CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
JUNE 30, 1998 0-11579
TBC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0600670
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4770 Hickory Hill Road
Memphis, Tennessee 38141
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (901) 363-8030
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by 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
23,083,175 Shares of Common Stock were outstanding as of June 30, 1998.
INDEX TO EXHIBITS at page 12 of this Report<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
June 30, December 31,
1998 1997
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 1,135 $ 917
Accounts and notes receivable, less
allowance for doubtful accounts
of $7,326 on June 30, 1998
and $7,344 on December 31, 1997:
Related parties 23,642 15,072
Other 64,447 62,267
Total accounts and notes receivable 88,089 77,339
Inventories 89,733 84,806
Refundable federal and state income taxes 2,247 2,489
Deferred income taxes 4,677 4,863
Other current assets 11,714 12,784
Total current assets 197,595 183,198
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land and improvements 7,242 5,604
Buildings and leasehold improvements 24,809 23,167
Furniture and equipment 30,355 29,455
62,406 58,226
Less accumulated depreciation 24,898 21,967
Total property, plant and equipment 37,508 36,259
TRADEMARKS, NET 17,113 17,337
GOODWILL, NET 14,438 14,628
OTHER ASSETS 15,437 13,526
TOTAL ASSETS $282,091 $264,948
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1998 1997
(Unaudited)
CURRENT LIABILITIES
Outstanding checks, net $ 5,902 $ 3,237
Notes payable to banks 11,677 22,496
Current portion of long-term debt 1,359 690
Accounts payable, trade 32,311 10,879
Other current liabilities 13,948 15,482
Total current liabilities 65,197 52,784
LONG-TERM DEBT, LESS CURRENT PORTION 66,833 67,647
NONCURRENT LIABILITIES 2,375 2,876
DEFERRED INCOME TAXES 7,408 7,454
STOCKHOLDERS' EQUITY
Common stock, $.10 par value,
shares issued and outstanding -
23,083 on June 30, 1998 and
23,163 on December 31, 1997 2,308 2,316
Additional paid-in capital 10,401 9,788
Retained earnings 127,569 122,083
Total stockholders' equity 140,278 134,187
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $282,091 $264,948
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
NET SALES* $161,923 $163,785 $302,658 $308,152
COSTS AND EXPENSES:
Cost of sales 137,148 139,261 255,549 262,332
Distribution 8,186 7,775 15,931 14,858
Selling and administrative 9,049 8,048 17,663 16,200
Interest expense 1,552 1,553 2,992 2,974
Other (income) expense - net (171) (746) (753) (1,441)
Total costs and expenses 155,764 155,891 291,382 294,923
INCOME BEFORE INCOME TAXES 6,159 7,894 11,276 13,229
PROVISION FOR INCOME TAXES 2,440 3,110 4,407 5,214
NET INCOME $ 3,719 $ 4,784 $ 6,869 $ 8,015
EARNINGS PER SHARE -
Basic and assuming dilution $ .16 $ .20 $ .30 $ .34
* Including sales to related parties of $35,784 and $34,107 in the
three months ended June 30, 1998 and 1997, respectively, and $69,800
and $68,814 in the six months ended June 30, 1998 and 1997,
respectively.
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
Number of Paid-In Retained
Shares Amount Capital Earnings Total
Six Months Ended
June 30, 1997
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 23,727 $2,373 $ 9,624 $107,808 $119,805
Net income for period 8,015 8,015
Issuance of common stock
under stock option and
incentive plan 28 3 165 - 168
Repurchase and retirement
of common stock (293) (30) (119) (2,161) (2,310)
Tax benefit from exercise
of stock options - - 14 - 14
BALANCE, JUNE 30, 1997 23,462 $2,346 $ 9,684 $113,662 $125,692
Six Months Ended
June 30, 1998
BALANCE, JANUARY 1, 1998 23,163 $2,316 $ 9,788 $122,083 $134,187
Net income for period 6,869 6,869
Issuance of common stock
under stock option and
incentive plan 84 8 626 - 634
Repurchase and retirement
of common stock (164) (16) (70) (1,383) (1,469)
Tax benefit from exercise
of stock options - - 57 - 57
BALANCE, JUNE 30, 1998 23,083 $2,308 $10,401 $127,569 $140,278
</TABLE>
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended June 30,
1998 1997
OPERATING ACTIVITIES
Net income $ 6,869 $ 8,015
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,302 3,287
Amortization 486 492
Deferred income taxes 140 (278)
Equity in earnings from joint ventures 102 (241)
Changes in operating assets and liabilities:
Receivables (12,659) (4,802)
Inventories (4,927) (2,086)
Other current assets 1,386 529
Other assets 219 (36)
Accounts payable, trade 21,432 (10,605)
Federal and state income taxes
refundable or payable 299 713
Other current liabilities (1,534) 199
Noncurrent liabilities (501) 118
Net cash provided by (used in)
operating activities 14,614 (4,695)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (4,764) (4,545)
Investment in joint ventures (395) -
Other, net 213 581
Net cash used in investing activities (4,946) (3,964)
FINANCING ACTIVITIES
Net bank borrowings (repayments) under
short-term borrowing arrangements (10,819) 8,750
Increase (decrease) in outstanding checks, net 2,665 4,162
Payments on long-term debt (145) (2,111)
Issuance of common stock under stock option
and incentive plan 318 168
Repurchase and retirement of common stock (1,469) (2,310)
Net cash provided by (used in)
financing activities (9,450) 8,659
Increase (decrease) in Cash and Cash Equivalents 218 -
CASH AND CASH EQUIVALENTS
Balance - Beginning of period 917 -
Balance - End of period $ 1,135 $ -
Supplemental Disclosures of Cash Flow Information:
Cash paid for - Interest $ 3,199 $ 2,872
- Income taxes 3,968 4,779
Supplemental Disclosure of Non-Cash Financing
Activities:
Tax benefit from exercise of stock options $ 57 $ 14
Issuance of restricted stock under stock
incentive plan 316 -
See accompanying notes to consolidated financial statements.
