-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fo526Ggrp5baEbHWxfGwtF+Yb8CLeb6LyZJz/mcOhV505MS9rSzXudMv2JQFv9Sb gavUa6APA6HTzgQ2/DTH6Q== 0000718449-96-000002.txt : 19960207 0000718449-96-000002.hdr.sgml : 19960207 ACCESSION NUMBER: 0000718449-96-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960206 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TBC CORP CENTRAL INDEX KEY: 0000718449 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MOTOR VEHICLES & MOTOR VEHICLE PARTS & SUPPLIES [5010] IRS NUMBER: 310600670 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11579 FILM NUMBER: 96511507 BUSINESS ADDRESS: STREET 1: 4770 HICKORY HILL RD CITY: MEMPHIS STATE: TN ZIP: 38141 BUSINESS PHONE: 9013638030 MAIL ADDRESS: STREET 1: 4770 HICKORY HILL RD CITY: MEMPHIS STATE: TN ZIP: 38141 10-K 1 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, 1995 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. [ ] INDEX TO EXHIBITS at page 32 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, 1995 (for purposes of this calculation, 2,099,738 shares beneficially owned by directors and executive officers of the Company were treated as being held by affiliates of the Company)................. $187,025,328 Number of shares of Common Stock, par value $.10, outstanding at the close of business on December 31, 1995 ............................ 23,783,834 DOCUMENT INCORPORATED BY REFERENCE TBC Corporation's Proxy Statement for its Annual Meeting of Stockholders to be held on April 25, 1996. 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. _______________________ -2- 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. The Company and its wholly-owned subsidiaries are principally engaged in the business of distributing products in the automotive replacement market. Unless the context indicates otherwise, the term "Company" refers to TBC Corporation and its subsidiaries. Products The Company's products are made by leading manufacturers and include tires, batteries, tubes, wheels, ride-control products, filters, brake parts, chassis parts, automotive service equipment and other products. Gross margin percentages on sales of tires and non-tire products do not differ significantly. Substantially all of the Company's products carry the Company's proprietary brand names. The Company's Cordovan, Multi-Mile and Sigma 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. Sales of tires accounted for approximately 89% of the Company's total sales in 1995 and 1994 and 88% in 1993. The Company believes it is the largest independent wholesale distributor of replacement tires in the United States. Other brands under which the Company's products are marketed include Grand Prix, Grand Am, Grand Spirit, Wild Spirit, Grand Sport, Aqua-Flow, Power King, Harvest King, and Astro-Lite . Marketing and Distribution The Company distributes its products other than those sold through its Battery Associates, Inc. subsidiary ("TBC products") through a network of distributors in the United States, Canada and Mexico. Some of these distributors act as wholesalers, some operate retail outlets, and some function as both wholesalers and retailers. 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. Through its distributors and their customers, the Company estimates that TBC products are sold by over 20,000 retail outlets. The retail outlets handling TBC products consist primarily of independent tire dealers. -3- Battery Associates, Inc. distributes batteries and related products for automobiles, trucks, motorcycles and other uses through its own nationwide distribution network of wholesale and retail distributors. Major Customers The Company's ten largest distributors accounted for 51% of the Company's gross sales in 1995. Sales to Carroll's, Inc., Hapeville, Georgia, excluding sales to distributors which operate under arrangements with and may pay compensation to Carroll's, represented 15% of the Company's gross sales in 1995. No distributor other than Carroll's individually accounted for more than 10% of the Company's 1995 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, battery manufacturers 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 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 future. 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 1995, pursuant to a supply agreement entered into in 1977 and a 10-year commitment signed in 1994. The Company also has written contracts with certain other suppliers. Trademarks Substantially all of the Company's products carry the Company's own brand names. The ability to offer products under recognized 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. -4- 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 1991, first quarter sales have represented, on the average, approximately 22% of annual sales; the second and third quarters approximately 26% 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 for TBC products are filled either out of the Company's inventory or by direct shipment to the customer from the manufacturers' plants at TBC's request. Sales made by Battery Associates to its distributors are made by direct shipments to customers from the manufacturers' plants at Battery Associates' request. Since distributors 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 $44,600,000 in 1995. The Company's inventory turn rate (cost of sales, including the cost of direct shipments from manufacturers to distributors, divided by average inventory) was 10.9 for 1995. 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 direct competitors at its level of distribution are the manufacturers, including its own suppliers, and independent distributors of the products it sells. Indirectly, the Company also competes against tire company stores, chain and department stores, warehouse clubs, oil companies and automotive product retailers, since retailers selling the Company's products must compete against the products offered by other retailers. The Company believes it is able to compete successfully in its industry because of its ability to offer quality products under its proprietary brand names, its efficient distribution systems, and its good relationships with its distributors and suppliers. Employees As of December 31, 1995, the Company employed 271 persons. The Company considers its employee relations to be satisfactory. The Company's employees are not currently represented by a union. -5- Item 2. PROPERTIES The Company's executive offices and warehouse distribution facilities, which total approximately 1,300,000 square feet under roof, are located in Memphis, Tennessee. The Company owns the office building and one of its warehouses. One warehouse is leased under an agreement expiring in 2005 and two other warehouses are leased under agreements expiring in 2000. Battery Associates, Inc. owns its facilities, which are also located in Memphis. The Company's Northern States Tire, Inc. subsidiary owns facilities in New Hampshire, Vermont and Maine and leases distribution facilities in Massachusetts. Item 3. LEGAL PROCEEDINGS The Company is a defendant in a number of personal injury lawsuits based upon alleged defects in products sold by the Company. Such actions are commonplace in the automotive replacement business, particularly with respect to tires. The Company believes that in substantially all such cases it is covered by its manufacturers' indemnity agreements or their product liability insurance. The Company also maintains its own product liability insurance. 