ITEM 1. BUSINESS -------------------------
General -------
Registrant was incorporated under the laws of the State of Ohio in 1920. Registrant and its subsidiaries operate in one industry segment which consists of the manufacture, marketing, selling, and distribution of plastic and rubber products consumed primarily by the end-user in the consumer, commercial, industrial, agricultural, office, marine, automotive accessories, contract, and juvenile markets. They include such items as housewares; home horticulture products; decorative coverings; leisure and recreational products; infant and children's toys; furniture, office, and industrial products; and products used in food service, health care, and sanitary maintenance. Registrant's products are distributed through its own sales personnel and manufacturers' agents to a variety of retailers and wholesalers, including mass merchandisers, toy stores, catalog showrooms, and distributors serving institutional markets.
Registrant's basic philosophy is to offer products of high value and quality to the user. Value is that best combination of price, quality, service, timeliness and innovation as perceived by consumers and customers. The Corporate objectives, since the late-1970's, have been, and continue to be, to increase sales, earnings, and earnings per share 15% per year, compounded annually. This growth is expected to come from a combination of maximizing core businesses through product line and market extensions, new product introductions, global expansion of the business, and selective acquisitions.
Registrant's primary focus is to achieve its earnings and earnings per share growth objective of 15%, compounded annually. Initially, the sales growth objective was based on certain fundamental assumptions: an increase of 3-5% in U. S. Gross Domestic Product (GDP); inflation of 2-4% in Registrant's pricing; and, unit volume growth averaging around 11%. Since Gross Domestic Product increases have been below this assumption and Registrant's pricing was essentially flat for the past several years, sales growth was less than the 15% targeted increase although Registrant was successful in implementing cost reductions and productivity improvement programs to leverage the sales growth towards the earnings goals.
In 1994, in recognition of this changed macro-economic environment, Registrant announced two new strategic initiatives aimed at achieving above-GDP growth to reach its primary objectives of 15% sales and earnings growth; this, despite a forecast of price inflation averaging only 1-2% over the next five years. The first initiative is a value improvement process aimed at increasing value and productivity. The second initiative is to invest those value improvements and cost savings to accelerate Registrant's worldwide growth enhancements of accelerated new product introductions, quicker entry into new markets, increased competitiveness, new business development, and the globalization of core businesses.
Among the businesses acquired by Registrant are The Little Tikes Company (1984); Gott Corporation (1985); Seco Industries, Inc. (1986); MicroComputer Accessories, Inc. (1986); Viking Brush Limited (1987); EWU (AG) (1990); Eldon Industries, Inc. (1990); CIPSA (1992); Iron Mountain Forge Corporation (1992); Empire Brushes, Inc. (1994); Carex Inc. (1994); and Glenwood Systems Pty. Ltd (Ausplay)(1994).
The companies acquired by Registrant shared many common characteristics with Registrant including a high-quality image, emphasis on new product development and customer service, similar materials and/or manufacturing processes, and similar distribution channels.
CIPSA, the leading plastic housewares manufacturer and marketer in Mexico operates as Rubbermaid de Mexico and is a part of the Home Products Division.
Empire Brushes, Inc., now Rubbermaid Cleaning Products Inc., which reports to the Home Products Division is a leading manufacturer and marketer of brushes, brooms, and mops for home and commercial use resulting from the integration of Empire Brushes' products and facilities with Registrant's existing household cleaning products business.
In 1994, Registrant sold its 40% interest in the Curver Rubbermaid European housewares joint venture to DSM who held the remaining 60%. On March 1, 1995, Registrant acquired Injectaplastic S.A., a French manufacturer and marketer of plastic housewares and other products which will provide a vehicle for re-entry into the European housewares market.
Iron Mountain Forge Corporation, which reports to The Little Tikes Company, is a leading manufacturer and marketer of commercial playground equipment. Registrant expects that the synergy with Little Tikes will increase Iron Mountain Forge's strengths in the parks, schools and recreational areas and accelerate the development of the attractive growing child care market. Ausplay, a leading marketer and designer of commercial playground equipment in Australia expands the geographic distribution of commercial play structures and will enhance future growth capabilities in additional geographic markets and new products.
