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CONFORMED
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
DECEMBER 31, 1997 0-11579
TBC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0600670
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4770 Hickory Hill Road
Memphis, Tennessee 38141
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (901)363-8030
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ X ]
INDEX TO EXHIBITS at page 37 of this Report
Aggregate market value of outstanding shares
of Common Stock, par value $.10, held by
non-affiliates of the Company on December
31, 1997 (for purposes of this calcu-
lation, 1,793,923 shares beneficially
owned by directors and executive officers
of the Company were treated as being held
by affiliates of the Company)................. $204,337,744
Number of shares of Common Stock, par value $.10,
outstanding at the close of business on
December 31, 1997 ............................ 23,162,576
DOCUMENT INCORPORATED BY REFERENCE
TBC Corporation's Proxy Statement for its Annual Meeting of Stockholders
to be held on April 22, 1998. Definitive copies of the Proxy Statement
will be filed with the Commission within 120 days after the end of the
Company's fiscal year. Only such portions of the Proxy Statement as are
specifically incorporated by reference under Part III of this Report shall
be deemed filed as part of this Report.
_______________________
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PART I
Item 1. BUSINESS
TBC Corporation's business began in 1956 under the name Cordovan
Associates, Incorporated. The present company was incorporated in
Delaware in 1970 under the name THE Tire & Battery Corporation. In 1983,
the Company changed its name to TBC Corporation.
TBC Corporation and its wholly-owned subsidiaries are
principally engaged in the business of distributing tires and other
products in the automotive replacement market. Through its Big O Tires,
Inc. ("Big O") subsidiary, which was acquired on July 10, 1996, the
Company is also engaged in the business of franchising independent retail
tire and automotive service stores. On a limited basis, Big O also owns
and operates retail stores and engages in site selection and real estate
development for retail stores. Big O's retail stores are located
primarily in the Midwest and western United States. Unless the context
indicates otherwise, the term "Company" refers to TBC Corporation and all
of its subsidiaries.
Products
Sales of tires accounted for approximately 94% of the Company's
total sales in 1997, 88% in 1996 and 89% in 1995. The Company's tire
lines, substantially all of which carry the Company's proprietary brand
names, are made by leading manufacturers. The Company's Cordovan ("R" -
Registered Trademark), Multi-Mile (R) and Sigma (R) brand lines of tires
are three of the most complete lines in the replacement tire market,
including tires for passenger, truck, farm, industrial, recreational and
other applications. Big O (R) brand tires, as well as other tires sold
through Big O's retail stores, are primarily for passenger and light truck
applications. The Company is one of the largest wholesale distributors of
replacement tires in the United States.
Other brands under which the Company's products are marketed
include Grand Prix (R), Grand Am ("TM" - Trademark), Grand Spirit (R),
Wild Spirit (R), Grand Sport (R), Gran Esprit (TM), Aqua-Flow (R), Wild
Country (R), Wild Trac (R), Stampede (R), Power King (R), Harvest King (R),
Big Foot (R), Legacy (R), Prestige (R), and Sun Valley (R).
Through 1996, the Company's products also included automotive
parts lines such as batteries, wheels, ride-control products, filters,
brake parts and chassis parts. In December 1996, the Company announced
its decision to refocus operations on the replacement tire business and
discontinue the marketing of automotive parts lines to independent
distributors. In connection with this decision, the Company sold certain
assets of its former battery distribution subsidiary in December 1996 and
completed the remainder of the marketing and operational changes in early
1997. There was no impact on the products marketed and distributed by Big
O, which include wheels, ride-control products and certain other
automotive products, in addition to its tire lines. There was also no
impact on the Company's marketing of tubes to independent distributors.
-3-
Marketing and Distribution
The Company distributes its products other than those sold
through its Big O subsidiary ("TBC products"), through a network of
distributors located across the United States, Canada and Mexico. Some of
these distributors act as wholesalers, some as retailers and some as both
wholesalers and retailers. The retail outlets handling TBC products
consist primarily of independent tire dealers. The loss of any major
distributor of TBC products could have a material adverse effect upon the
Company's business, pending the Company's establishment of a replacement
distributor.
Big O distributes its products principally through its
franchised independent retail tire and automotive service stores. At
December 31, 1997, Big O had a total of 415 stores in the United States,
including 399 franchisee-owned stores, three joint venture stores and 13
company-owned stores. Big O also distributes its products to 36
unaffiliated retail stores in British Columbia, Canada.
Big O franchise agreements grant a ten-year license to sell
Big O (R) brand tires and to use Big O trademarks and trade secrets in
the operation of a retail store at a specific location within a defined
trade area. Each franchisee is required to pay an initial franchise fee
as well as monthly royalty fees.
Major Customers
The Company's ten largest customers accounted for 44% of the
Company's gross sales in 1997. Sales to Les Schwab Warehouse Center,
Inc., Prineville, Oregon, represented 11% of the Company's gross sales in
1997. Sales to Carroll's, Inc., Hapeville, Georgia, excluding sales to
distributors which operate under arrangements with and may pay
compensation to Carroll's, also represented 11% of the Company's gross
sales in 1997. No other customers individually accounted for more than
10% of the Company's 1997 gross sales. See Item 13 of this Report for
additional information concerning major customers.
Suppliers
The Company purchases its products, in finished form, from a
number of major rubber companies and other suppliers to the automotive
replacement market. The Company owns the brand names under which most of
its products are sold and, in the case of tires, many of the molds in
which they are made.
The Kelly-Springfield Tire Company, a division of Goodyear Tire
and Rubber Company, has been a supplier to the Company since 1963. Kelly-
Springfield manufactured more than half of the tires purchased by the
Company in 1997, pursuant to a supply agreement entered into in 1977 and a
10-year commitment signed in 1994. The Company also has a 10-year supply
agreement, signed in 1994, with Cooper Tire and Rubber Company, its
second-largest supplier. In addition, the Company has written contracts
with certain other suppliers.
The Company has not heretofore experienced any difficulty in
purchasing products in quantities needed by it, but there can be no
assurance that such difficulties will not be encountered in the
-4-
future. If one of its two largest suppliers became unavailable, the
Company's business could be adversely affected, pending the establishment
of new, alternate suppliers. There are a number of other large tire manu-
facturers on a worldwide basis.
Trademarks
Substantially all of the Company's products carry the Company's
own brand names, as previously set forth.
The ability to offer products under established trademarks
represents an important marketing advantage in the automotive replacement
industry, and the Company regards its trademarks as valuable assets of its
business. The Company holds federal registrations for substantially all
of its trademarks.
Seasonality and Inventory
The Company normally experiences its highest level of sales in
the second and third quarters of each year, with the first quarter
exhibiting the lowest level. Since 1993, first quarter sales have
represented, on the average, approximately 23% of annual sales;
the second and third quarters approximately 25% and 28%, respectively;
and the fourth quarter approximately 24%. The Company's inventories
generally fluctuate with anticipated seasonal sales volume.
Orders for the Company's products are usually placed with the
Company by computer transmission, facsimile or telephone. Orders are
filled either out of the Company's inventory or by direct shipment to the
customer from the manufacturers' plants at TBC's request.
Since distributors and franchisees look to the Company to
fulfill their needs on short notice, the Company maintains a large
inventory of products. The average of beginning and end-of-year
inventories was $78,000,000 in 1997. The Company's inventory turn rate
(cost of sales, including the cost of direct shipments from manufacturers
to customers, divided by average inventory) was 7.0 for 1997.
Competition
The industry in which the Company operates is highly competitive,
and many of the Company's competitors are significantly larger and have
greater financial and other resources than the Company. The Company's
competitors include its own suppliers and other tire manufacturers, as
well as other wholesale tire distributors. The Company also competes
against chain and department stores, warehouse clubs, oil companies and
other tire and automotive product retailers. The Company believes it is
able to compete successfully in its industry because of its ability to
offer quality products under proprietary brand names, its efficient
distribution systems, and its good relationships with distributors,
franchisees and suppliers.
Employees
As of December 31, 1997, the Company employed 585 persons.
The Company considers its employee relations to be satisfactory.
The Company's employees are not represented by a union.
-5-
Item 2. PROPERTIES
TBC Corporation's executive offices are located in Memphis,
Tennessee. Warehouse distribution facilities for TBC products, which
total approximately 1,300,000 square feet under roof, are also located in
Memphis. The Company owns the executive office building and one of its
warehouses. One TBC warehouse is leased under an agreement expiring in
2005 and two other TBC warehouses are leased under agreements expiring in
2000. The Company's Northern States Tire, Inc. subsidiary owns facilities
in New Hampshire, Vermont and Maine.
Big O leases its executive offices, which are located in
Englewood, Colorado. Big O owns its warehouse distribution facilities,
which total approximately 480,000 square feet and are located in Boise,
Idaho, New Albany, Indiana and Henderson, Nevada. Big O also owns certain
retail store locations.
