1 aviation retread plant, and
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1 mix plant.
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These facilities have floor space aggregating approximately
13.4 million square feet.
Eastern Europe, Middle
East and Africa Tire Manufacturing
Facilities. Eastern Europe Tire owns and
operates 5 tire plants in 4 countries. These facilities have
floor space aggregating approximately 7.3 million square
feet.
Latin American Tire
Manufacturing Facilities. Latin American
Tire owns and operates 9 manufacturing facilities in 5
countries, including 6 tire plants, 1 textile mill, 1 tire
retread plant, and 1 aviation retread plant. These facilities
have floor space aggregating approximately 5.6 million
square feet.
Asia Pacific Tire
Manufacturing Facilities. Asia Pacific
Tire owns and operates 10 tire plants and 2 aviation retread
plants in 9 countries. These facilities have floor space
aggregating approximately 6.2 million square feet.
Plant
Utilization. Our worldwide tire capacity
utilization rate was approximately 86% during 2007 compared to
approximately 82% in 2006 and 87% in 2005. Our 2007 utilization
increased due to the recovery from the 2006 USW strike.
Other
Facilities. We also own and operate three
research and development facilities and technical centers, and
three tire proving grounds. We also operate more than 1,800
retail outlets for the sale of our tires to consumers,
approximately 60 tire retreading facilities and approximately
160 warehouse distribution facilities. Substantially all of
these facilities are leased. We do not consider any one of these
leased properties to be material to our operations. For
additional information regarding leased properties, refer to the
Notes to the Consolidated Financial Statements No. 9,
Property, Plant and Equipment and No. 10, Leased Assets.
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ITEM 3.
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LEGAL
PROCEEDINGS.
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Heatway
Litigation and Settlement
On June 4, 2004, we entered into an amended settlement
agreement in Galanti et al. v. Goodyear (Case
No. 03-209,
United States District Court for the District of New Jersey)
that was intended to address the claims arising out of a number
of Federal, state and Canadian actions filed against us
involving a rubber hose product, Entran II, that we supplied
from 1989 to 1993 to Chiles Power Supply, Inc. (d/b/a Heatway
Systems), a designer and seller of hydronic radiant heating
systems in the United States. Heating systems using
Entran II are typically attached or embedded in either
indoor flooring or outdoor pavement, and use Entran II hose
as a conduit to circulate warm fluid as a source of heat.
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Since the approval of the amended settlement by the Galanti
court in October 2004 through the end of 2007, we have made
an aggregate of $130 million of cash contributions to a
settlement fund and will make additional contributions of
$20 million in 2008. In addition to these payments, we
contributed approximately $174 million received from
insurance proceeds to the settlement fund. We do not expect to
receive any additional insurance reimbursements for
Entran II related matters.
Of the fewer than 40 sites that remain opted-out of the
settlement, two were the subject of Bloom et al. v.
Goodyear (Case
No. 05-CV-1317,
United States District Court for the District of Colorado). On
February 9, 2007, a jury awarded one of the Bloom
plaintiffs $4.3 million in damages, 50% of which was
allocated to us. The trial court denied all prejudgment
interest, and the plaintiff has appealed that denial. A portion
of the remaining opt-outs may file actions against us in the
future. Although any liability resulting from Bloom, or
the remaining opt-outs will not be covered by the amended
settlement, we will be entitled to assert a proxy claim against
the settlement fund for the payment such claimant would have
been entitled to under the amended settlement.
We expect that except for liabilities associated with three
actions in which we have received adverse judgments that are
currently on appeal, actions in which we have previously
satisfied judgments, Bloom and the remaining sites that
have opted-out of the amended settlement, our liability with
respect to Entran II matters has been addressed by the
amended settlement (which may be less than a claimant receives
in an award of damages).
The ultimate cost of disposing of Entran II claims is
dependent upon a number of factors, including our ability to
resolve claims not subject to the amended settlement (including
the cases in which we have received adverse judgments), the
extent to which the liability, if any, associated with such a
claim may be offset by our ability to assert a proxy claim
against the settlement fund and whether or not claimants
opting-out of the amended settlement pursue claims against us in
the future.
Securities/ERISA
Litigation
Following the announcement of a restatement of our financial
statements in October 2003, several lawsuits were filed in the
U.S. District Court for the Northern District of Ohio
against Goodyear and current
and/or
former officers, directors and associates of Goodyear asserting
breach of fiduciary duty claims under ERISA on behalf of a
putative class of participants in our Employee Savings Plan for
Bargaining Unit Employees and our Savings Plan for Salaried
Employees. All of these actions were consolidated into a
separate action in the U.S. District Court for the Northern
District of Ohio. In July 2006, the Court denied the
defendants motion to dismiss the breach of fiduciary duty
claims under ERISA. Although we continue to believe the ERISA
claims are without merit, we have entered into a settlement
agreement with the plaintiffs, which is subject to court
approval, in order to eliminate the ongoing cost and distraction
of the litigation. If the settlement agreement is not approved
by the court, we will continue to vigorously defend these claims.
VEBA
Litigation
On December 28, 2006, members of the USW ratified the terms
of a new master labor agreement ending a strike that began on
October 5, 2006. In connection with the master labor
agreement, we also entered into a memorandum of understanding
with the USW regarding the establishment of an independent VEBA
intended to provide healthcare benefits for current and future
USW retirees. The establishment of the VEBA is conditioned upon
District Court approval of a settlement of a declaratory
judgment action. On July 3, 2007, the USW and several
retirees filed a required class action lawsuit regarding the
establishment of the VEBA in the U.S. District Court for
the Northern District of Ohio. On October 29, 2007, the
parties filed the signed settlement agreement with the District
Court, and on December 14, 2007, the District Court
preliminarily approved the settlement agreement and established
the date for a hearing regarding the settlement. We have
committed to contribute $1 billion to the VEBA. We plan to
make our contributions to the VEBA entirely in cash following
the District Courts approval of the settlement. In the
event that the VEBA is not approved by the District Court (or if
the approval of the District Court is subsequently reversed),
the master labor agreement may be terminated by either us or the
USW, and negotiations may be reopened on the entirety of the
master labor agreement.
21
Asbestos
Litigation
We are currently one of several defendants in civil actions
pending in various state and federal courts involving
approximately 117,000 claimants (as of December 31,
2007) relating to their alleged exposure to materials
containing asbestos in products manufactured by us or asbestos
materials at our facilities. We manufactured, among other
things, rubber coated asbestos sheet gasket materials from 1914
through 1973 and aircraft brake assemblies containing asbestos
materials prior to 1987. Some of the claimants are independent
contractors or their employees who allege exposure to asbestos
while working at certain of our facilities. It is expected that
in a substantial portion of these cases there will be no
evidence of exposure to a Goodyear manufactured product
containing asbestos or asbestos in Goodyear facilities. The
amount expended by us and our insurers on defense and claim
resolution was approximately $22 million during 2007. The
plaintiffs in the pending cases allege that they were exposed to
asbestos and, as a result of such exposure suffer from various
respiratory diseases, including in some cases mesothelioma and
lung cancer. The plaintiffs are seeking unspecified actual and
punitive damages and other relief.
Engineered
Products Antitrust Investigation
The Antitrust Division of the United States Department of
Justice is conducting a grand jury investigation concerning the
closure of a portion of our Bowmanville, Ontario conveyor
belting plant announced in October 2003. In that connection, the
Division has sought documents and other information from us and
several associates. The plant was part of our former Engineered
Products division and originally employed approximately
120 people. Although we do not believe that we have
violated the antitrust laws, we are cooperating with the
Department of Justice.
Marine
Hose Investigation
In May 2007, the United States Department of Justice, Antitrust
Division, announced that it had executed search and arrest
warrants against a number of companies and their executives in
connection with an investigation into allegations of price
fixing in the marine hose industry. We received a grand jury
document subpoena in May 2007 relating to that investigation. We
have also received a similar request for information from
European antitrust authorities in connection with a similar
investigation of the marine hose industry in Europe. In
addition, in November 2007, the Brazilian antitrust authority
notified Goodyears Brazilian subsidiary that it was a
party to a civil investigation into alleged anticompetitive
practices in the marine hose industry in Brazil. Based on our
review, we continue to believe Goodyear and its subsidiaries did
not engage in unlawful conduct which is the subject of the
investigations described above. None of Goodyears
executives has been named in any criminal complaint; and no
arrest or search warrants have been executed against any of our
executives or at any of our facilities in connection with these
investigations. We are cooperating with U.S., European and
Brazilian authorities.
DOE
Facility Litigation
On June 7, 1990, a civil action, Teresa Boggs, et
al. v. Divested Atomic Corporation, et al. (Case
No. C-1-90-450),
was filed in the U.S. District Court for the Southern
District of Ohio by Teresa Boggs and certain other named
plaintiffs on behalf of themselves and a putative class
comprised of certain other persons who resided near the
Portsmouth Uranium Enrichment Complex, a facility owned by the
United States Department of Energy located in Pike County, Ohio
(the DOE Plant), against Divested Atomic Corporation
(DAC), the successor by merger of Goodyear Atomic
Corporation (GAC), Goodyear, and Lockheed Martin
Energy Systems (LMES). GAC operated the DOE Plant
for several years pursuant to a series of contracts with the DOE
until LMES assumed operation of the DOE Plant on
November 16, 1986. The plaintiffs allege that the operators
of the DOE Plant contaminated certain areas near the DOE Plant
with radioactive
and/or other
hazardous materials causing property damage and emotional
distress. Plaintiffs claim $300 million in compensatory
damages, $300 million in punitive damages and unspecified
amounts for medical monitoring and cleanup costs. This civil
action is no longer a class action as a result of rulings of the
District Court decertifying the class. On June 8, 1998, a
civil action, Adkins, et al. v. Divested Atomic
Corporation, et al. (Case No. C2
98-595), was
filed in the U.S. District Court for the Southern District
of Ohio, against DAC, Goodyear and LMES on behalf of
approximately 276 persons who currently reside, or in the
past resided, near the DOE Plant. The plaintiffs allege, on
behalf of themselves and a putative class of all persons who
were residents, property owners or lessees of property subject
to alleged windborne particulates and
22
water run-off from the DOE Plant, that DAC (and, therefore,
Goodyear) and LMES in their operation of the Portsmouth DOE
Plant (i) negligently contaminated, and are strictly liable
for contaminating, the plaintiffs and their property with
allegedly toxic substances, (ii) have in the past
maintained, and are continuing to maintain, a private nuisance,
(iii) have committed, and continue to commit, trespass, and
(iv) violated the Comprehensive Environmental Response,
Compensation and Liability Act of 1980. The plaintiffs are
seeking $30 million in actual damages, $300 million in
punitive damages, other unspecified legal and equitable
remedies, costs, expenses and attorneys fees. On
August 23, 2007, the District Court dismissed the
plaintiffs claims relating to exposure to radioactive
materials, nuisance, trespass and recovery under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980. As a result, the plaintiffs remaining claims
are state law claims for contamination by non-radioactive
hazardous materials.
Other
Matters
In addition to the legal proceedings described above, various
other legal actions, claims and governmental investigations and
proceedings covering a wide range of matters are pending against
us, including claims and proceedings relating to several waste
disposal sites that have been identified by the United States
Environmental Protection Agency and similar agencies of various
States for remedial investigation and cleanup, which sites were
allegedly used by us in the past for the disposal of industrial
waste materials. Based on available information, we do 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. For additional information
regarding our legal proceedings, refer to the Note to the
Consolidated Financial Statements No. 19, Commitments and
Contingent Liabilities.
|
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|
No matter was submitted to a vote of the security holders of the
Company during the quarter ended December 31, 2007.
23
PART II.
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
|
The principal market for our common stock is the New York Stock
Exchange (Stock Exchange Symbol GT).
Information relating to the high and low sale prices of shares
of our common stock appears under the caption Quarterly
Data and Market Price Information in Item 8 of this
Annual Report at page 122, and is incorporated herein by
reference. Under our primary credit facilities we are permitted
to pay dividends on our common stock as long as no default will
have occurred and be continuing, we can incur additional
indebtedness under the credit facilities following the payment,
and certain financial tests are satisfied. We have not declared
any cash dividends in the three most recent fiscal years. At
December 31, 2007, there were 22,497 record holders of the
240,122,374 shares of our common stock then outstanding.
The following table presents information with respect to
repurchases of common stock made by us during the three months
ended December 31, 2007. These shares were delivered to us
by employees as payment for the exercise price of stock options
as well as the withholding taxes due upon the exercise of the
stock options or the vesting or payment of stock awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
|
Maximum Number
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as
|
|
|
|
of Shares that May
|
|
|
|
|
|
|
|
|
|
|
|
|
Part of Publicly
|
|
|
|
Yet Be Purchased
|
|
|
|
|
Total Number of
|
|
|
|
Average Price Paid
|
|
|
|
Announced Plans or
|
|
|
|
Under the Plans or
|
|
Period
|
|
|
Shares Purchased
|
|
|
|
per Share
|
|
|
|
Programs
|
|
|
|
Programs
|
|
10/1/07-10/31/07
|
|
|
|
13,516
|
|
|
|
$
|
29.85
|
|
|
|
|
|
|
|
|
|
|
|
11/1/07-11/30/07
|
|
|
|
1,622
|
|
|
|
|
30.38
|
|
|
|
|
|
|
|
|
|
|
|
12/1/07-12/31/07
|
|
|
|
138,252
|
|
|
|
|
27.34
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
153,390
|
|
|
|
$
|
27.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The information regarding our equity compensation plans that is
required by this item is incorporated herein by reference from
the registrants definitive Proxy Statement for the Annual
Meeting of Shareholders.
24
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,(1)
|
|
(In millions, except per share amounts)
|
|
2007(2)
|
|
|
2006(3)
|
|
|
2005(4)
|
|
|
2004(5)
|
|
|
2003(6)
|
|
|
Net Sales
|
|
$
|
19,644
|
|
|
$
|
18,751
|
|
|
$
|
18,098
|
|
|
$
|
16,885
|
|
|
$
|
13,900
|
|
Income (Loss) from Continuing Operations
|
|
$
|
139
|
|
|
$
|
(373
|
)
|
|
$
|
124
|
|
|
$
|
14
|
|
|
$
|
(846
|
)
|
Discontinued Operations
|
|
|
463
|
|
|
|
43
|
|
|
|
115
|
|
|
|
101
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Cumulative Effect of Accounting Change
|
|
|
602
|
|
|
|
(330
|
)
|
|
|
239
|
|
|
|
115
|
|
|
|
(807
|
)
|
Cumulative Effect of Accounting Change
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
602
|
|
|
$
|
(330
|
)
|
|
$
|
228
|
|
|
$
|
115
|
|
|
$
|
(807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per Share Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
$
|
0.70
|
|
|
$
|
(2.11
|
)
|
|
$
|
0.70
|
|
|
$
|
0.08
|
|
|
$
|
(4.83
|
)
|
Discontinued Operations
|
|
|
2.30
|
|
|
|
0.25
|
|
|
|
0.66
|
|
|
|
0.57
|
|
|
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Cumulative Effect of Accounting Change
|
|
|
3.00
|
|
|
|
(1.86
|
)
|
|
|
1.36
|
|
|
|
0.65
|
|
|
|
(4.61
|
)
|
Cumulative Effect of Accounting Change
|
|
|
|
|
|
|
|
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per Share Basic
|
|
$
|
3.00
|
|
|
$
|
(1.86
|
)
|
|
$
|
1.30
|
|
|
$
|
0.65
|
|
|
$
|
(4.61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per Share Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
$
|
0.65
|
|
|
$
|
(2.11
|
)
|
|
$
|
0.66
|
|
|
$
|
0.08
|
|
|
$
|
(4.83
|
)
|
Discontinued Operations
|
|
|
2.00
|
|
|
|
0.25
|
|
|
|
0.55
|
|
|
|
0.57
|
|
|
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Cumulative Effect of Accounting Change
|
|
|
2.65
|
|
|
|
(1.86
|
)
|
|
|
1.21
|
|
|
|
0.65
|
|
|
|
(4.61
|
)
|
Cumulative Effect of Accounting Change
|
|
|
|
|
|
|
|
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per Share Diluted
|
|
$
|
2.65
|
|
|
$
|
(1.86
|
)
|
|
$
|
1.16
|
|
|
$
|
0.65
|
|
|
$
|
(4.61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
17,191
|
|
|
$
|
17,029
|
|
|
$
|
15,598
|
|
|
$
|
16,082
|
|
|
$
|
14,283
|
|
Long Term Debt and Capital Leases due Within One Year
|
|
|
171
|
|
|
|
405
|
|
|
|
448
|
|
|
|
1,010
|
|
|
|
113
|
|
Long Term Debt and Capital Leases
|
|
|
4,329
|
|
|
|
6,562
|
|
|
|
4,741
|
|
|
|
4,442
|
|
|
|
4,825
|
|
Shareholders Equity (Deficit)
|
|
|
2,850
|
|
|
|
(758
|
)
|
|
|
73
|
|
|
|
74
|
|
|
|
(33
|
)
|
Dividends Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Refer to Principles of Consolidation and
Recently Issued Accounting Standards in the Note to
the Consolidated Financial Statements No. 1, Accounting
Policies. |
|
(2) |
|
Net income in 2007 included a net after-tax gain of
$508 million, or $2.19 per share diluted,
related to the sale of our Engineered Products business. Net
income in 2007 also included net after-tax charges of
$332 million, or $1.43 per share diluted, due
to curtailment and settlement charges related to our pension
plans; asset sales, including the assets of North American
Tires tire and wheel assembly operation; costs related to
the redemption and conversion of long-term debt; write-offs of
deferred debt issuance costs associated with refinancing,
redemption and conversion activities; rationalization charges,
including accelerated depreciation and asset write-offs; and the
impact of the USW strike. Of these amounts, discontinued
operations in 2007 included net after-tax charges of
$90 million, or $0.39 per share diluted, due to
curtailment and settlement charges related to pension plans,
rationalization charges, and costs associated with the USW
strike. |
|
(3) |
|
Net loss in 2006 included net after-tax charges of
$804 million, or $4.54 per share diluted, due
to the impact of the USW strike, rationalization charges,
accelerated depreciation and asset write-offs, and general and
product liability discontinued products. Net loss in
2006 included net after-tax benefits of $283 million, or |
25
|
|
|
|
|
$1.60 per share diluted, from certain tax
adjustments, settlements with raw material suppliers, asset
sales and increased estimated useful lives of our tire mold
equipment. Of these amounts, discontinued operations in 2006
included net after-tax charges of $56 million, or $0.32 per
share diluted due to the impact of the USW strike,
rationalization charges, accelerated depreciation and asset
write-offs, and net after-tax benefits of $16 million, or
$0.09 per share diluted, from settlements with raw
material suppliers. |
|
(4) |
|
Net income in 2005 included net after-tax charges of
$68 million, or $0.33 per share-diluted, due to reductions
in production resulting from the impact of hurricanes, fire loss
recovery, favorable settlements with certain chemical suppliers,
rationalizations, receipt of insurance proceeds for an
environmental insurance settlement, general and product
liability-discontinued products, asset sales, write-off of debt
fees, the cumulative effect of adopting FIN 47, and the
impact of certain tax adjustments. Of these amounts,
discontinued operations in 2005 included after-tax charges of
$4 million, or $0.02 per share diluted, for
rationalizations. |
|
(5) |
|
Net sales in 2004 increased $1 billion resulting from the
consolidation of two businesses in accordance with FIN 46R.
Net income in 2004 included net after-tax charges of
$154 million, or $0.87 per share-diluted, for
rationalizations and related accelerated depreciation, general
and product liability-discontinued products, insurance fire loss
deductibles, external professional fees associated with an
accounting investigation and asset sales. Net income in 2004
also included net after-tax benefits of $239 million, or
$1.34 per share-diluted, from an environmental insurance
settlement, net favorable tax adjustments and a favorable
lawsuit settlement. Of these amounts, discontinued operations in
2004 included net after-tax charges of $28 million, or
$0.16 per share diluted, for rationalizations and
related accelerated depreciation, and after-tax gains of
$4 million, or $0.02 per share diluted, from
asset sales and a favorable lawsuit settlement. |
|
(6) |
|
Net loss in 2003 included net after-tax charges of
$516 million, or $2.93 per share-diluted, for
rationalizations, general and product liability-discontinued
products, accelerated depreciation and asset write-offs, net
favorable tax adjustments, and an unfavorable settlement of a
lawsuit. In addition, we recorded account reconciliation
adjustments related to Engineered Products in the restatements
totaling $19 million or $0.11 per share in 2003. Of these
amounts, discontinued operations in 2003 included net after-tax
charges of $29 million, or $0.17 per share
diluted, for rationalizations, favorable tax adjustments and
asset sales. In addition, discontinued operations included
charges for account reconciliation adjustments in the
restatements totaling $19 million or $0.11 per share in
2003. |
26
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
|
OVERVIEW
The Goodyear Tire & Rubber Company is one of the
worlds leading manufacturers of tires, with one of the
most recognizable brand names in the world and operations in
most regions of the world. We have a broad global footprint with
64 manufacturing facilities in 25 countries, including the
United States. In 2007, we operated our business through five
operating segments representing our regional tire businesses:
North American Tire; European Union Tire; Eastern Europe, Middle
East and Africa Tire; Latin American Tire; and Asia Pacific
Tire. As a result of our sale of substantially all of our
Engineered Products business, we have reported the results of
that segment as discontinued operations. Unless otherwise
indicated, all disclosures in Managements Discussion and
Analysis of Financial Condition and Results of Operations relate
to continuing operations.
We have been implementing strategies to drive top-line growth,
reduce costs, improve our capital structure and focus on core
businesses where we can achieve profitable growth. During 2007,
we continued to make progress in implementing these strategies
through the following accomplishments:
|
|
|
|
|
Our recovery from the fourth quarter 2006 USW strike was faster
and less costly than anticipated,
|
|
|
|
We continued to make progress on our four-point cost savings
plan,
|
|
|
|
We have taken significant steps in the VEBA approval process,
|
|
|
|
We announced significant changes to our
U.S.-based
retail and salaried employees pension and retiree benefit
plans, and
|
|
|
|
We completed our Capital Structure Improvement Plan.
|
Consolidated
Results of Operations
For the year ended December 31, 2007, we had net income of
$602 million compared to a net loss of $330 million in
2006. We recorded income from continuing operations in 2007 of
$139 million, compared to a loss from continuing operations
of $373 million in 2006. In addition, our total segment
operating income for 2007 was $1,230 million compared to
$712 million in 2006. See Result of
Operations Segment Information for additional
information. Operating income improved in 2007 by approximately
$279 million as a result of returning to normal sales and
production levels following the USW strike, which negatively
impacted the fourth quarter of 2006 and part of the first
quarter of 2007. The impact of the strike in 2007 was less than
originally anticipated primarily due to North American
Tires ability to
ramp-up
production faster than expected and to emphasize production of
higher margin replacement tires.
Our 2007 results were impacted favorably by price and product
mix improvements and favorable foreign currency translation,
partially offset by decreased volumes, primarily due to the USW
strike and our decision to exit certain segments of the private
label tire business, higher raw material costs, and increased
selling, administrative and general expense.
Four-Point
Cost Savings Plan
We have announced a four-point cost savings plan which includes
continuous improvement programs, reducing high-cost
manufacturing capacity, leveraging our global position by
increasing low-cost country sourcing, and reducing selling,
administrative and general expense. We expect to achieve between
$1.8 billion and $2 billion of aggregate gross cost
savings from 2006 through 2009. The expected cost reductions
consist of:
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from $1.25 billion to $1.4 billion of estimated
savings related to continuous improvement initiatives, including
safety programs, business process improvements, such as six
sigma and lean manufacturing, and product reformulations, and
ongoing savings that we expect to achieve from our master labor
agreement with the USW (through December 31, 2007, we
estimate we have achieved over $700 million in savings
under these initiatives);
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27
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|
over $150 million of estimated savings from the reduction
of high-cost manufacturing capacity by over 25 million
units (we estimate that announced reductions to date will result
in approximately $135 million of savings when complete);
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|
between $200 million to $300 million of estimated
savings related to our sourcing strategy of increasing our
procurement of tires, raw materials, capital equipment and
indirect materials from low-cost countries (through
December 31, 2007, we estimate we have achieved nearly
$100 million in savings under this strategy);
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from $200 million to $250 million of estimated savings
from reductions in selling, administrative and general expense
related to initiatives including benefit plan changes,
back-office and warehouse consolidations and headcount
reductions (through December 31, 2007, we estimate we have
achieved more than $175 million in savings under these
efforts).
|
Execution of our four-point cost savings plan and realization of
the projected savings is critical to our success.
Voluntary
Employees Beneficiary Association
During the fourth quarter of 2007, the U.S. District Court
for the Northern District of Ohio preliminarily approved the
settlement agreement filed by the USW, the retiree class
representatives and Goodyear that would result in the
establishment of the VEBA and set the date for a hearing
regarding the settlement agreement. Following that hearing, the
District Court will determine whether to grant final approval of
the settlement agreement. The savings we expect to achieve from
the VEBA are included in our anticipated continuous improvement
savings described above under Four-Point Cost Savings
Plan.
Pension
and Benefit Plan Changes
In February 2007, we announced various changes to our
U.S.-based
retail and salaried employee pension and retiree benefit plans.
These changes will be phased in over a two-year period, with
most benefit plan changes effective in 2008 and the most
significant pension plan changes effective in 2009. As a result
of the changes, we achieved after-tax savings of
$91 million in 2007, and expect to achieve after-tax
savings of $100 million to $110 million in 2008, and
$80 million to $90 million in 2009 and beyond. The
ongoing savings are included in our targeted savings from
continuous improvement initiatives and reductions in selling,
administrative and general expense described above under
Four-Point Cost Savings Plan. We recorded a
curtailment charge of $64 million related to these actions
in the first quarter of 2007.
Capital
Structure Improvement Plan
In April 2007, we completed a refinancing of three of our
primary credit facilities, which extended maturities, reduced
applicable interest rates and provides us with a more flexible
covenant package.
In May 2007, we completed a public equity offering of
26.1 million shares of common stock at a price of $33.00
per share, raising $862 million before offering costs. We
used a portion of the $833 million net proceeds from the
equity offering to exercise our rights to redeem
$175 million of our $500 million 8.625% senior
notes due 2011 and $140 million of our $400 million
9% senior notes due in 2015.
In July 2007, we completed the sale of our Engineered Products
business for $1.475 billion, which marked the completion of
our Capital Structure Improvement Plan that we began in 2003. We
recognized an after-tax gain on the sale of our Engineered
Products business of $508 million, or $2.19 per share,
which is reported in discontinued operations.
In addition, during the third quarter of 2007, we repaid our
$300 million third lien secured term loan due 2011. During
the fourth quarter of 2007, we completed an offer to exchange
our outstanding 4% convertible senior notes due 2034 for a
cash payment and shares of our common stock. The exchange offer
resulted in the issuance of 28.7 million shares of common
stock, a total cash payment, including accrued and unpaid
interest, of $23 million, and a reduction of debt of
$346 million. On February 1, 2008, we issued notices
of redemption to the holders of our $650 million senior
secured notes due 2011. That redemption will occur on
March 3, 2008.
28
New
Products
At our North American dealer conference in early February 2008
we continued our transformation to a market-driven,
consumer-focused company with the introduction of the Goodyear
Assurance and the Eagle GT tires. The Assurance is a mid-tier
passenger tire and joins the brands two premium offerings
in that segment: Assurance ComforTred and Assurance TripleTred.
It is targeted at the everyday consumer and designed to deliver
enhanced traction and responsive handling. The new Eagle GT is
positioned within the Goodyear Eagle Performance Tire family as
a mid-tier entry, complementing the brands three premium
ultra-high performance offerings, including the Eagle F1 GS-D3,
the Eagle F1 All-Season, and the Eagle F1 Asymmetric. We expect
to introduce additional new tires in key market segments in 2008.
Industry
Volume Estimates
Our 2008 industry volume estimates for our two largest regions
are as follows: In North America we estimate consumer OE volume
will be down 2% to 4%, and commercial OE volume will be up 20%
to 30% reflecting a recovery in demand following weak 2007
industry volumes which were driven by regulations regarding new
commercial vehicle emission standards. North American consumer
and commercial replacement volumes are both expected to be flat
to up 2%. In Europe, consumer OE volume is expected to be up 2%
to 4%, and commercial OE volume is expected to be up 5% to 10%.
We expect consumer replacement volume to be flat to up 1% and
commercial replacement volume to be up 1% to 2%.
Our results of operations, financial position and liquidity
could be adversely affected in future periods by loss of market
share or lower demand in the replacement market or the OE
industry, which would result in lower levels of plant
utilization and an increase in unit costs. Also, we could
experience higher raw material and energy costs in future
periods. These costs, if incurred, may not be recoverable due to
pricing pressures present in todays highly competitive
market and we may not be able to continue improving our product
mix. Our future results of operations are also dependent on our
ability to successfully implement our cost reduction programs
and address increasing competition from low-cost manufacturers.
We are unable to predict future currency fluctuations. Sales and
earnings in future periods would be unfavorably impacted if the
U.S. dollar strengthens against various foreign currencies,
or if economic conditions deteriorate in the economies in which
we operate. Continued volatile economic conditions or changes in
government policies in emerging markets could adversely affect
sales and earnings in future periods. For additional factors
that may impact our business and results of operations please
see Risk Factors at page 13.
RESULTS
OF OPERATIONS CONSOLIDATED
(All per share amounts are diluted)
2007
Compared to 2006
For the year ended December 31, 2007, we had net income of
$602 million, or $2.65 per share, compared to a net loss of
$330 million, or $1.86 per share, in the comparable period
of 2006. Income from continuing operations in 2007 was
$139 million, or $0.65 per share, compared to a loss from
continuing operations of $373 million, or $2.11 per share,
in 2006.
Net
Sales
Net sales in 2007 were $19.6 billion, increasing
$893 million, or 5% compared to 2006. Net sales in 2007
were impacted favorably by price and product mix of
$880 million and favorable currency translation of
$833 million, primarily in European Union Tire. These
increases were partially offset by decreased volume of
$784 million, net of $216 million of higher sales
volume in 2007 compared to 2006 as a result of the USW strike.
The decrease in volume is primarily attributable to North
American Tire, due to our June 2006 decision to exit the certain
segments of the private label tire business, in addition to
lower sales from other tire related businesses of
$32 million.
29
The following table presents our tire unit sales for the periods
indicated:
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|
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Year Ended December 31,
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(In millions of tires)
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2007
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2006
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|
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% Change
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|
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Replacement Units
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|
|
|
|
|
|
|
|
|
|
|
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North American Tire (U.S. and Canada)
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55.7
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61.6
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|
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(9.6
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)%
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International
|
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86.2
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|
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90.4
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|
|
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(4.7
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)%
|
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|
|
|
|
|
|
|
|
|
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Total
|
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141.9
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|
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|
152.0
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|
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|
(6.7
|
)%
|
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|
|
|
|
|
|
|
|
|
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|
OE Units
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North American Tire (U.S. and Canada)
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25.6
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29.3
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|
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(12.6
|
)%
|
International
|
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34.2
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33.7
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1.3
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%
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|
|
|
|
|
|
|
|
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Total
|
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59.8
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|
|
|
63.0
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|
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|
(5.1
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)%
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|
|
|
|
|
|
|
|
|
|
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|
Goodyear worldwide tire units
|
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201.7
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|
|
|
215.0
|
|
|
|
(6.2
|
)%
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|
|
|
|
|
|
|
|
|
|
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|
The decrease in worldwide tire unit sales of 13.3 million
units, or 6.2% compared to 2006 is primarily driven by a
decrease of 10.1 million units, or 6.7%, in replacement
units, primarily in North American Tire and European Union Tire.
North American Tire consumer replacement volume decreased
6.0 million units, or 10.3% due to a strategic share
reduction in the lower value segment following our decision to
exit certain segments of the private label tire business,
partially offset by increased share of our higher value branded
products. European Union Tire consumer replacement volume
decreased 4.4 million units, or 9.9% compared to 2006,
which was primarily market and strategy driven. The decrease in
replacement volume was partially offset by an increase in
Eastern Europe Tire replacement volume of 0.8 million units
or 4.5%. OE units sales in 2007 decreased by 3.2 million
units, or 5.1%, due primarily to decreases in North American
Tire, driven by lower vehicle production, and Eastern Europe
Tire, due to the exit of non-profitable business. This decrease
in OE unit sales was partially offset by increases in Latin
America Tire and European Union Tire.
Cost of
Goods Sold
Cost of goods sold (CGS) was $15.9 billion in
2007, an increase of $184 million, or 1% compared to the
2006 period. CGS decreased to 81.0% of sales in 2007 compared to
83.9% in 2006. CGS increased in 2007 due to higher foreign
currency translation of $606 million, product mix-related
cost increases of $241 million, primarily related to North
America Tire and European Union Tire, higher raw material costs
of $195 million, and increased conversion costs of
$94 million. Also increasing CGS were increased research
and development expenses of $30 million, a curtailment
charge of $27 million related to the benefit plan changes
announced in the first quarter of 2007, and increased costs of
approximately $25 million related to production
inefficiencies and a strike in South Africa. Partially
offsetting these increases was lower volume of
$883 million, primarily related to North American Tire,
higher savings from restructuring plans of $49 million,
lower accelerated depreciation of $46 million, and
decreased costs related to other tire related businesses of
$39 million. 2006 was also affected by a pension plan
curtailment gain of $13 million and $29 million
related to favorable settlements with certain raw material
suppliers. In addition, the net impact of the USW strike
increased volume and product mix by approximately
$125 million, and decreased conversion costs and costs
related to other tire-related businesses by approximately
$180 million in 2007 compared to 2006.
Selling,
Administrative and General Expense
Selling, administrative and general expense (SAG)
was $2.8 billion in 2007, an increase of $216 million
or 8%. SAG in 2007 was 14.1% of sales, compared to 13.6% in
2006. The increase was driven primarily by unfavorable foreign
currency translation of $111 million, a curtailment charge
of $37 million related to the benefit plan changes
announced in the first quarter of 2007, and higher incentive
stock compensation expense of $33 million. Also unfavorably
impacting SAG were higher advertising expenses of
$24 million, primarily in the North American and Asia
Pacific Tire Segments, increased general and product liability
expenses of $14 million, increased consulting and contract
labor expenses of $9 million, and higher bad debt expenses
of approximately $6 million, primarily in
30
European Union Tire. These increases were partially offset by
decreases in employee benefit costs of $26 million,
primarily related to North American Tire, and higher savings
from restructuring plans of $16 million.
Interest
Expense
Interest expense was $450 million, an increase of
$3 million during 2007 as compared to 2006. Interest
expense in 2007 was adversely impacted by higher debt levels
incurred during the USW strike, but was favorably affected by a
reduction in outstanding debt following the end of the strike
and the early retirement of various debt obligations during
2007. Interest expense in 2008 is expected to decline relative
to 2007 due primarily to lower average debt levels.
Other
(Income) and Expense
Other (income) and expense was $1 million of income in
2007, a decrease of $86 million compared to
$87 million of income in 2006. The decrease was primarily
due to higher financing fees of $66 million primarily
relating to our redemption of $315 million of long term
debt, our exchange offer for our outstanding 4% convertible
senior notes and our refinancing activities in April 2007. In
addition, we incurred higher losses of $33 million on
foreign currency exchange in 2007 primarily as a result of the
weakening U.S. dollar versus the euro, Chilean peso and
Brazilian real. Other income was also unfavorably impacted by
lower net gains on asset sales of approximately $25 million
in 2007 compared to 2006 primarily as a result of a loss of
$36 million ($35 million net of minority interest) on
the sale of substantially all of the assets of North American
Tires tire and wheel assembly operation in the fourth
quarter of 2007. In 2007 there was a fire in our Thailand
facility, which resulted in a loss of $12 million, net of
insurance proceeds. The decrease in other income was partially
offset by an increase in interest income of approximately
$42 million due primarily to higher cash balances in 2007.
In addition, other income was favorably impacted by a decrease
of approximately $11 million in expenses related to general
and product liabilities, including asbestos and Entran II
claims.
For further information, refer to the Note to the Consolidated
Financial Statements No. 3, Other (Income) and Expense.
Income
Taxes
For 2007, we recorded tax expense of $255 million on income
from continuing operations before income taxes and minority
interest of $464 million. For 2006, we recorded tax expense
of $60 million on a loss from continuing operations before
income taxes and minority interest of $202 million.
The difference between our effective tax rate and the
U.S. statutory rate was primarily due to our continuing to
maintain a full valuation allowance against our net Federal
and state deferred tax assets and the adjustments discussed
below.
Income tax expense in 2007 includes a net tax benefit totaling
$6 million, which consists of a tax benefit of
$11 million ($0.04 per share) related to prior periods
offset by a $5 million charge primarily related to recently
enacted tax law changes. The out-of-period adjustment related to
our correction of the inflation adjustment on equity of our
subsidiary in Colombia as a permanent tax benefit rather than as
a temporary tax benefit dating back as far as 1992, with no
individual year being significantly affected. Income tax expense
in 2006 included net favorable tax adjustments totaling
$163 million. The adjustments for 2006 related primarily to
the resolution of an uncertain tax position regarding a
reorganization of certain legal entities in 2001, which was
partially offset by a charge of $47 million to establish a
foreign valuation allowance, attributable to a rationalization
plan.
Our losses in certain foreign locations in recent periods
represented sufficient negative evidence to require us to
maintain a full valuation allowance against our net deferred tax
assets in these foreign locations. However, it is reasonably
possible that sufficient positive evidence required to release
all, or a portion, of these valuation allowances within the next
12 months will exist, resulting in one-time tax benefits of
up to $70 million ($60 million net of minority
interest).
For further information, refer to the Note to the Consolidated
Financial Statements No. 14, Income Taxes.
31
Rationalizations
To maintain global competitiveness, we have implemented
rationalization actions over the past several years to reduce
excess and high-cost manufacturing capacity and to reduce
associate headcount. We recorded net rationalization costs of
$49 million in 2007 and $311 million in 2006.
2007
Rationalization actions in 2007 consisted primarily of a
decision to reduce tire production at two facilities in Amiens,
France in our European Union Tire Segment. These actions are
expected to be implemented in the second half of 2008 and will
involve a reduction of up to 500 associates and the reduction of
certain high-cost production. Other rationalization actions in
2007 related to plans to reduce manufacturing, selling,
administrative and general expenses through headcount reductions
in several segments.
During 2007, net rationalization charges of $49 million
($41 million after-tax or $0.17 per share) were recorded.
New charges of $63 million were comprised of
$28 million for plans initiated in 2007, primarily related
to associate severance costs, and $35 million for plans
initiated in 2006, consisting of $9 million for associate
severance costs and $26 million for other exit and
non-cancelable lease costs. The net charges in 2007 also
included the reversal of $14 million of charges for actions
no longer needed for their originally intended purposes.
Approximately 600 associates will be released under programs
initiated in 2007, of which approximately 100 were released by
December 31, 2007.
In 2007, $45 million was incurred for associate severance
payments, and $39 million was incurred for non-cancelable
lease and other exit costs.
In addition to the above charges, accelerated depreciation
charges of $37 million were recorded in CGS in 2007,
primarily for fixed assets taken out of service in connection
with the elimination of tire production at our Tyler, Texas and
Valleyfield, Quebec facilities in our North American Tire
Segment.
General
Upon completion of the 2007 plans, we estimate that annual
operating costs will be reduced by approximately
$28 million ($22 million CGS and $6 million SAG).
The savings realized in 2007 for the 2007 plans totaled
approximately $7 million ($4 million CGS and
$3 million SAG). In addition, savings realized in 2007 for
the 2006 plans totaled approximately $122 million
($80 million CGS and $42 million SAG) compared to our
estimate of $205 million. 2007 savings related to 2006
rationalization activities is less than the prior year estimate
primarily due to the Tyler plant closure not occurring in 2007
as planned, the discontinuation of tire production at
Valleyfield not realizing a full year of savings, and plan
changes and implementation delays.
For further information, refer to the Note to the Consolidated
Financial Statements No. 2, Costs Associated with
Rationalization Programs.
2006
Rationalization actions in 2006 consisted of plant closures in
the European Union Tire Segment of a passenger tire
manufacturing facility in Washington, United Kingdom, and in the
Asia Pacific Tire Segment of the Upper Hutt, New Zealand
passenger tire manufacturing facility. Charges were also
incurred for a plan in North American Tire to cease tire
manufacturing at our Tyler, Texas facility, which was
substantially complete in December 2007, and a plan in Eastern
Europe Tire to close our tire manufacturing facility in
Casablanca, Morocco, which was completed in the first quarter of
2007. Charges were also recorded for a partial plant closure in
the North American Tire Segment involving a plan to discontinue
tire production at our Valleyfield, Quebec facility, which was
completed by the second quarter of 2007. In conjunction with
these charges we also recorded a $47 million tax valuation
allowance. Other plans in 2006 included an action in the Eastern
Europe Tire Segment to exit the bicycle tire and tube production
line in Debica, Poland, retail store closures in the European
Union Tire and Eastern Europe Tire Segments as well as plans in
most segments to reduce selling, administrative and general
expenses through headcount reductions, all of which were
substantially completed.
32
For 2006, $311 million ($328 million after-tax or
$1.85 per share) of net charges were recorded. New charges of
$322 million are comprised of $315 million for plans
initiated in 2006 and $7 million for plans initiated in
2005 for associate-related costs. The $315 million of
charges for 2006 plans consisted of $286 million of
associate-related costs, of which $159 million related to
associate severance costs and $127 million related to
non-cash pension and postretirement benefit costs, and
$29 million of non-cancelable lease costs. The net charges
in 2006 also included reversals of $11 million for actions
no longer needed for their originally intended purposes.
Approximately 4,800 associates will be released under programs
initiated in 2006, of which approximately 3,900 were released by
December 31, 2007.
In 2006, $98 million was incurred for associate severance
payments, $127 million for non-cash pension and
postretirement termination benefit costs, and $21 million
for non-cancelable lease and other exit costs.
In addition to the above charges, accelerated depreciation
charges of $81 million and asset impairment charges of
$2 million were recorded in CGS related to fixed assets
that will be taken out of service primarily in connection with
the Washington, Casablanca, Upper Hutt, and Tyler plant
closures. We also recorded charges of $2 million of
accelerated depreciation and $3 million of asset impairment
in SAG.
Discontinued
Operations
Discontinued operations had income of $463 million, or
$2.00 per share, in 2007 compared to income of $43 million,
or $0.25 per share, in 2006, representing an increase of
$420 million. The increase in 2007 is primarily due to a
gain of $508 million on the sale of our Engineered Products
business. For further information, refer to the Note to the
Consolidated Financial Statements No. 17, Discontinued
Operations.
2006
Compared to 2005
For the year ended December 31, 2006, we had a net loss of
$330 million, or $1.86 per share, compared to net income of
$228 million, or $1.16 per share, in the comparable period
of 2005. Loss from continuing operations in 2006 was
$373 million, or $2.11 per share, compared to income from
continuing operations of $124 million, or $0.66 per share,
in 2005. Net income in 2005 included a net loss from the
cumulative effect of an accounting change totaling
$11 million, or $0.05 per share.
Net
Sales
Net sales in 2006 were $18.8 billion, increasing
$653 million, or 4% compared to 2005. Net sales in 2006 for
our tire segments were impacted favorably by price and product
mix by approximately $1,067 million, increased sales from
our other tire related businesses of $407 million,
primarily in North American Tire, and favorable currency
translation of $200 million, primarily in European Union
Tire. Partially offsetting these were lower volume of
$405 million, primarily in North American Tire,
$318 million of lower sales as a result of the USW strike,
and $265 million of sales related to 2005 North American
Tire divestitures.
33
The following table presents our tire unit sales for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions of tires)
|
|
2006
|
|
|
2005
|
|
|
% Change
|
|
|
Replacement Units
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Tire (U.S. and Canada)
|
|
|
61.6
|
|
|
|
71.2
|
|
|
|
(13.4
|
)%
|
International
|
|
|
90.4
|
|
|
|
90.8
|
|
|
|
(0.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
152.0
|
|
|
|
162.0
|
|
|
|
(6.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OE Units
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Tire (U.S. and Canada)
|
|
|
29.3
|
|
|
|
30.7
|
|
|
|
(4.8
|
)%
|
International
|
|
|
33.7
|
|
|
|
33.7
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
63.0
|
|
|
|
64.4
|
|
|
|
(2.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodyear worldwide tire units
|
|
|
215.0
|
|
|
|
226.4
|
|
|
|
(5.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide replacement unit sales in 2006 decreased from 2005 due
primarily to an overall decline in the consumer replacement
market as well as a strategic share reduction in the lower value
segment in North American Tire. OE unit sales in 2006 decreased
from 2005 due primarily to North American Tire, driven by lower
vehicle production, and European Union Tire due to our selective
fitment strategy and a weak OE consumer market, offset by
increased unit sales in Latin American Tire due to increased
market share. The USW strike also decreased units by
2.8 million.
Cost of
Goods Sold
CGS was $15.7 billion in 2006, an increase of
$1.2 billion, or 8% compared to the 2005 period. CGS
increased to 83.9% of sales in 2006 compared to 80.3% in 2005.
CGS for our tire segments in 2006 increased due to higher raw
material costs of $829 million, and $369 million of
increased costs related to other tire related businesses.
Product mix-related manufacturing cost increases of
$321 million, primarily related to North American Tire and
European Union Tire, $212 million of higher conversion
costs mainly in North American Tire, and foreign currency
translation of $115 million, primarily related to European
Union Tire also increased CGS. Also increasing CGS was
$83 million of accelerated depreciation and asset
impairment charges, primarily related to the closure of the
Washington, United Kingdom; Upper Hutt, New Zealand; and
Casablanca, Morocco facilities and the elimination of tire
production at our Tyler, Texas facility. Partially offsetting
these increases were lower volume of $360 million,
primarily related to North American Tire, divestitures in 2005
of $227 million, lower depreciation expense of
$31 million as a result of the increased estimated useful
lives of our tire mold equipment, and $29 million as a
result of a favorable settlement with a raw material supplier.
Also reducing CGS was savings from rationalization plans of
$21 million and a pension plan curtailment gain in Brazil
of $13 million. The USW strike decreased volume and product
mix by $229 million, and increased conversion costs and
costs related to other tire related businesses by
$222 million. Also included in 2005 costs were
$21 million of hurricane related expenses.
Selling,
Administrative and General Expense
SAG was $2.5 billion in 2006, a decrease of
$88 million or 3%. SAG in 2006 was 13.6% of sales, compared
to 14.6% in 2005. The decrease in our tire segments was driven
primarily by lower advertising expenses of $49 million,
primarily in the European Union and North American Tire
Segments, savings from rationalization programs of
$22 million, and lower wage and benefit expenses of
$30 million, partially offset by stock-based compensation
expense of $26 million. Also 2005 included approximately
$10 million of costs related to hurricanes. These decreases
were partially offset by unfavorable currency translation of
$22 million, higher general and product liability expenses
of $15 million, primarily in North American Tire, and
$5 million of accelerated depreciation and asset impairment
charges primarily related to a plant closure in Morocco. Also
increasing SAG was approximately $2 million related to the
impact of the USW strike.
