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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1993
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________to________
Commission File Number 1-4329
COOPER TIRE & RUBBER COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 34-4297750
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Lima and Western Avenues, Findlay, Ohio 45840
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (419) 423-1321
Securities registered pursuant to Section 12(b) of the Act:
(Name of each exchange on
(Title of each class) which registered)
Common Stock, $1 par per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( )
State the aggregate market value of the voting stock held by
non-affiliates of the registrant (computed by reference to the closing
price on the Composite Tape for securities listed on the New York Stock
Exchange as of March 7, 1994). $2,337,491,283
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
(Class) (Outstanding at March 7, 1994)
Common Stock, $1 par per share 83,616,872
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and
the Part of the Form 10-K into which the document is incorporated:
Proxy statement dated March 22, 1994 - Part III
EXHIBIT INDEX appears on pages 16 and 17
1
Part I.
Item 1. BUSINESS.
Products and Sales
The primary business of Cooper Tire & Rubber Company ("Cooper" or
"Company") is the conversion of natural and synthetic rubbers into a
variety of carbon black reinforced rubber products. The Company
manufactures and markets the following products for the transportation
industry: automobile and truck tires, inner tubes, vibration control
products, hose and hose assemblies, automotive sealing systems and
specialty seating components. Its non-transportation products accounted
for less than one percent of sales in 1993, 1992 and 1991. Additional
information on the Company's products appears on pages 49, 50 and 54
through 56 of this Annual Report on Form 10-K.
The Company's tire products are sold nationally and internationally
in the replacement tire market, primarily through independent dealers
and distributors. In the United States, this channel of marketing has
accounted for 66 percent of all replacement passenger tires sold in 1993
and 1992 and 67 percent during the year 1991. Cooper has an efficient
distribution system to serve its markets for replacement passenger and
truck tires.
Cooper engineers and manufactures rubber parts for automotive vehicle
manufacturers. The Company's engineering and marketing personnel work
closely with these customers to assist in the design and development of
rubber products to meet their changing requirements.
Additional information on the Company's marketing and distribution
appears on pages 52, 53, 55 and 56 of this Annual Report on Form 10-K.
North American vehicle manufacturers experienced an 11.6% increase in
total production of light vehicles in 1993. The Company's sales of
engineered rubber products are generally linked to light vehicle
production. Cooper's improved sales in this market reflected the
increased vehicle production as well as the Company's success in the
procurement of larger contracts and development of new products. The
Company is an authorized supplier to all domestically owned automotive
vehicle manufacturers and the foreign-owned and joint-venture vehicle
manufacturers in the United States.
Current market data indicates an increasing demand for replacement
tires and engineered rubber products. Essentially, there are no
economical or practical substitutes for tires or certain rubber
automotive parts. Based on current data, the Company expects moderate
growth in the market for replacement tires and in the use of rubber
components by automobile manufacturers. Additional information on the
Company's outlook for the industry appears on pages 49 and 53 of this
Annual Report on Form 10-K.
During recent years Cooper has exported to Canada and countries in
Latin America, Western Europe, the Middle East, Asia, Africa and
Oceania. The international market for rubber products is expanding as
the standard of living in other countries increases and motor vehicle
usage grows. Net sales from international operations accounted for
approximately five percent of Cooper's sales in 1993, 1992 and 1991.
(continued)
2
During 1993 Cooper's ten largest customers accounted for
approximately 55 percent of total sales. Sales to one major customer
approximated 14, 15 and 14 percent of net sales in 1993, 1992 and 1991.
The amount of backlog of orders for the Company's products at any given
time is usually small in relation to annual sales and is, therefore, of
little value in forecasting sales or earnings for the current or
succeeding years.
The Company successfully operates in a competitive industry. A
number of its competitors are larger than the Company. The four largest
tire-producing companies are believed to account for approximately 67
percent of all domestic original equipment and replacement tire sales.
The Company's shipments of automobile and truck tires in 1993
represented approximately 10 percent of all such industry shipments. On
the basis of domestic tire manufacturing capacity the Company believes
it ranks fourth among twelve generally recognized producers of new
tires. According to a recognized trade source the Company ranked ninth
in worldwide tire sales based on 1992 estimated sales volumes. Sales of
the Company's tire products are affected by factors which include price,
quality, availability, technology, warranty, credit terms and overall
customer service.
Raw Materials
The primary raw materials used by the Company include synthetic and
natural rubbers, polyester and nylon fabrics, steel tire cord and carbon
black, which the Company acquires from multiple sources to provide
greater assurance of continuing supplies for its manufacturing
operations. The Company did not experience any significant raw material
shortages in 1993, nor have any shortages been experienced in the
opening months of 1994.
During 1993 the Company opened a purchasing office in Singapore to
acquire various grades of natural rubber direct from producers in
Indonesia, Malaysia and Thailand. This purchasing operation enables the
Company to work directly with processors to improve the consistency of
quality and to reduce the costs of materials, delivery and transactions.
In addition, control over packaging methods will enhance the Company's
goal to use recyclable materials in the packaging of these raw
materials.
The Company's contractual relationships with its raw material
suppliers are generally based on purchase order arrangements. Certain
materials are purchased pursuant to supply contracts which incorporate
normal purchase order terms and establish minimum purchase amounts.
Cooper has not experienced serious fuel shortages and none are
foreseen in the near future. The Findlay, Ohio plant uses coal and
natural gas with fuel oil as a standby energy source. All other Company
plants use natural gas with fuel oil as a standby energy source.
Research, Development and Product Improvement
Cooper generally directs its research activities toward product
development, improvements in quality, and operating efficiency. A
significant portion of basic research for the rubber industry is
performed by raw material suppliers. The Company participates in such
research with its suppliers. Cooper has approximately 187 full-time
employees engaged in research and development programs. Research and
development expenditures amounted to approximately $15,100,000 in 1993,
$13,700,000 in 1992, and $14,000,000 in 1991.
(continued) 3
The Company is a leader in the application of computer technology to
the development of new tire products and engineered automotive products.
The use of computer-aided design (CAD) and sophisticated modeling
programs reduce Cooper's product development costs and the time
necessary to bring new products to market. The Company also forms
strategic alliances with universities, research firms and high-tech
manufacturers to collaborate on new product development, particularly in
engineered automotive products. The ability to offer complete component
design services and full vehicle analysis to automotive customers
increases the Company's value as a partner in product design and
development.
The Company continues to actively develop new passenger and truck
tires. Cooper conducts extensive testing of current tire lines, as well
as new concepts in tire design and construction. During 1993
approximately 117 million miles of tests were performed on indoor test
wheels and in monitored road tests. Uniformity equipment is used to
physically check every radial passenger tire produced for high standards
of quality. The Company continues to design and develop specialized
equipment to fit the precise needs of its manufacturing and quality
control requirements.
Additional information on the Company's research, development and
product improvement programs appears on pages 51, 52 and 55 of this
Annual Report on Form 10-K.
Environmental Matters
Cooper recognizes the importance of compliance in environmental
matters and has an organization structure to supervise environmental
activities, planning and programs. The Company also participates in
activities concerning general industry environmental matters.
Cooper's manufacturing facilities, in common with those of industry
generally, are subject to numerous laws and regulations designed to
protect the environment. In general, the Company has not experienced
difficulty in complying with these requirements and believes they have
not had a material adverse effect on its financial condition or the
results of its operations. The Company expects that additional
requirements with respect to environmental control facilities and waste
disposal will be imposed in the future.
The Company has been named in environmental matters asserting
potential joint and several liability for past and future cleanup, state
and Federal claims, site remediation, and attorney fees. The Company
has determined that it has no material liability for these matters. The
Company's 1993 expense and capital expenditures for environmental
control at its facilities were not material, nor is it estimated that
expenditures in 1994 for such uses will be material.
Seasonal Trends
There is a year-round demand for passenger and truck replacement
tires, but passenger replacement tire sales are generally strongest
during the second and third quarters of the year. Winter tires are sold
principally during the months of August through October. Engineered
rubber product sales to automotive customers are lowest during the
months prior to model changeover.
(continued)
4
Employee Relations
As of December 31, 1993, the Company employed 7,607 persons, of whom
3,622 were salaried employees. Union contracts covering 3,985 employees
include, among other things: wages, hours, grievance procedures,
checkoff, seniority and working conditions. Union contracts with the
United Rubber, Cork, Linoleum and Plastic Workers of America
(AFL-CIO-CLC) for all production and maintenance employees at each of
the following Company plants continue in effect until the indicated
contract expiration date:
Auburn, Indiana - December 5, 1994
Bowling Green, Ohio (Sealing products) - October 31, 1994
Bowling Green, Ohio (Hose products) - April 30, 1995
Clarksdale, Mississippi - July 31, 1996
El Dorado, Arkansas - April 27, 1997
Findlay, Ohio - October 31, 1994
Texarkana, Arkansas, - March 5, 1996
Over-the-road truck drivers are affiliated with the International
Brotherhood of Teamsters with their contract in effect until February
13, 1994. This contract has been mutually extended to allow additional
time to schedule and hold negotiation meetings. No difficulties are
anticipated in the pending negotiations. Employees at the Piedras
Negras, Mexico plant are affiliated with Sindicato Autonomo de
Trabajadores Rio Grande SerVaas with their contract in effect until
January 31, 1996. All labor agreements will be extended for yearly
periods unless notice of termination or change is given by either party
at least 60 days prior to the expiration of any yearly period. During
the last three years there has been only one plant work stoppage, which
lasted for 23 days. Cooper considers its labor relations to be
favorable.
Substantially all employees are covered by hospital and surgical,
group life, and accident and sickness benefit plans. The Company has
various trusteed non-contributory retirement income plans which cover
most employees and retirees. Substantially all retirees are covered by
hospital and surgical and group life benefit plans. See "Notes to
Consolidated Financial Statements" on pages 28 through 32 of this Annual
Report on Form 10-K for additional information as to pension costs and
funding and postretirement benefits.
5
Item 2. PROPERTIES.
The Company owns its headquarters facility which is adjacent to its
Findlay, Ohio tire manufacturing plant. Properties are located in
various sections of the United States for use in the ordinary course of
business. Such properties consist of the following:
Location Use Title
- ----------------------- ----------------------------- -----
3300 Sylvester Road Tire plant and regional Owned
Albany, GA 31703 distribution center
725 West Eleventh St. Engineered products plant Owned
Auburn, IN 46706
1175 North Main St. Engineered products plant Owned
Bowling Green, OH 43402
400 Van Camp Rd. Engineered products plant Owned
Bowling Green, OH 43402
2205 Fourth Street Inner tube plant Owned
Clarksdale, MS 38614
Cooper Drive Engineered products plant Owned
El Dorado, AR 71730
701 Lima Ave. Tire plant Owned
Findlay, OH 45840
3500 E. Washington Rd. Tire plant and regional Owned
Texarkana, AR 75502 distribution center
1689 South Green St. Tire plant and regional Owned
Tupelo, MS 38802 distribution center
6340 Artesia Blvd. Regional distribution Owned
Buena Park, CA 90620 center
151 Regal Row, #112 Wholesale distribution Leased
Dallas, TX 75247 center
1300 Lunt Avenue Regional distribution Owned
Elk Grove Village, center
IL 60007
4200-D Industry Drive Regional distribution Leased
Fife, WA 98424 center
Lake Cascades Parkway Regional distribution Owned
Findlay, OH 45840 center
1026 Century Ave. Regional distribution Leased
Kansas City, MO 64120 center
3601 Dryden Road Regional distribution Owned
Moraine, OH 45439 center
Terminal Road & Regional distribution Owned
Industrial Drive center
New Brunswick, NJ 08901
(continued) 6
The Company also owns a manufacturing facility located in Mexico
which produces inner tubes and engineered rubber parts.
Cooper's tire plants are operating at rated capacity levels with the
exception of the plant in Albany, Georgia. This plant was acquired in
1990, began limited production during 1991, and continues to be equipped
to manufacture a full range of radial passenger, light truck and medium
truck tires using the most advanced technology. The former regional
distribution center in Atlanta, Georgia was sold during 1993. It was
closed during 1991 with its operations relocated to Albany, Georgia.
The Tupelo, Mississippi and Albany, Georgia plants operate on a 24-hour
day, seven-day production schedule. The other plants are operating 24
hours per day, five days per week. The Company believes its properties
have been adequately maintained and generally are in good condition.
Additional information concerning the Company's facilities appears on
pages 51, 53, and 54 of this Annual Report on Form 10-K. Information
related to leased properties appears on pages 33 and 34.
Item 3. LEGAL PROCEEDINGS.
