-----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, F+CitIdTHO9O4vJ9HcXR6Zc6KrF1VTJXaLWEsLN+/pWPHGYQUoIvdtzm4rJtYl8J T6xF4P+uWjcJAWvBWbwK9Q== 0000950124-97-000550.txt : 19970221 0000950124-97-000550.hdr.sgml : 19970221 ACCESSION NUMBER: 0000950124-97-000550 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970210 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANDARD PRODUCTS CO CENTRAL INDEX KEY: 0000093448 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 340549970 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02917 FILM NUMBER: 97522747 BUSINESS ADDRESS: STREET 1: 2401 S GULLEY ROAD CITY: DEARBORN STATE: MI ZIP: 48124 BUSINESS PHONE: 2162818300 MAIL ADDRESS: STREET 1: 2401 S GULLEY RD CITY: DEARBORN STATE: MI ZIP: 48124 10-Q 1 FORM 10-Q 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended DECEMBER 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to __________________ Commission file number: 1-2917 THE STANDARD PRODUCTS COMPANY (Exact Name of Registrant as Specified in Its Charter) OHIO 34-0549970 (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 2401 SOUTH GULLEY ROAD DEARBORN, MICHIGAN 48124 (Address of Principal Executive Offices)(Zip Code) Registrant's telephone number, including area code: (313) 561-1100 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. THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF FEBRUARY 6, 1997 WAS 16,807,723 SHARES. ================================================================================ This report consists of 10 pages. 2 THE STANDARD PRODUCTS COMPANY QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Statements of Operations .................................................. 3 Consolidated Balance Sheets ............................................................ 4 Consolidated Statements of Cash Flows .................................................. 5 Notes to Consolidated Financial Statements ............................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .. 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings ...................................................................... 9 Item 2. Changes in Securities .................................................................. 9 Item 3. Defaults upon Senior Securities ........................................................ 9 Item 4. Submission of Matters to a Vote of Security-Holders .................................... 9 Item 5. Other Information ...................................................................... 9 Item 6. Exhibits and Reports on Form 8-K ....................................................... 9 SIGNATURES ....................................................................................... 10
Unless otherwise indicated, references to "Company" mean The Standard Products Company and its subsidiaries and reference to a fiscal year means the Company's year ended June 30 of the same year (e.g., "fiscal 1997" refers to the period beginning July 1, 1996 and ending June 30, 1997). 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIODS ENDED DECEMBER 31, (UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
THREE MONTHS SIX MONTHS 1996 1995 1996 1995 ---------- --------- --------- --------- Net Sales.................................................. $266,620 $264,747 $532,231 $503,507 Cost of Goods Sold:........................................ Materials, wages and other manufacturing costs............ 222,813 232,441 453,558 452,219 Research, engineering and development expenses............ 12,111 10,537 21,685 20,113 --------- -------- -------- -------- 234,924 242,978 475,243 472,332 --------- -------- -------- -------- Gross income............................................ 31,696 21,769 56,988 31,175 Selling, General and Administrative Expenses .............. 16,901 16,749 34,204 33,892 --------- -------- -------- -------- 14,795 5,020 22,784 (2,717) --------- -------- -------- -------- Other (Income) Expense: Royalty and dividend income............................... (198) (121) (444) (240) Net interest expense...................................... 3,031 3,064 6,278 6,797 Other, net................................................ 139 (69) (316) 366 --------- -------- -------- -------- 2,972 2,874 5,518 6,923 --------- -------- -------- -------- Income (Loss) before Taxes on Income....................... 11,823 2,146 17,266 (9,640) Provision for Taxes on Income 5,479 601 9,525 (1,402) --------- -------- -------- -------- Net Income (Loss)......................................... $ 6,344 $ 1,545 $ 7,741 $ (8,238) ========= ======== ======== ======== Earnings (Loss) Per Common Share........................... $ 0.38 $ 0.09 $ 0.46 $ (0.49) ========= ======== ======== ======== Weighted average shares outstanding (in thousands)......... 16,807 16,755 16,800 16,750 ========= ======== ======== ======== Dividends declared per share............................... $ 0.17 $ 0.17 $ 0.34 $ 0.34 ========= ======== ======== ========
The accompanying notes are an integral part of these statements. 3 4 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (THOUSANDS OF DOLLARS)
