SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 1-4743
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Standard Motor Products, Inc.
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(Exact name of registrant as specified in its charter)
New York 11-1362020
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37-18 Northern Blvd., Long Island City, N.Y. 11101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 392-0200
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class registered
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Common stock New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Common voting stock based on a
closing price on the New York Stock Exchange on February 28, 1995 of $20.375
per share held by nonaffiliates of the registrant was $161,191,271. For
purposes of the foregoing calculation, all directors and officers have been
deemed to be affiliates, but the registrant disclaims that any of such are
affiliates.
As of the close of business on February 28, 1995 there were 13,122,826
shares outstanding of the Registrant's Common Stock.
- Continued -
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Location in Form 10-K Document
- --------------------- --------
Part III, Item 10 1995 Annual Proxy Statement
Part III, Item 11 1995 Annual Proxy Statement
Part III, Item 12 1995 Annual Proxy Statement
Part III, Item 13 1995 Annual Proxy Statement
Part IV, Item 14(a)(3)(B)(3) By Laws
Part IV, Item 14(a)(3)(B)(3) Restated Certificate of Incorporation dated
July 31, 1990
Part IV, Item 14(a)(3)(B)(4) Note Purchase Agreement dated January 15,
1987 between the Registrant and the Travelers
Insurance Company, the Great-West Life
Assurance Company, the Franklin Life
Insurance Company, the Franklin United Life
Insurance Company and the Woodmen Accident
and Life Company
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated January 25, 1989
amending the Note Agreement between the
Registrant and the Travelers Insurance
Company, the Great-West Life Assurance
Company, the Franklin Life Insurance
Company, the Franklin United Life Insurance
Company and the Woodmen Accident and Life
Company dated January 15, 1987
Part IV, Item 14(a)(3)(B)(4) Credit Agreement dated March 10, 1989
between the Registrant and Chemical Bank
Part IV, Item 14(a)(3)(B)(4) Note Purchase Agreement dated October 15,
1989 between the Registrant and the American
United Life Insurance Company, the General
American Life Insurance Company, the
Jefferson-Pilot Life Insurance Company, the
Ohio National Life Insurance Company, the
Crown Insurance Company, the Great-West Life
Assurance Company, the Guarantee Mutual Life
Company, the Security Mutual Life Insurance
Company of Lincoln, Nebraska and the Woodmen
Accident and Life Company
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated January 15, 1990
amending the Note Agreement between the
Registrant and the Travelers Insurance Company
dated January 15, 1987
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated July 20, 1990 amending
the Credit Agreement between the Registrant
and Chemical Bank dated March 10, 1989
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated September 30, 1990
amending the Note Agreement between the
Registrant and the Travelers Insurance
Company, the Great-West Life Assurance
Company, the Franklin Life Insurance Company,
the Franklin United Life Insurance Company
and the Woodmen Accident and Life Company
dated January 15, 1987
- 1 -
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Location in Form 10-K Document
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Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated March 4, 1991 amending
the Credit Agreement between the Registrant
and Chemical Bank dated March 10, 1989
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated December 20, 1991
amending the Credit Agreement between the
Registrant and Chemical Bank dated March 10,
1989
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated February 28, 1992
amending the Note Agreement between the
Registrant and the Travelers Insurance
Company, the Great-West Life Assurance
Company, the Franklin Life Insurance
Company, the Franklin United Life Insurance
Company and the Woodmen Accident and Life
Company dated January 15, 1987
Part IV, Item 14(a)(3)(B)(4) Letter Agreement of July 22, 1992 amending
the Note Agreement between the Registrant and
the Travelers Insurance Company, the
Great-West Life Assurance Company, the
Franklin Life Insurance Company, the Franklin
United Life Insurance Company and the
Woodmen Accident and Life Company dated
January 15, 1987
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated October 30, 1992
amending the Credit Agreement between the
Registrant and Chemical Bank, assigned to NBD
Bank, N.A., with amendment dated December 20,
1991, dated March 10, 1989
Part IV, Item 14(a)(3)(B)(4) Note Agreement of November 15, 1992 between
the Registrant and Kemper Investors Life
Insurance Company, Federal Kemper Life
Assurance Company, Lumbermans Mutual
Casualty Company, Fidelity Life Association,
American Motorists Insurance Company,
American Manufacturers Mutual Insurance
Company, Allstate Life Insurance Company,
Teachers Insurance & Annuity Association of
America and Phoenix Home Life Mutual
Insurance Company
Part IV, Item 14(a)(3)(B)(4) Note Agreement of November 15, 1992 between
the Registrant and Principal Mutual Life
Insurance Company and Principal National
Life Insurance Company
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated December 27, 1993
amending the Credit Agreement between the
Registrant and Chemical Bank, assigned to NBD
Bank, N.A. with amendment dated December 20,
1991, dated March 10, 1989
Part IV, Item 14(a)(3)(B)(5) Employee Stock Ownership Plan and Trust
dated January 1, 1989
- 2 -
PART I
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ITEM 1. BUSINESS
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(a) General Development of Business
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Registrant manufactures replacement parts for automotive ignition
systems, wires and cables, fuel system parts, temperature control systems, power
steering parts and brake systems parts, and distributes a general service line
of automotive related items.
In January 1994 the Company entered into a Joint Venture
Agreement with Autoline Industries, Inc. for the purpose of remanufacturing bare
and loaded brake calipers. The joint venture, a general partnership named
Eisline Manufacturing Company, is located at the Company's Ontario, California
facility and sells its remanufactured product exclusively to the co-venturers
under a long-term supply agreement with each. The Company's investment was
approximately $600,000. Profit or loss from the joint venture is shared equally
by the partners and for 1994 was not material.
In September 1994, the Company acquired, for approximately
$750,000, certain assets of Mintex Canada, a formulator of friction material.
The assets were transfered to a separate, wholly-owned Canadian corporation, EIS
Brake Manufacturing, Ltd. This company, located in Mississauga, Ontario, will
supply brake pads and shoes for the Canadian market and produce friction
material for other EIS Brake Parts manufacturing facilities.
In February 1995, the Company acquired, for approximately
$3,900,000, the assets and certain liabilities of PIK-A-NUT Corporation.
Located in Huntington, Indiana, PIK-A-NUT Corporation distributes a complete
line of general fasteners, brass fittings, expansion plugs and clamps primarily
to the automotive aftermarket. PIK-A-NUT Corporation revenues in 1994 were
approximately $4,100,000. This acquisition will expand the capability of
Standard's Champ Service Line Division to supply a full line of service products
to the automotive aftermarket.
Replacement Parts Market The size of the replacement parts market
------------------------
depends, in part, upon the average age and number of cars on the road and the
number of miles driven per year. According to the Motor Vehicle Manufacturers
Association and United States government sources, all three of the above factors
increased from 1989 through 1994 and this trend is projected to continue during
the 1990's.
(b) Financial Information about Industry Segments
---------------------------------------------
Distribution of Sales The table below shows the registrant's sales
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by product groups.
[CAPTION]
<TABLE>
Years Ended December 31,
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(Dollars in thousands)
<CAPTION>
1994 1993 1992 1991 1990
------------------ ------------------ ------------------ ------------------ ------------------
% of % of % of % of % of
Amount Total Amount Total Amount Total Amount Total Amount Total
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ignition Parts $228,031 35.6% $197,244 33.8% $180,111 33.6% $179,424 33.6% $170,076 33.5%
Wires and Cables $ 51,419 8.0% $ 53,703 9.2% $ 47,878 8.9% $ 50,607 9.5% $ 56,723 11.2%
Fuel System Parts $ 43,841 6.8% $ 45,000 7.7% $ 47,554 8.9% $ 54,055 10.1% $ 52,291 10.3%
Temperature Control
Systems $110,961 17.3% $ 89,031 15.3% $ 78,767 14.7% $ 89,311 16.7% $ 83,907 16.5%
Champ Service Line $ 41,127 6.4% $ 35,973 6.2% $ 26,189 4.9% $ 26,181 4.8% $ 27,689 5.5%
Brake Parts $165,431 25.9% $161,900 27.8% $155,054 29.0% $135,230 25.3% $117,134 23.0%
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total $640,810 100.0% $582,851 100.0% $535,553 100.0% $534,808 100.0% $507,820 100.0%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
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No class of products other than those listed in the chart on page 3
accounted for more than ten percent (10%) of total sales in any of such years.
The business of the registrant is not dependent on any single customer. In the
year ended December 31, 1994, the registrant's five largest customers accounted
for approximately 27.0% of sales, or approximately $173,000,000.
Ignition Parts Replacement parts for automotive ignition and
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emission control systems account for about 36% of the registrant's revenues.
These parts include distributor caps and rotors, electronic ignition control
modules, voltage regulators, coils, switches and sensors. The registrant is a
basic manufacturer of many of the ignition parts it markets. These products
cover a wide range of applications, from 30-year old vehicles to current models,
both domestic and import, including passenger car, truck, farm, off-road and
marine applications.
Like most automotive aftermarket suppliers, registrant began by
offering ignition parts which were equal in quality to O.E. (original equipment
parts installed on new vehicles). Soon afterward, registrant pioneered the
concept of offering an alternate higher level of quality, significantly better
than O.E. and priced proportionately higher. This has now evolved to a
"good-better-best" concept, and a lower priced line has been made available
under the registrant's Tru-Tech and Modern Mechanic brands.
Nearly all new vehicles are factory-equipped with
computer-controlled engine management systems to control ignition, emission
control, and fuel injection. The on-board computer monitors inputs from many
types of sensors located throughout the vehicle, and controls a myriad of
valves, switches and motors. The registrant is a leader in the manufacture and
sale of these engine management component parts, including remanufactured
automotive computers.
Electronic control modules and electronic voltage regulators
comprise a significant and growing portion of registrant's total ignition sales.
The registrant is one of the few aftermarket companies that manufactures these
parts, and the only independent aftermarket supplier to manufacture the complex
electronic control modules for distributorless ignition systems. The
registrant's electronic production is divided between highly-automated
operations, which are performed in Long Island City, NY, and assembly
operations, which are performed in assembly plants in Hong Kong and Puerto Rico.
Production of printed circuit boards was moved to Puerto Rico in 1994.
The registrant's sales of such parts as sensors, valves and
solenoids have increased steadily as auto manufacturers equip their cars with
more complex engine management systems. New government emission laws,
including the 1990 Federal Clean Air Act, are expected to increase automotive
repair activity creating an increase in parts sales. Although there is much
controversy over how quickly these new procedures will be implemented, it is no
doubt going to have a positive impact on sales of the registrant's products.
The registrant is a basic manufacturer of throttle position sensors, air pump
check valves, coolant temperature sensors, air charge temperature sensors,
EGR valves, idle air control valves and MAP
sensors.
The joint venture entered into in 1992 with Blue Streak Electronics,
Inc., a rebuilder of engine management computers and MAF sensors, has
positioned the registrant as a key supplier in the fast growing remanufactured
electronics market. In 1994, registrant vastly increased its offering of
remanufactured computers, and instituted a program to offer slower-moving items
by overnight shipment from its factory. This has enabled the registrant's
customers to expand their coverage without increasing inventory investment.
- 4 -
Brake System Products As of August 31, 1986, the registrant
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acquired the EIS Brake Parts Division from Parker-Hannifin Corporation. In the
aftermarket, brake parts represent the single largest product group in a
warehouse distributor's inventory.
The division manufactures a full line of brake replacement parts and
also markets many special tools and fluids used by mechanics who perform brake
service. EIS has a long- established reputation in the industry for quality
products and engineering excellence.
EIS brake products account for approximately 26% of the registrant's
revenues, making it the second largest revenues source for the registrant. We
anticipate that EIS's growth will be enhanced in 1995 and the future as a result
of the increased wear on friction products resulting from front wheel drives and
other vehicle design dynamics. The Company's growth should also be enhanced
by the continued vertical integration of its manufacturing capabilities, which
includes the addition of a joint venture in Ontario, California to remanufacture
bare and loaded calipers and the addition of a friction manufacturing facility
in Mississauga, Canada, as well as the addition of ABS systems to this divisions
product lines.
Wires and Cables Wire and cable parts account for about 8% of the
----------------
registrant's revenues. These products include ignition (spark plug) wires,
battery cables and a wide range of electrical wire, terminals, connectors and
tools for servicing an automobile's electrical system.
A major part of this division's business is the sale of ignition
wire sets. The registrant has historically offered a premium brand of ignition
wires and battery cables, which capitalize on the market's awareness of the
importance of quality. With the growing customer interest in lower-priced
products, the registrant introduced a second line of wire and cable products,
known as Modern Mechanic, in 1989. This line has steadily expanded to include
import coverage, and in 1995 will also be offered under the registrant's
Tru-Tech brand name.
