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, 1996
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 10, 1997). $1,585,095,440
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 10, 1997)
Common Stock, $1 par per share 79,254,772
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 17, 1997 - Part III
EXHIBIT INDEX appears on pages 16 and 17
1
<PAGE>
Part I
Item 1. BUSINESS
Acquisition of Tire Operations of Avon Rubber p.l.c.
On March 14, 1997, the Company, through a wholly-owned United Kingdom
subsidiary, acquired the tire operations of Avon Rubber p.l.c. (Avon) of
the United Kingdom. This purchase includes the land and manufacturing
facility in Melksham, England; the shares of Avon Tyres Limited and the
shares of tire distribution companies in France, Germany and
Switzerland; and other minor assets. In a separate transaction the
Company acquired from Avon various trademarks and technology. The total
purchase price for the land, manufacturing facility, shares, trademarks
and technology was approximately $110 million. The Company intends to
finance debt associated with the Avon acquisition on a long-term basis
through sale of debt securities using its existing Shelf Registration
with the Securities and Exchange Commission. The Avon tire operations
had sales of $169 million and after tax income of $6.5 million for their
fiscal year ended September 28, 1996.
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, 44, 46, and 47 of this Annual Report on Form 10-K.
The Company markets its products nationally and internationally
through well-established channels of distribution. Among its customers
are automotive manufacturing companies, independent tire dealers and
wholesale distributors and large retail chains.
Tires are sold in the replacement market through independent dealers
and distributors. This channel of marketing accounted for approximately
69.5 percent of all replacement passenger tires sold in the United
States in 1996. During 1995 and 1994 this share approximated 69 and 68
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, 45, 46 and 47 of this Annual Report on Form 10-K.
North American vehicle manufacturers experienced a 1.6% increase in
total production of light vehicles in 1996. 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 substantially all 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
(continued) 2
<PAGE>
economical or practical substitutes for tires or certain rubber
automotive parts. Based on current data, the Company expects moderate
growth in the market for replacement tires and in the use of rubber
components by automobile manufacturers. Additional information on the
Company's outlook for the industry appears on pages 39 and 43 of this
Annual Report on Form 10-K.
During recent years Cooper has exported to Canada and countries in
Latin America, Western Europe, the Middle East, Asia, Africa and
Oceania. The international market for rubber products is expanding as
the standard of living in other countries increases and motor vehicle
usage grows. Net sales from international operations accounted for
approximately nine, eight and seven percent of Cooper's sales in 1996,
1995, and 1994, respectively.
During 1996 Cooper's ten largest customers accounted for
approximately 58 percent of total sales. Sales to one major customer
approximated 17, 14 and 13 percent of net sales in 1996, 1995 and 1994.
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 1996 represented approximately 12
percent of all domestic, original equipment and replacement tire sales.
On the basis of North American tire manufacturing capacity the Company
believes it ranks fourth among sixteen generally recognized producers of
new tires. According to a recognized trade source the Company ranked
ninth in worldwide tire sales based on 1995 estimated sales volumes.
Sales of the Company's tire products are affected by factors which
include price, quality, availability, technology, warranty, credit terms
and overall customer service.
Raw Materials
The primary raw materials used by the Company include synthetic and
natural rubbers, polyester and nylon fabrics, steel tire cord and carbon
black, which the Company acquires from multiple sources to provide
greater assurance of continuing supplies for its manufacturing
operations. The Company did not experience any significant raw material
shortages in 1996, nor have any shortages been experienced in the
opening months of 1997.
The Company has a purchasing office in Singapore to acquire natural
rubber and various raw materials direct from producers in the Far East.
This purchasing operation enables the Company to work directly with
producers 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.
(continued)
3
<PAGE>
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 223 full-time
employees engaged in research and development programs. Research and
development expenditures amounted to approximately $19,700,000 in 1996,
$16,000,000 in 1995, and $14,700,000 in 1994.
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 1996 the new manufacturing facility for tire molds in Findlay,
Ohio began production. This facility, using state-of-the-art
technology, 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 are
employed in this normally labor-intensive process.
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 1996
approximately 78 million miles of tests were performed on indoor test
wheels and in monitored road tests. Uniformity equipment is used to
physically check every radial passenger tire produced for high standards
of quality. The Company continues to design and develop specialized
equipment to fit the precise needs of its manufacturing and quality
control requirements.
Additional information on the Company's research, development and
product improvement programs appears on pages 41 and 44 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.
(continued)
4
<PAGE>
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 1996 expense and capital expenditures for environmental
control at its facilities were not material, nor is it estimated that
expenditures in 1997 for such uses will be material.
Seasonal Trends
There is a year-round demand for passenger and truck replacement
tires, but passenger replacement tire sales are generally strongest
during the second and third quarters of the year. Winter tires are sold
principally during the months of August through November. Engineered
rubber product sales to automotive customers are lowest during the
months prior to model changeover.
Employee Relations
As of December 31, 1996, the Company employed 8,932 persons, of whom
4,570 were salaried employees. Union contracts covering 4,362 employees
include, among other things: wages, hours, grievance procedures,
checkoff, seniority and working conditions. Union contracts with the
United Steelworkers 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 6, 1997
Bowling Green, Ohio (Sealing products) - October 31, 1997
Bowling Green, Ohio (Hose products) - April 30, 1998
Clarksdale, Mississippi - July 28, 1999
El Dorado, Arkansas - April 27, 2000
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, 2001. 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 29 through 33 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 at December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
Location Use Title
- ----------------------- ------------------------ -----
<S> <C> <C>
3300 Sylvester Road Tire plant and regional Leased
Albany, GA 31705-9100 distribution center
725 West Eleventh St. Engineered products plant Owned
Auburn, IN 46706-2089
1175 North Main St. Engineered products plant Owned
Bowling Green, OH 43402-1310
400 Van Camp Rd. Engineered products plant Owned
Bowling Green, OH 43402
2205 Dr. Martin Luther King Blvd. Inner tube plant Owned
Clarksdale, MS 38614-0130
166 Cooper Drive Engineered products plant Owned
El Dorado, AR 71730-6611
701 Lima Ave., Findlay, OH 45840-1237 Tire plant Owned
2025 Production Drive Metal fabrication and Owned
Findlay, OH 45840 assembly plant
250 Oak Grove Drive Engineered products plant Owned
Mt. Sterling, KY 40353
3500 E. Washington Rd. Tire plant and regional Owned
Texarkana, AR 71854-5895 distribution center
1689 South Green St. Tire plant and regional Owned/
Tupelo, MS 38801-6553 distribution center Leased
6340 Artesia Blvd. Regional distribution Owned
Buena Park, CA 90620-1069 center
1300 Lunt Avenue Regional distribution Owned
Elk Grove Village, IL 60007-5667 center
4200-D Industry Drive Regional distribution Leased
Fife, WA 98424-1855 center
1625 Lake Cascades Parkway Regional distribution Owned
Findlay, OH 45840-1237 center
1026 North Century Ave. Regional distribution Leased
Kansas City, MO 64120-1903 center
3601 Dryden Road Regional distribution Owned
Moraine, OH 45439-1411 center
Terminal Road & Industrial Drive Regional distribution Owned
New Brunswick, NJ 08901-7082 center
</TABLE>
(continued) 6
<PAGE>
The Company also owns a manufacturing facility located in Mexico
which produces 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, at least 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 new Mt.
Sterling, Kentucky plant commenced production of engineered rubber
products during the second quarter of 1996.
Additional information concerning the Company's facilities appears on
pages 40, 41, 44, and 45 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, 1996.
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 29, 34 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>
1996 $1,619,345 $252,796 $172,922 $172,092 $64,208 $107,884 $107,884
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
<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>
1996 $786,612 $1,273,009 $256,130 $792,419 $193,696 $76,820 $69,489
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
(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>
1996 14.4% 9.4% 2.4 10.6% 37.3% 6.7% 8.1%
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
<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>
1996 $1.30 $1.30 $9.67 $.31 83,214 81,367
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
<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>
1996 5,991 8,932 $440,393 $102,097 $19,700 $27.25 $18.00 17.4
1995 6,721 8,284 411,694 101,884 16,000 29.63 22.25 19.2
1994 7,623 7,815 382,002 111,504 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
<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 $256 million at year-end 1996 compared
with $272 million one year earlier. A current ratio of 2.4 indicates a
strong liquidity position, although down slightly from the year-end 1995
current ratio of 2.7.
