<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE) FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
- - --- EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1994
--------------------------------------------
OR
_______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
----------------------- ----------------
Commission file number 1-2917
-------------------------------------------------
THE STANDARD PRODUCTS COMPANY
- - ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0549970
- - ---------------------------- ------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
2130 West 110th Street, Cleveland, Ohio 44102
- - --------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 281-8300
-----------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- - ---------------------------- -----------------------------------------
COMMON SHARES, $1 PAR VALUE
- - ---------------------------- -----------------------------------------
- - ---------------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
- - ---------------------------------------------------------------------------
(Title of class)
- - ---------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 12 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing required for the past 90 days. Yes X No .
----- -----
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices for
such stock, as of a specified date within 60 days prior to the date of filing.
(See definition of affiliate in Rule 405). $370,981,595 AT AUGUST 31, 1994
(APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by sections 12, 13 or 15(D) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ______ No _____.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date. 16,682,234 AT AUGUST 31,
1994
(DOCUMENTS INCORPORATED BY REFERENCE)
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
1994 ANNUAL REPORT TO SHAREHOLDERS (PARTS I, II AND IV)
- - -------------------------------------------------------
PROXY STATEMENT FOR 1994 ANNUAL MEETING OF SHAREHOLDERS (PART III)
- - ------------------------------------------------------------------
<PAGE> 2
PART I
ITEM I. BUSINESS
- - ------
General and Industry Segments
-----------------------------
The Company is engaged primarily in the manufacture of
rubber and plastic parts requiring a substantial degree of
product engineering and high-volume production processes for
automotive original equipment manufacturers in the United States,
Canada, France, the United Kingdom and other European countries
(the "Transportation Equipment Segment"). This segment also
produces rubber and plastic parts for the appliance, construction
and marine industries. The Company also manufactures precure and
mold cure tread rubber for the truck tire retreading industry
(the "Tread Rubber Segment").
Reference is made to "Notes to Consolidated Financial
Statements" included on page 25 and 26 of the Company's 1994
Annual Report to Shareholders, incorporated herein by reference,
for additional financial information concerning the Company's
reportable business segments and geographic areas.
In January 1993, the Company acquired all of the issued
and outstanding shares of capital stock of Standard Products
Industriel (SPI), a corporation organized under French law. See
"Foreign Operations" for a discussion of SPI and its operations.
In December 1992, the Company increased its ownership in its
North American joint venture, Nishikawa Standard Company (NISCO)
to 50% from 40% by making additional capital contributions and by
purchasing partnership units from the Company's partner,
Nishikawa Rubber Company, of Hiroshima, Japan. In July 1992, the
Company's subsidiary, Holm Industries, Inc., acquired the assets
of Jarrow Products, a manufacturer of plastic extrusion products
for commercial appliances and building door sealing systems. In
fiscal 1991, the Company discontinued the manufacture of
rubberized track for military vehicles. See the section
"Discontinued Operations" for a discussion of developments which
have occurred regarding these operations during the past year.
The Company was incorporated in Ohio in 1927 and was
consolidated in 1936 with the Reid Products Company.
TRANSPORTATION EQUIPMENT SEGMENT
Automotive Original Equipment
-----------------------------
PRODUCTS. Rubber products supplied to the automotive
manufacturing industry include flocked rubber and steel
weatherstrip assemblies to seal vehicle windows; flocked rubber
window channel assemblies and rubber window gaskets; and vehicle
body and door dynamic sealing systems. These products form the
sealing system of automotive vehicles preventing water leakage
and inhibiting wind noise from entering the vehicle.
Attractiveness of design is an important feature of the sealing
system. An increasing number of the Company's parts are sold to
automotive original equipment manufacturers as complete sealing
systems. This is a departure from former practices which
involved more suppliers who supplied individual parts, not
complete systems. The Company also supplies molded rubber engine
mounts and body cushions, which comprise a vehicle's vibration
control system, to the automotive manufacturing industry.
Plastic products include metallized, multicolored and embossed
exterior and interior vinyl trim and flocked vinyl and steel
weatherstrip assemblies. The plastic exterior products serve as
protective barriers preventing damage to the vehicle's sheet
metal and have become an integral part of the vehicle's overall
styling and appearance. Although reliable industry statistics
are not available, the Company believes that it is one of the
leading independent manufacturers of rubber window and door
weather sealing products and plastic trim for the automotive
industry.
-2-
<PAGE> 3
MARKETS AND CUSTOMERS. The Company manufactures parts
and accessories for automotive and truck original equipment
manufacturers in the United States, Canada, France and the United
Kingdom and other European countries. Manufacturing operations
for the automotive original equipment market of this segment are
conducted by the Company, Standard Products (Canada) Limited,
Standard Products Limited and Standard Products Industriel.