34
Interest
Expense
Interest expense was $447 million, an increase of
$39 million during 2006 as compared to 2005. The increase
was primarily due to an increase in 2006 average debt levels due
to financing arrangements entered into partly as a result of the
USW strike.
Other
(Income) and Expense
Other (income) and expense was $87 million of income in
2006, an increase of $149 million compared to
$62 million of expense in 2005. The increase in income was
primarily due to lower amortization of commitment fees and other
debt related costs of $69 million, and increased interest
income of $28 million from short term investments of the
additional cash balances resulting from increased borrowings. In
2006 there were gains of $21 million and $9 million,
respectively, from the sale of a capital lease in the European
Union and the Fabric business, compared to a net loss of
$49 million in 2005 from the sale of the Farm Tire and
Wingtack businesses. 2006 also included the reversal of a
liability of $13 million in Brazil subsequent to a
favorable court ruling. These gains were partially offset by
approximately $17 million in additional expenses related to
general and product liabilities, primarily related to asbestos
claims, and a decline of $42 million in net insurance
settlement gains.
For further information, refer to the Note to the Consolidated
Financial Statements No. 3, Other (Income) and Expense.
Income
Taxes
For 2006, we recorded tax expense of $60 million on a loss
from continuing operations before income taxes and minority
interest of $202 million. For 2005, we recorded tax expense
of $233 million on income from continuing operations before
income taxes and minority interest in net income of subsidiaries
of $452 million.
The difference between our effective tax rate and the
U.S. statutory rate was primarily due to our continuing to
maintain a full valuation allowance against our net Federal
and state deferred tax assets and the net favorable adjustments
discussed below.
Income tax expense in 2006 and 2005 includes net favorable tax
adjustments totaling $163 million and $25 million,
respectively. The adjustments for 2006 related primarily to the
resolution of an uncertain tax position regarding a
reorganization of certain legal entities in 2001, which was
partially offset by a charge of $47 million to establish a
foreign valuation allowance, attributable to a rationalization
plan. The favorable adjustment for 2005 related primarily to the
release of certain foreign valuation allowances.
For further information, refer to the Note to the Consolidated
Financial Statements No. 14, Income Taxes.
Rationalizations
To maintain global competitiveness, we have implemented
rationalization actions over the past several years for the
purpose of reducing excess and high-cost manufacturing capacity
and to reduce associate headcount. We recorded net
rationalization costs of $311 million in 2006 and
$7 million in 2005.
2006
Rationalization actions in 2006 consisted of plant closures in
the European Union Tire Segment of a passenger tire
manufacturing facility in Washington, United Kingdom, and in the
Asia Pacific Tire Segment of the Upper Hutt, New Zealand
passenger tire manufacturing facility. Charges were also
incurred for a plan in North American Tire to cease tire
manufacturing at our Tyler, Texas facility, which was
substantially complete in December 2007, and a plan in Eastern
Europe Tire to close our tire manufacturing facility in
Casablanca, Morocco, which was completed in the first quarter of
2007. Charges were also recorded for a partial plant closure in
the North American Tire Segment involving a plan to discontinue
tire production at our Valleyfield, Quebec facility, which was
completed by the second quarter of 2007. In conjunction with
these charges we also recorded a $47 million tax valuation
allowance. Other plans in 2006 included an action in the Eastern
Europe Tire Segment to exit the bicycle tire and tube production
line in Debica, Poland, retail store closures in the European
Union Tire and Eastern Europe Tire Segments as well as plans in
most segments to reduce selling, administrative and general
expenses through headcount reductions, all of which were
substantially completed.
35
For 2006, $311 million ($328 million after-tax or
$1.85 per share) of net charges were recorded. New charges of
$322 million are comprised of $315 million for plans
initiated in 2006 and $7 million for plans initiated in
2005 for associate-related costs. The $315 million of
charges for 2006 plans consisted of $286 million of
associate-related costs, of which $159 million related to
associate severance costs and $127 million related to
non-cash pension and postretirement benefit costs, and
$29 million of non-cancelable lease costs. The net charges
in 2006 also included reversals of $11 million for actions
no longer needed for their originally intended purposes.
Approximately 4,800 associates will be released under programs
initiated in 2006, of which approximately 3,900 were released by
December 31, 2007.
In 2006, $98 million was incurred for associate severance
payments, $127 million for non-cash pension and
postretirement termination benefit costs, and $21 million
for non-cancelable lease and other exit costs.
In addition to the above charges, accelerated depreciation
charges of $81 million and asset impairment charges of
$2 million were recorded in CGS related to fixed assets
that will be taken out of service primarily in connection with
the Washington, Casablanca, Upper Hutt, and Tyler plant
closures. We also recorded charges of $2 million of
accelerated depreciation and $3 million of asset impairment
in SAG.
2005
Rationalization charges in 2005 consisted of manufacturing
associate reductions, retail store reductions, IT associate
reductions, and a sales function reorganization in European
Union Tire; manufacturing and administrative associate
reductions in Eastern Europe Tire; and manufacturing and
corporate support group associate reductions in North American
Tire, all of which were substantially completed.
For 2005, $7 million ($2 million after-tax or $0.00
per share) of net charges were recorded, which included
$24 million of charges recorded in 2005, of which
$22 million were for associate-related costs for new plans
initiated in 2005 and $2 million for plans initiated in
prior years. These charges were partially offset by
$17 million of reversals for rationalization charges no
longer needed for their originally-intended purposes. The
reversals consisted of $10 million of associate-related
costs for plans initiated in prior years, and $7 million
for non-cancelable leases that were exited during the first
quarter related to plans initiated in prior years. Approximately
740 associates have been released under the programs initiated
in 2005 as of December 31, 2007.
In 2005, $33 million was incurred for associate severance
payments, $1 million for cash pension settlement benefit
costs and $7 million for non-cancelable lease costs.
Discontinued
Operations
Income in 2006 decreased $72 million compared to 2005 due
primarily to the negative impact of the USW strike of
approximately $48 million, increased raw material costs of
$40 million, and lower volume of $18 million.
Partially offsetting these were favorable price and product mix
of $39 million, $16 million in favorable settlements
with certain raw material suppliers, $1 million in lower
SAG, and lower conversion costs of approximately
$4 million. In addition, currency translation of
$3 million and $2 million related to a pension plan
curtailment gain in Brazil, favorably impacted operating income.
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board
(FASB) issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes-an
Interpretation of FASB Statement No. 109
(FIN 48). FIN 48 clarifies what criteria
must be met prior to recognizing the financial statement benefit
of a position taken in a tax return and requires companies to
include additional qualitative and quantitative disclosures
related to such positions within their financial statements. The
disclosures include potential tax benefits from positions taken
for tax return purposes that have not been recognized for
financial reporting purposes and a tabular presentation of
significant changes during each period. The disclosures also
include a discussion of the nature of uncertainties, factors
which could cause a change, and an estimated range of reasonably
possible changes in tax uncertainties. FIN 48 also requires
a company to recognize a financial statement benefit for a
position taken for tax return purposes when it will be more
likely than not that the position will be sustained. We adopted
FIN 48 on January 1, 2007. The adoption resulted in
36
an increase in the opening balance of retained earnings and a
decrease in goodwill of $32 million and $5 million,
respectively, for tax benefits not previously recognized under
historical practice.
In September 2006, the FASB issued Statement of Financial
Accounting Standards (SFAS) No. 157, Fair
Value Measurements (SFAS No. 157).
SFAS No. 157 addresses how companies should measure
fair value when they are required to use a fair value measure
for recognition and disclosure purposes under generally accepted
accounting principles. SFAS No. 157 will require the
fair value of an asset or liability to be based on market-based
measures which will reflect the credit risk of the company.
SFAS No. 157 will also expand disclosure requirements
to include the methods and assumptions used to measure fair
value and the effect of fair value measures on earnings. The
adoption of SFAS No. 157 effective January 1,
2008 did not have a material impact on our consolidated
financial statements.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities Including an Amendment of FASB Statement
No. 115 (SFAS No. 159).
SFAS No. 159 permits a company to choose to measure
many financial instruments and other items at fair value that
are not currently required to be measured at fair value. The
objective is to improve financial reporting by providing a
company with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting
provisions. A company will report unrealized gains and losses in
earnings at each subsequent reporting date on items for which
the fair value option has been elected. The adoption of
SFAS No. 159 effective January 1, 2008 did not
have a material impact on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141
(Revised), Business Combinations
(SFAS No. 141 (R)), replacing
SFAS No. 141, Business Combinations
(SFAS No. 141), and
SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements an Amendment of
ARB No. 51 (SFAS No. 160).
SFAS No. 141(R) retains the fundamental requirements
of SFAS No. 141, broadens its scope by applying the
acquisition method to all transactions and other events in which
one entity obtains control over one or more other businesses,
and requires, among other things, that assets acquired and
liabilities assumed be measured at fair value as of the
acquisition date, that liabilities related to contingent
consideration be recognized at the acquisition date and
remeasured at fair value in each subsequent reporting period,
that acquisition-related costs be expensed as incurred, and that
income be recognized if the fair value of the net assets
acquired exceeds the fair value of the consideration
transferred. SFAS No. 160 establishes accounting and
reporting standards for noncontrolling interests (i.e., minority
interests) in a subsidiary, including changes in a parents
ownership interest in a subsidiary and requires, among other
things, that noncontrolling interests in subsidiaries be
classified as a separate component of equity. Except for the
presentation and disclosure requirements of
SFAS No. 160, which are to be applied retrospectively
for all periods presented, SFAS No. 141 (R) and
SFAS No. 160 are to be applied prospectively in
financial statements issued for fiscal years beginning after
December 15, 2008. We are assessing the impact
SFAS No. 160 will have on our consolidated financial
statements.
CRITICAL
ACCOUNTING POLICIES
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
the financial statements. On an ongoing basis, management
reviews its estimates, based on currently available information.
Changes in facts and circumstances may alter such estimates and
affect results of operations and financial position in future
periods. Our critical accounting policies relate to:
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general and product liability and other litigation,
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workers compensation,
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recoverability of goodwill and other intangible assets,
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deferred tax asset valuation allowance and uncertain income tax
positions, and
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pensions and other postretirement benefits.
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37
General and Product Liability and Other
Litigation. General and product liability and
other recorded litigation liabilities are recorded based on
managements assessment that a loss arising from these
matters is probable. If the loss can be reasonably estimated, we
record the amount of the estimated loss. If the loss is
estimated within a range and no point within the range is more
probable than another, we record the minimum amount in the
range. As additional information becomes available, any
potential liability related to these matters is assessed and the
estimates are revised, if necessary. Loss ranges are based upon
the specific facts of each claim or class of claims and are
determined after review by counsel. Court rulings on our cases
or similar cases may impact our assessment of the probability
and our estimate of the loss, which may have an impact on our
reported results of operations, financial position and
liquidity. We record receivables for insurance recoveries
related to our litigation claims when it is probable that we
will receive reimbursement from the insurer. Specifically, we
are a defendant in numerous lawsuits alleging various
asbestos-related personal injuries purported to result from
alleged exposure to asbestos 1) in certain rubber
encapsulated products or aircraft braking systems manufactured
by us in the past, or 2) in certain of our facilities.
Typically, these lawsuits have been brought against multiple
defendants in Federal and state courts.
We engage an independent asbestos valuation firm, Bates White,
LLC (Bates), to review our existing reserves for
pending asbestos claims, provide a reasonable estimate of the
liability associated with unasserted asbestos claims, and
estimate our receivables from probable insurance recoveries
related to such claims.
A significant assumption in our estimated asbestos liability is
the period over which the liability can be reasonably estimated.
Due to the difficulties in making these estimates, analysis
based on new data
and/or
changed circumstances arising in the future may result in an
increase in the recorded obligation in an amount that cannot be
reasonably estimated, and that increase may be significant. We
had recorded liabilities for both asserted and unasserted
asbestos claims, inclusive of defense costs, totaling
$127 million at December 31, 2007. The portion of the
liability associated with unasserted asbestos claims and related
defense costs was $76 million. At December 31, 2007,
we estimate that it is reasonably possible that our gross
liabilities could exceed our recorded reserve by $20 to
$30 million, approximately 50% of which would be
recoverable by our accessible policy limits.
We maintain primary insurance coverage under
coverage-in-place
agreements as well as excess liability insurance with respect to
asbestos liabilities. We record a receivable with respect to
such policies when we determine that recovery is probable and we
can reasonably estimate the amount of a particular recovery.
This determination is based on consultation with our outside
legal counsel and taking into consideration relevant factors,
including ongoing legal proceedings with certain of our excess
coverage insurance carriers, their financial viability, their
legal obligations and other pertinent facts.
Bates also assists us in valuing receivables to be recorded for
probable insurance recoveries. Based upon the model employed by
Bates, as of December 31, 2007, (i) we had recorded a
receivable related to asbestos claims of $71 million, and
(ii) we expect that approximately 50% of asbestos claim
related losses would be recoverable up to our accessible policy
limits. The receivables recorded consist of an amount we expect
to collect under
coverage-in-place
agreements with certain primary carriers as well as an amount we
believe is probable of recovery from certain of our excess
coverage insurance carriers. Of this amount, $8 million was
included in Current Assets as part of Accounts receivable at
December 31, 2007.
In addition to asbestos claims, we are a defendant in various
lawsuits related to our Entran II rubber hose product.
During 2004, we entered into a settlement agreement to address a
substantial portion of our Entran II liabilities. The
claims associated with the plaintiffs that opted not to
participate in the settlement are evaluated in a manner
consistent with our other litigation claims. We had recorded
liabilities related to Entran II claims of
$193 million at December 31, 2007.
Workers Compensation. We had recorded
liabilities, on a discounted basis, of $276 million for
anticipated costs related to workers compensation claims
at December 31, 2007. The costs include an estimate of
expected settlements on pending claims, defense costs and a
provision for claims incurred but not reported. These estimates
are based on our assessment of potential liability using an
analysis of available information with respect to pending
claims, historical experience, and current cost trends. The
amount of our ultimate liability in respect of these matters may
differ from these estimates. We periodically, and at least
annually, update our loss development factors based on actuarial
analyses. The liability is discounted using the risk-free rate
of return.
38
For further information on general and product liability and
other litigation, and workers compensation, refer to the
Note to the Consolidated Financial Statements No. 19,
Commitments and Contingencies.
Recoverability of Goodwill and Other Intangible
Assets. In accordance with
SFAS No. 142, Goodwill and Other Intangible Assets
(SFAS No. 142), goodwill and other
intangible assets with indefinite lives are not amortized.
Rather, these assets are tested for impairment annually or more
frequently if an indicator of impairment is present.
SFAS No. 142 requires that goodwill be allocated to
various reporting units, which are either at the operating
segment level or one reporting level below the operating
segment. We have determined our reporting units to be consistent
with our operating segments as determined under
SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. Our reporting units
for purposes of applying the provisions of
SFAS No. 142 are comprised of five strategic business
units: North American Tire, European Union Tire, Eastern Europe,
Middle East and Africa Tire, Latin American Tire, and Asia
Pacific Tire. Goodwill is allocated to these reporting units
based on the original purchase price allocation for acquisitions
within the various reporting units. During 2007, there have been
no changes to our reporting units or in the manner in which
goodwill was allocated.
For purposes of our annual impairment testing, which is
conducted as of July 31 each year, we determine the estimated
fair values of our reporting units using a valuation methodology
based on an earnings before interest, taxes, depreciation and
amortization (EBITDA) multiple of comparable
companies. The EBITDA multiple is adjusted if necessary to
reflect local market conditions and recent transactions. The
EBITDA of the reporting units are based on a combination of
historical and forecasted results and are adjusted to exclude
certain non-recurring or unusual items and corporate charges.
Significant decreases in EBITDA in future periods may be an
indication of a potential impairment. Additionally, valuation
multiples of comparable companies would have to decline in
excess of 40% to indicate a potential goodwill impairment.
Goodwill was $713 million and other intangible assets with
indefinite lives were $122 million at December 31,
2007. Our annual impairment analysis for 2007 indicated no
impairment of goodwill or other intangible assets with
indefinite lives. In addition, there were no events or
circumstances that indicated the impairment test should be
re-performed at December 31, 2007.
Deferred Tax Asset Valuation Allowance and Uncertain Income
Tax Positions. At December 31, 2007, we had
a valuation allowance aggregating $2.2 billion against all
of our net Federal and state and certain of our foreign net
deferred tax assets.
The valuation allowance was calculated in accordance with the
provisions of SFAS No. 109, Accounting for
Income Taxes (SFAS No. 109), which
requires an assessment of both negative and positive evidence
when measuring the need for a valuation allowance. In accordance
with SFAS No. 109, evidence, such as operating results
during the most recent three-year period, is given more weight
than our expectations of future profitability, which are
inherently uncertain. Our losses in the U.S. and certain
foreign locations in recent periods represented sufficient
negative evidence to require a full valuation allowance against
our net Federal, state and certain of our foreign deferred
tax assets under No. SFAS 109. We intend to maintain a
valuation allowance against our net deferred tax assets until
sufficient positive evidence exists to support the realization
of such assets.
The calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations. We
recognize liabilities for anticipated tax audit issues based on
our estimate of whether, and the extent to which, additional
taxes will be required. If we ultimately determine that payment
of these amounts is unnecessary, we reverse the liability and
recognize a tax benefit during the period in which we determine
that the liability is no longer necessary. We also recognize tax
benefits to the extent that it is more likely than not that our
positions will be sustained when challenged by the taxing
authorities. To the extent we prevail in matters for which
liabilities have been established, or are required to pay
amounts in excess of our liabilities, our effective tax rate in
a given period may be materially affected. An unfavorable tax
settlement would require cash payments and result in an increase
in our effective tax rate in the year of resolution. A favorable
tax settlement would be recognized as a reduction in our
effective tax rate in the year of resolution. We report interest
and penalties related to uncertain income tax positions as
income taxes. For additional information regarding uncertain
income tax positions, refer to the Note to the Consolidated
Financial Statements No. 14, Income Taxes.
39
Pensions and Other Postretirement
Benefits. Our recorded liabilities for pensions
and other postretirement benefits are based on a number of
assumptions, including:
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life expectancies,
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retirement rates,
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discount rates,
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long term rates of return on plan assets,
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future compensation levels,
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future health care costs, and
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maximum company-covered benefit costs.
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Certain of these assumptions are determined with the assistance
of independent actuaries. Assumptions about life expectancies,
retirement rates, future compensation levels and future health
care costs are based on past experience and anticipated future
trends, including an assumption about inflation. The discount
rate for our U.S. plans is derived from a portfolio of
corporate bonds from issuers rated AA- or higher by
Standard & Poors as of December 31 and is
reviewed annually. The total cash flows provided by the
portfolio are similar to the timing of our expected benefit
payment cash flows. The long term rate of return on plan assets
is based on the compound annualized return of our
U.S. pension fund over periods of 15 years or more,
asset class return expectations and long term inflation. These
assumptions are reviewed regularly and revised when appropriate.
Changes in one or more of them may affect the amount of our
recorded liabilities and net periodic costs for these benefits.
Other assumptions involving demographic factors such as
retirement age, mortality and turnover are evaluated
periodically and are updated to reflect our experience and
expectations for the future. If the actual experience differs
from expectations, our financial position, results of operations
and liquidity in future periods may be affected.
The discount rates used in estimating the total liability for
our U.S. pension and other postretirement plans were 6.25%
and 6.00%, respectively, at December 31, 2007, compared to
5.75% at December 31, 2006 and 5.50% at December 31,
2005 for both our U.S. pension and other postretirement
plans. The increase in the discount rate at December 31,
2007 was due primarily to higher interest rates on highly rated
corporate bonds. Interest cost included in our U.S. net
periodic pension cost was $306 million in 2007, compared to
$295 million in 2006 and $294 million in 2005.
Interest cost included in our worldwide net periodic other
postretirement benefits cost was $109 million in 2007,
compared to $133 million in 2006 and $147 million in
2005. Interest cost was lower in 2007 as a result of the
reduction in the postretirement liability due to plan amendments
and actuarial gains. The weighted average amortization period
for employees covered by our U.S. plans is approximately
20 years.
The following table presents the sensitivity of our
U.S. projected pension benefit obligation, accumulated
other postretirement obligation, shareholders equity, and
2008 expense to the indicated increase/decrease in key
assumptions:
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+/− Change at December 31, 2007
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(Dollars in millions)
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Change
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PBO/ABO
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Equity
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2008 Expense
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Pensions:
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Assumption:
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Discount rate
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+/− 0.5
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%
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$
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261
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$
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261
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$
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15
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Actual return on assets
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+/− 1.0
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%
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N/A
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42
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7
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Estimated return on assets
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+/− 1.0
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%
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N/A
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N/A
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44
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Other Postretirement Benefits:
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Assumption:
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Discount rate
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+/− 0.5
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%
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$
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54
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$
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54
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$
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2
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Health care cost trends total cost
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+/− 1.0
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%
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3
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3
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Although we experienced an increase in our U.S. discount
rate at the end of 2007, a large portion of the unrecognized
actuarial loss of $936 million in our U.S. pension
plans as of December 31, 2007 is a result of the
40
overall decline in U.S. discount rates over time. For
purposes of determining our 2007 U.S. net periodic pension
expense, our funded status was such that we recognized
$56 million of the unrecognized actuarial loss in 2007. We
will recognize approximately $39 million of unrecognized
actuarial losses in 2008. Given no change to the assumptions at
our December 31, 2007 measurement, actuarial loss
recognition will remain at an amount near that to be recognized
in 2008 over the next few years before it begins to gradually
decline.
The actual rate of return on our U.S. pension fund was
8.1%, 14.0% and 8.5% in 2007, 2006 and 2005, respectively, as
compared to the expected rate of 8.5% for all three years. We
use the fair value of our pension assets in the calculation of
pension expense for substantially all of our pension plans.
The service cost of our U.S. pension plans was $84 million,
$91 million, and $50 million in 2007, 2006 and 2005,
respectively. The 2005 expense reflects the suspension of
pension service credit agreed to in our 2003 labor contract.
This suspension expired on November 1, 2005.
Although we experienced an increase in our U.S. discount
rate at the end of 2007, a large portion of the unrecognized
actuarial loss of $92 million in our worldwide other
postretirement benefit plans as of December 31, 2007 is a
result of the overall decline in U.S. discount rates over
time. The unrecognized actuarial loss decreased from 2006
primarily due to the increase in the discount rate at
December 31, 2007. For purposes of determining 2007
worldwide net periodic postretirement benefits cost, we
recognized $8 million of the unrecognized actuarial loss in
2007. We will recognize approximately $7 million of
unrecognized actuarial losses in 2008. If our future experience
is consistent with our assumptions as of December 31, 2007,
actuarial loss recognition will gradually decline from the 2008
levels.
For further information on pensions and other postretirement
benefits, refer to the Note to the Consolidated Financial
Statements No. 13, Pension, Other Postretirement Benefit
and Savings Plans.
RESULTS
OF OPERATIONS SEGMENT INFORMATION
Segment information reflects our strategic business units
(SBUs), which are organized to meet customer
requirements and global competition. Our segments are managed on
a regional basis.
Results of operations are measured based on net sales to
unaffiliated customers and segment operating income. Segment
operating income includes transfers to other SBUs. Segment
operating income is computed as follows: Net Sales less CGS
(excluding accelerated depreciation charges and asset impairment
charges) and SAG (including certain allocated corporate
administrative expenses). Segment operating income also includes
equity in earnings of most affiliates. Segment operating income
does not include rationalization charges (credits), asset sales
and certain other items. Segment assets include those assets
under the management of the SBU.
Total segment operating income was $1.2 billion in 2007,
$712 million in 2006 and $1.1 billion in 2005. Total
segment operating margin (segment operating income divided by
segment sales) in 2007 was 6.3%, compared to 3.8% in 2006 and
5.9% in 2005.
Management believes that total segment operating income is
useful because it represents the aggregate value of income
created by our SBUs and excludes items not directly related to
the SBUs for performance evaluation purposes. Total segment
operating income is the sum of the individual SBUs segment
operating income. Refer to the Note to the Consolidated
Financial Statements No. 16, Business Segments, for further
information and for a reconciliation of total segment operating
income to Income (Loss) from Continuing Operations before Income
Taxes and Minority Interest.
North
American Tire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Tire Units
|
|
|
81.3
|
|
|
|
90.9
|
|
|
|
101.9
|
|
Net Sales
|
|
$
|
8,862
|
|
|
$
|
9,089
|
|
|
$
|
9,091
|
|
Operating (Loss) Income
|
|
|
139
|
|
|
|
(233
|
)
|
|
|
167
|
|
Operating Margin
|
|
|
1.6
|
%
|
|
|
(2.6
|
)%
|
|
|
1.8
|
%
|
41
2007
Compared to 2006
North American Tire unit sales in 2007 decreased
9.6 million units or 10.5% from 2006. The decrease was
primarily due to a decline in replacement unit sales of
5.9 million units or 9.6% due to a strategic share
reduction in the lower value segment, following our decision to
exit certain segments of the private label tire business,
partially offset by increased share of our higher value branded
products. In addition, OE volume in 2007 decreased
3.7 million units or 12.6% in our consumer and commercial
businesses as a result of lower vehicle production.
Net sales in 2007 decreased $227 million or 2.5% from 2006.
The decrease was driven by a decline in volume of
$739 million primarily due to exiting certain segments of
the private label tire business in addition to decreased OE
volume in our consumer and commercial businesses as a result of
lower vehicle production. Sales in other tire related businesses
also decreased approximately $66 million. Partially
offsetting these were favorable price and product mix of $338
and favorable foreign currency translation of $24 million.
In addition, net sales in 2007 were $216 million higher
compared to 2006 as a result of the USW strike.
Operating income in 2007 was $139 million compared to an
operating loss in 2006 of $233 million, an increase of
$372 million. Operating income improved in 2007 by
approximately $279 million as a result of returning to
normal sales and production levels following the USW strike,
which negatively impacted the fourth quarter of 2006 and part of
the first quarter of 2007. Operating income in 2007 was also
favorably impacted by price and product mix of
$235 million, increased operating income in other tire
related businesses of $27 million, and lower conversion
costs of $19 million. Conversion costs were driven by lower
employee benefit expenses partially offset by unabsorbed fixed
costs due to lower production volume, training of new workers
and plant changeovers. This performance was partially offset by
increased raw material costs of $97 million, decreased
sales volume of $65 million, and higher SAG costs of
approximately $11 million. Also, included in 2006 was
$21 million of favorable settlements with certain raw
material suppliers.
Operating income in 2007 did not include $35 million of
accelerated depreciation primarily related to the elimination of
tire production at our Tyler, Texas and Valleyfield, Quebec
facilities. Operating income in 2006 did not include
$14 million of accelerated depreciation primarily related
to the elimination of tire production at our Tyler, Texas
facility. Operating income also did not include net
rationalization charges (credits) totaling $11 million in
2007 and $187 million in 2006 and (gains) losses on asset
sales of $17 million in 2007 and $(11) million in 2006.
2006
Compared to 2005
North American Tire unit sales in 2006 decreased
11.0 million units or 10.8% from 2005. The decrease was
primarily due to a decline in replacement unit sales of
9.6 million units or 13.4% due to an overall market decline
in the consumer replacement market as well as further strategic
share reduction in the lower value segment, following our
decision to exit the wholesale private label tire business,
partially offset by increased share of our higher value branded
products. Also, OE volume in 2006 decreased 1.4 million
units or 4.8% from 2005 driven by lower vehicle production.
Included in the volume decrease was 1.1 million units due
to the Farm Tire divestiture and approximately 2.8 million
units as a result of the USW strike.
Net sales in 2006 decreased $2 million from 2005. Net sales
in 2006 decreased $386 million due primarily to lower
volume from the weak consumer replacement market and exiting the
wholesale private label tire business, approximately
$318 million due to the unfavorable impact of the USW
strike and approximately $265 million from divestitures in
2005. Partially offsetting these were favorable price and mix of
$543 million due to price increases to offset higher raw
material costs and improved mix resulting from our strategy to
focus on the higher value consumer replacement market and
greater selectivity in the consumer OE market. Also, positively
impacting sales in the period was growth in other tire related
businesses of $393 million, as well as currency translation
of approximately $31 million.
Operating loss in 2006 was $233 million compared to
operating income in 2005 of $167 million, a decrease of
$400 million. Operating income was unfavorably impacted by
increased raw material costs of $373 million, increased
costs of $313 million as a result of the USW strike,
increased conversion costs of $135 million, primarily
driven by lower volume and higher energy costs, lower volume of
$45 million and approximately $34 million of income
related to divested businesses. Partially offsetting these were
favorable price and product mix of
42
$367 million, and lower SAG costs of $55 million,
which includes lower wages and benefits of $20 million,
approximately $17 million of lower advertising expenses,
and $9 million of savings from rationalization plans,
partially offset by $15 million in increased general and
product liability expenses. In addition, $21 million of
favorable settlements with certain raw material suppliers,
increased operating income in chemical and other tire related
businesses of $22 million, and approximately
$15 million of lower depreciation expense as a result of
the increased estimated useful lives of our tire mold equipment
favorably impacted operating income. In 2005, approximately
$25 million of costs were incurred associated with the
hurricanes.
Operating income in 2006 did not include $14 million of
accelerated depreciation primarily related to the elimination of
tire production at our Tyler, Texas facility. Operating income
also did not include net rationalization charges (credits)
totaling $187 million in 2006 and $(8) million in 2005
and (gains) losses on asset sales of $(11) million in 2006
and $43 million in 2005.
European
Union Tire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Tire Units
|
|
|
59.4
|
|
|
|
63.5
|
|
|
|
64.3
|
|
Net Sales
|
|
$
|
5,393
|
|
|
$
|
4,990
|
|
|
$
|
4,676
|
|
Operating Income
|
|
|
302
|
|
|
|
286
|
|
|
|
317
|
|
Operating Margin
|
|
|
5.6
|
%
|
|
|
5.7
|
%
|
|
|
6.8
|
%
|
2007
Compared to 2006
European Union Tire Segment unit sales in 2007 decreased
4.1 million units or 6.5% from 2006. Replacement volume
decreased 4.4 million units or 9.6%, mainly in consumer
replacement which was primarily market and strategy driven,
while OE volume increased 0.3 million units or 1.6%.
Net sales in 2007 increased $403 million or 8.1% from 2006.
Favorably impacting sales was foreign currency translation of
$449 million, and improved price and product mix of
$287 million. Lower volume of $288 million and lower
sales in the other tire related businesses of approximately
$50 million unfavorably impacted net sales.
Operating income in 2007 increased $16 million or 5.6%
compared to 2006 due to improvement in price and mix of
$175 million and favorable foreign currency translation of
$26 million. These were offset in part by lower volume of
$61 million, higher raw material costs of $51 million,
and lower operating income from other tire related businesses of
$24 million. In addition, increased research and
development expenses of $22 million, and increased
conversion costs of $18 million also had an unfavorable
impact on operating income in 2007. Operating income in 2006
also included $6 million in favorable settlements with
certain raw material suppliers.
Operating income in 2007 and 2006 did not include
$2 million and $50 million, respectively, of
accelerated depreciation primarily related to the closure of the
Washington, UK facility. Operating income also did not include
net rationalization charges totaling $24 million in 2007
and $64 million in 2006 and gains on asset sales of
$20 million in 2007 and $27 million in 2006.
European Union Tires results are highly dependent upon
Germany, which accounted for approximately 44% and 43% of
European Union Tires net sales in 2007 and 2006,
respectively. Accordingly, results of operations in Germany will
have a significant impact on European Union Tires future
performance.
2006
Compared to 2005
European Union Tire Segment unit sales in 2006 decreased
0.8 million units or 1.2% from 2005. OE volume decreased
0.8 million units or 4.1% due to a selective OE fitment
strategy and a weak OE consumer market.
Net sales in 2006 increased $314 million or 6.7% from 2005.
The increase was due primarily to price and product mix of
$246 million, driven by price increases to offset higher
raw material costs and a favorable mix in the consumer
replacement and commercial markets. Also favorably impacting
sales was currency translation totaling
43
$109 million. This improvement was partially offset by the
lower volume of $48 million, primarily due to decreased
consumer OE sales.
Operating income in 2006 decreased $31 million or 9.8%
compared to 2005 due to higher raw material costs of
$224 million, increased conversion costs of
$25 million and lower volume of $12 million. Partially
offsetting these were improvements in price and product mix of
$136 million, driven by price increases to offset higher
raw material costs and the continued shift towards high
performance and ultra-high performance tires, lower SAG expenses
of $69 million, primarily due to lower advertising and
wages and benefits, and lower research and development of
approximately $5 million. Also, lower depreciation expense
of $10 million as a result of the increased estimated
useful lives of our tire mold equipment, favorable settlements
with certain raw material suppliers of $6 million, and
favorable currency translation of $6 million favorably
impacted operating income.
Operating income in 2006 did not include $50 million of
accelerated depreciation primarily related to the closure of the
Washington, UK facility. Operating income also did not include
net rationalization charges totaling $64 million in 2006
and $8 million in 2005 and gains on asset sales of
$27 million in 2006 and $5 million in 2005.
Eastern
Europe, Middle East and Africa Tire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Tire Units
|
|
|
20.2
|
|
|
|
20.0
|
|
|
|
19.7
|
|
Net Sales
|
|
$
|
1,824
|
|
|
$
|
1,562
|
|
|
$
|
1,437
|
|
Operating Income
|
|
|
280
|
|
|
|
229
|
|
|
|
198
|
|
Operating Margin
|
|
|
15.4
|
%
|
|
|
14.7
|
%
|
|
|
13.8
|
%
|
2007
Compared to 2006
Eastern Europe, Middle East and Africa Tire unit sales in 2007
increased 0.2 million units or 0.8% from 2006 primarily
related to increased replacement unit sales of 0.8 million
or 4.5% as a result of market growth in certain countries. This
increase was partially offset by a decrease in OE units sales of
0.6 million units or 16.1% due primarily to the exit of
non-profitable businesses.
Net sales in 2007 increased by $262 million, or 16.8%
compared to 2006 due to price increases and favorable product
mix due to continued growth of high performance tires and
premium brands of $112 million. Net sales were also
favorably impacted by foreign currency translation of
$93 million, improved sales in other tire related
businesses of $48 million, and increased volume of
approximately $10 million.
Operating income in 2007 increased by $51 million, or 22.3%
from 2006. Operating income in 2007 was favorably impacted by
price and product mix of $101 million, improvements in the
other tire related businesses of $12 million, and favorable
foreign currency translation of $4 million. Negatively
impacting operating income were increased costs of approximately
$25 million related to a strike and production
inefficiencies in South Africa, higher conversion costs of
$15 million, higher SAG expenses of $21 million,
primarily due to higher advertising and compensation costs, and
increases in warranty and research and development expenses
totaling $4 million.
Operating income did not include net rationalization charges
totaling $9 million in 2007 and $30 million in 2006.
Operating income in 2006 also did not include accelerated
depreciation charges and asset write-offs of $12 million
and net gains on asset sales of $1 million.
2006
Compared to 2005
Eastern Europe, Middle East and Africa Tire unit sales in 2006
increased 0.3 million units or 1.5% from 2005 primarily
related to increased replacement unit sales of 0.6 million
or 3.6% primarily due to growth in certain countries. OE units
sales decreased 0.3 million units or 7.1% due primarily to
the exit of non-profitable businesses.
Net sales in 2006 increased by $125 million, or 8.7%
compared to 2005 mainly due to price increases to recover higher
raw material costs and favorable product mix due to continued
growth of high performance tires and premium brands of
approximately $106 million, increased volume of
$19 million, mainly in Central Europe and
44
Russia, as well as improved other sales, mainly South African
retail sales of approximately $9 million. These were offset
in part by unfavorable foreign currency translation of
$10 million.
Operating income in 2006 increased by $31 million, or 15.7%
from 2005. Operating income in 2006 was favorably impacted by
price and product mix of $73 million due to factors
described above, favorable foreign currency translation of
$10 million, and improved volume of approximately
$6 million primarily in emerging markets. Also favorably
impacting operating income was lower SAG expenses of
$10 million due to a decrease in marketing expenses, and
improvement in other tire related businesses of $5 million.
Negatively impacting operating income were higher raw material
costs of $61 million, and higher conversion costs of
$16 million primarily due to increased energy costs.
Operating income did not include accelerated depreciation
charges and asset write-offs of $12 million in 2006 related
to the closure of the Morocco facility. Operating income also
did not include net rationalization charges totaling
$30 million in 2006 and $9 million in 2005 and net
(gains) losses on asset sales of $(1) million in 2006 and
$1 million in 2005.
Latin
American Tire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Tire Units
|
|
|
21.8
|
|
|
|
21.2
|
|
|
|
20.4
|
|
Net Sales
|
|
$
|
1,872
|
|
|
$
|
1,607
|
|
|
$
|
1,471
|
|
Operating Income
|
|
|
359
|
|
|
|
326
|
|
|
|
294
|
|
Operating Margin
|
|
|
19.2
|
%
|
|
|
20.3
|
%
|
|
|
20.0
|
%
|
2007
Compared to 2006
Latin American Tire unit sales in 2007 increased
0.6 million units or 2.9% compared to 2006. OE volume
increased 0.8 million units or 12.0% as a result of
improving market conditions, offset by a decline in replacement
units of 0.2 million units or 1.0%.
Net sales in 2007 increased $265 million, or 16.5% compared
to 2006. Net sales increased in 2007 due to the favorable impact
of foreign currency translation, mainly in Brazil, of
approximately $123 million, favorable price and product mix
of $73 million, and increased volume of $43 million. Also
increasing net sales was higher sales of other tire related
businesses of approximately $29 million.
Operating income in 2007 increased $33 million, or 10.1%
compared to 2006. Operating income was favorably impacted by
$74 million from the impact of currency translation,
$60 million due to improved price and product mix, and
$11 million due to increased volume. Operating income was
unfavorably impacted by higher raw material costs of
$41 million and higher conversion costs of
$32 million. Lower operating income in other tire related
businesses of $11 million and higher SAG expenses of
$8 million also had an unfavorable impact on operating
income in 2007. In addition, included in 2006 was a pension plan
curtailment gain of $17 million.
Operating income did not include net rationalization charges
totaling $2 million in both 2007 and 2006. Operating income
also did not include gains on asset sales of $1 million in
2007 and 2006. In addition, operating income in 2006 did not
include a gain of $13 million resulting from the favorable
resolution of a legal matter in Brazil.
Latin American Tires results are highly dependent upon
Brazil, which accounted for approximately 49% and 46% of Latin
American Tires net sales in 2007 and 2006, respectively.
Accordingly, results of operations in Brazil will have a
significant impact on Latin American Tires future
performance.
2006
Compared to 2005
Latin American Tire unit sales in 2006 increased
0.8 million units or 3.6% compared to 2005 primarily due to
an increase in OE volume of 0.9 million units or 17.1%. OE
volume increased due to new business and increased market share.
Replacement units decreased 0.1 million units or 1.2%.
45
Net sales in 2006 increased $136 million, or 9.2% compared
to 2005. Net sales increased in 2006 due to the favorable impact
of currency translation, mainly in Brazil, of approximately
$63 million, increased volume of $47 million, and
favorable price and product mix of $60 million.
Operating income in 2006 increased $32 million, or 10.9%
compared to 2005. Operating income was favorably impacted by
$46 million from the favorable impact of currency
translation, approximately $60 million due to improved
price and product mix, a pension plan curtailment gain of
$17 million, and $14 million due to increased volume.
Increased raw material costs of $96 million and higher
conversion costs of $10 million, negatively impacted
operating income compared to 2005.
Operating income did not include net rationalization charges
totaling $2 million in 2006. In addition, operating income
did not include gains on asset sales of $1 million in 2006
and 2005.
Asia
Pacific Tire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Tire Units
|
|
|
19.0
|
|
|
|
19.4
|
|
|
|
20.1
|
|
Net Sales
|
|
$
|
1,693
|
|
|
$
|
1,503
|
|
|
$
|
1,423
|
|
Operating Income
|
|
|
150
|
|
|
|
104
|
|
|
|
84
|
|
Operating Margin
|
|
|
8.9
|
%
|
|
|
6.9
|
%
|
|
|
5.9
|
%
|
2007
Compared to 2006
Asia Pacific Tire unit sales in 2007 decreased 0.4 million
units or 2.1% compared to 2006. Replacement units decreased
0.4 million units or 3.1% driven by reduced participation
in low margin segments of the market and reduced production
volume resulting from the Thailand fire.
Net sales in 2007 increased $190 million or 12.6% from 2006
due to favorable foreign currency translation of
$144 million and favorable price and product mix of
$70 million. Partially offsetting these increases was lower
volume of approximately $26 million.
Operating income in 2007 increased $46 million or 44.2%
from 2006 primarily due to improved price and product mix of
$67 million and $8 million of favorable foreign
currency translation. These were offset in part by higher SAG
expenses of $11 million primarily related to increased
advertising costs, lower sales volume of $5 million, and
increased conversion costs of $5 million related to lower
production volume as a result of the Thailand fire. Higher raw
material prices of $4 million and increased research and
development costs of $4 million also had an unfavorable
impact on operating income. In addition, operating income in
2006 included approximately $2 million in favorable
settlements with certain raw material suppliers.
Operating income did not include net rationalization charges
totaling $1 million in 2007 and $28 million in 2006
and gains on assets sales of $8 million in 2007 and
$2 million in 2006. Operating income in 2007 also did not
include a $12 million loss, net of insurance proceeds, as a
result of the Thailand fire. In addition, operating income in
2006 did not include approximately $12 million of
accelerated depreciation related to the closure of the Upper
Hutt, New Zealand facility.
Asia Pacific Tires results are highly dependent upon
Australia, which accounted for approximately 46% of Asia Pacific
Tires net sales in 2007 and 2006. Accordingly, results of
operations in Australia will have a significant impact on Asia
Pacific Tires future performance.
2006
Compared to 2005
Asia Pacific Tire unit sales in 2006 decreased 0.7 million
units or 3.3% compared to 2005. OE volume increased
0.1 million units or 3.0% mainly due to improvements in the
Chinese and Indian OE markets. Replacement units decreased
0.8 million units or 6.1% driven by reduced participation
in low margin segments of the market, as well as, increased
low-cost import competition in several countries within the
region.
46
Net sales in 2006 increased $80 million or 5.6% from 2005
due to favorable price and product mix of $112 million, and
to favorable currency translation of $7 million. Partially
offsetting these increases was lower volume of $37 million.
Operating income in 2006 increased $20 million or 23.8%
from 2005 primarily due to improved price and product mix of
$110 million, and approximately $2 million in
favorable settlements with certain raw material suppliers. These
were offset in part by raw material cost increases of
$75 million, decreased volume of $8 million, decreased
income in our Asian joint ventures of $6 million, and
increased conversion costs of approximately $5 million due
to lower production volume.
Operating income in 2006 did not include $12 million of
accelerated depreciation related to the closure of the Upper
Hutt, New Zealand facility. Operating income also did not
include net rationalization charges (credits) totaling
$28 million in 2006 and $(2) million in 2005 and gains
on asset sales of $2 million in 2006.
LIQUIDITY
AND CAPITAL RESOURCES
At December 31, 2007, we had $3,463 million in Cash
and cash equivalents as well as $2,169 million of unused
availability under our various credit agreements, compared to
$3,862 million and $533 million, respectively, at
December 31, 2006. Cash and cash equivalents decreased
primarily due to $2.3 billion of repayments on our
borrowings, including $1.3 billion under our U.S. and
European revolving credit facilities and European term loans,
$300 million of
81/2% senior
notes due 2007, the $315 million debt redemption in the
second quarter of 2007, and the prepayment of the
$300 million third lien term loan in the third quarter of
2007. The decrease was offset in part by cash received from the
sale of our Engineered Products business of $1,475 million
and our public equity offering which raised $833 million.
Cash and cash equivalents do not include restricted cash.
Restricted cash primarily consists of our contributions made
related to the settlement of the Entran II litigation and
proceeds received pursuant to insurance settlements. In
addition, we will, from time to time, maintain balances on
deposit at various financial institutions as collateral for
borrowings incurred by various subsidiaries, as well as cash
deposited in support of trade agreements and performance bonds.
At December 31, 2007, cash balances totaling
$191 million were subject to such restrictions, compared to
$214 million at December 31, 2006.
Our ability to service our debt depends in part on the results
of operations of our subsidiaries and upon the ability of our
subsidiaries to make distributions of cash to various other
entities in our consolidated group, whether in the form of
dividends, loans or otherwise. In certain countries where we
operate, transfers of funds into or out of such countries by way
of dividends, loans or advances are generally or periodically
subject to various restrictions. The primary restriction is
that, in certain countries, we must obtain approval from the
foreign government
and/or
currency exchange board before net assets can be transferred out
of the country. In addition, certain of our credit agreements
and other debt instruments restrict the ability of foreign
subsidiaries to make distributions of cash. Thus, we would have
to repay
and/or amend
these credit agreements and other debt instruments in order to
use this cash to service our consolidated debt. Because of the
inherent uncertainty of overcoming these restrictions, we do not
consider the net assets of our subsidiaries that are subject to
such restrictions to be integral to our liquidity or readily
available to service our debt. At December 31, 2007,
approximately $308 million of net assets were subject to
such restrictions, compared to approximately $373 million
at December 31, 2006.
Operating
Activities
Net cash provided by operating activities of continuing
operations was $92 million in 2007, decreasing
$353 million from $445 million in 2006. The decrease
was due primarily to increased working capital requirements
following the end of the USW strike. Operating cash flows from
continuing operations in 2007 were favorably impacted by
improved operating results.
Net cash provided by operating activities of continuing
operations was $445 million in 2006, decreasing
$335 million from $780 million in 2005. The decrease
was due in part to lower operating results. In addition,
increased pension contributions, lower proceeds from insurance
settlements, and higher rationalization payments adversely
affected cash flows from operating activities in 2006. Lower
working capital levels resulting from the USW strike and savings
from our four-point cost savings plan favorably affected
operating cash flows from continuing operations.
47
Investing
Activities
Net cash used in investing activities of continuing operations
was $606 million during 2007, compared to $498 million
in 2006 and $408 million in 2005. Capital expenditures were
$739 million, $637 million and $601 million in
2007, 2006 and 2005, respectively. Investing activities in 2007
exclude $132 million of capital expenditures that remain
unpaid and accrued for at December 31, 2007. This was
partially offset by cash provided from the sale of assets each
year as a result of the realignment of operations under
rationalization programs. Cash was used in 2006 for the
acquisition of the remaining outstanding shares that we did not
already own of South Pacific Tyres Ltd., a joint venture tire
manufacturer and distributor in Australia.
Cash flows from investing activities of discontinued operations
in 2007 included the net proceeds from the sale of our
Engineered Products business.
Financing
Activities
Net cash provided by (used in) financing activities of
continuing operations was $(1,426) million in 2007,
$1,648 million in 2006, and $(181) million in 2005.
Non-cash
financing activities in 2007 included the issuance of
28.7 million shares of our common stock in exchange for
approximately $346 million principal amount of our 4%
convertible senior notes due 2034.
