<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, 1997
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
------
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
------------
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, 1998 -- 149,800,356.
Aggregate market value of such shares held by non-affiliates of Registrant as of
that date -- $3,795,485,956.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement for the Annual Meeting of Shareholders
on April 28, 1998 -- Part III
Consolidated financial statements and other data from Registrant's 1997 Annual
Report to Shareholders -- Parts I and II
<PAGE> 2
PART I
------
ITEM 1. BUSINESS
- ----------------------
General
-------
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 and sale of primarily plastic products for
resale in the consumer, commercial, industrial, institutional, office,
specialty, agricultural and contract markets. The items produced and marketed by
Registrant are principally in the home, juvenile and commercial products
categories; and include such product lines as: housewares; hardware; storage and
organizational products; seasonal items; decorative coverings; leisure and
recreational products; infant furnishings; children's toys and products;
commercial and industrial maintenance products; home health care products;
sanitary maintenance items; 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, catalog showrooms, home supply stores, office supply
outlets, agricultural supply stores and distributors serving institutional and
industrial markets.
Registrant's basic strategy is to 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. In conjunction with available opportunities for
global growth, the Registrant has set a growth objective to double sales and
earnings per share 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, alliances, 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, substantial
improvement in productivity has been achieved by company associates. 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.
During the fourth quarter of 1995, the Registrant announced a
two-year strategic realignment program designed to reduce costs, streamline
manufacturing and distribution operations, and accelerate growth. This plan
included the cost of exiting facilities, asset write-offs primarily due to
product realignments, and employee termination costs associated with a reduction
in the total number of associates. The items and product variations that were
eliminated represented approximately five percent of sales in 1995. Registrant
included in its 1995 Consolidated Statement of Earnings a charge of $158.0
million for costs associated with this program. These charges
1
<PAGE> 3
reduced after-tax earnings by $98.7 million. Approximately $129.0 million
represented non-cash costs, while the remaining $29.0 million of costs was
associated with employee terminations and certain exit-related costs. During the
second quarter of 1997, the Registrant revised the estimate of costs to complete
the program and included an additional $16.0 million non-cash charge ($9.9
million after-tax), or $0.07 per Common Share.
Concurrent with the 1995 realignment announcement, Registrant
also implemented a strategic initiative to rebalance its long-term capital
structure. During 1996, the Registrant repurchased $185.5 million of Common
Shares and completed a significant acquisition for cash, which enabled the
achievement of a prudent amount of leverage and lowered the Registrant's overall
cost of capital. As part of this capital structure initiative, the Registrant in
1996 entered the commercial paper market for the first time and filed a Shelf
Registration for up to $400.0 million of senior unsecured debt securities, of
which the Registrant subsequently issued $150.0 million of senior notes with a
maturity of 2006 and a coupon rate of 6.6%.
As of December 31, 1997, the two year realignment program was
substantially completed. Registrant has exited or initiated closure of all nine
locations slated for closure in the plan, completed the associate reductions,
and achieved the estimated annual $50.0 million of savings anticipated in the
1995 realignment plan. The realignment actions have led to improved customer
service, lower costs and reduced complexity in the core businesses.
In January 1998, the Registrant announced a major
restructuring plan designed to expand the Company's global market leadership and
accelerate quality growth. The plan includes centralized global procurement and
consolidating manufacturing and distribution worldwide to more fully realize
economies of scale. Shared utilization of assets to make and distribute products
will support efficient customer logistics and service, allowing for the
elimination of redundant, inefficient and excess capacity, which, in turn,
should further enhance profitability. To enhance core unit volume growth, the
Registrant plans to fund increased expenditures in consumer advertising,
category management and product development.
The specifics of the cost breakdown will be available later in
1998; however, it is expected that the pretax restructuring charge could reach
at least $200 million. This charge, incurred over a two year period, would
include cash outlays for severance, removal of equipment, and other actions.
Other charges related to consolidation or relocation of facilities will
primarily be recorded in 1998. North American, European and Asian operations
will all be affected by the restructuring plan.
Business Development Activities
-------------------------------
Registrant's acquisition strategy is focused on companies that
tend to fit one of three broad criteria: (1) provide a base for a new product
category offering significant growth opportunities; (2) provide an extension of
an existing core business; or (3) 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.
During the last five years, the Registrant exited or divested
products and businesses which had $437 million in annualized business revenues.
Registrant determined that the capital
2
<PAGE> 4
invested in those businesses could be redeployed into projects which would
provide greater shareholder returns. During the same period, the Registrant
acquired businesses which contributed net sales of $530 million during their
first 12-months of consolidation.
Divestitures
------------
In 1994, Registrant sold its 40-percent interest in the Curver
Rubbermaid joint venture to DSM, the Dutch chemical group, who held the
remaining 60-percent interest. Also in 1994, Registrant divested its casual
outdoor resin furniture business and the Davson Division of Rubbermaid Office
Products Inc.
During 1995 and 1996, Registrant divested or discontinued more
than 45% of its items and product stock-keeping units (SKUs) which had
contributed approximately 5% to net sales in the preceding year.
During 1997, Registrant divested its Office Products business
to Newell Co. in a cash transaction. The transaction included the sale of the
worldwide manufacturing and distribution facilities, related equipment, and
inventory.
Acquisitions
------------
In 1994, the Registrant acquired Glenwood Systems Pty. Ltd., a
leading marketer and designer of commercial play systems in Australia, and known
as Ausplay, expanding the Company's product lines and international markets for
commercial playground equipment. In 1995, further expansion was achieved with
the acquisition of Par-Rec Holdings, Inc., a leading manufacturer of similar
play equipment in Canada. Decor Concepts, Inc., acquired in 1995 and known as
Omni, makes contained-play systems for commercial uses, such as in restaurants
and indoor playgrounds, and has also expanded the Registrant's lines of
commercial play equipment. Par-Rec and Omni have been integrated with
Registrant's Commercial Play Systems' business.
Empire Brushes, Inc., a manufacturer and marketer of mops,
brooms, brushes and other cleaning products for home and commercial use, was
acquired in 1994 and its products have been integrated with Registrant's
existing cleaning products lines.
Also acquired in 1994 was Carex, which manufactures and sells
bath safety, mobility, daily living and personal care aids and accessories for
the home health care market. This business has been integrated with Registrant's
Commercial Products business.
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% to 51%.
Royal Rubbermaid Structures Ltd., a joint venture of the
Registrant and Royal Plastics Group Limited of Canada, was formed early in 1995.
This venture manufactured and marketed modular, plastic components and kits for
small structures. Each partner owned 50% of the joint venture. Registrant sold
its partnership interest to Royal Plastics Group Limited of Canada in 1996. The
Registrant continues to manufacture and market its own line of consumer
snap-together storage sheds.
3
<PAGE> 5
In 1995, Injectaplastic S.A., a plastics housewares
manufacturer and marketer in France was acquired. Injectaplastic re-established
the Registrant in the European marketplace for housewares and seasonal product
lines following the 1994 dissolution of the Curver Rubbermaid joint venture.
Also in 1995, a majority interest in Dom-Plast S.A., a leading manufacturer and
marketer of plastic housewares products in Poland, was acquired.
During 1996, Registrant acquired Graco Children's Products
Inc. (Graco) a leading manufacturer of strollers, stationary entertainers and
walkers, portable playards, high chairs and other infant and toddler products.
Graco's product lines provide a strategic, cross-marketing complement and
addition to Registrant's Little Tikes toy lines.
In 1997, the first products from the Registrant's long-term,
global alliance with Amway Corporation to jointly develop and market an
exclusive, co-branded line of distinctive products, was launched in Japan, with
further geographic expansions in Europe and North America taking place by
year-end 1997. Additional products and geographic market expansion are
contemplated for introduction throughout 1998.
Subsequent to December 31, 1997, the Registrant completed the
acquisition of Curver Consumer Products, the European market leader in plastic
home products. As previously noted, Registrant in 1994 had sold its minority
interest in the Curver Rubbermaid joint venture, which had been formed in 1990
when Registrant's European home products business and the Curver home products
group were combined.
Raw Materials
-------------
The principal raw materials used in the manufacture of
Registrant's products are various plastic resins (which are derivatives of
petroleum or natural gas liquids) and color concentrates. The Registrant also
utilizes various metals (such as steel and aluminum) and fabric in certain
product lines. 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 1994, resin costs remained relatively stable.
However, since 1994, an unprecedented volatility in plastic resin costs has been
experienced, with rapid price increases through 1995, followed by a drop through
mid-1996, another rapid increase through the end of 1996, reaching a market peak
at mid-year 1997. In the second half of 1997, resin costs began to decline.
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, 1996 and 1997. 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 trademarks RUBBERMAID, LITTLE TIKES, GRACO and CURVER have become of
value in the identification and acceptance of its products. In addition,
Registrant has many well-known brands such as BLUE ICE Brand (ice substitute),
BRUTE (maintenance products), CON-TACT Brand (pressure sensitive decorative
coverings), COZY COUPE (ride-on car), PACK'N PLAY (playard), ROUGHNECK (tool
boxes and storage containers), and SERVIN' SAVER (containers) that compete in
domestic and international markets.
4
<PAGE> 6
Seasonality
-----------
Historically, the year-end holiday gift-giving season records
the highest sales volume for the toy industry; however the Registrant has spring
and summer outdoor product lines which have served to more evenly balance annual
shipments. Certain of the Registrant's insulated products and outdoor storage
sheds have higher sales in the first six months of the year. No material portion
of the 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 as part of normal
marketing activities.
Customers
---------
Sales are made to a broad range of customers, one of which
accounted for 15.5%, 13.9% and 14.5% of net sales in 1997, 1996 and 1995,
respectively. Sales to a second customer amounted to 10.1% of net sales in 1997.
Due in part to Registrant's studies that note high loyalty among consumers to
Registrant's brand names, Registrant does not believe that the loss of any one
customer would have a materially adverse effect on its long-term business.
Backlog
-------
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
-----------
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 $27.8 million, $29.5 million
and $29.0 million during 1997, 1996 and 1995, respectively, on research and
development activities related to product, process and materials development,
and mold design. These costs are charged to operations as incurred.
5
<PAGE> 7
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
page 31 of the 1997 Annual Report to Shareholders, which is contained in Exhibit
13 hereof, concerning further information regarding Registrant's Environmental
Program.
Registrant 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 Registrant's
operations. Many state and local governments also have adopted environmental and
employee safety and health laws and regulations. Federal and state authorities
may seek fines and penalties for violation of these laws and regulations. As
part of its continuing environmental program, Registrant has been able to comply
with regulations and requirements of state and federal agencies without any
materially adverse effect on its business.
Registrant is committed to a long-term environmental
protection program which is managed by the Registrant's environmental council.
The council meets regularly and assesses the impact of environmental laws and
regulations on the Registrant's operations. In addition, Registrant uses outside
firms to perform regular environmental audits of its facilities that have, to
date, revealed no significant environmental problems.
Employees
---------
The average number of persons employed by Registrant and its
subsidiaries during 1997 was 12,618.
Foreign Operations
------------------
Reference is made to page 27 of the 1997 Annual Report to
Shareholders, which is contained in Exhibit 13 hereof, for information
concerning Registrant's operations in different geographical areas. Revenues
from outside U.S. ("OUS") customers, including OUS net sales and exports from
U.S. operations, represented 19.5%, 18.9% and 18.0% of total net sales in 1997,
1996 and 1995, respectively.
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. In markets where sufficient contract
supply capabilities exist, such supply contract arrangements may be utilized. In
markets where it is deemed appropriate to gain immediate access to manufacturing
facilities or distribution, Registrant may make selective acquisitions.
Licensing arrangements are an alternative that may be 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, the Registrant's products
are distributed worldwide.
6
<PAGE> 8
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 of this report, the Registrant's
Annual Report or made by management of the Registrant, 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, but
not limited to, changes in: the competitive environment; the condition of the
industry and economy, including the effects of weather, consumer and customer
demand; the success of new product development; the cost of raw materials, which
may not be recovered through selling prices; the rate of growth in selling,
general and administrative expenses due to Registrant's business expansion;
working capital requirements; changes in interest rates; the under-utilization
of Registrant's production facilities; employee productivity; international
factors, including currency exchange rates, economic conditions and difficulties
or delays in Registrant's business expansion outside the United States; or
difficulties or delays in the implementation of the Registrant's 1998
restructuring program, including changes in manufacturing, distribution and
procurement, the closing of facilities without undue disruption and achieving
estimated reductions in employees without interruption to workflow.
ITEM 2. PROPERTIES
- ------------------------
Registrant and its subsidiaries have manufacturing and/or
warehousing locations in 12 states and 13 foreign countries.
Major plant and warehouse locations of Registrant are as
follows:
Home Products Division - Wooster and Akron, Ohio;
Phoenix, Arizona; Centerville, Iowa; Winfield,
Kansas; Greenville, North Carolina; Cleburne and
Greenville, Texas; Mississauga, Ontario, Canada;
Montreal, Quebec, Canada (leased) and Calgary,
Alberta, Canada (leased); Mexico City, Mexico
The Little Tikes Company - Hudson and Sebring, Ohio;
City of Industry, California (leased); Shippensburg,
Pennsylvania
Rubbermaid Commercial Products Inc. - Winchester,
Virginia; Phoenix, Arizona (leased); Farmington,
Missouri; Cleveland, Tennessee; Nuevo Leon, Mexico
Graco Children's Products Inc. - Elverson,
Pennsylvania; Hesperia, California; Greer, South
Carolina
7
<PAGE> 9
Rubbermaid Europe S.A. - Brussels, Belgium; Amiens
and Oyonnax, France; Slupsk, Poland; Dublin, Ireland;
Differdange, Luxembourg; Debrecen, Hungary; Brunssum,
The Netherlands; Zaragoza, Spain; Corby, United
Kingdom; Dreieich, Germany
Rubbermaid Asia Pacific - Toyama, Japan
Two domestic facilities are subject to security interests
relating to 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
- -------------------------------
In September 1997, an administrative law judge of the Federal
Trade Commission ("F.T.C.") ruled that a major customer of the Registrant
illegally pressured manufacturers not to sell toys to warehouse clubs. That
decision is being appealed. Subsequent to the F.T.C. decision, numerous class
action suits seeking damages on behalf of consumers have been filed against the
customer and certain manufacturers, including the Registrant, which was not
named as a defendant in the F.T.C. suit, nor were any other manufacturers. The
Registrant is of the opinion, supported by legal counsel, that it has not
violated any law and intends to contest any such class action suits. Management
believes the outcome of this matter will not have a material adverse effect on
the financial position or overall trends in the results of operations of the
Registrant.
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.
8
<PAGE> 10
EXECUTIVE OFFICERS OF REGISTRANT
--------------------------------
<TABLE>
<CAPTION>
Employed By
-----------
Registrant
----------
Name Age Since Positions and Offices Held
---- --- ----- --------------------------
<S> <C> <C> <C>
Wolfgang R. Schmitt 54 1966 Chairman of the Board and
Chief Executive Officer
Mr. Schmitt has been Chairman since September 1993 and
Chief Executive Officer since November 1992. From May
1991, he was President and Chief Operating Officer,
Executive Vice President (1987-1991) and President of
the Home Products Division (1984-1990).
Charles A. Carroll 48 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
Inc.
Leavitt B. Ahrens, Jr. 54 1996 Senior Vice President,
International
Mr. Ahrens joined Registrant in April 1996 as Senior
Vice President, International. He was previously with
VF Corporation from 1985 to 1996, where he served most
recently as President of Asia-Pacific and previously as
President of Europe. His career in branded consumer
products began in 1970 and has included seventeen years
of overseas residence.
Lucius W. Hoffa, Jr. 54 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.
</TABLE>
9
<PAGE> 11
EXECUTIVE OFFICERS OF REGISTRANT
--------------------------------
<TABLE>
<CAPTION>
Employed By
-----------
Registrant
----------
Name Age Since Positions and Offices Held
---- --- ----- --------------------------
<S> <C> <C> <C>
James A. Morgan 62 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.