Fuel System Parts Fuel system parts account for about 7% of the
-----------------
registrant's revenues. The registrant manufactures and markets over 2,000 parts
for the maintenance and repair of automotive fuel systems. These include parts
for carburetors, mechanical and electric fuel pumps, and fuel injection systems.
For several decades, the registrant's most important fuel system
product was the carburetor rebuilding kit. Sales of these kits have been
declining in recent years, since nearly all new cars are equipped with
electronic fuel injection systems. However, the registrant's sales of fuel
injection parts have steadily increased, and this segment of the business is
expected to continue to grow.
The assembly of carburetor rebuilding kits was moved in 1994 from
Edwardsville, KS to Puerto Rico. This move will consolidate the assembly of
carburetor kits in one location, improving efficiencies and expanding the
registrant's favorable tax benefits of its Puerto Rico subsidiary.
In 1988 the registrant began manufacturing mechanical fuel pumps,
and added the manufacture of electric fuel pumps in 1994. Electric pumps are
replacing the traditional mechanical units at O.E. levels, since they are more
easily integrated
- 5 -
into an electronic fuel injection system. Electric pumps are expected to become
the dominant technology, and the fuel pump is now seen as an integral part of
the engine management system.
Temperature Control Systems & Power Steering Parts The registrant
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markets a line of replacement parts for automotive temperature control systems
(air conditioning and heating), primarily under the brand name Four Seasons.
However, in recent years Four Seasons has offered private label packaging to its
larger accounts which are experiencing significant growth. Revenues from Four
Seasons account for approximately 17% of the registrant's total sales.
Federal regulation of CFC (fluorocarbon) refrigerants is changing
the climate control industry. Legislation is phasing out R-12 refrigerant
(DuPont's Freon and other brands) production completely. This is generating
wide industry demand for refrigeration recycling equipment, retrofit kits, and
for training in recycling and retrofit techniques. In the near future, vehicle
air conditioners needing repair or recharge become candidates for retrofit to
use the new R-134a refrigerant, at a cost as high as several hundred dollars per
car. Installers are urgently seeking training and certification in the new
technology, and the Company's Four Seasons Division has taken the lead in
providing these services.
These major technological changes require many new parts, as well as
new service equipment. As a result, our climate control division is enjoying
excellent growth opportunities as evidenced by a 25% growth in sales in 1994.
Four Seasons also markets a full line of power steering products,
which currently number over 1,500 parts including replacement hose assemblies
and pumps.
Champ Service Line Products In 1994, Champ accounted for
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approximately 6% of the registrant's total sales. The division markets over
8,000 different automotive-related items, ranging from mirrors, window cranks
and antennas to cleaning and polishing materials, specialty tools and
maintenance supplies.
Champ purchases products from a wide range of manufacturers and
packages them under the Champ and Big A private brand label, enabling its
customers to conveniently order items in many separate product groups from a
single source. Champ's marketing program offers its customers ordering
efficiency, marketing support and effective shipping that are considered key
benefits by the registrant's customers.
Early in 1993, Champ's flexibility was enhanced by the designation
of its own management team and sales force. This improved customer
responsiveness paid a dividend in 1994, as Champ's unit sales, excluding Big A
sales, increased for the first time in four years.
In February 1995, the Company acquired the assets and certain
liabilities of PIK-A-NUT Corporation, a reseller of a complete line of general
fasteners, brass fittings, expansion plugs and clamps primarily to the
automotive aftermarket in both retail and bulk packaging. This acquisition will
expand the capability of Champ to supply a full line of service products to the
automotive aftermarket.
(c) Narrative Description of Business
---------------------------------
Sales and Distribution The registrant sells its products throughout
----------------------
the United States and Canada under its proprietary brand names, to
approximately 1,600 warehouse distributors, who distribute to approximately
23,000 jobber outlets. The jobbers sell the registrant's products primarily to
professional mechanics, and secondarily to consumers who perform their own
automobile repairs. The registrant has a direct field sales force of
approximately 490 persons.
- 6 -
The registrant generates demand for its products by directing the
major portion of its sales effort to its customers' customers (i.e. jobbers and
professional mechanics). In 1994 the registrant conducted approximately 4,000
instructional clinics, which teach mechanics how to diagnose and repair complex
new electronic ignition systems, including computerized ignition and emission
controls, automotive brake systems and temperature control systems. The
registrant also publishes and sells related service manuals and video/cassettes
and provides a free technical information bulletin service to registered
mechanics. In addition, our Standard Plus Club, a professional service dealer
network comprising approximately 10,000 members, offers technical and
business development support and has a technical service telephone hotline.
The registrant continued expansion into the retail market by selling
its products to large retail chains. The registrant expects continued growth in
the retail market in future years.
Production and Engineering The registrant engineers, tools and
--------------------------
manufactures many of the components for its products, except for certain
commonly available small parts in temperature control, brake system and fuel
system products and all of the Champ Service Line. It also performs its own
plastic and rubber molding operations, extensive screw machining and stamping
operations, automated electronics assembly and a wide variety of other
processes.
The registrant has engineering departments staffed by 89 persons,
approximately 61% of whom are graduate engineers. The departments perform
product research and development and quality control and, wherever practical,
design machinery for automation of the registrant's factories.
As new models of automobiles, trucks, tractors, buses and other
equipment are introduced, the registrant engineers and manufactures
replacement parts for them. The registrant employs and trains tool and die
makers needed in its manufacturing operations.
Competition Although the registrant is a leading independent
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manufacturer of automotive replacement parts and supplies, it faces substantial
competition in all markets that it serves. A number of major manufacturers of
replacement parts and supplies are divisions of companies having greater
financial resources than those of the registrant. In addition, automobile
manufacturers supply virtually every replacement part sold by the registrant.
The competitive factors affecting the registrant's products are
primarily product quality, customer service and price. The registrant's
business requires that it maintain inventory levels sufficient for the rapid
delivery requirements of customers. Management believes that it is able to
compete effectively and that its trademarks and trade names are well known and
command respect in the industry and the marketplace.
Backlog Backlog is maintained at minimal levels by the registrant.
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The registrant primarily fills orders, as received, from inventory and
manufactures to maintain inventory levels.
- 7 -
Supplies The principal raw materials purchased by the registrant
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consist of brass, electronic components, fabricated copper (primarily in the
form of magnet wire and insulated cable), ignition wire, stainless steel coils
and rods, aluminum coils and rods, lead, rubber molding compound, thermo-set and
thermo plastic molding powders, cast iron castings and friction lining
materials. All of these materials are purchased in the open market and are
available from a number of prime suppliers.
Insurance In 1990, 1991 and 1992 the registrant maintained basic
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liability coverage (general, product and automobile) of $1 million and umbrella
liability coverage of $20 million. In 1993 the umbrella coverage was increased
to $50 million and remains at $50 million. Historically, the registrant has not
experienced casualty losses in any year in excess of its coverage. Management
has no reason to expect this experience to change, but can offer no assurances
that liability losses in the future will not exceed the registrant's coverage.
Employees The registrant has approximately 3,300 employees
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in the United States, Canada, Puerto Rico and Hong Kong. Of these,
approximately 1,550 are production employees. Long Island City, New York
production employees are covered by a collective bargaining agreement with the
United Auto Workers, which expires on October 1, 1995. Edwardsville, Kansas
production employees are covered by a United Auto Workers contract that
expires April 2, 1997. Berlin, Connecticut employees are covered by a
collective bargaining agreement with the United Auto Workers, which expires on
June 1, 1995. The registrant believes that its facilities are in favorable
labor markets with ready access to adequate numbers of skilled and unskilled
workers. In the opinion of management, employee relations have been good.
There have been no significant strikes or work stoppages in the last five years.
(d) Financial Information About Export Sales
----------------------------------------
The registrant sells its general line of products primarily through
Canada, Latin America, Europe and the Middle East. The table below shows the
registrant's export sales for the last three years:
(U.S. Dollars in thousands)
Years Ended December 31, 1994 1993 1992
- ------------------------ ---- ---- ----
Canada $38,109 $32,341 $29,083
All Others 12,341 12,746 12,209
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Total $50,450 $45,087 $41,292
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ITEM 2. PROPERTIES
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The registrant maintains its executive offices and a
manufacturing plant at 37-18 Northern Boulevard, Long Island City, NY.
The table below describes the registrant's major (a) manufacturing
and packaging properties and (b) warehousing properties. (For information with
respect to rentals, see note 16 of Notes to Consolidated Financial Statements on
page F12.).
(a) Manufacturing Properties
------------------------
Approximate Products
Number of (See Key
Location Square Feet Owned or Leased Employees On Page 10)
- -------- ----------- --------------- ----------- -----------
Long Island City, 318,000 Owned (1) (2) (6) 492 A, B, I
New York
Edwardsville, 150,000 Owned (11) 193 C
Kansas
Puerto Rico 114,000 Leased (expires in 1997) 261 A, B, H, I
Puerto Rico 24,100 Leased (expires in 2004) 51 B
Hong Kong 22,500 Leased (expires in 1997) 82 I
Grapevine, Texas 180,000 Owned (2) (4) 335 E, J
Middleton, CT 161,700 Owned (8) -0-
Berlin, CT 165,000 Owned (1) 254 H
Manila, AR 119,300 Leased (expires in 1995) (10) 211 F
Manila, AR 100,000 Owned (2) (9) 20 F
Rural Retreat, VA 72,300 Leased (expires in 2003) (13) 31 F
West Bend, WI 110,600 Owned (5) -0-
Ontario, CA 107,600 Leased (expires in 2003) 28 F
Mississauga, Canada 94,600 Leased (expires in 2004) 7 F
-Continued-
See Notes on page 11
- 9 -
(b) Warehousing Properties
----------------------
Approximate Products
Number of (See Key
Location Square Feet Owned or Leased Employees On Page 10)
- -------- ----------- --------------- ----------- -----------
Disputanta, VA 411,000 Owned 251 A, B, D, I
Edwardsville, 205,000 Owned (1) (11) 169 C, D
Kansas
Reno, Nevada 67,000 Owned (3) 20 A, B, C, E, I
Coppell, Texas 168,000 Owned (1) 155 E, J
Berlin, CT 66,000 Owned 159 H
Manila, AR 150,000 Owned (2) (7) 34 F, G
Mississauga, Canada 96,800 Leased (expires in 1996) (1) 44 A, B, C, D, E,
F, H, I
Calgary, Canada 33,500 Leased (expires in 1998) 8 A, B, C, D, E,
F, G, H, I
Ontario, CA 142,600 Leased (expires in 2003) 24 A, B, C, E,
F, G, H, I
Grand Prairie, Texas 51,200 Leased (expires in 1996) 5 E, J
Huntington, Indiana 62,600 Leased (expires in 2000) (12)-0- D
Product Key: A) Ignition
B) Fuel System Parts
C) Wire & Cable
D) Champ Service Line
E) Temperature Control System Parts
F) Friction - Brake Shoes & Pads
G) Drums & Rotors
H) Hydraulic Brake System Components
I) Electronic Ignition
J) Power Steering Parts
See Notes on page 11
- 10 -
NOTES TO PROPERTY SCHEDULE:
- ---------------------------
(1) Includes executive or division offices.
(2) While owned by the registrant for accounting purposes, these properties
were actually sold to local industrial development authorities and leased
to the registrant under the terms of Industrial Revenue Bond ("IRB")
financing agreements. Under those agreements, title to these properties
passes to the registrant at maturity for little or no consideration. The
rental payments made by the registrant equal the principal and interest
due under each IRB.
(3) This property is owned subject to a mortgage held by the Massachusetts
Mutual Life Insurance Company, in the original amount of $465,000, the
final payment of which is due in 1995.
(4) Financed with a bond issue in 1980 for $2,670,000 fully paid off in 1993
and a bond issue in 1984 for $2,000,000 maturing through 1999.
(5) As of January 1, 1987, the registrant vacated this facility. It is now
being leased by the registrant to a third party. This facility is
presently being offered for sale.
(6) This property was purchased on January 5, 1988.
(7) Financed with a bond issue in 1989 for $2,500,000 maturing through 1999.
(8) Part of this facility is now being leased by the registrant to a third
party. This facility is presently being offered for sale.
(9) Financed with a bond issue in 1990 for $1,800,000 maturing through 2000.
(10) Under terms of the lease, the registrant has an option to purchase the
property for $1,000 at the expiration of the lease.
(11) Financed with Industrial Revenue Bonds fully paid off in 1994.
(12) This lease agreement was entered into in February 1995 in connection
with the acquisition of the assets of the PIK-A-NUT Corporation.
