UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1994
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________to________
Commission File Number 1-4329
COOPER TIRE & RUBBER COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 34-4297750
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Lima and Western Avenues, Findlay, Ohio 45840
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (419) 423-1321
Securities registered pursuant to Section 12(b) of the Act:
(Name of each exchange on
(Title of each class) which registered)
Common Stock, $1 par per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (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 (X) No ( )
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 registrant's 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. (X)
State the aggregate market value of the voting stock held by
non-affiliates of the registrant (computed by reference to the closing
price on the Composite Tape for securities listed on the New York Stock
Exchange as of March 6, 1995). $2,351,188,600
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
(Class) (Outstanding at March 6, 1995)
Common Stock, $1 par per share 83,638,872
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and
the Part of the Form 10-K into which the document is incorporated:
Proxy statement dated March 21, 1995 - Part III
EXHIBIT INDEX appears on pages 16 and 17
1
<PAGE>
Part I.
Item 1. BUSINESS.
Products and Sales
The primary business of Cooper Tire & Rubber Company ("Cooper" or
"Company") is the conversion of natural and synthetic rubbers into a
variety of carbon black reinforced rubber products. The Company
manufactures and markets the following products for the transportation
industry: automobile and truck tires, inner tubes, vibration control
products, hose and hose assemblies and automotive sealing systems. Its
non-transportation products accounted for less than one percent of sales
in 1994, 1993 and 1992. Additional information on the Company's
products appears on pages 39, 40, 43, 44, and 46 of this Annual Report
on Form 10-K.
The Company's tire products are sold nationally and internationally
in the replacement tire market, primarily through independent dealers
and distributors. In the United States, this channel of marketing has
accounted for 66 percent of all replacement passenger tires sold since
1992. Cooper has an efficient distribution system to serve its markets
for replacement passenger and truck tires.
Cooper engineers and manufactures rubber parts for automotive vehicle
manufacturers. The Company's engineering and marketing personnel work
closely with these customers to assist in the design and development of
rubber products to meet their changing requirements.
Additional information on the Company's marketing appears on pages
41, 42 and 45 of this Annual Report on Form 10-K.
North American vehicle manufacturers experienced a 10.4% increase in
total production of light vehicles in 1994. The Company's sales of
engineered rubber products are generally linked to light vehicle
production. Cooper's improved sales in this market reflected the
increased vehicle production as well as the Company's success in the
procurement of larger contracts and development of new products. The
Company is an authorized supplier to all domestically owned automotive
vehicle manufacturers and the foreign-owned and joint-venture vehicle
manufacturers in the United States.
Current market data indicates an increasing demand for replacement
tires and engineered rubber products. Essentially, there are no
economical or practical substitutes for tires or certain rubber
automotive parts. Based on current data, the Company expects moderate
growth in the market for replacement tires and in the use of rubber
components by automobile manufacturers. Additional information on the
Company's outlook for the industry appears on pages 39 and 43 of this
Annual Report on Form 10-K.
During recent years Cooper has exported to Canada and countries in
Latin America, Western Europe, the Middle East, Asia, Africa and
Oceania. The international market for rubber products is expanding as
the standard of living in other countries increases and motor vehicle
usage grows. Net sales from international operations accounted for
approximately six percent of Cooper's sales in 1994, and five percent of
sales in 1993 and 1992.
(continued)
2
<PAGE>
During 1994 Cooper's ten largest customers accounted for
approximately 53 percent of total sales. Sales to one major customer
approximated 13, 14 and 15 percent of net sales in 1994, 1993 and 1992.
The amount of backlog of orders for the Company's products at any given
time is usually small in relation to annual sales and is, therefore, of
little value in forecasting sales or earnings for the current or
succeeding years.
The Company successfully operates in a competitive industry. A
number of its competitors are larger than the Company. The four largest
tire-producing companies are believed to account for approximately 67
percent of all domestic original equipment and replacement tire sales.
The Company's shipments of automobile and truck tires in 1994
represented approximately 10 percent of all such industry shipments. On
the basis of domestic tire manufacturing capacity the Company believes
it ranks fourth among fourteen generally recognized producers of new
tires. According to a recognized trade source the Company ranked ninth
in worldwide tire sales based on 1993 estimated sales volumes. Sales of
the Company's tire products are affected by factors which include price,
quality, availability, technology, warranty, credit terms and overall
customer service.
Raw Materials
The primary raw materials used by the Company include synthetic and
natural rubbers, polyester and nylon fabrics, steel tire cord and carbon
black, which the Company acquires from multiple sources to provide
greater assurance of continuing supplies for its manufacturing
operations. The Company did not experience any significant raw material
shortages in 1994. However, supplies of carbon black and synthetic
rubber are currently constrained due to high levels of demand by the
industry.
The Company has a purchasing office in Singapore to acquire various
grades of natural rubber direct from producers in Indonesia, Malaysia
and Thailand. This purchasing operation enables the Company to work
directly with processors to improve the consistency of quality and to
reduce the costs of materials, delivery and transactions. In addition,
control over packaging methods enhances the Company's goal to use
recyclable materials in the packaging of these raw materials.
The Company's contractual relationships with its raw material
suppliers are generally based on purchase order arrangements. Certain
materials are purchased pursuant to supply contracts which incorporate
normal purchase order terms and establish minimum purchase amounts.
Cooper has not experienced serious fuel shortages and none are
foreseen in the near future. The Findlay, Ohio plant uses coal and
natural gas with fuel oil as a standby energy source. All other Company
plants use natural gas with fuel oil as a standby energy source.
Research, Development and Product Improvement
Cooper generally directs its research activities toward product
development, improvements in quality, and operating efficiency. A
significant portion of basic research for the rubber industry is
performed by raw material suppliers. The Company participates in such
research with its suppliers. Cooper has approximately 188 full-time
employees engaged in research and development programs. Research and
development expenditures amounted to approximately $14,700,000 in 1994,
$15,100,000 in 1993 and $13,700,000 in 1992.
(continued) 3
<PAGE>
The Company is a leader in the application of computer technology to
the development of new tire products and engineered automotive products.
The use of computer-aided design (CAD) and sophisticated modeling
programs reduce Cooper's product development costs and the time
necessary to bring new products to market. The Company also forms
strategic alliances with universities, research firms and high-tech
manufacturers to collaborate on new product development, particularly in
engineered automotive products. The ability to offer complete component
design services and full vehicle analysis to automotive customers
increases the Company's value as a partner in product design and
development.
The Company continues to actively develop new passenger and truck
tires. Cooper conducts extensive testing of current tire lines, as well
as new concepts in tire design and construction. During 1994
approximately 132 million miles of tests were performed on indoor test
wheels and in monitored road tests. Uniformity equipment is used to
physically check every radial passenger tire produced for high standards
of quality. The Company continues to design and develop specialized
equipment to fit the precise needs of its manufacturing and quality
control requirements.
Additional information on the Company's research, development and
product improvement programs appears on pages 41, 44 and 45 of this
Annual Report on Form 10-K.
Environmental Matters
Cooper recognizes the importance of compliance in environmental
matters and has an organization structure to supervise environmental
activities, planning and programs. The Company also participates in
activities concerning general industry environmental matters.
Cooper's manufacturing facilities, in common with those of industry
generally, are subject to numerous laws and regulations designed to
protect the environment. In general, the Company has not experienced
difficulty in complying with these requirements and believes they have
not had a material adverse effect on its financial condition or the
results of its operations. The Company expects that additional
requirements with respect to environmental control facilities and waste
disposal will be imposed in the future.
The Company has been named in environmental matters asserting
potential joint and several liability for past and future cleanup, state
and Federal claims, site remediation, and attorney fees. The Company
has determined that it has no material liability for these matters. The
Company's 1994 expense and capital expenditures for environmental
control at its facilities were not material, nor is it estimated that
expenditures in 1995 for such uses will be material.
Seasonal Trends
There is a year-round demand for passenger and truck replacement
tires, but passenger replacement tire sales are generally strongest
during the second and third quarters of the year. Winter tires are sold
principally during the months of August through October. Engineered
rubber product sales to automotive customers are lowest during the
months prior to model changeover.
(continued)
4
<PAGE>
Employee Relations
As of December 31, 1994, the Company employed 7,815 persons, of whom
3,719 were salaried employees. Union contracts covering 4,096 employees
include, among other things: wages, hours, grievance procedures,
checkoff, seniority and working conditions. Union contracts with the
United Rubber, Cork, Linoleum and Plastic Workers of America
(AFL-CIO-CLC) for all production and maintenance employees at each of
the following Company plants continue in effect until the indicated
contract expiration date:
Auburn, Indiana - December 5, 1997
Bowling Green, Ohio (Sealing products) - October 31, 1997
Bowling Green, Ohio (Hose products) - April 30, 1998
Clarksdale, Mississippi - July 31, 1996
El Dorado, Arkansas - April 27, 1997
Findlay, Ohio - October 31, 1997
Texarkana, Arkansas, - March 5, 1996
Over-the-road truck drivers are affiliated with the International
Brotherhood of Teamsters with their contract in effect until February
13, 1997. Employees at the Piedras Negras, Mexico plant are affiliated
with Sindicato Autonomo de Trabajadores Rio Grande SerVaas with their
contract in effect until January 31, 1996. All labor agreements will be
extended for yearly periods unless notice of termination or change is
given by either party at least 60 days prior to the expiration of any
yearly period. During the last three years there have been no work
stoppages. Cooper considers its labor relations to be favorable.
Substantially all employees are covered by hospital and surgical,
group life, and accident and sickness benefit plans. The Company has
various trusteed non-contributory retirement income plans which cover
most employees and retirees. Substantially all retirees are covered by
hospital and surgical and group life benefit plans. See "Notes to
Consolidated Financial Statements" on pages 28 through 32 of this Annual
Report on Form 10-K for additional information as to pension costs and
funding and postretirement benefits.
5
<PAGE>
Item 2. PROPERTIES.
The Company owns its headquarters facility which is adjacent to its
Findlay, Ohio tire manufacturing plant. Properties are located in
various sections of the United States for use in the ordinary course of
business. Such properties consist of the following:
<TABLE>
<CAPTION>
Location Use Title
- ----------------------- ----------------------------- -----
<S> <C> <C>
3300 Sylvester Road Tire plant and regional Owned
Albany, GA 31703 distribution center
725 West Eleventh St. Engineered products plant Owned
Auburn, IN 46706
1175 North Main St. Engineered products plant Owned
Bowling Green, OH 43402
400 Van Camp Rd. Engineered products plant Owned
Bowling Green, OH 43402
2205 Fourth Street Inner tube plant Owned
Clarksdale, MS 38614
Cooper Drive Engineered products plant Owned
El Dorado, AR 71730
701 Lima Ave. Tire plant Owned
Findlay, OH 45840
3500 E. Washington Rd. Tire plant and regional Owned
Texarkana, AR 75502 distribution center
1689 South Green St. Tire plant and regional Owned
Tupelo, MS 38802 distribution center
6340 Artesia Blvd. Regional distribution Owned
Buena Park, CA 90620 center
1300 Lunt Avenue Regional distribution Owned
Elk Grove Village, center
IL 60007
4200-D Industry Drive Regional distribution Leased
Fife, WA 98424 center
Lake Cascades Parkway Regional distribution Owned
Findlay, OH 45840 center
1026 Century Ave. Regional distribution Leased
Kansas City, MO 64120 center
3601 Dryden Road Regional distribution Owned
Moraine, OH 45439 center
Terminal Road & Regional distribution Owned
Industrial Drive center
New Brunswick, NJ 08901
</TABLE>
(continued) 6
<PAGE>
The Company also owns a manufacturing facility located in Mexico
which produces inner tubes and engineered rubber parts.