Leon E. Salomon 61 1996 Senior Vice President,
Procurement
Mr. Salomon joined Registrant in May 1996, as Corporate
Vice President, Purchasing and Logistics. He was
appointed to his current position, Senior Vice
President, Procurement, in January 1998. Previously and
from 1994, he commanded the U.S. Army Material Command
and prior thereto held various assignments as Deputy
Chief of Staff for Logistics, Department of the Army;
Deputy Commanding General for Combined Arms Support, U.
S. Army Training and Doctrine Command; and Commanding
General, U.S. Army Combined Arms Support Command and
also Fort Lee, Virginia.
George C. Weigand 46 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.
</TABLE>
10
<PAGE> 12
EXECUTIVE OFFICERS OF REGISTRANT
--------------------------------
<TABLE>
<CAPTION>
Employed By
-----------
Registrant
----------
Name Age Since Positions and Offices Held
---- --- ----- --------------------------
<S> <C> <C> <C>
John W. Dean III 42 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.
Cal C. Eller 49 1996 President and Chief Operating Officer,
The Little Tikes Company
Mr. Eller was appointed President and Chief Operating
Officer of The Little Tikes Company in August 1997
having previously served from August 1996, as President
and General Manager of Rubbermaid Specialty Products
Inc. He was previously with Venture Stores from
1979-1996 where he served as Executive Vice President
of Merchandising from 1992-1996 and as Senior Vice
President/General Merchandising Manager from 1985-1992.
David T. Gibbons 54 1995 President and General Manager,
Rubbermaid Europe S.A.
Mr. Gibbons was appointed President and General
Manager, Rubbermaid Europe, S.A. in August 1997 having
previously served from 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 and from 1991-1994,
General Manager of the Ceramic Material Business of the
3M Company, which he joined in 1968.
</TABLE>
11
<PAGE> 13
EXECUTIVE OFFICERS OF REGISTRANT
--------------------------------
<TABLE>
<CAPTION>
Employed By
-----------
Registrant
----------
Name Age Since Positions and Offices Held
---- --- ----- --------------------------
<S> <C> <C> <C>
Gary F. Mattison 57 1967 President and General Manager,
Global Transformation Team
Mr. Mattison was appointed President and General
Manager, Global Transformation Team in 1996. He
previously served as President and General Manager of
Rubbermaid Specialty Products Inc. from June 1993 and
from 1979, as Vice President, Manufacturing for the
Home Products Division.
Michael E. Naylor 59 1992 President,
Global Manufacturing and Distribution Operations
Mr. Naylor was appointed President, Global Manufacturing
and Distribution Operations in January 1998. Previously
from 1994, he served as Senior Vice President,
Operations and prior thereto from 1992, as Senior Vice
President, Technology and Environment. He was
previously with General Motors Corporation for 25
years.
Larry B. Porcellato 39 1988 President and Chief Operating Officer,
Home Products Division
Mr. Porcellato was appointed President and Chief
Operating Officer for Home Products Division in August
1997. He previously served from 1994 as President and
General Manager of Rubbermaid Europe S.A. and prior
thereto as President and General Manager of Rubbermaid
Canada Inc. and Vice President of Marketing, Home
Products Division.
</TABLE>
12
<PAGE> 14
EXECUTIVE OFFICERS OF REGISTRANT
--------------------------------
<TABLE>
<CAPTION>
Employed By
-----------
Registrant
----------
Name Age Since Positions and Offices Held
---- --- ----- --------------------------
<S> <C> <C> <C>
Joseph M. Ramos 56 1992 President and Chief Operating Officer,
Rubbermaid Commercial Products Inc.
Mr. Ramos was appointed President and Chief Operating
Officer in August 1997. He 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.
Derial H. Sanders 55 1996 President and Chief Operating Officer,
Graco Children's Products Inc.
Mr. Sanders was appointed President and Chief Operating
Officer in August 1997. He became President and General
Manager of Graco Children's Products Inc. upon its
acquisition by Registrant in 1996. He previously served
from 1980 to 1996 as President. Since joining Graco in
1969 as Sales Manager, he has also held the position of
Vice President of Sales and Marketing.
</TABLE>
All executive officers who are officers of Registrant are elected for a one-year
term.
PART II
-------
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, 1998, Registrant had
approximately 26,500 shareholders of record. Reference is made to page 28 of the
1997 Annual Report to Shareholders, which is contained in Exhibit 13 hereof, for
information concerning market prices for and dividends paid on Registrant's
Common Shares during 1997 and 1996, which information is incorporated by
reference herein.
13
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------------
Reference is made to pages 34 and 35 of the 1997 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, 1997 as part
of Registrant's "11-Year 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 28 through 33 of the 1997 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 1997, 1996 and 1995, which information is incorporated
herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------------------------------------------------------------------------
Reference is made to pages 32 through 33 of the 1997 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" which discuss the Registrant's exposure to market risk from changes
in interest rates, foreign exchange rates and market indexed raw material
prices.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------------
Reference is made to pages 16 through 28 of the 1997 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, 1997
and 1996, 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, 1997, together with the independent auditors' report thereon of
KPMG Peat Marwick LLP dated January 30, 1998, 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.
14
<PAGE> 16
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 13, 1998, and is incorporated herein by
reference. Information regarding the executive officers of 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 - Report of Compensation Committee" in Registrant's
proxy statement dated March 13, 1998, 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
of Common Shares" in Registrant's proxy statement dated March 13, 1998, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------------------------------------------------------------
Registrant has no relationships or related transactions
required to be reported by Item 404 of Regulation S-K.
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(h) to this Item 14
constitute each executive compensation plan and
arrangement of Registrant.
15
<PAGE> 17
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) 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.
(4c) Shareholder Rights Agreement between Rubbermaid
Incorporated and The First National Bank of Boston dated
June 25, 1996. Incorporated by reference from Exhibit 4.1
to Form 8-K filed with the Commission on June 26, 1996.
(10a) Rubbermaid Incorporated 1997 Management Incentive Plan.
Attached hereto as Exhibit 10(a).
(10b) Rubbermaid Incorporated Amended and Restated 1989 Stock
Incentive and Option Plan. Incorporated by reference from
Exhibit A to Proxy Statement for April 22, 1997 Annual
Meeting of Shareholders.
(10c) Rubbermaid Incorporated Supplemental Executive Retirement
Plan, as amended. Incorporated by reference from Exhibit
10d to Form 10-K for the year ended December 31, 1993.
(10d) Rubbermaid Incorporated Supplemental Retirement Plan, as
amended through December 23, 1997. Attached hereto as
Exhibit 10(d).
(10e) Change-Of-Control Employment Agreement. Identical
agreements have been entered into with Leavitt B. Ahrens,
Jr., Charles A. Carroll, John W. Dean III, Cal C. Eller,
David T. Gibbons, Lucius W. Hoffa, Jr., Gary F. Mattison,
James A. Morgan, Michael E. Naylor, Larry B. Porcellato,
Joseph M. Ramos, Leon E. Salomon, Derial H. Sanders,
Wolfgang R. Schmitt, and George C. Weigand. Incorporated
by reference from Exhibit 10(e) to Form 10-K for the year
ended December 31, 1996.
(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. Attached
hereto as Exhibit 10(g).
16
<PAGE> 18
(10h) Employment Agreement with Charles A. Carroll. Attached
hereto as Exhibit 10(h).
(13) Consolidated financial statements and other data from
pages 16 to 35 of the 1997 Annual Report to Shareholders.
(21) Subsidiaries of Registrant.
(23) Consent of KPMG Peat Marwick LLP.
(24) Power of Attorney.
(27) Financial Data Schedule.
17
<PAGE> 19
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 25, 1998 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 25, 1998.
/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
Tom H. Barrett Director
Charles A. Carroll Director
Scott S. Cowen Director
Robert O. Ebert Director
Thomas J. Falk Director
Robert M. Gerrity Director
Karen N. Horn Director By: /s/ James A. Morgan
----------------------
William D. Marohn Director James A. Morgan
Attorney-in-Fact
Jan Nicholson Director
Paul G. Schloemer Director
Gordon R. Sullivan Director
18
<PAGE> 1
EXHIBIT 10(a)
-------------
RUBBERMAID INCORPORATED
1997 MANAGEMENT INCENTIVE PLAN
I. PLAN OBJECTIVE
--------------
The 1997 Management Incentive Plan ("Plan") is designed to encourage
and reward participants for acting in ways that increase Rubbermaid's
value to its shareholders--in short, it is designed to help them think,
act and be rewarded like an owner of the Company.
II. PLAN YEAR
---------
The Plan Year will be coincident with the Company's fiscal year.
III. PLAN ADMINISTRATION AND PARTICIPATION
-------------------------------------
The Plan shall be administered by the Compensation and Management
Development Committee of the Board of Directors (the "Committee") which
in conjunction with the Chairman and Chief Executive Officer of the
Company will determine participants in the Plan. The Committee shall
interpret the Plan, set performance goals and make all determinations
and decisions thereunder.
All officers as well as other key employees regularly employed by
Rubbermaid or its subsidiaries are eligible to be selected to
participate in the Plan. Participation in any Plan Year does not
guarantee inclusion in any following year.
The Company has the right to modify or amend this Plan from time to
time, or suspend it or terminate it entirely at any time.
IV. BONUS AND PERFORMANCE GOALS
---------------------------
Annual cash bonus targets will be established for each management
salary band. Payment of the bonus will depend upon the achievement of
performance goals that are linked to the current and long range
performance objectives of the Company.
Performance goals will be established annually from performance
measures selected from the Plan and approved by the Committee. The
bonus can range from 0% to 200% (300% in the case of Corporate Council
and Operating Team participants) of the target bonus, depending upon
how the Company and its various business units perform against
performance goals. Regardless of performance, the amount of bonus which
may be paid to a participant for any Plan Year may not exceed $3
million.
<PAGE> 2
The Performance measures established by the Committee will be based on
one or more of the following: return on net assets, return on capital
employed, economic value added, level of sales, earnings per share,
income before income taxes and cumulative effect of accounting changes,
net income, return on equity, total shareholder return, market
valuation, cash flow and completion of acquisitions. The foregoing
criteria may have any reasonable definitions that the Committee may
specify, which may include or exclude any or all of the following
items: extraordinary, unusual, or non-recurring items; effects of
accounting changes; effects of currency fluctuations; effects of
financing activities (e.g., effect on earnings per share of issuing
convertible debt securities); expenses for restructuring or
productivity initiatives; non-operating items; acquisition expenses
(e.g., pooling of interest); and effects of divestitures. Any such
performance criterion or combination of such criteria may apply to the
participant's award opportunity in its entirety or to any designated
portion or portions of the opportunity, as the Committee may specify.
V. PAYOUT OF AWARDS
----------------
Earned bonus awards will be paid following completion of a Plan Year
(at the end of February following award calculation and approval).
VI. EMPLOYMENT STATUS
-----------------
New Hire, Transfer, Promotion
-----------------------------
A newly hired employee or an employee transferred or promoted during a
Plan Year to a position qualifying for participation in the Plan will
be eligible to receive a pro rata award for the Plan Year. To be
eligible for a bonus for a Plan Year, a participant must be in an
eligible position by November 1 of the Plan Year.
Death, Disability, Retirement
-----------------------------
If a participant's employment is terminated during a Plan Year by
reason of death, disability or retirement (age 55 and 15 years of
service or age 60 regardless of years of service) a pro-rata award will
be calculated. This will be based on the participant's earnings while
employed during the Plan Year, times the target bonus, times the
appropriate performance factor. Payment of the pro-rata bonus will be
as described in Section V, not at date of termination.
Other
-----
A participant whose employment is terminated during a Plan Year for
reason other than retirement, disability, or death has no vested
interest in a bonus award under the Plan. However, the Company reserves
the right to pay some or all of the current year's earned bonus, at its
sole discretion.
A participant who becomes ineligible for Plan participation during a
Plan Year will be eligible for a prorata bonus at the discretion of the
Chief Executive Officer of Rubbermaid Incorporated.
<PAGE> 1
EXHIBIT 10(d)
-------------
THE RUBBERMAID INCORPORATED
SUPPLEMENTAL RETIREMENT PLAN
Reflecting Amendments Through
December 23, 1997
Federal Employer Identification No. 34-0628700
<PAGE> 2
Originally effective as of January 1, 1991 and restated as of January
1, 1995, Rubbermaid Incorporated adopted this Plan known as the Rubbermaid
Incorporated Supplemental Retirement Plan, to provide retirement benefits to
certain management and highly compensated employees to supplement benefits
provided from other retirement or profit sharing plans maintained by Rubbermaid
Incorporated or a subsidiary.
The Plan is not intended to meet the requirements of Sections 401(a)
and 501(a) of the Internal Revenue Code of 1954, as amended by the Employee
Retirement Income Security Act of 1974 nor is the Plan intended to meet other
requirements of such Act.
The provisions of this Plan as revised and restated effective January
1, 1995 shall apply only to persons who are employed by Rubbermaid Incorporated
or an Adopting Employer.
ARTICLE I
---------
DEFINITIONS
-----------
The following words and phrases, when used in this Plan, unless the
context clearly indicates otherwise, shall have the following meanings:
1.1 - Accrual or Employer Accrual
- ---------------------------------
The amount which is computed and credited to a Participant's account
pursuant to Article 3 of this Plan.
1.2 - Actuary
- -------------
An independent, qualified actuary who is a Fellow of the Society of
Actuaries and an enrolled actuary pursuant to the provisions of ERISA,
selected by the Company or a firm of independent actuaries selected by
the Company at least one of whose members is a Fellow of the Society of
Actuaries and an enrolled actuary pursuant to the provisions of ERISA.
1.3 - Adopting Employer
- -----------------------
A Subsidiary of Rubbermaid Incorporated who has adopted this Plan
pursuant to the terms of Article 6.
1.4 - Age
- ---------
A person's actual attained age expressed in years from date of birth.
<PAGE> 3
1.5 - Approved Absence
- ----------------------
Absence of an Associate (including periods of temporary or indefinite
layoff) authorized or approved by the Company as determined in
accordance with the normal practices of the Company as may be applied
at each location, division or Subsidiary of the Company. In the event
the Associate does not return within the period specified, termination
of employment shall be deemed to have occurred on the last day of such
period. The provisions of this Section shall be uniformly applied to
all Participants similarly situated.
1.6 - Associate
- ---------------
The term Associate shall mean any non-union, salaried employee of
Rubbermaid Incorporated or any of its United States Subsidiaries.
1.7 - Beneficiary
- -----------------
The term Beneficiary shall mean such persons described in Section 5.8.
1.8 - Board
- -----------
The present and any succeeding Board of Directors of Rubbermaid
Incorporated.
1.9 - Bonus
- -----------
The amount of annual incentive compensation payable by Rubbermaid
Incorporated or an Adopting Employer under the Rubbermaid Incorporated
Management Incentive Plan ("MIP") (effective January 1, 1997, the
Rubbermaid Incorporated Management Value Plan ("MVP")) maintained by
Rubbermaid Incorporated or an Adopting Employer.
1.10 - Break in Service
- -----------------------
The term Break in Service shall mean any Plan Year during which an
Associate is credited with 500 or fewer Hours of Service.
1.11 - Code
- -----------
The Internal Revenue Code of 1986, as amended from time to time.
1.12 - Committee
- ----------------
The Committee appointed pursuant to Article 7.
<PAGE> 4
1.13 - Company
- --------------
Rubbermaid Incorporated, an Ohio corporation, and any United States
Subsidiary of Rubbermaid Incorporated which is an Adopting Employer and
any organization that is a successor to Rubbermaid Incorporated or is
the result of a merger or consolidation of one or more Adopting
Employers.
