-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, YGmTOaAXu58xUC4WGaCR+OIvy6P8fvIzG2O6yWflcPfiaOKAQJKYcOkkTOpR5nvC G31xFd7UmAfRnAHD8btffQ== 0000950152-94-001105.txt : 19941122 0000950152-94-001105.hdr.sgml : 19941122 ACCESSION NUMBER: 0000950152-94-001105 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941108 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANDARD PRODUCTS CO CENTRAL INDEX KEY: 0000093448 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94558080 BUSINESS ADDRESS: STREET 1: 2130 W 110TH ST CITY: CLEVELAND STATE: OH ZIP: 44102 BUSINESS PHONE: 2162818300 MAIL ADDRESS: STREET 1: 2130 W 110TH ST CITY: CLEVELAND STATE: OH ZIP: 44102 10-Q 1 THE STANDARD PRODUCTS COMPANY 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 September 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from _____________________ to ____________________ Commission File No. 1-2917 THE STANDARD PRODUCTS COMPANY ----------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Ohio 34-0549970 - - ------------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.)
2130 West 110th Street, Cleveland, OH 44102 ----------------------------------------------------- (Address of Principal Executive Offices and Zip Code) Registrant's telephone number, including area code (216) 281-8300 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ Number of common shares outstanding as of October 28, 1994: 16,710,220 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements - - ------- -------------------- The following consolidated financial statements are submitted in accordance with the Securities and Exchange Commission's rules and regulations for Form 10-Q. These consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary to present fairly the financial position and results of operations for the interim periods presented. -2- 3 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES Consolidated Balance Sheets (Unaudited) (Thousands of Dollars)
Sept. 30, June 30, 1994 1994 --------- -------- ASSETS Current Assets: Cash and cash equivalents................................................................... $ - $ - Receivables, less allowances of $4,641 at September 30 and $3,627 at June 30.......................................................................... 214,938 202,363 Inventories................................................................................. 57,782 53,018 Prepaid insurance, taxes, etc............................................................... 12,560 15,305 -------- -------- Total current assets....................................................................... 285,280 270,686 -------- -------- Property, Plant and Equipment, at cost........................................................ 442,501 422,576 Less - Accumulated depreciation............................................................. (190,885) (180,567) -------- -------- 251,616 242,009 Goodwill, net................................................................................. 63,028 62,564 Other Assets.................................................................................. 48,548 49,055 -------- -------- $648,472 $624,314 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term notes payable.................................................................... $ 18,499 $ 10,373 Current maturities of long-term debt........................................................ 1,572 1,690 Accounts payable............................................................................ 97,151 94,514 Accrued payrolls............................................................................ 18,276 24,433 Accrued expenses............................................................................ 43,599 48,919 Dividend payable............................................................................ 2,840 2,835 -------- -------- Total current liabilities.................................................................. 181,937 182,764 -------- -------- Long-term Debt, net of current maturities..................................................... 155,482 135,381 -------- -------- Other Postretirement Benefits................................................................. 25,717 25,649 -------- -------- Deferred Income Taxes and Other Credits....................................................... 39,120 37,843 -------- -------- Commitments and Contingent Liabilities 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, 16,705,220 shares at September 30 and 16,674,016 at June 30...................................................................... 16,705 16,674 Paid-in capital............................................................................. 95,718 95,614 Retained earnings........................................................................... 142,929 142,871 Foreign currency translation adjustments.................................................... (7,013) (10,359) Minimum pension liability................................................................... (2,123) (2,123) -------- -------- Total shareholders' equity................................................................. 246,216 242,677 -------- -------- $648,472 $624,314 ======== ======== The accompanying notes are an integral part of these statements.
-3- 4 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME For the Three Month Periods Ended September 30, 1994 and 1993 (Unaudited) (Thousands of Dollars Except Share Data)
1994 1993 -------- -------- Net Sales........................................................................... $220,927 $201,691 Cost of Goods Sold: Materials, wages and other manufacturing costs.................................... 191,884 168,177 Research, engineering and development expenses.................................... 7,445 7,349 -------- -------- 199,329 175,526 -------- -------- Gross income..................................................................... 21,598 26,165 Selling, General and Administrative Expenses........................................ 14,748 14,476 -------- -------- 6,850 11,689 -------- -------- Other Income (Deductions): Royalty and dividend income....................................................... 292 122 Net interest expense.............................................................. 2,948 2,752 Other, net........................................................................ (2,241) (959) -------- -------- (4,897) (3,589) -------- -------- Income before Taxes on Income....................................................... 1,953 8,100 Provision for Taxes on Income....................................................... (945) 3,248 -------- -------- Net Income (Loss)................................................................ $ 2,898 $ 4,852 ======== ======== Earnings Per Common Share........................................................... $.17 $.29 ==== ==== The accompanying notes are an integral part of these statements.
