SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2003
Commission File Number: 1-1927
THE GOODYEAR TIRE & RUBBER COMPANY
(Exact name of Registrant as specified in its charter)
| OHIO | 34-0253240 | |
| (State or Other Jurisdiction of | (I.R.S. Employer | |
| Incorporation or Organization) | Identification No.) | |
| 1144 East Market Street, Akron, Ohio | 44316-0001 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(330) 796-2121
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
| Yes þ | No ___ |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Yes þ | No ___ |
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
| Number of Shares of Common Stock, | ||
| Without Par Value, Outstanding at June 30, 2003: | 175,309,525 |
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Unaudited
| (In millions, except per share) | Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
NET SALES |
$ | 3,758.2 | $ | 3,478.8 | $ | 7,303.7 | $ | 6,790.0 | ||||||||
Cost of Goods Sold |
3,051.0 | 2,787.4 | 5,975.4 | 5,548.5 | ||||||||||||
Selling, Administrative and General Expense |
596.5 | 553.4 | 1,170.4 | 1,078.5 | ||||||||||||
Rationalizations (Note 2) |
17.6 | — | 85.8 | — | ||||||||||||
Interest Expense |
82.0 | 59.6 | 139.8 | 120.6 | ||||||||||||
Other (Income) and Expense (Note 3) |
26.6 | 17.9 | 69.5 | 36.1 | ||||||||||||
Foreign Currency Exchange |
19.7 | (6.1 | ) | 19.1 | 7.2 | |||||||||||
Equity in (Earnings) Losses of Affiliates |
4.4 | 1.4 | 6.9 | 6.0 | ||||||||||||
Minority Interest in Net Income (Loss) of Subsidiaries |
12.1 | 16.0 | 23.5 | 29.5 | ||||||||||||
Income (Loss) before Income Taxes |
(51.7 | ) | 49.2 | (186.7 | ) | (36.4 | ) | |||||||||
United States and Foreign Taxes on Income (Loss) |
21.9 | 20.3 | 50.2 | (2.1 | ) | |||||||||||
NET INCOME (LOSS) |
$ | (73.6 | ) | $ | 28.9 | $ | (236.9 | ) | $ | (34.3 | ) | |||||
Retained Earnings at Beginning of Period |
2,007.1 | 3,192.7 | ||||||||||||||
CASH DIVIDENDS |
— | (39.2 | ) | |||||||||||||
Retained Earnings at End of Period |
$ | 1,770.2 | $ | 3,119.2 | ||||||||||||
NET INCOME (LOSS) PER SHARE OF COMMON STOCK – BASIC: |
$ | (0.42 | ) | $ | 0.18 | $ | (1.35 | ) | $ | (0.21 | ) | |||||
Average Shares Outstanding (Note 4) |
175.3 | 163.3 | 175.3 | 163.2 | ||||||||||||
NET INCOME (LOSS) PER SHARE OF COMMON STOCK – DILUTED: |
$ | (0.42 | ) | $ | 0.18 | $ | (1.35 | ) | $ | (0.21 | ) | |||||
Average Shares Outstanding (Note 4) |
175.3 | 164.3 | 175.3 | 163.2 | ||||||||||||
CASH DIVIDENDS PER SHARE |
$ | — | $ | 0.12 | $ | — | $ | 0.24 | ||||||||
The accompanying notes are an integral part of this financial statement.