Accounts receivable increased to $267 million from $257 million at
year-end 1995, reflecting strong fourth quarter sales. Collection
experience continues to be excellent and adequate allowances have been
made for possible collection losses.
Total inventories at $142 million were up from $138 million at
year-end 1995. Finished goods and work-in-process inventories were down
slightly from one year ago. Raw materials and supplies inventories were
$4 million higher than last year due to increased levels of raw material
purchases.
Prepaid expenses and deferred income taxes at December 31, 1996
include $12 million in deferred tax assets which are considered fully
realizable within one year.
Investments made in property, plant and equipment were $194 million
in 1996 and are comparable to the record $195 million in 1995. These
additions reflect improved manufacturing technology and expansion
projects begun in 1995 as well as similar projects during 1996. The
Company's capital expenditure commitments approximated $21 million at
December 31, 1996. Capital expenditures in 1997 are anticipated to be
lower than in 1996 and 1995. Funding for these expenditures will be
available from operating cash flows with additional funding available,
if needed, under the Company's existing commercial paper program, credit
agreement, and/or Shelf Registration. Depreciation and amortization was
$77 million in 1996, a 21 percent increase from $63 million in 1995,
resulting from the significant capital expenditures in recent years.
Current liabilities of $187 million were $29 million higher than the
$158 million at year-end 1995 reflecting increases in commercial paper
borrowings and notes payable.
Long-term debt increased $41 million from year-end 1995 to $69
million reflecting $46 million in borrowings incurred to finance stock
repurchases offset by scheduled debt payments. Long-term debt, as a
percent of total capitalization, increased to 8.1 percent at December
31, 1996 from 3.7 percent one year earlier. The Company has a
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
funded as claims are incurred.
Noncurrent deferred income taxes increased to $53 million at December
31, 1996 from $37 million one year earlier, primarily reflecting the
excess of tax depreciation over book depreciation.
(continued)
10
<PAGE>
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 should not have a material adverse effect on
its financial condition or results of operations.
Stockholders' equity increased $38 million after the reduction of $46
million for the repurchase of Company stock during the year reaching
$787 million at year end. Earnings retentions for 1996 (net income less
dividends paid) added $82 million to stockholders' equity and an
adjustment to the minimum pension liability added another $2 million.
Stockholders' equity per share was $9.67 at year-end 1996, an increase
of 8 percent over $8.95 per share at year-end 1995.
Results of Operations
Customer demand was very strong for the Company's tires and was
excellent for the Company's engineered rubber products. New and larger
contracts with our customers continued to be achieved. Capacity
utilization was maintained at high levels. Net sales increased over 8
percent in 1996 to a record of $1.6 billion. This followed a 6 percent
increase in sales in 1995 which resulted primarily from growth in
customer demand.
Sales margins were lower in 1996 than in 1995 and were lower in 1995
than in 1994. Intense pricing pressure in the replacement tire industry
contributed to margin erosion in both 1996 and 1995. Raw material costs
moderated in 1996, following two years of significant increases, and
offset some of this impact. These costs, which contributed significantly
to the decrease in margins in 1995 from 1994, are expected to continue to
moderate during the first half of 1997. The effects of inflation on
sales and operations were not material during 1996 and 1995.
Increases in 1996 and 1995 selling, general and administrative
expenses were attributable to increased sales activity levels. As a
percent of net sales, these expenses were unchanged.
Interest expense in 1996 is higher than in 1995 reflecting increased
borrowings partially offset by capitalized interest. The decrease in
interest expense in 1995 from 1994 resulted from higher amounts of
capitalized interest.
Effective income tax rates in 1996 were comparable to 1995 and were
lower in 1995 than in 1994 due to reductions in the effective state and
local income tax rate.
Subsequent Event
On February 18, 1997, the Company, through a wholly-owned United Kingdom
subsidiary, signed an agreement to acquire the tire operations of Avon
Rubber p.l.c. (Avon) of the United Kingdom pending approval of Avon's
shareholders in March of 1997. This purchase includes the land and
manufacturing facility in Melksham, England; the shares of Avon Tyres
Limited and the shares of tire distribution companies in France, Germany
and Switzerland; and other minor assets. In a separate transaction the
Company is acquiring from Avon various trademarks and technology. The
total purchase price for the land, manufacturing facility, shares,
trademarks and technology will be approximately $110 million. The Company
intends to finance debt associated with the Avon acquisition on a long-term
basis through sale of debt securities using its existing Shelf Registration
with the Securities and Exchange Commission. The Avon tire operations had
sales of $169 million and after tax income of $6.5 million for their fiscal
year ended September 28, 1996.
11
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated statements of financial position at December 31, 1996
and 1995 and consolidated statements of income, cash flows, and
stockholders' equity for each of the three years in the period ended
December 31, 1996, the independent auditor's report thereon, and the
Company's unaudited quarterly financial data for the two-year period
ended December 31, 1996 are presented on pages 19 through 36 of this
Annual Report on Form 10-K and are incorporated herein by reference.
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 19 of the Company's Proxy Statement dated March 17, 1997
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 61 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 55 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 60 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 64 Vice President Vice President since
1985. Principal
Accounting Officer and
Corporate Controller
from 1975 to 1997.
(continued) 13
<PAGE>
Robert C. Gasser 60 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 62 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 54 Vice President Vice President since
1995. Previously
Director of Corporate
Purchasing from 1994
to 1995. Manager of
Corporate Purchasing
from 1973 to 1994.
Assistant Purchasing
Agent and Buyer from
1966 to 1973.
William S. Klein 59 Vice President Vice President since 1984.
Vice President-Tire
Operations since 1975.
Richard D. Teeple 54 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 58 Secretary Secretary since 1986.
Eileen B. White 46 Corporate Controller Principal Accounting
Officer and Corporate
Controller since February
11, 1997. Previously
Assistant Corporate
Controller from 1994
to 1997. Manager of
Financial Research and
Compliance from 1986
to 1994.
Stephen O. Schroeder 46 Assistant Treasurer Assistant Treasurer
since 1994. Previously
Manager, Cash and
Employee Funds since
1984.
</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 15 of the Company's Proxy Statement dated March 17, 1997 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 17 through 19 of the Company's Proxy
Statement dated March 17, 1997 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, 1996.
15
<PAGE>
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
Page(s)
FINANCIAL STATEMENTS: Reference
---------
Consolidated Statements of Income for the years
ended December 31, 1996, 1995 and 1994 19
Consolidated Balance Sheets at December 31, 1996 and 1995 20-21
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994 22
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994 23
Notes to Consolidated Financial Statements 24-34
Report of Independent Auditors 35
SUPPLEMENTARY INFORMATION:
Quarterly Financial Data (Unaudited) 36
FINANCIAL STATEMENT SCHEDULES:
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) Rights agreement dated as of May 27, 1988 between the Company and
KeyCorp Shareholder Services, Inc., as Rights Agent, is incorporated
herein by reference from Exhibit 1 to the Company's Form 8-A
dated June 3, 1988.
