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, 1995
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 11, 1996). $2,126,430,270
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 11, 1996)
Common Stock, $1 par per share 83,667,472
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 26, 1996 - 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.
Additional information on the Company's products appears on pages 39,
40, 43, 44, and 45 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
accounted for more than 68 percent of all replacement passenger tires
sold in 1995. During 1994 and 1993 this share approximated 68 and 67
percent, respectively. 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 and distribution
appears on pages 41, 42, 43 and 44 of this Annual Report on Form 10-K.
North American vehicle manufacturers experienced a 2.2% decrease in
total production of light vehicles in 1995. The Company's sales of
engineered rubber products are generally linked to light vehicle
production. Cooper's improved sales in this market reflected 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 42 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 eight, seven and five percent of Cooper's sales in 1995,
1994, and 1993, respectively.
(continued)
2
<PAGE>
During 1995 Cooper's ten largest customers accounted for
approximately 55 percent of total sales. Sales to one major customer
approximated 14, 13 and 14 percent of net sales in 1995, 1994 and 1993.
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 Company's
sales of automobile and truck tires in 1995 represented approximately 12
percent of all domestic, original equipment and replacement tire sales.
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 1994 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 experienced shortages in carbon black and
synthetic rubber during 1995 due to high levels of demand throughout the
world. However, the Company did not curtail production due to these
shortages.
The Company has a purchasing office in Singapore to acquire various
grades of natural rubber direct from producers in Indonesia, Malaysia and
other countries in the Far East. 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 natural gas
with fuel oil and coal as standby energy sources. 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 210 full-time
employees engaged in research and development programs. Research and
development expenditures amounted to approximately $16,800,000 in 1995,
$14,700,000 in 1994 and $15,100,000 in 1993.
(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.
During 1995 the Company announced plans for construction of a new
manufacturing facility for tire molds in Findlay, Ohio. Using
state-of-the-art technology, this investment will assure the Company's
ability to service its customers' expanding needs for new products in a
timely manner. Because of the use of advanced technology, only a few
highly specialized people will be needed in this normally
labor-intensive process. The facility will commence production in
mid-1996.
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 1995
approximately 105 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 40, 41 and 43 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 1995 expense and capital expenditures for environmental
control at its facilities were not material, nor is it estimated that
expenditures in 1996 for such uses will be material.
(continued)
4
<PAGE>
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.
Employee Relations
As of December 31, 1995, the Company employed 8,284 persons, of whom
4,059 were salaried employees. Union contracts covering 4,225 employees
include, among other things: wages, hours, grievance procedures,
checkoff, seniority and working conditions. Union contracts with the
United Steel 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, 1999
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, 1998. 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 Leased
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 Dr. Martin Luther King Blvd. Inner tube plant Owned
Clarksdale, MS 38614
166 Cooper Drive Engineered products plant Owned
El Dorado, AR 71730
701 Lima Ave., Findlay, OH 45840 Tire plant Owned
2025 Production Drive Metal fabrication and Owned
Findlay, OH 45840 assembly plant
3571 Owingsville Rd. Engineered products plant Owned
Mt. Sterling, KY 40353 (under construction)
3500 E. Washington Rd. Tire plant and regional Owned
Texarkana, AR 71854 distribution center
1689 South Green St. Tire plant and regional Owned/
Tupelo, MS 38802 distribution center Leased
6340 Artesia Blvd. Regional distribution Owned
Buena Park, CA 90620 center
1300 Lunt Avenue Regional distribution Owned
Elk Grove Village, IL 60007 center
4200-D Industry Drive Regional distribution Leased
Fife, WA 98424 center
Lake Cascades Parkway Regional distribution Owned
Findlay, OH 45840 center
1026 North Century Ave. Regional distribution Leased
Kansas City, MO 64120 center
3601 Dryden Road Regional distribution Owned
Moraine, OH 45439 center
Terminal Road & Industrial Drive Regional distribution Owned
New Brunswick, NJ 08901 center
</TABLE>
(continued) 6
<PAGE>
The Company also owns a manufacturing facility located in Mexico
which produces inner tubes and engineered rubber parts. The Company
believes its properties have been adequately maintained and generally
are in good condition.
Cooper's tire plants are operating at rated capacity levels. 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, five days per week.
The Company's capacity to manufacture a full range of radial
passenger, light truck and medium truck tires using the most advanced
technology continues to be incrementally expanded. The Mt. Sterling,
Kentucky plant, currently under construction, is planned to commence
production of engineered rubber products during the second quarter of
1996.
Additional information concerning the Company's facilities appears on
pages 40 and 43 of this Annual Report on Form 10-K. Information related
to leased properties appears on page 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, 1995.
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>
1995 $1,493,622 $250,727 $176,931 $180,070 $67,250 $112,820 $112,820
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
<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>
1995 $748,799 $1,143,701 $272,216 $678,876 $194,894 $63,313 $28,574
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
(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>
1995 17.0% 10.9% 2.7 12.1% 37.3% 7.6% 3.7%
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
<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>
1995 $1.35 $1.35 $8.95 $.27 83,646 83,662
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
<CAPTION>
Number Price/
of Stock Price* Earnings
Stock- Number of Wages & Total Research & ------------ Average
holders Employees Benefits Taxes# Development High Low Ratio+
------- --------- -------- ------ ----------- ---- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 6,721 8,284 $411,315 $101,884 $16,800 $29.63 $22.25 19.2
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
<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 investment in capacity expansion
and technological advances and contributed to growing financial
strength.
Working capital amounted to $272 million at year-end 1995 compared
with $303 million one year earlier. A current ratio of 2.7 indicates a
strong liquidity position, although down slightly from the excellent
year-end 1994 current ratio of 3.0.
Accounts receivable increased to $257 million versus $221 million at
year-end 1994, reflecting strong fourth quarter sales and a delay of
customer payments. However, collection experience has been excellent.
Adequate allowances have been made for possible collection losses.
Total inventories at $138 million were up from $116 million at
year-end 1994. Finished goods inventories were $88 million, or 28
percent higher than one year ago. This increase resulted from
restoration of inventory from the low levels at December, 1994 and the
building of inventory to provide for new customers coming on stream in
1996. Raw materials and supplies inventories were slightly lower
compared to one year ago. Work-in-process inventories were $3 million
higher compared with the prior year reflecting current production
levels.
Prepaid expenses and deferred income taxes at December 31, 1995
include $11 million in deferred tax assets which are considered fully
realizable within one year.