Item 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings which are
routine to the conduct of its business, none of which is believed to be
material to the Company. Some of these proceedings involve personal injury
lawsuits based upon alleged defects in products sold by the Company. The
Company believes that in substantially all such product liability cases, it
is covered by its manufacturers' indemnity agreements or product liability
insurance. The Company also maintains its own product liability insurance.
See Note 6 to the consolidated financial statements for informa-
tion with respect to pending legal proceedings relative to the collection
of a promissory note receivable held by the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table presents certain information concerning the
executive officers of the Company. The term of office of all executive
officers of the Company is until the next Annual Meeting of Directors
(April 22, 1998) or until their respective successors are elected.
-6-
Capacities in which
Individual Serves
Name Age the Company
Louis S. DiPasqua 63 President and Chief
Executive Officer
Bob M. Hubbard 63 Executive Vice President
Purchasing and Engineering
Kenneth P. Dick 51 Senior Vice President
Sales
Ronald E. McCollough 57 Senior Vice President
Operations and Treasurer
Barry D. Robbins 55 Senior Vice President
Strategic Planning
Larry D. Coley 40 Vice President and
Controller
Mr. DiPasqua has been Chief Executive Officer since July 1994,
and President since joining the Company in 1991. Mr. DiPasqua has been a
director since 1991 and served as the Company's Chief Operating Officer
from 1991 until July 1994. Prior to joining the Company, Mr. DiPasqua was
an executive with the Goodyear Tire & Rubber Company. During his 28 years
at Goodyear, Mr. DiPasqua held a variety of positions, including Vice
President of Replacement Tire Sales and Marketing, President and Chief
Executive Officer of Kelly Springfield Tire Company (a division of
Goodyear) and Chairman and Managing Director of Goodyear Great Britain.
Mr. Hubbard was named Executive Vice President Purchasing and
Engineering of the Company in December 1997. Mr. Hubbard served as Senior
Vice President Purchasing and Engineering from 1982 until being named
Executive Vice President. From 1973 to 1982, Mr. Hubbard served as Vice
President Purchasing and Quality Assurance of the Company.
Mr. Dick has served as Senior Vice President Sales of the Company
since 1988. From 1982 until his election as Senior Vice President, Mr.
Dick served as Vice President Sales of the Company. Mr. Dick joined the
Company in 1971, and from 1980 until 1982, served as Sales Manager of the
Company.
Mr. McCollough has been Senior Vice President Operations of the
Company since 1982 and Treasurer since May 1996. Mr. McCollough served as
Controller of the Company from 1973 to 1985 and as Vice President
Operations from 1978 until his election as a Senior Vice President.
-7-
Mr. Robbins joined the Company as Senior Vice President Strategic
Planning in June 1996. From 1995 until joining the Company, Mr. Robbins
was President and Chief Executive Officer of Tire Alliance Groupe. Prior
to 1995, Mr. Robbins had been continuously employed by Goodyear Tire &
Rubber Company and its subsidiaries in a number of management and other
positions since 1968.
Mr. Coley has been a Vice President of the Company since 1993 and
the Controller of the Company since 1989. Prior to that, Mr. Coley was
the Company's Manager of Financial Reporting.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock of the Company is traded on The Nasdaq Stock
Market under the symbol TBCC. As of December 31, 1997, the Company had
approximately 4,800 stockholders based on the number of holders of record
and an estimate of the number of individual participants represented by
security position listings. The Company did not declare any cash
dividends during 1997 or 1996.
The following table sets forth for the periods indicated the
high and low sale prices for the Company's Common Stock on the Nasdaq
National Market System.
Price Range
High Low
Quarter ended
03/31/96............ 8.63 6.38
06/30/96............ 9.13 6.63
09/30/96............ 8.75 6.38
12/31/96............ 8.38 5.25
03/31/97............ 9.94 7.00
06/30/97............ 10.00 6.75
09/30/97............ 9.75 7.38
12/31/97............ 11.00 9.00
-8-
Item 6. SELECTED FINANCIAL DATA
Set forth below is selected financial information of the
Company for each year in the five-year period ended December 31, 1997.
The selected financial information should be read in conjunction with the
consolidated financial statements of the Company and notes thereto which
appear elsewhere in this Report. Specific reference should be made to the
discussion of the 1996 acquisition of Big O Tires, Inc. in Note 3 to the
consolidated financial statements. The Company did not declare any cash
dividends during the five-year period ended December 31, 1997.
Year ended December 31,
1997 1996 1995 1994 1993
INCOME STATEMENT DATA (1):
Net sales ................ $642,852 $604,585 $547,785 $563,661 $580,104
Net income ............... 19,700 15,499 15,249 19,546 21,375
Earnings per share (2) ... .84 .65 .62 .71 .74
Average shares
outstanding .......... 23,466 23,793 24,583 27,551 28,758
BALANCE SHEET DATA (1):
Total assets ............. $262,141 $253,882 $179,952 $169,682 $166,746
Working capital .......... 130,414 117,980 76,600 91,279 95,114
Long-term debt ........... 67,647 69,550 555 - -
Stockholders' equity ..... 134,187 119,805 104,823 113,983 116,550
(1) In thousands except per share amounts.
(2) Basic and assuming dilution.
-9-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1997 Compared to 1996:
As a result of the Company's acquisition of Big O Tires, Inc. on
July 10, 1996 (see Note 3 to the consolidated financial statements), there
were a number of significant changes in income statement items between the
years 1997 and 1996. Additionally, the impact of the Company's decision
in December 1996 to discontinue the marketing of automotive parts, except
those sold through Big O, affected the comparison of year-to-year
results. Included in the 1996 operating results were $2.4 million in
pre-tax charges related to this decision. The discontinued product lines
comprised approximately 6.5% of net sales in 1996. (See Note 14 to the
consolidated financial statements.)
Net sales for 1997 increased 6.3% from the 1996 level, with Big
O contributing an additional $75.3 million in net sales. Sales of tires
accounted for approximately 94% of total sales in 1997 compared to 88% in
1996. The increased percentage of tire sales was the result of the above-
mentioned decision to discontinue the marketing of certain non-tire
products to TBC's independent distributors. Excluding the contribution by
Big O, TBC's unit tire volume increased 2.9% compared to the 1996 level.
The average tire sales price excluding Big O declined 1.7%, due
principally to industry-wide price discounting that was prevalent
throughout much of 1996 and 1997.
Cost of sales as a percentage of net sales decreased from 87.4%
in 1996 to 84.6% in 1997, due largely to the full-year effect of the Big O
acquisition, including the positive impact on the Company's overall
sourcing strength. In addition, an increase in the percentage of
shipments through the Company's distribution facilities rather than direct
from manufacturers affected the comparison to 1996 results. Gross margin
percentages on shipments through the Company's own facilities are
typically higher than on shipments direct from manufacturers, since sales
prices are generally higher to help offset the incremental costs of
distribution.
Distribution expenses increased $6.5 million in 1997 compared to
1996. The increase was principally due to the inclusion of additional
warehousing and product delivery expenses at Big O of $5.1 million. The
increase was also due in part to the above-noted increase in the percentage
of TBC's shipments through the Company's distribution facilities.
Selling and administrative expenses increased $8.9 million in
1997 compared to 1996, due primarily to the inclusion of additional Big O
expenses of approximately $9.8 million. The 1997 increase was also
affected by a charge of $810,000 associated with an early retirement
program accepted by certain employees. Expenses in 1996 included charges
of approximately $700,000 related to the decision to discontinue selling
automotive parts to TBC's independent distributors. Excluding these
items, selling and administrative expenses were reduced by $1.0 million in
1997.
-10-
Interest expenses increased $1.7 million compared to the 1996
level. The full-year impact of the long-term borrowings incurred to
finance the Big O acquisition resulted in increased interest in 1997.
This more than offset an $887,000 reduction in interest on short-term
borrowings related to lower borrowing levels.
Net other income was higher in 1997 than in 1996, due primarily
to greater interest income and an increase in the equity in earnings from
the Company's joint ventures.
The Company's effective tax rate decreased from 39.0% in 1996 to
37.6% in 1997. The lower effective rate reflects a reduction in TBC's
state taxes, as well as the impact of certain other 1997 tax reductions.
1996 Compared to 1995:
Net sales for 1996 were $604.6 million, a 10.4% increase from
1995 net sales of $547.8 million. The increase was due principally to the
addition of sales by Big O, which was acquired July 10, 1996. Sales of
tires accounted for approximately 88% of total sales in 1996 compared to 89%
in 1995. Excluding the contribution by Big O, sales of tires declined 2.4%,
due principally to industry-wide price discounting throughout much of 1996
which caused average tire sales prices to be 3.7% lower than in 1995. TBC's
unit tire volume (excluding Big O) increased 1.3% in 1996 compared to the
1995 level.
Cost of sales as a percentage of net sales decreased from 89.2%
in 1995 to 87.4% in 1996, due to the positive effects of the Big O
acquisition, including the Company's improved overall sourcing strength.
In addition, a shift in the Company's sales toward shipments through the
Company's distribution facilities rather than direct from manufacturers
affected the year-to-year comparison.