Cooper's tire plants are operating at rated capacity levels with the
exception of the plant in Albany, Georgia. This plant was acquired in
1990, began limited production during 1991, and continues to be equipped
to manufacture a full range of radial passenger, light truck and medium
truck tires using the most advanced technology. The Tupelo, Mississippi
and Albany, Georgia plants operate on a 24-hour day, seven-day
production schedule. The other plants are operating 24 hours per day,
six days per week. The Company believes its properties have been
adequately maintained and generally are in good condition.
Additional information concerning the Company's facilities appears on
pages 40, 41, 43, and 44 of this Annual Report on Form 10-K.
Information related to leased properties appears on pages 33 and 34.
Item 3. LEGAL PROCEEDINGS.
Cooper is a defendant in many unrelated actions in Federal and state
courts throughout the United States. In a number of such cases the
plaintiffs allege violations of state and Federal laws, breach of
contract and product liability and assert damages of many thousands of
dollars. The Company self-insures product liability losses up to
$2,250,000 per occurrence with an annual aggregate of $6,000,000. In
addition, Cooper carries Excess Liability Insurance which provides
protection with respect to product liability losses in excess of the
self-insured amounts. While the outcome of litigation cannot be
predicted with any certainty, in the opinion of counsel for the Company,
the pending claims and lawsuits against the Company should not have a
material adverse effect on the financial condition of the Company or the
results of its operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the last
quarter of the fiscal year ended December 31, 1994.
7
<PAGE>
Part II.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Cooper Tire & Rubber Company common stock is traded on the New York
Stock Exchange under the symbol CTB. Information concerning the
Company's common stock and related security holder matters (including
dividends) is presented on pages 9, 21, 25 through 28 and 36 of this
Annual Report on Form 10-K.
<TABLE>
Item 6. SELECTED FINANCIAL DATA.
<CAPTION>
(All dollar amounts in thousands except per share figures)
Income
Before
Net Gross Operating Income Income Net
Sales Margin Margin Taxes+ Taxes Income+ Income
--------- ------ --------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $1,403,243 $277,265 $208,517 $208,119 $79,600 $128,519 $128,519
1993 1,193,648 228,295 166,013 164,250 62,040 102,210 102,210
1992 1,174,728 229,332 170,646 169,841 61,670 108,171 43,211
1991 1,001,071 180,432 128,495 124,465 45,030 79,435 79,435
1990 895,896 155,892 108,715 104,874 38,410 66,464 66,464
1989 866,805 139,482 94,188 92,624 34,380 58,244 58,244
1988 748,032 106,419 66,575 64,912 23,850 41,062 41,062
1987 665,775 93,877 56,031 53,090 22,410 30,680 30,680
1986 577,517 81,515 46,432 43,138 20,120 23,018 23,018
1985 522,639 64,862 34,492 31,151 12,680 18,471 18,471
1984 555,388 73,030 43,447 41,978 17,400 24,578 24,578
<CAPTION>
Net Deprecia-
Stock- Property, Capital tion & Long-
holders' Total Working Plant & Expend- Amorti- term
Equity Assets Capital Equipment itures zation Debt
------ ------ ------- --------- ------ ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $662,077 $1,039,731 $303,103 $549,601 $ 78,449 $55,603 $33,614
1993 550,186 889,584 204,857 527,949 117,249 46,352 38,729
1992 471,474 796,858 175,154 460,373 110,157 38,077 48,075
1991 439,648 670,572 144,285 388,557 85,954 31,969 53,512
1990 369,003 616,458 167,291 334,794 100,141 27,615 91,027
1989 310,064 519,893 150,285 262,445 73,182 23,393 65,727
1988 257,756 442,582 143,101 212,923 70,621 19,873 67,790
1987 221,566 413,306 154,283 162,447 41,507 18,436 70,059
1986 195,151 367,715 153,538 139,721 26,548 16,666 76,795
1985 175,711 295,161 110,300 123,380 23,660 14,955 41,910
1984 160,526 279,857 92,920 115,329 57,239 11,605 36,501
(continued)
8
<PAGE>
<CAPTION>
Long-term
Return On Return On Debt to
Beginning Beginning Current Pretax Effective Return On Capital-
Equity+ Assets+ Ratio Margin+ Tax Rate+ Sales+ ization
--------- --------- ------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 23.4% 14.4% 3.0 14.8% 38.2% 9.2% 4.8%
1993 21.7 12.8 2.6 13.8 37.8 8.6 6.6
1992 24.6 16.1 2.3 14.5 36.3 9.2 9.3
1991 21.5 12.9 2.2 12.4 36.2 7.9 10.9
1990 21.4 12.8 2.7 11.7 36.6 7.4 19.8
1989 22.6 13.2 2.5 10.7 37.1 6.7 17.5
1988 18.5 9.9 2.7 8.7 36.7 5.5 20.8
1987 15.7 8.3 2.6 8.0 42.2 4.6 24.0
1986 13.1 7.8 3.1 7.5 46.6 4.0 28.2
1985 11.5 6.6 2.8 6.0 40.7 3.5 19.3
1984 17.6 10.1 2.3 7.6 41.4 4.4 18.5
<CAPTION>
Net Common Common
Income Income Equity Dividends Shares Shares
Per Per Per Per Average Year End
Share*+ Share* Share* Share* (000)* (000)*
------- ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1994 $1.54 $1.54 $7.92 $.23 83,623 83,634
1993 1.22 1.22 6.58 .20 83,550 83,582
1992 1.30 .52 5.65 .17 83,357 83,511
1991 .96 .96 5.30 .13 82,738 82,962
1990 .81 .81 4.47 .11 82,391 82,519
1989 .71 .71 3.77 .09 82,077 82,259
1988 .50 .50 3.15 .07 81,583 81,821
1987 .38 .38 2.72 .06 81,258 81,383
1986 .28 .28 2.40 .05 80,864 81,152
1985 .23 .23 2.18 .05 80,256 80,623
1984 .31 .31 2.00 .05 79,979 80,070
<CAPTION>
Number Price/
of Earnings
Stock- Number of Wages & Total Research & Stock Price* Average
holders Employees Benefits Taxes# Development High Low Ratio+
------- --------- -------- ------ ----------- ---- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994 7,623 7,815 $381,764 $111,504 $14,700 $29.50 $21.63 16.6
1993 8,096 7,607 346,062 91,479 15,100 39.63 20.00 24.4
1992 6,142 7,207 329,396 46,432 13,700 35.63 22.00 22.2
1991 4,492 6,545 266,683 67,933 14,000 26.25 7.88 17.8
1990 4,459 6,225 256,076 59,802 10,800 10.50 6.19 10.3
1989 3,871 6,041 233,881 54,020 10,300 9.75 5.63 10.8
1988 3,627 6,031 217,480 41,743 11,200 6.81 3.53 10.3
1987 3,516 5,720 189,209 39,056 10,300 4.97 2.78 10.3
1986 3,138 5,398 165,458 34,801 8,900 3.60 2.16 10.1
1985 3,526 4,876 153,825 26,275 7,300 2.55 1.83 9.5
1984 3,872 4,805 148,139 30,845 6,700 2.38 1.58 6.4
<FN>
+ Prior to cumulative effect of changes in accounting in 1992 for
postretirement benefits other than pensions and income taxes.
* Share data reflects stock splits in 1992, 1990 and 1988.
# Excluding Federal excise taxes.
</TABLE>
9
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Financial Condition
The financial position of the Company continues to be excellent. Strong
operating cash flows provided funds for modernization and expansion and
contributed to continued financial strength.
Working capital amounted to $303 million at year-end 1994 compared to
$205 million one year earlier. A current ratio of 3.0 indicates an
excellent liquidity position and is improved from the strong year-end
1993 current ratio of 2.6.
Accounts receivable increased to $221 million versus $182 million at
year-end 1993, reflecting strong fourth quarter sales levels. Adequate
allowances have been made for possible collection losses. Generally,
collection experience has been excellent and customer payment terms are
comparable to the prior year.
Total inventories at $116 million were up from $111 million at
year-end 1993. Finished goods inventories were $69 million, or 15
percent lower than one year ago. This decrease resulted from the strong
sales activity during the year. Raw material and supplies inventories
were $17 million higher than one year ago due to increased levels of raw
material purchases. Work-in-process inventories were unchanged compared
with the prior year.
Prepaid expenses and deferred taxes at December 31, 1994 include $11
million in deferred tax assets which are considered fully realizable
within one year.
In 1994 additions to property, plant and equipment were $78 million
compared with $117 million in 1993. This decrease reflects completion
of several major expansions in 1993 and the timing of capital projects
currently in progress. The Company has invested significant amounts for
property, plant and equipment in recent years primarily for continuing
expansions and improving manufacturing technology. A continuation of
high levels of capital expenditures is anticipated. Funding for these
projects will be available from operating cash flows with additional
funding available, if needed, under a credit agreement and a shelf
registration. The Company's capital expenditure commitments, which were
not material at December 31, 1993, approximated $32 million at December
31, 1994. Depreciation and amortization was $56 million in 1994, a 22
percent increase from $46 million in 1993, and results from the
significant capital expenditures in recent years.
Other assets of $35 million are up $5 million from year-end 1993 and
primarily reflect the increase in the amount of cumulative pension
funding in excess of amounts expensed under Statement of Financial
Accounting Standards (SFAS) #87, "Employers' Accounting for Pensions".
Current liabilities of $152 million were $25 million higher than the
$127 million at year-end 1993 reflecting increases in trade payables
associated with raw material purchases.
Long-term debt decreased $5 million from year-end 1993 to $34 million
due to scheduled debt payments. Long-term debt, as a percent of total
capitalization, decreased to 4.8 percent at December 31, 1994 from 6.6
percent a year earlier. The Company has a shelf registration statement
with the Securities and Exchange Commission covering the proposed sale
of its debt securities in an aggregate amount of up to $200 million.
The net proceeds received by the Company from any sale of the debt
securities would be available for general corporate purposes.
The Company currently provides certain health care and life insurance
benefits for its active and retired employees. If the Company does not
terminate such benefits, or modify coverage or eligibility requirements,
substantially all of the Company's United States employees may become
10
<PAGE>
eligible for these benefits at their retirement. The Company uses the
accrual method of accounting for the cost of providing such benefits.
These benefit costs are funded as claims are incurred. The Company
adjusted certain assumptions used to derive the liabilities for pensions
and postretirement benefits other than pensions at December 31, 1994.
The discount rate for pensions was increased from 7 percent to 8 percent
and the assumed rate of increase in compensation was increased from 5
percent to 6 percent. The discount rate for postretirement benefits
other than pensions was increased from 7.5 percent at December 31, 1993
to 8.5 percent at December 31, 1994.
Noncurrent deferred income taxes increased to $30 million at December
31, 1994, from $19 million one year earlier, primarily reflecting the
excess of tax over book depreciation.
The Company has been named in environmental matters asserting
potential joint and several liability for past and future cleanup, state
and Federal claims, site remediation, and attorney fees. The Company
has determined that it has no material liability for these matters. In
addition, the Company is a defendant in unrelated product liability
actions in Federal and state courts throughout the United States in
which plaintiffs assert damages of many thousands of dollars. While the
outcome of litigation cannot be predicted with any certainty, in the
opinion of counsel for the Company, the pending claims and lawsuits
against the Company have not had and should not have a material adverse
effect on its financial condition or results of operations.
Stockholders' equity increased $112 million during the year reaching
$662 million at year end. Earnings retentions for 1994 (net income less
dividends paid) added $109 million to stockholders' equity.
Stockholders' equity per share was $7.92 at year-end 1994, an increase
of 20 percent over $6.58 per share at year-end 1993.
Results of Operations
High levels of capacity utilization and strong customer demand continued
for the Company's tires and engineered rubber products. Sales increased
18 percent in 1994 to a record $1.4 billion. This followed a 2 percent
increase in sales in 1993 which resulted primarily from growth in
customer demand.
Sales margins were higher in 1994 than in 1993 and were lower in 1993
than in 1992. During 1994, higher operating rates, more favorable
product mix and higher finished goods pricing offset raw material cost
increases. Pricing pressures in the replacement tire industry were
intense in 1993 contributing to the reduction from 1992.