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TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statement Presentation
The December 31, 1997 balance sheet was derived from audited
financial statements. The consolidated balance sheet as of June 30,
1998, and the consolidated statements of income, stockholders' equity and
cash flows for the periods ended June 30, 1998 and 1997, have been
prepared by the Company, without audit. It is Management's opinion that
these statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows as of June 30, 1998 and
for all periods presented. The results for the periods presented are not
necessarily indicative of the results that may be expected for the full
year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's 1997
Annual Report.
2. Earnings Per Share
Basic earnings per share have been computed by dividing net income by
the weighted average number of shares of common stock outstanding.
Diluted earnings per share have been computed by dividing net income by
the weighted average number of common shares and equivalents outstanding.
Common share equivalents represent shares issuable upon assumed exercise
of stock options. The weighted average number of common shares and
equivalents outstanding for the periods ended June 30, 1998 and 1997,
were as follows (in thousands):
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Weighted average common
shares outstanding 23,082 23,501 23,095 23,563
Common share equivalents 71 71 93 81
Weighted average common shares
and equivalents outstanding 23,153 23,572 23,188 23,644
3. Other Assets
Other assets consist of the following (in thousands):
June 30, December 31,
1998 1997
Notes receivable $10,354 $ 8,445
Investments in joint ventures 2,921 2,811
Other intangible assets, net 613 741
Other 1,549 1,529
$15,437 $13,526
-7-<PAGE>
TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Other Assets (continued)
The notes receivable totals include a note for $4,897,000 from a
former distributor. The maker of the note was discharged in a proceeding
under Chapter 11 of the Bankruptcy Code in 1991. The Company received
distributions totaling $308,000 from the bankruptcy proceeding. The
Company holds written guarantees of the distributor's account, absolute
and continuing in form, signed by the principal former owners and
officers of the distributor and their wives, upon which the Company filed
suit in 1989. The defendants have pleaded various defenses based on,
among other things, an alleged oral cancellation of the guarantees. The
defendants have also filed a third party complaint against the Company's
former chief executive officer in which they claim the right to recover
against him for any liability they may have to the Company. The lawsuit
was scheduled to be tried in June 1998, but was postponed, and has now
been set for trial in November 1998. The Company believes that the
defendants' defenses are invalid and that there is no merit to the third
party complaint. The Company knows of no reason to believe that the
defendants will be unable to pay any judgment that may be entered against
them in the action.
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ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition
The Company's financial position and liquidity remain strong. Working
capital totaled $132.4 million at June 30, 1998 compared to $130.4
million at December 31, 1997. Current accounts and notes receivable
increased by $10.8 million and inventories increased by $4.9 million
during the first six months of 1998, due principally to seasonal
fluctuations. The net total owed to banks and vendors, consisting of the
combined balances of cash and cash equivalents, outstanding checks, notes
payable to banks and accounts payable, increased $13.1 million from
December 31, 1997 to June 30, 1998. This increase, together with cash
generated from operations, enabled the Company to fund the above-noted
increases in receivables and inventories, as well as stock repurchases and
normally recurring capital expenditures during the first six months of
1998.
Results of Operations
Net sales decreased 1.1% during the second quarter and 1.8% in the
first six months compared to the year-earlier levels. Sales of tires
accounted for approximately 94% of total sales in the second quarter and
95% in the first six months of 1998 versus 94% in the second quarter of
1997 and 93% in the first half of 1997. Unit tire shipments were
relatively unchanged, increasing 0.4% in the second quarter and declining
0.7% in the first six months compared to the year-earlier results. The
average tire sales price decreased 1.2% in the current quarter and was
unchanged during the first half of 1998 compared with 1997 levels, due to
the continuation of industry-wide pricing pressures.
Cost of sales as a percentage of net sales decreased from 85.0% in the
second quarter of 1997 to 84.7% in the current quarter. For the year-to-
date period, cost of sales declined from 85.1% in 1997 to 84.4% in 1998.
The reduction was due principally to an increased percentage of shipments
to franchised retail dealers compared to other customers. Gross margin
percentages on sales to franchised retailers are generally higher than on
shipments to the Company's other customers.
Distribution expenses as a percentage of net sales increased from 4.7%
in the second quarter of 1997 to 5.1% in the current quarter, and from 4.8%
in the first six months of 1997 to 5.3% in the first half of 1998. The
increases included higher product delivery expenses as well as greater
costs for labor and other warehousing items. The fluctuations were
related in part to the previously-mentioned increase in the percentage of
shipments to franchised retail dealers and the associated higher costs of
serving those customers.