1.14 - Change of Control
- ------------------------
A "Change of Control" of Rubbermaid Incorporated shall be deemed to
occur:
a. in the event Article Fifth of Rubbermaid Incorporated
Amended Articles of Incorporation shall become operative,
b. in the event that the Rubbermaid Incorporated Board of
Directors recommends to its shareholders the acceptance of
any tender offer as provided in said Article Fifth,
c. in the event the necessary percentage of shareholders
approves a transaction of the nature described in Article
Sixth of the Rubbermaid Incorporated Amended Articles of
Incorporation, or
d. in the event any person, as defined in said Article Fifth
of the Amended Articles of Incorporation, becomes the
beneficial owner, directly or indirectly, of 20% or more
of the outstanding common shares of Rubbermaid
Incorporated.
1.15 - Effective Date
- ---------------------
January 1, 1995, the date on which the provisions of this Plan were
revised and restated.
1.16 - Eligible Associate
- -------------------------
Any non-union salaried Associate of the Company compensated on the
basis of periodic salary in accordance with the Company's normal
practices, who is receiving remuneration for personal services rendered
to the Company (or who would be receiving such remuneration except for
an Approved Absence) and such Associate is:
a. eligible to participate in the Rubbermaid Incorporated
Management Incentive Plan ("MIP") (effective January 1,
1997, the Rubbermaid Incorporated Management Value Plan
("MVP")) and the Rubbermaid Retirement Plan; or
b. a Highly Compensated Associate and eligible to participate
in the Rubbermaid Retirement Plan; or
c. any other Associate as designated by the Company.
<PAGE> 5
1.17 - Eligible Spouse
- ----------------------
The lawful husband or wife, as the case may be, recognized under the
laws of the state in which a Participant is regularly and continuously
employed by the Company, as of the date specified in the relevant
section of this Plan. The Plan Administrator may rely on the statement
of a Participant concerning the Participant's marital status and all
persons claiming any benefit under the Plan shall be bound by such
reliance.
1.18 - Employer
- ---------------
Any Employer as defined in Section 3(5) of ERISA, which includes
Rubbermaid Incorporated and any Adopting Employer.
1.19 - Employment Commencement Date
- -----------------------------------
The date upon which an Eligible Associate first performs an Hour of
Service for the Company.
1.20 - ERISA
- ------------
Public Law No. 93-406, the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.21 - Fiduciary
- ----------------
Rubbermaid Incorporated (acting through its Board or where applicable,
duly authorized officers), the Plan Administrator, or such other
parties named as Fiduciaries in this Plan, but only with respect to the
specific responsibilities of each.
1.22 - Highly Compensated Associate
- -----------------------------------
Any Associate who during any Plan Year is a highly compensated employee
as defined in Section 414(q) of the Code.
1.23 - Hour of Service
- ----------------------
An Hour of Service shall generally be determined in accordance with
Department of Labor Regulation 2530.200(b)-2. Hours of Service with
respect to any Participant shall be determined using the same rules as
the Rubbermaid Retirement Plan.
1.24 - Participant
------------------
An Eligible Associate who (i) has met all the participation
requirements of this Plan and (ii) has become included in this Plan as
provided in Section 2.1.
<PAGE> 6
1.25 - Plan
- -----------
The Rubbermaid Incorporated Supplemental Retirement Plan, the terms of
which are set forth herein, as it may be amended from time to time.
1.26 - Plan Administrator
- -------------------------
The Plan Administrator shall be the Rubbermaid Incorporated and
effective August 22, 1995 shall be the Benefit Plans Committee of
Rubbermaid Incorporated, or its delegate.
1.27 - Plan Year
- ----------------
The twelve-month period commencing each January I and ending on
December 31.
1.28 - Rubbermaid Incorporated
- ------------------------------
Rubbermaid Incorporated shall mean the Ohio corporation located in
Wooster, Ohio
1.29 - Subsidiary
- -----------------
Any corporation included with a "controlled group of corporations" of
which Rubbermaid Incorporated is a member shall be deemed a Subsidiary.
A controlled group of corporations shall be defined pursuant to Section
1563 of the Code and the Regulations thereunder.
1.30 - Normal Retirement Date
- -----------------------------
The Normal Retirement Date is the first day of the month following the
date upon which a Participant attains the Age of 65. A Participant
shall be vested in all amounts credited to such Participant's account
upon attaining Age 65 notwithstanding any other provision of this Plan.
1.31 - Disability Retirement Date
- ---------------------------------
The date upon which a Participant retires from the employment of the
Company due to Total and Permanent Disability.
1.32 - Retirement Plan
- ----------------------
Retirement Plan shall mean the Rubbermaid Retirement Plan.
1.33 - Total and Permanent Disability
- -------------------------------------
Total and Permanent Disability or Totally and Permanently Disabled
shall mean physical or mental disability or illness which renders the
Participant incapable of performing the duties regularly performed for
the Company when such disability commenced, as determined by
<PAGE> 7
the Plan Administrator upon the basis of evidence submitted to it
within a reasonable time after it so requests. In case of a difference
of opinion between a doctor selected by the Participant and a doctor
selected by the Company as to the existence and extent of the
disability of the Participant, a third doctor shall be appointed by the
other two doctors to examine said Participant and to make a report to
the Plan Administrator with respect to the disability of the
Participant. The report of such doctor shall be accepted by the Plan
Administrator as the basis for its determination of the existence and
extent of disability under the provisions of this Section.
1.34 - Valuation Date
- ---------------------
Each January 31, which is the date on which Participant Accounts shall
be adjusted to reflect accruals and forfeitures for the preceding Plan
Year. Such date shall also be used to credit interest to the
Participant's Account for the 12 month period ending on such date. The
Plan Administrator may select other Valuation Dates (not more
frequently than monthly) as it deems necessary.
1.35 - Year(s) of Service
- -------------------------
A Participant shall be credited with a Year of Service under this Plan
for any "Year of Vesting Service" credited to such Participant under
the Rubbermaid Retirement Plan.
ARTICLE 2
---------
PARTICIPATION
-------------
2.1 - Eligibility
- -----------------
An Associate shall become eligible to participate in the Plan on the
date the Associate becomes an Eligible Associate.
2.2 - Conditions of Participation
- ---------------------------------
Participation in this Plan by an Eligible Associate shall be contingent
upon receipt by the Plan Administrator of such documents and
information as prescribed by the Plan Administrator. Each Associate,
upon becoming a Participant, shall be deemed conclusively, for all
purposes, to have consented to the terms and provisions of this Plan
and shall be bound thereby.
2.3 - Break in Service/Rehire
- -----------------------------
A Participant who terminates employment and is rehired shall
participate in the Plan pursuant to Section 2.1.
<PAGE> 8
ARTICLE 3
---------
ACCRUALS
--------
3.1 - Employer Accruals
- -----------------------
As of the last day of the Plan Year, Rubbermaid Incorporated and each
Adopting Employer shall accrue on their book of account, an amount
which equals the sum of the following amounts for each Participant who
is employed by Rubbermaid Incorporated or an Adopting Employer on the
last day of the Plan Year (June 13, 1997 with respect to a Participant
who was employed by Rubbermaid Office Products Inc. on June 13, 1997
and not employed by Rubbermaid Incorporated or an Adopting Employer
after June 13, 1997 but before December 31, 1997) except for absence
due to Military Duty, Death, Approved Absence or Disability:
a. For each Participant who is a participant in the Executive
Management Plan of the Rubbermaid Incorporated Management
Incentive Plan (effective January 1, 1997, the Rubbermaid
Incorporated Management Value Plan) AND eligible to receive an
"employer regular contribution" under the Retirement Plan, an
amount equal to the greater of:
i. Fifteen percent (15%) of the total of the
Participant's Bonus (determined prior to reduction
under the 1997 Exchange of Compensation for Stock
Options Program) earned for the Plan Year, regardless
of whether such Bonus was deferred in whole or in
part and for a Participant who is a member of
Corporate Council, the value of any regular
restricted stock award (effective January 1, 1997,
performance stock award) for the Plan Year under the
Rubbermaid Incorporated Amended and Restated 1989
Stock Incentive and Option Plan; or
ii. Fifteen percent (15%) of the Participant's
"compensation" (as defined in the Retirement Plan)
for the Plan Year LESS the amount of the "employer
regular contribution" made to the Retirement Plan for
such Participant for the Plan Year.
b. For each Participant who is a participant in the Key
Management Incentive Plan of the Rubbermaid Incorporated
Management Incentive Plan (effective January 1, 1997, the
Rubbermaid Incorporated Management Value Plan) AND eligible to
receive an "employer regular contribution" under the
Retirement Plan, an amount equal to the greater of:
i. Twelve percent (12%) of the Participant's Bonus
(determined prior to reduction under the 1997
Exchange of Compensation for Stock Options Program)
earned for the calendar year, regardless of whether
such Bonus was deferred in whole or in part; or
<PAGE> 9
ii. Fifteen percent (15%) of the Participant's
"compensation" (as defined in the Retirement Plan)
for the Plan Year LESS the amount of the "employer
regular contribution" made to the Retirement Plan for
such Participant for the Plan Year EXCEPT that this
Section 3.1(b)(ii) shall NOT apply for the 1995 Plan
Year to a Participant who was employed by The Little
Tikes Company.
c. For each Participant who is NOT eligible for a contribution
under Sections 3.1(a) or 3.1(b) AND is a eligible to receive
an "employer regular contribution" under the Retirement Plan,
an amount equal to the difference, if any, between the amount
of the "employer regular contribution" the Participant would
receive under the Retirement Plan for the Plan Year if he was
a non-Highly Compensated Associate (based on his total
"compensation" as defined in the Retirement Plan) and the
amount he actually received as an "employer regular
contribution" under the Retirement Plan for the Plan Year.
d. For each Participant who is eligible to receive an "employer
regular contribution" under the Retirement Plan, an amount
equal to the amount the Participant would have received as an
"employer regular contribution" under the Retirement Plan for
the Plan Year if the limitations under Sections 401(a)(17) and
401(a)(4) of the Code were not applied to that Participant.
e. For each Participant designated by the Company, such amount as
determined by the Company in its sole discretion.
If the amount credited to a Participant for the 1997 Plan Year under
this Section 3.1 (except 3.1(e)) PLUS the amount of the "employer
regular contribution" made to the Retirement Plan for such Participant
for the 1997 Plan Year (the "1997 Retirement Plan Allocation") is LESS
than the amount credited to the Participant for the 1996 Plan Year
under this Section 3.1 (except 3.1(e)) PLUS the amount of the "employer
regular contribution" made to the Retirement Plan for the 1996 Plan
Year (the "1996 Total Allocation") then the amount credited to the
Participant for the 1997 Plan Year under this Section 3.1 (except
3.1(e)) shall be an amount equal to the 1996 Total Allocation LESS the
1997 Retirement Plan Allocation. Notwithstanding the above, the amount
credited to a Participant under this Section 3.1 for the 1997 Plan Year
(after application of the preceding sentence) shall be REDUCED by the
amount, if any, elected by the Participant under the 1997 Exchange of
Compensation for Stock Options Program. Participants in the Rubbermaid
Incorporated Executive FUNDED Supplemental Retirement Plan shall not
receive a contribution under this Section 3.1(a), (b) or (c).
3.2 - Participant Accounts
- --------------------------
The Plan Administrator shall establish separate accounts for each
Participant as it deems necessary or appropriate to reflect the
Participants interest in Employer Accruals credited to the Participant
under Section 3.1.
<PAGE> 10
3.3 - Interest on Participant Accounts
- --------------------------------------
a. The rate of interest credited to the Participant accounts
shall be the rate actually earned by the Stable Value Fund
under the Retirement Plan for the 12 month period ending on
the Valuation Date.
b. As of each Valuation Date, each Participant's individual
account, unless otherwise provided herein, is to be adjusted
to reflect for amounts or items directly allocable to such
individual account, including but not limited to amounts
accrued, amounts paid out, amounts forfeited and interest
earned.
3.4 - Costs
- -----------
All normal costs and expenses of administering the Plan are to be paid
by the Company.
ARTICLE 4
---------
VESTING
-------
4.1 - Vesting - Employer Accruals
- ---------------------------------
a. Accruals allocated to the Participant's account under Section
3.3(a)(i) as in effect prior to the January 1, 1995
restatement of the Plan shall be 100% vested.
b. Accruals under Section 3.1(e) shall be vested as of the date
or dates determined by the Company in its sole discretion.
c. Accruals under Section 3.1(a), (b), (c) and (d) shall vest at
the following rate:
<TABLE>
<CAPTION>
YEAR OF VESTING EACH YEAR CUMULATIVE VESTING
SERVICE
<S> <C> <C>
First Year 0% 0%
Second Year 0% 0%
Third Year 20% 20%
Fourth Year 20% 40%
Fifth Year 20% 60%
Sixth Year 20% 80%
Seventh Year
and Thereafter 20% 100%
</TABLE>
d. The nonforfeitable percentage of a Participant's interest in
the Participant's account shall not be reduced as the result
of any direct or indirect amendment to this Article.
<PAGE> 11
4.2 - Years of Service
- ----------------------
A Participant's Years of Service shall be equal to the Years of Service
determined pursuant to Section 1.35 of the Plan.
4.3 - Forfeitures
- -----------------
Any amount credited to a Participant's account which is not vested upon
termination of employment (other than for death or disability) shall be
retained in the Plan in a segregated account in the Participant's name
until forfeited. Such amounts shall be forfeited in the Plan Year in
which the Participant incurs a 1-year Break in Service. However,
effective January 31, 1997, such amounts shall be forfeited upon the
earlier of any distribution to the Participant or the Valuation Date
immediately following termination of employment with the Company.
As of each Valuation Date, forfeitures which occurred during the
preceding 12 month period shall be removed from the books of the
Company.
A Participant's forfeited account balance will be restored if the
Participant is re-employed by the Company prior to incurring five (5)
consecutive 1 Year Breaks in Service.
4.4 - Break in Service/Rehire
- -----------------------------
A Participant who terminates employment for any reason and who is
rehired will have his Years of Service determined in accordance with
Section 1.35.
4.5 - Disability
- ----------------
When it is determined that a Participant is Totally and Permanently
Disabled, the Participant's account shall become 100% vested.
4.6 - Death
- -----------
On the death of a Participant while employed by the Company, the
interest of the Participant in the account shall become 100% vested in
the Beneficiary.
4.7 - Change of Control
- -----------------------
In the event of an imminent or actual Change of Control, a
Participant's account shall become 100% vested in the amount in the
Participant's account.
<PAGE> 12
ARTICLE 5
---------
DISTRIBUTIONS
-------------
5.1 - Amount of Distribution or Payment
- ---------------------------------------
At such time that a Participant has satisfied any of the requirements
of this Article, the Plan Administrator shall commence to make payments
from the Participant's account as provided in this Article 5.
a. The amount which is to be paid to a Participant or a
Beneficiary shall be equal to the amount in the
Participant's account on the Valuation Date coincident
with or subsequent to any of the following events:
i. Separation from service on or after the Normal
Retirement Date;
ii. Separation from service due to Permanent and
Total Disability;
iii. Death while in the employ of the Company;
iv. Change of Control.
b. The amount which is to be paid to a Participant or
Beneficiary due to termination of employment prior to the
Normal Retirement Date for reasons other than disability,
death or a Change of Control, shall not exceed the vested
interest of the Participant in the account on the
Valuation Date coincident with or subsequent to the date
of termination of employment. The non vested amount shall
be forfeited in accordance with the provisions of Article
4.
The account of each Participant which becomes payable under this
Article 5 shall continue to be credited with interest pursuant to
Article 3.
5.2 - Time of Distribution
- --------------------------
Annual distributions shall commence as of the April of the Plan Year
immediately following the earlier of the Plan Year in which the
Participant attains Age 65 or the Plan Year in which the Participant
retires from full time employment (whether or not such employment is
with the Company). A Participant shall notify the Committee in writing
that he has retired from full-time employment.
5.3 - Change of Control
- -----------------------
Unless the Board provides otherwise by their written resolution, the
Plan Administrator shall cause the entire account balance of each
Participant to be paid in one lump sum payment on or before the date of
such Change of Control.
<PAGE> 13
5.4 - Authority to Alter Time or Form of Distribution
- -----------------------------------------------------
The Committee, taking into account the health, financial need and
family obligations of the Participant, may alter the form of payments
or the time at which any vested amount is to be paid, as it in its sole
discretion decides.