(10) The following related documents are 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
f) 1996 Stock Option Plan - Form S-8 Registration Statement
No. 333-09619 and Appendix to the Company's Proxy
Statement dated March 26, 1996
(continued)
16
<PAGE>
(12) Computation of Ratio of Earnings to Fixed Charges 38
(13) Annual report to security holders, Form 10-Q or quarterly
report to security holders 39-47
(23) Consent of Independent Auditors 48
(24) Powers of Attorney 49-52
(27) Financial Data Schedule
(99) Undertakings of the Company 53-55
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 17, 1997
--------------
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 17, 1997
President, Chief Executive
Officer and Director
(Principal Executive Officer)
J. ALEC REINHARDT* Executive Vice President and March 17, 1997
Director (Principal Financial
Officer)
JOHN FAHL* Vice President and Director March 17, 1997
EILEEN B. WHITE* Corporate Controller March 17, 1997
(Principal Accounting Officer)
ARTHUR H. ARONSON* Director March 17, 1997
DELMONT A. DAVIS* Director March 17, 1997
EDSEL D. DUNFORD* Director March 17, 1997
DEBORAH M. FRETZ* Director March 17, 1997
DENNIS J. GORMLEY* Director March 17, 1997
ALLAN H. MELTZER* Director March 17, 1997
JOHN H. SHUEY* Director March 17, 1997
*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>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Net sales $1,619,345 $1,493,622 $1,403,243
Other income 824 3,836 2,282
--------- --------- ---------
1,620,169 1,497,458 1,405,525
Costs and expenses:
Cost of products sold 1,366,549 1,242,895 1,125,978
Selling, general
and administrative 79,874 73,796 68,748
Interest 1,654 697 2,680
--------- --------- ---------
1,448,077 1,317,388 1,197,406
--------- --------- ---------
Income before income taxes 172,092 180,070 208,119
Provision for income taxes 64,208 67,250 79,600
--------- --------- ---------
Net income $ 107,884 $ 112,820 $ 128,519
========= ========= =========
Net income per share $1.30 $1.35 $1.54
==== ==== ====
<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 1996 1995
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,459 $ 23,187
Accounts receivable, less
allowances of $3,700 in
1996 and $3,600 in 1995 267,149 257,049
Inventories:
Finished goods 87,105 88,470
Work in process 13,419 13,154
Raw materials and supplies 41,094 36,340
--------- ---------
141,618 137,964
Prepaid expenses and
deferred income taxes 15,399 12,384
--------- ---------
Total current assets 443,625 430,584
Property, plant and equipment:
Land and land improvements 23,641 23,038
Buildings 265,118 228,877
Machinery and equipment 882,774 765,192
Molds, cores and rings 69,316 50,626
--------- ---------
1,240,849 1,067,733
Less accumulated depreciation
and amortization 448,430 388,857
--------- ---------
Net property, plant
and equipment 792,419 678,876
Other assets 36,965 34,241
--------- ---------
$1,273,009 $1,143,701
========= =========
(continued)
20
<PAGE>
<CAPTION>
December 31
-------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
---------- ----------
<S> <C> <C>
Current liabilities:
Notes payable $ 32,000 $ -
Accounts payable 81,571 78,823
Accrued liabilities 65,727 63,676
Income taxes 3,116 10,834
Current portion of debt 5,081 5,035
--------- ---------
Total current liabilities 187,495 158,368
Long-term debt 69,489 28,574
Postretirement benefits other
than pensions 139,070 132,963
Other long-term liabilities 37,575 38,341
Deferred income taxes 52,768 36,656
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; 83,672,372 shares
issued (83,661,972 in 1995) 83,672 83,662
Capital in excess of par value 2,027 1,931
Retained earnings 754,481 672,373
Minimum pension liability (7,434) (9,167)
--------- ---------
832,746 748,799
Less: 2,305,500 common shares
in treasury at cost (46,134) -
--------- ---------
Total stockholders' equity 786,612 748,799
--------- ---------
$1,273,009 $1,143,701
========= =========
<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 Common
Stock In Excess Minimum Shares
$1 Par of Par Retained Pension in
Value Value Earnings Liability Treasury Total
------ ------- -------- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1994 $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
Net income 107,884 107,884
Purchase of
treasury shares (46,134) (46,134)
Exercise of
stock options 10 96 106
Cash dividends -
$.31 per share (25,776) (25,776)
Minimum pension
liability adjustment,
net of income taxes 1,733 1,733
------ ----- ------- ------ ------- -------
Balance at
December 31, 1996 $83,672 $2,027 $754,481 $(7,434) $(46,134) $786,612
====== ===== ======= ====== ======= =======
<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>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Operating activities:
Net income $107,884 $112,820 $128,519
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 76,820 63,313 55,603
Deferred income taxes 14,096 9,356 8,983
Changes in operating assets
and liabilities:
Accounts receivable (10,100) (35,812) (39,034)
Inventories and
prepaid expenses (6,669) (20,159) (6,174)
Accounts payable and
accrued liabilities 4,799 2,052 24,698
Postretirement benefits
other than pensions 7,207 6,315 8,170
Other (5,830) 3,051 (828)
------- ------- -------
Net cash provided by
operating activities 188,207 140,936 179,937
Investing activities:
Property, plant and equipment (193,696) (194,894) (78,449)
Other 604 1,258 88
------- ------- -------
Net cash used in
investing activities (193,092) (193,636) (78,361)
Financing activities:
Issuance of debt 162,000 - 13,000
Payment on debt (89,039) (5,117) (18,349)
Purchase of treasury shares (46,134) - -
Payment of dividends (25,776) (22,584) (19,234)
Issuance of common shares 106 303 493
------- ------- -------
Net cash provided by (used in)
financing activities 1,157 (27,398) (24,090)
------- ------- -------
Changes in cash and cash
equivalents (3,728) (80,098) 77,486
Cash and cash equivalents
at beginning of year 23,187 103,285 25,799
------- ------- -------
Cash and cash equivalents
at end of year $ 19,459 $ 23,187 $103,285
======= ======= =======
<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.
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 cash equivalents - The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. The carrying amount reported in the balance sheets for
cash and cash equivalents 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 (APB) No. 25,
"Accounting for Stock Issued to Employees". Accordingly, additional
disclosures required under Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation," are included
in the Stock Options note.
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 $19,700, $16,000, and $14,700 in 1996,
1995 and 1994, 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 nine,
eight and seven percent of net sales in 1996, 1995 and 1994,
respectively. Sales to one major customer approximated 17, 14 and 13
percent of net sales in 1996, 1995 and 1994, respectively.
INVENTORIES
Under the LIFO method, inventories have been reduced by approximately
$73,925 and $76,309 at December 31, 1996 and 1995, respectively, from
current cost which would be reported under the first-in, first-out
method.
DEBT
Short-term debt consists of commercial paper borrowings and notes
payable at a weighted average interest rate of 5.6%.
<TABLE>
The Company's long-term debt at December 31 consisted of the following:
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Commercial paper notes with a
weighted average interest rate of 5.6% $46,000 $ -
9% senior notes due 2001 22,727 27,273
Capitalized lease due 2021 at variable
rates (4.6% in 1996; 5.8% in 1995) 5,130 5,133
8-7/8% Mortgage note due 1998 713 1,203
------ ------
74,570 33,609
Less current maturities 5,081 5,035
------ ------
$69,489 $28,574
====== ======
</TABLE>
The Company has an agreement with four banks authorizing borrowings
up to $150,000 on a long-term basis through October 31, 2001 and
$100,000 on a short term basis, with interest at varying rates. The
credit facility supports the issuance of commercial paper. The proceeds
may be used for general corporate purposes. A commitment fee is payable
quarterly and is based on the daily unused portion of the amount
authorized.
The $46 million of commercial paper notes which were issued for the
repurchase of the Company's common stock are due within one year. The
Company intends to refinance them on a long-term basis and has the
ability to do so through its existing credit agreement, although other
facilities may be used for this purpose.
The 9% senior notes, due October 1, 2001, provide for semiannual
interest payments on April 1 and October 1 and annual principal payments
of $4,545 on October 1 through the year 2000. Based on the borrowing
rates available to the Company for instruments with similar terms and
maturity at December 31, 1996 and 1995 the fair value of the senior
notes was $24,110 and $29,733, respectively.
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
$578,410 at December 31, 1996.
(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.
Interest paid on debt during 1996, 1995 and 1994 was $6,217, $3,515
and $3,911, respectively. The amount of interest capitalized was
$4,315, $2,694 and $1,170 during 1996, 1995 and 1994, respectively.
The required principal payments for long-term debt during the next
five years are as follows: 1997 - $5,081; 1998 - $4,723; 1999 - $4,545;
2000 - $4,545; 2001 - $4,545.