Consolidated debt at December 31, 2007 was
$4,725 million, compared to $7,210 million at
December 31, 2006. Cash flows in 2007 included the
repayment of approximately $2.3 billion of long term debt
offset by net proceeds from our public equity offering of
approximately $833 million.
Consolidated debt at December 31, 2006 of
$7,210 million increased from 2005 by $1,814 million
due primarily to increased borrowings related to the USW strike
and refinancing debt maturing in March 2007.
Credit
Sources
In aggregate, we had credit arrangements of $7,392 million
available at December 31, 2007, of which
$2,169 million were unused, compared to $8,196 million
available at December 31, 2006, of which $533 million
were unused.
Outstanding
Notes
At December 31, 2007, we had $2,634 million of
outstanding notes as compared to $3,592 million at
December 31, 2006.
Certain of our notes were issued pursuant to indentures that
contain varying covenants and other terms. In general, the terms
of our indentures, among other things, limit our ability and the
ability of certain of our subsidiaries to (i) incur
additional debt or issue redeemable preferred stock,
(ii) pay dividends, or make certain other restricted
payments or investments, (iii) incur liens, (iv) sell
assets, (v) incur restrictions on the ability of our
subsidiaries to pay dividends to us, (vi) enter into
affiliate transactions, (vii) engage in sale and leaseback
transactions, and (viii) consolidate, merge, sell or
otherwise dispose of all or substantially all of our assets.
These covenants are subject to significant exceptions and
qualifications. For example, under certain of our indentures, if
the notes are assigned an investment grade rating by
Moodys and S&P and no default has occurred or is
continuing, certain covenants will be suspended.
In the first quarter of 2007, we repaid our $300 million
81/2%
senior notes at their maturity.
On June 29, 2007, we exercised our right to redeem
$175 million of our $500 million 8.625% senior
notes due 2011 and $140 million of our $400 million
9% senior notes due 2015.
On December 10, 2007, we completed an offer to exchange our
outstanding 4% convertible senior notes due 2034 for a cash
payment and shares of our common stock. The exchange offer
resulted in the issuance of approximately 28.7 million
shares of common stock, a total cash payment, including accrued
and unpaid interest, of approximately $23 million, and a
reduction of debt of approximately $346 million.
On February 1, 2008, we issued notices of redemption to the
holders of our $650 million senior secured notes due 2011.
As provided in the notice to the holders, on March 3, 2008,
we will redeem $450 million in aggregate
48
principal amount of our 11% senior secured notes due 2011
at a redemption price of 105.5% of the principal amount thereof
and $200 million in aggregate principal amount of our
floating rate senior secured notes due 2011 at a redemption
price of 104% of the principal amount thereof, plus in each case
accrued and unpaid interest to the redemption date.
For additional information on our outstanding notes, refer to
the Note to Consolidated Financial Statements, No. 11,
Financing Arrangements and Derivative Financial Instruments.
$1.5
Billion Amended and Restated First Lien Revolving Credit
Facility due 2013
On April 20, 2007, we amended and restated our first lien
revolving credit facility. This facility is available in the
form of loans or letters of credit, with letter of credit
availability limited to $800 million. Subject to the
consent of the lenders whose commitments are to be increased, we
may request that the facility be increased by up to
$250 million. Our obligations under the facility are
guaranteed by most of our wholly-owned U.S. and Canadian
subsidiaries. Our obligations under the facility and our
subsidiaries obligations under the related guarantees are
secured by first priority security interests in various
collateral.
At December 31, 2007, there were no borrowings under the
revolving credit facility and $526 million of letters of
credit were issued under the revolving credit facility. At
December 31, 2006, we had $873 million outstanding
under the revolving credit facility and $6 million of
letters of credit issued under the revolving credit facility. At
December 31, 2006, there were no borrowings and
$500 million of letters of credit issued under a
deposit-funded facility. The $500 million of letters of
credit that were outstanding prior to the refinancing were
transferred to the revolving credit facility in April 2007.
$1.2
Billion Amended and Restated Second Lien Term Loan Facility due
2014
On April 20, 2007, we amended and restated our second lien
term loan facility. The $1.2 billion in aggregate amount of
term loans that were outstanding under this facility prior to
the refinancing continue to be outstanding under the facility as
amended and restated. Subject to the consent of the lenders
making additional term loans, we may request that the facility
be increased by up to $300 million. Our obligations under
this facility are guaranteed by most of our wholly-owned
U.S. and Canadian subsidiaries and are secured by second
priority security interests in the same collateral securing the
$1.5 billion first lien credit facility. At
December 31, 2007 and December 31, 2006, this facility
was fully drawn.
$300
Million Third Lien Secured Term Loan Facility due
2011
On August 16, 2007, we prepaid all outstanding borrowings
under the $300 million third lien term loan at par.
505
Million Amended and Restated Senior Secured European and German
Revolving Credit Facilities due 2012
On April 20, 2007, we amended and restated our facilities,
which now consist of a 350 million European revolving
credit facility, with a 50 million letter of credit
sublimit, and a 155 million German revolving credit
facility. Goodyear and its domestic subsidiaries that secure our
U.S. facilities provide unsecured guarantees to support the
European revolving credit facilities. Goodyear Dunlop Tires
Europe B.V. (GDTE) and certain of its subsidiaries
in the United Kingdom, Luxembourg, France and Germany also
provide guarantees. GDTEs obligations under the facilities
and the obligations of its subsidiaries under the related
guarantees are secured by first priority security interests in
various collateral.
Each of these facilities have customary representations and
warranties including, as a condition to borrowing, material
adverse change representations in our financial condition since
December 31, 2006. For a description of the collateral
securing the above facilities as well as the covenants
applicable to them, please refer to the Note to the Consolidated
Financial Statements No. 11, Financing Arrangements and
Derivative Financial Instruments.
Covenant
Compliance
As of December 31, 2007, we were in compliance with the
material covenants imposed by our principal credit facilities.
49
EBITDA
(per our Amended and Restated Credit Facilities)
Our amended and restated credit facilities state that we may
only incur additional debt or make restricted payments that are
not otherwise expressly permitted if, after giving effect to the
debt incurrence or the restricted payment, our ratio of EBITDA
(as defined in those facilities) (Covenant EBITDA)
to Consolidated Interest Expense (as defined in those
facilities) for the prior four fiscal quarters would exceed 2.0
to 1.0. Certain of our senior note indentures have substantially
similar limitations on incurring debt and making restricted
payments. In addition, if the amount of availability under our
first lien revolving credit facility plus our Available Cash (as
defined in that facility) is less than $150 million, we may
not permit our ratio of Covenant EBITDA to Consolidated Interest
Expense to be less than 2.0 to 1.0 for any period of four
consecutive fiscal quarters.
Covenant EBITDA is a non-GAAP financial measure that is
presented not as a measure of operating results, but rather as a
measure of these limitations imposed under our credit
facilities. Covenant EBITDA should not be construed as an
alternative to either (i) income from operations or
(ii) cash flows from operating activities. Our failure to
comply with the financial covenants in our credit facilities
could have a material adverse effect on our liquidity and
operations. As a limitation on our ability to incur debt in
accordance with our credit facilities could affect our
liquidity, we believe that the presentation of Covenant EBITDA
provides investors with important information.
The following table presents the calculation of EBITDA and the
calculation of Covenant EBITDA in accordance with the
definitions in our amended and restated credit facilities for
the periods indicated. Other companies may calculate similarly
titled measures differently than we do. Certain line items are
presented as defined in the credit facilities and do not reflect
amounts as presented in the Consolidated Statements of
Operations. Those line items also include discontinued
operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Net Income (Loss)
|
|
$
|
602
|
|
|
$
|
(330
|
)
|
|
$
|
228
|
|
Consolidated Interest Expense
|
|
|
452
|
|
|
|
451
|
|
|
|
411
|
|
United States and Foreign Taxes
|
|
|
296
|
|
|
|
106
|
|
|
|
250
|
|
Depreciation and Amortization Expense
|
|
|
623
|
|
|
|
675
|
|
|
|
630
|
|
Cumulative Effect of Accounting Change
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
1,973
|
|
|
|
902
|
|
|
|
1,530
|
|
Credit Facilities Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Adjustments to Net Income
(Loss)(1)
|
|
|
(467
|
)
|
|
|
354
|
|
|
|
52
|
|
Minority Interest in Net Income of Subsidiaries
|
|
|
71
|
|
|
|
111
|
|
|
|
95
|
|
Other Non-Cash Items
|
|
|
50
|
|
|
|
(1
|
)
|
|
|
22
|
|
Capitalized Interest and Other Interest Related Expense
|
|
|
18
|
|
|
|
17
|
|
|
|
23
|
|
Rationalization Charges
|
|
|
61
|
|
|
|
319
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covenant EBITDA
|
|
$
|
1,706
|
|
|
$
|
1,702
|
|
|
$
|
1,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In 2007, other adjustments primarily include a $542 million
pre-tax gain on the sale of our Engineered Products business. |
Other
Foreign Credit Facilities
At December 31, 2007, we had short term committed and
uncommitted bank credit arrangements totaling $564 million,
of which $339 million were unused, compared to
$479 million and $236 million at December 31,
2006. The continued availability of these arrangements is at the
discretion of the relevant lender, and a portion of these
arrangements may be terminated at any time.
50
International
Accounts Receivable Securitization Facilities (On-Balance
Sheet)
On December 10, 2004, GDTE and certain of its subsidiaries
entered into a five-year pan-European accounts receivable
securitization facility. The facility provides
275 million of funding and is subject to customary
annual renewal of
back-up
liquidity lines.
As of December 31, 2007, the amount available and fully
utilized under this program was $403 million compared to
$362 million as of December 31, 2006.
In addition to the pan-European accounts receivable
securitization facility discussed above, subsidiaries in
Australia have accounts receivable securitization programs
totaling $78 million and $81 million at
December 31, 2007 and December 31, 2006, respectively.
Accounts
Receivable Factoring Facilities (Off-Balance
Sheet)
Various subsidiaries sold certain of their trade receivables
under off-balance sheet programs during 2007 and 2006. The
receivable financing programs of these subsidiaries did not
utilize a special purpose entity (SPE). At
December 31, 2007 and 2006, the gross amount of receivables
sold was $152 million and $88 million, respectively.
Credit
Ratings
Our credit ratings as of the date of this report are presented
below:
|
|
|
|
|
|
|
|
|
|
|
S&P
|
|
Moodys
|
|
|
$1.5 Billion Amended and Restated First Lien Revolving Credit
Facility, due 2013
|
|
|
BB+
|
|
|
|
Baa3
|
|
$1.2 Billion Amended and Restated Second Lien Term Loan
Facility, due 2014
|
|
|
BB
|
|
|
|
Ba1
|
|
European Facilities
|
|
|
BB+
|
|
|
|
Baa3
|
|
Floating Rate and 11% Senior Secured Notes, due 2011
|
|
|
B+
|
|
|
|
Ba3
|
|
Floating Rate Senior Unsecured Notes, due 2009 and
8.625% Senior Unsecured Notes, due 2011
|
|
|
B
|
|
|
|
Ba3
|
|
9% Senior Unsecured Notes, due 2015
|
|
|
B
|
|
|
|
Ba3
|
|
All other Senior Unsecured
|
|
|
B
|
|
|
|
B2
|
|
Corporate Rating (implied)
|
|
|
BB−
|
|
|
|
Ba3
|
|
Outlook
|
|
|
Positive
|
|
|
|
Positive
|
|
Although we do not request ratings from Fitch, the rating agency
rates our secured debt facilities (ranging from BB+ to B−
depending on the facility) and our unsecured debt
(B−).
A rating reflects only the view of a rating agency, and is not a
recommendation to buy, sell or hold securities. Any rating can
be revised upward or downward at any time by a rating agency if
such rating agency decides that circumstances warrant such a
change.
Voluntary
Employees Beneficiary Association
On December 28, 2006, the USW ratified the terms of a new
master labor agreement ending a strike by the USW. In connection
with the master labor agreement, we entered into a memorandum of
understanding with the USW regarding the establishment of a VEBA
intended to provide healthcare benefits for current and future
USW retirees. The establishment of the VEBA is conditioned upon
receiving District Court approval of a settlement of a
declaratory judgment action. On July 3, 2007, the USW and
several retirees filed a required class action lawsuit regarding
the establishment of the VEBA in the U.S. District Court
for the Northern District of Ohio. On October 29, 2007, the
parties filed the signed settlement agreement within the
District Court, and on December 14, 2007, the District
Court preliminarily approved the settlement agreement and
established the date for a hearing regarding the settlement. We
plan to make our contributions to the VEBA entirely in cash
following the U.S. District Courts approval of the
settlement. In addition, we expect to remove our liability for
USW retiree healthcare benefits from
51
our balance sheet when this settlement has received final
judicial approval (including exhaustion of all appeals, if any)
and we have made our contributions to the VEBA. We expect to use
cash on hand and generated from operating activities, unused
availability under our various credit agreements
and/or
proceeds from the sale of our Engineered Products business to
fund the VEBA. We do not expect our VEBA funding commitment or
our inability to immediately remove our liability for USW
retiree healthcare benefits from our balance sheet to have a
significant impact on our liquidity or cash position.
Furthermore, we do not expect our plan to fund the VEBA entirely
in cash to have a significant impact on our operations or
liquidity.
Potential
Future Financings
In addition to our previous financing activities, we may seek to
undertake additional financing actions which could include
restructuring bank debt or a capital markets transaction,
possibly including the issuance of additional debt or equity.
Given the challenges that we face and the uncertainties of the
market conditions, access to the capital markets cannot be
assured.
Future liquidity requirements also may make it necessary for us
to incur additional debt. However, a substantial portion of our
assets are already subject to liens securing our indebtedness.
As a result, we are limited in our ability to pledge our
remaining assets as security for additional secured
indebtedness. In addition, no assurance can be given as to our
ability to raise additional unsecured debt.
Dividends
Under our primary credit facilities we are permitted to pay
dividends on our common stock as long as no default will have
occurred and be continuing, we can incur additional indebtedness
under the credit facilities following the payment, and certain
financial tests are satisfied.
Asset
Dispositions
The restrictions on asset sales imposed by our material
indebtedness have not affected our strategy of divesting
non-core businesses, and those divestitures have not affected
our ability to comply with those restrictions.
COMMITMENTS
AND CONTINGENT LIABILITIES
Contractual
Obligations
The following table presents our contractual obligations and
commitments to make future payments as of December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due by Period as of December 31, 2007
|
|
|
|
|
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
|
5th
|
|
|
After
|
|
(In millions)
|
|
Total
|
|
|
Year
|
|
|
Year
|
|
|
Year
|
|
|
Year
|
|
|
Year
|
|
|
5 Years
|
|
|
Long Term Debt(1)
|
|
$
|
4,685
|
|
|
$
|
391
|
|
|
$
|
959
|
|
|
$
|
13
|
|
|
$
|
1,624
|
|
|
$
|
56
|
|
|
$
|
1,642
|
|
Capital Lease Obligations(2)
|
|
|
53
|
|
|
|
8
|
|
|
|
8
|
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
|
|
16
|
|
Interest Payments(3)
|
|
|
1,367
|
|
|
|
290
|
|
|
|
265
|
|
|
|
195
|
|
|
|
173
|
|
|
|
111
|
|
|
|
333
|
|
Operating Leases(4)
|
|
|
1,403
|
|
|
|
311
|
|
|
|
244
|
|
|
|
192
|
|
|
|
144
|
|
|
|
106
|
|
|
|
406
|
|
Pension Benefits(5)
|
|
|
1,300
|
|
|
|
425
|
|
|
|
350
|
|
|
|
275
|
|
|
|
175
|
|
|
|
75
|
|
|
|
|
|
Other Post Retirement Benefits(6)
|
|
|
1,576
|
|
|
|
194
|
|
|
|
188
|
|
|
|
180
|
|
|
|
172
|
|
|
|
162
|
|
|
|
680
|
|
Workers Compensation(7)
|
|
|
379
|
|
|
|
85
|
|
|
|
45
|
|
|
|
32
|
|
|
|
24
|
|
|
|
19
|
|
|
|
174
|
|
Binding Commitments(8)
|
|
|
1,363
|
|
|
|
1,291
|
|
|
|
45
|
|
|
|
10
|
|
|
|
5
|
|
|
|
3
|
|
|
|
9
|
|
Uncertain Income Tax Positions(9)
|
|
|
70
|
|
|
|
15
|
|
|
|
11
|
|
|
|
2
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,196
|
|
|
$
|
3,010
|
|
|
$
|
2,115
|
|
|
$
|
906
|
|
|
$
|
2,366
|
|
|
$
|
539
|
|
|
$
|
3,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Long term debt payments include notes payable and reflect long
term debt maturities as of December 31, 2007. Our $650
million senior secured notes due 2011 are included in the table
as maturing in the 4th year. However, on February 1, 2008,
we called for the redemption of all outstanding amounts on
March 3, 2008. |
52
|
|
|
(2) |
|
The present value of capital lease obligations is
$40 million. |
|
(3) |
|
These amounts represent future interest payments related to our
existing debt obligations based on fixed and variable interest
rates specified in the associated debt agreements. Payments
related to variable debt are based on the six-month LIBOR rate
at December 31, 2007 plus the specified margin in the
associated debt agreements for each period presented. The
amounts provided relate only to existing debt obligations and do
not assume the refinancing or replacement of such debt. No
interest payments for the $650 million senior secured notes were
assumed beyond March 3, 2008, the date of the redemption. |
|
(4) |
|
Operating lease obligations have not been reduced by minimum
sublease rentals of $46 million, $35 million,
$26 million, $16 million, $10 million, and
$17 million in each of the periods above, respectively, for
a total of $150 million. Payments, net of minimum sublease
rentals, total $1,253 million. The present value of the net
operating lease payments is $920 million. The operating
leases relate to, among other things, real estate, vehicles,
data processing equipment and miscellaneous other assets. No
asset is leased from any related party. |
|
(5) |
|
The obligation related to pension benefits is actuarially
determined and is reflective of obligations as of
December 31, 2007. Although subject to change, the amounts
set forth in the table for 2008 (the 1st year), 2009 (the 2nd
year) and 2010 (the 3rd year) represent the midpoint of the
range of our estimated minimum funding requirements for domestic
defined benefit pension plans under current ERISA law, and the
midpoint of the range of our expected contributions to our
funded
non-U.S.
pension plans, plus expected cash funding of direct participant
payments to our domestic and
non-U.S.
pension plans. For years after 2010, the amounts shown in the
table represent the midpoint of the range of our estimated
minimum funding requirements for our domestic defined benefit
pension plans, plus expected cash funding of direct participant
payments to our domestic and
non-U.S.
pension plans, and do not include estimates for contributions to
our funded
non-U.S.
pension plans. |
|
|
|
The expected contributions for our domestic plans are based upon
a number of assumptions, including: |
|
|
|
an ERISA liability interest rate of 6.05% for 2008,
6.15% for 2009, 6.35% for 2010, 6.50% for 2011, and 6.60% for
2012, and
|
|
|
|
plan asset returns of 8.5% for 2008 and beyond.
|
|
|
|
Future contributions are also effected by other factors such as: |
|
|
|
future interest rate levels,
|
|
|
|
the amount and timing of asset returns, and
|
|
|
|
how contributions in excess of the minimum
requirements could impact the amounts and timing of future
contributions.
|
|
(6) |
|
The payments presented above are expected payments for the next
10 years. The payments for other postretirement benefits
reflect the estimated benefit payments of the plans using the
provisions currently in effect. Under the relevant summary plan
descriptions or plan documents we have the right to modify or
terminate the plans. The obligation related to other
postretirement benefits is actuarially determined on an annual
basis. The estimated payments have been reduced to reflect the
provisions of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003. These amounts will be reduced
significantly provided the proposed settlement with the USW
regarding retiree healthcare becomes effective. |
|
(7) |
|
The payments for workers compensation obligations are
based upon recent historical payment patterns on claims. The
present value of anticipated claims payments for workers
compensation is $276 million. |
|
(8) |
|
Binding commitments are for our normal operations and are
related primarily to obligations to acquire land, buildings and
equipment. In addition, binding commitments includes obligations
to purchase raw materials through short term supply contracts at
fixed prices or at formula prices related to market prices or
negotiated prices. |
|
(9) |
|
These amounts represent expected payments with interest for
uncertain tax positions as of December 31, 2007. We have
reflected them in the period in which we believe they will be
ultimately settled based upon our experience with these matters. |
Additional other long term liabilities include items such as
general and product liabilities, environmental liabilities and
miscellaneous other long term liabilities. These other
liabilities are not contractual obligations by nature. We
53
cannot, with any degree of reliability, determine the years in
which these liabilities might ultimately be settled.
Accordingly, these other long term liabilities are not included
in the above table.
In addition, the following contingent contractual obligations,
the amounts of which cannot be estimated, are not included in
the table above:
|
|
|
|
|
The terms and conditions of our global alliance with SRI, as set
forth in the Umbrella Agreement between SRI and us, provide for
certain minority exit rights available to SRI commencing in
2009. In addition, the occurrence of certain other events
enumerated in the Umbrella Agreement, including certain
bankruptcy events or changes in our control, could trigger a
right of SRI to require us to purchase their interests in the
global alliance immediately. SRIs exit rights, in the
unlikely event of the occurrence of a triggering event and the
subsequent exercise of SRIs exit rights, could require us
to make a substantial payment to acquire SRIs interests in
the global alliance. The Umbrella Agreement provides that the
payment amount would be based on the fair value of SRIs
25% minority shareholders interest in each of Goodyear
Dunlop Tires Europe B.V. and Goodyear Dunlop Tires North
America, Ltd. and the book value of net assets of the Japanese
joint ventures. The payment amount would be determined through a
negotiation process where, if no mutually agreed amount was
determined, a binding arbitration process would determine that
amount. For further information regarding our global alliance
with SRI, see Item 1. Business. Description of
Goodyears Business Global Alliance.
|
|
|
|
Pursuant to certain long term agreements, we will purchase
minimum amounts of a raw material at agreed upon base prices
that are subject to periodic adjustments for changes in raw
material costs and market price adjustments.
|
We do not engage in the trading of commodity contracts or any
related derivative contracts. We generally purchase raw
materials and energy through short term, intermediate and long
term supply contracts at fixed prices or at formula prices
related to market prices or negotiated prices. We may, however,
from time to time, enter into contracts to hedge our energy
costs.
Off-Balance
Sheet Arrangements
An off-balance sheet arrangement is any transaction, agreement
or other contractual arrangement involving an unconsolidated
entity under which a company has:
|
|
|
|
|
made guarantees,
|
|
|
|
retained or held a contingent interest in transferred assets,
|
|
|
|
undertaken an obligation under certain derivative
instruments, or
|
|
|
|
undertaken any obligation arising out of a material variable
interest in an unconsolidated entity that provides financing,
liquidity, market risk or credit risk support to the company, or
that engages in leasing, hedging or research and development
arrangements with the company.
|
We have entered into certain arrangements under which we have
provided guarantees that are off-balance sheet arrangements.
Those guarantees were not significant at December 31, 2007.
For further information about our guarantees, refer to the Note
to the Consolidated Financial Statements No. 19,
Commitments and Contingent Liabilities.
FORWARD-LOOKING
INFORMATION SAFE HARBOR STATEMENT
Certain information in this
Form 10-K
(other than historical data and information) may constitute
forward-looking statements regarding events and trends that may
affect our future operating results and financial position. The
words estimate, expect,
intend and project, as well as other
words or expressions of similar meaning, are intended to
identify forward-looking statements. You are cautioned not to
place undue reliance on forward-looking statements, which speak
only as of the date of this
Form 10-K.
Such statements are based on current expectations
54
and assumptions, are inherently uncertain, are subject to risks
and should be viewed with caution. Actual results and experience
may differ materially from the forward-looking statements as a
result of many factors, including:
|
|
|
|
|
if we do not achieve projected savings from various cost
reduction initiatives or successfully implement other strategic
initiatives our operating results and financial condition may be
materially adversely affected;
|
|
|
|
a significant aspect of our master labor agreement with the USW
is subject to court approval, which, if not received, could
result in the termination and renegotiation of the agreement;
|
|
|
|
we face significant global competition, increasingly from lower
cost manufacturers, and our market share could decline;
|
|
|
|
our pension plans are underfunded and further increases in the
underfunded status of the plans could significantly increase the
amount of our required contributions and pension expenses;
|
|
|
|
higher raw material and energy costs may materially adversely
affect our operating results and financial condition;
|
|
|
|
continued pricing pressures from vehicle manufacturers may
materially adversely affect our business;
|
|
|
|
pending litigation relating to our 2003 restatement could have a
material adverse effect on our financial condition;
|
|
|
|
our long term ability to meet current obligations and to repay
maturing indebtedness, is dependent on our ability to access
capital markets in the future and to improve our operating
results;
|
|
|
|
we have a substantial amount of debt, which could restrict our
growth, place us at a competitive disadvantage or otherwise
materially adversely affect our financial health;
|
|
|
|
any failure to be in compliance with any material provision or
covenant of our secured credit facilities and the indenture
governing our senior secured notes could have a material adverse
effect on our liquidity and our results of operations;
|
|
|
|
our capital expenditures may not be adequate to maintain our
competitive position and may not be implemented in a timely or
cost-effective manner;
|
|
|
|
our variable rate indebtedness subjects us to interest rate
risk, which could cause our debt service obligations to increase
significantly;
|
|
|
|
we may incur significant costs in connection with product
liability and other tort claims;
|
|
|
|
our reserves for product liability and other tort claims and our
recorded insurance assets are subject to various uncertainties,
the outcome of which may result in our actual costs being
significantly higher than the amounts recorded;
|
|
|
|
we may be required to deposit cash collateral to support an
appeal bond if we are subject to a significant adverse judgment,
which may have a material adverse effect on our liquidity;
|
|
|
|
we are subject to extensive government regulations that may
materially adversely affect our operating results;
|
|
|
|
our international operations have certain risks that may
materially adversely affect our operating results;
|
|
|
|
we have foreign currency translation and transaction risks that
may materially adversely affect our operating results;
|
|
|
|
the terms and conditions of our global alliance with SRI provide
for certain exit rights available to SRI in 2009 or thereafter,
upon the occurrence of certain events, which could require us to
make a substantial payment to acquire SRIs interest in
certain of our joint venture alliances (which include much of
our operations in Europe);
|
|
|
|
if we are unable to attract and retain key personnel, our
business could be materially adversely affected;
|
55
|
|
|
|
|
work stoppages, financial difficulties or supply disruptions at
our suppliers or our major OE customers could harm our
business; and
|
|
|
|
we may be impacted by economic and supply disruptions associated
with events beyond our control, such as war, acts of terror,
political unrest, public health concerns, labor disputes or
natural disasters.
|
It is not possible to foresee or identify all such factors. We
will not revise or update any forward-looking statement or
disclose any facts, events or circumstances that occur after the
date hereof that may affect the accuracy of any forward-looking
statement.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
Commodity
Price Risk
The raw materials costs to which our operations are principally
exposed include the cost of natural rubber, synthetic rubber,
carbon black, fabrics, steel cord and other petrochemical-based
commodities. Approximately two-thirds of our raw materials are
oil-based derivatives, whose cost may be affected by
fluctuations in the price of oil. We currently do not hedge
commodity prices. We do, however, use various strategies to
partially offset cost increases for raw materials, including
centralizing purchases of raw materials through our global
procurement organization in an effort to leverage our purchasing
power and expand our capabilities to substitute lower-cost raw
materials.
Interest
Rate Risk
We continuously monitor our fixed and floating rate debt mix.
Within defined limitations, we manage the mix using refinancing
and unleveraged interest rate swaps. We will enter into fixed
and floating interest rate swaps to alter our exposure to the
impact of changing interest rates on consolidated results of
operations and future cash outflows for interest. Fixed rate
swaps are used to reduce our risk of increased interest costs
during periods of rising interest rates, and are normally
designated as cash flow hedges. Floating rate swaps are used to
convert the fixed rates of long term borrowings into short term
variable rates, and are normally designated as fair value
hedges. Interest rate swap contracts are thus used to separate
interest rate risk management from debt funding decisions. At
December 31, 2007, 56% of our debt was at variable interest
rates averaging 7.46% compared to 58% at an average rate of
7.85% at December 31, 2006. The decrease in the average
variable interest rate was driven by decreases in the spread
associated with our variable rate debt as a result of our April
refinancing. We also have from time to time entered into
interest rate lock contracts to hedge the risk-free component of
anticipated debt issuances. As a result of credit ratings
actions and other related events, our access to these
instruments may be limited.
There were no contracts outstanding at December 31, 2007 or
2006.
Weighted average interest rate swap contract information follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Fixed Rate Contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional principal amount
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7
|
|
Pay fixed rate
|
|
|
|
|
|
|
|
|
|
|
5.94
|
%
|
Receive variable LIBOR
|
|
|
|
|
|
|
|
|
|
|
5.66
|
%
|
Floating Rate Contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional principal amount
|
|
$
|
|
|
|
$
|
183
|
|
|
$
|
200
|
|
Pay variable LIBOR
|
|
|
|
|
|
|
6.67
|
%
|
|
|
4.92
|
%
|
Receive fixed rate
|
|
|
|
|
|
|
6.63
|
%
|
|
|
6.63
|
%
|
The following table presents information about long term fixed
rate debt, including capital leases, at December 31:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
Carrying amount liability
|
|
$
|
2,074
|
|
|
$
|
2,998
|
|
Fair value liability
|
|
|
2,172
|
|
|
|
3,353
|
|
Pro forma fair value liability
|
|
|
2,223
|
|
|
|
3,440
|
|
56
The pro forma information assumes a 100 basis point
decrease in market interest rates at December 31 of each year,
and reflects the estimated fair value of fixed rate debt
outstanding at that date under that assumption.
The sensitivity of our interest rate contracts and fixed rate
debt to changes in interest rates was determined with a
valuation model based upon net modified duration analysis. The
model assumes a parallel shift in the interest rate yield curve.
The precision of the model decreases as the assumed change in
interest rates increases.
Foreign
Currency Exchange Risk
We enter into foreign currency 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. These contracts reduce exposure to currency
movements affecting existing foreign currency-denominated
assets, liabilities, firm commitments and forecasted
transactions resulting primarily from trade receivables and
payables, equipment acquisitions, intercompany loans and royalty
agreements and forecasted purchases and sales. Contracts hedging
short term trade receivables and payables normally have no
hedging designation.
The following table presents foreign currency forward contract
information at December 31:
|
|
|
|
|
(In millions)
|
|
2007
|
|
2006
|
|
Fair value asset
|
|
$1
|
|
$(1)
|
Pro forma decrease in fair value
|
|
(66)
|
|
(44)
|
Contract maturities
|
|
1/08 - 10/19
|
|
1/07 - 10/19
|
We were not a party to any foreign currency option contracts at
December 31, 2007 or 2006.
The pro forma change in fair value assumes a 10% decrease in
foreign exchange rates at December 31 of each year, and reflects
the estimated change in the fair value of contracts outstanding
at that date under that assumption. The sensitivity of our
foreign currency positions to changes in exchange rates was
determined using current market pricing models.
Fair values are recognized on the Consolidated Balance Sheets at
December 31 as follows:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
Asset (liability):
|
|
|
|
|
|
|
|
|
Current asset
|
|
$
|
3
|
|
|
$
|
3
|
|
Long term asset
|
|
|
5
|
|
|
|
3
|
|
Current liability
|
|
|
(7
|
)
|
|
|
(7
|
)
|
Long term liability
|
|
|
|
|
|
|
|
|
For further information on interest rate contracts and foreign
currency forward contracts, refer to the Note to the
Consolidated Financial Statements No. 11, Financing
Arrangements and Derivative Financial Instruments.
57
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
59
|
|
|
|
|
60
|
|
Consolidated Financial Statements of The Goodyear
Tire & Rubber Company:
|
|
|
|
|
|
|
|
62
|
|
|
|
|
63
|
|
|
|
|
64
|
|
|
|
|
65
|
|
|
|
|
66
|
|
|
|
|
122
|
|
Financial Statement Schedules:
|
|
|
|
|
The following consolidated financial statement schedules of The
Goodyear Tire & Rubber Company are filed as part of
this Report on
Form 10-K
and should be read in conjunction with the Consolidated
Financial Statements of The Goodyear Tire & Rubber
Company:
|
|
|
|
|
|
|
|
FS-2
|
|
|
|
|
FS-8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedules not listed above have been omitted since they are not
applicable or are not required, or the information required to
be set forth therein is included in the Consolidated Financial
Statements or Notes thereto.
|
|
|
|
|
58
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting
as such term is defined under
Rule 13a-15(f)
promulgated under the Securities Exchange Act of 1934, as
amended.
Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of the Companys
consolidated financial statements for external purposes in
accordance with generally accepted accounting principles.
Internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
Company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit the preparation
of the consolidated financial statements in accordance with
generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance
with appropriate authorizations of management and directors of
the Company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets
that could have a material effect on the consolidated financial
statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the Companys
internal control over financial reporting as of
December 31, 2007 using the framework specified in
Internal Control Integrated Framework,
published by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on such assessment, management has
concluded that the Companys internal control over
financial reporting was effective as of December 31, 2007.
The effectiveness of the Companys internal control over
financial reporting as of December 31, 2007 has been
audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated in their report which is
presented in this Annual Report on
Form 10-K.
59
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Shareholders of The Goodyear
Tire & Rubber Company
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of The Goodyear Tire & Rubber
Company and its subsidiaries at December 31, 2007 and 2006,
and the results of their operations and their cash flows for
each of the three years in the period ended December 31,
2007 in conformity with accounting principles generally accepted
in the United States of America. In addition, in our opinion,
the financial statement schedules listed in the accompanying
index present fairly, in all material respects, the information
set forth therein when read in conjunction with the related
consolidated financial statements. Also in our opinion, the
Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2007,
based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial
statements and financial statement schedules, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in the accompanying
Managements Report on Internal Control over Financial
Reporting, appearing under Item 8. Our responsibility is to
express opinions on these financial statements, on the financial
statement schedules, and on the Companys internal control
over financial reporting based on our integrated audits. We
conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audits of the financial statements included
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. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our
opinions.
As discussed in the notes to the consolidated financial
statements, the Company changed the manner in which it accounts
for uncertain tax positions as of January 1, 2007
(Note 14), defined benefit pension and other postretirement
plans as of December 31, 2006 (Note 13), share-based
compensation as of January 1, 2006 (Note 12), and
asset retirement obligations as of December 31, 2005
(Note 1).
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
60
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Cleveland, Ohio
February 14, 2008
61
THE
GOODYEAR TIRE & RUBBER COMPANY AND
SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(Dollars in millions, except per share amounts)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Net Sales
|
|
$
|
19,644
|
|
|
$
|
18,751
|
|
|
$
|
18,098
|
|
Cost of Goods Sold
|
|
|
15,920
|
|
|
|
15,736
|
|
|
|
14,535
|
|
Selling, Administrative and General Expense
|
|
|
2,762
|
|
|
|
2,546
|
|
|
|
2,634
|
|
Rationalizations (Note 2)
|
|
|
49
|
|
|
|
311
|
|
|
|
7
|
|
Interest Expense (Note 15)
|
|
|
450
|
|
|
|
447
|
|
|
|
408
|
|
Other (Income) and Expense (Note 3)
|
|
|
(1
|
)
|
|
|
(87
|
)
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations before Income Taxes
and Minority Interest
|
|
|
464
|
|
|
|
(202
|
)
|
|
|
452
|
|
United States and Foreign Taxes (Note 14)
|
|
|
255
|
|
|
|
60
|
|
|
|
233
|
|
Minority Interest
|
|
|
70
|
|
|
|
111
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
|
139
|
|
|
|
(373
|
)
|
|
|
124
|
|
Discontinued Operations (Note 17)
|
|
|
463
|
|
|
|
43
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Cumulative Effect of Accounting
Change
|
|
|
602
|
|
|
|
(330
|
)
|
|
|
239
|
|
Cumulative Effect of Accounting Change (Note 1)
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
602
|
|
|
$
|
(330
|
)
|
|
$
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per Share Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
$
|
0.70
|
|
|
$
|
(2.11
|
)
|
|
$
|
0.70
|
|
Discontinued Operations
|
|
|
2.30
|
|
|
|
0.25
|
|
|
|
0.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Cumulative Effect of Accounting Change
|
|
|
3.00
|
|
|
|
(1.86
|
)
|
|
|
1.36
|
|
Cumulative Effect of Accounting Change
|
|
|
|
|
|
|
|
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per Share Basic
|
|
$
|
3.00
|
|
|
$
|
(1.86
|
)
|
|
$
|
1.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding (Note 4)
|
|
|
201
|
|
|
|
177
|
|
|
|
176
|
|
Net Income (Loss) Per Share Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
$
|
0.65
|
|
|
$
|
(2.11
|
)
|
|
$
|
0.66
|
|
Discontinued Operations
|
|
|
2.00
|
|
|
|
0.25
|
|
|
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Cumulative Effect of Accounting Change
|
|
|
2.65
|
|
|
|
(1.86
|
)
|
|
|
1.21
|
|
Cumulative Effect of Accounting Change
|
|
|
|
|
|
|
|
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per Share Diluted
|
|
$
|
2.65
|
|
|
$
|
(1.86
|
)
|
|
$
|
1.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding (Note 4)
|
|
|
232
|
|
|
|
177
|
|
|
|
209
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
62
THE
GOODYEAR TIRE & RUBBER COMPANY AND
SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Dollars in millions)
|
|
2007
|
|
|
2006
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (Note 1)
|
|
$
|
3,463
|
|
|
$
|
3,862
|
|
Restricted cash (Note 1)
|
|
|
191
|
|
|
|
214
|
|
Accounts receivable (Note 5)
|
|
|
3,103
|
|
|
|
2,800
|
|
Inventories (Note 6)
|
|
|
3,164
|
|
|
|
2,601
|
|
Prepaid expenses and other current assets
|
|
|
251
|
|
|
|
289
|
|
Current assets of discontinued operations (Note 17)
|
|
|
|
|
|
|
413
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
10,172
|
|
|
|
10,179
|
|
Goodwill (Note 7)
|
|
|
713
|
|
|
|
662
|
|
Intangible Assets (Note 7)
|
|
|
167
|
|
|
|
166
|
|
Deferred Income Tax (Note 14)
|
|
|
83
|
|
|
|
150
|
|
Other Assets and Prepaid Pension Assets (Notes 8 and 13)
|
|
|
458
|
|
|
|
453
|
|
Long Term Assets of Discontinued Operations (Note 17)
|
|
|
|
|
|
|
352
|
|
Property, Plant and Equipment (Note 9)
|
|
|
5,598
|
|
|
|
5,067
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
17,191
|
|
|
$
|
17,029
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable-trade
|
|
$
|
2,422
|
|
|
$
|
1,945
|
|
Compensation and benefits (Notes 12 and 13)
|
|
|
897
|
|
|
|
883
|
|
Other current liabilities
|
|
|
753
|
|
|
|
811
|
|
Current liabilities of discontinued operations (Note 17)
|
|
|
|
|
|
|
157
|
|
United States and foreign taxes
|
|
|
196
|
|
|
|
222
|
|
Notes payable and overdrafts (Note 11)
|
|
|
225
|
|
|
|
243
|
|
Long term debt and capital leases due within one year
(Note 11)
|
|
|
171
|
|
|
|
405
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
4,664
|
|
|
|
4,666
|
|
Long Term Debt and Capital Leases (Note 11)
|
|
|
4,329
|
|
|
|
6,562
|
|
Compensation and Benefits (Notes 12 and 13)
|
|
|
3,404
|
|
|
|
4,935
|
|
Long Term Liabilities of Discontinued Operations (Note 17)
|
|
|
|
|
|
|
47
|
|
Deferred and Other Noncurrent Income Taxes (Note 14)
|
|
|
274
|
|
|
|
320
|
|
Other Long Term Liabilities
|
|
|
667
|
|
|
|
380
|
|
Minority Equity in Subsidiaries
|
|
|
1,003
|
|
|
|
877
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
14,341
|
|
|
|
17,787
|
|
Commitments and Contingent Liabilities (Note 19)
|
|
|
|
|
|
|
|
|
Shareholders Equity (Deficit)
|
|
|
|
|
|
|
|
|
Preferred Stock, no par value:
|
|
|
|
|
|
|
|
|
Authorized, 50,000,000 shares, unissued
|
|
|
|
|
|
|
|
|
Common Stock, no par value:
|
|
|
|
|
|
|
|
|
Authorized, 450,000,000 shares in 2007 and 2006
|
|
|
|
|
|
|
|
|
Outstanding shares, 240,122,374 (178,218,970 in 2006)
(Note 22)
|
|
|
240
|
|
|
|
178
|
|
Capital Surplus
|
|
|
2,660
|
|
|
|
1,427
|
|
Retained Earnings
|
|
|
1,602
|
|
|
|
968
|
|
Accumulated Other Comprehensive Loss (Note 18)
|
|
|
(1,652
|
)
|
|
|
(3,331
|
)
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity (Deficit)
|
|
|
2,850
|
|
|
|
(758
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity (Deficit)
|
|
$
|
17,191
|
|
|
$
|
17,029
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
63
THE
GOODYEAR TIRE & RUBBER COMPANY AND
SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Other
|
|
|
Shareholders
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Equity
|
|
(Dollars in millions)
|
|
Shares
|
|
|
Amount
|
|
|
Surplus
|
|
|
Earnings
|
|
|
Loss
|
|
|
(Deficit)
|
|
|
Balance at December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(after deducting 20,059,029 treasury shares)
|
|
|
175,619,639
|
|
|
$
|
176
|
|
|
$
|
1,392
|
|
|
$
|
1,070
|
|
|
$
|
(2,564
|
)
|
|
$
|
74
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
228
|
|
|
|
|
|
|
|
228
|
|
Foreign currency translation (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(201
|
)
|
|
|
|
|
Reclassification adjustment for amounts
recognized in income (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
Minimum pension liability (net of tax of $23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(97
|
)
|
|
|
|
|
Unrealized investment gain (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
Deferred derivative loss (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
Reclassification adjustment for amounts
recognized in income (net of tax of $(1))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Common stock issued from treasury:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation plans
|
|
|
890,112
|
|
|
|
1
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(after deducting 19,168,917 treasury shares)
|
|
|
176,509,751
|
|
|
|
177
|
|
|
|
1,398
|
|
|
|
1,298
|
|
|
|
(2,800
|
)
|
|
|
73
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(330
|
)
|
|
|
|
|
|
|
(330
|
)
|
Foreign currency translation (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233
|
|
|
|
|
|
Reclassification adjustment for amounts
recognized in income (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Additional pension liability (net of tax of $38)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
439
|
|
|
|
|
|
Unrealized investment loss (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
Deferred derivative gain (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Reclassification adjustment for amounts
recognized in income (net of tax of $(3))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
338
|
|
Adjustment to initially apply FASB Statement No. 158
for pension and OPEB (net of tax of $49)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,199
|
)
|
|
|
(1,199
|
)
|
Common stock issued from treasury:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation plans
|
|
|
1,709,219
|
|
|
|
1
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(after deducting 17,459,698 treasury shares)
|
|
|
178,218,970
|
|
|
|
178
|
|
|
|
1,427
|
|
|
|
968
|
|
|
|
(3,331
|
)
|
|
|
(758
|
)
|
Adjustment for adoption of FIN 48 (Note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
32
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
602
|
|
|
|
|
|
|
|
602
|
|
Foreign currency translation (net of tax of $1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
482
|
|
|
|
|
|
Reclassification adjustment for amounts recognized in income
(net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
Prior service credit from defined benefit plan
amendments (net of minority interest of $3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
488
|
|
|
|
|
|
Amortization of prior service cost and
unrecognized gains and losses included in net periodic benefit
cost (net of tax of $8 and minority interest of $14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154
|
|
|
|
|
|
Decrease in net actuarial losses (net of tax of $21 and
minority interest of $28)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
445
|
|
|
|
|
|
Immediate recognition of prior service cost and
unrecognized gains and losses due to curtailments,
settlements and divestitures (net of tax of $10 and
minority interest of $2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137
|
|
|
|
|
|
Unrealized investment loss (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,281
|
|
Issuance of shares for public equity offering (Note 23)
|
|
|
26,136,363
|
|
|
|
26
|
|
|
|
808
|
|
|
|
|
|
|
|
|
|
|
|
834
|
|
Issuance of shares for conversion of debt (Note 11)
|
|
|
28,728,852
|
|
|
|
29
|
|
|
|
307
|
|
|
|
|
|
|
|
|
|
|
|
336
|
|
Common stock issued from treasury:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation plans (Note 12)
|
|
|
7,038,189
|
|
|
|
7
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
103
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(after deducting 10,438,287 treasury shares)
|
|
|
240,122,374
|
|
|
$
|
240
|
|
|
$
|
2,660
|
|
|
$
|
1,602
|
|
|
$
|
(1,652
|
)
|
|
$
|
2,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
64
THE
GOODYEAR TIRE & RUBBER COMPANY AND
SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
602
|
|
|
$
|
(330
|
)
|
|
$
|
228
|
|
Less: Discontinued Operations
|
|
|
463
|
|
|
|
43
|
|
|
|
115
|
|
Cumulative Effect of Accounting Change
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
|
139
|
|
|
|
(373
|
)
|
|
|
124
|
|
Adjustments to reconcile net income (loss) from continuing
operations to cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
614
|
|
|
|
637
|
|
|
|
593
|
|
Amortization and write-off of debt issuance costs
|
|
|
45
|
|
|
|
19
|
|
|
|
76
|
|
Deferred tax provision (Note 14)
|
|
|
(5
|
)
|
|
|
(41
|
)
|
|
|
(15
|
)
|
Net rationalization charges (Note 2)
|
|
|
49
|
|
|
|
311
|
|
|
|
7
|
|
Net (gains) losses on asset sales (Note 3)
|
|
|
(15
|
)
|
|
|
(40
|
)
|
|
|
36
|
|
Net insurance settlement gains (Note 3)
|
|
|
|
|
|
|
(3
|
)
|
|
|
(79
|
)
|
Fire loss expense
|
|
|
17
|
|
|
|
|
|
|
|
|
|
Minority interest and equity earnings
|
|
|
64
|
|
|
|
106
|
|
|
|
91
|
|
Pension contributions and direct payments
|
|
|
(719
|
)
|
|
|
(708
|
)
|
|
|
(522
|
)
|
Rationalization payments
|
|
|
(75
|
)
|
|
|
(119
|
)
|
|
|
(39
|
)
|
Insurance recoveries
|
|
|
7
|
|
|
|
46
|
|
|
|
228
|
|
Changes in operating assets and liabilities, net of asset
acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(104
|
)
|
|
|
268
|
|
|
|
(6
|
)
|
Inventories
|
|
|
(395
|
)
|
|
|
127
|
|
|
|
(237
|
)
|
Accounts payable trade
|
|
|
294
|
|
|
|
74
|
|
|
|
62
|
|
U.S. and foreign taxes
|
|
|
(36
|
)
|
|
|
(187
|
)
|
|
|
168
|
|
Deferred taxes and noncurrent income taxes
|
|
|
28
|
|
|
|
(4
|
)
|
|
|
(117
|
)
|
Compensation and benefits
|
|
|
292
|
|
|
|
337
|
|
|
|
421
|
|
Other current liabilities
|
|
|
(76
|
)
|
|
|
27
|
|
|
|
(62
|
)
|
Other assets and liabilities
|
|
|
(32
|
)
|
|
|
(32
|
)
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating cash flows from continuing operations
|
|
|
92
|
|
|
|
445
|
|
|
|
780
|
|
Operating cash flows from discontinued operations
|
|
|
13
|
|
|
|
115
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flows from Operating Activities
|
|
|
105
|
|
|
|
560
|
|
|
|
886
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(739
|
)
|
|
|
(637
|
)
|
|
|
(601
|
)
|
Asset dispositions
|
|
|
107
|
|
|
|
127
|
|
|
|
257
|
|
Asset acquisitions
|
|
|
|
|
|
|
(41
|
)
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
23
|
|
|
|
27
|
|
|
|
(80
|
)
|
Other transactions
|
|
|
3
|
|
|
|
26
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investing cash flows from continuing operations
|
|
|
(606
|
)
|
|
|
(498
|
)
|
|
|
(408
|
)
|
Investing cash flows from discontinued operations
|
|
|
1,435
|
|
|
|
(34
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flows from Investing Activities
|
|
|
829
|
|
|
|
(532
|
)
|
|
|
(441
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term debt and overdrafts incurred
|
|
|
21
|
|
|
|
77
|
|
|
|
38
|
|
Short term debt and overdrafts paid
|
|
|
(81
|
)
|
|
|
(101
|
)
|
|
|
(7
|
)
|
Long term debt incurred
|
|
|
142
|
|
|
|
2,245
|
|
|
|
2,290
|
|
Long term debt paid
|
|
|
(2,327
|
)
|
|
|
(501
|
)
|
|
|
(2,390
|
)
|
Common stock issued (Notes 12 and 23)
|
|
|
937
|
|
|
|
12
|
|
|
|
7
|
|
Dividends paid to minority interests in subsidiaries
|
|
|
(100
|
)
|
|
|
(69
|
)
|
|
|
(52
|
)
|
Debt issuance costs
|
|
|
|
|
|
|
(15
|
)
|
|
|
(67
|
)
|
Debt retirement costs
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cash flows from continuing operations
|
|
|
(1,426
|
)
|
|
|
1,648
|
|
|
|
(181
|
)
|
Financing cash flows from discontinued operations
|
|
|
(9
|
)
|
|
|
(1
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flows from Financing Activities
|
|
|
(1,435
|
)
|
|
|
1,647
|
|
|
|
(178
|
)
|
Net Change in Cash of Discontinued Operations
|
|
|
27
|
|
|
|
(10
|
)
|
|
|
(2
|
)
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
75
|
|
|
|
59
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents
|
|
|
(399
|
)
|
|
|
1,724
|
|
|
|
203
|
|
Cash and Cash Equivalents at Beginning of the Year
|
|
|
3,862
|
|
|
|
2,138
|
|
|
|
1,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of the Year
|
|
$
|
3,463
|
|
|
$
|
3,862
|
|
|
$
|
2,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
65
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
|
|
Note 1.
|
Accounting
Policies
|
A summary of the significant accounting policies used in the
preparation of the accompanying consolidated financial
statements follows:
Principles
of Consolidation
The consolidated financial statements include the accounts of
all majority-owned subsidiaries in which no substantive
participating rights are held by minority shareholders. All
intercompany transactions have been eliminated. Our investments
in companies in which we do not own a majority and we have the
ability to exercise significant influence over operating and
financial policies are accounted for using the equity method.