Selling and administrative expenses increased $1.0 million in the second
quarter and $1.5 million in the first six months, compared to the year-
earlier levels. Included in the total for the prior year was an $810,000
charge in the first quarter associated with an early retirement program
accepted by certain employees. Excluding that charge, year-to-date selling
and administrative expenses were $2.3 million higher than in the first six
months of 1997. The increases were due largely to the Company's efforts
to accelerate the growth in its number of franchised retail dealers. The
Company has added personnel and systems and incurred various other
operating expenses in conjunction with these expansion efforts.
Interest expenses did not change significantly in the periods ended June
30, 1998 compared to the year-earlier levels. Net other income was lower
in the second quarter and first six months of 1998 due to certain charges
recorded in conjunction with retail store development activities and to
reduced operating results for joint ventures in which the Company has
ownership interests.
The Company's effective tax rate was 39.6% in the current quarter
compared to 39.4% in the year-earlier period. For the first six months,
the effective tax rate was 39.1% in 1998 compared to 39.4% in 1997. The
changes between interim periods and when compared to the effective tax
rate for the year 1997 were due primarily to fluctuations in state income
taxes.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on April 22, 1998,
Messrs. Louis S. DiPasqua, Charles A. Ledsinger, Jr. and Raymond E.
Schultz were elected as directors of the Company for a term expiring at
the 2001 Annual Meeting of Stockholders.
The number of shares of Common Stock voted for each director elected at
the Annual Meeting and the number of shares with respect to which
authority to vote for each such director was withheld are as follows:
18,925,540 shares were voted for Mr. DiPasqua and authority to vote
329,500 shares for Mr. DiPasqua was withheld; 18,928,148 shares were voted
for Mr. Ledsinger and authority to vote 326,892 shares for Mr. Ledsinger
was withheld; 18,929,223 shares were voted for Mr. Schultz and authority
to vote 325,817 shares for Mr. Schultz was withheld.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Index to Exhibits
(b) No reports on Form 8-K were filed during the three months ended
June 30, 1998.
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SIGNATURE
Pursuant to the requirements 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.
TBC CORPORATION
July 30, 1998 By /s/ Ronald E. McCollough
Ronald E. McCollough
Executive Vice President, Chief
Financial Officer
and Treasurer
(principal accounting and
financial officer)
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INDEX TO EXHIBITS
Located at
Sequentially
Exhibit No. Description Numbered Page
(3) ARTICLES OF INCORPORATION AND BY-LAWS:
3.1 By-Laws of TBC Corporation as amended through
April 22, 1998 . . . . . . . . . . . . . . . . 13
(10) MATERIAL CONTRACTS:
Management Contracts and Compensatory Plans
or Arrangements
10.1 TBC Corporation Executive Retirement Plan . . . 20
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EXHIBIT 3.1
BY-LAWS OF TBC CORPORATION
(As amended through April 22, 1998)
ARTICLE I
Offices; Agent
Section 1. Principal Office; Registered Agent. Until
changed in the manner specified by law, the principal office of the
Corporation and the Corporation's registered agent shall be as set forth
in the Corporation's Certificate of Incorporation as the same may be
amended from time to time (hereinafter referred to as the "Certificate of
Incorporation").
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware
as from time to time the Board of Directors may determine or the business
of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Annual Meeting. The annual meeting of
stockholders of the Corporation for the purpose of electing directors and
transacting such other business as may properly come before the meeting
shall be held on the third Thursday of May of each year or on such other
date as may be determined by the Board of Directors.
Section 2. Special Meetings. Special meetings of
stockholders or of any class of stockholders may be called only by the
Board of Directors pursuant to a resolution adopted by a majority of the
then authorized number of directors.
Section 3. Place of Meetings. Meetings of stockholders
shall be held at the principal office of the Corporation unless the Board
of Directors determines that a meeting shall be held at some other place
within or without the State of Delaware and causes the notice thereof to
so state.
Section 4. Notice of Meetings. Unless waived by him, a
written notice of each annual or special meeting, stating the place, date,
and hour of the meeting, and in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be personally delivered
or mailed postage prepaid to each stockholder of record entitled to vote
at such meeting, not more than sixty days nor less than ten days before
such meeting. If mailed, such notice shall be addressed to the
stockholder at his address as it appears upon the records of the
Corporation. Unless otherwise required by law, notice of adjournment of a
meeting need not be given if the time and place to which it is adjourned
are announced at such meeting.
Notice of any meeting of stockholders or class thereof, whether
required by law, the Certificate of Incorporation, or these By-Laws, may
be waived in writing by any stockholder entitled to such notice, either
before or after the holding of such meeting. The attendance of any
stockholder at any meeting
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without protesting, prior to or at the commencement of the meeting, the
lack of proper notice shall constitute a waiver by him of notice of such
meeting.
Section 5. Quorum. Unless a greater proportion is required
by law, the Certificate of Incorporation, or these By-Laws, and subject to
the right of any class of shares to vote as a class, at any meeting of
stockholders (i) the holders of shares constituting a majority of the
shares entitled to vote, if present in person or by proxy, shall
constitute a quorum for all purposes; and (ii) if a quorum is present, all
questions and business which shall come before the meeting shall be
determined by the vote of a majority of the shares present in person or by
proxy and entitled to vote on the subject matter.
