<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 1-4188
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RUBBERMAID INCORPORATED
-----------------------
(Exact name of Registrant as specified in its charter)
OHIO 34-0628700
---- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1147 AKRON ROAD, WOOSTER, OHIO 44691-6000
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code - 330-264-6464
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Securities registered pursuant to Section 12(b) of the act:
Title of each class Name of each exchange on which registered
COMMON, PAR VALUE $1.00 PER SHARE NEW YORK STOCK EXCHANGE
- --------------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the act: NONE
----
Indicate by check mark whether 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, 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/
Common Shares, Par Value $1.00, Outstanding at January 31, 1996 -- 154,589,297.
Aggregate market value of such shares held by non-affiliates of Registrant as
of that date -- $4,386,471,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement for the Annual Meeting of Shareholders
on April 23, 1996 -- Part III
Consolidated financial statements and other data from Registrant's 1995 Annual
Report to Shareholders -- Parts I and II
<PAGE> 2
PART I
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ITEM 1. BUSINESS
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General
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Registrant was incorporated under the laws of the State of Ohio
in 1920. Registrant and its subsidiaries operate in one industry segment which
consists of the manufacture, marketing, selling and distribution of plastic and
rubber products consumed primarily by the end-user in the consumer, commercial,
industrial, agricultural, institutional, office, marine, automotive
accessories, contract, juvenile and home health care accessories markets. The
items produced and marketed by Registrant are in such categories as:
housewares; home horticulture; decorative coverings; leisure and recreational
products; infant and children's toys; office and computer furniture; commercial
and industrial maintenance products; home health care products; sanitary
maintenance; and food service products. Registrant's broad range of products
are sold and distributed through its own sales personnel and manufacturers'
agents to a variety of retailers and wholesalers, including mass merchandisers,
toy stores, office supply outlets, catalog showrooms, home supply stores and
distributors serving institutional markets.
Registrant's basic philosophy is to manufacture and market
branded, high-quality products that offer high value to customers and
consumers. Value is that best combination of quality, service, timeliness,
innovation and price as perceived by the user. Registrant's strategic
direction is to grow as a global enterprise by focusing on developing best
values through innovation, partnerships and continuous improvement, which will
be reflected in the recognition of the Registrant's brands worldwide.
Registrant's growth objective is to double sales and earnings
per share over a five-to-six year period, a rate consistent with its long-term
historical performance. Prior to the late 1970s, the objective was to double
sales and earnings on average over a six-year period. Reflecting the higher
rates of inflation that then existed in the US economy, the growth objective
was increased to an annual average compounded rate of 15 percent, which would
cause a doubling in size every five years. In 1995, Registrant announced an
adjustment of its growth objective to reflect the lower inflation in the US
economy, resulting in the current objective of doubling over a five-to-six year
period.
Registrant expects to meet its growth objective primarily from
internally generated core business activities, supplemented by selective
acquisitions. Registrant has focused its resources to achieve growth through
continued introduction of new products and line extensions, entry into new
product categories and markets, maintaining competitiveness in its existing
product lines, expanding its core businesses to attain a global presence, and
through business development activities, such as acquisitions, joint ventures
or licensing arrangements.
To support this growth initiative, Registrant has accelerated
its focus on continuous improvement and value enhancements. Since announcing
this initiative of accelerated value improvement in 1994, productivity achieved
by Company associates has reached record levels. Those savings are being
reinvested in activities that support the long-term growth initiative of the
Registrant, such as capital expenditures for expansion and productivity
improvements, new product research and development, human resource training and
business development activities.
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In December 1995, Registrant announced a realignment program
aimed at streamlining its manufacturing and distribution operations. That plan
includes reducing the number of stock-keeping units (SKUs) by approximately 40
percent, the closing or disposal of nine facilities and an approximate nine
percent reduction in Registrant's worldwide workforce. The SKUs eliminated
represented approximately five percent of sales in 1995. The actions announced
are aimed at furthering Registrant's value improvement initiative and is
expected to lead to improved customer service, lower costs and reduced
complexity in the core businesses. Registrant recorded a one-time, primarily
non-cash charge of $158 million in 1995 to reflect costs associated with the
realignment.
Concurrent with the realignment announcement, Registrant also
added a strategic initiative to balance its long-term capital structure. By
prudently increasing the amount of debt as part of its capitalization,
Registrant expects to lower the cost of capital employed in its business.
Business Development Activities
-------------------------------
Registrant's acquisition strategy is focused on companies that
tend to fit one of three broad criteria: provide a base for a new product
category offering significant growth opportunities, provide an extension of an
existing core business, or provide geographic extension and/or an expanded
presence in an international market. The companies acquired by the Registrant
tend to have common characteristics, many of which are shared with the
Registrant. Among these characteristics are: a high-quality image; emphasis on
marketing and customer service; capability to benefit from new product
development; similar materials and/or related manufacturing processes and/or
comparable distribution channels. The businesses acquired during the last
several years include:
CIPSA, the leading plastic housewares manufacturer and marketer
in Mexico, was acquired in 1992. It now operates as Rubbermaid de Mexico and
is part of the Home Products Division.
Iron Mountain Forge Corporation, a leading manufacturer and
marketer of commercial playground equipment, was also acquired in 1992 and
formed the foundation for the Little Tikes Commercial business. It expanded
Little Tikes' development of the growing child care market into parks, schools,
playgrounds and other commercial recreation markets. Glenwood Systems Pty.
Ltd, acquired in 1994, a leading marketer and designer of commercial play
systems in Australia known as Ausplay and PAR-REC Holdings, Inc., acquired in
1995, a leading manufacturer of similar play equipment in Canada, expand
product lines and the distribution of commercial play structures into
additional geographic markets. Decor Concepts, Inc., acquired in 1995 and
known as OMNI, makes contained-play systems for commercial uses such as in
restaurants and indoor playgrounds which expands the commercial play business
into new markets.
Empire Brushes, Inc., acquired in 1994, a manufacturer and
marketer of mops, brooms, brushes and other cleaning products for home and
commercial use, has been integrated with Registrant's existing cleaning
products business and is now Rubbermaid Cleaning Products Inc., a part of the
Home Products Division.
Carex, now Rubbermaid Health Care Products Inc., acquired in
1994, manufactures and sells bath safety, mobility, daily living and personal
care aids and accessories for the home health care market, a new market for the
Registrant. Incorporating a marketing focus and the Rubbermaid brand,
Registrant expects to enhance new product development, offer greater product
line values and expand channels of distribution.
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A joint venture with Richell Corporation, a leading Japanese
housewares manufacturer, was formed in 1994. The joint venture, Rubbermaid
Japan Inc., develops, markets and sells housewares, leisure and seasonal
products in Japan. In October 1994, Registrant exercised an option to increase
its equity position from an initial 40 percent to 51 percent.
Royal Rubbermaid Structures Ltd., a joint venture of the
Registrant and Royal Plastics Group Limited of Canada, was formed early in
1995. This venture manufactures and markets modular plastic components and
kits for small structures, such as storage buildings and sheds. Each partner
owns 50 percent of the joint venture. The Seasonal Products business of
Registrant maintains primary responsibility for conducting the sales and
marketing efforts of the joint venture.
Also in 1995, Injectaplastic S.A., a plastic housewares
manufacturer and marketer in France, was acquired. Injectaplastic re-
established the Registrant in the European marketplace for housewares and
seasonal product lines following dissolution of the previous Curver Rubbermaid
joint venture with DSM, the Dutch Chemical Group. In November 1995, a majority
interest in Dom-Plast S.A., a leading manufacturer and marketer of plastic
housewares products in Poland, was acquired. This expanded Registrant's
presence in Central and Eastern Europe, and offers an attractive manufacturing
opportunity for distribution of Registrant's products into Northern and Western
Europe.
In 1994, Registrant sold its 40-percent interest in the Curver
Rubbermaid European housewares joint venture to DSM who held the remaining
60-percent interest. Registrant believes that it has a greater opportunity in
the European market by proceeding on an independent basis.
In 1994, Registrant's Seasonal Products business divested its
outdoor casual resin furniture business, including the manufacturing facility
in Stanley, North Carolina. The divestiture will allow management to provide
greater focus and resources on core business competencies.
Also in 1994, the Davson Division of Rubbermaid Office Products
Inc. was sold because the Davson product line was not considered a long-term
strategic complement to the remaining office products business.
Net Sales
The percent of net sales contributed by each of the consumer
and institutional classes of products for the three years ended December 31,
1995 was as follows:
<TABLE>
<CAPTION>
NET SALES
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Consumer Institutional
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<S> <C> <C>
1995 80% 20%
1994 79% 21%
1993 78% 22%
</TABLE>
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Raw Materials
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The principal raw materials used in the manufacture of
Registrant's products are various plastic resins and synthetic rubber (all of
which are derivatives of petroleum or natural gas liquids) and color
concentrates. All of these items are available from numerous competitive
sources. For the most part, the particular raw materials which Registrant uses
are of a commodity nature whose prices are subject to change as supply and
demand fluctuate. From 1991 to mid-1994, resin costs remained relatively
stable, however beginning mid-1994 and continuing into 1995, resin costs began
to escalate rapidly, as demand was growing and supply tightened. Because of
the sharpness and rapidity of the price increases, Registrant was unable to
fully recover the incremental costs through adjustments to its selling prices,
thus negatively impacting earnings for 1995. The sharp increases in resin
costs began to moderate beginning mid-1995 and have now declined from the peak
reached during 1995, as supply and demand have returned to more balanced
levels. Registrant has accelerated its continuing programs for substituting
available or reformulated resins that are consistent with its quality
standards. The Registrant expects to obtain adequate supplies of raw materials
for its needs.
Patents and Trademarks
----------------------
There are no patents or licenses considered material to the
business. Registrant is of the opinion that through sustained advertising and
use, the trademark RUBBERMAID has become of value in the identification and
acceptance of its products, especially in North America. In addition,
Registrant has many well-known brands such as CON-TACT (pressure sensitive
decorative coverings), ELDON (office products), LITTLE TIKES (toys), and SECO
(floor maintenance products) that compete in domestic and international
markets.
Seasonality
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Historically, the year-end holiday season records the highest
sales volume for the toy industry; however, the Little Tikes spring and summer
products have served to more evenly balance monthly shipments. Rubbermaid
Specialty Products concentrates its efforts on product categories of a seasonal
nature, including insulated products, planters, and bird feeders. Insulated
product sales are highest during the first six months of the year, and
inventories are built during the other periods of the year in order to more
easily accommodate demand. No material portion of Registrant's other business
is of a highly seasonal nature.
Working Capital
---------------
Working capital requirements of the business increase
generally as sales volumes increase. There are normally no unusual working
capital needs existent at any one time in the ordinary course of business.
Dating programs offering extended terms are carried on by the various operating
companies as part of their normal marketing activities.