(13) Under terms of the lease, the registrant has an option to purchase the
property for $350,000 at 12/31/97 or $200,000 at 12/31/2002.
- 11 -
ITEM 3. LEGAL PROCEEDINGS
- ------------------------------
Currently, there are no legal proceedings which management deems
would have a material economic impact on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ----------------------------------------------------------------
None
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
- -----------------------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
The Company's stock is listed on the New York Stock Exchange.
The number of Shareholders of record of Common Stock on February 28, 1995 was
approximately 1,000 including brokers who hold approximately 7,126,615 shares
in street name. The quarterly market price and dividend information is
presented in the following chart.
Price Range of Common Stock and Dividends
The Company's Common Stock is traded on the New York Stock Exchange
under the symbol SMP. The following table shows the high and low sale prices
on the composite tape of, and the dividend paid per share on, the Common Stock
during the periods indicated.
1994 Quarter High Low Dividend 1993 Quarter High Low Dividend
- ------------------------------------- -------------------------------------
1st $26.88 $16.00 $.08 1st $17.38 $13.13 $.08
2nd 18.38 14.75 .08 2nd 20.25 16.13 .08
3rd 19.75 17.38 .08 3rd 24.13 18.88 .08
4th 19.75 16.88 .08 4th 26.88 21.00 .08
- ------------------------------------- -------------------------------------
The Board of Directors will consider the payment of future dividends on the
basis of earnings, capital requirements and the financial condition of the
Company. The Company's loan agreements limit dividends and distributions by
the Company. As of December 31, 1994, approximately $12,194,000 of retained
earnings was available under those agreements for payment of cash dividends
and purchase of capital stock.
- 12 -
PART II (CONT'D)
-------
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------------
[CAPTION]
<TABLE>
Years Ended December 31,
--------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------
<CAPTION>
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $640,810 $582,851 $535,553 $534,808 $507,820
Earnings before cumulative effect of
changes in accounting principles $ 23,665 $ 18,598 $ 8,878 $ 6,667 $ 7,734
Net earnings $ 23,665 $ 17,508 $ 8,878 $ 6,667 $ 7,734
Earnings per share before cumulative
effect of changes in accounting
principles $ 1.80 $ 1.41 $ .68 $ .51 $ .59
Net earnings per share $ 1.80 $ 1.32 $ .68 $ .51 $ .59
Working capital $189,207 $188,220 $180,143 $113,937 $134,473
Total assets $462,351 $433,354 $384,616 $401,764 $430,658
Long-term debt (excluding current
portion) $109,927 $130,514 $136,111 $ 73,338 $ 90,230
Stockholders' equity $195,089 $178,183 $161,128 $155,328 $151,035
Stockholders' equity per share $ 14.82 $ 13.47 $ 12.28 $ 11.84 $ 11.51
Cash dividends per common share $ .32 $ .32 $ .32 $ .32 $ .32
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Liquidity and Capital Resources - During 1994, stockholders' equity increased
$16,906,000 to $195,089,000 and working capital increased $987,000 to
$189,207,000. Cash provided by operations in 1992 amounted to $31,550,000,
primarily due to the $18,971,000 reduction in inventories. In 1993, cash
provided by operations amounted to $20,105,000 primarily due to net earnings of
$17,508,000. In 1994, cash provided by operations amounted to $21,104,000
primarily due to net earnings of $23,665,000. Cash used in investing activities,
primarily due to capital expenditures, was $15,048,000 in 1992 and $11,899,000
in 1993. Cash used in investing activities in 1994 was $20,299,000 primarily
due to capital expenditures and held-to-maturity transactions. Cash used in
financing activities, primarily due to repayment of debt and dividend payments,
was $23,519,000 in 1992. In December 1992, the Company secured $80,000,000 in
long-term financing which was used to reduce short-term bank borrowings. Cash
used in financing activities in 1993 was $12,879,000 which consisted primarily
of repayments of debt and dividend payments. In 1993, cash provided by the
exercise of employee stock options was almost
- 13 -
PART II (CONT'D)
-------
entirely offset by the repurchase of treasury stock. Cash used in financing
activities in 1994 was $10,335,000 primarily due to dividend payments,
repayment of debt and repurchase of treasury stock.
The Company expects capital expenditures for 1995 to be approximately
$18,000,000 primarily for new machinery and equipment. At December 31,
1994, the Company had unused lines of credit aggregating approximately
$98,000,000 which will be used as a source of funding capital expenditures and
working capital requirements. The Company anticipates that its present sources
of funds will continue to be adequate to meet its needs.
Total debt (current and non-current) decreased $4,035,000. In 1995, required
long-term debt payments will be approximately $19,987,000.
As part of an ongoing operating strategy, the Company is reviewing potential
acquisition candidates in related automotive component businesses. If such an
acquisition is made, additional sources of capital could be required. It
presently is anticipated that any such acquisition could be funded in the short
term by presently available lines of credit with new long term financing to
follow.
Restructuring plans started in 1993 were completed by the end of 1994.
Comparison of 1994 to 1993 - Property, plant and equipment additions of
$12,557,000 were primarily attributable to expenditures for new machinery and
equipment.
Net sales increased $57,959,000 or 9.9%. Sales increases were evident in all
divisions with the largest percentage increases at the Temperature Control
Division and the Canadian Division. The increase in sales was predominantly
due to volume increases.
Cost of goods sold increased $42,099,000 from $373,588,000 to $415,687,000.
Cost of sales, as a percentage of net sales, increased from 64.1% to 64.9%. The
increase reflects the required price reductions implemented early in the first
quarter to respond to competitive actions. It also reflects the continuing
shift of sales mix to lower margin market segments. The Company is aggresively
implementing cost reduction programs, and although the results of these
programs have had a positive impact upon 1994 gross margins, many of these
programs have not yet achieved their full impact. By the fourth quarter of
1994, gross margins were slightly ahead of the comparable period in 1993.
However, any favorable impacts could be offset by an acceleration of purchased
material inflation or a further shift to lower margin market segments.
Selling, general and administrative expenses increased by 5.7% or $9,693,000,
but as a percentage of net sales, decreased from 29% to 27.9%. The expense
increase was primarily due to increased new customer acquisition costs in the
first half of 1994 and higher variable costs due to increased sales, partially
offset by cost reduction programs.
Restructuring charges of $2,781,000 were incurred in 1993 primarily due to the
consolidation of the EIS Brake Parts operation within Connecticut and the
rationalization of the Company's manufacturing operations involving the
relocation of several product lines.
- 14 -
PART II (CONT'D)
-------
Other income (expense), net decreased $412,000 primarily due to an increase in
the loss on sale of accounts receivables and a lower rate of return on
investments in 1994, partially offset by an increase in income from Blue Streak
Electronics, Inc.
Taxes based on earnings increased by $3,525,000 due to increased earnings and
a higher effective tax rate. The higher effective tax rate in 1994 was
primarily due to a lower relative benefit from earnings of the Company's Hong
Kong and Puerto Rico subsidiaries.
Cumulative effect of changes in accounting for postretirement benefits and
income taxes, net is the result of the Company adopting, as of January 1, 1993,
two changes in accounting principles, Statement of Financial Accounting
Standards (SFAS) No. 106 - "Employers' Accounting for Postretirement Benefits
Other Than Pensions" and SFAS No. 109 - "Accounting for Income Taxes". The
after-tax charge for SFAS No. 106 of $6,135,000 (after an income tax benefit of
$4,090,000), combined with the tax benefit for SFAS No. 109 of $5,045,000
reduced net earnings by $1,090,000.
Comparison of 1993 to 1992 - Property, plant and equipment additions of
$12,329,000 were primarily attributable to expenditures for new machinery and
equipment.
Short-term notes payable increased $5,100,000 primarily due to principal
payments of long-term debt and capital expenditures. Long-term debt (current
and non-current) decreased $16,010,000.
Net sales increased $47,298,000 or 8.8%. The sales increase was primarily
attributable to increased sales at the Standard Division, Four Seasons Division
and the Champ Service Line Division. The sales increase at the Champ Service
Line Division was primarily due to the acquisition of substantially all of the
General Service Line inventory and certain other related assets of APS, Inc. in
the second quarter of 1993 (see Note 2). Excluding the sales resulting from
the acquisition, revenues increased by 6.8% in 1993 compared to a year ago.
Cost of goods sold increased $27,018,000 from $346,570,000 to $373,588,000.
Cost of sales, as a percentage of net sales, decreased from 64.7% to 64.1%.
The improvement was attributable to continuous cost reduction programs, and
increased absorption of manufacturing overhead partially offset by the lower
gross margins of the new product line acquired by the Champ Service Line
Division.
Selling, general and administrative expenses increased by 1.5% or $2,460,000.
This increase was primarily due to costs to support the service line expansion,
higher variable costs due to increased sales, higher administrative expenses,
ongoing postretirement expenses and increased employee profit sharing
contributions due to the higher level of earnings. This increase was partially
offset by lower new customer acquisition costs.
- 15 -
PART II (CONT'D)
-------
Restructuring charges of $2,781,000 were incurred in 1993 primarily due to the
consolidation of the EIS Brake Parts operation within Connecticut and the
rationalization of the Company's manufacturing operations involving the
relocation of several product lines.
Other income (expense), net increased $951,000 primarily due to income from
Blue Streak Electronics, Inc., a decrease on the loss on sale of receivables and
realized gains on investments sold.
Taxes based on earnings increased by $6,265,000 due to increased earnings and
a higher effective tax rate. The higher effective tax rate in 1993 was
primarily due to an increase in tax rates resulting from the Omnibus Budget
Reconciliation Act of 1993 and lower United States tax exempt earnings of the
Company's Puerto Rican operation relative to the Company's Domestic operations.
Cumulative effect of changes in accounting for postretirement benefits and
income taxes, net is the result of the Company adopting, as of January 1, 1993
two changes in accounting principles, Statement of Financial Accounting
Standards (SFAS) No. 106 - "Employers' Accounting for Postretirement Benefits
Other Than Pensions" and SFAS No. 109 - "Accounting for Income Taxes". The
after-tax charge for SFAS No. 106 of $6,135,000 (after an income tax benefit of
$4,090,000), combined with the tax benefit for SFAS No. 109 of $5,045,000
reduced net earnings by $1,090,000.
Impact of Inflation - Although inflation is not a significant issue, the
Company's management believes it will be able to continue to minimize any
adverse effect of inflation on earnings. This will be achieved principally by
cost reduction programs and, where competitive situations permit, selling price
increases.
Future Results of Operations - Inventory levels increased significantly in the
fourth quarter of 1994 partially reflecting open orders which have been shipped
during the first quarter of 1995 and a build-up in temperature control products
to meet anticipated strong orders for the 1995 season. The Company will
continue to focus on its inventory reduction plans during 1995 and future years.
The company is continuing to face competitive pressures and is implementing
cost reduction programs targeted to offset any price reductions.
- 16 -
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Board of Directors and Stockholders
Standard Motor Products, Inc.
We have audited the consolidated balance sheet of Standard Motor Products,
Inc. and subsidiaries as of December 31, 1994, and the related consolidated
statements of earnings, changes in stockholders' equity, and cash flows for
the year then ended. 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 audit.
We conducted our audit 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 audit provides 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 Standard
Motor Products, Inc. and subsidiaries as of December 31, 1994, and the
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Short Hills, New Jersey
February 23, 1995
- F1 -
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Board of Directors and Stockholders
Standard Motor Products, Inc.
We have audited the consolidated balance sheet of Standard Motor
Products, Inc. and subsidiaries as of December 31, 1993, and the related
consolidated statements of earnings, changes in stockholders' equity and
cash flows for each of the two years in the period ended December 31,
1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audit 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 audit provides 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 Standard
Motor Products, Inc. and subsidiaries as of December 31, 1993, and the
consolidated results of their operations and their cash flows for each of
the two years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles.
