FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the Quarterly Period Ended March 31, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
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)
(718) 392-0200
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(Registrant's telephone number, including area code)
None
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(Former name, former address and former fiscal year,
if changed since last report.)
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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Date Class Shares Outstanding
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March 31, 1996 Common Stock 13,127,826
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL AND OTHER INFORMATION
MARCH 31, 1996
PART 1 - FINANCIAL INFORMATION
------------------------------
Item 1 Page No.
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CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995 2 & 3
CONSOLIDATED STATEMENTS OF EARNINGS AND
RETAINED EARNINGS for the Three-Month periods ended 4
March 31, 1996 and 1995
CONSOLIDATED STATEMENTS OF CASH FLOWS for the Three-Month
periods ended March 31, 1996 and 1995 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 - 8
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 9
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
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Item 6
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Exhibits and Reports on Form 8K 10
Signature 11
- 1 -
[CAPTION]
<TABLE>
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
------
<CAPTION>
March 31, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,898 $ 10,856
Marketable securities (Note 2) 8,774 6,672
Accounts and notes receivable, net of
allowance for doubtful accounts and
discounts of $7,685 (1995 - $5,907) 183,552 121,516
Inventories (Note 3) 203,076 206,279
Deferred income taxes 22,647 22,647
Prepaid expenses and other current assets 7,479 6,569
----------- ------------
Total current assets 440,426 374,539
Property, plant and equipment, net of
accumulated depreciation (Note 4) 111,980 109,537
Other assets (Note 9) 48,995 37,154
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Total assets $ 601,401 $ 521,230
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----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
- 2 -
[CAPTION]
<TABLE>
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except for shares and per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<CAPTION>
March 31, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Notes payable - banks $ 57,800 $ 10,200
Current portion of long-term debt (Note 7) 12,419 14,262
Accounts payable 29,640 24,625
Sundry payables and accrued expenses 73,471 69,502
Accrued customer returns 13,571 13,446
Payroll and commissions 8,757 10,331
----------- ------------
Total current liabilities 195,658 142,366
Long-term debt (Note 7) 167,745 148,665
Deferred income taxes 5,730 5,730
Postretirement benefits other than pensions
and other accrued liabilities 16,969 14,069
----------- ------------
Total liabilities 386,102 310,830
Commitments and contingencies (Note 7)
Stockholders' equity (Notes 6 and 7):
Common stock-par value $2.00 per share
Authorized - 30,000,000 shares
Issued - 13,324,476 shares in 1996 and 1995
(including 196,650 shares held as treasury 26,649 26,649
shares in 1996 and 1995)
Capital in excess of par value 2,651 2,651
Loan to Employee Stock Ownership Plan (ESOP) (3,345) (5,025)
Minimum pension liability adjustment (27) (27)
Retained earnings 193,080 189,837
Foreign currency translation adjustment 126 150
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219,134 214,235
Less: treasury stock-at cost 3,835 3,835
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Total stockholders' equity 215,299 210,400
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Total liabilities and stockholders' equity $ 601,401 $ 521,230
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</TABLE>
See accompanying notes to consolidated financial statements.