Cooper is a defendant in many unrelated actions in Federal and state
courts throughout the United States. In a number of such cases the
plaintiffs allege violations of state and Federal laws, breach of
contract and product liability and assert damages of many thousands of
dollars. The Company self-insures product liability losses up to
$2,250,000 per occurrence with an annual aggregate of $6,000,000. In
addition, Cooper carries Excess Liability Insurance which provides
protection with respect to product liability costs in excess of the
self-insured amounts. While the outcome of litigation cannot be
predicted with any certainty, in the opinion of counsel for the Company,
the pending claims and lawsuits against the Company should not have a
material adverse effect on the financial condition of the Company or the
results of its operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the last
quarter of the fiscal year ended December 31, 1993.
7
Part II.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Cooper Tire & Rubber Company common stock is traded on the New York
Stock Exchange under the symbol CTB. Information concerning the
Company's common stock and related security holder matters (including
dividends) is presented on pages 9, 21, 25 through 28 and 36 of this
Annual Report on Form 10-K.
Item 6. SELECTED FINANCIAL DATA.
(All dollar amounts in thousands except per share figures)
Income
Before
Net Gross Operating Income Income Net
Sales Margin Margin Taxes+ Taxes Income+ Income
--------- ------ --------- ------- ------ ------- ------
1993 $1,193,648 $228,295 $166,013 $164,250 $62,040 $102,210 $102,210
1992 1,174,728 229,332 170,646 169,841 61,670 108,171 43,211
1991 1,001,071 180,432 128,495 124,465 45,030 79,435 79,435
1990 895,896 155,892 108,715 104,874 38,410 66,464 66,464
1989 866,805 139,482 94,188 92,624 34,380 58,244 58,244
1988 748,032 106,419 66,575 64,912 23,850 41,062 41,062
1987 665,775 93,877 56,031 53,090 22,410 30,680 30,680
1986 577,517 81,515 46,432 43,138 20,120 23,018 23,018
1985 522,639 64,862 34,492 31,151 12,680 18,471 18,471
1984 555,388 73,030 43,447 41,978 17,400 24,578 24,578
1983 457,780 67,666 41,009 39,796 18,390 21,406 21,406
Net Deprecia-
Stock- Property, Capital tion & Long-
holders' Total Working Plant & Expend- Amorti- term
Equity Assets Capital Equipment itures zation Debt
------ ------ ------- --------- ------ ------- ----
1993 $550,186 $889,584 $204,857 $527,949 $117,249 $46,352 $38,729
1992 471,474 796,858 175,154 460,373 110,157 38,077 48,075
1991 439,648 670,572 144,285 388,557 85,954 31,969 53,512
1990 369,003 616,458 167,291 334,794 100,141 27,615 91,027
1989 310,064 519,893 150,285 262,445 73,182 23,393 65,727
1988 257,756 442,582 143,101 212,923 70,621 19,873 67,790
1987 221,566 413,306 154,283 162,447 41,507 18,436 70,059
1986 195,151 367,715 153,538 139,721 26,548 16,666 76,795
1985 175,711 295,161 110,300 123,380 23,660 14,955 41,910
1984 160,526 279,857 92,920 115,329 57,239 11,605 36,501
1983 139,601 243,665 111,586 69,839 18,502 9,527 33,414
(continued)
8
Long-term
Return On Return On Debt to
Beginning Beginning Current Pretax Effective Return On Capital-
Equity+ Assets+ Ratio Margin+ Tax Rate+ Sales+ ization
--------- --------- ------- ------- --------- --------- -------
1993 21.7% 12.8% 2.6 13.8% 37.8% 8.6% 6.6%
1992 24.6 16.1 2.3 14.5 36.3 9.2 9.3
1991 21.5 12.9 2.2 12.4 36.2 7.9 10.9
1990 21.4 12.8 2.7 11.7 36.6 7.4 19.8
1989 22.6 13.2 2.5 10.7 37.1 6.7 17.5
1988 18.5 9.9 2.7 8.7 36.7 5.5 20.8
1987 15.7 8.3 2.6 8.0 42.2 4.6 24.0
1986 13.1 7.8 3.1 7.5 46.6 4.0 28.2
1985 11.5 6.6 2.8 6.0 40.7 3.5 19.3
1984 17.6 10.1 2.3 7.6 41.4 4.4 18.5
1983 17.6 9.7 2.8 8.7 46.2 4.7 19.3
Net Common Common
Income Income Equity Dividends Shares Shares
Per Per Per Per Average Year End
Share*+ Share* Share* Share* (000)* (000)*
------- ------ ------ ------- ------- -------
1993 $1.22 $1.22 $6.58 $.20 83,550 83,582
1992 1.30 .52 5.65 .17 83,357 83,511
1991 .96 .96 5.30 .13 82,738 82,962
1990 .81 .81 4.47 .11 82,391 82,519
1989 .71 .71 3.77 .09 82,077 82,259
1988 .50 .50 3.15 .07 81,583 81,821
1987 .38 .38 2.72 .06 81,258 81,383
1986 .28 .28 2.40 .05 80,864 81,152
1985 .23 .23 2.18 .05 80,256 80,623
1984 .31 .31 2.00 .05 79,979 80,070
1983 .27 .27 1.75 .04 79,808 79,905
Number Price/
of Earnings
Stock- Number of Wages & Total Research & Stock Price* Average
holders Employees Benefits Taxes# Development High Low Ratio+
------- --------- -------- ------ ----------- ---- --- ------
1993 8,096 7,607 $346,062 $91,479 $15,100 $39.63 $20.00 24.4
1992 6,142 7,207 329,396 46,432 13,700 35.63 22.00 22.2
1991 4,492 6,545 266,683 67,933 14,000 26.25 7.88 17.8
1990 4,459 6,225 256,076 59,802 10,800 10.50 6.19 10.3
1989 3,871 6,041 233,881 54,020 10,300 9.75 5.63 10.8
1988 3,627 6,031 217,480 41,743 11,200 6.81 3.53 10.3
1987 3,516 5,720 189,209 39,056 10,300 4.97 2.78 10.3
1986 3,138 5,398 165,458 34,801 8,900 3.60 2.16 10.1
1985 3,526 4,876 153,825 26,275 7,300 2.55 1.83 9.5
1984 3,872 4,805 148,139 30,845 6,700 2.38 1.58 6.4
1983 4,028 4,455 128,844 29,660 6,400 2.85 1.55 8.2
+ Prior to cumulative effect of changes in accounting in 1992 for
postretirement benefits other than pensions and income taxes.
* Share data reflects stock splits in 1992, 1990, 1988 and 1983.
# Excluding Federal excise taxes.
9
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Financial Condition
The financial position of the Company continues to be excellent. Strong
operating cash flows provided funds for modernization and expansion and
contributed to continued financial strength.
Working capital amounted to $205 million at year-end 1993 compared to
$175 million one year earlier. A current ratio of 2.6 indicates an
excellent liquidity position and is improved from the year-end 1992
current ratio of 2.3.
Accounts receivable increased slightly to $182 million versus $181
million at year-end 1992, reflecting fourth quarter sales levels.
Adequate allowances have been made for possible collection losses.
Generally, collection experience has been excellent and customer payment
terms are comparable to the prior year.
Total inventories at $111 million were up significantly from $75
million at year-end 1992. Finished goods inventories were $29 million,
or 55 percent, higher than one year ago. This increase is a result of
rebuilding inventories to provide desirable customer service levels.
Raw material and supplies inventories were $5 million higher than one
year ago due to increased levels of raw material purchases.
Work-in-process inventories were $2 million higher compared to the prior
year reflecting current production levels.
Prepaid expenses and deferred taxes include $10 million in deferred
tax assets at December 31, 1993 which are considered fully realizable
within one year.
In 1993 additions to property, plant and equipment were $117 million.
This was an increase of $7 million from the previous record of $110
million in 1992. The Company's capital expenditure commitments at
December 31, 1993 were not material. The Company has invested
significant amounts for property, plant and equipment in recent years
primarily for continuing expansions and plant modernization. A
continuation of high levels of capital expenditures is anticipated.
Funding for these projects will be available from operating cash flows
with additional funding available, if needed, under a credit agreement
and a shelf registration. Depreciation and amortization was $46 million
in 1993, a 22 percent increase from $38 million in 1992, and results
from the significant capital expenditures in recent years.
Other assets of $30 million are up $8 million from year-end 1992 and
primarily reflect the increase in the amount of cumulative pension
funding in excess of amounts expensed under Statement of Financial
Accounting Standards (SFAS) #87, "Employers' Accounting for Pensions".
Current liabilities of $127 million were $13 million lower than the
$140 million at year-end 1992 reflecting decreases in trade payables.
Long-term debt decreased $9 million from year-end 1992 to $39 million
due to the payment of the $4 million Industrial Development Revenue
Bonds and scheduled debt payments. Long-term debt, as a percent of
total capitalization, decreased to 6.6 percent at December 31, 1993 from
9.3 percent one year earlier. The Company has a shelf registration
statement with the Securities and Exchange Commission covering the
proposed sale of its debt securities in an aggregate amount of up to
$200 million. The net proceeds received by the Company from any sale of
the debt securities would be available for general corporate purposes.
In December 1992, the Company adopted changes in accounting for
postretirement benefits other than pensions and income taxes retroactive
to January 1, 1992. The net impact of these accounting changes had no
effect on cash flows of the Company. The discount rate used to derive
the liability for postretirement benefits other than pensions was
reduced from 8.5 percent at December 31, 1992 to 7.5 percent at December
31, 1993.
(continued) 10
Other long-term liabilities increased $16 million reaching $36
million at December 31, 1993 from $20 million one year earlier. This
increase reflects a $14 million increase in the additional minimum
pension liability and results primarily from the change in the
assumptions used to value pension liabilities. The discount rate for
pensions was reduced from 8 percent to 7 percent and the assumed rate of
increase in compensation was reduced from 6 percent to 5 percent.
Noncurrent deferred income taxes increased to $12 million at December
31, 1993, from $7 million one year earlier, primarily reflecting the
excess of tax over book depreciation.
The Company has been named in environmental matters asserting
potential joint and several liability for past and future cleanup, state
and Federal claims, site remediation, and attorney fees. The Company
has determined that it has no material liability for these matters. In
addition, the Company is a defendant in unrelated product liability
actions in Federal and state courts throughout the United States in
which plaintiffs assert damages of many thousands of dollars. While the
outcome of litigation cannot be predicted with any certainty, in the
opinion of counsel for the Company, the pending claims and lawsuits
against the Company have not had and should not have a material adverse
effect on its financial condition or results of operations.
Stockholders' equity increased $79 million during the year reaching
$550 million at year end. Earnings retentions for 1993 (net income less
dividends paid) added $85 million to stockholders' equity but was offset
by a $7 million reduction for minimum pension liability, net of taxes.
Stockholders' equity per share was $6.58 at year-end 1993, an increase
of 16 percent over $5.65 per share at year-end 1992.
Results of Operations
High levels of capacity utilization and good customer demand continued
for the Company's tires and engineered rubber products. Sales increased
2 percent in 1993 to a record of nearly $1.2 billion. This followed a
17 percent increase in sales in 1992 which resulted primarily from
growth in customer demand.
Sales margins were lower in 1993 than in 1992 and were higher in 1992
than in 1991. In 1993 intense pricing pressure in the replacement tire
industry contributed to the reduction. Changes in product mix and
production efficiencies were the primary contributing factors to the
1992 improvement. The effects of inflation on sales and operations were
not material during 1993, 1992 and 1991.
Other income was lower in 1993 compared with 1992 and higher in 1992
compared to 1991. These changes were related to the investments of cash
reserves and rates earned thereon.
Increases in 1993 and 1992 selling, general and administrative
expenses were normal considering sales activity levels and general
inflation.
Effective income tax rates were higher in 1993 reflecting the Omnibus
Budget Reconciliation Act of 1993 which, among other things, increased
the effective federal tax rate and reinstated the research and
development credit. The increased rate in 1992 over 1991 was due
primarily to differences in tax credits.
(continued)
11
The Company currently provides certain health care and life insurance
benefits for its active and retired employees. If the Company does not
terminate such benefits, or modify coverage or eligibility requirements,
substantially all of the Company's United States employees may become
eligible for these benefits at their retirement. During 1992 the
Company began using the accrual method of accounting for the cost of
providing such benefits. The Company continues to fund these benefit
costs as claims are incurred. The cumulative effect of adopting this
accounting standard was a one-time charge to net income of $67 million,
net of a deferred income tax benefit of $41 million, or 81 cents per
share.