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 25, 1996) or until their respective successors are elected. Capacities in which Individual Serves Name Age the Company Louis S. DiPasqua 61 President and Chief Executive Officer Kenneth P. Dick 49 Senior Vice President Sales Bob M. Hubbard 61 Senior Vice President Purchasing and Engineering Ronald E. McCollough 55 Senior Vice President Operations Larry D. Coley 38 Vice President and Controller Charles B. Quinn, Jr. 47 Vice President and Treasurer -6- 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. From 1989 until 1991, Mr. DiPasqua was Vice President, Replacement Tire Sales and Marketing for the Goodyear Tire & Rubber Company and prior to that was President and Chief Executive Officer of Kelly Springfield Tire Company, a division of Goodyear. From 1984 to 1988, Mr. DiPasqua was Chairman and Managing Director of Goodyear Great Britain. Mr. Dick has served as Senior Vice President Sales of the Company since 1988. From 1982 until his election as Senior Vice President Sales, 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. Hubbard was elected Senior Vice President Purchasing and Engineering of the Company in 1982. From 1973 until his election as a Senior Vice President, Mr. Hubbard was Vice President Purchasing and Quality Assurance of the Company. Mr. McCollough has been Senior Vice President Operations of the Company since 1982 and served as Controller of the Company from 1973 to 1985. From 1978 until his election as a Senior Vice President, Mr. McCollough was also Vice President Operations of the Company. 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. Mr. Quinn has been a Vice President of the Company since 1982 and the Treasurer of the Company since 1980. -7- 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, 1995, the Company had approximately 6,100 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 1995 or 1994. The following table sets forth for the periods indicated the high and low sale prices for the Company's Common Stock as reported by the Nasdaq National Market. Price Range High Low Quarter ended 03/31/94............ 13.88 11.25 06/30/94............ 13.50 11.50 09/30/94............ 11.75 9.38 12/31/94............ 10.25 8.50 03/31/95............ 10.50 8.75 06/30/95............ 11.75 10.00 09/30/95............ 11.00 8.88 12/31/95............ 9.75 6.63 -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, 1995. 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. The Company did not declare any cash dividends during the five-year period ended December 31, 1995. Year ended December 31, 1995 1994 1993 1992 1991 INCOME STATEMENT DATA (1): Net sales ............. $536,122 $551,920 $568,700 $569,508 $499,469 Net income ............ 15,249 19,546 21,375 22,474 17,667 Earnings per share (2). .62 .71 .74 .76 .59 Average shares and equivalents outstanding (2).... 24,683 27,683 28,945 29,584 30,106 BALANCE SHEET DATA (1): Total assets .......... $179,952 $169,682 $166,746 $176,859 $135,284 Working capital ....... 76,600 91,279 95,114 80,630 71,959 Long-term debt ........ 555 - - - - Stockholders' equity .. 104,823 113,983 116,550 102,960 90,370 (1) In thousands except per share amounts. (2) Reflects 3-for-2 stock splits effective November 15, 1991 and December 11, 1992. -9- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS 1995 Compared to 1994: Net sales for 1995 decreased 2.9% from the 1994 level, due principally to a 3.1% decline in tire sales. Sales of tires accounted for approximately 89% of total sales in both 1995 and 1994. Unit tire shipments decreased 6.5% from the year-earlier level, reflecting increased competitive pressures and sluggishness in the replacement tire market during 1995. Partially offsetting the lower unit volume was a 3.7% increase in the average tire sales price, primarily related to the effect of industry price increases since the beginning of 1994. Cost of sales as a percentage of net sales increased from 90.6% in 1994 to 91.2% in 1995. The fluctuation was due to the combined effects of the above-noted competitive pressures and a shift in the Company's sales toward shipments direct from manufacturers rather than through the Company's distribution facilities. Margins on shipments direct from manufacturers are typically lower than through the Company's own facilities. Distribution expenses were relatively unchanged in the current year compared to the year-earlier level. Selling and administrative expenses declined slightly in 1995 due to the recognition in 1994 of a charge of $2.5 million for supplemental retirement benefits. Excluding that charge, selling and administrative expenses increased principally due to the addition of facilities in the northeastern United States in 1995, higher pension costs and increased selling expenses. Net other income/expense shifted from net other income of $1.8 million in 1994 to net other expense of $520,000 in 1995. The fluctuation was due primarily to increased interest expenses associated with higher bank borrowing levels and interest rates than in 1994. The increase in average bank borrowings in 1995 was largely related to repurchases of common stock and higher inventory levels during the year. 1994 Compared to 1993: Net sales for 1994 were $551.9 million, a 3.0% decrease from 1993 net sales of $568.7 million. Sales of tires accounted for approximately 89% of total sales in 1994 compared to 88% in 1993. Tire sales declined 1.5%, the result of a 1.7% decrease in unit tire shipments partially offset by a 0.2% increase in the average tire sales price. The reduction in sales of non-tire products was primarily due to lower unit shipments of batteries. -10- Cost of sales as a percentage of net sales increased from 90.4% in 1993 to 90.6% in 1994, due to higher net product costs from suppliers and an increase in shipments direct from manufacturers rather than through the Company's distribution facilities. Distribution expenses decreased 9.2% in 1994 compared to 1993, due principally to decreases in labor and related costs. Selling and administrative expenses increased from the 1993 level, due primarily to charges of $2.5 million for supplemental retirement benefits. See Note 6 to the consolidated financial statements. Net other income was higher in 1994 than in 1993, due primarily to decreased interest expenses associated with lower bank borrowings. LIQUIDITY AND CAPITAL RESOURCES The Company's financial position and liquidity are strong. At December 31, 1995, working capital totaled $76.6 million and the current ratio was 2.04. At the end of 1994, working capital was $91.3 million and the Company's current ratio was 2.66. The Company has arrangements