-----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, A9OKaSAZSKD1rW64yjaVa21vBdQDVdLgIo7rytOx/jXqLOjxmRMCuERq4gwRvElG t+T+OfoYoDyAEauzM0mWJQ== 0000950152-94-000946.txt : 19940923 0000950152-94-000946.hdr.sgml : 19940923 ACCESSION NUMBER: 0000950152-94-000946 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940916 SROS: NONE 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02917 FILM NUMBER: 94549370 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-K 1 STANDARD PRODUCTS 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (MARK ONE) FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND - - --- EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended June 30, 1994 -------------------------------------------- OR _______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 (NO FEE REQUIRED) 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 (IRS Employer Identification No.) of incorporation or organization) 2130 West 110th Street, Cleveland, Ohio 44102 - - --------------------------------------- ----------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (216) 281-8300 ----------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - - ---------------------------- ----------------------------------------- COMMON SHARES, $1 PAR VALUE - - ---------------------------- ----------------------------------------- - - ---------------------------- ----------------------------------------- Securities registered pursuant to Section 12(g) of the Act: - - --------------------------------------------------------------------------- (Title of class) - - --------------------------------------------------------------------------- (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12 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 required for the past 90 days. Yes X No . ----- ----- State the aggregate market value of the voting stock held by nonaffiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices for such stock, as of a specified date within 60 days prior to the date of filing. (See definition of affiliate in Rule 405). $370,981,595 AT AUGUST 31, 1994 (APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by sections 12, 13 or 15(D) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ______ No _____. (APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 16,682,234 AT AUGUST 31, 1994 (DOCUMENTS INCORPORATED BY REFERENCE) List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). 1994 ANNUAL REPORT TO SHAREHOLDERS (PARTS I, II AND IV) - - ------------------------------------------------------- PROXY STATEMENT FOR 1994 ANNUAL MEETING OF SHAREHOLDERS (PART III) - - ------------------------------------------------------------------ 2 PART I ITEM I. BUSINESS - - ------ General and Industry Segments ----------------------------- The Company is engaged primarily in the manufacture of rubber and plastic parts requiring a substantial degree of product engineering and high-volume production processes for automotive original equipment manufacturers in the United States, Canada, France, the United Kingdom and other European countries (the "Transportation Equipment Segment"). This segment also produces rubber and plastic parts for the appliance, construction and marine industries. The Company also manufactures precure and mold cure tread rubber for the truck tire retreading industry (the "Tread Rubber Segment"). Reference is made to "Notes to Consolidated Financial Statements" included on page 25 and 26 of the Company's 1994 Annual Report to Shareholders, incorporated herein by reference, for additional financial information concerning the Company's reportable business segments and geographic areas. In January 1993, the Company acquired all of the issued and outstanding shares of capital stock of Standard Products Industriel (SPI), a corporation organized under French law. See "Foreign Operations" for a discussion of SPI and its operations. In December 1992, the Company increased its ownership in its North American joint venture, Nishikawa Standard Company (NISCO) to 50% from 40% by making additional capital contributions and by purchasing partnership units from the Company's partner, Nishikawa Rubber Company, of Hiroshima, Japan. In July 1992, the Company's subsidiary, Holm Industries, Inc., acquired the assets of Jarrow Products, a manufacturer of plastic extrusion products for commercial appliances and building door sealing systems. In fiscal 1991, the Company discontinued the manufacture of rubberized track for military vehicles. See the section "Discontinued Operations" for a discussion of developments which have occurred regarding these operations during the past year. The Company was incorporated in Ohio in 1927 and was consolidated in 1936 with the Reid Products Company. TRANSPORTATION EQUIPMENT SEGMENT Automotive Original Equipment ----------------------------- PRODUCTS. Rubber products supplied to the automotive manufacturing industry include flocked rubber and steel weatherstrip assemblies to seal vehicle windows; flocked rubber window channel assemblies and rubber window gaskets; and vehicle body and door dynamic sealing systems. These products form the sealing system of automotive vehicles preventing water leakage and inhibiting wind noise from entering the vehicle. Attractiveness of design is an important feature of the sealing system. An increasing number of the Company's parts are sold to automotive original equipment manufacturers as complete sealing systems. This is a departure from former practices which involved more suppliers who supplied individual parts, not complete systems. The Company also supplies molded rubber engine mounts and body cushions, which comprise a vehicle's vibration control system, to the automotive manufacturing industry. Plastic products include metallized, multicolored and embossed exterior and interior vinyl trim and flocked vinyl and steel weatherstrip assemblies. The plastic exterior products serve as protective barriers preventing damage to the vehicle's sheet metal and have become an integral part of the vehicle's overall styling and appearance. Although reliable industry statistics are not available, the Company believes that it is one of the leading independent manufacturers of rubber window and door weather sealing products and plastic trim for the automotive industry. -2- 3 MARKETS AND CUSTOMERS. The Company manufactures parts and accessories for automotive and truck original equipment manufacturers in the United States, Canada, France and the United Kingdom and other European countries. Manufacturing operations for the automotive original equipment market of this segment are conducted by the Company, Standard Products (Canada) Limited, Standard Products Limited and Standard Products Industriel. Approximately 56%, 65% and 71% of the Company's annual revenues in its 1994, 1993 and 1992 fiscal years, respectively, were attributable to direct worldwide sales to General Motors Corporation, Ford Motor Company and Chrysler Motors Corporation. Since most of the Company's rubber and plastic automotive products are used on original equipment, sales of such products are directly affected by the annual car production of original equipment manufacturers. Original equipment sales are based upon purchase orders issued annually by automobile manufacturers for each part which the Company manufactures. The purchase orders are for all or a percentage of the customers' estimated requirements and are binding, subject to the annual car production of original equipment manufacturers. As the year evolves, customers issue releases under those purchase orders, specifying quantities of the parts which the assembly plants require. The Company's sales and product development personnel work directly with the engineering and styling departments of the automotive original equipment manufacturers and suppliers in the engineering and development of its various products. DISTRIBUTION. The Company utilizes, as a distribution center for some of its automotive finished products, approximately 138,000 square feet of a 283,000 square foot public warehouse which it operates in Dearborn, Michigan. The balance of the warehouse space is allocated to commercial customers' use. The Company also distributes automotive finished products from a leased warehouse in Charlotte, North Carolina, central to the Company's Southern plants. Most of the Company's nondomestic customers are supplied directly by foreign manufacturing plants of subsidiaries of the Company. COMPETITION. Each aspect of the Company's business in automotive products is highly competitive. No single firm competes with the Company in all aspects of this business. The Company's competitive position depends upon its ability to offer engineering and design capabilities and to manufacture products which meet its customers' pricing, quality and delivery requirements. The Company has historically met the customers' requirements. Other ----- The Company, through its subsidiary, Holm Industries, Inc., manufactures rubber and plastic trim seals for the automotive replacement, construction and marine industries and a variety of plastic and magnetic parts for original equipment appliance manufacturers and residential and commercial exterior door and window manufacturers. These products are manufactured with some of the raw materials similar to those used in the products manufactured by the Transportation Equipment and Tread Rubber Segments. See "Raw Materials" for a discussion of suppliers and available supplies. Distribution of these products are through both internal sales personnel and manufacturing representatives. These products are sold to many customers, and market share information is not available for all of the products which Holm manufactures. For plastic and magnetic seals, Holm is the largest supplier to the United States refrigeration and freezer appliance market. In July 1992, Holm acquired the assets of Jarrow Products, a small manufacturer of commercial refrigeration gaskets and exterior door weatherstrip. Joint Venture ------------- The Company also manufactures vehicle body and door sealing systems for sale to North American automotive original equipment manufacturers and Japanese transplants, including Honda, Ford Motor Company and Automotive Alliance International (formerly Mazda), through its North American joint venture, -3- 4 Nishikawa Standard Company (NISCO), a general partnership owned 50% by the Company and 50% by Nishikawa Rubber Company (Nishikawa) of Hiroshima, Japan. Manufacturing operations are conducted at plants located in Bremen and Topeka, Indiana. In December 1992, the Company increased its ownership in NISCO to 50% from 40% by making additional capital contributions and by purchasing partnership units from Nishikawa. The chief operating officer of the Company is the chief executive officer of NISCO and chairman of its Policy Committee. TREAD RUBBER SEGMENT PRODUCTS. The Company's wholly owned subsidiary, Oliver Rubber Company ("Oliver"), manufactures and markets precure and mold cure tread rubber, bonding gum, cement, repair materials and equipment for the tire retreading industry. Oliver also supplies custom mixed rubber to the Company for use in automotive original equipment products and to NISCO for the manufacture of door seals for automotive original equipment. Oliver also custom mixes rubber compounds for selected customers throughout the United States. Precure tread rubber is shipped to a retreader partially cured and with a specially designed tread imprinted. The retreader cements the precure tread to a tire casing using heat and pressure to complete a permanent bond. Mold cure tread rubber is applied by a retread dealer to the tire casing in a pressure mold which cures the rubber and at the same time imprints into it the tread design. Based on industry statistics in 1994, precure tread rubber represents approximately 75% of the tread rubber used by the retreading industry and mold cure represents 25%. Oliver supplies both precure and mold cure tread rubber. MARKETS. Oliver serves the trucking industry in North America and Europe through its licensed dealer network for precure retreading and through dealers who sell mold cure rubber. Oliver also serves markets in other areas of the world, such as India, through license arrangements and export sales. Truck mileage, and therefore demand for tread rubber, correlate with general economic conditions of the market served. Oliver also supplies mold cure tread rubber for off-the- road (OTR) construction equipment. DISTRIBUTION. In North America, tread rubber products are marketed by Oliver's sales force to retread dealers, some of which are licensed by Oliver. Licensed dealers use Oliver's patented precure system and market tread rubber under the name of Tuff-Cure. COMPETITION. The tread rubber industry is very competitive with more than ten suppliers, of which three are significant. Competition is based upon the price and quality of the products supplied. While exact market share information is not available, it is estimated that based on pounds shipped, the largest supplier of precure tread rubber is Bandag, Incorporated ("Bandag"). Oliver, unlike Bandag, sells in North America, both precure and mold cure tread rubber, and management believes it is the largest supplier of mold cure rubber and it is the second largest supplier of tread rubber in 1994. Other ----- In 1992, Oliver acquired the assets of Salisbury Machine, a manufacturer of equipment used in retreading tires. -4- 5 DISCONTINUED OPERATIONS In fiscal 1991, the Company discontinued the manufacture of rubberized track for military vehicles. As a result, the Company significantly curtailed operations at its Port Clinton Division and recorded a provision of $30,000,000 for estimated ongoing losses and estimated costs associated with closure and/or sale of the division. During fiscal 1992, the Company completed or subcontracted its contractual commitments, and losses incurred were charged to the reserve. In 1993, the Company announced the complete closure of the Port Clinton Division, which had been involved in rubber mixing for other Company facilities following its termination of the military business. Assets related to the military operations have been sold, transferred to other Company facilities or disposed. The accumulated postretirement benefits of the Port Clinton employees had been recognized in the provision for discontinued operations of $30,000,000 and has now been reclassified to accrued postretirement benefits. The remaining balance of the reserve represents reserves for building and site work and closure costs. RAW MATERIALS The principal materials used by the Company and its subsidiaries in its Transportation Equipment and Tread Rubber Segments are synthetic rubber and rubber chemicals. In addition, other significant materials used by the Company in its Transportation Equipment Segment are plastic resins, woven fabrics, flock fibers, coil steel, aluminum and adhesives. The majority of these materials are purchased on the open market from domestic suppliers. The Company believes that it has adequate supplies of raw materials available from reliable sources for the levels of production presently anticipated. ENGINEERING AND DEVELOPMENT Product development is an essential part of the market strength of the Company and its automotive subsidiaries. The Company's sales and product development personnel work directly with the engineering and styling departments of its major customers in the engineering and development of new products. In recent years, the Company's involvement with its automotive customers has begun at the earlier model design stage with the Company assuming an increasing share of engineering and design capability and responsibility. The Company's main sales and product development group is located in Dearborn, Michigan, close to the purchasing and engineering groups of its customers. The Company also has significant product development facilities at Stratford, Ontario, Huntingdon, England and Courbevoie, France. As of August 15, 1994, 231 engineers and technicians were engaged in development and engineering activities. The Company spent approximately $31,538,000 in 1994, $22,003,000 in 1993 and $17,153,000 in 1992 on product engineering and development, of which $2,688,000 in 1994, $1,032,000 in 1993 and $3,534,000 in 1992 were customer-reimbursed. In 1994, the product engineering and development expenditures, net of customer reimbursement, were 3.6% of Transportation Equipment sales. In 1993 and 1992, the comparable percentages were 3% and 2.3%, respectively. The percentage of product engineering and development expenditures to Tread Rubber Segment sales for 1994, 1993 and 1992 were 1.2%, 1.3% and .9%, respectively. PATENTS AND LICENSES The Company holds numerous patents covering various manufacturing processes and products of the Transportation Equipment Segment and several patents relating to application processes used by its tread rubber customers. The Company has licensed certain of the patents. The Company has a license agreement with Nishikawa Rubber Company for sales, marketing and engineering services on certain products sold by -5- 6 the Company. While the Company considers some of its patents and licenses to be important in certain aspects of its business, the Company does not believe that the loss or expiration of any particular patent or license would have an adverse effect on either segment of its business. The Company actively pursues the application for patents on new products and processes. EMPLOYEES As of June 30, 1994, the Company employed approximately 9,480 persons, of whom approximately 6,273 were hourly employees. Employee relations at the Company's plants generally have been good. ENVIRONMENTAL MATTERS The Company believes that it is in substantial compliance with federal, state and local provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. The Company maintains personnel whose function is to monitor compliance with environmental protection regulations. At the Company's Gaylord, Michigan plant, the Company is correcting the condition of groundwater located under its plant by injecting such water to underground depths well below and separate from the drinking water aquifer. All corrective activities are fully permitted by the Michigan Department of Natural Resources and the United States Environmental Protection Agency. The cost of installation and operation are not material to the Company's financial position. The Company has been previously designated as a potentially responsible party in connection with several disposal sites. Settlements with payment of an immaterial amount or no amount at all have been obtained for all sites, except a site located in Jamestown, North Carolina. The Company believes that it was an insignificant contributor at this site and that this matter will be resolved without a material adverse affect to the Company's financial position. The Company has been notified that the property occupied by its Schenectady, New York plant is being investigated due to allegations concerning possible contamination resulting from the operations of the previous property owner. No determination of liability to the Company, if any, can be made at this time. FOREIGN OPERATIONS The Company owns all of the outstanding shares of Standard Products (Canada) Limited, a Canadian corporation which is engaged primarily in the manufacture of parts and accessories for United States and Canadian automotive original equipment manufacturers and for the automotive replacement parts market and the manufacture of tread rubber for the tire retreading industry. The Company owns all of the outstanding shares (except for qualifying shares held by nominees) of Standard Products Limited, an English corporation which is engaged primarily in the manufacture of parts and accessories for the North American, United Kingdom and European automotive original equipment manufacturers and for the automotive replacement parts market. The Company owns all of the outstanding shares (except for qualifying shares held by nominees) of Oliver Europa, an English corporation engaged primarily in the manufacture and distribution of tread rubber and rubber and related products in Europe. -6- 7 In January 1993, the Company acquired all of the issued and outstanding shares of capital stock of Standard Products Industriel (SPI), a corporation organized under French law, and all of the issued and outstanding shares of capital stock of SPI's affiliated companies: Societe Lillebonnaise de Caoutchoucs, Standard Products Atlantic and Central Auto, each of which is a corporation organized under French law, Standard Products Industriel SA, a corporation organized under Swiss law, Rubber Industrial Holding Company, a Delaware corporation, "5" Rubber Corporation, a Pennsylvania corporation and La Riviere Corporation, a Pennsylvania corporation (SPI and such affiliated companies collectively, the "SPI Group"). The SPI Group is engaged in the business of designing, developing, manufacturing and distributing automotive window weatherstrips, glass weatherstrips, vehicle body and door seals and glass encapsulation products to French, other European and North American auto manufacturers. The SPI Group's customers include, among others, PSA (Peugeot/Citroen), Renault, Fiat, Volvo, Chrysler Corporation, General Motors Corporation, Volkswagen and Saab. SPI's European customer base complements the customer base of the Company's operations in the United Kingdom. The SPI Group has an experienced management team and expertise in the technical design and engineering of automotive sealing products and systems. Similar to the Company, SPI's design personnel work closely with the engineering and styling departments of its customers. The Company also has minority equity interests in and licensing arrangements with firms in Australia, Brazil, Japan, Korea, India and other countries throughout the world. The Company's United States export sales in the aggregate for the three fiscal years ended June 30, 1994 and 1993 and June 28, 1992, were $41,472,000, $42,800,000 and $37,400,000, respectively, of which a substantial portion is represented by sales to automotive original equipment manufacturers in Canada. The Company's experience has been that its significant foreign businesses in Canada and Western Europe do not present materially different risks or problems from those encountered in its United States markets. The risks of the Company, Standard Products (Canada) Limited, Standard Products Limited and Standard Products Industriel involve meeting the customers' expectations as to the timely delivery of parts which meet their specifications. The automotive business is directly affected by the annual car production of original equipment manufacturers. Standard Products (Canada) Limited, Standard Products Limited, and Standard Products Industriel participate in the risk of varying car builds similar to any of the Company's other automotive plants which supply domestic assembly plants. ITEM 2. PROPERTIES - - ------ The Company operates the properties described as follows:
Land Plant Location (Acreage) (Square Feet) -------- --------- ------------- Asheboro, North Carolina (1) 16.4 161,000 Athens, Georgia (1) 32.0 109,000 Athens, Georgia (1)(3) 3.3 37,000 Bezons, France (4) 4.3 140,00 Bolbec, France (3)(4) 24.3 276,000 Cleveland, Ohio (4) 12.0 157,000 Colsterworth, England (1)(3) .5 19,200 Courbevoie, France (3)(4) .5 23,000 Dallas, Texas (1)(3) 6.0 96,000 Dearborn, Michigan (Warehouse and Offices) (4) 13.9 358,000 Etobicoke, Ontario, Canada (3)(4) .8 33,000 Export, Pennsylvania (1)(3) 2.0 40,500 Gaylord, Michigan (4) 96.2 92,000 Georgetown, Ontario, Canada (4) 5.7 89,000
-7- 8
Land Plant Location (Acreage) (Square Feet) -------- --------- ------------- Goldsboro, North Carolina (4) 6.6 140,000 Greenville, Michigan (4) 1.0 10,000 Griffin, Georgia (4) 17.5 190,000 Hartselle, Alabama (3)(4) 11.1 72,000 Huntingdon, England (4) 11.1 175,000 Kittanning, Pennsylvania (4) 6.1 80,000 Lexington, Kentucky (4) 5.9 115,000 Lillebonne, France (4) 9.1 100,000 Maesteg, Wales (4) 8.4 102,000 Mississauga, Ontario, Canada (3)(4) 5.0 97,000 Mitchell, Ontario, Canada (4) 10.5 88,000 New Ulm, Minnesota (4) 3.5 46,000 Oakland, California (1) 4.2 112,000 Paris, Texas (1) 28.5 31,000 Plymouth, England (3)(4) 9.0 127,000 Port Clinton, Ohio (5) 20.0 225,000 Rocky Mount, North Carolina (4) 24.2 222,000 St.Charles, Illinois (4) 2.3 47,000 San Diego, California (3)(4) -- 10,000 Salisbury, NC (1) 2.7 37,200 Schenectady, New York (4) 22.5 224,000 Scottsburg, Indiana (2)(4) 8.5 192,000 Spartanburg, South Carolina (4) 30.1 85,000 Stratford, Ontario, Canada (4) 20.0 80,000 Stratford, Ontario, Canada (1)(4) 5.4 94,000 Stratford, Ontario, Canada (4) 26.8 107,000 Vitre, France (3)(4) 16.6 207,000 Wadsworth, Ohio (1) 2.0 28,000 Winnsboro, South Carolina (4) 26.4 175,000 (1) Facilities used in the Tread Rubber Segment. (2) These facilities are encumbered by either capital lease or mortgage agreements which provide for payments sufficient to pay principal of and interest on first mortgage industrial revenue bonds issued for the purchase of the plants and equipment. These agreements have been capitalized for financial statement purposes. (3) Leased from others. The leases are short to medium term operating leases, some of which have options to renew for additional periods. Rental rates are competitive for the market in which the property is located. The Company believes that all of these leased facilities could be replaced for comparable terms. (4) Facilities used in the Transportation Equipment Segment. (5) Facilities are currently idle.