The Company also adopted the liability method of accounting for
income taxes in 1992. The cumulative effect of this change in
accounting was a credit to net income of $2 million, or 3 cents per
share.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Statements of financial position at December 31, 1993 and 1992 and
statements of income, cash flows, and stockholders' equity for each of
the three years in the period ended December 31, 1993, the independent
auditor's report thereon, and the Company's unaudited quarterly financial
data for the two-year period ended December 31, 1993 are presented on
pages 19 through 36 of this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
12
Part III.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning the Company's directors appears on pages 2
through 6 and 17 of the Company's Proxy Statement dated March 22, 1994
and is incorporated herein by reference. The names, ages, and all
positions and offices held by all executive officers of the Company, as
of the same date are as follows:
Name Age Executive Office Held Business Experience
--------------------- --- --------------------- ---------------------
Ivan W. Gorr 64 Chairman of the Board Principal Executive
of Directors Officer and Chairman
of the Board of
Directors since 1989;
previously Principal
Operating Officer
since 1982. President
from 1982 to 1989.
Executive Vice
President from 1977 to
1982. Treasurer from
1976 to 1982.
Principal Financial
Officer from 1975 to
1983. Director since
1975. Vice President
from 1975 to 1977.
Corporate Controller
from 1972 to 1975.
Patrick W. Rooney 58 President and Director Principal Operating
Officer and President
since 1991. Director
since 1990. Vice
President from 1987 to
1991. President of
Tire Division since
1990; previously Vice
President-Sales from
1984 to 1987. Vice
President of Cooper
Brand Sales, Tire
Division from 1969
to 1984.
J. Alec Reinhardt 52 Executive Vice Principal Financial
President and Director Officer and Director
since 1983. Executive
Vice President since
1991. Vice President
from 1982 to 1991.
Secretary from 1977 to
1986. General Counsel
from 1976 to 1983.
John Fahl 57 Vice President and Vice President since
Director 1978. Director since
July 1992. Corporate
Director of Purchasing
from 1966 to 1978.
(continued) 13
Julien A. Faisant 61 Vice President and Principal Accounting
Corporate Controller Officer and Corporate
Controller since 1975.
Vice President since
1985.
Robert C. Gasser 57 Vice President Vice President since
1987. President of
Engineered Products
Division, formerly
Industrial Products
Division, since May of
1987; Vice President-
Sales of Industrial
Products Division from
1983 to 1987.
William S. Klein 56 Vice President Vice President since
1984. Vice President-
Operations of Tire
Division since 1975.
Richard D. Teeple 51 Vice President and Vice President since
General Counsel 1990. General Counsel
since 1983. Assistant
General Counsel from
1979 to 1983.
Associate Counsel from
1977 to 1979.
William C. Hattendorf 59 Treasurer Treasurer since 1982.
Assistant Treasurer
and Assistant
Secretary from 1977 to
1982.
Stan C. Kaiman 55 Secretary Secretary since 1986.
Each such officer shall hold such office until his successor is
elected and qualified in his stead.
Item 11. EXECUTIVE COMPENSATION.
Information regarding executive compensation appears on pages 6
through 14 of the Company's Proxy Statement dated March 22, 1994 and is
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information concerning the security ownership of certain beneficial
owners and management of the Company's voting securities and equity
securities appears on pages 15 through 17 of the Company's Proxy
Statement dated March 22, 1994 and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
14
Part IV.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
The financial statements listed in the accompanying index to
financial statements and financial statement schedules are filed
as part of this Annual Report on Form 10-K.
2. Financial Statement Schedules
The financial statement schedules listed in the accompanying
index to financial statements and financial statement schedules
are filed as part of this Annual Report on Form 10-K.
3. Exhibits
The exhibits listed on the accompanying index to exhibits are
filed as part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
fiscal year ended December 31, 1993.
15
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
Page(s)
FINANCIAL STATEMENTS: Reference
---------
Consolidated Statements of Income for the years
ended December 31, 1993, 1992 and 1991 19
Consolidated Balance Sheets at December 31, 1993 and 1992 20-21
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1993, 1992 and 1991 22
Consolidated Statements of Cash Flows for the years
ended December 31, 1993, 1992 and 1991 23
Notes to Consolidated Financial Statements 24-34
Report of Independent Auditors 35
SUPPLEMENTARY INFORMATION:
Quarterly Financial Data (Unaudited) 36
FINANCIAL STATEMENTS SCHEDULES:
I Marketable Securities 37
V Property, plant and equipment 38
VI Accumulated depreciation and amortization of
property, plant and equipment 39
VIII Valuation and qualifying accounts 40
IX Short-term borrowings 40
X Supplementary Income Statement Information 41
EXHIBITS:
(3) Certificate of Incorporation and Bylaws
(i) Certificate of Incorporation, as restated and filed with
the Secretary of State of Delaware on May 17, 1993, is
incorporated herein by reference from Exhibit 3(i) of the
Company's Form 10-Q for the quarter ended June 30, 1993
(ii) Bylaws, as amended May 5, 1987, are incorporated herein
by reference from Exhibit 19 of the Company's Form 10-Q
for the quarter ended June 30, 1987
(4) Description of the Common Stock of the Company 42
(10) Description of management contracts, compensatory plans,
contracts, or arrangements is incorporated herein by
reference from pages 6 through 14 of the Company's Proxy
Statement dated March 22, 1994.
The following related documents are also incorporated by
reference:
a) 1981 Incentive Stock Option Plan - Form S-8
Registration Statement No. 2-77400, Exhibit 15(a)
b) 1986 Incentive Stock Option Plan - Form S-8
Registration Statement No. 33-5483, Exhibit 4(a)
c) Thrift and Profit Sharing Plan - Form S-8
Registration Statement No. 2-58577, Post-Effective
Amendment No. 6, Exhibit 4
d) Employment Agreements - Form 10-K for fiscal year
ended December 31, 1987, Exhibit 10
e) 1991 Stock Option Plan for Non-Employee Directors -
Form S-8 Registration Statement No. 33-47980 and
Appendix to the Company's Proxy Statement dated
March 26, 1991
(continued) 16
(11) Statement regarding computation of earnings per share is
presented on page 28 of this Annual Report on Form 10-K
(23) Consent of Ernst & Young 43
(24) Powers of Attorney 44-48
(99) Operations Review and Product Overview as published in the
Company's Annual Report to Stockholders for its fiscal
year ended December 31, 1993 49-56
Undertakings of the Company 57-59
All other schedules have been omitted since the required information is
not present or not present in amounts sufficient to require submission of
the schedules, or because the information required is included in the
financial statements or the notes thereto.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
COOPER TIRE & RUBBER COMPANY
/s/ Stan C. Kaiman
--------------------------------
STAN C. KAIMAN, Attorney-in-fact
Date: March 22, 1994
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
IVAN W. GORR* Chairman of the Board, Chief March 22, 1994
Executive Officer and Director
(Principal Executive Officer)
PATRICK W. ROONEY* President, Chief Operating March 22, 1994
Officer and Director (Principal
Operating Officer)
J. ALEC REINHARDT* Executive Vice President and March 22, 1994
Director (Principal Financial
Officer)
JOHN FAHL* Vice President and Director March 22, 1994
JULIEN A. FAISANT* Vice President and Corporate March 22, 1994
Controller (Principal
Accounting Officer)
DELMONT A. DAVIS* Director March 22, 1994
DENNIS J. GORMLEY* Director March 22, 1994
JOSEPH M. MAGLIOCHETTI* Director March 22, 1994
WILLIAM D. MAROHN* Director March 22, 1994
ALLAN H. MELTZER* Director March 22, 1994
LEON F. WINBIGLER* Director March 22, 1994
*By/s/ Stan C. Kaiman
--------------------------------
STAN C. KAIMAN, Attorney-in-fact
18
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31
1993 1992 1991
-------------- -------------- --------------
Revenues:
Net sales $1,193,647,544 $1,174,728,146 $1,001,070,670
Other income 588,204 1,275,487 509,896
------------- ------------- -------------
1,194,235,748 1,176,003,633 1,001,580,566
Costs and expenses:
Cost of products sold 965,352,347 945,395,933 820,639,025
Selling, general
and administrative 62,281,818 58,686,026 51,936,400
Interest and debt expense 2,351,477 2,080,987 4,540,305
------------- ------------- -------------
1,029,985,642 1,006,162,946 877,115,730
------------- ------------- -------------
Income before income taxes
and cumulative effect of
changes in accounting 164,250,106 169,840,687 124,464,836
Provision for income taxes 62,040,000 61,670,000 45,030,000
------------- ------------ -------------
Income before cumulative
effect of changes in
accounting 102,210,106 108,170,687 79,434,836
Cumulative effect of changes in
accounting for postretirement
benefits other than pensions
and income taxes - (64,960,000) -
------------- ------------- -------------
Net income $ 102,210,106 $ 43,210,687 $ 79,434,836
============= ============= =============
Income per share before
cumulative effect of
changes in accounting $1.22 $1.30 $.96
Cumulative effect of changes
in accounting - (.78) -
---- --- ---
Net income per share $1.22 $.52 $.96
==== === ===
See Notes to Consolidated Financial Statements, pages 24 to 34.
19
CONSOLIDATED BALANCE SHEETS
December 31
-------------------------------
ASSETS 1993 1992
------------ ------------
Current assets:
Cash, including short-term
investments of $15,000,000 in
1993 and $44,000,000 in 1992 $ 25,798,746 $ 55,111,255
Accounts receivable, less
allowances of $3,100,000 182,203,436 181,223,546
Inventories:
Finished goods 81,066,480 52,220,254
Work in process 10,381,354 7,968,229
Raw materials and supplies 19,663,017 14,855,168
----------- -----------
111,110,851 75,043,651
Prepaid expenses and deferred taxes 12,904,058 3,348,757
----------- -----------
Total current assets 332,017,091 314,727,209
Property, plant and equipment:
Land and land improvements 19,633,318 18,141,887
Buildings 182,612,322 162,624,474
Machinery and equipment 579,951,638 500,436,277
Molds, cores and rings 25,017,761 19,398,791
----------- -----------
807,215,039 700,601,429
Less accumulated depreciation
and amortization 279,265,993 240,228,481
----------- -----------
Net property, plant
and equipment 527,949,046 460,372,948
Other assets 29,618,164 21,757,708
----------- -----------
$889,584,301 $796,857,865
=========== ===========
(continued)
20
December 31
-------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1992
------------ ------------
Current liabilities:
Accounts payable $ 65,685,355 $ 78,383,064
Income taxes 6,066,283 5,706,780
Accrued liabilities 50,063,327 50,166,033
Current portion of debt 5,345,000 5,317,000
----------- -----------
Total current liabilities 127,159,965 139,572,877
Long-term debt:
9% senior notes payable, due 2001 31,818,635 36,364,090
Other 6,910,732 11,710,935
----------- -----------
Total long-term debt 38,729,367 48,075,025
Postretirement benefits other
than pensions 118,542,360 111,608,000
Other long-term liabilities 36,015,019 19,618,000
Deferred income taxes 18,952,000 6,510,000
Commitments - -
Stockholders' equity:
Preferred stock, $1 par value;
5,000,000 shares authorized;
none issued - -
Common stock, $1 par value;
300,000,000 shares authorized
(150,000,000 in 1992); 83,581,768
shares outstanding
(83,510,732 in 1992) 83,581,768 83,510,732
Capital in excess of par value 1,215,181 611,359
Retained earnings 465,388,641 387,351,872
----------- -----------
Total stockholders' equity 550,185,590 471,473,963
----------- -----------
$889,584,301 $796,857,865
=========== ===========
See Notes to Consolidated Financial Statements, pages 24 to 34.
21
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31
Capital In
Common Stock Excess of Retained
$1 Par Value Par Value Earnings
------------ ---------- ------------
Balance at December 31, 1990 $41,259,364 $ 6,038,099 $321,705,970
Net income 79,434,836
Exercise of stock options 221,620 1,747,996
Cash dividends -
$.13 per share (10,759,705)
---------- ---------- -----------
Balance at December 31, 1991 41,480,984 7,786,095 390,381,101
Net income 43,210,687
Exercise of stock options 323,070 2,470,489
Two-for-one stock split 41,706,678 (9,645,225) (32,061,453)
Cash dividends -
$.17 per share (14,178,463)
---------- ---------- -----------
Balance at December 31, 1992 83,510,732 611,359 387,351,872
Net income 102,210,106
Exercise of stock options 71,036 603,822
Cash dividends -
$.20 per share (16,710,337)
Reduction for minimum pension
liability, net of
deferred income taxes (7,463,000)
---------- ---------- -----------
Balance at December 31, 1993 $83,581,768 $1,215,181 $465,388,641
========== ========= ===========
See Notes to Consolidated Financial Statements, pages 24 to 34.