Customers
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Sales are made to a broad range of customers, one of which
accounted for 15%, 15%, and 14% of net sales in 1995, 1994, and 1993,
respectively. Due in part to Registrant's perception that consumers are loyal
to Registrant's brand names, Registrant does not believe that the loss of any
one customer would have a materially adverse effect on its business.
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Backlog
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Registrant produces to and sells from inventory for the
majority of its products. The amount of backlog existent at any one time is
not a significant factor in the business.
Competition
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All markets served by Registrant and its subsidiaries are
competitive as to price, service, and product performance. Most of
Registrant's products compete not only with those of other manufacturers using
similar raw materials but also with products manufactured from other materials.
Many of the competitor companies are either closely held or are divisions of
larger entities. Registrant is recognized as a strong competitive factor in
the marketplace, but there is no reliable quantitative manner in which the
aggregate competitive position of Registrant can be determined.
Research and Development
------------------------
Registrant expended approximately $28,963,000, $27,747,000,
and $28,202,000 during 1995, 1994, and 1993, respectively, on research and
development activities related to product, process and materials development,
and mold design. These costs are charged to operations as incurred.
Environmental Matters
---------------------
Compliance with Federal, State, and local provisions, which
have been enacted or adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment, is not
expected to have an adverse effect upon the capital expenditures, earnings, or
competitive position of Registrant and its subsidiaries. Reference is made to
pages 40 and 41 of the 1995 Annual Report to Shareholders, which is contained
in Exhibit 13 hereof, concerning further information regarding Registrant's
Environmental Program.
Employees
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The average number of persons employed by Registrant and its
subsidiaries during 1995 was 14,054.
Foreign Operations
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Reference is made to page 38 of the 1995 Annual Report to
Shareholders, which is contained in Exhibit 13 hereof, for information
concerning Registrant's operations in different geographical areas. Export
sales are not material and are, therefore, not separately stated.
To accelerate international growth, foreign businesses are
positioned to provide direct line reporting relationships with their
counterpart domestic operation. The management of Rubbermaid businesses around
the world, plus the coordination of sales in foreign markets, are the
responsibility of the respective core operating companies. The Corporate role
is to develop and coordinate with the core businesses strategic plans,
priorities, and global operations. To improve efficiencies in the new regions
being developed, staff functions are centralized, while the line functions are
decentralized to each core business.
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Registrant uses a variety of approaches to expand and develop
international markets. To initiate market development in certain geographic
areas, particularly new and developing markets, emphasis is placed on exporting
from existing manufacturing facilities. Where market size and economics
justify, manufacturing facilities are established - for example, Canada, Europe
and Mexico. In markets where it is deemed appropriate to gain immediate access
to manufacturing facilities or distribution, Registrant may make selective
acquisitions. Licensing arrangements are used in those markets where the costs
of importing are prohibitive and where Company-owned manufacturing is not
economically justified. In addition, Registrant may use a combination of any
or all of these approaches. Today, Rubbermaid products are distributed
worldwide.
No greater known significant risk is attendant to the foreign
business than to the domestic business conducted by Registrant and its
subsidiaries.
Forward-Looking Discussions
---------------------------
Except for the historical information contained, or
incorporated by reference herein, the statements and objectives set forth in
Item 1, or incorporated by reference in Item 7, are forward-looking and involve
uncertainty and risk. Registrant's future financial performance may differ
materially from those described in the forward-looking statements made by, or
on behalf of, Registrant as a result of a variety of factors such as changes
in: a) the competitive environment; b) the condition of the industry and
economy, including the effects of weather, consumer and customer demand; c) the
cost of raw materials, which may not be recovered through selling prices; d)
the rate of growth in selling, general and administrative expenses due to
Registrant's business expansion; e) working capital requirements; f) the under
utilization of Registrant's production facilities; g) international factors,
including currency exchange rates, economic conditions and difficulties or
delays in Registrant's business expansion outside the United States, or h)
difficulties or delays in the implementation of the Registrant's realignment
program.
ITEM 2. PROPERTIES
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Registrant and its subsidiaries have manufacturing and/or
warehousing locations in 14 states and 10 foreign countries.
Major plant and warehouse locations of Registrant are as
follows:
Home Products Division - Wooster and Akron, Ohio;
Phoenix, Arizona; Sparks, Nevada (leased); Cortland,
New York; Greenville, and Robersonville, North
Carolina; Cleburne and Greenville, Texas; Suffolk,
Virginia (leased); Mississauga, Ontario and Montreal,
Quebec (leased), Canada; Toyama, Japan; Mexico City,
Mexico; Oyonnax, France; and Slupsk, Poland.
Rubbermaid Specialty Products Inc. - Goddard and
Winfield, Kansas; and Centerville, Iowa.
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The Little Tikes Company - Hudson and Sebring, Ohio;
City of Industry (leased), California; Aurora and
Farmington, Missouri; Shippensburg, Pennsylvania;
Columbia, South Carolina; Melbourne, Australia
(leased); Paris and Guelph (leased), Ontario, Canada;
Dublin, Ireland; and Differdange, Luxembourg.
Rubbermaid Commercial Products Inc. - Winchester,
Virginia; Phoenix, Arizona (leased); Cleveland,
Tennessee; Birmingham, England (leased); and
Dietzenbach, Germany (leased).
Rubbermaid Office Products Inc. - Maryville, Tennessee
Silverwater, Australia (leased); Shefford, England
(leased); and Coignieres, France (leased).
Rubbermaid Health Care Products Inc. - Statesville,
North Carolina.
Certain facilities are subject to mortgages securing
industrial revenue bond or other governmental financing.
The properties and facilities of Registrant and its
subsidiaries are modern and suitable to the requirements of the business. On
an overall basis, these facilities, with certain exceptions due primarily to
general economic slowdowns, have been operated near capacity. As a general
rule, continuing capital expenditures are required each year to provide the
necessary plant, equipment, and tooling to support the growth of the business.
To supplement its own facilities, Registrant has followed a practice of
sourcing a portion of its production and warehousing requirements from third
parties.
ITEM 3. LEGAL PROCEEDINGS
- -------- -----------------
There are no material pending legal proceedings to which
Registrant or any of its subsidiaries is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------- ---------------------------------------------------
During the fourth quarter of the fiscal year covered by this
Form 10-K, no matter was submitted to a vote of Registrant's shareholders,
through the solicitation of proxies or otherwise.
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<TABLE>
<CAPTION>
Executive Officers of Registrant
--------------------------------
Employed By
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Registrant
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Name Age Since Positions and Offices Held
---- --- ----- --------------------------
<S> <C> <C> <C>
Wolfgang R. Schmitt 52 1966 Chairman of the Board and
Chief Executive Officer
Mr. Schmitt has been Chairman since September 1993
and Chief Executive Officer since November 1992;
previously from November 1992, Co-Chairman. From May
1991, President and Chief Operating Officer, Executive
Vice President (1987-1991) and President of the Home
Products Division (1984-1990). Employed by Registrant
in various marketing and research and development
assignments since 1966.
Charles A. Carroll 46 1971 President and
Chief Operating Officer
Mr. Carroll was elected President and Chief Operating
Officer of Registrant in September 1993. From 1990, he
served as President and General Manager of the Home
Products Division and previously from 1988, President
and General Manager of Rubbermaid Specialty Products.
He has been employed by Registrant in various sales and
management capacities since 1971.
Richard D. Gates 53 1973 Senior Vice President,
Business Development and Investor Relations
Mr. Gates joined Registrant as Assistant Controller
in 1973 and was elected Assistant Treasurer in 1977,
Treasurer in 1979, and Vice President in 1980. He was
named Senior Vice President, Investor Relations and
Corporate Communications in 1991 and to his present
position in 1992.
</TABLE>
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<TABLE>
<CAPTION>
Executive Officers of Registrant
--------------------------------
Employed By
-----------
Registrant
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Name Age Since Positions and Offices Held
---- --- ----- --------------------------
<S> <C> <C> <C>
Lucius W. Hoffa, Jr. 52 1967 Senior Vice President,
Information Services
Mr. Hoffa was named Senior Vice President,
Information Services in January 1995 and was previously
Vice President of Management Information Services of the
Home Products Division from 1988. He has been employed
by Registrant since 1967 in a variety of management
information positions.
James A. Morgan 60 1974 Senior Vice President,
General Counsel and Secretary
Mr. Morgan joined Registrant as Assistant Secretary
and Counsel in February 1974 and was elected Secretary
in 1977, Vice President in 1979, Senior Vice President
in 1983, and General Counsel in 1988.
Michael E. Naylor 57 1992 Senior Vice President,
Operations
Mr. Naylor joined Registrant as Senior Vice
President, Technology and Environment in August 1992,
and was named Senior Vice President, Operations in 1994.
He was previously with General Motors Corporation for 25
years and most recently served as General Director of
the Military Vehicle Business. In previous assignments
he was Executive in charge of Corporate Strategic
Planning and Manager of Research and Development for the
Transportation Systems Division.
David L. Robertson 50 1994 Senior Vice President,
Human Resources
Mr. Robertson joined Registrant in April, 1994, as
Senior Vice President, Human Resources. Previously and
from 1982, he was Vice President, Human Resources for
Hillenbrand Industries.
</TABLE>
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<TABLE>
<CAPTION>
Executive Officers of Registrant
--------------------------------
Employed By
-----------
Registrant
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Name Age Since Positions and Offices Held
---- --- ----- --------------------------
<S> <C> <C> <C>
George C. Weigand 44 1984 Senior Vice President
and Chief Financial Officer
Mr. Weigand became Senior Vice President and Chief
Financial Officer in March, 1994, having previously
served as Vice President and Corporate controller
since 1992, and Vice President, Auditing and Taxes from
1990. Previously, he was Manager of Auditing and Taxes
from 1987 and prior, thereto, Manager of Auditing.
Hugh L. Easterbrook 38 1994 Vice President,
International Business Development
Mr. Easterbrook became Vice President, International
Business Development in October, 1995, having previously
served as Vice President, Business Development.
Previously and from 1992, he was Associate Director for
Trianon Finance in Paris, France and prior, thereto, was
an independent business development consultant.
John W. Dean, III 40 1988 Vice President and
Treasurer
Mr. Dean joined Registrant as Assistant Treasurer in
1988 and was elected Vice President and Treasurer in
1991. He was previously Director of Banking and Finance
with The Uniroyal Goodrich Tire Company.
John L. Theler 48 1992 Vice President and
Corporate Controller
Mr. Theler joined Registrant in 1992 as Vice
President of Finance and Controller for the Home
Products Division and was named Vice President and
Corporate Controller in 1994. He was previously with
the General Electric Company from 1971, where he served
in a number of senior financial management positions.