for short-term borrowings totaling $73.0 million. At December 31, 1995, borrowings under these arrangements totaled $50.8 million. Capital expenditures totaled $9.2 million in 1995, which included the purchase of certain distribution facilities and equipment in the northeastern United States and expenditures of $4.2 million for tire molds. This was compared to capital expenditures of $3.6 million in 1994, principally for tire molds. The Company expects to fund 1996 day-to-day operating expenses and normally recurring capital expenditures out of operating funds and its present financial resources. The Company had no material commitments for capital expenditures at the end of 1995. Cash generated by operations, together with the available credit arrangements, enabled the Company to fund stock repurchases totaling $24.6 million in 1995 and $22.3 million in 1994, as well as the above-mentioned capital expenditures. The latest repurchase plans, approved by the Board of Directors in 1995, authorized the repurchase of a total of 2,500,000 shares of common stock in market and other transactions, of which approximately 1,285,000 shares had been repurchased as of the end of 1995. Included in other assets at December 31, 1995 and 1994 is a promissory note receivable of $4,897,000 from a former distributor. (See Note 4 to the Consolidated Financial Statements for a discussion of the legal proceedings relative to that receivable.) Other assets increased $1.9 million during 1995, due primarily to investments by the Company in a Mexican joint venture and a domestic import/export joint venture. -11- Accounts payable decreased from $20.8 million at December 31, 1994 to $10.1 million at the end of 1995, as the Company took advantage of certain early payment terms from suppliers which were not offered at the end of 1994. Notes payable to banks increased from $25.8 million at December 31, 1994 to $50.8 million at December 31, 1995. This increase was due to the above-noted early payment of accounts payable, as well as increased inventories and the aforementioned capital expenditures and stock repurchases during 1995. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary financial information required by this Item 8 are included on the following 12 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, 1995 and 1994, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Memphis, Tennessee January 26, 1996 -13- TBC CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands) ASSETS December 31, 1995 1994 CURRENT ASSETS Accounts and notes receivable, less allowance for doubtful accounts of $8,014 in 1995 and $7,069 in 1994: Related parties $ 17,208 $ 13,557 Other 78,330 88,221 Total accounts and notes receivable 95,538 101,778 Inventories 49,538 39,754 Refundable federal and state income taxes 472 383 Deferred federal income taxes 2,389 1,928 Other current assets 2,252 2,482 Total current assets 150,189 146,325 PROPERTY, PLANT AND EQUIPMENT, AT COST Land and improvements 2,572 1,560 Buildings 10,985 8,438 Equipment 20,324 16,943 Furniture and fixtures 2,381 2,101 Leasehold improvements 600 600 36,862 29,642 Less accumulated depreciation 17,714 15,020 Total property, plant and equipment 19,148 14,622 OTHER ASSETS 10,615 8,735 TOTAL ASSETS $179,952 $169,682 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, 1995 1994 CURRENT LIABILITIES Outstanding checks, net $ 8,120 $ 4,257 Notes payable to banks 50,838 25,780 Current portion of long-term debt 81 - Accounts payable, trade 10,117 20,763 Other current liabilities 4,433 4,246 Total current liabilities 73,589 55,046 LONG-TERM DEBT, LESS CURRENT PORTION 555 - NONCURRENT LIABILITIES 985 653 STOCKHOLDERS' EQUITY Common stock, $.10 par value, shares issued and outstanding - 23,784 in 1995 and 26,282 in 1994 2,378 2,628 Additional paid-in capital 9,543 10,391 Retained earnings 92,902 100,964 Total stockholders' equity 104,823 113,983 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $179,952 $169,682 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, 1995 1994 1993 NET SALES* $536,122 $551,920 $568,700 COSTS AND EXPENSES Cost of sales 488,717 500,085 514,174 Distribution 8,040 8,010 8,825 Selling and administrative 14,073 14,158 11,991 Other (income) expense - net 520 (1,764) (915) Total costs and expenses 511,350 520,489 534,075 INCOME BEFORE INCOME TAXES 24,772 31,431 34,625 PROVISION FOR INCOME TAXES 9,523 11,885 13,250 NET INCOME $ 15,249 $ 19,546 $ 21,375 Earnings per share $ .62 $ .71 $ .74 Weighted average number of shares and equivalents outstanding 24,683 27,683 28,945 * Including sales to related parties of $130,215, $135,786 and $140,343 in the years ended December 31, 1995, 1994 and 1993, 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, 1993, 1994 and 1995 Common Stock Additional Number of Paid-In Retained Shares Amount Capital Earnings Total BALANCE, JANUARY 1, 1993 29,032 $2,903 $10,593 $89,464 $102,960 Net income for year 21,375 21,375 Issuance of common stock under stock option and incentive plans 48 5 713 - 718 Repurchase and retirement of common stock (703) (70) (272) (8,183) (8,525) Tax benefit from exercise of stock options - - 22 - 22 BALANCE, DECEMBER 31, 1993 28,377 2,838 11,056 102,656 116,550 Net income for year 19,546 19,546 Issuance of common stock under stock option and incentive plans 20 2 131 - 133 Repurchase and retirement of common stock (2,115) (212) (837) (21,238) (22,287) Tax benefit from exercise of stock options - - 41 - 41 BALANCE, DECEMBER 31, 1994 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 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, 1995 1994 1993 Operating Activities: Net income $ 15,249 $ 19,546 $ 21,375 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 4,612 4,012 3,838 Amortization 23 86 105 Deferred federal income taxes (461) 238 839 Changes in operating assets and liabilities: Receivables 6,179 (6,270) 1,981 Inventories (9,784) 3,559 4,768 Other current assets 230 (601) (240) Other assets (280) (375) - Outstanding checks, net 3,863 3,276 981 Accounts payable, trade (10,646) 2,281 (13,674) Federal and state income taxes refundable or payable (67) (426) (771) Other current liabilities 187 (312) (2,694) Noncurrent liabilities 332 653 - Net cash provided by operating activities 9,437 25,667 16,508 Investing Activities: Purchase of property, plant and equipment (9,151) (3,580) (3,078) Investments in joint ventures (1,562) - - Other 13 378 29 Net cash used in investing activities (10,700) (3,202) (3,049) Financing Activities: Net bank borrowings (repayments) under short-term borrowing arrangements 25,058 (311) (7,523) Net increase in long-term debt 636 - - Issuance of common stock under stock option and incentive plans, net of repurchase 134 133 718 Repurchase and retirement of common stock (24,565) (22,287) (8,525) Net cash provided by (used in) financing activities 1,263 (22,465) (15,330) Decrease in cash and cash equivalents - - (1,871) Cash and cash equivalents: Balance - Beginning of year - - 1,871 Balance - End of year $ - $ - $ - Supplemental Disclosures of Cash Flow Information: Cash paid for - Interest $ 2,956 $ 1,324 $ 1,844 - Income Taxes 10,051 12,073 13,182 Supplemental Disclosure of Non-Cash Financing Activity: Tax benefit from exercise of stock options $ 22 $ 41 $ 22 The accompanying notes are an integral part of the financial statements. -18- TBC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation - The accompanying financial statements include the accounts of TBC Corporation and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions have been eliminated. 