-4- 5 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1994 AND 1993 (Unaudited) (Thousands of Dollars)
Foreign Total Currency Minimum Share- Common Paid-In Retained Translation Pension holders' Shares Capital Earnings Adjustments Liability Equity -------- -------- -------- ----------- --------- -------- Balance, June 30, 1994.................. $16,674 $95,614 $142,871 $ (10,359) $ (2,123) $242,677 Net income.............................. - - 2,898 - - 2,898 Cash dividends ($.17 per share)......... - - (2,840) - - (2,840) Foreign currency translation adjustments - - - 3,346 - 3,346 Sale of 31,204 shares to option holders. 31 104 - - - 135 ------- ------- -------- --------- -------- -------- Balance, September 30, 1994............. $16,705 $95,718 $142,929 $ (7,013) $ (2,123) $246,216 ======= ======= ======== ========= ======== ======== Balance, June 30, 1993.................. $16,552 $94,083 $120,660 $ (6,650) $ (209) $224,436 Net income.............................. - - 4,852 - - 4,852 Cash dividends ($.16 per share)......... - - (2,659) - - (2,659) Foreign currency translation adjustments - - - (5,535) - (5,535) Restricted stock awards................. - 72 - - - 72 Sale of 59,331 shares to option holders. 59 210 - - - 269 Minimum pension liability............... - - - - 10 10 ------- ------- -------- --------- -------- -------- Balance, September 30, 1993............. $16,611 $94,365 $122,853 $ (12,185) $ (199) $221,445 ======= ======= ======== ========= ======== ======== The accompanying notes are an integral part of these statements.
6 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1994 AND 1993 (Unaudited) (Thousands of Dollars)
1994 1993 -------- -------- Net cash provided by (used for) operating activities: Net income........................................................... $ 2,898 $ 4,852 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................... 10,736 11,385 Deferred taxes and other credits................................. 1,235 (2,175) Effect of changes in foreign currency............................ (703) 304 Other operating items............................................ (653) (4,943) -------- -------- Net cash provided by continuing operations.................... 13,513 9,423 -------- -------- Net cash provided by (used for) changes in operating assets and liabilities: Receivables...................................................... (12,575) 12,996 Inventories...................................................... (4,764) (5,567) Accounts payable and accrued expenses............................ (7,384) (19,791) Other............................................................ 2,745 499 -------- -------- Net cash used for changes in operating assets and liabilities (21,978) (11,863) -------- -------- Net cash provided by operating activities..................... (8,465) (2,440) -------- -------- Net cash used for investments: Purchase of property, plant and equipment, net....................... (16,311) (13,456) Investments in affiliates............................................ - (1,500) -------- -------- Net cash used for investments................................. (16,311) (14,956) -------- -------- Net cash provided by (used for) financing: Proceeds of long-term borrowings..................................... 20,000 15,110 Net increase in short-term borrowings................................ 8,126 5,761 Repayment of long-term borrowings.................................... (213) (5,841) Cash dividends....................................................... (2,840) (2,659) -------- -------- Net cash provided by financing................................ 25,073 12,371 -------- -------- Effect of exchange rate changes on cash................................ (297) 254 -------- -------- Increase (decrease) in cash and cash equivalents....................... - (4,771) Cash and cash equivalents at the beginning of the period............... - 5,548 -------- -------- Cash and cash equivalents at the end of the period..................... $ - $ 777 ======== ======== The accompanying notes are an integral part of these statements.