The Company operates a 283,000 square foot public warehouse in Dearborn, Michigan of which the Company utilized approximately 138,000 square feet for its own products. The Company has its automotive sales office and product development and engineering division at this location, and these facilities utilize approximately 61,000 square feet of space. -8- 9 The Company believes that all of its properties, machinery and equipment are in good operating condition and suitable and adequate for the business of the Company as presently conducted. The utilization of the Company's Transportation Equipment facilities varies with the car build production. The utilization of the Tread Rubber facilities varies with demand for tread rubber product. Capacities of each facility are adequate to meet current demands. During the past year, utilization of capacity was 86% for Transportation Equipment facilities and 77% for Tread Rubber facilities. ITEM 3. LEGAL PROCEEDINGS - - ------ The Company was not a party to any pending legal proceedings other than ordinary routine litigation incidental to its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - - ------ No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. EXECUTIVE OFFICERS OF THE REGISTRANT The information below is included in this report pursuant to instruction 3 to Item 401(B) of Regulation S-K. The Executive Officers of the Company are elected annually to serve for one-year terms or until their successors are elected and qualified. The officers listed below were elected on October 18, 1993. Their business experience, principal occupations and employment during the last five years are indicated in the table below.
Served In Present Office Name Age Position with Registrant Since ---------------------- --- ------------------------------------------------------ --------- James S. Reid, Jr. 68 Chairman and Chief Executive Officer 1962 In addition to his position as Chief Executive Officer, Mr. Reid served as President from 1962 to 1988 and in 1990. Theodore K. Zampetis 49 President and Chief Operating Officer 1991 Formerly, Mr. Zampetis was Vice President- Manufacturing, North American Automotive Operations from 1989 to 1990 and Executive Vice President - President Standard Products Automotive Operations from 1990. Aubrey E. Arndt 54 Vice President-Finance 1992 Formerly, Mr. Arndt was Director of Audit, Special Studies and Taxes from 1990 and Executive Vice President/Chief Financial Officer, The Westgate Group from 1989.
-9- 10
Served In Present Office Name Age Position with Registrant Since ---------------------- --- ------------------------------------------------------ --------- Larry J. Enders 52 Vice President of the Company and President 1993 and Chief Executive Officer, Oliver Rubber Company Formerly, Mr. Enders was Vice President-Sales from 1988 to 1991 and Vice President-Purchasing and Worldwide Supply from 1991. James F. Keys 40 Vice President of the Company and Managing 1991 Director of Standard Products Limited Formerly, Mr. Keys was Division Manager, Product Development and Engineering Division from 1987. Stephan J. Mack 57 President, Holm Industries, Inc. 1986 James D. Pry 50 Vice President of the Company and President, 1991 Standard Products (Canada) Limited Formerly, Mr. Pry was Division Manager, Goldsboro Division from 1987. Thomas J. Stecz 46 Corporate Controller and Assistant Secretary 1992 Formerly, Mr. Stecz was Corporate Controller.
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER - - ------ MATTERS The information required by Item 5 is incorporated herein by reference to Note 4 of "Notes to Consolidated Financial Statements" on page 22 and "Common Shares" on page 28 of the Annual Report to Shareholders for the year ended June 30, 1994. ITEM 6. SELECTED FINANCIAL DATA - - ------ The information required by Item 6 is incorporated herein by reference to pages 14 and 15 of the Annual Report to Shareholders for the year ended June 30, 1994. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - - ------ AND RESULTS OF OPERATIONS The information required by Item 7 is incorporated herein by reference to pages 12 through 16 of the Annual Report to Shareholders for the year ended June 30, 1994. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - - ------ Financial statements and statements required by Item 8 are incorporated herein by reference to pages 17 through 27 of the Annual Report to Shareholders for the year ended June 30, 1994. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - - ------ None -10- 11 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - - ------- The information required by Item 10 as to directors of the Registrant is incorporated herein by reference to the information set forth under the caption "Election of Directors" on pages 3 through 5 of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held October 17, 1994. As to Executive Officers, the information required is included in Part I of this report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION - - ------- The information required by Item 11 is incorporated herein by reference to the material under the caption "Executive Compensation" on pages 6 through 11 of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held October 17, 1994. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - - ------- The information required by Item 12 is incorporated herein by reference to the information set forth under the captions "Security Ownership of Certain Beneficial Owners" on pages 1 through 3 of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held October 17, 1994. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - - ------- The information required by Item 13 is incorporated herein by reference to the information set forth under the caption "Compensation Committee Interlocks and Insider Participation" on pages 9 and 10 of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held October 17, 1994. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM - - ------- 8-K (a) (1) Financial Statements: The following consolidated financial statements and related notes of the Registrant and its subsidiaries are incorporated herein by reference to the 1994 Annual Report to Shareholders (pages 17 through 27): Consolidated Balance Sheets - June 30, 1994 and 1993 Consolidated Statements of Income for the Years Ended June 30, 1994 and 1993 and June 28, 1992 Consolidated Statements of Shareholders' Equity for the Years Ended June 30, 1994 and 1993 and June 28, 1992 Consolidated Statements of Cash Flows for the Years Ended June 30, 1994 and 1993 and June 28, 1992 Notes to Consolidated Financial Statements Auditors' Report (a) (2) Financial Statement Schedules: -11- 12 Report of Independent Public Accountants on the Financial Statement Schedules Schedule V -- Property, Plant and Equipment for the Years Ended June 30, 1994 and 1993 and June 28, 1992 Schedule VI -- Accumulated Depreciation and Amortization of Property, Plant and Equipment for the Years Ended June 30, 1994 and 1993 and June 28, 1992 Schedule VIII -- Valuation and Qualifying Accounts and Reserves for the Years Ended June 30, 1994 and 1993 and June 28, 1992 Schedule X -- Supplementary Income Statement Information for the Years Ended June 30, 1994 and 1993 and June 28, 1992 All schedules, other than Schedules V, VI, VIII and X, are omitted since the information is not required or is otherwise furnished. Separate financial statements of the Registrant have been omitted since restricted net assets of consolidated subsidiaries and unconsolidated investees and the Company's share of the unconsolidated subsidiaries' equity is less than 25% of the Company's net assets at June 30, 1994. (a) (3) Exhibits:
If Incorporated by Exhibit No. Reference, Documents Under Reg. S-K Form 10-K with which Exhibit Sequential Item 601 Exhibit No. Description Was Previously Filed Page - - -------------- ----------- --------------------------------- ----------------------- ---------- 2 2a Stock Sale Agreement, Dated Form 8-K, Dated January December 19, 1992 with respect 26, 1993 to the acquisition of the Standard (Filed with the SEC on Products Industriel Group. February 8, 1993; see Exhibit 2 therein) 3 3a Second Amended and Restated Quarterly Report Form 10-Q Articles of Incorporation (Filed with the SEC on November 1, 1993; see Exhibit 3a therein) 3 3b Amended and Restated Code of Form S-3 Registration Regulations No. 33-62054 (Filed with the SEC on May 5, 1993; see Exhibit 3.2 therein) 4 4a Senior Notes Agreement - Quarterly Report Form 10-Q $75,000,000 6.55% Senior Notes due (Filed with the SEC on December 16, 2003, by and among February 11, 1994; The Standard Products Company and see Exhibit 4 therein) Metropolitan Life Insurance Company and certain of its Affiliates
-12- 13
Exhibit No. Reference, Documents Under Reg. S-K Form 10-K with which Exhibit Sequential Item 601 Exhibit No. Description Was Previously Filed Page - - -------------- ----------- --------------------------------- ----------------------- ---------- 4 4b Senior Notes Agreement - Annual Report Form 10-K $25,000,000 aggregate principal (Filed with the SEC on amount Dated as of June 30, 1989, September 25, 1989; between the Company and see Exhibit 4b therein) Nationwide Life Insurance Company, Aid Association for Lutherans and Employers Life Insurance Company of Wausau 4 4c Amendments to the Senior Notes Annual Report Form 10-K Agreement - $25,000,000 (Filed with the SEC on aggregate principal amount (4e), September 15, 1992; dated February 22, 1991 and, see Exhibit 4f therein) June 30, 1991, between the Company and Nationwide Life Insurance Company, Aid Association for Lutherans and Employers Life Insurance Company of Wausau 4 4d Credit Agreement, Dated as of Annual Report Form 10-K January 19, 1993, Among The (Filed with the SEC on Standard Products Company, as September 13, 1993; Borrower, and National City Bank, see Exhibit 4c therein) Society National Bank, Comerica Bank and NBD Bank, N.A. and National City, as Agent. 4 4e Agreement of Amendment, Dated as 25 of April 30, 1994, Among The Standard Products Company, as Borrower, and National City Bank, Society National Bank, Comerica Bank and NBD Bank, N.A. and National City, as Agent. 10 10a Supplemental Salaried Pension Annual Report Form 10-K Plan (Filed with the SEC on September 23, 1986; see Exhibit 10a therein) 10 10b The Standard Products Company Form S-8 Registration 1985 Employee Incentive Stock No. 33-01558 Option Plan (Filed with the SEC on November 15, 1985; see Exhibit 4a therein) 10 10c The Standard Products Company Annual Report Form 10-K 1981 Employee Incentive Stock (Filed with the SEC on Option Plan September 1, 1982; see Exhibit 10 therein)
-13- 14
Exhibit No. Reference, Documents Under Reg. S-K Form 10-K with which Exhibit Sequential Item 601 Exhibit No. Description Was Previously Filed Page - - -------------- ----------- --------------------------------- ----------------------- ---------- 10 10d The Standard Products Company Form S-8 Registration 1989 Employee Incentive Stock No. 33-33617 Option Plan (Filed with the SEC on February 28, 1990; see Exhibit 4a therein) 10 10e The Standard Products Company Form S-8 Registration 1991 Employee Stock Option Plan No. 33-51556 (Filed with the SEC on September 2, 1992; see Exhibit 4c therein) 10 10f The Standard Products Company Form S-8 Registration 1991 Restricted Stock Plan No. 33-51554 (Filed with the SEC on September 2, 1992; see Exhibit 4c therein) 10 10g The Standard Products Company Annual Report Form 10-K Restricted Stock Agreement between (Filed with the SEC on the Company and the Chairman and September 15, 1992; Chief Executive Officer see Exhibit 10h therein) 10 10h The Standard Products Company Annual Report Form 10-K Restricted Stock Agreement between (Filed with the SEC on the Company and the President and September 15, 1992; Chief Operating Officer see Exhibit 10i therein) 10 10i The Standard Products Company Form S-8 Registration 1993 Employee Stock Option Plan No. 33-53989 (Filed with the SEC on June 6, 1994; see Exhibit 4 therein) 13 13 Annual Report to Shareholders 29 for the Year Ended June 30, 1994 21 21 Subsidiaries of Registrant 64 23 23 Consent of Independent Public 65 Accountants 27 27 Financial Data Schedule 66 (b) Reports on Form 8-K: No reports have been filed during the last quarter of the fiscal year covered by this report on Form 10-K.
-14- 15 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) 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 BY /s/ Aubrey E. Arndt -------------------------- Aubrey E. Arndt Vice President-Finance Date: September 14, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below on SEPTEMBER 14, 1994 by the following persons on behalf of the Registrant and in the capacities indicated. /s/ James S. Reid, Jr. Chairman and Chief Executive Officer; Director - - ----------------------------- James S. Reid, Jr. /s/ Theodore K. Zampetis President and Chief Operating Officer; Director - - ------------------------- Theodore K. Zampetis /s/ Aubrey E. Arndt Vice President-Finance - - --------------------------- Principal Financial Officer Aubrey E. Arndt /s/ Thomas J. Stecz Corporate Controller and Assistant Secretary - - ---------------------------- Principal Accounting Officer Thomas J. Stecz /s/ Richard J. Boland - - ---------------------------- Richard J. Boland Director /s/ Edward B. Brandon - - ------------------------- Edward B. Brandon Director /s/ John D. Drinko - - --------------------------- John D. Drinko Director /s/ Curtis E. Moll - - ----------------------------- Curtis E. Moll Director /s/ Malcolm R. Myers - - ------------------------- Malcolm R. Myers Director /s/ Leigh H. Perkins, Sr. - - ---------------------------- Leigh H. Perkins, Sr. Director /s/ Alfred M. Rankin, Jr. - - -------------------------- Alfred M. Rankin, Jr. Director /s/ Alan E. Riedel - - ----------------------------- Alan E. Riedel Director /s/ John D. Sigel - - ----------------------------- John D. Sigel Director /s/ W. Hayden Thompson - - ---------------------- W. Hayden Thompson Director
-15- 16 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- ON THE FINANCIAL STATEMENT SCHEDULES ------------------------------------ To: The Standard Products Company We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in The Standard Products Company and Subsidiary Companies 1994 Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated August 2, 1994. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index of financial statements are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN & CO. Cleveland, Ohio August 2, 1994. -16- 17 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES PROPERTY, PLANT AND EQUIPMENT SCHEDULE V For The Year Ended June 30, 1994 (Thousands of Dollars)
Column A Column B Column C Column D Column E Column F - - ----------------------------- --------- -------- ---------- ------------ -------- Other Charges Add (Deduct) Balance At Primarily Balance Beginning Additions Translation At End Classification Of Period At Cost Retirements Adjustments Of Period - - ------------------------------- ---------- --------- ----------- ----------- ---------- Land and land improvements..... $ 5,973 $ 226 $ (59) $ 611 $ 6,751 Building and improvements...... 74,227 5,138 (997) 6,717 85,085 Machinery and equipment (autos included)............. 246,771 36,836 (8,268) (11,474) 263,865 Furniture and fixtures......... 22,551 11,575 (940) (869) 32,317 Capital projects in process.... 28,042 7,604 - (1,088) 34,558 -------- ------- --------- --------- -------- Total....................... $377,564 $61,379 $ (10,264) $ (6,103) $422,576 ======== ======= ========= ========= -------- The useful lives used in computing depreciation expense are as follows: Building and improvements 20 to 30 Years Machinery and equipment 3 to 15 Years Furniture and fixtures 5 to 15 Years NOTE: Column E represents the following: - - ---------------------------------------- Translation adjustment totaling $4,841,000 represents the effect of varying exchange rates between years used to translate the foreign owned assets to U.S. funds. Other changes totaling $1,260,000 represent the revaluation of purchased business assets from the original preliminary valuation.