In 1995 additions to property, plant and equipment were $195 million
compared with $78 million in 1994. This increase reflects modernization
and expansion projects begun in 1994 as well as similar projects during
1995. The Company invested significant amounts for property, plant and
equipment in recent years primarily for expansions and improving
manufacturing technology. The Company's capital expenditure commitments
approximated $73 million and $32 million at December 31, 1995 and 1994,
respectively. Continuation of high levels of capital expenditures is
anticipated. Funding for these expenditures will be available from
operating cash flows with additional funding available, if needed, under
a credit agreement and a shelf registration. Depreciation and
amortization was $63 million in 1995, a 13 percent increase from $56
million in 1994, resulting from the significant capital expenditures in
recent years.
Current liabilities of $158 million were $6 million higher than the
$152 million at year-end 1994 reflecting increases in income taxes.
Long-term debt decreased $5 million from year-end 1994 to $29 million
due to scheduled debt payments. Long-term debt, as a percent of total
capitalization, decreased to 3.7 percent at December 31, 1995 from 4.8
percent one year earlier.
The Company has a shelf registration statement with the Securities
and Exchange Commission covering the proposed sale of 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
eligible for these benefits upon retirement. The Company uses the
accrual method of accounting for such benefits. These benefit costs are
10
<PAGE>
funded as claims are incurred. The Company adjusted certain demographic
and actuarial assumptions used to derive the liabilities for pensions
and postretirement benefits other than pensions at December 31, 1995.
These adjustments included a decrease in the discount rate for pensions
from 8 percent to 7.5 percent and a decrease in the assumed rate of
increase in compensation from 6 percent to 5.5 percent. The discount
rate for postretirement benefits other than pensions was decreased from
8.5 percent at December 31, 1994 to 8 percent at December 31, 1995.
Noncurrent deferred income taxes increased to $37 million at December
31, 1995 from $30 million one year earlier, primarily reflecting the
excess of tax depreciation 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 monetary damages. While the outcome of
litigation cannot be predicted with 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 $87 million during the year reaching
$749 million at year end. Earnings retentions for 1995 (net income less
dividends paid) added $90 million to stockholders' equity but was offset
by a $4 million minimum pension liability adjustment. Stockholders'
equity per share was $8.95 at year-end 1995, an increase of 13 percent
over $7.92 per share at year-end 1994.
Results of Operations
Customer demand was strong for the Company's tires in spite of a
decreased industry market, and was excellent for the Company's
engineered rubber products as new and larger contracts with our
automotive customers were achieved. Capacity utilization was maintained
at high levels. Sales increased over 6 percent in 1995 to a record of
nearly $1.5 billion. This followed an 18 percent increase in sales in
1994 which resulted primarily from growth in customer demand.
Sales margins were lower in 1995 than in 1994, and were higher in
1994 than in 1993. Raw material cost increases and intense pricing
pressure in the replacement tire industry, which restricted recovery of
the increased costs, contributed to the reduction in 1995. During 1994
higher operating rates, more favorable product mix, and higher finished
goods pricing more than offset raw material cost increases.
The costs of certain raw materials increased significantly during
1994 and more so in 1995, and are expected to continue at high levels
during the first half of 1996. In addition, some of these materials are
likely to be in short supply if the high levels of global demand
experienced in 1995 recur in 1996. Sales margins during 1996 may be
affected by these situations. The effects of inflation on sales and
operations were not material during 1995 and 1994.
Other income was higher in 1995 compared with 1994, and higher in
1994 compared to 1993. These changes were related to the investments of
cash reserves and interest earned thereon.
Increases in 1995 and 1994 selling, general and administrative
expenses were normal considering sales activity levels. As a percent of
net sales, these expenses were unchanged.
Effective income tax rates were lower in 1995 than in 1994 due to a
reduction in the effective state and local income tax rate. The
increased rate in 1994 over 1993 was due primarily to changes in tax
credits.
11
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Consolidated statements of financial position at December 31, 1995
and 1994 and consolidated statements of income, cash flows, and
stockholders' equity for each of the three years in the period ended
December 31, 1995, the independent auditor's report thereon, and the
Company's unaudited quarterly financial data for the two-year period
ended December 31, 1995 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 6 and 21 of the Company's Proxy Statement dated March 26, 1996
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 60 Chairman of the Board, Principal Executive
President, Chief Officer and Chairman
Executive Officer and of the Board since
Director 1994. President
since 1991.
Principal Operating
Officer from 1991 to
1994. Director since
1990. Vice President
from 1987 to 1991.
President of Tire
Operations from 1990
to 1994; previously
Vice President-Sales
from 1984 to 1987.
Vice President of
Cooper Brand Sales,
Tire Operations from
1969 to 1984.
J. Alec Reinhardt 54 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 59 Vice President and Vice President since
Director 1978. President of
Tire Operations since
1994. Director since
1992. Corporate
Director of Purchasing
from 1966 to 1978.
Julien A. Faisant 63 Vice President and Principal Accounting
Corporate Controller Officer and Corporate
Controller since 1975.
Vice President since
1985.
(continued) 13
<PAGE>
Robert C. Gasser 59 Vice President Vice President since
1987. President of
Engineered Products
Operations, formerly
Industrial Products,
since 1987; Vice
President-Sales of
Industrial Products
from 1983 to 1987.
William C. Hattendorf 61 Vice President and Vice President since
Treasurer 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 53 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 58 Vice President Vice President since
1984. Vice President-
Tire Operations
since 1975.
Richard D. Teeple 53 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 57 Secretary Secretary since 1986.
Stephen O. Schroeder 45 Assistant Treasurer Assistant Treasurer
since 1994.
Previously Manager,
Cash and Employee Funds
since 1984.
Eileen B. White 45 Assistant Corporate Assistant Corporate
Controller Controller since 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 10 and 12 through 17 of the Company's Proxy Statement dated
March 26, 1996 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 19 through 21 of the Company's Proxy
Statement dated March 26, 1996 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 Schedules
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, 1995.
15
<PAGE>
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
Page(s)
FINANCIAL STATEMENTS: Reference
---------
Consolidated Statements of Income for the years
ended December 31, 1995, 1994 and 1993 19
Consolidated Balance Sheets at December 31, 1995 and 1994 20-21
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, 1994 and 1993 22
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993 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 10 and 12 through 17 of the
Company's Proxy Statement dated March 26, 1996.