Carex is a growing manufacturer and marketer of bath safety products, personal care accessories, daily living aids, and other products designed to assist the aging and physically challenged. Registrant expects to stimulate further sales growth by integrating Carex to enhance product development and product line offerings.
In April 1994, Registrant completed a joint venture with Richell Corporation, a leading Japanese housewares manufacturer. The joint venture, Rubbermaid Japan Inc., develops, markets, and sells housewares, leisure, and specialty products for the Japanese market. Registrant initially held a 40% equity interest in the venture and, in October 1994, exercised an option to increase its equity interest to 51%.
In January, 1995, Registrant formed Royal Rubbermaid Structures Ltd., a joint venture with Royal Plastics Group Limited of Canada, for the manufacture and marketing of modular, plastic components, and kits for small structures, such as storage buildings and sheds, in consumer, industrial, commercial, and agricultural markets. Each partner owns 50% of the joint venture. Sale of joint venture products are expected to commence by mid-year 1995.
Additional expansion has come from new operations formed from existing businesses to focus on specific segments of their markets.
Rubbermaid Specialty Products Inc. was formed in 1988 to consolidate seasonal products with similar channels of distribution into one operation. The GOTT line of insulated products and BLUE ICE refreezable ice substitute were also integrated into this business and rebranded with the Rubbermaid name. This creates the opportunity to utilize seasonal product synergies which, coupled with the Rubbermaid brand, increase critical marketing mass at the trade level. In 1994, the casual outdoor resin furniture business of Specialty Products, including the
manufacturing facility in Stanley, North Carolina, was sold. This will allow Specialty Products to focus its resources and management more effectively on its core competencies.
During 1988 Registrant established an Office Products Division which combined the activities of home office products from the Home Products Division, commercial office products from Rubbermaid Commercial Products Inc., and MicroComputer Accessories, Inc. The Division enhanced service for traditional customers while capitalizing on the emerging distribution trends in the industry with concentrated marketing and distribution and a complete and diversified line of products. Early in 1991, the Office Products Division and Eldon Industries, Inc., were combined to form Rubbermaid Office Products Inc., located in Maryville, Tennessee, to capitalize on their many synergies and to improve support and service to customers. During 1994, Registrant sold the Davson Division of Rubbermaid Office Products Inc. because the Davson product line was not considered a long term strategic fit for the business and merged the MicroComputer Accessories, Inc. company into Rubbermaid Office Products Inc.
Raw Materials -------------
The principal raw materials used in the manufacture of Registrant's products are various plastic resins and synthetic rubber (all of which are derivatives of petroleum or natural gas liquids) and color concentrates. All of these items are available from numerous competitive sources. Even though a significant portion of Registrant's raw materials are derivatives of natural gas, the increase in crude oil costs during 1990 resulting from the Persian Gulf crisis was reflected in Registrant's costs of raw materials. As crude oil costs returned to lower levels, so did resin prices. From 1990 until 1994, resin costs remained at a more stable supply/demand level. In 1994, resin costs began to escalate rapidly late in the year, as demand for resin increased and supply tightened. Registrant expects to obtain adequate resins for its needs and has accelerated its continuing program of substituting available or reformulated resins where practical and consistent with quality considerations.
Patents and Trademarks ----------------------
There are no patents or licenses considered material to the business. Registrant is of the opinion that through sustained advertising and use, the trademark RUBBERMAID has become of value in the identification and acceptance of its products, especially in North America. In addition, Registrant has many well-known brands such as CON-TACT (pressure sensitive decorative coverings), ELDON (office products), LITTLE TIKES (toys), and SECO (floor maintenance products) that compete in domestic and international markets.
Seasonality -----------
Historically, the year-end holiday season records the highest sales volume for the toy industry; however, the Little Tikes spring and summer products have served to more evenly balance monthly shipments. Rubbermaid Specialty Products concentrates its efforts on product categories of a seasonal nature, including insulated products, planters, and bird feeders. Insulated product sales are highest during the first six months of the year, and inventories are built during the other periods of the year in order to more easily accommodate demand. No material portion of Registrant's other businesses is of a highly seasonal nature.