5.5 - Normal Form of Benefit Payment
- ------------------------------------
Benefit payments will be made annually in April of each year for a
period of fifteen (15) years, commencing as of the date set forth in
Section 5.2. The annual amounts will be determined by the Plan
Administrator by dividing the account balance on the Valuation Date by
the number of annual payments remaining.
5.6 - Optional Lump Sum Payment
- -------------------------------
Prior to the commencement of any annual benefit payments as set forth
in Section 5.5, a Participant may irrevocably elect to receive a single
lump-sum payment of his entire vested account by notifying the Plan
Administrator in writing at least eighteen (18) months prior to the
month in which the Participant attains Age 65. The lump sum payment
will be paid in the April of the Plan Year following the Plan Year in
which the Participant attains Age 65.
5.7 - Death Distribution Provisions
- -----------------------------------
A Participant who dies before attaining Age 65 or retirement and who is
not receiving distributions from the Plan, shall have their account
balance paid to the designated Beneficiary in the same form as
receivable by the Participant, commencing on the April 1 following the
Participant's Normal Retirement Date.
If a Participant dies while distributions are being made, the
Beneficiary shall receive the balance of the remaining payments in the
same manner and at the same time as the Participant would have received
them if living.
Upon a determination by the Committee that a hardship exists, the
Committee may direct payments to commence within a reasonable period
after the Participant's death and/or be in form other than elected by
the Participant.
5.8 - Designation of Beneficiary
- --------------------------------
A person entitled to designate a Beneficiary shall do so in writing on
a form provided by the Plan Administrator. The Beneficiary designation
may be changed at any time by filing a new form, and the most recent
designation received by the Plan Administrator shall govern. If a
deceased Participant is not survived by a named Beneficiary (or if no
Beneficiary was effectively named), the benefits shall be paid to the
Participant's
<PAGE> 14
surviving spouse or, if there is no surviving spouse, the deceased
Participant's surviving children in equal shares or, if there are no
surviving children, the Participant's estate. If the Beneficiary is
living at the death of the Participant, but the Beneficiary dies prior
to receiving the entire death benefit, the remaining portion (if any)
of such death benefit shall be paid in a single sum to the estate of
such deceased Beneficiary.
5.9 - Location of Participant or Beneficiary Unknown
- ----------------------------------------------------
In the event that all, or any portion, of the distribution payable to a
Participant or a Beneficiary hereunder shall, at the expiration of five
(5) years after it shall become payable, remain unpaid solely by reason
of the inability of the Plan Administrator, after reasonable effort to
ascertain the whereabouts of such Participant or Beneficiary, the
amount so distributable shall be treated as a forfeiture pursuant to
the Plan.
ARTICLE 6
---------
ADOPTING EMPLOYERS
------------------
6.1 - Adoption by Employers
- ---------------------------
Rubbermaid Incorporated and each Subsidiary which is listed in Exhibit
A, as attached hereto, shall be deemed to adopt this Plan with all of
the provisions herein and shall be known as an Adopting Employer as of
the date set forth in Exhibit A. An Employer which becomes a Subsidiary
after the Effective Date may adopt this Plan with the consent of
Rubbermaid Incorporated.
6.2 - Requirements of Adopting Employer
- ---------------------------------------
Each Adopting Employer shall be bound by all decisions of the Plan
Administrator and the Committee. The Committee shall have the sole
authority to make any and all necessary rules or regulations, binding
upon any Adopting Employer and as to all Participants of such Adopting
Employer, to effectuate the purpose of this Article. Each Adopting
Employer shall be deemed to have designated irrevocably Rubbermaid
Incorporated as its agent.
The transfer of any Participant from or to an Adopting Employer
participating in this Plan, whether such person is an Employee of
Rubbermaid Incorporated or an Adopting Employer, shall not affect such
Participant's rights under the Plan. All amounts credited to such
Participant's Account as well as accumulated service time with the
transferor or predecessor shall continue to the Participant's credit.
<PAGE> 15
6.3 - Adopting Employer Accruals
- --------------------------------
The Plan Administrator shall keep records concerning the accounts of
the Participants of each Adopting Employer.
6.4 - Discontinuance of Participation
- -------------------------------------
Any Adopting Employer shall be permitted to discontinue or revoke its
participation in the Plan by written resolution of the Adopting
Employer's Board of Directors. Rubbermaid Incorporated, at its
discretion, may determine that an Adopting Employer shall no longer
participate and may require such Adopting Employer to withdraw from the
Plan. At the time of any such discontinuance or revocation,
satisfactory evidence thereof and of any applicable conditions imposed
shall be delivered to the Plan Administrator. A Subsidiary shall not
participate in this Plan upon the date it ceases to be a Subsidiary of
Rubbermaid Incorporated.
ARTICLE 7
---------
THE PLAN ADMINISTRATOR/COMMITTEE
--------------------------------
7.1 - Plan Administrator
- ------------------------
The Plan Administrator shall have only those specific powers, duties,
responsibilities and obligations as are specifically given under this
Plan, and any power, duty, responsibility or obligation for the
control, management, or administration of the Plan which is not
specifically allocated to any Fiduciary, or with respect to which the
allocation is in doubt, shall be deemed allocated to the Committee. The
Plan Administrator may employ and suitably compensate attorneys,
accountants and other advisors as may be necessary to the performance
of the Plan Administrator's duties.
The Plan Administrator shall maintain adequate records and information
to insure the proper operation of this Plan for the benefit of its
Participants.
The Plan Administrator shall make available to Participants and their
Beneficiaries, for examination during business hours, such records as
pertain to the person wishing to examine the same.
The Plan Administrator, on behalf of the Participants and their
Beneficiaries shall enforce the Plan in accordance with the terms of
this Plan and shall have all powers necessary to accomplish that
purpose including, but not by way of limitation, the following:
a. To receive all Participant information, determine all
questions relating to the eligibility of Associates to
become Participants, or receive distributions;
<PAGE> 16
b. To compute and certify the amount and kind of benefits
payable to Participants and their Beneficiaries;
c. To authorize all disbursements;
d. To make and publish such rules for the regulation of the
Plan as are not inconsistent with the terms hereof and
regulations, rules and interpretations concerning the Plan
as may be approved by the Committee.
e. To file or cause to be filed all such annual reports,
financial and other statements as may be required by any
Federal or State statute, agency or authority within the
time prescribed by law or regulations for filing such
documents. The Plan Administrator shall furnish such
reports, statements and other documents to such
Participants and Beneficiaries of the Plan as may be
required by any Federal or State statute or regulation
within the time prescribed for furnishing such documents.
7.2 - Appointment of Committee
- ------------------------------
The Chief Executive Officer of Rubbermaid Incorporated shall appoint a
Committee, which effective August 22, 1995 is the Rubbermaid
Incorporated Benefit Plans Committee as established by the Board, under
the Plan whose powers, duties and responsibilities shall be those set
forth in this Plan and those as delegated to the Committee by the
Board. The Committee shall provide rules, regulations, and
interpretations of the Plan provisions as the Committee deems necessary
for the administration of the Plan.
7.3 - Indemnification
- ---------------------
Rubbermaid Incorporated shall indemnify the Members of the Committee
and any person in the employ of the Company engaged in the
administration of this Plan against any claims, loss, damage, expense
and liability, whether or not compensated for by insurances or
otherwise (other than amounts paid in settlement not approved by
Rubbermaid Incorporated), reasonably incurred by such person in
connection with any action or failure to act to which such person may
be a party by reason of performance of an authorized duty or
responsibility for or on behalf of the Company pursuant to the Plan
unless the same is judicially determined to be the result of the
individual's gross negligence or willful misconduct. Such
indemnification shall be made only to the extent (i) such expense or
liability is not payable to or on behalf of such person under any
liability insurance coverage, and (ii) the Plan is precluded from
assuming such expense or liability because of the operations of
applicable law. The foregoing right to indemnification shall be in
addition to any other rights to which any such person may be entitled
as a matter of law.
<PAGE> 17
ARTICLE 8
---------
TERMINATION
-----------
Rubbermaid Incorporated has established this Plan with the expectation
that the Plan will be continued indefinitely. However, Rubbermaid
Incorporated by action of its Board may terminate the Plan at any time.
In the event of the dissolution, merger, consolidation or
reorganization of Rubbermaid Incorporated, the Plan shall terminate and
benefits hereunder shall become immediately payable to the
Participants, unless the Plan is Adopted by the successor to Rubbermaid
Incorporated or the Board specifies otherwise by their written
resolution. Upon termination of the Plan with respect to a group of
Participants which is deemed to be a partial termination of the Plan,
the benefits payable to such affected Participants shall become
immediately payable unless otherwise provided for by the Committee.
Upon the complete or partial termination of the Plan, the right of all
Participants to their account balance shall become fully vested and
nonforfeitable.
ARTICLE 9
---------
NON-ALIENATION OF BENEFITS
--------------------------
Except as specifically provided under a qualified domestic relations
order (as defined under Section 414(p) of the Code), no Participant's
interest hereunder and no amount payable to or held for the benefit of
any Participant or the Beneficiary of any Participant shall be
alienated, disposed of or in any manner encumbered, voluntarily or
involuntarily or by operation of law by a Participant or Beneficiary.
If by reason of any act of any Participant, Beneficiary or by operation
of law or the happening of any event, the amount, or any part of the
amount, payable to or held for the benefit of such Participant or
Beneficiary, under this Plan would, except for this provision, vest in
or be enjoyed by some person, firm, association or corporation
otherwise than as provided in this Plan, then and in any of such event
the Participant's or Beneficiary's interest in any such amount so
payable to the Participant or held for the Participant's benefit shall
cease. Thereafter such amount or interest may be held by the Plan
Administrator to or for the benefit of such Participant, the
Participant's spouse, children or other dependents, or any of them, in
such manner and in such proportions pursuant to the terms of the Plan
as the Plan Administrator in its sole and absolute discretion
interprets such terms. The foregoing shall apply to any attempt by a
Participant or Beneficiary to alienate, charge, or encumber any amount
held for the benefit of or payable to a Participant or Beneficiary by
reason of any attachment, garnishment, judicial or legal proceeding,
order, judgement of court of law or in equity. Rubbermaid Incorporated,
or the Plan Administrator may bring an action in a court of competent
jurisdiction for a determination of the proper recipient of benefits
under the Plan.
<PAGE> 18
ARTICLE 10
----------
AMENDMENTS
----------
Except as hereinafter provided, Rubbermaid Incorporated (acting through
its Board) or effective October 27, 1997, the Committee (but only with
respect to administrative matters as determined by the Committee in its
sole discretion) has the right to amend this Plan in whole or in part.
No modification or amendment may result in the retroactive reduction of
a Participant's Accruals prior to such amendment or modification. Such
amendment shall be evidenced by a written instrument executed by an
Officer or Committee member pursuant to a resolution by the Board of
Directors or the Committee. Any amendment shall be binding upon all
Adopting Employers unless otherwise provided in such amendment.
ARTICLE 11
----------
MERGER OR CONSOLIDATION
-----------------------
This Plan shall not be merged or consolidated with, nor shall any
assets or liabilities be transferred to any other plan, unless the
benefits payable to each Participant if the Plan was terminated
immediately after such action would be equal to or greater than the
benefits to which such Participant would have been entitled if this
Plan had been terminated immediately before such action.
ARTICLE 12
----------
CLAIMS PROCEDURE
----------------
Any person who may be entitled to a benefit under the Plan shall have
the right to file with the Plan Administrator a written notice of claim
for such benefit. Within a reasonable time after its receipt of such
written notice of claim, the Plan Administrator shall either grant or
deny such claim provided, however, that any delay on the part of the
Plan Administrator in arriving at a decision shall not adversely affect
benefits payable under a granted claim. Each claimant shall have the
right to appeal the denial of his claim to the Committee for a full and
fair review at any time within seventy-five (75) days after claimant
received written notice of such denial. The Committee shall thereby
afford the claimant or his duly authorized representative the
opportunity (1) to review documents pertinent to the claim, (2) to
submit issues and comments in writing and (3) to discuss such documents
and issues. The final decision of the Committee shall be made promptly
after its receipt from the claimant of a request for review unless
circumstances beyond the control of the Committee require an extension
of time for processing. Such decision shall be made in writing and
shall include specific reasons for the decision, and specific
references to pertinent Plan provisions on which the decision is based.
<PAGE> 19
ARTICLE 13
----------
MISCELLANEOUS PROVISIONS
------------------------
13.1 - Validity of Plan
- -----------------------
The laws of the State of Ohio shall be the controlling State law with
respect to all matters relating to this Plan.
13.2 - No Commitment as to Employment
- -------------------------------------
Nothing contained in this Plan shall be construed as a contract of
employment between the Company and any Associate, or as a right of any
Associate to be continued in the employment of the Company, or as a
limitation of the right of the Company to discharge any Associate with
or without cause.
IN WITNESS WHEREOF, Rubbermaid Incorporated has caused this Rubbermaid
Incorporated Supplemental Retirement Plan to be executed as of this 23rd day of
December, 1997.
By: /s/ David L. Robertson
-------------------------------------------
David L. Robertson, Senior Vice-President
By: /s/ James A. Morgan
-------------------------------------------
James A. Morgan, Secretary
<PAGE> 20
EXHIBIT A
---------
ADOPTING EMPLOYER AND
--------------------- DATE OF
LOCATION ADOPTION
-------- --------
1. Rubbermaid Commerical 1/1/91
Products Inc.
Winchester, Virginia
2. Rubbermaid Incorporated 1/1/91
Wooster, Ohio
3. Rubbermaid Texas Limited 1/1/95
Greenville, Texas
(formerly Rubbermaid Incorporated,
Greenville, Texas)
Cleburne, Texas
(formerly Rubbermaid
Incorporated,
Cleburne, Texas)
4. Rubbermaid Sales Corporation 1/1/95
Wooster, Ohio
Winchester, Virginia
Hudson, Ohio
Corning, New York
Jeffersonville, Ohio
Woodbridge, Virginia
5. Rubbermaid Commerical 1/1/91
Products Inc. (formerly
Rubbermaid Commercial -
Cleveland Inc.)
Cleveland, Tennessee
6. Rubbermaid Health Care 1/1/91
Products (formerly
Rubbermaid-Statesville,
Inc. and Carex Inc.)
Statesville, North Carolina
7. Rubbermaid-Cortland, Inc. 1/1/91
Cortland, New York
8. Rubbermaid Specialty 1/1/91
Products Inc.
Centerville, Iowa
(formerly Rubbermaid
Centerville Inc.)
<PAGE> 21
9. Rubbermaid Office 1/1/91
Products, Inc.
Maryville, Tennessee
Carson, California
10. Rubbermaid Incorporated 1/1/91
Goodyear, Arizona
11. The Little Tikes Company 1/1/91
Hudson, Ohio
Sebring, Ohio
City of Industry, California
12. The Little Tikes Company 1/1/91
(Missouri)
Aurora, Missouri
13. The Little Tikes Company 1/1/94
(Pennsylvania)
Shippensburg, Pennsylvania
14. The Little Tikes Company 1/1/95
(South Carolina)
Columbia, South Carolina
15. Rubbermaid Cleaning 1/1/96
Products Inc.
(formerly Empire Brushes,
Inc.)
Greenville, North Carolina
16. Graco Childrens Products Inc. 1/1/97
Elverson, Pennsylvania
<PAGE> 1
EXHIBIT 10(g)
-------------
MEMORANDUM
DATE: July 31,1997
TO: Dave Gibbons
FROM: Dave Robertson
RE: Special arrangements
CC: Wolf Schmitt, Chuck Carroll
The purpose of this note is to summarize and confirm the special
arrangements which will be recommended to the Board of Directors that the
company has offered in conjunction with your continued employment with
Rubbermaid and subsequent assignment as President of Rubbermaid Europe. I will
summarize each of the elements of our discussion.
1. SRP - We will contribute $105,000 per year to your SRP for 1997, 1998
and 1999. Thereafter the SRP contributions will be made on the same
basis as provided under the SRP plan in place at that time.