At any meeting, whether a quorum is present or not, the holders of
a majority of the shares present in person or by proxy and entitled to
vote may adjourn the meeting to another time or place. At any such
adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
notified or held.
Section 6. Proxies. Each stockholder entitled to vote at a
meeting of stockholders may authorize another person or persons to act for
him by proxy. The instrument appointing a proxy shall be in writing and
subscribed by the person making the appointment. The person so appointed
need not be a stockholder. A vote in accordance with the terms of a proxy
shall be valid notwithstanding the previous death or incapacity of the
principal or revocation of the appointment unless notice in writing of
such death, incapacity, or revocation shall have been given to the
Corporation before a vote is taken. The presence of a stockholder at a
meeting shall not operate to revoke a proxy unless and until notice of
such revocation is given to the Corporation in writing or in open meeting.
Section 7. Advance Notice. At an annual meeting or special
meeting of the stockholders, only such business may be conducted as has
been specified in the notice of meeting, brought before the meeting by or
at the direction of the Board of Directors, otherwise properly brought
before the meeting by or at the director of the Board of Directors, or by
a stockholder who has given timely written notice to the Corporation's
corporate secretary (the "Secretary") of such stockholder's intention to
bring such business before the meeting (the "Business Procedure").
Only persons who are nominated by or at the direction of the Board
of Directors, by a nominating committee or person appointed by the Board
of Directors, or by a stockholder who has given timely written notice to
the Secretary prior to the meeting at which directors are to be elected,
will be eligible for election as directors (the "Nomination Procedure").
To be timely, notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 75 days
nor more than 90 days prior to the meeting; provided, however, that in
the event that less than 90 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 15th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made,
whichever was first.
A stockholder's notice to the Corporation proposing to nominate a
person for election as a director must contain certain information (i)
about each proposed nominee, including, without limitation, (a) the name,
age, business address and residence address of the nominee, (b) the
principal occupation or employment of the nominee, (c) the class and
number of shares of Common Stock of the Corporation ("Common Stock") which
are beneficially owned by the nominee and (d) any other information
relating to the nominee that is required to be disclosed in solicitations
of proxies for election of directors pursuant
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to Regulation 14A under the Securities Exchange Act of 1934 and (ii) about
the stockholder proposing to nominate such person, including, without
limitation, (a) the name and record address of the stockholder and (b) the
class and number of shares of Common Stock which are beneficially owned by
the stockholder.
A stockholder's notice relating to the conduct of business other
than the nomination of directors at an annual meeting must contain certain
information about such business and about the proposing stockholders
including, without limitation, (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (b) the name and record address of the
proposing stockholder, (c) the class and number of shares of Common Stock
owned by the proposing stockholder and (d) a description of any material
interest of the stockholder in such business.
If the chairman of the meeting determines that a person was not
nominated in accordance with the Nomination Procedure, such person will
not be eligible for election as a director and such nomination shall be
disregarded. If such chairman determines that that business was not
properly brought before such meeting in accordance with the Business
Procedure, such business will not be transacted at such meeting.
ARTICLE III
Directors
Section 1. Number and Classification. The number of
directors of the Corporation (exclusive of directors, if any, to be
elected by the holders of any one or more classes of Preferred Stock
voting separately as a class or classes) shall be not less than six nor
more than fifteen. Within such minimum and maximum limitations, the
authorized number of directors shall be fixed from time to time by the
Board of Directors pursuant to a resolution adopted by a majority of the
then authorized number of directors. Until otherwise determined by the
Board of Directors, the number of directors shall be fixed at twelve.
The Board of Directors shall be divided into three classes, with
the term of office of one class expiring each year. The number of
directors in each class shall be determined by the Board of Directors.
Section 2. Term of Office. At each annual meeting of
stockholders, directors elected to succeed those directors whose terms
then expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election.
Each director shall hold office until the expiration of the term
for which he is elected and until his successor has been elected and
qualified or until his earlier resignation or removal. No reduction in
the number of directors or change in the size of any class shall shorten
the term of any incumbent director.
Section 3. Qualification of Directors. Directors of the
Corporation need not be stockholders of the Corporation. At any time, no
less than a majority of the directors then in office shall be independent
directors. For purposes of these By-Laws, an "independent director" shall
mean a director who (i) has not been employed by the Corporation or any of
its affiliates in an executive capacity within the last five years; (ii)
does not have any business relationship with the Corporation (other than
service as a director), any of its affiliates, or any executive officer of
the Corporation, for which the Corporation is required (or would be
required if such relationship were with the Corporation) to make
disclosure under Regulation S-K of the Securities and Exchange Commission;
(iii) is not employed by a publicly-held company of which an executive
officer of the Corporation serves as a director; and (iv) is not a member
of the immediate family of any person described in (i) through (iii)
above.
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Section 4. Newly Created Directorships and Vacancies.
Subject to the rights, if any, of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the
Board of Directors resulting from the death, resignation, retirement,
disqualification, removal from office, or other cause may be filled by a
majority vote of the directors then in office, though less than a quorum,
and any director so chosen shall hold office until the next election of
the class for which such director shall have been chosen and until his
successor shall be elected and qualified.