</TABLE>
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<TABLE>
<CAPTION>
Executive Officers of Registrant
--------------------------------
Employed By
-----------
Registrant
----------
Name Age Since Positions and Offices Held
---- --- ----- --------------------------
<S> <C> <C> <C>
David T. Gibbons 52 1995 President and General Manager,
Home Products Division
Mr. Gibbons joined Registrant in December 1995 as
President and General Manager of the Home Products
Division. He was previously, from 1994, General Manager
of the Home and Commercial Products Division of the 3M
Company which he joined in 1968. He has held various
sales and marketing management positions with that
company including General Manager of the ceramic
material business from 1991-1994 and Managing Director
of the Company's Thailand operation from 1986-1991.
Gary E. Kleinjan 47 1980 President and General Manager,
The Little Tikes Company
Mr. Kleinjan was appointed President and General
Manager of The Little Tikes Company in September 1994
having previously served as President and General
Manager of Rubbermaid Office Products Inc. from March
1994. Prior thereto and from August 1992, he was Vice
President and General Manager of MicroComputer
Accessories, Inc. Previously and from 1988, he was Vice
President, Sales of the Home Products Division where he
held various sales assignments since joining Registrant
in 1980.
Gary F. Mattison 55 1967 President and General Manager,
Rubbermaid Specialty Products Inc.
Mr. Mattison was appointed President and General
Manager of Rubbermaid Specialty Products in June 1993.
Prior thereto and from 1979, he was Vice President,
Manufacturing for the Home Products Division. He has
been employed by Registrant in various manufacturing
assignments since 1967.
</TABLE>
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<TABLE>
<CAPTION>
Executive Officers of Registrant
--------------------------------
Employed By
-----------
Registrant
----------
Name Age Since Positions and Offices Held
---- --- ----- --------------------------
<S> <C> <C> <C>
Joseph M. Ramos 54 1992 President and General Manager,
Rubbermaid Commercial Products Inc.
Mr. Ramos joined Rubbermaid Commercial Products on
January 1, 1992 as President and General Manager. He
was previously employed with 3M Company for 25 years in
various domestic and international sales, marketing, and
general management assignments.
Wayne L. Schmidt 46 1991 President and General Manager,
Rubbermaid Health Care Products Inc.
Mr. Schmidt was appointed President and General
Manager of Rubbermaid Health Care Products Inc. in May
of 1995, having served previously as Executive Vice
President and General Manager since September of 1994.
He was previously Vice President of Sales for Rubbermaid
Commercial Products Inc., having joined that
organization in 1991 as Vice President Foodservice.
Carol S. Troyer 52 1962 President and General Manager,
Rubbermaid Office Products Inc.
Ms. Troyer was named President and General Manager of
Rubbermaid Office Products Inc. in 1994 having served
previously from 1992 as President and General Manager of
Rubbermaid Canada Inc. From 1991, she was Vice
President Invincible Customer Services of the Home
Products Division and prior thereto Eastern Regional
Sales Vice President for the Division.
</TABLE>
All executive officers who are officers of Registrant are elected for a
one-year term.
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PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
Registrant's Common Shares are traded on the New York Stock
Exchange under the symbol RBD. As of January 31, 1996, Registrant had
approximately 32,300 shareholders of record. Reference is made to page 38 of
the 1995 Annual Report to Shareholders, which is contained in Exhibit 13
hereof, for information concerning sales prices for and dividends paid on
Registrant's Common Shares during 1995 and 1994.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Reference is made to pages 42 and 43 of the 1995 Annual Report
to Shareholders, which are contained in Exhibit 13 hereof, which pages include
the selected financial data for the five years ended December 31, 1995 as part
of Registrant's "Consolidated Financial Summary", which information is
incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Reference is made to pages 39, 40 and 41 of the 1995 Annual
Report to Shareholders, which are contained in Exhibit 13 hereto, which include
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for the years 1995, 1994, and 1993, which information is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
Reference is made to pages 29 through 38 of the 1995 Annual
Report to Shareholders, which are contained in Exhibit 13 hereto, which include
the consolidated balance sheets and the notes thereto as of December 31, 1995
and 1994, and the related consolidated statements of earnings, cash flows and
shareholders' equity for each of the years in the three year period ended
December 31, 1995, together with the independent auditors' report thereon of
KPMG Peat Marwick LLP dated February 2, 1996, which information is incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Registrant has not changed its independent auditors, and there
have been no reportable disagreements with such auditors regarding accounting
principles or practices or financial disclosure matters.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
- -------- ----------------------------------------------
Information regarding the directors of Registrant is included
under the caption "Information as to Board of Directors and Nominees" in
Registrant's proxy statement dated March 8, 1996, and is incorporated herein by
reference. Information regarding the executive officers of
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Registrant is included under a separate caption in Part I hereof and is
incorporated by reference, in accordance with General Instruction G(3) to Form
10-K and Instruction 3 to Item 401(b) of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
- ---------------------------------
Information regarding the above is included under the caption
"Executive Compensation" in Registrant's proxy statement dated March 8, 1996,
and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------
Information regarding the above is included under the captions
"Security Ownership of Certain Beneficial Owners" and "Ownership By Management"
in Registrant's proxy statement dated March 8, 1996, and is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ---------------------------------------------------------
Information regarding the above is included under the caption
"Security Ownership of Certain Beneficial Owners" in Registrant's proxy
statement dated March 8, 1996, and is incorporated herein by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- ---------------------------------------------------------------------------
(a) The following documents are filed as part of this Form 10-K
Report.
(1) The financial statements referred to in Item 8 above
which are contained in Exhibit 13 hereto and which
are incorporated by reference thereto.
(2) Exhibits 10(a) through 10(g) to this Item 14
constitute each executive compensation plan and
arrangement of Registrant.
All schedules have been omitted because the material is not
applicable, or is not required, or because the required information is shown in
the consolidated financial statements or in the notes thereto, or is not
otherwise material to the consolidated financial statements.
(b) There were no reports on Form 8-K filed for the quarter ended
December 31, 1995.
(c) Exhibits (numbered in accordance with Item 601 of Regulation
S-K).
(3a, 4a) Amended Articles of Incorporation of Rubbermaid
Incorporated. Incorporated by reference from
Exhibits 3a and 4a to Form 10-K for the year ended
December 31, 1992.
(3b, 4b) Regulations of Rubbermaid Incorporated.
Incorporated by reference from Exhibits 3b and 4b
to Form 10-K for the year ended December 31, 1992.
14
<PAGE> 16
(4c) Amended and Restated Rights Agreement between
Rubbermaid Incorporated and The First National Bank
of Boston. Incorporated by reference from
Exhibit 4 to Form 8 filed with the Commission on
October 26, 1989.
(10a) Rubbermaid Incorporated Management Incentive Plan.
Incorporated by reference from Exhibit 10a to Form
10-K for the year ended December 31, 1992.
(10b) Rubbermaid Incorporated Amended 1989 Restricted
Stock Incentive and Option Plan. Incorporated by
reference from Exhibit A to Proxy Statement
for April 26, 1994 Annual Meeting of Shareholders.
(10c) Rubbermaid Incorporated Supplemental Executive
Retirement Plan, as amended. Incorporated by
reference from Exhibit 10(d) to Form 10-K for
the year ended December 31, 1993.
(10d) Rubbermaid Incorporated Supplemental Retirement
Plan. Incorporated by reference from Exhibit 10(e)
to Form 10-K for the year ended December 31, 1991.
(10e) Change-Of-Control Employment Agreements -
Identical agreements have been entered into with
Charles A. Carroll, Richard D. Gates, David T.
Gibbons, Lucius W. Hoffa, Jr., Gary E. Kleinjan,
Gary F. Mattison, James A. Morgan, Michael E.
Naylor, Joseph M. Ramos, David L. Robertson,
Wolfgang R. Schmitt, Carol S. Troyer, and George C.
Weigand. Incorporated by reference from Exhibit
10(i) to Form 10-K for the year ended December 31,
1991.
(10f) Rubbermaid Incorporated 1993 Deferred Compensation
Plan. Incorporated by reference to Exhibit A to
Proxy Statement for April 27, 1993 Annual
Meeting of Shareholders.
(10g) Employment Agreement with David T. Gibbons.
(13) Consolidated financial statements and other data
from pages 29 to 43 of 1995 Annual Report to
Shareholders.
(21) Subsidiaries of Registrant.
(23) Consent of KPMG Peat Marwick LLP.
(24) Power of Attorney.
(27) Financial Data Schedule.
15
<PAGE> 17
SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: March 13, 1996 RUBBERMAID INCORPORATED
By: /s/ Wolfgang R. Schmitt
--------------------------------
Wolfgang R. Schmitt
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
Registrant and in the capacities indicated on March 13, 1996.
/s/ Wolfgang R. Schmitt Director, Chairman of the Board and
- ------------------------- Chief Executive Officer
Wolfgang R. Schmitt
/s/ George C. Weigand Senior Vice President and
- ------------------------- Chief Financial Officer
George C. Weigand
/s/ John L. Theler Vice President and Corporate Controller
- ------------------------- (Principal Accounting Officer)
John L. Theler
Tom H. Barrett Director
Charles A. Carroll Director
Robert O. Ebert Director
Stanley C. Gault Director
Robert M. Gerrity Director
Karen N. Horn Director By: /s/ James A. Morgan
-----------------------
William D. Marohn Director James A. Morgan
Attorney-in-Fact
Steven A. Minter Director
Jan Nicholson Director
Paul G. Schloemer Director
Gordon R. Sullivan Director
16
<PAGE> 18
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Number Exhibit Description
-------------- -------------------
<S> <C>
(3a, 4a) Amended Articles of Incorporation of Rubbermaid
Incorporated. Incorporated by reference from
Exhibits 3a and 4a to Form 10-K for the year
ended December 31, 1992.
(3b, 4b) Regulations of Rubbermaid Incorporated.
Incorporated by reference from Exhibits 3b and 4b
to Form 10-K for the year ended December 31,
1992.
(4c) Amended and Restated Rights Agreement between
Rubbermaid Incorporated and The First National
Bank of Boston. Incorporated by reference from
Exhibit 4 to Form 8 filed with the Commission on
October 26, 1989.
(10a) Rubbermaid Incorporated Management Incentive
Plan. Incorporated by reference from
Exhibit 10(a) to Form 10-K for the year ended
December 31, 1992.
(10b) Rubbermaid Incorporated Amended 1989 Restricted
Stock Incentive and Option Plan. Incorporated by
reference from Exhibit A to Proxy Statement
for April 26, 1994 Annual Meeting of Shareholders.
(10c) Rubbermaid Incorporated Supplemental Executive
Retirement Plan, as amended. Incorporated by
reference from Exhibit 10(d) to Form 10-K for
the year ended December 31, 1993.
(10d) Rubbermaid Incorporated Supplemental Retirement
Plan. Incorporated by reference from Exhibit
10(e) to Form 10-K for the year ended December
31, 1991.
(10e) Change-Of-Control Employment Agreements -
Identical agreements have been entered into
with Charles A. Carroll, Richard D. Gates,
David T. Gibbons, Lucius W. Hoffa, Jr., Gary E.