New York, New York David Berdon & Co. LLP
February 25, 1994 Certified Public Accountants
- F2 -
[CAPTION]
<TABLE>
Standard Motor Products, Inc. and Subsidiaries
Consolidated Statements of Earnings
(Dollars in thousands, except per share amounts)
<CAPTION>
Years Ended December 31,
----------------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales ....................................................... $ 640,810 $ 582,851 $ 535,553
Cost of sales ................................................... 415,687 373,588 346,570
- ------------------------------------------------------------------------------------------------------------
Gross profit .................................................... 225,123 209,263 188,983
Selling, general and administrative expenses .................... 178,674 168,981 166,521
Provision for restructuring charges (Note 17) .................... - - 2,781 - -
- ------------------------------------------------------------------------------------------------------------
Operating Income ................................................ 46,449 37,501 22,462
Other income (expense), net (Note 13) ........................... 1,236 1,648 697
- ------------------------------------------------------------------------------------------------------------
47,685 39,149 23,159
Interest expense ................................................ 12,288 12,344 12,339
- ------------------------------------------------------------------------------------------------------------
Earnings before taxes and cumulative
effect of changes in accounting principles ............. 35,397 26,805 10,820
- ------------------------------------------------------------------------------------------------------------
Taxes based on earnings (Note 14)
Current:
Federal (principally U.S) ..................................... 10,294 11,475 1,996
State and local ............................................... 2,851 2,275 522
- -------------------------------------------------------------------------------------------------------------
13,145 13,750 2,518
Deferred ........................................................ (1,413) (5,543) (576)
- -------------------------------------------------------------------------------------------------------------
11,732 8,207 1,942
- -------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of
changes in accounting principles ...................... 23,665 18,598 8,878
Cumulative effect of changes in accounting for postretirement
benefits and income taxes, net (Notes 12 and 14) ............. - - (1,090) - -
- -------------------------------------------------------------------------------------------------------------
Net earnings ......................................... $ 23,665 $ 17,508 $ 8,878
- -------------------------------------------------------------------------------------------------------------
Per share data:
Earnings before cumulative effect of changes in
accounting principles ..................................... $ 1.80 $ 1.41 $ .68
Cumulative effect of changes in accounting principles ........ - - (.09) - -
- -------------------------------------------------------------------------------------------------------------
Net earnings per common and
common equivalent share .................................... $ 1.80 $ 1.32 $ .68
- -------------------------------------------------------------------------------------------------------------
Cash dividends paid:
Common stock - $.32 per share ................................ $ 4,217 $ 4,211 $ 4,199
- -------------------------------------------------------------------------------------------------------------
Average number of common and
common equivalent shares ..................................... 13,165,567 13,226,678 13,130,733
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- F3 -
[CAPTION]
<TABLE>
Standard Motor Products, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
December 31,
---------------------------------
1994 1993
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets Current assets:
Cash and cash equivalents (Note 15) ........................... $ 2,796 $ 12,346
Marketable securities (Notes 15) .............................. 6,018 11
Accounts receivable, less allowances for discounts and
doubtful accounts of $5,708 (1993 - $5,536) (Note 3) ......... 109,966 103,019
Inventories (Note 4) .......................................... 185,855 160,268
Prepaid taxes based on earnings ............................... - - 974
Deferred income taxes (Note 14) ............................... 20,111 17,460
Prepaid expenses and other current assets ..................... 4,131 3,722
-----------------------------------------------------------------------------------------------------
Total current assets .................................... 328,877 297,800
------------------------------------------------------------------------------------------------------
Property, plant and equipment, net (Notes 5 and 8) ............. 104,126 103,004
------------------------------------------------------------------------------------------------------
Other assets:
Receivables - due after one year .............................. 501 2,645
Sundry (Note 6) ............................................... 28,847 29,905
------------------------------------------------------------------------------------------------------
Total other assets ...................................... 29,348 32,550
-----------------------------------------------------------------------------------------------------
Total assets ............................................ $ 462,351 $ 433,354
-----------------------------------------------------------------------------------------------------
Current liabilities:
Notes payable - banks (Note 7) ................................ $ 6,600 $ 5,100
Liabilities and Current portion of long-term debt (Notes 8 and 15) ............ 19,987 4,935
Stockholders' Accounts payable .............................................. 40,517 41,373
Equity Sundry payables and accrued expenses .......................... 58,832 42,050
Taxes based on earnings ....................................... 2,412 4,617
Taxes (other than those based on earnings) ................... 822 1,332
Payroll and commissions ....................................... 10,500 10,173
------------------------------------------------------------------------------------------------------
Total current liabilities ............................... 139,670 109,580
------------------------------------------------------------------------------------------------------
Long-term debt (current portion shown above) (Notes 8 and 15) .. 109,927 130,514
------------------------------------------------------------------------------------------------------
Deferred income taxes (Note 14) ................................ 4,863 3,625
------------------------------------------------------------------------------------------------------
Postretirement benefits other than pensions (Note 12) .......... 12,802 11,452
------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 8, 9, 15 and 16)
Stockholders' equity (Notes 8, 9, 10 and 11):
Common Stock - par value $2.00 per share:
Authorized 30,000,000 shares, issued 13,324,476 shares in 1994 and
13,309,976 shares in 1993 (including 203,650 and 5,000 shares
held as treasury shares in 1994 and 1993, respectively) ..... 26,649 26,620
Capital in excess of par value ................................ 2,555 2,120
Loan to Employee Stock Ownership Plan (E.S.O.P.) ............. (6,705) (8,385)
Minimum pension liability adjustment .......................... (1,204) (581)
Retained earnings ............................................. 177,904 158,456
Foreign currency translation adjustment ....................... (139) 69
-----------------------------------------------------------------------------------------------------------
.................................................................. 199,060 178,299
Less: Treasury stock - at cost .................................. 3,971 116
-----------------------------------------------------------------------------------------------------------
Total stockholders' equity ............................. 195,089 178,183
-----------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity ............. $ 462,351 $ 433,354
-----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- F4 -
[CAPTION]
<TABLE>
Standard Motor Products, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<CAPTION>
Years Ended December 31,
-------------------------------------
1994 1993 1992
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows Net Earnings ......................................................... $ 23,665 $ 17,508 $ 8,878
From Adjustments to reconcile net earnings to net cash
Operating provided by operating activities:
Activities Cumulative effect of changes in accounting for postretirement
benefits and income taxes, net ................................... - - 1,090 - -
Depreciation and amortization .................................... 11,008 10,523 9,688
Loss on disposal of property, plant & equipment .................. 364 204 191
Proceeds from sales of trading securities ........................ 7,500 - - - -
Purchases of trading securities .................................. (7,676) - - - -
(Increase) in deferred income taxes .............................. (1,411) (5,543) (576)
Tax benefits applicable to E.S.O.P. .............................. 123 124 123
Tax benefits applicable to the exercise of employee stock options . 249 1,240 - -
Change in assets and liabilities:
(Increase) in accounts receivable, net ......................... (7,203) (13,890) (5,686)
(Increase) decrease in inventories ............................. (26,032) (10,893) 18,971
(Increase) decrease in prepaid taxes based on earnings ......... 974 259 (97)
(Increase) decrease in other assets ............................ 4,859 (13,802) 3,422
Increase (decrease) in accounts payable ........................ (842) 14,237 (6,792)
Increase (decrease) in taxes based on earnings ................. (2,211) 2,856 1,269
Increase (decrease) in other current assets and liabilities .... (528) 3,672 32
Increase in sundry payables and accrued expenses ............... 18,265 12,520 2,127
------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ............................ 21,104 20,105 31,550
------------------------------------------------------------------------------------------------------------------
Cash Flows Proceeds from held-to-maturity securities ............................ 5,828 - - - -
From Purchases of held-to-maturity securities ............................. (13,618) - - - -
Investing Proceeds from sales of marketable securities ......................... - - 18,283 23,533
Activities Purchases of marketable securities ................................... - - (17,970) (23,376)
Sale of fixed assets ................................................. 48 117 52
Capital expenditures ................................................. (12,557) (12,329) (15,257)
------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities .............................. (20,299) (11,899) (15,048)
------------------------------------------------------------------------------------------------------------------
Cash Flows Net borrowings (repayments) under line-of-credit agreements .......... 1,500 5,100 (82,200)
From Proceeds from issuance of long-term debt ............................. . - - - - 80,000
Financing Principal payments of long-term debt ................................. (5,535) (16,010) (18,782)
Activities Reduction of loan to E.S.O.P. ........................................ 1,680 1,680 1,680
Proceeds from exercise of employee stock options ..................... 538 5,086 20
Purchase of treasury stock ........................................... (4,301) (4,524) (38)
Dividends paid ....................................................... (4,217) (4,211) (4,199)
------------------------------------------------------------------------------------------------------------------
Net cash (used in) financing activities .............................. (10,335) (12,879) (23,519)
------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash .............................. (20) (6) - -
------------------------------------------------------------------------------------------------------------------
Net (decrease) in cash ............................................... (9,550) (4,679) (7,017)
Cash and cash equivalents at beginning of year ....................... 12,346 17,025 24,042
------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year ............................. $ 2,796 $ 12,346 $ 17,025
------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest ............................................................ $ 12,377 $ 12,160 $ 13,284
Income taxes ........................................................ 14,376 10,635 1,346
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- F5 -
[CAPTION]
<TABLE>
Standard Motor Products, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
(In thousands)
<CAPTION>
Years Ended December 31, 1994, 1993 and 1992
- ----------------------------------------------------------------------------------------------------------------------------------
Minimum Foreign
Capital in Loan Pension Currency
Common Excess of to Liability Retained Translation Treasury
Stock Par Value E.S.O.P. Adjustment Earnings Adjustment Stock Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 ........ $ 26,458 $ 1,536 $ (11,745) $ 140,480 $ (1,401) $ 155,328
Net earnings - 1992 ................ 8,878 8,878
Cash dividends paid ................ (4,199) (4,199)
Exercise of employee stock options . (5) 25 20
Minimum pension liability adjustment. $ (664) (664)
Tax benefits applicable to
Employee Stock Ownership Plan .... 123 123
Employee Stock Ownership Plan ...... 1,680 1,680
Purchase of treasury stock ......... (38) (38)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 ....... 26,458 1,654 (10,065) (664) 145,159 (1,414) 161,128
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings - 1993 ................ 17,508 17,508
Cash dividends paid ................ (4,211) (4,211)
Exercise of employee stock options . 162 (898) 5,822 5,086
Minimum pension liability adjustment 83 83
Tax benefits applicable to
Employee Stock Ownership Plan .... 124 124
Tax benefits applicable to the exercise
of employee stock options ........ 1,240 1,240
Employee Stock Ownership Plan ...... 1,680 1,680
Purchase of treasury stock ......... (4,524) (4,524)
Foreign currency translation adjustment $ 69 69
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 ....... 26,620 2,120 (8,385) (581) 158,456 69 (116) 178,183
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings - 1994 ................ 23,665 23,665
Cash dividends paid ................ (4,217) (4,217)
Exercise of employee stock options . 29 63 446 538
Minimum pension liability adjustment (623) (623)
Tax benefits applicable to
Employee Stock Ownership Plan .... 123 123
Tax benefits applicable to the exercise
of employee stock options ........ 249 249
Employee Stock Ownership Plan ...... 1,680 1,680
Purchase of treasury stock ......... (4,301) (4,301)
Foreign currency translation adjustment (208) (208)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 ....... $ 26,649 $ 2,555 $ (6,705) $ (1,204) $ 177,904 $ (139) $ (3,971) $ 195,089
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- F6 -
Standard Motor Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation
The Company is engaged in the manufacture and sale of automotive replacement
parts.
The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly owned. As more fully
described in Note 2, the Company's investments in unconsolidated
affiliates are accounted for on the equity method. All significant
intercompany items have been eliminated.
Reclassifications
Where appropriate, certain amounts in 1992 and 1993 have been reclassified to
conform with the 1994 presentation.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents.
Marketable Securities
Effective January 1, 1994 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." Prior years' financial statements have not
been restated to apply the provisions of SFAS No. 115. The adoption of the
standard had an immaterial impact on the Company's financial position and
results of operations for the year ended December 31, 1994.
At December 31, 1994, held-to-maturity securities amounted to
approximately $10,790,000 and trading securities amounted to approximately
$28,000. Held-to-maturity securities consist primarily of U.S. Treasury
Bills and corporate debt securities which are reported at unamortized cost
which approximates fair value. As of December 31, 1994, $5,990,000 of the
held-to-maturity securities mature within one year and $4,800,000 mature
within five to ten years.
The first-in, first-out method is used in computing realized gains or
losses.
Inventories
Inventories are stated at the lower of cost (determined by means of the
first-in, first-out method) or market.
Property, Plant and Equipment
These assets are recorded at cost and are depreciated over their respective
useful lives using the straight-line method of depreciation.
Revenue Recognition
The Company recognizes revenues from product sales upon shipment to the
customers.
Net Earnings Per Common and Common Equivalent Share
Net earnings per common and common equivalent share are calculated using the
daily weighted average number of common shares outstanding during each year
and if material, the net additional number of shares which would be issuable
upon the exercise of stock options, assuming that the Company used the
proceeds received to purchase additional shares at market value. Shares held
by the ESOP are considered outstanding and are included in the calculation to
determine earnings per share.
Income Taxes
Deferred income taxes result from temporary differences in methods of
recording certain revenues and expenses for financial reporting and income
tax purposes (see Note 14).
Customer Acquisition Costs
Costs associated with the acquisition of new customer accounts are deferred
and amortized over a twelve-month period.