Section 5. Removal. Subject to the rights, if any, of the
holders of any series of Preferred Stock then outstanding and
notwithstanding the fact that a lesser percentage may be specified by law,
any director or the entire Board of Directors may be removed from office
at any time, but only by the affirmative vote of the holders of at least
66 2/3% of the shares of the Corporation then entitled to vote at an
election of directors.
ARTICLE IV
Powers and Meetings of the Board of Directors
Section 1. Powers of the Board. Except as otherwise provided
by law or the Certificate of Incorporation, the business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors. The directors then in office shall have the authority to act
on matters relating to the business and affairs of the Corporation
notwithstanding the fact than less than a majority are independent
directors; provided, however, that until such time as a majority of the
directors are independent directors, the directors shall fill any newly-
created directorship or any vacancy only with an independent director.
Section 2. Meetings of the Board. An annual meeting of the
Board of Directors shall be held immediately following the adjournment of
each annual meeting of stockholders, and notice of such meeting need not
be given.
The Board of Directors may, by resolution, provide for other
meetings of the Board. Meetings of the Board of Directors may also be
held at any time upon the call of the Chairman of the Board, the
President, or any three members of the Board.
Meetings of the Board of Directors may be held at any place either
within or without the State of Delaware. Written notice of the time and
place of each meeting of the Board of Directors other than the annual
meeting shall be given by mailing the same to each director at his last-
known address at least three (3) days prior to the date of said meeting,
or such notice may be given to each director, not later than the day
preceding the meeting, personally, or by delivery of a notice addressed to
him at said address, or by sending the same to him at said address by
telegraph, telecopier or any other means. Notice of a meeting to be held
by conference telephone or other communications equipment may be given to
each director by telephone or like means at any time prior to the meeting.
Notices need not specify the purposes of the meeting. Notice of any
meeting of directors may be waived in writing by any director, either
before or after the holding of such meeting. The attendance of any
director at any meeting without protesting, prior to or at the
commencement of the meeting, the lack of prior notice shall constitute a
waiver by him of notice of such meeting. Notice of adjournment of a
meeting need not be given if the time and place to which it is adjourned
are announced at such meeting.
-16-<PAGE>
Section 3. Quorum. A majority of the then authorized number
of directors shall constitute a quorum for the transaction of business,
provided that whenever less than a quorum is present at any time or place
appointed for a meeting of the Board, a majority of those present may
adjourn the meeting from time to time without notice, other than by
announcement at the meeting, until a quorum shall be present. The vote of
a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors unless the act of a
greater number is required by the Certificate of Incorporation or these
By-Laws.
Section 4. Action by Directors without a Meeting. Any
action required or permitted to be taken at any meeting of the directors
may be taken without a meeting if all directors consent thereto in writing
and the writing or writings are filed with or entered upon the records of
the Corporation.
Section 5. Action by Communications Equipment. Directors
may participate in a meeting of the Board or any committee of directors
appointed by the Board as hereinafter provided by means of conference
telephone or other communications equipment if all persons participating
can hear each other. Participation in a meeting pursuant to this Section
shall constitute presence at such meeting.
ARTICLE V
Committees
The Board of Directors may, by resolution passed by a majority of
the then authorized number of directors, designate one or more committees,
each committee to consist of three or more of the directors of the
Corporation. The Board may designate one or more directors as alternate
members of any committee who may replace any absent or disqualified member
at any meeting of the committee. To the extent provided in the resolution
of the Board of Directors establishing any such committee and except as
otherwise prohibited by law, any committee of the Board may exercise all
the powers and authority of the Board of Directors in the management of
the business and affairs of the Corporation other than the power or
authority to declare a dividend or to authorize the issuance of stock.
Each such committee shall serve at the pleasure of the Board of
Directors and shall be subject to the control and direction of the Board
of Directors.
An act or authorization of an act by any such committee within the
authority delegated to it by the resolution establishing it shall be as
effective for all purposes as the act or authorization of the Board
of Directors.
Any such committee may act by a majority of its members at a
meeting or by a writing or writings signed by all of its members and filed
with or entered upon the records of the Corporation.
The Board of Directors may likewise appoint other members of any
committee who are not members of the Board of Directors; provided,
however, that any such individual shall act only in an advisory capacity
and shall have no vote upon any matter of business before the committee.
The following committees heretofore established by resolutions of
the Board shall be permanent committees of the Board, namely, the
Executive committee, the Audit Committee and the Compensation Committee.
A majority of the members of the Audit Committee shall be independent
directors, as defined in ARTICLE III, Section 3, of these By-Laws.
-17-<PAGE>
ARTICLE VI
Officers
Section 1. Officers. The officers of the Corporation shall
be a President, a Secretary, and a Treasurer, and such other officers
(including, without limitation, a Chairman of the Board and one or more
Vice Presidents) and assistant officers as the Board of Directors from
time to time may determine. Any two or more offices may be held by one
person, except the offices of President and Vice President.