(UNAUDITED) DECEMBER 31, JUNE 30, 1996 1996 --------------- ---------------- ASSETS Current Assets: Cash and cash equivalents.............................................. $ 564 $ - Receivables, less allowances of $2,685 at December 31 and $2,958 at June 30 (Note 4)............................................. 153,193 180,787 Inventories............................................................ 68,959 60,377 Prepaid insurance, taxes, etc.......................................... 23,572 19,680 --------- --------- Total current assets................................................. 246,288 260,844 Property, Plant and Equipment, at cost................................. 573,615 548,816 Less - Accumulated depreciation........................................ (274,257) (250,278) --------- --------- 299,358 298,538 Goodwill, net........................................................... 70,297 71,653 Other Assets............................................................ 53,544 53,660 --------- --------- $ 669,487 $ 684,695 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term notes payable............................................... $ 9,798 $ 1,198 Current maturities of long-term debt................................... 1,831 2,450 Accounts payable....................................................... 74,246 99,093 Accrued payrolls....................................................... 24,213 26,651 Accrued expenses....................................................... 83,068 74,565 Dividend payable....................................................... 2,857 2,853 --------- --------- Total current liabilities............................................ 196,013 206,810 --------- --------- Long-term Debt, net of current maturities............................... 128,476 143,041 Other Postretirement Benefits........................................... 26,762 26,023 Deferred Income Taxes and Other Credits................................. 55,401 50,056 Commitments and Contingent Liabilities (Note 3) Shareholders' Equity: Serial preferred shares, without par value, authorized 6,000,000 voting and 6,000,000 non-voting shares, none issued.......................... - - Common shares, par value $1 per share; authorized 50,000,000 shares, issued and outstanding, 16,806,723 shares at December 31 and 16,784,867 at June 30................................................. 16,807 16,785 Paid-in capital........................................................ 97,632 96,906 Retained earnings...................................................... 156,546 154,669 Foreign currency translation adjustments............................... (4,873) (6,318) Minimum pension liability.............................................. (3,277) (3,277) --------- --------- Total shareholders' equity............................................. 262,835 258,765 --------- --------- $ 669,487 $ 684,695 ========= =========
The accompanying notes are an integral part of these statements 4 5 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (THOUSANDS OF DOLLARS)
SIX MONTHS ENDED DECEMBER 31, -------------------------------- 1996 1995 --------------- --------------- Net cash provided by (used for) operating activities: Net income (loss).................................................................... $ 7,741 $ (8,238) Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization....................................................... 30,268 26,067 Deferred taxes and other credits.................................................... 3,835 (221) Effect of changes in foreign currency............................................... (149) (2,587) Other operating items............................................................... 352 (328) -------- -------- Net cash provided by operations.................................................... 42,047 14,693 -------- -------- Net cash provided by (used for) changes in operating assets and liabilities: Receivables (Note 4)................................................................ 27,594 48,040 Inventories......................................................................... (8,180) (498) Accounts payable and accrued expenses............................................... (19,182) (2,183) Other............................................................................... (3,887) 456 -------- -------- Net cash provided by (used for) changes in operating assets and liabilities (3,655) 45,815 -------- -------- Net cash provided by operating activities........................................... 38,392 60,508 Net cash (used for) investments: Purchase of property, plant and equipment, net...................................... (25,743) (36,373) Investment in nonconsolidated entities.......................................... (164) - -------- -------- Net cash (used for) investments.................................................... (25,907) (36,373) Net cash provided by (used for) financing: Proceeds of long-term borrowings.................................................... 14,716 27,218 Repayment of long-term borrowings (Note 4).......................................... (29,336) (51,110) Net increase (decrease) in short-term borrowings.............................. 8,600 (2,288) Cash dividends...................................................................... (5,864) (5,697) -------- -------- Net cash (used for) financing...................................................... (11,884) (31,877) Effect of exchange rate changes on cash.............................................. (37) 330 -------- -------- Increase (decrease) in cash and cash equivalents..................................... 564 (7,412) Cash and cash equivalents at the beginning of the period............................. - 19,546 -------- -------- Cash and cash equivalents at the end of the period................................... $ 564 $ 12,134 ======== ========