2. STOCK OPTIONS - Upon your retirement or earlier termination of
employment we will vest all unvested stock options and you will have
two years from that date in which to exercise your options.
3. STOCK OPTION GRANT - With regard to the 10,000 share stock option
grant made to you on 4-22-97 at $24.875 per share in conjunction with
the merger of Home Products and Specialty Products we will request
the Board of Directors to waive the associated performance
conditions. Those options vest 1/3, 1/3, 1/3 on 4-22-98, 4-22-99, and
4-22-2000.
4. PERFORMANCE AND RESTRICTED SHARES - Upon your retirement or earlier
termination of employment we will vest all outstanding performance
and restricted shares that have been granted to you. The value of the
performance and restricted shares will be paid at the end of the
respective cycles will be based upon the attainment of the
performance objectives for the grants and the share price of
Rubbermaid at the time of the distribution.
5. COMPENSATION - Your base salary will be continued at a no less than
your current base salary of $285,200 per year. You will continue to
have a bonus target of not less that 65% of your base salary. Your
annual grants of performance shares and stock options will not be
less than 3,200 shares and 22,000 shares respectively.
<PAGE> 2
6. EXPATRIATE ASSIGNMENT - You will receive the expatriate allowances
and other benefits as prescribed by the appropriate Rubbermaid
policies in place at the time of your assignment. In the event the
home sale provisions of the expatriate policy do not cover the
documented costs associated with your current residence, we will
cover the loss on the sale of that property.
7. SEVERANCE - In the event of your involuntary termination of
employment for reasons other than cause, we will provide you with
three years of severance equal to your base salary and the
continuation of your regular associate benefits, but not including
grants of stock options, performance shares or annual bonus payments,
provided that for each month you work following September 1, 1997,
the amount of your severance coverage will be reduced by a month
until you reach eighteen months of coverage. If you achieve the
performance targets established for the EVA center for which you are
responsible, we will add 12 months of severance coverage, but in no
case will the maximum exceed 36 months. This arrangement will be
provided to you until July 1, 2001 at which time the maximum benefit
you can receive under this program will be 18 months. Following July
2001, the severance benefit will be reduced on a month per month
basis until the amount of severance available to you is consistent
with the Rubbermaid practice of severance benefits for executives at
your level.
Dave as you know, Rubbermaid is anxious to retain your services. The
commitments outlined above are a reflection of that desire, and we hope are
directly responsive to the issues you have raised throughout these discussions.
I will be happy to discuss any of these items with you in detail.
2
<PAGE> 1
EXHIBIT 10(h)
-------------
[Rubbermaid Logo]
September 2, 1997
Mr. Charles A. Carroll
President and Chief Operating Officer
Rubbermaid Incorporated
1147 Akron Road
Wooster, OH 44691
Dear Chuck:
This will confirm the action by the Rubbermaid Board of Directors at its meeting
on April 22, 1997 relating to the provision of a separation compensation package
in the event of your involuntary termination of employment for reasons other
than cause.
As provided in the Board action, in the event of your involuntary termination of
employment, other than for cause, by Rubbermaid, the following separation
compensation package will be provided to you:
Salary - Continuation for two years of your base pay at the time of
termination of employment to be paid on a bi-weekly basis as
currently paid.
Bonus - Two years of annual bonus which will be paid at plan
target for the year in which termination occurs. Payments
will be made at the time annual bonus would normally be
made.
Stock - All unvested stock options will become vested and you will
Incentives have two years in which to exercise such options as well as
previously vested options. There will be no forfeiture of
restricted or performance share awards, but lapse of
restrictions will depend upon achievement of performance
targets.
Benefits - Continuation for two years of the health, life and dental
insurance coverage provided to associates of Rubbermaid.
The separation compensation package will be paid so long as you maintain a
positive attitude toward Rubbermaid following termination of employment and you
do not engage in competition detrimental to Rubbermaid for the two years
following termination of employment, as determined by action of the Rubbermaid
Board of Directors.
<PAGE> 2
Termination of employment for cause includes conduct detrimental to the best
interest of Rubbermaid or misconduct involving dishonesty or moral turpitude.
In the event of your death prior to the end of the two year period any remaining
payments will be paid to your spouse or estate in a lump sum.
The provisions of your current Change in Control Employment Agreement will
govern your employment relationship in the event of any Change in Control of
Rubbermaid as defined in that Agreement.
Very truly yours,
/s/ James A. Morgan
James A. Morgan
Senior Vice President,
General Counsel and Secretary
<PAGE> 1
Exhibit 13
FINANCIAL MESSAGE
- --------------------------------------------------------------------------------
In 1996's financial message, we discussed the benefits anticipated from adopting
Economic Value-Added (EVA) and a new incentive compensation system primarily
linked to improvements in EVA. We strongly believe that EVA provides the best
correlation between financial performance and the market value of the Company.
Simply put, EVA measures after-tax operating profit after subtracting the cost
of capital to determine whether management is building the long-term value of
the Company.
During 1997, we trained associates throughout the world in the underlying
drivers of EVA in our business and challenged our associates to identify ways
they can improve EVA. The focus on EVA has spread throughout the Company. It is
EVA that has spearheaded many of our successful efforts to improve capital
management and assisted us in reaching critical decisions in the business.
We have categorized EVA improvement opportunities into four areas.
Growth--Investing, or redeploying capital, into projects that produce a return
greater than the cost of capital. During 1997, we sold the Office Products
business to redeploy capital to projects in which we could earn a higher return.
We recently announced the consummation of the acquisition of Curver Consumer
Products, which along with our Graco acquisition in 1996, are expected to bring
superior returns to our shareholders.
Operating Efficiency--Maintaining sales while lowering costs and not investing
in additional assets. We were not content with the incremental savings achieved
in the 1995 realignment program and in 1998 we are taking the necessary steps to
begin the transformation of our global procurement and operations into the low
cost service provider through the recently announced 1998 restructuring plan.
Capital Utilization--Reducing the amount of money tied up in assets used to
generate operating profit. We rationalized the capital base of our Little Tikes
business, which had excess capital in property, plant, and equipment. We also
continued to make improvements in reducing our working capital base throughout
the Company.
Cost of Capital--Lowering the cost of capital by maintaining the capital
structure of the Company at optimal leverage. Through prudent use of short and
long-term debt and the share repurchase program, we believe we have made
important strides in balancing equity and debt financing in the Company.
* * * * *
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. 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, 1997 and 1996, 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, 1997. 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, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Cleveland, Ohio
January 30, 1998
------
16
<PAGE> 2
CONSOLIDATED STATEMENT OF EARNINGS [Rubbermaid Logo]
- --------------------------------------------------------------------------------
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 2,399,701 $ 2,354,989 $ 2,344,170
Cost of sales 1,748,424 1,649,520 1,673,232
Selling, general, and administrative expenses 416,641 432,063 402,586
Realignment costs 16,000 -- 158,000
Other charges (credits), net:
Interest expense 37,944 26,281 13,682
Interest income (2,182) (1,933) (3,422)
Miscellaneous (51,032) 4,046 4,457
- ---------------------------------------------------------------------------------------------------------------------------
(15,270) 28,394 14,717
- ---------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 233,906 245,012 95,635
Income taxes 91,370 92,614 35,863
- ---------------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 142,536 $ 152,398 $ 59,772
- ---------------------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED NET EARNINGS PER COMMON SHARE $ .95 $ 1.01 $ .38
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
DISTRIBUTION OF 1997 NET SALES
- --------------------------------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION
<S> <C>
Materials 46.1%
Compensation and Benefits 19.6%
Services 11.3%
Pretax Earnings 9.7%
Advertising and Promotion 5.8%
Depreciation and Amortization 4.9%
Taxes other than Income 1.9%
Realignment Costs 0.7%
</TABLE>
-------
17
<PAGE> 3
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
At December 31 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 114,024 $ 27,599
Receivables, less allowance for doubtful accounts
of $8,882 in 1997 and $10,900 in 1996 421,911 496,601
Inventories 250,597 276,811
Other current assets 29,672 55,709
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 816,204 856,720
Property, plant, and equipment, net 707,974 721,914
Intangible and other assets, net 399,716 475,346
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,923,894 $ 2,053,980
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Notes payable $ 223,744 $ 399,865
Long-term debt, current 281 3,287
Payables 160,820 154,518
Accrued liabilities 182,239 185,151
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 567,084 742,821
Other deferred liabilities 153,385 142,992
Long-term debt, non-current 153,163 154,467
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 1997 and 1996 162,677 162,677
Paid-in capital 68,819 70,829
Retained earnings 1,216,166 1,165,052
Foreign currency translation adjustment (36,682) (25,359)
Treasury shares, at cost (12,975,131 shares in 1997
and 12,924,764 shares in 1996) (360,718) (359,499)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,050,262 1,013,700
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,923,894 $ 2,053,980
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
------
18
<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS [Rubbermaid Logo]
- --------------------------------------------------------------------------------
(Dollars in thousands)
( ) Denotes decrease in cash and cash equivalents
<TABLE>
<CAPTION>
Years Ended December 31 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 142,536 $ 152,398 $ 59,772
Adjustments to reconcile net earnings to
net cash from operating activities:
Gain on sale of business (134,447) -- --
Asset impairment charges 81,000 -- --
Depreciation and amortization 118,133 109,082 104,158
Non-cash realignment costs 16,000 -- 129,000
Employee benefits 15,982 8,762 11,992
Deferred income taxes 9,793 49,046 (22,388)
Other (2,577) 4,411 2,110
Changes in:
Receivables 43,575 9,078 (27,506)
Inventories (2,845) (1,980) 4,052
Other assets (24,867) (17,723) (39,265)
Payables 13,725 10,345 (5,771)
Accrued liabilities (17,941) (8,178) 13,867
- ---------------------------------------------------------------------------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES 258,067 315,241 230,021
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (145,847) (171,764) (151,528)
Acquisition of businesses, net of cash -- (318,047) (43,996)
Proceeds from sale of business 246,500 -- --
Purchase of marketable securities -- -- (100,000)
Proceeds from sale of marketable securities -- -- 159,049
Other, net 1,839 (6,246) (8,867)
- ---------------------------------------------------------------------------------------------------------------------------
NET CASH FROM INVESTING ACTIVITIES 102,492 (496,057) (145,342)
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in notes payable (176,121) 283,326 95,562
Proceeds from long-term debt -- 150,000 --
Repayment of long-term debt (3,035) (4,382) (6,999)
Cash dividends paid (91,422) (86,016) (81,731)
Common Shares repurchased (2,575) (185,482) (134,190)
Other, net (981) -- 1,399
- ---------------------------------------------------------------------------------------------------------------------------
NET CASH FROM FINANCING ACTIVITIES (274,134) 157,446 (125,959)
- ---------------------------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 86,425 (23,370) (41,280)
Cash and cash equivalents at beginning of year 27,599 50,969 92,249
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 114,024 $ 27,599 $ 50,969
- ---------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 36,002 $ 48,762 $ 94,683
Interest paid $ 33,407 $ 17,720 $ 12,971
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
------
19
<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 1995:
Opening balance $ 162,677 $ 69,795 $ 1,120,629 $ (16,583) $ (50,692) $ 1,285,826
Net earnings -- -- 59,772 -- -- 59,772
Cash dividends, $.52 per share -- -- (81,731) -- -- (81,731)
Employee stock plans -- 726 -- -- 4,244 4,970
Common 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
TRANSACTIONS FOR 1996:
Net earnings -- -- 152,398 -- -- 152,398
Cash dividends, $.57 per share -- -- (86,016) -- -- (86,016)
Employee stock plans -- 4 -- -- 4,362 4,366
Common Shares repurchased -- -- -- -- (185,482) (185,482)
Foreign currency translation
adjustment -- -- -- (6,939) -- (6,939)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 162,677 70,829 1,165,052 (25,359) (359,499) 1,013,700
TRANSACTIONS FOR 1997:
Net earnings -- -- 142,536 -- -- 142,536
Cash dividends, $.61 per share -- -- (91,422) -- -- (91,422)
Employee stock plans -- (2,010) -- -- 1,356 (654)
Common Shares repurchased -- -- -- -- (2,575) (2,575)
Foreign currency translation
adjustment -- -- -- (11,323) -- (11,323)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 $ 162,677 $ 68,819 $ 1,216,166 $ (36,682) $ (360,718) $ 1,050,262
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
------
20
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [Rubbermaid Logo]
- --------------------------------------------------------------------------------
(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 primarily plastic products in three major categories: home products,
juvenile products, and commercial products. The Company's products are
distributed primarily through its own sales personnel and manufacturers' agents
to a variety of retailers and wholesalers, including mass merchandisers, toy
stores, home centers, hardware 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 51.0% owned Rubbermaid Japan Inc. and 89.6% owned Dom-Plast S.A. 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 78.2% and 78.4% of inventories in 1997
and 1996, respectively. Cost of the remaining inventories is determined using
the first-in, first-out (FIFO) method.
Long-Lived Assets
Property, plant, and equipment, net, 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:
<TABLE>
<S> <C>
Land improvements 5 to 45 years
Buildings and fixtures 5 to 45 years
Machinery and equipment 2 to 15 years
</TABLE>
The excess of cost over fair value of net assets of businesses acquired at
December 31, 1997 and 1996 of $303,618 and $380,524, respectively, net of
accumulated amortization of $13,589 and $28,385, respectively, is amortized on a
straight-line basis over periods ranging from 20 to 40 years.
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. During 1997, the Company recorded a pretax asset
impairment charge of $81,000, or $59,797 after-tax, or $.40 per Common Share.
Stock-Based Compensation Plans
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25), and related Interpretations in accounting
for its stock-based compensation. The Financial Accounting Standards Board
issued Statement No. 123, "Accounting for Stock-Based Compensation" (FAS 123),
which was effective in 1996. FAS 123 provides the option either to continue the
Company's current method of accounting for stock-based compensation or to adopt
the fair value method of accounting. The Company elected to continue accounting
for stock-based compensation using APB 25.
Financial Instruments
Investments with maturities of three months or less at date of purchase are
considered cash equivalents. 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, 1997 and 1996, the
fair value of these financial instruments approximates carrying value.
Derivative financial instruments are utilized by the Company to manage foreign
exchange and interest rate risks. The Company does not use derivative financial
instruments for trading.
A limited number of foreign exchange instruments are used by the Company to
hedge firm and anticipated commitments and net investments in foreign
subsidiaries. Instruments have included forward contracts, currency swaps,
foreign currency loans, and foreign currency options, all in the same currency
as the hedged commitment and net investment. In accordance with Financial
Accounting Standards Board Statement No. 52, "Foreign Currency Translation" (FAS
52), before hedge accounting is applied, derivative financial instruments are
designated
------
21
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(Dollars in thousands except per share amounts)
and considered effective as hedges. When hedging commitments, gains and losses
on financial instruments are deferred and recognized in income in the same
period as the hedged transaction. When hedging net investments in foreign
subsidiaries, gains and losses on financial instruments are included in the
foreign currency translation adjustment. The fair value of these foreign
currency instruments is estimated using current market prices provided by an
outside quotation service. Should the Company terminate the foreign exchange
instrument or the underlying hedged transaction, the Company would follow the
applicable principles of FAS 52. The net unrealized gains or losses from hedging
anticipated transactions were not material at December 31, 1997 and 1996.
The Company also uses floating-to-fixed interest rate swap agreements on a
portion of its floating interest rate debt. Before hedge accounting is utilized,
the swap agreement is designated to a specific debt instrument or commercial
paper facility and the terms are closely related to the terms of the debt
instrument or commercial paper facility. After designation, interest is recorded
on the notional portion of debt covered by the agreements at the revised
interest rate. Gains or losses on interest rate swap agreements terminated are
deferred and recognized as a component of interest expense over the shorter of
the term of the underlying debt obligation or the term of the terminated swap
agreement. If the underlying debt obligation is retired, the Company would mark
the swap agreement to market and recognize the related gain or loss. At December
31, 1997 and 1996, the carrying value of interest rate swaps approximates fair
value.