The costs of certain raw materials significantly increased during
1994 and are expected to remain at high levels through at least the
second quarter of 1995. In addition, some of these same materials are
currently in short supply due to high levels of demand by the rubber
industry. Sales margins early in the year may be affected by these
situations. The Company successfully implemented price increases on its
tires during the fourth quarter of 1994 and has announced additional
price increases effective late in the first quarter of 1995. The
effects of inflation on sales and operations were not material in 1993
and 1992.
Other income was higher in 1994 compared with 1993 and lower in 1993
compared to 1992. These changes were related to the investments of cash
reserves and interest earned thereon.
Increases in 1994 and 1993 selling, general and administrative
expenses were normal considering sales activity levels and general
inflation.
Effective income tax rates were slightly higher in 1994 than in 1993
due to changes in tax credits. The increased rate in 1993 over 1992
reflected the Omnibus Budget Reconciliation Act of 1993 which, among
other things, increased the effective federal tax rate and reinstated
the research and development credit.
11
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Statements of financial position at December 31, 1994 and 1993 and
statements of income, cash flows, and stockholders' equity for each of
the three years in the period ended December 31, 1994, the independent
auditor's report thereon, and the Company's unaudited quarterly
financial data for the two-year period ended December 31, 1994 are
presented on pages 19 through 36 of this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
12
<PAGE>
Part III.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning the Company's directors appears on pages 2
through 5 and 18 of the Company's Proxy Statement dated March 21, 1995
and is incorporated herein by reference. The names, ages, and all
positions and offices held by all executive officers of the Company, as
of the same date, are as follows:
<TABLE>
<CAPTION>
Name Age Executive Office Held Business Experience
- --------------------- --- --------------------- ---------------------
<S> <C> <C> <C>
Patrick W. Rooney 59 Chairman of the Board, Principal Executive
President, Chief Officer and Chairman
Executive Officer and of the Board since
Director October 17, 1994.
President since 1991.
Principal Operating
Officer from 1991 to
1994. Director since
1990. Vice President
from 1987 to 1991.
President of Tire
Division from 1990 to
1994; previously
Vice President-Sales
from 1984 to 1987.
Vice President of
Cooper Brand Sales,
Tire Division from
1969 to 1984.
J. Alec Reinhardt 53 Executive Vice Principal Financial
President and Director Officer and Director
since 1983. Executive
Vice President since
1991. Vice President
from 1982 to 1991.
Secretary from 1977 to
1986. General Counsel
from 1976 to 1983.
John Fahl 58 Vice President and President of Tire
Director Division since
October 19, 1994.
Vice President since
1978. Director since
July 1992. Corporate
Director of Purchasing
from 1966 to 1978.
Julien A. Faisant 62 Vice President and Principal Accounting
Corporate Controller Officer and Corporate
Controller since 1975.
Vice President since
1985.
(continued) 13
<PAGE>
Robert C. Gasser 58 Vice President Vice President since
1987. President of
Engineered Products
Division, formerly
Industrial Products
Division, since 1987;
Vice President-Sales
of Industrial Products
Division from 1983 to
1987.
William C. Hattendorf 60 Vice President and Vice President since
Treasurer November 10, 1994.
Treasurer since 1982.
Assistant Treasurer
and Assistant
Secretary from 1977 to
1982. Corporate Tax
and Insurance Manager
from 1972 to 1977.
Keith L. Jolliff 52 Vice President Vice President since
February 14, 1995.
Previously Director of
Corporate Purchasing
since 1994. Manager
of Corporate Purchasing
from 1973 to 1994.
Assistant Purchasing
Agent and Buyer from
1966 to 1973.
William S. Klein 57 Vice President Vice President since
1984. Vice President-
Operations of Tire
Division since 1975.
Richard D. Teeple 52 Vice President and Vice President since
General Counsel 1990. General Counsel
since 1983. Assistant
General Counsel from
1979 to 1983.
Associate Counsel from
1977 to 1979.
Stan C. Kaiman 56 Secretary Secretary since 1986.
Stephen O. Schroeder 44 Assistant Treasurer Assistant Treasurer
since November 10, 1994.
Previously Manager,
Cash and Employee Funds
since 1984.
Eileen B. White 44 Assistant Corporate Assistant Corporate
Controller Controller since
November 10, 1994.
Previously Manager of
Financial Research and
Compliance since 1986.
</TABLE>
Each such officer shall hold such office until a successor is
selected and qualified.
14
<PAGE>
Item 11. EXECUTIVE COMPENSATION.
Information regarding executive compensation appears on pages 6
through 14 of the Company's Proxy Statement dated March 21, 1995 and is
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information concerning the security ownership of certain beneficial
owners and management of the Company's voting securities and equity
securities appears on pages 16 and 17 of the Company's Proxy Statement
dated March 21, 1995 and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
Part IV.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
The financial statements listed in the accompanying index to
financial statements and financial statement schedules are filed
as part of this Annual Report on Form 10-K.
2. Financial Statement Schedule
The financial statement schedule listed in the accompanying
index to financial statements and financial statement schedules
is filed as part of this Annual Report on Form 10-K.
3. Exhibits
The exhibits listed on the accompanying index to exhibits are
filed as part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
fiscal year ended December 31, 1994.
15
<PAGE>
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
Page(s)
FINANCIAL STATEMENTS: Reference
---------
Consolidated Statements of Income for the years
ended December 31, 1994, 1993 and 1992 19
Consolidated Balance Sheets at December 31, 1994 and 1993 20-21
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1994, 1993 and 1992 22
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992 23
Notes to Consolidated Financial Statements 24-34
Report of Independent Auditors 35
SUPPLEMENTARY INFORMATION:
Quarterly Financial Data (Unaudited) 36
FINANCIAL STATEMENT SCHEDULE:
II. Valuation and qualifying accounts 37
EXHIBITS:
(3) Certificate of Incorporation and Bylaws
(i) Certificate of Incorporation, as restated and filed with
the Secretary of State of Delaware on May 17, 1993, is
incorporated herein by reference from Exhibit 3(i) of the
Company's Form 10-Q for the quarter ended June 30, 1993
(ii) Bylaws, as amended May 5, 1987, are incorporated herein
by reference from Exhibit 19 of the Company's Form 10-Q
for the quarter ended June 30, 1987
(4) Description of the Common Stock of the Company 38
(10) Description of management contracts, compensatory plans,
contracts, or arrangements is incorporated herein by
reference from pages 6 through 14 of the Company's Proxy
Statement dated March 21, 1995.
The following related documents are also incorporated by
reference:
a) 1981 Incentive Stock Option Plan - Form S-8
Registration Statement No. 2-77400, Exhibit 15(a)
b) 1986 Incentive Stock Option Plan - Form S-8
Registration Statement No. 33-5483, Exhibit 4(a)
c) Thrift and Profit Sharing Plan - Form S-8
Registration Statement No. 2-58577, Post-Effective
Amendment No. 6, Exhibit 4
d) Employment Agreements - Form 10-K for fiscal year
ended December 31, 1987, Exhibit 10
e) 1991 Stock Option Plan for Non-Employee Directors -
Form S-8 Registration Statement No. 33-47980 and
Appendix to the Company's Proxy Statement dated
March 26, 1991
(11) Statement regarding computation of earnings per share is
presented on page 28 of this Annual Report on Form 10-K
(13) Annual report to security holders, Form 10-Q or quarterly
report to security holders 39-46
(continued) 16
<PAGE>
(23) Consent of Ernst & Young LLP 47
(24) Powers of Attorney 48-51
(27) Financial Data Schedule
(99) Undertakings of the Company 52-54
All other schedules have been omitted since the required
information is not present or not present in amounts sufficient to
require submission of the schedules, or because the information required
is included in the financial statements or the notes thereto.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
COOPER TIRE & RUBBER COMPANY
/s/ Stan C. Kaiman
--------------------------------
STAN C. KAIMAN, Attorney-in-fact
Date: March 21, 1995
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
PATRICK W. ROONEY* Chairman of the Board, March 21, 1995
President, Chief Executive
Officer and Director
(Principal Executive Officer)
J. ALEC REINHARDT* Executive Vice President and March 21, 1995
Director (Principal Financial
Officer)
JOHN FAHL* Vice President and Director March 21, 1995
JULIEN A. FAISANT* Vice President and Corporate March 21, 1995
Controller (Principal
Accounting Officer)
DELMONT A. DAVIS* Director March 21, 1995
EDSEL D. DUNFORD* Director March 21, 1995
DENNIS J. GORMLEY* Director March 21, 1995
IVAN W. GORR* Director March 21, 1995
JOSEPH M. MAGLIOCHETTI* Director March 21, 1995
ALLAN H. MELTZER* Director March 21, 1995
LEON F. WINBIGLER* Director March 21, 1995
*By/s/ Stan C. Kaiman
--------------------------------
STAN C. KAIMAN, Attorney-in-fact
18
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31
(Dollar amounts in thousands; per-share amounts in dollars)
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Net sales $1,403,243 $1,193,648 $1,174,728
Other income 2,282 588 1,276
--------- --------- ---------
1,405,525 1,194,236 1,176,004
Costs and expenses:
Cost of products sold 1,125,978 965,353 945,396
Selling, general
and administrative 68,748 62,282 58,686
Interest and debt expense 2,680 2,351 2,081
--------- --------- ---------
1,197,406 1,029,986 1,006,163
--------- --------- ---------
Income before income taxes
and cumulative effect of
changes in accounting 208,119 164,250 169,841
Provision for income taxes 79,600 62,040 61,670
--------- --------- ---------
Income before cumulative
effect of changes in
accounting 128,519 102,210 108,171
Cumulative effect of changes in
accounting for postretirement
benefits other than pensions
and income taxes - - (64,960)
--------- --------- ---------
Net income $ 128,519 $ 102,210 $ 43,211
========= ========= =========
Income per share before
cumulative effect of
changes in accounting $1.54 $1.22 $1.30
Cumulative effect of changes
in accounting - - (.78)
---- ---- ---
Net income per share $1.54 $1.22 $ .52
==== ==== ====
<FN>
See Notes to Consolidated Financial Statements, pages 24 to 34.
</TABLE>
19
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands; per-share amounts in dollars)
<CAPTION>
December 31
---------------------------
ASSETS 1994 1993
---------- ----------
<S> <C> <C>
Current assets:
Cash, including short-term
investments of $83,000 in
1994 and $15,000 in 1993 $ 103,285 $ 25,799
Accounts receivable, less
allowances of $3,600
in 1994 and $3,100 in 1993 221,237 182,203
Inventories:
Finished goods 69,098 81,067
Work in process 10,341 10,381
Raw materials and supplies 37,084 19,663
--------- -------
116,523 111,111
Prepaid expenses and deferred taxes 13,666 12,904
--------- -------
Total current assets 454,711 332,017
Property, plant and equipment:
Land and land improvements 20,228 19,633
Buildings 190,129 182,612
Machinery and equipment 631,711 579,952
Molds, cores and rings 38,546 25,018
--------- -------
880,614 807,215
Less accumulated depreciation
and amortization 331,013 279,266
--------- -------
Net property, plant
and equipment 549,601 527,949
Other assets 35,419 29,618
--------- -------
$1,039,731 $889,584
========= =======
(continued)
20
<PAGE>
<CAPTION>
December 31
-------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
---------- --------
<S> <C> <C>
Current liabilities:
Accounts payable $ 83,864 $ 65,686
Income taxes 6,049 6,066
Accrued liabilities 56,583 50,063
Current portion of debt 5,112 5,345
--------- -------
Total current liabilities 151,608 127,160
Long-term debt:
9% senior notes payable, due 2001 27,273 31,818
Other 6,341 6,911
--------- -------
Total long-term debt 33,614 38,729
Postretirement benefits other
than pensions 127,347 118,542
Other long-term liabilities 35,348 36,015
Deferred income taxes 29,737 18,952
Commitments - -
Stockholders' equity:
Preferred stock, $1 par value;
5,000,000 shares authorized;
none issued - -
Common stock, $1 par value; 300,000,000
shares authorized; 83,634,072 shares
outstanding (83,581,768 in 1993) 83,634 83,582
Capital in excess of par value 1,656 1,215
Retained earnings 576,787 465,389
--------- -------
Total stockholders' equity 662,077 550,186
--------- -------
$1,039,731 $889,584
========= =======
<FN>
See Notes to Consolidated Financial Statements, pages 24 to 34.