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 $6,863,000 and $5,746,000 at December 31, 1995 and 1994, respectively. Revenue recognition - Sales are recognized upon shipment of products. Estimated costs of returns and allowances are accrued at the time products are shipped. Interest on early payments to suppliers for product - Interest income associated with early payments to suppliers for product is recorded as a reduction of product cost. The portion of this interest which was included in the statements of income as a reduction to cost of sales represented 1.59% of net sales in 1995, 1.44% in 1994 and 1.45% in 1993. Concentrations of credit risk - The Company sells its products to distributors in the automotive replacement market. 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 who maintain 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 on the straight-line method over 3-20 years. 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. Income taxes - In 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Accordingly, the Company follows the liability approach of accounting for income taxes as prescribed by SFAS No. 109. Prior to 1993, the Company used the deferred method of accounting for income taxes. The cumulative effect of applying SFAS No. 109 was not material. -19- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) Standard warranty - The costs of anticipated adjustments for defective workmanship and materials that are the responsibility of the Company are estimated and charged to expense currently. Earnings per share - Earnings per share have been computed by dividing net income by the weighted average number of shares of common stock and equivalents outstanding. Common stock equivalents included in the computation represent shares issuable upon assumed exercise of stock options, which would have a dilutive effect in the respective years. Fully diluted earnings per share did not significantly differ from primary earnings per share in the years presented. Recently-issued pronouncements - Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of", was issued in March 1995. Adoption of this statement, which established accounting standards for long-lived assets and certain intangible assets beginning in 1996, is not expected to have a material impact on the Company's consolidated financial statements. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", was issued in October 1995. This statement encourages companies to recognize stock-based compensation using new fair value accounting rules and requires companies not adopting such rules to make certain financial disclosures, beginning in 1996. The company does not expect to change its expense recognition policies as a result of this pronouncement but plans to adopt the required disclosure provisions. 2. RELATED PARTY TRANSACTIONS The Company's operations, consisting of the distribution of products for the automotive replacement market, are managed through the Board of Directors, members of which owned or are affiliated with companies which owned approximately 9% of the Company's common stock at December 31, 1995. Sales to distributors represented on the Board, including affiliates of such distributors, accounted for approximately 24% of the Company's net sales during 1995 and 25% in 1994 and 1993. One distributor accounted for approximately 15% of net sales in 1995 and 16% in 1994 and 1993. Sales to joint ventures in which the Company has an ownership interest accounted for approximately 1% of the Company's 1995 net sales. Accounts receivable resulting from transactions with related parties are presented separately in the balance sheets. 3. SHORT-TERM FINANCING AGREEMENTS The Company has lines of credit for short-term borrowings totaling $53,000,000, bearing interest at a negotiated rate not to exceed prime. In addition, the Company may borrow up to $20,000,000 under a bank revolving loan. The unused amount under these arrangements at December 31, 1995 was $22,162,000. The weighted average interest rate on short-term borrowings at December 31, 1995 and 1994 was 6.80% and 7.23%, respectively. -20- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 4. OTHER ASSETS Other assets consist of the following (in thousands): December 31, 1995 1994 Notes receivable $ 7,961 $7,900 Investments in joint ventures 1,562 - Intangible assets, net of amortization 1,058 835 Other 34 - $10,615 $8,735 The notes receivable totals include a note for $4,897,000 from a former distributor. The maker of the note was discharged in a proceeding under Chapter 11 of the Bankruptcy Code in 1991. The Company received distributions totaling $308,000 from the bankruptcy proceeding. The Company holds written guarantees of the distributor's account, absolute and continuing in form, signed by the principal former owners and officers of the distributor and their wives, upon which the Company filed suit in 1989. The defendants have pleaded various defenses based on, among other things, an alleged oral cancellation of the guarantees. The defendants have also filed a third party complaint against the Company's former chief executive officer in which they claim the right to recover against him for any liability they may have to the Company. The Company believes, on the basis of applicable Tennessee law, that those defenses are invalid and that there is no merit to the third-party complaint. In October 1994, the Court granted the Company's motion to exclude evidence of any oral cancellation of the guarantees. The Court's order has been appealed and no date for trial has been scheduled. 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. 5. INCOME TAXES Income taxes provided for the years ended December 31, 1995, 1994 and 1993 were as follows (in thousands): 1995 1994 1993 Current: Federal $ 8,868 $10,349 $11,095 State 1,116 1,298 1,316 9,984 11,647 12,411 Deferred - Federal (461) 238 839 $ 9,523 $11,885 $13,250 The provision for deferred income taxes is based on the liability method prescribed by Statement of Financial Accounting Standards No. 109 and represents the change in the Company's deferred income tax asset 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 -21- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 5. INCOME TAXES (Continued) their reported amounts in the financial statements. The net deferred income tax assets in the financial statements at December 31, 1995, 1994 and 1993 included approximately $2,762,000, $2,474,000 and $2,740,000, respectively, related to the allowance for doubtful accounts and notes. The difference between the Company's effective income tax rate and the statutory U. S. Federal income tax rate is reconciled as follows: 1995 1994 1993 Statutory U.S. Federal rate 35.0% 35.0% 35.0% State income taxes 2.9 2.7 2.5 Other .5 .1 .8 Effective tax rate 38.4% 37.8% 38.3% 6. RETIREMENT PLANS The Company has a defined benefit pension plan covering the majority of its employees. The benefits are based on years of service and the employee's final compensation. The Company's present funding policy is to contribute annually 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. 