22
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31
1993 1992 1991
------------ ------------ ------------
Operating activities:
Net income $102,210,106 $ 43,210,687 $ 79,434,836
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Provision for
postretirement benefits
other than pensions 8,399,960 115,684,000 -
Depreciation and
amortization 46,352,117 38,076,734 31,968,905
Deferred taxes 10,526,000 (33,546,300) 5,596,000
Increase in accounts
receivable (979,890) (28,527,092) (25,706,185)
Decrease (increase) in
inventories and
prepaid expenses (45,622,501) 6,206,466 46,077,355
Increase (decrease) in
accounts payable and
accrued liabilities (12,800,415) 25,273,932 13,393,789
Increase (decrease) in
other long-term
liabilities and other 1,978,740 (7,957,247) (3,679,452)
----------- ----------- -----------
Net cash provided by
operating activities 110,064,117 158,421,180 147,085,248
Investing activities:
Additions to property,
plant and equipment (117,248,973) (110,156,594) (85,953,595)
Other 3,225,484 59,189 42,857
----------- ----------- ----------
Net cash used in
investing activities (114,023,489) (110,097,405) (85,910,738)
Financing activities:
Issuance of debt 24,000,000 - -
Payments on debt (33,317,658) (6,259,180) (38,077,327)
Issuance of common stock 674,858 2,793,559 1,969,616
Dividends paid (16,710,337) (14,178,463) (10,759,705)
----------- ----------- -----------
Net cash used in
financing activities (25,353,137) (17,644,084) (46,867,416)
----------- ----------- -----------
Increase (decrease) in cash
and short-term investments (29,312,509) 30,679,691 14,307,094
Cash and short-term investments
at beginning of year 55,111,255 24,431,564 10,124,470
----------- ----------- -----------
Cash and short-term investments
at end of year $ 25,798,746 $ 55,111,255 $ 24,431,564
=========== =========== ===========
See Notes to Consolidated Financial Statements, pages 24 to 34.
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
Accounting policies employed by the Company are based on generally
accepted accounting principles. The following summary of significant
accounting policies is presented for assistance in the evaluation and
interpretation of the financial statements and supplementary data.
Consolidation - The consolidated financial statements include the
accounts of the Company and its subsidiaries, all of which are
wholly-owned. All material intercompany accounts and transactions have
been eliminated.
Cash and short-term investments - The Company considers all highly
liquid investments with an original maturity of three months or less to
be short-term investments (cash equivalents). The carrying amount
reported in the balance sheets for cash and short-term investments
approximates its fair value. The effect of changes in foreign exchange
rates on cash balances was not significant.
Inventories - Substantially all inventories are valued at cost, using
the last-in, first-out (LIFO) cost method, which is not in excess of
market.
Property, plant and equipment - Assets are recorded at cost and
depreciated or amortized using the straight-line method over their
expected useful lives. For income tax purposes accelerated depreciation
methods and shorter lives are used.
Revenue recognition - Revenues are recognized after goods are shipped
to customers in accordance with their purchase orders.
Warranties - Estimated costs for product warranties are charged to
income at the time of sale.
Research and development - These costs are charged to expense as
incurred and amounted to approximately $15,100,000, $13,700,000 and
$14,000,000 in 1993, 1992 and 1991, respectively.
BUSINESS
The Company, a specialist in the rubber industry, manufactures and
markets automobile and truck tires, inner tubes, vibration control
products, hose and hose assemblies, automotive sealing systems, and
specialty seating components.
The Company manufactures products primarily for the transportation
industry. Its non-transportation products accounted for less than one
percent of sales in 1993, 1992 and 1991. Sales to one major customer
approximated 14, 15 and 14 percent of net sales in 1993, 1992 and 1991,
respectively.
INVENTORIES
Under the LIFO method, inventories have been reduced by approximately
$52,850,000 and $52,746,000 at December 31, 1993 and 1992, respectively,
from current cost which would be reported under the first-in, first-out
method.
(continued)
24
LONG-TERM DEBT
The Company has a credit agreement with four banks authorizing
borrowings up to $120,000,000 with interest at varying rates. The
proceeds may be used for general corporate purposes. The agreement
provides that on June 30, 1996 the Company may convert any outstanding
borrowings into a four-year term loan. A commitment fee of 3/16 percent
per year on the daily unused portion of the $120,000,000 is payable
quarterly. The credit facility supports the issuance of commercial
paper. There were no borrowings under the agreement at December 31,
1993 and 1992.
The 9% Senior Notes, due October 1, 2001, provide for semiannual
interest payments on April 1 and October 1 and annual principal
prepayments of $4,545,000 on October 1 through the year 2000.
Other long-term debt at December 31 was as follows:
1993 1992
---------- ----------
Capitalized lease obligations $5,258,595 $5,647,790
Industrial Development Revenue Bonds - 4,000,000
8 7/8% mortgage note, payable
$47,083 monthly including interest 1,652,137 2,063,145
--------- ----------
$6,910,732 $11,710,935
========= ==========
The Company paid the $4,000,000 Industrial Development Revenue Bonds
during 1993 as a result of the sale of a regional distribution facility.
The mortgage note is secured by real and personal property with a
carrying value of $7,637,000 at December 31, 1993.
The most restrictive covenants under the loan agreements require the
maintenance of $65,000,000 in working capital and restrict the payment
of dividends; the amount of retained earnings not restricted was
$342,886,000 at December 31, 1993.
Interest paid on debt during 1993, 1992 and 1991 was $4,723,000,
$5,111,000 and $8,321,000, respectively. The amount of interest
capitalized was $2,297,000, $2,907,000 and $3,733,000 during 1993, 1992
and 1991, respectively.
The required principal payments for long-term debt during the next
five years are as follows: 1994-$5,345,000; 1995-$5,112,000;
1996-$5,036,000; 1997 - $5,081,000; 1998 - $4,723,000. See the note on
lease commitments for information on capitalized lease obligations.
The Company has a Registration Statement with the Securities and
Exchange Commission covering the proposed sale of its debt securities in
an aggregate amount of up to $200,000,000. The Company may sell the
securities to or through underwriters, and may also sell the securities
directly to other purchasers or through agents or dealers. The net
proceeds received by the Company from any sale of the debt securities
would be available for general corporate purposes.
(continued)
25
ACCRUED LIABILITIES
Accrued liabilities at December 31, were as follows:
1993 1992
----------- -----------
Payroll $27,466,553 $27,138,465
Other 22,596,774 23,027,568
---------- ----------
$50,063,327 $50,166,033
========== ==========
PREFERRED STOCK
At December 31, 1993, 5,000,000 shares of preferred stock were
authorized but unissued. The rights of the preferred stock will be
determined upon issuance by the board of directors.
PREFERRED STOCK PURCHASE RIGHT
Each stockholder is entitled to the right to purchase 1/100th of a
newly-issued share of Series A preferred stock of the Company at an
exercise price of $16.88. The rights will be exercisable only if a
person or group acquires beneficial ownership of 20 percent or more of
the Company's outstanding common stock, or commences a tender or
exchange offer which upon consummation would result in such person or
group beneficially owning 30 percent or more of the Company's
outstanding common stock.
If any person becomes the beneficial owner of 25 percent or more of
the Company's outstanding common stock, or if a holder of 20 percent or
more of the Company's common stock engages in certain self-dealing
transactions or a merger transaction in which the Company is the
surviving corporation and its common stock remains outstanding, then
each right not owned by such person or certain related parties will
entitle its holder to purchase a number of shares of the Company's
Series A preferred stock having a market value equal to twice the then
current exercise price of the right. In addition, if the Company is
involved in a merger or other business combination transaction with
another person after which the Company's common stock does not remain
outstanding, or if the Company sells 50 percent or more of its assets or
earning power to another person, each right will entitle its holder to
purchase a number of shares of common stock of such other person having
a market value equal to twice the then current exercise price of the
right.
The Company will generally be entitled to redeem the rights at one
cent per right, or as adjusted to reflect stock splits or similar
transactions, at any time until the tenth day following public
announcement that a person or group has acquired 20 percent or more of
the Company's common stock.
COMMON STOCK
There were 7,617,672 common shares reserved for the exercise of stock
options and contributions to the Company's Thrift and Profit Sharing
Plan at December 31, 1993.
(continued)
26
STOCK OPTIONS
The Company's 1981 and 1986 incentive stock option plans provide for
granting options to key employees to purchase common shares at prices
not less than market at the date of grant. These plans were amended in
1988 to allow the granting of nonqualified stock options. Nonqualified
stock options are not intended to qualify for the tax treatment
applicable to incentive stock options under provisions of the Internal
Revenue Code.
Options under these plans may have terms of up to ten years becoming
exercisable in whole or in consecutive installments, cumulative or
otherwise. The plans also permit the granting of stock appreciation
rights with the options. Stock appreciation rights enable an optionee
to surrender exercisable options and receive common stock and/or cash
measured by the difference between the option price and the market value
of the common stock on the date of surrender.
The options granted under these plans which were outstanding at
December 31, 1993 have a term of 10 years and become exercisable 50
percent after the first year and 100 percent after the second year.
The Company's 1991 nonqualified stock option plan provides for
granting options to directors, who are not employees of the Company, to
purchase common shares at prices not less than market at the date of
grant. Options granted under this plan have a term of ten years and are
exercisable in full beginning one year after the date of grant.
Summarized information for the plans follows:
Number of Price Range
Shares Per Share
--------- -------------
Outstanding at
December 31, 1991 951,870 $ 4.44-$15.19
Granted under 1986 plan 81,700 24.94
Granted under 1991 plan 2,204 25.88
Exercised (548,764) 4.44- 15.19
Cancelled ( 43,400) 5.09- 15.19
--------
Outstanding at
December 31, 1992 443,610 $ 5.09-$25.88
Granted under 1986 plan 84,800 25.00
Granted under 1991 plan 2,195 34.69
Exercised (71,036) 5.09 - 24.94
Cancelled (4,800) 15.19 - 24.94
-------
Outstanding at
December 31, 1993 454,769 $5.09 -$34.69
=======
At December 31, 1993, under the 1981 plan, options were exercisable
on 37,200 shares and no shares were available for future grants. At
December 31, 1992, options were exercisable on 53,400 shares and no
shares were available for future grants.
(continued)
27
Under the 1986 plan, at December 31, 1993, options were exercisable
on 285,850 shares and 1,308,640 shares were available for future grants.
At December 31, 1992, options were exercisable on 234,700 shares and
1,388,640 shares were available for future grants.
At December 31, 1993, under the 1991 plan, 5,074 options were
exercisable and 92,495 shares were available for future grants. At
December 31, 1992, 3,106 options were exercisable and 94,690 shares were
available for future grants.
EARNINGS PER SHARE
Net income per share is based upon the weighted average number of shares
outstanding which were 83,549,566 in 1993, 83,357,141 in 1992 and
82,737,762 in 1991. The effect of common stock equivalents is not
significant for any period presented.
PENSIONS
The Company has defined benefit plans covering substantially all
employees. The salary plan provides pension benefits based on an
employee's years of service and average earnings for the five highest
calendar years during the ten years immediately preceding retirement.
The hourly plans provide benefits of stated amounts for each year of
service. The Company's general funding policy is to contribute amounts
deductible for Federal income tax purposes.
Pension expense increased in 1993, 1992 and 1991 reflecting increased
benefits in each year offset by returns on the plans' assets. Pension
expense for 1993, 1992 and 1991 included the following components:
1993 1992 1991
----------- ----------- -----------
Service cost - benefits
earned during period $ 7,641,000 $ 6,378,000 $ 5,627,000
Interest cost on projected
benefit obligation 16,327,000 14,280,000 12,685,000
Actual return on assets (12,875,000) (26,337,000) (25,793,000)
Net amortization and deferral (879,000) 15,377,000 16,915,000
---------- ---------- ----------
Net periodic pension cost $10,214,000 $ 9,698,000 $ 9,434,000
========== ========== ==========
(continued)
28
The plans' assets consist of cash, cash equivalents and marketable
securities. The funded status of the Company's plans at December 31,
1993 and 1992 was as follows:
December 31, 1993
-----------------------------
Plans for Which
---------------
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
------------- -------------
Actuarial present value of
benefit obligations:
Vested benefit obligation $(106,304,000) $( 87,598,000)
=========== ============
Accumulated benefit obligation $(108,984,000) $( 89,743,000)
=========== ============
Projected benefit obligation $(152,243,000) $( 91,579,000)
Plans' assets at fair value 144,934,000 63,341,000
----------- ------------
Projected benefit obligation
in excess of plan assets ( 7,309,000) ( 28,238,000)
Unrecognized transition amount 6,508,000 3,566,000
Unrecognized prior service cost - 7,828,000
Unrecognized net (gain) loss 18,067,000 12,759,000
Adjustment for minimum liability - ( 23,929,000)
------------ ------------
Pension asset (liability)
recognized in the Balance Sheet $ 17,266,000 $( 28,014,000)
============ ============
(continued)
29
December 31, 1992
------------------------------
Plans for Which
---------------
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
------------- -------------
Actuarial present value of
benefit obligations:
Vested benefit obligation $( 87,679,000) $( 63,694,000)
=========== ===========
Accumulated benefit obligation $( 89,588,000) $( 65,002,000)
=========== ===========
Projected benefit obligation $(130,366,000) $( 66,885,000)
Plans' assets at fair value 137,448,000 52,069,000
----------- -----------
Projected benefit obligation less
than (in excess of) plan assets 7,082,000 ( 14,816,000)
Unrecognized transition amount 7,038,000 4,124,000
Unrecognized prior service cost 604,000 6,646,000
Unrecognized net (gain) loss ( 2,342,000) 164,000
Adjustment for minimum liability - ( 10,206,000)
------------ -----------
Pension asset (liability)
recognized in the Balance Sheet $ 12,382,000 $( 14,088,000)
============ ===========
The increase in the actuarial present value of benefit obligations in
1993 is due primarily to the reduction of the assumptions for the
discount rate and the rate of increase in future compensation levels.