Kleinjan, Gary F. Mattison, James A. Morgan,
Michael E. Naylor, Joseph M. Ramos, David L.
Robertson, Wolfgang R. Schmitt, Carol S. Troyer,
and George C. Weigand. Incorporated by reference
from Exhibit 10(i) to Form 10-K for the year ended
December 31, 1991.
</TABLE>
<PAGE> 19
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Number Exhibit Description
-------------- -------------------
<S> <C>
(10f) Rubbermaid Incorporated 1993 Deferred Compensation
Plan. Incorporated by reference to Exhibit A to
Proxy Statement for April 27, 1993 Annual Meeting
of Shareholders.
(10g) Employment Agreement with David T. Gibbons.
(13) Consolidated financial statements and other data
from pages 29 to 43 of 1995 Annual Report to
Shareholders.
(21) Subsidiaries of Registrant.
(23) Consent of KPMG Peat Marwick LLP.
(24) Power of Attorney.
(27) Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT (10G)
-------------
October 25, 1995
Mr. David T. Gibbons
5 La Costa Drive
Dellwood, MN 55110
Dear Dave
We are pleased to confirm our offer of employment to you to join Rubbermaid as
our President and General Manager of the Home Products Division.
We are confident that your skills and experience will be valuable in assisting
Rubbermaid in achieving our growth objectives. We look forward to you joining
our team.
Confirming our discussion, our offer to you consists of the following:
<TABLE>
<S> <C>
TITLE: President and General Manager, Home
Products Division
REPORTING TO: President and Chief Operating Officer,
Rubbermaid Incorporated
BASE SALARY: $225,000 annually, payable biweekly.
BONUS: You will participate in our Executive
Management Incentive Bonus Plan (MIB Plan)
at a 1.6 factor. Your target cash bonus
will be the product of your base salary
times your factor times .60 or $216,000 for
1996. Your actual annual cash bonus is a
function of your performance contributions
and the performance achievement of
Rubbermaid against annually established
performance objectives.
</TABLE>
Continued
<PAGE> 2
Mr. David T. Gibbons -2- October 25, 1995
RESTRICTED In accordance with provisions of the plan you will
STOCK PLANS: participate in the regular five-year restricted
stock cycles at 15% of the product of your base
salary times your MIB factor. Grants under
this plan are made on an annual basis. The
grant is the product of your base salary
times your MIB factor times your restricted
stock percent divided by a 30-day average
price of Rubbermaid stock at the time of
the grant. The restrictions lapse after
five years if RONA performance targets are
achieved. The plan also provides for cash
awards if RONA targets are exceeded.
In addition to the five-year restricted
stock cycles, you will participate in our
three-year restricted stock cycles.
Three-year cycle awards are determined
based upon your performance and the
attainment of performance objectives for
the Corporation. Your award is the
difference between your target annual cash
MIB award (.60) and the actual cash MIB
award in excess of .60. For example, if
your actual MIB award were .80, your
three-year restricted stock award would be
the difference between:
1. your base salary times your factor times
.80, minus,
2. your base salary times your factor times
.60.
This product would then be increased by 20%
and then divided by a thirty-day average
stock price of Rubbermaid at the time of
the grant. The first year of your
participation in the three-year restricted
stock plan would be 1996. Restrictions
lapse after two years (first year of cycle
is MIB award year) if RONA performance
targets are met. The plan also provides for
cash awards if RONA targets are exceeded.
<PAGE> 3
Mr. David T. Gibbons -3- October 25, 1995
STOCK OPTIONS: You will participate in the stock
option plan. Grants of ten year
non-qualified options are made on an annual
basis. The vesting schedule for the option
plan is 25% per year in years 4 through 7
following the date of grant. We will
recommend to the Compensation and
Management Development Committee of the
Board of Directors an option grant of 3500
shares in January 1996.
RETIREMENT You will participate in the Rubbermaid Retirement
PLANS: Plan in accordance with its provisions. In
addition, you will participate in the
Supplemental Retirement Plan. Accruals to
the Supplemental Plan are currently
calculated at 15% of your annual MIB award.
AUTOMOBILE: A leased car will be provided in accordance with
the executive car policy.
COUNTRY CLUB: You will be provided with a membership in the
Wooster Country Club and will be reimbursed for
the monthly membership dues.
RELOCATION: The company will assist in your relocation
from Minnesota and will assist in the
purchase of a residence in the Wooster area
pursuant to established company policy. In
addition, we will reimburse for any
documented loss on the sale of your home up
to $20,000.
ADDITIONAL: 1. You will be included in the Rubbermaid
change in control employment plan. A draft
copy of the Change in Control agreement is
enclosed for your review. A completed
version will be available for your
execution upon your arrival.
<PAGE> 4
Mr. David T. Gibbons -4- October 25, 1995
2. We will provide 24 months of base
salary and target bonus in the event
of the involuntary termination of
your employment during the first
three years of employment with the
company. This arrangement is subject
to non-competitive employment during
the period and is not applicable in
cases of change in control, or
conduct detrimental to the best
interest of Rubbermaid or misconduct
involving dishonesty or moral
turpitude.
3. You will be provided with financial
planning assistance through AYCO
Corporation.
4. In recognition of the forfeiture
value of your Performance Unit Plan
and unexercised stock options, we
will make a special grant of 2750
shares of restricted stock for a
three-year cycle (1996-1998). These
shares will vest at the end of the
three-year cycle regardless of
company performance, unless you
voluntarily terminate employment
prior to that time. In the event of
involuntary termination of
employment, other than for cause,
prior to the end of the three-year
cycle, the shares will vest and be
issued to you. There will be no cash
component attached to these shares.
5. We will vest the allocations to your
non-qualified pension account as such
contributions are made.
6. You will be provided with life
insurance in the amount of three
times your base salary and will have
the opportunity to purchase one times
your annual base salary in
supplemental life insurance.
7. You will receive Accidental Death and
Dismemberment coverage in the amount
of $500,000.
<PAGE> 5
Mr. David T. Gibbons -5- October 25, 1995
8. You will be granted four weeks of
vacation annually.
Dave, we are confident that you can make substantial contributions to
Rubbermaid. We are looking forward to you joining our organization.
Sincerely
CHARLES A. CARROLL
President & Chief Operating Officer
Enclosures
<PAGE> 1
EXHIBIT 13
[ RUBBERMAID LOGO ]
FINANCIAL MESSAGE
During 1995, we set a course that will more effectively utilize our financial
strength to facilitate long-term growth and increase shareholder value. Our
focus is on enhancing cash flow and achieving a lower cost of capital. At year
end, working capital showed improvement over the prior year, especially
considering the selling price increases reflected in receivables.
Our plan to balance the Company's capital structure will reduce our cost of
capital through a prudent use of borrowed funds. We are targeting a 30 percent
debt-to-capital ratio which, in conjunction with the operating focus discussed
in the preceding pages of this Annual Report, will help us to achieve our
growth objectives. We began this initiative in January 1996, filing a Shelf
Registration to sell up to $400 million of debt securities. We also entered
into a $500 million unsecured committed credit facility to support a com-
mercial paper program planned for the first quarter of 1996. Looking ahead, a
more balanced capital structure will provide considerable financial flexibility
for our ongoing share repurchase program, the pursuit of acquisitions and
general corporate purposes.
In 1995, we added several new disclosures in the notes to consolidated
financial statements. They stem from the Company's adoption of FAS No. 121,
which addresses accounting for the impairment of long-lived assets, and from
two Statements of Position requiring disclosures about certain significant
risks and uncertainties and advertising costs. Also included is a new footnote
discussing our realignment program.
The responsibility for the integrity and objectivity of the consolidated
financial statements and other data included in this Annual Report rests with
management and the Board of Directors. Our management has established a system
of internal controls to provide reasonable assurance that this financial
information is reliable and the Company's assets are properly safeguarded. We
maintain these controls by selecting and training qualified associates, and by
establishing and implementing accepted policies and procedures of accounting
and business practice. Concurrently, we employ internal auditors to monitor
and evaluate the effectiveness of these controls, policies and procedures.
The Audit and Environmental Committee of the Board, comprised entirely of
outside directors, also monitors and reviews the Company's financial reporting
and accounting practices by meeting with management, internal auditors and
external auditors. The internal and external auditors have unrestricted access
to the Committee.
/s/ George C. Weigand
George C. Weigand
Senior Vice President and Chief Financial Officer
INDEPENDENT AUDITORS' REPORT
SHAREHOLDERS AND BOARD OF DIRECTORS
RUBBERMAID INCORPORATED:
We have audited the accompanying consolidated balance sheets of Rubbermaid
Incorporated and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of earnings, cash flows, and shareholders' equity for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Rubbermaid
Incorporated and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Cleveland, Ohio
February 2, 1996
29
<PAGE> 2
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1993
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,344,170 $2,169,354 $1,960,207
Cost of sales 1,673,232 1,465,586 1,285,949
Selling, general, and administrative expenses 402,586 347,915 328,741
Realignment costs 158,000 - -
Other charges (credits), net:
Interest expense 13,682 7,198 7,787
Interest income (3,422) (5,066) (4,921)
Miscellaneous, net 4,457 (13,430) 768
-------------------------------------------------------------------------------------------
14,717 (11,298) 3,634
-------------------------------------------------------------------------------------------
Earnings before income taxes 95,635 367,151 341,883
-------------------------------------------------------------------------------------------
Income taxes 35,863 139,025 130,470
-------------------------------------------------------------------------------------------
NET EARNINGS $ 59,772 $ 228,126 $ 211,413
===========================================================================================
NET EARNINGS PER COMMON SHARE $ .38 $ 1.42 $ 1.32
===========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
Distribution of 1995 Net Sales
<S> <C>
Materials 46.0%
Compensation and Benefits 18.9%
Depreciation and Amortization 4.4%
Taxes, other than income 2.0%
Advertising and Promotion 6.0%
Services 11.9%
Realignment 6.7%
Pretax Earnings 4.1%
</TABLE>
30
<PAGE> 3
CONSOLIDATED BALANCE SHEET
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
At December 31 1995 1994
-----------------------------------------------------------------------------
ASSETS
-----------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 50,969 $ 92,249
Marketable securities - 59,049
Receivables, less allowance for doubtful accounts
of $10,467 in 1995 and $11,062 in 1994 499,203 471,384
Inventories 251,723 295,180
Other current assets 49,312 8,804
-----------------------------------------------------------------------------
TOTAL CURRENT ASSETS 851,207 926,666
-----------------------------------------------------------------------------
Property, plant, and equipment, net 626,637 607,628
Intangible and other assets, net 213,684 174,886
-----------------------------------------------------------------------------
TOTAL ASSETS $1,691,528 $1,709,180
=============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
-----------------------------------------------------------------------------
CURRENT LIABILITIES:
Notes payable $ 116,539 $ 20,374
Long-term debt, current 5,957 1,783
Payables 102,003 102,681
Accrued liabilities 190,233 170,759
-----------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 414,732 295,597
-----------------------------------------------------------------------------
Other deferred liabilities 135,244 116,181
Long-term debt, non-current 6,179 11,576
-----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Preferred stock, without par value.