Section 2. Election and Term of Office. Each officer of the
Corporation shall be elected by the Board of Directors and shall hold
office until the annual meeting of the Board of Directors following his
election and until his successor is elected and qualified or until his
earlier resignation or removal. The Board of Directors may remove any
officer at any time, with or without cause. The Board of Directors may
fill any vacancy in any office occurring from whatever cause.
Section 3. Duties of Officers. Each officer and assistant
officer shall have such duties, responsibilities, powers, and authority as
may be prescribed by law or assigned to him by the Board of Directors from
time to time.
ARTICLE VII
Indemnification of Directors and Officers
The Corporation shall indemnify any person who served or serves as
a director or officer of the Corporation and any director or officer of
the Corporation who served or serves at the request of the Corporation as
a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against any and
all losses, liabilities, damages, and expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement, incurred by such person,
in connection with any claim, action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, including any action by or in
the right of the Corporation, by reason of any act or omission to act as
such director, officer, employee, or agent, to the full extent permitted
by Delaware law including, without limitation, the provisions of Section
145 of the General Corporation Law of Delaware.
The right to indemnification conferred in this Article VII shall be
a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such claim, action, suit or
proceeding in advance of its final disposition; provided, however, that if
the Delaware General Corporation Law so requires, such payment 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 indemnification provided by this Article VII shall not be
deemed exclusive of any other rights to which any person seeking
indemnification may be entitled under these By-Laws or any agreement, vote
of stockholders or disinterested directors, or otherwise, both as to
action in such person's official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who
has ceased to be a director or officer of the Corporation and shall inure
to the benefit of the heirs, executors, and administrators of such a
person.
-18-<PAGE>
ARTICLE VIII
Certificates for Shares of Stock
Section 1. The interest of each stockholder in the
Corporation shall be evidenced by a certificate or certificates for shares
in such form as the Board of Directors from time to time may prescribe.
The shares of the Corporation shall be transferable on the books of the
Corporation by the holder thereof in person or by his attorney, upon
surrender for cancellation of a certificate or certificates for the same
number of shares, with an assignment and power of transfer endorsed
thereon or attached thereto, duly executed, and with such proof of the
authenticity of the signature as the Corporation or its agent may
reasonably require.
Section 2. Certificates for shares of stock shall be signed
by the Chairman of the Board, the President, or a Vice President, and by
the Secretary or Treasurer or an Assistant Secretary or an Assistant
Treasurer of the Corporation and shall be countersigned and registered in
such manner, if any, as the Board of Directors may prescribe. Any or all
signatures on the certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall cease to be such officer,
transfer agent, or registrar before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Section 3. No certificate for shares of stock shall be
delivered in place of any certificate alleged to have been lost, stolen,
or destroyed, except upon production of such evidence of such loss, theft,
or destruction, and upon delivery to the Corporation of a bond of
indemnity in such amount, upon such terms, and secured by such surety, as
the Board of Directors in its discretion may require.
ARTICLE IX
Seal
The seal of the Corporation shall be circular with the name of the
Corporation and the word "DELAWARE" surrounding the word "SEAL". Failure
to affix the corporate seal shall not affect the validity of any
instrument.
ARTICLE X
Amendments
These By-Laws may be amended or repealed only in the manner
provided in the Corporation's Certificate of Incorporation.
-19-
EXHIBIT 10.1
TBC CORPORATION
EXECUTIVE RETIREMENT PLAN
-20-<PAGE>
ARTICLE I - DEFINITIONS
The following terms, as used herein and designated by initial capital
letters, have the meanings stated below:
1.1 Actuarial Equivalent. The term "Actuarial Equivalent" means
equality in value of the aggregate amounts to be received under different
forms of payment based upon the following mortality and interest rate
assumptions:
Mortality Table: 1971 Group Annuity Mortality Table Projected by
Scale D to 1975, using a unisex rate that is 25%
male and 75% female as to employees and 75% male
and 25% female for all former employees.
Interest Rate: 6.5%
Notwithstanding the above, when determining the Actuarial Equivalent of a
Participant's Supplemental Benefit for purposes of calculating a lump-sum
payment, the applicable mortality table and interest rate provided in
Section 417(e)(3) of the Internal Revenue Code of 1986, as from time to
time hereafter amended, will be used in lieu of the mortality table and
interest rate described above.
1.2 Committee. The term "Committee" means the Compensation
Committee of the Board of Directors of TBC.
1.3 Compensation. For purposes of calculating a Participant's
Supplemental Benefit, the term "Compensation" means the aggregate of his
compensation by way of salary, incentive compensation, compensation
deferred pursuant to an agreement between TBC or its subsidiary and the
Participant, compensation subject to income tax which has been deferred by
virtue of a plan or arrangement made by TBC, its subsidiary or the
Participant, grants of restricted stock and grants of stock options (to
the extent of any excess of market value over option price on the date of
grant) without reduction, in the case of restricted stock and stock
options, by reason of any restrictions or limitations upon the
availability or exercisability thereof.
1.4 Disability. The term "Disability" means a physical or mental
imparity that entitles the Participant to disability benefits under the
federal Social Security laws. In addition, the Participant must provide
the Committee with satisfactory evidence that the Participant is receiving
or has been approved to receive disability benefits under the federal
Social Security laws.
1.5 401(k) Plan. The term "401(k) Plan" means the TBC
Corporation 401(k) Savings Plan, originally effective as of January 1,
1994, as it may be amended from time to time.