Accordingly, our share of the earnings of these companies is
included in the Consolidated Statement of Operations.
Investments in other companies are carried at cost.
The consolidated financial statements also include the accounts
of entities previously consolidated pursuant to the provisions
of Interpretation No. 46 of the Financial Accounting
Standards Board (FASB), Consolidation of
Variable Interest Entities (VIEs) an
Interpretation of ARB No. 51, as amended by FASB
Interpretation No. 46R (collectively,
FIN 46).
As discussed in Note 17, the results of operations,
financial position and cash flows of the Engineered Products
business segment, previously a reportable operating segment,
have been reported as discontinued operations for all periods
presented. Unless otherwise indicated, all disclosures in the
notes to the consolidated financial statements relate to
continuing operations.
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. Actual results could differ from those
estimates. On an ongoing basis, management reviews its
estimates, including those related to:
|
|
|
|
|
recoverability of intangibles and other long-lived assets,
|
|
|
|
|
|
deferred tax asset valuation allowances and uncertain income tax
positions,
|
|
|
|
workers compensation,
|
|
|
|
general and product liabilities and other litigation,
|
|
|
|
pension and other postretirement benefits, and
|
|
|
|
various other operating allowances and accruals, based on
currently available information.
|
Changes in facts and circumstances may alter such estimates and
affect results of operations and financial position in future
periods.
Revenue
Recognition and Accounts Receivable Valuation
Revenues are recognized when finished products are shipped to
unaffiliated customers, both title and the risks and rewards of
ownership are transferred or services have been rendered and
accepted, and collectibility is reasonably assured. A provision
for sales returns, discounts and allowances is recorded at the
time of sale. Appropriate provisions are made for uncollectible
accounts based on historical loss experience, portfolio
duration, economic conditions and credit risk quality. The
adequacy of the allowances are assessed quarterly.
66
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 1.
|
Accounting
Policies (continued)
|
Shipping
and Handling Fees and Costs
Costs incurred for transportation of products to customers are
recorded as a component of Cost of Goods Sold (CGS).
Research
and Development Costs
Research and development costs include, among other things,
materials, equipment, compensation and contract services. These
costs are expensed as incurred and included as a component of
CGS. Research and development expenditures were
$372 million, $342 million and $346 million in
2007, 2006 and 2005, respectively.
Warranty
Warranties are provided on the sale of certain of our products
and services and an accrual for estimated future claims is
recorded at the time revenue is recognized. Tire replacement
under most of the warranties we offer is on a prorated basis.
Warranty reserves are based on past claims experience, sales
history and other considerations. Refer to Note 19.
Environmental
Cleanup Matters
We expense environmental costs related to existing conditions
resulting from past or current operations and from which no
current or future benefit is discernible. Expenditures that
extend the life of the related property or mitigate or prevent
future environmental contamination are capitalized. We determine
our liability on a site by site basis and record a liability at
the time when it is probable and can be reasonably estimated.
Our 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. Our estimated liability is not
discounted or reduced for possible recoveries from insurance
carriers. Refer to Note 19.
Legal
Costs
We record a liability for estimated legal and defense costs
related to pending general and product liability claims,
environmental matters and workers compensation claims.
Refer to Note 19.
Advertising
Costs
Costs incurred for producing and communicating advertising are
generally expensed when incurred as a component of Selling,
Administrative and General Expense (SAG). Costs
incurred under our cooperative advertising program with dealers
and franchisees are generally recorded as reductions of sales as
related revenues are recognized. Advertising costs, including
costs for our cooperative advertising programs with dealers and
franchisees, were $394 million, $318 million and
$375 million in 2007, 2006 and 2005, respectively.
Rationalizations
We record costs for rationalization actions implemented to
reduce excess and high-cost manufacturing capacity, and to
reduce associate headcount. Associate-related costs include
severance, supplemental unemployment compensation and benefits,
medical benefits, pension curtailments, postretirement benefits,
and other termination benefits. Other than associate-related
costs, costs generally include, but are not limited to,
noncancelable lease costs, contract terminations, and moving and
relocation costs. Rationalization charges related to accelerated
depreciation and asset impairments are recorded in CGS or SAG.
Refer to Note 2.
67
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 1.
|
Accounting
Policies (continued)
|
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 under
applicable tax laws. The effect on deferred tax assets or
liabilities of a change in the tax law or tax rate is recognized
in the period the change is enacted. Valuation allowances are
recorded to reduce net deferred tax assets to the amount that is
more likely than not to be realized. The calculation of our tax
liabilities also involves dealing with uncertainties in the
application of complex tax regulations. We recognize liabilities
for uncertain income tax positions based on our estimate of
whether, and the extent to which, additional taxes will be
required. We also report interest and penalties related to
uncertain income tax positions as income taxes. Refer to
Note 14.
Cash
and Cash Equivalents / Consolidated Statements 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 generally have
original maturities within three months from the date of
acquisition. Our short-term investment securities are held with
counterparties who are substantial and creditworthy financial
institutions.
Cash flows associated with derivative financial instruments
designated as hedges of identifiable transactions or events are
classified in the same category as the cash flows from the
related hedged items. Cash flows associated with derivative
financial instruments not designated as hedges are classified as
operating activities. Book overdrafts are recorded within
Accounts payable-trade and totaled $118 million and
$117 million at December 31, 2007 and 2006,
respectively. Bank overdrafts are recorded within Notes payable
and overdrafts. Cash flows associated with book and bank
overdrafts are classified as financing activities. Non-cash
investing activities in 2007 included $132 million of
accrued capital expenditures. Non-cash financing activities in
2007 included the issuance of 28.7 million shares of our
common stock in exchange for approximately $346 million
principal amount of our 4% convertible senior notes due
2034.
Restricted
Cash and Restricted Net Assets
Restricted cash primarily consists of Goodyear contributions
made related to the settlement of the Entran II litigation
and proceeds received pursuant to insurance settlements. Refer
to Note 19 for further information about Entran II
claims. In addition, we will, from time to time, maintain
balances on deposit at various financial institutions as
collateral for borrowings incurred by various subsidiaries, as
well as cash deposited in support of trade agreements and
performance bonds. At December 31, 2007, cash balances
totaling $191 million were subject to such restrictions,
compared to $214 million at December 31, 2006.
In certain countries where we operate, transfers of funds into
or out of such countries by way of dividends, loans or advances
are generally or periodically subject to various restrictive
governmental regulations. In addition, certain of our credit
agreements and other debt instruments restrict the ability of
foreign subsidiaries to make cash distributions. At
December 31, 2007, approximately $308 million of net
assets were subject to such restrictions, compared to
approximately $373 million at December 31, 2006.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the
first-in,
first-out or the average cost method. Costs include direct
material, direct labor and applicable manufacturing and
engineering overhead. We allocate fixed manufacturing overheads
based on normal production capacity and recognize abnormal
manufacturing costs as period costs. We determine a provision
for excess and obsolete inventory based on managements
review of inventories on hand compared to estimated future usage
and sales. Refer to Note 6.
68
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 1.
|
Accounting
Policies (continued)
|
Goodwill
and Other Intangible Assets
Goodwill is recorded when the cost of acquired businesses
exceeds the fair value of the identifiable net assets acquired.
Goodwill and intangible assets with indefinite useful lives are
not amortized, but are tested for impairment annually or when
events or circumstances indicate that impairment may have
occurred, as provided in Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and
Other Intangible Assets. We perform the goodwill and
intangible assets with indefinite useful lives impairment tests
annually as of July 31. The impairment test uses a
valuation methodology based upon an EBITDA multiple using
comparable companies. In addition, the carrying amount of
goodwill and intangible assets with indefinite useful lives is
reviewed whenever events or circumstances indicated that
revisions might be warranted. Goodwill and intangible assets
with indefinite useful lives would be written down to fair value
if considered impaired. Intangible assets with finite useful
lives are amortized to their estimated residual values over such
finite lives, and reviewed for impairment in accordance with
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Refer to Note 7.
Investments
Investments in marketable securities are stated at fair value.
Fair value is determined using quoted market prices at the end
of the reporting period and, when appropriate, exchange rates at
that date. Unrealized gains and losses on marketable securities
classified as available-for-sale are recorded in Accumulated
Other Comprehensive Loss (AOCL), net of tax. We
regularly review our investments to determine whether a decline
in fair value below the cost basis is other than temporary. If
the decline in fair value is judged to be other than temporary,
the cost basis of the security is written down to fair value and
the amount of the write-down is included in the Consolidated
Statements of Operations. Refer to Notes 8 and 18.
Property,
Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation
is computed using the straight-line method. Additions and
improvements that substantially extend the useful life of
property, plant and equipment, and interest costs incurred
during the construction period of major projects, are
capitalized. Repair and maintenance costs are expensed as
incurred. Property, plant and equipment are depreciated to their
estimated residual values over their estimated useful lives, and
reviewed for impairment in accordance with
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Refer to Notes 9 and
15.
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
AOCL. Where the U.S. dollar is the functional currency,
translation adjustments are recorded in the Statement of
Operations. Income taxes are generally not provided for foreign
currency translation adjustments.
Derivative
Financial Instruments and Hedging Activities
To qualify for hedge accounting, hedging instruments must be
designated as hedges and meet defined correlation and
effectiveness criteria. These criteria require that the
anticipated cash flows
and/or
financial statement effects of the hedging instrument
substantially offset those of the position being hedged.
Derivative contracts are reported at fair value on the
Consolidated Balance Sheets as both current and long term
Accounts Receivable or Other Liabilities. Deferred gains and
losses on contracts designated as cash flow hedges are recorded
net of tax in AOCL. Ineffectiveness in hedging relationships is
recorded in Other (Income) and Expense in the current period.
69
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 1.
|
Accounting
Policies (continued)
|
Interest Rate Contracts Gains and losses on
contracts designated as cash flow hedges are initially deferred
and recorded in AOCL. Amounts are transferred from AOCL and
recognized in income as Interest Expense in the same period that
the hedged item is recognized in income. Gains and losses on
contracts designated as fair value hedges are recognized in
income in the current period as Interest Expense. Gains and
losses on contracts with no hedging designation are recorded in
the current period in Other (Income) and Expense.
Foreign Currency Contracts Gains and losses
on contracts designated as cash flow hedges are initially
deferred and recorded in AOCL. Amounts are transferred from AOCL
and recognized in income in the same period and on the same line
that the hedged item is recognized in income. Gains and losses
on contracts with no hedging designation are recorded in Other
(Income) and Expense in the current period.
We do not include premiums paid on forward currency contracts in
our assessment of hedge effectiveness. Premiums on contracts
designated as hedges are recognized in Other (Income) and
Expense over the life of the contract.
Net Investment Hedging Nonderivative
instruments denominated in foreign currencies are used from time
to time to hedge net investments in foreign subsidiaries. Gains
and losses on these instruments are deferred and recorded in
AOCL as Foreign Currency Translation Adjustments. These gains
and losses are only recognized in income upon the complete or
partial sale of the related investment or the complete
liquidation of the investment.
Termination of Contracts Gains and losses
(including deferred gains and losses in AOCL) are recognized in
Other (Income) and Expense when contracts are terminated
concurrently with the termination of the hedged position. To the
extent that such position remains outstanding, gains and losses
are amortized to Interest Expense or to Other (Income) and
Expense over the remaining life of that position. Gains and
losses on contracts that we temporarily continue to hold after
the early termination of a hedged position, or that otherwise no
longer qualify for hedge accounting, are recognized in income in
Other (Income) and Expense.
Refer to Note 11.
Stock-Based
Compensation
The FASB issued SFAS No. 123R, Share-Based
Payments (SFAS No. 123R), which
replaced SFAS No. 123, Accounting for
Stock-Based Compensation
(SFAS No. 123), and superseded Accounting
Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, (APB 25).
SFAS No. 123R requires entities to measure
compensation cost arising from the grant of share-based awards
to employees at fair value and to recognize such cost in income
over the period during which the service is provided, usually
the vesting period. We adopted SFAS No. 123R effective
January 1, 2006 under the modified prospective transition
method. Accordingly, we recognize compensation expense for all
awards granted or modified after December 31, 2005 and for
the unvested portion of all outstanding awards at the date of
adoption.
We recognize compensation expense using the straight-line
approach. We estimate fair value using the Black-Scholes
valuation model. Assumptions used to estimate the compensation
expense are determined as follows:
|
|
|
|
|
Expected term is determined using a weighted average of the
contractual term and vesting period of the award;
|
|
|
|
Expected volatility is measured using the weighted average of
historical daily changes in the market price of our common stock
over the expected term of the award and implied volatility
calculated for our exchange traded options with an expiration
date greater than one year;
|
|
|
|
Risk-free interest rate is equivalent to the implied yield on
zero-coupon U.S. Treasury bonds with a remaining maturity
equal to the expected term of the awards; and,
|
70
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 1.
|
Accounting
Policies (continued)
|
|
|
|
|
|
Forfeitures are based substantially on the history of
cancellations of similar awards granted in prior years.
|
Refer to Note 12 for additional information on our
stock-based compensation plans and related compensation expense.
Prior to the adoption of SFAS No. 123R, we used the
intrinsic value method prescribed in APB 25 and also followed
the disclosure requirements of SFAS No. 123, as
amended by SFAS No. 148, Accounting for
Stock-Based Compensation Transition and
Disclosure (SFAS No. 148), which
required certain disclosures on a pro forma basis as if the fair
value method had been followed for accounting for such
compensation. The following table presents the pro forma effect
on net income as if we had applied the fair value method to
measure compensation cost prior to our adoption of
SFAS No. 123R:
|
|
|
|
|
|
|
Year Ended
|
|
(In millions, except per share amounts)
|
|
December 31, 2005
|
|
|
Income from Continuing Operations as reported
|
|
$
|
124
|
|
Add: Stock-based compensation expense included in net income
(net of tax)
|
|
|
5
|
|
Deduct: Stock-based compensation expense calculated using the
fair value method (net of tax)
|
|
|
(21
|
)
|
|
|
|
|
|
Income from Continuing Operations as adjusted
|
|
|
108
|
|
Discontinued Operations
|
|
|
115
|
|
Cumulative Effect of Accounting Change
|
|
|
(11
|
)
|
|
|
|
|
|
Net Income as adjusted
|
|
$
|
212
|
|
|
|
|
|
|
Income from Continuing Operations per share:
|
|
|
|
|
Basic as reported
|
|
$
|
0.70
|
|
as adjusted
|
|
|
0.61
|
|
Diluted as reported
|
|
$
|
0.66
|
|
as adjusted
|
|
|
0.59
|
|
Net income per share:
|
|
|
|
|
Basic as reported
|
|
$
|
1.30
|
|
as adjusted
|
|
|
1.20
|
|
Diluted as reported
|
|
$
|
1.16
|
|
as adjusted
|
|
|
1.09
|
|
Earnings
Per Share of Common Stock
Basic earnings per share are computed based on the weighted
average number of common shares outstanding. Diluted earnings
per share primarily reflects the dilutive impact of outstanding
stock options and contingently convertible debt, regardless of
whether the provision of the contingent features had been met.
All earnings per share amounts in these notes to the
consolidated financial statements are diluted, unless otherwise
noted. Refer to Note 4.
Asset
Retirement Obligations
We adopted FASB Interpretation No. 47, Accounting for
Conditional Asset Retirement Obligations an
interpretation of FASB Statement No. 143
(FIN 47) on December 31, 2005. Upon
adoption, we recorded a liability of $16 million and
recognized a non-cash charge for the cumulative effect of
adoption of $11 million, net of
71
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 1.
|
Accounting
Policies (continued)
|
taxes and minority interests of $3 million. The cumulative
effect on basic and diluted earnings per share of the accounting
change, net of taxes and minority interest was $0.06 and $0.05,
respectively.
Our asset retirement obligations (AROs) are primarily associated
with the removal and disposal of asbestos. We recognize a
liability for these obligations in the period in which
sufficient information regarding the timing and method of
settlement becomes available to make a reasonable estimate of
the liabilitys fair value. In addition, we have identified
certain other AROs for which information regarding the timing
and method of potential settlement is not available as of
December 31, 2007, and therefore, we are not able to
reasonably estimate the fair value of those liabilities at this
time.
Reclassifications
Certain items previously reported in specific financial
statement captions have been reclassified to conform to the 2007
presentation.
Recently
Issued Accounting Pronouncements
In July 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes-an
Interpretation of FASB Statement No. 109
(FIN 48). FIN 48 clarifies what criteria
must be met prior to recognizing the financial statement benefit
of a position taken in a tax return and requires companies to
include additional qualitative and quantitative disclosures
related to such positions within their financial statements. The
disclosures include potential tax benefits from positions taken
for tax return purposes that have not been recognized for
financial reporting purposes and a tabular presentation of
significant changes during each period. The disclosures also
include a discussion of the nature of uncertainties, factors
which could cause a change, and an estimated range of reasonably
possible changes in tax uncertainties. FIN 48 also requires
a company to recognize a financial statement benefit for a
position taken for tax return purposes when it will be more
likely than not that the position will be sustained. We adopted
FIN 48 on January 1, 2007. The adoption resulted in an
increase in the opening balance of retained earnings and a
decrease in goodwill of $32 million and $5 million,
respectively, for tax benefits not previously recognized under
historical practice.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS No. 157). SFAS No. 157
addresses how companies should measure fair value when they are
required to use a fair value measure for recognition and
disclosure purposes under generally accepted accounting
principles. SFAS No. 157 will require the fair value
of an asset or liability to be based on market-based measures
which will reflect the credit risk of the company.
SFAS No. 157 will also expand disclosure requirements
to include the methods and assumptions used to measure fair
value and the effect of fair value measures on earnings. The
adoption of SFAS No. 157 effective January 1,
2008 did not have a material impact on our consolidated
financial statements.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities Including an Amendment of FASB Statement
No. 115 (SFAS No. 159).
SFAS No. 159 permits a company to choose to measure
many financial instruments and other items at fair value that
are not currently required to be measured at fair value. The
objective is to improve financial reporting by providing a
company with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting
provisions. A company will report unrealized gains and losses in
earnings at each subsequent reporting date on items for which
the fair value option has been elected. The adoption of
SFAS No. 159 effective January 1, 2008 did not
have a material impact on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141
(Revised), Business Combinations
(SFAS No. 141 (R)), replacing
SFAS No. 141, Business Combinations
(SFAS No. 141), and
SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements an Amendment of
ARB No. 51 (SFAS No. 160).
SFAS No. 141(R) retains
72
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 1.
|
Accounting
Policies (continued)
|
the fundamental requirements of SFAS No. 141, broadens
its scope by applying the acquisition method to all transactions
and other events in which one entity obtains control over one or
more other businesses, and requires, among other things, that
assets acquired and liabilities assumed be measured at fair
value as of the acquisition date, that liabilities related to
contingent consideration be recognized at the acquisition date
and remeasured at fair value in each subsequent reporting
period, that acquisition-related costs be expensed as incurred,
and that income be recognized if the fair value of the net
assets acquired exceeds the fair value of the consideration
transferred. SFAS No. 160 establishes accounting and
reporting standards for noncontrolling interests (i.e., minority
interests) in a subsidiary, including changes in a parents
ownership interest in a subsidiary and requires, among other
things, that noncontrolling interests in subsidiaries be
classified as a separate component of equity. Except for the
presentation and disclosure requirements of
SFAS No. 160, which are to be applied retrospectively
for all periods presented, SFAS No. 141 (R) and
SFAS No. 160 are to be applied prospectively in
financial statements issued for fiscal years beginning after
December 15, 2008. We are assessing the impact
SFAS No. 160 will have on our consolidated financial
statements.
|
|
Note 2.
|
Costs
Associated with Rationalization Programs
|
To maintain global competitiveness, we have implemented
rationalization actions over the past several years to reduce
excess and high-cost manufacturing capacity and to reduce
associate headcount. The net rationalization charges included in
Income (Loss) from Continuing Operations before Income Taxes and
Minority Interest are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
New charges
|
|
$
|
63
|
|
|
$
|
322
|
|
|
$
|
24
|
|
Reversals
|
|
|
(14
|
)
|
|
|
(11
|
)
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49
|
|
|
$
|
311
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the roll-forward of the liability
balance between periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Than
|
|
|
|
|
|
|
Associate- related
|
|
|
Associate- related
|
|
|
|
|
(In millions)
|
|
Costs
|
|
|
Costs
|
|
|
Total
|
|
|
Balance at December 31, 2004
|
|
$
|
39
|
|
|
$
|
27
|
|
|
$
|
66
|
|
2005 charges
|
|
|
22
|
|
|
|
2
|
|
|
|
24
|
|
Incurred
|
|
|
(34
|
)
|
|
|
(7
|
)
|
|
|
(41
|
)
|
Reversed to the Statement of Operations
|
|
|
(10
|
)
|
|
|
(7
|
)
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
17
|
|
|
|
15
|
|
|
|
32
|
|
2006 charges
|
|
|
294
|
|
|
|
28
|
|
|
|
322
|
|
Incurred
|
|
|
(225
|
)
|
|
|
(21
|
)
|
|
|
(246
|
)
|
Reversed to the Statement of Operations
|
|
|
(9
|
)
|
|
|
(2
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
77
|
|
|
|
20
|
|
|
|
97
|
|
2007 charges
|
|
|
36
|
|
|
|
27
|
|
|
|
63
|
|
Incurred
|
|
|
(45
|
)
|
|
|
(39
|
)
|
|
|
(84
|
)
|
Reversed to the Statement of Operations
|
|
|
(12
|
)
|
|
|
(2
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
56
|
|
|
$
|
6
|
|
|
$
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rationalization actions in 2007 consisted primarily of a
decision to reduce tire production at two facilities in Amiens,
France in our European Union Tire Segment. These actions are
expected to be implemented in the second
73
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 2.
|
Costs
Associated with Rationalization Programs (continued)
|
half of 2008 and will involve a reduction of up to 500
associates and the reduction of certain high-cost production.
Other rationalization actions in 2007 related to plans to reduce
manufacturing, selling, administrative and general expenses
through headcount reductions in several segments.
During 2007, net rationalization charges of $49 million
($41 million after-tax or $0.17 per share) were recorded.
New charges of $63 million were comprised of
$28 million for plans initiated in 2007, primarily related
to associate severance costs, and $35 million for plans
initiated in 2006, consisting of $9 million for associate
severance costs and $26 million for other exit and
non-cancelable lease costs. The net charges in 2007 also
included the reversal of $14 million of charges for actions
no longer needed for their originally intended purposes.
Approximately 600 associates will be released under programs
initiated in 2007, of which approximately 100 were released by
December 31, 2007.
In 2007, $45 million was incurred for associate severance
payments, and $39 million was incurred for non-cancelable
lease and other exit costs.
The accrual balance of $62 million at December 31,
2007 consists of $56 million for associate severance costs
that are expected to be substantially utilized within the next
twelve months and $6 million primarily for long term
non-cancelable lease costs.
In addition to the above charges, accelerated depreciation
charges of $37 million were recorded in CGS in 2007,
primarily for fixed assets taken out of service in connection
with the elimination of tire production at our Tyler, Texas and
Valleyfield, Quebec facilities in our North American Tire
Segment.
No significant additional rationalization charges are expected
to be incurred related to rationalization plans announced in
2007.
Rationalization actions in 2006 consisted of plant closures in
the European Union Tire Segment of a passenger tire
manufacturing facility in Washington, United Kingdom, and in the
Asia Pacific Tire Segment of the Upper Hutt, New Zealand
passenger tire manufacturing facility. Charges were also
incurred for a plan in North American Tire to cease tire
manufacturing at our Tyler, Texas facility, which was
substantially complete in December 2007, and a plan in Eastern
Europe Tire to close our tire manufacturing facility in
Casablanca, Morocco, which was completed in the first quarter of
2007. Charges were also recorded for a partial plant closure in
the North American Tire Segment involving a plan to discontinue
tire production at our Valleyfield, Quebec facility, which was
completed by the second quarter of 2007. In conjunction with
these charges we also recorded a $47 million tax valuation
allowance. Other plans in 2006 included an action in the Eastern
Europe Tire Segment to exit the bicycle tire and tube production
line in Debica, Poland, retail store closures in the European
Union Tire and Eastern Europe Tire Segments as well as plans in
most segments to reduce selling, administrative and general
expenses through headcount reductions, all of which were
substantially completed.
For 2006, $311 million ($328 million after-tax or
$1.85 per share) of net charges were recorded. New charges of
$322 million are comprised of $315 million for plans
initiated in 2006 and $7 million for plans initiated in
2005 for associate-related costs. The $315 million of
charges for 2006 plans consisted of $286 million of
associate-related costs, of which $159 million related to
associate severance costs and $127 million related to
non-cash pension and postretirement benefit costs, and
$29 million of non-cancelable lease costs. The net charges
in 2006 also included reversals of $11 million for actions
no longer needed for their originally intended purposes.
Approximately 4,800 associates will be released under programs
initiated in 2006, of which approximately 3,900 were released by
December 31, 2007.
In 2006, $98 million was incurred for associate severance
payments, $127 million for non-cash pension and
postretirement termination benefit costs, and $21 million
for non-cancelable lease and other exit costs.
74
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 2.
|
Costs
Associated with Rationalization Programs (continued)
|
In addition to the above charges, accelerated depreciation
charges of $81 million and asset impairment charges of
$2 million were recorded in CGS related to fixed assets
that will be taken out of service primarily in connection with
the Washington, Casablanca, Upper Hutt, and Tyler plant
closures. We also recorded charges of $2 million of
accelerated depreciation and $3 million of asset impairment
in SAG.
Rationalization charges in 2005 consisted of manufacturing
associate reductions, retail store reductions, IT associate
reductions, and a sales function reorganization in European
Union Tire; manufacturing and administrative associate
reductions in Eastern Europe Tire; and manufacturing and
corporate support group associate reductions in North American
Tire, all of which were substantially completed.
For 2005, $7 million ($2 million after-tax or $0.00
per share) of net charges were recorded, which included
$24 million of charges recorded in 2005, of which
$22 million were for associate-related costs for new plans
initiated in 2005 and $2 million for plans initiated in
prior years. These charges were partially offset by
$17 million of reversals for rationalization charges no
longer needed for their originally-intended purposes. The
reversals consisted of $10 million of associate-related
costs for plans initiated in prior years, and $7 million
for non-cancelable leases that were exited during the first
quarter related to plans initiated in prior years. Approximately
740 associates have been released under the programs initiated
in 2005 as of December 31, 2007.
In 2005, $33 million was incurred for associate severance
payments, $1 million for cash pension settlement benefit
costs and $7 million for non-cancelable lease costs.
Accelerated depreciation charges of $4 million were
recorded for fixed assets that were taken out of service in
connection with certain rationalization plans initiated in 2005
and 2004 in the European Union Tire Segment, of which
$3 million was recorded as CGS and $1 million was
recorded as SAG.
|
|
Note 3.
|
Other
(Income) and Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Interest income
|
|
$
|
(128
|
)
|
|
$
|
(86
|
)
|
|
$
|
(58
|
)
|
Net (gains) losses on asset sales
|
|
|
(15
|
)
|
|
|
(40
|
)
|
|
|
36
|
|
Financing fees
|
|
|
106
|
|
|
|
40
|
|
|
|
109
|
|
General and product liability discontinued products
|
|
|
15
|
|
|
|
26
|
|
|
|
9
|
|
Foreign currency exchange
|
|
|
31
|
|
|
|
(2
|
)
|
|
|
21
|
|
Insurance settlements
|
|
|
|
|
|
|
(1
|
)
|
|
|
(43
|
)
|
Equity in earnings of affiliates
|
|
|
(9
|
)
|
|
|
(10
|
)
|
|
|
(11
|
)
|
Royalty income
|
|
|
(15
|
)
|
|
|
(8
|
)
|
|
|
(6
|
)
|
Fire loss expense
|
|
|
12
|
|
|
|
|
|
|
|
|
|
Miscellaneous
|
|
|
2
|
|
|
|
(6
|
)
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1
|
)
|
|
$
|
(87
|
)
|
|
$
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income consisted primarily of amounts earned on cash
deposits. The increase was due primarily to higher cash balances
during the year.
Net gains on asset sales in 2007 included a gain of
$19 million ($16 million after-tax or $0.07 per share)
on the sale of our Washington, UK facility in European Union
Tire, a gain of $19 million ($19 million after-tax or
$0.08 per share) on the sale of warehouses and other property
and equipment in North American Tire, a gain of $7 million
($6 million after-tax or $0.03 per share) on the sale of
property in Asia Pacific Tire, and net gains of $6 million
($4 million after-tax or $0.02 per share) on the sales of
other assets primarily in European Union Tire and North American
Tire. Net gains were partially offset by the loss of
$36 million ($35 million after-tax or $0.15 per share)
on
75
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 3.
|
Other
(Income) and Expense (continued)
|
the sale of substantially all of the assets of North American
Tires tire and wheel assembly operation in the fourth
quarter of 2007.
Net gains on asset sales in 2006 included a gain of
$21 million ($16 million after-tax or $0.09 per share)
on the sale of a capital lease in European Union Tire, a gain of
$9 million ($8 million after-tax or $0.04 per share)
on the sale of the Fabric business, and net gains of
$10 million ($7 million after-tax or $0.04 per share)
on the sales of other assets primarily in European Union Tire.
Net loss on asset sales in 2005 included a loss of
$73 million ($73 million after-tax or $0.35 per share)
on the sale of the Farm Tire business in North American Tire, a
gain of $24 million ($24 million after-tax or $0.12
per share) on the sale of the Wingtack adhesive resins business
in North American Tire and net gains of $13 million
($12 million after-tax or $0.06 per share) on the sales of
other assets primarily in North American Tire.
Financing fees in 2007 included $33 million related to the
redemption of $315 million of long term debt, of which
$28 million was a cash premium paid on the redemption, and
$5 million was deferred financing fee write-offs. Also
included was a $17 million charge related to the exchange
offer for our outstanding 4% convertible senior notes and
$14 million of debt issuance costs written-off in
connection with our refinancing activities in April 2007.
Financing fees in 2005 included $47 million of debt
issuance costs written-off in connection with our 2005
refinancing activities, which includes approximately
$30 million of previously unamortized fees related to
replaced facilities and $17 million of costs related to the
new facilities. Also in 2005 there were higher amortization of
debt fees of $15 million.
General and product liability-discontinued products includes
charges for claims against us related to asbestos personal
injury claims, and for liabilities related to Entran II
claims, net of probable insurance recoveries. During 2007,
$4 million of expenses were related to Entran II
claims and $11 million of net expenses were related to
asbestos claims ($25 million of expense and
$14 million of probable insurance recoveries). During 2006,
$9 million of expenses were related to Entran II
claims and $17 million of net expenses were related to
asbestos claims ($39 million of expense and
$22 million of probable insurance recoveries). During 2005,
we recorded gains of $32 million from settlements with
certain insurance companies related to asbestos coverage. A
portion of the costs incurred by us related to these claims had
been recorded in prior years.
During 2007, we incurred approximately $31 million of
foreign currency exchange losses primarily as a result of the
strengthening euro, Chilean peso, and Brazilian real against the
U.S. dollar.
Net insurance settlement gains in 2005 of $43 million
primarily represent settlements with certain insurance companies
related to environmental coverage and property loss.
Royalty income increased in 2007 due to a trademark licensing
agreement entered into as part of the sale of our Engineered
Products business.
In 2007, there was a fire in our Thailand facility, which
resulted in a loss of $12 million, net of insurance
proceeds.
Included in 2006 miscellaneous income is a $13 million gain
in Latin American Tire resulting from the favorable resolution
of a legal matter.
|
|
Note 4.
|
Per Share
of Common Stock
|
Basic earnings per share have been computed based on the
weighted average number of common shares outstanding.
There are contingent conversion features included in the
indenture governing our $350 million 4% convertible
senior notes due 2034 (the convertible notes),
issued on July 2, 2004. If the $350 million of
convertible notes were
76
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 4.
|
Per Share
of Common Stock (continued)
|
converted, the aggregate number of shares of common stock
issuable would be approximately 29 million. On
December 10, 2007, $346 million of convertible notes
were exchanged for approximately 28.7 million shares of
Goodyear common stock plus a cash payment. If all of the
remaining convertible notes outstanding are surrendered for
conversion, the aggregate number of shares of common stock
issuable would be approximately 0.3 million.
The following table presents the number of incremental weighted
average shares outstanding used in computing diluted per share
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Weighted average shares outstanding basic
|
|
|
200,933,767
|
|
|
|
177,253,463
|
|
|
|
176,107,411
|
|
4% convertible senior notes due 2034
|
|
|
26,673,721
|
|
|
|
|
|
|
|
29,069,767
|
|
Stock options and other dilutive securities
|
|
|
4,110,442
|
|
|
|
|
|
|
|
3,553,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted
|
|
|
231,717,930
|
|
|
|
177,253,463
|
|
|
|
208,730,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted for 2006
exclude the effects of approximately 29 million
contingently issuable shares and approximately 7 million
equivalent shares related to options with exercise prices less
than the average market price of our common stock (i.e.,
in-the-money options), as their inclusion would have
been anti-dilutive due to the Net loss in 2006.
Additionally, weighted average shares outstanding
diluted exclude approximately 6 million, 17 million
and 23 million equivalent shares related to options with
exercise prices greater than the average market price of our
common stock (i.e., underwater options), for 2007,
2006 and 2005, respectively.
The following table presents the computation of Adjusted income
(loss) from continuing operations and Adjusted net income (loss)
used in computing per share amounts. The computation assumes
that after-tax interest costs incurred on the convertible notes
would have been avoided had the convertible notes been converted
as of January 1, 2007 and 2005 for 2007 and 2005,
respectively. Amounts for 2006 do not include the after-tax
interest cost as the convertible notes were anti-dilutive for
the year.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Income (Loss) from Continuing Operations
|
|
$
|
139
|
|
|
$
|
(373
|
)
|
|
$
|
124
|
|
After-tax impact of 4% Convertible Senior Notes due 2034
|
|
|
13
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Income (Loss) from Continuing Operations
|
|
|
152
|
|
|
|
(373
|
)
|
|
|
138
|
|
Discontinued Operations
|
|
|
463
|
|
|
|
43
|
|
|
|
115
|
|
Cumulative Effect of Accounting Change
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income (Loss)
|
|
$
|
615
|
|
|
$
|
(330
|
)
|
|
$
|
242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 5.
|
Accounts
Receivable
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
Accounts receivable
|
|
$
|
3,191
|
|
|
$
|
2,898
|
|
Allowance for doubtful accounts
|
|
|
(88
|
)
|
|
|
(98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,103
|
|
|
$
|
2,800
|
|
|
|
|
|
|
|
|
|
|
77
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
Raw materials
|
|
$
|
591
|
|
|
$
|
663
|
|
Work in process
|
|
|
147
|
|
|
|
135
|
|
Finished products
|
|
|
2,426
|
|
|
|
1,803
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,164
|
|
|
$
|
2,601
|
|
|
|
|
|
|
|
|
|
|
Note 7. Goodwill
and Other Intangible Assets
The net carrying amount of goodwill allocated by reporting unit,
and changes during 2007 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Translation &
|
|
|
Balance at
|
|
|
|
December 31,
|
|
|
Purchase Price
|
|
|
|
|
|
Other
|
|
|
December 31,
|
|
(In millions)
|
|
2006
|
|
|
Allocation
|
|
|
Divestitures
|
|
|
Adjustments
|
|
|
2007
|
|
|
North American Tire
|
|
$
|
95
|
|
|
$
|
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
94
|
|
European Union Tire
|
|
|
381
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
414
|
|
Eastern Europe, Middle East and Africa Tire
|
|
|
119
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
16
|
|
|
|
133
|
|
Asia Pacific Tire
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
662
|
|
|
$
|
|
|
|
$
|
(3
|
)
|
|
$
|
54
|
|
|
$
|
713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We reduced the carrying amount of goodwill by $11 million
during 2007 primarily as a result of the adoption of FIN 48
and the release of a tax valuation allowance recorded in the
purchase price allocation in prior years.
The net carrying amount of goodwill allocated by reporting unit,
and changes during 2006 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Translation &
|
|
|
Balance at
|
|
|
|
December 31,
|
|
|
Purchase Price
|
|
|
|
|
|
Other
|
|
|
December 31,
|
|
(In millions)
|
|
2005
|
|
|
Allocation
|
|
|
Divestitures
|
|
|
Adjustments
|
|
|
2006
|
|
|
North American Tire
|
|
$
|
98
|
|
|
$
|
|
|
|
$
|
(3
|
)
|
|
$
|
|
|
|
$
|
95
|
|
European Union Tire
|
|
|
343
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
42
|
|
|
|
381
|
|
Eastern Europe, Middle East and Africa Tire
|
|
|
111
|
|
|
|
1
|
|
|
|
|
|
|
|
7
|
|
|
|
119
|
|
Asia Pacific Tire
|
|
|
64
|
|
|
|
2
|
|
|
|
|
|
|
|
1
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
616
|
|
|
$
|
3
|
|
|
$
|
(7
|
)
|
|
$
|
50
|
|
|
$
|
662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents information about other intangible
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
(In millions)
|
|
Amount(1)
|
|
|
Amortization(1)
|
|
|
Amount
|
|
|
Amount(1)
|
|
|
Amortization(1)
|
|
|
Amount
|
|
|
Intangible assets with indefinite lives
|
|
$
|
131
|
|
|
$
|
(9
|
)
|
|
$
|
122
|
|
|
$
|
130
|
|
|
$
|
(9
|
)
|
|
$
|
121
|
|
Trademarks and patents
|
|
|
46
|
|
|
|
(23
|
)
|
|
|
23
|
|
|
|
45
|
|
|
|
(21
|
)
|
|
|
24
|
|
Other intangible assets
|
|
|
31
|
|
|
|
(9
|
)
|
|
|
22
|
|
|
|
29
|
|
|
|
(8
|
)
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other intangible assets
|
|
$
|
208
|
|
|
$
|
(41
|
)
|
|
$
|
167
|
|
|
$
|
204
|
|
|
$
|
(38
|
)
|
|
$
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes impact of foreign currency translation. |
78
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Note 7. Goodwill
and Other Intangible
Assets (continued)
Intangible assets are primarily comprised of the right to use
certain brand names and trademarks on a non-competitive basis
related to our global alliance with Sumitomo Rubber Industries,
Ltd.
Amortization expense for intangible assets totaled
$4 million in 2007, 2006 and 2005, respectively. We
estimate that annual amortization expense related to intangible
assets will be approximately $4 million during each of the
next five years and the weighted average remaining amortization
period is approximately 19 years.
Investments
and Acquisitions
We have funded approximately 33% of the obligations under our
Supplemental Pension Plan as of December 31, 2007
(approximately 37% at December 31, 2006) using a
trust. The trust invests in debt and equity securities and funds
current benefit payments under the Supplemental Pension Plan. No
contributions were made to the trust in 2007 or 2006. The debt
securities have maturities ranging from March 20, 2008
through September 1, 2036. The fair value of the trust
assets was $21 million and $25 million at
December 31, 2007 and 2006, respectively, and was included
in Other Assets and Prepaid Pension Assets on the Consolidated
Balance Sheets. We have classified the trust assets as
available-for-sale, as provided in SFAS No. 115,
Accounting for Certain Investments in Debt and Equity
Securities (SFAS No. 115).
Accordingly, gains and losses resulting from changes in the fair
value of the trust assets are deferred and reported in AOCL on
the Consolidated Balance Sheets. At December 31, 2007 and
2006, AOCL included a gross unrealized holding gain on the trust
assets of $4 million ($2 million after-tax) and
$5 million ($2 million after-tax), respectively.
We owned 3,421,306 shares of Sumitomo Rubber Industries,
Ltd. (SRI) at December 31, 2007 and 2006 (the
Sumitomo Investment). The fair value of the Sumitomo
Investment was $31 million and $44 million at
December 31, 2007 and 2006, respectively, and was included
in Other Assets and Prepaid Pension Assets on the Consolidated
Balance Sheets. We have classified the Sumitomo Investment as
available-for-sale, as provided in SFAS No. 115. At
December 31, 2007, AOCL included gross unrealized holding
gains on the Sumitomo Investment of $14 million
($15 million after-tax), compared to $28 million
($29 million after-tax) at December 31, 2006.
In January 2006, we acquired the remaining 50% ownership
interest in our South Pacific Tyres (SPT) joint
venture. In connection with the acquisition we paid
approximately $40 million and repaid approximately
$50 million of outstanding loans. As a result of the
acquisition, we recorded goodwill of approximately
$12 million and indefinite lived intangible assets of
$10 million. The purchase price was allocated based on 50%
of the assets acquired and liabilities assumed.
Dividends received from our consolidated subsidiaries were
$562 million, $247 million and $290 million in
2007, 2006 and 2005, respectively, which included stock
dividends of $16 million in 2005. Dividends received from
our affiliates accounted for using the equity method were
$3 million, $5 million and $7 million in 2007,
2006 and 2005, respectively.
79
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 9.
|
Property,
Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
(In millions)
|
|
Owned
|
|
|
Capital Leases
|
|
|
Total
|
|
|
Owned
|
|
|
Capital Leases
|
|
|
Total
|
|
|
Property, plant and equipment, at cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
441
|
|
|
$
|
5
|
|
|
$
|
446
|
|
|
$
|
426
|
|
|
$
|
5
|
|
|
$
|
431
|
|
Buildings
|
|
|
1,992
|
|
|
|
64
|
|
|
|
2,056
|
|
|
|
1,786
|
|
|
|
84
|
|
|
|
1,870
|
|
Machinery and equipment
|
|
|
10,564
|
|
|
|
92
|
|
|
|
10,656
|
|
|
|
9,762
|
|
|
|
108
|
|
|
|
9,870
|
|
Construction in progress
|
|
|
596
|
|
|
|
|
|
|
|
596
|
|
|
|
420
|
|
|
|
|
|
|
|
420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,593
|
|
|
|
161
|
|
|
|
13,754
|
|
|
|
12,394
|
|
|
|
197
|
|
|
|
12,591
|
|
Accumulated depreciation
|
|
|
(8,236
|
)
|
|
|
(93
|
)
|
|
|
(8,329
|
)
|
|
|
(7,574
|
)
|
|
|
(99
|
)
|
|
|
(7,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,357
|
|
|
|
68
|
|
|
|
5,425
|
|
|
|
4,820
|
|
|
|
98
|
|
|
|
4,918
|
|
Spare parts
|
|
|
173
|
|
|
|
|
|
|
|
173
|
|
|
|
149
|
|
|
|
|
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,530
|
|
|
$
|
68
|
|
|
$
|
5,598
|
|
|
$
|
4,969
|
|
|
$
|
98
|
|
|
$
|
5,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The range of useful lives of property used in arriving at the
annual amount of depreciation provided are as follows: buildings
and improvements, 8 to 45 years; machinery and equipment, 3
to 30 years.
Net rental expense comprised the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Gross rental expense
|
|
$
|
372
|
|
|
$
|
361
|
|
|
$
|
351
|
|
Sublease rental income
|
|
|
(70
|
)
|
|
|
(75
|
)
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
302
|
|
|
$
|
286
|
|
|
$
|
275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We enter into leases primarily for our wholesale and retail
distribution facilities, vehicles, and data processing equipment
under varying terms and conditions. Many of the leases require
us to pay taxes assessed against leased property and the cost of
insurance and maintenance. A portion of our domestic retail
distribution network is sublet to independent dealers.
While substantially all subleases and some operating leases are
cancelable for periods beyond 2008, 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, we would normally
expect to evaluate such leases and either renew the leases or
substitute another more favorable retail location.