The accompanying notes are an integral part of these statements. 5 6 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 (AMOUNTS IN THOUSANDS) (1) BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared by management and, in the opinion of management, contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of the Company as of December 31, 1996 and June 30, 1996, and the results of its operations for the three and six months ended December 31, 1996 and 1995 and cash flows for the six months ended December 31, 1996 and 1995. The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996. Results for interim periods are not necessarily indicative of those to be expected for the year. (2) INVENTORIES Inventories are stated at the lower of cost or market. The majority of domestic inventories are valued using the last-in, first-out (LIFO) method and the remaining inventories are valued using the first-in, first-out (FIFO) method. The major components of inventory are as follows:
December 31, 1996 June 30, 1996 ----------------- ------------- Raw materials..................... $27,878 $27,186 Work-in-process and finished goods 41,081 33,191 ------- ------- Totals........................... $68,959 $60,377 ======= =======
(3) COMMITMENTS AND CONTINGENCIES At December 31, 1996, management believes that the Company was in compliance with its various financial covenants. During the current quarter, the Company has renegotiated its debt covenants with various lenders to reduce the ratio of assets to liabilities which must be maintained for the payment of dividends from 1.25 to 1.00. No other terms were changed on the debt agreements. Under the most restrictive of the revised covenants of the Company's various loan agreements, principally the Revolving Credit Agreement, $57,827 of retained earnings were not restricted at December 31, 1996 for the payment of dividends. Management expects that the Company will remain in compliance with its financial covenants in all material respects through the period ending December 31, 1997. The Company and its subsidiaries are involved in certain legal actions and claims. In the opinion of management, any liability which may ultimately be incurred would not materially affect the financial position or results of operations of the Company. (4) ACCOUNTS RECEIVABLE SECURITIZATION In September 1995, the Company and certain of its U.S. subsidiaries entered into an agreement to sell, on an ongoing basis, all of their accounts receivable to The Standard Products Funding Corporation (Funding Co.), a wholly owned subsidiary of the Company. Accordingly, the Company and those subsidiaries, irrevocably and without recourse, transferred all of their U.S. dollar denominated trade accounts receivable (principally representing amounts owed by original equipment customers in the U.S. automotive and related industries) to the Funding Co. The Funding Co. has sold and, subject to certain conditions, may from time to time sell an undivided interest in those receivables to the Clipper Receivables Corporation. The Funding Co. is permitted to receive advances of up to $50,000 for the sale of such undivided interest. At December 31, 1996, $50,000 had been advanced to the Funding Company. Unless extended by amendment, the agreement expires in September 1998. 6 7 Proceeds from the sales of receivables have been used to reduce outstanding borrowings under the Company's Revolving Credit Agreement and are reflected as operating cash flows in the accompanying consolidated statement of cash flows. Costs of the program, which primarily consist of the purchasers' financing and administrative costs, have been classified as Selling, General and Administrative Expenses in the accompanying consolidated statement of income. The Company maintains an allowance for accounts receivable ($2,685 and $2,958 at December 31, 1996 and June 30, 1996 respectively) based on the expected collectibility of all trade accounts receivable, including receivables sold. (5) NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This standard requires that long-lived assets held by and used by an entity may be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS No. 121 also requires that long-lived assets to be disposed of be reported at the lower of carrying amount or fair value less costs to sell. The FASB also issued SFAS No. 123, "Accounting for Stock-Based Compensation" which was effective for the Company beginning July 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based compensation arrangements with employees and encourages (but does not require) compensation cost to be measured based on the fair value of the equity instrument awarded. Companies are permitted, however, to continue to apply APB Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company will continue to apply APB Opinion No. 25 to its stock based compensation awards to employees and will disclose the required pro forma effect on net income and earnings per share. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (1) RESULTS OF OPERATIONS The Company's net sales for the second quarter of fiscal 1997 increased by 0.7%, or $1.9 million, to $266.6 million compared to the second quarter of fiscal year 1996. Sales for the Company's Transportation Equipment segment totaled $233.9 million for the second quarter of fiscal 1997 compared with $235.0 million for the same period last year. Sales by our North American automotive operations declined $5.5 million, or 3.7%, due primarily to the strike by Canadian autoworkers against General Motors in Canada. Automotive sales in Europe also declined $0.9 million, or 1.5%, led by weaker demand in France. Current quarter results include sales of $11.5 million from our Brazilian subsidiaries, a 66.1% increase over the second quarter of last year, which was prior to the commencement of production at our new plant in Brazil. Sales for the Company's Tread Rubber segment increased 10.0% to $32.7 million, reflecting the impact of new business from the previously announced contract with Treadco, Inc., the nation's largest independent truck-tire retreader. Based on published industry data, management believes that car and light truck production for the United States and Canada decreased by almost 3% during the quarter when compared to the same period in the prior year. Car production decreased by over 7%, while light truck production actually increased over 2%. Vehicles for which the Company supplies components that were particularly strong during the quarter included the Chrysler minivan, Ford Taurus and Ford F-Series light truck. For the first half of fiscal 1997, sales of the Transportation Equipment segment were $463.7 million or 4.8% ahead of the first half of fiscal 1996. Virtually all of the year-over-year sales increase was experienced in the first quarter. Chrysler minivan and Ford Taurus were especially strong in the first half of the year and our new plant in Brazil was not in production until the third quarter of fiscal 1996. Sales in the Tread Rubber segment for the first half of fiscal 1997 were $68.5 million, up $7.4 million from the same period in fiscal 1996. The 12.1% sales gain is attributable to the Treadco contract noted above. 7 8 Gross income for the second quarter of fiscal 1997 increased $9.9 million to $31.7 million, or 11.9% of net sales, from $21.8 million, or 8.2% of net sales for the same period in fiscal 1996. The increase in gross income occurred in each business unit. Principal factors affecting the improvement were: (1) reduction in launch costs from the prior year period, (2) a reduction in raw material costs, and (3) continued benefit from cost reduction and process improvement programs. This continued improvement brought gross income as a percentage of sales from a first quarter rate of 9.5% to a year-to-date rate of 10.7%. This compares to 6.2% for the first six months of fiscal 1996. Research, engineering and development expenses for the quarter and for the first six months of fiscal 1997 exceeded those of the same periods in the prior year. The increase relates primarily to the Company's effort to introduce a significantly improved vehicle sealing system that will have cosmetic, weight and performance characteristics that are superior to current products as well as allow for cycle time improvements in production. Even when completed, use of this process and product in production will be dependent on customers' acceptance of its benefits. At this time, development is expected to continue through calendar 1997. Selling, general and administrative expenses increased $0.2 million, or 1.2%, to $16.9 million compared to $16.7 million in fiscal 1996. As a percentage of sales, these costs remained flat at 6.3% for the period. For the first half of fiscal 1997, the increase in Other, net is attributable to better performance at Nishikawa Standard Company, primarily in the first quarter of the year. The Company's tax provision for the second quarter of fiscal 1997 reflects a tax rate of 46.3%. This compares with a year-to-date rate of 55.2%. This high effective rate continues to demonstrate the Company's inability to utilize net operating losses generated in certain of its foreign operations. The improvement in the rate reflects the fact that these operations are getting closer to profitable status. The recognition of tax benefits related to the losses will be reported in future periods as opportunities to utilize these carryforwards become more certain. (2) FINANCIAL CONDITION Cash provided by operations for the first half of fiscal 1997 was $38.4 million. This represents a decrease from the same period in fiscal 1996 of $22.1 million. The major factor resulting in the net decline is the accounts receivable transaction described in Note 4 that took place in fiscal 1996. This was partially offset by improved operating results, higher depreciation and amortization and the one-time benefit of a change in payment terms with a major customer. The first half of fiscal 1997 ended with higher inventories that could be expected due to the holiday shutdown period; however, management believes they will come down from these levels through the end of the year. Capital spending for the first six months of fiscal 1997 totaled $25.7 million compared to $36.4 million for the same period last year. The total capital spending for fiscal 1996 was $79.7 million. The Company expects capital spending to approximate $65.0 million. This includes capital required in connection with the start-up of an operation in Mexico. Construction has been started on this project with estimated completion of the first phase estimated for the fall of calendar 1997. This operation is owned 70% by