Distribution expenses increased $5.5 million in 1996 compared to
1995, due primarily to Big O warehousing and product delivery expenses
totaling $3.9 million since the acquisition date. Approximately
$643,000 of the increase was associated with the addition of certain
facilities in the northeastern United States in September 1995. The 1996
increase was also related in part to the above-noted increase in the
percentage of TBC's shipments through its own distribution facilities.
Selling and administrative expenses increased $10.2 million in
1996 compared to 1995, due principally to expenses for Big O of approx-
imately $7.1 million since the July 10, 1996 acquisition date. Expenses
in 1996 included charges of approximately $700,000 related to the decision
to discontinue selling automotive parts to TBC's independent distributors.
Increased expenses of $1.6 million were attributable to the facilities
added in the northeastern United States in September 1995. The remainder
of the increase in selling and administrative expenses was principally
related to salary increases and related expenses.
Interest expenses increased $1.0 million compared to the 1995
level. Interest on the additional long-term borrowings required to
finance the Big O acquisition totaled $2.2 million in 1996, but was
partially offset by the effect of reduced short-term borrowing levels.
Net other income was higher in 1996 than in 1995, due primarily
to income from the settlement of a trademark infringement matter.
-11-
The Company's effective tax rate increased from 38.4% in 1995 to
39.0% in 1996. The increased effective rate reflected the impact of the
Big O acquisition, due to the additional goodwill amortization and greater
overall state tax burden.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position and liquidity remain strong,
with working capital of $130.4 million at December 31, 1997 compared to
$118.0 million at the end of 1996. The Company's current ratio was 3.47
at the end of 1997 compared to 3.18 at December 31, 1996.
The Company's short-term borrowing agreements consist of a one-
year committed bank facility and a three-year committed bank facility,
which allow the Company to borrow up to $51.5 million. The unused amount
under these facilities at December 31, 1997 was $28.4 million. Long-term
debt totaled $68.3 million at December 31, 1997, of which $690,000 was
current and the remainder was due after one year. Of the total long-term
debt, $60 million was incurred to finance the 1996 acquisition of Big O.
Capital expenditures, primarily for equipment and tire molds,
totaled $9.1 million in 1997 and $5.3 million in 1996. The Company had
no material commitments for capital expenditures at the end of 1997. The
Company expects to fund 1998 day-to-day operating expenses and normally
recurring capital expenditures out of operating funds and its present
financial resources. The Company believes that the combination of its net
assets, committed bank facilities and expected funds from operations will
be sufficient to operate on both a short-term and long-term basis.
Cash generated by operations, together with the available credit
arrangements, enabled the Company to fund stock repurchases totaling $5.7
million in 1997 and $634,000 in 1996, as well as the above-mentioned
capital expenditures. As of December 31, 1997, the Company had unused
authorizations from the Board of Directors for the repurchase of
approximately 2,011,000 additional shares of common stock.
Accounts and notes receivable decreased from $85.8 million at
December 31, 1996 to $77.3 million at the end of 1997, due principally to
improved receivable turnover. Inventories increased from $71.1 million at
the end of 1996 to $84.8 million at December 31, 1997, due to the addition
of a number of new lines and sizes of tires during 1997 and to the effect
of less-than-anticipated sales demand during the fourth quarter of 1997.
Included in other assets at December 31, 1997 and 1996 is a
promissory note receivable of $4,897,000 from a former distributor. (See
Note 6 to the Consolidated Financial Statements for a discussion of the
legal proceedings relative to that receivable.)
The Company is addressing any "Year 2000" issues and does not
believe that the costs will be significant.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary financial informa-
tion required by this Item 8 are included on the following 17 pages of
this Report.
-12-
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders
TBC Corporation
We have audited the accompanying consolidated balance sheets of
TBC Corporation and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of TBC Corporation and Subsidiaries as of December 31, 1997 and
1996, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Memphis, Tennessee
January 30, 1998
-13-
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
December 31,
1997 1996
CURRENT ASSETS
Cash and Cash Equivalents $ 917 $ -
Accounts and notes receivable, less
allowance for doubtful accounts
of $7,344 in 1997 and $8,879 in 1996:
Related parties 15,072 18,362
Other 62,267 67,444
Total accounts and notes receivable 77,339 85,806
Inventories 84,806 71,102
Refundable federal and state income taxes 2,489 -
Deferred income taxes 4,863 6,716
Other current assets 12,784 8,409
Total current assets 183,198 172,033
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land and improvements 5,604 5,285
Buildings and leasehold improvements 23,167 21,691
Furniture and equipment 29,455 25,929
58,226 52,905
Less accumulated depreciation 21,967 17,818
Total property, plant and equipment 36,259 35,087
TRADEMARKS, NET 17,337 17,787
GOODWILL, NET 14,628 14,900
OTHER ASSETS 13,526 14,075
TOTAL ASSETS $264,948 $253,882
The accompanying notes are an integral part of the financial
statements.
-14-
TBC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
1997 1996
CURRENT LIABILITIES
Outstanding checks, net $ 3,237 $ 559
Notes payable to banks 22,496 21,092
Current portion of long-term debt 690 1,537
Accounts payable, trade 10,879 16,761
Federal and state income taxes payable - 106
Other current liabilities 15,482 13,998
Total current liabilities 52,784 54,053
LONG-TERM DEBT, LESS CURRENT PORTION 67,647 69,550
NONCURRENT LIABILITIES 2,876 2,753
DEFERRED INCOME TAXES 7,454 7,721
STOCKHOLDERS' EQUITY
Common stock, $.10 par value,
shares issued and outstanding -
23,163 in 1997 and 23,727 in 1996 2,316 2,373
Additional paid-in capital 9,788 9,624
Retained earnings 122,083 107,808
Total stockholders' equity 134,187 119,805
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $264,948 $253,882
The accompanying notes are an integral part of the financial
statements.
-15-
TBC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Years ended December 31,
1997 1996 1995
NET SALES* $642,852 $604,585 $547,785
COSTS AND EXPENSES
Cost of sales 544,119 528,610 488,717
Distribution 31,479 24,933 19,461
Selling and administrative 33,218 24,294 14,073
Interest expense 5,796 4,115 3,110
Other (income) expense - net (3,347) (2,766) (2,348)
Total costs and expenses 611,265 579,186 523,013
INCOME BEFORE INCOME TAXES 31,587 25,399 24,772
PROVISION FOR INCOME TAXES 11,887 9,900 9,523
NET INCOME $ 19,700 $ 15,499 $ 15,249
EARNINGS PER SHARE -
Basic and assuming dilution $ .84 $ .65 $ .62
* Including sales to related parties of $138,511, $137,219 and $130,215 in
the years ended December 31, 1997, 1996 and 1995, respectively.
The accompanying notes are an integral part of the financial statements.
-16-
TBC CORPORATION
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
(In thousands)
Years ended December 31, 1995, 1996 and 1997
Common Stock Additional
Number of Paid-In Retained
Shares Amount Capital Earnings Total
BALANCE, JANUARY 1, 1995 26,282 $2,628 $10,391 $100,964 $113,983
Net income for year 15,249 15,249
Issuance of common stock
under stock option and
incentive plans, net 19 2 132 - 134
Repurchase and retirement
of common stock (2,517) (252) (1,002) (23,311) (24,565)
Tax benefit from exercise of
stock options - - 22 - 22
BALANCE, DECEMBER 31, 1995 23,784 2,378 9,543 92,902 104,823
Net income for year 15,499 15,499
Issuance of common stock
under stock option and
incentive plans, net 24 3 114 - 117
Repurchase and retirement
of common stock (81) (8) (33) (593) (634)
BALANCE, DECEMBER 31, 1996 23,727 2,373 9,624 107,808 119,805
Net income for year 19,700 19,700
Issuance of common stock
under stock option and
incentive plans 59 6 364 - 370
Repurchase and retirement
of common stock (623) (63) (254) (5,425) (5,742)
Tax benefit from exercise of
stock options - - 54 - 54
BALANCE, DECEMBER 31, 1997 23,163 $2,316 $ 9,788 $122,083 $134,187
The accompanying notes are an integral part of the financial statements.