Foreign Currency Translation
Assets and liabilities are translated into U.S. dollars at year end exchange
rates and revenues and expenses are translated at average exchange rates
during the year. The resulting translation adjustments are recorded in a
separate component of stockholders' equity.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company places its cash investments with high
quality financial institutions and limits the amount of credit exposure to
any one institution. With respect to accounts receivable, such receivables
are primarily from warehouse distributors in the automotive aftermarket
industry located in the United States. The Company performs ongoing credit
evaluations of its customers' financial conditions and does require
collateral or other security to support customer receivables where
appropriate. Members of one of marketing groups represents the Company's
largest group of customers and accounted for 15% of consolidated net sales
for the year ended December 31, 1994. No individual member of this marketing
group accounted for more than 10% of net sales for the year ended December
31, 1994. For the year ended December 31, 1994 the Company's five largest
individual customers, including the members of this marketing group,
accounted for 27% of net sales.
2. Acquisitions
The Company acquired, as of September 1, 1992, 50% ownership in Blue Streak
Electronics, Inc. for approximately $360,000. Blue Streak Electronics,
Inc., located in Concord, Canada, is a remanufacturer of automotive on-board
computers, sensors and related parts. The investment is accounted for under
the equity method. The accompanying consolidated balance sheets include
the investment in subsidiary at December 31, 1994 and 1993 of
approximately $1,384,000 and $597,000, respectively in "Other Assets:
Sundry."
In April 1993, the Company acquired, for approximately $9,000,000,
substantially all of the general service line inventory and certain other
related assets of APS, Inc., a national distributor of automotive parts,
along with a ten-year agreement to supply this product line to APS, Inc.
on an exclusive basis. This acquisition has been accounted for as a
purchase. The acquisition increased consolidated net sales by
approximately $16,300,000 in 1994 and $10,900,000 in 1993.
During 1994 the Company made two additional investments. The investments
had no significant effect on the Company's financial position or results
of operations.
3. Sale of Accounts Receivables
On December 20, 1993, the Company entered into a new three-year agreement
whereby it can sell up to a $25,000,000 undivided interest in a designated
pool of certain eligible accounts receivable. At December 31, 1994 and 1993,
net receivables amounting to $25,000,000 had been sold under these
- F7 -
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
agreements. As collections reduce previously sold undivided fractional
interest, new receivables are customarily sold up to the $25,000,000
level. At the expiration of the agreement, the Company and the purchaser
share a proportionate risk of loss as the eligible pool of account
receivable is liquidated (see Note 13).
4. Inventories
(In thousands)
December 31,
--------------------
1994 1993
----------------------------------------------------------------
Inventories consist of:
Finished goods $114,021 $100,004
Work in process 19,336 18,249
Raw materials 52,498 42,015
----------------------------------------------------------------
Total inventory 185,855 160,268
----------------------------------------------------------------
5. Property, Plant and Equipment
(In thousands)
December 31,
--------------------
1994 1993
----------------------------------------------------------------
Property, plant and equipment consist of the following:
Land and buildings $67,819 $67,470
Machinery and equipment 65,146 55,341
Tools, dies and auxiliary equipment 7,244 6,526
Furniture and fixtures 15,025 13,756
Leasehold improvements 4,641 4,622
Construction in progress 7,481 8,147
--------------------
167,356 155,862
Less, accumulated depreciation
and amortization 63,230 52,858
----------------------------------------------------------------
Total property, plant and
equipment, net 104,126 103,004
----------------------------------------------------------------
6. Other Assets - Sundry
(In thousands)
December 31,
--------------------
1994 1993
----------------------------------------------------------------
Other assets - sundry consist of the following:
Deferred new customer acquisition costs $12,233 $14,742
Unamortized customer supply agreements 6,908 8,178
Marketable securities 4,800 3,000
Equity in joint ventures 2,196 792
Pension assets 632 713
Other 2,078 2,480
----------------------------------------------------------------
Total other assets - sundry $28,847 $29,905
----------------------------------------------------------------
Included in Other is a preferred stock investment in a customer of the
Company. Net sales to such customer amounted to $51,935,000 and
$42,823,000 in 1994 and 1993, respectively.
7. Notes Payable - Banks
The maximum amount of short-term bank borrowings outstanding at any month-end
was $38,500,000 in 1994 and $27,700,000 in 1993, and averaged $27,268,000 and
$16,958,000, respectively. The weighted average short-term interest rate was
4.77% for 1994 and 3.99% for 1993. At December 31, 1994, the Company had
unused lines of credit aggregating approximately $98,000,000.
8. Long-Term Debt
(In thousands)
December 31,
--------------------
1994 1993
----------------------------------------------------------------
Long-term debt consists of:
7.85% senior note payable $65,000 $65,000
10.50%-11.50% senior note payable 4,000 6,000
9.47% senior note payable 30,000 30,000
6.01% senior note payable 15,000 15,000
Credit Agreement 6,714 8,394
7.35%-12.875% purchase obligations 8,200 9,862
Floating rate purchase obligation 950 1,100
9.50% mortgage payable 50 93
----------------------------------------------------------------
129,914 135,449
Less current portion 19,987 4,935
----------------------------------------------------------------
Total noncurrent portion of
long-term debt 109,927 130,514
----------------------------------------------------------------
Under the terms of the $65,000,000 senior note agreement, the Company is
required to repay the loan in seven equal annual installments beginning in
1996.
Under the terms of the $4,000,000 senior note agreement, the Company is
required to repay the remaining loan in two equal annual installments ending
in 1996.
Under the terms of the $30,000,000 senior note agreement, the Company is
required to repay the loan in seven varying annual installments beginning in
1998. Subject to certain restrictions, the Company may make prepayments
without premium beginning in 1998.
Under the terms of the $15,000,000 senior note agreement, the Company is
required to repay the loan in full in 1995. The Company also entered into an
interest rate swap agreement. The swap agreement modifies the interest rate
on the $15,000,000 senior note agreement, adjusted favorably or unfavorably
for the spread between 5.66% and the 6-month reserve unadjusted London
Interbank Offering rate ("LIBOR").
The Credit Agreement matures in varying annual installments through 1998
and bears interest at the lower of 91% of prime rate, or 91% of the "LIBOR"
plus 1.092%. The Company also entered into an interest rate swap agreement to
reduce the impact of changes in interest rates on its Credit Agreement. The
swap agreement modifies the interest rate on $6,412,500 of the Credit
Agreement, adjusted favorably or unfavorably for the spread between 77.52% of
the 3-month reserve unadjusted "LIBOR" and 7.69%. The proceeds of such note
were loaned to the Company's Employee Stock Ownership Plan (ESOP) to purchase
1,000,000 shares of the Company's common stock to be distributed in
accordance with the terms of the ESOP established in 1989 (see Note 11).
The Company is exposed to credit loss in the event of nonperformance
by the other parties to the interest rate swap agreements. However, the
Company does not anticipate nonperformance by the counterparties.
The purchase obligations, due under agreements with municipalities,
mature in annual installments through 2003, and are secured by properties
having a net book value of approximately $20,794,000 at December 31, 1994. An
optional prepayment of $600,000 was made on July 1, 1994.
- F8 -
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
The floating rate purchase obligation matures in annual installments
through 1999, bears interest at sixty-five percent of prime, and is secured
by property having a net book value of approximately $1,334,000 at
December 31, 1994.
The mortgage payable is due in installments through 1995.
Maturities of long-term debt during the five years ending December 31,
1999 are $19,987,000, $14,262,000, $12,312,000, $16,601,000 and $14,982,000
respectively.
Certain loan agreements require the maintenance of a specified amount of
working capital and limit, among other items, investments, leases,
indebtedness and distributions for the payment of dividends and the
acquisition of capital stock. At December 31, 1994, the Company had
unrestricted retained earnings of $12,194,000.
9. Stockholders - Equity
The Company has authority to issue 500,000 shares of preferred stock, $20 par
value, and the Board of Directors is vested with the authority to establish
and designate series of preferred, to fix the number of shares therein and
the variations in relative rights as between series. No such shares are
outstanding at December 31, 1994.
The Company announced on October 18, 1993 that the Board of Directors
has authorized the repurchase by the Company of up to 325,000 shares of its
common stock to be used to meet present and future requirements of its stock
option program. The repurchase program was completed in early March 1994 and
325,000 shares were repurchased at a cost of $7,345,000.
On April 20, 1994, the Company announced that the Board of Directors has
authorized the repurchase by the Company of up to 200,000 shares of its
common stock to be used to meet present and future requirements of its stock
option program. As of December 31, 1994, 90,300 shares were repurchased
at a cost of $1,480,000.
10.Stock Options
Under the Company's stock option plans, while the holder is an employee of
the Company, the options are exercisable in whole or in part anytime during
the five years following the date of grant for options granted prior to
1994. For options granted in 1994, while the holder is an employee of the
Company, the options are exercisable in whole or in part anytime during
the five years following the date of vesting.
On May 26, 1994, the shareholders approved an increase of 400,000 shares
for issuance under the Company's 1994 Omnibus Stock Option Plan. At
December 31, 1994, 438,000 shares of authorized but unissued common stock
were reserved for issuance under the Company's stock option plans, of which
288,000 shares were subject to outstanding options.
The change in outstanding options are as follows:
1994 1993 1992
Outstanding at beginning.. 82,300 437,700 441,600
Granted ......................... 250,000 32,000 72,000
Exercised (1994 and 1993 -
$10.13 to $16.88, 1992 -
$10.13) (35,950) (378,650) (2,000)
Terminated and expired (8,350) (8,750) (73,900)
--------------------------------------------------------------------
Outstanding at end 288,000 82,300 437,700
--------------------------------------------------------------------
Vested at end 38,000 82,300 437,700
--------------------------------------------------------------------
Aggregate option price $4,756,375 $1,337,688 $5,968,938
--------------------------------------------------------------------
At a price range per share of:
1994 1993 1992
---------------------------------------------------------------------------
Beginning $10.13 to $18.56 $10.13 to $16.88 $10.13 to $17.56
End $12.75 to $18.56 $10.13 to $18.56 $10.13 to $16.88
---------------------------------------------------------------------------
11.Employee Benefit Plans
The Company has a defined benefit pension plan covering substantially all of
the unionized employees of the EIS Brake Parts Division. The benefits are
based on years of service. The Company's funding policy is to contribute
annually the maximum amount that can be deducted for federal income tax
purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned in
the future.
(In thousands)
December 31,
------------------------------
1994 1993 1992
----------------------------------------------------------------
Net periodic pension cost for 1994, 1993
and 1992 includes the following components:
Service cost - benefits earned
during the period.. 250 248 220
Interest cost on projected benefit
obligation 631 613 590
Actual return on plan assets (88) (960) (724)
Net amortization and deferral (521) 391 59
----------------------------------------------------------------
Net periodic pension cost 272 292 145
----------------------------------------------------------------
The following table sets forth the plan's funded status at December 31,
1994 and 1993:
(In thousands)
December 31,
--------------------
1994 1993
----------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $(9,706) and $(9,474) in
1994 and 1993, respectively ($10,322) ($10,032)
----------------------------------------------------------------
Projected benefit obligation for
service rendered to date ($10,322) ($10,032)
Plan assets at fair value (primarily
debt securities, commercial mortgages
and listed stocks) 8,486 8,738
----------------------------------------------------------------
Plan assets (less than) projected
benefit obligation (1,836) (1,294)
Unrecognized prior service cost 460 503
Unrecognized net loss 1,343 747
Unrecognized net obligation being
recognized over 15 years 172 198
Adjustment required to recognize
minimum liability (1,975) (1,448)
----------------------------------------------------------------
Accrued pension cost included in
accrued expenses (1,836) (1,294)
----------------------------------------------------------------
Assumptions used in accounting
for the pension plan are as follows:
------------------------------
1994 1993 1992
----------------------------------------------------------------
Discount rates 6.5% 6.5% 6.6%
Expected long-term rate of return
on assets 8.0% 8.0% 8.5%
----------------------------------------------------------------
- F9 -
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
In addition, the Company participates in several multiemployer plans
which provide defined benefits to substantially all unionized workers. The
Multiemployer Pension Plan Amendments Act of 1980 imposes certain liabilities
upon employers associated with multiemployer plans. The Company has not
received information from the plans' administrators to determine its
share, if any, of unfunded vested benefits.
The Company and certain of its subsidiaries also maintain various
defined contribution plans, which includes profit sharing, providing
retirement benefits for other eligible employees.