Basic and Diluted Net Earnings Per Common Share
Basic and diluted 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 149,849,551, 151,003,599, and 158,765,812 in 1997,
1996, and 1995, respectively. For the periods presented, the dilutive effect of
stock options is not significant.
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, improve operating
efficiencies, and accelerate growth. During the second quarter of 1997, the
Company revised the estimate of the costs to complete the program and included
an additional $16,000 non-cash charge, or $9,920 after-tax, or $.07 per Common
Share, in the 1997 Consolidated Statement of Earnings.
Subsequent to year end, the Company announced that the Board of Directors
authorized the finalization of a major restructuring plan, designed to expand
the Company's global market leadership and accelerate quality growth. Major
initiatives will include the centralization of global procurement, and the
consolidation of manufacturing and distribution worldwide. The Company expects
that the restructuring actions could reach a pretax charge of at least $200,000.
The charge will include cash outlays for severance, removal of equipment, and
other activities that will be incurred over the next two years. Other charges
related to consolidation or relocation of facilities will be recorded primarily
in 1998.
3. BUSINESS DEVELOPMENT
Acquisitions
During November 1997, the Company agreed to acquire Curver Consumer Products,
the European market leader in plastic consumer goods, from DSM N.V. The
acquisition includes all Curver facilities, brands, and other assets and
liabilities, in a total transaction valued at approximately $140,000. Subsequent
to year end, the Company completed the transaction, which was funded by debt and
cash.
During 1996, the Company acquired Graco Children's Products Inc. (Graco), a
leading manufacturer of strollers and other children's products, for $318,047,
net of cash. The excess of the purchase price over the fair value of the net
identifiable assets acquired of $242,589 is being amortized over 40 years. The
Graco acquisition was accounted for as a purchase and was funded with a
combination of debt and cash.
Divestiture
During June 1997, the Company sold its Office Products business to Newell Co. in
a cash transaction. The transaction included the sale of the worldwide
manufacturing and distribution facilities, related equipment, and inventory for
$246,500, resulting in a one-time, pretax gain of $134,447, or $79,447
after-tax, or $.53 per share.
------
22
<PAGE> 8
[Rubbermaid Logo]
- --------------------------------------------------------------------------------
4. INVENTORIES
A summary of inventories follows:
<TABLE>
<CAPTION>
1997 1996
- -----------------------------------------------------------
<S> <C> <C>
FIFO cost:
Raw materials $ 65,411 $ 83,250
Work-in-process 8,571 11,494
Finished goods 201,900 213,000
- -----------------------------------------------------------
275,882 307,744
Excess of FIFO over LIFO cost (25,285) (30,933)
- -----------------------------------------------------------
$ 250,597 $ 276,811
- ------------------------------------------------------------
</TABLE>
5. PROPERTY, PLANT, AND EQUIPMENT, NET
The components of property, plant, and equipment, net, are summarized below:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 29,750 $ 33,724
Buildings and fixtures 300,489 320,527
Machinery and equipment 920,586 877,148
- ------------------------------------------------------------
1,250,825 1,231,399
Accumulated depreciation (648,377) (614,220)
- ------------------------------------------------------------
602,448 617,179
Additions in progress 105,526 104,735
- ------------------------------------------------------------
$ 707,974 $ 721,914
- ------------------------------------------------------------
</TABLE>
6. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consist primarily of commercial paper and uncommitted credit
facilities. The commercial paper, of which $49,738 was outstanding at December
31, 1997, was placed through brokers and is supported by a $500,000 committed
credit facility entered into in January 1996. This facility is subject to normal
banking terms and conditions, and expires in January 2001. In addition, as of
December 31, 1997, the Company had approximately $259,400 in uncommitted credit
facilities made available by commercial banks, of which $174,006 had been
utilized. The Company's weighted average interest rate for notes payable was
5.9% and 5.7% as of December 31, 1997 and 1996, respectively.
During January 1996, the Company filed a Shelf Registration with the Securities
and Exchange Commission for up to $400,000 of senior unsecured debt securities
and in November 1996, issued $150,000 senior notes with a maturity of 2006 and a
coupon rate of 6.6%.
Long-term debt at December 31, 1997 and 1996, is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
- -----------------------------------------------------------
<S> <C> <C>
6.6% Notes due 2006 $ 150,000 $ 150,000
Other 3,444 7,754
- -----------------------------------------------------------
153,444 157,754
Less current portion 281 3,287
- -----------------------------------------------------------
$ 153,163 $ 154,467
- -----------------------------------------------------------
</TABLE>
The aggregate principal payments due on the long-term debt for the five years
subsequent to December 31, 1997 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
1998 1999 2000 2001 2002
- -----------------------------------------------------------
$281 $290 $318 $301 $306
- -----------------------------------------------------------
</TABLE>
7. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1997 and 1996, consist of the following:
<TABLE>
<CAPTION>
1997 1996
- -----------------------------------------------------------
<S> <C> <C>
Compensation and commissions $ 25,091 $ 31,351
Retirement plans 18,133 24,574
Income taxes 40,681 --
Other 98,334 129,226
- -----------------------------------------------------------
$ 182,239 $ 185,151
- -----------------------------------------------------------
</TABLE>
8. EMPLOYEE BENEFIT AND RETIREMENT PLANS
The Company provides retirement benefits primarily through noncontributory
defined contribution plans. The cost of these plans aggregated $10,265, $13,742,
and $11,834 in 1997, 1996, and 1995, respectively.
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 ($37,088 and $33,881 at December 31,
1997 and 1996, respectively) is included in other deferred liabilities. The
Company also maintains a Voluntary Employee Beneficiary Association (VEBA).
------
23
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(Dollars in thousands except per share amounts)
9. STOCK-BASED COMPENSATION PLANS
The Company's Stock Incentive and Option Plan (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. In addition, the Plan provides for
supplemental cash awards in the event performance goals are exceeded. The Plan
also provides for the granting of non-qualified stock options as well as
incentive stock options. No incentive stock options have been granted to date.
The number of Common Shares as to which stock-based compensation awards may be
granted under the Plan in any calendar year is limited to 1.0% of the total
outstanding Common Shares as of the first day of the year.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related Interpretations
in accounting for its employee stock options because the alternative fair value
accounting provided for under Financial Accounting Standards Board Statement No.
123, "Accounting for Stock-Based Compensation" (FAS 123), requires use of option
pricing models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized. Generally, stock options become
exercisable over a three-year vesting period and expire 10 years from the date
of grant.
Pro forma information for net earnings and basic and diluted net earnings per
Common Share is required by FAS 123 and has been determined as if the Company
had accounted for its employee stock options under the fair value method of that
statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted average
assumptions for 1997, 1996, and 1995, respectively: risk-free interest rates of
6.1%, 6.3%, and 6.2%; dividend yield of 2.0%; volatility factor of the expected
market price of the Company's common stock of 23.0% in 1997 and 21.0% in 1996
and 1995; and an expected life of the option of 5 years.
Had compensation cost for the stock options been determined based on the fair
value at the grant dates, the Company's net earnings and basic and diluted net
earnings per Common Share would have been reduced. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the option's vesting period. The pro forma amounts for the years ending
December 31, 1997, 1996, and 1995 are indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------
<S> <C> <C> <C>
Net earnings:
As reported $ 142,536 $ 152,398 $ 59,772
Pro forma 137,937 151,937 59,564
Basic and diluted
net earnings per
Common Share:
As reported .95 1.01 .38
Pro forma .92 1.01 .38
- -----------------------------------------------------------
</TABLE>
A summary of the Company's stock option activity, and related information for
the years ended December 31, 1997, 1996, and 1995, are as follows:
<TABLE>
<CAPTION>
Options
- ------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at
beginning of year 1,078,101 528,756 372,350
Granted 1,365,013 595,871 170,646
Exercised (2,141) (225) --
Forfeited (179,981) (46,301) (14,240)
- ------------------------------------------------------------
Outstanding at
end of year 2,260,992 1,078,101 528,756
- ------------------------------------------------------------
Exercisable at
end of year 1,263,142 278,546 121,250
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Weighted Average Exercise Price
- ------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at
beginning of year $ 26.61 $ 29.47 $ 29.99
Granted 24.21 24.08 28.13
Exercised 27.02 26.06 --
Forfeited 24.13 26.74 26.88
- ------------------------------------------------------------
Outstanding at
end of year $ 25.36 $ 26.61 $ 29.47
- ------------------------------------------------------------
Exercisable at
end of year $ 26.58 $ 29.93 $ 30.09
- ------------------------------------------------------------
</TABLE>
------
24
<PAGE> 10
[Rubbermaid Logo]
- --------------------------------------------------------------------------------
The weighted average fair values of stock options granted during 1997, 1996, and
1995 were $6.31, $6.05, and $7.00, respectively. Exercise prices for options
outstanding as of December 31, 1997 ranged from $22.81 to $34.63. The weighted
average remaining contractual life of the outstanding stock options is 8.7
years.
During 1996 and 1995 the Company awarded 172,988 and 147,946 Common Shares,
respectively, related to the Company's restricted stock awards. During 1997,
1996, and 1995, stock awards for 33,828, 39,230, and 31,824 Common Shares,
respectively, were forfeited. The cost of the restricted stock awards,
determined as the market value of the shares at the date of grant, is being
amortized over the award's cycle period which ranges from three to five years.
In 1997, 1996, and 1995, $2,171, $1,755, and $2,894, respectively, were charged
to expense for restricted stock awards.
In addition, the Plan provides that shares of common stock may be awarded as
performance shares to certain key executives having a critical impact on the
long-term performance of the Company. Substantially all of the participants
elected to receive stock options in lieu of performance shares in 1997.
10. OTHER POSTRETIREMENT BENEFIT PLANS
The Company sponsors defined benefit health care plans that provide medical
benefits to retired associates who meet certain eligibility requirements. The
plans generally contain cost-sharing features such as deductibles and
coinsurance, and some plans are contributory. The Company's annual per capita
contributions under certain plans are limited. The plans are unfunded.
At December 31, 1997 and 1996, the actuarially determined status of these plans
is as follows:
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $ 37,208 $ 32,110
Other fully eligible participants 2,188 1,935
Other active participants 20,954 16,959
- ---------------------------------------------------------
60,350 51,004
Unrecognized net reduction
in prior service costs (321) 4,266
Unrecognized net gain 10,433 14,681
- ---------------------------------------------------------
Amount included in other
deferred liabilities $ 70,462 $ 69,951
- ---------------------------------------------------------
</TABLE>
The expense related to the plans is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 1,394 $ 1,520 $ 1,284
Interest cost 3,846 3,681 3,721
Amortization (1,449) (1,110) (1,799)
- ---------------------------------------------------------
$ 3,791 $ 4,091 $ 3,206
- ---------------------------------------------------------
</TABLE>
In estimating the Company's December 31, 1997 obligation under these plans, the
annual increase in the per capita cost of covered benefits is assumed to
decrease approximately one percentage point per year from 9.0% in 1997 to an
ultimate rate of 6.0% 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 obligation and the expense
related to these plans by approximately 10.4% and 11.8%, respectively. The
discount rate used in determining the accumulated postretirement benefit
obligation was 7.25% and 7.75% at December 31, 1997 and 1996, respectively.
11. 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 $27,772, $29,505, and $28,963 in 1997, 1996, and 1995,
respectively.
------
25
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(Dollars in thousands except per share amounts)
12. ADVERTISING COSTS
Costs incurred for producing and communicating advertising and other brand
support, including costs incurred under cooperative advertising programs with
customers, are charged to selling, general, and administrative expenses as
incurred or expensed ratably during the year in relation to revenues or certain
other performance measures. Advertising costs were $137,963, $153,313, and
$142,025 in 1997, 1996, and 1995, respectively.
13. INCOME TAXES
Income taxes are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 66,257 $ 36,778 $ 44,500
State and local 9,125 4,496 6,151
OUS 6,195 2,294 7,600
- ------------------------------------------------------------
81,577 43,568 58,251
Deferred:
Federal 10,562 43,796 (13,663)
State and local 1,455 3,753 (2,725)
OUS (2,224) 1,497 (6,000)
- ------------------------------------------------------------
9,793 49,046 (22,388)
- ------------------------------------------------------------
$ 91,370 $ 92,614 $ 35,863
- ------------------------------------------------------------
</TABLE>
Earnings (loss) before income taxes aggregated $222,604, $234,010, and $98,835
for domestic operations and $11,302, $11,002, and $(3,200) for outside United
States (OUS) operations in 1997, 1996, and 1995, respectively.
US income tax expense at the statutory tax rate is reconciled to the combined US
and OUS income tax expense below:
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------
<S> <C> <C> <C>
Tax at US federal
statutory rate $ 81,867 $ 85,754 $ 33,472
State and local income
taxes, net of US
federal benefit 5,848 6,125 2,391
Non-deductible
amortization of
intangible assets 4,867 -- --
Tax basis differential
on sale of business 5,814 -- --
Other (7,026) 735 --
- -----------------------------------------------------------
$ 91,370 $ 92,614 $ 35,863
- -----------------------------------------------------------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of December 31, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
December 31 1997 1996
- -----------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Postretirement benefits $ 26,807 $ 26,211
Other employee benefits 23,669 25,105
Realignment costs 6,342 10,064
Accruals, reserves, and
other items 36,016 50,067
- -----------------------------------------------------------
Total deferred tax assets 92,834 111,447
- -----------------------------------------------------------
Deferred tax liabilities:
Property, plant, and equipment 76,428 59,892
Intangible assets and
other items 1,786 28,355
- -----------------------------------------------------------
Total deferred tax liabilities 78,214 88,247
- -----------------------------------------------------------
Net deferred tax assets $ 14,620 $ 23,200
- -----------------------------------------------------------
</TABLE>
As of December 31, 1997 and 1996, current deferred tax assets of $22,400 and
$43,715, respectively, are reflected in other current assets.
14. COMMON SHARES
Share Repurchase Program
As part of a program previously authorized by the Board of Directors, the
Company purchased approximately 100,000, 6,587,000, and 4,843,700 Common Shares
in 1997, 1996, and 1995, respectively, for the treasury at an aggregate cost of
$2,575, $185,482, and $134,190, respectively. Approximately 12,800,000 Common
Shares remain available for repurchase through 1999 based on the current Board
authorization.
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 $125.00 per
share. The rights are only exercisable in the event a person acquires or
commences a tender offer or exchange offer for 10.0% or more of the Company's
outstanding Common Shares. In
------
26
<PAGE> 12
[Rubbermaid Logo]
- --------------------------------------------------------------------------------
the event that a person who owns 10.0% 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 15.0% or more, each right
would entitle its holder to purchase a number of 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
50.0% or more of the Company's assets or earning power are sold, each right
would entitle its holder to purchase a number of 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, 2006, and may be redeemed by the Company at a
price that is currently $.01 per right, prior to the occurrence of the events
described above.
15. BUSINESS AND CREDIT CONCENTRATIONS
The Company operates exclusively in one industry, which is the manufacture and
distribution of primarily plastic products, and sells to a broad range of
customers, one of which accounted for 15.5%, 13.9%, and 14.5% of net sales in
1997, 1996, and 1995, respectively. Sales to a second customer amounted to 10.1%
of net sales in 1997. 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.
16. GEOGRAPHIC SEGMENTS
At December 31, 1997, 1996, and 1995, the Company's equity in OUS subsidiaries
was $173,957, $164,195, and $148,143, respectively.
Revenues from OUS customers, including OUS net sales and exports from US
operations, represented 19.5%, 18.9%, and 18.0% of total net sales in 1997,
1996, and 1995, respectively.