-17-
TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years ended December 31,
1997 1996 1995
Operating Activities:
Net income $ 19,700 $ 15,499 $ 15,249
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 6,742 5,750 4,612
Amortization 979 530 23
Write-off of intangible assets - 276 -
Deferred income taxes 1,586 (845) (461)
Equity in (earnings) loss from joint ventures (426) (265) -
Changes in operating assets
and liabilities:
Receivables 9,260 19,383 6,179
Inventories (13,704) (2,815) (9,784)
Other current assets (4,375) (1,986) 230
Other assets (15) (40) (280)
Accounts payable, trade (5,882) 589 (10,646)
Federal and state income taxes
refundable or payable (2,541) 1,240 (67)
Other current liabilities 1,484 1,366 187
Noncurrent liabilities 123 203 332
Net cash provided by
operating activities 12,931 38,885 5,574
Investing Activities:
Purchase of property, plant and equipment (9,104) (5,260) (9,151)
Acquisition of Big O Tires, Inc. - (55,433) -
Investments in joint ventures - - (1,562)
Net proceeds from asset disposition - 2,099 -
Other 1,130 777 13
Net cash used in investing activities (7,974) (57,817) (10,700)
Financing Activities:
Net bank borrowings (repayments) under
short-term borrowing arrangements 1,404 (29,746) 25,058
Increase (decrease) in outstanding checks, net 2,678 (8,480) 3,863
Increase in long-term debt - 60,000 697
Payments on long-term debt (2,750) (2,325) (61)
Issuance of common stock under stock option
and incentive plans, net of repurchase 370 117 134
Repurchase and retirement of common stock (5,742) (634) (24,565)
Net cash provided by (used in)
financing activities (4,040) 18,932 5,126
Change in cash and cash equivalents 917 - -
Cash and cash equivalents:
Balance - Beginning of year - - -
Balance - End of year $ 917 $ - $ -
-18-
TBC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
Years ended December 31,
1997 1996 1995
Supplemental Disclosures of Cash Flow Information:
Cash paid for - Interest $ 6,090 $ 3,510 $ 2,956
- Income Taxes 12,842 9,506 10,051
Supplemental Disclosure of Non-Cash Financing
Activity:
Tax benefit from exercise of stock options $ 54 $ - $ 22
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
On July 10, 1996, the Company completed the
acquisition of Big O Tires, Inc. for a total
purchase price of approximately $54,646, plus
applicable closing costs. The acquisition was
accounted for under the purchase method, as
follows:
Estimated fair value of assets acquired $ 60,263
Trademarks and Goodwill 33,072
Cash Paid (55,433)
Liabilities assumed $ 37,902
During 1996, the Company disposed of
certain assets of its battery distribution
subsidiary, as follows:
Assets sold $ (2,882)
Cash received 2,099
Liabilities assumed by purchaser $ (783)
The accompanying notes are an integral part of the financial statements.
-19-
TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Operations
The Company is principally engaged in the business of distributing
tires and other products in the automotive replacement market, through
wholesale and retail customers in the United States, Canada and Mexico.
Through its Big O Tires, Inc. subsidiary, which was acquired on July 10,
1996, the Company also acts as a franchisor of independent retail tire and
automotive service stores located primarily in the Midwest and western
United States. On a limited basis, Big O engages in site selection and
real estate development for franchised stores and owns and operates a
limited number of retail stores.
Significant Accounting Policies
Principles of consolidation - The accompanying financial
statements include the accounts of TBC Corporation and its wholly-owned
subsidiaries. All significant intercompany transactions and balances have
been eliminated. Investments in 50% or less-owned joint ventures over
which the Company has the ability to exercise significant influence are
accounted for using the equity method.
Accounting estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses, as well as certain
financial statement disclosures.
Cash equivalents - Cash equivalents consist of short-term, highly
liquid investments which are readily convertible into cash.
Inventories - Inventories, consisting of automotive products held
for resale, are valued at the lower of cost (principally last in-first
out) or market. Current costs of inventories exceeded the LIFO value by
$3,517,000 and $4,759,000 at December 31, 1997 and 1996, respectively.
Concentrations of credit risk - The Company performs ongoing
credit evaluations of its customers and typically requires some form of
security, including collateral, guarantees or other documentation. The
Company maintains allowances for potential credit losses. The Company
maintains cash balances with financial institutions with high credit
ratings. The Company has not experienced any losses with respect to bank
balances in excess of government-provided insurance.
Property, plant and equipment - Depreciation is computed
principally using the straight-line method, over estimated lives of 3-15
years for furniture and equipment and 20-40 years for buildings and
leasehold improvements. Amounts expended for maintenance and repairs are
charged to operations, and expenditures for major renewals and betterments
are capitalized. When property, plant and equipment is retired or
otherwise disposed of, the related gain or loss is included in operations.
-20-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill, Trademarks and Other Intangible Assets - Goodwill and
trademarks were recorded as a result of the acquisition of Big O Tires,
Inc. on July 10, 1996. Goodwill represents the excess of cost over the
fair value of identifiable net assets acquired. The value assigned to
trademarks was based on an independent third-party valuation prepared at
the time of acquisition. Goodwill, trademarks and other intangible assets
are amortized on a straight-line basis, principally over 40 years.
Accumulated amortization on intangible assets totaled $1,266,000 and
$414,000 at December 31, 1997 and 1996, respectively.
The Company periodically reviews the recoverability of intangible
and other long-lived assets. If facts or circumstances support the
possibility of impairment, the Company will prepare a projection of the
undiscounted future cash flows of the specific intangible assets and
determine if the assigned value is recoverable based on such projection.
If impairment is indicated, an adjustment will be made to the carrying
value of the assets based on the discounted future cash flows. The
Company does not believe that there are any facts or circumstances
indicating impairment of any of its recorded intangible assets.
Revenue recognition - Sales are recognized upon shipment of
products. Estimated costs of returns and allowances are accrued at the
time products are shipped.
Franchise fees - Each Big O franchisee is required to pay an
initial franchise fee as well as monthly royalty fees of 2% of gross
sales. Included in net sales in 1997 and 1996 were franchise and royalty
fees of $7,811,000 and $3,742,000, respectively.
Standard warranty - The costs of anticipated adjustments for
workmanship and materials that are the responsibility of the Company are
estimated and charged to expense currently. Warranty reserves of
$6,931,000 and $6,675,000 were included in other current liabilities in
the balance sheets at December 31, 1997 and 1996, respectively.
Interest on early payments to suppliers for product - Interest
income associated with early payments to suppliers for product is recorded
as a reduction to cost of sales in the statements of income. This
interest income represented 1.5% of net sales during 1997 and 1996 and
1.6% in 1995.
Earnings per share - In 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per share", which
established new standards for computing and presenting earnings per share.
Earnings per share for all periods presented have been calculated
according to this standard. Basic earnings per share have been computed
by dividing net income by the weighted average number of shares of common
stock outstanding. Diluted earnings per share have been computed by
dividing net income by the weighted average number of common shares and
equivalents outstanding. The weighted average number of common shares
outstanding totaled 23,466,000 in 1997, 23,793,000 in 1996 and 24,583,000
in 1995. Common stock equivalents, representing shares issuable upon
assumed exercise of stock options, totaled 105,000 in 1997, 47,000 in 1996
and 99,000 in 1995. The weighted average number of common shares and
equivalents outstanding totaled 23,571,000 in 1997, 23,840,000 in 1996 and
24,682,000 in 1995.
-21-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. TRANSACTIONS WITH RELATED PARTIES AND MAJOR CUSTOMERS
The Company's operations are managed through its Board of
Directors, members of which owned or are affiliated with companies which
owned approximately 8% of the Company's common stock at December 31, 1997.
Sales to distributors represented on the Board, including affiliates of
such distributors, accounted for approximately 18% of the Company's net
sales during 1997, 20% during 1996 and 24% in 1995. One such distributor
accounted for approximately 11% of net sales in 1997, 12% in 1996 and 15%
in 1995. Another major customer, unaffiliated with the board of
directors, accounted for approximately 11% of net sales in 1997, 9% in
1996 and 8% in 1995. Sales to joint ventures in which the Company has an
ownership interest accounted for approximately 4% of the Company's net
sales during 1997, 3% in 1996 and 1% in 1995. Accounts receivable
resulting from transactions with related parties are presented separately
in the balance sheets.
3. ACQUISITION OF BIG O TIRES, INC.
On July 10, 1996, the Company completed the acquisition of Big O
Tires, Inc. Under the terms of the merger agreement, Big O stockholders
received $16.47 in cash for each of the 3,317,916 outstanding shares of
common stock, a total purchase price of $54,646,000. The acquisition was
accounted for as a purchase. These consolidated financial statements
include the operating results of Big O from the date of acquisition.
The following unaudited pro forma information (adjusted for
interest on required borrowings, estimated amortization of intangible
assets, improved sourcing strength, etc.) was prepared as if the companies
had been combined as of January 1, 1995. The pro forma information does
not purport to present what actual results of operations would have been
if the acquisition of Big O had occurred on such date or to project
results for any future period.
(In millions, except per share data)
Years Ended December 31,
1996 1995
(Unaudited)
Net sales $ 673.7 $ 684.4
Net income 18.0 18.3
Earnings per share .76 .74
4. CREDIT FACILITIES
The Company's short-term borrowing agreements consist of a one-
year committed bank facility and a three-year committed bank facility.
The credit facilities allow the Company to borrow up to $51,500,000, with
interest on the one-year facility at the federal funds rate plus 1.15% and
interest on the three-year facility based on LIBOR plus a variable rate
between 0.45% and 0.875%. The credit facilities also require the payment
of certain commitment and administrative fees. The unused amount under
these facilities at December 31, 1997 was $28.4 million. The weighted
average interest rate on short-term borrowings at December 31, 1997 and
1996 was 7.22% and 6.61%, respectively.