The expected long-term rate of return on the plans' assets was 10
percent in 1993, 1992 and 1991. The assumptions used to determine the
status of the Company's plans were as follows:
December 31, 1993 December 31, 1992
----------------- -----------------
Increase in future
compensation levels 5.0% 6.0%
Discount rate 7.0 8.0
The information presented above includes an unfunded, nonqualified
supplemental executive retirement plan covering certain employees whose
participation in the qualified plan is limited by provisions of the
Internal Revenue Code.
The Company sponsors several defined contribution plans for its
employees who are eligible to participate. Participation is voluntary
and participants' contributions are based on their compensation. A
thrift and profit sharing plan is available for any salaried employee
(continued) 30
after completion of one year of continuous service. Company
contributions are based on the lesser of (a) participants' contributions
up to six percent of each participant's compensation, less any
forfeitures, or (b) an amount equal to fifteen percent of the Company's
pre-tax earnings in excess of ten percent of stockholders' equity at the
beginning of the year. Thrift and profit sharing expense for 1993, 1992
and 1991 was $6,027,000, $5,503,000 and $4,759,000, respectively.
Pre-tax savings plans are available for certain hourly employees after
completion of 30 days of continuous credited service. The Company has
not contributed to these plans.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company currently provides certain health care and life insurance
benefits for its active and retired employees. If the Company does not
terminate such benefits, or modify coverage or eligibility requirements,
substantially all of the Company's United States employees may become
eligible for these benefits during their retirement if they meet certain
age and service requirements. The Company has reserved the right to
modify or terminate such benefits at any time. In recent years benefit
changes have been implemented throughout the Company.
During the fourth quarter of 1992 the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," retroactive to January 1,
1992. The Standard requires, among other things, that employers use the
accrual method of accounting for the cost of providing such benefits in
the future. The Company continues to fund these benefit costs as claims
are incurred. The cumulative effect of adopting this Standard at
January 1, 1992 was a one-time charge to net income of $67,393,000, net
of a deferred income tax benefit of $40,797,000, or 81 cents per share.
Postretirement benefit costs for years prior to 1992 were recorded on a
cash basis and have not been restated.
Postretirement benefits expense for 1993 and 1992 included the
following components:
1993 1992
----------- -----------
Service cost $ 2,226,000 $ 2,094,000
Interest cost 9,805,000 9,261,000
---------- ----------
$12,031,000 $11,355,000
========== ==========
The status of the Company's plans at December 31, 1993 and 1992 was
as follows:
1993 1992
------------ ------------
Accumulated postretirement
benefit obligation (APBO):
Retirees $ 83,974,000 $ 70,293,000
Fully eligible active plan participants 24,148,000 18,029,000
Other active plan participants 38,547,000 27,459,000
----------- -----------
146,669,000 115,781,000
Deferred gain (loss) (21,591,000) 1,237,000
Postretirement benefit liability ----------- -----------
recognized in the Balance Sheet $125,078,000 $117,018,000
=========== ===========
(continued) 31
The discount rate used in determining the APBO was 7.5 percent and
8.5 percent for 1993 and 1992, respectively. The increase in the
actuarial present value of the accumulated benefit obligation is due
primarily to the reduction of the assumption for the discount rate. At
December 31, 1993, the assumed average annual rate of increase in the
cost of health care benefits (health care cost trend rate) was 11.75
percent for 1994 declining by .75 percent per year through 1997, by .5
percent per year through 2003, and by .25 percent per year through 2007
when the ultimate rate of 5.5 percent is attained. This trend rate
assumption has a significant effect on the amounts reported above. A 1
percent increase in the health care cost trend rate would increase the
APBO by $7,900,000 and the net periodic expense by $600,000 for the
year.
The Company has a Voluntary Employees' Beneficiary Trust and Welfare
Benefits Plan (VEBA) to pre-fund future health benefits for eligible
active and retired employees. The pre-funded amount was $9,200,000 in
1993 and $8,600,000 in 1992.
INCOME TAXES
The provision for income taxes, before cumulative effect of changes in
accounting, consists of the following:
1993 1992 1991
----------- ----------- -----------
Current:
Federal $44,531,000 $47,940,000 $34,204,000
State and local 6,983,000 6,883,000 5,230,000
---------- ---------- ----------
51,514,000 54,823,000 39,434,000
Deferred:
Excess of tax over book
depreciation 11,039,000 7,965,000 5,479,000
Other (513,000) ( 1,118,000) 117,000
---------- ---------- ----------
10,526,000 6,847,000 5,596,000
---------- ---------- ----------
$62,040,000 $61,670,000 $45,030,000
========== ========== ==========
The effective income tax rate, based on income before cumulative effect
of changes in accounting, differs from the statutory Federal tax rate as
follows:
1993 1992 1991
---- ---- ----
Statutory Federal tax rate 35.0% 34.0% 34.0%
State and local income taxes,
net of Federal income tax
benefit 3.4 3.2 2.8
Other (0.6) (0.9) (0.6)
---- ---- ----
Effective income tax rate 37.8% 36.3% 36.2%
==== ==== ====
Payments for income taxes in 1993, 1992 and 1991 were $54,712,000,
$53,123,000 and $35,782,000, respectively.
(continued)
32
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
liabilities and assets as of December 31, 1993 and 1992 are as follows:
1993 1992
----------- -----------
Deferred tax liabilities:
Tax over book depreciation $55,181,000 $42,921,000
Other 17,207,000 13,547,000
---------- ----------
Total deferred tax liabilities 72,388,000 56,468,000
Deferred tax assets:
Postretirement benefits other
than pensions 43,305,000 39,501,000
Other 20,377,000 10,457,000
---------- ----------
Total deferred tax assets 63,682,000 49,958,000
---------- -----------
Net deferred tax liabilities $ 8,706,000 $ 6,510,000
========== ==========
These amounts are included in the accompanying balance sheets as
follows:
1993 1992
----------- ----------
Current assets, included in prepaid
expenses and income taxes $10,246,000 $ -
Noncurrent liabilities - deferred
income taxes 18,952,000 6,510,000
---------- ---------
Net deferred tax liabilities $ 8,706,000 $6,510,000
========== =========
During the fourth quarter of 1992, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes",
retroactive to January 1, 1992. The Company's financial statements for
years prior to adoption have not been restated. The cumulative effect
of adopting this Standard at January 1, 1992 was a one-time credit to
income of $2,433,000, or 3 cents per share.
LEASE COMMITMENTS
The Company leases certain facilities and equipment under long-term
leases expiring at various dates. The leases generally contain renewal
or purchase options and provide that the Company shall pay for
insurance, property taxes and maintenance.
(continued) 33
Included in property, plant and equipment are the following
capitalized lease amounts at December 31, 1993 and 1992:
1993 1992
----------- -----------
Land and land improvements $ 378,048 $ 440,048
Buildings 9,787,642 11,187,642
Machinery and equipment 13,793,087 13,794,787
---------- ----------
23,958,777 25,422,477
Less accumulated amortization 20,329,805 21,104,938
---------- ----------
$ 3,628,972 $ 4,317,539
========== ==========
Rental expense for operating leases was $5,362,000 for 1993,
$5,756,000 for 1992 and $6,152,000 for 1991.
Future minimum payments for all noncancelable leases at December 31,
1993 are summarized below:
Capital Operating
Leases Leases
----------- ----------
1994 $ 654,000 $2,264,000
1995 315,000 1,817,000
1996 194,000 1,244,000
1997 194,000 455,000
1998 194,000 167,000
1999 and later 9,458,000 70,000
---------- ---------
11,009,000 $ 6,017,000
==========
Less amount representing
interest 5,361,000
----------
Present value of minimum
lease payments $ 5,648,000
==========
34
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Cooper Tire & Rubber Company
We have audited the accompanying consolidated balance sheets of Cooper
Tire & Rubber Company as of December 31, 1993 and 1992, and the related
consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1993. Our
audits also included the financial statement schedules listed in the
Index at Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Cooper Tire & Rubber Company at December 31, 1993 and 1992, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
As discussed in the notes to the financial statements, in 1992 the
Company changed its methods of accounting for postretirement benefits
other than pensions and income taxes.
/s/ Ernst & Young
-----------------
ERNST & YOUNG
Toledo, Ohio
February 14, 1994
35
QUARTERLY FINANCIAL DATA
(UNAUDITED)
(All dollar amounts in thousands except per share figures)
QUARTER
------------------------------------------
1993 FOURTH THIRD SECOND FIRST
---- ------ ----- ------ -----
Net Sales $294,875 $326,107 $292,566 $280,100
Gross Margin $ 59,943 $ 57,108 $ 54,572 $ 56,672
Net Income $ 27,835 $ 25,155 $ 24,024 $ 25,196
Net Income Per Share $.33 $.30 $.29 $.30
Dividend Per Share $.055 $.055 $.045 $.045
Stock Price: High $25 1/2 $28 5/8 $39 5/8 $39 1/2
Low $20 $22 7/8 $21 1/2 $30 1/2
QUARTER
------------------------------------------
1992 FOURTH THIRD SECOND FIRST
---- ------ ----- ------ -----
Net Sales $294,007 $305,211 $306,405 $269,105
Gross Margin $ 66,068 $ 63,141 $ 55,025 $ 45,098
Income+ $ 33,846 $ 30,439 $ 25,028 $ 18,858
Net Income* $ 33,846 $ 30,439 $ 25,028 $(46,102)
Income Per Share+ $.41 $.36 $.30 $.23
Net Income Per Share* $.41 $.36 $.30 $(.55)
Dividend Per Share $.045 $.045 $.045 $.035
Stock Price: High $35 5/8 $30 1/4 $27 3/8 $26 7/8
Low $25 1/2 $24 $22 $22 1/8
+ Prior to cumulative effect of changes in accounting for post-
retirement benefits other than pensions and income taxes.
*Net income and net income per share for the first quarter, 1992 reflect
the net impact of cumulative changes in accounting resulting from the
adoption of SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions", and SFAS No. 109, "Accounting for
Income Taxes".
36
COOPER TIRE & RUBBER COMPANY
SCHEDULE I - MARKETABLE SECURITIES
Years Ended December 31, 1993 and 1992
Amount at Which
Market Value Each Security
Principal Amounts of Each Issue Issue Is
Title of of Bonds and Cost of at Balance Carried in the
Each Issue Notes Each Issue Sheet Date Balance Sheet
---------- ----------------- ---------- ------------- ---------------
1993
----
Not required.
1992
----
U. S. Government
Securities $16,000,000 $16,000,000 $16,000,000 $16,000,000
Commercial Paper* 28,000,000 28,000,000 28,000,000 28,000,000
---------- ---------- ---------- ----------
$44,000,000 $44,000,000 $44,000,000 $44,000,000
========== ========== ========== ==========
*No individual security issue exceeds 2% of total assets.