</TABLE>
21
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31
(Dollar amounts in thousands; per-share amounts in dollars)
<CAPTION>
Capital In
Common Stock Excess of Retained
$1 Par Value Par Value Earnings
------------ ----------- ---------
<S> <C> <C> <C>
Balance at December 31, 1991 $41,481 $7,786 $390,381
Net income 43,211
Exercise of stock options 323 2,470
Two-for-one stock split 41,707 (9,645) (32,062)
Cash dividends -
$.17 per share (14,178)
------ ----- -------
Balance at December 31, 1992 83,511 611 387,352
Net income 102,210
Exercise of stock options 71 604
Cash dividends -
$.20 per share (16,710)
Reduction for minimum pension
liability, net of
deferred income taxes (7,463)
------ ----- -------
Balance at December 31, 1993 83,582 1,215 465,389
Net income 128,519
Exercise of stock options 52 441
Cash dividends -
$.23 per share (19,234)
Adjustment for minimum pension
liability, net of
deferred income taxes 2,113
------ ----- -------
Balance at December 31, 1994 $83,634 $1,656 $576,787
====== ===== =======
<FN>
See Notes to Consolidated Financial Statements, pages 24 to 34.
</TABLE>
22
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31
(in thousands)
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Operating activities:
Net income $128,519 $102,210 $ 43,211
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 55,603 46,352 38,077
Deferred taxes 8,983 10,526 (33,546)
Postretirement benefits
other than pensions 8,170 8,400 115,684
Increase in accounts
receivable (39,034) (980) (28,527)
Decrease (increase) in
inventories and
prepaid expenses (6,174) (45,623) 6,206
Increase (decrease) in
accounts payable and
accrued liabilities 24,698 (12,800) 25,274
Increase (decrease) in
other long-term
liabilities and other (828) 1,979 (7,958)
------- ------- -------
Net cash provided by
operating activities 179,937 110,064 158,421
Investing activities:
Additions to property,
plant and equipment (78,449) (117,249) (110,156)
Other 88 3,226 59
------- ------- -------
Net cash used in
investing activities (78,361) (114,023) (110,097)
Financing activities:
Issuance of debt 13,000 24,000 -
Payments on debt (18,349) (33,318) (6,259)
Issuance of common stock 493 675 2,793
Dividends paid (19,234) (16,710) (14,178)
------- ------- -------
Net cash used in
financing activities (24,090) (25,353) (17,644)
------- ------- -------
Increase (decrease) in cash
and short-term investments 77,486 (29,312) 30,680
Cash and short-term investments
at beginning of year 25,799 55,111 24,431
------- ------- -------
Cash and short-term investments
at end of year $103,285 $ 25,799 $ 55,111
======= ======= =======
<FN>
See Notes to Consolidated Financial Statements, pages 24 to 34.
</TABLE>
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands; per-share amounts in dollars)
SIGNIFICANT ACCOUNTING POLICIES
Accounting policies employed by the Company are based on generally
accepted accounting principles. The following summary of significant
accounting policies is presented for assistance in the evaluation and
interpretation of the financial statements and supplementary data.
Consolidation - The consolidated financial statements include the
accounts of the Company and its subsidiaries, all of which are
wholly-owned. All material intercompany accounts and transactions have
been eliminated.
Cash and short-term investments - The Company considers all highly
liquid investments with an original maturity of three months or less to
be short-term investments (cash equivalents). The carrying amount
reported in the balance sheets for cash and short-term investments
approximates its fair value. The effect of changes in foreign exchange
rates on cash balances was not significant.
Inventories - Substantially all inventories are valued at cost, using
the last-in, first-out (LIFO) cost method, which is not in excess of
market.
Property, plant and equipment - Assets are recorded at cost and
depreciated or amortized using the straight-line method over their
expected useful lives. For income tax purposes accelerated depreciation
methods and shorter lives are used.
Revenue recognition - Revenues are recognized after goods are shipped
to customers in accordance with their purchase orders.
Warranties - Estimated costs for product warranties are charged to
income at the time of sale.
Research and development - These costs are charged to expense as
incurred and amounted to approximately $14,700, $15,100 and $13,700 in
1994, 1993 and 1992, respectively.
BUSINESS
The Company, a specialist in the rubber industry, manufactures and
markets automobile and truck tires, inner tubes, vibration control
products, hose and hose assemblies and automotive sealing systems.
The Company manufactures products primarily for the transportation
industry. Its non-transportation products accounted for less than one
percent of sales in 1994, 1993 and 1992. Sales to one major customer
approximated 13, 14 and 15 percent of net sales in 1994, 1993 and 1992,
respectively.
INVENTORIES
Under the LIFO method, inventories have been reduced by approximately
$64,653 and $52,850 at December 31, 1994 and 1993, respectively, from
current cost which would be reported under the first-in, first-out
method.
(continued)
24
<PAGE>
LONG-TERM DEBT
The Company entered into a new credit agreement with four banks
authorizing borrowings up to $120,000 with interest at varying rates.
The proceeds may be used for general corporate purposes. The agreement
provides that on March 1, 1998 the Company may convert any outstanding
borrowings into a four-year term loan. A commitment fee is payable
quarterly and is based on the daily unused portion of the $120,000. The
credit facility supports the issuance of commercial paper. There were
no borrowings under the agreement at December 31, 1994.
The 9% Senior Notes, due October 1, 2001, provide for semiannual
interest payments on April 1 and October 1 and annual principal
prepayments of $4,545 on October 1 through the year 2000.
<TABLE>
Other long-term debt at December 31 was as follows:
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Capitalized lease obligations $5,137 $5,259
8 7/8% mortgage note, payable
$47,083 monthly including interest 1,204 1,652
----- -----
$6,341 $6,911
===== =====
</TABLE>
The mortgage note is secured by real and personal property with a
carrying value of $7,631 at December 31, 1994.
The most restrictive covenants under the loan agreements require the
maintenance of $65,000 in working capital and restrict the payment of
dividends; the amount of retained earnings not restricted was
$454,284 at December 31, 1994.
Interest paid on debt during 1994, 1993 and 1992 was $3,911, $4,723,
and $5,111, respectively. The amount of interest capitalized was
$1,170, $2,297, and $2,907 during 1994, 1993 and 1992, respectively.
The required principal payments for long-term debt during the next
five years are as follows: 1995-$5,112; 1996-$5,036; 1997 - $5,081;
1998 - $4,723; 1999 - $4,545. See the note on lease commitments for
information on capitalized lease obligations.
The Company has a Registration Statement with the Securities and
Exchange Commission covering the proposed sale of its debt securities in
an aggregate amount of up to $200,000. The Company may sell the
securities to or through underwriters, and may also sell the securities
directly to other purchasers or through agents or dealers. The net
proceeds received by the Company from any sale of the debt securities
would be available for general corporate purposes.
(continued)
25
<PAGE>
ACCRUED LIABILITIES
<TABLE>
Accrued liabilities at December 31, were as follows:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Payroll $32,403 $27,466
Other 24,180 22,597
------ ------
$56,583 $50,063
====== ======
</TABLE>
PREFERRED STOCK
At December 31, 1994, 5,000,000 shares of preferred stock were
authorized but unissued. The rights of the preferred stock will be
determined upon issuance by the board of directors.
PREFERRED STOCK PURCHASE RIGHT
Each stockholder is entitled to the right to purchase 1/100th of a
newly-issued share of Series A preferred stock of the Company at an
exercise price of $16.88. The rights will be exercisable only if a
person or group acquires beneficial ownership of 20 percent or more of
the Company's outstanding common stock, or commences a tender or
exchange offer which upon consummation would result in such person or
group beneficially owning 30 percent or more of the Company's
outstanding common stock.
If any person becomes the beneficial owner of 25 percent or more of
the Company's outstanding common stock, or if a holder of 20 percent or
more of the Company's common stock engages in certain self-dealing
transactions or a merger transaction in which the Company is the
surviving corporation and its common stock remains outstanding, then
each right not owned by such person or certain related parties will
entitle its holder to purchase a number of shares of the Company's
Series A preferred stock having a market value equal to twice the then
current exercise price of the right. In addition, if the Company is
involved in a merger or other business combination transaction with
another person after which the Company's common stock does not remain
outstanding, or if the Company sells 50 percent or more of its assets or
earning power to another person, each right will entitle its holder to
purchase a number of shares of common stock of such other person having
a market value equal to twice the then current exercise price of the
right.
The Company will generally be entitled to redeem the rights at one
cent per right, or as adjusted to reflect stock splits or similar
transactions, at any time until the tenth day following public
announcement that a person or group has acquired 20 percent or more of
the Company's common stock.
COMMON STOCK
There were 7,565,368 common shares reserved for the exercise of stock
options and contributions to the Company's Thrift and Profit Sharing
Plan at December 31, 1994.
(continued)
26
<PAGE>
STOCK OPTIONS
The Company's 1981 and 1986 incentive stock option plans provide for
granting options to key employees to purchase common shares at prices
not less than market at the date of grant. These plans were amended in
1988 to allow the granting of nonqualified stock options. Nonqualified
stock options are not intended to qualify for the tax treatment
applicable to incentive stock options under provisions of the Internal
Revenue Code.
Options under these plans may have terms of up to ten years becoming
exercisable in whole or in consecutive installments, cumulative or
otherwise. The plans also permit the granting of stock appreciation
rights with the options. Stock appreciation rights enable an optionee
to surrender exercisable options and receive common stock and/or cash
measured by the difference between the option price and the market value
of the common stock on the date of surrender.
The options granted under these plans which were outstanding at
December 31, 1994 have a term of 10 years and become exercisable 50
percent after the first year and 100 percent after the second year.
The Company's 1991 nonqualified stock option plan provides for
granting options to directors, who are not employees of the Company, to
purchase common shares at prices not less than market at the date of
grant. Options granted under this plan have a term of ten years and are
exercisable in full beginning one year after the date of grant.
<TABLE>
Summarized information for the plans follows:
<CAPTION>
Number of Price Range
Shares Per Share
--------- -----------
<S> <C> <C>
Outstanding at
December 31, 1992 443,610 $ 5.09 - $25.88
Granted under 1986 plan 84,800 25.00
Granted under 1991 plan 2,195 34.69
Exercised (71,036) 5.09 - 24.94
Cancelled (4,800) 15.19 - 24.94
-------
Outstanding at
December 31, 1993 454,769 $5.09 - $34.69
Granted under 1986 plan 75,000 24.50
Granted under 1991 plan 2,747 26.44
Exercised (52,304) 5.09 - 15.19
Cancelled ( 5,143) 12.16 - 34.69
-------
Outstanding at
December 31, 1994 475,069 $5.09 - $34.69
=======
</TABLE>
At December 31, 1994, under the 1981 plan, options were exercisable
on 24,024 shares and no shares were available for future grants. At
December 31, 1993, options were exercisable on 37,200 shares and no
shares were available for future grants.
Under the 1986 plan, at December 31, 1994, options were exercisable
on 326,022 shares and 1,236,990 shares were available for future grants.
At December 31, 1993, options were exercisable on 285,850 shares and
1,308,640 shares were available for future grants.
(continued)
27
<PAGE>
At December 31, 1994, under the 1991 plan, 5,476 options were
exercisable and 91,541 shares were available for future grants. At
December 31, 1993, 5,074 options were exercisable and 92,495 shares were
available for future grants.