Working Capital ---------------
Working capital requirements of the business increase generally as sales volumes increase. There are normally no unusual working capital needs existent at any one time in the ordinary course of business. Dating programs offering extended terms are carried on by the various operating companies as part of their normal marketing activities.
Customers ---------
Sales are made to a broad range of customers, one of which accounted for 15%, 14%, and 13% of net sales in 1994, 1993, and 1992, respectively. Due in part to Registrant's perception that consumers are loyal to Registrant's brand names, Registrant does not believe that the loss of any one customer would have a materially adverse effect on its business.
Backlog -------
Registrant produces to and sells from inventory for the majority of its products. The amount of backlog existent at any one time is not a significant factor in the business.
Competition -----------
All markets served by Registrant and its subsidiaries are competitive as to price, service, and product performance. Most of Registrant's products compete not only with those of other manufacturers using similar raw materials but also with products manufactured from other materials. Many of the competitor companies are either closely held or are divisions of larger entities. Registrant is recognized as a strong competitive factor in the marketplace, but there is no reliable quantitative manner in which the aggregate competitive position of Registrant can be determined.
Research and Development ------------------------
Registrant expended approximately $27,747,000, $28,202,000, and $25,951,000 during 1994, 1993, and 1992, respectively, on research activities related to product, process and materials development, and mold design. These costs are charged to operations as incurred.
Environmental Matters ---------------------
Compliance with Federal, State, and local provisions, which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, is not expected to have an adverse effect upon the capital expenditures, earnings, or competitive position of Registrant and its subsidiaries. Reference is made to page 35 of the 1994 Annual Report to Shareholders, which is contained in Exhibit 13 hereof, concerning further information regarding Registrant's Environmental Program.
Employees ---------
The average number of persons employed by Registrant and its subsidiaries during 1994 was 12,939.
Foreign Operations ------------------
Reference is made to page 33 of the 1994 Annual Report to Shareholders, which is contained in Exhibit 13 hereof, for information concerning Registrant's operations in different geographical areas. Export sales are not material and are, therefore, not separately stated.
To accelerate international growth, foreign businesses were repositioned in January 1990 to provide direct line reporting relationships with their counterpart domestic operation. The management of Rubbermaid businesses around the world, plus the coordination of sales in foreign markets, are the responsibility of the respective core operating companies. The Corporate role is to develop and coordinate with the core businesses strategic plans, priorities, and global operations. To improve efficiencies in the new regions being developed, staff functions are centralized, while the line functions are decentralized to each core business.
Registrant uses a variety of approaches to expand and develop international markets. To initiate market development in certain geographic areas, particularly new and developing markets, emphasis is placed on exporting from existing manufacturing facilities. Where market size and economics justify, manufacturing facilities are established - for example, Canada, Europe and Mexico. In markets where it is deemed appropriate to gain immediate access to manufacturing facilities or distribution, Registrant may make selective acquisitions. Licensing arrangements are used in those markets where the costs of importing are prohibitive and where Company-owned manufacturing is not economically justified. In addition, Registrant may use a combination of any or all of these approaches. Today, Rubbermaid products are distributed worldwide.
No greater known significant risk is attendant to the foreign business than to the domestic business conducted by Registrant and its subsidiaries.
ITEM 2.
ITEM 2. PROPERTIES ---------------------------
Registrant and its subsidiaries have manufacturing and/or warehousing locations in 14 states and 9 foreign countries.
Major plant and warehouse locations of Registrant are as follows:
Home Products Division - Wooster and Akron, Ohio; Phoenix, Arizona; Sparks, Nevada (leased); Cortland, New York; Greenville, Robersonville, and Statesville, North Carolina; Cleburne and Greenville, Texas; Suffolk, Virginia (leased); Mississauga, Ontario and Montreal, Quebec (leased), Canada; Toyama, Japan; and Mexico City, Mexico.
Rubbermaid Specialty Products Inc. - Goddard and Winfield, Kansas.