-6- 7 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1994 1. ACCOUNTING POLICIES ------------------- A. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Major intercompany items have been eliminated. B. 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 at September 30, 1994 and June 30, 1994 are as follows:
Sept. 30 June 30 -------- -------- (Thousands of Dollars) Raw materials.................................... $19,387 $20,477 Work-in-process and finished goods............... 38,395 32,541 ------- ------- Totals...................................... $57,782 $53,018 ======= =======
2. DEBT Long-term debt at September 30, 1994 and June 30, 1994 consisted of the following:
Sept. 30 June 30 -------- -------- (Thousands of Dollars) Senior Notes..................................... $100,000 $100,000 Revolving credit agreement....................... 50,000 30,000 First mortgage industrial revenue bonds.......... 537 537 Other debt....................................... 6,517 6,534 -------- -------- Total............................................ 157,054 137,071 Less - current maturities........................ 1,572 1,690 -------- -------- $155,482 $135,381 ======== ========
At September 30, 1994, Senior Notes outstanding of $100,000,000 include two issues, $75,000,000 and $25,000,000. The $75,000,000 Senior Notes, placed directly with three affiliated insurance companies, are unsecured and accrue interest at 6.55%. Interest payments are payable semi-annually, and annual principal payments of $12,500,000 begin in December 1998 through December 2002, with the balance due on maturity in December 2003. Coinciding with the issuance of the $75,000,000 fixed rate Senior Notes, the Company entered into a currency and interest rate swap transaction to establish fixed interest rates on intercompany borrowings of its French subsidiary. The nominal amount is 150,000,000 FF and the term extends to November 2000. The $25,000,000 Senior Notes are also unsecured notes placed directly with the holders. The interest rate is 9.81%, interest is paid semiannually and the notes are payable July 1, 1999. Each of the Senior Note agreements require the Company to maintain certain financial covenants as to net worth, leverage and working capital. -7- 8 The Revolving Credit Agreement (Credit Agreement) represents borrowings from a group of banks that have committed to make available for borrowing up to $125,000,000 until January 1997 with provisions for extending the agreement beyond that date upon satisfaction of certain requirements. The Company has the right to convert up to $50,000,000 of revolving loans in a five-year term loan with quarterly repayments thereafter. The loans may be denominated in either U.S. dollars or certain other currencies based upon Eurodollar interest rates or the agent bank's base rate. At September 30, 1994, borrowings under the Credit Agreement bear interest at 5.5%. A commitment fee of .25% is due on the unused portion of the agreement. The terms of the Credit Agreement also require the Company to maintain certain financial covenants as to net worth, leverage and working capital. Under the most restrictive covenants of the Company's various loan agreements, principally the Credit Agreement, $63,838,000 of retained earnings were not restricted at September 30, 1994 for the payment of dividends, and the ratio of current assets to current liabilities was 1.57 to 1, in excess of the minimum requirement of 1.25 to 1. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF - - ------- --------------------------------------- RESULTS OF OPERATIONS AND FINANCIAL CONDITION --------------------------------------------- RESULTS OF OPERATIONS --------------------- For the first quarter of fiscal 1995, net sales increased 10% to $220,927,000 from $201,691,000 last year. Net income for the first quarter of fiscal 1995 was $2,899,000, or $.17 a share compared to $4,852,000, or $.29 a share a year ago. In the Transportation Equipment Segment, sales in the first quarter were $187,643,000 compared to $172,046,000, an increase of 9%. In North America, sales in this segment were $116,124,000 compared to $103,479,000 a year ago for an increase of 12%. The increased North American sales were led by sales of Company produced parts on several models with accelerated volumes over a year ago. These include the Ford Mustang and Windstar and the Chrysler Neon. Sales volumes of the first quarter were reduced, however, as launches of several programs by the manufacturers did not proceed as rapidly as planned. Also, production of several models ceased, and the absence of sales of the Company's parts on these models reduced sales during the first quarter period. For the first quarter of fiscal 1995, North American car and light truck production advanced 15% over the production of the prior year. In Europe, fiscal 1995 first quarter sales of the Company's European subsidiaries, Standard Products Limited (SPL) and Standard Products Industrial (SPI), advanced 32% compared with the same period a year ago. In the prior year first quarter period, SPI's reporting was brought current with the Company, and the first quarter period of last year included SPI's June 1993 results. Current year European sales advanced 1% over last year's reported sales. The