1.6 Normal Retirement Date. The term "Normal Retirement Date"
means the first day of the month immediately following the date on which
the Participant attains age 65 or, if later, the date on which the
Participant completes five (5) years of participation in the Plan.
-21-<PAGE>
1.7 Participant. The term "Participant" means a highly paid
employee of TBC or any of its subsidiaries selected by the Committee to
participate in the Plan.
1.8 Plan. The term "Plan" means TBC's Executive Retirement Plan,
as stated herein and as it may be amended from time to time.
1.9 Supplemental Benefit. The term "Supplemental Benefit" means
the pension benefit provided under the terms of the Plan, as set forth in
Article IV.
1.10 TBC. The term "TBC" means TBC Corporation, a Delaware
corporation, and its successors.
1.11 Year of Service. The term "Year of Service" shall mean each
twelve-month period in which the Participant is employed by TBC or any of
its subsidiaries. In addition, the Committee may grant a Participant
Years of Service for periods of time prior to the Participant's employment
with TBC or a subsidiary, if applicable.
ARTICLE II - GENERAL
2.1 Purpose and Effective Date. The Plan is hereby established by
TBC. The Plan is intended to be unfunded and to provide supplemental
pension benefits to certain highly paid employees of TBC and its
subsidiaries.
2.2 Plan Administration. The Plan shall be administered by the
Committee. The Committee, in its sole discretion, shall determine all
matters relating to Plan benefits and to the computation and payment
thereof.
2.3 Applicable Laws. The Plan will be construed and administered
in accordance with the laws of the State of Tennessee to the extent that
such laws are not preempted by the laws of the United States of America.
2.4 Gender and Number. For simplicity of expression and where
appropriate to the context, a reference to one gender shall be deemed to
include the other. Also, words in the singular shall include the plural,
and words in the plural shall include the singular.
ARTICLE III - PARTICIPATION
3.1 Eligibility to Participate. Effective as of any date selected
by it, the Committee may designate any employee to be a Participant in the
Plan.
3.2 Participation not Contract of Employment. The Plan does not
constitute a contract of employment, and participation in the Plan will
not give any employee the right to be retained
-22-<PAGE>
in the employ of TBC or any of its subsidiaries nor give any person any
right or claim to any benefit under the terms of the Plan unless such
right or claim has specifically accrued under the terms of the Plan.
ARTICLE IV - AMOUNT OF SUPPLEMENTAL BENEFIT
4.1 Normal Retirement Benefit. If a Participant has completed at
least 25 Years of Service, the Participant's Supplemental Benefit, when
expressed as an annual single life annuity payable at the Participant's
Normal Retirement Date, is equal to:
(a) 40% of the average of the three (3) highest consecutive
calendar years of the Participant's Compensation within the last ten
(10) completed calendar years during which the Participant received
any Compensation, reduced by
(b) an amount, expressed as a single life annuity with annual
payments beginning at the Participant's Normal Retirement Date,
which is Actuarially Equivalent (using the applicable mortality
table and interest rate used for purposes of determining lump-sum
payments) to the Participant's account balance in the 401(k) Plan
attributable to contributions made by TBC or its subsidiaries (other
than 401(k) elective deferral contributions or company matching
contributions).
4.2 Reduction in Benefit for Failure to Complete 25 Years of
Service. If the Participant has not completed at least 25 Years of
Service, the Participant's Supplemental Benefit shall be the result
derived by multiplying the amount determined in Section 4.1, above, by a
fraction (not to exceed 1), the numerator of which is the Participant's
Years of Service and the denominator of which is 25.
4.3 Termination of Employment Due to Disability. Notwithstanding
Section 4.2, if a Participant terminates employment with TBC and its
subsidiaries because the Participant has incurred a Disability, the amount
of the Participant's Supplemental Benefit shall be the benefit described
in Section 4.1 multiplied by a fraction (not to exceed 1), the numerator
of which is the Years of Service the Participant would have had if he had
continued to be employed by TBC or its subsidiaries until his Normal
Retirement Date and the denominator of which is 25.
4.4 Adjustment of Benefit for Early Payment. Notwithstanding
Sections 4.1, 4.2 or 4.3, if a Participant begins to receive payment of
his Supplemental Benefit before his Normal Retirement Date, the
Participant's Supplemental Benefit shall be the amount determined under
-23-<PAGE>
Section 4.1, 4.2 or 4.3, as applicable, multiplied by the applicable early
retirement factor in the table, below:
Early Retirement Factors
Age When Early Age When Early
Benefits Retirement Benefits Retirement
Start Factor Start Factor
55 .500 60 .750
56 .550 61 .800
57 .600 62 .850
58 .650 63 .900
59 .700 64 .950
4.4 Vesting. Notwithstanding any other provision of the Plan, if
a Participant in the Plan terminates employment with TBC and its
subsidiaries for any reason before the January 1 following the year in
which he is credited with at least 5 Years of Service, the Participant
shall forfeit his entire Supplemental Benefit under the Plan.