the Company and 30% by Nishikawa Rubber Company of Japan. At December 31, 1996, debt represented 34.8% of total capitalization compared with 36.2% at June 30, 1996. This improvement is the result of net cash generation from the business used to pay down debt. (3) SUBSEQUENT EVENT On January 27, 1997, the Company announced plans to close two manufacturing facilities in the United States. These closings will result in the termination of approximately 500 employees. Business currently conducted at these locations will be moved to other U.S. manufacturing locations owned by the Company. The Company expects to record a significant charge against earnings in the third quarter of fiscal 1997 related to this decision. The cost of closing the facilities will depend on several factors, including negotiations with employee groups. The Company 8 9 anticipates estimated costs will be reflected in third quarter results for fiscal 1997. Any costs incurred in the closing process that will benefit future operations, such as moving machinery and equipment to another location, will be charged to operations as incurred. (4) CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR" UNDER THE PRIVATE SECURITIES REFORM ACT OF 1995 This document may include projections, forecasts and other forward-looking statements about the Company, the industry in which it competes and the markets it serves. The achievement of such projections, forecasts and other forward-looking statements is subject to certain risks and uncertainties, fully detailed in the "Cautionary Statements for Purposes of "Safe Harbor" Under the Private Securities Reform Act of 1995" in the Company's Annual Report on Form 10-K for the year ended June 30, 1996, which is on file with the Securities and Exchange Commission. PART II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security-Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
Exhibit No. Under Reg. S-K Form 10-Q Item 601 Exhibit No. Description -------------- ----------- ----------------------------------------------------- 10 10a Second Amendment to Receivables Purchase Agreement 10 10b Third Agreement of Amendment to the Standard Products Revolving Credit Facility 10 10c Amendment of Agreement of the Note Purchase Agreement dated December 16, 1993 between The Standard Products Co. and the Metropolitan Life Insurance Company 27 27 Financial Data Schedule
(b) Reports on Form 8-K None. 9 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE STANDARD PRODUCTS COMPANY Dated: February 10, 1997 by /s/ Donald R. Sheley, Jr. ---------------------------- Donald R. Sheley, Jr. Vice President, Finance Chief Financial Officer /s/ Bernard J. Theisen ---------------------------- Bernard J. Theisen Corporate Controller Prinicpal Accounting Officer 10 11 EXHIBIT INDEX
Exhibit No. Under Reg. S-K Form 10-Q Item 601 Exhibit No. Description -------------- ----------- ----------------------------------------------------- 10 10a Second Amendment to Receivables Purchase Agreement 10 10b Third Agreement of Amendment to the Standard Products Revolving Credit Facility 10 10c Amendment of Agreement of the Note Purchase Agreement dated December 16, 1993 between The Standard Products Co. and the Metropolitan Life Insurance Company 27 27 Financial Data Schedule
EX-10.A 2 EXHIBIT 10.A 1 EXHIBIT 10a EXECUTION COPY SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT This Second Amendment to Receivables Purchase Agreement, dated as of October 1, 1996 (this "Amendment") is among THE STANDARD PRODUCTS FUNDING CORPORATION, a Delaware corporation ("Seller"), THE STANDARD PRODUCTS COMPANY, an Ohio corporation ("Standard"), CLIPPER RECEIVABLES CORPORATION, a Delaware corporation ("Purchaser"), STATE STREET BOSTON CAPITAL CORPORATION, a Massachusetts corporation ("Administrator") and NATIONAL CITY BANK a national bank ("NCB"), and is consented to by the financial institutions listed under the caption "Facility Banks" on the signature pages hereto (the "Facility Banks"). Unless otherwise indicated, terms defined in Appendix A to the Receivables Purchase Agreement have the same meanings when used herein. RECITALS 1. The parties hereto have entered into that certain Receivables Purchase Agreement, dated as of September 22, 1995 (the "Original Receivables Purchase Agreement") as amended by this Amendment (as amended, the "Amended Agreement"). 2. No Liquidity Loans have been made under the related Liquidity Agreement up to and including the date hereof. 3. Pursuant to this Amendment, the parties wish to amend certain definitions and financial covenants in the Original Receivables Purchase Agreement. NOW THEREFORE, the parties agree that the Original Receivables Purchase Agreement shall be amended on the terms herein provided: SECTION 1 AMENDMENTS. The following amendments to the Receivables Purchase Agreement shall be effective upon satisfaction of the conditions in Section 3 of this Amendment. SECTION 1.1 Amendments to Appendix A: Definitions. Each of the following definitions set forth in Appendix A to the Original Receivables Purchase Agreement shall be amended and restated in its entirety as follows: "General Liquidation Cost Reserve" means, on any day an amount equal to the product of (a) (x) 1.25 times (y) the Average Days' Sales Outstanding of all Pool Receivables (other than Tooling Receivables), calculated as of the Cut-Off Date for the next preceding Settlement Period, divided by (z) 360; times (b) the sum of (i) 2% over the Alternate Base Rate in effect on such day, plus (ii) the percentage as may be in effect for the purposes of calculating the Program Fee applicable to the Purchaser's Total Investment, plus (iii) 1.00% (or, if greater, such other percentage as may be in effect for purposes of clause (b) (x) of the definition of "Master Servicer's Fee"); times (c) the General Percentage of the Purchaser's Total Investment on such day. 2 "Special Liquidation Cost Reserve" means, on any day, an amount equal to the product of (a) (x) 2.5 times (y) the Average Days' Sales Outstanding of all Pool Receivables (other than Tooling Receivables), calculated as of the Cut-Off Date for the next preceding Settlement Period, divided by (z) 360; times (b) the sum of (i) 2% over the Alternate Base Rate in effect on such day, plus (ii) the percentage as may be effect for the purposes of calculating the Program Fee applicable to the Purchaser's Total Investment, plus (iii) 1.00% (or, if greater, such clause (b) (x) of the definition of "Master Servicer's Fee"), plus (iv) the percentage as may be in effect for the purposes of calculating the Concentration Fees; times (c) the Special Percentage of the Purchaser's Total Investment on such day. "Default Ratio" means the ratio (expressed as a percentage) computed as of each Cut-Off Date by dividing (x) the sum of (i) the aggregate Unpaid Balance of all Pool Receivables (other than Tooling Receivables) that are Defaulted Receivables on such Cut-Off Date by application of clauses (a) or (e) of the definition of Defaulted Receivable, except, in the case of Receivables that are Defaulted Receivables by application of clause (e), to the extent such Receivable (or portion thereof) is the subject of a good faith dispute between the applicable Obligor and Originator, plus (ii) the aggregate Unpaid Balance of all Pool Receivables (other than Tooling Receivables) that are Defaulted Receivables and became Defaulted Receivables solely by application of clause (b), (c) or (d) of the definition of Defaulted Receivable during the Settlement Period ended on such Cut-Off Date by (y) the Unpaid Balance of all Pool Receivables (other than Tooling Receivables) as of such Cut-Off Date. SECTION 1.2 Other Amendments. Section 7.05 (c) of the Original Receivables Purchase Agreement shall be amended and restated in its entirety as follows: (c) Current Ratio. Not permit the Current Ratio to be less than 1.00 to 1.00 at any time SECTION 2 REPRESENTATIONS AND WARRANTIES. Seller and Standard hereby represent and warrant to the Purchaser, Administrator and NCB that: (a) The execution and delivery by them of this Amendment and the performance of their obligations under the Amended Agreement, are within their corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental and other consents and approvals (if any shall be required) and do not and will not contravene or conflict with, or create a lien under, (i) any provision of law, (ii) their constituent documents, (iii) any court or administrative decree applicable to them, or (iv) any contractual restriction binding upon them or their property. (b) The representations and warranties of Seller contained in Section 6.01 of the Receivables Purchase Agreement are true and correct as of the date of Seller's execution and delivery of this Amendment and after giving effect hereto (except for those representations and warranties that relate solely to an earlier date). (c) This Amendment has been duly executed and delivered by them, and the Amended Agreement is their legal, valid and binding obligation, enforceable against them in accordance with its terms. 2 3 (d) After giving effect to this Amendment, no Liquidation Event or Unmatured Liquidation Event shall have occurred and be continuing. SECTION 3 CONDITIONS TO EFFECTIVENESS. This Amendment shall be effective as of the date hereof when the following conditions shall have been satisfied (the "Condition Satisfaction Date"): SECTION 3.1 Delivery of Counterparts. The Administrator shall have received (by telecopy or otherwise) counterparts of this Amendment or the signature pages hereto, executed by each Seller, Standard, Purchaser, Administrator, NCB and Facility Banks holding 66-2/3% of the Liquidity Commitments and Concentration Commitments (as each is defined in the Liquidity Agreement) at the time such counterparts are received. SECTION 3.2 Other Conditions. The conditions set forth in Section 5.02 of the Receivables Purchase Agreement shall be satisfied with the same effect as if a Purchase were to be made on the the Condition Satisfaction Date. SECTION 4 MISCELLANEOUS PROVISIONS. SECTION 4.1 Reaffirmation. As hereby amended, the Receivables Purchase Agreement is hereby ratified and reaffirmed by Seller and Standard and the guarantee of Standard set forth in Section 12.1 of the Purchase Agreement is also hereby ratified and reaffirmed and shall continue in full force and effect after the Condition Satisfaction Date. SECTION 4.2 Costs and Expenses. Seller and Standard, jointly and severally, hereby agree to pay on demand all costs and expenses incurred by the Administrator and NCB (including legal fees and other charges of counsel to the Administrator and NCB) in connection with the preparation, execution and delivery of this Amendment. SECTION 4.3 Captions. The various captions in this Amendment are included for convenience only and shall not affect the meaning