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, 1995 1994 Actuarial present value of accumulated benefit obligations, including vested benefits of $2,850 in 1995 and $2,863 in 1994 $(3,325) $(3,202) Actuarial present value of projected benefit obligations for service rendered to date $(5,053) $(4,553) Plan assets at fair value, primarily listed stocks and U.S. bonds 5,695 5,247 Plan assets over projected benefit obligation 642 694 Unrecognized net loss from experience different from that assumed 1,357 1,485 Unrecognized net assets at January 1, 1995 and 1994, being recognized over 15.53 years (91) (108) Unrecognized prior service cost 133 170 Prepaid pension cost $ 2,041 $ 2,241 -22- 0 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 6. RETIREMENT PLANS (Continued) The net expense for the defined benefit pension plan for 1995, 1994 and 1993 included the following (in thousands): 1995 1994 1993 Service cost $ 274 $ 319 $ 289 Interest cost 349 375 356 Return on plan assets (757) (2) (862) Net amortization and deferral 616 (633) 291 $ 482 $ 59 $ 74 The weighted average discount rate and rate of increase in future compensation levels used in determining the 1995 actuarial present value of the projected benefit obligation were 7.25% and 5%, respectively. The expected long-term rate of return on assets was 10%. 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 and were included in the former Chief Executive Officer's employment agreement. During 1994, the Company determined that expenses should be recorded under these arrangements, and that the accumulated benefit obligation, which was previously unaccrued, should be reflected as a liability in the consolidated balance sheets until paid. As a result, expenses for 1994 included supplemental retirement charges of $2,548,000. Expenses in 1995 included supplemental retirement charges of $199,000. At December 31, 1995, the projected benefit obligation was $1,048,000 and the accumulated benefit obligation, which was reflected as a noncurrent liability, totaled $985,000. In 1994, the Company adopted an employee savings plan under Section 401(k) of the Internal Revenue Code, covering the majority of its employees. Contributions made by the Company to the 401(k) plan are based on a specified percentage of employee contributions. Expenses recorded in 1995 and 1994 for the Company's contributions totaled $62,000 and $39,000, respectively. 7. 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, 1995 or 1994. -23- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 7. STOCKHOLDERS' EQUITY (Continued) The Company has a 1983 stock option plan ("1983 Plan") and a 1989 stock incentive plan ("1989 Plan"). The 1989 Plan effectively replaced the 1983 Plan; however, all options and stock appreciation rights outstanding under the 1983 Plan remain in full force and effect. The 1989 Plan provides for the grant of options to purchase shares of the Company's common stock to officers and other key employees of the Company upon terms and conditions determined by a committee of the Board of Directors. The committee may also grant 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, 1994, the Company had options for 438,540 shares outstanding, with exercise prices equal to market value on the date of grant, ranging from $1.48 to $12.13 per share. Options for 119,325 shares were granted in 1995, with an exercise price equal to market value of $9.69 per share. Options for 37,918 shares were exercised in 1995 at prices ranging from $1.48 to $8.00 per share, and options for 6,604 shares were forfeited. At December 31, 1995, options for 513,343 shares were outstanding with exercise prices ranging from $1.48 to $12.13 per share. Stock appreciation rights for options on 38,280 and 63,280 shares were outstanding at December 31, 1995 and 1994, respectively. Amounts included in the statements of income relating to stock appreciation rights included a charge of $23,000 in 1995 and credits of $198,000 in 1994 and $162,000 in 1993. 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 1995 and 1994, shares of the Company's common stock were repurchased and retired under plans approved by the Board of Directors. The latest plans, approved in 1995, authorized the repurchase of 2,500,000 shares in market and other transactions. As of December 31, 1995, approximately 1,285,000 shares had been repurchased under these plans. -24- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 8. LEASES Rental expense of $2,069,000, $2,160,000 and $2,149,000 was charged to operations in 1995, 1994 and 1993, respectively. Minimum noncancelable real property lease commitments at December 31, 1995, were as follows (in thousands): Year Amount 1996 2,004 1997 2,144 1998 1,179 1999 1,179 2000 1,180 Thereafter through 2005 4,914 $12,600 The commitments relate substantially to distribution facilities in Memphis, Tennessee. In addition to the above rental payments, the Company is obligated in some instances to pay real estate taxes, insurance and certain maintenance. SUPPLEMENTARY DATA: QUARTERLY FINANCIAL INFORMATION Unaudited quarterly results for 1995 and 1994 are summarized as follows: (In thousands, except per share amounts) First Second Third Fourth Quarter Quarter Quarter Quarter 1995 Net sales $130,343 $132,223 $147,171 $126,385 Cost of sales 118,432 120,270 135,253 114,762 Net income 4,276 4,035 3,870 3,068 Earnings per share $ .17 $ .16 $ .16 $ .13 1994 Net sales $133,780 $132,925 $157,513 $127,702 Cost of sales 120,963 119,988 143,929 115,205 Net income 5,086 3,603 5,664 5,193 Earnings per share* $ .18 $ .13 $ .21 $ .20 * The total of earnings per share for each of the quarters of 1994 does not equal earnings per share for the year ended December 31, 1994, due to the decrease in average shares outstanding. -25- 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 25, 1996, 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 25, 1996, 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 25, 1996, 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 25, 1996, and is incorporated herein by this reference. -26- 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, 1995, and 1994 Consolidated Statements of Income - Years ended December 31, 1995, 1994, and 1993 Consolidated Statements of Stockholders' Equity - Years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows - Years ended December 31, 1995, 1994, and 1993 Notes to Consolidated Financial Statements (a) (2) FINANCIAL STATEMENT SCHEDULES Report of Independent Certified Public Accountants (at p. 30 of this Report) Schedule VIII - Valuation and qualifying accounts (at p. 31 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. 