80
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 10.
|
Leased
Assets (Continued)
|
The following table presents minimum future lease payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 and
|
|
|
|
|
(In millions)
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Beyond
|
|
|
Total
|
|
|
Capital Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum lease payments
|
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
16
|
|
|
$
|
53
|
|
Imputed interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum lease payments
|
|
$
|
311
|
|
|
$
|
244
|
|
|
$
|
192
|
|
|
$
|
144
|
|
|
$
|
106
|
|
|
$
|
406
|
|
|
$
|
1,403
|
|
Minimum sublease rentals
|
|
|
(46
|
)
|
|
|
(35
|
)
|
|
|
(26
|
)
|
|
|
(16
|
)
|
|
|
(10
|
)
|
|
|
(17
|
)
|
|
|
(150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
265
|
|
|
$
|
209
|
|
|
$
|
166
|
|
|
$
|
128
|
|
|
$
|
96
|
|
|
$
|
389
|
|
|
|
1,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(333
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 11.
|
Financing
Arrangements and Derivative Financial Instruments
|
At December 31, 2007, we had total credit arrangements
totaling $7,392 million, of which $2,169 million were
unused.
Notes
Payable and Overdrafts, Long Term Debt and Capital Leases due
Within One Year and Short Term Financing
Arrangements
At December 31, 2007, we had short term committed and
uncommitted credit arrangements totaling $564 million, of
which $339 million were unused. These arrangements are
available primarily to certain of our international subsidiaries
through various banks at quoted market interest rates. There are
no commitment fees associated with these arrangements.
The following table presents amounts due within one year at
December 31:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
Notes payable and overdrafts
|
|
$
|
225
|
|
|
$
|
243
|
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate
|
|
|
6.90
|
%
|
|
|
5.60
|
%
|
Long term debt and capital leases due within one year:
|
|
|
|
|
|
|
|
|
81/2% Notes
due 2007
|
|
$
|
|
|
|
$
|
300
|
|
63/8% Notes
due 2008
|
|
|
100
|
|
|
|
|
|
U.S. Revolving credit facility
|
|
|
|
|
|
|
37
|
|
Other (including capital leases)
|
|
|
71
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
171
|
|
|
$
|
405
|
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate
|
|
|
6.57
|
%
|
|
|
8.34
|
%
|
Total obligations due within one year
|
|
$
|
396
|
|
|
$
|
648
|
|
|
|
|
|
|
|
|
|
|
81
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 11.
|
Financing
Arrangements and Derivative Financial Instruments
(continued)
|
Long
Term Debt and Capital Leases and Financing
Arrangements
At December 31, 2007, we had long term credit arrangements
totaling $6,828 million, of which $1,830 million were
unused.
The following table presents long term debt and capital leases,
net of unamortized discounts, and interest rates at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Interest
|
|
(In millions)
|
|
2007
|
|
|
Rate
|
|
|
2006
|
|
|
Rate
|
|
|
Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81/2%
due 2007
|
|
$
|
|
|
|
|
|
|
|
$
|
300
|
|
|
|
81/2
|
%
|
63/8%
due 2008
|
|
|
100
|
|
|
|
63/8
|
%
|
|
|
100
|
|
|
|
63/8
|
%
|
Floating rate notes due 2009
|
|
|
497
|
|
|
|
8.66
|
%
|
|
|
495
|
|
|
|
9.14
|
%
|
76/7%
due 2011
|
|
|
650
|
|
|
|
76/7
|
%
|
|
|
650
|
|
|
|
76/7
|
%
|
8.625% due 2011
|
|
|
325
|
|
|
|
8.625
|
%
|
|
|
500
|
|
|
|
8.625
|
%
|
Floating rate notes due 2011
|
|
|
200
|
|
|
|
13.71
|
%
|
|
|
200
|
|
|
|
13.70
|
%
|
11% due 2011
|
|
|
449
|
|
|
|
11.25
|
%
|
|
|
448
|
|
|
|
11.25
|
%
|
9% due 2015
|
|
|
260
|
|
|
|
9
|
%
|
|
|
400
|
|
|
|
9
|
%
|
7% due 2028
|
|
|
149
|
|
|
|
7
|
%
|
|
|
149
|
|
|
|
7
|
%
|
4% convertible senior notes due 2034
|
|
|
4
|
|
|
|
4
|
%
|
|
|
350
|
|
|
|
4
|
%
|
Bank term loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155 million senior secured European term loan due 2010
|
|
|
|
|
|
|
|
|
|
|
202
|
|
|
|
5.91
|
%
|
$300 million third lien secured term loan due 2011
|
|
|
|
|
|
|
|
|
|
|
300
|
|
|
|
8.89
|
%
|
$1.2 billion second lien term loan facility due 2014
|
|
|
1,200
|
|
|
|
6.43
|
%
|
|
|
1,200
|
|
|
|
8.14
|
%
|
Pan-European accounts receivable facility due 2009
|
|
|
403
|
|
|
|
5.75
|
%
|
|
|
362
|
|
|
|
5.05
|
%
|
German revolving credit facility due 2012
|
|
|
|
|
|
|
|
|
|
|
204
|
|
|
|
6.42
|
%
|
U.S. first lien revolving credit facility
|
|
|
|
|
|
|
|
|
|
|
873
|
|
|
|
7.60
|
%
|
Other domestic and international debt
|
|
|
223
|
|
|
|
7.65
|
%
|
|
|
177
|
|
|
|
7.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,460
|
|
|
|
|
|
|
|
6,910
|
|
|
|
|
|
Capital lease obligations
|
|
|
40
|
|
|
|
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,500
|
|
|
|
|
|
|
|
6,967
|
|
|
|
|
|
Less portion due within one year
|
|
|
(171
|
)
|
|
|
|
|
|
|
(405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,329
|
|
|
|
|
|
|
$
|
6,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents information about long term fixed
rate debt, including capital leases, at December 31:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
Carrying amount liability
|
|
$
|
2,074
|
|
|
$
|
2,998
|
|
Fair value liability
|
|
|
2,172
|
|
|
|
3,353
|
|
The fair value was estimated using quoted market prices or
discounted future cash flows. At December 31, 2007, the
fair value exceeded the carrying amount primarily due to lower
market interest rates. At December 31, 2006, the fair value
exceeded the carrying amount primarily due to the impact of our
stock price on the convertible
82
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 11.
|
Financing
Arrangements and Derivative Financial Instruments
(continued)
|
senior notes. The fair value of our variable rate debt
approximated its carrying amount at December 31, 2007 and
2006.
NOTES
$1.0
Billion Senior Notes Offering
On November 21, 2006, we completed an offering of
(i) $500 million aggregate principal amount of
8.625% Senior Notes due 2011 (the Fixed Rate
Notes), and (ii) $500 million aggregate
principal amount of Senior Floating Rate Notes due 2009 (the
Floating Rate Notes). The Fixed Rate Notes were sold
at par and bear interest at a fixed rate of 8.625% per annum.
The Floating Rate Notes were sold at 99% of the principal amount
and bear interest at a rate per annum equal to the six-month
London Interbank Offered Rate, or LIBOR, plus 375 basis
points. These notes are guaranteed by our U.S. and Canadian
subsidiaries that also guarantee our obligations under our
senior secured credit facilities. The guarantee is unsecured.
We may redeem some or all of the Floating Rate Notes at any time
prior to maturity at a redemption price equal to the principal
amount of the Floating Rate Notes plus accrued and unpaid
interest. After December 1, 2009, we may redeem all or a
portion of the Fixed Rated Notes at the redemption prices set
forth in the related indenture. Prior to December 1, 2009,
we may redeem all or a portion of the Fixed Rate Notes at a
redemption price equal to the principal amount of the Fixed Rate
Notes plus the make-whole premium set forth in the Indenture. In
addition, at any time prior to December 1, 2009, we may
redeem up to 35% of the aggregate principal amount of the Fixed
Rate Notes with the net cash proceeds of certain equity
offerings at the redemption price set forth in the Indenture. On
June 29, 2007, we redeemed $175 million, or 35%, of
the Fixed Rate Notes with a portion of the proceeds from our May
2007 equity offering. A prepayment premium of $15 million
was paid in connection with the redemption.
$400
Million Senior Notes
On June 29, 2007, we redeemed $140 million of our
$400 million 9% senior notes due 2015 with a portion
of the proceeds from our May 2007 equity offering. A prepayment
premium of $13 million was paid in connection with the
redemption.
$350
Million Convertible Senior Notes
Our $350 million aggregate principal amount of
4% convertible senior notes are due June 15, 2034. The
notes are convertible into shares of our common stock initially
at a conversion rate of 83.07 shares of common stock per
$1,000 principal amount of notes, which is equal to an initial
conversion price of $12.04 per share.
On November 6, 2007, we commenced an offer to exchange our
outstanding 4% convertible senior notes for a cash payment
and shares of our common stock. The exchange offer allowed
holders of convertible notes to receive the same number of
shares of our common stock as they would have received upon
conversion of the convertible notes in accordance with their
existing terms, a cash payment of $48.30 for each $1,000 in
principal amount of convertible notes, and accrued and unpaid
interest. The exchange offer was consummated on
December 10, 2007 and resulted in the issuance of
approximately 28.7 million shares of common stock, a total
cash payment, including accrued and unpaid interest, of
approximately $23 million, and a reduction of debt of
approximately $346 million.
$650
Million Senior Secured Notes
Our $650 million of senior secured notes consist of
$450 million of senior secured notes due 2011, which bear
interest at a rate of 11.25%, and $200 million of senior
secured floating rate notes due 2011, which bear interest at
LIBOR plus 8.25%. The notes are guaranteed by the same
subsidiaries that guarantee our $1.5 billion first lien
revolving credit facility and the notes are secured by perfected
third-priority liens on the same collateral securing
83
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 11.
|
Financing
Arrangements and Derivative Financial Instruments
(continued)
|
that facility (however, the facility is not secured by any of
the manufacturing facilities that secure the first and second
lien facilities).
On February 1, 2008, we issued notices of redemption to the
holders of our $650 million senior secured notes due 2011.
As provided in the notices to the holders, on March 3,
2008, we will redeem $450 million in aggregate principal
amount of our 11% senior secured notes due 2011 at a
redemption price of 105.5% of the principal amount thereof and
$200 million in aggregate principal amount of our senior
secured floating rate notes due 2011 at a redemption price of
104% of the principal amount thereof, plus in each case accrued
and unpaid interest to the redemption date.
Certain of our notes were issued pursuant to indentures that
contain varying covenants and other terms. In general, the terms
of our indentures, among other things, limit our ability and the
ability of certain of our subsidiaries to (i) incur
additional debt or issue redeemable preferred stock,
(ii) pay dividends, or make certain other restricted
payments or investments, (iii) incur liens, (iv) sell
assets, (v) incur restrictions on the ability of our
subsidiaries to pay dividends to us, (vi) enter into
affiliate transactions, (vii) engage in sale and leaseback
transactions, and (viii) consolidate, merge, sell or
otherwise dispose of all or substantially all of our assets.
These covenants are subject to significant exceptions and
qualifications. For example, under certain of our indentures, if
the Notes are assigned an investment grade rating by
Moodys and S&P and no default has occurred or is
continuing, certain covenants will be suspended.
CREDIT
FACILITIES
$1.5
Billion Amended and Restated First Lien Revolving Credit
Facility due 2013
On April 20, 2007, we amended and restated our first lien
revolving credit facility. This facility is available in the
form of loans or letters of credit, with letter of credit
availability limited to $800 million. Subject to the
consent of the lenders whose commitments are to be increased, we
may request that the facility be increased by up to
$250 million. Our obligations under the facility are
guaranteed by most of our wholly-owned U.S. and Canadian
subsidiaries. Our obligations under the facility and our
subsidiaries obligations under the related guarantees are
secured by first priority security interests in collateral that
includes, subject to certain exceptions:
|
|
|
|
|
U.S. and Canadian accounts receivable and inventory;
|
|
|
|
certain of our U.S. manufacturing facilities;
|
|
|
|
equity interests in our U.S. subsidiaries and up to 65% of
the equity interests in our foreign subsidiaries, excluding
Goodyear Dunlop Tires Europe B.V. (GDTE) and its
subsidiaries; and
|
|
|
|
substantially all other tangible and intangible assets,
including equipment, contract rights and intellectual property.
|
Availability under the facility is subject to a borrowing base,
which is based on eligible accounts receivable and inventory,
with reserves which are subject to adjustment from time to time
by the administrative agent and the majority lenders at their
discretion (not to be exercised unreasonably). Adjustments are
based on the results of periodic collateral and borrowing base
evaluations and appraisals. If at any time the amount of
outstanding borrowings and letters of credit under the facility
exceeds the borrowing base, we are required to prepay borrowings
and/or cash
collateralize letters of credit sufficient to eliminate the
excess.
The facility, which matures on April 30, 2013, contains
certain covenants that, among other things, limit our ability to
incur additional debt or issue redeemable preferred stock, make
certain restricted payments or investments, incur liens, sell
assets (excluding the sale of properties located in Akron,
Ohio), incur restrictions on the ability of our subsidiaries to
pay dividends to us, enter into affiliate transactions, engage
in sale and leaseback transactions, and consolidate, merge, sell
or otherwise dispose of all or substantially all of our assets.
These
84
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 11.
|
Financing
Arrangements and Derivative Financial Instruments
(continued)
|
covenants are subject to significant exceptions and
qualifications. In addition, in the event that the availability
under the facility plus the aggregate amount of our Available
Cash is less than $150 million, we will not be permitted to
allow our ratio of EBITDA to Consolidated Interest Expense to be
less than 2.0 to 1.0 for any period of four consecutive fiscal
quarters. Available Cash, EBITDA and
Consolidated Interest Expense have the meanings
given them in the facility.
The facility has customary representations and warranties
including, as a condition to borrowing, that all such
representations and warranties are true and correct, in all
material respects, on the date of the borrowing.
For the
270-day
period following April 20, 2007 and, thereafter if the
availability under the facility is greater than or equal to
$400 million, amounts drawn under the facility will bear
interest either (i) at a rate of 125 basis points over
LIBOR or (ii) 25 basis points over an alternative base
rate (the higher of the prime rate or the federal funds rate
plus 50 basis points), and undrawn amounts under the
facility will be subject to an annual commitment fee of
37.5 basis points. After the
270-day
period following April 20, 2007, if the availability under
the facility is less than $400 million, then amounts drawn
under the facility will bear interest either (i) at a rate
of 150 basis points over LIBOR or (ii) 50 basis
points over an alternative base rate, and undrawn amounts under
the facility will be subject to an annual commitment fee of
25 basis points.
At December 31, 2007, there were no borrowings and
$526 million of letters of credit were issued under the
revolving credit facility. At December 31, 2006, we had
$873 million outstanding and $6 million of letters of
credit issued under the revolving credit facility. At
December 31, 2006, there were no borrowings and
$500 million of letters of credit issued under a prior
deposit-funded facility. The $500 million of letters of
credit that were outstanding under that deposit-funded facility
prior to the refinancing were transferred to the revolving
credit facility in April 2007.
$1.2
Billion Amended and Restated Second Lien Term Loan Facility due
2014
On April 20, 2007, we amended and restated our second lien
term loan facility. The $1.2 billion in aggregate amount of
term loans that were outstanding under this facility prior to
the refinancing continue to be outstanding under the facility as
amended and restated. Subject to the consent of the lenders
making additional term loans, we may request that the facility
be increased by up to $300 million. Our obligations under
this facility are guaranteed by most of our wholly-owned
U.S. and Canadian subsidiaries and are secured by second
priority security interests in the same collateral securing the
$1.5 billion first lien credit facility. The second lien
term loan facility, which matures on April 30, 2014,
contains covenants similar to those in the $1.5 billion
first lien credit facility. However, if our Pro Forma Senior
Secured Leverage Ratio (the ratio of Consolidated Net Secured
Indebtedness to EBITDA) for any period of four consecutive
fiscal quarters is greater than 3.0 to 1.0, before we may use
cash proceeds from certain asset sales to repay any junior lien,
senior unsecured or subordinated indebtedness, we must first
offer to prepay borrowings under the second lien term loan
facility. Pro Forma Senior Secured Leverage Ratio,
Consolidated Net Secured Indebtedness and
EBITDA have the meanings given them in the facility.
Loans under this facility bear interest, at our option, at LIBOR
plus 150 basis points or an alternative base rate plus
50 basis points. If our corporate ratings by Moodys
and Standard & Poors were to decline to B1 or
less and B+ or less, respectively (or our outlook at our current
rating level was negative), then loans under this facility will
bear interest, at our option, at LIBOR plus 175 basis
points or an alternative base rate plus 75 basis points.
$300
Million Third Lien Secured Term Loan Facility due 2011
On August 16, 2007, we prepaid all outstanding borrowings
under the $300 million third lien term loan at par.
85
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 11.
|
Financing
Arrangements and Derivative Financial Instruments
(continued)
|
505
Million Amended and Restated Senior Secured European and German
Revolving Credit Facilities due 2012
On April 20, 2007, we amended and restated our facilities,
which now consist of a 350 million European revolving
credit facility, with a 50 million letter of credit
sublimit, and a 155 million German revolving credit
facility. Goodyear and its domestic subsidiaries that secure our
U.S. facilities provide unsecured guarantees to support the
European revolving credit facilities. GDTE and certain of its
subsidiaries in the United Kingdom, Luxembourg, France and
Germany also provide guarantees. GDTEs obligations under
the facilities and the obligations of its subsidiaries under the
related guarantees are secured by first priority security
interests in collateral that includes, subject to certain
exceptions:
|
|
|
|
|
the capital stock of the principal subsidiaries of GDTE; and
|
|
|
|
substantially all the tangible and intangible assets of GDTE and
GDTEs subsidiaries in the United Kingdom, Luxembourg,
France and Germany, including certain accounts receivable,
inventory, real property, equipment, contract rights and cash
and cash accounts, but excluding certain accounts receivable and
cash accounts in subsidiaries that are or may become parties to
securitization programs.
|
The facilities, which mature on April 30, 2012, contain
covenants similar to those in our first lien credit facility,
with additional limitations applicable to GDTE and its
subsidiaries. In addition, under the facilities we are not
permitted to allow GDTEs ratio of Consolidated Net J.V.
Indebtedness (which is determined net of cash and cash
equivalents in excess of $100 million) to Consolidated
European J.V. EBITDA to be greater than 3.0 to 1.0 at the end of
any fiscal quarter. Consolidated Net J.V.
Indebtedness and Consolidated European J.V.
EBITDA have the meanings given them in the facilities.
Under the revolving credit facilities, we pay an annual
commitment fee of 62.5 basis points on the undrawn portion
of the commitments and loans bear interest at LIBOR plus
200 basis points for loans denominated in U.S. dollars
or pounds sterling and EURIBOR plus 200 basis points for
loans denominated in euros.
The above facilities have customary representations and
warranties including, as a condition to borrowing, that all such
representations and warranties are true and correct, in all
material respects, on the date of the borrowing.
As of December 31, 2007 and 2006, there were
$12 million and $4 million, respectively, of letters
of credit issued and no borrowings under the European revolving
credit facility. There were no borrowings as of
December 31, 2007 and $204 million at
December 31, 2006 under the German revolving credit
facility. The $202 million in term loans that were
outstanding at December 31, 2006 were transferred to the
German revolving credit facility in April 2007 and subsequently
repaid.
International
Accounts Receivable Securitization Facilities (On-Balance
Sheet)
GDTE and certain of its subsidiaries are party to a five-year
pan-European accounts receivable securitization facility. The
facility provides 275 million of funding and is
subject to customary annual renewal of
back-up
liquidity lines.
The facility involves the twice-monthly sale of substantially
all of the trade accounts receivable of certain GDTE
subsidiaries to a bankruptcy-remote French company controlled by
one of the liquidity banks in the facility. These subsidiaries
retained servicing responsibilities. It is an event of default
under the facility if:
|
|
|
|
|
the ratio of our Consolidated EBITDA to our Consolidated
Interest Expense falls below 2.00 to 1.00;
|
|
|
|
the ratio of our Consolidated Secured Indebtedness (net of cash
in excess of $400 million) to our Consolidated EBITDA is
greater than 3.50 to 1.00; or
|
|
|
|
the ratio of GDTEs third party indebtedness (net of cash
held by GDTE and its consolidated subsidiaries in excess of
$100 million) to its Consolidated EBITDA is greater than
2.75 to 1.00.
|
86
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 11.
|
Financing
Arrangements and Derivative Financial Instruments
(continued)
|
The defined terms used in the events of default tests are
similar to those in the European Credit Facilities. As of
December 31, 2007 and 2006, the amount available and fully
utilized under this program totaled $403 million and
$362 million, respectively. The program did not qualify for
sale accounting pursuant to the provisions of
SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities, and accordingly, this amount is included in
Long- term debt and capital leases.
In addition to the pan-European accounts receivable
securitization facility discussed above, subsidiaries in
Australia have accounts receivable programs totaling
$78 million and $81 million at December 31, 2007
and 2006, respectively. These amounts are included in Notes
payable and overdrafts.
Debt
Maturities
The annual aggregate maturities of long term debt and capital
leases for the five years subsequent to December 31, 2007
are presented below. Maturities of debt 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)
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Domestic
|
|
$
|
104
|
|
|
$
|
500
|
|
|
$
|
3
|
|
|
$
|
1,626
|
|
|
$
|
3
|
|
International
|
|
|
67
|
|
|
|
465
|
|
|
|
16
|
|
|
|
2
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
171
|
|
|
$
|
965
|
|
|
$
|
19
|
|
|
$
|
1,628
|
|
|
$
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our $650 million senior secured notes due 2011 are included in
the table above as maturing in 2011. However, on
February 1, 2008, we called for the redemption of all
outstanding amounts on March 3, 2008.
Derivative
Financial Instruments
We utilize derivative financial instrument contracts and
nonderivative instruments to manage interest rate, foreign
exchange and commodity price risks. We have established a
control environment that includes policies and procedures for
risk assessment and the approval, reporting and monitoring of
derivative financial instrument activities. Company policy
prohibits holding or issuing derivative financial instruments
for trading purposes.
Interest
Rate Contracts
We manage our fixed and floating rate debt mix, within defined
limitations, using refinancings and unleveraged interest rate
swaps. We will enter into fixed and floating interest rate swaps
to hedge against the effects of adverse changes in interest
rates on consolidated results of operations and future cash
outflows for interest. Fixed rate swaps are used to reduce our
risk of increased interest costs during periods of rising
interest rates, and are normally designated as cash flow hedges.
Floating rate swaps are used to convert the fixed rates of long
term borrowings into short term variable rates, and are normally
designated as fair value hedges. We use interest rate swap
contracts to separate interest rate risk management from the
debt funding decision. At December 31, 2007, 56% of our
debt was at variable interest rates averaging 7.46% compared to
58% at an average rate of 7.85% at December 31, 2006. The
decrease in the average variable interest rate was driven by
decreases in the spread associated with our variable rate debt,
as a result of our April 2007 refinancing.
There were no interest rate contracts outstanding at
December 31, 2007 or 2006.
87
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 11.
|
Financing
Arrangements and Derivative Financial Instruments
(continued)
|
Weighted average interest rate swap contract information follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
(Dollars in millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Fixed rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional principal amount
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7
|
|
Pay fixed rate
|
|
|
|
|
|
|
|
|
|
|
5.94
|
%
|
Receive variable LIBOR
|
|
|
|
|
|
|
|
|
|
|
5.66
|
%
|
Floating rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional principal amount
|
|
$
|
|
|
|
$
|
183
|
|
|
$
|
200
|
|
Pay variable LIBOR
|
|
|
|
|
|
|
6.67
|
%
|
|
|
4.92
|
%
|
Receive fixed rate
|
|
|
|
|
|
|
6.63
|
%
|
|
|
6.63
|
%
|
Interest
Rate Lock Contracts
We will use, when appropriate, interest rate lock contracts to
hedge the risk-free rate component of anticipated long term debt
issuances. These contracts are designated as cash flow hedges of
forecasted transactions. Gains and losses on these contracts are
amortized to income over the life of the debt. No interest rate
lock contracts were outstanding at December 31, 2007 or
2006.
Foreign
Currency Contracts
We will enter into foreign currency 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. These contracts reduce exposure to currency
movements affecting existing foreign currency-denominated
assets, liabilities, firm commitments and forecasted
transactions resulting primarily from trade receivables and
payables, equipment acquisitions, intercompany loans, royalty
agreements and forecasted purchases and sales. Contracts hedging
short term trade receivables and payables normally have no
hedging designation.
The following table presents foreign currency forward contract
information at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Fair
|
|
|
Contract
|
|
|
Fair
|
|
|
Contract
|
|
(In millions)
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Buy currency:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro
|
|
$
|
19
|
|
|
$
|
19
|
|
|
$
|
11
|
|
|
$
|
11
|
|
Australian dollar
|
|
|
45
|
|
|
|
45
|
|
|
|
56
|
|
|
|
55
|
|
Japanese yen
|
|
|
76
|
|
|
|
76
|
|
|
|
35
|
|
|
|
37
|
|
U.S. dollar
|
|
|
394
|
|
|
|
399
|
|
|
|
140
|
|
|
|
141
|
|
All other
|
|
|
8
|
|
|
|
7
|
|
|
|
19
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
542
|
|
|
$
|
546
|
|
|
$
|
261
|
|
|
$
|
263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract maturity
|
|
1/08 12/08
|
|
1/07 5/07
|
88
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 11.
|
Financing
Arrangements and Derivative Financial Instruments
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Fair
|
|
|
Contract
|
|
|
Fair
|
|
|
Contract
|
|
(In millions)
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Sell currency:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
British pound
|
|
$
|
80
|
|
|
$
|
82
|
|
|
$
|
146
|
|
|
$
|
145
|
|
Swedish krona
|
|
|
16
|
|
|
|
16
|
|
|
|
13
|
|
|
|
13
|
|
U.S. dollar
|
|
|
24
|
|
|
|
27
|
|
|
|
24
|
|
|
|
26
|
|
Euro
|
|
|
34
|
|
|
|
36
|
|
|
|
29
|
|
|
|
31
|
|
All other
|
|
|
9
|
|
|
|
7
|
|
|
|
30
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
163
|
|
|
$
|
168
|
|
|
$
|
242
|
|
|
$
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract maturity
|
|
1/08 10/19
|
|
1/07 10/19
|
The following table presents foreign currency forward contract
carrying amounts at December 31:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Carrying amount asset (liability):
|
|
|
|
|
|
|
|
|
Current asset
|
|
$
|
3
|
|
|
$
|
3
|
|
Long term asset
|
|
|
5
|
|
|
|
3
|
|
Current liability
|
|
|
(7
|
)
|
|
|
(7
|
)
|
Long term liability
|
|
|
|
|
|
|
|
|
We were not a party to any foreign currency option contracts at
December 31, 2007 or 2006.
The counterparties to our interest rate and foreign exchange
contracts were substantial and creditworthy multinational
commercial banks or other financial institutions that are
recognized market makers. Due to the creditworthiness of the
counterparties, we consider the risk of counterparty
nonperformance associated with these contracts to be remote.
However, the inability of a counterparty to fulfill its
obligations when due could have a material effect on our
consolidated financial position, results of operations or
liquidity in the period in which it occurs.
|
|
Note 12.
|
Stock
Compensation Plans
|
Our 1989 Performance and Equity Incentive Plan, 1997 Performance
Incentive Plan and 2002 Performance Plan (collectively the
Plans) permitted grants of performance share units, stock
options, stock appreciation rights (SARs), and
restricted stock to employees. The Plans expired on
April 14, 1997, December 31, 2001 and April 15,
2005, respectively, except for grants then outstanding. Our 2005
Performance Plan, due to expire on April 26, 2008, also
permits the grant of performance share units, stock options,
SARs and restricted stock. A maximum of 12,000,000 shares
of our common stock may be issued for grants made under the 2005
Performance Plan.
On December 4, 2000, we adopted The Goodyear
Tire & Rubber Company Stock Option Plan for Hourly
Bargaining Unit Employees and the Hourly and Salaried Employee
Stock Option Plan, which permitted the grant of options up to a
maximum of 3,500,000 and 600,000 shares of our common
stock, respectively. These plans expired on December 31,
2001 and December 31, 2002, respectively, except for
options then outstanding. The options granted under these plans
were fully vested prior to January 1, 2006.
Shares issued under our stock-based compensation plans are
usually issued from shares of our common stock held in treasury.
89
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 12.
|
Stock
Compensation Plans (Continued)
|
Stock
Options
Grants of stock options and SARs (collectively referred to as
options) under the Plans generally have a graded
vesting period of four years whereby one-fourth of the awards
vest on each of the first four anniversaries of the grant date,
an exercise price equal to the fair market value of one share of
our common stock on the date of grant (calculated as the average
of the high and low price on that date) and a contractual term
of ten years. The exercise of tandem SARs cancels an equivalent
number of stock options and conversely, the exercise of stock
options cancels an equivalent number of tandem SARs. Option
grants are cancelled on termination of employment unless
termination is due to retirement under certain circumstances, in
which case, all outstanding options vest fully on retirement and
remain outstanding until the end of their contractual term.
The exercise of certain stock options through a share swap,
whereby the employee exercising the stock options tenders shares
of our common stock then owned by such employee towards the
exercise price plus taxes, if any, due from such employee,
results in an immediate grant of new options (hereinafter
referred to as reload options) equal to the number
of shares so tendered, plus any shares tendered to satisfy the
employees income tax obligations on the transaction. Each
such grant of reload options vests on the first anniversary of
its respective grant date, has an exercise price equal to the
fair market value of one share of our common stock on the date
of grant (calculated as the average of the high and low price on
that date) and a contractual term equal to the remaining
contractual term of the original option. The subsequent exercise
of such reload options through a share swap does not result in
the grant of any additional reload options.
The following table summarizes the activity related to options
during 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Contractual Term
|
|
|
Aggregate Intrinsic
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
(Years)
|
|
|
Value (In Millions)
|
|
|
Outstanding at January 1
|
|
|
23,908,291
|
|
|
$
|
24.00
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
2,731,402
|
|
|
|
25.74
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(8,148,510
|
)
|
|
|
16.23
|
|
|
|
|
|
|
$
|
101
|
|
Options expired
|
|
|
(1,654,505
|
)
|
|
|
63.21
|
|
|
|
|
|
|
|
|
|
Options cancelled
|
|
|
(714,082
|
)
|
|
|
23.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31
|
|
|
16,122,596
|
|
|
|
24.25
|
|
|
|
4.2
|
|
|
$
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31
|
|
|
15,682,731
|
|
|
|
24.33
|
|
|
|
4.1
|
|
|
$
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31
|
|
|
12,121,783
|
|
|
|
25.14
|
|
|
|
2.9
|
|
|
$
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for grant at December 31
|
|
|
6,935,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of options exercised in 2006 was
$14 million.
90
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 12.
|
Stock
Compensation Plans (Continued)
|
Significant option groups outstanding at December 31, 2007
and related weighted average exercise price and remaining
contractual term information follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Contractual Term
|
|
|
|
|
Grant Date(1)
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Price
|
|
|
(Years)
|
|
|
|
|
|
2/22/07
|
|
|
1,477,226
|
|
|
|
12,500
|
|
|
$
|
24.71
|
|
|
|
9.2
|
|
|
|
|
|
12/06/05(2)
|
|
|
1,108,723
|
|
|
|
446,027
|
|
|
|
17.15
|
|
|
|
7.9
|
|
|
|
|
|
12/09/04
|
|
|
2,181,755
|
|
|
|
1,462,724
|
|
|
|
12.54
|
|
|
|
6.9
|
|
|
|
|
|
12/02/03
|
|
|
1,351,938
|
|
|
|
1,351,938
|
|
|
|
6.81
|
|
|
|
5.9
|
|
|
|
|
|
12/03/02
|
|
|
637,305
|
|
|
|
637,305
|
|
|
|
7.94
|
|
|
|
4.9
|
|
|
|
|
|
12/03/01
|
|
|
1,306,305
|
|
|
|
1,306,305
|
|
|
|
22.05
|
|
|
|
3.9
|
|
|
|
|
|
12/04/00
|
|
|
1,705,890
|
|
|
|
1,705,890
|
|
|
|
17.68
|
|
|
|
2.9
|
|
|
|
|
|
12/06/99
|
|
|
2,643,713
|
|
|
|
2,643,713
|
|
|
|
32.00
|
|
|
|
1.9
|
|
|
|
|
|
11/30/98
|
|
|
1,848,842
|
|
|
|
1,848,842
|
|
|
|
57.25
|
|
|
|
0.9
|
|
|
|
|
|
All other
|
|
|
1,860,899
|
|
|
|
706,539
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,122,596
|
|
|
|
12,121,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Grants of options and other stock-based compensation, that were
usually made by our Board of Directors in December each year for
the subsequent fiscal year, will henceforth be determined by our
Board of Directors during the first quarter of the respective
fiscal year. Consequently, no grants for 2007 were made in
December 2006. |
|
(2) |
|
The number of options granted in 2005 decreased in comparison to
2004, as we anticipated grants of performance share units to
certain employees in 2006 in lieu of a portion of their 2005
option grants. |
|
(3) |
|
Options in the All other category had exercise
prices ranging from $5.52 to $74.25. The weighted average
exercise price for options outstanding and exercisable in that
category was $19.64 and $20.84, respectively, while the
remaining weighted average contractual term was 5.1 years
and 4.5 years, respectively. |
Weighted average grant date fair values of stock options and the
assumptions used in estimating those fair values are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Weighted average grant date fair value
|
|
$
|
10.62
|
|
|
$
|
6.52
|
|
|
$
|
8.61
|
|
Black-Scholes model assumptions(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected term (years)
|
|
|
5.10
|
|
|
|
6.25
|
|
|
|
6.25
|
|
Interest rate
|
|
|
4.61
|
%
|
|
|
4.35
|
%
|
|
|
4.35
|
%
|
Volatility
|
|
|
39.2
|
|
|
|
44.7
|
|
|
|
44.7
|
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We review the assumptions used in our Black-Scholes model in
conjunction with estimating the grant date fair value of the
annual grants of stock-based awards by our Board of Directors. |
Performance
Share Units
Performance share units granted under the 2005 Performance Plan
are earned over a three-year period beginning January 1 of the
year of grant. Total units earned may vary between 0% and 200%
of the units granted based on the cumulative attainment of
pre-determined performance targets over the related three-year
period. The performance
91
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 12.
|
Stock
Compensation Plans (Continued)
|
targets are established by the Board of Directors. Half of the
units earned will be settled through the payment of cash and the
balance will be settled through the issuance of an equivalent
number of shares of our common stock. Eligible employees may
elect to defer receiving the payout of all or a portion of their
units earned until termination of employment. Each deferred unit
equates to one share of our common stock and is payable, at the
election of the employee, in cash, shares of our common stock or
any combination thereof.
The following table summarizes the activity related to
performance share units during 2007:
|
|
|
|
|
|
|
Number of Shares
|
|
|
Unvested at January 1
|
|
|
1,035,566
|
|
Granted
|
|
|
1,221,706
|
|
Vested
|
|
|
|
|
Forfeited
|
|
|
(304,560
|
)
|
|
|
|
|
|
Unvested at December 31
|
|
|
1,952,712
|
|
|
|
|
|
|
Other
Information
In 2007, we recognized stock-based compensation expense of
$59 million ($57 million after-tax) in accordance with
SFAS No. 123R. In 2007, we also made cash payments of
$5 million to settle exercises of SARs and performance
equity units granted under the 2002 Performance Plan. Total cash
received from the exercise of stock options during 2007 was
$103 million.
As of January 1, 2006, we recognized stock-based
compensation expense of $3 million ($2 million
after-tax or $0.01 per share, basic and diluted) upon the
adoption of SFAS No. 123R. Additionally, during 2006,
we recognized related expense of $26 million
($24 million after-tax). In 2006, we also made cash
payments of $3 million to settle exercises of SARs and
performance equity units granted under the 2002 Performance
Plan. Total cash received from the exercise of stock options
during 2006 was $12 million.
As of December 31, 2007, unearned compensation cost related
to the unvested portion of all stock-based awards was
approximately $63 million and is expected to be recognized
over the remaining vesting period of the respective grants,
through December 31, 2011.
|
|
Note 13.
|
Pension,
Other Postretirement Benefit and Savings Plans
|
We adopted SFAS No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement
Plans (SFAS No. 158) effective
December 31, 2006. The impact of the adoption of
SFAS No. 158 has been reflected within our
consolidated financial statements as of December 31, 2006.
We provide employees with defined benefit pension or defined
contribution plans. Our principal domestic hourly pension plan
provides benefits based on length of service. The principal
domestic pension plans covering salaried employees provide
benefits based on final five-year average earnings formulas.
Salaried employees making voluntary contributions to these plans
receive higher benefits. Effective January 1, 2005, the
domestic pension plans covering salaried employees were closed
to newly hired salaried employees in the United States, and
those employees are eligible for Company-funded contributions
into our defined contribution savings plan.
On February 28, 2007, we announced that we will freeze our
U.S. salaried pension plans effective December 31,
2008 and will implement improvements to our defined contribution
savings plan effective January 1, 2009. As a result of
these actions, we recognized a curtailment charge of
$64 million during the first quarter of 2007. On
February 28, 2007, we also announced changes to our
U.S. salaried other postretirement benefit plans effective
January 1, 2008, including increasing the amounts that
salaried retirees contribute toward the cost of their medical
92
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 13.
|
Pension,
Other Postretirement Benefit and Savings Plans
(Continued)
|
benefits, redesigning retiree medical benefit plans to minimize
the cost impact on premiums, and discontinuing company-paid life
insurance for retirees. As a result of these actions, we were
required to remeasure the benefit obligations of the affected
plans. The discount rate used to measure the benefit obligations
of our U.S. salaried pension plan at February 28, 2007
and December 31, 2006 was 5.75%. The discount rate used to
measure the benefit obligation of our U.S. salaried other
postretirement benefit plans at February 28, 2007 was 5.50%
compared to 5.75% at December 31, 2006.
On March 23, 2007, we announced an agreement to sell our
Engineered Products business, which resulted in the recognition
of curtailment and termination charges for both pensions and
other post retirement benefit plans during the first quarter of
2007 of $72 million and a curtailment gain of
$43 million for the salaried other postretirement benefit
plan during the third quarter of 2007 upon completion of the
sale. These amounts have been included in Discontinued
Operations. Upon closing of the sale on July 31, 2007, we
were required to reexamine the discount rate used to measure the
benefit obligations of our U.S. salaried other
postretirement benefit plan. This resulted in a discount rate of
6.0% compared to 5.50% at February 28, 2007. Under the
terms of the Purchase and Sale Agreement for Engineered
Products, we retained our obligations for pension and other
postretirement benefits under our U.S. plans for Engineered
Products existing retirees and employees eligible to
retire as of July 31, 2007. Obligations for benefits under
certain
non-U.S. plans
were not retained. A portion of U.S. net periodic cost for
active employees of Engineered Products, and net periodic cost
for certain
non-U.S. plans
have been included in Discontinued Operations.
During the fourth quarter of 2007, we recognized a settlement
charge of $14 million for our U.S. salaried pension
plan. This settlement charge resulted from total 2007 lump sum
payments from the salaried pension plan exceeding 2007 service
and interest cost for the plan. These payments primarily related
to employees who terminated service as a result of the sale of
our Engineered Products business. As such, $11 million of
the charge was included in Discontinued Operations.
Effective March 1, 2006, all active participants in the
Brazil pension plan were converted to a defined contribution
savings plan, resulting in the recognition of a curtailment
gain. The announcement of the elimination of tire production at
our Tyler, Texas and Valleyfield, Quebec facilities resulted in
the recognition of curtailment and termination charges for both
pensions and other postretirement benefit plans during 2006. We
also amended our plan under the union agreement to restore the
service credit for the U.S. hourly pension plan. Under the
old agreement, union participation in the U.S. hourly plan
did not receive service credit for a two year period ended
November 1, 2005, and effective October 1, 2005, our
UK pension plans were closed to new participants. Other pension
plans provide benefits similar to the principal domestic plans
as well as termination indemnity plans at certain
non-U.S. subsidiaries.
In addition, we provide substantially all domestic employees and
employees at certain
non-U.S. subsidiaries
with health care benefits upon retirement. We also provide
certain domestic employees with life insurance benefits upon
retirement. Insurance companies provide life insurance and
certain health care benefits 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 funded from operations.
We use a December 31 measurement date for all plans.
93
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 13.
|
Pension,
Other Postretirement Benefit and Savings Plans
(Continued)
|
Total benefits cost and amounts recognized in other
comprehensive (income) loss follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
Other Benefits
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Benefits cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
84
|
|
|
$
|
91
|
|
|
$
|
50
|
|
|
$
|
41
|
|
|
$
|
49
|
|
|
$
|
48
|
|
|
$
|
14
|
|
|
$
|
21
|
|
|
$
|
20
|
|
Interest cost
|
|
|
306
|
|
|
|
295
|
|
|
|
294
|
|
|
|
152
|
|
|
|
133
|
|
|
|
125
|
|
|
|
109
|
|
|
|
133
|
|
|
|
147
|
|
Expected return on plan assets
|
|
|
(351
|
)
|
|
|
(295
|
)
|
|
|
(258
|
)
|
|
|
(130
|
)
|
|
|
(112
|
)
|
|
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
40
|
|
|
|
59
|
|
|
|
63
|
|
|
|
2
|
|
|
|
4
|
|
|
|
3
|
|
|
|
(5
|
)
|
|
|
42
|
|
|
|
43
|
|
- net (gains) losses
|
|
|
56
|
|
|
|
91
|
|
|
|
86
|
|
|
|
76
|
|
|
|
73
|
|
|
|
57
|
|
|
|
8
|
|
|
|
9
|
|
|
|
10
|
|
- transition amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
|
|
135
|
|
|
|
241
|
|
|
|
235
|
|
|
|
141
|
|
|
|
147
|
|
|
|
123
|
|
|
|
126
|
|
|
|
205
|
|
|
|
220
|
|
Curtailments/settlements
|
|
|
67
|
|
|
|
20
|
|
|
|
13
|
|
|
|
1
|
|
|
|
(9
|
)
|
|
|
2
|
|
|
|
|
|
|
|
31
|
|
|
|
25
|
|
Termination benefits
|
|
|
|
|
|
|
10
|
|
|
|
15
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total benefits cost
|
|
$
|
202
|
|
|
$
|
271
|
|
|
$
|
263
|
|
|
$
|
142
|
|
|
$
|
164
|
|
|
$
|
125
|
|
|
$
|
126
|
|
|
$
|
266
|
|
|
$
|
245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in other comprehensive (income) loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (credit) from plan amendments
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(501
|
)
|
|
|
|
|
|
|
|
|
Decrease in net actuarial losses
|
|
|
(215
|
)
|
|
|
|
|
|
|
|
|
|
|
(140
|
)
|
|
|
|
|
|
|
|
|
|
|
(139
|
)
|
|
|
|
|
|
|
|
|
Amortization of prior service (cost) credit in net periodic cost
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
Amortization of net gains (losses) in net periodic cost
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
Immediate recognition of prior service cost and unrecognized
gains and losses due to curtailments, settlements and
divestitures
|
|
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in other comprehensive (income) loss
|
|
|
(446
|
)
|
|
|
|
|
|
|
|
|
|
|
(253
|
)
|
|
|
|
|
|
|
|
|
|
|
(611
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in total benefits cost and other
comprehensive (income) loss
|
|
$
|
(244
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We use the fair value of our pension assets in the calculation
of pension expense for substantially all of our pension plans.
The estimated prior service cost and net actuarial loss for the
defined benefit pension plans that will be amortized from
accumulated other comprehensive loss into benefits cost in 2008
are $36 million and $39 million, respectively, for our
U.S. plans and $2 million and $53 million,
respectively for our
non-U.S. plans.
The estimated prior service cost and net actuarial loss for the
postretirement benefit plans that will be amortized from
accumulated other comprehensive loss into benefits cost in 2008
are a benefit of $12 million and expense of
$7 million, respectively.