The provisions for retirement expense in connection with the plans are
as follows:
Defined
Multi- Contribution
employer Plans and Other Plans
------------------------------------------------------------------
Year-end December 31,
1994 $379,000 $5,033,000
1993 358,000 4,760,000
1992 498,000 1,895,000
------------------------------------------------------------------
In January 1989, the Company established an Employee Stock Ownership
Plan and Trust for employees who are not covered by a collective bargaining
agreement. The ESOP authorized the Trust to purchase up to 1,000,000 shares
of the Company's common stock in the open market. In 1989, the Company
entered into an agreement with a bank authorizing the Company to borrow up to
$18,000,000 in connection with the ESOP. Under this agreement, the Company
borrowed $16,729,000, payable in annual installments through 1998 (see Note
8), which was loaned on the same terms to the ESOP for the purchase of
common stock. During 1989, the ESOP made open market purchases of
1,000,000 shares at an average cost of $16.78 per share. Future company
contributions plus dividends earned will be used to service the debt.
During 1994, 1993 and 1992, 96,800, 100,700 and 101,600 shares were
allocated to the employees, leaving 398,800 unallocated shares in the ESOP
trust at December 31, 1994.
Contributions to the ESOP are based on a predetermined formula which is
primarily tied into dividends earned by the ESOP and loan repayments. The
provision for expense in connection with the ESOP was approximately
$1,321,000 in 1994, $1,380,000 in 1993 and $1,387,000 in 1992. The expense
was calculated by subtracting dividend and interest income earned by the
ESOP, which amounted to approximately $296,000, $305,000 and $313,000 for
the years ended December 31, 1994, 1993 and 1992, respectively, from the
principal repayment on the outstanding bank loan. Interest costs amounted
to approximately $645,000, $772,000 and $756,000 for the years ended
December 31, 1994, 1993 and 1992, respectively.
At December 31, 1994 and 1993, indebtedness of the ESOP to the Company
in the amounts of $6,705,000 and $8,385,000, respectively, are shown as
deductions from stockholders' equity in the consolidated balance sheets.
Dividends paid on ESOP shares are recorded as reductions in retained
earnings in the consolidated balance sheet.
In August 1994 the Company established an unfunded Supplemental
Executive Retirement Plan for key employees of the Company. Under the
plan, employees may elect to defer a portion of their compensation and, in
addition, the Company may at its discretion make contributions to the plan
on behalf of the employees. Such contributions were not significant in 1994.
12.Postretirement Benefits
The Company provides certain medical and dental care benefits to eligible
retired employees. Approximately 1,900 employees and 200 retirees are
eligible under this plan. Salaried employees become eligible for retiree
health care benefits after reaching age 65 if they retire at age 65 or older
with at least 15 years of continuous service. EIS Brake Parts unionized
employees become eligible after reaching age 65 if they retire at age 65
or older with at least 10 years of continuous service. Other unionized
employees are covered under union health care plans.
Generally, the health care plans pay a stated percentage of most health
care expenses reduced for any deductible and payments made by government
programs and other group coverage. The costs of providing most of these
benefits has been shared with retirees since 1991. Retiree annual
contributions will increase proportionally if the Company's health care
payments increase.
Effective January 1, 1993 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Prior years' financial
statements have not been restated to apply the provisions of SFAS No. 106.
SFAS No. 106 requires that the expected cost of these postretirement
benefits be charged to expense during the years that the employees render
services. SFAS No. 106 was adopted using the immediate recognition
transition option; the accumulated postretirement benefit obligation of
$10,225,000, and related deferred tax benefit of $4,090,000 (net of
$6,135,000), has been included in "cumulative effect of changes in
accounting for postretirement benefits and income taxes, net" in the 1993
consolidated statement of earnings. This new accounting method has no
effect on the Company's cash outlays for retiree benefits. The Company's
current policy is to fund the cost of the health care plans on a
pay-as-you-go basis.
- F10 -
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
The components of the net periodic benefit cost, excluding the
cumulative effect of this accounting change, for the years ended December 31,
1994 and 1993 are as follows:
(In thousands)
1994 1993
----------------------------------------------------------------
Service cost $701 $672
Interest cost 960 800
----------------------------------------------------------------
1,661 1,472
----------------------------------------------------------------
The following table sets forth the amounts included in the accompanying
consolidated balance sheets at December 31, 1994 and 1993:
(In thousands)
1994 1993
----------------------------------------------------------------
Accumulated Postretirement Benefit Obligation (APBO):
Retirees 4,012 4,015
Fully eligible active participants 1,011 936
Other active participants 7,779 6,501
----------------------------------------------------------------
Total 12,802 11,452
----------------------------------------------------------------
For measuring the expected postretirement benefit obligation, a health
care cost trend rate of 13 and 14 percent was assumed for 1994 and 1993,
respectively, declining 1 percent per year to 7 percent in 2000, then 0.5
percent per year to 6 percent in 2002 and remain at that level thereafter.
The weighted-average discount rate used in determining the APBO was 8
percent at January 1, 1994 and 1993.
The health care cost trend rate has a significant effect on the APBO and
net periodic benefit cost. A 1 percent increase in the trend rate for health
care costs would increase the APBO by $2,479,000 and service and interest
costs by $359,000.
13.Other Income (Expense), Net
(In thousands)
December 31,
------------------------------
1994 1993 1992
----------------------------------------------------------------
Other income (expense), net consists of:
Interest and dividend income $1,724 $1,648 $1,630
(Loss) on sale of accounts
receivables (Note 3) (1,107) (660) (997)
Income (loss) from
Blue Streak Electronics, Inc. 828 352 (97)
Other - net (209) 308 161
----------------------------------------------------------------
Total other income (expense), net $1,236 $1,648 $697
----------------------------------------------------------------
14.Taxes Based on Earnings
Effective January 1, 1993 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Prior
years' financial statements have not been restated to apply the provisions of
SFAS No. 109.
Under SFAS No. 109, deferred tax balances are stated at tax rates
expected to be in effect when taxes are actually paid or recovered. The
cumulative catch-up adjustment resulted in a deferred tax benefit of
$5,045,000, which has been included in the consolidated statements of
earnings as "cumulative effect of changes in accounting for postretirement
benefits and income taxes, net."
Reconciliations between the U.S. federal income tax rate and the
Company's effective income tax rate as a percentage of earnings before income
taxes and cumulative effect of changes in accounting principles follow:
----------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------
U.S. federal income tax rate... 35.0% 35.0% 34.0%
Increase (decrease) in tax rate
resulting from:
State and local income taxes, net
of federal income tax benefit 5.2 5.5 1.5
(Tax-exempt income)/
non-deductible items - net 0.1 0.2 0.2
Benefits of income subject to taxes
at lower than the U.S. federal rate (8.6) (9.7) (16.8)
Other 1.4 (0.4) (1.0)
----------------------------------------------------------------
Effective tax rate 33.1% 30.6% 17.9%
----------------------------------------------------------------
The following is a summary of the components of the net deferred tax
assets and liabilities recognized in the accompanying consolidated balance
sheets:
(In thousands)
December 31,
--------------------
1994 1993
----------------------------------------------------------------
Deferred tax assets:
Inventory 12,161 9,291
Allowance for customer returns 6,075 5,412
Postretirement benefits 4,827 4,581
Allowance for doubtful accounts 1,287 1,348
Accrued salaries 1,315 1,424
Restructuring charges -- 1,023
Other 1,704 408
----------------------------------------------------------------
Total 27,369 23,487
----------------------------------------------------------------
Deferred tax liabilities:
Depreciation $8,847 $8,093
Promotional costs 1,820 728
Other 1,454 831
----------------------------------------------------------------
Total 12,121 9,652
----------------------------------------------------------------
Net deferred tax assets 15,248 13,835
----------------------------------------------------------------
Based upon the level of historical taxable income and projections for
future taxable income over the periods which the deferred tax assets are
deductible, the Company believes that it is more likely than not that the
results of future operations will generate sufficient taxable income to
realize the net deferred tax assets.
The Company has not provided for federal income taxes on the
undistributed income of its foreign subsidiaries because of the availability
of foreign tax credits and/or the Company's intention to permanently
reinvest such undistributed income. Cumulative undistributed earnings of
foreign subsidiaries on which no United States income tax has been
provided were $12,502,000 at the end of 1994, $10,011,000 at the end of
1993 and $7,181,000 at the end of 1992.
Earnings of a subsidiary operating in Puerto Rico, amounting to
approximately $9,482,000 (1993 - $7,285,000; 1992 - $6,941,000), which are
not subject to United States income taxes, are partially exempt from
Puerto Rican income taxes under a tax exemption grant expiring on December
31, 2002. The tax benefits of the exemption, reduced by a minimum tollgate
tax instituted in 1993, amounted to $.24 per share in 1994 (1993 - $.19;
1992 - $.23).
- F11 -
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Foreign income taxes amounted to approximately $1,097,000, $838,000 and
$697,000 for 1994, 1993 and 1992, respectively.
15.Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash and cash equivalents
The carrying amount approximates fair value because of the short maturity of
those instruments.
Marketable securities
The fair values of investments are estimated based on quoted market prices
for these or similar instruments.
Long-term debt
The fair value of the Company's long-term debt is estimated based on the
current rates offered to the Company for debt of the same remaining
maturities.
Interest rate swap agreements
The fair value of interest rate swaps (used for hedging purposes) is the
estimated amount that the Company would receive or pay to terminate the swap
agreements at the reporting dates, taking into account current interest
rates.
The estimated fair values of the Company's financial instruments are as
follows:
(In thousands)
Carrying Fair
December 31, 1994 Amount Value
----------------------------------------------------------------
Cash and cash equivalents $2,796 $2,796
Marketable securities 10,818 10,811
Long-term debt (129,914) (127,077)
Off-Balance Sheet financial instruments:
Interest rate swaps:
In a net payable position -- (482)
----------------------------------------------------------------
(In thousands)
Carrying Fair
December 31, 1994 Amount Value
----------------------------------------------------------------
Cash and cash equivalents $12,346 $12,346
Marketable securities 3,011 3,011
Long-term debt (135,449) (151,587)
Off-Balance Sheet financial instruments:
Interest rate swaps:
In a net receivable position -- 415
In a net payable position -- (1,146)
----------------------------------------------------------------
16.Commitments and Contingencies
Total rent expense for the three years ended December 31, 1994 was as
follows:
(In thousands)
Real
Total Estate Other
----------------------------------------------------------------
1994 $5,345 $ 2,223 $3,122
1993 5,544 2,320 3,224
1992 5,931 2,618 3,313
At December 31, 1994, the Company is obligated to make minimum rental
payments (exclusive of real estate taxes and certain other charges) through
2004, under operating leases for real estate, as follows:
(In thousands)
1995 $2,389
1996 2,093
1997 1,577
1998 1,217
1999 1,175
Thereafter 4,643
----------------------------------------------------------------
$13,094
----------------------------------------------------------------
At December 31, 1994, the Company had letters of credit outstanding
aggregating approximately $1,652,000. The contract amount of the letters of
credit is a reasonable estimate of their value as the value for each is fixed
over the life of the commitment.
The Company is involved in various litigation matters arising in the
ordinary course of business. Although the final outcome of these matters
cannot be determined, it is management's opinion that the final resolution of
these matters will not have a material effect on the Company's financial
position and results of operations.
17.Restructuring Charges
During 1993, the Company recorded a $2,781,000 provision for restructuring
charges. Included in the restructuring plan are charges for the expected
costs of facility consolidations, asset retirements, employee separations,
relocations and related costs. Restructuring plans started in 1993 were
completed by the end of 1994.
18.Quarterly Financial Data (Unaudited)
Net Gross Net Per
Sales Profit Earnings Share
----------------------------------------------------------------------
(In thousands, except per share amounts)
----------------------------------------------------------------------
1994 Quarter:
First $147,126 $50,226 $2,745 $0.21
Second 187,645 63,989 8,216 0.62
Third 168,291 58,825 7,730 0.59
Fourth 137,748 52,083 4,974 0.38
----------------------------------------------------------------------
Total 640,810 225,123 23,665 $1.80
----------------------------------------------------------------------
1993 Quarter:
First $127,755 $45,684 $1,763 $0.13
Second 161,201 56,760 6,779 0.51
Third 161,340 56,786 5,703 0.43
Fourth 132,555 50,033 3,263 0.25
---------------------------------------------------------------------
Total 582,851 209,263 17,508 $1.32
---------------------------------------------------------------------
The fourth quarter of 1994 results reflect physical inventory
adjustments which had the effect of increasing fourth quarter operating
income by approximately $3,245,000 ($1,947,000 net of income taxes).
The fourth quarter 1993 reflects an improved gross profit percentage,
compared to the prior 1993 quarters, primarily due to favorable year-end
inventory adjustments.
- F12 -
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors and Stockholders
Standard Motor Products, Inc.