ACCRUED LIABILITIES
<TABLE>
Accrued liabilities at December 31, were as follows:
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Payroll $32,299 $29,422
Other 33,428 34,254
------ ------
$65,727 $63,676
====== ======
</TABLE>
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 9,738,718 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, 1996.
STOCK OPTIONS
The Company has elected to follow APB No. 25, "Accounting for Stock
Issued to Employees," in accounting for employee stock options. The
alternative fair value accounting provided for under SFAS No. 123,
"Accounting for Stock-Based Compensation," requires use of option
valuation models that were not developed for use in valuing employee
stock options. Under APB No. 25 no compensation expense is recognized
because the exercise price of the Company's employee stock options
equals the market price of the underlying stock at the date of grant.
In the opinion of management, the existing fair value models do not
provide a reliable measure of the value of employee stock options. The
Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and
are fully transferable. The Company's employee stock options have
characteristics significantly different from those of traded options.
In addition, option valuation models require highly subjective
assumptions including the expected stock price volatility. Changes in
these assumptions can materially affect the fair value estimate.
SFAS No. 123 is effective for awards granted by the Company during
fiscal years beginning after December 15, 1994. The Standard requires,
if APB No. 25 is followed, disclosure of pro forma information regarding
net income and earnings per share determined as if the Company accounted
for its employee stock options under the fair value method. The fair
value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Risk-free interest rate 6.6% 6.2%
Dividend yield 1.0% 1.0%
Expected volatility of the Company's
common stock .206 .203
Expected life 5.4 years 5.3 years
</TABLE>
The weighted-average fair value of options granted in 1996 and 1995 was
$5.58 and $6.98, respectively. For purposes of pro forma disclosures,
the estimated fair value of options is amortized to expense over the
option's vesting period. During 1995, only grants awarded during the
year are amortized. During 1996, amortization attributable to grants
awarded in both 1995 and 1996 impacts pro forma results. The Company's
reported and pro forma information follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net income: Reported $107,884 $112,820
Pro forma 107,363 112,653
Earnings per share: Reported $1.30 $1.35
Pro forma 1.29 1.35
</TABLE>
(continued) 27
<PAGE>
The Company's 1981, 1986 and 1996 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. Options under
these plans may have terms of up to ten years becoming exercisable in
whole or in consecutive installments, cumulative or otherwise. The 1981
and 1986 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. The options granted
under these plans which were outstanding at December 31, 1996 have a
term of ten 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>
Weighted
Average
Number of Exercise Price Range
Shares Price Per Share
--------- --------- -----------
<S> <C> <C> <C>
January 1, 1994
Outstanding 454,769 $16.10 $5.09 - $34.69
Granted under 1986 plan 75,000 24.50 24.50
Granted under 1991 plan 2,910 26.44 26.44
Exercised (52,304) 9.43 5.09 - 15.19
Cancelled ( 5,143) 23.65 12.16 - 34.69
-------
December 31, 1994
Outstanding 475,232 18.15 5.09 - 34.69
Exercisable 355,522 15.93
Granted under 1986 plan 103,800 24.13 24.13
Granted under 1991 plan 3,153 24.25 24.25
Exercised (27,900) 10.87 5.09 - 25.00
Cancelled (13,110) 24.90 24.13 - 25.00
-------
December 31, 1995
Outstanding 541,175 19.54 5.09 - 34.69
Exercisable 397,822 17.85
Granted under 1991 plan 1,703 24.31 24.31
Granted under 1996 plan 140,900 18.50 18.50
Exercised (10,400) 10.23 5.09 - 15.19
Cancelled (27,786) 19.57 5.09 - 34.69
-------
December 31, 1996
Outstanding 645,592 19.47 5.09 - 34.69
Exercisable 454,439 19.24
</TABLE>
The weighted average remaining contractual life of options outstanding
at December 31, 1996 is 6.7 years.
SFAS No. 123 also requires segregated disclosure of options
outstanding if a significant range of exercise prices exists. This
information is presented below:
(continued)
28
<PAGE>
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Options with an exercise price
of less than $20:
Options outstanding 327,046 205,846 233,446
Weighted average exercise price $14.45 $11.19 $11.13
Remaining contractual life 6.2 4.6 5.6
Options exercisable 187,646 205,846 233,446
Weighted average exercise price $11.44 $11.19 $11.13
Options with an exercise price
equal to or greater than $20:
Options outstanding 318,546 335,329 241,786
Weighted average exercise price $24.63 $24.67 $24.92
Remaining contractual life 7.2 8.2 8.5
Options exercisable 266,793 191,976 122,076
Weighted average exercise price $24.73 $25.00 $25.11
</TABLE>
<TABLE>
The status of options exercisable and available for grant for each
plan is as follows:
<CAPTION>
1981 1986 1991 1996
Plan Plan Plan Plan
---- ---- ---- ----
<S> <C> <C> <C> <C>
December 31, 1994
Exercisable 24,024 326,022 5,476
Available for grant none 1,236,990 91,378
December 31, 1995
Exercisable 22,424 367,012 8,386
Available for grant none 1,146,300 88,225
December 31, 1996
Exercisable 22,424 425,712 6,303 none
Available for grant none none 90,758 3,060,600
</TABLE>
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.
(continued)
29
<PAGE>
<TABLE>
The Company continues to fund these benefit costs as claims are
incurred. Postretirement benefits expense for 1996, 1995 and 1994
included the following components:
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost $ 3,254 $ 2,607 $ 3,022
Interest cost 10,674 9,810 10,803
Amortization - (333) 261
------ ------ ------
$13,928 $12,084 $14,086
====== ====== ======
</TABLE>
<TABLE>
The status of the Company's plans at December 31, 1996 and 1995 was
as follows:
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Accumulated postretirement
benefits obligation (APBO):
Retirees $ 78,378 $ 71,077
Fully eligible active plan participants 26,413 25,131
Other active plan participants 39,143 37,314
------- -------
143,934 133,522
Deferred gain 2,836 6,041
------- -------
Postretirement benefits liability $146,770 $139,563
======= =======
</TABLE>
<TABLE>
These amounts are included in the accompanying balance sheet captions:
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accrued liabilities $ 7,700 $ 6,600
Postretirement benefits other than pensions 139,070 132,963
------- -------
$146,770 $139,563
======= =======
</TABLE>
The discount rate used in determining the APBO was 8.0 percent in 1996
and 1995. At December 31, 1996, the assumed average annual rate of
increase in the cost of health care benefits (health care cost trend
rate) was 9.0 percent for 1997 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
1.0 percent increase in the health care cost trend rate would increase
the APBO by $5,057 and the net periodic expense by $441 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 $11,400 in 1996 and
$11,000 in 1995.
(continued)
30
<PAGE>
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 1996, 1995 and 1994 included the following
components:
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost $13,811 $ 9,833 $ 9,769
Interest cost 24,707 20,374 17,485
Actual return on plan assets (44,559) (54,268) 1,565
Net amortization and deferral 24,144 38,966 (17,201)
------ ------ ------
Net periodic pension cost $18,103 $14,905 $11,618
====== ====== ======
</TABLE>
The increases in service and interest costs in 1996 result from changes
in certain demographic actuarial assumptions made at December 31, 1995.
<TABLE>
The plans' assets consist of cash, cash equivalents and marketable
securities. The funded status of the Company's plans at December 31,
1996 and 1995 was as follows:
<CAPTION>
December 31, 1996
-----------------------------
Plans for Which
---------------
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
------------- -------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $147,256 $120,221
======= =======
Accumulated benefit obligation $150,416 $123,905
======= =======
Projected benefit obligation $218,512 $124,911
Plans' assets at fair value 225,077 95,195
------- -------
Projected benefit obligation less than
(in excess of) plan assets 6,565 (29,716)
Unrecognized transition amount 4,485 2,326
Unrecognized prior service cost 93 9,818
(continued)
31
<PAGE>
Unrecognized net loss 12,736 12,753
Adjustment for minimum liability - (24,709)
------- ------
Pension asset (liability)
recognized in the Balance Sheet $ 23,879 $(29,528)
======= =======
<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)
======= =======
</TABLE>
The assumed rate of increase in future compensation levels was 5.5
percent and the assumed discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.5 percent at
December 31, 1996 and 1995. The expected long-term rate of return on
the plans' assets was 10 percent in 1996, 1995 and 1994.