94
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 13.
|
Pension,
Other Postretirement Benefit and Savings Plans
(Continued)
|
The change in benefit obligation and plan assets for 2007 and
2006 and the amounts recognized in our Consolidated Balance
Sheets at December 31, 2007 and 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
Other Benefits
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(5,417
|
)
|
|
$
|
(5,407
|
)
|
|
$
|
(2,927
|
)
|
|
$
|
(2,580
|
)
|
|
$
|
(2,456
|
)
|
|
$
|
(2,610
|
)
|
Newly adopted plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
Service cost benefits earned
|
|
|
(87
|
)
|
|
|
(103
|
)
|
|
|
(41
|
)
|
|
|
(49
|
)
|
|
|
(15
|
)
|
|
|
(24
|
)
|
Interest cost
|
|
|
(306
|
)
|
|
|
(295
|
)
|
|
|
(152
|
)
|
|
|
(133
|
)
|
|
|
(110
|
)
|
|
|
(134
|
)
|
Plan amendments
|
|
|
(10
|
)
|
|
|
(111
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
501
|
|
|
|
(1
|
)
|
Actuarial gain (loss)
|
|
|
207
|
|
|
|
120
|
|
|
|
235
|
|
|
|
(74
|
)
|
|
|
125
|
|
|
|
114
|
|
Participant contributions
|
|
|
(9
|
)
|
|
|
(10
|
)
|
|
|
(5
|
)
|
|
|
(7
|
)
|
|
|
(41
|
)
|
|
|
(26
|
)
|
Curtailments/settlements
|
|
|
190
|
|
|
|
(10
|
)
|
|
|
27
|
|
|
|
66
|
|
|
|
|
|
|
|
1
|
|
Termination benefits
|
|
|
(3
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
(30
|
)
|
Divestitures
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
(214
|
)
|
|
|
(257
|
)
|
|
|
(32
|
)
|
|
|
|
|
Benefit payments
|
|
|
330
|
|
|
|
409
|
|
|
|
150
|
|
|
|
148
|
|
|
|
266
|
|
|
|
254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
(5,105
|
)
|
|
$
|
(5,417
|
)
|
|
$
|
(2,923
|
)
|
|
$
|
(2,927
|
)
|
|
$
|
(1,762
|
)
|
|
$
|
(2,456
|
)
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
4,050
|
|
|
$
|
3,404
|
|
|
$
|
1,850
|
|
|
$
|
1,576
|
|
|
$
|
4
|
|
|
$
|
|
|
Newly adopted plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
332
|
|
|
|
478
|
|
|
|
96
|
|
|
|
133
|
|
|
|
|
|
|
|
|
|
Company contributions to plan assets
|
|
|
519
|
|
|
|
556
|
|
|
|
158
|
|
|
|
118
|
|
|
|
2
|
|
|
|
4
|
|
Cash funding of direct participant payments
|
|
|
12
|
|
|
|
11
|
|
|
|
30
|
|
|
|
23
|
|
|
|
223
|
|
|
|
228
|
|
Participant contributions
|
|
|
9
|
|
|
|
10
|
|
|
|
5
|
|
|
|
7
|
|
|
|
41
|
|
|
|
26
|
|
Curtailments/settlements
|
|
|
(136
|
)
|
|
|
|
|
|
|
(24
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
Divestitures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
145
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
Benefit payments
|
|
|
(330
|
)
|
|
|
(409
|
)
|
|
|
(150
|
)
|
|
|
(148
|
)
|
|
|
(266
|
)
|
|
|
(254
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
4,456
|
|
|
$
|
4,050
|
|
|
$
|
2,110
|
|
|
$
|
1,850
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year
|
|
$
|
(649
|
)
|
|
$
|
(1,367
|
)
|
|
$
|
(813
|
)
|
|
$
|
(1,077
|
)
|
|
$
|
(1,758
|
)
|
|
$
|
(2,474
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 13.
|
Pension,
Other Postretirement Benefit and Savings Plans
(Continued)
|
Amounts recognized in the Consolidated Balance Sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
Other Benefits
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Noncurrent assets
|
|
$
|
1
|
|
|
$
|
|
|
|
$
|
61
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
(23
|
)
|
|
|
(19
|
)
|
|
|
(22
|
)
|
|
|
(23
|
)
|
|
|
(193
|
)
|
|
|
(231
|
)
|
Noncurrent liabilities
|
|
|
(627
|
)
|
|
|
(1,348
|
)
|
|
|
(852
|
)
|
|
|
(1,090
|
)
|
|
|
(1,565
|
)
|
|
|
(2,221
|
)
|
Net assets and liabilities of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(649
|
)
|
|
$
|
(1,367
|
)
|
|
$
|
(813
|
)
|
|
$
|
(1,077
|
)
|
|
$
|
(1,758
|
)
|
|
$
|
(2,474
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss, net
of tax and minority, consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
Other Benefits
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Prior service cost
|
|
$
|
236
|
|
|
$
|
366
|
|
|
$
|
12
|
|
|
$
|
14
|
|
|
$
|
(183
|
)
|
|
$
|
299
|
|
Net actuarial loss
|
|
|
936
|
|
|
|
1,252
|
|
|
|
822
|
|
|
|
1,043
|
|
|
|
92
|
|
|
|
216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amount recognized
|
|
|
1,172
|
|
|
|
1,618
|
|
|
|
834
|
|
|
|
1,057
|
|
|
|
(91
|
)
|
|
|
515
|
|
Deferred income taxes
|
|
|
(210
|
)
|
|
|
(210
|
)
|
|
|
(91
|
)
|
|
|
(122
|
)
|
|
|
2
|
|
|
|
3
|
|
Minority shareholders equity
|
|
|
(19
|
)
|
|
|
(24
|
)
|
|
|
(149
|
)
|
|
|
(185
|
)
|
|
|
15
|
|
|
|
9
|
|
Amounts related to discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
943
|
|
|
$
|
1,384
|
|
|
$
|
594
|
|
|
$
|
772
|
|
|
$
|
(74
|
)
|
|
$
|
531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents significant weighted average
assumptions used to determine benefit obligations at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
Other Benefits
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Discount rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
6.25
|
%
|
|
|
5.75
|
%
|
|
|
6.00
|
%
|
|
|
5.75
|
%
|
Non-U.S.
|
|
|
5.84
|
|
|
|
5.01
|
|
|
|
6.55
|
|
|
|
5.76
|
|
Rate of compensation increase:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
4.04
|
|
|
|
4.04
|
|
|
|
|
|
|
|
4.00
|
|
Non-U.S.
|
|
|
3.81
|
|
|
|
3.63
|
|
|
|
4.26
|
|
|
|
4.32
|
|
96
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 13.
|
Pension,
Other Postretirement Benefit and Savings Plans
(Continued)
|
The following table presents significant weighted average
assumptions used to determine benefits cost for the years ended
December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
Other Benefits
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Discount rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
5.75
|
%
|
|
|
5.50
|
%
|
|
|
5.75
|
%
|
|
|
5.75
|
%
|
|
|
5.50
|
%
|
|
|
5.75
|
%
|
Non-U.S.
|
|
|
5.01
|
|
|
|
4.95
|
|
|
|
5.39
|
|
|
|
5.76
|
|
|
|
6.18
|
|
|
|
6.99
|
|
Expected long term return on plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
8.50
|
|
|
|
8.50
|
|
|
|
8.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
|
|
|
6.69
|
|
|
|
6.92
|
|
|
|
7.46
|
|
|
|
12.50
|
|
|
|
10.25
|
|
|
|
|
|
Rate of compensation increase:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
4.04
|
|
|
|
4.04
|
|
|
|
4.04
|
|
|
|
4.00
|
|
|
|
4.08
|
|
|
|
4.00
|
|
Non-U.S.
|
|
|
3.63
|
|
|
|
3.64
|
|
|
|
3.48
|
|
|
|
4.32
|
|
|
|
4.28
|
|
|
|
4.72
|
|
For 2007, an assumed long term rate of return of 8.50% was used
for the U.S. pension plans. In developing this rate, we
evaluated the compound annualized returns of our
U.S. pension fund over periods of 15 years or more
through December 31, 2006. In addition, we evaluated input
from our pension fund consultant on asset class return
expectations and long term inflation. For our
non-U.S. locations,
a weighted average assumed long term rate of return of 6.69% was
used. Input from local pension fund consultants concerning asset
class return expectations and long-term inflation form the basis
of this assumption.
The following table presents estimated future benefit payments
from the plans as of December 31, 2007. Benefit payments
for other postretirement benefits are presented net of retiree
contributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits
|
|
|
|
Pension Plans
|
|
|
Without Medicare
|
|
|
Medicare Part D
|
|
(In millions)
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
Part D Subsidy
|
|
|
Subsidy Receipts
|
|
|
2008
|
|
$
|
362
|
|
|
$
|
157
|
|
|
$
|
212
|
|
|
$
|
(18
|
)
|
2009
|
|
|
362
|
|
|
|
156
|
|
|
|
207
|
|
|
|
(19
|
)
|
2010
|
|
|
370
|
|
|
|
181
|
|
|
|
201
|
|
|
|
(21
|
)
|
2011
|
|
|
394
|
|
|
|
166
|
|
|
|
193
|
|
|
|
(21
|
)
|
2012
|
|
|
388
|
|
|
|
170
|
|
|
|
185
|
|
|
|
(23
|
)
|
2013-2017
|
|
|
2,029
|
|
|
|
898
|
|
|
|
807
|
|
|
|
(127
|
)
|
The following table presents selected information on our pension
plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
All plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
5,092
|
|
|
$
|
5,322
|
|
|
$
|
2,766
|
|
|
$
|
2,722
|
|
Plans not fully-funded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
$
|
4,993
|
|
|
$
|
5,417
|
|
|
$
|
2,413
|
|
|
$
|
2,483
|
|
Accumulated benefit obligation
|
|
|
4,981
|
|
|
|
5,322
|
|
|
|
2,290
|
|
|
|
2,318
|
|
Fair value of plan assets
|
|
|
4,343
|
|
|
|
4,050
|
|
|
|
1,544
|
|
|
|
1,402
|
|
Certain
non-U.S. subsidiaries
maintain unfunded pension plans consistent with local practices
and requirements. At December 31, 2007, these plans
accounted for $268 million of our accumulated pension
benefit obligation, $288 million of our projected pension
benefit obligation, and $37 million of our accumulated
other comprehensive
97
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 13.
|
Pension,
Other Postretirement Benefit and Savings Plans
(Continued)
|
loss adjustment. At December 31, 2006, these plans
accounted for $271 million of our accumulated pension
benefit obligation, $287 million of our projected pension
benefit obligation and $67 million of our accumulated other
comprehensive loss adjustment.
Our pension plan weighted average asset allocation at
December 31, by asset category, follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Equity securities
|
|
|
68
|
%
|
|
|
70
|
%
|
|
|
41
|
%
|
|
|
48
|
%
|
Debt securities
|
|
|
32
|
|
|
|
30
|
|
|
|
52
|
|
|
|
48
|
|
Real estate
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Cash and short term securities
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007 and 2006, the Plans did not directly
hold any of our Common Stock.
Our pension investment policy recognizes the long term nature of
pension liabilities, the benefits of diversification across
asset classes and the effects of inflation. The diversified
portfolio is designed to maximize returns consistent with levels
of liquidity and investment risk that are prudent and
reasonable. All assets are managed externally according to
guidelines we have established individually with investment
managers. The manager guidelines prohibit the use of any type of
investment derivative without our prior approval. Portfolio risk
is controlled by having managers comply with guidelines,
establishing the maximum size of any single holding in their
portfolios and by using managers with different investment
styles. We periodically undertake asset and liability modeling
studies to determine the appropriateness of the investments. The
portfolio includes holdings of domestic,
non-U.S.,
and private equities, global high quality and high yield fixed
income securities, and short term interest bearing deposits. The
target asset allocation of the U.S. pension fund is 70%
equities and 30% fixed income.
We expect to contribute approximately $350 million to
$400 million to our funded U.S. and
non-U.S. pension
plans in 2008.
Assumed health care cost trend rates at December 31 follow:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Health care cost trend rate assumed for the next year
|
|
|
10.50
|
%
|
|
|
11.20
|
%
|
Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate)
|
|
|
5.0
|
|
|
|
5.0
|
|
Year that the rate reaches the ultimate trend rate
|
|
|
2014
|
|
|
|
2014
|
|
A 1% change in the assumed health care cost trend would have
increased (decreased) the accumulated postretirement benefit
obligation at December 31, 2007 and the aggregate service
and interest cost for the year then ended as follows:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
1% Increase
|
|
1% Decrease
|
|
Accumulated postretirement benefit obligation
|
|
$
|
33
|
|
|
$
|
(27
|
)
|
Aggregate service and interest cost
|
|
|
4
|
|
|
|
(3
|
)
|
Savings
Plans
Substantially all employees in the U.S. and employees of
certain
non-U.S. locations
are eligible to participate in a defined contribution savings
plan. Expenses recognized for contributions to these plans were
$32 million, $26 million and $20 million for
2007, 2006 and 2005, respectively.
98
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The components of Income (Loss) from Continuing Operations
before Income Taxes and Minority Interest follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
U.S
|
|
$
|
(342
|
)
|
|
$
|
(797
|
)
|
|
$
|
(324
|
)
|
Foreign
|
|
|
806
|
|
|
|
595
|
|
|
|
776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
464
|
|
|
$
|
(202
|
)
|
|
$
|
452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of income taxes at the U.S. statutory rate
to income taxes provided on Income (Loss) from Continuing
Operations follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
U.S. Federal income tax (benefit) expense at the statutory rate
of 35%
|
|
$
|
162
|
|
|
$
|
(71
|
)
|
|
$
|
158
|
|
Adjustment for foreign income taxed at different rates
|
|
|
(25
|
)
|
|
|
(7
|
)
|
|
|
(14
|
)
|
U.S. loss with no tax benefit
|
|
|
122
|
|
|
|
235
|
|
|
|
88
|
|
Foreign operating (income) losses with no tax due to valuation
allowances
|
|
|
(8
|
)
|
|
|
67
|
|
|
|
23
|
|
Establishment (Release) of valuation allowances
|
|
|
(8
|
)
|
|
|
46
|
|
|
|
(15
|
)
|
Establishment (Resolution) of uncertain tax positions
|
|
|
2
|
|
|
|
(204
|
)
|
|
|
(4
|
)
|
Deferred tax impact of enacted tax rate and law changes
|
|
|
3
|
|
|
|
(8
|
)
|
|
|
2
|
|
Other
|
|
|
7
|
|
|
|
2
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States and Foreign Taxes
|
|
$
|
255
|
|
|
$
|
60
|
|
|
$
|
233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the provision (benefit) for taxes on income
from continuing operations, by taxing jurisdiction, follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
|
$
|
(45
|
)
|
|
$
|
(26
|
)
|
Foreign
|
|
|
258
|
|
|
|
148
|
|
|
|
276
|
|
State
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
260
|
|
|
|
101
|
|
|
|
248
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
3
|
|
|
|
|
|
|
|
(2
|
)
|
Foreign
|
|
|
(1
|
)
|
|
|
(36
|
)
|
|
|
(12
|
)
|
State
|
|
|
(7
|
)
|
|
|
(5
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
(41
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States and Foreign Taxes
|
|
$
|
255
|
|
|
$
|
60
|
|
|
$
|
233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense in 2007 includes a net tax benefit totaling
$6 million, which consists of a tax benefit of
$11 million ($0.04 per share) related to prior periods
offset by a $5 million charge primarily related to recently
enacted tax law changes. The out-of-period adjustment related to
our correction of the inflation adjustment on equity of our
subsidiary in Colombia as a permanent tax benefit rather than as
a temporary tax benefit dating back as far as 1992, with no
individual year being significantly affected.
99
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 14.
|
Income
Taxes (continued)
|
Income tax expense in 2006 includes net favorable tax
adjustments totaling $163 million. The adjustments for 2006
related primarily to the resolution of an uncertain tax position
regarding a reorganization of certain legal entities in 2001,
which was partially offset by a charge of $47 million to
establish a foreign valuation allowance, attributable to a
rationalization plan.
Temporary differences and carryforwards giving rise to deferred
tax assets and liabilities at December 31 follow:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
Postretirement benefits and pensions
|
|
$
|
973
|
|
|
$
|
1,609
|
|
Tax credit and loss carryforwards
|
|
|
499
|
|
|
|
747
|
|
Capitalized expenditures
|
|
|
361
|
|
|
|
296
|
|
Accrued expenses deductible as paid
|
|
|
425
|
|
|
|
293
|
|
Alternative minimum tax credit
carryforwards(1)
|
|
|
76
|
|
|
|
63
|
|
Vacation and sick pay
|
|
|
44
|
|
|
|
45
|
|
Rationalizations and other provisions
|
|
|
19
|
|
|
|
26
|
|
Other
|
|
|
123
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,520
|
|
|
|
3,156
|
|
Valuation allowance
|
|
|
(2,231
|
)
|
|
|
(2,814
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
289
|
|
|
|
342
|
|
Tax on undistributed subsidiary earnings
|
|
|
(15
|
)
|
|
|
(18
|
)
|
Total deferred tax liabilities:
|
|
|
|
|
|
|
|
|
property basis differences
|
|
|
(316
|
)
|
|
|
(338
|
)
|
|
|
|
|
|
|
|
|
|
Total net deferred tax liabilities
|
|
$
|
(42
|
)
|
|
$
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Unlimited carryforward period. |
At December 31, 2007, we had $368 million of tax
assets for net operating loss, capital loss and tax credit
carryforwards related to certain international subsidiaries that
are primarily from countries with unlimited carryforward
periods. A valuation allowance totaling $422 million has
been recorded against these and other deferred tax assets where
recovery of the asset or carryforward is uncertain. In addition,
we had $50 million of state and $114 million of
Federal tax assets for net operating loss and tax credit
carryforwards. The state carryforwards are subject to expiration
from 2008 to 2030. The Federal carryforwards consist of
$89 million of foreign tax credits which are subject to
expiration in 2016, and $25 million of tax assets related
to net operating losses and research and development credits
that are subject to expiration from 2020 to 2027. The amount of
tax credit and loss carryforwards reflected in the table above
has been reduced by unrealized stock option attributes of
$33 million. A full valuation allowance has also been
recorded against these deferred tax assets as recovery is
uncertain.
The adoption of FIN 48 resulted in a one-time increase to
the opening balance of retained earnings and a decrease in
goodwill as of January 1, 2007 of $32 million and
$5 million, respectively, for tax benefits not previously
recognized under historical practice. At December 31, 2007,
we had unrecognized tax benefits of $174 million (see table
below) that if recognized, would have a favorable impact on our
tax expense of $162 million. We report interest and
penalties as income taxes and have accrued interest of
$11 million as of December 31, 2007. If not favorably
settled, $59 million of the unrecognized tax benefits and
$11 million of accrued interest would require the use of
our cash.
100
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 14.
|
Income
Taxes (continued)
|
|
|
|
|
|
Reconciliation of Unrecognized Tax Benefits
|
|
|
|
(In millions)
|
|
2007
|
|
|
Balance at January 1
|
|
$
|
161
|
|
Increases related to prior year tax positions
|
|
|
36
|
|
Decreases related to prior year tax positions
|
|
|
(18
|
)
|
Increases related to current year tax positions
|
|
|
6
|
|
Settlements
|
|
|
(24
|
)
|
Lapse of statute of limitations
|
|
|
(2
|
)
|
Foreign currency impact
|
|
|
15
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
174
|
|
|
|
|
|
|
Generally, years beginning after 2002 are still open to
examination by foreign taxing authorities, including several
major taxing jurisdictions. In Germany, we are open to
examination from 1998 onward. In the United States, we are open
to examination from 2004 forward. We are also involved in a
United States/Canada Competent Authority resolution process that
deals with transactions between our operations in these
countries from 1997 through 2003. This proceeding is expected to
be concluded within the next 18 months.
It is expected that the amount of unrecognized tax benefits will
also change for other reasons in the next 12 months;
however, we do not expect that change to have a significant
impact on our financial position or results of operations.
No provision for Federal income tax or foreign withholding tax
on undistributed earnings of international subsidiaries of
approximately $2.8 billion is required because the amount
has been or will be reinvested in property, plant and equipment
and working capital. Quantification of the deferred tax
liability, if any, associated with these undistributed earnings
is not practicable.
Net cash payments for income taxes were $274 million,
$310 million and $239 million in 2007, 2006 and 2005,
respectively.
|
|
Note 15.
|
Interest
Expense
|
Interest expense includes interest and amortization of debt
discounts, less amounts capitalized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Interest expense before capitalization
|
|
$
|
460
|
|
|
$
|
454
|
|
|
$
|
415
|
|
Capitalized interest
|
|
|
(10
|
)
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
450
|
|
|
$
|
447
|
|
|
$
|
408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments for interest were $495 million,
$444 million and $398 million in 2007, 2006 and 2005,
respectively.
101
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 16.
|
Business
Segments
|
Segment information reflects our strategic business units
(SBUs), which are organized to meet customer requirements and
global competition.
Our business is comprised of five regional SBUs. Segment
information is reported on the basis used for reporting to our
Chairman of the Board, Chief Executive Officer and President.
Each of the five regional business segments is involved in the
development, manufacture, distribution and sale of tires.
Certain of the business segments also provide related products
and services, which include retreads, automotive repair services
and merchandise purchased for resale.
North American Tire provides OE and replacement tires for autos,
motorcycles, trucks, aviation and construction applications in
the United States, Canada and export markets. North American
Tire also provides related products and services including tread
rubber, tubes, retreaded tires, automotive repair services and
merchandise purchased for resale, as well as sells chemical
products to unaffiliated customers.
European Union Tire provides OE and replacement tires for autos,
motorcycles, trucks, farm and construction applications in
Western Europe and export markets. European Union Tire also
provides related products and services including tread rubber,
retread truck and aviation tires, automotive repair services and
merchandise purchased for resale.
Eastern Europe, Middle East and Africa Tire provides OE and
replacement tires for autos, trucks, farm, construction and
mining applications in Eastern Europe, the Middle East, Africa
and export markets.
Latin American Tire provides OE and replacement tires for autos,
trucks, tractors, aviation and construction applications in
Central and South America, Mexico and export markets. Latin
American Tire also provides related products and services
including tread rubber, retreaded tires, and merchandise
purchased for resale.
Asia Pacific Tire provides OE and replacement tires for autos,
trucks, farm, aviation and construction applications in Asia,
the Pacific and export markets. Asia Pacific Tire also provides
related products and services including tread rubber, retread
aviation tires, automotive repair services and merchandise
purchased for resale.
102
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 16.
|
Business
Segments (Continued)
|
The following table presents segment sales and operating
income, and the reconciliation of segment operating income to
Income (Loss) from Continuing Operations before Income Taxes and
Minority Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Tire
|
|
$
|
8,862
|
|
|
$
|
9,089
|
|
|
$
|
9,091
|
|
European Union Tire
|
|
|
5,393
|
|
|
|
4,990
|
|
|
|
4,676
|
|
Eastern Europe, Middle East and Africa Tire
|
|
|
1,824
|
|
|
|
1,562
|
|
|
|
1,437
|
|
Latin American Tire
|
|
|
1,872
|
|
|
|
1,607
|
|
|
|
1,471
|
|
Asia Pacific Tire
|
|
|
1,693
|
|
|
|
1,503
|
|
|
|
1,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
19,644
|
|
|
$
|
18,751
|
|
|
$
|
18,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Tire
|
|
$
|
139
|
|
|
$
|
(233
|
)
|
|
$
|
167
|
|
European Union Tire
|
|
|
302
|
|
|
|
286
|
|
|
|
317
|
|
Eastern Europe, Middle East and Africa Tire
|
|
|
280
|
|
|
|
229
|
|
|
|
198
|
|
Latin American Tire
|
|
|
359
|
|
|
|
326
|
|
|
|
294
|
|
Asia Pacific Tire
|
|
|
150
|
|
|
|
104
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Operating Income
|
|
|
1,230
|
|
|
|
712
|
|
|
|
1,060
|
|
Rationalizations
|
|
|
(49
|
)
|
|
|
(311
|
)
|
|
|
(7
|
)
|
Accelerated depreciation
|
|
|
(37
|
)
|
|
|
(88
|
)
|
|
|
(4
|
)
|
Interest expense
|
|
|
(450
|
)
|
|
|
(447
|
)
|
|
|
(408
|
)
|
Corporate incentive compensation plans
|
|
|
(77
|
)
|
|
|
(66
|
)
|
|
|
(28
|
)
|
Intercompany profit elimination
|
|
|
(11
|
)
|
|
|
(11
|
)
|
|
|
13
|
|
Curtailment
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
Retained expenses of discontinued operations
|
|
|
(17
|
)
|
|
|
(48
|
)
|
|
|
(52
|
)
|
Other Income, net less equity in earnings of affiliates
|
|
|
(8
|
)
|
|
|
77
|
|
|
|
(73
|
)
|
Other
|
|
|
(53
|
)
|
|
|
(20
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations before Income Taxes
and Minority Interest
|
|
$
|
464
|
|
|
$
|
(202
|
)
|
|
$
|
452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents segment assets at December 31:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
Assets
|
|
|
|
|
|
|
|
|
North American Tire
|
|
$
|
5,307
|
|
|
$
|
4,803
|
|
European Union Tire
|
|
|
4,411
|
|
|
|
4,367
|
|
Eastern Europe, Middle East and Africa Tire
|
|
|
1,618
|
|
|
|
1,390
|
|
Latin American Tire
|
|
|
1,265
|
|
|
|
1,015
|
|
Asia Pacific Tire
|
|
|
1,394
|
|
|
|
1,236
|
|
|
|
|
|
|
|
|
|
|
Total Segment Assets
|
|
|
13,995
|
|
|
|
12,811
|
|
Corporate
|
|
|
3,196
|
|
|
|
3,453
|
|
Discontinued Operations
|
|
|
|
|
|
|
765
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,191
|
|
|
$
|
17,029
|
|
|
|
|
|
|
|
|
|
|
103
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 16.
|
Business
Segments (Continued)
|
Results of operations are measured based on net sales to
unaffiliated customers and segment operating income. Segment
operating income includes transfers to other SBUs. Segment
operating income is computed as follows: Net sales less CGS
(excluding accelerated depreciation charges and asset impairment
charges) and SAG (including certain allocated corporate
administrative expenses). Segment operating income also includes
equity in earnings of most affiliates. Segment operating income
does not include rationalization charges (credits), asset sales
and certain other items. Segment assets include those assets
under the management of the SBU.
The following table presents geographic information. Net sales
by country were determined based on the location of the selling
subsidiary. Long-lived assets consisted of property, plant and
equipment. Besides Germany, management did not consider the net
sales or long-lived assets of any other individual countries
outside the United States to be significant to the consolidated
financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
7,407
|
|
|
$
|
7,691
|
|
|
$
|
7,902
|
|
Germany
|
|
|
2,359
|
|
|
|
2,170
|
|
|
|
1,788
|
|
Other international
|
|
|
9,878
|
|
|
|
8,890
|
|
|
|
8,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,644
|
|
|
$
|
18,751
|
|
|
$
|
18,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Lived Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
2,173
|
|
|
$
|
2,152
|
|
|
|
|
|
Germany
|
|
|
668
|
|
|
|
546
|
|
|
|
|
|
Other international
|
|
|
2,757
|
|
|
|
2,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,598
|
|
|
$
|
5,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, significant concentrations of cash,
cash equivalents and restricted cash held by our international
subsidiaries included the following amounts:
|
|
|
|
|
$545 million or 15% in Europe, primarily Western Europe,
($852 million or 21% at December 31, 2006),
|
|
|
|
$222 million or 6% in Asia, primarily Singapore and
Australia, ($205 million or 5% at December 31,
2006), and
|
|
|
|
$157 million or 4% in Latin America, primarily Venezuela,
($141 million or 3% at December 31, 2006).
|
104
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 16.
|
Business
Segments (Continued)
|
Rationalizations, as described in Note 2, Costs Associated
with Rationalization Programs, and net (gains) losses on asset
sales, as described in Note 3, Other (Income) and Expense,
were not charged (credited) to the SBUs for performance
evaluation purposes but were attributable to the SBUs as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Rationalizations
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Tire
|
|
$
|
11
|
|
|
$
|
187
|
|
|
$
|
(8
|
)
|
European Union Tire
|
|
|
24
|
|
|
|
64
|
|
|
|
8
|
|
Eastern Europe, Middle East and Africa Tire
|
|
|
9
|
|
|
|
30
|
|
|
|
9
|
|
Latin American Tire
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
Asia Pacific Tire
|
|
|
1
|
|
|
|
28
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Rationalizations
|
|
|
47
|
|
|
|
311
|
|
|
|
7
|
|
Corporate
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49
|
|
|
$
|
311
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Gains) Losses on Asset Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Tire
|
|
$
|
17
|
|
|
$
|
(11
|
)
|
|
$
|
43
|
|
European Union Tire
|
|
|
(20
|
)
|
|
|
(27
|
)
|
|
|
(5
|
)
|
Eastern Europe, Middle East and Africa Tire
|
|
|
|
|
|
|
(1
|
)
|
|
|
1
|
|
Latin American Tire
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Asia Pacific Tire
|
|
|
(8
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Net (Gains) Losses on Asset Sales
|
|
|
(12
|
)
|
|
|
(42
|
)
|
|
|
38
|
|
Corporate
|
|
|
(3
|
)
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(15
|
)
|
|
$
|
(40
|
)
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 16.
|
Business
Segments (Continued)
|
The following table presents segment capital expenditures,
depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Tire
|
|
$
|
281
|
|
|
$
|
248
|
|
|
$
|
237
|
|
European Union Tire
|
|
|
179
|
|
|
|
133
|
|
|
|
126
|
|
Eastern Europe, Middle East and Africa Tire
|
|
|
62
|
|
|
|
58
|
|
|
|
51
|
|
Latin American Tire
|
|
|
115
|
|
|
|
67
|
|
|
|
72
|
|
Asia Pacific Tire
|
|
|
74
|
|
|
|
70
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Capital Expenditures
|
|
|
711
|
|
|
|
576
|
|
|
|
556
|
|
Corporate
|
|
|
28
|
|
|
|
61
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
739
|
|
|
$
|
637
|
|
|
$
|
601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Tire
|
|
$
|
273
|
|
|
$
|
277
|
|
|
$
|
296
|
|
European Union Tire
|
|
|
131
|
|
|
|
116
|
|
|
|
121
|
|
Eastern Europe, Middle East and Africa Tire
|
|
|
53
|
|
|
|
50
|
|
|
|
45
|
|
Latin American Tire
|
|
|
42
|
|
|
|
34
|
|
|
|
29
|
|
Asia Pacific Tire
|
|
|
55
|
|
|
|
52
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Depreciation and Amortization
|
|
|
554
|
|
|
|
529
|
|
|
|
546
|
|
Corporate
|
|
|
60
|
|
|
|
108
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
614
|
|
|
$
|
637
|
|
|
$
|
593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 17.
|
Discontinued
Operations
|
On July 31, 2007, we completed the sale of substantially
all of the business activities and operations of our Engineered
Products business segment (Engineered Products) to
EPD Inc. (EPD), a company controlled by Carlyle
Partners IV, L.P., an affiliate of the Carlyle Group, for
$1,475 million. As a result, we recognized a gain of
$508 million (net of taxes of $34 million). As part of
the transaction, we entered into certain licensing agreements
that will permit EPD to use the Goodyear brand and
certain other trademarks related to the Engineered
Products business for periods of up to 22 years.
Accordingly, we have deferred recognition of a portion of the
sale proceeds, and will recognize them in income over the term
of the licensing agreements.
The following table presents the components of Discontinued
Operations reported on the Consolidated Statement of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Net Sales
|
|
$
|
894
|
|
|
$
|
1,507
|
|
|
$
|
1,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations before taxes
|
|
$
|
(38
|
)
|
|
$
|
89
|
|
|
$
|
132
|
|
United States and foreign taxes
|
|
|
7
|
|
|
|
(46
|
)
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income from Operations
|
|
$
|
(45
|
)
|
|
$
|
43
|
|
|
$
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on Disposal before taxes
|
|
$
|
542
|
|
|
$
|
|
|
|
$
|
|
|
United States and foreign taxes
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on Disposal
|
|
$
|
508
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations
|
|
$
|
463
|
|
|
$
|
43
|
|
|
$
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the major classes of assets and
liabilities of discontinued operations reported on the
Consolidated Balance Sheet:
|
|
|
|
|
(In millions)
|
|
2006
|
|
|
Cash
|
|
$
|
37
|
|
Accounts receivable
|
|
|
173
|
|
Inventories
|
|
|
188
|
|
Other
|
|
|
15
|
|
|
|
|
|
|
Current Assets of Discontinued Operations
|
|
$
|
413
|
|
|
|
|
|
|
Property, plant and equipment
|
|
$
|
310
|
|
Other
|
|
|
42
|
|
|
|
|
|
|
Long Term Assets of Discontinued Operations
|
|
$
|
352
|
|
|
|
|
|
|
Accounts payable trade
|
|
$
|
92
|
|
Compensation and benefits
|
|
|
22
|
|
Other
|
|
|
43
|
|
|
|
|
|
|
Current Liabilities of Discontinued Operations
|
|
$
|
157
|
|
|
|
|
|
|
Compensation and benefits
|
|
$
|
30
|
|
Other
|
|
|
17
|
|
|
|
|
|
|
Long Term Liabilities of Discontinued Operations
|
|
$
|
47
|
|
|
|
|
|
|
107
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 18.
|
Accumulated
Other Comprehensive Loss
|
The components of Accumulated Other Comprehensive Loss follow:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
Foreign currency translation adjustment
|
|
$
|
(206
|
)
|
|
$
|
(675
|
)
|
Unrecognized losses and prior service costs, net
|
|
|
(1,463
|
)
|
|
|
(2,687
|
)
|
Unrealized investment gain
|
|
|
17
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
Total Accumulated Other Comprehensive Loss
|
|
$
|
(1,652
|
)
|
|
$
|
(3,331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Note 19.
|
Commitments
and Contingent Liabilities
|
At December 31, 2007, we had binding commitments for raw
materials and investments in land, buildings and equipment of
$1,363 million and off-balance sheet financial guarantees
written and other commitments totaling $35 million.
Environmental
Matters
We had recorded liabilities totaling $46 million and
$43 million at December 31, 2007 and 2006,
respectively, for anticipated costs related to various
environmental matters, primarily the remediation of numerous
waste disposal sites and certain properties sold by us. Of these
amounts, $11 million and $9 million were included in
Other current liabilities at December 31, 2007 and 2006,
respectively. The costs include:
|
|
|
|
|
legal and consulting fees,
|
|
|
|
|
|
site studies,
|
|
|
|
the design and implementation of remediation plans, and
|
|
|
|
post-remediation monitoring and related activities.
|
These costs will be paid over several years. The amount of our
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. During 2004, we reached a settlement with
certain insurance companies releasing the insurers from certain
past, present and future environmental claims. A significant
portion of the costs incurred by us related to these claims had
been recorded in prior years. As a result of the settlement, we
have limited potential insurance coverage for future
environmental claims. See Asbestos below for
information regarding additional insurance settlements completed
during 2005 related to both asbestos and environmental matters.
Workers
Compensation
We had recorded liabilities, on a discounted basis, totaling
$276 million and $269 million for anticipated costs
related to workers compensation at December 31, 2007
and December 31, 2006, respectively. Of these amounts,
$86 million and $106 million were included in Current
Liabilities as part of Compensation and benefits at
December 31, 2007 and December 31, 2006, respectively.
The costs include an estimate of expected settlements on pending
claims, defense costs and a provision for claims incurred but
not reported. These estimates are based on our assessment of
potential liability using an analysis of available information
with respect to pending claims, historical experience, and
current cost trends. The amount of our ultimate liability in
respect of these matters may differ from these estimates. We
periodically update our loss development factors based on
actuarial analyses. At December 31, 2007 and 2006, the
liability was discounted using a risk-free rate of return.
108
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 19.
|
Commitments
and Contingent Liabilities (continued)
|
General
and Product Liability and Other Litigation
We had recorded liabilities totaling $467 million at
December 31, 2007 and $454 million at
December 31, 2006 for potential product liability and other
tort claims, including related legal fees expected to be
incurred. Of these amounts, $270 million and
$260 million were included in Other current liabilities at
December 31, 2007 and 2006, respectively. The amounts
recorded were estimated based on an assessment of potential
liability using an analysis of available information with
respect to pending claims, historical experience and, where
available, recent and current trends. We had recorded insurance
receivables for potential product liability and other tort
claims of $71 million at December 31, 2007 and
$66 million at December 31, 2006. Of these amounts,
$8 million and $9 million were included in Current
Assets as part of Accounts receivable at December 31, 2007
and 2006, respectively. We have restricted cash of
$172 million and $193 million at December 31,
2007 and 2006, respectively, to fund certain of these
liabilities.
Asbestos. We are a defendant in numerous
lawsuits alleging various asbestos-related personal injuries
purported to result from alleged exposure to certain asbestos
products manufactured by us or present in certain of our
facilities. Typically, these lawsuits have been brought against
multiple defendants in state and Federal courts. To date, we
have disposed of approximately 49,100 claims by defending and
obtaining the dismissal thereof or by entering into a
settlement. The sum of our accrued asbestos-related liability
and gross payments to date, including legal costs, totaled
approximately $297 million through December 31, 2007
and $272 million through December 31, 2006.
A summary of approximate asbestos claims activity in recent
years follows. Because claims are often filed and disposed of by
dismissal or settlement in large numbers, the amount and timing
of settlements and the number of open claims during a particular
period can fluctuate significantly. The passage of tort reform
laws and creation of deferred dockets for non-malignancy claims
in several states has contributed to a decline in the number of
claims filed in recent years.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Pending claims, beginning of year
|
|
|
124,000
|
|
|
|
125,500
|
|
|
|
127,300
|
|
New claims filed during the year
|
|
|
2,400
|
|
|
|
3,900
|
|
|
|
6,200
|
|
Claims settled/dismissed during the year
|
|
|
(9,000
|
)
|
|
|
(5,400
|
)
|
|
|
(8,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pending claims, end of year
|
|
|
117,400
|
|
|
|
124,000
|
|
|
|
125,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments(1)
|
|
$
|
22
|
|
|
$
|
19
|
|
|
$
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents amount spent by us and our insurers on asbestos
litigation defense and claim resolution. |
We engaged an independent asbestos valuation firm, Bates White,
LLC (Bates), to review our existing reserves for
pending claims, provide a reasonable estimate of the liability
associated with unasserted asbestos claims, and estimate our
receivables from probable insurance recoveries.
We had recorded gross liabilities for both asserted and
unasserted claims, inclusive of defense costs, totaling
$127 million and $125 million at December 31,
2007 and 2006, respectively. The recorded liability represents
our estimated liability over the next ten years, which
represents the period over which the liability can be reasonably
estimated. Due to the difficulties in making these estimates,
analysis based on new data
and/or a
change in circumstances arising in the future could result in an
increase in the recorded obligation in an amount that cannot be
reasonably estimated, and that increase could be significant.
The portion of the liability associated with unasserted asbestos
claims and related defense costs was $76 million at
December 31, 2007 and $63 million at December 31,
2006. At December 31, 2007, our liability with respect to
asserted claims and related defense costs was $51 million,
compared to $62 million at December 31, 2006. At
December 31, 2007, we estimate that it is reasonably
possible
109
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 19.
|
Commitments
and Contingent Liabilities (continued)
|
that our gross liabilities could exceed our recorded reserve by
$20 to $30 million, approximately 50% of which would be
recoverable by our accessible policy limits.
We maintain primary insurance coverage under
coverage-in-place
agreements, and also have excess liability insurance with
respect to asbestos liabilities. We have instituted coverage
actions against certain of these excess carriers. After
consultation with our outside legal counsel and giving
consideration to relevant factors including the ongoing legal
proceedings with certain of our excess coverage insurance
carriers, their financial viability, their legal obligations and
other pertinent facts, we determine an amount we expect is
probable of recovery from such carriers. We record a receivable
with respect to such policies when we determine that recovery is
probable and we can reasonably estimate the amount of a
particular recovery.
Based upon a model employed by Bates, as of December 31,
2007, (i) we had recorded a receivable related to asbestos
claims of $71 million, compared to $66 million at
December 31, 2006, and (ii) we expect that
approximately 50% of asbestos claim related losses would be
recoverable up to our accessible policy limits through the
period covered by the estimated liability. Of these amounts,
$8 million and $9 million were included in Current
Assets as part of Accounts receivable at December 31, 2007
and 2006, respectively. The receivable recorded consists of an
amount we expect to collect under
coverage-in-place
agreements with certain primary carriers as well as an amount we
believe is probable of recovery from certain of our excess
coverage insurance carriers.
We believe that, at December 31, 2007, we had at least
approximately $180 million in aggregate limits of excess
level policies potentially applicable to indemnity payments for
asbestos products claims, in addition to limits of available
primary insurance policies. Some of these excess policies
provide for payment of defense costs in addition to indemnity
limits. A portion of the availability of the excess level
policies is included in the $71 million insurance
receivable recorded at December 31, 2007. We also had
approximately $15 million in aggregate limits for products
claims, as well as coverage for premise claims on a per
occurrence basis and defense costs, available with our primary
insurance carriers through
coverage-in-place
agreements at December 31, 2007.
We believe that our reserve for asbestos claims, and the
receivable for recoveries from insurance carriers recorded in
respect of these claims, reflect reasonable and probable
estimates of these amounts, subject to the exclusion of claims
for which it is not feasible to make reasonable estimates. The
estimate of the assets and liabilities related to pending and
expected future asbestos claims and insurance recoveries is
subject to numerous uncertainties, including, but not limited
to, changes in:
|
|
|
|
|
the litigation environment,
|
|
|
|
Federal and state law governing the compensation of asbestos
claimants,
|
|
|
|
recoverability of receivables due to potential insolvency of
carriers,
|
|
|
|
our approach to defending and resolving claims, and
|
|
|
|
the level of payments made to claimants from other sources,
including other defendants and 524(g) trusts.
|
As a result, with respect to both asserted and unasserted
claims, it is reasonably possible that we may incur a material
amount of cost in excess of the current reserve, however, such
amount cannot be reasonably estimated. Coverage under insurance
policies is subject to varying characteristics of asbestos
claims including, but not limited to, the type of claim (premise
vs. product exposure), alleged date of first exposure to our
products or premises and disease alleged. Depending upon the
nature of these characteristics, as well as the resolution of
certain legal issues, some portion of the insurance may not be
accessible by us.
Heatway (Entran II). On June 4, 2004, we
entered into an amended settlement agreement that was intended
to address the claims arising out of a number of Federal, state
and Canadian actions filed against us involving a
110
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 19.
|
Commitments
and Contingent Liabilities (continued)
|
rubber hose product used in hydronic radiant heating systems,
known as Entran II. On October 19, 2004, the amended
settlement received court approval. As a result, we made cash
contributions to a settlement fund of $130 million through
2007 and will make additional contributions of $20 million
in 2008. In addition to these annual payments, we contributed
approximately $174 million received from insurance
contributions to the settlement fund pursuant to the terms of
the settlement agreement. We do not expect to receive any
additional insurance reimbursements for Entran II related
matters. We had recorded liabilities related to Entran II
claims totaling $193 million and $217 million at
December 31, 2007 and 2006, respectively.
Fewer than 40 sites remain opted-out of the amended settlement.
Although any liability resulting from the opt-outs will not be
covered by the amended settlement, we will be entitled to assert
a proxy claim against the settlement fund for the payment such
claimant would have been entitled to under the amended
settlement. We are also entitled to a proxy claim for any
liability resulting from certain actions in which we have
received an adverse judgment (which may be less than a claimant
receives in an award of damages).
The ultimate cost of disposing of Entran II claims is
dependent upon a number of factors, including our ability to
resolve claims not subject to the amended settlement (including
the cases in which we have received adverse judgments), the
extent to which the liability, if any, associated with such a
claim may be offset by our ability to assert a proxy claim
against the settlement fund and whether or not claimants
opting-out of the amended settlement pursue claims against us in
the future.
Other Actions. We are currently a party to
various claims and legal proceedings in addition to those noted
above. If management believes that a loss arising from these
matters is probable and can reasonably be estimated, we record
the amount of the loss, or the minimum estimated liability when
the loss is estimated using a range, and no point within the
range is more probable than another. As additional information
becomes available, any potential liability related to these
matters is assessed and the estimates are revised, if necessary.
Based on currently available information, management believes
that the ultimate outcome of these matters, individually and in
the aggregate, will not have a material adverse effect on our
financial position or overall trends in results of operations.
However, litigation is subject to inherent uncertainties, and
unfavorable rulings could occur. An unfavorable ruling could
include monetary damages or an injunction prohibiting us from
selling one or more products. If an unfavorable ruling were to
occur, there exists the possibility of a material adverse impact
on the financial position and results of operations of the
period in which the ruling occurs, or future periods.
Tax
Matters
The calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations. We
recognize liabilities for anticipated tax audit issues based on
our estimate of whether, and the extent to which, additional
taxes will be due. If we ultimately determine that payment of
these amounts is unnecessary, we reverse the liability and
recognize a tax benefit during the period in which we determine
that the liability is no longer necessary. We also recognize tax
benefits to the extent that it is more likely than not that our
positions will be sustained when challenged by the taxing
authorities. To the extent we prevail in matters for which
liabilities have been established, or are required to pay
amounts in excess of our liabilities, our effective tax rate in
a given period could be materially affected. An unfavorable tax
settlement would require use of our cash and result in an
increase in our effective tax rate in the year of resolution. A
favorable tax settlement would be recognized as a reduction in
our effective tax rate in the year of resolution.
VEBA
Litigation
On December 28, 2006, members of the USW ratified the terms
of a new master labor agreement ending a strike that began on
October 5, 2006. In connection with the master labor
agreement, we also entered into a memorandum of understanding
with the USW regarding the establishment of an independent VEBA
intended to provide healthcare
111
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 19.
|
Commitments
and Contingent Liabilities (continued)
|
benefits for current and future USW retirees. The establishment
of the VEBA is conditioned upon District Court approval of a
settlement of a declaratory judgment action. On July 3,
2007, the USW and several retirees filed a required class action
lawsuit regarding the establishment of the VEBA in the
U.S. District Court for the Northern District of Ohio. On
October 29, 2007, the parties filed the signed settlement
agreement with the District Court, and on December 14,
2007, the District Court preliminarily approved the settlement
agreement and established the date for a hearing regarding the
settlement. We have committed to contribute $1 billion to
the VEBA. We plan to make our contributions to the VEBA entirely
in cash following the District Courts approval of the
settlement. In the event that the VEBA is not approved by the
District Court (or if the approval of the District Court is
subsequently reversed), the master labor agreement may be
terminated by either us or the USW, and negotiations may be
reopened on the entirety of the master labor agreement.
Guarantees
We are a party to various agreements under which we have
undertaken obligations resulting from the issuance of certain
guarantees. Guarantees have been issued on behalf of certain of
our affiliates and customers. Normally there is no separate
premium received by us as consideration for the issuance of
guarantees. Our performance under these guarantees would
normally be triggered by the occurrence of one or more events as
provided in the specific agreements. Collateral and recourse
provisions available to us under these agreements were not
significant.
Other
Financing
We will from time to time issue guarantees to financial
institutions on behalf of certain of our unconsolidated
affiliates or our customers. We generally do not require
collateral in connection with the issuance of these guarantees.
In the event of non-payment by an affiliate, we are obligated to
make payment to the financial institution, and will typically
have recourse to the assets of that affiliate or customer. At
December 31, 2007, we had affiliate and customer guarantees
outstanding under which the maximum potential amount of payments
totaled approximately $35 million. The affiliate and
customer guarantees expire at various times through 2008 and
2019, respectively. We are unable to estimate the extent to
which our affiliates or customers assets, in the
aggregate, would be adequate to recover the maximum amount of
potential payments with that affiliate or customer.
Indemnifications
At December 31, 2007, we were a party to various agreements
under which we had assumed obligations to indemnify the
counterparties from certain potential claims and losses. These
agreements typically involve standard commercial activities
undertaken by us in the normal course of business; the sale of
assets by us; the formation of joint venture businesses to which
we had contributed assets in exchange for ownership interests;
and other financial transactions. Indemnifications provided by
us pursuant to these agreements relate to various matters
including, among other things, environmental, tax and
shareholder matters; intellectual property rights; government
regulations and employment-related matters; and dealer, supplier
and other commercial matters.
Certain indemnifications expire from time to time, and certain
other indemnifications are not subject to an expiration date. In
addition, our potential liability under certain indemnifications
is subject to maximum caps, while other indemnifications are not
subject to caps. Although we have been subject to
indemnification claims in the past, we cannot reasonably
estimate the number, type and size of indemnification claims
that may arise in the future. Due to these and other
uncertainties associated with the indemnifications, our maximum
exposure to loss under these agreements cannot be estimated.
We have determined that there are no guarantees other than
liabilities for which amounts are already recorded or reserved
in our consolidated financial statements under which it is
probable that we have incurred a liability.
112
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 19.
|
Commitments
and Contingent Liabilities (continued)
|
Warranty
We had recorded $20 million and $22 million for
potential claims under warranties offered by us at
December 31, 2007 and 2006, respectively, the majority of
which is recorded in Other current liabilities at
December 31, 2007 and 2006.
|
|
Note 20.
|
Change in
Estimate
|
Effective April 1, 2006, we increased the estimated useful
lives of our tire mold equipment for depreciation purposes. The
change was due primarily to improved practices related to mold
maintenance and handling in our tire manufacturing facilities
and the completion of a review, in the second quarter of 2006,
of current and forecasted product lives. The change resulted in
a benefit to pretax income in 2006 of $28 million
($23 million after-tax or $0.13 per share). Prior periods
have not been adjusted for this change.
|
|
Note 21.
|
Asset
Dispositions
|
On July 31, 2007, we completed the sale of substantially
all of the business activities and operations of our Engineered
Products business segment. For information regarding the sale,
refer to the Note to the Consolidated Financial Statements
No. 17, Discontinued Operations.
On December 21, 2007, substantially all of the assets of
North American Tires tire and wheel assembly operation
were sold. As a result of the sale, we recorded an after-tax
charge of $36 million ($35 million net of minority
interest) in the fourth quarter of 2007, primarily relating to
the loss on the sale of the assets.
On December 29, 2006, we completed the sale of our North
American and Luxembourg tire fabric operations. We received
approximately $77 million for the net assets sold and
recorded a gain of approximately $9 million on the sale.