The Little Tikes Company - Hudson and Sebring, Ohio; City of Industry, California (leased); Aurora and Farmington, Missouri; Shippensburg, Pennsylvania; Melbourne, Australia (leased); Guelph, Ontario, Canada (leased); Dublin, Ireland; and Differdange, Luxembourg.
Rubbermaid Commercial Products Inc. - Winchester, Virginia; Phoenix, Arizona (leased); Centerville, Iowa; Cleveland, Tennessee; Birmingham, England (leased); and Dietzenbach, Germany (leased).
Rubbermaid Office Products Inc. - Maryville, Tennessee; Carson, California (leased); Silverwater, Australia (leased); Markham, Ontario, Canada (leased); Shefford, England (leased); and Coignieres, France (leased).
Carex Inc. - Newark, New Jersey (leased)
Certain portions of the Cortland, New York facility are leased from Industrial Development Authorities pursuant to industrial development bond financing; however, Registrant will own the facilities upon repayment of such financing. Certain other facilities are subject to mortgages securing industrial revenue bond financing.
The properties and facilities of Registrant and its subsidiaries are modern and suitable to the requirements of the business. On an overall basis, these facilities, with certain exceptions due primarily to general economic slowdowns, have been operated near capacity. As a general rule, continuing capital expenditures are required each year to provide the necessary plant, equipment, and tooling to support the growth of the business. To supplement its own facilities, Registrant has followed a practice of sourcing a portion of its production and warehousing requirements from third parties.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS ----------------------------------
There are no material pending legal proceedings to which Registrant or any of its subsidiaries is a party.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------------------------
During the fourth quarter of the fiscal year covered by this Form 10-K, no matter was submitted to a vote of Registrant's shareholders, through the solicitation of proxies or otherwise.
All executive officers who are officers of Registrant are elected for a one-year term.
PART II -------
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER ------------------------------------------------------------------------------ MATTERS -------
Registrant's Common Shares are traded on the New York Stock Exchange under the symbol RBD. As of January 31, 1995, Registrant had approximately 31,000 shareholders of record. Reference is made to page 33 of the 1994 Annual Report to Shareholders, which is contained in Exhibit 13 hereof, for information concerning sales prices for and dividends paid on Registrant's Common Shares during 1994 and 1993.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA ----------------------------------------
Reference is made to pages 36 and 37 of the 1994 Annual Report to Shareholders, which are contained in Exhibit 13 hereof, which pages include the selected financial data for the five years ended December 31, 1994 as part of Registrant's "Consolidated Financial Summary", which information is incorporated by reference herein.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ---------------------------------------------------------------------------- AND RESULTS OF OPERATIONS -------------------------
Reference is made to pages 34 and 35 of the 1994 Annual Report to Shareholders, which are contained in Exhibit 13 hereto, which include "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the years 1994, 1993, and 1992, which information is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------------------------
Reference is made to pages 25 through 33 of the 1994 Annual Report to Shareholders, which are contained in Exhibit 13 hereto, which include the consolidated financial statements and the notes thereto as of December 31, 1994 and 1993, and for each of the years in the three year period ended December 31, 1994, together with the independent auditors' report thereon of KPMG Peat Marwick LLP dated January 31, 1995, which information is incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ---------------------------------------------------------------------------- AND FINANCIAL DISCLOSURE ------------------------
Registrant has not changed its independent auditors, and there have been no reportable disagreements with such auditors regarding accounting principles or practices or financial disclosure matters.
PART III --------
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT ---------------------------------------------------------------
Information regarding the directors of Registrant is included under the caption "Information as to Board of Directors and Nominees" in Registrant's proxy statement dated March 10, 1995, and is incorporated herein by reference. Information regarding the executive officers of Registrant is included under a separate caption in Part I hereof and is incorporated by reference, in accordance with General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION ---------------------------------------
Information regarding the above is included under the caption "Executive Compensation" in Registrant's proxy statement dated March 10, 1995, and is incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------------------------
Information regarding the above is included under the captions "Security Ownership of Certain Beneficial Owners" and "Ownership By Management" in Registrant's proxy statement dated March 10, 1995, and is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------------------------
Information regarding the above is included under the caption "Security Ownership of Certain Beneficial Owners" in Registrant's proxy statement dated March 10, 1995, and is incorporated herein by reference.