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
voluntary and participants' contributions are based on their
compensation. The Company matches certain plan participants'
32
<PAGE>
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 15 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 $8,331, $8,489 and $7,723 for 1996, 1995 and
1994, respectively.
INCOME TAXES
<TABLE>
The provision for income taxes consists of the following:
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $44,250 $51,141 $60,819
State and local 5,862 6,753 9,798
------ ------ ------
50,112 57,894 70,617
Deferred:
Federal 12,096 8,062 7,677
State and local 2,000 1,294 1,306
------ ------ ------
14,096 9,356 8,983
------ ------ ------
$64,208 $67,250 $79,600
====== ====== ======
</TABLE>
<TABLE>
The effective income tax rate differs from the statutory Federal tax
rate as follows:
<CAPTION>
1996 1995 1994
----- ----- -----
<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 3.0 2.9 3.5
Other (0.7) (0.6) (0.3)
---- ---- ----
Effective income tax rate 37.3% 37.3% 38.2%
==== ==== ====
</TABLE>
Payments for income taxes in 1996, 1995 and 1994 were $57,884,
$53,110 and $70,634, respectively.
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, 1996 and 1995 are as follows:
(continued)
33
<PAGE>
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment $ 87,327 $75,238
Other 28,647 23,945
------- ------
Total deferred tax liabilities 115,974 99,183
Deferred tax assets:
Postretirement benefits other than pensions 50,661 48,163
Other 24,175 25,025
------- ------
Total deferred tax assets 74,836 73,188
------- ------
Net deferred tax liabilities $ 41,138 $25,995
======= ======
</TABLE>
<TABLE>
These amounts are included in the accompanying balance sheet captions:
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Prepaid expenses and deferred income taxes $11,630 $10,661
Deferred income taxes 52,768 36,656
------ ------
Net deferred tax liabilities $41,138 $25,995
====== ======
</TABLE>
LEASE COMMITMENTS
The Company rents certain manufacturing facilities and equipment under
long-term leases expiring at various dates. Rental expense for operating
leases was $7,242 for 1996, $6,696 for 1995 and $6,235 for 1994.
Future minimum payments for all noncancelable operating leases during
the next five years are as follows: 1997 - $2,596; 1998 - $2,127; 1999 -
$1,580; 2000 - $856; 2001 - $564.
EARNINGS PER SHARE
Net income per share is based upon the weighted average number of shares
outstanding which were 83,213,960 in 1996, 83,645,864 in 1995 and
83,623,234 in 1994. The effect of common stock equivalents is not
significant for any period presented.
SUBSEQUENT EVENT
On February 18, 1997, the Company, through a wholly-owned United Kingdom
subsidiary, signed an agreement to acquire the tire operations of Avon
Rubber p.l.c. (Avon) of the United Kingdom pending approval of Avon's
shareholders in March of 1997. This purchase includes the land and
manufacturing facility in Melksham, England; the shares of Avon Tyres
Limited and the shares of tire distribution companies in France, Germany
and Switzerland; and other minor assets. In a separate transaction the
Company is acquiring from Avon various trademarks and technology. The
total purchase price for the land, manufacturing facility, shares,
trademarks and technology will be approximately $110 million. The Company
intends to finance debt associated with the Avon acquisition on a long-term
basis through sale of debt securities using its existing Shelf Registration
with the Securities and Exchange Commission. The Avon tire operations had
sales of $169 million and after tax income of $6.5 million for their fiscal
year ended September 28, 1996.
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, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, 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 11, 1997,
except for the Subsequent Event,
as to which the date is
February 18, 1997
35
<PAGE>
<TABLE>
QUARTERLY FINANCIAL DATA
(UNAUDITED)
(All dollar amounts in thousands except per share figures)
<CAPTION>
QUARTER
------------------------------------------
1996 FOURTH THIRD SECOND FIRST
- ---- ------ ----- ------ -----
<S> <C> <C> <C> <C>
Net Sales $416,277 $423,172 $398,858 $381,038
Gross Margin $ 71,704 $ 64,095 $ 60,292 $ 56,705
Net Income $ 32,700 $ 26,913 $ 25,162 $ 23,109
Net Income Per Share $.40 $.32 $.30 $.28
Dividend Per Share $.085 $.075 $.075 $.075
Stock Price: High $21 7/8 $22 3/8 $26 5/8 $27 1/4
Low $18 3/4 $18 $21 7/8 $22 3/4
</TABLE>
[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
36
<PAGE>
<TABLE>
COOPER TIRE & RUBBER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1996, 1995 and 1994
<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>
1996 $3,600,000 $1,050,960 $ 950,960 $3,700,000
========= ========= ========= =========
1995 $3,600,000 $ 375,705 $ 375,705 $3,600,000
========= ========= ========= =========
1994 $3,100,000 $1,089,074 $ 589,074 $3,600,000
========= ========= ========= =========
<FN>
(a) Accounts charged off during the year, net of recoveries of accounts
previously charged off.
</TABLE>
37
<PAGE>
Exhibit (12)
<TABLE>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(000's)
<CAPTION>
Years Ended December 31
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Consolidated income
before income taxes $172,092 $180,070 $208,119 $164,250 $169,841
Add:
Interest and
amortization of
debt expense 1,654 697 2,680 2,351 2,081
Interest portion of
rental expense 2,414 2,232 2,078 1,787 1,919
------- ------- ------- ------- -------
Income as adjusted $176,160 $182,999 $212,877 $168,388 $173,841
======= ======= ======= ======= =======
Fixed charges:
Interest and
amortization of
debt expense $ 1,654 $ 697 $ 2,680 $ 2,351 $ 2,081
Capitalized interest 4,315 2,694 1,170 2,297 2,907
Interest portion of
rental expense 2,414 2,232 2,078 1,787 1,919
------- ------- ------- ------- ------
Total fixed charges $ 8,383 $ 5,623 $ 5,928 $ 6,435 $ 6,907
======= ======= ======= ======= ======
Ratio of earnings to
fixed charges 21.0 32.5 35.9 26.2 25.2
==== ==== ==== ==== ====
<FN>
Consolidated income before income taxes in 1992 is before the cumulative
effect of changes in accounting for postretirement benefits other than
pensions.
</TABLE>
38
<PAGE>
Exhibit (13)
OPERATIONS REVIEW AND PRODUCT OVERVIEW
OPERATIONS REVIEW
Tire Products
INDUSTRY OVERVIEW
Cooper's total tire shipments in 1996 posted a gain over the previous
year, maintaining a consistent growth pattern and exceeding the pace
recorded by the overall industry.
Industry replacement tire shipments increased 5.1 percent, rising
more than 10 million units from the 1995 total of 204 million. This
outcome is attributed to the increase in light vehicle registrations,
the aging of the vehicles currently on the road and the increase in
miles traveled per vehicle.
By product category, industry replacement passenger shipments
increased 5.1 percent; light truck replacement tire shipments posted an
increase of 8.1 percent; and medium truck tire shipments decreased by
1.1 percent. Tube sales continued their decline resulting in a 3.6
percent decrease from 1995 totals.
Consumer purchases of low profile passenger radials continued to
rise in 1996, improving market share from 53 percent in 1995 to 57.4
percent in 1996. Cooper introduced several new low profile sizes
in 1996, matching the increasing demand for this growing market.
Independent tire dealers continued to rise in popularity among
consumers who purchased tires last year. According to Modern Tire
Dealer, a leading industry magazine, 69.5 percent of replacement
passenger tires reached the U.S. consumer in 1996 through independent
tire dealers.
With a substantial share of Cooper's tire sales moving through
independent tire dealers, the Company's ongoing commitment to this
segment of the market remains intact.
PRODUCTS
In 1996 Cooper kept pace with the industry's focus on meeting the
demands of today's performance-oriented driver by expanding size
offerings and adding six new passenger tire lines.