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 39-45
(continued) 16
<PAGE>
(23) Consent of Ernst & Young LLP 46
(24) Powers of Attorney 47-50
(27) Financial Data Schedule
(99) Undertakings of the Company 51-53
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 26, 1996
--------------
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 26, 1996
President, Chief Executive
Officer and Director
(Principal Executive Officer)
J. ALEC REINHARDT* Executive Vice President and March 26, 1996
Director (Principal Financial
Officer)
JOHN FAHL* Vice President and Director March 26, 1996
JULIEN A. FAISANT* Vice President and Corporate March 26, 1996
Controller (Principal
Accounting Officer)
ARTHUR H. ARONSON* Director March 26, 1996
DELMONT A. DAVIS* Director March 26, 1996
EDSEL D. DUNFORD* Director March 26, 1996
DENNIS J. GORMLEY* Director March 26, 1996
IVAN W. GORR* Director March 26, 1996
ALLAN H. MELTZER* Director March 26, 1996
*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>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Net sales $1,493,622 $1,403,243 $1,193,648
Other income 3,836 2,282 588
--------- --------- ---------
1,497,458 1,405,525 1,194,236
Costs and expenses:
Cost of products sold 1,242,895 1,125,978 965,353
Selling, general
and administrative 73,796 68,748 62,282
Interest 697 2,680 2,351
--------- --------- ---------
1,317,388 1,197,406 1,029,986
--------- --------- ---------
Income before income taxes 180,070 208,119 164,250
Provision for income taxes 67,250 79,600 62,040
--------- --------- ---------
Net income $ 112,820 $ 128,519 $ 102,210
========= ========= =========
Net income per share $1.35 $1.54 $1.22
==== ==== ====
<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 1995 1994
---------- ----------
<S> <C> <C>
Current assets:
Cash, including short-term
investments of $14,000 in
1995 and $83,000 in 1994 $ 23,187 $ 103,285
Accounts receivable, less
allowances of $3,600 257,049 221,237
Inventories:
Finished goods 88,470 69,098
Work in process 13,154 10,341
Raw materials and supplies 36,340 37,084
--------- ---------
137,964 116,523
Prepaid expenses and
deferred income taxes 12,384 13,666
--------- ---------
Total current assets 430,584 454,711
Property, plant and equipment:
Land and land improvements 23,038 20,228
Buildings 228,877 190,129
Machinery and equipment 765,192 631,711
Molds, cores and rings 50,626 38,546
--------- ---------
1,067,733 880,614
Less accumulated depreciation
and amortization 388,857 331,013
--------- ---------
Net property, plant
and equipment 678,876 549,601
Other assets 34,241 35,419
--------- ---------
$1,143,701 $1,039,731
========= =========
(continued)
20
<PAGE>
<CAPTION>
December 31
-------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
---------- ----------
<S> <C> <C>
Current liabilities:
Accounts payable $ 78,823 $ 77,020
Accrued liabilities 63,676 63,427
Income taxes 10,834 6,049
Current portion of debt 5,035 5,112
--------- ---------
Total current liabilities 158,368 151,608
Long-term debt:
9% senior notes payable, due 2001 22,727 27,273
Other 5,847 6,341
--------- ---------
Total long-term debt 28,574 33,614
Postretirement benefits other
than pensions 132,963 127,347
Other long-term liabilities 38,341 35,348
Deferred income taxes 36,656 29,737
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; 83,661,972 shares
outstanding (83,634,072 in 1994) 83,662 83,634
Capital in excess of par value 1,931 1,656
Retained earnings 672,373 582,137
Minimum pension liability (9,167) (5,350)
--------- ---------
Total stockholders' equity 748,799 662,077
--------- ---------
$1,143,701 $1,039,731
========= =========
<FN>
See Notes to Consolidated Financial Statements, pages 24 to 34.
</TABLE>
21
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollar amounts in thousands; per-share amounts in dollars)
<CAPTION>
Common Capital
Stock In Excess Minimum
$1 Par of Par Retained Pension
Value Value Earnings Liability Total
------- --------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $83,511 $ 611 $387,352 $ - $471,474
Net income 102,210 102,210
Exercise of stock options 71 604 675
Cash dividends -
$.20 per share (16,710) (16,710)
Minimum pension liability
adjustment, net of
income taxes (7,463) (7,463)
------ ----- ------- ------ -------
Balance at December 31, 1993 83,582 1,215 472,852 (7,463) 550,186
Net income 128,519 128,519
Exercise of stock options 52 441 493
Cash dividends -
$.23 per share (19,234) (19,234)
Minimum pension liability
adjustment, net of
income taxes 2,113 2,113
------ ----- ------- ------ -------
Balance at December 31, 1994 83,634 1,656 582,137 (5,350) 662,077
Net income 112,820 112,820
Exercise of stock options 28 275 303
Cash dividends -
$.27 per share (22,584) (22,584)
Minimum pension liability
adjustment, net of
income taxes (3,817) (3,817)
------ ----- ------- ------ -------
Balance at December 31, 1995 $83,662 $1,931 $672,373 $(9,167) $748,799
====== ===== ======= ====== =======
<FN>
See Notes to Consolidated Financial Statements, pages 24 to 34.
</TABLE>
22
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31
(Dollar amounts in thousands, per share amounts in dollars)
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Operating activities:
Net income $112,820 $128,519 $102,210
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 63,313 55,603 46,352
Deferred income taxes 9,356 8,983 10,526
Changes in operating assets
and liabilities:
Accounts receivable (35,812) (39,034) (980)
Inventories and
prepaid expenses (20,159) (6,174) (45,623)
Accounts payable and
accrued liabilities 2,052 24,698 (12,800)
Postretirement benefits
other than pensions 6,315 8,170 8,400
Other 3,051 (828) 1,979
------- ------- -------
Net cash provided by
operating activities 140,936 179,937 110,064
Investing activities:
Property, plant and equipment (194,894) (78,449) (117,249)
Other 1,258 88 3,226
------- ------- -------
Net cash used in
investing activities (193,636) (78,361) (114,023)
Financing activities:
Payment on debt (5,117) (18,349) (33,318)
Issuance of debt - 13,000 24,000
Issuance of common stock 303 493 675
Payment of dividends (22,584) (19,234) (16,710)
------- ------- -------
Net cash used in
financing activities (27,398) (24,090) (25,353)
------- ------- -------
Changes in cash
and short-term investments (80,098) 77,486 (29,312)
Cash and short-term investments
at beginning of year 103,285 25,799 55,111
------- ------- -------
Cash and short-term investments
at end of year $ 23,187 $103,285 $ 25,799
======= ======= =======
<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
The Company employs accounting policies that are based on generally
accepted accounting principles. The preparation of financial statements
in conformity with these principles requires management to make
estimates and assumptions that affect reported amounts of (1) revenues
and expenses during the reporting period, and (2) assets and
liabilities, as well as disclosure of contingent assets and liabilities,
at the date of the financial statements. Actual results could differ
from those estimates.