37
COOPER TIRE & RUBBER COMPANY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Years Ended December 31, 1993, 1992 and 1991
Balance at Balance
Beginning Additions Reclass & at End
Description of Year at Cost Disposals of Year
----------- --------- --------- --------- -------
1993
----
Land and land
improvements $ 18,141,887 $ 2,258,384 $ 766,953 $ 19,633,318
Buildings 162,624,474 23,008,865 3,021,017 182,612,322
Machinery and
equipment 500,436,277 83,001,279 3,485,918 579,951,638
Molds, cores
and rings 19,398,791 8,980,445 3,361,475(a) 25,017,761
----------- ----------- ---------- -----------
$700,601,429 $117,248,973 $10,635,363 $807,215,039
=========== =========== ========== ===========
1992
----
Land and land
improvements $ 16,272,933 $ 1,868,954 $ - $ 18,141,887
Buildings 144,510,984 18,113,490 - 162,624,474
Machinery and
equipment 417,896,779 85,185,224 2,645,726 500,436,277
Molds, cores
and rings 17,800,340 4,988,926 3,390,475(a) 19,398,791
----------- ----------- ---------- -----------
$596,481,036 $110,156,594 $ 6,036,201 $700,601,429
=========== =========== ========== ===========
1991
----
Land and land
improvements $ 15,130,984 $ 1,192,338 $ 50,389 $ 16,272,933
Buildings 127,382,588 17,371,050 242,654 144,510,984
Machinery and
equipment 364,383,471 62,069,810 8,556,502 417,896,779
Molds, cores
and rings 14,044,774 5,320,397 1,564,831(a) 17,800,340
----------- ----------- ---------- -----------
$520,941,817 $ 85,953,595 $10,414,376 $596,481,036
=========== =========== ========== ===========
(a) Includes fully depreciated assets removed from records in:
1993 - $3,361,475; 1992 - $3,390,475; 1991 - $1,564,831.
38
COOPER TIRE & RUBBER COMPANY
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Years Ended December 31, 1993, 1992 and 1991
Balance at Provision Balance
Beginning Charged Reclass & at End
Description of Year to Income Disposals of Year
----------- --------- --------- --------- -------
1993
----
Land
improvements $ 3,210,429 $ 638,466 $ 34,034 $ 3,814,861
Buildings 33,321,089 4,541,489 618,917 37,243,661
Machinery and
equipment 194,542,667 36,171,353 3,300,179 227,413,841
Molds, cores
and rings 9,154,296 5,000,809 3,361,475(a) 10,793,630
----------- ----------- ---------- -----------
$240,228,481 $ 46,352,117 $ 7,314,605 $279,265,993
=========== =========== ========== ===========
1992
----
Land
improvements $ 2,680,575 $ 529,854 $ - $ 3,210,429
Buildings 29,423,012 3,898,077 - 33,321,089
Machinery and
equipment 167,270,120 29,654,360 2,381,813 194,542,667
Molds, cores
and rings 8,550,328 3,994,443 3,390,475(a) 9,154,296
----------- ----------- ---------- -----------
$207,924,035 $ 38,076,734 $ 5,772,288 $240,228,481
=========== =========== ========== ===========
1991
----
Land
improvements $ 2,303,882 $ 427,082 $ 50,389 $ 2,680,575
Buildings 26,261,219 3,382,742 220,949 29,423,012
Machinery and
equipment 150,852,506 24,773,864 8,356,250 167,270,120
Molds, cores
and rings 6,729,942 3,385,217 1,564,831(a) 8,550,328
----------- ----------- ---------- -----------
$186,147,549 $ 31,968,905 $10,192,419 $207,924,035
=========== =========== ========== ===========
DEPRECIATION AND AMORTIZATION
Annual depreciation and amortization provisions have been computed based
upon the following estimated lives:
Land improvements 10 to 20 years
Buildings 20 to 40 years
Machinery and equipment 5 to 14 years
Molds, cores and rings 4 years
(a) Includes fully depreciated assets removed from records in:
1993 - $3,361,475; 1992 - $3,390,475; 1991 - $1,564,831.
39
COOPER TIRE & RUBBER COMPANY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1993, 1992 and 1991
Balance at Additions Balance
Beginning Charged Deductions at End
of Year To Income (a) of Year
--------- --------- --------- -------
Allowance for
doubtful accounts:
1993 $3,100,000 $ 647,967 $ 647,967 $3,100,000
========= ========= ========= =========
1992 $3,000,000 $1,392,578 $1,292,578 $3,100,000
========= ========= ========= =========
1991 $2,600,000 $ 536,896 $ 136,896 $3,000,000
========= ========= ========= =========
(a) Accounts charged off during the year, net of recoveries of accounts
previously charged off.
SCHEDULE IX - SHORT-TERM BORROWINGS
Years Ended December 31, 1993, 1992 and 1991
Weighted
Maximum Average Average
Category of Weighted Amount Amount Interest
Aggregate Balance Average Outstanding Outstanding Rate
Short-Term at End of Interest During the During the During the
Borrowings Period Rate Period Period (b) Period(c)
---------- --------- -------- ----------- ----------- ----------
1993
Commercial
paper (a) none n/a $24,000,000 $8,544,000 3.20%
==== === ========== ========= =====
1992 none n/a none none n/a
==== === ==== ==== ===
1991 none n/a none none n/a
==== === ==== ==== ===
(a) Commercial paper is issued with various maturities the longest
of which may not exceed 270 days.
(b) The average amount outstanding during the period was computed by
dividing the total daily outstanding principal balances by 364.
(c) The weighted average interest rate during the period was computed
by dividing the sum of the annualized interest costs for each
issue by the sum of debt issuances.
40
COOPER TIRE & RUBBER COMPANY
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years Ended December 31, 1993, 1992 and 1991
Charged to Costs and Expenses
---------------------------------------
Item
---- 1993 1992 1991
---- ---- ----
Maintenance and repairs $36,824,000 $36,012,000 $28,506,000
========== ========== ==========
Taxes, other than payroll and
income taxes * * *
Royalties * * *
Advertising * * *
*Less than 1 percent of total sales
41
Exhibit (4)
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue 300,000,000 shares of Common
Stock, par value $1.00 per share. As of March 7, 1994, 83,616,872
shares were issued and outstanding. Each share of Common Stock has
equal dividend, liquidation and voting rights. The shares of Common
Stock are not redeemable and have no conversion rights. The only rights
to subscribe for additional shares of the Company's capital stock are
those involved in a Stockholder Rights Plan adopted May 27, 1988 and
described in a Rights Agreement between the Company and Society National
Bank as Rights Agent. All shares of Common Stock presently outstanding
are fully paid and nonassessable.
The most restrictive covenants under the Company's loan agreements
require the maintenance of $65,000,000 in working capital and limit the
payment of cash dividends, purchase or redemption of capital stock and
any other cash distributions to stockholders. The amount of retained
earnings not restricted under the agreements was $342,886,000 at
December 31, 1993.
Subject to the foregoing, holders of the Common Stock are entitled to
receive such dividends as the Board of Directors may from time to time
declare out of funds lawfully available therefor. The Company has paid
cash dividends on its Common Stock in each year since 1950. See
"Quarterly Financial Data (Unaudited)" presented on page 36 of this
Annual Report on Form 10-K for a description of the Company's recent
dividend practices. The payment of future dividends will depend on the
earnings and financial position of the Company, its capital requirements
and other relevant factors.
The Company's Board of Directors consists of three classes of
directors as nearly equal in number as the total number of directors
constituting the entire board permits. By a vote of a majority, the
Board of Directors has the authority to fix the number of directors
constituting the entire board at not less than six (6) nor more than
twelve (12) individuals, and the number is currently set at eleven (11).
The term of each class of directors is three years and each class of
directors is elected in successive years. The shares of Common Stock
have non-cumulative voting rights.
The Transfer Agent and Registrar for the shares of Common Stock of
the Company is Society National Bank, Cleveland, Ohio.
42
Exhibit (23)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements of Cooper Tire & Rubber Company listed below, and in the
Prospectus related to the Form S-3, of our report dated February 14, 1994,
with respect to the consolidated financial statements and schedules of
Cooper Tire & Rubber Company included in the Annual Report (Form 10-K) for
the year ended December 31, 1993:
Form S-3 No. 33-44159 $200,000,000 aggregate principal amount of
the Company's Debt Securities
Form S-8 No. 2-58577 Thrift and Profit Sharing Plan
No. 2-77400 1981 Incentive Stock Option Plan
No. 33-5483 1986 Incentive Stock Option Plan
No. 33-35071 Texarkana Pre-Tax Savings Plan
No. 33-47979 Pre-Tax Savings Plan at the Auburn Plant
No. 33-47980 1991 Stock Option Plan for Non-Employee
Directors
No. 33-47981 Pre-Tax Savings Plan at the Findlay Plant
No. 33-47982 Pre-Tax Savings Plan at the El Dorado Plant
No. 33-52499 Pre-Tax Savings Plan (Bowling Green - Hose)
No. 33-52505 Pre-Tax Savings Plan (Bowling Green - Sealing)
/s/ Ernst & Young
-----------------
ERNST & YOUNG
Toledo, Ohio
March 22, 1994
43
Exhibit (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, in the capacities
indicated, do hereby constitute and appoint Ivan W. Gorr, or Stan C.
Kaiman, or J. Alec Reinhardt, or Patrick W. Rooney as their attorney
with full power of substitution and resubstitution for and in their
name, place and stead, to sign and file with the Securities and
Exchange Commission an Annual Report on Form 10-K, as amended, together
with any and all amendments and exhibits thereto and any and all
applications, instruments or documents to be filed with the Securities
and Exchange Commission pertaining to such report, with full power and
authority to do and perform any and all acts and things whatsoever
requisite and necessary to be done in the premises, hereby ratifying
and approving the acts of said attorney or any such substitute.
Executed at Findlay, Ohio this 14th day of February, 1994.
/s/ Delmont A. Davis /s/ John Fahl
--------------------------- -----------------------------
Delmont A. Davis, Director John Fahl, Director
/s/ Julien A. Faisant /s/ Dennis J. Gormley
--------------------------- -----------------------------
Julien A. Faisant, Vice Dennis J. Gormley, Director
President and Controller,
Principal Accounting Officer
/s/ Ivan W. Gorr /s/ Stan C. Kaiman
--------------------------- -----------------------------
Ivan W. Gorr, Chairman of the Stan C. Kaiman, Secretary
Board, Principal Executive
Officer, and Director
/s/ William D. Marohn
--------------------------- -----------------------------
Joseph M. Magliochetti, William D. Marohn, Director
Director
/s/ J. Alec Reinhardt
--------------------------- -----------------------------
Allan H. Meltzer, Director J. Alec Reinhardt, Executive
Vice President, Principal
Financial Officer, and
Director
/s/ Patrick W. Rooney /s/ Leon F. Winbigler
--------------------------- ------------------------------
Patrick W. Rooney, President, Leon F. Winbigler, Director
Principal Operating Officer, and
Director
(continued)
44
STATE OF OHIO )
) ss.
COUNTY OF HANCOCK)
On this 14th day of February, 1994, before me a Notary Public in and
for the State and County aforesaid, personally appeared Delmont A.
Davis, John Fahl, Julien A. Faisant, Dennis J. Gormley, Ivan W. Gorr,
Stan C. Kaiman, William D. Marohn, J. Alec Reinhardt, Patrick W.
Rooney, and Leon F. Winbigler, known to me to be the persons whose
names are subscribed in the within instrument and acknowledged to me
that they executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Julie A. Grismore
--------------------------------------
Julie A. Grismore
Notary Public, State of Ohio
My commission expires January 15, 1996
(SEAL)
45
Exhibit (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, in the capacity
indicated, does hereby constitute and appoint Ivan W. Gorr, or Stan C.
Kaiman, or J. Alec Reinhardt, or Patrick W. Rooney as his attorney with
full power of substitution and resubstitution for and in his name, place
and stead, to sign and file with the Securities and Exchange Commission
an Annual Report on Form 10-K, as amended, together with any and all
amendments and exhibits thereto and any and all applications,
instruments or documents to be filed with the Securities and Exchange
Commission pertaining to the filing of such report, with full power and
authority to do and perform any and all acts and things whatsoever
requisite and necessary to be done in the premises, hereby ratifying and
approving the acts of said attorney or any such substitute.
Executed at Toledo, Ohio this 21st day of February, 1994.
/s/ Joseph M. Magliochetti
--------------------------------
Joseph M. Magliochetti, Director
STATE OF OHIO )
) ss.
COUNTY OF LUCAS)
On this 21st day of February, 1994, before me a Notary Public, in and
for the State and County aforesaid, personally appeared Joseph M.
Magliochetti, known to me to be the person whose name is subscribed in
the within instrument and acknowledged to me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Marcia L. Coy-Bauman
---------------------------------
Marcia L. Coy-Bauman
Notary Public, State of Ohio
My commission expires March 27, 1997
(SEAL)
46
Exhibit (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, in the capacity
indicated, does hereby constitute and appoint Ivan W. Gorr, or Stan C.