- 1 -
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
| (In millions) | June 30, | December 31, | |||||||||
| 2003 | 2002 | ||||||||||
| Unaudited | |||||||||||
ASSETS: |
|||||||||||
Current Assets: |
|||||||||||
Cash and cash equivalents (Note 1) |
$ | 1,182.8 | $ | 923.0 | |||||||
Short term securities |
— | 24.3 | |||||||||
Accounts and notes receivable,
less allowance – $109.9 ($99.9 in 2002) (Note 5) |
2,608.0 | 1,459.7 | |||||||||
Inventories: |
|||||||||||
Raw materials |
466.2 | 451.0 | |||||||||
Work in process |
110.8 | 100.0 | |||||||||
Finished products |
2,065.7 | 1,820.6 | |||||||||
| 2,642.7 | 2,371.6 | ||||||||||
Prepaid expenses and other current assets |
306.8 | 448.1 | |||||||||
Total Current Assets |
6,740.3 | 5,226.7 | |||||||||
Long Term Accounts and Notes Receivable |
315.9 | 236.3 | |||||||||
Investments in Affiliates |
146.7 | 141.7 | |||||||||
Other Assets |
76.6 | 254.9 | |||||||||
Goodwill and Other Intangible Assets |
784.4 | 768.7 | |||||||||
Prepaid and Deferred Pension Costs |
924.7 | 913.4 | |||||||||
Deferred Charges |
501.1 | 412.6 | |||||||||
Properties and Plants,
less accumulated depreciation – $6,956.2 ($6,571.6 in 2002) |
5,251.0 | 5,192.3 | |||||||||
TOTAL ASSETS |
$ | 14,740.7 | $ | 13,146.6 | |||||||
LIABILITIES: |
|||||||||||
Current Liabilities: |
|||||||||||
Accounts payable – trade |
$ | 1,525.4 | $ | 1,502.2 | |||||||
Compensation and benefits |
965.9 | 961.2 | |||||||||
Other current liabilities |
427.0 | 481.6 | |||||||||
United States and foreign taxes |
466.7 | 473.2 | |||||||||
Notes payable (Note 7) |
129.4 | 283.4 | |||||||||
Long term debt due within one year (Note 7) |
42.3 | 369.8 | |||||||||
Total Current Liabilities |
3,556.7 | 4,071.4 | |||||||||
Long Term Debt and Capital Leases (Note 7) |
4,851.0 | 2,989.0 | |||||||||
Compensation and Benefits |
4,309.4 | 4,194.2 | |||||||||
Other Long Term Liabilities |
624.2 | 501.2 | |||||||||
Minority Equity in Subsidiaries |
788.2 | 740.2 | |||||||||
TOTAL LIABILITIES |
14,129.5 | 12,496.0 | |||||||||
Commitments and Contingent Liabilities (Note 8) |
|||||||||||
SHAREHOLDERS’ EQUITY: |
|||||||||||
Preferred Stock, no par value: |
|||||||||||
Authorized 50.0 shares, unissued |
— | — | |||||||||
Common Stock, no par value: |
|||||||||||
Authorized 300.0 shares |
|||||||||||
Outstanding shares - 175.3 (175.3 in 2002)
after deducting 20.4 treasury shares (20.4 in 2002) |
175.3 | 175.3 | |||||||||
Capital Surplus |
1,390.4 | 1,390.3 | |||||||||
Retained Earnings |
1,770.2 | 2,007.1 | |||||||||
Accumulated Other Comprehensive Income |
(2,724.7 | ) | (2,922.1 | ) | |||||||
TOTAL SHAREHOLDERS’ EQUITY |
611.2 | 650.6 | |||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 14,740.7 | $ | 13,146.6 | |||||||
The accompanying notes are an integral part of this financial statement.