Cooper's latest entry into the snow tire market, the Weather-Master
XGR Radial, met the growing consumer demand for traction tires. Based
on a specially engineered studless design developed for the Japanese
market, the Weather-Master XGR has a unique tread compound containing a
special particle additive that helps increase traction by forming
additional gripping edges.
Cooper also upgraded its Cobra Radial G/T and Cobra Radial GTH
performance tire lines. Updates to the Cobra G/T include a new
long-wearing tread design that carries a 50,000-mile limited treadwear
warranty; a T-speed rating on all 60, 65 and 70 series sizes to match
popular original equipment (O.E.) applications; and a new, stylized
sidewall option that offers a traditional performance white letter style
on one side while the reverse side sports a unique Cobra-inspired,
black-letter look for a more subtle effect.
Called the most technologically advanced Cooper performance tire to
date, the new H-rated Cobra GTH radial line scored exceptionally well
when tested against some of the industry's finest performance radials.
With new symmetric and asymmetric designs and a 45,000 mile limited
treadwear protection warranty, the GTH offers car enthusiasts excellent
handling and cornering in all seasons.
Beginning in early 1997 Cooper has extended the Cobra line to
provide a new level of tire performance capability. Both the new Cobra
ZHP and the Cobra Radial GTZ are among the industry's first Z-speed
rated tires to qualify for the new AA UTQG rating for traction.
(ontinued)
39
<PAGE>
Among other characteristics, the Cobra ZHP has a unique directional
block element tread, specially formulated compounding and a special bead
filler that stiffens the lower sidewall for excellent handling on tough
cornering situations.
The Cobra Radial GTZ combines deep channel tread elements with a
high void ratio to provide excellent wet and dry handling capability in
all weather conditions.
The newest addition to the Cooper line is the T-rated Sportmaster
GLT, which is metric sized to meet the requirements of most popular
import cars. Combined with excellent wet and dry traction, the tire's
tread compound is specifically formulated to provide a balance of all
season traction, good handling and long wear. The Sportmaster GLT
carries a 40,000 mile limited treadwear protection warranty.
In order to meet the competitive demands of the tire industry,
Cooper added an associate brand line in early 1997. Developed as
"value-based brands," the existing Starfire line has been updated and is
now available to Cooper dealers while the all-new Roadmaster line is
available to Mastercraft dealers. The new associate brand lines will
help Cooper's proprietary brands gain additional market share in areas
where strong brand penetration has prevented further growth.
By monitoring original equipment trends and responding to consumer
feed-back, Cooper is contin-ually upgrading and expanding tire lines to
meet current consumer demand.
FACILITIES
The Findlay and Tupelo plants both achieved production milestones in
late 1996.
In October the 50 millionth radial tire produced at the Findlay
plant rolled off the line. Radial production began at the plant in 1974
responding to increasing demand and decreasing popularity of bias tires.
Today, radial passenger and light truck tires comprise about 90 percent
of the total production in Findlay, which is the only Cooper plant still
producing bias truck tires.
In November the Tupelo plant marked the production of its 100
millionth radial tire. Radial passenger tires are the only product
manufactured at Cooper's Tupelo location.
Throughout the year, expansion efforts continued at the tire
facilities to meet production and customer service demands. In early
1996, warehousing began in the 200,000-square-foot addition to the
distribution center located at the Tupelo plant. Completed in December
1995, the expansion increased the Tupelo warehouse space by 50 percent.
In Albany a 300,000-square-foot expansion of warehouse and
production areas reached completion in 1996. The plant expansion
allowed for increased passenger and radial medium truck production and
will accommodate future growth while the added space at the warehouse
enabled dock doors to be added and increased storage capacity.
Consolidation of tube production and distribution at the Clarksdale
facility was completed at the end of 1996. The consolidation is a
continuation of changes initiated in 1995, which included the renovation
and modernization of the facility and a 48,000-square-foot expansion of
manufacturing and warehousing space. The streamlining of tube
production and distribution in Clarksdale allows for continued expansion
of Cooper's engineered products manufacturing capacity in the Piedras
Negras facility.
Three of the four tire plants are now equipped with a new
computerized maintenance and production system. This high-tech system
links maintenance, production, purchasing, accounting and engineering to
help achieve a proactive approach to maintaining production equipment.
The system helps the maintenance and production departments schedule
maintenance for equipment while ensuring the resources--technicians,
parts and equipment--necessary to accomplish the task are available.
The Findlay plant came "on-line" in early 1995 and both the Albany and
(continued)
40
<PAGE>
Texarkana plants began using the system in late 1996. The Tupelo plant
is planning for the system installation in late 1997.
Production efforts also were enhanced in 1996 with the addition of
an automated finishing system at the Texarkana plant. The new procedure
transfers the tires between each of the finishing processes, sorting the
tires by size and sidewall style as they progress along the conveyor. A
scanner is located at various points above the conveyor to read each
tire's bar code and sort the tire into the appropriate trimming,
buffing, uniformity, balancing and labeling areas. Texarkana is the
third of Cooper's tire plants to install the new system, which enhances
the sorting process and moves the tires more efficiently throughout the
finishing departments.
By mid-1996 Cooper began producing tire molds at its multi-million
dollar manufacturing facility located in Findlay. The new high-tech
operation will continue to help Cooper fulfill part of its strategic
plan to ensure a competitive edge in the marketplace today and well into
the 21st century.
TECHNOLOGY
As with many global markets today, using advanced computer technology is
an integral part of production in the tire industry. During 1996
Cooper's development engineers continued to employ technological
advancements with the goal of further decreasing cost, improving quality
and enhancing driving comfort and overall satisfaction for consumers.
A new process, applying a nylon overwrap, was specially designed
for the Company's Z-speed rated and low aspect ratio H-rated tires. The
process eliminates full width splices while enhancing the tire's
durability and uniformity. Positioned between the belt and the tread,
the overwrap enables the tire to maintain integrity when traveling at
higher speeds.
Cooper's new Cobra GTH was the first product developed using a
fully-integrated design system. Using the three-dimensional computer
design software, Findlay engineers generated the tire's design and
created the engineering specifications and drawings for the line. The
tire's mold was developed from this data base and then manufactured at
Cooper's new mold operations facility.
In response to a growing consumer demand for driving comfort and
value, Cooper continues to access technological advancements to enhance
durability and reduce noise generated when a tire comes in contact with
the road. A new tire durability model and tire noise model are being
used in the research of potential lines. Last year, results from the
models were applied in the development of the Cobra Radial GTZ.
Designed with the ultimate in driving comfort in mind, the tire features
a variable pitch sequence to help keep noise levels at a minimum.
MARKETING
During recent years Cooper has received recognition from a variety of
sources for quality, customer service and overall operations and 1996
was no exception. Acknowledging Cooper as a "customer-focused
organization," Unisys honored the Company in June with a 1995
CUSTOMERIZE Award for Excellence. For the past four years Unisys has
presented the award to customers that consistently use creative
applications of information technology to better serve their customers.
As the only recipient based in the United States, Cooper was one of four
companies selected for the award from the Unisys worldwide base of more
than 50,000 clients.
In its Annual Tire Brands Survey, the industry magazine Tire Review
identified Cooper and Mastercraft as two of the most well-liked brands
by tire dealers. Out of the 47 tire brands mentioned during the random
survey of dealers, Mastercraft was named as one of the top five overall
suppliers while Cooper was named at the top of the "major" brands
(continued)
41
<PAGE>
category. Both Cooper and Mastercraft fared well in the individual
categories, which included on-time delivery, product availability, tire
line coverage, product quality and purchasing terms.
Considered to be a "premier listing," Cooper was named among the
1,000 largest companies in the world by Industry Week magazine. In its
May issue, the magazine reported Cooper ranked 852 in the global
listing. In early 1997, a leading consumer product testing organization
reported its findings from a test conducted on standard all-season
tires. Out of the ten tires analyzed, Cooper's Lifeliner Classic II
ranked among the top five in overall performance, finishing ahead of
many well-known and respected competitors. The final results were based
on individual tests that included braking, cornering, hydroplaning, ride
comfort and noise.