EARNINGS PER SHARE
Net income per share is based upon the weighted average number of shares
outstanding which were 83,623,234 in 1994, 83,549,566 in 1993 and
83,357,141 in 1992. The effect of common stock equivalents is not
significant for any period presented.
PENSIONS
The Company has defined benefit plans covering substantially all
employees. The salary plan provides pension benefits based on an
employee's years of service and average earnings for the five highest
calendar years during the ten years immediately preceding retirement.
The hourly plans provide benefits of stated amounts for each year of
service. The Company's general funding policy is to contribute amounts
deductible for Federal income tax purposes.
<TABLE>
Pension expense increased in 1994, 1993 and 1992 reflecting increased
benefits in each year offset by returns on the plans' assets. Pension
expense for 1994, 1993 and 1992 included the following components:
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits
earned during period $ 9,769 $ 7,641 $ 6,378
Interest cost on projected
benefit obligation 17,485 16,327 14,280
Actual return on assets 1,565 (12,875) (26,337)
Net amortization and deferral (17,201) (879) 15,377
------ ------ ------
Net periodic pension cost $11,618 $10,214 $ 9,698
====== ====== ======
</TABLE>
28
<PAGE>
<TABLE>
The plans' assets consist of cash, cash equivalents and marketable
securities. The funded status of the Company's plans at December 31,
1994 and 1993 was as follows:
<CAPTION>
December 31, 1994
-----------------------------
Plans for Which
---------------
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
------------- -------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $(106,291) $(86,629)
======= =======
Accumulated benefit obligation $(108,824) $(88,350)
======= =======
Projected benefit obligation $(159,326) $(90,310)
Plans' assets at fair value 148,488 63,059
------- -------
Projected benefit obligation
in excess of plan assets ( 10,838) (27,251)
Unrecognized transition amount 5,814 3,172
Unrecognized prior service cost 173 10,498
Unrecognized net loss 26,344 9,707
Adjustment for minimum liability - (22,673)
------- ------
Pension asset (liability)
recognized in the Balance Sheet $ 21,493 $(26,547)
======== ======
(continued)
29
<PAGE>
<CAPTION>
December 31, 1993
-----------------------------
Plans for Which
---------------
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
------------- -------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $(106,304) $(87,598)
======== =======
Accumulated benefit obligation $(108,984) $(89,743)
======== =======
Projected benefit obligation $(152,243) $(91,579)
Plans' assets at fair value 144,934 63,341
-------- -------
Projected benefit obligation
in excess of plan assets ( 7,309) (28,238)
Unrecognized transition amount 6,508 3,566
Unrecognized prior service cost - 7,828
Unrecognized net loss 18,067 12,759
Adjustment for minimum liability - (23,929)
-------- -------
Pension asset (liability)
recognized in the Balance Sheet $ 17,266 $(28,014)
======== =======
</TABLE>
The actuarial present value of benefit obligations in 1994 reflects
the increase of the assumptions for the discount rate and the rate of
increase in future compensation levels. The expected long-term rate of
return on the plans' assets was 10 perent in 1994, 1993 and 1992. The
assumptions used to determine the status of the Company's plans at
December 31 were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Increase in future
compensation levels 6.0% 5.0%
Discount rate 8.0 7.0
</TABLE>
The information presented above includes an unfunded, nonqualified
supplemental executive retirement plan covering certain employees whose
participation in the qualified plan is limited by provisions of the
Internal Revenue Code.
The Company sponsors several defined contribution plans for its
employees. Substantially all employees are eligible to participate upon
attaining minimum continuous service requirements. Participation is
(continued)
30
<PAGE>
voluntary and participants' contributions are based on their
compensation. The Company matches certain plan participants'
contributions up to various limits. Company contributions are based on
the lesser of (a) participants' contributions up to a specified percent
of each participant's compensation, less any forfeitures, or (b) an
amount equal to fifteen percent of the Company's pre-tax earnings in
excess of ten percent of stockholders' equity at the beginning of the
year. Expense for these plans was $7,485, $6,027 and $5,503 for 1994,
1993 and 1992, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company currently provides certain health care and life insurance
benefits for its active and retired employees. If the Company does not
terminate such benefits, or modify coverage or eligibility requirements,
substantially all of the Company's United States employees may become
eligible for these benefits during their retirement if they meet certain
age and service requirements. The Company has reserved the right to
modify or terminate such benefits at any time. In recent years benefit
changes have been implemented throughout the Company.
During the fourth quarter of 1992 the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," retroactive to January 1,
1992. The Standard requires, among other things, that employers use the
accrual method of accounting for the cost of providing such benefits in
the future. The Company continues to fund these benefit costs as claims
are incurred. The cumulative effect of adopting this Standard at
January 1, 1992 was a one-time charge to net income of $67,393, net of a
deferred income tax benefit of $40,797, or 81 cents per share.
<TABLE>
Postretirement benefits expense for 1994, 1993 and 1992 included the
following components:
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service cost $ 3,022 $ 2,226 $ 2,094
Interest cost 10,803 9,805 9,261
Amortization 261 - -
------ ------ ------
$14,086 $12,031 $11,355
====== ====== ======
</TABLE>
<TABLE>
The status of the Company's plans at December 31, 1994 and 1993 was
as follows:
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Accumulated postretirement
benefit obligation (APBO):
Retirees $ 61,280 $ 83,974
Fully eligible active plan participants 22,525 24,148
Other active plan participants 31,881 38,547
------- -------
115,686 146,669
Deferred gain (loss) 17,561 (21,591)
------- -------
Postretirement benefit liability
recognized in the Balance Sheet $133,247 $125,078
======= =======
</TABLE>
(continued)
31
<PAGE>
The discount rate used in determining the APBO was 8.5 percent and
7.5 percent for 1994 and 1993, respectively. The decrease in the APBO
is due primarily to the increase in the assumption for the discount
rate. At December 31, 1994, the assumed average annual rate of increase
in the cost of health care benefits (health care cost trend rate) was
ten percent for 1995 declining by 1/2 percent per year through 2003 when
the ultimate rate of six percent is attained. This trend rate
assumption has a significant effect on the amounts reported above. A
one percent increase in the health care cost trend rate would increase
the APBO by $5,300 and the net periodic expense by $600 for the year.
The Company has a Voluntary Employees' Beneficiary Trust and Welfare
Benefits Plan (VEBA) to pre-fund future health benefits for eligible
active and retired employees. The pre-funded amount was $9,900 in 1994
and $9,200 in 1993.
INCOME TAXES
<TABLE>
The provision for income taxes, before cumulative effect of changes in
accounting, consists of the following:
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $60,819 $44,531 $47,940
State and local 9,798 6,983 6,883
------ ------ ------
70,617 51,514 54,823
Deferred:
Federal 7,677 8,849 5,420
State and local 1,306 1,677 1,427
------ ------ ------
8,983 10,526 6,847
------ ------ ------
$79,600 $62,040 $61,670
====== ====== ======
</TABLE>
<TABLE>
The effective income tax rate, based on income before cumulative
effect of changes in accounting, differs from the statutory Federal tax
rate as follows:
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Statutory Federal tax rate 35.0% 35.0% 34.0%
State and local income taxes,
net of Federal income tax
benefit 3.5 3.4 3.2
Other (0.3) (0.6) (0.9)
---- ---- ----
Effective income tax rate 38.2% 37.8% 36.3%
==== ==== ====
</TABLE>
Payments for income taxes in 1994, 1993 and 1992 were $70,634,
$54,712, and $53,123, respectively.
(continued)
32
<PAGE>
<TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
liabilities and assets as of December 31, 1994 and 1993 are as follows:
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $65,638 $55,181
Other 20,852 17,207
------ ------
Total deferred tax liabilities 86,490 72,388
Deferred tax assets:
Postretirement benefits other
than pensions 46,119 43,305
Other 21,326 20,377
------ ------
Total deferred tax assets 67,445 63,682
------ ------
Net deferred tax liabilities $19,045 $ 8,706
====== ======
</TABLE>
<TABLE>
These amounts are included in the accompanying balance sheets as
follows:
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Current assets, included in prepaid
expenses and deferred taxes $10,692 $10,246
Noncurrent liabilities - deferred
income taxes 29,737 18,952
------ ------
Net deferred tax liabilities $19,045 $ 8,706
====== ======
</TABLE>
During the fourth quarter of 1992, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
retroactive to January 1, 1992. The cumulative effect of adopting this
Standard at January 1, 1992 was a one-time credit to income of $2,433,
or 3 cents per share.
LEASE COMMITMENTS
The Company leases certain manufacturing facilities and equipment under
long-term leases expiring at various dates. The leases generally
contain renewal or purchase options and provide that the Company shall
pay for insurance, property taxes and maintenance.
(continued)
33
<PAGE>
<TABLE>
Included in property, plant and equipment are the following
capitalized lease amounts at December 31, 1994 and 1993:
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Land and land improvements $ 378 $ 378
Buildings 9,788 9,788
Machinery and equipment 13,640 13,793
------ ------
23,806 23,959
Less accumulated amortization 20,444 20,330
------ ------
$ 3,362 $ 3,629
====== ======
</TABLE>
Rental expense for operating leases was $6,235 for 1994, $5,362 for
1993 and $5,756 for 1992.
<TABLE>
Future minimum payments for all noncancelable leases at December 31,
1994 are summarized below:
<CAPTION>
Capital Operating
Leases Leases
-------- ---------
<S> <C> <C>
1995 $ 444 $ 2,152
1996 323 1,536
1997 323 608
1998 323 307
1999 323 140
2000 and later 12,010 108
------ ------
13,746 $ 4,851
======
Less amount representing
interest 8,491
------
Present value of minimum
lease payments $ 5,255
======
</TABLE>
34
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Cooper Tire & Rubber Company
We have audited the accompanying consolidated balance sheets of Cooper
Tire & Rubber Company as of December 31, 1994 and 1993, and the related
consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1994. Our
audits also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Cooper Tire & Rubber Company at December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in the notes to the financial statements, in 1992 the
Company changed its methods of accounting for postretirement benefits
other than pensions and income taxes.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Toledo, Ohio
February 14, 1995
35
<PAGE>
<TABLE>
QUARTERLY FINANCIAL DATA
(UNAUDITED)
(All dollar amounts in thousands except per share figures)
<CAPTION>
QUARTER
------------------------------------------
1994 FOURTH THIRD SECOND FIRST
- ---- ------ ----- ------ -----
<S> <C> <C> <C> <C>
Net Sales $361,316 $383,456 $329,339 $329,132
Gross Margin $ 77,999 $ 76,087 $ 61,691 $ 61,488
Net Income $ 39,100 $ 35,454 $ 27,459 $ 26,506
Net Income Per Share $.47 $.42 $.33 $ .32
Dividend Per Share $.060 $.060 $.055 $.055
Stock Price: High $25 3/8 $26 1/8 $28 $29 1/2
Low $21 5/8 $22 3/4 $22 1/2 $23 1/2
<CAPTION>
QUARTER
------------------------------------------
1993 FOURTH THIRD SECOND FIRST
- ---- ------ ----- ------ -----
<S> <C> <C> <C> <C>
Net Sales $294,875 $326,107 $292,566 $280,100
Gross Margin $ 59,943 $ 57,108 $ 54,572 $ 56,672
Net Income $ 27,835 $ 25,155 $ 24,024 $ 25,196
Net Income Per Share $.33 $.30 $.29 $.30
Dividend Per Share $.055 $.055 $.045 $.045
Stock Price: High $25 1/2 $28 5/8 $39 5/8 $39 1/2
Low $20 $22 7/8 $21 1/2 $30 1/2
</TABLE>
36
<PAGE>
<TABLE>
COOPER TIRE & RUBBER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1994, 1993 and 1992
<CAPTION>
Balance at Additions Balance
Beginning Charged Deductions at End
of Year To Income (a) of Year
--------- --------- --------- -------
Allowance for
doubtful accounts:
<S> <C> <C> <C> <C>
1994 $3,100,000 $1,089,074 $ 589,074 $3,600,000
========= ========= ========= =========
1993 $3,100,000 $ 647,967 $ 647,967 $3,100,000
========= ========= ========= =========
1992 $3,000,000 $1,392,578 $1,292,578 $3,100,000
========= ========= ========= =========
<FN>
(a) Accounts charged off during the year, net of recoveries of accounts
previously charged off.