The following is information about the Company's operations in different
geographic areas:
<TABLE>
<CAPTION>
Net Sales Operating Earnings Total Assets
- ---------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1997 1996 1995 1997(a) 1996 1995(a) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 2,078.0 $2,045.0 $ 2,007.4 $ 209.6 $ 257.9 $ 108.5 $ 1,572.7 $ 1,774.9 $1,410.0
OUS 321.7 310.0 336.8 9.0 15.5 1.9 351.2 279.1 281.5
- ---------------------------------------------------------------------------------------------------------------------------
$ 2,399.7 $2,355.0 $ 2,344.2 $ 218.6 $ 273.4 $ 110.4 $ 1,923.9 $ 2,054.0 $1,691.5
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Operating earnings in 1997 and 1995 include a pretax realignment charge of
$16.0 million and $158.0 million, respectively. The charge in 1997 reduced
United States and OUS operating earnings by $14.8 million and $1.2 million,
respectively, while the 1995 charge reduced respective operating earnings
by $140.8 million and $17.2 million.
------
27
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(Dollars in thousands except per share amounts)
17. QUARTERLY FINANCIAL INFORMATION - UNAUDITED
<TABLE>
<CAPTION>
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996 1997(a) 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 574,285 $ 616,021 $ 583,349 $ 632,694 $ 640,379 $ 572,989 $ 601,688 $ 533,285
Cost of sales 420,368 456,078 429,113 438,361 466,364 389,127 432,579 365,954
Net earnings 31,790 19,863 30,126 46,108 46,595 44,750 34,025 41,677
- ---------------------------------------------------------------------------------------------------------------------------
Per Common Share:
Net earnings --
basic and diluted .21 .13 .20 .31 .31 .30 .23 .27
Cash dividends paid .16 .15 .15 .14 .15 .14 .15 .14
Market price range:
High 26.50 24.75 30.31 29.25 30.00 29.13 24.88 30.25
Low 23.31 22.63 24.75 22.38 24.00 26.75 21.63 25.25
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Included in the second quarter of 1997 is a pretax gain of $134.4 million
($79.4 million after-tax, or $.53 per Common Share) on the divestiture of
the Office Products business, partially offset by pretax asset impairment
charges and revised realignment costs totaling $97.0 million ($69.7 million
after-tax, or $.47 per Common Share).
18. CONTINGENCIES
In September 1997, an administrative law judge of the Federal Trade Commission
("F.T.C.") ruled that a major customer of the Company illegally pressured
manufacturers not to sell toys to warehouse clubs. That decision is being
appealed. Subsequent to the F.T.C. decision, numerous class action suits seeking
damages on behalf of consumers have been filed against the customer and certain
manufacturers, including the Company, which was not named as a defendant in
the F.T.C. suit, nor were any other manufacturers. The Company is of the
opinion, supported by legal counsel, that it has not violated any law and
intends to contest any such class action suits. Management believes the outcome
of this matter will not have a material adverse effect on the financial position
or overall trends in the results of operations of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Net sales in 1997 of $2.400 billion, increased for the 46th consecutive year, a
2% increase over the $2.355 billion posted in 1996. Total volume growth
contributed 5%, of which acquisitions, net of divestitures, added 5% for the
year, while continuing core unit volume was flat. Price and currency offset this
increase with a negative 3% impact. Core unit volumes were depressed by a
decline in the juvenile products category and the flat performance of the home
products category, partially offset by a core unit volume increase experienced
in the commercial products category. Core unit volumes for the year were
depressed as a result of the Company's decline in the third fiscal quarter,
primarily resulting from retail inventory control programs and retail delays in
new product launches. In all other fiscal quarters the Company achieved core
unit volume growth. Net sales in 1996 were slightly ahead of the $2.344 billion
of 1995. Acquisitions and core continuing unit volume both added 4% each. Sales
were impacted by negative price realization of 3% and divested and discontinued
SKUs of 5%.
For the fifth consecutive year the Company's emphasis on global expansion has
resulted in international sales growth that has outpaced that of the domestic
business. Revenues from OUS customers, including exports from US operations,
represented 19.5%, 18.9%, and 18.0% of total net sales in 1997, 1996, and 1995
respectively.
Net earnings in 1997 were $142.5 million, or $.95 per share, compared to $152.4
million, or $1.01 per share in 1996. Included in 1997 net earnings is a
non-operating after-tax gain of $79.4 million offset by a non-operating
after-tax charge of $69.7 million. Excluding the one-time
------
28
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS [Rubbermaid Logo]
- --------------------------------------------------------------------------------
non-operating items, net earnings were $132.8 million, or $.89 per share.
Earnings in 1997 are 13% lower than 1996 which reflects lower sales volumes,
higher year-over-year resin and other material cost inflation, lower price
realization, unfavorable product mix, and higher interest costs. Net earnings in
1995 were $59.8 million, or $.38 per share, after recording a realignment charge
of $98.7 million after-tax, or $.62 per share.
During the fourth quarter of 1995, the Company's management approved a two-year
strategic realignment program designed to reduce costs, improve operating
efficiencies, and accelerate growth. This two-year program included the cost of
exiting facilities, asset write-offs primarily due to product realignments, and
employee termination costs associated with a reduction in the total number of
associates. The Company included in its 1995 Consolidated Statement of Earnings
a charge of $158.0 million for costs associated with this program. These charges
reduced after-tax earnings by $98.7 million. Approximately $129.0 million
represented non-cash costs while the remaining $29.0 million of costs was
associated with employee terminations and certain exit related costs. During the
second quarter of 1997, the Company revised the estimate of the costs to
complete the program and included an additional $16.0 million non-cash charge,
or $.07 per share.
As of December 31, 1997, the realignment activities were substantially
completed. The Company has exited or initiated closure of all nine locations
slated for closure in the plan, completed the associate reductions, and achieved
the estimated annual savings of $50.0 million anticipated in the 1995
realignment program.
Cost of sales as a percent of sales was 72.9%, 70.0%, and 71.4% in 1997, 1996,
and 1995, respectively. The increase in 1997 over 1996 was caused by
significantly higher raw material costs, a higher mix of lower margin products,
lower price realization, and unfavorable operating variances. An unprecedented
volatility in raw material costs, particularly plastic resin costs, was
experienced with rapid price increases through 1995, followed by a drop through
mid 1996, another rapid increase through the end of 1996, reaching a peak at
mid-year 1997. In the second half of 1997, prices began to decline. The
improvement in 1996 over 1995 reflects productivity gains as a result of the
realignment, other structural improvements in cost, and lower resin costs. In
addition, in 1997, 1996, and 1995, the Company experienced substantial
underabsorbed overhead costs related to the combined impact of
lower-than-planned sales volume and efforts to reduce inventories.
Selling, general, and administrative expenses as a percent of net sales were
17.4%, 18.3%, and 17.2%, in 1997, 1996, and 1995, respectively. The lower level
in 1997 versus 1996 reflects productivity arising from realignment activities
and control over spending. The increase in 1996 over 1995 is attributable to
additional marketing activities and globalization efforts, partially offset by
productivity improvements.
Other charges (credits), net, reflects higher interest expense in 1997 over 1996
with a full year of funding of Graco and share repurchases, partially offset by
the reduction of short-term debt from the funds generated by the divestiture of
Office Products. Miscellaneous other charges reflects income in 1997 resulting
from a pretax gain of $134.4 million for Office Products, partially offset by a
pretax charge of $81.0 million for asset impairments related to acquisitions.
Other charges increased in 1996 over 1995 primarily as a result of higher net
interest expense attributable to debt increases to fund the share repurchase
program and acquisition of Graco.
The effective tax rate as a percentage of earnings before income taxes was
39.1%, 37.8%, and 37.5% for 1997, 1996, and 1995, respectively. In 1997 the
effective rate on operating activities was 32.4%. The higher rate of 39.1%
reflects the tax effects of the non-operating activities in 1997. The Company
was able to reduce the 1997 effective tax rate on operating earnings by taking
advantage of recent global expansion initiatives that allowed the Company to
enter into rate reducing strategies.
OUTLOOK FOR 1998
Excluding the effect of the Curver acquisition, which was completed in January
1998, the Company anticipates core unit volume sales growth to outpace the
effects of divestitures and continuing negative price and currency translation.
The addition of Curver enhances the European business and will put the Company
well on the way to its 30% OUS sales as a percent to total sales target. Curver
is expected to provide additional sales growth in 1998 of $180.0 million.
Earnings are anticipated to grow at a rate in excess of sales growth,
benefitting from lower raw material costs, anticipated volume leverage, and
further productivity improvements. In 1998, the Company is projecting an
effective tax rate of 35%. Stronger earnings for 1998 in conjunction with the
fixed nature of the benefits from the tax strategies will push the effective
rate higher. The total
------
29
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
impact on earnings for 1998 from the Curver acquisition is expected to be
non-dilutive. In subsequent years, the acquisition is expected to be accretive.
In January 1998, the Company announced a major restructuring plan designed to
expand the Company's global market leadership and accelerate quality growth. The
restructuring plan includes centralizing global procurement, and consolidating
manufacturing and distribution worldwide. The Company will establish the
procurement organization during the first quarter of 1998, allowing the Company
to fully realize economies of scale and establish alliances to drive innovation
through shared research. The new operations format will be modeled on the cost
effective structure the Company has in place in its European business. Shared
utilization of assets to make and distribute product will support efficient
customer logistics and service, which will free up inefficient and excess
capacity, in turn enhancing profitability. To enhance core unit volume growth,
the Company will fund increased expenditures in consumer advertising, category
management, and product development.
The specifics of the cost breakdown will be available later in 1998; however, it
is expected that the restructuring charge could reach at least $200 million
pretax. This charge, incurred over a two year period, would include cash outlays
for severance, removal of equipment, and other actions. Other charges related to
consolidation or relocation of facilities will primarily be recorded in 1998.
North American, European, and Asian operations will all be affected by the
restructuring plan. The Company expects a reduction in annual operating expenses
of approximately $30 million in 1998, with a running rate of $200 million
attained by the end of 2000.
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 from
operations, debt financing, and new equity issuance. Cash provided from
operating activities is the primary source of liquidity and amounted to $258.1
million, $315.2 million, and $230.0 million in 1997, 1996, and 1995,
respectively. The cash generated from operations in 1997, in addition to
proceeds from the sale of Office Products, enabled the Company to satisfy
capital expenditure needs and pay dividends.
At December 31, 1997, the Company maintained uncommitted arrangements with
various commercial banks to provide $259.4 million in availability under
short-term unsecured credit facilities to finance fluctuations in working
capital and general corporate purposes. This borrowing capacity is in addition
to a $500 million unsecured, committed credit facility designated to support the
commercial paper program entered into in 1996. In 1996, the Company filed a
Shelf Registration with the Securities and Exchange Commission for the issuance
of up to $400 million of senior, unsecured debt securities. To date the Company
has issued $150 million of senior notes with a maturity of 10 years and a coupon
rate of 6.6%.
As part of a program previously authorized by the Board of Directors, the
Company purchased approximately 0.1 million shares in 1997, and 6.6 million
shares in 1996, of its common stock for the treasury at an aggregate cost of
$2.6 million and $185.5 million, respectively.
In 1997, the Company invested $145.8 million in property, plant, and equipment
to improve productivity, tool new products, expand capacity, and for the
ongoing implementation of a common, integrated, global management information
system. A significant part of the 1998 restructuring will require capital
investment for robotics and machine upgrades, as well as for expansion or
construction of facilities. However, the Company anticipates total capital
expenditures in 1998 to be approximately $150 million.
Working capital, excluding cash and cash equivalents, increased $48.8 million in
1997. The net change is primarily the result of lower notes payable of $176.1
million resulting from the proceeds of the Office Products divestiture.
Excluding the effect of notes payable, working capital decreased $127.3 million,
reflecting the disposition of Office Products, lower receivables and prepaid
expenses, and higher accounts payable.
Dividends
For 43 consecutive years the Company has increased dividends paid per share. The
Company's objective is to pay approximately 30% of current year earnings as
dividends, to provide higher dividends to shareholders each year, and to retain
sufficient earnings and capital to fund future investment opportunities to
enable sales and earnings per share to double every 5 to 6 years.
------
30
<PAGE> 16
[Rubbermaid Logo]
- --------------------------------------------------------------------------------
OTHER MATTERS
Divestitures
In June 1997, the Company sold the worldwide manufacturing and distribution
facilities, related equipment, and inventory of the Office Products business for
$246.5 million in cash, resulting in an after-tax gain of $79.4 million.
Acquisitions
Subsequent to the end of the year, the Company acquired Curver Consumer
Products, Europe's largest producer of plastic consumer products for indoor and
outdoor use sold through retail channels.
Year 2000
The Company has been aware of the potential implications the "Year 2000" issue
could have on its business, as a result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer systems that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a major
system failure or miscalculations. As a result, in 1996 the Company conducted a
comprehensive review of its computer systems to identify those that could be
affected by the Year 2000 issue and developed a plan that included implementing
a common, integrated, global management information system to resolve the issue.
The global management information system is Year 2000 compliant and will
eventually replace all of the Company's primary business systems. The
implementation schedule calls for completion prior to the Year 2000 changeover,
thereby eliminating many of the concerns of the transition. To mitigate concern
over potential failures while minimizing the expense associated with Year 2000
compliance, the Company has developed contingency plans in each of the business
units to correct and upgrade only those existing systems where potential
failures could occur should the targeted implementation dates not be met. To
date the Company has not experienced any Year 2000 failures and the amounts
expended on corrections and upgrades have been minimal.
The Company presently believes that, with converting to a new global management
information system, and modifications to existing software for businesses with
implementation dates close to the end of the century, the Year 2000 issue will
not pose significant operational problems for the Company's computer systems as
so converted and modified. However, if such conversions and modifications are
not completed timely by the Company, or significant third parties with whom the
Company does business, the Year 2000 issue could have a material impact on the
operations of the Company.
Inflation
The Company maintains operations in Mexico which has experienced high inflation
levels. Neither the operations of Mexico nor the effects of the inflation are
material to the results of operations of the Company.
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 US 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 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
FAS 128
The Financial Accounting Standards Board issued Statement No. 128, "Earnings per
Share" (FAS 128), which is effective in 1997. FAS 128 replaced Accounting
Principles Board Opinion No. 15 (APB 15), and specifies the computation,
presentation, and disclosure for earnings per share (EPS) amounts. FAS 128
replaces the presentation of APB 15 primary EPS with "basic" EPS and replaces
APB 15 fully diluted EPS with "diluted" EPS.
Basic EPS is computed by dividing income available to common stockholders by the
weighted average number of common shares for the period. In adopting FAS 128
------
31
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
the Company does not have a difference between the calculation of basic and
primary EPS. Diluted EPS reflects the dilution that would occur if securities or
other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock. The Company would include its
outstanding stock option grants in this calculation. Under the treasury stock
method allowed in FAS 128, the options will only be dilutive when the average
market price of the common stock exceeds the exercise price of the options.
FAS 129
The Financial Accounting Standards Board issued Statement No. 129, "Disclosure
of Information about Capital Structure" (FAS 129), which is also effective in
1997. FAS 129 lists required disclosures about capital structure that had
previously been included in a number of existing statements or opinions. As this
statement is a compilation of existing disclosures, it did not have an impact on
the consolidated financial statements of the Company.
FAS 130
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income" (FAS 130), which is effective in 1998. FAS 130
requires the Company to report comprehensive income in the consolidated
financial statements. Comprehensive income includes net income and other
revenues, expenses, gains, and losses that are excluded from net income. The
items excluded from net income are those covered by other Financial Accounting
Standards Board Statements, such as FAS 52 "Foreign Currency Translation", FAS
80 "Accounting for Futures Contracts", FAS 87 "Employers' Accounting for
Pensions", and FAS 115 "Accounting for Certain Investments in Debt and Equity
Securities".
FAS 130 allows three alternatives for disclosure of comprehensive income; in the
statement of earnings; a separate statement of comprehensive income; or in
a separate column in the statement of shareholders' equity. The Company already
discloses separately in the Consolidated Statement of Shareholders' Equity
the applicable components of comprehensive income. Therefore, there will not be
any significant changes in disclosure resulting from this statement.
FAS 131
Also in June of 1997, the Financial Accounting Standards Board issued Statement
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
(FAS 131), which is effective in 1998. This statement supersedes the existing
segmental disclosures of FAS 14, as well as parts of other various statements.