Kaiman, or J. Alec Reinhardt, or Patrick W. Rooney as his attorney with
full power of substitution and resubstitution for and in his name, place
and stead, to sign and file with the Securities and Exchange Commission
an Annual Report on Form 10-K, as amended, together with any and all
amendments and exhibits thereto and any and all applications,
instruments or documents to be filed with the Securities and Exchange
Commission pertaining to the filing of such report, with full power and
authority to do and perform any and all acts and things whatsoever
requisite and necessary to be done in the premises, hereby ratifying and
approving the acts of said attorney or any such substitute.
Executed at Pittsburgh, Pennsylvania this 24th day of February, 1994.
/s/ Allan H. Meltzer
--------------------------------
Allan H. Meltzer, Director
STATE OF PENNSYLVANIA)
) ss.
COUNTY OF ALLEGHENY )
On this 24th day of February, 1994, before me a Notary Public, in and
for the State and County aforesaid, personally appeared Allan H.
Meltzer, known to me to be the person whose name is subscribed in the
within instrument and acknowledged to me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Richard C. Schaeffer
---------------------------------
Richard C. Schaeffer
Pittsburgh, Allegheny County
My commission expires February 29, 1996
(SEAL)
47
Exhibit (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby, for
and on behalf of Cooper Tire & Rubber Company in accordance with the
certain resolution of the Board of Directors adopted February 14, 1994,
constitute and appoint Ivan W. Gorr, or Stan C. Kaiman, or J. Alec
Reinhardt, or Patrick W. Rooney as its attorney with full power of
substitution and resubstitution for and in its name, place and stead,
to sign and file with the Securities and Exchange Commission an Annual
Report on Form 10-K pursuant to the Securities Act of 1934, as amended,
together with any and all amendments and exhibits thereto, and all
applications, instruments or documents to be filed with the Securities
and Exchange Commission pertaining to the filing of such report, with
full power and authority to do and perform any and all acts and things
whatsoever requisite and necessary to be done in the premises, hereby
ratifying and approving the acts of said attorney or any such
substitute.
Executed at Findlay, Ohio this 23rd day of February, 1994.
ATTEST: COOPER TIRE & RUBBER COMPANY
/s/ Stan C. Kaiman /s/ Ivan W. Gorr
------------------------- -----------------------------
Stan C. Kaiman Ivan W. Gorr
Secretary Chairman of the Board
and Chief Executive Officer
STATE OF OHIO )
) ss.
COUNTY OF HANCOCK)
On this 23rd day of February, 1994, before me a Notary Public, in
and for the State and County aforesaid, personally appeared Ivan W.
Gorr and Stan C. Kaiman, known to me to be the persons whose names are
subscribed in the within instrument and acknowledged to me that they
executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Julie A. Grismore
----------------------------------
Julie A. Grismore
Notary Public, State of Ohio
My commission expires January 15, 1996
(SEAL)
48
Exhibit (99)
OPERATIONS REVIEW AND PRODUCT OVERVIEW
OPERATIONS REVIEW
Tire Products
INDUSTRY OVERVIEW
Following an exceptional year in 1992, industry demand returned to
rather normal levels in 1993. Total replacement tire shipments for the
year were approximately 199.2 million units, virtually equal to the 1992
total of 199 million units. Industry sales of replacement passenger
tires were slightly lower than the prior year, while the light truck and
medium truck tire segments showed slight gains.
The most popular replacement passenger tires continue to be
performance-type, all-season radials. Of the total industry replacement
passenger tires shipped during the year, eight out of ten were
all-season designs, while half carried speed ratings of S or higher and
had aspect ratios in the performance range below 75 series.
Light truck tires in the replacement market are following a
comparable direction. Four out of five replacement light truck tires
shipped are radial construction and three out of five have all-season
treads. Speed ratings are also finding application in this market,
however, the trend is not significant at this time.
Five out of six medium truck tires in the replacement market are of
radial construction. Industry shipments of radial medium truck tires to
the replacement market increased during the year, while bias tire sales
declined.
The total inner tube market is declining gradually each year. Within
the total units shipped, smaller sized tubes, such as for passenger and
light truck tires, are decreasing, while larger tubes for trucks, farm
implements and construction vehicles are experiencing increased demand.
Factors which indicate consumer buying potential in the replacement
industry continue to show favorable trends. The number of passenger car
registrations in the U.S. increased by more than a half million vehicles
during the year over the 1992 figure. Passenger cars in the U.S.
traveled almost 2.3 trillion miles during the year, about 50 billion
miles more than in 1992. For the second consecutive year, the average
age of a passenger car in the U.S. exceeded 8 years. Combined, these
factors show that more vehicles are being driven more miles over a
longer period of time which will, consequently, require the purchase of
additional replacement tires.
The Company distributes its Cooper, Falls Mastercraft and Starfire
house brand tires primarily through independent tire dealers, who make
up the largest distribution channel in the replacement industry.
According to consumer surveys, independent dealers are the most
preferred source for retail tire purchases. The expertise and customer
service provided by independent dealers prevails as a major consumer
benefit.
PRODUCTS
Cooper manufactures and markets full lines of passenger, light truck and
medium truck tires in sizes, tread designs and sidewall styles to meet
the application and price demands of the replacement market.
(continued) 49
Five new lines of tire products were introduced during the year and
received excellent dealer and consumer acceptance. The Cooper Lifeliner
Grand Classic STE is a premium radial passenger tire with a treadwear
protection warranty of 80,000 miles.
The Cooper Cobra GTV replaced the Company's initial V speed-rated
high performance passenger tire. Market advantages of this new tire
include an all-season tread design for excellent overall traction,
increased treadwear, and a non-directional tread pattern, which
eliminates special inventory handling. Another passenger tire updated
during the year was the Cooper Monogram 2000, an original
equipment-style all-season radial. The new Monogram 2000 offers longer
treadwear and improved wet traction over the previous design.
In the light truck category, the Company introduced the Cooper
Discoverer STE, a touring design for all-season use on sport utility
vehicles, vans, and small and large pickup trucks. For the first time
on a light truck tire line, the Company is offering a free, limited
replacement warranty on workmanship and materials for the useful life of
the tread.
Also introduced in the light truck category, the Cooper Discoverer
CTD is a radial traction tire designed for heavy-duty commercial
applications, such as in farm and construction work.
The Company began previewing its lines of radial medium truck tires
to customers during the year, while production continues to increase at
the Albany plant. The Cooper CXMT 340 all-wheel position tire and the
Cooper CT 240 free-rolling position tire feature all-steel, tubeless
radial construction. To the end user, these tires will contribute to
lower vehicle operating costs through excellent original treadwear and
subsequent recapping for extended life. The Company will add a drive
wheel version of the tire to the line in 1994.
Other tire products are in development for introduction in 1994. The
Company will introduce the Cooper Rainmaster, a non-directional
passenger tire which channels water and reduces the potential for
hydroplaning in wet weather conditions. Also to be introduced is a new
premium touring radial, the Cooper Lifeliner Classic II, with a
60,000-mile treadwear warranty, all-season performance and excellent wet
traction.
Over forty percent of all new vehicles sold in 1993 were sport
utility vehicles, vans and pick-up trucks. Cooper has a strong presence
in this market with its large Discoverer line of recreational and
commercial LT tires. Additional sizes across the line will be provided
in 1994 to meet new vehicle specifications.
To verify the quality of new products and existing lines, the Company
ran more than 117 million tire miles of tests in controlled laboratory
conditions and actual on-the-road trials. Through testing, tire
characteristics such as carcass durability, treadwear, handling,
traction and noise are evaluated to ensure ultimate quality and consumer
satisfaction.
The Company's products are of the highest quality and value to
compete with leading brands on the market today.
(continued)
50
FACILITIES
A new tire warehouse was constructed at the Findlay plant to add
capacity and improve distribution services to customers. The new
163,000-sq. ft. warehouse enhanced the plant's shipping and receiving
operations and allowed the previous warehouse to be converted to
manufacturing use. The largest of the Findlay plant's rubber compound
mixers was replaced with a new state-of-the-art model, which operates at
greater efficiency and provides for needed additional mixing capacity.
The Albany plant reached planned production goals for radial
passenger, light truck and medium truck tires. More tire building and
support equipment was installed during the second half of the year to
increase production capacity. The Albany plant provides incremental
production expansion opportunity at minimum cost to meet growing demand
for Cooper tire products.
In January 1993 the Tupelo plant reached a milestone with the
production of its 50 millionth radial passenger tire. Equipment
upgrades and manufacturing process improvements were installed and
implemented during the year, including the application of robotics in
the tread extrusion operation to enhance quality and efficiency.
Major modernization and improvement projects were completed at the
Texarkana facility during the year. All curing presses are now fitted
with computer controls and a pre-cure process is being applied to all
calendered ply material, reducing production cost and yielding high
quality products. During 1994 Texarkana employees will observe the
plant's 30th anniversary.
Additional capacity for producing large size inner tubes for farm and
construction vehicles was installed at the Clarksdale plant. The plant
reorganized its technical support group and began a program to reduce
production costs by increasing process controls and other manufacturing
efficiencies.
The Piedras Negras plant began production of engineered rubber
products in response to market opportunities in Mexico. Inner tube
production continues and is dedicated to high-volume lines of passenger,
light truck and medium truck sizes, maximizing the plant's efficiency.
Expanded production of engineered rubber parts is planned for the
future.
The Company follows a strategic and systematic schedule of building
and equipment maintenance to protect and preserve its capital
investments. Programmed systems provide effective scheduling and
controls over vital routine maintenance.
TECHNOLOGY
Virtually all areas of Cooper tire and tube production have been
affected by the application of advanced technologies. The Company and
its customers have benefited with improved productivity, lower costs and
higher quality. Computers, lasers and robotics are used in many
production operations. New materials and rubber compounding chemistry
improve product performance and overall quality.
Cooper has a competitive advantage in being able to design and build
much of its proprietary production equipment. Cost savings and
increased quality are usually derived from custom-designed equipment.
(continued)
51
The Company uses unique, sophisticated tire assembly equipment for
passenger, light truck and medium truck tires and is currently
implementing new and efficient methods of supplying components in the
tire assembly operation. Projects include equipment development to
measure aspects of finished products with greater precision for more
advanced data collection and analysis.
A new system for computer-aided analysis and computer-aided design
was installed for mold design operations. The system is expected to
reduce mold design time by half, contributing significantly to the
Company's ability to respond to customer needs and reduce product launch
time.
Over the years, Cooper has been an industry leader in obtaining
higher tire production rates from its equipment. For example, employee
teams have fitted curing presses with specialized computer controls and
optical scanners to monitor and adjust curing cycles. Shaving even
seconds off a curing cycle can result in significant production
increases. Improved production efficiencies have been achieved in many
operations resulting in increased competitiveness.
MARKETING AND DISTRIBUTION
The Company markets its Cooper, Falls Mastercraft and Starfire house
brand products primarily through independent dealers and distributors.
A 1993 study of the replacement tire industry by J. D. Power and
Associates confirmed that independent tire dealers and service stations
are viewed by consumers as providing the most expertise for tire
purchases, installation and service. Company marketing programs are
designed to help position Cooper dealers prominently in their local
markets.
Two other industry surveys conducted during the year by Tire Review
magazine confirmed the Company's excellent service to customers. In the
annual Tire Brands Survey, independent dealers rated their suppliers on
a number of criteria. Another survey, the annual Tire Dealer Profile,
asked independent dealers to rank their most critical needs and
concerns. A cross comparison of the two studies shows Cooper scores
very high in meeting critical dealer needs, particularly dealer
profitability, product availability, total service and ease of doing
business.
The Company introduced an advertising theme during the year which
continued to differentiate Cooper's independence and 100 percent
American-made tires from competitors. The theme, "Put Your Trust in
American Hands," was used throughout Cooper's national consumer
advertising in USA TODAY and on Paul Harvey's syndicated radio
broadcasts. Trade advertising also carried the theme, as well as retail
materials for dealer use in the Company's cooperative advertising
program. Cooper will continue an American-made, American-owned message
in its 1994 campaign and expand its media coverage to include national
television and consumer automotive magazines.
Cooper's network of distribution centers, located strategically
around the country, efficiently serve its customers. A computerized
information system has streamlined inventory, shipping and receiving
operations to fill orders and provide timely shipments to customers.
(continued)
52
Limited treadwear protection warranties, ranging from 40,000 miles to
80,000 miles, are offered on five tire lines. Consumers consider
mileage warranties an important factor in the tire purchase decision.
Highly promoted by dealers, the Cooper warranty program is very
competitive with other industry brands.
New packaging and labeling processes instituted for inner tube
operations are designed to improve product handling. Pallet quantities
have been optimized for ease of shipping and storage for customers.