18 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES PROPERTY, PLANT AND EQUIPMENT SCHEDULE V For The Year Ended June 30, 1993 (Thousands of Dollars)
Column A Column B Column C Column D Column E Column F - - ----------------------------- --------- --------------------------- ---------- ------------ -------- Additions ---------------------------- Balance At Other Balance Beginning Purchased Changes At End Classification Of Period At Cost Business Retirements Add (Deduct) Of Period - - ------------------------------- ---------- --------- --------- ----------- ------------ --------- Land........................... $ 3,141 $ - $ 2,814 $ - $ 18 $ 5,973 Building and improvements...... 54,503 1,937 20,424 (19) (2,618) 74,227 Machinery and equipment........ 195,695 17,533 46,320 (3,718) (9,059) 246,771 Furniture and fixtures......... 17,906 2,435 3,712 (484) (1,018) 22,551 Capital projects in process.... 8,585 17,685 2,300 - (528) 28,042 ---------- ---------- ---------- ----------- ------------ ---------- Total....................... $ 279,830 $ 39,590 $ 75,570 $ (4,221) $ (13,205) $ 377,564 ========== ========== ========== =========== ============ ========== The useful lives used in computing depreciation expense are as follows: Building and improvements 20 to 30 Years Machinery and equipment 3 to 15 Years Furniture and fixtures 5 to 15 Years Note: Column E represents the following - - ---------------------------------------- Translation adjustment totaling $13,205,000 represents the effect of varying exchange rates between years used to translate the foreign owned assets to U.S. funds.
19 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES PROPERTY, PLANT AND EQUIPMENT SCHEDULE V For The Year Ended June 28, 1992 (Thousands of Dollars)
Column A Column B Column C Column D Column E Column F - - ----------------------------- --------- --------------------------- ---------- ------------ -------- Additions ---------------------------- Balance At Other Balance Beginning Purchased Changes At End Classification Of Period At Cost Business Retirements Add (Deduct) Of Period - - ------------------------------- ---------- --------- --------- ----------- ------------ --------- Land........................... $ 3,083 $ - $ 50 $ - $ 8 $ 3,141 Building and improvements...... 50,827 1,131 394 (124) 2,275 54,503 Machinery and equipment........ 173,703 16,262 182 (7,010) 12,557 195,695 Furniture and fixtures......... 15,726 1,718 35 (149) 576 17,906 Capital projects in process.... 7,812 95 - - 678 8,585 --------- --------- ---------- ----------- ----------- --------- Total...................... $ 251,151 $ 19,207 $ 661 $ (7,283) $ 16,094 $ 279,830 ========= ========= ========== =========== =========== ========= The useful lives used in computing depreciation expense are as follows: Building and improvements 20 to 30 Years Machinery and equipment 3 to 15 Years Furniture and fixtures 5 to 15 Years Note: Column E represents the following - - ---------------------------------------- Translation adjustment totaling $2,968,000 represents the effect of varying exchange rates between years used to translate the foreign owned assets to U.S. funds. The Port Clinton reclassification totaling $13,126,000 represents the assets devoted to the mixing operation which will remain in service. Other changes totaling $447,000 represent reclassification of miscellaneous assets among account classifications.
20 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT SCHEDULE VI For The Year Ended June 30, 1994 (Thousands of Dollars)
Column A Column B Column C Column D Column E Column F - - ---------------------------- ---------- ---------- ----------- ----------- ---------- Other Charges Additions Add (Deduct) Balance At Charged To Primarily Balance Beginning Costs and Translation At End Classification Of Period Expenses Retirements Adjustments Of Period - - ---------------------------- ---------- ---------- ----------- ----------- --------- Buildings and improvements... $ 21,955 $ 4,165 $ (301) $ (97) $ 25,722 Machinery and equipment...... 119,152 27,562 (7,012) (1,033) 138,669 Furniture and fixtures....... 12,030 4,834 (694) 6 16,176 -------- ------- -------- -------- -------- Total.................... $153,137 $36,561 $ (8,007) $ (1,124) $180,567 ======== ======= ======== ======== ======== NOTE: Column E represents the following: - - ----------------------------------------- Translation adjustment totaling $1,439,000 represents the effect of varying exchange rates between years used to translate the foreign owned assets to U.S. funds and $315,000 represents adjustments of reserves from purchased businesses.
21 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT SCHEDULE VI For The Year Ended June 30, 1993 (Thousands of Dollars)
Column A Column B Column C Column D Column E Column F - - ----------------------------- --------- ---------- ---------- ------------ -------- Additions Balance At Charged To Other Balance Beginning Costs and Changes At End Classification Of Period Expenses Retirements Add (Deduct) Of Period - - ------------------------------- ---------- ---------- ----------- ------------ --------- Building and improvements..... $ 19,172 $ 3,530 $ (14) $ (733) $ 21,955 Machinery and equipment....... 100,604 25,000 (2,170) (4,282) 119,152 Furniture and fixtures........ 10,634 2,422 (462) (564) 12,030 ---------- ---------- ---------- ---------- --------- Total................... $ 130,410 $ 30,952 $ (2,646) $ (5,579) $ 153,137 ========== ========== ========== ========== ========= Note: Column E represents the following - - ---------------------------------------- Translation adjustment totaling $5,579,000 represents the effect of varying exchange rates between years used to translate the foreign owned assets to U.S. funds.
22 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT SCHEDULE VI For The Year Ended June 28, 1992 (Thousands of Dollars)
Column A Column B Column C Column D Column E Column F - - ------------------------------------ ---------- ---------- ----------- ------------ -------- Additions Balance At Charged To Other Balance Beginning Costs and Changes At End Classification Of Period Expenses Retirements Add (Deduct) Of Period - - --------------------------------------- ---------- ---------- ----------- ------------ --------- Buildings and improvements......... $ 15,684 $ 2,669 $ (87) $ 906 $ 19,172 Machinery and equipment............ 78,787 20,262 (4,960) 6,515 100,604 Furniture and fixtures............. 8,082 1,965 (124) 711 10,634 ---------- ---------- ---------- ------------ --------- Total......................... $ 102,553 $ 24,896 $ (5,171) $ 8,132 $ 130,410 ========== ========== ========== ============ ========= Note: Column E represents the following: - - ---------------------------------------- Translation adjustments totaling $43,000 represent the effect of foreign exchange rates between years used to translate the foreign owned assets to U.S. funds. The Port Clinton reclassification totaling $8,089,000 represents the assets devoted to the mixing operation which will remain in service. Other changes totaling $10,000 represent reclassification of miscellaneous expenses among account classifications.
23 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES VALUATION AND QUALIFYING ACCOUNTS SCHEDULE VIII For the Years Ended June 30, 1994 and 1993 and June 28, 1992 (Thousands of Dollars)
Column A Column B Column C Column D Column E Column F - - -------------------------------- --------- ---------- ---------- ---------- --------- Additions Balance At Charged To Balance Beginning Costs And At End Description Of Period Expenses Recoveries Deductions Of Period - - -------------------------------- --------- ---------- ---------- ---------- --------- Year Ended June 30, 1994 Valuation Allowance - Deferred Tax Asset $ 25,812 $ 1,798 $ - $ - $ 27,610 ======== ======== ======== ======== ======== Reserve for Plant Closing $ 9,111 $ - $ - $ 5,136 $ 3,975 ======== ======== ======== ======== ======== Allowance for doubtful accounts $ 2,293 $ 459 $ 605 $ (270) $ 3,627 ======== ======== ======== ======== ======== Year Ended June 30, 1993 Valuation Allowance - Deferred Tax Asset $ - $ 32,338 $ - $ 6,526 $ 25,812 (1) ======== ======== ======== ======== ======== Reserve for Plant Closing $ 22,885 $ - $ 734 $ 14,508 $ 9,111 (2) ======== ======== ======== ======== ======== Allowance for doubtful accounts $ 3,128 $ 885 $ - $ 1,720 $ 2,293 ======== ======== ======== ======== ======== Year Ended June 28, 1992 Reserve for Plant Closing $ 30,000 $ 1,320 $ - $ 8,435 $ 22,885 (3) ======== ======== ======== ======== ======== Allowance for doubtful accounts $ 2,312 $ 1,165 $ 133 $ 482 $ 3,128 ======== ======== ======== ======== ======== (1) In connection with the adoption of SFAS No. 109 in 1993, a valuation allowance was recorded equal to the deferred tax asset recorded for United Kingdom net operating loss carryforwards. (2) Of this amount, deductions of $13,717 reflect an amount reclassified to accrued postretirement benefits other than pensions. The balance of $9,111 has been classified as a current liability in the accompanying consolidated balance sheet as of June 30, 1993. (3) Of this amount, $8,635 has been classified as a current liability, and the remainder, $14,250, is classified as a long-term liability in the accompanying consolidated balance sheet as of June 28, 1992.
24 THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES SUPPLEMENTARY INCOME STATEMENT INFORMATION SCHEDULE X For the Years Ended June 30, 1994 and 1993 and June 28, 1992 (Thousands of Dollars)
Column A Column B - - ---------------------------- -------------------------------------- Charged to Costs and Expenses -------------------------------------- Item 1994 1993 1992 - - ---------------------------- --------- --------- --------- Maintenance and repair...... $44,803 $34,069 $ 29,008 ======= ======= ========
EX-4 2 STANDARD PRODUCTS EX-4 1 Exhibit 4e AGREEMENT OF AMENDMENT This Agreement of Amendment ("Amendment") is executed at Cleveland, Ohio as of April 30, 1994 by and among THE STANDARD PRODUCTS COMPANY ("Borrower") and NATIONAL CITY BANK ("NCB"), as agent (the "Agent") for itself, SOCIETY NATIONAL BANK ("Society"), COMERICA BANK ("Comerica"), and NBD BANK, N.A. ("NBD") (hereinafter collectively referred to as "Banks"). WHEREAS, Borrower, Banks and Agent entered into a credit agreement dated as of January 19, 1993 (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. Subsection 2.03(a) of the Agreement (captioned "CONVERSION TO TERM LOANS") is hereby amended in its entirety to read as follows: 2.03(a) CONVERSION TO TERM LOANS -- Subject to the terms and conditions hereof, each Bank agrees that, upon the Borrower's satisfaction of the conditions set forth in Section 3.02, the Borrower may, at its option and at any time during the life of the facility, request that up to Fifty Million Dollars ($50,000,000), but not less than Five Million Dollars ($5,000,000) (or the equivalent thereof in the Alternate Currency) in the aggregate of the Banks' then outstanding Revolving Credit Loans be converted to Term Loans as of the first Business Day of any calendar month. On the Term Loan conversation Date, the proceeds of each Bank's Term Loans shall be applied to the payment of each Bank's then outstanding Revolving Credit Loans and the Revolving Credit Commitment of each Bank shall be permanently reduced by the aggregate amount of such Bank's Term Loans. 2. Subsection 2.03(d) (captioned "AMORTIZATION AND MATURITY OF TERM LOANS") is hereby amended in its entirety to read as follows: 2.03(d) AMORTIZATION AND MATURITY OF TERM LOANS -- The outstanding principal amount of each Bank's Term Loans will be payable in equal quarterly installments of principal commencing on the first Repayment Date which occurs after the Term Loan Conversion Date, with the final quarterly installment due no later than five (5) years after the Term Loan Conversion Date. 3. Subsection 2.05(c) (captioned "REDUCTION FEE") is hereby deleted in its entirety. 4. Schedule 2.06(b) is hereby amended in its entirety to read as follows: 2 SCHEDULE 2.06(B)
Reduction IF the AND the THEN the Standard Leverage EBIT Ratio Eurocurrency Applicable is if Margin is - - ---------- ----------- -------------- ------------- I Greater than or equal to 55% Greater than 3.0 to 1.0 1.125% II Greater than or equal to 45% Greater than 3.0 to 1.0 0.875% but less than 55% III Greater than or equal to 35% Greater than 3.0 to 1.0 0.625% but less than 45% IV Greater than or equal to 45% Less than 3.0 to 1.0 1.0% but less than 55% V Greater than or equal to 35% Less than 3.0 to 1.0 0.75% but less than 45% VI Less than 35% Greater than 3.0 to 1.0 0.50% VII Less than 35% Less than 3.0 to 1.0 0.625%
5. Subsection 2.06(c) (captioned "INCREASED INTEREST RATING") is hereby deleted in its entirety. 6. Subsection 2.08(d) (captioned "LETTER OF CREDIT FEES AND COMMISSIONS") is hereby amended such that the Letter of Credit commission rate is reduced from one percent (1%) per annum to three-quarters of one percent (3/4%) per annum. 7. Subsection 5.04(b) (captioned "CREDIT EXTENSIONS") is hereby amended in its entirety to read as follows: 5.04(b) CREDIT EXTENSIONS -- The Borrower shall not and shall not permit any of its Subsidiaries to make or keep any investment in any notes, bonds or other obligations of any kind for the payment of money or make or have outstanding at any time any advance or loan to anyone; PROVIDED, HOWEVER, that this subsection shall not apply to (A) any existing or future advance, commission or relocation payment, or other loan or advance made to any employee in the ordinary course of business and consistent with past practice or to a director or officer of any Company; PROVIDED, HOWEVER, that the aggregate made to all directors and officers shall not exceed Five Hundred Thousand Dollars ($500,000) (or the equivalent thereof in any other currency) at any one time outstanding, (B) any existing or future investment in any such notes, bonds or other obligations consisting of Acceptable Marketable Securities, (C) any Letter of Credit, (D) any existing investment, advance or loan fully disclosed in the Borrower's June 28, 1992 audited financial statements or in the Supplemental Schedule or the Revised Supplement Schedule, or 3 (E) any endorsement of a check or other medium of payment for deposit or collection, or any similar transaction in the normal course of business. 8. Subsection 5.04(c) (captioned "INDEBTEDNESS") is hereby amended in its entirety to read as follows: 5.04(c) INDEBTEDNESS -- The Borrower shall not and shall not permit any of its Subsidiaries to create, assume or have outstanding at any time any Indebtedness of any kind; PROVIDED, HOWEVER, that this Subsection shall not apply to (i) the Obligations, (ii) any Indebtedness owing by a Company to a Company, (iii) short term Indebtedness denominated in Dollars or in a currency other than Dollars in the aggregate amount not to exceed Twenty-Five Million Dollars ($25,000,000) (or the Dollar equivalent thereof to the extent such Indebtedness is not denominated in Dollars), (iv) any existing or future Indebtedness secured by a Purchase Money Security Interest permitted by Subsection 5.04(d) so long as the aggregate unpaid principal balance of all such Indebtedness does not exceed Twenty-Five Million Dollars ($25,000,000) (or the Dollar equivalent thereof) at any one time outstanding, (v) any existing Indebtedness that is fully disclosed in the Borrower's June 28, 1992 audited financial statements or in the Supplemental Schedule or the Revised Supplemental Schedule, or any renewal or extension thereof (without any increase) in whole or in part, (vi) publicly or privately issued Funded Indebtedness or equity of the Borrower in the aggregate amount of up to One Hundred Fifty Million Dollars ($150,000,000) or (vii) private Indebtedness or other Indebtedness not otherwise permitted hereby so long as said Indebtedness does not exceed an amount equal to ten percent (10%) of stockholders' equity. 9. Clause (M) of subsection 5.04(d) (captioned "LIENS, LEASES") is hereby amended in its entirety to read as follows: 5.04(d)(M) LIENS, LEASES -- any lien or encumbrance which is not otherwise permitted hereunder so long as the Indebtedness secured thereby does not exceed an amount equal to ten percent (10%) of stockholders' equity at any one time outstanding, or 10. Subsection 5.05(c) (captioned "INTEREST COVERAGE") is hereby amended in its entirety to read as follows: 5.05(c) INTEREST COVERAGE -- If the Borrower suffers or permits its Leverage to exceed 45%, then, at the end of each Fiscal Quarter, the EBIT Ratio of the Borrower and its Subsidiaries on a consolidated basis for the period consisting of the immediately preceding four Fiscal Quarters shall not be less than 2.0 to 1.0. 11. Pursuant to subsection 2.02(k) (captioned "EXTENSION OF REVOLVING CREDIT TERMINATION DATE") the Revolving Credit Termination Date is hereby extended one year from January 19, 1996 to January 19, 1997. 12. Section 1.01 (captioned "CERTAIN DEFINED TERMS") is hereby amended such that the definitions of "ACCEPTABLE MARKET SECURITIES" and "ALTERNATIVE CURRENCY" shall now read as follows: "ACCEPTABLE MARKET SECURITIES" means securities that are direct obligations of the United States of America or any agency thereof, or certificates of deposit issued by any Bank, or any other money-market investment if it carries the highest quality of rating of any nationally-recognized rating agency including, without limitation, the Rating Agency; provided, however, that no such security shall mature more than one (1) year after the date when made. 4 "ALTERNATIVE CURRENCY" means the currency of Canada, France, or England, as the case may be. 13. In all other respects the credit agreement shall remain in full effect. 14. Upon the execution and delivery of this Amendment, the Borrower will not be in default under the Agreement as so Amended. IN WITNESS WHEREOF, borrowers, banks and Agent have executed this Agreement of Amendment at the time and place first above mentioned. THE STANDARD PRODUCTS COMPANY By: /s/ Aubrey E. Arndt ------------------------------- Title: Vice President-Finance ------------------------------ NATIONAL CITY BANK, AS AGENT By: /s/ Paul Harris ------------------------------- Title: Vice President ------------------------------ NATIONAL CITY BANK By: /s/ Paul Harris ------------------------------- Title: Vice President ------------------------------ SOCIETY NATIONAL BANK By: /s/ William Kysela ------------------------------- Title: Vice President ------------------------------ COMERICA BANK By: /s/ Ian Hogan ------------------------------- Title: Vice President ------------------------------ NBD BANK, N.A. By: /s/ Fred J. Crawford ------------------------------- Title: Second Vice President ------------------------------ EX-13 3 STANDARD PRODUCTS EX-13 1 Exhibit 13 Serving the Global Auto Industry THE STANDARD PRODUCTS COMPANY 2 OUR STRATEGIC FOCUS. The Standard Products Co. has pursued a strategic focus on rubber and plastic laminated extrusion technology to grow related businesses into leadership positions in their industries and to build value for shareholders. Today we operate 39 facilities in North America and Europe and benefit from a 24-year partnership with Nishikawa Rubber Company of Hiroshima, Japan. AUTOMOTIVE INDUSTRY. We are one of the leading suppliers of complete sealing, trimming and vibration-control systems to the worldwide automotive industry. Our rubber and plastic components protect and decorate more than 100 car, van and light truck models manufactured by North American, European and Asian auto companies. APPLIANCE AND WINDOW/DOOR INDUSTRY. Through acquisitions and continuous growth we have become the major North American supplier of seals for home and commercial refrigerators and freezers, while growing as a supplier of seals to the residential door and window industry. TRUCK TIRE RETREAD INDUSTRY. Through our Oliver Rubber Company subsidiary we manufacture truck tire precure and mold cure rubber and offer fully integrated equipment and tooling support facilities to the retread industry. 3
FISCAL YEAR HIGHLIGHTS (Thousands of Dollars Except Share Data) 1994 1993 1992 - - ------------------------------------------------------------------- ---------- ---------- --------- Net Sales.............................................................. $872,367 $763,796 $657,036 Income Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle........................ 33,032 33,423 23,305 Extraordinary Item, Early Repayment of Debt, Net of Tax................ - (2,559) - Cumulative Effect on Prior Years of Change in Accounting Principle, Adoption of SFAS No. 106, Net of Tax...................... - (8,301) - -------- -------- -------- Net Income............................................................. $ 33,032 $ 22,563 $ 23,305 ======== ======== ======== Earnings Per Common Share: Income Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle..................... $1.99 $2.21 $1.79 Extraordinary Item, Early Repayment of Debt, Net of Tax........ - (.17) - Cumulative Effect on Prior Years of Change in Accounting Principle, Adoption of SFAS No. 106, Net of Tax.................... - (.55) - -------- -------- -------- $1.99 $1.49 $1.79 -------- -------- -------- Cash Dividends Declared Per Common Share............................... $ .65 $ .54 $ .38 Shareholders' Equity................................................... $242,677 $224,436 $177,753 Book Value Per Common Share............................................ $ 14.55 $ 13.56 $ 11.82 Shares Outstanding at Year-End......................................... 16,674 16,552 15,044 ____________________________________________________________________________________________________________________________ o Sales for fiscal 1994 increased 14% as we realized the full benefit of the 1993 acquisition of Standard Products Industriel. Earnings were flat with comparable 1993 results due to the transition to new model launches and the balancing out of certain car and light truck models. o We launched 18 new programs worldwide, including the Mustang, Neon and Windstar in North America, and we are in the midst of the Lumina launch. As a result of the transition to new models and the slow acceleration to full production, our total North American automotive sales rose only marginally compared with 1993. o Our European operations reported higher sales and profits in fiscal 1994 compared with the prior 12-month period. We benefited from an improving auto market in Europe and our participation on some of the most popular models introduced in the last 12 months. o We have completed a private placement of $75 million of 6.55% Senior Notes to Metropolitan Life Insurance Company. Proceeds from the placement were used to refinance a portion of existing debt, extending maturities and reducing rates. o In the fourth quarter, we increased the regular dividend by 6.25% to 17 cents a share. The payment brings the total dividends for fiscal 1994 to 65 cents a share, an increase of 19.5% compared with the previous fiscal year.