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[CAPTION]
<TABLE>
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Dollars in thousands, except for shares and per share data)
(Unaudited)
<CAPTION>
For the Three Months Ended
March 31,
-----------------------------
1996 1995
---- ----
<S> <C> <C>
Net sales $ 174,440 $ 159,720
Cost of sales 118,540 105,521
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Gross profit 55,900 54,199
Selling, general and
administrative expenses 46,552 46,085
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Operating Income 9,348 8,114
Other income (expense) - net 630 378
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9,978 8,492
Interest expense 3,845 3,158
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Earnings before taxes 6,133 5,334
Taxes based on earnings (Note 5) 1,840 1,440
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Net earnings $ 4,293 $ 3,894
Retained earnings
at beginning of period 189,837 177,904
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194,130 181,798
Less: cash dividends for period 1,050 1,050
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Retained earnings at end of period $ 193,080 $ 180,748
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Per share data:
Net earnings per share $.33 $.30
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---- ----
Dividends per common share $.08 $ .08
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---- ----
Average number of common shares 13,127,826 13,122,648
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---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
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[CAPTION]
<TABLE>
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,293 $ 3,894
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation and amortization 4,220 3,517
(Gain) on disposal of property,plant & equipment (7) (11)
Proceeds from sales of trading securities 3,951 431
Purchases of trading securities (5,794) (595)
Change in assets and liabilities, net of effects from acquisitions:
(Increase) in accounts receivable, net (60,755) (21,146)
(Increase) decrease in inventories 4,244 (12,734)
(Increase) in other assets (1,368) (1,235)
Increase (decrease) in accounts payable 4,484 (8,768)
(Decrease) in other current assets and liabilities (2,782) (4,793)
Increase in sundry payables and accrued expenses 3,580 597
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Net cash (used in) operating activites (45,934) (40,843)
Cash flows from investing activities:
Purchases of held-to-maturity securities (81) (106)
Capital expenditures, net of effects from acquisitions (5,259) (2,652)
Payments for acquisitions, net of cash acquired (9,953) (3,839)
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Net cash (used in) investing activities (15,293) (6,597)
Cash flows from financing activities:
Net borrowings under line-of-credit agreements 47,600 53,700
Proceeds from issuance of long-term debt 20,884
Principal payments of long-term debt (3,847) (3,859)
Reduction of loan to ESOP 1,680 1,680
Proceeds from exercise of employee stock options 26
Dividends paid (1,050) (1,050)
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Net cash provided by financing activities 65,267 50,497
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Effect of exchange rate changes on cash 2 (2)
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Net increase in cash 4,042 3,055
Cash and cash equivalents at beginning of the period 10,856 2,796
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Cash and cash equivalents at end of the period $ 14,898 $ 5,851
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---------- ----------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,570 $ 943
Income taxes 2,922 3,097
</TABLE>
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
The accompanying unaudited financial information should be read in conjunction
with the consolidated financial statements, including the notes thereto, for
the year ended December 31, 1995.
Management acknowledges its responsibility for the preparation of the
accompanying interim consolidated financial statements which reflect all
adjustments considered necessary, in the opinion of management, for a fair
statement of the results of interim periods presented. The results of
operations for the interim periods are not necessarily indicative of the
results of operations for the entire year.
Where appropriate, certain amounts in 1995 have been reclassified to conform
with the 1996 presentation.
Note 2
At March 31, 1996, held-to-maturity securities amounted to approximately
$13,370,000 and trading securities amounted to approximately $2,604,000.
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 March 31, 1996, $6,170,000 of the
held-to-maturity securities mature within one year and $7,200,000 mature within
five to ten years.
The first-in, first-out method is used in computing realized gains or losses.
Note 3
Inventories
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(Dollars in thousands)
March 31, December 31,
1996 1995
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(Unaudited)
Finished goods $ 131,805 $ 133,035
Work in process 4,549 3,550
Raw materials 66,722 69,694
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Total inventories $ 203,076 $ 206,279
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Note 4
Property, Plant and Equipment
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(Dollars in thousands)
March 31, December 31,
1996 1995
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(Unaudited)
Land, buildings and improvements $ 70,159 $ 70,159
Machinery and equipment 77,204 76,263
Tools, dies and auxiliary equipment 7,779 7,766
Furniture and fixtures 18,393 17,339
Leasehold improvements 5,553 5,486
Construction in progress 11,305 7,527
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190,393 184,540
Less accumulated depreciation 78,413 75,003
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Total property, plant and equipment - net $ 111,980 $ 109,537
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Note 5
The provision for taxes is less than the normal statutory rate primarily
because earnings of a subsidiary operating in Puerto Rico, amounting to
approximately $3,378,000 and $3,123,000 for the three months ended March 31,
1996 and 1995, respectively, are exempt from United States income taxes and
are partially exempt from Puerto Rican income taxes.
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6
On January 17, 1996, the Board of Directors adopted a Shareholder Rights Plan
(Plan). Under the Plan, the Board declared a dividend of one Preferred Share
Purchase Right (Right) for each outstanding common share of the Company. The
dividend was paid on March 1, 1996 to the shareholders of record as of February
15, 1996. The Rights are attached to and automatically trade with the
outstanding shares of the Company's common stock.