The following summary of significant accounting policies is presented
for assistance in the evaluation and interpretation of the financial
statements and supplementary data. Certain amounts for prior years have
been reclassified to conform to 1995 presentations.
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.
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.
Stock options - The Company accounts for employee stock options in
accordance with Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees".
Revenue recognition - Revenues are recognized when 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 - Costs are charged to expense as incurred
and amounted to approximately $16,800, $14,700 and $15,100 in 1995, 1994
and 1993, respectively.
BUSINESS
The Company, a specialist in the rubber industry, manufactures and
markets automobile and truck tires, inner tubes, vibration control
products, hoses and hose assemblies, and automotive sealing systems.
Product shipments to original equipment vehicle manufacturers
historically have approximated 15 to 20 percent of net sales.
(continued)
24
<PAGE>
The Company manufactures products for the transportation industry.
Shipments to customers outside of the United States approximated eight,
seven and five percent of net sales in 1995, 1994 and 1993, respectively.
Sales to one major customer approximated 14, 13 and 14 percent of net
sales in 1995, 1994 and 1993, respectively.
INVENTORIES
Under the LIFO method, inventories have been reduced by approximately
$76,309 and $64,653 at December 31, 1995 and 1994, respectively, from
current cost which would be reported under the first-in, first-out
method.
LONG-TERM DEBT
The Company has an 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,
1999 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, 1995.
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. Based on the
borrowing rates available to the Company for instruments with similar
term and maturity at December 31, 1995 and 1994, the fair value of the
senior notes including the current portion was $29,733 and $32,536
respectively.
<TABLE>
Other long-term debt at December 31 comprises the following:
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Capitalized lease obligations $5,133 $5,137
8 7/8% mortgage note, payable
$47 monthly including interest 714 1,204
----- -----
$5,847 $6,341
===== =====
</TABLE>
The mortgage note is secured by real and personal property with a
carrying value of $7,662 at December 31, 1995.
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
$540,703 at December 31, 1995.
Interest paid on debt during 1995, 1994 and 1993 was $3,515, $3,911,
and $4,723, respectively. The amount of interest capitalized was
$2,694, $1,170, and $2,297 during 1995, 1994 and 1993, respectively.
The required principal payments for long-term debt during the next
five years are as follows: 1996 - $5,035; 1997 - $5,081; 1998 - $4,723;
1999 - $4,545; 2000 - $4,545. See the note on lease commitments for
information on capitalized lease obligations.
(continued)
25
<PAGE>
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.
ACCRUED LIABILITIES
<TABLE>
Accrued liabilities at December 31, were as follows:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Payroll $29,422 $32,403
Other 34,254 31,024
------ ------
$63,676 $63,427
====== ======
</TABLE>
PREFERRED STOCK
At December 31, 1995, 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.
(continued)
26
<PAGE>
COMMON STOCK
There were 7,717,468 common shares reserved for the exercise of stock
options and contributions to the Company's Thrift and Profit Sharing and
Pre-Tax Savings plans at December 31, 1995.
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, 1995 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 current or former 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, 1993 454,769 $5.09 - $34.69
Granted under 1986 plan 75,000 24.50
Granted under 1991 plan 2,910 26.44
Exercised (52,304) 5.09 - 15.19
Cancelled ( 5,143) 12.16 - 34.69
-------
Outstanding at
December 31, 1994 475,232 $5.09 - $34.69
Granted under 1986 plan 103,800 24.13
Granted under 1991 plan 3,153 24.25
Exercised (27,900) 5.09 - 25.00
Cancelled (13,110) 24.13 - 25.00
-------
Outstanding at
December 31, 1995 541,175 $5.09 - $34.69
=======
</TABLE>
At December 31, 1995, under the 1981 plan, options were exercisable
on 22,424 shares and no shares were available for future grants. At
December 31, 1994, options were exercisable on 24,024 shares and no
shares were available for future grants.
(continued)
27
<PAGE>
Under the 1986 plan, at December 31, 1995, options were exercisable
on 367,012 shares and 1,146,300 shares were available for future grants.
At December 31, 1994, options were exercisable on 326,022 shares and
1,236,990 shares were available for future grants.
At December 31, 1995, under the 1991 plan, 8,386 options were
exercisable and 88,225 shares were available for future grants. At
December 31, 1994, 5,476 options were exercisable and 91,378 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 83,645,864 in 1995, 83,623,234 in 1994 and
83,549,566 in 1993. 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 for 1995, 1994 and 1993 included the following
components:
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits
earned during period $ 9,833 $ 9,769 $ 7,641
Interest cost on projected
benefit obligation 20,374 17,485 16,327
Actual return on assets (54,268) 1,565 (12,875)
Net amortization and deferral 38,966 (17,201) (879)
------ ------ ------
Net periodic pension cost $14,905 $11,618 $10,214
====== ====== ======
</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,
1995 and 1994 was as follows:
<CAPTION>
December 31, 1995
-----------------------------
Plans for Which
---------------
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
------------- -------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $131,996 $108,028
======= =======
Accumulated benefit obligation $135,171 $111,320
======= =======
Projected benefit obligation $203,446 $112,845
Plans' assets at fair value 187,831 82,144
------- -------
Projected benefit obligation
in excess of plan assets (15,615) (30,701)
Unrecognized transition amount 5,175 2,723
Unrecognized prior service cost - 8,014
Unrecognized net loss 33,093 15,895
Adjustment for minimum liability - (26,117)
------- ------
Pension asset (liability)
recognized in the Balance Sheet $ 22,653 $(30,186)
======= =======
(continued)
29
<PAGE>
<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)
======= ======
</TABLE>
The actuarial present value of benefit obligations in 1995 reflects
changes in certain actuarial assumptions including demographics and
decreases in 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 percent in 1995, 1994 and 1993. The assumptions
used to determine the status of the Company's plans at December 31 were
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Increase in future
compensation levels 5.5% 6.0%
Discount rate 7.5 8.0
</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 $8,277, $7,485 and $6,027 for 1995,
1994 and 1993, 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 upon 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.
The Company continues to fund these benefit costs as claims are
incurred.