</TABLE>
37
<PAGE>
Exhibit (4)
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue 300,000,000 shares of Common
Stock, par value $1.00 per share. As of March 6, 1995, 83,638,872
shares were issued and outstanding. Each share of Common Stock has
equal dividend, liquidation and voting rights. The shares of Common
Stock are not redeemable and have no conversion rights. The only rights
to subscribe for additional shares of the Company's capital stock are
those involved in a Stockholder Rights Plan adopted May 27, 1988 and
described in a Rights Agreement between the Company and Society National
Bank as Rights Agent. All shares of Common Stock presently outstanding
are fully paid and nonassessable.
The most restrictive covenants under the Company's loan agreements
require the maintenance of $65,000,000 in working capital and limit the
payment of cash dividends, purchase or redemption of capital stock and
any other cash distributions to stockholders. The amount of retained
earnings not restricted under the agreements was $454,284,000 at
December 31, 1994.
Subject to the foregoing, holders of the Common Stock are entitled to
receive such dividends as the Board of Directors may from time to time
declare out of funds lawfully available therefor. The Company has paid
cash dividends on its Common Stock in each year since 1950. See
"Quarterly Financial Data (Unaudited)" presented on page 36 of this
Annual Report on Form 10-K for a description of the Company's recent
dividend practices. The payment of future dividends will depend on the
earnings and financial position of the Company, its capital requirements
and other relevant factors.
The Company's Board of Directors consists of three classes of
directors as nearly equal in number as the total number of directors
constituting the entire board permits. By a vote of a majority, the
Board of Directors has the authority to fix the number of directors
constituting the entire board at not less than six (6) nor more than
twelve (12) individuals, and the number is currently fixed at ten (10).
The term of each class of directors is three years and each class of
directors is elected in successive years. The shares of Common Stock
have non-cumulative voting rights.
The Transfer Agent and Registrar for the shares of Common Stock of
the Company is KeyCorp Shareholder Services, Inc., Cleveland, Ohio.
38
<PAGE>
Exhibit (13)
OPERATIONS REVIEW AND PRODUCT OVERVIEW
OPERATIONS REVIEW
Tire Products
INDUSTRY OVERVIEW
Record-breaking replacement shipments were registered by the tire
industry in 1994. This improvement over early industry forecasts was
attributed to a strong economy and pent-up consumer demand. Total
replacement tire shipments for 1994 reached 208.8 million units compared
with 200.4 million in 1993, an increase of 4.2 percent. Light truck
shipments led the way with an 11.7 percent increase while medium truck
units increased 6.3 percent. Passenger units increased 2.9 percent.
Inner tubes for passenger, truck and bus use reversed a declining trend
and increased by 2.5 percent during the year.
The market for replacement tires continued to grow because of two key
consumer trends. Motorists continued to keep cars longer, and miles
driven per year increased. Ten years ago, the average age of
automobiles on America's highways was 7.6 years. In 1994 that estimated
average was 8.3 years. American motorists put approximately 11,600 miles
on each vehicle this past year compared to 9,600 a decade ago.
Consumers have several choices in buying tires: independent tire
dealers, department and chain stores, service stations, company-owned
tire stores and various other outlets. The majority of consumers buy
tires at independent tire dealers which is positive for Cooper. The
Company's three proprietary brands are sold to independent tire dealers
and distributors under the brand names Cooper, Mastercraft and Starfire.
According to a 1994 J.D. Power and Associates replacement tire study,
consumers feel that independent tire dealers and service stations
provide higher levels of customer satisfaction. A recent study by a
major trade magazine indicated independent tire dealers and service
stations represented 59 percent of all passenger tires sold in the
retail market. This is a positive implication for the Company since
more than half of all Cooper-produced tires are sold through this market
channel.
PRODUCTS
Cooper has established a solid reputation in the marketplace for
world-class quality tires at affordable prices. Excellence in customer
service continues to be a strength which helps differentiate Cooper in
the industry.
During 1994 Cooper introduced several new product lines for the
Cooper house brand. The Cooper Rain-Master Radial's deep center channel
helps resist hydroplaning, thus providing superior wet weather traction.
This outstanding radial tire features a 60,000 mile limited treadwear
warranty and one of the industry's highest UTQG grades for "rain tires"
at 420 A-B. As one of the pioneers in center groove technology, Cooper
first began using the deep, molded center channel earlier in performance
radials.
The Cooper Lifeliner Classic II is an updated version of the popular
touring radial. With a 60,000 mile limited treadwear warranty, this
all-season design is available in a traditional white sidewall
configuration. Several sizes are also available with black sidewalls
which fit the increasing OE and replacement market trend for the
sportier blackwall look.
Late in 1994 Cooper introduced the Trendsetter SE, an economy
all-season radial. This special edition, value radial carries a 40,000
mile limited warranty and is a result of the constant updating of Cooper
products to take advantage of the latest in technology and market
trends.
(continued)
39
<PAGE>
In 1994 five of the top ten best-selling vehicles were in the
pick-up, van and SUV (sport utility vehicle) category. Responding to
this strong demand, Cooper strengthened its light truck radial lines
with the introduction of the Discoverer Radial STE early in 1994. This
touring design radial carries a free replacement limited warranty on
workmanship and materials.
Cooper's steady entry into the medium truck radial market continued
in 1994 with the limited introduction of the Cooper CXML 440, a
drive-axle radial with a popular and versatile tread depth. Cooper's
strong "C9000" casing in this medium truck radial gives owner/operators
the opportunity for multiple recapping which, in turn, reduces the
cost-per-mile to operate the vehicle. Commercial users select tires
which help maximize their profitability.
A total of 67 new tire lines were brought on-line in 1994 for Cooper
customers. These included upgrades for existing successful product
categories in addition to brand new lines for the large private label
customers signed in the year.
In order to meet global competition, Cooper continues to use
cutting-edge technology along with careful market observation to
discover consumer trends and forecast market demand. This, combined
with a goal of total customer satisfaction, will help keep Cooper in a
prominent position in the marketplace.
FACILITIES
Cooper announced a major expansion of its Clarksdale inner tube plant
during 1994. This $10.5 million project represents renovation and
modernization of the existing 130,000-square-foot facility as well as an
additional 48,000-square-foot manufacturing and warehouse space. A new
distribution hub will be created at the Clarksdale facility to improve
service to domestic and international inner tube customers.
The Albany plant continues to provide steady, incremental production
growth for Cooper products. Goals have been met in planned expansions
to increase passenger, light and medium truck radial production. The
installation of multi-million dollar, state-of-the-art equipment plus
ongoing improvements in existing machinery are paving the way for
meeting objectives in 1995 and beyond. Future expansions have been
designed and are ready for implementation when necessary.
In early 1995 construction will begin on a new $14.4 million flexible
manufacturing facility for tire molds in Findlay. This advanced
technology facility will help improve customer service by allowing
Cooper the capability to produce critical tire molds in a significantly
shorter time frame than is possible when using outside mold
manufacturers.
Automation continues to be introduced throughout Cooper's plants to
improve product quality and control costs. One example is an automated
finishing unit in Albany. This concept, first put into place in the
Tupelo facility, was subsequently improved when implemented in Albany.
By using bar code technology tires can be sorted and finished according
to customers' specifications, and then separated for shipment
automatically, accurately and quickly for enhanced customer service.
The Findlay distribution center tested and implemented a
radio-frequency warehouse management system designed to improve the
handling of finished products. Planned for implementation in all
warehouses during 1995, this new system incorporates bar codes to
identify each tire and then determines the fastest and most practical
way to speed the tire onto its final destination. Some tires will be
sent directly to warehouse storage for future shipment while others will
come off the production line and immediately be loaded into trucks for
shipment to Cooper's network of distribution centers or customers'
receiving docks.
(continued)
40
<PAGE>
Findlay is also the pilot facility for a new computerized maintenance
system. Scheduled for launching early in 1995, this new program is
designed to keep equipment running at maximum efficiency. Because of
the complexity involved in scheduling routine maintenance, this new
system links maintenance, production, centralized stores, purchasing,
accounting and engineering to bring all components together efficiently
for routine maintenance and scheduled repairs. Cost savings under this
program are expected to be significant. This new maintenance system
will be incorporated in other manufacturing facilities in the near
future.
Cooper has an ongoing energy management program which has a goal of
reducing utility costs at all facilities. By negotiating utility
contracts and decreasing energy use through carefully monitored
conservation programs as well as various other key projects, Cooper has
substantially reduced utility costs over the past few years. It is the
Company's belief that natural resources are precious commodities and
should be protected.
TECHNOLOGY
The global marketplace demands that manufacturers today combine the
latest technology with product innovation to give consumers the products
they want at the prices they can afford.
Examples of Cooper's ability to implement cutting-edge technology
appear throughout its operations. Fiber optic backbone cables connect
work stations in all newly refurbished facilities. These high-speed
lines link departmental computers to all computing resources within the
Company for fast communication and information retrieval. There is a
trend in many progressive companies, which use "client/server"
technology, to reduce reliance on mainframe systems and take advantage
of the flexibility and low cost of departmental computers.
For many years Cooper engineers designed and fabricated complex
equipment to improve tire building processes. This past year, a new
tool became available to help design machinery and study applications.
Using specialized computer simulation software, a new machine could be
designed and "set into motion", measuring efficiency, space requirements
and output before undertaking the time-consuming prototype process
necessary in traditional machine design systems.
In addition to Cooper's successful equipment development programs,
product research and design teams have ongoing projects working to help
improve materials and tire construction processes. Cooper's chemists
and skilled technicians work closely with purchasing agents to find
better sources and improved compounds to enhance overall product quality
and reduce costs whenever possible. Saving minor amounts on materials
and compounds in each tire can result in significant cost improvements.
MARKETING
Over the years the Company has maintained a balance between proprietary
and private brand sales. Cooper's house brands are marketed through
independent dealers and distributors under the brand names Cooper,
Mastercraft and Starfire. Private label customers include mass
merchandisers, large wholesale distributors and large retailers.
Several industry surveys revealed that Cooper-produced brands are
among the industry's best. The September, 1994 issue of Tire Review's
annual brand survey cited Mastercraft and Cooper as two of the top three
brands in best overall brand satisfaction. In two Modern Tire Dealer
studies, independent dealers named Cooper as the light truck tire brand
which offered the greatest profit margin and also rated Cooper's
performance lines as one of the top two in profitability.
(continued)
41
<PAGE>
Cooper experienced substantial growth in 1994 in the international
market and currently exports to more than 80 countries around the world.
In September Cooper was named as a supplier to Autobacs Seven of Japan.
Cooper is currently furnishing two private label lines to this leading
Japanese retailer, and Autobacs will serve as the exclusive distributor
of Cooper brand products in Japan. With similar operating philosophies
- - quality products, excellent value and outstanding service - this
association should prove favorable for both companies.
Winston Tires, the largest retail automotive chain in California,
selected Cooper as a supplier early in 1994. This high-profile
retailer, with more than 160 stores in key California markets,
specializes in tires, wheels and automotive services. A unique feature
of Winston Tires is the signature of the owner, Sam Winston, stamped in
the sidewall of premium lines.
In addition to new business, Cooper signed a 10-year agreement with
an existing customer, TBC Corporation, Memphis, Tennessee, one of
America's largest marketer/distributors of tires. Cooper has been a
major supplier to TBC since 1971.