The Rights will become exercisable only in the event that any person or group
of affiliated persons becomes a holder of 20% or more of the Company's
outstanding common shares, or commences a tender or exchange offer which, if
consummated, would result in that person or group of affiliated persons owning
at least 20% of the Company's outstanding common shares. Once the Rights
become exercisable they entitle all other shareholders to purchase, by payment
of an $80.00 exercise price, one one-thousandth of a share of Series A
Participating Preferred Stock, subject to adjustment, with a value of twice
the the exercise price. In addition, at any time after a 20% position is
acquired and prior to the acquisition of a 50% position, the Board of Directors
may require, in whole or in part, each outstanding Right (other than Rights
held by the acquiring person or group of affiliated persons) to be exchanged
for one share of common stock or one one-thousandth of a share of Series A
Preferred Stock. The Rights may be redeemed at a price of $0.001 per Right at
any time prior to their expiration on February 28, 2006.
At March 31, 1996, 431,000 shares of authorized but unissued common stock were
reserved for issuance under the Company's stock option plans, of which 281,000
shares were subject to outstanding options. 196,650 shares held in treasury
will be used to meet requirements for the Company's stock option program.
93,500 outstanding options were vested at March 31, 1996. 62,500 of the
unvested outstanding options will become vested each May 2 through 1998.
Note 7
Long-Term Debt
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(Dollars in thousands)
March 31, December 31,
1996 1995
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(Unaudited)
Long-term debt consists of:
6.81% senior note payable $ 73,000 $ 53,000
7.85% senior note payable 65,000 65,000
9.47% senior note payable 30,000 30,000
7.88% - 10.50% purchase obligations 6,946 7,113
Credit Agreement 3,354 5,034
Capitalized lease & other 1,084
Floating rate purchase obligation 780 780
9.75% senior note payable 2,000
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180,164 162,927
Less current portion 12,419 14,262
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Total noncurrent portion of
long-term debt $ 167,745 $ 148,665
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 (Continued)
Under the terms of the $73,000,000 senior note agreement, the Company is
required to repay the loan in seven equal annual installments beginning in 2000.
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 $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.
The purchase obligations, due under agreements with municipalities, mature in
annual installments through 2003, and are secured by certain property, plant and
equipment.
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 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.
The Company is exposed to credit loss in the event of nonperformance by the
other parties to the interest rate swap agreement. However, the company does
not anticipate nonperformance by the counterparties.
Under the terms of the capitalized lease, the Company is required to make 60
monthly installments through 2001.
The floating rate purchase obligation matures in annual installments through
1999, bears interest at sixty-five percent of prime, and is secured by certain
property, plant and equipment.
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 March 31, 1996, the Company had unrestricted retained earnings of
$31,776,000.
Note 8
In February 1996, the Company acquired substantially all of the assets and
certain liabilities of Federal Parts Corporation for approximately $13,400,000
plus contingent payments based on performance. Located in Dallas, Texas,
Federal Parts assembles and distributes ignition wire sets and battery cables.
The acquisition had an immaterial effect on consolidated net earnings for the
three months ending March 31, 1996.
Note 9
Other assets consist primarily of unamortized goodwill, deferred new customer
acquisition costs, long-term investments, unamortized customer supply
agreements, equity in joint ventures, pension assets, security deposits and
receivables due after one year.
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
As of March 31, 1996, the Company was in a liquid position with stockholders'
equity of $215,299,000 and working capital of $244,768,000. The Company
expects capital expenditures to be approximately $12,000,000 primarily for new
machinery and equipment for the remainder of 1996. At March 31, 1996, the
Company had unused lines of credit, including the sale of accounts receivable,
aggregating approximately $62,000,000. In addition, the Company secured an
additional $20,000,000 of long-term financing in January 1996. These
borrowings will be used as a source of funding working capital requirements,
capital expenditures and new acquisitions. The Company anticipates that its
present sources of funds under the credit lines will continue to be adequate to
meet its needs.