European sales performance reflected a strengthening European economy compared to last year and sales of parts on new European models introduced recently. Holm Industries, Inc., the Company's subsidiary that supplies the appliance and building products industries, reported sales over the prior year first quarter period by 11% to $24,103,000. The increased sales were attributable to strong consumer and commercial refrigeration sales. In the Tread Rubber Segment, sales of $33,284,000 in the first quarter period of fiscal 1995 were 12% over the sales of last year's first quarter period based on volume increases. Consolidated gross margin for the first quarter of fiscal 1995 was 9.8% compared to 13.0% a year ago. Margins in the first quarter of fiscal 1995 were reduced by launch costs related to the Chevrolet Lumina and Chrysler Cirrus. The Lumina launch costs continued from the fourth quarter of fiscal 1994 into the first quarter of fiscal 1995 as production gradually increased during the quarter to full production levels reached as the first quarter closed. The Cirrus launch, which began during the quarter, encountered launch related costs that were greater than expected. The launch costs encountered during the quarter represented 2.6% of consolidated first quarter sales. Overall for the remainder of the Transportation Equipment Segment, margins improved, and the improvement represented .9% of first quarter sales. Tread Rubber Segment margins declined slightly on rising material costs and a sales mix toward lower margin products. -8- 9 Selling, general and administrative expenses were 6.7% of sales for the first quarter of fiscal 1995. A year ago, these expenses were 7.2% of fiscal 1994 first quarter sales. Net interest expense for the first quarter of fiscal 1994 was $2,948,000 compared to $2,752,000 a year ago. Interest expense in 1995 was $3,120,000 and interest income was $172,000. A year ago, interest expense amounted to $2,868,000 and interest income was $116,000. Interest expense increased by $252,000 for the quarter, and the increase is due to a higher level of short-term borrowings. Other income (expense), net was expense of $1,949,000 for the first quarter of fiscal 1995. A year ago, other expense was $837,000. The Company's subsidiary, Oliver Rubber Company (Oliver), had previously disclosed the occurrence of accounting irregularities at its European subsidiary. Since then, Oliver has revaluated the European operation and decided to exit that market. As a result, Oliver recorded a closing reserve of $2,309,000 in the first quarter. Dividend income, royalties and earnings of NISCO offset the Oliver provision to arrive at net expense of $1,949,000. A year ago, other expense was primarily the losses of the Company's joint venture with Nishikawa Rubber Company. The provision for taxes on income reflects tax benefit associated with the decision of Oliver to exit the European market. The tax benefit offset the provision noted above. Without the tax benefit, the provision for taxes on income would have been $1,364,000 for an effective tax rate of 32%. This rate is in line with statutory rates in the countries in which the Company does business and net of tax credits and loss carryforwards available to the Company. Financial Condition ------------------- In the first quarter of fiscal 1995, operations required $339,000. Reduced earnings combined with increased working capital requirements associated with the increased sales levels to result in the operating funds requirement. Additions to property, plant and equipment required funds of $16,311,000 and cash dividends required $2,840,000. Funds were provided by the proceeds of short-term and revolving credit borrowings of $20,000,000. At September 30, 1994, the ratio of current assets to current liabilities was 1.57 to 1. On total capitalization of $401,698,000, debt was 38.7% and equity was 61.3%. Considering available borrowing capacity under the Company's Revolving Credit Agreement and short-term borrowing arrangements plus funds to be generated from operations, the Company believes it has sufficient available funds to meet operating needs for the remainder of the year. -9- 10 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - - ------- -------------------------------- (a) EXHIBITS:
Exhibit No. Under Reg. S-K Form 10-Q Sequential Item 601 Exhibit No. Description Page -------------- ----------- ------------ ---------- 27 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K: No reports on Form 8-K have been filed during the quarter for which this report on Form 10-Q is filed. -10- 11 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 ----------------------------- (REGISTRANT) Dated: November 8, 1994 /s/ Aubrey E. Arndt ---------------- -------------------------------- Aubrey E. Arndt Vice President-Finance Principal Financial Officer /s/ Thomas J. Stecz -------------------------------- Thomas J. Stecz Corporate Controller Chief Accounting Officer -11- EX-27 2 EXHIBIT 27
5 1000 QTR-1 JUN-30-1995 JUL-01-1994 SEP-30-1994 0 0 219,579 4,641 57,782 285,280 442,501 190,885 648,472 181,937 155,482 16,705 0 0 229,511 648,472 220,927 220,927 199,329 214,077 (1,949) 1,014 (2,948) 1,953 (945) 2,898 0 0 0 2,898 .17 .17
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