AKRON (Dec. 11, 2003) — Goodyear will delay filing its amended 2002 10-K with the Securities and Exchange Commission until next year—a move that could threaten the company's ability to satisfy parts of its agreement with the United Steelworkers of America as well as its ability to generate cash for operations.
Goodyear said it needs to delay filing the 10-K because an ongoing internal investigation has identified possible improper accounting issues in Europe, and the company wants to complete its review into those issues.
“To date, there has been no determination whether this would have a material impact on the financial statements,” the Akron-based tire maker said in a statement.
The amended filing was due after Goodyear restated more than five years' worth of earnings. The company announced details of the restatement with its third quarter results—which itself was delayed—on Nov. 20. The restatement pulled net income from 1998 through the first half of 2003 down by $84.7 million.
Delaying the 10-K filing could affect the company's ability to satisfy an obligation to the union to raise $250 million in debt and $75 million in equity-linked financing by year-end. The obligations are part of the recently ratified contract with the union, which represents about 18,000 of the tire maker's workers. Goodyear said the union has the right—but not the obligation—to strike after a grievance process if the tire maker does not complete these obligations by the end of the year.
Goodyear said it has initiated talks with the USWA to discuss options that would include aggressively pursuing financing options, including capital market access, once the amended 10-K is filed.
In a statement, the union said it will closely monitor the situation, but it did not say a strike is imminent.
“We are hopeful that the problems in Europe are not significant,” said Andrew Palm, international vice president for USWA. “We expect that the company will quickly resolve this situation and move on to complete their financing commitments in the near future.”
But even if the union doesn't strike, analyst Saul Rubin of UBS Investment Research said the inability to access capital markets for cash could throw yet another wrench into Goodyear's turnaround efforts. Just a week ago Mr. Rubin upgraded Goodyear's stock because of its potential to raise cash in the bond market. With the latest news, Mr. Rubin is reviewing his position and said the few available details make Goodyear a “high risk investment.”
“In our opinion, there's little doubt Goodyear needs to tap the capital markets soon to be able to run operations effectively,” he wrote.