During the three months ended March 31, 1996, total debt increased by
$64,837,000. This was primarily due to an increase in accounts receivable and
payments for acquisitions.
During the three months ended March 31, 1996, accounts receivable increased by
$62,036,000. This was mainly due to seasonal sales increases, primarily in the
Climate Control Division. Net sales in the first quarter of 1996 were
$32,966,000 greater than net sales in the fourth quarter of 1995. In addition,
an increase in days sales outstanding during this period primarily as a result
of the Company's expansion into retail markets, a decrease in the sale of
accounts receivable and the Federal Parts acquisition contributed to the
accounts receivable increase.
As part of an ongoing operating strategy, the Company is reviewing potential
acquisition candidates in related automotive businesses. If any such
acquisitions are made, they would be funded in the short term by presently
available lines of credit.
INTERIM RESULTS OF OPERATIONS
- - -----------------------------
Comparison of the three months ended March 31, 1996 to the three months ended
- - -----------------------------------------------------------------------------
March 31, 1995.
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Net sales for the current quarter increased $14,720,000 or 9.2% from the
comparable period in 1995 primarily due to a significant sales increase at the
Climate Control Division, reflecting early pre-season orders, and sales
resulting from recent acquisitions.
The gross margin percentage for the first quarter of 1996 of 32.0% was below
the 33.9% during the comparable quarter in 1995. This increase in cost of goods
sold as a percentage of net sales primarily reflects the Company's continued
expansion into lower margin business, sales mix of lower margin products and an
increase in sales deductions related to customer returns.
Selling, general and administrative (S.G. & A.) expenses increased by $467,000
over the comparable quarter in 1995. This increase was primarily due to costs
to support new acquisitions as well as higher variable distribution expenses
and marketing cooperative programs due to increased sales. These increases
were partially offset by reduced expenses related to a reorganization of the
Company's sales force at the end of 1995. As a percentage of net sales, S.G. &
A. expenses were 26.7%, a decrease of 2.2 percentage points versus the first
quarter of 1995.
Other income - net increased $252,000 primarily due to an increase in
investments, a decrease in the loss on sale of accounts receivable and higher
earnings at Blue Streak Electronics, our Canadian joint venture. This was
partially offset by by a lower rate of return on investments.
Interest expense increased by $687,000 as compared to the comparable period of
1995 due primarily to higher average borrowings partially offset by a lower
average effective borrowing rate.
Taxes based on earnings increased by $400,000 due to both higher earnings and a
higher effective tax rate of 30.0% in 1996 as compared to 27.0% in 1995. The
higher effective tax rate in 1996 was primarily due to the lower relative
earnings of the Company's Puerto Rican subsidiary.
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PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibit
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Number Description Method of Filing
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3(i) Restated Articles of Incorporation Filed with this Document
4 Registration of Preferred Share Incorporated by reference
Purchase Rights to Registration Statement
on Form 8-A filed on
February 27, 1996
27 Financial Data Schedule Filed with this Document
(b) Reports on Form 8-K
-------------------
During the three-month period ending March 31, 1996, the following report
was filed on Form 8-K under Item 5. Other Events:
1. The report dated January 19, 1996 announcing the
Registrant's declaration of a dividend of one Preferred
Share Purchase Right on each outstanding common share.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STANDARD MOTOR PRODUCTS, INC.
-----------------------------------
(Registrant)
May 15, 1996 Michael J. Bailey
- - ------------ -----------------------------------
(Date) Vice President Finance,
Chief Financial Officer
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Exhibit 3(i)
CERTIFICATE OF AMENDMENT
of the
CERTIFICATE OF INCORPORATION
of
STANDARD MOTOR PRODUCTS, INC.
under Section 805 of the Business Corporation Law
Lawrence I. Sills, President, and Sanford Kay, Secretary of
Standard Motor Products, Inc., a New York corporation for profit with its
principal place of business at 37-18 Northern Boulevard, Long Island City, New
York 11101, (hereinafter called the ("Corporation"), hereby certify pursuant
to Sections 502 and 805 of the New York Business Corporation Law ("BCL") as
follows:
1. The name of the Corporation is Standard Motor
Products, Inc.