A new national advertising campaign was launched in 1994 for the
Cooper brand. A series of computer-animated commercials were aired on
national network television. To help support this initial television
campaign, a four-color print ad featuring the popular Discoverer light
truck line appeared in magazines geared toward recreational vehicle
users. Cooper continued its sponsorship of Paul Harvey's popular,
syndicated national radio broadcasts for the fifth year. For 1995 the
Company plans to use network television and Paul Harvey radio to
continue to build awareness of the Cooper brand among the general
consuming public.
The Company remained committed to superior customer service by
encouraging employee teams to enhance total customer satisfaction.
These groups focus on areas of critical importance to Cooper customers
such as faster product introductions, improved warehousing, specialized
forecasting, performance tire development and other marketing issues.
Using experts in the computer software field, a Cooper employee team
designed a new order entry system that combines employee strengths and
customer needs with the latest technology to "make the best better."
This new communication system is slated to go on-line in 1995 and will
upgrade a proven Cooper strength/outstanding customer service.
GLOSSARY OF TERMS
UNIFORM TIRE QUALITY GRADING (UTQG) - a system required by the National
Highway Transportation Safety Administration to help consumers compare
tire features and benefits.
SPORT UTILITY VEHICLES (SUV) - an industry term referring to vehicles in
the light truck category such as Ford Explorer, Jeep Grand Cherokee and
Chevrolet Blazer.
DRIVE AXLE - generally used when referring to medium trucks, this is the
axle which "drives" or "powers" the vehicle. It is usually the rear
axle on the cab.
FIBER OPTIC BACKBONE CABLES - a high speed "pipeline" for transmitting
large volumes of information without interference from environmental
disturbances such as electrical motors and lightning.
PROPRIETARY - exclusively owned or created by the Company as in
"proprietary brands sold only by Cooper" or "proprietary equipment
designed and patented by Cooper."
FINISHING - the last stage of tire production where sidewalls are buffed
and vents are trimmed to provide an attractive, consumer-ready product.
42
<PAGE>
THE AMAZING BAR CODE
Most individuals today have come in contact with bar codes whether in
the check-out line at the local supermarket or when buying shoes at
their favorite department store.
UPC (Uniform Product Code) or bar code technology enables today's
consumer to make purchasing quick and accurate, saving time and money.
This technology also enables manufacturers to streamline and automate
processes. At Cooper bar codes are used in many applications to enhance
product quality and improve service to customers.
In one manufacturing facility, bar codes are used to steer self-guided
vehicles through the plant using radio frequency transmission. Trays of
tire components silently glide through aisles arriving at the necessary
work station just in time for the builder's use.
Bar codes are located on tire sidewalls to track tires as they proceed
through the various processes. Tires can be sorted, finished according
to a specific customer specification and then separated for shipment
automatically, accurately and quickly.
In the warehouse, bar codes on tire labels are used to identify tires
and designate final destination. Dealers with automated systems also
use this technology to manage their tire inventories.
Engineered Products
INDUSTRY OVERVIEW
The North American auto industry continues to serve as a major force in
the overall economy. During 1994 consumer confidence in the marketplace
reached a five-year high. With the average 1994 car price in the United
States topping $20,000, leasing became a popular option for consumers by
helping make new car payments more affordable. Leasing accounted for 25
percent of all new car sales and helped drive the market upward. The
number of new passenger and light truck vehicles produced in the United
States, Canada and Mexico for the year was approximately 15.3 million
vehicles, up about 11 percent over 1993. Industry analysts currently
predict an 8 percent growth rate for North American light vehicle
production in 1995. The Company expects continuing strong demand for
its engineered rubber products.
Cooper's quality and responsiveness to customer needs have helped the
Company grow faster than the markets served. Understanding the
automobile industry and a willingness to tackle challenges has allowed
Cooper the opportunity to develop and introduce new and innovative
products.
The Company's commitment to the automotive industry is evident by the
fact that virtually all engineered product sales are to original
equipment manufacturers. Cooper is a market-driven company,
understanding the needs of the automotive industry.
PRODUCTS
Cooper is a leading supplier of vibration control products, body sealing
components and reinforced hoses for the automotive industry. Cooper's
firm commitment to deliver quality components and service has resulted
in industry-wide respect in this highly competitive field. The Company
improves products through research, international licensing agreements
and cooperation with customers and outside resources.
(continued)
43
<PAGE>
Under development since 1992, Cooper's full vehicle vibration modal
analysis will present exciting possibilities for future vehicle
improvements. Originally developed with a major auto manufacturer and a
large university, this program is now funded entirely by Cooper. This
process will allow for identification of vibration and noise sources
within the vehicle and predicts the characteristics of the ideal rubber
isolator to correct the objectionable condition. This advanced
technology achievement will help provide consumers the ultimate in ride
and vehicle comfort.
Cooper successfully introduced body seals for the new Chrysler Cirrus
and Stratus in 1994. Reacting to consumer demand for aesthetic appeal
in today's vehicle, color-matched body seals will be supplied by
Cooper's engineered products for several 1996 General Motors models.
This is the single largest body sealing program ever undertaken by
Cooper's engineered products.
Cooper hose products continue to gain wide acceptance among
automotive manufacturers. New business secured for 1995 and beyond will
require future expansions of the hose facility in Bowling Green. As
part of these expansions, Cooper will also include space for the
development of power steering and air conditioning hoses which require
different processing than the current low pressure hose products. One
of the goals of this process currently under development is to permit
the manufacture of this new product line without using lead press
technology thereby providing an environmental benefit.
FACILITIES
Cooper is committed to a planned program of continuous improvements to
maintain position as a world-class supplier to the automotive industry.
Over the last five years the Company has invested over $70 million in
new engineered products manufacturing facilities and equipment.
At the Auburn molded-products facility a waterborne adhesive line was
added. This major investment will help meet environmental regulation
standards as well as improve performance and productivity. In the El
Dorado plant a pin barrel extruder and preformer were installed. Both
will enhance quality and help meet production objectives.
The two plants in Bowling Green also were upgraded in 1994. At the
hose facility, two autoclaves were added while the body sealing facility
installed more efficient curing ovens, giving greater line speed,
increased productivity and improved quality products.
Cooper's engineered products facilities continued overall improvement
efforts with the implementation of a formalized program whereby
processes and procedures are systematically examined for efficiency
maximization and waste minimization opportunities. The initial program
was instituted at the Bowling Green facilities and will be conducted at
the Auburn and El Dorado locations.
Cooper also initiated a QS9000 certification process in 1994 with
formal registration planned for 1996. This mandate by the major U.S.
car companies specifies the quality standards which must be met by
automotive suppliers. In addition to an overall industry standard, each
major U.S. auto manufacturer will also require an individual standard to
be met as well.
TECHNOLOGY
Over the years Cooper's engineered products have evolved, responding to
the changing requirements of the automotive industry. Today, Cooper
offers complete, independent and cooperative design and development
assistance as well as the latest manufacturing technologies. Cooper
engineers and design technicians have pioneered many new and improved
products and will continue to impact the original equipment industry.
Cooper continues to be dedicated to the study of active sound and
vibration technologies. As consumers demand more driving comfort,
automotive manufacturers strive to provide quiet, vibration-free
vehicles.
(continued) 44
<PAGE>
Cooper, in cooperation with two major universities, has an ongoing
program to investigate the inter-relationship of vibration-induced
noise. The Company has acquired sound pressure intensity measuring
equipment and calibrated microphones to measure sound in two key areas.
The new equipment will be used in Auburn for vibration studies and at
Bowling Green for sealing system analysis.
In addition to the improvements in the development of active engine
mounts, sound control systems and muffler systems, there are many other
related areas that could benefit from this technology. The Company will
be pursuing these applications to take advantage of its expertise.
Cooper entered into a collaborative agreement with Germany's
ContiTech Group which is a part of Continental AG. This accord allows
for technical assistance and licensing agreements, as well as design
and development cooperation in original equipment automotive component
projects in North America and Europe. Covering automotive projects in
areas such as vibration control, hose products and body sealing, this
agreement will provide for an efficient exchange of technology as
"world" cars are designed on one continent for production on another.
MARKETING
At Cooper, quality assurance starts with raw material purchases, extends
through final assembly, and finishes with customer service. Investments
in modern manufacturing facilities and equipment, information processing
and technical engineering tools have helped expand Cooper's leadership
position in the original equipment products field.
Many of today's most popular vehicles carry Cooper-produced parts.
The new Chrysler minivans carry a multitude of Cooper hoses and
vibration control components. On Chrysler's T300 Ram pickup, Cooper
furnishes all the body seals plus several different hoses and vibration
control devices. On Ford's Contour and Mercury's Mystique, Cooper makes
the engine mounts and various hoses.
Cooper continues to expand engineered product lines with the
development of total vehicle systems as evidenced by new business on
line for 1995. Included are parts for the Ford Explorer and Taurus,
Mercury Sable, Chevrolet Blazer and Chrysler Voyager, Town & Country and
Caravan and Dodge Dakota pickup. Cooper has already secured business as
the lead supplier for fluid-filled mounts on the 1999 replacements for
the recently introduced Ford Contour and Mercury Mystique.
In a move to streamline operations, two non-core product lines were
discontinued in the engineered products area during 1994. The exhaust
hose and urethane seating operations were sold in order to concentrate
resources and production capacity in core product areas where more
opportunities exist for Cooper. This move allows the Company to focus
on expanded business opportunities in the hose, vibration control and
body sealing product lines.
Cooper continues to improve its relationship with the world's leading
automotive manufacturers. With recognized expertise in product
engineering, manufacturing and customer service, Cooper continues to
gain new business in all product lines.
GLOSSARY OF TERMS
VEHICLE VIBRATION MODAL ANALYSIS - a state-of-the-art method for
determining vehicle performance during acceleration, braking, turning
and ride. This analysis is used to design vibration suppression
products to minimize or eliminate vibration or noise in vehicles.
LEAD PRESS TECHNOLOGY - a process utilizing a lead sheath around the
outside of certain hoses to control dimensions during manufacturing.
ISOLATOR - a component used to remove or isolate vibration or noise in a
vehicle.
(continued)
45
<PAGE>
SOUND PRESSURE INTENSITY MEASURING EQUIPMENT - highly sophisticated
sensors and equipment that measure and record vibration-induced noise at
different performance points in the vehicle during test simulation of
idle, acceleration, braking, turning and ride.
FLUID-FILLED MOUNTS - a load-bearing, liquid-filled engine mount used to
reduce vibrations as vehicles travel over rough roads.
PRODUCT OVERVIEW
TIRE PRODUCTS - The Company sells replacement tires and tubes to
consumers through a network of independent dealers, large wholesale
distributors, mass merchandisers and large retailers.
PASSENGER
The 15 lines of passenger radial tires include "rain-tire", touring,
high performance and value designs. With speed ratings of S,T,H and V
and other important characteristics such as all-season, rib and high
traction capability, Cooper's passenger lines fit most market needs.
LIGHT TRUCK
Light truck tires are available in 13 different lines to fit pickup
trucks, vans and sport utility vehicles for recreational or commercial
use. Lines are offered in radial or conventional bias constructions,
all-season, rib and traction designs, with sporty white letters or black
sidewall selections.
MEDIUM TRUCK
With 10 lines of medium truck tires, Cooper provides tires to fit
vehicles such as tractor-trailer rigs, buses and other commercial
trucks. Selections include conventional bias ply or all-steel radial
constructions; all-wheel, drive wheel and trailer applications; and rib
and traction designs.
INNER TUBES
Inner tubes are offered in radial and bias constructions for passenger,
light truck and medium truck applications. Included are sizes for
special use vehicles such as farm tractors and implements, road graders
and industrial vehicles.
ENGINEERED PRODUCTS - Cooper supplies engineered rubber products to
virtually every automobile manufacturer in the United States and Canada,
either directly or through other tier-one suppliers.