4 (Across pages 2 and 3 reads "1994 continued a period of major business expansion" in large print.) TO OUR SHAREHOLDERS: Fiscal 1994 continued a period of major business expansion for The Standard Products Co. We successfully integrated our acquisition of Standard Products Industriel (SPI), achieving a broader global presence. Concurrently, we met the challenge of launching 18 new programs worldwide, part of a continuing expansion that will almost double the size of the Company between 1991 and 1996. In delivering on these programs, we made important progress in streamlining the business and improving operations, as we gear up for the even more intensive schedule of new programs ahead. Sales in fiscal 1994 increased 14% to $872,367,000 compared with $763,796,000 the prior year. Net income for the year was $33,032,000, equal to $1.99 per share on 16,627,000 shares outstanding. That compares with income before nonrecurring items of $33,423,000, or $2.21 per share last year, on 15,114,000 shares outstanding. Sales included $161,825,000 from SPI and 5 Rubber Corporation compared with a contribution to sales of $46,411,000 in fiscal 1993, which covered only four months of the year. A large part of 5 Rubber's 1994 contribution was new business from the launch of Chrysler's Neon four-door model. North American automotive operations recorded fiscal 1994 sales of $461,794,000 compared with $457,821,000 last year. Sales for 1994 included $32,935,000 from 5 Rubber and its launch of the four-door Neon. The continued acceleration of successful launches of the Ford Mustang and Ford Windstar minivan also contributed to revenues during the year. These gains, however, were offset by a drop in the build of certain car and light truck models carrying Standard Products' parts. Also, revenues from the parts supplied for the Chevrolet Lumina were off $26,300,000 compared with the prior year due to a customer delay in the ramp up of the new model. General Motors is now forecasting that the Lumina will reach full production by the end of September 1994. As a result of these factors, profits from North American automotive operations were down for the year. Our European operations, Standard Products Limited (SPL) in the United Kingdom and SPI in France, reported higher volumes and improved profits in fiscal 1994 compared with the prior 12-month period. We benefited from an improving European auto market and our participation on some of the most popular models introduced in the last 12 months. We brought our new worldwide engineering and development capabilities to bear in the European market last year. A European team lead by SPL, with support from SPI, our North American operations and our joint-venture partner Nishikawa Rubber, took on an assignment from Ford of Europe to redesign the sealing system of the European Escort. Our redesign reached "best in class" performance levels, and as a result, SPL and SPI were awarded a portion of the Escort business. This project should have positive long-term implications with our key customers in Germany. Looking ahead, both SPI and SPL have solid schedules of new business for the coming year, and their key models are selling well. They also stand to gain from an improving European auto market. NISCO, our 50%-owned joint venture with Nishikawa Rubber Company of Japan, was profitable in fiscal 1994. This marked NISCO's first full year of profitability after seven years of investment. Our share of NISCO's profits is 50%, but NISCO's sales are not consolidated in the Standard Products income statement. Sales at our Oliver Rubber Company subsidiary were $124,169,000, marginally higher than last year. Earnings, however, were off substantially due to higher manufacturing costs, more sales of lower-margin products and problems at its Oliver Europa operation based in the United Kingdom. To create greater synergy between Oliver and our automotive business, we are coordinating company-wide rubber mixing operations and integrating Oliver more fully into the Standard Products organization. Oliver is also in the process of relocating its headquarters from Oakland, California, to Athens, Georgia. The move will bring Oliver's management and customer service functions closer to the majority of the Company's retread customers and to its largest precure production facilities. Sales at Holm Industries rose 10% to $87,044,000, while profits increased by a comparable percentage. The improvement was due to increased volume from Holm's primary customers and growth at Jarrow Products, which Holm acquired in 1992. 5 In May 1994, we announced the transfer of our corporate finance and human resources departments from Cleveland, Ohio, to our Dearborn, Michigan, office. The move, to be completed by April 1995, will consolidate and integrate our corporate operations functions and bring all our operating executives nearer to our major customers. Directors of the Company voted in June 1994 to increase the regular quarterly dividend by 6.25% to 17 cents a share, payable July 25, 1994. The payment brings the total dividends for fiscal 1994 to 65 cents a share, an increase of 19.5% compared with the previous fiscal year. Earlier in the year, we completed the placement of $75 million of 6.55% Senior Notes, due December 16, 2003, to Metropolitan Life Insurance Company, with principal payments to begin in December 1998. Proceeds from the placement have been used to refinance a portion of existing debt under our revolving credit agreement. Fiscal 1995 will be another challenging transition year for us. We will launch major new programs, such as the Lumina, the European Ford Escort, the Chrysler Cirrus/Stratus, the Ford Taurus/Sable, the new Chrysler NS minivan and many other models. At the same time, we continue to streamline the Company with plant adjustments, personnel transfers, productivity improvements and cost reduction programs. We see the possibility that some delays at the customer level will affect results in the first quarter of fiscal 1995. All in all, this is an exciting time. With new business coming in at a rapid pace and opportunities developing all over the world, we expect continuing improvement as the year progresses and into fiscal 1996. /s/ James S. Reid, Jr. ------------------------------------------------------- James S. Reid, Jr., Chairman and Chief Executive Officer /s/ Theodore K. Zampetis ------------------------------------------------------- Theodore K. Zampetis, President and Chief Operating Officer 6 NEW GLOBAL RESOURCES NEW GLOBAL PROGRAMS In the next 21 months, Standard Products plants will produce sealing and trimming systems for a number of major new auto models for North American, European and Japanese manufacturers. Together with other smaller programs, including the Lumina but not including NISCO, these new contracts represent some $350 million in annual new business, replacing $105 million in existing volume. 7 PROGRAM MANAGEMENT New model programs represent the greatest source of sales growth at Standard Products but also the greatest challenge. The demands have expanded in the 1990's, as the U.S. auto industry has shortened the design-to-production cycle time and sought to shift much of the responsibility for engineering, testing and systems-integration to the suppliers. In 1991, anticipating the heavy schedule of launches, we developed our Program Management system. More than two years in advance of the launch date, a dedicated team is created and its executive manager given full responsibility and authority to get the job done. While no amount of planning can prevent all disruptions, the Program Management approach clearly proved its worth this past year in three major launches - the Mustang, Neon and Windstar. The Neon launch in particular highlighted our global capabilities. The sealing system for the Neon was designed by SPI in France for production in the U.S. With the help of a team of our engineers and managers from France, the U.K., the U.S. and Canada, we overcame the challenge of a new plant, workforce, equipment and production methods to meet Chrysler's accelerated production schedule. 8 CHRYSLER NEON From the new 5 Rubber plant in Griffin, Georgia, we are producing channels, weatherstripping and door seals for Chrysler's new four-door Neon. Griffin launches the two-door Neon this fall, and is installing manufacturing equipment in preparation for the introduction of Chrysler's NS minivan later in the fiscal year. 9 ADVANCED TECHNOLOGY Worldwide leadership in rubber and plastic laminated extrusion technology is the foundation of Standard Products' business and essential to the Company's long-term success. In support of this position, we have established design and development centers in the U.S., Canada, England and France, and we enjoy a link to Asia through our longstanding joint venture with Nishikawa Rubber of Japan. To coordinate this transcontinental expertise, the Company last year named Gerard H. Mesnel, an experienced European automotive industry executive, to the new position of executive vice president, advanced technology, worldwide. Advanced technology and superior design and engineering services have enabled us to win a growing share of new programs and increase our content per car. In Europe, our U.K. subsidiary was awarded a major contract from Ford of Germany after we redesigned the sealing system of the European Escort to "best in class" performance levels. Demonstrating our technology leadership in laminated plastic extrusion, we have developed new, more efficient processes for making extruded bodyside moldings for the Ford Mustang and Chrysler Cirrus/Dodge Stratus. 10 FORD MUSTANG The sealing and trimming systems on the new Ford Mustang include some 20 different parts manufactured by eight different Standard Products and NISCO plants. NISCO's preeminence in the design and engineering of sponge rubber dynamic door seals has made it a preferred supplier to Ford as well as the U.S. plants owned by Honda, Toyota and other Japanese OEMs. 11 CONTINUOUS IMPROVEMENT As important as it is, capital investment alone will not provide the ongoing breakthroughs in technology and efficiency that the marketplace demands. For this reason, we place great emphasis on the concepts of employee involvement and kaizen, or continuous improvement. These programs have been adopted in our operations worldwide. They are paying off in higher quality and in dramatic reductions in work-in-process inventories, manufacturing space and lead times. Our ability to achieve continuous improvements, combined with the synergy of our worldwide resources, is becoming a key competitive advantage for our future. One area where we continue to focus more attention is purchasing and materials management. By marshaling our corporate-wide purchasing power, we hope to take advantage of the fact that we are among the largest buyers in the world of certain materials and equipment. Providing additional leverage is our increasingly sophisticated rubber-manufacturing capability. We are making more of our own rubber, and by coordinating all our rubber-mixing operations - retread and automotive - we expect to achieve further improvements in this area. 12 CHEVROLET LUMINA The new Chevrolet Lumina features bodyside moldings, rubber glass-run channels and weatherstripping supplied by Standard Products plants in Canada and the United States. Always focused on continuous improvement, we developed a one-piece integrated glass-run channel assembly for the Lumina that had previously required five separate components. 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OVERVIEW The Company's Transportation Equipment Segment is engaged in the production of a variety of extruded and molded rubber and plastic products for the automotive, construction and marine industries and plastic and magnetic parts for the appliance and building products industries. Operations of the Transportation Equipment Segment are conducted in Canada, Europe and the United States, serving the automotive industry in each of these geographic areas. The Tread Rubber Segment manufactures and distributes precure and mold cure tread rubber, bonding gum, repair materials, retread tire molds and equipment for the tire retreading industry. Operations are conducted in North America, Europe and other countries by the Company's subsidiary, Oliver Rubber Company. The primary market for tread rubber is the over-the-road trucking industry. In addition, this segment provides tread rubber for off-the-road construction equipment and custom mixes rubber for both internal and external customers. RESULTS OF OPERATIONS Sales for fiscal 1994 increased $108,571,000, or 14.2%, to $872,367,000. Net income was $33,032,000, or $1.99 a share, compared to income before an accounting change and an extraordinary item in 1993 of $33,423,000, or $2.21 a share. In 1993, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 106, and the cumulative effect of the change to this accounting principle was $8,301,000, net of tax. The Company also prepaid a portion of its Senior Notes, incurring a prepayment charge of $4,128,000, or $2,559,000 after tax. Net income, therefore, was $22,563,000, or $1.49 a share. SALES PERFORMANCE - 1994 AND 1993 Sales of the Transportation Equipment Segment for fiscal 1994 amounted to $753,764,000, an increase of $103,709,000, or 16%, over fiscal 1993. Fiscal year 1994 includes a full year effect of the Company's acquisition in fiscal 1993 of Standard Products Industriel (SPI) and its subsidiary in the United States, 5 Rubber Corporation. In 1993, sales of SPI and 5 Rubber Corporation since the date of acquisition were $46,411,000. In 1994, full year sales of SPI and 5 Rubber Corporation were $161,825,000. In North America, sales, including 5 Rubber Corporation, amounted to $461,794,000, an increase of $3,973,000 over the previous year. A full year of sales of 5 Rubber Corporation combined with the launch of 5 Rubber Corporation's new products on the Chrysler Neon resulted in increased sales of $26,812,000. The sales of parts for the Neon amounted to $20,672,000. Offsetting these gains were sales declines in Canada. General Motors ceased production of the former Lumina model in November 1993 to begin conversion of plant facilities for the new Lumina/Monte Carlo models. Sales volumes of the Company's Canadian subsidiary, therefore, declined by a net $11,033,000 with the decline of $26,300,000 related to the Lumina offset partially by other new production. In addition, over the course of fiscal 1994, the rate of exchange of the U.S./Canadian dollar declined, and the effect of the decline was to reduce sales by $10,600,000. For fiscal 1994, sales of U.S. operations other than 5 Rubber Corporation declined $1,200,000, and this resulted from model changeovers and declines in units of production of some models which are assembled with parts manufactured by the Company. Car and light truck build advanced 10.2% over the build of fiscal 1993. The decline in the Lumina build, as well as several other models, caused the Company's sales to lag behind the pace of the North American production of fiscal 1994. Sales of the Company's United Kingdom subsidiary, Standard Products Limited (SPL), increased $2,834,000 to $75,706,000. New business with European automotive manufacturers, including Saab, Volkswagen and Japanese transplant Toyota, and increased volumes of production resulted in sales increases of $8,498,000. These gains were offset by a decline in the rate of exchange of the British pound sterling and the U.S. dollar. SPI recorded full year sales of $128,890,000 compared to fiscal 1993's short period of $40,288,000. A sales comparison for a full twelve month period of fiscal 1993 reveals year-to-year improvement of 8.6%. SPI has benefited from new business and rising production volumes realized during the period of economic recovery in Europe, which became evident in the fourth quarter. 14 Holm Industries, Inc., the Company's subsidiary that supplies the appliance and building products industries, recorded sales increases of $7,890,000, or 10%, to $87,044,000. Holm Industries' sales increases were attributable to increased demand in the residential and commercial appliance market and the broadening of its product line in building products. In the Tread Rubber Segment, sales in fiscal 1994 were $124,169,000, including intersegment sales of $5,566,000. Sales increased 5.9%, or $6,945,000. Increased sales were realized in this segment's mold cure and mixed rubber products, while precure sales were approximately even with a year ago. Prices were generally stable in 1994 compared to 1993. SALES PERFORMANCE - 1993 AND 1992 In the Transportation Equipment Segment, sales were $650,055,000 in fiscal 1993 compared to $551,768,000 in 1992. The increase of 18%, or $98,287,000, included $46,411,000 related to the acquisition of SPI and $11,773,000 related to the acquisition of Jarrow Products. Global automotive sales were $570,981,000 in 1993 compared to $490,589,000 in 1992. In North America, sales were $457,821,000, an increase of $46,000,000, or 11%. The SPI subsidiary in North America represented $6,123,000 of the 1993 sales gain. In addition, the increase in the Company's sales due to increased 1993 car and light truck production was $50,285,000, or 12%. Offsetting these increases was the 7% decline in the rate of exchange of the Canadian dollar to the U.S. dollar, resulting in a reduction of sales of $10,407,000. For 1993, the production of cars and light trucks advanced 9.4% over 1992 with light truck production ahead by 14.7% and car production ahead by 5.9%. In the United Kingdom, sales of the Company's subsidiary, SPL, declined by $5,897,000 to $72,872,000. The majority of the decline in sales was related to the 7% decline in the rate of exchange between British pound sterling and the U.S. dollar. Sales volume for the year was even with 1992. SPL experienced a variation in the mix of sales as their volume improved in line with strengthening United Kingdom car sales. SPL's shipments to North America, however, declined as the Crown Victoria/Grand Marquis production experienced production interruptions during 1993. Holm Industries recorded sales of $79,154,000, an increase of $19,155,000 over 1992. The acquisition of Jarrow Products contributed $11,773,000 of the increase with the balance due to strengthening appliance sales in 1993. The Tread Rubber Segment reported sales of $117,224,000 including intersegment sales of $3,483,000. These results represent an increase of $9,735,000, or 9.1% over 1992 sales. Oliver increased sales volume in North America by 7% with new dealer programs and improved national account sales. OPERATING EXPENSE ANALYSIS Consolidated gross margins of 13.7% for fiscal 1994 decreased from 14.2% in 1993 and 14.3% in 1992. The costs of material, wages and manufacturing expenses were $724,090,000 in 1994, $634,218,000 in 1993 and $549,164,000 in 1992. Research, engineering and development expenses were $28,850,000 in fiscal 1994, an increase of $7,879,000 over 1993's research, engineering and development expenditures of $20,971,000. These expenses were $13,619,000 in 1992. Gross income was $119,427,000 in 1994, $108,607,000 in 1993 and $94,253,000 in 1992. Gross income was favorably affected by the inclusion of SPI and 5 Rubber Corporation for a full year period compared to last year's four month period. In addition, these locations experienced rising volumes of sales related to increased production and new model introductions. SPI also benefited from an improved European economy. The incremental gross income from SPI and 5 Rubber Corporation represented 2.7% of fiscal 1994 sales. Similarly, SPL benefited from its new business and the increasing volumes of its European car base, contributing .5% of 1994 sales to improved gross income. North American automotive operations adversely affected gross income. Canadian operations experienced a significant decline in sales with the conversion of General Motors assembly plants to the new Lumina/Monte Carlo models. In addition, the introduction of the new models was later than originally expected. United States operations also were down from the preceding year as production volumes were off for several car models which use the Company's parts. Further, the U.S. plants began preparing for upcoming new product introductions. North American operations adversely affected gross income by .8% of fiscal 1994 sales. The increase in research, engineering and development expenditures included $5,067,000 of incremental expenses associated with the acquisition of SPI. These expenses and the preparation for new model introductions noted previously are expected to continue at high levels and without immediate revenue contribution. Holm Industries' profitability for the year was ahead of fiscal 1993 on sales volume increases. Margins in the Tread Rubber Segment declined. Profitability was affected by a shift in sales mix to lower margin products. In addition, two plants experienced problems in the introduction of new manufacturing processes. The Tread Rubber Segment decline represented .4% of fiscal 1994 sales. 