Under date of February 23, 1995, we reported on the consolidated balance
sheet of Standard Motor Products, Inc. and subsidiaries as of December
31, 1994, and the related consolidated statements of earnings, changes in
stockholders' equity, and cash flows for the year then ended, as contained
in the annual report on Form 10-K for the year 1994. In connection with
our audit of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule as listed in
the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Short Hills, New Jersey
February 23, 1995
- 17 -
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors and Stockholders
Standard Motor Products, Inc.
In connection with our audits of the consolidated financial statements of
Standard Motor Products, Inc. and subsidiaries for the years ended
December 31, 1993 and 1992, we have also audited the financial
statement schedule listed in the accompanying index at Item 14(a)(2) for
the years ending December 31, 1993 and 1992. Our audits of the financial
statements were made for the purpose of forming an opinion on those
statements taken as a whole. The financial statement schedule is
presented for the purpose of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
financial statement schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in
our opinion, fairly states in all material respects the financial data required
to be set forth therein in relation to the basic financial statements taken as
a whole.
David Berdon & Co. LLP
New York, New York Certified Public Accountants
February 25, 1994
- 18 -
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------
Information relating to Directors and Executive Officers is set
forth in the 1995 Annual Proxy Statement.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
- ----------------------------------------------------
Information relating to Management Remuneration and
Transactions is set forth in the 1995 Annual Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- -----------------------------------------------------------
AND MANAGEMENT
--------------
Information relating to Security Ownership of Certain Beneficial
Owners and Management is set forth in the 1995 Annual Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ----------------------------------------------------------
Information relating to Certain Relationships and
Related Transactions is set forth under "Certain Transactions" in
the 1995 Annual Proxy Statement.
- 19 -
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
- -------------------------------------------------------------------
FORM 8-K
--------
14.(a) Document List
-------------
(a)(1) Among the responses to this Item 14(a) are the following
financial statements.
Report of Independent Certified Public Accountants
Financial Statements:
Consolidated Balance Sheets -
December 31, 1994 and 1993
Consolidated Statements of Earnings -
Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Changes in Stockholders'
Equity - Years Ended December 31, 1994, 1993
and 1992
Consolidated Statements of Cash Flows -
Years Ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(a)(2) The following financial schedule for the years 1994,
1993 and 1992 is submitted herewith:
Schedule Page
-------- ----
II. Valuation and Qualifying Accounts 26
Selected Quarterly Financial Data, for the Years
Ended December 31, 1994 and 1993, are included
herein by reference to Part II, Item 8.
All other schedules are omitted because they are
not required, inapplicable or the information is
included in the financial statements or notes
thereto.
- 20 -
(a)(3) Exhibits required by Item 601 of Securities and Exchange
Commission Regulations S-K.
(A) The following such Exhibits are filed as a separate
section of this report.
(22) List of Subsidiaries of Standard Motor Products,
Inc. is included on Page 27.
(B) The following such Exhibits are incorporated herein by
reference.
(3) By-Laws filed as an Exhibit of Registrant's annual
report on Form 10-K for the year ended December
31, 1986 is incorporated herein by reference.
Restated Certificate of Incorporation, dated July
31, 1990, filed as an Exhibit of Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1990 is incorporated herein by
reference.
(4) Note Purchase Agreement of January 15,
1987 between the Registrant and the
Travelers Insurance Company, the
Great-West Life Assurance Company, the
Franklin Life Insurance Company, the
Franklin United Life Insurance Company, and
the Woodmen Accident and Life Company
filed as an Exhibit of Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1986 is incorporated herein by
reference.
Letter Agreement of January 25, 1989
amending the Note Agreement between the
Registrant and the Travelers Insurance
Company, the Great-West Life Assurance
Company, the Franklin Life Insurance
Company, the Franklin United Life Insurance
Company, and the Woodmen Accident and
Life Company dated January 15, 1987 filed as
an Exhibit of Registrant's Annual Report on
Form 10-K for the year ended December 31,
1987 filed as an Exhibit of Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1989 is incorporated
herein by reference.
- 21 -
Credit Agreement dated March 10, 1989
between the Registrant and Chemical Bank
filed as an Exhibit of Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1989 is incorporated herein by
reference.
Note Purchase Agreement dated October 15,
1989 between the Registrant and the
American United Life Insurance Company,
the General American Life Insurance
Company, the Jefferson-Pilot Life Insurance
Company, the Ohio National Life Insurance
Company, the Crown Insurance Company, the
Great-West Life Assurance Company, the
Guarantee Mutual Life Company, the Security
Mutual Life Insurance Company of Lincoln,
Nebraska, and the Woodmen Accident and
Life Company filed as an Exhibit of
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989 is
incorporated herein by reference.
Letter Agreement of January 15, 1990
amending the Note Agreement between the
Registrant and the Travelers Insurance
Company dated January 15, 1987 filed as an
Exhibit of Registrant's Annual Report on
Form 10-K for the year ended December 31,
1990 is incorporated herein by reference.
Letter Agreement of July 20, 1990 amending
the Credit Agreement between the Registrant
and Chemical Bank dated March 10, 1989
filed as an Exhibit of Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1990 is incorporated herein by
reference.
Letter Agreement of September 30, 1990
amending the Note Agreement between the
Registrant and the Travelers Insurance
Company, the Great-West Life Assurance
Company, the Franklin Life Insurance
Company, the Franklin United Life Insurance
Company, and the Woodmen Accident and
Life Company dated January 15, 1987 filed as
an Exhibit of Registrant's Annual Report on
Form 10-K for the year ended December 31,
1991 is incorporated herein by reference.
- 22 -
Letter Agreement of March 4, 1991 amending
the Credit Agreement between the Registrant
and Chemical Bank dated March 10, 1989
filed as an Exhibit of Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1991 is incorporated herein by
reference.
Letter Agreement of December 20, 1991
amending the Credit Agreement between the
Registrant and Chemical Bank dated March
10, 1989 filed as an Exhibit of Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1991 is incorporated
herein by reference.
Letter Agreement of February 28, 1992
amending the Note Agreement between the
Registrant and the Travelers Insurance
Company, the Great-West Life Assurance
Company, the Franklin Life Insurance
Company, the Franklin United Life Insurance
Company and the Woodmen Accident and
Life Company dated January 15, 1987 filed as
an Exhibit of Registrant's Annual Report on
Form 10-K for the year ended December 31,
1992 is incorporated herein by reference.
Letter Agreement of July 22, 1992 amending
the Note Agreement between the Registrant
and the Travelers Insurance Company, the
Great-West Life Assurance Company, the
Franklin Life Insurance Company, the
Franklin United Life Insurance Company, and
the Woodmen Accident and Life Company
dated January 15, 1987 filed as an Exhibit of
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992 is
incorporated herein by reference.
Letter Agreement dated October 30, 1992
amending the Credit Agreement between the
Registrant and Chemical Bank, assigned to
NBD Bank, N.A. with amendment dated
December 20, 1991, dated March 10, 1989
filed as an Exhibit of Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1992 is incorporated herein by
reference.
- 23 -
Note Agreement of November 15, 1992
between the Registrant and Kemper
Investors Life Insurance Company, Federal
Kemper Life Assurance Company,
Lumbermens Mutual Casualty Company,
Fidelity Life Association, American Motorists
Insurance Company, American Manufacturers
Mutual Insurance Company, Allstate Life
Insurance Company, Teachers Insurance &
Annuity Association of America, and Phoenix
Home Life Mutual Insurance Company filed
as an Exhibit of Registrant's Annual Report
on Form 10-K for the year ended December
31, 1992 is incorporated herein by reference.
Note Agreement of November 15, 1992
between the Registrant and Principal Mutual
Life Insurance Company, and Principal
National Life Insurance Company filed as an
Exhibit of Registrant's Annual Report on
Form 10-K for the year ended December 31,
1992 is incorporated herein by reference.
Letter Agreement dated December 27, 1993
amending the Credit Agreement between the
Registrant and Chemical Bank, assigned to
NBD Bank, N.A. with amendment dated
December 20, 1991, dated March 10, 1989
filed as an Exhibit of Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1993 is incorporated herein by
reference.
(5) Employee Stock Ownership Plan and Trust
dated January 1, 1989 filed as an Exhibit of
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989 is
incorporated herein by reference.
(C) The following exhibits have been included in the
filing made with the SEC and are available upon
request.
Supplemental Executive Retirement Plan dated
August 15, 1994 is included as Exhibit A.
14(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were required to be filed for the three
months ended December 31, 1994.
- 24 -
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.
STANDARD MOTOR PRODUCTS, INC.
(Registrant)
Lawrence I. Sills
--------------------------------------------
Lawrence I. Sills, President, Director
Chief Operating Officer
Michael J. Bailey
-------------------------------------------
Michael J. Bailey, Vice President Finance,
Chief Financial Officer
James J. Burke
--------------------------------------------
James J. Burke, Corporate Controller
Dated: New York, New York
March 31, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the Capacities and on the dates indicated:
March 31, 1995 Lawrence I. Sills
- -------------- --------------------------------------------
(Dated) Lawrence I. Sills, President, Director
Chief Operating Officer
March 31, 1995 Bernard Fife
- -------------- --------------------------------------------
(Dated) Bernard Fife
Co-Chairman, Director
March 31, 1995 Nathaniel L. Sills
- -------------- --------------------------------------------
(Dated) Nathaniel L. Sills
Co-Chairman, Director
March 31, 1995 Arlene R. Fife
- -------------- --------------------------------------------
(Dated) Arlene R. Fife, Director
March 31, 1995 Ruth F. Sills
- -------------- --------------------------------------------
(Dated) Ruth F. Sills, Director
- 25 -
[CAPTION]
<TABLE>
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
Years ended December 31, 1994, 1993 and 1992
<CAPTION>
Additions
-------------------------------
Balance at Charged to Charged to
beginning costs and other Balance at
Description of year expenses accounts Deductions end of year
----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful accounts $ 3,468,000 $ 4,234,000 $ 254,000 $ 4,409,000 $ 3,547,000
Allowance for discounts 2,068,000 93,000 -- -- 2,161,000
----------- ----------- ----------- ----------- -----------
$ 5,536,000 $ 4,327,000 $ 254,000 $ 4,409,000 $ 5,708,000
=========== =========== =========== =========== ===========
Year ended December 31, 1993:
Allowance for doubtful accounts $ 3,460,000 $ 2,112,000 $ 86,000 $ 2,190,000 $ 3,468,000
Allowance for discounts 1,861,000 207,000 -- -- 2,068,000
----------- ----------- ----------- -----------
$ 5,321,000 $ 2,319,000 $ 86,000 $ 2,190,000 $ 5,536,000
=========== =========== =========== ===========
Year ended December 31, 1992:
Allowance for doubtful accounts $ 2,782,000 $ 4,116,000 $ 106,000 $ 3,544,000 $ 3,460,000
Allowance for discounts 1,736,000 189,000 -- 64,000 1,861,000
----------- ----------- ----------- -----------
$ 4,518,000 $ 4,305,000 $ 106,000 $ 3,608,000 $ 5,321,000
=========== =========== =========== ===========
</TABLE>
(a) Recoveries of accounts previously written off.
EXHIBIT 22
SUBSIDIARIES OF THE REGISTRANT
AS OF FEBRUARY 28, 1995
Percent
State or of Voting
Country of Securities
Name Incorporation Owned
Blue Streak-Hygrade Motor Products, Ltd. Canada 100
Marathon Auto Parts and Products, Inc. New York 100
Motortronics, Inc. New York 100
Reno Standard Incorporated Nevada 100
Stanric, Inc. Delaware 100
Mardevco Credit Corp. (1) New York 100
Standard Motor Products (Hong Kong) Limited Hong Kong 100
Industrial & Automotive Associates, Inc. California 100
EIS Brake Manufacturing, Ltd. Canada 100
All of the subsidiaries are included in the consolidated financial
statements.
(1) Wholly owned subsidiary of Stanric, Inc.
- 27 -
EXHIBIT A
STANDARD MOTOR PRODUCTS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EFFECTIVE AS OF AUGUST 15, 1994
Standard Motor Products, Inc.
Supplemental Executive Retirement Plan
Section PAGE
I. Establishment and Purpose................................. 1
II. Definitions............................................... 2
III. Eligibility and Participation............................. 3
IV. Deferred Compensation Amounts............................. 5
V. Time of Payment and Manner of Payments.................... 6
VI. Deferred Compensation Account............................. 8
VII. Change of Control......................................... 10
VIII. Administration............................................ 11
IX. Miscellaneous............................................. 12
Appendix Schedule of Participants
Section I
Establishment and Purpose
1.01 Establishment Standard Motor Products, Inc. (hereinafter
-------------
referred to as the "Company") hereby establishes, effective as of August 15,
1994, an unfunded supplemental deferred compensation plan for a select group of
management or highly compensated employees as described herein, which shall be
known as the "STANDARD MOTOR PRODUCTS, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN" (hereinafter referred to as the "Plan").