32 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, 1995. -27- 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 2nd day of February, 1996. 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 2, 1996 Louis S. DiPasqua Executive Officer and Director /s/ RONALD E. McCOLLOUGH Senior Vice President February 2, 1996 Ronald E. McCollough Operations (principal accounting and financial officer) * MARVIN E. BRUCE Chairman of the Board February 2, 1996 Marvin E. Bruce of Directors Director February , 1996 Robert E. Carroll, Jr. Director February , 1996 Robert H. Dunlap -28- * STANLEY A. FREEDMAN Director February 2, 1996 Stanley A. Freedman Director February , 1996 Dwain W. Higginbotham * RICHARD A. McSTAY Director February 2, 1996 Richard A. McStay * ROBERT M. O'HARA Director February 2, 1996 Robert M. O'Hara * ROBERT R. SCHOEBERL Director February 2, 1996 Robert R. Schoeberl * NICHOLAS F. TAUBMAN Director February 2, 1996 Nicholas F. Taubman * 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 -29- 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 26, 1996 -30- TBC CORPORATION SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (In thousands) Additions Charged Charged to Costs to Balance and Other Balance January 1, Expenses Accounts Deductions December 31, 1995 Warranty reserve...... $ 975 $1,591 - $1,564 (1) $1,002 Allowance for doubtful accounts..... 7,069 1,546 123 724 (2) 8,014 1994 Warranty reserve...... 861 1,643 - 1,529 (1) 975 Allowance for doubtful accounts..... 7,828 1,320 - 2,079 (2) 7,069 1993 Warranty reserve...... 755 1,466 - 1,360 (1) 861 Allowance for doubtful accounts..... 7,066 1,453 - 691 (2) 7,828 (1) Amounts paid during current year and payable at year end less amount payable at beginning of year. (2) Accounts written off during year. -31- INDEX TO EXHIBITS Located at Manually Numbered Page (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 January 13, 1988, were filed as Exhibit 3.3 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 1993 ............... * 3.4 Amendment to By-Laws of TBC Corporation dated January 6, 1993 was filed as Exhibit 3.4 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 1992 .................. * (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES: 4.1 Amended and Restated Promissory Note, dated June 30, 1993 from TBC Corporation to First Tennessee Bank National Association, for $15,000,000 line of credit, was filed as Exhibit 4.1 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 1993 .. * 4.2 Modification and Extension Agreement, dated June 30, 1995 between TBC Corporation and First Tennessee Bank National Association, regarding the $15,000,000 line of credit ...................... 38 4.3 Promissory Note, dated June 30, 1993 from TBC Corporation to First Tennessee Bank National Association, for $44,500,000 line of credit, was filed as Exhibit 4.2 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 1993 .................................. * -32- 4.4 Second Modification and Extension Agreement, dated June 30, 1995 between TBC Corporation and First Tennessee Bank National Association, regarding the $44,500,000 line of credit ......................... 40 4.5 Promissory Note (revolving loan), dated April 1, 1993 from TBC Corporation to Third National Bank in Nashville, for $20,000,000, was filed as Exhibit 4.3 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 1993 .. * # 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 TBC Corporation 1983 Stock Option Plan, as amended April 23, 1992 was filed as Exhibit 10.7 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 1992 ................... * 10.5 TBC Corporation 1989 Stock Incentive Plan, as amended April 23, 1992 was filed as Exhibit 10.8 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 1992 ............... * 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 ....................... * -33- 10.7 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 .................................. * 10.8 Agreement to Extend Executive Employment Agreement, between the Company and Mr. Kenneth P. Dick dated October 31, 1994 ................................... * 10.9 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 .................................. * 10.10 Agreement to Extend Executive Employment Agreement, between the Company and Mr. Bob M. Hubbard dated October 31, 1994 ................................... * 10.11 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 .................................. * 10.12 Agreement to Extend Executive Employment Agreement, between the Company and Mr. Ronald E. McCollough dated October 31, 1994 ............................. * 10.13 TBC Corporation 1995 Management Incentive Compensation Plan, effective for the calendar year 1995 and thereafter, was filed as Exhibit 10.1 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 ................ * 10.14 Amendment dated July 20, 1995 to the TBC Corporation 1995 Management Incentive Compensation Plan .................................. 42 10.15 TBC Corporation Executive Supplemental Retirement Plan, as amended October 22, 1992, was filed as Exhibit 10.14 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 1992 .. * -34- Other Material Contracts 10.16 1994 Amendment to the TBC Corporation Executive Supplemental Retirement Plan, dated November 30, 1994, was filed as Exhibit 10.16 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 1994................ * 10.17 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 (Reg. No. 2-83216) ...... * 10.18 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 ............... * 10.19 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 ..... * 10.20 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 ..... * 10.21 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 ........................ * 10.22 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 (Reg. No. 2-83216) ................................. * 10.23 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 ....................... * 10.24 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 ................ * -35- (21) SUBSIDIARIES OF THE COMPANY: 21.1 List of the names and jurisdictions of incorporation of the subsidiaries of the Company ... 43 (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 reports dated January 26, 1996 in Post-Effective Amendment No. 1 to Registration Statement on Form S-8 for the Company's 1983 Stock Option Plan (Reg. No. 2-97888) and Registration Statement on Form S-8 for the Company's 1989 Stock Incentive Plan (Reg. No. 33-43166) ................. 44 (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 .................... 