or interpretation of any provision of this Amendment. SECTION 4.4 GOVERNING LAW. THIS AMENDMENT AND THE AMENDED AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF PURCHASER IN THE RECEIVABLES OR RELATED PROPERTY IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. SECTION 4.5 Execution in Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Amendment. [SIGNATURE PAGES FOLLOW] 3 4 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized. THE STANDARD PRODUCTS FUNDING CORPORATION By: /s/ C. F. Nagy -------------------------------- Title: Treasurer ------------------------------ THE STANDARD PRODUCTS COMPANY By: /s/ Donald R. Sheley, Jr. -------------------------------- Title: V.P. Finance and CFO ------------------------------ CLIPPER RECEIVABLES CORPORATION By: /s/ Tiffany Perorval -------------------------------- Title: Vice President ----------------------------- STATE STREET BOSTON CAPITAL CORPORATION By: /s/ Pauliina Girsen -------------------------------- Title: Associate ------------------------------ NATIONAL CITY BANK By: /s/ Marybeth Howe -------------------------------- Title: Vice President ----------------------------- 4 5 Acknowledged and FACILITY BANKS: Consented to: ------------------- NATIONAL CITY BANK, as a Liquidity Bank, a Ford Concentration Bank and a Chrysler Concentration Bank By: /s/ Marybeth S. Howe ------------------------------ Name: Marybeth S. Howe ------------------------------ Title: Vice President ----------------------------- Address: 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Marybeth S. Howe Facsimile No.: (216) 575-9396 Percentage for Liquidity Commitment Amount 31.4285715% Percentage for Ford Commitment Amount 31.4285715% Percentage for Chrysler Commitment Amount 31.4285715% 5 6 Acknowledged and FACILITY BANKS: Consented to: --------------- COMERICA BANK, as a Liquidity Bank, a Ford Concentration Bank and a Chrysler Concentration Bank By: /s/ Michael T. Shea --------------------------- Name: Michael T. Shea ------------------------- Title: Vice President ------------------------ Address: 500 Woodward Avenue Detroit, Michigan 48226 Attention: Mike Shea Facsimile No.: (313) 222-3776 Percentage for Liquidity Commitment Amount 20.0000000% Percentage for Ford Commitment Amount 20.0000000% Percentage for Chrysler Commitment Amount 20.0000000% 6 7 Acknowledged and FACILITY BANKS: Consented to: ---------------------------- NBD BANK, as a Liquidity Bank, a Ford Concentration Bank and a Chrysler Concentration Bank By: /s/ Teresa A. Kalil -------------------------- Name: Teresa A. Kalil ------------------------ Title: Vice President ----------------------- Address: 611 Woodward Avenue Detroit, Michigan 48226 Attention: Facsimile No.: (313) 225-2290 Percentage for Liquidity Commitment Amount 22.8571428% Percentage for Ford Commitment Amount 22.8571428% Percentage for Chrysler Commitment Amount 22.8571428% 7 8 Acknowledged and FACILITY BANKS: Consented to: --------------- KEYBANK NATIONAL ASSOCIATION fka SOCIETY NATIONAL BANK, as a Liquidity Bank, a Ford Concentration Bank and a Chrysler Concentration Bank By: /s/ Thomas A. Crandell ---------------------------- Name: Thomas A. Crandell -------------------------- Title: AVP ------------------------- Address: 127 Public Square Cleveland, Ohio 44114-1306 Attention: Facsimile No.: (216) 689-4981 Percentage for Liquidity Commitment Amount 25.7142857% Percentage for Ford Commitment Amount 25.7142857% Percentage for Chrysler Commitment Amount 25.7142857% 8 EX-10.B 3 EXHIBIT 10.B 1 EXHIBIT 10b THIRD AGREEMENT OF AMENDMENT This THIRD Agreement of Amendment ("Amendment") is executed at Cleveland, Ohio as of October 25, 1996 by and among THE STANDARD PRODUCTS COMPANY (the "Borrower") and NATIONAL CITY BANK ("National City"), as agent (the "Agent") for itself, KEYBANK NATIONAL ASSOCIATION (formerly known as SOCIETY NATIONAL BANK ("KeyBank")), COMERICA BANK ("Comerica"), and NBD BANK (formerly known as NBD BANK, N.A.) ("NBD") (hereafter collectively referred to as "Banks"). WHEREAS, Borrower, Banks and Agent entered into a credit agreement dated as of January 19, 1993 as amended by an Agreement of Amendment dated April 30, 1994 and by an Agreement of Amendment dated August 25, 1995 (the "Agreement") wherein Banks agreed to make revolving loans to Borrower, under certain terms and conditions, aggregating not more than the principal amount of One Hundred Seventy-five Million Dollars ($175,000,000), which amount was reduced on June 30, 1993 to One Hundred Twenty-five Million Dollars ($125,000,000) and which may be reduced from time to time under the Agreement; and WHEREAS, Borrower, Banks and Agent want to make certain changes in and to the Agreement; NOW, THEREFORE, Borrower Banks and Agent agree as follows: 1. Section 1.01 (captioned "Certain Defined Terms") is hereby amended such that the definitions of "Revolving Credit Termination Date" and "Reduction Standard" shall now read as follows: "Revolving Credit Termination Date" means January 18, 1999, as the same may be extended pursuant to Section 2.02(k), or the earlier date of the termination in whole of the aggregate amount of the Revolving Credit Commitments pursuant to Section 2.04 or 6.02. "Reduction Standard" means any one of the standards identified as Reduction Standard I, II, III or IV in Schedule 2.06(b) hereto. 2. Section 2.05(a) captioned "Revolving Credit Commitment Fee" is hereby amended in its entirety to read as follows: (a) Revolving Credit Commitment Fee. The Borrower agrees to pay to the Agent for the account of each Bank a commitment fee on the average daily unused portion of such Bank's Revolving Credit Commitment from the date of execution of this Agreement until the Revolving Credit Termination Date at the rate per annum as shown in the following schedule 2