2. The Certificate of Incorporation of the
Corporation was filed by the Department of State
on December 30, 1926. The Restated Certificate
of Incorporation of the Corporation under Section
807 of the BCL was filed at the Department of
State on August 1, 1990.
3.. The Certificate of Incorporation of the Corporation
is hereby amended by the addition of a provision
stating the number, designation, relative rights,
preferences and limitations of the Corporation's
Series A Participating Preferred Stock, par value
$20.00 per share, as authorized and fixed by the
Corporation's Board of Directors at a meeting duly
called and held on the 17th day of January, 1996
in accordance with Article Fourth of the
Corporation's Certificate of Incorporation, as
follows:
"Series A Participating Preferred Stock":
Section 1 Designation and Amount. The shares of such series
shall be designated as "Series A Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 30,000.
Section 2 Dividends and Distributions.
1
(A) Subject to the rights of the holders of any shares
of any class of Preferred Stock ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of
shares of Series A Preferred Stock, in preference to the holders of
Common Stock, par value $2.00 per share (the "Common Stock"), of the
Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable
in cash on the first day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10.00 or (b)
subject to the provision for adjustment hereinafter set forth, 1,000
times the aggregate per share amount of all cash dividends, and
1,000 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of
any share or fraction of a share of Series A Preferred Stock. In
the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date
and the next subsequent Quarterly Dividend Payment Date, a dividend
of $10.00 per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date
2
next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares,
or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. The Board of Directors may
fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be not
more than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Preferred Stock shall
entitle the holder thereof to one thousand votes on all matters
submitted to a vote of the stockholders of the stockholders of the
Corporation. The holders of fractional Series A Preferred Stock
(except for holders of integral multiples of one one-thousandth of a
share of Series A Preferred Stock) shall not be entitled to any vote
on any matter submitted to a vote of the shareholders of the
Corporation.
(B) The holders of Series A Preferred Stock shall be
entitled to elect two directors of the Corporation whenever
dividends payable on Series A Preferred Stock shall be in default as
qualified therein. For purposes of exercising such right, the
Corporation's Bylaws and other provisions of law shall apply, as if
the Series A Preferred Stock were the only class of the
Corporation's shares outstanding.
(C) Except as otherwise provided herein, in the
Restated Certificate of Incorporation of the Corporation, in any
other Certificate of Amendment creating a series of Preferred Stock
or any similar stock, or by law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock and any
other capital stock of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation,
(D) Except as set forth herein, in the Restated
Certificate of Incorporation of the Corporation, or as otherwise
provided by law, holders of Series A Preferred Stock shall have no
special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
3
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on
shares of Series A Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except dividends paid ratably on the
Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled,
(iii) redeem, purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Preferred Stock at least to the same
extent as the junior stock so redeemed, purchased or acquired; or
(iv) redeem, purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any shares
of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of
the Corporation to redeem, purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the
Corporation could, under paragraph (A) of this Section 4, redeem,
purchase or otherwise acquire such shares at such time and in such
manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued Preferred Stock and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Corporation's Restated Certificate of Incorporation, or in
any other Certificate of Amendment creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
4
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $1,000.00 per share, plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case each
share of Series A Preferred Stock shall at the same time be similarly exchanged
or changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred Stock shall
be adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred
Stock shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, on a parity
with any other series of Preferred Stock.
Section 1. Amendment. Subject to the provisions of Article
FOURTH of the Corporation's Restated Certificate of Incorporation, the Bylaws
of the Corporation shall not be amended, altered or repealed in any manner
which would affect adversely the voting powers, rights or preferences of the
holders of the Series A Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of at least two-thirds of the outstanding
shares of Series A Preferred Stock, voting together as a single class."
5
IN WITNESS WHEREOF, this Certificate of Amendment is subscribed
and affirmed as true under the penalties of perjury on behalf of the
Corporation by its President and its Secretary this 15th day of February, 1996.
Lawrence I. Sills
President; Chief Operating Officer
Sanford Kay
Secretary
6
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