Awareness for Cooper also hit a peak in mid-1996 with the Company's
most successful product launch--the new Cobra GTH line. For the first
time, Cooper published test results against comparable competitors'
tires--illustrating the Cobra's strong performance. In addition, by
incorporating a photo of a coiled king cobra as the background for the
graphics on printed materials, the live snake's unique coloring and
texture provided an extraordinary visual image and generated exceptional
interest for the advertising campaign. The graphics, along with a
specially designed Cobra logo, were used for full-page ads in trade
magazines, along with a generous assortment of promotional materials for
in-store use. The graphics also are being incorporated into new
advertising materials promoting the Cobra GTZ and ZHP, introduced early
in 1997.
Year-long advertising campaigns included a variety of printed
materials in trade publications and the continuation of cable television
spots featuring computer-animated logos. Also in 1996, Paul Harvey
continued to inform listeners of Cooper's quality on his popular
syndicated radio program that airs during morning, noon and evening news
segments. For the seventh consecutive year, the icon of radio airwaves
has represented the Company well by enlightening listeners with his
highly respected opinion of Cooper.
Beginning in 1997, golfing legend Arnold Palmer will serve as the
new spokesman for Cooper Tire. Palmer, who is known world-wide as a
"down to earth" individual, is well respected for his integrity,
perseverance and dedication. Those same qualities can be said to
describe Cooper's reputation in the tire industry. Using Palmer as a
spokesman, Cooper expects to create a unique synergy to help build a new
level of national awareness for the Cooper brand.
Cooper has expanded the 1997 advertising program significantly to
include television spots on popular cable channels.
In addition to the increased media schedule, Cooper will also serve
as an associate sponsor of the Bay Hill Invitational Golf Tournament in
Orlando, Florida. The annual PGA tournament, held in March, includes
Cooper television spots on NBC during prime weekend coverage. Last year
the tournament generated an attendance of more than 150,000.
With Palmer's recognition value outside the sporting community
along with the increase in the popularity of golf, Cooper will be
positioned to create an unprecedented level of consumer awareness in the
coming years.
GLOSSARY OF TERMS
ASYMMETRIC/SYMMETRIC - Terms used to describe a tread design on a tire.
Dividing a tire down the center circumferentially, a symmetric design is
consistent on both sides while the asymmetric is different.
LOW PROFILE TIRES - Based on industry standards, tires having an aspect
ratio of less than 75 are considered to be low profile.
(continued)
42
<PAGE>
OVERWRAP - A component in the tire made up of nylon cord placed around
the circumference of the tire. Used on some H and all Z-rated tires, an
overwrap is used to restrain the growth of the steel belt due to
centrifugal force resulting from high-speed operation.
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, the tires with low aspect
ratios have shorter sidewalls and wider treads than tires with high
aspect ratios.
SPEED RATINGS - The speed-rating system used today originated in Europe
in an effort to define the performance levels of tires. The standardized
speeds for passenger and light truck tires are:
Speed Speed Speed Speed
Symbol Category Symbol Category
------------------------ -------------------------
N 140 km/h (87 mph) U 200 km/h (124 mph)
P 150 km/h (93 mph) H 210 km/h (130 mph)
Q 160 km/h (99 mph) V 240 km/h (150 mph)
R 170 km/h (106 mph) W 270 km/h (169 mph)
S 180 km/h (112 mph) Y 300 km/h (188 mph)
T 190 km/h (118 mph) ZR above 240 km/h (150 mph)
UNIFORM TIRE QUALITY GRADING (UTQG) - A system required by the National
Highway Transportation Safety Administration to help consumers compare
tire features and benefits.
VARIABLE PITCH SEQUENCE - Made up of three to five different lengths of
tread "blocks" on a tire. By arranging the elements in specific
sequence, tonality of the tire can be reduced, minimizing the perception
of noise generated when the tire makes contact with the road.
Engineered Products
INDUSTRY OVERVIEW
1996 was a strong year for the Company in engineered rubber products
sales despite industry vehicle production increasing just slightly over
1995. Total North American light vehicle production was up slightly
in 1996 after a decline in 1995. Passenger car production fell for the
third straight year, while truck production was at an all-time high.
Industry analysts predict a flat demand in total North American
production for 1997, however Cooper's market presence is strong and
continues to grow on a yearly basis. During the past decade, the
company's sales of original equipment engineered rubber products--per
new vehicle produced--has grown steadily. For the third consecutive
year, every vehicle on the nation's top 10 best selling vehicle list was
equipped with some Cooper-produced engineered rubber parts. The Company
continues to be a leading supplier of molded and extruded rubber
products to original equipment manufacturers.
(continued)
43
<PAGE>
PRODUCTS AND TECHNOLOGY
Cooper has a well-earned reputation among light vehicle manufacturers as
a world-class supplier of engineered parts, including vibration control
products, body sealing components and reinforced hoses. In today's
competitive environment, many light vehicle manufacturers are placing
more responsibility on Cooper for the research and development of
components. Through strong supplier/customer relationships, the
Company's design teams work with their counterparts in the automotive
manufacturing industry to explore methods that will enhance quality and
lower production costs.
The body seal group was active in 1996 with major new product
launches for Chrysler and General Motors. These new products included
traditional door and glass seals as well as a new plastic veneer door
opening weather strip. New equipment was installed to meet these new
customer requirements.
To meet new federal standards required for fuel delivery systems in
vehicles, a hose consisting of a special plastic veneer liner, with
fabric-reinforcement and rubber, was designed and manufactured in
limited quantities by Cooper. The new barrier hose provides for a fuel
delivery system that has an extremely low level of gasoline permeation.
This evolutionary product continues to be refined.
A state-of-the-art engine mount line in the Auburn plant began
producing two new hydromounts in 1996. This contract with Ford, as well
as another development contract for hydromounts, resulted from business
agreements with European-based companies.
FACILITIES
Increased demand for the Company's engineered rubber products required
the expansion of several Cooper facilities. Ground was broken in
November for an engineering technical center in Auburn. The
48,000-square-foot facility is scheduled for completion later in 1997.
Located just north of the manufacturing facility, the technical center
will allow the Company to expand its testing, research and development
capabilities as well as provide additional office space and improved
communication for the engineering, purchasing and inquiry departments.
The newest addition to the engineered products operations, a
178,000-square-foot manufacturing facility in Mt. Sterling, began
producing extruded rubber hose and hose assemblies in July. The new
facility was constructed to meet significant business opportunities
within the North American original equipment light vehicle market.
Ground was broken in December for a 30,000-square-foot expansion to
the Bowling Green seal plant to support additional finishing department
activities.
Also at the Bowling Green seal plant, a newly completed laboratory
offers improved resources for research and development as well as
product durability tests. These tests include analyses of door closing
capability, window tests and the determination of sound transmission
levels. Testing can be conducted on entire vehicle bodies or individual
sections such as body side panels. A water test booth is used for
checking water leaks either in localized areas such as around a window
or for the entire vehicle.
Installation of a third rubber mixer was accomplished in the Auburn
plant during 1996. The mixer provides significant productivity
improvement in addition to quality improvements.
In an effort to better serve the needs of original equipment
customers located in Detroit, the sales, engineering and design
force--previously housed in two office locations--were consolidated into
one major facility in Farmington Hills, Michigan. This
35,000-square-foot facility houses the body seal, hose and vibration
control products sales groups as well as an expanded engineering and
design center for body sealing and hose.
(continued)
44
<PAGE>
Construction was completed on the 42,000-square-foot warehouse
expansion at the El Dorado plant. This expansion was operational in the
second quarter of 1996. The addition allows for a layout reorganization
for improved work flow.
Production capabilities changed at the Piedras Negras facility. As
a result of combining inner tube production and distribution into the
Clarksdale plant, the Piedras Negras capacity is now dedicated solely to
manufacturing engineered products.
The Auburn, Bowling Green and El Dorado facilities were certified
for the QS9000 International Quality System Standards during 1996. The
QS9000 certification is an assurance to Cooper's customers that business
and quality procedures are fully documented and strictly followed. The
Mt. Sterling and Piedras Negras plants are expected to be certified by
May 1997.