-22-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. CREDIT FACILITIES (Continued)
The credit facilities contain certain financial covenants dealing
with the Company's tangible net worth, working capital, funded
indebtedness and fixed charge coverage ratio. The credit facilities also
include certain restrictions which affect the Company's ability to incur
additional debt, sell or place liens upon assets, provide guarantees and
make loans, advances, investments and certain expenditures.
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
December 31,
1997 1996
7.55% Series A Senior Note, due
from 1999 through 2003 $32,500 $32,500
7.87% Series B Senior Note, due
from 2004 through 2005 11,000 11,000
8.06% Series C Senior Note, due
from 2006 through 2008 16,500 16,500
8.71% Senior loan, collateralized
by certain real estate, due from
1998 through 2004 8,000 8,000
Prime rate credit loan from supplier - 1,415
Prime rate bank mortgage loan - 1,267
Other debt 337 405
68,337 71,087
Less current portion 690 1,537
$67,647 $69,550
The Senior Notes, issued in order to finance the acquisition of
Big O Tires, Inc., are unsecured with interest payable quarterly. The
note agreement related to such borrowings contains certain financial
covenants dealing with the Company's working capital ratio, interest
expense coverage and tangible net worth. In addition, the note agreement
places certain restrictions on the Company, including its ability to incur
additional debt, transfer or place liens upon assets, provide guarantees
and make loans, advances, investments and certain expenditures.
The 8.71% Senior loan provides for interest only to be paid
through July 1998, after which principal and interest are due in quarterly
installments.
Maturities of long-term debt for the next five years are as
follows: $690,000 due in 1998, $7,859,000 in 1999, $7,844,000 in 2000,
$7,833,000 in 2001 and $7,833,000 in 2002.
-23-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. OTHER ASSETS
Other assets consist of the following (in thousands):
December 31,
1997 1996
Notes receivable $ 8,445 $ 9,274
Investments in joint ventures 2,811 2,433
Other intangible assets, net 741 831
Other 1,529 1,537
$13,526 $14,075
The notes receivable totals include a note for $4,897,000 from a
former distributor. The maker of the note was discharged in a proceeding
under Chapter 11 of the Bankruptcy Code in 1991. The Company received
distributions totaling $308,000 from the bankruptcy proceeding. The
Company holds written guarantees of the distributor's account, absolute
and continuing in form, signed by the principal former owners and officers
of the distributor and their wives, upon which the Company filed suit in
1989. The defendants have pleaded various defenses based on, among other
things, an alleged oral cancellation of the guarantees. The defendants
have also filed a third party complaint against the Company's former chief
executive officer in which they claim the right to recover against him for
any liability they may have to the Company. No trial date has been set at
this time; however, the Company expects that the lawsuit will be tried
within the next few months. The Company believes that the defendants'
defenses are invalid and that there is no merit to the third-party
complaint. The Company knows of no reason to believe that the defendants
will be unable to pay any judgment that may be entered against them in the
action.
7. LEASES
Rental expense of $3,031,000, $2,545,000 and $2,069,000 was
charged to operations in 1997, 1996 and 1995, respectively, after
deducting sublease income applicable to 1997 and 1996 of $2,122,000 and
$996,000, respectively. Minimum noncancelable real property lease
commitments at December 31, 1997 were as follows (in thousands):
Year Amount
1998 $ 5,018
1999 4,746
2000 4,275
2001 3,285
2002 3,092
Thereafter 9,893
30,309
Less sublease income 10,483
$19,826
The commitments relate substantially to distribution facilities.
In addition to the above rental payments, the Company is obligated in some
instances to pay real estate taxes, insurance and certain maintenance.
-24-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. INCOME TAXES
The Company records income taxes using the liability method
prescribed by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Income taxes provided for the years ended
December 31, 1997, 1996 and 1995 were as follows (in thousands):
1997 1996 1995
Current:
Federal $ 8,910 $ 9,375 $ 8,868
State 1,391 1,370 1,116
10,301 10,745 9,984
Deferred 1,586 (845) (461)
$11,887 $ 9,900 $ 9,523
The provision for deferred income taxes represents the change in
the Company's net deferred income tax asset or liability during the year,
including the effect of enacted tax rate changes. Deferred income taxes
arise from temporary differences between the tax basis of the Company's
assets and liabilities and their reported amounts in the financial
statements. Included in the Big O assets acquired was a deferred income
tax asset of $3,365,000, while liabilities assumed in the Big O
acquisition included a deferred income tax liability of $7,604,000.
The net deferred income tax asset in the financial statements at
December 31, 1997 included $824,000 related to the allowance for doubtful
accounts and notes, $1,366,000 related to inventory reserves and basis
differences, and $2,696,000 related to accrued warranty reserves. At
December 31, 1996, the net deferred income tax asset included $3,156,000
related to the allowance for doubtful accounts and notes, $1,364,000
related to inventories and $2,596,000 related to warranty reserves. The
net deferred income tax liability at December 31, 1997 and 1996 included
$6,913,000 and $7,093,000, respectively, related to trademarks.
The difference between the Company's effective income tax rate and
the statutory U. S. Federal income tax rate is reconciled as follows:
1997 1996 1995
Statutory U.S. Federal rate 35.0% 35.0% 35.0%
State income taxes 2.9 3.5 2.9
Other (.3) .5 .5
Effective tax rate 37.6% 39.0% 38.4%
9. RETIREMENT PLANS
The Company has a defined benefit pension plan covering many of
its employees. The benefits are based on years of service and the
employee's final compensation. The Company makes contributions to the
plan, not to exceed the maximum amount that can be deducted for federal
income tax purposes. This amount is computed using a different actuarial
cost method and different assumptions from those used for financial
reporting purposes.
-25-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. RETIREMENT PLANS (Continued)
The following table sets forth the defined benefit pension plan's
funded status and amounts recognized in the Company's balance sheets (in
thousands):
December 31,
1997 1996
Actuarial present value of accumulated
benefit obligations, including
vested benefits of $4,123 in 1997
and $3,991 in 1996 $(4,206) $(4,273)
Actuarial present value of projected
benefit obligations for service
rendered to date $(6,852) $(6,589)
Plan assets at fair value, primarily
listed stocks and U.S. bonds 6,176 6,590
Plan assets over (under) projected
benefit obligation (676) 1
Unrecognized net loss from experience
different from that assumed 1,782 2,147
Unrecognized net assets at January 1,
1997 and 1996 being recognized
over 15.53 years (47) (75)
Unrecognized prior service cost 111 123
Prepaid pension cost $ 1,170 $ 2,196
The net expense for the defined benefit pension plan in 1997
included a charge of $810,000 associated with an early retirement program
accepted by certain employees. The net expense for 1997, 1996 and 1995
was comprised of the following (in thousands):
1997 1996 1995
Service cost $ 404 $ 392 $ 274
Interest cost 454 419 349
Return on plan assets (1,093) (639) (757)
Net amortization, deferral
and settlement charges 1,412 131 616
$ 1,177 $ 303 $ 482
The weighted average discount rates used in determining the 1997
and 1996 actuarial present values of projected benefit obligations were
7.00% and 7.25%, respectively. In both the 1997 and 1996 projections, a
5% increase in future compensation levels was used and the expected long-
term rate of return on assets was 10%.
-26-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. RETIREMENT PLANS (Continued)
The Company also has an unfunded supplemental retirement plan for
certain of its executive officers, to provide benefits in excess of
amounts permitted to be paid by its defined benefit pension plan under
current tax law. In addition, supplemental retirement provisions are
included in the employment agreement of the Company's President and Chief
Executive Officer. Expenses for supplemental retirement benefits totaled
$377,000 in 1997, $313,000 in 1996 and $199,000 in 1995. At December 31,
1997, the projected benefit obligation, computed using the same discount
rate and compensation assumptions as for the defined benefit pension plan,
was $2,296,000. The accumulated benefit obligation, which was reflected
as a noncurrent liability at December 31, 1997, totaled $1,847,000.
The Company maintains an employee savings plan under Section
401(k) of the Internal Revenue Code, covering substantially all of its
employees. Contributions by the Company to the 401(k) plan include those
based on a specified percentage of employee contributions, as well as
discretionary contributions. Expenses recorded for the Company's
contributions totaled $422,000 in 1997, $194,000 in 1996 and $62,000 in
1995.
10. STOCKHOLDERS' EQUITY
The Company is authorized to issue 50,000,000 shares of $.10 par
value common stock. In addition, 2,500,000 shares of $.10 par value
preferred stock are authorized, none of which were outstanding at
December 31, 1997 or 1996.
The Company has a Stockholder Rights Plan whereby outstanding
shares of the Company's common stock are accompanied by preferred stock
purchase rights. The rights become exercisable ten days after either a
person or group has acquired 20% or more of the Company's common stock or
the commencement of a tender offer which would result in the offeror's
ownership of 30% or more of TBC's common stock. Under defined
circumstances, the rights allow TBC stockholders to purchase stock in
either the Company or an acquiring company at a price less than the market
price. The rights expire on July 31, 1998 unless redeemed at an earlier
date.