IF the THEN the Leverage is Commitment fee is ----------- ----------------- Greater than or equal to 45% 1/4% Greater than or equal to 40% but less 1/4% than 45% Greater than or equal to 35% but less 3/16% than 40% Less than 35% 3/16%
The commitment fee shall be payable on the first day of each January, April, July and October during the term of such Bank's Revolving Credit Commitment, commencing January 1, 1997, and on the Revolving Credit Termination Date. 3. Schedule 2.06(b) is hereby amended in its entirety to read as follows: SCHEDULE 2.06(b)
AND the EBIT Ratio is AND the EBIT Ratio Reduction IF the Greater than or equal to 3.0 is less than 3.0 to 1.0 Standard Leverage to 1.0 THEN the THEN the Applicable is Eurocurrency Margin is Eurocurrency Margin is ---------- --------- ---------------------------- ----------------------- I Greater .75% .875% than or equal to 45% II Greater .625% .75% than or equal to 40% but less than 45% III Greater .50% .625% than or equal to 35% but less than 40% IV Less than to 35% .375% .50%
4. Subsection 5.05 (d) (captioned "Current Ratio") is hereby amended in its entirety to read as follows: "5.05(d) Current Ratio. The Borrower will not suffer or permit the Current Assets of the Borrower and its Subsidiaries at any time to fall below an amount equal to one hundred percent (100%) of the Current Liabilities of the Borrower and its Subsidiaries, all as determined on a consolidated basis." 2 3 5. In all other respects the credit agreement shall remain in full effect. 6. Upon the execution and delivery of this Amendment, the Borrower will not be in default under the Agreement as so amended. IN WITNESS WHEREOF, Borrower, Banks and Agent have executed this Third Agreement of Amendment at the time and place first above mentioned. NATIONAL CITY BANK, AS AGENT THE STANDARD PRODUCTS COMPANY By: /s/ Timothy J. Lathe By: /s/ Charles F. Nagy - ---------------------------- ----------------------------- Title: SVP Title: Treasurer - ---------------------------- ----------------------------- NATIONAL CITY BANK NBD BANK By: /s/ Timothy J. Lathe By: /s/ Teresa A. Kalil - ---------------------------- ----------------------------- Title: SVP Title: Vice President - ---------------------------- ----------------------------- COMERICA BANK KEYBANK NATIONAL ASSOCIATION By: /s/ Michael T. Shea By: /s/ Thomas A. Crandall - ---------------------------- ----------------------------- Title: Vice President Title: AVP - ---------------------------- ----------------------------- 3 EX-10.C 4 EXHIBIT 10.C 1 EXHIBIT 10c December 9, 1996 The Standard Products Company 2401 South Gulley Road Dearborn, Michigan 48124 Attention: Mr. Charles F. Nagy Treasurer Dear Sir: The undersigned are the holders of $75,000,000 aggregate principal amount of the 6.55% Senior Notes due December 16, 2003, as amended (the "Notes"), issued pursuant to the Note Purchase Agreement, dated December 16, 1993 (the "Agreements"), between The Standard Products Company (the "Company") and the undersigned. As holders of the Notes and parties to the Agreements, and subject to the Company's agreement herewith as evidenced by the signature of an authorized officer of the Company at the foot hereof, Metropolitan hereby agrees with the Company that Section 8.3 ("Current Ratio") of the Notes shall be amended by deleting the percentage "one hundred twenty-five percent (125%)" appearing therein and replacing it with the percentage "one hundred percent (100%)". It is understood that no compensation has been paid to any other senior lenders of the Company for agreement to the amendments referred to in this letter and that all senior lenders have agreed to such amendments. It is further understood that if any bank lenders of the Company subsequently increase the current ratio required by such bank lenders to be maintained by the Company, the current ratio referred to in Section 8.3 of the Notes shall be raised to such levels. If you are in agreement with the foregoing amendment please sign below and return three of the enclosed copies of this letter to Metropolitan Life Insurance Company, 334 Madison Avenue, Convent Station, New Jersey 07961-0633, to the attention of Morian Mooers, whereupon such amendment shall be effective as of the date first above written. Very truly yours, METROPOLITAN LIFE INSURANCE METROPOLITAN INSURANCE AND COMPANY ANNUITY COMPANY By: /s/ Joe A. Augustini By: /s/ James A. Wiviott - ------------------------------------ -------------------------- Vice President METROPOLITAN PROPERTY AND CASUALTY INSURANCE COMPANY By: /s/ James A. Wiviott -------------------------- The foregoing amendment to the Agreement is accepted and agreed to. THE STANDARD PRODUCTS COMPANY. By: /s/ Charles F. Nagy - ------------------------------------ Treasurer EX-27 5 EXHIBIT 27
5 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 564 0 155,878 2,685 68,959 246,288 573,615 274,257 669,487 196,013 128,476 0 0 16,807 246,028 669,487 266,620 266,620 234,924 251,825 (59) 0 3,031 11,823 5,479 6,344 0 0 0 6,344 0.38 0.38
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