Bridgestone 2003 Annual Report Download - page 49

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2003 ANNUAL REPORT
possibly be material to the results of operations in any one accounting period but will not have a material adverse effect on the financial position or
liquidity of the Company’s Americas operation.
In November 2002, an attorney who had filed a purported class action suit alleging that all the BSA’s Steeltex tires (14 million of which are esti-
mated to be in service as of December 31, 2003) were defective, petitioned the NHTSA to reopen an investigation of such tires which that agency had
closed in April 2002. The NHTSA denied that petition in June 2003, and on March 17, 2004, the court denied plaintiffs’ motion for class certification.
Plaintiffs have indicated that they will pursue other remedies, including appeal. BSA management has thoroughly investigated this issue, and contin-
ues to monitor the performance of the tires in question. However, except with regard to the February 26, 2004 voluntary safety campaign addressed
below, BSA (i) does not believe that a recall or similar action of its Steeltex tires is necessary or appropriate; (ii) strongly believes that the related liti-
gation is without merit; and (iii) plans to vigorously defend its position. Accordingly, BSA has made no provision for any related contingent liability.
On February 26, 2004, BSA announced a U.S. voluntary safety campaign to replace, free of any charge to consumers, approximately 297,000 tires.
The tires are Firestone-brand Steeltex Radial A/T tires in size LT265/75R16, and in Load Range D, which are on 2000–2002 and some early model year
2003 Ford Excursion vehicles. All the affected tires were made between March 1999 and December 2002 at BSA’s plant in Joliette, Quebec, Canada,
and none are presently being manufactured by BSA. BSA will also replace approximately 20,000 exported tires meeting the same criteria. BSA esti-
mates that the total direct costs of the voluntary safety campaign will approximate $30 million and believes the voluntary safety campaign will be
completed by September 2004; however, no amounts relating to the voluntary safety campaign have been recorded in the Company’s consolidated
financial statements as of December 31, 2003.
Two securities cases filed in January 2001 against BSA and the Company, alleging both misrepresentations regarding the quality of the tires previ-
ously under investigation by the NHTSA and violations of the U.S. Securities Exchange Act, were consolidated, and, in October 2002, dismissed. In
February 2003, the plaintiffs’ motion to reopen the court’s judgment was denied by the court. Plaintiffs have appealed, briefing will be completed,
and oral argument is expected in 2004. BSA and the Company intend to vigorously defend themselves and believe these cases are without merit.
Several governmental authorities in Venezuela have conducted investigations of accidents in that country involving Ford Explorers equipped with
Firestone tires, many of which were produced by BSA’s subsidiary in Venezuela, to determine whether civil fines or other penalties should be imposed
upon responsible management of either BSA’s Venezuelan subsidiary and/or Ford of Venezuela, or upon those companies themselves. These investiga-
tions remain open. The ultimate liability, if any, with respect to the Venezuelan investigations cannot be specifically quantified. However, in the opin-
ion of BSA management, the ultimate disposition of these investigations will not materially affect financial position, results of operations or liquidity
of the Company’s Americas operation.
NOTE 18—SUBSEQUENT EVENTS
The Company repurchased 11,431 thousand shares of common stock for its treasury at a cost of ¥17,704 million ($165,257 thousand) in the period
from January 1, 2004 to March 9, 2004, in accordance with the approval of the Company’s shareholders at the general shareholders meeting held on
March 28, 2003.
The Company and certain domestic subsidiaries have two types of pension plans for employees; a non-contributory and a contributory funded
defined benefit pension plan. The contributory funded defined benefit pension plan, which is established under the Japanese Welfare Pension
Insurance Law, covers a substitutional portion of the governmental pension program managed by the Company on behalf of the government and a
corporate portion established at the discretion of the Company. According to the enactment of the Defined Benefit Pension Plan Law in April 2002,
the Company applied for an exemption from obligation to pay benefits for future employee services related to the substitutional portion which
would result in the transfer of the pension obligations and related assets to the government by another subsequent application. The Company
obtained an approval of exemption from future obligation by the Ministry of Health, Labour and Welfare on January 1, 2004.
A transitional measurement of the accounting standard for employees’ retirement benefits permits entities to recognize a gain or loss on exemp-
tion from future pension obligation of the governmental program on the date of approval of exemption from future obligation by the Ministry of
Health, Labour and Welfare, however, the Company and certain domestic subsidiaries will not apply this transitional measurement in the year ending
December 31, 2004. If the Company and certain domestic subsidiaries applied such transitional measurement of the accounting standard for employ-
ees’ retirement benefits on the date of approval of exemption, income before income taxes and minority interests would increase by approximately
¥65 billion. The Company and certain domestic subsidiaries intend to recognize such gain in the year ending December 31, 2005 when the pension
obligations and related plan assets are transferred to the government, and the impact on its consolidated results of operation, when finally settled,
may change because the amount of the benefit obligation and the related plan assets to be transferred to the government may change.
On March 30, 2004, the shareholders of the Company approved payment of a cash dividend of ¥8.0 ($0.07) per share, or a total of ¥6,719 million
($62,718 thousand), to shareholders of record as of December 31, 2003. In addition, a stock option plan was approved, which provides options to
purchase 270 thousand shares of the Company’s common stock by directors and selected employees of the Company. The exercise price is equal to
the higher of either 1.05 times the monthly average closing market price of the Company’s common stock traded in the Tokyo Stock Exchange in the
month preceding the date of grant, or the closing market price of that on the date of grant. The exercise period of the stock options is from April 1,
2006 to March 31, 2011.