ARTICLE V - FORM AND TIME OF SUPPLEMENTAL BENEFIT PAYMENT
5.1 Form of Supplemental Benefit Payment. Unless an alternative
form of payment is selected by the Participant pursuant to Section 5.3,
the Actuarial Equivalent of the Participant's Supplemental Benefit will be
paid in the form of a "ten year certain annuity". A "ten year certain
annuity" is an annuity which is payable in equal monthly payments over the
lifetime of the Participant and, if the Participant dies before the
expiration of the ten year period, which continues payments to the
Participant's designated beneficiary during the remainder of the specified
period certain.
5.2 Timing of Supplemental Benefit Payment. Unless an election is
made by the Participant pursuant to Section 5.4, the Supplemental Benefit
shall commence to be paid within 90 days after the date on which the
Participant ceases employment with TBC and its subsidiaries or, if later,
the first day of the month following the Participant's 55th birthday.
5.3 Alternative Manner of Benefit Payment. In lieu of the form of
payment described in Section 5.1, the Participant may elect to receive the
Actuarial Equivalent of his Supplemental Benefit in a lump-sum payment or
in any form of annuity which is commercially available at the time.
-24-<PAGE>
5.4 Alternative Timing of Benefit Payment. A Participant may
elect to delay payment of his Supplemental Benefit to a date which is
later than the date described in Section 5.2.
5.5 Restrictions on Election under Section 5.3 or 5.4. To be
effective, an election pursuant to Section 5.3 or 5.4 must be made at
least 24 months prior to the date on which the Participant terminates
employment with TBC and its subsidiaries. An election may be revised, but
such revision must be made at least 24 months prior to the date on which
the Participant terminates employment with TBC and its subsidiaries. Also,
the Participant may request that the Committee, in its absolute
discretion, waive the 24-month requirement described in this Section.
5.6 Payment to Incapacitated Persons. Notwithstanding any other
provision of the Plan, if the Committee determines that a Participant or
other person entitled to a Supplemental Benefit under the Plan is
physically, mentally or legally incapacitated and unable to manage his
financial affairs, the Committee may, until claim is made by a conservator
or other person legally charged with the care of his person or of his
estate, make payment for the individual's benefit to one or more persons
or institutions which, in the Committee's judgment, are maintaining or
have custody of the person entitled to payment from the Plan. Any payment
made in accordance with this Section shall fully acquit and discharge the
Committee, TBC and its subsidiaries from all further liability on account
thereof.
5.7 Non-Transferability. The interests of Participants and other
persons in a Supplemental Benefit under the Plan are not subject to the
claims of their creditors and may not be voluntarily or involuntarily
assigned, alienated or encumbered.
5.8 Death. If the Participant terminates employment with TBC and
its subsidiaries due to his death and the Participant would not have
forfeited his entire Supplemental Benefit in accordance with Section 4.4
had he terminated employment with TBC immediately prior to his death, the
Participant's Supplemental Benefit (the amount of which is determined by
assuming that the Participant had terminated employment on the day before
his death) will be paid to the Participant's designated beneficiary or
estate, if applicable, in a single, lump-sum payment within 90 days after
the Participant's death.
5.9 Beneficiary. The Participant shall file with TBC a notice in
writing designating one or more beneficiaries to whom payments are to be
made upon the Participant's death. The Participant shall have the right to
change the beneficiary or beneficiaries from time to time; provided,
however, that any change shall not become effective until received in
writing by TBC. In the event the Participant fails to deliver such a
written designation of beneficiary, then any such payments shall be made
to the Participant's estate.
ARTICLE VI - FINANCING PLAN BENEFITS
The Plan shall be unfunded, and all Supplemental Benefit payments
shall be made from the general assets of TBC or its subsidiaries, as
applicable.
-25-<PAGE>
ARTICLE VII - AMENDMENT AND TERMINATION
While the Committee expects and intends to continue the Plan, it
must necessarily reserve, and reserves, the right to amend the Plan from
time to time and to terminate the Plan in its entirety. Notwithstanding
the foregoing, in no event will any amendment to, or the termination of,
the Plan reduce the amount of the Supplemental Benefit that a Participant
would have received had he terminated his employment with TBC and its
subsidiaries on the date of the amendment.
-26-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> (4767)<F1>
<SECURITIES> 0
<RECEIVABLES> 95415
<ALLOWANCES> 7326
<INVENTORY> 89733
<CURRENT-ASSETS> 197595
<PP&E> 62406
<DEPRECIATION> 24898
<TOTAL-ASSETS> 282091
<CURRENT-LIABILITIES> 65197
<BONDS> 0
0
0
<COMMON> 2308
<OTHER-SE> 137970
<TOTAL-LIABILITY-AND-EQUITY> 282091
<SALES> 302658
<TOTAL-REVENUES> 302658
<CGS> 255549
<TOTAL-COSTS> 255549
<OTHER-EXPENSES> 32841
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2992
<INCOME-PRETAX> 11276
<INCOME-TAX> 4407
<INCOME-CONTINUING> 6869
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6869
<EPS-PRIMARY> .30<F2>
<EPS-DILUTED> .30
<FN>
<F1>THIS ITEM IS SHOWN NET OF "OUTSTANDING CHECKS, NET" ON THE CONSOLIDATED
BALANCE SHEETS.
<F2>AMOUNT IS "BASIC" EPS AS COMPUTED PER FASB STATEMENT NO.128.
</FN>
</TABLE>