15 In fiscal 1993, sales volume increases were realized in the automotive and appliance units of the Transportation Equipment Segment and in the Tread Rubber Segment. The increases resulted from the stronger North American car build, improved level of home appliance sales and the gradual improvement in business conditions which had begun in the fourth quarter of fiscal 1992. The effect of volume increases on profitability represented 1.6% of fiscal 1993 sales. Incremental sales resulting from the Company's SPI acquisition and from Holm Industries' acquisition of Jarrow Products produced incremental gross profits as well and amounted to 1.4% of sales. Gross income was affected by the increase in corporate research, engineering and development expenses, representing 1% of 1993 sales. This increase included the incremental effect of the SPI acquisition. Gross income was also adversely affected by increased material costs representing .2% of 1993 sales. Selling, general and administrative expenses increased $12,443,000 to $62,211,000 in fiscal 1994. SPI and 5 Rubber Corporation were responsible for $8,531,000 of the increase. In addition, the Company recorded reserves for the relocation of two administrative areas, the corporate finance and human resources areas, from Cleveland, Ohio to the Dearborn, Michigan location and the Oliver's Oakland, California headquarters to Athens, Georgia. Each relocation positions corporate activities nearer to customer bases and consolidates distant departments. The accrual amounting to $2,424,000 consists of relocation, severance and other employee related costs. Approximately 65 employees are involved in these moves, which will be completed by April 1995. The Company also provided a reserve of $2,000,000 related to accounting irregularities which were discovered in the course of the normal year-end audit at Oliver Rubber's European subsidiary, Oliver Europa. The irregularities involved the propriety of accounts receivable, inventory and promotional expenses. The effect of these matters was not material to the earnings previously reported by the Company, and therefore, a restatement of quarterly earnings was not necessary. As a percent of sales, selling, general and administrative expenses were 7.1% in fiscal 1994 versus 6.5% in 1993 and 6.4% in 1992. Without the relocation provisions and the Oliver Europa reserve, selling, general and administrative expenses would have been 6.6% of sales. Interest expense, net in fiscal 1994 was $9,093,000. Interest expense was $9,982,000 and interest income was $889,000. In fiscal 1993, interest expense, net was $8,214,000 and interest expense was $9,684,000, while interest income was $1,470,000. Interest expense increased $298,000 and interest income declined $581,000. During a portion of fiscal 1994, the Company incurred interest expense at a lower short-term rate on a higher level of borrowings under the Company's Revolving Credit Agreement. In mid-fiscal 1994, short-term borrowings were reduced by the proceeds of a new senior note obligation at a fixed rate of 6.55%, higher than prevailing short-term rates, but less than previous fixed senior note rates. The decline in interest income was related to a lower level of invested funds in fiscal 1994 compared to 1993. In fiscal 1992, interest expense, net was $13,659,000. Interest expense that year was $14,980,000, while interest income was $1,321,000. In comparison to fiscal 1993, interest expense declined $5,296,000 and interest income increased by $149,000. Expense in 1992 includes a prepayment charge of $2,600,000 paid to senior note holders in connection with the early repayment of these obligations. A similar charge incurred in fiscal 1993 was reported as an extraordinary item due to its significance. The further reduction of interest expense in fiscal 1993 compared to 1992 reflects the lower borrowing rates of medium term Revolving Credit obligations in 1993 compared to the higher rate obligations of senior notes in the United States and of SPL's borrowings in the United Kingdom. Royalty and dividend income were comparable for the periods. Other, net in fiscal 1994 represents income of $1,322,000 compared to expense of $1,150,000 in 1993 and $753,000 in 1992. The Company's share of profitable results of the Company's joint ventures, including NISCO, accounted for the improvement. In fiscal 1994, the Company's effective tax rate was 34.2%, an increase over 1993's effective rate of 33.5% but less than 1992's effective rate of 40%. Over the three year period, the effective rate has declined as a result of tax credits for research and development available to the Company, primarily in its overseas locations, and due to improved results at SPL which are without tax expense as loss carryforwards of prior years are applied. The rate increased in 1994, however, as a result of the reserves provided for Oliver Europa which are not deductible. EFFECT OF INFLATION During the three year period ended June 30, 1994, rates of inflation have been low and operating costs reflect current costs for expenses, inventory and depreciation. 16 FINANCIAL CONDITION At June 30, 1994, capitalization of the Company totaled $378,058,000 with long-term debt of $135,381,000 and shareholders' equity of $242,677,000. The components of total capitalization were 35.8% debt and 64.2% equity. Working capital at year end was $87,922,000, and the ratio of current assets to current liabilities was 1.48 to 1. Average working capital to support a dollar of sales was $.10 compared to $.09 a year ago. Cash provided by operating activities amounted to $58,793,000 for fiscal 1994. Non-cash charges included therein were $40,495,000 for depreciation and amortization and $627,000 for foreign exchange variations. Depreciation and amortization increased over the prior year reflecting the Company's recent capital investment and the SPI acquisition. Investments in 1994 included $59,120,000 in property, plant and equipment and $1,500,000 invested in NISCO. During the year, new borrowings amounted to $140,343,000 and included the new issue of Senior Notes of $75,000,000. Proceeds of the Senior Notes and other borrowings were used to repay higher interest rate industrial revenue bonds and to reduce borrowings under the Company's Revolving Credit Agreement. Cash and cash equivalents at year end were nil, a decrease from last year's cash and cash equivalents of $5,548,000. Capital expenditures budgeted for fiscal 1995 are $62,000,000. Cash flow from operations and borrowing capacity of the Company using the Revolving Credit Agreement and short-term borrowing commitments are expected to be adequate to meet operating and capital requirements for fiscal 1995. 17 SELECTED FINANCIAL DATA
(Thousands of Dollars Except Share Data) 1994 1993 1992 1991 - - -------------------------------------------------------------------------------- -------- -------- -------- -------- INCOME STATEMENT Net Sales.................................................................. $872,367 $763,796 $657,036 $592,090 Gross Income............................................................... 119,427 108,607 94,253 38,946 Selling, General & Administrative Expenses................................. 62,211 49,768 41,760 40,073 Interest Income (Expense), net............................................. (9,093) (8,214) (13,659) (11,663) Other Income (Expense), net................................................ 2,092 (399) (54) (285) Provision for Taxes on Income.............................................. 17,183 16,803 15,475 7,879 Income (Loss) from Continuing Operations and Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle 33,032 33,423 23,305 (20,954) Income (Loss) from Operations and Disposal of Discontinued Division, Net of Tax............................................................... - - - (24,655) Income (Loss) Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle.................................. 33,032 33,423 23,305 (45,609) Extraordinary Item, Net of Tax............................................. - (2,559) - - Cumulative Effect on Prior Years of Change in Accounting Principle, Net of Tax................................................................... - (8,301) - - Net Income (Loss).......................................................... $ 33,032 $ 22,563 $ 23,305 (45,609) Percent Net Income to Sales................................................ 3.8 3.0 3.5 - Percent Net Income to Average Shareholders' Equity......................... 14.5 12.1 19.5 - PER SHARE Income (Loss) from Continuing Operations and Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle $ 1.99 $ 2.21 $ 1.79 $(1.65) Income (Loss) from Discontinued Operations................................. $ - $ - $ - $(1.94) Extraordinary Item, Net of Tax............................................. $ - $ (.17) $ - $ - Cumulative Effect on Prior Years of Change in Accounting Principle, Net of Tax................................................................... $ - $ (.55) $ - $ - Net Income (Loss).......................................................... $ 1.99 $ 1.49 $ 1.79 $(3.59) Cash Dividends Declared.................................................... $ .65 $ .54 $ .38 $ .47 Book Value................................................................. $14.55 $13.56 $11.82 $ 8.06 BALANCE SHEET Property, Plant & Equipment................................................ $422,576 $377,564 $279,830 $251,151 Accumulated Depreciation................................................... 180,567 153,137 130,410 102,553 Total Assets............................................................... 624,314 564,850 398,793 369,272 Working Capital............................................................ 87,922 79,396 97,303 61,594 Long-term Debt............................................................. 135,381 115,607 69,289 113,298 Shareholders' Equity....................................................... 242,677 224,436 177,753 102,366 Cash Dividends Declared.................................................... $ 10,821 $ 8,450 $ 5,103 $ 5,992 OTHER Additions to Property, Plant & Equipment................................... $ 61,380 $ 39,574 $ 19,207 $ 23,532 Depreciation & Amortization................................................ $ 40,495 $ 29,887 $ 26,228 $ 24,747 Shares Outstanding......................................................... 16,674 16,552 15,044 12,695 Average Shares Outstanding................................................. 16,627 15,114 13,010 12,694
(Thousands of Dollars Except Share Data) 1990 1989 1988 1987 - - -------------------------------------------------------------------------------- -------- -------- -------- -------- INCOME STATEMENT Net Sales.................................................................. $590,699 $527,896 $473,035 $412,507 Gross Income............................................................... 65,316 81,452 83,878 81,911 Selling, General & Administrative Expenses................................. 35,011 27,111 23,694 21,388 Interest Income (Expense), net............................................. (8,608) (3,125) (1,430) 86 Other Income (Expense), net................................................ (1,846) (2,062) (1,612) 1,720 Provision for Taxes on Income.............................................. 8,060 18,333 20,373 29,165 Income (Loss) from Continuing Operations and Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle 11,791 30,821 36,769 33,164 Income (Loss) from Operations and Disposal of Discontinued Division, Net of Tax............................................................... - (2,132) (2,712) (1,639) Income (Loss) Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle.................................. 11,791 28,689 34,057 31,525 Extraordinary Item, Net of Tax............................................. - - - - Cumulative Effect on Prior Years of Change in Accounting Principle, Net of Tax................................................................... - - - - Net Income (Loss).......................................................... $11,791 $28,689 $34,057 $31,525 Percent Net Income to Sales................................................ 2.0 5.4 7.2 7.6 Percent Net Income to Average Shareholders' Equity......................... 7.7 18.8 25.5 25.5 PER SHARE Income (Loss) from Continuing Operations and Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle $ .93 $ 2.33 $ 2.71 $ 2.33 Income (Loss) from Discontinued Operations................................. $ - $ (.16) $ (.20) $ (.11) Extraordinary Item, Net of Tax............................................. $ - $ - $ - $ - Cumulative Effect on Prior Years of Change in Accounting Principle, Net of Tax................................................................... $ - $ - $ - $ - Net Income (Loss).......................................................... $ .93 $ 2.17 $ 2.51 $ 2.22 Cash Dividends Declared.................................................... $ .74 $ .69 $ .61 $ .46 Book Value...................................................................... $12.05 $12.05 $10.96 $ 9.14 BALANCE SHEET Property, Plant & Equipment................................................ $239,773 $200,801 $154,623 $131,036 Accumulated Depreciation................................................... 91,739 76,591 65,922 55,878 Total Assets............................................................... 362,399 333,741 255,211 226,009 Working Capital............................................................ 90,014 88,937 74,759 74,572 Long-term Debt............................................................. 99,480 75,213 16,577 18,180 Shareholders' Equity....................................................... 152,829 156,348 145,800 127,359 Cash Dividends Declared.................................................... $ 9,365 $ 9,084 $ 8,194 $ 6,516 OTHER Additions to Property, Plant & Equipment................................... $ 39,676 $ 33,077 $ 22,300 $ 24,133 Depreciation & Amortization................................................ $ 19,975 $ 14,196 $ 11,078 $ 9,437 Shares Outstanding......................................................... 12,689 12,975 13,293 13,928 Average Shares Outstanding................................................. 12,753 13,250 13,571 14,241
(Thousands of Dollars Except Share Data) 1986 1985 - - -------------------------------------------------------------------------------- -------- -------- INCOME STATEMENT Net Sales.................................................................. $377,870 $314,483 Gross Income............................................................... 67,032 52,201 Selling, General & Administrative Expenses................................. 20,113 17,881 Interest Income (Expense), net............................................. 501 85 Other Income (Expense), net................................................ 1,530 957 Provision for Taxes on Income.............................................. 21,695 14,359 Income (Loss) from Continuing Operations and Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle 27,255 21,003 Income (Loss) from Operations and Disposal of Discontinued Division, Net of Tax............................................................... (71) 1,731 Income (Loss) Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle.................................. 27,184 22,734 Extraordinary Item, Net of Tax............................................. - - Cumulative Effect on Prior Years of Change in Accounting Principle, Net of Tax................................................................... - - Net Income (Loss).......................................................... $ 27,184 $ 22,734 Percent Net Income to Sales................................................ 7.2 7.2 Percent Net Income to Average Shareholders' Equity......................... 25.9 26.2 PER SHARE Income (Loss) from Continuing Operations and Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle $1.88 $1.43 Income (Loss) from Discontinued Operations................................. $(.01) $ .12 Extraordinary Item, Net of Tax............................................. $ - $ - Cumulative Effect on Prior Years of Change in Accounting Principle, Net of Tax................................................................... $ - $ - Net Income (Loss).......................................................... $1.87 $1.55 Cash Dividends Declared.................................................... $ .38 $ .34 Book Value................................................................. $8.06 $6.60 BALANCE SHEET Property, Plant & Equipment................................................ $105,484 $ 91,206 Accumulated Depreciation................................................... 46,697 40,537 Total Assets............................................................... 199,252 168,090 Working Capital............................................................ 78,280 67,570 Long-term Debt............................................................. 17,504 20,588 Shareholders' Equity....................................................... 117,383 95,582 Cash Dividends Declared.................................................... $ 5,583 $ 5,026 OTHER Additions to Property, Plant & Equipment................................... $ 16,069 $ 13,320 Depreciation & Amortization................................................ $ 7,581 $ 6,527 Shares Outstanding......................................................... 14,551 14,490 Average Shares Outstanding................................................. 14,525 14,616
18 CONSOLIDATED BALANCE SHEETS The Standard Products Company and Subsidiary Companies June 30, 1994 and 1993 (Thousands of Dollars) 1994 1993 - - ----------------------------------------------------------------------------------- -------- -------- ASSETS Current Assets: Cash and cash equivalents....................................................... $ - $ 5,548 Receivables, less allowances of $3,627 in 1994 and $2,293 in 1993............... 202,363 168,147 Inventories..................................................................... 53,018 46,677 Prepaid insurance, taxes, etc................................................... 15,305 13,965 -------- -------- Total current assets........................................................ 270,686 234,337 -------- -------- Property, Plant and Equipment, at cost: Land............................................................................ 6,751 5,973 Buildings and improvements...................................................... 85,085 74,227 Machinery and equipment......................................................... 263,865 246,771 Furniture and fixtures.......................................................... 32,317 22,551 Capital projects in process..................................................... 34,558 28,042 -------- -------- 422,576 377,564 Less - Accumulated depreciation................................................. (180,567) (153,137) -------- -------- 242,009 224,427 Goodwill, net...................................................................... 62,564 61,286 Other Assets....................................................................... 49,055 44,800 -------- -------- $624,314 $564,850 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term notes payable........................................................ $ 10,373 $ 7,834 Current maturities of long-term debt............................................ 1,690 5,856 Accounts payable................................................................ 94,514 75,693 Accrued payrolls................................................................ 24,433 21,400 Accrued expenses................................................................ 48,919 41,069 Dividend payable................................................................ 2,835 2,746 Accrued taxes on income......................................................... - 343 -------- -------- Total current liabilities................................................... 182,764 154,941 -------- -------- Long-term Debt, net of current maturities.......................................... 135,381 115,607 -------- -------- Other Postretirement Benefits...................................................... 25,649 25,627 -------- -------- Deferred Income Taxes and Other Credits............................................ 37,843 44,239 -------- -------- Commitments and Contingent Liabilities Shareholders' Equity: Serial preferred shares, without par value, authorized 6,000,000 voting shares and 6,000,000 non-voting shares, none issued......................... - - Common shares, par value $1 per share; authorized 50,000,000 shares, issued and outstanding 16,674,016 in 1994, and issued and outstanding 16,551,974 in 1993.............................................. 16,674 16,552 Paid-in capital................................................................. 95,614 94,083 Retained earnings............................................................... 142,871 120,660 Foreign currency translation adjustments........................................ (10,359) (6,650) Minimum pension liability....................................................... (2,123) (209) -------- -------- Total shareholders' equity.................................................. 242,677 224,436 -------- -------- $624,314 $564,850 ======== ======== The accompanying notes are an integral part of these statements.