In 1997, 1996 and 1995, shares of the Company's common stock were
repurchased and retired under authorizations made by the Board of
Directors. As of December 31, 1997, the Company had unused authorizations
from the Board for the repurchase of approximately 2,011,000 additional
shares.
11. STOCK OPTIONS AND INCENTIVE PLAN
The Company's 1989 stock incentive plan ("1989 Plan") provides for
the grant of options to purchase shares of the Company's common stock to
officers and other key employees upon terms and conditions determined by a
committee of the Board of Directors. Options typically are granted at the
fair market value of the stock on the date of grant, vest ratably over a
three-year period and expire in ten years. The committee may also grant
-27-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. STOCK OPTIONS AND INCENTIVE PLAN (Continued)
stock appreciation rights, either singly or in tandem with stock options,
which entitle the holder to benefit from market appreciation in the
Company's common stock without requiring any payment on the part of the
holder.
The 1989 Plan also authorizes the committee to grant performance
awards and restricted stock awards to officers and other key employees.
Additionally, the 1989 Plan provides for the annual grant of restricted
stock with a market value of $5,000 to each non-employee director of the
Company. Each of these shares of restricted stock is accompanied by four
options, which are only exercisable under certain conditions and the
exercise of which results in the forfeiture of the associated share of
restricted stock. The options expire in one-third increments as the
associated restricted stock vests. Such tandem options are not included
in the totals shown below for outstanding options. At December 31, 1997,
2,216,000 shares were available for future option and restricted stock
grants under the 1989 Plan.
A summary of stock option activity during 1995, 1996 and 1997 is
shown below:
Weighted
Average
Option Option Price Exercise
Shares Range Price
Outstanding at January 1, 1995
(330,360 exercisable) 438,540 $ 1.48 - $12.13 $ 6.73
Granted in 1995 119,325 9.69 9.69
Exercised in 1995 37,918 1.48 - 8.00 3.10
Forfeited in 1995 6,604 9.69 - 12.13 11.22
Outstanding at December 31, 1995
(332,099 exercisable) 513,343 $ 1.48 - $12.13 $ 7.62
Granted in 1996 72,731 6.38 - 8.88 8.47
Exercised in 1996 58,038 1.48 - 6.55 2.35
Forfeited in 1996 14,396 9.69 - 12.13 10.17
Outstanding at December 31, 1996
(331,784 exercisable) 513,640 $ 5.03 - $12.13 $ 8.27
Granted in 1997 324,112 7.75 7.75
Exercised in 1997 53,261 5.03 - 6.55 6.20
Forfeited in 1997 34,711 6.55 - 12.13 9.81
Outstanding at December 31, 1997
(330,225 exercisable) 749,780 $ 5.03 - $12.13 $ 8.12
Additional information regarding stock options outstanding at
December 31, 1997 is shown below:
Outstanding Options Exercisable Options
Weighted Weighted Weighted
Average Average Average
Option Exercise Remaining Option Exercise
Option Price Range Shares Price Term Shares Price
$5.03 - $7.50 183,293 $ 5.90 3.0 yrs. 181,212 $ 5.89
$7.51 - $10.00 478,670 8.24 8.7 yrs. 79,949 9.38
$10.01 - $12.13 87,817 12.09 5.6 yrs. 69,064 12.08
749,780 330,225
-28-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. STOCK OPTIONS AND INCENTIVE PLAN (Continued)
The option shares listed for the three-year period ended December
31, 1997 include any with stock appreciation rights (SAR's). No SAR's
were granted during this three-year period. 63,280 SAR's were outstanding
at January 1, 1995, each with an exercise price of $1.71 per share.
25,000 SAR's were exercised in 1995 and 38,280 were exercised in 1996. No
stock appreciation rights were outstanding as of December 31, 1997 or
1996. Amounts in the statements of income relating to stock appreciation
rights included a credit of $30,000 in 1996 and a charge of $23,000 in
1995.
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation". Accordingly, no compensation has been
recognized for the stock options granted in 1997, 1996 or 1995. Using
fair value assumptions specified in SFAS No. 123, the weighted average per
share value of options granted during 1997, 1996 and 1995 was $3.36, $3.29
and $3.66, respectively. Had compensation cost for such option grants
been determined using such assumptions, the Company's net income on a pro
forma basis would have been $19,355,000 in 1997, $15,405,000 in 1996 and
$15,238,000 in 1995, compared to reported net income of $19,700,000 in
1997, $15,499,000 in 1996 and $15,249,000 in 1995. Earnings per share on
a pro forma basis would have been $.82 in 1997 rather than the reported
$.84. Pro forma earnings per share in both 1996 and 1995 were the same as
the reported amounts.
The fair value of each option granted in 1997, 1996 and 1995 was
estimated on the date of grant using the Black-Scholes option-pricing
model using the following weighted-average assumptions: dividend yield of
0%; expected lives of 5 years and risk-free interest rates equal to zero-
coupon governmental issues. The expected volatility used for options
granted were 37.8% for 1997 and 30% for 1996 and 1995.
12. FINANCIAL GUARANTEES AND CREDIT RISK
The Company's Big O Tires, Inc. subsidiary has provided certain
financial guarantees associated with real estate leases and financing of
its franchisees. Although the guarantees were issued in the normal course
of business to meet the financing needs of its franchisees, they represent
credit risk in excess of the amounts reported on the balance sheet as of
December 31, 1997. The contractual amounts of the guarantees, which
represent the Company's maximum exposure to credit loss in the event of
non-performance by the franchisees, totaled $8,440,000 as of December 31,
1997, including $3,937,000 related to franchisee financing and $4,503,000
related to real estate leases. In addition, Big O is the guarantor of the
mortgage loan on a formerly-owned building. At December 31, 1997, the
exposure to credit loss on such mortgage loan totaled $2,642,000.
Most of the above franchisee financing and lease guarantees extend
for more than five years and expire in decreasing amounts through 2009.
The credit risk associated with these guarantees is essentially the same
as that involved in extending loans to the franchisees. Big O evaluates
each franchisee's creditworthiness
-29-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. FINANCIAL GUARANTEES AND CREDIT RISK (Continued)
and requires that sufficient collateral (primarily inventories and
equipment) and security interests be obtained by the third party lenders
or lessors, before the guarantees are issued. There are no cash
requirements associated with the guarantees, except in the event that an
actual financial loss is subsequently incurred due to non-performance by
the franchisees.
13. LEGAL PROCEEDINGS
In addition to the litigation described in Note 6, the Company
is involved in various legal proceedings which are routine to the conduct
of its business. The Company does not believe that any such routine
litigation will have a material adverse effect on its consolidated financial
position, results of operations or cash flows.
14. REFOCUS OF OPERATIONS ON REPLACEMENT TIRE BUSINESS
In December 1996, the Company decided to refocus its operations on
the replacement tire business and discontinue the marketing of certain
non-tire products such as batteries, wheels, ride-control products and
filters to independent distributors. The decision resulted in the
December 1996 sale of certain assets of the Company's former battery
distribution subsidiary, as well as other marketing and operational
changes which were completed by the end of the first quarter of 1997.
There was no impact on the products marketed through the Company's Big O
Tires subsidiary.
A total of $2.4 million in pre-tax charges was recorded in the
fourth quarter of 1996 related to these changes. Included were charges of
$1.2 million to cost of goods sold associated with inventory write-downs,
$700,000 in selling and administrative expenses and $460,000 in other
expenses.
SUPPLEMENTARY DATA:
QUARTERLY FINANCIAL INFORMATION
Unaudited quarterly results for 1997 and 1996 are summarized as
follows:
(In thousands, except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1997
Net sales $144,367 $163,785 $182,648 $152,052
Cost of sales 123,071 139,261 155,713 126,074
Net income 3,231 4,784 6,042 5,643
Earnings per share* $ .14 $ .20 $ .26 $ .24
1996
Net sales $124,005 $137,561 $177,338 $165,681
Cost of sales 110,065 123,854 153,875 140,816
Net income 3,389 3,227 4,730 4,153
Earnings per share* $ .14 $ .14 $ .20 $ .17
* Basic and assuming dilution
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Except for information concerning executive officers of the
Company which is set forth in Part I of this Report, the information
required by this Item 10 is set forth in the Company's Proxy Statement for
its Annual Meeting of Stockholders to be held April 22, 1998, under the
captions "Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance", and is incorporated herein by this reference.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is set forth in the
Company's Proxy Statement for its Annual Meeting of Stockholders to be
held April 22, 1998, under the captions "Election of Directors" and
"Executive Compensation", and, with the exception of the information
disclosed in the Proxy Statement pursuant to Item 402(k) or 402(l) of
Regulation S-K, is incorporated herein by this reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item 12 is set forth in the
Company's Proxy Statement for its Annual Meeting of Stockholders to be
held April 22, 1998, under the caption "Security Ownership of Management
and Principal Stockholders", and is incorporated herein by this reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is set forth in the
Company's Proxy Statement for its Annual Meeting of Stockholders to be
held April 22, 1998, under the captions "Election of Directors" and
"Executive Compensation", and is incorporated herein by this reference.