<TABLE>
Postretirement benefits expense for 1995, 1994 and 1993 included the
following components:
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Service cost $ 2,607 $ 3,022 $ 2,226
Interest cost 9,810 10,803 9,805
Amortization (333) 261 -
------ ------ ------
$12,084 $14,086 $12,031
====== ====== ======
</TABLE>
<TABLE>
The status of the Company's plans at December 31, 1995 and 1994 was
as follows:
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Accumulated postretirement
benefit obligation (APBO):
Retirees $ 71,077 $ 61,280
Fully eligible active plan participants 25,131 22,525
Other active plan participants 37,314 31,881
------- -------
133,522 115,686
Deferred gain 6,041 17,561
------- -------
Postretirement benefits liability $139,563 $133,247
======= =======
</TABLE>
(continued)
31
<PAGE>
<TABLE>
These amounts are included in the accompanying balance sheet captions:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Accrued liabilities $ 6,600 $ 5,900
Postretirement benefits other than pensions 132,963 127,347
------- -------
$139,563 $133,247
======= =======
</TABLE>
The discount rate used in determining the APBO was 8.0 percent and
8.5 percent for 1995 and 1994, respectively. The decrease in the APBO
is due primarily to the decrease in the assumption for the discount
rate. At December 31, 1995, the assumed average annual rate of increase
in the cost of health care benefits (health care cost trend rate) was
9.5 percent for 1996 declining by 1/2 percent per year through 2004 when
the ultimate rate of 5.5 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 $6,216 and the net periodic expense by $483 for the year.
The Company has a Voluntary Employees' Beneficiary Trust and Welfare
Benefits Plan (VEBA) to fund health benefits for eligible active and
retired employees. The pre-funded amount was $11,000 in 1995 and $9,900
in 1994.
INCOME TAXES
<TABLE>
The provision for income taxes consists of the following:
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $51,141 $60,819 $44,531
State and local 6,753 9,798 6,983
------ ------ ------
57,894 70,617 51,514
Deferred:
Federal 8,062 7,677 8,849
State and local 1,294 1,306 1,677
------ ------ ------
9,356 8,983 10,526
------ ------ ------
$67,250 $79,600 $62,040
====== ====== ======
</TABLE>
(continued)
32
<PAGE>
<TABLE>
The effective income tax rate differs from the statutory Federal tax
rate as follows:
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Statutory Federal tax rate 35.0% 35.0% 35.0%
State and local income taxes,
net of Federal income tax
benefit 2.9 3.5 3.4
Other (0.6) (0.3) (0.6)
---- ---- ----
Effective income tax rate 37.3% 38.2% 37.8%
==== ==== ====
</TABLE>
Payments for income taxes in 1995, 1994 and 1993 were $53,110,
$70,634 and $54,712, respectively.
<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, 1995 and 1994 are as follows:
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation over book depreciation $75,238 $65,638
Other 23,945 20,852
------ ------
Total deferred tax liabilities 99,183 86,490
Deferred tax assets:
Postretirement benefits other
than pensions 48,163 46,119
Other 25,025 21,326
------ ------
Total deferred tax assets 73,188 67,445
------ ------
Net deferred tax liabilities $25,995 $19,045
====== ======
</TABLE>
<TABLE>
These amounts are included in the accompanying balance sheet captions:
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Prepaid expenses and
deferred income taxes $10,661 $10,692
Deferred income taxes 36,656 29,737
------ ------
Net deferred tax liabilities $25,995 $19,045
====== ======
</TABLE>
(continued)
33
<PAGE>
LEASE COMMITMENTS
The Company rents 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.
<TABLE>
Included in property, plant and equipment are the following
capitalized lease amounts at December 31, 1995 and 1994:
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Land and land improvements $ 378 $ 378
Buildings 9,788 9,788
Machinery and equipment 13,339 13,640
------ ------
23,505 23,806
Less accumulated amortization 20,410 20,444
------ ------
$ 3,095 $ 3,362
====== ======
</TABLE>
Rental expense for operating leases was $6,696 for 1995, $6,235 for
1994 and $5,362 for 1993.
<TABLE>
Future minimum payments for all noncancelable leases at December 31,
1995 are summarized below:
<CAPTION>
Capital Operating
Leases Leases
-------- ---------
<S> <C> <C>
1996 $ 298 $ 2,444
1997 298 1,428
1998 298 1,074
1999 298 676
2000 298 254
2001 and later 11,156 94
------ ------
12,646 $ 5,970
======
Less amount representing
interest 7,513
------
Present value of minimum
lease payments $ 5,133
======
</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, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995, 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.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Toledo, Ohio
February 13, 1996
35
<PAGE>
<TABLE>
QUARTERLY FINANCIAL DATA
(UNAUDITED)
(All dollar amounts in thousands except per share figures)
<CAPTION>
QUARTER
------------------------------------------
1995 FOURTH THIRD SECOND FIRST
- ---- ------ ----- ------ -----
<S> <C> <C> <C> <C>
Net Sales $381,899 $375,004 $371,366 $365,353
Gross Margin $ 70,224 $ 61,505 $ 57,576 $ 61,422
Net Income $ 33,894 $ 27,048 $ 24,661 $ 27,217
Net Income Per Share $.41 $.32 $.29 $.33
Dividend Per Share $.075 $.075 $.060 $.060
Stock Price: High $25 3/4 $27 3/8 $29 1/8 $29 5/8
Low $22 1/4 $23 5/8 $22 7/8 $23 3/8
</TABLE>
[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
36
<PAGE>
<TABLE>
COOPER TIRE & RUBBER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1995, 1994 and 1993
<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>
1995 $3,600,000 $ 375,705 $ 375,705 $3,600,000
========= ========= ========= =========
1994 $3,100,000 $1,089,074 $ 589,074 $3,600,000
========= ========= ========= =========
1993 $3,100,000 $ 647,967 $ 647,967 $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 11, 1996, 83,667,472
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 $540,703,000 at
December 31, 1995.
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
Cooper's total tire shipments in 1995 improved over the previous year.
This achievement, while not at the historical pace, was remarkable when
compared with industry results.
Industry replacement tire shipments in 1995 fell short of early
predictions, reaching a total of 204.1 million units compared with 208.8
million units in 1994, a decrease of 2.2 percent. This outcome was
attributed to the record-breaking 1994 replacement tire shipments which
finished well ahead of the long-term industry trend of 2 percent annual
growth.
By product category, industry replacement passenger shipments
decreased 2.4 percent; light truck replacement tire shipments recorded a
slight increase of 0.7 percent; and medium truck tire shipments
decreased 5.9 percent.
Consumers continued to increase their purchase of low profile
passenger radials, which improved market share from 51.2 percent in 1994
to 53 percent in 1995. In the replacement tire industry a tire is
considered a low profile design if it has an aspect ratio less than a 75
series profile.
For the first time in the replacement market, during 1995 more
passenger tires were sold with either black sidewalls, outline white
letters or solid white letters than traditional white sidewall
configurations.