- 2 -
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
Unaudited
| (In millions) | ||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||
| Other | Total | |||||||||||||||||||||
| Common | Capital | Retained | Comprehensive | Shareholders' | ||||||||||||||||||
| Stock | Surplus | Earnings | Income (Loss) | Equity | ||||||||||||||||||
Balance at December 31, 2002 |
$ | 175.3 | $ | 1,390.3 | $ | 2,007.1 | $ | (2,922.1 | ) | $ | 650.6 | |||||||||||
Comprehensive loss for 2003: |
||||||||||||||||||||||
Net loss |
(236.9 | ) | ||||||||||||||||||||
Foreign currency translation |
209.8 | |||||||||||||||||||||
Minimum pension liability |
(21.6 | ) | ||||||||||||||||||||
Unrealized investment gain |
9.6 | |||||||||||||||||||||
Deferred derivative loss |
(0.4 | ) | ||||||||||||||||||||
Total comprehensive loss |
(39.5 | ) | ||||||||||||||||||||
Common stock issued from treasury: |
||||||||||||||||||||||
Stock compensation plans |
0.1 | 0.1 | ||||||||||||||||||||
Balance at June 30, 2003 |
$ | 175.3 | $ | 1,390.4 | $ | 1,770.2 | $ | (2,724.7 | ) | $ | 611.2 | |||||||||||
| June 30, | December 31, | |||||||||
Accumulated Other Comprehensive Loss |
2003 | 2002 | ||||||||
Foreign currency translation adjustment |
$ | (1,179.3 | ) | $ | (1,389.1 | ) | ||||
Minimum pension liability adjustment |
(1,538.5 | ) | (1,516.9 | ) | ||||||
Unrealized investment gain (loss) |
0.3 | (9.3 | ) | |||||||
Deferred derivative loss |
(7.2 | ) | (6.8 | ) | ||||||
Total |
$ | (2,724.7 | ) | $ | (2,922.1 | ) | ||||
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
Unaudited
| (In millions) | Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Net Income (Loss) |
$ | (73.6 | ) | $ | 28.9 | $ | (236.9 | ) | $ | (34.3 | ) | |||||||
Other comprehensive income (loss): |
||||||||||||||||||
Foreign currency translation |
144.9 | 67.5 | 209.8 | 45.4 | ||||||||||||||
Minimum pension liability |
(23.6 | ) | (4.1 | ) | (21.6 | ) | (3.4 | ) | ||||||||||
Deferred derivative gain (loss) |
(13.7 | ) | 53.2 | 9.0 | 49.0 | |||||||||||||
Tax on deferred derivative gain (loss) |
— | (20.2 | ) | — | (18.6 | ) | ||||||||||||
Reclassification adjustment for amounts
recognized in income |
5.3 | (50.7 | ) | (8.5 | ) | (41.5 | ) | |||||||||||
Tax on derivative reclassification adjustment |
(1.1 | ) | 19.3 | (0.9 | ) | 15.8 | ||||||||||||
Unrealized investment gain |
10.9 | 3.9 | 9.6 | 3.9 | ||||||||||||||
Comprehensive (Income) Loss |
$ | 49.1 | $ | 97.8 | $ | (39.5 | ) | $ | 16.3 | |||||||||
The accompanying notes are an integral part of this financial statement.
- 3 -
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
| (In millions) | Six Months Ended | |||||||||||
| June 30, | ||||||||||||
| 2003 | 2002 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
Net Loss |
$ | (236.9 | ) | $ | (34.3 | ) | ||||||
Adjustments to reconcile net loss to cash flows
from operating activities: |
||||||||||||
Depreciation and amortization |
301.7 | 302.2 | ||||||||||
Rationalizations (Note 2) |
78.6 | — | ||||||||||
Asset sales (Note 3) |
7.0 | — | ||||||||||
Net cash flows from sale of accounts receivable (Note 5) |
(647.2 | ) | 12.3 | |||||||||
Changes in operating assets and liabilities, net of
asset acquisitions and dispositions: |
||||||||||||
Accounts and notes receivable |
(403.6 | ) | (216.3 | ) | ||||||||
Inventories |
(183.5 | ) | (15.3 | ) | ||||||||
Accounts payable — trade |
(141.6 | ) | 114.5 | |||||||||
Other assets and liabilities |
169.0 | (83.2 | ) | |||||||||
Total adjustments |
(819.6 | ) | 114.2 | |||||||||
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES |
(1,056.5 | ) | 79.9 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
Capital expenditures |
(177.3 | ) | (172.9 | ) | ||||||||
Short term securities acquired |
— | (36.2 | ) | |||||||||
Short term securities redeemed |
26.0 | — | ||||||||||
Asset dispositions (Note 6) |
84.9 | — | ||||||||||
Asset acquisitions (Note 6) |
(71.2 | ) | (38.9 | ) | ||||||||
Other transactions |
101.4 | (30.4 | ) | |||||||||
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES |
(36.2 | ) | (278.4 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
Short term debt incurred |
408.6 | 41.8 | ||||||||||
Sho | ||||||||||||