1.02 Purpose The purpose of this Plan is to enable the Company
-------
to supplement the benefits under the Standard Motor Products, Inc. Capital
Accumulation Plan which will be reduced because of the new compensation
limitation under Section 401(a)(17) of the Internal Revenue Code of 1986, as
amended, to certain key executive employees of the Company as well as to
provide a means whereby certain amounts payable by the Company to key
executive employees may be deferred to some future period, and to attract and
retain key executive employees of outstanding competence.
- 1 -
Section II
Definitions
The following words and phrases shall have the following
meanings, unless a different meaning is plainly required by the context. Any
masculine terminology used in the Plan shall also include the feminine gender
and the definition of any terms in the singular shall also include the plural.
"Account" or "Deferred Compensation Account" means the
deferred compensation account established for a Participant pursuant to Section
VI.
"Beneficiary" means any person or entity validly designated by
the Participant in accordance with Section III to receive the benefits, if any,
payable under the Plan to such Participant.
"Board" means the Board of Directors of the Company.
2.04 "Committee" means the Compensation Committee of the
Board.
"Company" means Standard Motor Products, Inc., or any
successor thereto.
"Company Contribution" means the amount, if any, contributed
by the Company to the Plan on behalf of the Participant. For any Plan Year, the
decision to make Company Contributions shall be made in the sole discretion of
the Company.
"Disability" means a physical or mental disability which is
determined by a physician acceptable to the Committee to have rendered the
Participant incapable of continuing in the regular active employment of the
Company for at least six months.
"Early Retirement" means the date on which a Participant
attains his early retirement date as defined in accordance with the Standard
Motor Products, Inc. Capital Accumulation Plan.
- 2 -
"Effective Date" means August 15, 1994.
"Eligible Employee" means any employee designated by the
Committee who satisfies the requirements of Section III.
"Normal Retirement Date" means the date the Participant
attains sixty-five (65) years of age.
"Participant" means an Eligible Employee of the Company who is
selected to participate in the Plan in the manner described in Section III.
"Plan" means the Standard Motor Products, Inc. Supplemental
Executive Retirement Plan as set forth herein and, as the same may be amended
from time to time.
"Plan Year" means the calendar year.
"Total Compensation" means base wages and any bonuses payable
in cash to the Participant as reflected on the Participant's Form W-2 during a
Plan Year, excluding any compensation from the exercise of stock options.
"Trust" means the Standard Motor Products, Inc. Supplemental
Executive Retirement Plan Trust or any other trust established by agreement
between the Company and the Trustee in connection with the Plan under which Plan
assets are held and invested and from which benefits under the Plan are paid.
"Trustee" means the corporation, or other entity acting as
trustee of the Trust at any time of reference.
"Year of Service" means a one year period of employment with
the Company in which the Participant completes at least 1,000 hours.
"Valuation Date" means each business day of the Plan year.
- 3 -
Section III
Eligibility and Participation
3.01 Eligibility
-----------
(a) All officers of the Company and other key executives shall
be Eligible Employees and the Committee may select from time to time the other
key executive employees who shall be eligible to participate under the Plan.
(b) In order for an Eligible Employee to participate in the
Plan, he must file with the Committee, before the beginning of the applicable
Plan Year, an election on the form attached hereto as Exhibit A.
Notwithstanding the above, for the first Plan Year, a Participant shall be
permitted to elect to defer his Compensation within (30) thirty days from the
Effective Date of the Plan.
(c) Participation in the Plan shall continue until the balance
credited to the Participant's Account has been paid in full.
3.02 Beneficiary Designation The Participant shall submit to the
-----------------------
Company upon enrollment in the Plan or at such time as the Committee requests
and on the form attached hereto as Exhibit B, a written designation of a primary
beneficiary to whom payment of his Deferred Compensation Account under the Plan
shall be made in the event of his death. Each beneficiary designation shall
become effective only when received by the Committee.
- 4 -
Section IV
Deferred Compensation Amounts
4.01 Employee Salary Deferrals. An Eligible Employee may
--------------------------
irrevocably elect on an election form attached hereto as Exhibit B, to defer
receipt of (a) all or a portion of his bonus for the year or (b) his
Compensation which would otherwise be payable for the applicable Plan Year up
to a maximum of 50%. The deferred amount may be expressed as a dollar
amount, or a percentage of such bonus or Compensation payable during the Plan
year.
4.02 Company Contributions. Notwithstanding Section 4.01, the
----------------------
Company may contribute to the Trust for each Plan Year and on behalf of each
Participant, a Company Contribution in such amount as may be determined by the
Committee in its sole discretion.
4.03 Deferral Period At the time the Participant makes a deferral
---------------
election pursuant to Section 4.01, he shall specify the date on which payments
of the balance credited to his Account shall be made in accordance with Section
V.
4.04 Vesting
-------
(a) All employee salary deferrals made by a Participant and
credited to his Deferred Compensation Account shall be nonforfeitable at all
times.
(b) All Company Contributions made on behalf of a Participant
and credited to his Deferred Compensation Account shall be fully vested provided
that the Employee has completed (3) three consecutive Years of Service with the
Company. Notwithstanding the preceding sentence, the Committee may in its
discretion accelerate the vesting of any Company Contributions made on behalf of
a Participant who terminates employment before the completion of the three year
period.
- 5 -
Section V
Time of Payment and Manner of Payments
5.01 Time of Payment. Deferrals under the Plan will be made until
----------------
the earliest to occur of:
(a) death,
(b) disability,
(c) early retirement or normal retirement date, or
(d) other termination of employment
Manner of Payment Election. A Participant may irrevocably
elect the manner in which amounts deferred under the Plan and Company
Contributions made under the Plan will be paid. Any such election must be made
at the Participant's initial enrollment in the Plan. The Participant may select
either a single lump sum payment or periodic payments over a period not to
exceed 10 years, payable in installments of equal or varying percentages of
the balance of his bookkeeping account under the Trust or such other method
as approved by the Committee. Notwithstanding the above and subject to the
approval of the Committee, the Participant may change the method of payment by
filing an election with the Committee on the form attached hereto as Exhibit A
approved by it prior to the beginning of the year preceding the year in which
payment of the Participant's Account with respect to such election is to be
made or commenced. Distribution of the Participant's Deferred Compensation
Account shall commence as soon as practicable following the Participant's
termination of employment.
- 6 -
5.03 Death Benefit.
--------------
(a) In the event of the Participant's death while in the
employment of the Company and prior to the commencement of his Deferred
Compensation Account, the Company shall pay the amount of the Participant's
Deferred Compensation Account in a lump sum payment as of the date of death to
the Participant's designated Beneficiary in accordance with the such
designation received by the Committee.
(b) In the event of the Participant's death after the
commencement of his Deferred Compensation Account, but prior to the completion
of all such payments due and owing hereunder, the Company shall continue to make
such payments, in equal annual installments over the remainder of the period
that would have been applicable to the Participant had he survived. Such
continuing payments shall be made to the Participant's designated
Beneficiary, in accordance with the last such designation received by the
Committee from the Participant prior to his death.
- 7 -
Section VI
Deferred Compensation Account
6.01 Participant Accounts. The Committee shall cause the
Trustee to maintain a bookkeeping account to be kept in the name of each
Participant which shall reflect the value of the deferrals made by a Participant
and the Company Contributions, if any, made by the Company, on the
Participant's behalf. The Participant's Account shall be credited as of the
date the amounts deferred otherwise would have become due or payable,
and with respect to Company Contributions at times as the Committee shall
direct.
6.02 Investment of Accounts. In accordance with the terms of the
-----------------------
Trust, the value of funds credited to the Participant's bookkeeping account may
be kept in cash or invested and reinvested in mutual funds, stocks, bonds,
securities or any other investment funds as may be selected by the Committee
in its discretion and reflected in Investment Guidelines which may be
furnished to the Trustee from time to time. In providing such
Investment Guidelines to the Trustee, the Committee may consult Participants
with regard to investment decisions, engage investment counsel and, if it so
desires, may delegate to such counsel full or limited authority to select the
investment vehicles described in the Investment Guidelines in which the
accounts are deemed to be invested. As of each Valuation Date, the
bookkeeping account of each Participant shall be credited with a gain or loss
equal to the adjustment which would be made if assets equal to the bookkeeping
account had been invested in accordance with such Investment Guidelines.
- 8 -
6.03 Assumption of Risk. The Participant agrees on behalf of
-------------------
himself and his designated beneficiary to assume all risk in connection with any
decrease in value of the funds which are deemed to be invested or which continue
to be invested in accordance with the provisions of this Plan. Funds invested
or deemed invested under this Plan shall continue for all purposes to be part of
the general assets of the Company, and no person, other than the Company shall,
by virtue of the provisions of this Plan, have any interest in such funds.
6.04 Charges Against Accounts. There shall be charged against each
-------------------------
Participant's bookkeeping account any payments made to the Participant or his
beneficiary in accordance with Plan Article V.
- 9 -
Section VII
Change of Control
7.01 Effect of Change of Control. In the event of a Change of
Control, as defined in Section 13(d) of the Trust, the Company shall, as soon as
possible, but in no event longer than 60 days following the Change of Control,
make an irrevocable contribution to the Trust in the amount that is sufficient
to pay each Plan Participant or beneficiary the benefits to which Plan
Participants or their beneficiaries would be entitled pursuant to the terms of
the Plan as of the date on which the Change of Control occurred. Upon a Change
of Control each Participant's Deferred Compensation Account shall be fully
vested.
- 10 -
Section VIII
Administration
8.01 Authority. The Plan shall be administered by the Compensation
----------
Committee thereof appointed by the Board, which shall have full power and
authority to administer and interpret the Plan.
8.02 Liability. No member of the Board or management of the
----------
Company shall be liable to any persons for any actions taken under the Plan.
8.03 Procedures. The Board may from time to time adopt such
-----------
procedures as it deems appropriate to assist in the administration of the Plan.
- 11 -
Section IX
Miscellaneous
9.01 Claim for Benefits. No employee or other person shall have
-------------------
any claim or right to payment of any amount hereunder until payment has been
authorized and directed by the Board.
9.02 Not an Employment Contract. This Plan is not and shall not be
---------------------------
deemed to constitute a contract of employment between the Company and any
employee or other person, nor shall anything herein contained be deemed to give
any employee or other person any right to be retained in the Company's employ or
in any way limit or restrict the Company's right or power to discharge any
employee or other person at any time and to treat him without regard to the
effect which such treatment might have upon him as a Participant in the Plan.
Each Participant, Beneficiary and any other person or persons having or
claiming a right to payments thereunder shall rely solely on the unsecured
promise of the Company, and nothing herein shall be construed to give a
Participant, Beneficiary or any other person or persons any right, title,
interest or claim in or to any specific asset, fund, reserve, account or
property of any kind whatsoever owned by the Company or in which it may have
any right, title or interest now or in the future.
9.03 Nontransferability. A Participant's rights and interest under
-------------------
the Plan, including amounts payable, may not be assigned, pledged or transferred
except, in the event of a Participant's death, to his Beneficiary.
9.04 Tax Withholding. The Company shall withhold the amount of any
----------------
federal, state or local income tax or other tax required to be withheld by the
Company under applicable law with respect to any amount payable under the Plan.
- 12 -
9.05 Expenses. All expenses of administering the Plan shall be
---------
borne by the Company.
9.06 Governing Law. The Plan shall be construed in accordance with
--------------
and governed by the laws of the State of New York.
9.07 Amendment and Termination. The Board, in its discretion, may
--------------------------
amend or terminate the Plan at any time. Notice of any amendment or termination
shall be promptly communicated to Participants.
- 13 -
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> QTR-4
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2796
<SECURITIES> 6018
<RECEIVABLES> 115674
<ALLOWANCES> 5708
<INVENTORY> 185855
<CURRENT-ASSETS> 328877
<PP&E> 167356
<DEPRECIATION> 63230
<TOTAL-ASSETS> 462351
<CURRENT-LIABILITIES> 139670
<BONDS> 109927
<COMMON> 26649
0
0
<OTHER-SE> 168440
<TOTAL-LIABILITY-AND-EQUITY> 462351
<SALES> 640810
<TOTAL-REVENUES> 640810
<CGS> 415687
<TOTAL-COSTS> 415687
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4327
<INTEREST-EXPENSE> 12288
<INCOME-PRETAX> 35397
<INCOME-TAX> 11732
<INCOME-CONTINUING> 23665
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23665
<EPS-PRIMARY> 1.80
<EPS-DILUTED> 1.80
</TABLE>