The prospective market for replacement tires continues to be positive
for several reasons. In 1995 the number of registrations of passenger
cars increased by an estimated 1.2 percent while light trucks increased
by an estimated 1 percent; the average age of a passenger car in the
United States increased to an estimated 8.4 years; and the average
annual passenger vehicle miles traveled in 1995 increased to an
estimated 11,400 miles. These are factors which contribute to a sound
market for replacement tires.
According to a leading industry magazine, Modern Tire Dealer,
independent tire dealers remain the top choice among consumers when
buying tires. More than 68 percent of today's replacement tires in the
United States reach the consumer through an independent tire dealer.
This is a positive factor in view of Cooper's ongoing commitment to this
segment of the market. A substantial share of Cooper's tire sales are
to independent dealers and distributors. Marketing three proprietary
brand lines under the names of Cooper, Mastercraft and Starfire, Cooper
solidly supports the independent channel of distribution.
PRODUCTS
During 1995 more than 700 new stockkeeping units were brought on-stream
for Cooper customers. Included were additional sizes for existing tire
lines as well as new designs for customers.
Knowing that consumers want a choice in price levels, early in 1995
Cooper introduced the Trendsetter SE in 70 series sizes. Industry
trends indicate an increase in 70 series profiles with decreases in the
broadline 75 and 80 series sizes. The Trendsetter SE, with its 40,000
mile limited warranty, offers the entry level selection of
Good-Better-Best radials for Cooper customers. Consumers looking for an
upgrade in a 70 series profile may select the Lifeliner Classic II with
a 60,000 mile limited warranty or the top-of-the-line Cooper Grand
Classic STE with an 80,000 mile limited free replacement warranty.
(continued)
39
<PAGE>
Also in 1995 Cooper introduced the Mastercraft Glacier Grip, the
first Mastercraft-identified winter tire radial for this proprietary
brand group. With S or T speed ratings, depending on size, this high
traction design offers a selection of sizes in 55, 60, 65, 70, 75 and 80
series profiles.
A new studless snow tire was developed during 1995 for the Japanese
market. Because of stud restrictions in that country, special snow
tires have been developed for needed traction on snow and ice. This new
tire combines specially designed sipes and slots in the tread and has a
unique compounding which stays more pliable in freezing weather. The
result is excellent traction. Cooper will be using this technology in
new studless tire designs planned for 1996 U.S. introductions.
As production increased for radial medium truck tires, Cooper
formally introduced its rib, drive and free-rolling, all-steel, radial
medium truck lines. Marketed through independent dealers and
distributors only, the CXMT 340, CXML 440 and the CT 240 steel radials
offer lines which cover 75 percent of the current demand for replacement
radial medium truck tires.
Cooper continues to monitor original equipment trends to be prepared
to offer the replacement tires necessary to fulfill consumer demand.
FACILITIES
Cooper continued to expand its tire facilities to meet production and
customer service demands. In Findlay a 140,300-square-foot warehouse
was added to the existing distribution center. At the Tupelo plant a
200,000-square-foot expansion was completed to help increase passenger
tire capacity as well as increase warehouse space. At the Albany
manufacturing facility almost 300,000 square feet were added to the
existing facility to increase warehouse and production capacity.
The new high-tech manufacturing facility for tire molds, located in
Findlay, is on schedule. With production of tire molds targeted to
begin in mid-1996, the new facility will help fulfill part of Cooper's
strategic plan to ensure a competitive edge in the marketplace. The
Company's speed-to-market with new products should be accelerated as
this new facility gains production momentum.
Cooper successfully implemented a new computerized maintenance system
in its Findlay plant during 1995. This high-tech system links
maintenance, production, purchasing, accounting and engineering to help
schedule preventative maintenance for equipment while also coordinating
the resources--both technicians and parts--necessary to accomplish the
task. Because of its success in Findlay, other plants will be scheduled
for this program during 1996.
Automated finishing units help provide greater accuracy in product
labeling and shipping. By year-end 1996, Cooper should have automated
finishing in place or in process at three of its four tire manufacturing
facilities. As this highly complex system is installed at each plant
the process is continually improved.
An aggressive study is underway to assess Cooper's regional
warehousing program with a goal of helping to further improve customer
service. One warehouse has been selected for a test program to help
evaluate cost-effective storage and retrieval systems.
TECHNOLOGY
Escalating raw material prices, combined with intense price competition
in the industry, put pressure on manufacturers to reduce product cost.
While Cooper already has a reputation in the industry as a low-cost
manufacturer, the Company continues to look for ways to further decrease
cost and improve quality.
Cooper employees designed new equipment to automate the application
of rubber strips to wire beads. The new system automates this
application by using a multiple-cavity machine into which the worker
loads the beads. The rubber strips are then machine-applied in
significantly less time than in the prior process.
(continued) 40
<PAGE>
In the area of product technology, Cooper was successful in
implementing its HPL system for construction in passenger sizes. This
system was independently developed by in-house engineers and provides
cost-saving and product-enhancing technology. Cooper's HPL construction
offers cost savings by using less material than traditional designs and
also provides for faster tire assembly, thus reducing building costs.
MARKETING
Cooper has an excellent balance of tire sales between its house brand
and private label customers. Proprietary house brands include Cooper,
Mastercraft and Starfire. Private label customers include mass
merchandisers, large wholesale distributors and large retail chains.
According to an annual report card issued by Tire Review in its
brands survey, both Cooper and Mastercraft ranked among the top five
brands, nationally, in overall performance and dealer satisfaction.
Independent dealers were asked to indicate their preferences among tire
suppliers in ten key categories such as on-time delivery, profitability,
product availability and merchandising support.
Once again, Cooper's international growth contributed to the year's
success. Exporting to more than 90 countries, on all developed
continents, Cooper was selected as a recipient of the 1995 Ohio
Governor's "E" Award for excellence in exporting.
In addition, Cooper was named as "Overseas Vendor of the Year 1995"
by Autobacs Seven. Cooper began manufacturing a private label line for
Japan's largest automotive parts retailer late in 1994. In making the
award, Autobacs Seven cited similar business cultures and operating
philosophies such as customer focus, goal orientation and responding to
client needs as factors in the positive relationship.
A long-term agreement to continue producing private brand Eldorado
tires was signed between Cooper and Treadways Corporation. Eldorado, a
Michigan based distributor, is a long-time Cooper customer that was
purchased by Treadways during the year.
Early in 1995 Sears, Roebuck and Co. announced that Cooper had been
selected to receive a large share of its private label tire business.