VIBRATION CONTROL
These important products are used throughout a vehicle to minimize
various vibrations. By helping to minimize vibration, riding comfort is
increased and vehicle noise is reduced. Cooper's product lines include
mounts, bushings, isolators and torsional springs.
SEALING SYSTEMS
Rubber seals around vehicle doors, trunks and hoods protect interiors
from outside elements. Window channels allow glass panels to slide open
and closed easily while still providing a tight weather seal.
HOSE PRODUCTS
Vehicle hoses are used primarily to transport fluids, fuels and gases.
Cooper manufactures hoses in many different shapes, sizes, diameters,
lengths, rubber compounds and constructions to meet vehicle
configurations.
46
<PAGE>
Exhibit (23)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements of Cooper Tire & Rubber Company listed below, and in the
Prospectus related to the Form S-3, of our report dated February 14,
1995, with respect to the consolidated financial statements and schedule
of Cooper Tire & Rubber Company included in the Annual Report (Form
10-K) for the year ended December 31, 1994:
Form S-3 No. 33-44159 $200,000,000 aggregate principal amount of
the Company's Debt Securities
Form S-8 No. 2-58577 Thrift and Profit Sharing Plan
No. 2-77400 1981 Incentive Stock Option Plan
No. 33-5483 1986 Incentive Stock Option Plan
No. 33-35071 Texarkana Pre-Tax Savings Plan
No. 33-47979 Pre-Tax Savings Plan at the Auburn Plant
No. 33-47980 1991 Stock Option Plan for Non-Employee
Directors
No. 33-47981 Pre-Tax Savings Plan at the Findlay Plant
No. 33-47982 Pre-Tax Savings Plan at the El Dorado Plant
No. 33-52499 Pre-Tax Savings Plan (Bowling Green - Hose)
No. 33-52505 Pre-Tax Savings Plan (Bowling Green - Sealing)
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Toledo, Ohio
February 14, 1995
47
<PAGE>
Exhibit (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, in the capacities
indicated, do hereby constitute and appoint John Fahl, or Stan C.
Kaiman, or J. Alec Reinhardt, or Patrick W. Rooney as their attorney
with full power of substitution and resubstitution for and in their
name, place and stead, to sign and file with the Securities and Exchange
Commission an Annual Report on Form 10-K, as amended, together with any
and all amendments and exhibits thereto and any and all applications,
instruments or documents to be filed with the Securities and Exchange
Commission pertaining to the filing of such report, with full power and
authority to do and perform any and all acts and things whatsoever
requisite and necessary to be done in the premises, hereby ratifying and
approving the acts of said attorney or any such substitute.
Executed at Findlay, Ohio this 14th day of February, 1995.
/s/ Delmont A. Davis
- --------------------------- -----------------------------
Delmont A. Davis, Director Edsel D. Dunford, Director
/s/ John Fahl /s/ Julien A. Faisant
- --------------------------- -----------------------------
John Fahl, Director Julien A. Faisant, Vice
President and Controller,
Principal Accounting Officer
/s/ Dennis J. Gormley /s/ Ivan W. Gorr
- --------------------------- -----------------------------
Dennis J. Gormley, Director Ivan W. Gorr, Director
/s/ Stan C. Kaiman /s/ Joseph M. Magliochetti
- --------------------------- -----------------------------
Stan C. Kaiman, Secretary Joseph M. Magliochetti,
Director
/s/ Allan H. Meltzer /s/ J. Alec Reinhardt
- --------------------------- -----------------------------
Allan H. Meltzer, Director J. Alec Reinhardt, Executive
Vice President, Principal
Financial Officer, and Director
/s/ Patrick W. Rooney /s/ Leon F. Winbigler
- --------------------------- ------------------------------
Patrick W. Rooney, Chairman Leon F. Winbigler, Director
of the Board, President,
Principal Executive Officer,
and Director
(continued)
48
<PAGE>
STATE OF OHIO )
) ss.
COUNTY OF HANCOCK)
On this 14th day of February, 1995, before me a Notary Public in and for
the State and County aforesaid, personally appeared Delmont A. Davis,
John Fahl, Julien A. Faisant, Dennis J. Gormley, Ivan W. Gorr, Stan C.
Kaiman, Joseph M. Magliochetti, Allan H. Meltzer, J. Alec Reinhardt,
Patrick W. Rooney, and Leon F. Winbigler, known to me to be the persons
whose names are subscribed in the within instrument and acknowledged to
me that they executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Julie A. Grismore
--------------------------------------
Julie A. Grismore
Notary Public, State of Ohio
My commission expires January 15, 1996
(SEAL)
49
<PAGE>
Exhibit (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, in the capacity
indicated, does hereby constitute and appoint John Fahl, or Stan C.
Kaiman, or J. Alec Reinhardt, or Patrick W. Rooney as his attorney with
full power of substitution and resubstitution for and in his name, place
and stead, to sign and file with the Securities and Exchange Commission
an Annual Report on Form 10-K, as amended, together with any and all
amendments and exhibits thereto and any and all applications,
instruments or documents to be filed with the Securities and Exchange
Commission pertaining to the filing of such report, with full power and
authority to do and perform any and all acts and things whatsoever
requisite and necessary to be done in the premises, hereby ratifying and
approving the acts of said attorney or any such substitute.
Executed at San Diego, California this 23rd day of February, 1995.
/s/ Edsel D. Dunford
--------------------------------
Edsel D. Dunford, Director
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this 23rd day of February, 1995, before me, a Notary Public in and
for the State and County aforesaid, personally appeared Edsel D.
Dunford, known to me to be the person whose name is subscribed in the
within instrument and acknowledged to me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Judith L. Nelson
------------------------------------
Judith L. Nelson
Notary Public, State of California
San Diego County
My commission expires December 9, 1998
(SEAL)
50
<PAGE>
Exhibit (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby, for
and on behalf of Cooper Tire & Rubber Company in accordance with the
certain resolution of the Board of Directors adopted February 14, 1995,
constitute and appoint John Fahl, or Stan C. Kaiman, or J. Alec
Reinhardt, or Patrick W. Rooney as its attorney with full power of
substitution and resubstitution for and in its name, place and stead, to
sign and file with the Securities and Exchange Commission an Annual
Report on Form 10-K pursuant to the Securities Act of 1934, as amended,
together with any and all amendments and exhibits thereto, and all
applications, instruments or documents to be filed with the Securities
and Exchange Commission pertaining to the filing of such report, with
full power and authority to do and perform any and all acts and things
whatsoever requisite and necessary to be done in the premises, hereby
ratifying and approving the acts of said attorney or any such
substitute.
Executed at Findlay, Ohio this 14th day of February, 1995.
ATTEST: COOPER TIRE & RUBBER COMPANY
/s/ Stan C. Kaiman /s/ Patrick W. Rooney
- ------------------------- -----------------------------
Stan C. Kaiman Patrick W. Rooney
Secretary Chairman of the Board,
President, and Chief
Executive Officer
STATE OF OHIO )
) ss.
COUNTY OF HANCOCK)
On this 14th day of February, 1995, before me, a Notary Public in
and for the State and County aforesaid, personally appeared Patrick W.
Rooney and Stan C. Kaiman, known to me to be the persons whose names are
subscribed in the foregoing instrument and acknowledged to me that they
executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Julie A. Grismore
----------------------------------
Julie A. Grismore
Notary Public, State of Ohio
My commission expires January 15, 1996
(SEAL)
51
<PAGE>
Exhibit (99)
COOPER TIRE & RUBBER COMPANY
UNDERTAKINGS OF THE COMPANY
FOR FISCAL YEAR ENDED DECEMBER 31, 1994
1. Undertakings.
------------
a. The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
i. To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represents a
fundamental change in the information set forth in the
registration statement;
iii. To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
do not apply if the registration statement is on Form S-3 or
Form S-8 and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration
statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
b. The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
f. Employee plans on Form S-8.
1. The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus to each employee
to whom the prospectus is sent or given a copy of the
registrant's annual report to stockholders for its last
fiscal year, unless such employee otherwise has received a
copy of such report, in which case the registrant shall
state in the prospectus that it will promptly furnish,
without charge, a copy of such report on written request of
the employee. If the last fiscal year of the registrant has
(continued) 52
<PAGE>
ended within 120 days prior to the use of the prospectus,
the annual report of the registrant for the preceding fiscal
year may be so delivered, but within such 120 day period the
annual report for the last fiscal year will be furnished to
each such employee.
2. The undersigned registrant hereby undertakes to transmit or
cause to be transmitted to all employees participating in
the plan who do not otherwise receive such material as
stockholders of the registrant, at the time and in the
manner such material is sent to its stockholders, copies of
all reports, proxy statements and other communications
distributed to its stockholders generally.
3. Where interests in a plan are registered herewith, the
undersigned registrant and plan hereby undertake to transmit
or cause to be transmitted promptly, without charge, to any
participant in the plan who makes a written request, a copy
of the then latest annual report of the plan filed pursuant
to section 15(d) of the Securities Exchange Act of 1934
(Form 11-K). If such report is filed separately on Form 11-
K, such form shall be delivered upon written request. If
such report is filed as a part of the registrant's annual
report on Form 10-K, that entire report (excluding exhibits)
shall be delivered upon written request. If such report is
filed as a part of the registrant's annual report to
stockholders delivered pursuant to paragraph (1) or (2) of
this undertaking, additional delivery shall not be required.
h. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
2. Indemnification of Directors and Officers.
-----------------------------------------
Article VII of the Bylaws of the registrant and Section 145 of the
Delaware Code provide for indemnification. Article VII, in which
registrant is referred to as "Corporation", provides as follows:
Section 1. Right to Indemnification.
--------- ------------------------
Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he,
or a person of whom he is the legal representative, is or was a
director or officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee
or agent of another corporation or a partnership, joint venture,
trust or other enterprise, including service with respect to
employee benefit plans maintained or sponsored by the
(continued) 53
<PAGE>
Corporation, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee
or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by
the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said Law
permitted the Corporation to provide prior to such amendment),
against all expense, liability and loss (including attorneys'
fees, judgments, fines, excise taxes pursuant to the Employee
Retirement Income Security Act of 1974 or penalties and amounts
paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators;
provided, however, that the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding
(or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the Board of
Directors. The right to indemnification conferred in this
Article shall be a contract right and shall include the right to
be paid by the Corporation the expenses incurred in defending
any such proceeding in advance of its final disposition;
provided, however, that if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer in
advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or
on behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this Article
or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of
the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
Section 2. Non-Exclusivity of Rights.
--------- -------------------------
The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final
disposition conferred in this Article shall not be exclusive of
any other right which any person may have or hereafter acquire
under any statute, the Restated Certificate of Incorporation,
these Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 3. Insurance.
--------- ---------
The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability
or loss under the Delaware General Corporation Law.
The registrant also maintains policies insuring the liability of the
registrant to its directors and officers under the terms and
provisions of the Bylaws of the registrant and insuring its
directors and officers against liability incurred in their
capacities as such directors and officers.
54
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AND STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31,
1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 20285
<SECURITIES> 83000
<RECEIVABLES> 224937
<ALLOWANCES> 3600
<INVENTORY> 116523
<CURRENT-ASSETS> 454711
<PP&E> 880614
<DEPRECIATION> 331013
<TOTAL-ASSETS> 1039731
<CURRENT-LIABILITIES> 151608
<BONDS> 0
<COMMON> 83634
0
0
<OTHER-SE> 578443
<TOTAL-LIABILITY-AND-EQUITY> 1039731
<SALES> 1403243
<TOTAL-REVENUES> 1405525
<CGS> 1125978
<TOTAL-COSTS> 1125978
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2680
<INCOME-PRETAX> 208119
<INCOME-TAX> 79600
<INCOME-CONTINUING> 128519
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128519
<EPS-PRIMARY> 1.54
<EPS-DILUTED> 1.54
</TABLE>