19 CONSOLIDATED STATEMENTS OF INCOME The Standard Products Company and Subsidiary Companies For the Years Ended June 30, 1994, 1993 and June 28, 1992
(Thousands of Dollars Except Share Data) 1994 1993 1992 - - ------------------------------------------------------------ -------- -------- -------- Net Sales................................................... $872,367 $763,796 $657,036 Cost of Goods Sold: Materials, wages and other manufacturing costs..... 724,090 634,218 549,164 Research, engineering and development expenses..... 28,850 20,971 13,619 -------- -------- -------- 752,940 655,189 562,783 -------- -------- -------- Gross Income................................. 119,427 108,607 94,253 Selling, General and Administrative Expenses................ 62,211 49,768 41,760 -------- -------- -------- 57,216 58,839 52,493 -------- -------- -------- Other Income (Deductions): Royalty and dividend income........................ 770 751 699 Net interest expense............................... (9,093) (8,214) (13,659) Other, net......................................... 1,322 (1,150) (753) -------- -------- -------- (7,001) (8,613) (13,713) -------- -------- -------- Income before Taxes on Income, Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle..................................... 50,215 50,226 38,780 Provision for Taxes on Income............................... 17,183 16,803 15,475 -------- -------- -------- Income before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle....................................... 33,032 33,423 23,305 Extraordinary Item, Early Repayment of Debt, Less Applicable Income Tax of $1,569.......................... - (2,559) - Cumulative Effect on Prior Years of Change in Accounting Principle, Less Applicable Income Tax of $5,088.......... - (8,301) - -------- -------- -------- Net Income......................................... $ 33,032 $ 22,563 $ 23,305 ======== ======== ======== Earnings Per Common Share: Income before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle.......................................... $1.99 $2.21 $1.79 Extraordinary Item, Early Repayment of Debt, Net of Tax................................................ - (.17) - Cumulative Effect on Prior Years of Change in Accounting Principle, Net of Tax.................................. - (.55) - -------- -------- -------- Net Income......................................... $1.99 $1.49 $1.79 ======== ======== ======== The accompanying notes are an integral part of these statements.
20 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY The Standard Products Company and Subsidiary Companies For the Years Ended June 30, 1994, 1993 and June 28, 1992
- - ---------------------------------------------------------------------------------------------------------------------------------- Foreign Currency Common Paid-In Retained Translation (Thousands of Dollars Except Share Data) Shares Capital Earnings Adjustments - - ---------------------------------------------------- -------- ------- -------- ----------- BALANCE, JUNE 30, 1991.............................. $10,156 $ 60 $ 88,345 $ 4,680 Net income........................................ - - 23,305 - Cash dividends ($.38 per share)................... - - (5,103) - Foreign currency translation adjustments.......... - - - 1,584 Restricted stock awards........................... - 665 - - Sale of 38,550 shares to option holders........... 39 690 - - Common stock offering net of recorded expenses.... 1,840 51,807 - - Minimum pension liability......................... - - - - -------- ------- -------- ----------- BALANCE, JUNE 28, 1992.............................. $12,035 $53,222 $106,547 $ 6,264 Net income........................................ - - 22,563 - Cash dividends ($.54 per share)................... - - (8,450) - Foreign currency translation adjustments.......... - - - (12,914) Restricted stock awards........................... - 866 - - Sale of 89,889 shares to option holders........... 90 1,121 - - Common stock offering net of recorded expenses.... 1,400 41,913 - - Minimum pension liability......................... - - - - Par value of shares issued in connection with a five-for-four stock split...................... 3,027 (3,039) - - -------- ------- -------- ----------- BALANCE, JUNE 30, 1993.............................. $16,552 $94,083 $120,660 $ (6,650) Net income........................................ - - 33,032 - Cash dividends ($.65 per share)................... - - (10,821) - Foreign currency translation adjustments.......... - - - (3,709) Restricted stock awards........................... - 585 - - Sale of 122,042 shares to option holders.......... 122 946 - - Minimum pension liability......................... - - - - -------- ------- -------- ----------- BALANCE, JUNE 30, 1994.............................. $16,674 $95,614 $142,871 $ (10,359) ======== ======= ======== =========== - - ------------------------------------------------------------------------------------------------------------------------------------ Total Minimum Share- Pension holders' (Thousands of Dollars Except Share Data) Liability Equity - - ---------------------------------------------------- --------- -------- BALANCE, JUNE 30, 1991.............................. $ (875) $102,366 Net income........................................ - 23,305 Cash dividends ($.38 per share)................... - (5,103) Foreign currency translation adjustments.......... - 1,584 Restricted stock awards........................... - 665 Sale of 38,550 shares to option holders........... - 729 Common stock offering net of recorded expenses.... - 53,647 Minimum pension liability......................... 560 560 --------- -------- BALANCE, JUNE 28, 1992.............................. $ (315) $177,753 Net income........................................ - 22,563 Cash dividends ($.54 per share)................... - (8,450) Foreign currency translation adjustments.......... - (12,914) Restricted stock awards........................... - 866 Sale of 89,889 shares to option holders........... - 1,211 Common stock offering net of recorded expenses.... - 43,313 Minimum pension liability......................... 106 106 Par value of shares issued in connection with a five-for-four stock split...................... - (12) --------- -------- BALANCE, JUNE 30, 1993.............................. $ (209) $224,436 Net income........................................ - 33,032 Cash dividends ($.65 per share)................... - (10,821) Foreign currency translation adjustments.......... - (3,709) Restricted stock awards........................... - 585 Sale of 122,042 shares to option holders.......... - 1,068 Minimum pension liability......................... (1,914) (1,914) --------- -------- BALANCE, JUNE 30, 1994.............................. $ (2,123) $242,677 ========= ======== The accompanying notes are an integral part of these statements.
21 CONSOLIDATED STATEMENTS OF CASH FLOWS The Standard Products Company and Subsidiary Companies For the Years Ended June 30, 1994, 1993 and June 28, 1992
(Thousands of Dollars) 1994 1993 1992 - - ------------------------------------------------------------------ -------- -------- -------- Net cash provided by (used for) operating activities: Net income..................................................... $ 33,032 $ 22,563 $ 23,305 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.............................. 40,495 29,887 26,228 Deferred taxes and other credits........................... (7,839) 4,851 2,207 Equity in (income) loss of non-consolidated affiliate (1,603) 363 1,111 Cumulative effect on prior years of change in accounting principle.................................... - 8,301 - Effect of changes in foreign currency...................... (627) (5,935) (54) Other operating items...................................... (4,665) (967) 2,261 -------- -------- -------- Net cash provided by operations......................... 58,793 59,063 55,058 -------- -------- -------- Net cash provided by (used for) changes in operating assets and liabilities: Receivables.................................................... (34,419) 5,403 (15,215) Inventories.................................................... (6,304) 982 (3,074) Accounts payable and accrued expenses.......................... 29,248 (7,993) 4,794 Other.......................................................... (981) (3,490) (1,563) -------- -------- -------- Net cash used for changes in operating assets and liabilities.......................................... (12,456) (5,098) (15,058) -------- -------- -------- Working capital provided by assets held for disposition........ - - 6,678 -------- -------- -------- Net cash provided by operating activities............... 46,337 53,965 46,678 -------- -------- -------- Net cash provided by (used for) investments: Purchase of property, plant and equipment,net.................. (59,120) (38,000) (18,367) Investments in affiliates...................................... (1,500) (8,700) - Assets acquired by purchase of businesses...................... - (128,438) (2,318) Utilization of industrial revenue bonds........................ - 3,752 - -------- -------- -------- Net cash used for investments........................... (60,620) (171,386) (20,685) -------- -------- -------- Net cash provided by (used for) financing: Proceeds of common stock offering.............................. - 43,313 53,647 Proceeds from exercise of stock options........................ 1,068 1,211 729 Proceeds of new long-term borrowings........................... 140,343 140,730 8,267 Net increase (decrease) in short-term borrowings............... 2,247 7,834 (7,860) Repayment of long-term borrowings.............................. (124,031) (105,993) (51,971) Cash dividends................................................. (10,821) (8,450) (5,103) -------- -------- -------- Net cash provided by (used for) financing............... 8,806 78,645 (2,291) -------- -------- -------- Effect of exchange rate changes on cash........................... (71) (18) (161) -------- -------- -------- Increase (decrease) in cash and cash equivalents.................. (5,548) (38,794) 23,541 Cash and cash equivalents at the beginning of the year............ 5,548 44,342 20,801 -------- -------- -------- Cash and cash equivalents at the end of the year.................. $ - $ 5,548 $ 44,342 ======== ======== ======== The accompanying notes are an integral part of these statements.
22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Standard Products Company and Subsidiary Companies June 30, 1994, 1993 and June 28, 1992 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. SHORT-TERM INVESTMENTS Short-term investments include bankers acceptances and repurchase agreements at varying rates of interest and with original maturities less than thirty days. These investments are carried at cost which approximates market value. For purposes of reporting the Company's cash flow, these investments are cash equivalents. FOREIGN CURRENCY TRANSLATION The financial statements of the Company's Canadian, English and French subsidiaries have been translated in accordance with Statement of Financial Accounting Standards No. 52. Current rates of exchange are used to translate the balance sheets of these entities while the average exchange rate of each fiscal year is used for the translation of income accounts. The resulting unrealized gains and losses are recorded as a component of shareholders' equity. PROPERTY, PLANT AND EQUIPMENT For financial reporting purposes, the Company provides for depreciation of plant and equipment using the straight-line and sum-of-years' digits methods at annual rates based on the estimated service lives of the property. Maintenance and repair expenditures are charged to income as incurred. Expenditures for improvements and major renewals are capitalized. When assets are retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss on the disposition is credited or charged to income. 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. INVESTMENTS IN AFFILIATES The Company's investments in affiliate operations are accounted for by both the equity and cost methods of accounting. The cost method is followed in those situations where the Company's ownership is less than 20% and operations are conducted by management of the affiliate. Income is recorded as received. The equity method of accounting is followed in those situations of larger ownership interests but less than 51%, and the Company's results of operations include those of the affiliate to the extent of its ownership interest. EXCESS OF COST OVER NET ASSETS OF ACQUIRED COMPANIES The excess cost over the fair value of acquired net assets is amortized on the straight-line method over the estimated useful life but not in excess of 40 years. INCOME TAXES In fiscal 1993, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 109, Accounting for Income Taxes. The effect of adopting SFAS No. 109 was immaterial, and prior years were not restated. Income tax expense includes United States, foreign and state income taxes, exclusive of taxes on the undistributed income of foreign subsidiaries where it is the intention of the Company to have those subsidiaries reinvest the income locally. For fiscal 1994 and 1993, the Company determined tax expense and other deferred tax information using the liability method, which recognizes the differences in financial reporting bases and tax bases of assets and liabilities at tax rates currently in effect. For 1992, tax expense was based upon transactions included in determining financial statement income. Deferred taxes were provided for differences in the timing of reporting transactions for tax and financial reporting purposes. Permanent differences are included in the calculation of income tax expense currently. 23 RETIREMENT PLANS The Company and its subsidiary companies have a number of plans providing pension, retirement or profit sharing benefits for substantially all employees. These plans include defined benefit, defined contribution and multi-employer plans. For defined benefit plans, those covering salaried employees provide pension benefits based upon the individual employee's average compensation over the last five years, while hourly plans provide benefits of stated amounts for each year of service. The Company's policy is to fund the pension costs of the defined benefit plans in accordance with Internal Revenue Service regulations. The defined contribution and multi-employer plans are funded as accrued, and the accrual is based upon hourly rates or a percentage of the unit's performance. POSTRETIREMENT MEDICAL BENEFITS The Company provides postretirement health and life insurance benefits for retired salaried and certain retired hourly employees. Benefits provided under various plans, individually arranged by business unit, include health and life insurance. The plans generally provide for a means to limit the cost of the plans to the Company through cost sharing or spending limitations. In the fourth quarter of fiscal 1993, the Company adopted SFAS No. 106, Employers' Accounting For Postretirement Benefits Other Than Pensions, retroactive to the beginning of fiscal 1993. As a result, the previously reported quarterly results of operations were restated to reflect adoption of the standard as of the beginning of the fiscal year and the recognition of the expense of these plans on the accrual basis. The accumulated postretirement benefit obligation was recorded as a charge to earnings in 1993. In 1992, the expense of these plans was recognized as claims were paid. FOREIGN EXCHANGE CONTRACTS The Company enters into forward exchange contracts to hedge certain foreign currency transactions for periods consistent with the terms of the underlying transaction. The Company does not engage in speculation and does not hedge foreign currency positions which are not related to specific transactions. Gains and losses on the foreign exchange contracts generally offset losses and gains of the transactions being hedged, resulting in protection from the risks of foreign exchange movement for those transactions and avoiding losses affecting results of operations. POSTEMPLOYMENT BENEFIT PLANS In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 112, Employers' Accounting for Postemployment Benefits. The standard becomes effective for fiscal years beginning after December 15, 1993 with earlier adoption permitted. For the Company, adoption is required for fiscal 1995. The Company's accounting method for postemployment benefits has effectively complied with the provisions of SFAS No. 112. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to their 1994 presentation in the financial statements. 2. ACQUISITIONS In January 1993, the Company acquired all of the issued and outstanding shares of capital stock of Standard Products Industriel (SPI), a French Company, and its subsidiary companies. SPI designs, develops and manufactures window and glass weatherstrips, vehicle body and door seals and glass encapsulation products for French, other European and North American auto manufacturers. The cost of the acquisition was approximately $125,500,000. The acquisition has been accounted for under the purchase method of accounting, and the financial statements of the Company include the acquired assets, assumed liabilities and results of operations of SPI since the date of acquisition. Valuation of the assets acquired and liabilities assumed in accordance with Accounting Principles Board Opinion No. 16 resulted in goodwill and other assets of approximately $54,000,000. In 1993, incremental revenues related to SPI since the date of acquisition amounted to $46,411,000. Results of operations, including the effects of purchase valuations, reduced earnings per share by $.06. If the acquisition of SPI had been reflected in the consolidated results of operations from the beginning of the 1993 fiscal year, sales would have been $846,015,000, and income before extraordinary items and changes in accounting principles would have been $34,024,000, or $2.24 per share. For 1992, pro forma sales would have been $779,000,000, and pro forma income before extraordinary items and changes in accounting principles would have been $25,600,000, or $1.98 per share. All pro forma amounts are unaudited. 24 In July 1992, the Company's subsidiary, Holm Industries, Inc., acquired the assets of Jarrow Products, Inc., a manufacturer of commercial refrigeration gaskets and exterior door weatherstrip. The purchase price of $7,000,000 equalled the fair value of assets acquired. The financial statements of the Company include the results of Jarrow since August 1, 1992. The pro forma effect of the Jarrow acquisition was not material. In fiscal 1993, the Company increased its ownership in NISCO, to 50% from 40% by making additional capital contributions and by purchasing partnership units from its joint venture partner, Nishikawa Rubber Company. The additional investment in NISCO was $8,700,000. In fiscal 1994, the Company invested $1,500,000 in its joint venture, Nishikawa Standard Company (NISCO). The Company's investment in NISCO at June 30, 1994 was $15,700,000. In 1994, the Company's share of NISCO's operating income was $1,603,000, compared to $363,000 of losses in 1993. The NISCO investment is reported in Other Assets in the accompanying consolidated balance sheet, and the operating results are reported in Other, net in the accompanying consolidated statement of income. Under the terms of NISCO's revolving credit and term loan facility, the joint venture partners are required to guarantee 50% of NISCO's borrowings. The Company's share of the guarantee at year end was $7,500,000. 3. DISCONTINUED OPERATIONS The Company previously closed its Port Clinton Division, which had been dedicated primarily to the Company's former military business. Reserves were provided for the costs associated with the discontinuance. At June 30, 1994, the remaining balance of the reserve of $3,975,000, which is included in Accrued Expenses in the accompanying consolidated balance sheet, is for building and site work and closure costs. 4. FINANCING ARRANGEMENTS Long-term debt at June 30, 1994 and 1993 consisted of the following:
(Thousands of Dollars) 1994 1993 -------- -------- Senior notes................ $100,000 $ 25,000 Revolving credit agreement 30,000 75,000 Other debt.................. 6,534 8,319 First mortgage industrial revenue bonds............. 537 13,144 -------- -------- Total....................... 137,071 121,463 Less-current maturities..... 1,690 5,856 -------- -------- $135,381 $115,607
At June 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. 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 into 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 June 30, 1994, borrowings under the Credit Agreement bear interest at 5.0%. 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. The maturities of long-term debt for the five years subsequent to June 30, 1994 are $1,690,000 in 1995, $1,594,000 in 1996, $31,466,000 in 1997, $1,177,000 in 1998 and $13,613,000 in 1999. 25 Under the most restrictive covenants of the Company's various loan agreements, principally the Credit Agreement, $63,929,000 of retained earnings were not restricted at June 30, 1994 for the payment of dividends, and the ratio of current assets to current liabilities was 1.48 to 1, in excess of the minimum requirement of 1.25 to 1. The Company and its subsidiaries also have from various banking sources approximately $38,000,000 of unused short-term lines of credit at rates of interest approximating the prime commercial rate. These funds are available subject to satisfying covenant restrictions as to funded debt limitations. In 1994, the average month-end borrowings were $8,400,000, and the highest month-end balance was $13,400,000. Comparable amounts for 1993 were $4,800,000 and $12,300,000 and $4,600,000 and $11,357,000, for 1992. The effective annual borrowing rate was 4.2% in 1994, 4.9% in 1993 and 8.6% in 1992. Interest payments with respect to all of the Company's borrowing arrangements amounted to $9,655,000 in 1994, $10,430,000 in 1993 and $17,225,000 in 1992. 5. FINANCIAL INSTRUMENTS The Company's financial instruments consist primarily of cash and cash equivalents, trade receivables and payables, debt obligations and swap transactions, and foreign exchange forward contracts. The book value of cash and cash equivalents, trade receivables and payables and short-term debt are considered to be representative of fair value because of the short maturity of these instruments. The fair value of long-term debt and the currency and interest rate swap has been estimated using discounted cash flow analyses based upon the incremental borrowing rates for similar types of borrowing arrangements with comparable terms and maturities. At June 30, 1994, the Company's long-term debt was $135,381,000, and this amount exceeded fair value by approximately $4,500,000. The Company and its subsidiaries have entered into foreign exchange forward contracts to manage exposure to foreign exchange fluctuations. These contracts hedge primarily firm commitments of less than one year that are denominated in foreign currencies. At June 30, 1994, the Company had $4,300,000 of contracts outstanding and the carrying value of these contracts was not materially different from fair value. 6. RETIREMENT PLANS The cost of providing pension, retirement and profit sharing benefits charged to operations amounted to $4,932,000 in 1994, $5,141,000 in 1993 and $4,945,000 in 1992. For 1994, the expense of defined benefit plans equalled $533,000, while the expense of defined contribution plans was $3,859,000 and multi-employer plan expense was $540,000. Comparable figures for 1993 were $105,000, $4,389,000 and $607,000, and for 1992, $767,000, $3,568,000 and $610,000. Pension expense of domestic and foreign defined benefit plans were based on the provisions of SFAS No. 87. Components of pension expense for defined benefit plans included the following items:
(Thousands of Dollars) 1994 1993 1992 ------ ------ ------ Service cost........................ $2,113 $1,772 $2,070 Interest cost on projected benefit obligation....................... 4,750 5,299 5,159 Actual (gain) on plan assets........ (1,391) (8,206) (9,037) Net amortization and deferral....... (4,939) 1,240 2,575 ------ ------ ------ Net pension expense................ $ 533 $ 105 $ 767 ====== ====== ======
The funded status of the foreign and domestic defined benefit plans is displayed below and is based on information supplied by the actuary as of March 31 of each year. For 1994 and 1993, the calculations assume a weighted-average discount rate of 8%, an anticipated long-term rate of return of 9% and an increase in compensation levels of 5%. For 1992, the calculations assumed a weighted-average discount rate of 8.5%, an anticipated long-term rate of return on plan assets of 9.5% and an increase in compensation levels of 5.0%. The assets of the plans consist of listed bonds, stocks, mutual investment funds and cash securities. In connection with the recognition of the minimum liability as required by SFAS No. 87, the Company has recorded an intangible asset of $1,066,000, included in Other Assets in the accompanying consolidated balance sheet, and an equity reduction of $2,123,000. 26
(Thousands of Dollars) 1994 1993 ------------------ ----------------- Less Greater Less Greater Than Than Than Than Plan Plan Plan Plan Accumulated benefits are: Assets Assets Assets Assets - - ------------------------- ------- ------- ------- -------- Vested benefits.......... $41,776 $21,667 $51,486 $ 7,973 Non-vested benefits...... 1,303 600 1,388 356 ------- ------- ------- -------- Accumulated benefit obligation.............. 43,079 22,267 52,874 8,329 Projected future compensation increases 6,739 777 6,984 236 ------- ------- ------- -------- Projected benefit obligation............. 49,818 23,044 59,858 8,565 Plan assets at fair market value........... 56,915 18,452 72,662 6,490 ------- ------- ------- -------- Projected benefit obliga- tion (in excess of) or less than plan assets.. 7,097 (4,592) 12,804 (2,075) Unrecognized transition (asset) liability...... (6,876) (270) (7,827) 53 Unrecognized (gain) loss 3,105 2,674 309 477 Adjustment required to recognize minimum liability.............. - (3,188) - (830) Unrecognized prior service cost............ 2,526 1,562 2,268 536 ------- ------- ------- -------- Prepaid Pension Cost, (Liability) $ 5,852 $(3,814) $ 7,554 $ (1,839) ======= ======= ======= ========
The Company has accrued $8,224,000 for workers' compensation claims as of June 30, 1994, and this amount is included in Accrued Expenses in the accompanying consolidated balance sheet. 7. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The cost of providing health and life insurance benefits for certain retired employees has been determined under the provisions of SFAS No. 106 for 1994 and 1993. As a result, the estimated cost of these benefits has been accrued based on the employees' active service lives. In 1992, the cost of these benefits, which were primarily health care, were expensed as claims were paid. In 1994 and 1993, the expense for postretirement benefits other than pensions was $2,443,900 and $2,172,000, respectively, while expenses in 1992 for claims paid were $1,135,000. All plans under which these benefits are provided are unfunded. In 1993, the Company recognized this change in accounting on the immediate recognition basis. The effect of adopting SFAS No. 106 as of the beginning of 1993 was to reduce pretax earnings by $13,389,000, and the accrual method of accounting for postretirement health care costs was approximately equal to the former claims paid method. The Company continues to fund these benefits as claims are incurred. Spending limitations per annum are in effect for several plans and future retirees of other plans will pay a portion of these costs. A summary of plan information is as follows:
(Thousands of Dollars) 1994 1993 ---------- ---------- Accumulated postretirement benefit obligation (APBO): Retirees....................... $21,782 $22,725 Active participants eligible to receive benefits............. 1,978 2,498 Other active plan participants. 2,519 3,021 ---------- ---------- 26,279 28,244 Unrecognized gain/(loss)....... 1,522 (836) ---------- ---------- $27,801 $27,408 ========== ========== Periodic postretirement benefit cost: Current service cost........... $ 243 $ 269 Interest on postretirement benefit benefit obligation... 2,201 1,903 ---------- ---------- $ 2,444 $ 2,172 ========== ==========
27 Actuarial assumptions: Discount rate.................. 8% 8% 1993 to 2002 - health care cost trend rate................... 15% to 5.5% 15% to 5.5% Effect of a 1% increase in health care cost trend rate: Increase year end APBO......... 7.3% 7.2% Increase expense............... 6.8% 8.0% 8. INVENTORY The major components of inventory are as follows:
(Thousands of Dollars) 1994 1993 1992 ------- ------- ------- Raw Materials............ $20,477 $20,055 $12,481 Work-in-process and finished goods.......... 32,541 26,622 27,617 ------- ------- ------- Total, at both FIFO and LIFO cost............. $53,018 $46,677 $40,098 ------- ------- ------- Excess of FIFO cost over LIFO cost............... $11,651 $11,045 $11,126 ======= ======= =======
Approximately 60% of the Company's inventories are valued at LIFO cost. 9. COMMITMENTS AND CONTINGENT LIABILITIES The Company and its subsidiaries have operating leases covering manufacturing facilities and transportation and material handling equipment expiring at various dates through 2004. Rental costs charged to operations amounted to $11,844,000 in 1994, $9,162,000 in 1993 and $8,677,000 in 1992. At June 30, 1994, future commitments under the terms of non-cancelable operating leases for minimum rentals are $7,640,000 in 1995, $7,000,000 in 1996; $5,850,000 in 1997, $4,250,000 in 1998, $2,600,000 in 1999 and $8,300,000 in 2000 through 2004. 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. 10. COMMON SHARES In October 1993, shareholders approved The Standard Products Company 1993 Employee Stock Option Plan. Options to purchase common shares are granted under the 1993 plan and similar plans adopted in 1991, 1989 and 1985. For each plan, options are exercisable over periods of five or ten years. The option price is either the fair market value at the time the option is granted or 110% of the fair market value at the time the option is granted for those individuals owning more than ten percent of the common shares of the Company. Generally, options become exercisable one year from the date of grant and annually thereafter. No more than 40% of the grant can be exercised in any one plan year. Summarized below is stock option activity for 1994.
Shares Range of Option Prices ------- ---------------------- Stock options outstanding at June 30, 1993 397,405 $13.50 - 33.63 Options granted 105,500 29.13 - 32.05 Options exercised (108,479) 13.50 - 22.80 Options cancelled (5,068) 13.50 - 33.63 --------- ---------------- Stock options outstanding at June 30, 1994 389,358 $13.50 - 33.63 ======= ================
At June 30, 1994, options for 151,457 shares were exercisable at an average exercise price of $23.07 a share. Shares reserved for the future granting of options were 373,995 at year end; 174,430 were reserved a year ago. 28 Under The Standard Products Company 1991 Restricted Stock Plan, 375,000 common shares were reserved for restricted stock awards. Shares awarded are earned ratably over the term of the restricted stock agreement, based upon achieving specified performance goals. Generally, transferability of shares earned is restricted for a specified number of years following the year in which they were earned. Until the restrictions lapse, the recipient is entitled to all of the rights of a shareholder, including the right to vote the shares, but the shares are restricted as to transferability and subject to forfeiture to the Company during the restriction period. In 1992, 187,500 shares were awarded. Of those shares, 20,800 were earned in 1994 and 25,000 were earned in 1993 and 1992. In 1994, $585,000 was charged to operations as compensation expense based upon the market value of the earned shares. The similar charge to operations in 1993 and 1992 was $866,000 and $665,000, respectively. At year end, 187,500 shares remain available for future awards. 11. EARNINGS PER COMMON SHARE Earnings per common share have been determined based on the weighted average common shares outstanding during the periods. The averages for 1994, 1993 and 1992 were 16,626,927, 15,114,013 and 13,009,741, respectively. 12. SEGMENT INFORMATION The Company's operations are in two industry segments. The Transportation Equipment Segment includes extruded and molded rubber and plastic products for automotive, building and marine industries and plastic and magnetic door seals for home appliances. The Tread Rubber Segment produces tread rubber for the truck tire retreading industry. Net sales by segment include both sales to unaffiliated customers, as reported in the Company's consolidated statements of income, and intersegment sales. Operating income consists of net sales less applicable operating costs and expenses related to those sales. In computing operating income, general corporate expenses are excluded. Identifiable assets by segment are those assets that are used in the operations of each segment. General corporate assets are those not identifiable with the operations of a segment. Approximately 56%, 65% and 71% of the Company's annual revenues in 1994, 1993 and 1992, respectively, are represented by direct sales to automotive original equipment customers - Chrysler, Ford and General Motors. Likewise, at year end, 36% of accounts receivable are concentrated in the automotive market. The Company does not view such a concentration in the automotive market as an unusual credit risk. Sales to the automotive original equipment customers include a number of different products and types of the same product, the sales of which are not interdependent. BUSINESS SEGMENT INFORMATION
(Thousands of Dollars) 1994 1993 1992 -------- -------- -------- Net Sales: Transportation equipment.............$753,764 $650,055 $551,768 Tread rubber............ 124,169 117,224 107,489 Less-intersegment sales................. (5,566) (3,483) (2,221) -------- -------- -------- Net sales...........$872,367 $763,796 $657,036 ======== ======== ======== Operating Income: Transportation equipment.............$ 58,476 $ 53,067 $ 46,392 Tread rubber............ 2,890 9,308 9,346 General corporate expenses.............. (4,150) (3,536) (3,245) -------- -------- -------- Total operating income..............$ 57,216 $ 58,839 $ 52,493 -------- -------- -------- Other expense, net...... (7,001) (8,613) (13,713) -------- -------- -------- Income from operations before taxes..........$ 50,215 $ 50,226 $ 38,780 ======== ======== ========
29
Identifiable Assets: Transportation equipment.............$519,088 $468,236 $303,097 Tread rubber............ 81,365 75,770 69,887 General corporate assets................ 23,861 20,844 25,809 -------- -------- -------- Total identifiable assets............... $624,314 $564,850 $398,793 ======== ======== ======== Capital Expenditures*: Transportation equipment.............$ 57,291 $109,431 $ 16,810 Tread rubber............ 4,089 3,381 3,058 -------- -------- -------- Total capital expenditures..........$ 61,380 $112,812 $ 19,868 ======== ======== ======== Depreciation and Amortization: Transportation equipment.............$ 37,340 $ 26,529 $ 23,106 Tread rubber............ 3,155 3,358 3,122 -------- -------- -------- Total depreciation and amortization..........$ 40,495 $ 29,887 $ 26,228 ======== ======== ======== * Includes assets acquired by purchase of businesses in 1993 and 1992.
GEOGRAPHIC AREA
(Thousands of Dollars) 1994 1993 1992 -------- -------- -------- Net Sales: United States...........$532,546 $491,184 $421,350 Canada.................. 153,484 166,102 160,568 Europe.................. 213,961 121,413 91,112 Less-interarea sales.... (27,624) (14,903) (15,994) -------- -------- -------- Net sales...........$872,367 $763,796 $657,036 ======== ======== ======== Income From Operations: United States...........$ 19,691 $ 24,807 $ 14,903 Canada.................. 7,114 9,991 11,168 Europe.................. 8,796 817 (754) General corporate expenses, net of tax.. (2,569) (2,192) (2,012) -------- -------- -------- Income from operations.........$ 33,032 $ 33,423 $ 23,305 ======== ======== ======== Identifiable Assets: United States...........$311,947 $266,423 $220,327 Canada.................. 62,193 65,121 80,535 Europe.................. 226,313 212,462 72,122 General corporate assets................ 23,861 20,844 25,809 -------- -------- -------- Total identifiable assets..............$624,314 $564,850 $398,793 ======== ======== ========
13. INCOME TAXES
(Thousands of Dollars) 1994 1993 1992 -------- -------- -------- Income before taxes: United States...........$ 36,097 $ 14,084 $ 18,092 Foreign................. 14,118 18,625 20,688 -------- -------- -------- $ 50,215 $ 32,709 $ 38,780 ======== ======== ========
30
Deferred Liability Method Method ------------------ -------- Amounts currently payable: Federal.................$ 8,591 $ 8,252 $ 3,905 Foreign................. 4,139 5,904 9,104 State and local......... 1,262 2,130 917 -------- -------- -------- $ 13,992 $ 16,286 $ 13,926 ======== ======== ======== Deferred taxes: Federal.................$ 4,485 $ (3,413) $ 1,457 Foreign................. (1,317) (811) (508) State and local......... 23 (1,916) 600 -------- -------- -------- 3,191 (6,140) 1,549 -------- -------- -------- Total provision.......$ 17,183 $ 10,146 $ 15,475 ======== ======== ======== Income before non- recurring items.........$ 17,183 $ 16,803 $ 15,475 Extraordinary item........ - (1,569) - Cumulative effect on prior years of changes in accounting principles - (5,088) - -------- -------- -------- Total provision.......$ 17,183 $ 10,146 $ 15,475 ======== ======== ========
The components of deferred taxes and their tax effect are as follows:
(Thousands of Dollars) 1994 1993 1992 -------- -------- -------- Deferred Liability Method Method ------------------ -------- Cumulative effect on prior years of change in accounting principles.. $ - $(5,088) $ - Alternative minimum tax.. - (1,300) - Discontinued operations.. 1,795 - 2,269 Excess of tax over book depreciation........... 249 37 (1,246) Employee benefits........ 630 (754) - All other items, none of which exceeds 5% of of computed tax........ 517 965 526 -------- -------- -------- $ 3,191 $ (6,140) $ 1,549 ======== ======== ========
A reconciliation of income tax expense to the U.S. statutory rate is as follows:
1994 1993 1992 -------- -------- -------- Tax at U.S. statutory rate 35.0% 34.0% 34.0% Difference in effective rate of international operations.............. (2.1) (3.8) 2.7 State and local income tax..................... 1.7 .4 2.6 Other..................... (.4) .4 .6 -------- -------- -------- Effective tax rate........ 34.2% 31.0% 39.9% ======== ======== ========
In accordance with the Company's policy, as of June 30, 1994, federal income taxes have not been provided on the undistributed earnings of foreign subsidiaries. If these earnings were distributed, approximately $8,000,000 of tax would be payable. In connection with cash flow information, the Company paid $20,338,000 in 1994, $16,022,000 in 1993 and $12,200,000 in 1992 for federal, foreign and state taxes on income. Through its United Kingdom subsidiaries, the Company has available net operating loss carryforwards of $28,000,000 for income tax purposes with no limit as to expiration under United Kingdom tax regulations. For financial reporting purposes and the adoption of SFAS No. 109, the Company has recognized valuation allowances equal to the deferred tax assets related to these tax loss carryforwards. 31 At June 30, 1994, deferred tax liabilities were $25,600,000 and deferred tax assets were $19,900,000. The major component of deferred tax liabilities is $25,000,000 for excess depreciation and amortization. In addition to the loss carryforward and valuation allowance noted above, deferred tax assets include $1,400,000 for discontinued operations and $14,400,000 related to employee benefits. 14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following table sets forth a summary of the quarterly results of operations for the years ended June 30, 1994 and 1993. Amounts previously reported in the first quarter of fiscal 1993 were restated to reflect the adoption of SFAS No. 106.