On August 9, 2005, we completed the sale of our 95%
ownership in Goodyear Sumatra Plantations, our natural rubber
plantation in Indonesia, at a sales price of approximately
$70 million.
On September 1, 2005, we completed the sale of our Wingtack
adhesive resins business. We received approximately
$55 million in cash proceeds and retained an additional
$10 million of working capital and recorded a gain within
Other (Income) and Expense of approximately $24 million on
the sale.
On December 28, 2005, we completed the sale of our North
American farm tire assets. The sale included our farm tire
manufacturing plant, property and equipment in Freeport,
Illinois, and inventories. We also entered into a license
agreement with the buyer, under which the buyer will pay a
royalty to manufacture and sell Goodyear branded farm tires in
North America. We received $100 million for these assets
and recorded a loss within Other (Income) and Expense of
approximately $73 million on the sale, primarily related to
pension and retiree medical costs.
On April 11, 2006, our shareholders approved a proposal to
amend our Amended Articles of Incorporation to increase the
number of shares of common stock authorized to be issued by us
from 300,000,000 to 450,000,000. As a result of the amendment,
we are authorized to have issued and outstanding
500,000,000 shares, consisting of
(a) 450,000,000 shares of common stock, without par
value, and (b) 50,000,000 shares of preferred stock,
without par value, issuable in one or more series.
113
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On May 22, 2007, we completed a public equity offering of
26,136,363 common shares, which included the exercise of the
over-allotment option of 3,409,091 common shares, at a price of
$33.00 per share, raising $862 million before offering
costs. We paid $28 million in underwriting discounts and
commissions and approximately $1 million in offering
expenses.
|
|
Note 24.
|
Consolidating
Financial Information
|
Certain of our subsidiaries have guaranteed Goodyears
obligations under the $650 million outstanding principal
amount of senior secured notes due 2011 (consisting of
$450 million outstanding principal amount of
11% senior secured notes and $200 million outstanding
principal amount of senior secured floating rate notes), the
$260 million outstanding principal amount of 9% senior
notes due 2015 and the $825 million outstanding principal
amount of senior notes (consisting of $325 million
outstanding principal amount of 8.625% senior notes due
2011 and $500 million outstanding principal amount of
senior floating rate notes due 2009) (collectively, the
notes). The following presents the condensed
consolidating financial information separately for:
|
|
|
|
(i)
|
The Goodyear Tire & Rubber Company (the Parent
Company), the issuer of the guaranteed obligations;
|
|
|
|
|
(ii)
|
Guarantor subsidiaries, on a combined basis, as specified in the
indentures related to Goodyears obligations under the
notes;
|
|
|
|
|
(iii)
|
Non-guarantor subsidiaries, on a combined basis;
|
|
|
|
|
(iv)
|
Consolidating entries and eliminations representing adjustments
to (a) eliminate intercompany transactions between or among
the Parent Company, the guarantor subsidiaries and the
non-guarantor subsidiaries, (b) eliminate the investments
in our subsidiaries and (c) record consolidating
entries; and
|
(v) The Goodyear Tire & Rubber Company and
Subsidiaries on a consolidated basis.
Each guarantor subsidiary is 100% owned by the Parent Company at
the date of each balance sheet presented. The notes are fully
and unconditionally guaranteed on a joint and several basis by
each guarantor subsidiary. Each entity in the consolidating
financial information follows the same accounting policies as
described in the consolidated financial statements, except for
using the equity method of accounting to reflect ownership
interests in subsidiaries which are eliminated upon
consolidation.
Certain non-guarantor subsidiaries of the Parent Company are
restricted from remitting funds to it by means of dividends,
advances or loans due to required foreign government
and/or
currency exchange board approvals or restrictions in credit
agreements or other debt instruments of those subsidiaries.
114
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Balance Sheet
|
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Entries and
|
|
|
|
|
(In millions)
|
|
Company
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,516
|
|
|
$
|
25
|
|
|
$
|
922
|
|
|
$
|
|
|
|
$
|
3,463
|
|
Restricted cash
|
|
|
178
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
191
|
|
Accounts receivable
|
|
|
837
|
|
|
|
207
|
|
|
|
2,059
|
|
|
|
|
|
|
|
3,103
|
|
Accounts receivable from affiliates
|
|
|
|
|
|
|
920
|
|
|
|
69
|
|
|
|
(989
|
)
|
|
|
|
|
Inventories
|
|
|
1,356
|
|
|
|
296
|
|
|
|
1,575
|
|
|
|
(63
|
)
|
|
|
3,164
|
|
Prepaid expenses and other current assets
|
|
|
97
|
|
|
|
12
|
|
|
|
145
|
|
|
|
(3
|
)
|
|
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
4,984
|
|
|
|
1,460
|
|
|
|
4,783
|
|
|
|
(1,055
|
)
|
|
|
10,172
|
|
Goodwill
|
|
|
|
|
|
|
25
|
|
|
|
487
|
|
|
|
201
|
|
|
|
713
|
|
Intangible Assets
|
|
|
110
|
|
|
|
18
|
|
|
|
56
|
|
|
|
(17
|
)
|
|
|
167
|
|
Deferred Income Tax
|
|
|
|
|
|
|
16
|
|
|
|
82
|
|
|
|
(15
|
)
|
|
|
83
|
|
Other Assets and Prepaid Pension Assets
|
|
|
221
|
|
|
|
44
|
|
|
|
193
|
|
|
|
|
|
|
|
458
|
|
Investments in Subsidiaries
|
|
|
4,842
|
|
|
|
622
|
|
|
|
3,298
|
|
|
|
(8,762
|
)
|
|
|
|
|
Property, Plant and Equipment
|
|
|
1,967
|
|
|
|
228
|
|
|
|
3,389
|
|
|
|
14
|
|
|
|
5,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
12,124
|
|
|
$
|
2,413
|
|
|
$
|
12,288
|
|
|
$
|
(9,634
|
)
|
|
$
|
17,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable-trade
|
|
$
|
680
|
|
|
$
|
79
|
|
|
$
|
1,663
|
|
|
$
|
|
|
|
$
|
2,422
|
|
Accounts payable to affiliates
|
|
|
989
|
|
|
|
|
|
|
|
|
|
|
|
(989
|
)
|
|
|
|
|
Compensation and benefits
|
|
|
552
|
|
|
|
35
|
|
|
|
310
|
|
|
|
|
|
|
|
897
|
|
Other current liabilities
|
|
|
520
|
|
|
|
18
|
|
|
|
215
|
|
|
|
|
|
|
|
753
|
|
United States and foreign taxes
|
|
|
66
|
|
|
|
13
|
|
|
|
123
|
|
|
|
(6
|
)
|
|
|
196
|
|
Notes payable and overdrafts
|
|
|
|
|
|
|
|
|
|
|
225
|
|
|
|
|
|
|
|
225
|
|
Long term debt and capital leases due within one year
|
|
|
102
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
2,909
|
|
|
|
145
|
|
|
|
2,605
|
|
|
|
(995
|
)
|
|
|
4,664
|
|
Long Term Debt and Capital Leases
|
|
|
3,750
|
|
|
|
|
|
|
|
579
|
|
|
|
|
|
|
|
4,329
|
|
Compensation and Benefits
|
|
|
2,053
|
|
|
|
232
|
|
|
|
1,119
|
|
|
|
|
|
|
|
3,404
|
|
Deferred and Other Noncurrent Income Taxes
|
|
|
76
|
|
|
|
22
|
|
|
|
187
|
|
|
|
(11
|
)
|
|
|
274
|
|
Other Long Term Liabilities
|
|
|
486
|
|
|
|
42
|
|
|
|
139
|
|
|
|
|
|
|
|
667
|
|
Minority Equity in Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
773
|
|
|
|
230
|
|
|
|
1,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
9,274
|
|
|
|
441
|
|
|
|
5,402
|
|
|
|
(776
|
)
|
|
|
14,341
|
|
Commitments and Contingent Liabilities Shareholders
Equity (Deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
240
|
|
|
|
617
|
|
|
|
4,512
|
|
|
|
(5,129
|
)
|
|
|
240
|
|
Capital Surplus
|
|
|
2,660
|
|
|
|
5
|
|
|
|
786
|
|
|
|
(791
|
)
|
|
|
2,660
|
|
Retained Earnings
|
|
|
1,602
|
|
|
|
1,644
|
|
|
|
2,379
|
|
|
|
(4,023
|
)
|
|
|
1,602
|
|
Accumulated Other Comprehensive Loss
|
|
|
(1,652
|
)
|
|
|
(294
|
)
|
|
|
(791
|
)
|
|
|
1,085
|
|
|
|
(1,652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity (Deficit)
|
|
|
2,850
|
|
|
|
1,972
|
|
|
|
6,886
|
|
|
|
(8,858
|
)
|
|
|
2,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity (Deficit)
|
|
$
|
12,124
|
|
|
$
|
2,413
|
|
|
$
|
12,288
|
|
|
$
|
(9,634
|
)
|
|
$
|
17,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Balance Sheet
|
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Entries and
|
|
|
|
|
(In millions)
|
|
Company
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,626
|
|
|
$
|
37
|
|
|
$
|
1,199
|
|
|
$
|
|
|
|
$
|
3,862
|
|
Restricted cash
|
|
|
202
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
214
|
|
Accounts receivable
|
|
|
693
|
|
|
|
198
|
|
|
|
1,909
|
|
|
|
|
|
|
|
2,800
|
|
Accounts receivable from affiliates
|
|
|
|
|
|
|
858
|
|
|
|
242
|
|
|
|
(1,100
|
)
|
|
|
|
|
Inventories
|
|
|
1,031
|
|
|
|
269
|
|
|
|
1,345
|
|
|
|
(44
|
)
|
|
|
2,601
|
|
Prepaid expenses and other current assets
|
|
|
142
|
|
|
|
6
|
|
|
|
129
|
|
|
|
12
|
|
|
|
289
|
|
Current assets of discontinued operations
|
|
|
305
|
|
|
|
6
|
|
|
|
246
|
|
|
|
(144
|
)
|
|
|
413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
4,999
|
|
|
|
1,374
|
|
|
|
5,082
|
|
|
|
(1,276
|
)
|
|
|
10,179
|
|
Goodwill
|
|
|
|
|
|
|
24
|
|
|
|
452
|
|
|
|
186
|
|
|
|
662
|
|
Intangible Assets
|
|
|
111
|
|
|
|
28
|
|
|
|
55
|
|
|
|
(28
|
)
|
|
|
166
|
|
Deferred Income Tax
|
|
|
|
|
|
|
1
|
|
|
|
149
|
|
|
|
|
|
|
|
150
|
|
Other Assets and Prepaid Pension Assets
|
|
|
255
|
|
|
|
24
|
|
|
|
174
|
|
|
|
|
|
|
|
453
|
|
Long Term Assets of Discontinued Operations
|
|
|
196
|
|
|
|
|
|
|
|
176
|
|
|
|
(20
|
)
|
|
|
352
|
|
Investments in Subsidiaries
|
|
|
4,286
|
|
|
|
539
|
|
|
|
3,166
|
|
|
|
(7,991
|
)
|
|
|
|
|
Property, Plant and Equipment
|
|
|
1,860
|
|
|
|
228
|
|
|
|
2,958
|
|
|
|
21
|
|
|
|
5,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
11,707
|
|
|
$
|
2,218
|
|
|
$
|
12,212
|
|
|
$
|
(9,108
|
)
|
|
$
|
17,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable-trade
|
|
$
|
436
|
|
|
$
|
72
|
|
|
$
|
1,437
|
|
|
$
|
|
|
|
$
|
1,945
|
|
Accounts payable to affiliates
|
|
|
1,100
|
|
|
|
|
|
|
|
|
|
|
|
(1,100
|
)
|
|
|
|
|
Compensation and benefits
|
|
|
585
|
|
|
|
42
|
|
|
|
256
|
|
|
|
|
|
|
|
883
|
|
Other current liabilities
|
|
|
562
|
|
|
|
15
|
|
|
|
234
|
|
|
|
|
|
|
|
811
|
|
Current liabilities of discontinued operations
|
|
|
74
|
|
|
|
138
|
|
|
|
86
|
|
|
|
(141
|
)
|
|
|
157
|
|
United States and foreign taxes
|
|
|
59
|
|
|
|
18
|
|
|
|
145
|
|
|
|
|
|
|
|
222
|
|
Notes payable and overdrafts
|
|
|
|
|
|
|
|
|
|
|
243
|
|
|
|
|
|
|
|
243
|
|
Long term debt and capital leases due within one year
|
|
|
339
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
3,155
|
|
|
|
285
|
|
|
|
2,467
|
|
|
|
(1,241
|
)
|
|
|
4,666
|
|
Long Term Debt and Capital Leases
|
|
|
5,647
|
|
|
|
1
|
|
|
|
914
|
|
|
|
|
|
|
|
6,562
|
|
Compensation and Benefits
|
|
|
3,301
|
|
|
|
297
|
|
|
|
1,337
|
|
|
|
|
|
|
|
4,935
|
|
Long Term Liabilities of Discontinued Operations
|
|
|
6
|
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
47
|
|
Deferred and Other Noncurrent Income Taxes
|
|
|
69
|
|
|
|
5
|
|
|
|
238
|
|
|
|
8
|
|
|
|
320
|
|
Other Long Term Liabilities
|
|
|
287
|
|
|
|
5
|
|
|
|
88
|
|
|
|
|
|
|
|
380
|
|
Minority Equity in Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
671
|
|
|
|
206
|
|
|
|
877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
12,465
|
|
|
|
593
|
|
|
|
5,756
|
|
|
|
(1,027
|
)
|
|
|
17,787
|
|
Commitments and Contingent Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity (Deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
178
|
|
|
|
616
|
|
|
|
4,487
|
|
|
|
(5,103
|
)
|
|
|
178
|
|
Capital Surplus
|
|
|
1,427
|
|
|
|
5
|
|
|
|
869
|
|
|
|
(874
|
)
|
|
|
1,427
|
|
Retained Earnings
|
|
|
968
|
|
|
|
1,441
|
|
|
|
2,443
|
|
|
|
(3,884
|
)
|
|
|
968
|
|
Accumulated Other Comprehensive Loss
|
|
|
(3,331
|
)
|
|
|
(437
|
)
|
|
|
(1,343
|
)
|
|
|
1,780
|
|
|
|
(3,331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity (Deficit)
|
|
|
(758
|
)
|
|
|
1,625
|
|
|
|
6,456
|
|
|
|
(8,081
|
)
|
|
|
(758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity (Deficit)
|
|
$
|
11,707
|
|
|
$
|
2,218
|
|
|
$
|
12,212
|
|
|
$
|
(9,108
|
)
|
|
$
|
17,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Statements of
Operations
|
|
|
|
Twelve Months Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entries
|
|
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
and
|
|
|
|
|
(In millions)
|
|
Company
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net Sales
|
|
$
|
7,944
|
|
|
$
|
1,988
|
|
|
$
|
19,136
|
|
|
$
|
(9,424
|
)
|
|
$
|
19,644
|
|
Cost of Goods Sold
|
|
|
7,096
|
|
|
|
1,736
|
|
|
|
16,662
|
|
|
|
(9,574
|
)
|
|
|
15,920
|
|
Selling, Administrative and General Expense
|
|
|
1,053
|
|
|
|
187
|
|
|
|
1,546
|
|
|
|
(24
|
)
|
|
|
2,762
|
|
Rationalizations
|
|
|
|
|
|
|
14
|
|
|
|
35
|
|
|
|
|
|
|
|
49
|
|
Interest Expense
|
|
|
417
|
|
|
|
39
|
|
|
|
285
|
|
|
|
(291
|
)
|
|
|
450
|
|
Other (Income) and Expense
|
|
|
(231
|
)
|
|
|
(31
|
)
|
|
|
(201
|
)
|
|
|
462
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations before Income Taxes,
Minority Interest, and Equity in Earnings of Subsidiaries
|
|
|
(391
|
)
|
|
|
43
|
|
|
|
809
|
|
|
|
3
|
|
|
|
464
|
|
United States and Foreign Taxes
|
|
|
30
|
|
|
|
6
|
|
|
|
220
|
|
|
|
(1
|
)
|
|
|
255
|
|
Minority Interest
|
|
|
|
|
|
|
|
|
|
|
70
|
|
|
|
|
|
|
|
70
|
|
Equity in Earnings of Subsidiaries
|
|
|
560
|
|
|
|
36
|
|
|
|
|
|
|
|
(596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
|
139
|
|
|
|
73
|
|
|
|
519
|
|
|
|
(592
|
)
|
|
|
139
|
|
Discontinued Operations
|
|
|
463
|
|
|
|
4
|
|
|
|
164
|
|
|
|
(168
|
)
|
|
|
463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
602
|
|
|
$
|
77
|
|
|
$
|
683
|
|
|
$
|
(760
|
)
|
|
$
|
602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entries
|
|
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
and
|
|
|
|
|
(In millions)
|
|
Company
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net Sales
|
|
$
|
7,914
|
|
|
$
|
2,041
|
|
|
$
|
17,143
|
|
|
$
|
(8,347
|
)
|
|
$
|
18,751
|
|
Cost of Goods Sold
|
|
|
7,507
|
|
|
|
1,780
|
|
|
|
14,981
|
|
|
|
(8,532
|
)
|
|
|
15,736
|
|
Selling, Administrative and General Expense
|
|
|
987
|
|
|
|
182
|
|
|
|
1,379
|
|
|
|
(2
|
)
|
|
|
2,546
|
|
Rationalizations
|
|
|
129
|
|
|
|
61
|
|
|
|
121
|
|
|
|
|
|
|
|
311
|
|
Interest Expense
|
|
|
410
|
|
|
|
39
|
|
|
|
202
|
|
|
|
(204
|
)
|
|
|
447
|
|
Other (Income) and Expense
|
|
|
(265
|
)
|
|
|
(8
|
)
|
|
|
(206
|
)
|
|
|
392
|
|
|
|
(87
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations before Income Taxes,
Minority Interest, and Equity in Earnings of Subsidiaries
|
|
|
(854
|
)
|
|
|
(13
|
)
|
|
|
666
|
|
|
|
(1
|
)
|
|
|
(202
|
)
|
United States and Foreign Taxes
|
|
|
(28
|
)
|
|
|
54
|
|
|
|
36
|
|
|
|
(2
|
)
|
|
|
60
|
|
Minority Interest
|
|
|
|
|
|
|
|
|
|
|
111
|
|
|
|
|
|
|
|
111
|
|
Equity in Earnings of Subsidiaries
|
|
|
453
|
|
|
|
52
|
|
|
|
|
|
|
|
(505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
|
(373
|
)
|
|
|
(15
|
)
|
|
|
519
|
|
|
|
(504
|
)
|
|
|
(373
|
)
|
Discontinued Operations
|
|
|
43
|
|
|
|
1
|
|
|
|
54
|
|
|
|
(55
|
)
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(330
|
)
|
|
$
|
(14
|
)
|
|
$
|
573
|
|
|
$
|
(559
|
)
|
|
$
|
(330
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Statements of
Operations
|
|
|
|
Twelve Months Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entries
|
|
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
and
|
|
|
|
|
(In millions)
|
|
Company
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net Sales
|
|
$
|
8,189
|
|
|
$
|
1,928
|
|
|
$
|
15,605
|
|
|
$
|
(7,624
|
)
|
|
$
|
18,098
|
|
Cost of Goods Sold
|
|
|
7,297
|
|
|
|
1,686
|
|
|
|
13,329
|
|
|
|
(7,777
|
)
|
|
|
14,535
|
|
Selling, Administrative and General Expense
|
|
|
1,068
|
|
|
|
179
|
|
|
|
1,393
|
|
|
|
(6
|
)
|
|
|
2,634
|
|
Rationalizations
|
|
|
(3
|
)
|
|
|
1
|
|
|
|
9
|
|
|
|
|
|
|
|
7
|
|
Interest Expense
|
|
|
364
|
|
|
|
37
|
|
|
|
184
|
|
|
|
(177
|
)
|
|
|
408
|
|
Other (Income) and Expense
|
|
|
(77
|
)
|
|
|
(58
|
)
|
|
|
(140
|
)
|
|
|
337
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations before Income Taxes,
Minority Interest, and Equity in Earnings of Subsidiaries
|
|
|
(460
|
)
|
|
|
83
|
|
|
|
830
|
|
|
|
(1
|
)
|
|
|
452
|
|
United States and Foreign Taxes
|
|
|
(10
|
)
|
|
|
10
|
|
|
|
235
|
|
|
|
(2
|
)
|
|
|
233
|
|
Minority Interest
|
|
|
|
|
|
|
|
|
|
|
95
|
|
|
|
|
|
|
|
95
|
|
Equity in Earnings of Subsidiaries
|
|
|
568
|
|
|
|
50
|
|
|
|
|
|
|
|
(618
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
|
118
|
|
|
|
123
|
|
|
|
500
|
|
|
|
(617
|
)
|
|
|
124
|
|
Discontinued Operations
|
|
|
115
|
|
|
|
2
|
|
|
|
40
|
|
|
|
(42
|
)
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Cumulative Effect of Accounting
Change
|
|
|
233
|
|
|
|
125
|
|
|
|
540
|
|
|
|
(659
|
)
|
|
|
239
|
|
Cumulative Effect of Accounting Change
|
|
|
(5
|
)
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
228
|
|
|
$
|
125
|
|
|
$
|
534
|
|
|
$
|
(659
|
)
|
|
$
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating
Statement of Cash Flows
|
|
|
|
Twelve Months Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Entries and
|
|
|
|
|
(In millions)
|
|
Company
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating cash flows from continuing operations
|
|
$
|
(363
|
)
|
|
$
|
(264
|
)
|
|
$
|
1,761
|
|
|
$
|
(1,042
|
)
|
|
$
|
92
|
|
Operating cash flows from discontinued operations
|
|
|
(4
|
)
|
|
|
(8
|
)
|
|
|
12
|
|
|
|
13
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flow From Operating Activities
|
|
|
(367
|
)
|
|
|
(272
|
)
|
|
|
1,773
|
|
|
|
(1,029
|
)
|
|
|
105
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(289
|
)
|
|
|
(16
|
)
|
|
|
(430
|
)
|
|
|
(4
|
)
|
|
|
(739
|
)
|
Asset dispositions
|
|
|
107
|
|
|
|
9
|
|
|
|
81
|
|
|
|
(90
|
)
|
|
|
107
|
|
Asset acquisitions
|
|
|
|
|
|
|
|
|
|
|
(90
|
)
|
|
|
90
|
|
|
|
|
|
Capital contributions
|
|
|
(11
|
)
|
|
|
|
|
|
|
(151
|
)
|
|
|
162
|
|
|
|
|
|
Capital redemptions
|
|
|
55
|
|
|
|
4
|
|
|
|
27
|
|
|
|
(86
|
)
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
24
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
23
|
|
Loans with affiliates acquired
|
|
|
(465
|
)
|
|
|
|
|
|
|
|
|
|
|
465
|
|
|
|
|
|
Loans with affiliates redeemed
|
|
|
646
|
|
|
|
44
|
|
|
|
|
|
|
|
(690
|
)
|
|
|
|
|
Other transactions
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investing cash flows from continuing operations
|
|
|
67
|
|
|
|
41
|
|
|
|
(561
|
)
|
|
|
(153
|
)
|
|
|
(606
|
)
|
Investing cash flows from discontinued operations
|
|
|
1,060
|
|
|
|
115
|
|
|
|
248
|
|
|
|
12
|
|
|
|
1,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flows From Investing Activities
|
|
|
1,127
|
|
|
|
156
|
|
|
|
(313
|
)
|
|
|
(141
|
)
|
|
|
829
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term debt and overdrafts incurred
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
21
|
|
Short term debt and overdrafts paid
|
|
|
(6
|
)
|
|
|
(10
|
)
|
|
|
(65
|
)
|
|
|
|
|
|
|
(81
|
)
|
Long term debt incurred
|
|
|
|
|
|
|
|
|
|
|
142
|
|
|
|
|
|
|
|
142
|
|
Long term debt paid
|
|
|
(1,790
|
)
|
|
|
(1
|
)
|
|
|
(536
|
)
|
|
|
|
|
|
|
(2,327
|
)
|
Loans with affiliates incurred
|
|
|
|
|
|
|
122
|
|
|
|
343
|
|
|
|
(465
|
)
|
|
|
|
|
Loans with affiliates paid
|
|
|
|
|
|
|
(11
|
)
|
|
|
(679
|
)
|
|
|
690
|
|
|
|
|
|
Common stock issued
|
|
|
937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
937
|
|
Capital contributions
|
|
|
|
|
|
|
|
|
|
|
162
|
|
|
|
(162
|
)
|
|
|
|
|
Capital redemptions
|
|
|
|
|
|
|
|
|
|
|
(74
|
)
|
|
|
74
|
|
|
|
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(1,105
|
)
|
|
|
1,005
|
|
|
|
(100
|
)
|
Debt retirement costs
|
|
|
(11
|
)
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cash flows from continuing operations
|
|
|
(870
|
)
|
|
|
100
|
|
|
|
(1,798
|
)
|
|
|
1,142
|
|
|
|
(1,426
|
)
|
Financing cash flows from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(37
|
)
|
|
|
28
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flows From Financing Activities
|
|
|
(870
|
)
|
|
|
100
|
|
|
|
(1,835
|
)
|
|
|
1,170
|
|
|
|
(1,435
|
)
|
Net Change in Cash of Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
27
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
|
|
|
|
4
|
|
|
|
71
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents
|
|
|
(110
|
)
|
|
|
(12
|
)
|
|
|
(277
|
)
|
|
|
|
|
|
|
(399
|
)
|
Cash and Cash Equivalents at Beginning of the Year
|
|
|
2,626
|
|
|
|
37
|
|
|
|
1,199
|
|
|
|
|
|
|
|
3,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of the Year
|
|
$
|
2,516
|
|
|
$
|
25
|
|
|
$
|
922
|
|
|
$
|
|
|
|
$
|
3,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating
Statement of Cash Flows
|
|
|
|
Twelve Months Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Entries and
|
|
|
|
|
(In millions)
|
|
Company
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating cash flows from continuing operations
|
|
$
|
233
|
|
|
$
|
12
|
|
|
$
|
715
|
|
|
$
|
(515
|
)
|
|
$
|
445
|
|
Operating cash flows from discontinued operations
|
|
|
64
|
|
|
|
|
|
|
|
101
|
|
|
|
(50
|
)
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flow From Operating Activities
|
|
|
297
|
|
|
|
12
|
|
|
|
816
|
|
|
|
(565
|
)
|
|
|
560
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(244
|
)
|
|
|
(14
|
)
|
|
|
(373
|
)
|
|
|
(6
|
)
|
|
|
(637
|
)
|
Asset dispositions
|
|
|
49
|
|
|
|
1
|
|
|
|
111
|
|
|
|
(34
|
)
|
|
|
127
|
|
Asset acquisitions
|
|
|
(71
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
35
|
|
|
|
(41
|
)
|
Capital contributions
|
|
|
(1
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
11
|
|
|
|
|
|
Decrease in restricted cash
|
|
|
26
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
27
|
|
Other transactions
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investing cash flows from continuing operations
|
|
|
(215
|
)
|
|
|
(23
|
)
|
|
|
(266
|
)
|
|
|
6
|
|
|
|
(498
|
)
|
Investing cash flows from discontinued operations
|
|
|
(20
|
)
|
|
|
|
|
|
|
(21
|
)
|
|
|
7
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flows From Investing Activities
|
|
|
(235
|
)
|
|
|
(23
|
)
|
|
|
(287
|
)
|
|
|
13
|
|
|
|
(532
|
)
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term debt and overdrafts incurred
|
|
|
|
|
|
|
4
|
|
|
|
73
|
|
|
|
|
|
|
|
77
|
|
Short term debt and overdrafts paid
|
|
|
(64
|
)
|
|
|
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
(101
|
)
|
Long term debt incurred
|
|
|
1,970
|
|
|
|
|
|
|
|
275
|
|
|
|
|
|
|
|
2,245
|
|
Long term debt paid
|
|
|
(402
|
)
|
|
|
|
|
|
|
(99
|
)
|
|
|
|
|
|
|
(501
|
)
|
Common stock issued
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Capital contributions
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
Dividends paid
|
|
|
|
|
|
|
(8
|
)
|
|
|
(597
|
)
|
|
|
536
|
|
|
|
(69
|
)
|
Debt issuance costs
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cash flows from continuing operations
|
|
|
1,501
|
|
|
|
7
|
|
|
|
(385
|
)
|
|
|
525
|
|
|
|
1,648
|
|
Financing cash flows from discontinued operations
|
|
|
(3
|
)
|
|
|
6
|
|
|
|
(31
|
)
|
|
|
27
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flows From Financing Activities
|
|
|
1,498
|
|
|
|
13
|
|
|
|
(416
|
)
|
|
|
552
|
|
|
|
1,647
|
|
Net Change in Cash of Discontinued Operations
|
|
|
1
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(10
|
)
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents
|
|
|
1,561
|
|
|
|
2
|
|
|
|
161
|
|
|
|
|
|
|
|
1,724
|
|
Cash and Cash Equivalents at Beginning of the Year
|
|
|
1,065
|
|
|
|
35
|
|
|
|
1,038
|
|
|
|
|
|
|
|
2,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of the Year
|
|
$
|
2,626
|
|
|
$
|
37
|
|
|
$
|
1,199
|
|
|
$
|
|
|
|
$
|
3,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120
THE
GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating
Statement of Cash Flows
|
|
|
|
Twelve Months Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Entries and
|
|
|
|
|
(In millions)
|
|
Company
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating cash flows from continuing operations
|
|
$
|
106
|
|
|
$
|
42
|
|
|
$
|
994
|
|
|
$
|
(362
|
)
|
|
$
|
780
|
|
Operating cash flows from discontinued operations
|
|
|
93
|
|
|
|
|
|
|
|
55
|
|
|
|
(42
|
)
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flows From Operating Activities
|
|
|
199
|
|
|
|
42
|
|
|
|
1,049
|
|
|
|
(404
|
)
|
|
|
886
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(229
|
)
|
|
|
(12
|
)
|
|
|
(353
|
)
|
|
|
(7
|
)
|
|
|
(601
|
)
|
Asset dispositions
|
|
|
248
|
|
|
|
1
|
|
|
|
14
|
|
|
|
(6
|
)
|
|
|
257
|
|
Asset acquisitions
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
6
|
|
|
|
|
|
Capital contributions
|
|
|
(11
|
)
|
|
|
|
|
|
|
(202
|
)
|
|
|
213
|
|
|
|
|
|
Capital redemptions
|
|
|
51
|
|
|
|
|
|
|
|
93
|
|
|
|
(144
|
)
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
(82
|
)
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
(80
|
)
|
Other transactions
|
|
|
5
|
|
|
|
(1
|
)
|
|
|
12
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investing cash flows from continuing operations
|
|
|
(18
|
)
|
|
|
(12
|
)
|
|
|
(440
|
)
|
|
|
62
|
|
|
|
(408
|
)
|
Investing cash flows from discontinued operations
|
|
|
(20
|
)
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flows From Investing Activities
|
|
|
(38
|
)
|
|
|
(12
|
)
|
|
|
(453
|
)
|
|
|
62
|
|
|
|
(441
|
)
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term debt and overdrafts incurred
|
|
|
6
|
|
|
|
7
|
|
|
|
25
|
|
|
|
|
|
|
|
38
|
|
Short term debt and overdrafts paid
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
(7
|
)
|
Long term debt incurred
|
|
|
1,921
|
|
|
|
|
|
|
|
369
|
|
|
|
|
|
|
|
2,290
|
|
Long term debt paid
|
|
|
(1,969
|
)
|
|
|
(1
|
)
|
|
|
(420
|
)
|
|
|
|
|
|
|
(2,390
|
)
|
Common stock issued
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
Capital contributions
|
|
|
|
|
|
|
|
|
|
|
213
|
|
|
|
(213
|
)
|
|
|
|
|
Capital redemptions
|
|
|
|
|
|
|
(51
|
)
|
|
|
(93
|
)
|
|
|
144
|
|
|
|
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(436
|
)
|
|
|
384
|
|
|
|
(52
|
)
|
Debt issuance costs
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cash flows from continuing operations
|
|
|
(102
|
)
|
|
|
(45
|
)
|
|
|
(349
|
)
|
|
|
315
|
|
|
|
(181
|
)
|
Financing cash flows from discontinued operations
|
|
|
3
|
|
|
|
|
|
|
|
(27
|
)
|
|
|
27
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flows From Financing Activities
|
|
|
(99
|
)
|
|
|
(45
|
)
|
|
|
(376
|
)
|
|
|
342
|
|
|
|
(178
|
)
|
Net Change in Cash of Discontinued Operations
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(2
|
)
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents
|
|
|
61
|
|
|
|
(15
|
)
|
|
|
157
|
|
|
|
|
|
|
|
203
|
|
Cash and Cash Equivalents at Beginning of the Year
|
|
|
1,004
|
|
|
|
50
|
|
|
|
881
|
|
|
|
|
|
|
|
1,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of the Year
|
|
$
|
1,065
|
|
|
$
|
35
|
|
|
$
|
1,038
|
|
|
$
|
|
|
|
$
|
2,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121
THE
GOODYEAR TIRE & RUBBER COMPANY AND
SUBSIDIARIES
Supplementary
Data
(Unaudited)
Quarterly
Data and Market Price Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
|
(In millions, except per share amounts)
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Year
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
4,499
|
|
|
$
|
4,921
|
|
|
$
|
5,064
|
|
|
$
|
5,160
|
|
|
$
|
19,644
|
|
Gross Profit
|
|
|
758
|
|
|
|
954
|
|
|
|
1,013
|
|
|
|
999
|
|
|
|
3,724
|
|
Income (Loss) from Continuing Operations
|
|
|
(110
|
)
|
|
|
29
|
|
|
|
159
|
|
|
|
61
|
|
|
|
139
|
|
Discontinued Operations
|
|
|
(64
|
)
|
|
|
27
|
|
|
|
509
|
|
|
|
(9
|
)
|
|
|
463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(174
|
)
|
|
$
|
56
|
|
|
$
|
668
|
|
|
$
|
52
|
|
|
$
|
602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
$
|
(0.61
|
)
|
|
$
|
0.15
|
|
|
$
|
0.76
|
|
|
$
|
0.28
|
|
|
$
|
0.70
|
|
Discontinued Operations
|
|
|
(0.35
|
)
|
|
|
0.13
|
|
|
|
2.41
|
|
|
|
(0.04
|
)
|
|
|
2.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(0.96
|
)
|
|
$
|
0.28
|
|
|
$
|
3.17
|
|
|
$
|
0.24
|
|
|
$
|
3.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
$
|
(0.61
|
)
|
|
$
|
0.14
|
|
|
$
|
0.67
|
|
|
$
|
0.27
|
|
|
$
|
0.65
|
|
Discontinued Operations
|
|
|
(0.35
|
)
|
|
|
0.12
|
|
|
|
2.08
|
|
|
|
(0.04
|
)
|
|
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)(a)
|
|
$
|
(0.96
|
)
|
|
$
|
0.26
|
|
|
$
|
2.75
|
|
|
$
|
0.23
|
|
|
$
|
2.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding Basic
|
|
|
180
|
|
|
|
196
|
|
|
|
211
|
|
|
|
216
|
|
|
|
201
|
|
Diluted
|
|
|
180
|
|
|
|
231
|
|
|
|
244
|
|
|
|
239
|
|
|
|
232
|
|
Price Range of Common Stock:* High
|
|
$
|
32.16
|
|
|
$
|
36.59
|
|
|
$
|
36.90
|
|
|
$
|
31.36
|
|
|
$
|
36.90
|
|
Low
|
|
|
21.40
|
|
|
|
30.96
|
|
|
|
23.83
|
|
|
|
25.34
|
|
|
|
21.40
|
|
Selected Balance Sheet Items at Quarter-End:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
15,861
|
|
|
$
|
16,504
|
|
|
$
|
17,042
|
|
|
$
|
17,191
|
|
|
|
|
|
Total Debt and Capital Leases
|
|
|
5,826
|
|
|
|
5,453
|
|
|
|
5,057
|
|
|
|
4,725
|
|
|
|
|
|
Shareholders Equity (Deficit)
|
|
|
(90
|
)
|
|
|
970
|
|
|
|
1,799
|
|
|
|
2,850
|
|
|
|
|
|
|
|
|
(a) |
|
Due to the anti-dilutive impact of potentially dilutive
securities in periods which we recorded a net loss, the
quarterly earnings per share amounts do not add to the full year. |
|
* |
|
New York Stock Exchange Composite Transactions |
The first quarter of 2007 included after-tax pension plan
curtailment and termination charges of $136 million,
primarily related to the announced benefit plan changes,
after-tax rationalization charges, including accelerated
depreciation, of $37 million primarily related to the
elimination of tire production at our Tyler, Texas and
Valleyfield, Quebec facilities, and approximately
$40 million of costs associated with the USW strike. Of
these amounts, discontinued operations included after-tax
charges of $72 million related to pension plan curtailment
and termination costs, after-tax rationalization charges,
including accelerated depreciation, of $9 million, and
approximately $6 million of costs associated with the USW
strike.
The second quarter of 2007 included after-tax rationalization
charges, including accelerated depreciation, of $20 million
primarily related to the elimination of tire production at our
Tyler, Texas and Valleyfield, Quebec facilities. Also included
were after-tax charges of $33 million related to the
redemption of long term debt, $14 million of debt issuance
costs written-off in connection with our refinancing activities,
a gain of $9 million related to asset sales, and a tax
benefit of $11 million related to an out-of-period tax
adjustment related to our
122
correction of the inflation adjustment on equity of our
subsidiary in Colombia. Of these amounts, discontinued
operations included after-tax rationalization charges, including
accelerated depreciation, of $3 million.
The third quarter of 2007 included an after-tax gain on the sale
of our Engineered Products business of $517 million and
after-tax rationalization charges, including accelerated
depreciation, of $6 million, primarily related to the
elimination of tire production at our Tyler, Texas and
Valleyfield, Quebec facilities. Also included was a gain of
$11 million related to asset sales. Of these amounts,
discontinued operations included an after-tax gain on the sale
of $517 million.
The fourth quarter of 2007 included an after-tax gain of
$16 million on the sale of assets in the UK, an after-tax
loss of $36 million ($35 million after minority interest)
on the sale of substantially all of the assets of North American
Tires tire and wheel assembly operation, and an after-tax
charge of $17 million related to the conversion of our
4% convertible senior notes due 2034. Also included were
after-tax rationalization charges, including accelerated
depreciation, of $26 million, primarily related to the
reduction of tire production at two facilities in Amiens, France
and the elimination of tire production at our Tyler, Texas
facility. Discontinued operations included after-tax expense
adjustments to the gain on the sale of our Engineered Products
business of $9 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
|
(In millions, except per share amounts)
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Year
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
4,462
|
|
|
$
|
4,738
|
|
|
$
|
4,913
|
|
|
$
|
4,638
|
|
|
$
|
18,751
|
|
Gross Profit
|
|
|
854
|
|
|
|
786
|
|
|
|
853
|
|
|
|
522
|
|
|
|
3,015
|
|
(Loss) Income from Continuing Operations
|
|
|
46
|
|
|
|
(33
|
)
|
|
|
(76
|
)
|
|
|
(310
|
)
|
|
|
(373
|
)
|
Discontinued Operations
|
|
|
28
|
|
|
|
35
|
|
|
|
28
|
|
|
|
(48
|
)
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income
|
|
$
|
74
|
|
|
$
|
2
|
|
|
$
|
(48
|
)
|
|
$
|
(358
|
)
|
|
$
|
(330
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income from Continuing Operations
|
|
$
|
0.26
|
|
|
$
|
(0.19
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(1.74
|
)
|
|
$
|
(2.11
|
)
|
Discontinued Operations
|
|
|
0.16
|
|
|
|
0.20
|
|
|
|
0.16
|
|
|
|
(0.28
|
)
|
|
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income
|
|
$
|
0.42
|
|
|
$
|
0.01
|
|
|
$
|
(0.27
|
)
|
|
$
|
(2.02
|
)
|
|
$
|
(1.86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income from Continuing Operations
|
|
$
|
0.24
|
|
|
$
|
(0.19
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(1.74
|
)
|
|
$
|
(2.11
|
)
|
Discontinued Operations
|
|
|
0.13
|
|
|
|
0.20
|
|
|
|
0.16
|
|
|
|
(0.28
|
)
|
|
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income(a)
|
|
$
|
0.37
|
|
|
$
|
0.01
|
|
|
$
|
(0.27
|
)
|
|
$
|
(2.02
|
)
|
|
$
|
(1.86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding Basic
|
|
|
177
|
|
|
|
177
|
|
|
|
177
|
|
|
|
178
|
|
|
|
177
|
|
Diluted
|
|
|
207
|
|
|
|
177
|
|
|
|
177
|
|
|
|
178
|
|
|
|
177
|
|
Price Range of Common Stock:* High
|
|
$
|
19.31
|
|
|
$
|
15.42
|
|
|
$
|
15.07
|
|
|
$
|
21.35
|
|
|
$
|
21.35
|
|
Low
|
|
|
12.78
|
|
|
|
10.35
|
|
|
|
9.75
|
|
|
|
13.61
|
|
|
|
9.75
|
|
Selected Balance Sheet Items at Quarter-End:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
15,692
|
|
|
$
|
15,921
|
|
|
$
|
15,968
|
|
|
$
|
17,029
|
|
|
|
|
|
Total Debt and Capital Leases
|
|
|
5,247
|
|
|
|
5,295
|
|
|
|
5,401
|
|
|
|
7,210
|
|
|
|
|
|
Shareholders Equity (Deficit)
|
|
|
193
|
|
|
|
222
|
|
|
|
176
|
|
|
|
(758
|
)
|
|
|
|
|
|
|
|
(a) |
|
Due to the anti-dilutive impact of potentially dilutive
securities in periods which we recorded a net loss, the
quarterly earnings per share amounts do not add to the full year. |
|
* |
|
New York Stock Exchange Composite Transactions |
The first quarter of 2006 included after-tax gains of
$32 million related to favorable settlements with certain
raw material suppliers and after-tax rationalization charges
including accelerated depreciation and asset write-offs of
$32 million primarily related to the closure of the
Washington, United Kingdom facility. The first quarter also
123
included an after-tax pension plan curtailment gain of
approximately $13 million and an after-tax gain of
$10 million resulting from the favorable resolution of a
legal matter in Latin American Tire. Of these amounts,
Discontinued Operations included after-tax gains of
$5 million related to favorable settlements with certain
raw material suppliers and after-tax rationalization charges of
$2 million.
The second quarter of 2006 included after-tax rationalization
charges, including accelerated depreciation and asset write-offs
of $63 million primarily related to the closure of the
Upper Hutt, New Zealand facility.
The third quarter of 2006 included after-tax rationalization
charges, including accelerated depreciation and asset
write-offs, of $133 million primarily related to the
elimination of tire production at our Tyler, Texas facility and
an after-tax gain of $11 million as a result of favorable
settlements with certain raw material suppliers. Of these
amounts, Discontinued Operations included after-tax
rationalization charges including accelerated depreciation and
asset write-offs of $2 million, and an after-tax gain of
$11 million as a result of favorable settlements with
certain raw material suppliers.
The fourth quarter of 2006 included after-tax rationalization
charges including accelerated depreciation and asset write-offs
of $184 million related to the elimination of tire
production at our Valleyfield, Quebec and Tyler, Texas
facilities and the closure of our Casablanca, Morocco facility.
The fourth quarter also included after-tax costs of
$367 million related to the USW strike and net favorable
tax adjustments of $153 million primarily related to the
settlement of an uncertain tax position regarding a
reorganization of certain legal entities in 2001. Of these
amounts, Discontinued Operations included after-tax
rationalization charges including accelerated depreciation and
asset write-offs of $6 million. Discontinued operations
also included after-tax costs of $48 million related to the
USW strike.
124
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
|
None.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES.
|
Managements
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures
which, consistent with
Rule 13a-15(e)
under the Securities Exchange Act of 1934, as amended, we define
to mean controls and other procedures that are designed to
ensure that information required to be disclosed by us in the
reports that we file or submit under the Securities Exchange Act
of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commissions rules and forms, and to ensure that
such information is accumulated and communicated to our
management, including our principal executive and financial
officers, as appropriate, to allow timely decisions regarding
required disclosure.
Our management, with the participation of our principal
executive and financial officers, has evaluated the
effectiveness of our disclosure controls and procedures. Based
on such evaluation, our principal executive and financial
officers have concluded that such disclosure controls and
procedures were effective as of December 31, 2007 (the end
of the period covered by this Annual Report on
Form 10-K).
Assessment
of Internal Control Over Financial Reporting
Managements report on our internal control over financial
reporting is presented on page 59 of this Annual Report on
Form 10-K.
The report of PricewaterhouseCoopers LLP relating to the
consolidated financial statements, financial statement
schedules, and the effectiveness of internal control over
financial reporting is presented on pages 60 through 61 of
this Annual Report on
Form 10-K.
Changes
in Internal Control Over Financial Reporting
There have been no changes in our internal control over
financial reporting during the quarter ended December 31,
2007, that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
PART III.
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
The information required by this item about Goodyears
Executive Officers is included in Part I,
Item 1. Business of this Annual Report on
Form 10-K
under the caption Executive Officers of the
Registrant. All other information required by this item is
incorporated herein by reference from the registrants
definitive Proxy Statement for the Annual Meeting of
Shareholders to be held April 8, 2008 to be filed with the
Commission pursuant to Regulation 14A.
125
Code
of Business Conduct and Code of Ethics
Goodyear has adopted a code of business conduct and ethics for
directors, officers and employees, known as the Business Conduct
Manual. Goodyear also has adopted a conflict of interest policy
applicable to directors and executive officers. Both of these
documents are available on Goodyears website at
http://www.goodyear.com/investor/investor_governance.html.
Shareholders may request a free copy of these documents from:
The Goodyear Tire & Rubber Company
Attention: Investor Relations
1144 East Market Street
Akron, Ohio
44316-0001
(330) 796-3751
Goodyears Code of Ethics for its Chief Executive Officer
and its Senior Financial Officers (the Code of
Ethics) is also posted on Goodyears website.
Amendments to and waivers from the Code of Ethics will be
disclosed on the website.
Corporate
Governance Guidelines Certain Committee
Charters
Goodyear has adopted Corporate Governance Guidelines as well as
charters for its Audit, Compensation and Governance Committees.
These documents are available on Goodyears website at
http://www.goodyear.com/investor/investor_governance.html.
Shareholders may request a free copy of any of these documents
from the address and phone number set forth above under
Code of Business Conduct and Code of Ethics. The
information contained on our Web site is not incorporated by
reference into this Annual Report on
Form 10-K.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION.
|
The information required by this item is incorporated herein by
reference from the registrants definitive Proxy Statement
for the Annual Meeting of Shareholders.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
|
The information required by this item is incorporated herein by
reference from the registrants definitive Proxy Statement
for the Annual Meeting of Shareholders.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.
|
The information required by this item is incorporated herein by
reference from the registrants definitive Proxy Statement
for the Annual Meeting of Shareholders.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
|
The information required by this item is incorporated herein by
reference from the registrants definitive Proxy Statement
for the Annual Meeting of Shareholders.