In its national advertising and on product information materials, the
Company provides a toll-free number for consumers to call to locate
their nearest Cooper dealer. The number, 1-800-854-6288, is staffed
weekdays during normal business hours. Telephone calls are answered by
members of the Cooper team who provide assistance to customers and
consumers.
Engineered Products
INDUSTRY OVERVIEW
The Company expects continuing strong demand for its engineered rubber
products. The number of new passenger and light truck vehicles produced
in the U.S. and Canada during the year was approximately 13 million
vehicles, up about 12 percent over the 11.7 million vehicles produced in
1992. About a 10 percent growth rate for North American vehicle
production is anticipated by industry economists in 1994.
According to industry experts, automobile manufacturers use
approximately 134 pounds of rubber components per vehicle, excluding
tires. This would indicate the automotive market for engineered rubber
products for safety, sealing, convenience and comfort was in excess of
1.7 billion pounds in 1993. There is excellent opportunity for Cooper
to expand in this area as a result of its expertise in design, technical
and production capabilities.
Automotive manufacturers continue to reduce their supplier base in
order to simplify administration of the supply process and to realize
cost savings from higher volume orders. They require suppliers to
provide consistent product quality, on-time deliveries, advanced
technical support, and competitive costs and value in order to remain a
preferred supplier.
As a result of this trend, Cooper is in an excellent position to
strengthen its partnerships with automakers. The Company has
established a reputation for excellent quality levels, and demonstrated
its technical expertise in specific product development.
About 99 percent of the Company's vibration control, hose, body
sealing and seating products are sold directly to vehicle manufacturers
or their primary (tier 1) suppliers. Almost 200 customers are served by
the engineered products operation.
FACILITIES
A second manufacturing plant in Bowling Green, Ohio, was built to
accommodate increased demand for both hose and body sealing products.
All hose production was moved to the new facility, allowing body seal
production to expand at the original plant. Completed on time and under
budget, the new hose plant is in full production.
(continued)
53
No major plant construction projects are currently planned for
engineered products in 1994. New production lines and equipment will be
installed at all facilities to increase production capacity and meet
customer commitments.
The third phase of the Auburn expansion -- the rubber mixing facility
-- was completed during 1993. Currently supplying rubber compounds to
the Company's engineered products plants in Ohio and Indiana, the new
mixer offers greater automation for improved quality controls and
operating cost efficiencies. Further expansion phases are scheduled for
1995.
Many manufacturing operations have been converted to a cellular
configuration. Improved production scheduling and significant inventory
and work-in-process reductions have been realized. The reorganization
has also resulted in improved product quality and customer service.
A reconfiguration of the El Dorado plant in 1994 will optimize
process flow, modernize mixing operations, and result in improved
manufacturing capabilities and overall efficiency.
Production of molded products at the Piedras Negras plant was begun
during 1993 and certified for quality on an interim basis. Direct
shipments to automotive customers in Mexico will continue to be made
from the plant and full certification will be granted in 1994. Tooling
is under way for new business which will start production at the plant
in mid-1994 and represent a significant volume increase in engineered
products sales to Mexican manufacturers.
In 1994 additional equipment will be installed in all plants to begin
fulfilling orders for 1995 model year products, as well as initial 1996
requirements.
PRODUCTS
Cooper is one of the most complete engineered rubber component suppliers
in the industry. Its extensive manufacturing capabilities include the
basic processes of molding and extrusion, including high-technology
dual-durometer extrusion, flocking and rubber-to-metal bonding. Cooper
has the engineering, technology and research facilities to serve as a
development partner with its automotive customers for vehicle design and
performance applications.
Vibration control products, such as body, cradle and engine mounts,
vary in complexity and are used to absorb vibrations throughout the
vehicle. Products currently in production for 1994 vehicle models are
the result of development projects ranging over several years.
Slight alterations in vehicle engine configurations from model year
to model year significantly modify hoses and hose assembly requirements.
Cooper has proven its ability to respond quickly to design changes. The
Company supplies hoses for virtually all categories of passenger
vehicles and light trucks made in North America, and branched hose
components using the Diradia (Reg. USPTO by Caoutchouc Manufacture et
Plastiques) process for the three largest automakers.
Body seals around vehicle doors, trunks, hoods and windows prevent
water, wind and dust from entering the inside of the vehicle. Done
properly, seals also serve as noise barriers. The products often
contain both hard and soft rubber compounds, plus metal carriers for
attachment and decoration.
(continued)
54
The Company's line of seating components is produced for a
specialized market. Inflatable comfort bladders are specified primarily
for upscale vehicles or as optional equipment on other models. Made
from urethane, the inflatable bladders can be positioned anywhere in the
seat.
Vehicle design and development is a complex process requiring the
cooperation of many different suppliers. Due to the long lead time from
concept to production, original equipment manufacturers and their
suppliers are working with vehicle designs intended for 1998
introductions. Through its design and manufacturing capability, the
Company is well-represented in these on-going projects.
TECHNOLOGY
The auto industry has been challenged to develop a high-mileage
"supercar" within the next decade. Along with an 80-miles-per-gallon
capability, automotive designers are specifying active control systems
and lightweight, high-temperature resistant materials among other
innovative ideas. Cooper has product development and service
capabilities which are very compatible with these automotive design
requirements of the future.
Active noise and vibration control systems with electronic sensors
have a high priority in future vehicle designs. In 1992 Cooper launched
an intensive program to produce a working prototype of an actively
controlled engine mount. The prototype will be demonstrated to
customers on a test vehicle in 1994. Cooper is also developing 'active'
vibration control systems technology for applications on other vehicle
components.
Engine materials that withstand very high temperatures are targeted
components for future development projects. For several years, Cooper
has been testing and developing formulas using various polymers with
high temperature resistance for use in its lines of engine hose
products.
Cooper has long established its ability to support customers with
product design capability. Using the latest computer-aided design
equipment and advanced computer modeling programs, Company engineers
provide component design service throughout the vehicle design process,
including "black box" (total design) and "gray box" (partial design)
assignments.
Cooper's partnerships with customers employ direct electronic
communication for complete documentation of work, support services, and
efficient, just-in-time deliveries.
MARKETING AND DISTRIBUTION
Cooper has been providing product design and development services to
automotive manufacturers for many years. The development and
introduction of new products into the manufacturing process is
accomplished by close teamwork and cooperation from many individuals
representing many disciplines.
At the onset of a design project, members of the Company's
engineering, manufacturing and quality control staffs join with customer
representatives to form a product development team. This early
involvement permits the Company's project team members to help optimize
the component design for efficient, high quality and cost effective
manufacturing.
(continued) 55
The Company uses advanced inventory handling and storage methods in
its distribution operations to provide excellent service to customers
around the world. Warehoused products are inventoried using an on-line,
real-time electronic information system. Optical scanning devices aid
in ensuring correct shipments and in generating electronic
documentation. Approximately 20 percent of the Company's engineered
products sales are exported to customers primarily in Canada, Mexico,
Europe, Australia and South America.
Cooper is a proven and established member of the world automotive
supplier base. The Company continues to improve its operations, expand
its capabilities and strengthen its service levels for greater business
opportunities in the future.
PRODUCT OVERVIEW
Tire Products
PASSENGER TIRES: The 15 lines of passenger tires include touring, high
performance and conventional designs. Speed ratings of S, T, H and V
are also offered as well as standard and low profiles, all-season, rib
and high traction treads, and white, white lettered and black sidewalls.
LIGHT TRUCK: Light truck tires in 13 lines fit pickup trucks, vans and
sport utility vehicles for either recreational or commercial use. Lines
include all-steel radial, steel-belted radial and conventional bias
constructions, all-season, rib and high traction treads, and white and
black lettered sidewalls.
MEDIUM TRUCK: Ten lines of medium truck tires include all-steel radial
and conventional bias ply constructions, all-wheel, drive wheel and
trailer applications, and rib and traction treads for on-road and
off-road service. Medium truck tires fit vehicles such as
tractor-semitrailer rigs.
INNER TUBES: Inner tubes are offered in radial and bias constructions
for passenger, light truck and medium truck applications. The size
range covers specialty tires such as farm tractors and implements, road
graders and industrial vehicles.
Engineered Products
VIBRATION CONTROL: These products are used throughout vehicle engines,
bodies and powertrains to minimize the amount of vibrations reaching the
passenger compartment. Product lines include mounts, bushings,
isolators and torsional springs.
BODY & WINDOW SEALING SYSTEMS: Rubber seals around doors, trunks and
hoods protect vehicle interiors from outside elements. Flocked window
channels allow glass panels to slide open and closed easily while still
providing a tight weather seal.
HOSES: Hoses are used primarily in the engine to transport fluids and
gases. Different shapes, sizes, diameters, lengths, rubber compounds
and constructions are produced to meet vehicle engine configurations.
SPECIALTY SEATING COMPONENTS: Inflatable bladders are placed in various
sections of a passenger seat for adjustable comfort. Production
includes single- and multi-cell bladders from rubber or polyurethane and
provides both manual and electronic inflation systems. A thin-line seat
suspension system is also offered under a licensing agreement.
56
Exhibit (99)
COOPER TIRE & RUBBER COMPANY
UNDERTAKINGS OF THE COMPANY
FOR FISCAL YEAR ENDED DECEMBER 31, 1993
1. Undertakings.
------------
a. The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
i. To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represents a
fundamental change in the information set forth in the
registration statement;
iii. To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
do not apply if the registration statement is on Form S-3 or
Form S-8 and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration
statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
b. The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
f. Employee plans on Form S-8.
1. The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus to each employee
to whom the prospectus is sent or given a copy of the
registrant's annual report to stockholders for its last
fiscal year, unless such employee otherwise has received a
copy of such report, in which case the registrant shall
state in the prospectus that it will promptly furnish,
without charge, a copy of such report on written request of
the employee. If the last fiscal year of the registrant has
(continued) 57
ended within 120 days prior to the use of the prospectus,
the annual report of the registrant for the preceding fiscal
year may be so delivered, but within such 120 day period the
annual report for the last fiscal year will be furnished to
each such employee.
2. The undersigned registrant hereby undertakes to transmit or
cause to be transmitted to all employees participating in
the plan who do not otherwise receive such material as
stockholders of the registrant, at the time and in the
manner such material is sent to its stockholders, copies of
all reports, proxy statements and other communications
distributed to its stockholders generally.
3. Where interests in a plan are registered herewith, the
undersigned registrant and plan hereby undertake to transmit
or cause to be transmitted promptly, without charge, to any
participant in the plan who makes a written request, a copy
of the then latest annual report of the plan filed pursuant
to section 15(d) of the Securities Exchange Act of 1934
(Form 11-K). If such report is filed separately on Form 11-
K, such form shall be delivered upon written request. If
such report is filed as a part of the registrant's annual
report on Form 10-K, that entire report (excluding exhibits)
shall be delivered upon written request. If such report is
filed as a part of the registrant's annual report to
stockholders delivered pursuant to paragraph (1) or (2) of
this undertaking, additional delivery shall not be required.
i. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
2. Indemnification of Directors and Officers.
-----------------------------------------
Article VII of the Bylaws of the registrant and Section 145 of the
Delaware Code provide for indemnification. Article VII, in which
registrant is referred to as "Corporation", provides as follows:
Section 1. Right to Indemnification.
--------- ------------------------
Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he,
or a person of whom he is the legal representative, is or was a
director or officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee
or agent of another corporation or a partnership, joint venture,
trust or other enterprise, including service with respect to
employee benefit plans maintained or sponsored by the
(continued) 58
Corporation, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee
or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by
the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said Law
permitted the Corporation to provide prior to such amendment),
against all expense, liability and loss (including attorneys'
fees, judgments, fines, excise taxes pursuant to the Employee
Retirement Income Security Act of 1974 or penalties and amounts
paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators;
provided, however, that the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding
(or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the Board of
Directors. The right to indemnification conferred in this
Article shall be a contract right and shall include the right to
be paid by the Corporation the expenses incurred in defending
any such proceeding in advance of its final disposition;
provided, however, that if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer in
advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or
on behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this Article
or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of
the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
Section 2. Non-Exclusivity of Rights.
--------- -------------------------
The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final
disposition conferred in this Article shall not be exclusive of
any other right which any person may have or hereafter acquire
under any statute, the Restated Certificate of Incorporation,
these Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 3. Insurance.
--------- ---------
The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability
or loss under the Delaware General Corporation Law.
The registrant also maintains policies insuring the liability of the
registrant to its directors and officers under the terms and
provisions of the Bylaws of the registrant and insuring its
directors and officers against liability incurred in their
capacities as such directors and officers.
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