1994 ------------------------------------------------------------------------ Three Months Ended ----------------------------------------------------------------- Sept. 30 Dec. 31 March 31 June 30 -------- ------- -------- ------- (Thousands of Dollars Except Per Share Data) Net Sales...................................... $201,691 $198,335 $222,676 $249,665 Gross Income................................... 26,165 24,623 28,150 40,489 Net Income..................................... 4,852 6,187 8,178 13,815 Earnings Per Common Share...................... $.29 $.37 $.49 $.83 ==== ==== ==== ==== 1993 ----------------------------------------------------------- Three Months Ended ----------------------------------------------------------- Sept. 27 Jan. 3 April 4 June 30 -------- -------- -------- -------- (Thousands of Dollars Except Per Share Data) Net Sales...................................... $164,417 $174,795 $200,934 $223,650 Gross Income................................... 17,807 24,481 30,717 35,602 Income before extraordinary item and cumulative effect on prior years of changes in accounting principles............. 4,436* 7,813 10,147 11,027 Extraordinary item, Net of tax................. - - (2,559) - Cumulative effect on prior years of change in accounting principles, net of tax......... (8,301) - - - -------- -------- -------- -------- Net Income (Loss).............................. $ (3,865) $ 7,813 $ 7,588 $ 11,027 ======== ======== ======== ======== Earnings Per Common Share: Income before extraordinary item and cumulative effect on prior years of changes in accounting principles............ $ .29* $ .52 $ .67 $ .73 Extraordinary item, net of tax................. - - (.17) - Cumulative effect on prior years of change in accounting principles, net of tax......... (.55) - - - -------- -------- -------- -------- Net Income (Loss).............................. $ (.26) $ .52 $ .50 $ .73 ======== ======== ======== ======== * Represents the amount previously reported for the first quarter of fiscal 1993.
32 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Shareholders and the Board of Directors, The Standard Products Company: We have audited the accompanying consolidated balance sheets of The Standard Products Company (an Ohio corporation) and Subsidiary Companies as of June 30, 1994 and 1993, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three fiscal years in the period ended June 30, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Standard Products Company and Subsidiary Companies as of June 30, 1994 and 1993, and the results of their operations and their cash flows for each of the three fiscal years in the period ended June 30, 1994 in conformity with generally accepted accounting principles. As explained in Note 1 to the consolidated financial statements, effective June 29, 1992, the Company changed its methods of accounting for postretirement benefits other than pensions and income taxes. ARTHUR ANDERSEN & CO. August 2, 1994, Cleveland, Ohio. 33 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The accompanying financial statements were prepared under management's direction, which has responsibility for their integrity and objectivity. These statements have been prepared in conformity with generally accepted accounting principles consistently applied and, where appropriate, reflect estimates based upon management's best judgment. Management is further responsible for maintaining a system of internal accounting controls, designed to provide reasonable assurance that the books and records reflect the transactions of the companies and that its established policies and procedures are carefully followed. The system is continually reviewed for its effectiveness and is augmented by segregation of responsibilities, written policies and guidelines, the careful selection and training of qualified personnel and an internal audit program. Management believes that the Company's accounting controls provide reasonable assurance that errors or irregularities that could be material to the financial statements do not occur or would be detected within a timely period by employees performing their assigned functions. However, inherent limitations exist in any system of internal controls and, of course, the cost of controls should not exceed their benefits. Management believes that the Company's balance between the costs and benefits of controls reasonably assures the reliability of its financial reporting at reasonable costs. Arthur Andersen & Co., independent public accountants, are engaged to audit the financial statements of the Company and issue reports thereon. Their audit is conducted in accordance with generally accepted auditing standards and, accordingly, includes tests of accounting records and such other auditing procedures as they consider necessary in the circumstances. The accountants' report appears elsewhere. The Board of Directors, through the Audit Committee of the Board, is responsible for: (1) assuring that management fulfills its responsibilities in the preparation of the financial statements; and (2) engaging the independent public accountants with whom the Committee reviews the scope of the audit and the accounting principles to be applied in financial reporting. The Audit Committee, which is comprised entirely of seven outside Directors, meets regularly (separately and jointly) with the independent public accountants, representatives of management, and the internal auditors to review the activities of each and to ensure that each is properly discharging its responsibilities. To ensure complete independence, Arthur Andersen & Co. has full and free access to meet with the Audit Committee, without management representatives present, to discuss the results of their audit, accounting and financial reporting matters and internal accounting controls. /s/ James S. Reid, Jr. /s/ Aubrey E. Arndt ------------------ -------------------- James S. Reid, Jr. Aubrey E. Arndt Chairman and Chief Vice President - Finance Executive Officer 34 COMMON SHARES The Company's common shares are listed on the New York Stock Exchange. Quarterly market and dividend data are shown in the following table.
Cash Dividends Price Range Declared ----------------------------------- ------------------------ 1994 1993 1994 1993 --------------- ---------------- ---- ---- High Low High Low ------ ----- ------ ------ Quarter 1st................ $36.63 $29.63 $28.50 $21.20 $.16 $.128 2nd............... $36.00 $31.25 $26.00 $19.80 $.16 $.128 3rd................ $38.75 $32.50 $32.40 $25.70 $.16 $.128 4th................ $32.63 $26.25 $35.63 $31.00 $.17 $.160 ---- ----- $.65 $.544 ==== ===== There were approximately 893 shareholders as of August 18, 1994.
IN MEMORIAM This past year The Standard Products Co. lost a respected and well-loved colleague when Director Emeritus Charles (Charlie) Brooks passed away. Mr. Brooks became associated with Standard Products in 1967 following the acquisition of his two companies, Campbell Plastics Company and Cee-Bee Manufacturing Company. He became a senior executive of Standard Products and a member of the Board of Directors. Through his dedication and knowledge, he contributed significantly to the success of Standard Products. He is missed by all of us. 35
DIRECTORS OFFICERS Richard J. Boland * + James S. Reid, Jr. Consultant; Retired Senior Partner, Chairman and Chief Executive Officer Arthur Andersen & Co. Theodore K. Zampetis Edward B. Brandon * + President and Chief Operating Officer Chairman, President and Chief Executive Officer, National Gerard Mesnel City Corporation Executive Vice President- (Bank holding company) Advanced Technology Worldwide John D. Drinko - Attorney - Baker & Hostetler, Aubrey E. Arndt Attorneys at Law Vice President-Finance Curtis E. Moll * - John C. Brandmahl Chairman and Chief Executive Officer, Vice President-Human Resources MTD Products, Inc. (Manufacturer of outdoor power John C. Clegg equipment, and tools, dies and Vice President-Information Services stampings for the automotive industry) Bruce G. Davis Malcolm R. Myers * + Vice President-Purchasing & Chairman and Chief Executive Officer, Supply, Worldwide Cloyes Gear & Products, Inc. (Manufacturer of automotive timing Larry J. Enders components) Vice President and President and Chief Executive Officer, Leigh H. Perkins + - Oliver Rubber Company Chairman, The Orvis Company, Inc. (Manufacturer and distributor of Joseph Farkas fishing tackle and sporting goods) President, Standard Products Industriel Alfred M. Rankin, Jr. * Chairman, President and Chief James F. Keys Executive Officer, NACCO Industries, Vice President and Managing Director, Inc. (Holding company with operations Standard Products Limited in mining, manufacturing of small electrical appliances and fork lift Stephan J. Mack trucks and service parts.) President, Holm Industries, Inc. James S. Reid, Jr. Douglas N. Malm Chairman and Chief Executive Officer Vice President-Plastics Operations Alan E. Riedel + - Joel H. Nussbaum Retired Vice Chairman, Vice President-Program Management Cooper Industries, Inc. and Engineering and Development (A worldwide diversified manufacturer of electrical products, electric Valdis I. Petrovs power equipment, tools and hardware, Vice President-Rubber Operations automotive products and petroleum and industrial equipment) James D. Pry Group Vice President and President, John D. Sigel * Standard Products (Canada) Limited Partner - Hale and Dorr and 5 Rubber Corporation Attorneys at Law W. Hayden Thompson * - William A. Russell Chairman and Chief Executive Officer, Vice President-Sales and Marketing Solarflo Corporation (Manufacturer of gas and electric heating equipment) J. Richard Hamilton Secretary Theodore K. Zampetis President and Chief Operating Officer Charles F. Nagy Treasurer * Audit Committee - - - Finance Committee Thomas J. Stecz + Compensation Committee Corporate Controller and Assistant Secretary FACILITIES ADMINISTRATIVE OFFICES 2130 West 110th Street Cleveland, Ohio 44102 (216) 281-8300 SALES OFFICE, PRODUCT DEVELOPMENT AND WESTBORN SERVICE CENTER 2401 South Gulley Road Dearborn, Michigan 48124 PLANTS UNITED STATES: Hartselle, Alabama; Oakland and San Diego, California; Athens and Griffin, Georgia; St. Charles, Illinois; Scottsburg, Indiana; Lexington, Kentucky; Gaylord, Michigan; New Ulm, Minnesota; Schenectady, New York; Asheboro, Goldsboro, Rocky Mount and Salisbury, North Carolina; Cleveland and Wadsworth, Ohio; Export and Kittanning, Pennsylvania; Spartanburg and Winnsboro, South Carolina; Dallas and Paris, Texas. CANADA: Etobicoke, Georgetown, Mississauga, Mitchell and Stratford, Ontario FRANCE: Bezons, Bolbec, Courbevoie, Lillebonne and Vitre, France. UNITED KINGDOM: Grantham, Huntingdon and Plymouth, England; Maesteg, Wales. WAREHOUSE OPERATIONS: Dearborn and Greenville, Michigan; Charlotte, North Carolina. SHAREHOLDER INFORMATION COMMON SHARES New York Stock Exchange (Symbol SPD) REGISTRAR AND TRANSFER AGENT National City Bank Cleveland, Ohio ANNUAL MEETING The Annual Meeting of Shareholders will be held at 9 a.m., Monday, October 17, 1994 at the Company's administrative offices, 2130 West 110th Street, Cleveland, Ohio. FORM 10-K COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST. PLEASE ADDRESS YOUR REQUEST TO MR. AUBREY E. ARNDT, VICE PRESIDENT-FINANCE, AT THE COMPANY'S ADMINISTRATIVE OFFICES, 2130 WEST 110TH STREET, CLEVELAND, OHIO 44102. COUNSEL Baker & Hostetler Cleveland, Ohio AUDITORS Arthur Andersen & Co. Cleveland, Ohio
36 THE STANDARD PRODUCTS CO. 2130 West 110th Street Cleveland, Ohio 44102 216-281-8300 Annual Report 1994 37 APPENDIX TO ANNUAL REPORT TO SHAREHOLDERS
Paper Format Photo No. Description Document Page - - --------- ------------------------------------------------ ------------- 1 Row of cars Front Cover 2 Chairman and CEO and President and COO 4 3 Picture of the Globe 5 4 Passenger side of Chrysler Neon Transparent Sheet over page 7 5 Chrysler Neon Transparent Sheet over page 7 6 Machines at 5 Rubber's Griffin, Georgia Plant 7 (On page 6 appears the following description of this photograph: "Every individual sealing system assembly for Chrysler's four-door Neon receives a final quality control check at the new Griffin, Georgia, facility before it is shipped to the customer's assembly plant.") 7 Passenger seat of Ford Mustang Transparent Sheet over page 9 8 Ford Mustang Transparent Sheet over page 9 9 Machines at NISCO's Bremen, Indiana Plant 9 (On page 8 appears the following description of this photograph: "We manufacture the sponge rubber sealing system for the new Ford Mustang and numerous other models at our NISCO plant in Bremen, Indiana. Here, a molded sponge rubber component is bonded with the rubber extrusion to produce a one-piece assembly for easy installation.") 10 Passenger side panel of Chevrolet Lumina Transparent Sheet over page 11 11 Chevrolet Lumina Transparent Sheet over page 11 12 Machines at Standard Products (Canada) Ltd., 11 Stratford, Ontario Plant (On page 10 appears the following description of this photograph: "To help maintain our leadership position in rubber extrusion technology while controlling costs and improving quality, we added a modern new rubber mixing facility at one of our plants in Stratford, Ontario, during the past fiscal year.") Graphs - - ------ Bar Graph No. 1 2 Depicts comparison of Net Sales for the years 1985 through 1994 - refer to line entitled "Net Sales" under caption "Income Statement" on table on page 15 for figures Bar Graph No. 2 2 Depicts comparison of Earnings Per Share for the years 1985 through 1994 - refer to the lines entitled "Income (Loss) from Continuing Operations and Before Extraordinary Item and Cumulative Effect on Prior Years of Change in Accounting Principle" through "Net Income (Loss)" under caption "Per Share" on table on page 15 for figures
38 -2-
Paper Format Graphs Description Document Page - - ------ ------------------------------------------------ ------------- Bar Graph No. 3 3 Depicts comparison of Capital Expenditures for the years 1985 through 1994 - refer to line entitled "Additions to Property, Plant & Equipment" under caption "Other" on table on page 15 for figures Bar Graph No. 4 3 Total Company R&D (Thousands of Dollars) 1985 $ 4,461 1986 $ 4,888 1987 $ 4,137 1988 $ 6,296 1989 $10,079 1990 $10,038 1991 $10,181 1992 $13,619 1993 $20,971 1994 $28,850 Bar Graph No. 5 Transparent Sheet Depicts Major New Model Programs: FY 1994-96, over page 5 the Launch Dates and the car model Bar Graph No. 6 14 Depicts comparison of Dividends Declared Per Share for the years 1985 through 1994 - refer to line entitled "Cash Dividends Declared" under caption "Per Share" on table on page 15 for figures Bar Graph No. 7 14 Depicts comparison of Book Value Per Share for the years 1985 through 1994 - refer to line entitled "Book Value" under caption "Per Share" on table on page 15 for figures Bar Graph No. 8 14 Depicts comparison of Working Capital for the years 1985 through 1994 - refer to line entitled "Working Capital" under caption "Balance Sheet" on table on page 15 for figures
39
Paper Format Graphs Description Document Page - - ------ ------------------------------------------------ ------------- Bar Graph No. 9 14 Total Capitalization (Thousands of Dollars) Long-term Shareholders' Debt Equity Total ---------- ------------- --------- 1985 $ 20,588 $ 95,582 $116,170 1986 $ 17,504 $117,383 $134,887 1987 $ 18,180 $127,359 $145,539 1988 $ 16,577 $145,800 $162,377 1989 $ 75,213 $156,348 $231,561 1990 $ 99,480 $152,829 $252,309 1991 $113,298 $102,366 $215,664 1992 $ 69,289 $177,753 $247,042 1993 $115,607 $224,436 $340,043 1994 $135,381 $242,677 $378,058
EX-21 4 STANDARD PRODUCTS EX-21 1 EXHIBIT NO. 21 SUBSIDIARIES OF THE STANDARD PRODUCTS COMPANY --------------------------------------------- The following is a list of all subsidiaries of the Registrant as of June 30, 1994.
Jurisdiction In Which Name Incorporated - - ------------------------ ------------ Admiral Retread Equipment, Inc. Ohio "5" Rubber Corporation Pennsylvania Rubber Industrial Holding Company Delaware La Riviere Corporation Pennsylvania Holm Industries, Inc. Indiana Nisco Holding Company Delaware Oliver Europa United Kingdom Oliver Rubber Company California Standard Products International France Standard Products Industriel France Societe Lillebonnaise de Caoutchoucs France Standard Products Atlantic France Central Auto France Standard Products Limited United Kingdom Standard Products (Canada) Limited Dominion of Canada Standard Products International, Inc. Delaware Westborn Service Center, Inc. Michigan Union Trucking Company Michigan
EX-23 5 STANDARD PRODUCTS EX-23 1 EXHIBIT NO. 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation of our reports dated August 2, 1994, included and incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 File Numbers 33-53989, 33-51554, 33- 51556, 33-34437, 33-33612, 33-38348, 33-01558, 2-63498, 2-91928 and 2-86957. ARTHUR ANDERSEN LLP Cleveland, Ohio September 14, 1994. EX-27 6 STANDARD PRODUCTS EX-27
5 1000 YEAR JUN-30-1994 JUL-1-1993 JUN-30-1994 0 0 205,990 3,627 53,018 270,686 422,576 180,567 624,314 182,764 135,381 16,674 0 0 226,003 624,314 872,367 872,367 752,940 815,151 (2,092) 459 9,093 50,215 17,183 33,032 0 0 0 33,032 1.99 1.99
-----END PRIVACY-ENHANCED MESSAGE-----