PART IV.
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES.
|
LIST OF
DOCUMENTS FILED AS PART OF THIS REPORT:
1. Financial Statements: See Index on
page 58 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 Schedules at pages FS-2 through FS-8 are
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 attached to and incorporated into and made a part of this
Annual Report.
126
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: February 14, 2008
|
|
/s/ Robert
J. Keegan
Robert
J. Keegan, Chairman of the Board,
Chief Executive Officer and President
|
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Annual Report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
|
|
Date: February 14, 2008
|
|
/s/ Robert
J. Keegan
Robert
J. Keegan, Chairman of the Board,
Chief Executive Officer,
President and Director
(Principal Executive Officer)
|
|
|
|
Date: February 14, 2008
|
|
/s/ W.
Mark Schmitz
W.
Mark Schmitz, Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
Date: February 14, 2008
|
|
/s/ Thomas
A. Connell
Thomas
A. Connell, Vice President and Controller
(Principal Accounting Officer)
|
|
|
|
|
|
|
|
|
|
|
Date: February 14, 2008
|
|
JAMES C. BOLAND, Director
JOHN G. BREEN, Director
JAMES A. FIRESTONE, Director
WILLIAM J. HUDSON JR., Director
W. ALAN McCOLLOUGH, Director
STEVEN A. MINTER, Director
DENISE M. MORRISON, Director
RODNEY ONEAL, Director
SHIRLEY D. PETERSON, Director
G. CRAIG SULLIVAN, Director
THOMAS H. WEIDEMEYER, Director
MICHAEL R. WESSEL, Director
|
|
/s/ W.
Mark Schmitz
W.
Mark Schmitz, Signing as
Attorney-in-Fact
for the Directors
whose names appear opposite
|
127
FINANCIAL
STATEMENT SCHEDULES
ITEMS 8 AND 15(a)(2) OF
FORM 10-K
FOR CORPORATIONS
ANNUAL REPORT ON
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2007
INDEX TO
FINANCIAL STATEMENT SCHEDULES
Financial
Statement Schedules:
|
|
|
|
|
|
|
|
|
|
|
Schedule No.
|
|
Page Number
|
|
Condensed Financial Information of Registrant
|
|
|
I
|
|
|
|
FS-2
|
|
Valuation and Qualifying Accounts
|
|
|
II
|
|
|
|
FS-8
|
|
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
Financial statements 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 these
companies would not constitute a significant subsidiary.
FS-1
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
THE
GOODYEAR TIRE & RUBBER COMPANY
PARENT COMPANY STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions, except per share amounts)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Net Sales
|
|
$
|
7,944
|
|
|
$
|
7,914
|
|
|
$
|
8,189
|
|
Cost of Goods Sold
|
|
|
7,096
|
|
|
|
7,507
|
|
|
|
7,297
|
|
Selling, Administrative and General Expense
|
|
|
1,053
|
|
|
|
987
|
|
|
|
1,068
|
|
Rationalizations
|
|
|
|
|
|
|
129
|
|
|
|
(3
|
)
|
Interest Expense
|
|
|
417
|
|
|
|
410
|
|
|
|
364
|
|
Other (Income) and Expense
|
|
|
(231
|
)
|
|
|
(265
|
)
|
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations before Income Taxes and
Equity in Earnings of Subsidiaries
|
|
|
(391
|
)
|
|
|
(854
|
)
|
|
|
(460
|
)
|
United States and Foreign Taxes
|
|
|
30
|
|
|
|
(28
|
)
|
|
|
(10
|
)
|
Equity in Earnings of Subsidiaries
|
|
|
560
|
|
|
|
453
|
|
|
|
568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
|
139
|
|
|
|
(373
|
)
|
|
|
118
|
|
Discontinued Operations
|
|
|
463
|
|
|
|
43
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Cumulative Effect of Accounting
Change
|
|
|
602
|
|
|
|
(330
|
)
|
|
|
233
|
|
Cumulative Effect of Accounting Change
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
602
|
|
|
$
|
(330
|
)
|
|
$
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per Share Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
$
|
0.70
|
|
|
$
|
(2.11
|
)
|
|
$
|
0.67
|
|
Discontinued Operations
|
|
|
2.30
|
|
|
|
0.25
|
|
|
|
0.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Cumulative Effect of Accounting Change
|
|
|
3.00
|
|
|
|
(1.86
|
)
|
|
|
1.33
|
|
Cumulative Effect of Accounting Change
|
|
|
|
|
|
|
|
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
3.00
|
|
|
$
|
(1.86
|
)
|
|
$
|
1.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
|
201
|
|
|
|
177
|
|
|
|
176
|
|
Net Income (Loss) Per Share Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
$
|
0.65
|
|
|
$
|
(2.11
|
)
|
|
$
|
0.63
|
|
Discontinued Operations
|
|
|
2.00
|
|
|
|
0.25
|
|
|
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Cumulative Effect of Accounting Change
|
|
|
2.65
|
|
|
|
(1.86
|
)
|
|
|
1.18
|
|
Cumulative Effect of Accounting Change
|
|
|
|
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
2.65
|
|
|
$
|
(1.86
|
)
|
|
$
|
1.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
|
232
|
|
|
|
177
|
|
|
|
209
|
|
The accompanying notes are an integral part of these
financial statements.
FS-2
THE
GOODYEAR TIRE & RUBBER COMPANY
PARENT
COMPANY BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Dollars in millions)
|
|
2007
|
|
|
2006
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
2,516
|
|
|
$
|
2,626
|
|
Restricted Cash
|
|
|
178
|
|
|
|
202
|
|
Accounts Receivable, less allowance $24 ($24 in 2006)
|
|
|
837
|
|
|
|
693
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Raw Materials
|
|
|
256
|
|
|
|
338
|
|
Work in Process
|
|
|
57
|
|
|
|
44
|
|
Finished Products
|
|
|
1,043
|
|
|
|
649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,356
|
|
|
|
1,031
|
|
Prepaid Expenses and Other Current Assets
|
|
|
97
|
|
|
|
142
|
|
Current Assets of Discontinued Operations
|
|
|
|
|
|
|
305
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
4,984
|
|
|
|
4,999
|
|
Intangible Assets
|
|
|
110
|
|
|
|
111
|
|
Other Assets and Prepaid Pension Assets
|
|
|
221
|
|
|
|
255
|
|
Long Term Assets of Discontinued Operations
|
|
|
|
|
|
|
196
|
|
Investments in Subsidiaries
|
|
|
4,842
|
|
|
|
4,286
|
|
Property, Plant and Equipment, less accumulated
depreciation $4,250 ($4,114 in 2006)
|
|
|
1,967
|
|
|
|
1,860
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
12,124
|
|
|
$
|
11,707
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable-trade
|
|
$
|
680
|
|
|
$
|
436
|
|
Accounts payable to affiliates
|
|
|
989
|
|
|
|
1,100
|
|
Compensation and benefits
|
|
|
552
|
|
|
|
585
|
|
Other current liabilities
|
|
|
520
|
|
|
|
562
|
|
Current liabilities of discontinued operations
|
|
|
|
|
|
|
74
|
|
United States and foreign taxes
|
|
|
66
|
|
|
|
59
|
|
Long term debt and capital leases due within one year
|
|
|
102
|
|
|
|
339
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
2,909
|
|
|
|
3,155
|
|
Long Term Debt and Capital Leases
|
|
|
3,750
|
|
|
|
5,647
|
|
Compensation and Benefits
|
|
|
2,053
|
|
|
|
3,301
|
|
Long Term Liabilities of Discontinued Operations
|
|
|
|
|
|
|
6
|
|
Deferred and Other Noncurrent Income Taxes
|
|
|
76
|
|
|
|
69
|
|
Other Long Term Liabilities
|
|
|
486
|
|
|
|
287
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
9,274
|
|
|
|
12,465
|
|
Commitments and Contingent Liabilities
|
|
|
|
|
|
|
|
|
Shareholders Equity (Deficit)
|
|
|
|
|
|
|
|
|
Preferred Stock, no par value:
|
|
|
|
|
|
|
|
|
Authorized, 50,000,000 shares, unissued
|
|
|
|
|
|
|
|
|
Common Stock, no par value:
|
|
|
|
|
|
|
|
|
Authorized, 450,000,000 shares in 2007 and 2006 Outstanding
shares, 240,122,374 (178,218,970 in 2006)
|
|
|
240
|
|
|
|
178
|
|
Capital Surplus
|
|
|
2,660
|
|
|
|
1,427
|
|
Retained Earnings
|
|
|
1,602
|
|
|
|
968
|
|
Accumulated Other Comprehensive Loss
|
|
|
(1,652
|
)
|
|
|
(3,331
|
)
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity (Deficit)
|
|
|
2,850
|
|
|
|
(758
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity (Deficit)
|
|
$
|
12,124
|
|
|
$
|
11,707
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
financial statements.
FS-3
THE
GOODYEAR TIRE & RUBBER COMPANY
PARENT
COMPANY STATEMENTS OF SHAREHOLDERS EQUITY
(DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Capital
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Shareholders
|
|
(Dollars in millions)
|
|
Shares
|
|
|
Amount
|
|
|
Surplus
|
|
|
Earnings
|
|
|
Loss
|
|
|
Equity (Deficit)
|
|
|
Balance at December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(after deducting 20,059,029 treasury shares)
|
|
|
175,619,639
|
|
|
$
|
176
|
|
|
$
|
1,392
|
|
|
$
|
1,070
|
|
|
$
|
(2,564
|
)
|
|
$
|
74
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
228
|
|
|
|
|
|
|
|
228
|
|
Foreign currency translation (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(201
|
)
|
|
|
|
|
Reclassification adjustment for amounts recognized in income
(net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
Minimum pension liability (net of tax of $23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(97
|
)
|
|
|
|
|
Unrealized investment gain (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
Deferred derivative loss (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
Reclassification adjustment for amounts recognized in income
(net of tax of $(1))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Common stock issued from treasury:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation plans
|
|
|
890,112
|
|
|
|
1
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(after deducting 19,168,917 treasury shares)
|
|
|
176,509,751
|
|
|
|
177
|
|
|
|
1,398
|
|
|
|
1,298
|
|
|
|
(2,800
|
)
|
|
|
73
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(330
|
)
|
|
|
|
|
|
|
(330
|
)
|
Foreign currency translation (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233
|
|
|
|
|
|
Reclassification adjustment for amounts recognized in income
(net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Additional pension liability (net of tax of $38)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
439
|
|
|
|
|
|
Unrealized investment loss (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
Deferred derivative gain (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Reclassification adjustment for amounts recognized in income
(net of tax of $(3))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
338
|
|
Adjustment to initially apply FASB Statement No. 158 for
pension and OPEB (net of tax of $49)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,199
|
)
|
|
|
(1,199
|
)
|
Common stock issued from treasury:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation plans
|
|
|
1,709,219
|
|
|
|
1
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(after deducting 17,459,698 treasury shares)
|
|
|
178,218,970
|
|
|
|
178
|
|
|
|
1,427
|
|
|
|
968
|
|
|
|
(3,331
|
)
|
|
|
(758
|
)
|
Adjustment for adoption of FIN 48 (Note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
32
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
602
|
|
|
|
|
|
|
|
602
|
|
Foreign currency translation (net of tax of $1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
482
|
|
|
|
|
|
Reclassification adjustment for amounts recognized in income
(net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
Prior service credit from defined benefit plan amendments (net
of minority interest of $3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
488
|
|
|
|
|
|
Amortization of prior service cost and unrecognized gains and
losses included in net periodic benefit cost (net of tax of $8
and minority interest of $14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154
|
|
|
|
|
|
Decrease in net actuarial losses (net of tax of $21 and minority
interest of $28)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
445
|
|
|
|
|
|
Immediate recognition of prior service cost and unrecognized
gains and losses due to curtailments, settlements and
divestitures (net of tax of $10 and minority interest of $2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137
|
|
|
|
|
|
Unrealized investment loss (net of tax of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,281
|
|
Issuance of shares for public equity offering
|
|
|
26,136,363
|
|
|
|
26
|
|
|
|
808
|
|
|
|
|
|
|
|
|
|
|
|
834
|
|
Issuance of shares for conversion of debt
|
|
|
28,728,852
|
|
|
|
29
|
|
|
|
307
|
|
|
|
|
|
|
|
|
|
|
|
336
|
|
Common stock issued from treasury:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation plans
|
|
|
7,038,189
|
|
|
|
7
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
103
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(after deducting 10,438,287 treasury shares)
|
|
|
240,122,374
|
|
|
$
|
240
|
|
|
$
|
2,660
|
|
|
$
|
1,602
|
|
|
$
|
(1,652
|
)
|
|
$
|
2,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
FS-4
THE
GOODYEAR TIRE & RUBBER COMPANY
PARENT
COMPANY STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating cash flows from continuing operations
|
|
$
|
(363
|
)
|
|
$
|
233
|
|
|
$
|
106
|
|
Operating cash flows from discontinued operations
|
|
|
(4
|
)
|
|
|
64
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash flows from operating activities
|
|
|
(367
|
)
|
|
|
297
|
|
|
|
199
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(289
|
)
|
|
|
(244
|
)
|
|
|
(229
|
)
|
Asset dispositions
|
|
|
107
|
|
|
|
49
|
|
|
|
248
|
|
Asset acquisitions
|
|
|
|
|
|
|
(71
|
)
|
|
|
|
|
Capital contributions to subsidiaries
|
|
|
(11
|
)
|
|
|
(1
|
)
|
|
|
(11
|
)
|
Capital redemptions from subsidiaries
|
|
|
55
|
|
|
|
|
|
|
|
51
|
|
Decrease (increase) in restricted cash
|
|
|
24
|
|
|
|
26
|
|
|
|
(82
|
)
|
Loans with affiliates acquired
|
|
|
(465
|
)
|
|
|
|
|
|
|
|
|
Loans with affiliates redeemed
|
|
|
646
|
|
|
|
|
|
|
|
|
|
Other transactions
|
|
|
|
|
|
|
26
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investing cash flows from continuing operations
|
|
|
67
|
|
|
|
(215
|
)
|
|
|
(18
|
)
|
Investing cash flows from discontinued operations
|
|
|
1,060
|
|
|
|
(20
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Flows From Investing Activities
|
|
|
1,127
|
|
|
|
(235
|
)
|
|
|
(38
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term debt and overdrafts incurred
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Short term debt and overdrafts paid
|
|
|
(6
|
)
|
|
|
(64
|
)
|
|
|
|
|
Long term debt incurred
|
|
|
|
|
|
|
1,970
|
|
|
|
1,921
|
|
Long term debt paid
|
|
|
(1,790
|
)
|
|
|
(402
|
)
|
|
|
(1,969
|
)
|
Common stock issued
|
|
|
937
|
|
|
|
12
|
|
|
|
7
|
|
Debt retirement costs
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
Debt issuance costs
|
|
|
|
|
|
|
(15
|
)
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cash flows from continuing operations
|
|
|
(870
|
)
|
|
|
1,501
|
|
|
|
(102
|
)
|
Financing cash flows from discontinued operations
|
|
|
|
|
|
|
(3
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash flows from Financing Activities
|
|
|
(870
|
)
|
|
|
1,498
|
|
|
|
(99
|
)
|
Net Change in Cash of Discontinued Operations
|
|
|
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents
|
|
|
(110
|
)
|
|
|
1,561
|
|
|
|
61
|
|
Cash and Cash Equivalents at Beginning of the Year
|
|
|
2,626
|
|
|
|
1,065
|
|
|
|
1,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of the Year
|
|
$
|
2,516
|
|
|
$
|
2,626
|
|
|
$
|
1,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
financial statements.
FS-5
THE
GOODYEAR TIRE & RUBBER COMPANY
NOTES TO
PARENT COMPANY FINANCIAL STATEMENTS
LONG
TERM DEBT AND FINANCING ARRANGEMENTS
At December 31, 2007, the Parent Company was a party to
various long term financing facilities. Under the terms of these
facilities, the Parent Company has pledged a significant portion
of its assets as collateral. The collateral included first,
second and third priority security interests in current assets,
certain property, plant and equipment, capital stock of certain
subsidiaries, and other tangible and intangible assets. In
addition, the facilities contain certain covenants that, among
other things, limit the Parent Companys ability to incur
additional debt or issue redeemable preferred stock, make
certain restricted payments or investments, incur liens, sell
assets (excluding the sale of properties located in Akron,
Ohio), incur restrictions on the ability of the Parent
Companys subsidiaries to pay dividends to the Parent
Company, enter into affiliate transactions, engage in sale and
leaseback transactions, and consolidate, merge, sell or
otherwise dispose of all or substantially all of the Parent
Companys assets. These covenants are subject to
significant exceptions and qualifications. The primary credit
facilities permit the Parent Company to pay dividends on its
common stock as long as no default will have occurred and be
continuing under those facilities, the Parent Company can incur
additional indebtedness under the facilities following the
dividend payment, and certain financial tests are satisfied.
In addition, in the event that the availability under the Parent
Companys first lien facility plus the aggregate amount of
Available Cash is less than $150 million, the Parent
Company will not be permitted to allow the ratio of EBITDA to
Consolidated Interest Expense to be less than 2.0 to 1.0 for any
period of four consecutive fiscal quarters. Available
Cash, EBITDA and Consolidated Interest
Expense have the meanings given them in the first lien
facility. As provided in the Parent Companys second lien
term loan facility, if the Pro Forma Senior Secured
Leverage Ratio (the ratio of Consolidated Net Secured
Indebtedness to EBITDA) for any period of four consecutive
fiscal quarters is greater than 3.0 to 1.0, before the Parent
Company may use cash proceeds from certain asset sales to repay
any junior lien, senior unsecured or subordinated indebtedness,
the Parent Company must first offer to prepay borrowings under
the second lien term loan facility. Pro Forma Senior
Secured Leverage Ratio, Consolidated Net Secured
Indebtedness and EBITDA have the meanings
given them in the second lien term loan facility. For further
information, refer to the Note to the Consolidated Financial
Statements No. 11, Financing Arrangements and Derivative
Financial Instruments.
The annual aggregate maturities of long term debt and capital
leases for the five years subsequent to December 31, 2007
are presented below. Maturities of debt 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)
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Debt maturities
|
|
$
|
102
|
|
|
$
|
499
|
|
|
$
|
3
|
|
|
$
|
1,626
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our $650 million senior secured notes due 2011 are included
in the table above as maturing in 2011. However, on
February 1, 2008, we called for the redemption of all
outstanding amounts on March 3, 2008.
COMMITMENTS
AND CONTINGENT LIABILITIES
At December 31, 2007, the Parent Company did not have
off-balance sheet financial guarantees written and other
commitments.
At December 31, 2007, the Parent Company had recorded costs
related to a wide variety of contingencies. These contingencies
included, among other things, environmental matters,
workers compensation, general and product liability and
other matters. For further information, refer to the Note to the
Consolidated Financial Statements No. 19, Commitments and
Contingent Liabilities.
DIVIDENDS
The Parent Company used the equity method of accounting for
investments in consolidated subsidiaries during 2007, 2006 and
2005.
FS-6
THE
GOODYEAR TIRE & RUBBER COMPANY
NOTES TO
PARENT COMPANY FINANCIAL
STATEMENTS (Continued)
The following table presents dividends received during 2007,
2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Consolidated subsidiaries
|
|
$
|
562
|
|
|
$
|
247
|
|
|
$
|
290
|
|
50% or less-owned persons
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
562
|
|
|
$
|
247
|
|
|
$
|
291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no stock dividends received from consolidated
subsidiaries in 2007 and in 2006. In 2005, dividends received
from consolidated subsidiaries included stock dividends of
$16 million.
SUPPLEMENTAL
CASH FLOW INFORMATION
The Parent Company made cash payments for interest in 2007, 2006
and 2005 of $455 million, $410 million and
$349 million, respectively. The Parent Company had net cash
receipts for income taxes in 2007, 2006 and 2005 of
$4 million, $6 million and $19 million,
respectively.
INTERCOMPANY
TRANSACTIONS
The following amounts included in the Parent Company Statements
of Operations have been eliminated in the preparation of the
consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Sales
|
|
$
|
1,165
|
|
|
$
|
1,166
|
|
|
$
|
1,236
|
|
Cost of Goods Sold
|
|
|
1,157
|
|
|
|
1,160
|
|
|
|
1,240
|
|
Interest Expense
|
|
|
36
|
|
|
|
33
|
|
|
|
22
|
|
Other (Income) and Expense
|
|
|
(437
|
)
|
|
|
(422
|
)
|
|
|
(391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before Income Taxes
|
|
$
|
409
|
|
|
$
|
395
|
|
|
$
|
365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FS-7
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Balance
|
|
|
Additions
|
|
|
|
|
|
Translation
|
|
|
|
|
|
|
at
|
|
|
Charged
|
|
|
Charged
|
|
|
Acquired
|
|
|
Deductions
|
|
|
adjustment
|
|
|
Balance
|
|
|
|
beginning
|
|
|
(credited)
|
|
|
(credited)
|
|
|
by
|
|
|
from
|
|
|
during
|
|
|
at end of
|
|
Description
|
|
of period
|
|
|
to income
|
|
|
to AOCL
|
|
|
purchase
|
|
|
reserves
|
|
|
period
|
|
|
period
|
|
|
|
2007
|
|
Allowance for doubtful accounts
|
|
$
|
98
|
|
|
$
|
15
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(31
|
)(a)
|
|
$
|
6
|
|
|
$
|
88
|
|
Valuation allowance deferred tax assets
|
|
|
2,814
|
|
|
|
(36
|
)
|
|
|
(583
|
)
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
2,231
|
|
|
|
|
2006
|
|
Allowance for doubtful accounts
|
|
$
|
124
|
|
|
$
|
10
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(42
|
)(a)
|
|
$
|
6
|
|
|
$
|
98
|
|
Valuation allowance deferred tax assets
|
|
|
2,051
|
|
|
|
364
|
|
|
|
366
|
|
|
|
13
|
|
|
|
(3
|
)
|
|
|
23
|
|
|
|
2,814
|
|
|
|
|
2005
|
|
Allowance for doubtful accounts
|
|
$
|
140
|
|
|
$
|
25
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(33
|
)(a)
|
|
$
|
(8
|
)
|
|
$
|
124
|
|
Valuation allowance deferred tax assets
|
|
|
2,065
|
|
|
|
(8
|
)
|
|
|
39
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
(27
|
)
|
|
|
2,051
|
|
|
|
Note:
(a) Accounts receivable charged off.
FS-8
THE
GOODYEAR TIRE & RUBBER COMPANY
Annual
Report on
Form 10-K
For Year
Ended December 31, 2007
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Table
|
|
|
|
|
Item
|
|
Description of
|
|
|
No.
|
|
Exhibit
|
|
Exhibit Number
|
|
|
3
|
|
|
Articles of Incorporation and By-Laws
|
|
|
|
|
|
(a)
|
|
|
Certificate of Amended Articles of Incorporation of The Goodyear
Tire & Rubber Company, dated December 20, 1954, Certificate
of Amendment to Amended Articles of Incorporation of the
Company, dated April 6, 1993, Certificate of Amendment to
Amended Articles of Incorporation of the Company, dated June 4,
1996, and Certificate of Amendment to Amended Articles of
Incorporation of the Company, dated April 20, 2006, four
documents comprising the Companys Articles of
Incorporation, as amended (incorporated by reference, filed as
Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q
for the quarter ended March 31, 2006, File No. 1-1927).
|
|
|
|
|
|
(b)
|
|
|
Code of Regulations of The Goodyear Tire & Rubber Company,
adopted November 22, 1955, and amended April 5, 1965, April 7,
1980, April 6, 1981, April 13, 1987, May 7, 2003, April 26, 2005
and April 11, 2006 (incorporated by reference, filed as Exhibit
3.2 to the Companys Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006, File No. 1-1927).
|
|
|
|
|
|
4
|
|
|
Instruments Defining the Rights of Security Holders,
Including Indentures
|
|
|
|
|
|
(a)
|
|
|
Specimen Nondenominational Certificate for Shares of the Common
Stock, Without Par Value, of the Company (incorporated by
reference, filed as Exhibit 4.1 to the Companys Current
Report on Form 8-K, filed May 9, 2007, File No. 1-1927).
|
|
|
|
|
|
(b)
|
|
|
Indenture, dated as of March 15, 1996, between the Company and
Chemical Bank (now Wells Fargo Bank, N.A.), as Trustee, as
supplemented on March 16, 1998, in respect of the Companys
7% Notes due 2028, and March 20, 1998, in respect of the
Companys
63/8% Notes
due 2008 (incorporated by reference, filed as Exhibit 4.1 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998, File No. 1-1927).
|
|
|
|
|
|
(c)
|
|
|
Indenture, dated as of March 1, 1999, between the Company and
The Chase Manhattan Bank (now Wells Fargo Bank, N.A.), as
Trustee (incorporated by reference, filed as Exhibit 4.1 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000, File No. 1-1927), as supplemented on
August 15, 2001, in respect of the Companys
7.857% Notes due 2011 (incorporated by reference, filed as
Exhibit 4.3 to the Companys Quarterly Report on Form 10-Q
for the quarter ended September 30, 2001, File No. 1-1927).
|
|
|
|
|
|
(d)
|
|
|
Indenture, dated as of June 23, 2005, among the Company, the
subsidiary guarantors party thereto and Wells Fargo Bank, N.A.,
as Trustee, in respect of the Companys 9% Senior
Notes due 2015 (incorporated by reference, filed as Exhibit 4.2
to the Companys Current Report on Form 8-K filed June 24,
2005, File No. 1-1927).
|
|
|
|
|
|
(e)
|
|
|
Amended and Restated General Master Purchase Agreement dated
December 10, 2004, as amended and restated on May 23, 2005 and
August 26, 2005, between Ester Finance Titrisation, as
Purchaser, Eurofactor, as Agent, Calyon, as Joint Lead Arranger
and as Calculation Agent, Natexis Banques Populairies, as Joint
Lead Arranger, Goodyear Dunlop Tires Finance Europe B.V., as
Centralising Unit, the Sellers listed therein and Goodyear
Dunlop Tires Germany GmbH (incorporated by reference, filed as
Exhibit 4.1 to the Companys Registration Statement on Form
S-4, File
No. 333128932).
|
|
|
|
|
X-1
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Table
|
|
|
|
|
Item
|
|
Description of
|
|
|
No.
|
|
Exhibit
|
|
Exhibit Number
|
|
|
(f)
|
|
|
Amended and Restated Master Subordinated Deposit Agreement dated
December 10, 2004, as amended and restated on May 23, 2005 and
August 26, 2005, between Eurofactor, as Agent, Calyon, as
Calculation Agent, Ester Finance Titrisation, as Purchaser, and
Goodyear Dunlop Tires Finance Europe B.V., as Subordinated
Depositor or Centralising Unit (incorporated by reference, filed
as Exhibit 4.2 to the Companys Registration Statement on
Form S-4, File No. 333-128932).
|
|
|
|
|
|
(g)
|
|
|
Master Complementary Deposit Agreement dated December 10, 2004
between Eurofactor, as Agent, Calyon, as Calculation Agent,
Ester Finance Titrisation, as Purchaser, and Goodyear Dunlop
Tires Finance Europe B.V., as Complementary Depositor or
Centralising Unit (incorporated by reference, filed as Exhibit
4.3 to the Companys Annual Report on Form 10-K for the
year ended December 31, 2004, File No. 1-1927).
|
|
|
|
|
|
(h)
|
|
|
Indenture, dated as of March 12, 2004, among the Company, the
subsidiary guarantors party thereto and Wells Fargo Bank, N.A.,
as Trustee, in respect of the Companys 11% Senior
Secured Notes due 2011 and Senior Secured Floating Rate Notes
due 2011 (incorporated by reference, filed as Exhibit 4.11 to
the Companys Annual Report on Form 10-K for the year ended
December 31, 2003, File No. 1-1927).
|
|
|
|
|
|
(i)
|
|
|
Collateral Agreement, dated as of March 12, 2004, among the
Company, certain subsidiaries of the Company and Wilmington
Trust Company, as Collateral Agent (incorporated by reference,
filed as Exhibit 4.14 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2003, File No. 1-1927).
|
|
|
|
|
|
(j)
|
|
|
Lien Subordination and Intercreditor Agreement, dated as of
March 12, 2004, among the Company, certain subsidiaries of the
Company, JPMorgan Chase Bank and Wilmington Trust Company
(incorporated by reference, filed as Exhibit 4.15 to the
Companys Annual Report on Form 10-K for the year ended
December 31, 2003, File No. 1-1927).
|
|
|
|
|
|
(k)
|
|
|
Indenture, dated as of July 2, 2004, between the Company and
Wells Fargo Bank, N.A., as Trustee, in respect of the
Companys 4% Convertible Senior Notes due 2034
(incorporated by reference, filed as Exhibit 4.4 to the
Companys Form 10-Q for the quarter ended September 30,
2004, File No. 1-1927).
|
|
|
|
|
|
(l)
|
|
|
Indenture, dated as of November 21, 2006, among the Company, the
subsidiary guarantors party thereto and Wells Fargo Bank, N.A.,
as Trustee, in respect of the Companys 8.625% Senior
Notes due 2011 and Senior Floating Rate Notes due 2009
(incorporated by reference, filed as Exhibit 4.2 to the
Companys Current Report on Form 8-K filed November 22,
2006, File No. 1-1927).
|
|
|
|
|
|
|
|
|
In accordance with Item 601(b)(4)(iii) of Regulation S-K,
certain instruments defining the rights of holders of long-term
debt of the Company and its consolidated subsidiaries pursuant
to which the total amount of securities authorized thereunder
does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis are not filed herewith. The
Company hereby agrees to furnish a copy of any such instrument
to the Securities and Exchange Commission upon request.
|
|
|
|
|
|
10
|
|
|
Material Contracts
|
|
|
|
|
|
(a)
|
|
|
Amended and Restated First Lien Credit Agreement, dated as of
April 20, 2007, among the Company, the lenders party thereto,
the issuing banks party thereto, Citicorp USA, Inc., as
Syndication Agent, Bank of America, N.A., BNP Paribas, The CIT
Group/Business Credit, Inc., General Electric Capital
Corporation, GMAC Commercial Finance LLC, Wells Fargo Foothill,
as Documentation Agents, and JPMorgan Chase Bank, N.A., as
Administrative Agent and Collateral Agent (incorporated by
reference, filed as Exhibit 4.1 to the Companys Quarterly
Report on Form 10-Q for the quarter ended March 31, 2007, File
No. 1-1927).
|
|
|
|
|
X-2
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Table
|
|
|
|
|
Item
|
|
Description of
|
|
|
No.
|
|
Exhibit
|
|
Exhibit Number
|
|
|
(b)
|
|
|
Amended and Restated Second Lien Credit Agreement, dated as of
April 20, 2007, among the Company, the lenders party thereto,
Deutsche Bank Trust Company Americas, as Collateral Agent, and
JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated
by reference, filed as Exhibit 4.2 to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31,
2007, File No. 1-1927).
|
|
|
|
|
|
(c)
|
|
|
Amended and Restated Revolving Credit Agreement, dated as of
April 20, 2007, among the Company, Goodyear Dunlop Tires Europe
B.V., Goodyear Dunlop Tires Germany GmbH, Goodyear GmbH &
Co. KG, Dunlop GmbH & Co. KG, Goodyear Luxembourg Tires
S.A., the lenders party thereto, J.P. Morgan Europe
Limited, as Administrative Agent, JPMorgan Chase Bank, N.A., as
Collateral Agent, and the Mandated Lead Arrangers and Joint
Bookrunners identified therein (incorporated by reference, filed
as Exhibit 4.3 to the Companys Quarterly Report on Form
10-Q for the quarter ended March 31, 2007, File No. 1-1927).
|
|
|
|
|
|
(d)
|
|
|
First Lien Guarantee and Collateral Agreement, dated as of April
8, 2005, among the Company, the subsidiaries of the Company
identified therein and JPMorgan Chase Bank, N.A., as Collateral
Agent (incorporated by reference, filed as Exhibit 4.5 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 2005, File No. 1-1927).
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|
|
|
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(e)
|
|
|
Reaffirmation of First Lien Guarantee and Collateral Agreement,
dated as of April 20, 2007, among the Company, the subsidiaries
of the Company identified therein and JPMorgan Chase Bank, N.A.,
as Administrative Agent and Collateral Agent (incorporated by
reference, filed as Exhibit 4.4 to the Companys Quarterly
Report on Form 10-Q for the quarter ended March 31, 2007, File
No. 1-1927).
|
|
|
|
|
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(f)
|
|
|
Second Lien Guarantee and Collateral Agreement, dated as of
April 8, 2005, among the Company, the subsidiaries of the
Company identified therein and Deutsche Bank Trust Company
Americas, as Collateral Agent (incorporated by reference, filed
as Exhibit 4.6 to the Companys Quarterly Report on Form
10-Q for the quarter ended March 31, 2005, File No. 1-1927).
|
|
|
|
|
|
(g)
|
|
|
Reaffirmation of Second Lien Guarantee and Collateral Agreement,
dated as of April 20, 2007, among the Company, the subsidiaries
of the Company identified therein, Deutsche Bank Trust Company
Americas, as Collateral Agent, and JPMorgan Chase Bank, N.A., as
Administrative Agent (incorporated by reference, filed as
Exhibit 4.5 to the Companys Quarterly Report on Form 10-Q
for the quarter ended March 31, 2007, File No. 1-1927).
|
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(h)
|
|
|
Master Guarantee and Collateral Agreement, dated as of March 31,
2003, as Amended and Restated as of February 20, 2004, and as
further Amended and Restated as of April 8, 2005, among the
Company, Goodyear Dunlop Tires Europe B.V., the other
subsidiaries of the Company identified therein and JPMorgan
Chase Bank, N.A., as Collateral Agent (incorporated by
reference, filed as Exhibit 4.7 to the Companys Quarterly
Report on Form 10-Q for the quarter ended March 31, 2005, File
No. 1-1927), as amended by the Amendment and Restatement
Agreement, dated as of April 20, 2007 (incorporated by
reference, filed as Exhibit 4.6 to the Companys Quarterly
Report on Form 10-Q for the quarter ended March 31, 2007, File
No. 1-1927).
|
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|
|
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(i)
|
|
|
Lenders Lien Subordination and Intercreditor Agreement, dated as
of April 8, 2005, among JPMorgan Chase Bank, N.A., as Collateral
Agent for the First Lien Secured Parties referred to therein,
Deutsche Bank Trust Company Americas, as Collateral Agent for
the Second Lien Secured Parties referred to therein, the
Company, and the subsidiaries of the Company named therein
(incorporated by reference, filed as Exhibit 4.8 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 2005, File No. 1-1927).
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X-3
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|
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|
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Exhibit
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|
|
Table
|
|
|
|
|
Item
|
|
Description of
|
|
|
No.
|
|
Exhibit
|
|
Exhibit Number
|
|
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(j)
|
|
|
Umbrella Agreement, dated as of June 14, 1999, between the
Company and Sumitomo Rubber Industries, Ltd. (incorporated by
reference, filed as Exhibit 10.1 to the Companys Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999, File
No. 1-1927).
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(k)
|
|
|
Amendment No. 1 to the Umbrella Agreement, dated as of January
1, 2003, between the Company and Sumitomo Rubber Industries,
Ltd. (incorporated by reference, filed as Exhibit 10.2 to the
Companys Annual Report on Form 10-K for the year ended
December 31, 2002, File No. 1-1927).
|
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|
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(l)
|
|
|
Amendment No. 2 to the Umbrella Agreement, dated as of April 7,
2003, between the Company and Sumitomo Rubber Industries, Ltd.
(incorporated by reference, filed as Exhibit 10.1 to the
Companys Annual Report on Form 10-K for the year ended
December 31, 2004, File No. 1-1927).
|
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(m)
|
|
|
Amendment No. 3 to the Umbrella Agreement, dated as of July 15,
2004, between the Company and Sumitomo Rubber Industries, Ltd.
(incorporated by reference, filed as Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004, File No. 1-1927).
|
|
|
|
|
|
(n)
|
|
|
Amendment No. 4 to the Umbrella Agreement, dated as of
February 12, 2008, among the Company, Sumitomo Rubber
Industries, Ltd. and their respective affiliates named therein.
|
|
|
10
|
.1
|
|
(o)
|
|
|
Joint Venture Agreement for Europe, dated as of June 14, 1999,
as amended by Amendment No. 1 thereto, dated as of September 1,
1999, among the Company, Goodyear S.A., a French corporation,
Goodyear S.A., a Luxembourg corporation, Goodyear Canada Inc.,
Sumitomo Rubber Industries, Ltd. and Sumitomo Rubber Europe B.V.
(incorporated by reference, filed as Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-1927).
|
|
|
|
|
|
(p)
|
|
|
Shareholders Agreement for the Europe JVC, dated as of June 14,
1999, among the Company, Goodyear S.A., a French corporation,
Goodyear S.A., a Luxembourg corporation, Goodyear Canada Inc.,
and Sumitomo Rubber Industries, Ltd. (incorporated by reference,
filed as Exhibit 10.2 to the Companys Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, File No.
1-1927).
|
|
|
|
|
|
(q)
|
|
|
Amendment No. 1 to the Shareholders Agreement for the Europe
JVC, dated April 21, 2000, among the Company, Goodyear S.A., a
French corporation, Goodyear S.A., a Luxembourg corporation,
Goodyear Canada Inc., and Sumitomo Rubber Industries, Ltd.
(incorporated by reference, filed as Exhibit 10.2 to the
Companys Annual Report on Form 10-K for the year ended
December 31, 2004, File No.
1-1927).
|
|
|
|
|
|
(r)
|
|
|
Amendment No. 2 to the Shareholders Agreement for the Europe
JVC, dated July 15, 2004, among the Company, Goodyear S.A., a
French corporation, Goodyear S.A., a Luxembourg corporation,
Goodyear Canada Inc., and Sumitomo Rubber Industries, Ltd.
(incorporated by reference, filed as Exhibit 10.2 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004, File No. 1-1927).
|
|
|
|
|
|
(s)
|
|
|
Amendment No. 3 to the Shareholders Agreement for the Europe
JVC, dated August 30, 2005, among the Company, Goodyear S.A., a
French corporation, Goodyear S.A., a Luxembourg corporation,
Goodyear Canada Inc., and Sumitomo Rubber Industries, Ltd.
(incorporated by reference, filed as Exhibit 10.1 to the
Companys Registration Statement on Form S-4, File No.
333-128932).
|
|
|
|
|
|
(t)
|
|
|
Memorandum of Agreement (Amendment No. 4 to the Shareholders
Agreement for the Europe JVC), dated April 26, 2007, between the
Company and Sumitomo Rubber Industries, Ltd. (incorporated by
reference, filed as Exhibit 10.5 to the Companys Quarterly
Report on Form 10-Q for the quarter ended March 31, 2007, File
No. 1-1927).
|
|
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|
|
X-4
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Table
|
|
|
|
|
Item
|
|
Description of
|
|
|
No.
|
|
Exhibit
|
|
Exhibit Number
|
|
|
(u)
|
|
|
Agreement, dated as of March 3, 2003, between the Company and
Sumitomo Rubber Industries, Ltd., amending certain provisions of
the alliance agreements (incorporated by reference, filed as
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
for the quarter ended March 31, 2003, File No. 1-1927).
|
|
|
|
|
|
(v)*
|
|
|
2005 Performance Plan of the Company (incorporated by reference,
filed as Exhibit 10.1 to the Companys Current Report on
Form 8-K filed April 27, 2005, File No.
1-1927).
|
|
|
|
|
|
(w)*
|
|
|
Forms of Stock Option Grant Agreements for options and SARs
granted under the 2005 Performance Plan; Part I, Agreement
for Incentive Stock Options; Part II, Agreement for
Non-Qualified Stock Options; Part III, Agreement for
Non-Qualified Stock Options with Tandem Stock Appreciation
Rights; and Part IV, Agreement for Reinvestment Options
(incorporated by reference, filed as Exhibit 10.4 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 2007, File No. 1-1927).
|
|
|
|
|
|
(x)*
|
|
|
Form of Performance Share Unit Grant Agreement under the 2005
Performance Plan (incorporated by reference, filed as Exhibit
10.1 to the Companys Current Report on Form 8-K filed
February 27, 2006, File No. 1-1927).
|
|
|
|
|
|
(y)*
|
|
|
Form of Restricted Stock Purchase Agreement (incorporated by
reference, filed as Exhibit 10.3 to the Companys Annual
Report on Form 10-K for the year ended December 31, 2004, File
No. 1-1927).
|
|
|
|
|
|
(z)*
|
|
|
2002 Performance Plan of the Company (incorporated by reference,
filed as Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended March 31, 2002, File No. 1-1927).
|
|
|
|
|
|
(aa)*
|
|
|
1997 Performance Incentive Plan of the Company (incorporated by
reference, filed as Exhibit 10.1 to the Companys Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997, File
No. 1-1927).
|
|
|
|
|
|
(bb)*
|
|
|
1989 Goodyear Performance and Equity Incentive Plan
(incorporated by reference, filed as Exhibit A to the
Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 1989, File No. 1-1927).
|
|
|
|
|
|
(cc)*
|
|
|
Performance Recognition Plan of the Company adopted effective
January 1, 2007 (incorporated by reference, filed as Exhibit
10.2 to the Companys Quarterly Report on Form 10-Q for the
quarter ended March 31, 2007, File No. 1-1927).
|
|
|
|
|
|
(dd)*
|
|
|
Executive Performance Plan of the Company effective January 1,
2004 (incorporated by reference, filed as Exhibit 10.1 to the
Companys Annual Report on Form 10-K for the year ended
December 31, 2003, File No. 1-1927).
|
|
|
|
|
|
(ee)*
|
|
|
Form of Grant Agreement for Executive Performance Plan
(incorporated by reference, filed as Exhibit 10.1 to the
Companys Current Report on Form 8-K filed February 28,
2005, File No. 1-1927).
|
|
|
|
|
|
(ff)*
|
|
|
Goodyear Supplementary Pension Plan (January 1, 1995
Restatement) as amended by the First Amendment thereto, dated
December 20, 2001 (incorporated by reference, filed as Exhibit
10.1 to the Companys Annual Report on Form 10-K for the
year ended December 31, 2001, File No. 1-1927).
|
|
|
|
|
|
(gg)*
|
|
|
Excess Benefit Plan of the Company, as amended and restated
effective January 1, 2000 (incorporated by reference, filed as
Exhibit 10.1 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2005, File No. 1-1927).
|
|
|
|
|
|
(hh)*
|
|
|
Deferred Compensation Plan for Executives, amended and restated
as of January 1, 2002 (incorporated by reference, filed as
Exhibit 10.3 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2001, File No. 1-1927).
|
|
|
|
|
X-5
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Table
|
|
|
|
|
Item
|
|
Description of
|
|
|
No.
|
|
Exhibit
|
|
Exhibit Number
|
|
|
(ii)*
|
|
|
First Amendment to Deferred Compensation Plan for Executives,
effective as of December 3, 2002 (incorporated by reference,
filed as Exhibit 10.1 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2002, File No. 1-1927).
|
|
|
|
|
|
(jj)*
|
|
|
1994 Restricted Stock Award Plan for Non-Employee Directors of
the Company, effective June 1, 1994 (incorporated by reference,
filed as Exhibit B to the Companys Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994, File No. 1-1927).
|
|
|
|
|
|
(kk)*
|
|
|
Outside Directors Equity Participation Plan, as adopted
February 2, 1996 and last amended February 27, 2007
(incorporated by reference, filed as Exhibit 10.3 to the
Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 2007, File No. 1-1927).
|
|
|
|
|
|
(ll)*
|
|
|
Letter agreement dated September 11, 2000, between the Company
and Robert J. Keegan (incorporated by reference, filed as
Exhibit 10.1 to Registrants Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000, File No. 1-1927).
|
|
|
|
|
|
(mm)*
|
|
|
Supplement and amendment to letter agreement between the Company
and Robert J. Keegan, dated February 3, 2004 (incorporated by
reference, filed as Exhibit 10.2 to the Companys Annual
Report on Form 10-K for the year ended December 31, 2003, File
No. 1-1927).
|
|
|
|
|
|
(nn)*
|
|
|
Restricted Stock Purchase Agreement, dated October 3, 2000,
between the Company and Robert J. Keegan (incorporated by
reference, filed as Exhibit 10.2 to the Companys Quarterly
Report on Form 10-Q for the quarter ended September 30, 2000,
File No. 1-1927).
|
|
|
|
|
|
(oo)*
|
|
|
Stock Option Grant Agreement, dated October 3, 2000, between the
Company and Robert J. Keegan (incorporated by reference, filed
as Exhibit 10.3 to the Companys Quarterly Report on Form
10-Q for the quarter ended September 30, 2000, File No. 1-1927).
|
|
|
|
|
|
(pp)*
|
|
|
Continuity Plan for Salaried Employees, as amended and restated
effective April 10, 2007 (incorporated by reference, filed as
Exhibit 10.1 to the Companys Current Report on Form 8-K
filed April 13, 2007, File No. 1-1927).
|
|
|
|
|
|
(qq)*
|
|
|
Stock Option Plan for Hourly Bargaining Unit Employees at
Designated Locations, as amended December 4, 2001 (incorporated
by reference, filed as Exhibit 10.2 to the Companys Annual
Report on Form 10-K for the year ended December 31, 2001, File
No. 1-1927).
|
|
|
|
|
|
(rr)*
|
|
|
Hourly and Salaried Employees Stock Option Plan of the Company,
as amended September 30, 2002 (incorporated by reference, filed
as Exhibit 10.1 to the Companys Quarterly Report on Form
10-Q for the quarter ended September 30, 2002, File No. 1-1927).
|
|
|
|
|
|
12
|
|
|
Statement re Computation of Ratios
|
|
|
|
|
|
(a)
|
|
|
Statement setting forth the Computation of Ratio of Earnings to
Fixed Charges.
|
|
|
12
|
.1
|
|
21
|
|
|
Subsidiaries
|
|
|
|
|
|
(a)
|
|
|
List of subsidiaries of the Company at December 31, 2007.
|
|
|
21
|
.1
|
|
23
|
|
|
Consents
|
|
|
|
|
|
(a)
|
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
|
23
|
.1
|
|
(b)
|
|
|
Consent of Bates White, LLC.
|
|
|
23
|
.2
|
|
24
|
|
|
Powers of Attorney
|
|
|
|
|
|
(a)
|
|
|
Powers of Attorney of Officers and Directors signing this report.
|
|
|
24
|
.1
|
X-6
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Table
|
|
|
|
|
Item
|
|
Description of
|
|
|
No.
|
|
Exhibit
|
|
Exhibit Number
|
|
|
31
|
|
|
302 Certifications
|
|
|
|
|
|
(a)
|
|
|
Certificate of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
|
|
|
31
|
.1
|
|
(b)
|
|
|
Certificate of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
|
|
|
31
|
.2
|
|
32
|
|
|
906 Certifications
|
|
|
|
|
|
(a)
|
|
|
Certificate of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
32
|
.1
|
|
|
|
* |
|
Indicates management contract or compensatory plan or arrangement |
X-7