Authorized 20,000,000 shares; none issued - -
Common Shares of $1 par value.
Authorized 400,000,000 shares; issued
162,677,082 shares in 1995 and 1994 162,677 162,677
Paid-in capital 70,825 69,795
Retained earnings 1,098,670 1,120,629
Foreign currency translation adjustment (18,420) (16,583)
Treasury shares, at cost (6,473,220 shares in 1995
and 1,875,830 shares in 1994) (178,379) (50,692)
-----------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,135,373 1,285,826
-----------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,691,528 $1,709,180
=============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
( ) Denotes decrease in cash and cash equivalents
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1993
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 59,772 $228,126 $211,413
Adjustments to reconcile net earnings to
net cash from operating activities:
Depreciation and amortization 104,158 93,724 85,415
Non-cash realignment costs 129,000 - -
Employee benefits 11,992 13,887 14,204
Other 2,110 (2,137) 7,170
Changes in:
Receivables (27,506) (117,716) (31,949)
Inventories 4,052 18,462 (31,520)
Other assets (39,265) 964 (10,533)
Payables (5,771) (45,012) 16,783
Accrued liabilities (8,521) 21,895 28,426
--------------------------------------------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES 230,021 212,193 289,409
--------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (100,000) (277,312) (66,260)
Proceeds from sale of marketable securities 159,049 284,535 -
Capital expenditures (151,528) (118,000) (141,697)
Acquisition of businesses, net of cash (43,996) - -
Other, net (8,867) (6,792) 87
--------------------------------------------------------------------------------------------
NET CASH FROM INVESTING ACTIVITIES (145,342) (117,569) (207,870)
--------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in notes payable 95,562 6,961 (5,630)
Proceeds from long-term debt - 1,736 2,000
Repayment of long-term debt (6,999) (15,766) (5,650)
Cash dividends paid (81,731) (74,425) (64,938)
Common Shares repurchased (134,190) (48,683) (2,013)
Other, net 1,399 - -
--------------------------------------------------------------------------------------------
NET CASH FROM FINANCING ACTIVITIES (125,959) (130,177) (76,231)
--------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (41,280) (35,553) 5,308
Cash and cash equivalents at beginning of year 92,249 127,802 122,494
--------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 50,969 $ 92,249 $127,802
============================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 94,683 $123,673 $112,423
Interest paid $ 12,971 $ 7,346 $ 8,182
============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 5
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Foreign
Currency Total
Common Paid-in Retained Translation Treasury Shareholders'
Shares Capital Earnings Adjustment Shares Equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TRANSACTIONS FOR 1993:
Opening balance $160,239 $ 5,620 $ 820,453 $ 1,954 $ (617) $ 987,649
Net earnings - - 211,413 - - 211,413
Cash dividends, $.405 per share - - (64,938) - - (64,938)
Employee stock plans 118 4,895 - - (75) 4,938
Common Shares repurchased - - - - (2,013) (2,013)
Foreign currency translation
adjustment - - - (6,567) - (6,567)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31,1993 160,357 10,515 966,928 (4,613) (2,705) 1,130,482
TRANSACTIONS FOR 1994:
Net earnings - - 228,126 - - 228,126
Cash dividends, $.4625 per share - - (74,425) - - (74,425)
Employee stock plans 139 4,833 - - 696 5,668
Common Shares repurchased - - - - (48,683) (48,683)
Shares issued for an acquisition 2,181 54,447 - - - 56,628
Foreign currency translation
adjustment - - - (11,970) - (11,970)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 162,677 69,795 1,120,629 (16,583) (50,692) 1,285,826
TRANSACTIONS FOR 1995:
Net earnings - - 59,772 - - 59,772
Cash dividends, $.515 per share - - (81,731) - - (81,731)
Employee stock plans - 726 - - 4,244 4,970
Commmon Shares repurchased - - - - (134,190) (134,190)
Shares issued for an acquisition - 304 - - 2,259 2,563
Foreign currency translation
adjustment - - - (1,837) - (1,837)
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,1995 $162,677 $70,825 $1,098,670 $(18,420) $(178,379) $1,135,373
=========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Rubbermaid Incorporated and its subsidiaries manufacture, market, sell, and
distribute plastic and rubber products consumed primarily by the end user in
the consumer, commercial, industrial, agricultural, office, marine, automo-
tive accessories, contract and juvenile markets. The Company's products
include such items as housewares; home horticulture products; decorative
coverings; leisure and recreational products; infant and children's toys;
furniture, office and industrial products; and products used in food service,
health care, and sanitary maintenance. The Company's products are distributed
through its own sales personnel and manufacturers' agents to a variety of
retailers and wholesalers, including mass merchandisers, toy stores, catalog
showrooms, and distributors serving institutional markets. The Company's raw
materials are readily available, and the Company is not dependent on a single
supplier or only a few suppliers.
Principles of Consolidation
The consolidated financial statements include the accounts of Rubbermaid
Incorporated and its subsidiary companies, all of which are wholly owned
except for Rubbermaid Japan Inc. (see note 3). All significant intercompany
profits, transactions, and balances have been eliminated in consolidation.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method for 80% and 83% of inventories in
1995 and 1994, respectively. Cost of the remaining inventories is determined
using the first-in, first-out (FIFO) method.
Long-Lived Assets
Property, plant, and equipment is stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed on the
straight-line method over the following estimated useful lives:
Land improvements 10 to 45 years
Buildings and fixtures 5 to 45 years
Machinery and equipment 2 to 15 years
The excess of cost over fair value of net assets of businesses acquired
at December 31, 1995 and 1994, of $137,736 and $118,579, respectively, net of
accumulated amortization of $21,452 and $16,768, respectively, is amortized on a
straight-line basis over periods ranging from 20 to 40 years.
The Company adopted the provisions of FAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
during 1995, which had no material effect on the consolidated financial
statements. The Company utilizes the undiscounted cash flow method to determine
impairment in the carrying value of its long-lived assets. Measurement of an
impairment loss is determined by reducing the carrying value of assets to fair
value. Assets to be disposed of by sale or abandonment, as part of a plan
committed to and approved by management, are recorded at the lower of carrying
value or fair value less cost to sell.
Financial Instruments
Investments with maturities at date of purchase of three months or less are
considered cash equivalents. Cash equivalents include $9,700 of Eurodollar
investments at December 31, 1995, and $49,453 of commercial paper and $22,500
of Eurodollar investments at December 31, 1994.
The fair value of financial instruments, consisting of investments in cash,
cash equivalents, receivables, obligations under accounts payable, and debt
instruments, is based on interest rates available to the Company and
comparisons to quoted prices. At December 31, 1995 and 1994, the fair value of
these financial instruments approximates carrying value.
The Company adopted the provisions of FAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" at January 1, 1994. Management
determines the appropriate classification of debt securities at the time of
purchase and reevaluates such designation as of each balance sheet date. The
Company's marketable securities are classified as available-for-sale and are
carried at fair value which approximates cost. The Company's portfolio at
December 31, 1994, consisted of debt securities of $26,050, all of which mature
in less than one year, and equity securities of $32,999.
The Company uses a limited number of foreign exchange instruments to hedge
firm and anticipated commitments, as well as dividends denominated in foreign
currencies and net investments in foreign subsidiaries. Instruments have
included forward contracts, currency swaps, foreign currency loans, and foreign
currency options. Gains and losses incurred on foreign exchange instruments
identified as hedges are deferred and recognized in income in the same period
as the hedged transaction. The fair value of these foreign currency instruments
is estimated using current market prices provided by an outside quotation
service. The net unrealized gains or losses from hedging anticipated
transactions were not material at December 31, 1995 and 1994.
34
<PAGE> 7
Net Earnings Per Common Share
Net earnings per Common Share are based on the weighted average number of
Common Shares outstanding during each year. Average shares used in the
calculations were 158,765,812, 160,893,465, and 160,318,196 in 1995, 1994, and
1993, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
2. REALIGNMENT COSTS
During the fourth quarter of 1995, the Company's management approved a
two-year strategic realignment program designed to reduce costs and improve
operating efficiencies. This program, anticipated to be completed by the end
of 1997, includes the cost of exiting certain facilities, asset impairments
primarily due to product realignments, and employee termination costs. Costs
associated with this program of $158 million have been recognized at December
31, 1995, and are reflected in the Company's Consolidated Statement of Earnings
as realignment costs. Included in this charge is $120 million relating to the
disposition of inventories and machinery and equipment. Disposition of these
assets will not have a material effect on future periods revenues,
depreciation, or earnings. These realignment charges reduced after-tax earnings
by $98.7 million or $0.62 per Share. Other costs associated with this program,
not meeting the criteria for recognition at December 31, 1995, will be
recognized in future periods as incurred.
3. BUSINESS DEVELOPMENT
Acquisitions
During 1995, the Company acquired Injectaplastic S.A., a leading manufacturer
and marketer of plastic housewares, seasonal products, and bath accessories in
France; PAR-REC Holdings, Inc., a Canadian manufacturer of commercial play-
ground equipment; Decor Concepts, Inc., better known as Omni, an innovative
leader in the design and manufacture of contained soft play systems; and
Dom-Plast S.A., the leading manufacturer and marketer of plastic housewares in
Poland.
In 1994, the Company acquired Carex Inc., a manufacturer and marketer of
health care items including bath safety products, personal care accessories, and
other products designed to assist the aging and physically challenged; Empire
Brushes, Inc., a manufacturer and marketer of brushes, brooms, and mops for home
and commercial use; and the assets of Glenwood Systems Pty Ltd. and related
companies, well known in Australia as Ausplay, an innovative designer and
marketer of high-quality commercial playground equipment.
The acquisitions made in 1995 and 1994 were funded with cash, stock or a
combination thereof, and accounted for as purchases.
Divestitures
During 1994, the Company sold its casual outdoor resin furniture business, as
well as the assets of the Davson Division of Rubbermaid Office Products.
Joint Ventures
In January 1995, the Company formed Royal Rubbermaid Structures Ltd., a joint
venture with Royal Plastics Group Limited of Canada, for the manufacture and
marketing of modular plastic components and kits for small structures, such as
storage buildings and sheds. Each partner owns 50% of the joint venture,
accounted for by the equity method.
In 1994, the Company completed a joint venture with Richell Corporation, a
leading Japanese housewares manufacturer. The joint venture, Rubbermaid Japan
Inc., develops, markets, and sells housewares, leisure, and seasonal products
for the Japanese market. The Company initially held a 40% equity interest in
the venture and, in October 1994, exercised an option to increase it to 51%.