Cooper continues to furnish tires to Western Auto, NTW (National Tire
Warehouse) and Tire America, which are all part of the Sears Automotive
Group. In the announcement, Sears described Cooper as a world-class
company that provided the Western Auto Supply Company with excellent
products for many years.
At the annual NTDRA convention in New Orleans, Cooper's retired
chairman and CEO Ivan Gorr was inducted into the Tire Industry Hall of
Fame. Mr. Gorr joins 80 other members in this prestigious industry
group.
During 1995 Cooper continued its national advertising campaign with a
schedule of network and cable television spots. Featuring unique,
computer-animated logos, these popular commercials first aired in 1994
with messages designed to help create awareness of the Cooper name as a
replacement tire brand. New spots added in 1995 were created to build
awareness of Cooper's technology and expertise. Many Cooper dealers use
these high-recognition spots in their local television campaigns,
capitalizing on the awareness created by the national schedule.
Supplementing this exposure, Cooper tires were again promoted on Paul
Harvey's popular syndicated national radio programs which air during
morning, noon and evening news periods. Listeners who look forward to
hearing "the rest of the story" frequently hear Paul Harvey's highly
regarded opinion of Cooper tires. This association has proven to be
very successful in Cooper's overall marketing plan.
Cooper actively supports its independent tire dealers with a generous
cooperative advertising allowance. Dealers use these cooperative funds
to develop sales and promote the Cooper brand in newspaper, direct mail,
radio, cable television, yellow pages and other selected media.
(continued)
41
<PAGE>
As always, excellence in customer service is a first priority of
Cooper employees. With many market factors being uncontrollable in
today's competitive environment, taking care of customers is something
Cooper can control.
Cooper's success as an independent manufacturer and marketer of tires
and inner tubes continues because employees at all levels embrace these
principles: offer customers good merchandise, fair play and a square
deal. This operating philosophy, first penned by Ira J. Cooper in 1926,
is as relevant today as it was then.
GLOSSARY OF TERMS
BROADLINE - usually referring to 75 and 80 series sizes, this term
describes the most common range of radial tire sizes found on light
vehicles today.
FINISHING - the last stage of tire production where sidewalls are buffed
and vents are trimmed to provide an attractive, consumer-ready product.
SERIES; ASPECT RATIO - the percentage relationship between a tire's
section height and its section width. (On a 70 series tire, the section
height is 70 percent of the width.) Visually, tires with low aspect
ratios have shorter sidewalls and wider treads than tires with high
aspect ratios.
SPEED RATINGS - letter symbols that indicate a tire's sustained speed
capability on indoor wheel tests, ranging from 112 mph up to 186 mph.
STOCKKEEPING UNIT (SKU) - a unique specification in brand, line and size.
STUD - a small metal pin inserted into the tread of a traction tire to
enhance traction capability on ice.
OPERATIONS - ENGINEERED PRODUCTS
INDUSTRY OVERVIEW
The Company expects continuing strong demand for its engineered rubber
products even though 1995 was a soft year for the light vehicle
industry. Total light vehicle production in the United States and
Canada declined 1.3 percent in 1995 after increasing by 11 percent in
1994. This was the first year-to-year decline since 1991. Passenger
car sales were down 3.3 percent while light truck sales increased
slightly.
While industry analysts predict minimal growth of 1.4 percent in
1996, Cooper's penetration is expected to continue to grow. The
Company's sales of original equipment engineered rubber products per
vehicle produced has steadily increased over the past decade. In
addition, Cooper supplied a significant number of engineered rubber
parts for every vehicle on the 1995 top ten best-selling vehicle list.
Cooper continues to gain respect as a world-class supplier of rubber
products to light vehicle manufacturers.
Cooper engineered rubber products can be found on all of the top ten
selling vehicles in the United States.
1995 TOP TEN SELLING VEHICLES
Ford F-Series Pickup Toyota Camry
Chevrolet C/K Pickup Ford Ranger
Ford Explorer Honda Civic
Ford Taurus Saturn
Honda Accord Dodge Ram Pickup
42
<PAGE>
PRODUCTS AND TECHNOLOGY
Cooper has established a reputation in the light vehicle engineered
products industry as a state-of-the-art manufacturer for vibration
control products, body sealing components and reinforced hoses. The
Cooper team works closely with light vehicle manufacturers exploring
ways to improve products and decrease manufacturing costs. In today's
competitive environment, many light vehicle manufacturers rely on Cooper
expertise to help make their products more attractive to consumers.
Several new products were developed in 1995 for 1996 vehicle models.
A plastic veneer door opening weatherstrip, available in multiple
colors, was developed for a major automotive customer. This entailed a
new process line to extrude dense rubber, sponge rubber and a
thermoplastic material.
In order to meet new federal standards required for the fuel delivery
systems of vehicles, Cooper designed a special plastic veneer liner to
be used in conjunction with fabric-reinforcement and rubber. This
creates a fuel-line with an extremely low level of gasoline permeation.
Development was completed for two new hydraulic engine mounts with
production scheduled to begin in 1996. This contract, as well as
another development contract for hydraulic mounts, resulted from
business agreements with European-based companies.
FACILITIES
Strong demand for the Company's engineered products has required the
construction of a new 178,000-square-foot manufacturing facility in Mt.
Sterling, Kentucky. Ground was broken in October for the new plant with
production scheduled to begin by mid-year 1996. Products will include
extruded rubber hose and hose assemblies for the automotive industry.
This expansion is necessary because significant business opportunities
have developed as a result of supplier consolidation and product
realignment within the North American original equipment light vehicle
market.
Further expansion in 1995 increased production at the Bowling Green
hose plant. Initially built in 1993, this new plant was expanded by
60,000 square feet. Once again, a rise in demand for Cooper-produced
hose products necessitated the additional production capacity.
A newly completed Bowling Green body sealing laboratory provides for
research and development as well as product durability studies.
Vehicles will be brought into the lab to conduct such analyses as door
closing durability, window tests and sound transmission. Testing can be
performed on full vehicle bodies or portions of a vehicle such as a body
side. There will also be a water test booth for checking water leaks
either in localized areas such as around a window or for the entire
vehicle.
A new facility was added in the Detroit area to house body sealing
sales, design and customer engineering organizations. This office and
the Bowling Green body sealing lab will function interactively with
customers to provide more rapid and thorough analytical input into the
progressive automotive design and development cycle.
In late 1995 construction began at the El Dorado plant on 42,000
square feet of additional warehousing space to provide increased
customer service. The building will be operational in the second
quarter of 1996.
MARKETING
Cooper's expertise in product innovation and use of advanced technology
is recognized world wide. New products, processes and systems are
constantly being developed to maintain Cooper's competitive edge in the
light vehicle manufacturing industry.