MARKETING
The Company's experience in the design and manufacturing of
elastomer-based components is recognized worldwide. Cooper is
continually
developing innovative new products, manufacturing processes and systems
to help maintain the Company's strong competitive edge in the light
vehicle manufacturing industry.
During 1996 Cooper began producing the complete body sealing
packages, which include all dynamic seals for sheet metal and moveable
glass, for new Dodge Dakota truck and General Motors' new van, which is
marketed under the Silhouette, Trans Sport and Venture names in North
America and the Sintra in Europe.
Cooper also will manufacture multiple parts on the new 1998 Dodge
Durango Sport Utility vehicle. These parts will include mounts,
bumpers, bushings, door and window seals and vent hoses. The Durango is
scheduled to be released in autumn 1997. Also new for 1997, the
Oldsmobile Intrigue will contain Cooper door seals as well as hoses.
Cooper cradle mounts and hoses can be found on the sporty Plymouth
Prowler.
Among the awards and honors presented to the engineered products
operations in 1996 were Nissan's Quality Master and Zero Defects awards
for outstanding manufacturing performance by Cooper's Auburn facility.
In addition, the Auburn, Bowling Green hose and Piedras Negras plants
received the Gold Pentastar customer quality award from Chrysler. The
Bowling Green hose plant was presented with the Suppliers Quality
Assurance Award from AutoAlliance.
Over the years, Cooper has made sizeable investments in equipment,
facilities and technology to remain a competitive supplier to the light
vehicle manufacturing industry. Through these monetary investments and
the investments of time, energy and vision by all Cooper team members,
the Company will continue to boldly lead as a Tier-One supplier to the
automotive industry.
1996 TOP TEN SELLING VEHICLES
1. FORD F-SERIES PICKUP 6. HONDA ACCORD
2. CHEVROLET C/K PICKUP 7. TOYOTA CAMRY
3. FORD EXPLORER 8. DODGE CARAVAN
4. FORD TAURUS 9. FORD RANGER
5. DODGE RAM PICKUP 10. HONDA CIVIC
Cooper engineered rubber products can be found on all of the top ten
selling vehicles in the United States.
45
<PAGE>
GLOSSARY OF TERMS
HYDROMOUNT - 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 sports
utility vehicles, with gross vehicle weight of 8,000 pounds or less.
THERMOPLASTIC MATERIAL - An elastomer capable of being softened by
increasing the temperature and hardened by decreasing the temperature.
TIER-ONE SUPPLIER - A manufacturer supplying parts directly to an
automotive OEM manufacturer.
PERMEATION - The ability of a gas or liquid to pass through the pores or
interstices of an object.
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
Cooper's passenger radial tires include touring, high performance,
traction and value designs in 15 line offerings. With important
characteristics such as all-season and winter traction capability,
the tires are available in competitive speed ratings and meet most
of the needs of today's drivers.
LIGHT TRUCK
Designed for trucks, vans and sport utility vehicles for recreational or
commercial use, Cooper's light truck tires are available in 12 different
lines. Offered in radial or conventional bias constructions, the tires
have all-season, rib and traction designs with sporty white letters
or black sidewall selections.
MEDIUM TRUCK
Cooper's medium truck tires fit vehicles such as tractor-trailer rigs,
buses and other commercial trucks. Available in 8 lines, the tires
include conventional bias ply or all-steel radial constructions;
all-wheel, drive wheel and trailer applications; and rib and traction
designs.
INNER TUBES
Available in radial and bias constructions, Cooper's inner tube
applications include passenger, light truck and medium truck vehicles.
Sizes are available for special application use such as farm tractors
and implements, road graders and industrial vehicles.
(continued)
46
<PAGE>
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, trunk and hood protect interiors from
outside elements. Window channels allow glass panels to slide open and
shut 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.
47
<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 11,
1997, except for the Subsequent Event, as to which the date is February
18, 1997, 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, 1996:
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)
No. 333-09619 1996 Stock Option Plan
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Toledo, Ohio
March 17, 1997
48
<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 11th day of February, 1997.
/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/ Deborah M. Fretz
--------------------------- ---------------------------
Julien A. Faisant, Vice Deborah M. Fretz, Director
President and Controller,
Principal Accounting Officer
/s/ Dennis J. Gormley /s/ Stan C. Kaiman
--------------------------- ---------------------------
Dennis J. Gormley, Director Stan C. Kaiman, Secretary
/s/ Allan H. Meltzer /s/ J. Alec Reinhardt
--------------------------- -----------------------------
Allan H. Meltzer, Director J. Alec Reinhardt, Executive
Vice President, Principal
Financial Officer, and Director
/s/ Patrick W. Rooney /s/ John H. Shuey
---------------------------- ------------------------------
Patrick W. Rooney, Chairman of John H. Shuey, Director
the Board, President,
Principal Executive Officer,
and Director
(continued)
49
<PAGE>
STATE OF OHIO )
)ss.
COUNTY OF HANCOCK)
On this 11th day of February, 1997, 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, Deborah M. Fretz, Dennis J. Gormley, Stan C. Kaiman, Allan H.
Meltzer, J. Alec Reinhardt, Patrick W. Rooney, and John H. Shuey, known
to me to be the persons whose names are subscribed in the within
instrument and who acknowledged to me that they executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Julie A. Grismore
--------------------------------------
Julie A. Grismore, Notary Public
State of Ohio
My commission expires January 16, 2001
(SEAL)
50
<PAGE>
Exhibit (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby, for
and on behalf of Cooper Tire & Rubber Company in accordance with the
certain resolution of the Board of Directors adopted February 11, 1997,
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 11th day of February, 1997.
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 11th day of February, 1997, before me, a Notary Public in
and for the State and County aforesaid, personally appeared Patrick W.
Rooney and Stan C. Kaiman, known to me to be the persons whose names are
subscribed in the foregoing instrument and acknowledged to me that they
executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Julie A. Grismore
----------------------------------
Julie A. Grismore, Notary Public
State of Ohio
My commission expires January 16, 2001
(SEAL)
51
<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 her attorney with
full power of substitution and resubstitution for and in her 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 26th day of February, 1997.
/s/ Eileen B. White
-----------------------------
Eileen B. White
Principal Accounting Officer and
Corporate Controller
STATE OF OHIO )
)ss.
COUNTY OF HANCOCK)
On this 26th day of February, 1997, before me, a Notary Public in and
for the State and County aforesaid, personally appeared Eileen B. White,
known to me to be the person whose name is subscribed in the within
instrument and acknowledged to me that she 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.
----------------------------------
Phyllis C. Hall
Notary Public, State of Ohio
My commission expires October 6, 2000
(SEAL)
52
<PAGE>
Exhibit (99)
COOPER TIRE & RUBBER COMPANY
UNDERTAKINGS OF THE COMPANY
FOR FISCAL YEAR ENDED DECEMBER 31, 1996
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.
f. Employee plans on Form S-8.
1. The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each employee
to whom the prospectus is sent or given, a copy of the
registrant's annual report to stockholders for its last
fiscal year, unless such employee otherwise has received a
copy of such report, in which case the registrant shall
state in the prospectus that it will promptly furnish,
without charge, a copy of such report on written request of
the employee. If the last fiscal year of the registrant has
(continued) 53
<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) 54
<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.
55
<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, 1996 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 19,459
<SECURITIES> 0
<RECEIVABLES> 270,849
<ALLOWANCES> 3,700
<INVENTORY> 141,618
<CURRENT-ASSETS> 443,625
<PP&E> 1,240,849
<DEPRECIATION> 448,430
<TOTAL-ASSETS> 1,273,009
<CURRENT-LIABILITIES> 187,495
<BONDS> 69,489
0
0
<COMMON> 81,367
<OTHER-SE> 705,245
<TOTAL-LIABILITY-AND-EQUITY> 1,273,009
<SALES> 1,619,345
<TOTAL-REVENUES> 1,620,169
<CGS> 1,366,549
<TOTAL-COSTS> 1,366,549
<OTHER-EXPENSES> 79,774
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 1,654
<INCOME-PRETAX> 172,092
<INCOME-TAX> 64,208
<INCOME-CONTINUING> 107,884
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,884
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30
</TABLE>