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PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following items, including consolidated financial
statements of the Company, are set forth at Item 8 of this
Report:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - December 31, 1997, and
1996
Consolidated Statements of Income - Years ended
December 31, 1997, 1996, and 1995
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1995, 1996 and 1997
Consolidated Statements of Cash Flows - Years ended
December 31, 1997, 1996, and 1995
Notes to Consolidated Financial Statements
(a) (2) FINANCIAL STATEMENT SCHEDULES
Report of Independent Certified Public Accountants (at
p. 35 of this Report)
Schedule II - Valuation and qualifying accounts (at
p. 36 of this Report)
All other schedules are omitted because they are not
applicable, or not required, or because the required
information is included in the consolidated financial
statements or notes thereto.
(a) (3) EXHIBITS
See INDEX to EXHIBITS included at p. 37 of this Report
(b) REPORTS ON FORM 8-K
The Company did not file any Reports on Form 8-K during the
quarter ended December 31, 1997.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, TBC Corporation has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Memphis, Tennessee, on this 11th day of February,
1998.
TBC CORPORATION
By: /s/ LOUIS S. DiPASQUA
Louis S. DiPasqua
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf
of TBC Corporation and in the capacities and on the dates indicated:
Name Title Date
/s/ LOUIS S. DiPASQUA President, Chief February 11, 1998
Louis S. DiPasqua Executive Officer
and Director
/s/ RONALD E. McCOLLOUGH Senior Vice President February 11, 1998
Ronald E. McCollough Operations and
Treasurer (principal
accounting and
financial officer)
* MARVIN E. BRUCE Chairman of the Board February 11, 1998
Marvin E. Bruce of Directors
* ROBERT E. CARROLL, JR. Director February 11, 1998
Robert E. Carroll, Jr.
* ROBERT H. DUNLAP Director February 11, 1998
Robert H. Dunlap
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* DWAIN W. HIGGINBOTHAM Director February 11, 1998
Dwain W. Higginbotham
* CHARLES A. LEDSINGER, JR. Director February 11, 1998
Charles A. Ledsinger, Jr.
* RICHARD A. McSTAY Director February 11, 1998
Richard A. McStay
* ROBERT M. O'HARA Director February 11, 1998
Robert M. O'Hara
* ROBERT R. SCHOEBERL Director February 11, 1998
Robert R. Schoeberl
* The undersigned by signing his name hereto does sign and execute
this Report on Form 10-K on behalf of each of the above-named directors of
TBC Corporation pursuant to a power of attorney executed by each such
director and filed with the Securities and Exchange Commission as an
exhibit to this Report.
/s/ LOUIS S. DiPASQUA
Louis S. DiPasqua
Attorney-in-Fact
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders
TBC Corporation
Our report on the consolidated financial statements of TBC
Corporation and Subsidiaries is included on page 13 of this Form 10-K. In
connection with our audits of such financial statements, we have also
audited the related financial statement schedule listed in the index at
Item 14(a) (2) of this Form 10-K.
In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
Memphis, Tennessee
January 30, 1998
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TBC CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(In thousands)
Additions
Charged Charged
to Costs to
Balance and Other Balance
January 1, Expenses Accounts Deductions December 31,
1997
Warranty reserve......$ 6,675 $ 6,422 $ - $ 6,166 $ 6,931
Allowance for
doubtful
accounts........... 8,879 1,394 - 2,929 7,344
1996
Warranty reserve...... 1,002 4,159 5,613 4,099 6,675
Allowance for
doubtful
accounts........... 8,014 1,640 1,954 2,729 8,879
1995
Warranty reserve...... 975 1,591 - 1,564 1,002
Allowance for
doubtful
accounts........... 7,069 1,546 123 724 8,014
Includes amounts for Big O Tires, Inc. as of the July 10, 1996
acquisition date.
Amounts added during current year and payable at year end less
amount payable at beginning of year.
Accounts written off during year, net of recoveries.
-36-
INDEX TO EXHIBITS
Located at
Manually
Numbered Page
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT,
LIQUIDATION OR SUCCESSION:
2.1 Agreement and Plan of Merger, dated as of April 30,
1996, by and among TBC Corporation, TBCO
Acquisition, Inc. and Big O Tires, Inc., was filed
as Exhibit 2.1 to the TBC Corporation Current
Report on Form 8-K, dated April 30, 1996 ........... *
(3) ARTICLES OF INCORPORATION AND BY-LAWS:
3.1 Certificate of Incorporation of TBC Corporation,
as amended April 29, 1988, was filed as Exhibit
3.1 to the TBC Corporation Annual Report on
Form 10-K for the year ended December 31, 1994 ..... *
3.2 Amendment to Restated Certificate of Incorporation
of TBC Corporation dated April 23, 1992, was filed
as Exhibit 3.2 to the TBC Corporation Annual Report
on Form 10-K for the year ended December 31, 1992 .. *
3.3 By-Laws of TBC Corporation as amended through
July 25, 1996, were filed as Exhibit 3.1 to the
TBC Corporation Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996 ........... *
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES:
4.1 $30,000,000 Long Term Credit Agreement, dated as of
September 25, 1996, among TBC Corporation, the
lending institutions party thereto, First Tennessee
Bank National Association as Administrative Agent,
and NBD Bank as Co-Agent, including as Exhibit A
the form of Note, dated September 25, 1996, issued
by TBC Corporation to each lender pursuant thereto,
and including as Exhibit F the form of Continuing
Guaranty executed by certain subsidiaries of TBC
Corporation in connection therewith, was filed as
Exhibit 4.1 to the TBC Corporation Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1996 ................................. *
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4.2 First Amendment, dated July 1, 1997, to Long Term
Credit Agreement among TBC Corporation, the lending
institutions party thereto, First Tennessee Bank
National Association as Administrative Agent, and
NBD Bank as Co-Agent, was filed as Exhibit 4.1 to
the TBC Corporation Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997 ........... *
4.3 $48,500,000 Short Term Credit Agreement, dated as
of September 25, 1996, among TBC Corporation, the
lending institutions party thereto, First Tennessee
Bank National Association as Administrative Agent,
and NBD Bank as Co-Agent, including as Exhibit A-1
the form of Revolving Note, dated September 25,
1996, issued by TBC Corporation to each lender
pursuant thereto, including as Exhibit A-2 the
form of Swing Line Note, dated September 25, 1996,
issued by TBC Corporation to First Tennessee Bank
National Association pursuant thereto, and
including as Exhibit F the form of Continuing
Guaranty executed by certain subsidiaries of TBC
Corporation in connection therewith, was filed as
Exhibit 4.2 to the TBC Corporation Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1996.................................. *
4.4 First Amendment, dated July 1, 1997, to Short Term
Credit Agreement among TBC Corporation, the lending
institutions party thereto, First Tennessee Bank
National Association as Administrative Agent, and
NBD Bank as Co-Agent, was filed as Exhibit 4.2 to
the TBC Corporation Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997 ........... *
4.5 Second Amendment, dated September 23, 1997, to
Short Term Credit Agreement among TBC Corporation,
the lending institutions party thereto, First
Tennessee Bank National Association as
Administrative Agent, and NBD Bank as Co-Agent,
was filed as Exhibit 4.3 to the TBC Corporation
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 ........................... *
4.6 Third Amendment to Short Term Credit Agreement and
Second Amendment to Long Term Credit Agreement,
dated October 28, 1997, among TBC Corporation, the
lending institutions party thereto, First Tennessee
Bank National Association as Administrative Agent,
and NBD Bank as Co-Agent ........................... 45
4.7 Third Amendment to Long Term Credit Agreement and
Fourth Amendment to Short Term Credit Agreement,
dated December 17, 1997, among TBC Corporation, the
lending institutions party thereto, First Tennessee
Bank National Association as Administrative Agent,
and NBD Bank as Co-Agent ........................... 48
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4.8 Note Purchase and Private Shelf Agreement, dated
July 10, 1996, between TBC Corporation and The
Prudential Insurance Company of America, was filed
as Exhibit 4.1 to the TBC Corporation Current
Report on Form 8-K, dated July 10, 1996 ............ *
4.9 Series A, Series B, and Series C Senior Notes,
dated July 10, 1996, issued by TBC Corporation
pursuant to the Note Purchase Agreement
referenced in item 4.8 above, were filed as
Exhibit 4.2 to the TBC Corporation Current Report
on Form 8-K, dated July 10, 1996 ................... *
4.10 Amendment No. 1, dated September 20, 1996, to the
Note Purchase Agreement referenced in item 4.8
above, including form of Continuing Guaranty
executed by certain subsidiaries of TBC Corporation
in connection therewith, was filed as Exhibit 4.5
to the TBC Corporation Quarterly Report on Form
10-Q for the quarter ended September 30, 1996 ...... *
4.11 Other long-term debt instruments ................... #
(10) MATERIAL CONTRACTS:
Management Contracts and Compensatory Plans
or Arrangements
10.1 Executive Employment Agreement between the Company
and Mr. Louis S. DiPasqua, amended and restated
as of January 31, 1995, was filed as Exhibit 10.1
to the TBC Corporation Quarterly Report on Form
10-Q for the quarter ended March 31, 1995 .......... *
10.2 Executive Consulting Agreement between the Company
and Mr. Marvin E. Bruce dated January 1, 1995, was
filed as Exhibit 10.2 to the TBC Corporation
Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995 .............................. *
10.3 Louis S. DiPasqua Trust Agreement dated as of
October 22, 1992 between the Company and First
Tennessee Bank National Association was filed as
Exhibit 10.6 to the TBC Corporation Annual Report
on Form 10-K for the year ended December 31, 1992 .. *
10.4 Amendment, dated July 1, 1996, to Executive
Employment Agreement between the Company and
Mr. Louis S. DiPasqua was filed as Exhibit 10.4
to the TBC Corporation Annual Report on Form 10-K
for the year ended December 31, 1996 ............... *
10.5 TBC Corporation 1989 Stock Incentive Plan, as
amended and restated April 23, 1997 was filed as
Exhibit 10.1 to the TBC Corporation Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1997 ...................................... *
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10.6 TBC Corporation Deferred Compensation Plan for
Directors was filed as Exhibit 10.10 to the TBC
Corporation Annual Report on Form 10-K for the
year ended December 31, 1993 ....................... *
10.7 Resolution adopted by the Compensation Committee
of the TBC Corporation Board of Directors,
September 26, 1996, relating to interest payable
on deferred compensation of officers and directors
of TBC Corporation, was filed as Exhibit 10.3 to
the TBC Corporation Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996............ *
10.8 Executive Employment Agreement dated as of
November 1, 1988 between the Company and Mr.