(continued)
43
<PAGE>
In the body sealing area, a total vehicle sealing project includes
all dynamic seals for sheet metal and moveable glass. Cooper's first
total vehicle sealing program for General Motors was awarded for the new
U-Van which is marketed under the Sintra, Silhouette, Trans Sport and
Venture names.
Cooper also will manufacture engine mounts on the 1999 General Motors
GMT800 platform which will replace, in 1998, the current full-size
pickup series in the Chevrolet and GMC Sierra lines.
In addition, Cooper was awarded the contract for the complete engine
mount package for the new 1999 Opel/Saturn vehicles. This package
includes both conventional mounts and hydramounts. Cooper strut mounts
will be found in the new 1998 Ford Escort and Mercury Tracer models.
As a result of a collaborative agreement with ContiTech, part of
Continental AG, development work is also being completed for heater,
fuel-line and vacuum hoses on the new BMW Z3 Roadster; the radiator
hoses for the new Mercedes Benz W136 All Activity Vehicle; and radiator
and heater hoses on the VW A4 Concept, Golf and Jetta vehicles.
Cooper's investment in equipment, facilities and technology, combined
with the determination and dedication of well-trained employees has
made, and keeps, Cooper a strong competitor in the automotive
manufacturing market.
GLOSSARY OF TERMS
HYDRAMOUNT - a fluid-filled engine mount which can be made to react to
different vibration frequencies. This compares to a conventional mount
which is designed for one specific frequency.
LIGHT VEHICLES - includes passenger cars, pickup trucks and sport
utility vehicles, with gross vehicle weight of 8,000 pounds or less.
PLATFORM - an industry term which describes a basic vehicle model that a
manufacturer markets under various brand names.
THERMOPLASTIC MATERIAL - a substance capable of being repeatedly
softened by increasing the temperature and hardened by decreasing
the temperature.
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 retail chains.
PASSENGER
The 15 lines of passenger radial tires include touring, high
performance, traction and value designs. With speed ratings of S,T,H
and V and other important characteristics such as all-season and winter
traction capability, Cooper's passenger lines fit most motorists' 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.
(continued)
44
<PAGE>
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.
45
<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 13,
1996, 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, 1995:
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
March 26, 1996
46
<PAGE>
Exhibit (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, in the capacities
indicated, do hereby constitute and appoint Patrick W. Rooney, or J.
Alec Reinhardt, or John Fahl, or Stan C. Kaiman 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 13th day of February, 1996.
/s/ Arthur H. Aronson /s/ Delmont A. Davis
- --------------------------- ---------------------------
Arthur H. Aronson, Director Delmont A. Davis, Director
/s/ Edsel D. Dunford /s/ John Fahl
- --------------------------- ---------------------------
Edsel D. Dunford, Director John Fahl, Director
/s/ Julien A. Faisant /s/ Ivan W. Gorr
- --------------------------- ---------------------------
Julien A. Faisant, Vice Ivan W. Gorr, Director
President and Controller,
Principal Accounting Officer
/s/ Allan H. Meltzer
---------------------------
/s/ Stan C. Kaiman Allan H. Meltzer, Director
- ---------------------------
Stan C. Kaiman, Secretary
/s/ Patrick W. Rooney
---------------------------
/s/ J. Alec Reinhardt Patrick W. Rooney, Chairman of
- ----------------------------- the Board, President,
J. Alec Reinhardt, Executive Principal Executive Officer,
Vice President, Principal and Director
Financial Officer, and Director
(continued)
47
<PAGE>
STATE OF OHIO )
) ss.
COUNTY OF HANCOCK)
On this 13th day of February, 1996, before me, a Notary Public in and
for the State and County aforesaid, personally appeared Arthur H.
Aronson, Delmont A. Davis, Edsel D. Dunford, John Fahl, Julien A.
Faisant, Ivan W. Gorr, Stan C. Kaiman, Allan H. Meltzer, J. Alec
Reinhardt, and Patrick W. Rooney, 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/ Phyllis C. Hall
--------------------------------------
Phyllis C. Hall, Notary Public
State of Ohio
My commission expires October 6, 2000
(SEAL)
48
<PAGE>
Exhibit (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, in the capacity
indicated, does hereby constitute and appoint Patrick W. Rooney, or J.
Alec Reinhardt, or John Fahl, or Stan C. Kaiman 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 Southfield, Michigan this 5th day of February, 1996.
/s/ Dennis J. Gormley
--------------------------------
Dennis J. Gormley, Director
STATE OF MICHIGAN )
) ss.
COUNTY OF OAKLAND )
On this 5th day of February, 1996, before me, a Notary Public in and for
the State and County aforesaid, personally appeared Dennis J. Gormley,
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/ Christine E. Cusmano
------------------------------------
Christine E. Cusmano
Notary Public, Macomb County, MI
My commission expires February 6, 1998
Acting in Oakland County, MI
(SEAL)
49
<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 13, 1996,
constitute and appoint Patrick W. Rooney, or J. Alec Reinhardt, or John
Fahl, or Stan C. Kaiman 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 12th day of February, 1996.
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 12th day of February, 1996, 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/ Phyllis C. Hall
----------------------------------
Phyllis C. Hall, Notary Public
State of Ohio
My commission expires October 6, 2000
(SEAL)
50
<PAGE>
Exhibit (99)
COOPER TIRE & RUBBER COMPANY
UNDERTAKINGS OF THE COMPANY
FOR FISCAL YEAR ENDED DECEMBER 31, 1995
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, represent 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.
e. 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) 51
<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) 52
<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.
53
<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, 1995 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-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<CASH> 9,187
<SECURITIES> 14,000
<RECEIVABLES> 260,649
<ALLOWANCES> 3,600
<INVENTORY> 137,964
<CURRENT-ASSETS> 430,584
<PP&E> 1,067,733
<DEPRECIATION> 388,857
<TOTAL-ASSETS> 1,143,701
<CURRENT-LIABILITIES> 158,368
<BONDS> 28,574
0
0
<COMMON> 83,662
<OTHER-SE> 665,137
<TOTAL-LIABILITY-AND-EQUITY> 1,143,701
<SALES> 1,493,622
<TOTAL-REVENUES> 1,497,458
<CGS> 1,242,895
<TOTAL-COSTS> 1,242,895
<OTHER-EXPENSES> 73,796
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 697
<INCOME-PRETAX> 180,070
<INCOME-TAX> 67,250
<INCOME-CONTINUING> 112,820
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,820
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.35
</TABLE>