Also in 1994, the Company ended its European housewares joint venture with DSM,
the Dutch chemical group. Prior to its termination, the Company's 40% interest
in the joint venture was accounted for by the equity method.
The business development activities described above had no material effect on
the 1995 and 1994 financial statements.
4. INVENTORIES
A summary of inventories follows:
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------
<S> <C> <C>
FIFO cost:
Raw materials $ 73,862 $ 93,960
Work-in-process 14,346 16,555
Finished goods 193,991 209,140
- ------------------------------------------------------------
282,199 319,655
Excess of FIFO over LIFO cost (30,476) (24,475)
- ------------------------------------------------------------
$251,723 $295,180
============================================================
</TABLE>
35
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
5. PROPERTY, PLANT, AND EQUIPMENT, NET
The components of property, plant, and equipment are summarized below:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 30,696 $ 27,185
Buildings and fixtures 282,094 256,271
Machinery and equipment 843,296 763,629
- -------------------------------------------------------------
1,156,086 1,047,085
Accumulated depreciation (636,397) (555,555)
- -------------------------------------------------------------
519,689 491,530
Additions in progress 106,948 116,098
- -------------------------------------------------------------
$ 626,637 $ 607,628
=============================================================
</TABLE>
6. NOTES PAYABLE
Notes payable consist primarily of short-term loans borrowed under short-term
credit facilities made available on an informal basis by commercial banks. At
December 31, 1995, the Company had approximately $450 million in aggregate
availability under such credit facilities. The Company's weighted average
interest rate for notes payable was 6.1% and 6.7% as of December 31,1995 and
1994, respectively.
In January 1996, the Company entered into a $500 million committed
credit facility designated to support a commercial paper program planned for the
first quarter of 1996. ThiS facility is subject to normal banking terms and
conditions, and expires in January 2001. In conjunction with this action,
availability under certain informal lines was reduced.
7. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1995 and 1994, consist
of the following:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Compensation and commissions $ 27,193 $ 30,420
Retirement plans 25,881 26,759
Other 137,159 113,580
- -------------------------------------------------------------
$190,233 $170,759
=============================================================
</TABLE>
8. EMPLOYEE BENEFIT AND RETIREMENT PLANS
The Company provides retirement benefits primarily through noncontributory
defined contribution plans. The cost of these plans aggregated $16,134,
$22,178, and $21,185 in 1995, 1994, and 1993, respectively.
The Company's Restricted Stock Incentive and Option Plan provides for
Common Share awards to be made to key management associates with restrictions as
to disposition and subject to forfeiture upon termination of employment or if
certain performance goals are not achieved. The plan provides for supplemental
cash awards in the event performance goals are exceeded. During 1995, 1994,
and 1993, 147,946, 139,341, and 143,844 Common Shares were awarded and 31,824,
53,758, and 23,852 Common Shares were forfeited, respectively. The plan also
provides for the granting of incentive stock options as well as non-qualified
Stock options. In 1995 and 1994, 170,646 and 380,550 options were granted at
average option prices of $28.13 and $29.91, respectively, none of which were
exercisable at December 31, 1995 and 1994.
The Company maintains an incentive plan and an unfunded deferred compensation
plan for participating officers and key management associates. The liability
related to the deferred compensation plan ($30,154 and $26,350 at December
31, 1995 and 1994, respectively) is included in other deferred liabilities. The
Company also maintains a Voluntary Employee Beneficiary Association (VEBA).
9. OTHER POSTRETIREMENT BENEFIT PLANS
The Company sponsors defined benefit health care plans that provide medical
benefits to retired associates meeting certain eligibility requirements. The
plans generally contain cost-sharing features such as deductibles and
coinsurance, and some plans are contributory. During 1993, certain plans were
amended to limit the Company's annual per capita contributions. The plans are
unfunded.
At December 31, 1995 and 1994, the actuarially determined status of these
plans was as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $29,408 $25,399
Other fully eligible participants 3,298 8,527
Other active participants 19,266 10,929
- --------------------------------------------------------------
51,972 44,855
Unrecognized net reduction in prior
service costs 4,857 5,448
Unrecognized net gain 10,991 16,463
- --------------------------------------------------------------
Amount included in other deferred
liabilities $67,820 $66,766
==============================================================
</TABLE>
<TABLE>
<CAPTION>
The expense related to the plans was as follows:
1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $1,284 $1,317 $1,865
Interest cost 3,721 3,872 4,607
Amortization (1,799) (591) (197)
- ---------------------------------------------------------------------------
$3,206 $4,598 $6,275
===========================================================================
</TABLE>
In estimating the Company's December 31, 1995 obligation under these plans, the
per capita cost of covered benefits is assumed to decrease from 11 % in 1995
one percentage point per year to an ultimate rate of 6% in 2000. Adjusting the
assumed annual increase in the per capita cost of covered benefits upward by
one percentage point each year would increase the accumulated postretirement
benefit
36
<PAGE> 9
obligation and the expense related to these plans by approximately 11%. The
discount rate used in determining the accumulated postretirement benefit
obligation was 7.25% and 8.5% at December 31,1995 and 1994, respectively.
10. RESEARCH AND DEVELOPMENT COSTS
Research and development costs relating to both future and present products are
charged to selling, general, and administrative expenses as incurred. These
costs aggregated $28,963, $27,747, and $28,202 in 1995, 1994, and 1993,
respectively.
11. ADVERTISING COSTS
Costs incurred for producing and communicating advertising, including costs
incurred under cooperative advertising programs with customers, are charged to
selling, general and administrative expenses as incurred, or expensed ratably
over the year in relation to revenues or certain other performance measures.
Advertising costs were $142,025, $113,086 and $82,153 in 1995, 1994, and 1993,
respectively.
12. INCOME TAXES
Income taxes are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 44,500 $112,704 $108,712
State and local 6,151 16,430 17,306
Foreign 7,600 13,825 7,802
- ----------------------------------------------------------------------
58,251 142,959 133,820
Deferred:
Federal (13,663) (3,625) (3,019)
State and local (2,725) (390) (504)
Foreign (6,000) 81 173
- ----------------------------------------------------------------------
(22,388) (3,934) (3,350)
- ----------------------------------------------------------------------
$ 35,863 $139,025 $130,470
======================================================================
</TABLE>
Earnings (loss) before income taxes aggregated $98,835, $336,798, and $316,655
for domestic operations and $(3,200), $30,353, and $25,228 for foreign
operations in 1995, 1994 and 1993, respectively. Total tax expense as a percent
of pretax income differs from the amounts computed by applying the U.S. federal
income tax rate of 35% to earnings before income taxes primarily due to the
effect of state and local income tax expense.
As of December 31,1995, and 1994, the Company had aggregate deferred tax
assets of $103,305 and $87,032, respectively, including $25,772 and $25,482,
respectively, related to postretirement benefits, and $43,125 in 1995
related to the realignment charge. The Company had aggregate deferred tax
liabilities of $46,605 and $49,881, respectively, including $41,784 and
$47,916, respectively, related to property, plant, and equipment. At December
31, 1995, current deferred tax assets of $40,900 are reflected in other current
assets.
13. COMMON SHARES
Share Repurchase Program
As part of a program previously authorized by the Board of Directors, the
Company purchased approximately 4.8 million shares in 1995 and 1.8 million
shares in 1994 of its common stock for the treasury at an aggregate cost of
$134,190 and $48,683 in 1995 and 1994, respectively. In December 1995, the
Board of Directors increased the authorization for stock repurchase over the
next four years by 20 million shares in addition to those already acquired at
that time.
Shareholder Rights Plan
Under the Company's Rights Agreement, each shareholder has the right to
purchase from the Company one Common Share at a price that is currently $62.50
per share. The rights are only exercisable in the event a person acquires or
commences a tender offer or exchange offer for 20% or more of the Company's
outstanding Common Shares. In the event that a person who owns 20% or more of
the Company's outstanding Common Shares merges into the Company, engages in one
of a number of self-dealing transactions, or increases ownership to 25% or
more, each right would entitle its holder to purchase the Company's Common
Shares having a market value equal to twice the right's exercise price. In the
event that the Company engages in a merger or other business transaction in
which the Company is not the surviving corporation, engages in a merger or
other business combination transaction in which its Common Shares are changed
or exchanged, or 50% or more of the Company's assets or earning power are sold,
each right would entitle its holder to purchase common shares of the acquiring,
surviving, or resulting person having a market value equal to twice the right's
exercise price.
The rights expire June 24, 1996, and may be redeemed by the Company at a cost
that is currently $.0125 per right, prior to the occurrence of the events
described above.
37
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
14. BUSINESS AND CREDIT CONCENTRATIONS
The Company operates exclusively in one industry which is the manufacture and
distribution of plastic and rubber products and sells to a broad range of
customers, one of which accounted for 15%, 15%, and 14% of net sales in 1995,
1994, and 1993, respectively. The Company estimates an allowance for doubtful
accounts based on the credit worthiness of its customers as well as general
economic conditions. Consequently, an adverse change in those factors could
affect the Company's estimate.
15. GEOGRAPHIC SEGMENTS
At December 31, 1995, 1994, and 1993, the Company's equity in foreign
subsidiaries was $148,143, $123,855, and $105,485, respectively.
Revenues from non-U.S. customers, including foreign net sales and exports from
U.S. operations, represented 18%, 16%, and 14% of total net sales in 1995,
1994, and 1993, respectively.
The following is information about the Company's operations in different
geographic areas. Foreign amounts do not include minority-owned joint ventures
which are accounted for under the equity method.
<TABLE>
<CAPTION>
Net Sales Operating Earnings(a) Total Assets
- ----------------------------------------------------------------------------------------------------------------
(in millions) 1995 1994 1993 1995 1994 1993 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $2,007.4 $1,906.4 $1,753.6 $108.5 $330.1 $325.0 $1,410.0 $1,481.3 $1,342.9
Foreign 336.8 263.0 206.6 1.9 25.8 20.5 281.5 227.9 170.2
- ----------------------------------------------------------------------------------------------------------------
$2,344.2 $2,169.4 $1,960.2 $110.4 $355.9 $345.5 $1,691.5 $1,709.2 $1,513.1
================================================================================================================
<FN>
(a) Operating earnings in 1995 include a pretax realignment charge of $158
million, which reduced United States and Foreign operating earnings by
$140.8 million and $17.2 million, respectively.