PART IV -------
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM ----------------------------------------------------------------------------- 8-K ---
(a) The following documents are filed as part of this Form 10-K Report.
(1) The financial statements referred to in Item 8 above which are contained in Exhibit 13 hereto and which are incorporated by reference thereto.
(2) Exhibits 10(a) through 10(f) to this Item 14 constitute each executive compensation plan and arrangement of Registrant.
All schedules have been omitted because the material is not applicable, or is not required, or because the required information is shown in the consolidated financial statements or in the notes thereto, or is not otherwise material to the consolidated financial statements.
(b) There were no reports on Form 8-K filed for the quarter ended December 31, 1994.
(c) Exhibits (numbered in accordance with Item 601 of Regulation S-K).
(3a, 4a) Amended Articles of Incorporation of Rubbermaid Incorporated. Incorporated by reference from Exhibits 3a and 4a to Form 10-K for the year ended December 31, 1992.
(3b, 4b) Regulations of Rubbermaid Incorporated. Incorporated by reference from Exhibits 3b and 4b to Form 10-K for the year ended December 31, 1992.
(4c) Amended and Restated Rights Agreement between Rubbermaid Incorporated and The First National Bank of Boston. Incorporated by reference from Exhibit 4 to Form 8 filed with the Commission on October 26, 1989.
(10a) Rubbermaid Incorporated Management Incentive Plan. Incorporated by reference from Exhibit 10a to Form 10-K for the year ended December 31, 1992.
(10b) Rubbermaid Incorporated Amended 1989 Restricted Stock Incentive and Option Plan. Incorporated by reference from Exhibit A to Proxy Statement for April 26, 1994 Annual Meeting of Shareholders.
(10c) Rubbermaid Incorporated Supplemental Executive Retirement Plan, as amended. Incorporated by reference from Exhibit 10(d) to Form 10-K for the year ended December 31, 1993.
(10d) Rubbermaid Incorporated Supplemental Retirement Plan. Incorporated by reference from Exhibit 10(e) to Form 10-K for the year ended December 31, 1991.
(10e) Change-Of-Control Employment Agreements - Identical agreements have been entered into with Charles A. Carroll, Richard D. Gates, Fred S. Grunewald, Lucius W. Hoffa, Jr., Gary E. Kleinjan, Gary F. Mattison, James A. Morgan, Michael E. Naylor, Joseph M. Ramos, David L. Robertson, Wolfgang R. Schmitt, Carol S. Troyer, and George C. Weigand. Incorporated by reference from Exhibit 10(i) to Form 10-K for the year ended December 31, 1991.
(10f) Rubbermaid Incorporated 1993 Deferred Compensation Plan. Incorporated by reference to Exhibit A to Proxy Statement for April 27, 1993 Annual Meeting of Shareholders.
(13) Consolidated financial statements and other data from pages 25 to 37 of 1994 Annual Report to Shareholders.
(21) Subsidiaries of Registrant.
(23) Consent of KPMG Peat Marwick LLP.
(24) Power of Attorney.
(27) Financial Data Schedule.
SIGNATURE ---------
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 24, 1995 RUBBERMAID INCORPORATED
By: /s/Wolfgang R. Schmitt ------------------------------- Wolfgang R. Schmitt Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant and in the capacities indicated on March 24, 1995.
/s/ Wolfgang R. Schmitt Director, Chairman of the Board and ---------------------------------- Chief Executive Officer Wolfgang R. Schmitt
/s/ George C. Weigand Senior Vice President and ---------------------------------- Chief Financial Officer George C. Weigand
/s/ John L. Theler Vice President and Corporate ---------------------------------- Controller John L. Theler (Principal Accounting Officer)
Tom H. Barrett Director
Charles A. Carroll Director
Zoe Coulson Director
Robert O. Ebert Director
Stanley C. Gault Director
Robert M. Gerrity Director By: /s/ James A. Morgan -------------------------- Karen N. Horn Director James A. Morgan Attorney-in-Fact William D. Marohn Director
Steven A. Minter Director
Jan Nicholson Director
Paul G. Schloemer Director