FAS 131 uses a "management approach" to identify operating segments whose
operating results are regularly reviewed by the Company's chief operating
decision makers to allocate resources and assess performance, and for whom
discrete financial information is available.
Operating segments can be combined if the segments meet five aggregation
criteria outlined in FAS 131. Reportable segments are operating segments that
meet specified quantitative thresholds based on revenues, profit (or loss), and
assets. For each reportable segment FAS 131 requires disclosure of the types of
products and services, segment data measures, and segment reconciliations to the
consolidated financial statements. On an enterprise wide basis, FAS 131 requires
information about products and services, geographic data, and major customer
data.
The Company's pan-European business would be considered an operating segment
under FAS 131 and would meet the quantitative thresholds to be a reportable
segment. With the 1998 restructuring program, referenced earlier in this
discussion, the Company has not yet determined the operating segments of the
North American market as they would exist at December 31, 1998. The intent of
the restructuring program is to apply the pan-European operational approach to
the North American market. Therefore, as specific restructuring actions become
finalized in 1998, the structure of the organization may change the composition
of the reportable segments as they would be defined at December 31, 1997. The
Company already provides the enterprise wide disclosures for geographic data and
major customers. For the enterprise wide product revenue disclosure, the Company
intends to report its three major product categories of home products, juvenile
products, and commercial products.
RISK MANAGEMENT
The Company is exposed to market risk from changes in interest rates, foreign
exchange rates, and market indexed raw material prices. The Company enters into
various hedging transactions to manage this exposure through a controlled
program pursuant to the Company's policies and procedures. The Company monitors
interest rate, foreign exchange, and market indexed raw material risks and
offsetting hedged positions on an ongoing basis. The Company does not use
derivative financial instruments for trading purposes.
------
32
<PAGE> 18
[Rubbermaid Logo]
- --------------------------------------------------------------------------------
Value at Risk
Calculations of value at risk are intended to measure the maximum amount of loss
the Company could incur from adverse market movements in interest and foreign
exchange rates over a one day period, given a 95% confidence level. Loss is
defined in the value at risk estimates as loss of fair market value.
Calculations of loss are based on a variance-covariance value at risk model. The
calculations rely on interest rates and foreign exchange rates from the past
year to estimate the volatility and correlation of these rates in the future.
Financial returns are assumed in the model to be normally distributed. The model
includes all foreign exchange hedges, interest rate sensitive debt, investments,
and swaps, and their corresponding underlying exposures.
The estimated value at risk amounts discussed below represent the potential fair
value loss the Company could incur due to adverse changes in interest or foreign
exchange rates for a one day period. They ignore the possibility that such
movements could move in the Company's favor. It is unlikely that such daily
losses would occur over an extended period of time. The Company's calculated
value at risk amounts are forward looking statements of market risk in which
certain adverse market conditions are assumed to occur.
Interest Rate Risk
The Company uses interest rate swaps to hedge underlying debt obligations and
reduce its exposure to interest rate movements. Net exposure to interest rate
movements consists primarily of intermediate term debt.
Based on overall interest rate exposures at December 31, 1997, the potential
value at risk loss the Company could incur from adverse changes in interest
rates for a one day period, with a 95% confidence level, would not materially
affect the consolidated financial position, results of operations, or cash flows
of the Company.
Foreign Exchange Risk
The Company uses currency forward contracts and currency swaps to hedge its
exposure to adverse changes in foreign exchange rates. The primary objective of
the Company's hedging activity is to protect against volatility associated with
non-functional currency costs and cash flows from foreign operations. The
Company's greatest foreign exposures are in the Canadian Dollar and the Irish
Punt.
The foreign exchange value at risk is primarily driven by foreign currency net
assets deployed outside the United States. These assets are translated to US
dollars at the current exchange rates. The change in value of these assets
caused by fluctuations in currency rates is included in the currency translation
adjustment section of shareholders equity, and is not a part of income. Currency
interest rate swaps are designated as hedges of related net foreign asset
exposures. The currency effects of these hedges are reflected in the currency
translation adjustment section of shareholders' equity, offsetting a portion of
the translation of the net assets.
Based on overall currency rate exposures at December 31, 1997, the potential
value at risk loss the Company could incur from adverse changes in foreign
exchange rates for a one day period, with a 95% confidence level, would not
materially affect the consolidated financial position, results of operations, or
cash flows of the Company.
Market Indexed Raw Material Risk
The Company purchases raw materials, primarily derivatives of petroleum or
natural gas, that are subject to price volatility. Resin price volatility and
its affect on earnings is reviewed in the results of operations discussion.
Derivative financial instruments for hedging resin price risks are now
available, but this market is in the early stages of development. The Company
was not engaged in any material hedging of this risk at December 31, 1997.
FORWARD-LOOKING DISCUSSIONS
Forward-looking statements contained in this report involve uncertainty and
risk. As such, it is possible that the Company's future financial performance
may differ materially from current expectations due to a variety of factors such
as changes in: the competitive environment; the condition of the industry and
economy, including the effect of weather, consumer and customer demand; the cost
of raw materials, which may not be recovered through selling prices; the rate of
growth in selling, general, and administrative expenses due to the Company's
business expansion; working capital requirements; changes in interest rates; the
under-utilization of production facilities; international factors, including
currency exchange rates, economic conditions, and difficulties or delays in the
Company's business expansion outside the United States; or difficulties or
delays in the implementation of the Company's global management information
system.
------
33
<PAGE> 19
11-YEAR FINANCIAL SUMMARY
- --------------------------------------------------------------------------------
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Years ended December 31 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $ 2,399,701 $ 2,354,989 $ 2,344,170 $ 2,169,354
Cost of sales 1,748,424 1,649,520 1,673,232 1,465,586
Selling, general, and administrative expenses 416,641 432,063 402,586 347,915
NET EARNINGS 142,536(a) 152,398 59,772(b) 228,126
- ------------------------------------------------------------------------------------------------------------------------------------
Per Common Share--basic and diluted $ .95(a) $ 1.01 $ .38(b) $ 1.42
- ------------------------------------------------------------------------------------------------------------------------------------
Percent of net sales 5.9% 6.5% 2.5% 10.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Return on average shareholders' equity 13.8% 14.2% 4.9% 18.9%
FINANCIAL POSITION
Current assets $ 816,204 $ 856,720 $ 851,207 $ 926,666
Property, plant, and equipment, net 707,974 721,914 626,637 607,628
Intangible and other assets, net 399,716 475,346 213,684 174,886
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,923,894 $ 2,053,980 $ 1,691,528 $ 1,709,180
- ------------------------------------------------------------------------------------------------------------------------------------
Current liabilities $ 567,084 $ 742,821 $ 414,732 $ 295,597
Other deferred liabilities 153,385 142,992 135,244 116,181
Long-term debt 153,163 154,467 6,179 11,576
Shareholders' equity 1,050,262 1,013,700 1,135,373 1,285,826
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,923,894 $ 2,053,980 $ 1,691,528 $ 1,709,180
- ------------------------------------------------------------------------------------------------------------------------------------
Total debt as a percent of capitalization 26.4% 35.5% 10.2% 2.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Working capital $ 249,120 $ 113,899 $ 436,475 $ 631,069
- ------------------------------------------------------------------------------------------------------------------------------------
Current ratio 1.44 1.15 2.05 3.13
OTHER DATA
Average Common Shares outstanding (000) 149,850 151,004 158,766 160,893
- ------------------------------------------------------------------------------------------------------------------------------------
Cash dividends paid $ 91,422 $ 86,016 $ 81,731 $ 74,425
- ------------------------------------------------------------------------------------------------------------------------------------
Cash dividends paid per Common Share $ .61 $ .57 $ .52 $ .46
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity per Common Share $ 7.02 $ 6.77 $ 7.27 $ 8.00
- ------------------------------------------------------------------------------------------------------------------------------------
Stock price range - NYSE $ 30-22 $ 30-22 $ 34-25 $ 35-24
- ------------------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 145,847 $ 171,764 $ 151,528 $ 118,000
- ------------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 118,133 $ 109,082 $ 104,158 $ 93,724
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shareholders at year end 26,701 31,112 32,439 30,889
- ------------------------------------------------------------------------------------------------------------------------------------
Average number of associates 12,618 13,861 14,054 12,939
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Included in 1997 is a pretax gain of $134.4 million ($79.4 million
after-tax, or $.53 per Common Share) on the divestiture of the Office
Products business, partially offset by pretax asset impairment charges and
revised realignment costs totaling $97.0 million ($69.7 million after-tax,
or $.47 per Common Share).
(b) Included in 1995 is a pretax realignment charge of $158.0 million ($98.7
million after-tax, or $.62 per Common Share).
(c) Results before/after the cumulative effect of changing the method of
accounting for postretirement benefits other than pensions.
------
34
<PAGE> 20
[Rubbermaid Logo]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988 1987
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,960,207 $ 1,805,332 $ 1,667,305 $ 1,534,013 $ 1,452,365 $ 1,291,584 $ 1,096,055
1,285,949 1,200,651 1,102,685 1,014,526 967,563 886,850 727,927
328,741 310,410 307,780 286,647 268,148 221,497 199,145
211,413 184,207/164,095(c) 162,650 143,520 124,984 106,858 90,723
- ---------------------------------------------------------------------------------------------------------------------------------
$ 1.32 $1.15/1.02(c) $ 1.02 $ .90 $ .78 $ .67 $ .57
- ---------------------------------------------------------------------------------------------------------------------------------
10.8% 10.2%/9.1%(c) 9.8% 9.4% 8.6% 8.3% 8.3%
- ---------------------------------------------------------------------------------------------------------------------------------
20.0% 19.5%/17.5%(c) 19.7% 20.2% 20.6% 20.6% 20.8%
$ 829,744 $ 699,650 $ 663,999 $ 602,697 $ 567,307 $ 452,639 $ 418,563
572,136 517,096 461,375 405,520 379,107 347,677 310,017
111,244 109,823 119,157 106,033 38,591 42,389 45,748
- ---------------------------------------------------------------------------------------------------------------------------------
$1,513,124 $ 1,326,569 $ 1,244,531 $ 1,114,250 $ 985,005 $ 842,705 $ 774,328
- ---------------------------------------------------------------------------------------------------------------------------------
$ 259,314 $ 223,246 $ 245,500 $ 235,300 $ 215,121 $ 197,431 $ 209,771
103,914 95,395 85,479 71,555 67,114 47,471 47,585
19,414 20,279 27,812 39,191 50,294 39,023 40,042
1,130,482 987,649 885,740 768,204 652,476 558,780 476,930
- ---------------------------------------------------------------------------------------------------------------------------------
$1,513,124 $ 1,326,569 $ 1,244,531 $ 1,114,250 $ 985,005 $ 842,705 $ 774,328
- ---------------------------------------------------------------------------------------------------------------------------------
3.0% 4.3% 5.8% 7.0% 9.9% 10.5% 12.2%
- ---------------------------------------------------------------------------------------------------------------------------------
$ 570,430 $ 476,404 $ 418,499 $ 367,397 $ 352,186 $ 255,208 $ 208,792
- ---------------------------------------------------------------------------------------------------------------------------------
3.20 3.13 2.70 2.56 2.64 2.29 2.00
160,318 160,207 160,126 159,688 159,250 158,928 158,468
- ---------------------------------------------------------------------------------------------------------------------------------
$ 64,938 $ 56,477 $ 49,643 $ 42,621 $ 35,975 $ 29,520 $ 24,581
- ---------------------------------------------------------------------------------------------------------------------------------
$ .41 $ .35 $ .31 $ .27 $ .23 $ .19 $ .16
- ---------------------------------------------------------------------------------------------------------------------------------
$ 7.05 $ 6.16 $ 5.53 $ 4.80 $ 4.10 $ 3.52 $ 3.01
- ---------------------------------------------------------------------------------------------------------------------------------
$ 37-28 $ 37-27 $ 38-19 $ 23-16 $ 19-13 $ 14-11 $ 18-10
- ---------------------------------------------------------------------------------------------------------------------------------
$ 141,697 $ 134,528 $ 122,513 $ 103,720 $ 89,787 $ 87,333 $ 104,429
- ---------------------------------------------------------------------------------------------------------------------------------
$ 85,415 $ 73,836 $ 66,686 $ 58,586 $ 65,866 $ 50,173 $ 50,032
- ---------------------------------------------------------------------------------------------------------------------------------
22,508 20,255 15,429 13,305 11,225 10,482 10,104
- ---------------------------------------------------------------------------------------------------------------------------------
11,978 11,296 9,754 9,304 9,098 8,643 7,512
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
------
35
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT*
<TABLE>
<CAPTION>
STATE OR
JURISDICTION OF PERCENT OF
NAME** INCORPORATION OWNERSHIP
---- ------------- ----------
<S> <C> <C>
The Little Tikes Company Ohio 100%
Graco Children's Products Inc. Delaware 100%
Rubbermaid Commercial Products Inc. Delaware 100%
</TABLE>
* All of the listed subsidiaries are included in Registrant's consolidated
financial statements.
** All subsidiaries conduct their businesses under the names shown.
<PAGE> 1
EXHIBIT 23
[LETTERHEAD]
The Board of Directors
Rubbermaid Incorporated:
We consent to incorporation by reference in the registration statements (File
Nos. 33-63420, 33-56105, and 33-61817) on Form S-8, and in the registration
statement (File No. 33-00471) on Form S-3 of Rubbermaid Incorporated of our
report dated January 30, 1998, relating to the consolidated balance sheets of
Rubbermaid Incorporated and subsidiaries as of December 31, 1997 and 1996, 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, 1997,
which report appears in the December 31, 1997 annual report on Form 10-K of
Rubbermaid Incorporated.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
Cleveland, Ohio
March 25, 1998
<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, 1997, which
will be filed with the Securities and Exchange Commission, Washington, D.C., and
any and all amendments thereto.
/s/ Tom H. Barrett /s/ Robert M. Gerrity
- -------------------------------- --------------------------------
Tom H. Barrett, Director Robert M. Gerrity, Director
Date: February 27, 1998 Date: February 27, 1998
/s/ Charles A. Carroll /s/ Karen N. Horn
- -------------------------------- --------------------------------
Charles A. Carroll, Director Karen N. Horn, Director
Date: February 27, 1998 Date: February 27, 1998
/s/ Scott S. Cowen /s/ William D. Marohn
- -------------------------------- --------------------------------
Scott S. Cowen, Director William D. Marohn, Director
Date: February 27, 1998 Date: February 27, 1998
/s/ Robert O. Ebert /s/ Jan Nicholson
- -------------------------------- --------------------------------
Robert O. Ebert, Director Jan Nicholson, Director
Date: February 27, 1998 Date: February 27, 1998
/s/ Thomas J. Falk /s/ Paul G. Schloemer
- -------------------------------- --------------------------------
Thomas J. Falk, Director Paul G. Schloemer, Director
Date: February 27, 1998 Date: February 27, 1998
/s/ Gordon R. Sullivan
------------------------------
Gordon R. Sullivan, Director
Date: February 27, 1998
<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, 1997 AND
1996, AND FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31,
1997, 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 114,024
<SECURITIES> 0
<RECEIVABLES> 430,793
<ALLOWANCES> 8,882
<INVENTORY> 250,597
<CURRENT-ASSETS> 816,204
<PP&E> 1,356,351
<DEPRECIATION> 648,377
<TOTAL-ASSETS> 1,923,894
<CURRENT-LIABILITIES> 567,084
<BONDS> 153,163
0
0
<COMMON> 162,677
<OTHER-SE> 887,585
<TOTAL-LIABILITY-AND-EQUITY> 1,923,894
<SALES> 2,399,701
<TOTAL-REVENUES> 2,399,701
<CGS> 1,748,424
<TOTAL-COSTS> 2,165,065
<OTHER-EXPENSES> 16,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,944
<INCOME-PRETAX> 233,906
<INCOME-TAX> 91,370
<INCOME-CONTINUING> 142,536
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142,536
<EPS-PRIMARY> .95
<EPS-DILUTED> .95
</TABLE>