Kenneth P. Dick, including Trust Agreement as
Exhibit A thereto, as extended as of November 1,
1991 and as amended as of July 1, 1992, was
filed as Exhibit 10.10 to the TBC Corporation
Annual Report on Form 10-K for the year ended
December 31, 1992 .................................. *
10.9 Amendment, dated July 1, 1996, to Executive
Employment Agreement between the Company and
Mr. Kenneth P. Dick was filed as Exhibit 10.10
to the TBC Corporation Annual Report on Form 10-K
for the year ended December 31, 1996 ............... *
10.10 Agreement to Extend Executive Employment Agreement,
between the Company and Mr. Kenneth P. Dick dated
October 31, 1997.................................... 51
10.11 Executive Employment Agreement dated as of
November 1, 1988 between the Company and Mr.
Bob M. Hubbard, including Trust Agreement as
Exhibit A thereto, as extended as of November 1,
1991 and as amended as of July 1, 1992, was
filed as Exhibit 10.11 to the TBC Corporation
Annual Report on Form 10-K for the year ended
December 31, 1992 .................................. *
10.12 Agreement to Extend Executive Employment Agreement,
between the Company and Mr. Bob M. Hubbard dated
October 31, 1994, was filed as Exhibit 10.11 to the
TBC Corporation Annual Report on Form 10-K for the
year ended December 31, 1994 ....................... *
10.13 Amendment, dated July 1, 1996, to Executive
Employment Agreement between the Company and
Mr. Bob M. Hubbard was filed as Exhibit 10.13
to the TBC Corporation Annual Report on Form 10-K
for the year ended December 31, 1996 ............... *
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10.14 Executive Employment Agreement dated as of
November 1, 1988 between the Company and Mr.
Ronald E. McCollough, including Trust Agreement
as Exhibit A thereto, as extended as of November 1,
1991 and as amended as of July 1, 1992, was
filed as Exhibit 10.12 to the TBC Corporation
Annual Report on Form 10-K for the year ended
December 31, 1992 .................................. *
10.15 Amendment, dated July 1, 1996, to Executive
Employment Agreement between the Company and
Mr. Ronald E. McCollough was filed as Exhibit 10.16
to the TBC Corporation Annual Report on Form 10-K
for the year ended December 31, 1996 ............... *
10.16 Agreement to Extend Executive Employment Agreement,
between the Company and Mr. Ronald E. McCollough
dated October 31, 1997.............................. 52
10.17 Amended and Restated Executive Employment Agreement
dated as of August 1, 1997 between the Company and
Mr. Barry D. Robbins, including Trust Agreement as
Exhibit A thereto was filed as Exhibit 10.2 to the
TBC Corporation Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997 ............... *
10.18 TBC Corporation Management Incentive Compensation
Plan, effective January 1, 1997, was filed as
Exhibit 10.1 to the TBC Corporation Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1997 ................................. *
10.19 TBC Corporation Executive Supplemental Retirement
Plan, as amended through August 1, 1997, was filed
as Exhibit 10.3 to the TBC Corporation Quarterly
Report on Form 10-Q for the quarter ended September
30, 1997 ........................................... *
Other Material Contracts
10.20 Lease Agreement, dated February 25, 1980, between
TBC Corporation and Vantage-Memphis, Inc. was
filed as Exhibit 10.2 to TBC Corporation Registra-
tion Statement on Form S-1, filed on April 21, 1983
(Reg. No. 2-83216).................................. *
10.21 Modification and Ratification of Lease, dated
April 16, 1991, between TBC Corporation and
Vantage-Memphis, Inc. was filed as Exhibit 10.11
to the TBC Corporation Annual Report on Form 10-K
for the year ended December 31, 1991 ............... *
10.22 Lease Agreement, dated September 23, 1992, between
TBC Corporation and Weston Management Company
(for Weston Building #105) was filed as Exhibit
10.18 to the TBC Corporation Annual Report on
Form 10-K for the year ended December 31, 1992 ..... *
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10.23 Lease Agreement, dated September 23, 1992, between
TBC Corporation and Weston Management Company
(for Weston Building #108) was filed as Exhibit
10.19 to the TBC Corporation Annual Report on
Form 10-K for the year ended December 31, 1992 ..... *
10.24 Form of TBC Corporation's standard Distributor
Agreement was filed as Exhibit 10.1 to the TBC
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 ........................ *
10.25 Form of Franchise Agreement in use by Big O Tires,
Inc. ............................................... 53
10.26 Agreement, dated October 1, 1977, between TBC
Corporation and The Kelly-Springfield Tire
Company, including letter dated June 30, 1978,
was filed as Exhibit 10.6 to TBC Corporation
Registration Statement on Form S-1, filed on
April 21, 1983 (Reg. No. 2-83216) .................. *
10.27 Ten-Year Commitment Agreement, dated March 21, 1994,
between the Company and The Kelly-Springfield Tire
Company, was filed as Exhibit 10.2 to the TBC
Corporation Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994 ....................... *
10.28 Agreement, effective January 1, 1994, signed
April 25, 1994, between the Company and Cooper
Tire & Rubber Company, was filed as Exhibit 10.2 to
the TBC Corporation Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994 ................ *
(21) SUBSIDIARIES OF THE COMPANY:
21.1 List of the names and jurisdictions of
incorporation of the subsidiaries of the Company ... 106
(23) CONSENTS OF EXPERTS AND COUNSEL:
23.1 Consent of Coopers & Lybrand L.L.P., Independent
Certified Public Accountants, to incorporation by
reference of their report dated January 30, 1998
in Post-Effective Amendment No. 1 to Registration
Statement on Form S-8 for the Company's 1989 Stock
Incentive Plan (Reg. No. 33-43166) ................. 107
(24) POWER OF ATTORNEY:
24.1 Power of attorney of each person who signed this
Annual Report on Form 10-K on behalf of another
pursuant to a power of attorney .................... 108
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(27) FINANCIAL DATA SCHEDULE:
27.1 Financial Data Schedule ............................ +
(99) ADDITIONAL EXHIBITS:
99.1 Rights Agreement, dated as of July 21, 1988,
between TBC Corporation and the First National
Bank of Boston, as Rights Agent, was filed as an
Exhibit to the Company's Registration Statement
on Form 8-A dated July 21, 1988. The Rights
Agreement includes as Exhibit A the form of
Certificate of Designation, Preferences and
Rights; as Exhibit B, the form of Rights
Certificate; and as Exhibit C, the form of
Summary of Rights .................................. *
"*" Indicates that the Exhibit is incorporated by
reference into this Annual Report on Form 10-K
from a previous filing with the Commission.
"#" With respect to all other instruments defining the
rights of holders of long-term debt, the amount of
securities authorized under each of such instruments
does not exceed 10% of the total assets of TBC
Corporation and its subsidiaries on a consolidated
basis. A copy of each of such instruments will be
furnished to the Commission upon request.
"+" Included only in the Company's electronic filing
with the Commission.
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TBC CORPORATION
EXHIBITS
TO
FORM 10-K
FOR THE YEAR ENDED
DECEMBER 31, 1997
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