</TABLE>
16. QUARTERLY FINANCIAL INFORMATION - UNAUDITED
<TABLE>
<CAPTION>
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
- --------------------------------------------------------------------------------------------------------------------
1995 1994 1995 1994 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $581,950 $566,337 $641,520 $580,271 $556,844 $531,098 $563,856 $491,648
Cost of sales 422,911 384,774 453,802 391,119 409,991 362,432 386,528 327,261
Net earnings (loss)(a) (73,468) 54,601 50,289 66,759 28,810 56,145 54,141 50,621
- --------------------------------------------------------------------------------------------------------------------
Per Common Share:
Net earnings (loss)(a) (.46) .34 .32 .41 .18 .35 .34 .32
Cash dividends paid .1400 .1250 .1250 .1125 .1250 .1125 .1250 .1125
Market price range:
High 28.00 29.25 30.38 28.25 33.38 28.25 34.00 35.00
Low 25.00 25.75 27.63 25.63 26.13 23.75 27.88 27.25
====================================================================================================================
<FN>
(a) Included in the fourth quarter of 1995 is a pretax realignment charge of
$158 million ($98.7 million after-tax, or $0.62 per Common Share).
</TABLE>
38
<PAGE> 11
RUBBERMAID
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Net sales in 1995 were a record for the 44th consecutive year, totaling $2.344
billion, an 8% increase over the $2.169 billion posted in 1994. Acquisitions,
net of divestitures, and higher selling prices each represented 4% of the sales
increase, while core business unit volume was unchanged. Net sales in 1994 were
11% above those in 1993 as unit volume increased 12%, including 3% from
acquisitions, net of divestitures, while pricing declined 1%.
The Company's continuing emphasis on global expansion resulted in
international sales growth outpacing domestic sales growth for the third
consecutive year. Revenues from non-U.S. customers, including foreign net sales
and exports from U.S. operations, represented 18%, 16%, and 14% of total net
sales in 1995, 1994, and 1993, respectively.
Net earnings in 1995 were $59.8 million, or $0.38 per share, after recording a
realignment charge in the fourth quarter, compared to a record $228.1 million,
or $1.42 per share, in 1994. The earnings decrease reflects unprecedented
increases in material cost inflation, particularly plastic resin costs,
below-normal sales volume growth due to lackluster retail demand, and increased
marketing expenditures. In 1993, net earnings were $211.4 million, or $1.32 per
share.
During the fourth quarter of 1995, the Company's management approved a
two-year strategic realignment program designed to reduce costs, accelerate
growth, and improve operating efficiencies. This two-year program includes the
cost of exiting nine facilities, asset impairments primarily due to product
realignments, and employee termination costs associated with a 9% reduction in
the total number of associates. The Company has included in its Consolidated
Statement of Earnings a charge of $158 million in 1995 for costs associated
with this program. Included in this charge is $120 million relating to the
disposition of inventories and machinery and equipment. These charges reduced
after-tax earnings by $98.7 million, or $0.62 per share. Other costs associated
with this program, not meeting the criteria for recognition at December 31,
1995, will be recognized in future periods as incurred. Approximately $29
million of the costs associated with employee terminations and certain exit
related costs will be paid from Company funds. The remaining $129 million
represents non-cash costs. Cash inflows from the disposition of inventories
and machinery and equipment are anticipated to exceed cash outflows associated
with the realignment program. The Company anticipates annual pretax savings of
approximately $50 million once the actions associated with this program are
completed.
Cost of sales as a percent of net sales was 71.4%, 67.6%, and 65.6% in 1995,
1994, and 1993, respectively. The increases in both 1995 and 1994 reflect
unprecedented rapid increases in raw material costs, particularly plastic resin
costs, which began escalating in the third quarter of 1994 and continued rising
until late in the third quarter of 1995. In addition, in 1995 the Company
experienced substantial underabsorbed overhead costs related to the combined
impact of lower-than-planned sales volume and efforts to reduce inventories.
Cost of sales in 1993 reflected stable resin prices, favorable manufacturing
cost trends including a more efficient loading of factories, and a LIFO reserve
reduction.
Selling, general, and administrative expenses as a percent of net sales were
17.2%, 16.0%, and 16.8% in 1995, 1994, and 1993, respectively. The increase in
1995 over 1994 reflects higher marketing expenses on lower-than-planned sales
levels and the negative impact of consolidating acquisitions having higher
selling, general and administrative expenses as a percent of net sales,
partially offset by record productivity improvements. The decline in 1994
versus 1993 is primarily due to productivity improvements exceeding increases
in advertising and promotion expenses.
Other charges (credits), net includes items such as net interest, minority
interests in joint ventures, royalty income, foreign exchange gains and losses,
amortization of intangible assets, and gains and losses on the disposal of
property, plant, and equipment. The net charge in 1995 is primarily due to
higher net interest expense, while the net credit in 1994 primarily reflects
certain gains recognized from 1994 divestitures and a reduction in the loss
on disposal of equipment.
The effective income tax rate as a percent of earnings before income taxes was
37.5%, 37.9%, and 38.2% for 1995, 1994, and 1993, respectively.
OUTLOOK FOR 1996
Although the sluggish retail environment experienced during 1995 appears to be
continuing into early 1996, the Company anticipates moderate sales growth later
in 1996 through new product introductions, continued emphasis on merchandising
and promotional programs, and business development activities. Earnings are
expected to grow at a rate in excess of the sales growth with anticipated
increases in volume, lower resin costs, and incremental as well as leap
productivity improvements outweighing the effects of lower prices on certain
price-sensitive items.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition remains strong and the Company has the
resources necessary to meet future anticipated funding requirements. The
Company has historically financed its growth through a combination of cash
provided
39
<PAGE> 12
from operations, new equity issues, and to a lesser extent debt financing.
Cash provided from operating activities is the primary source of liquidity and
amounted to $230 million, $212 million, and $289 million in 1995, 1994, and
1993, respectively. The cash generated from operations in 1995, in addition to
net proceeds from the sale of marketable securities and proceeds from increased
notes payable, enabled the Company to address capital expenditure needs, make
acquisitions, pay dividends, and repurchase shares of its Common Stock.
At December 31, 1995, the Company had informal commitments with commercial
banks to provide approximately $450 million in availability under short-term
unsecured credit facilities to finance fluctuations in working capital and, if
necessary, to provide other funds for operations until term financing is
secured. The Company intends to reduce its cost of capital by balancing the
capital structure to enhance long-term shareholder value, without reducing
financial flexibility to pursue both internal growth and acquisition
opportunities. In January 1996, the Company entered into a $500 million
unsecured, committed credit facility designated to support a commercial paper
program planned for the first quarter of 1996. Also in January 1996, the Company
filed a Shelf Registration with the Securities and Exchange Commission for the
issuance of up to $400 million in senior, unsecured debt securities. The Company
intends to offer these debt securities from time to time in the future, with
terms determined at the time of sale. This registration will enable the Company
to access the public debt market should opportunities present themselves, and
the proceeds are intended to be used for general corporate purposes.
As part of a program previously authorized by the Board of Directors, the
Company purchased approximately 4.8 million shares in 1995 and 1.8 million
shares in 1994 of its common stock for the treasury at an aggregate cost of
$134.2 million and $48.7 million in 1995 and 1994, respectively. In December
1995, the Board of Directors increased the authorization for stock repurchase
over the next four years by 20 million shares in addition to those already
acquired at that time.
The Company's objective is to pay approximately 30% of current year earnings
as dividends and to retain sufficient capital to provide for future investment
opportunities in order to double sales and earnings per share every 5 to 6
years. The Company's dividend payments in 1995 exceeded current year earnings
and marked 41 consecutive years of increased dividends paid per share.
In 1995, the Company invested $151.5 million in property, plant, and
equipment to expand capacity, improve productivity, and tool new products.
Investments continue to be made in new equipment throughout the Company to
support productivity improvements and cost reduction programs. Tooling was
purchased for a wide variety of new products and to add capacity for existing
products. For 1996, another record investment has been budgeted, including the
Company's recently announced realignment plans and the implementation of a
common, integrated, global management information system.
Working capital, excluding cash and cash equivalents and marketable
securities, decreased $94.3 million in 1995. The net change reflects a
decrease in inventories, increased notes payable due to share repurchases, and
an increase in accrued liabilities, which were partially offset by an increase
in receivables and other current assets.
OTHER MATTERS
Business Development Activities
In March 1995, the Company acquired Injectaplastic S.A., a leading manufacturer
and marketer of plastic housewares, seasonal product, and bath accessories in
France. In April 1995, the Company acquired PAR-REC Holdings, Inc., a Canadian
manufacturer of commercial playground equipment. In September 1995, the
Company acquired Decor Concepts, Inc., better known as Omni, an innovative
leader in the design and manufacture of contained soft play systems. In
November 1995, the Company acquired a majority ownership position in
Dom-Plast S.A., the leading manufacturer and marketer of plastic housewares in
Poland, and made a public tender for the remaining shares. These acquisitions
were funded with cash, stock or a combination thereof, and accounted for as
purchases.
In January 1995, the Company formed Royal Rubbermaid Structures Ltd., a joint
venture with Royal Plastics Group Limited of Canada, for the manufacture and
marketing of modular plastic components and kits for small structures, such as
storage buildings and sheds. Each partner owns 50% of the joint venture,
accounted for by the equity method.
The business development activities described above had no material effect on
the 1995 financial statements.
ENVIRONMENTAL PROGRAM
The Company is subject to various laws and regulations concerning environmental
matters and employee safety and health in the United States and other
countries. The Occupational Safety and Health Administration, the U.S.
Environmental Protection Agency, and other federal agencies, have authority to
promulgate regulations that have an impact on the Company's operations. Many
state and local governments also have adopted environmental and employee safety
and health laws and regulations. Federal and state
40
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
authorities may seek fines and penalties for violation of these laws and
regulations. As part of its continuing environmental program, the Company has
been able to comply with regulations and requirements of state and federal
agencies without any materially adverse effect on its business.
The Company is committed to a long-term environmental protection program which
is managed by the Company's environmental council. The council meets regularly
and assesses the impact of environmental laws and regulations on the Company's
operations. In addition, the Company uses outside firms to perform regular
environmental audits of its facilities that have, to date, revealed no
significant environmental problems.
ACCOUNTING PRONOUNCEMENTS
In 1995, the Company adopted the provisions of FAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
Since the Company had previously been accounting for impairments substantially
in accordance with Statement No.121, there was no material effect on the
consolidated financial statements as a result of the adoption.
On October 23, 1995, the Financial Accounting Standards Board issued FAS No.
123, "Accounting for Stock-Based Compensation", which is effective for
financial statements for fiscal years beginning after December 15, 1995.
Statement No.123 provides a fair value method of accounting for stock-based
compensation arrangements rather than the intrinsic value based method
contained in APB Opinion No. 25. However, the Statement does not require an
entity to adopt the new fair value based method for purposes of preparing its
basic financial statements. Entities that retain the APB Opinion No. 25 method
of accounting will be required to display in the footnotes pro forma net income
and earnings per share information as if the fair value based method had been
adopted. The Company does not intend to adopt the fair value method provided in
Statement No.123, therefore this standard will not have a material effect on
the consolidated financial statements of the Company.