45 (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. "#" The total amount of securities authorized under other long-term debt instruments does not exceed 10% of the total assets of the company and its subsidiaries on a consolidated basis. A copy of each such instrument will be furnished to the commission upon request. "+" Included only in the Company's electronic filing with the Commission. -36- TBC CORPORATION EXHIBITS TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 -37- EXHIBIT 4.2 MODIFICATION AND EXTENSION AGREEMENT THIS AGREEMENT, made and entered into as of the 30th day of June, 1995 by and between FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national banking association having its principal place of business in Memphis, Tennessee (hereinafter referred to as the "Bank"), and TBC CORPORATION, a Delaware corporation (hereinafter referred to as the "Borrower"). WITNESSETH: WHEREAS, Bank has extended to the Borrower a committed line of credit in the maximum principal amount not to exceed the sum of Fifteen Million Dollars ($15,000,000.00)(the "Loan") advances pursuant to which are evidenced by a promissory note (the "Note"), dated June 30, 1993, in the principal amount of Fifteen Million Dollars ($15,000,000.00), executed by the Borrower and payable to the order of the Bank; and WHEREAS, the Note provided for principal to be payable on demand, and if no demand made, on June 30, 1994; and WHEREAS, the Bank has extended the maturity of the Note to June 30, 1995, pursuant to that certain Modification and Extension Agreement, dated as of the 30th day of June, 1994; and WHEREAS, the Borrower and the Bank now desire to enter into this Agreement in order to extend the maturity of the indebtedness evidenced by the Note. NOW, THEREFORE, for good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, it is agreed by the parties as follows: Agreements 1. At the request of the Borrower, the Bank, as the legal holder of the indebtedness evidenced by the Note, does hereby modify the payment of indebtedness, so that said indebtedness, together with interest from date at the variable rate per annum as set forth in the Note, shall be due and payable on demand, and if no demand is made, on June 30, 1996. 2. It is expressly understood and agreed that the Note shall continue as evidence of the indebtedness until the same is paid. As modified, amended, and extended hereby, -38- the Note evidencing the indebtedness above-mentioned is hereby ratified, approved and confirmed in all respects. IN WITNESS WHEREOF, the Borrower has executed this Modification and Extension Agreement and the Bank has caused this Agreement to be executed by its duly authorized officer, on this the day and year first above written. FIRST TENNESSEE BANK NATIONAL ASSOCIATION By: /s/ James G. Moore, Jr. Title: Vice President TBC CORPORATION By: /s/ Louis S. DiPasqua Title: President/CEO By: /s/ Charles B. Quinn, Jr. Title: Vice President/Treasurer -39- EXHIBIT 4.4 SECOND MODIFICATION AND EXTENSION AGREEMENT THIS SECOND MODIFICATION AND EXTENSION AGREEMENT ("Second Modification"), made and entered into as of the 30th day of June, 1995 by and between FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national banking association having its principal place of business in Memphis, Tennessee (hereinafter referred to as the "Bank"), and TBC CORPORATION, a Delaware corporation (hereinafter referred to as the "Borrower"). WITNESSETH: WHEREAS, Bank has extended to the Borrower an offering line of credit in the maximum principal amount not to exceed the sum of Forty-Four Million Five Hundred Thousand Dollars ($44,500,000.00) (the "Loan") advances pursuant to which are evidenced by a promissory note (the "Note"), dated June 30, 1993, in the principal amount of Forty-Four Million Five Hundred Thousand Dollars ($44,500,000.00), executed by the Borrower and payable to the order of the Bank; and WHEREAS, the Note originally provided for principal to be payable on demand, and, if no demand made, on June 30, 1994; and WHEREAS, the provision for making payment of principal by June 30, 1994 if no demand had been made previously was modified to provide that outstanding principal would be payable on June 30, 1995 if no demand had been made previously (the "First Modification"); and WHEREAS, the Borrower and the Bank now desire to enter into this Second Modification in order to reduce the maximum principal amount of the Loan (a) to Forty-Three Million Dollars ($43,000,000.00) during the period from the date the Bank notifies the Borrower that the Bank has received all of the required documentation for an offering line of credit to TBC de Mexico, S.A. de C.C.V. (the "TBC de Mexico Notice") through September 30, 1995, and (b) to Thirty-Eight Million Dollars ($38,000,000.00) as of October 1, 1995; and WHEREAS, the Borrower and the Bank further desire to modify the Note to provide that outstanding principal will be payable on June 30, 1996 if no demand has been made previously. NOW, THEREFORE, for good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, it is agreed by the parties as follows: -40- Agreements 1. At the mutual agreement of the Borrower and the Bank, as the legal holder of the indebtedness evidenced by the Note, the maximum principal amount which may be borrowed on the Loan (a) from the date of the TBC de Mexico Notice through September 30, 1995 is Forty-Three Million Dollars ($43,000,000.00) and (b) beginning October 1, 1995, is Thirty-Eight Million dollars ($38,000,000.00). 2. At the request of the Borrower, the Bank, as the legal holder of the indebtedness evidenced by the Note, does hereby modify the payment of the indebtedness, so that said indebtedness, together with interest from date at the variable rate per annum as set forth in the Note, shall be due and payable on demand, and if no demand is made, on June 30, 1996. 3. It is expressly understood and agreed that the Note, as modified by the First Modification and this Second Modification, shall continue as evidence of the indebtedness until the same is paid. As modified, amended, and extended by the First Modification and hereby, the Note evidencing the indebtedness above-mentioned is hereby ratified, approved and confirmed in all respects. IN WITNESS WHEREOF, the Borrower has executed this Second Modification and Extension Agreement and the Bank has caused this Second Modification and Extension Agreement to be executed by its duly authorized officer, on this the day and year first above written. FIRST TENNESSEE BANK NATIONAL ASSOCIATION By: /s/ James G. Moore, Jr. Title: Vice President TBC CORPORATION By: /s/ Louis S. DiPasqua Title: President/CEO By: /s/ Charles B. Quinn, Jr. Title: Vice President/Treasurer -41- EXHIBIT 10.14 JULY 20, 1995 AMENDMENT TO TBC CORPORATION 1995 MANAGEMENT INCENTIVE COMPENSATION PLAN On July 20, 1995, the Compensation Committee of the Board of Directors of TBC Corporation amended the TBC Corporation Management Incentive Compensation Plan by adding the following language to the end of the first sentence of Section 7(b) of the Plan: "provided further, however, that there shall be no forfeiture if the Participant ceases to be employed by the Company prior to the end of the Restricted Period by reason of normal retirement under a retirement plan of the Company or the Participant otherwise retires with the consent of the Company, or the Participant's employment is terminated by death or disability, or if the Company terminates his or her employment otherwise than by reason of fault on the part of the Participant." -42- EXHIBIT 21.1 SUBSIDIARIES OF TBC CORPORATION TBC Corporation has four subsidiaries, each of which is wholly-owned by TBC Corporation. The subsidiaries and their states of incorporation are as follows: Name of Subsidiary State of Incorporation Battery Associates, Inc. Delaware Northern States Tire, Inc. Delaware TBC International, Inc. Delaware TBC Sales, Inc. Delaware -43- EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the amended form S-8 registration statement for TBC Corporation's 1983 Stock Option Plan and the form S-8 registration statement for TBC Corporation's 1989 Stock Incentive Plan of our reports dated January 26, 1996, on our audits of the consolidated financial statements and financial statement schedule of TBC Corporation as of December 31, 1995 and 1994 and for the years ended December 31, 1995, 1994 and 1993, which reports are included in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Memphis, Tennessee January 26, 1996 -44- EXHIBIT 24.1 TBC CORPORATION LIMITED POWER OF ATTORNEY WHEREAS, TBC Corporation (the "Company") intends to file with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 1995; NOW, THEREFORE, the undersigned, in his capacity as a director of the Company, hereby appoints Louis S. DiPasqua and/or Ronald E. McCollough, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to execute in his name, place and stead, the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (including any amendment to such report), and any and all other instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Either of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in the aforesaid capacity, every act whatsoever necessary or desirable to be done, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of either of said attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 1st day of February, 1996. /s/ Marvin E. Bruce Marvin E. Bruce -45- TBC CORPORATION LIMITED POWER OF ATTORNEY WHEREAS, TBC Corporation (the "Company") intends to file with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 1995; NOW, THEREFORE, the undersigned, in his capacity as a director of the Company, hereby appoints Louis S. DiPasqua and/or Ronald E. McCollough, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to execute in his name, place and stead, the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (including any amendment to such report), and any and all other instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Either of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in the aforesaid capacity, every act whatsoever necessary or desirable to be done, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of either of said attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 1st day of February, 1996. /s/ Stanley A. Freedman Stanley A. Freedman -46- TBC CORPORATION LIMITED POWER OF ATTORNEY WHEREAS, TBC Corporation (the "Company") intends to file with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 1995; NOW, THEREFORE, the undersigned, in his capacity as a director of the Company, hereby appoints Louis S. DiPasqua and/or Ronald E. McCollough, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to execute in his name, place and stead, the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (including any amendment to such report), and any and all other instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Either of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in the aforesaid capacity, every act whatsoever necessary or desirable to be done, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of either of said attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 2nd day of February, 1996. /s/ Richard A. McStay Richard A. McStay -47- TBC CORPORATION LIMITED POWER OF ATTORNEY WHEREAS, TBC Corporation (the "Company") intends to file with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 1995; NOW, THEREFORE, the undersigned, in his capacity as a director of the Company, hereby appoints Louis S. DiPasqua and/or Ronald E. McCollough, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to execute in his name, place and stead, the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (including any amendment to such report), and any and all other instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Either of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in the aforesaid capacity, every act whatsoever necessary or desirable to be done, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of either of said attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 1st day of February, 1996. /s/ Robert M. O'Hara Robert M. O'Hara -48- TBC CORPORATION LIMITED POWER OF ATTORNEY WHEREAS, TBC Corporation (the "Company") intends to file with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 1995; NOW, THEREFORE, the undersigned, in his capacity as a director of the Company, hereby appoints Louis S. DiPasqua and/or Ronald E. McCollough, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to execute in his name, place and stead, the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (including any amendment to such report), and any and all other instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Either of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in the aforesaid capacity, every act whatsoever necessary or desirable to be done, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of either of said attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 1st day of February, 1996. /s/ Robert R. Schoeberl Robert R. Schoeberl -49- TBC CORPORATION LIMITED POWER OF ATTORNEY WHEREAS, TBC Corporation (the "Company") intends to file with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 1995; NOW, THEREFORE, the undersigned, in his capacity as a director of the Company, hereby appoints Louis S. DiPasqua and/or Ronald E. McCollough, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to execute in his name, place and stead, the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (including any amendment to such report), and any and all other instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Either of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in the aforesaid capacity, every act whatsoever necessary or desirable to be done, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of either of said attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 1st day of February, 1996. /s/ Nicholas F. Taubman Nicholas F. Taubman -50- EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 12-MOS DEC-31-1995 DEC-31-1995 (8,120) 0 103,552 8,014 49,538 150,189 36,862 17,714 179,952 73,589 0 0 0 2,378 102,445 179,952 536,122 536,122 488,717 488,717 22,633 1,546 0 24,772 9,523 15,249 0 0 0 15,249 .62 0 THIS ITEM IS SHOWN UNDER THE CATEGORY "OUTSTANDING CHECKS, NET" ON THE CONSOLIDATED BALANCE SHEETS. THESE ITEMS ARE NOT SEPARATELY REPORTED ON TBC CORPORATIONS'S FORM 10-K.
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