41
<PAGE> 14
[ Rubbermaid logo ]
11-YEAR FINANCIAL SUMMARY
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $2,344,170 $2,169,354 $1,960,207 $1,805,332
Cost of sales 1,673,232 1,465,586 1,285,949 1,200,651
Selling, general, and administrative expenses 402,586 347,915 328,741 310,410
Net earnings 59,772(a) 228,126 211,413 184,207/164,095(b)
=================================================================================================================
Per Common Share $ .38(a) $ 1.42 $ 1.32 $1.15/1.02(b)
- -----------------------------------------------------------------------------------------------------------------
Percent of net sales 2.5% 10.5% 10.8% 10.2%/9.1%(b)
- -----------------------------------------------------------------------------------------------------------------
Return on average shareholders' equity 4.9% 18.9% 20.0% 19.5%/17.5%(b)
FINANCIAL POSITION
Current assets $ 851,207 $926,666 $829,744 $699,650
Property, plant, and equipment, net 626,637 607,628 572,136 517,096
Intangible and other assets, net 213,684 174,886 111,244 109,823
- -----------------------------------------------------------------------------------------------------------------
Total assets $1,691,528 $1,709,180 $1,513,124 $1,326,569
=================================================================================================================
Current liabilities $ 414,732 $ 295,597 $ 259,314 $ 223,246
Other deferred liabilities 135,244 116,181 103,914 95,395
Long-term debt 6,179 11,576 19,414 20,279
Shareholders' equity 1,135,373 1,285,826 1,130,482 987,649
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,691,528 $1,709,180 $1,513,124 $1,326,569
=================================================================================================================
Long-term debt as a percent of capitalization 1% 1% 2% 3%
- -----------------------------------------------------------------------------------------------------------------
Working capital $ 436,475 $ 631,069 $ 570,430 $ 476,404
- -----------------------------------------------------------------------------------------------------------------
Current ratio 2.05 3.13 3.20 3.13
OTHER DATA
Average Common Shares outstanding (000) 158,766 160,893 160,318 160,207
- -----------------------------------------------------------------------------------------------------------------
Cash dividends paid $ 81,731 $ 74,425 $ 64,938 $ 56,477
- -----------------------------------------------------------------------------------------------------------------
Cash dividends paid per Common Share $ .515 $ .4625 $ .405 $ .3525
- -----------------------------------------------------------------------------------------------------------------
Shareholders' equity per Common Share $ 7.27 $ 8.00 $ 7.05 $ 6.16
- -----------------------------------------------------------------------------------------------------------------
Stock price range - NYSE $ 34-25 $ 35-24 $ 37-28 $ 37-27
- -----------------------------------------------------------------------------------------------------------------
Capital expenditures $ 151,528 $ 118,000 $ 141,697 $ 134,528
- -----------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 104,158 $ 93,724 $ 85,415 $ 73,836
- -----------------------------------------------------------------------------------------------------------------
Number of shareholders at year end 32,439 30,889 22,508 20,255
- -----------------------------------------------------------------------------------------------------------------
Average number of associates 14,054 12,939 11,978 11,296
- -----------------------------------------------------------------------------------------------------------------
<FN>
(a) Included in 1995 is a pretax realignment charge of $158 million ($98.7
million after tax, or $0.62 per Common Share).
(b) Results before/after the cumulative effect of changing the method of
accounting for postretirement benefits other than pensions.
</TABLE>
42
<PAGE> 15
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,667,305 $1,534,013 $1,452,365 $1,291,584 $1,096,055 $864,721 $747,858
1,102,685 1,014,526 967,563 886,850 727,927 554,421 488,169
307,780 286,647 268,148 221,497 199,145 166,954 140,203
162,650 143,520 124,984 106,858 90,723 75,004 62,288
======================================================================================================
$ 1.02 $ .90 $ .78 $ .67 $ .57 $ .47 $ .40
- ------------------------------------------------------------------------------------------------------
9.8% 9.4% 8.6% 8.3% 8.3% 8.7% 8.3%
- ------------------------------------------------------------------------------------------------------
19.7% 20.2% 20.6% 20.6% 20.8% 20.5% 20.0%
$ 663,999 $ 602,697 $ 567,307 $ 452,639 $ 418,563 $332,655 $309,336
461,375 405,520 379,107 347,677 310,017 248,224 210,929
119,157 106,033 38,591 42,389 45,748 45,780 13,041
- ------------------------------------------------------------------------------------------------------
$1,244,531 $1,114,250 $ 985,005 $ 842,705 $ 774,328 $626,659 $533,306
======================================================================================================
$ 245,500 $ 235,300 $ 215,121 $ 197,431 $ 209,771 $156,456 $133,116
85,479 71,555 67,114 47,471 47,585 40,013 28,713
27,812 39,191 50,294 39,023 40,042 35,668 34,071
885,740 768,204 652,476 558,780 476,930 394,522 337,406
- ------------------------------------------------------------------------------------------------------
$1,244,531 $1,114,250 $ 985,005 $ 842,705 $ 774,328 $626,659 $533,306
======================================================================================================
4% 5% 8% 7% 8% 9% 10%
- ------------------------------------------------------------------------------------------------------
$ 418,499 $ 367,397 $ 352,186 $ 255,208 $ 208,792 $176,199 $176,220
- ------------------------------------------------------------------------------------------------------
2.70 2.56 2.64 2.29 2.00 2.13 2.32
160,126 159,688 159,250 158,928 158,468 158,064 157,588
- ------------------------------------------------------------------------------------------------------
$ 49,643 $ 42,621 $ 35,975 $ 29,520 $ 24,581 $ 19,771 $ 15,907
- ------------------------------------------------------------------------------------------------------
$ .31 $ .27 $ .23 $ .19 $ .16 $ .13 $ .113
- ------------------------------------------------------------------------------------------------------
$ 5.53 $ 4.80 $ 4.10 $ 3.52 $ 3.01 $ 2.50 $ 2.15
- ------------------------------------------------------------------------------------------------------
$ 38-19 $ 23-16 $ 19-13 $ 14-11 $ 18-10 $ 14-8 $ 9-5
- ------------------------------------------------------------------------------------------------------
$ 122,513 $ 103,720 $ 89,787 $ 87,333 $ 104,429 $ 71,587 $ 71,665
- ------------------------------------------------------------------------------------------------------
$ 66,686 $ 58,586 $ 65,866 $ 50,173 $ 50,032 $ 35,455 $ 32,515
- ------------------------------------------------------------------------------------------------------
15,429 13,305 11,225 10,482 10,104 8,379 6,332
- ------------------------------------------------------------------------------------------------------
9,754 9,304 9,098 8,643 7,512 6,509 5,934
- ------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 1
EXHIBIT 21
----------
SUBSIDIARIES OF REGISTRANT*
---------------------------
<TABLE>
<CAPTION>
STATE OR
JURISDICTION OF PERCENT OF
NAME** INCORPORATION OWNERSHIP
------ ------------- ---------
<S> <C> <C>
Rubbermaid Commercial Products Inc. Delaware 100%
The Little Tikes Company Ohio 100%
Rubbermaid Canada Inc. Ontario, Canada 100%
Rubbermaid Office Products Inc. Delaware 100%
Rubbermaid Specialty Products Inc. Delaware 100%
<FN>
* All of the listed subsidiaries are included in Registrant's
consolidated financial statements.
** All subsidiaries conduct their businesses under the names shown.
</TABLE>
<PAGE> 1
EXHIBIT 23
[Letter Head]
The Board of Directors
Rubbermaid Incorporated
We consent to incorporation by reference in the registration statements (File
Nos. 33-63420, 33-56105, 33-57091, 33-57093, 33-57097 and 33-61817) on Form
S-8, and in the registration statements (File Nos. 33-54799 and 33-00471) on
Form S-3 of Rubbermaid Incorporated of our report dated February 2, 1996,
relating to the consolidated balance sheets of Rubbermaid Incorporated and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of earnings, cash flows, and shareholders' equity for each of the
years in the three year period ended December 31, 1995, which report appears in
the December 31, 1995, annual report on Form 10-K of Rubbermaid Incorporated.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Cleveland, Ohio
March 13, 1996
<PAGE> 1
Exhibit 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that each of the undersigned Directors of
Rubbermaid Incorporated (the "Registrant"), a corporation organized and
existing under the laws of the State of Ohio, hereby constitute and appoint
Wolfgang R. Schmitt, George C. Weigand and James A. Morgan, and each of them a
true and lawful attorney-in-fact in their name, place and stead with full power
of substitution, to sign, in their name as a Director of the Registrant, the
Registrant's Form 10-K Report for the fiscal year ended December 31, 1995,
which will be filed with the Securities and Exchange Commission, Washington,
D.C., and any and all amendments thereto.
<TABLE>
<S> <C>
/s/ Tom H. Barrett, Director /s/ Robert M. Gerrity
- ---------------------------- ----------------------------
Tom H. Barrett, Director Robert M. Gerrity, Director
Date: February 29, 1996 Date: February 29, 1996
--------------------- ---------------------
/s/ Charles A. Carroll /s/ Karen N. Horn
- ---------------------------- ----------------------------
Charles A. Carroll, Director Karen N. Horn, Director
Date: February 29, 1996 Date: February 29, 1996
--------------------- ---------------------
/s/ Paul G. Schloemer /s/ William D. Marohn
- ---------------------------- ----------------------------
Paul G. Schloemer, Director William D. Marohn, Director
Date: February 29, 1996 Date: February 29, 1996
--------------------- ---------------------
/s/ Robert O. Ebert /s/ Steven A. Minter
- ---------------------------- ----------------------------
Robert O. Ebert, Director Steven A. Minter, Director
Date: February 29, 1996 Date: February 29, 1996
--------------------- ---------------------
/s/ Stanley C. Gault /s/ Jan Nicholson
- ---------------------------- ----------------------------
Stanley C. Gault, Director Jan Nicholson, Director
Date: February 29, 1996 Date: February 29, 1996
--------------------- ---------------------
</TABLE>
/s/ Gordon R. Sullivan
----------------------------
Gordon R. Sullivan, Director
Date: February 29, 1996
----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AS OF DECEMBER 31,1995 AND
1994, AND FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 50,969
<SECURITIES> 0
<RECEIVABLES> 433,829
<ALLOWANCES> 10,467
<INVENTORY> 251,753
<CURRENT-ASSETS> 851,207
<PP&E> 1,263,034
<DEPRECIATION> 636,397
<TOTAL-ASSETS> 1,691,528
<CURRENT-LIABILITIES> 414,732
<BONDS> 6,179
<COMMON> 162,677
0
0
<OTHER-SE> 972,696
<TOTAL-LIABILITY-AND-EQUITY> 1,691,528
<SALES> 2,344,170
<TOTAL-REVENUES> 2,344,170
<CGS> 1,673,232
<TOTAL-COSTS> 2,233,818
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,682
<INCOME-PRETAX> 95,635
<INCOME-TAX> 35,863
<INCOME-CONTINUING> 59,772
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,772
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