Approximately 56%, 65% and 71% of the Company's annual revenues
in its 1994, 1993 and 1992 fiscal years, respectively, were
attributable to direct worldwide sales to General Motors
Corporation, Ford Motor Company and Chrysler Motors Corporation.
Since most of the Company's rubber and plastic automotive
products are used on original equipment, sales of such products
are directly affected by the annual car production of original
equipment manufacturers. Original equipment sales are based upon
purchase orders issued annually by automobile manufacturers for
each part which the Company manufactures. The purchase orders
are for all or a percentage of the customers' estimated
requirements and are binding, subject to the annual car
production of original equipment manufacturers. As the year
evolves, customers issue releases under those purchase orders,
specifying quantities of the parts which the assembly plants
require. The Company's sales and product development personnel
work directly with the engineering and styling departments of the
automotive original equipment manufacturers and suppliers in the
engineering and development of its various products.
DISTRIBUTION. The Company utilizes, as a distribution
center for some of its automotive finished products,
approximately 138,000 square feet of a 283,000 square foot public
warehouse which it operates in Dearborn, Michigan. The balance
of the warehouse space is allocated to commercial customers' use.
The Company also distributes automotive finished products from a
leased warehouse in Charlotte, North Carolina, central to the
Company's Southern plants.
Most of the Company's nondomestic customers are supplied
directly by foreign manufacturing plants of subsidiaries of the
Company.
COMPETITION. Each aspect of the Company's business in
automotive products is highly competitive. No single firm
competes with the Company in all aspects of this business. The
Company's competitive position depends upon its ability to offer
engineering and design capabilities and to manufacture products
which meet its customers' pricing, quality and delivery
requirements. The Company has historically met the customers'
requirements.
Other
-----
The Company, through its subsidiary, Holm Industries,
Inc., manufactures rubber and plastic trim seals for the
automotive replacement, construction and marine industries and a
variety of plastic and magnetic parts for original equipment
appliance manufacturers and residential and commercial exterior
door and window manufacturers. These products are manufactured
with some of the raw materials similar to those used in the
products manufactured by the Transportation Equipment and Tread
Rubber Segments. See "Raw Materials" for a discussion of
suppliers and available supplies. Distribution of these products
are through both internal sales personnel and manufacturing
representatives. These products are sold to many customers, and
market share information is not available for all of the products
which Holm manufactures. For plastic and magnetic seals, Holm is
the largest supplier to the United States refrigeration and
freezer appliance market.
In July 1992, Holm acquired the assets of Jarrow
Products, a small manufacturer of commercial refrigeration
gaskets and exterior door weatherstrip.
Joint Venture
-------------
The Company also manufactures vehicle body and door
sealing systems for sale to North American automotive original
equipment manufacturers and Japanese transplants, including
Honda, Ford Motor Company and Automotive Alliance International
(formerly Mazda), through its North American joint venture,
-3-
<PAGE> 4
Nishikawa Standard Company (NISCO), a general partnership owned
50% by the Company and 50% by Nishikawa Rubber Company
(Nishikawa) of Hiroshima, Japan. Manufacturing operations are
conducted at plants located in Bremen and Topeka, Indiana. In
December 1992, the Company increased its ownership in NISCO to
50% from 40% by making additional capital contributions and by
purchasing partnership units from Nishikawa. The chief operating
officer of the Company is the chief executive officer of NISCO
and chairman of its Policy Committee.
TREAD RUBBER SEGMENT
PRODUCTS. The Company's wholly owned subsidiary, Oliver
Rubber Company ("Oliver"), manufactures and markets precure and
mold cure tread rubber, bonding gum, cement, repair materials and
equipment for the tire retreading industry.
Oliver also supplies custom mixed rubber to the Company
for use in automotive original equipment products and to NISCO
for the manufacture of door seals for automotive original
equipment. Oliver also custom mixes rubber compounds for
selected customers throughout the United States.
Precure tread rubber is shipped to a retreader partially
cured and with a specially designed tread imprinted. The
retreader cements the precure tread to a tire casing using heat
and pressure to complete a permanent bond.
Mold cure tread rubber is applied by a retread dealer to
the tire casing in a pressure mold which cures the rubber and at
the same time imprints into it the tread design.
Based on industry statistics in 1994, precure tread
rubber represents approximately 75% of the tread rubber used by
the retreading industry and mold cure represents 25%. Oliver
supplies both precure and mold cure tread rubber.
MARKETS. Oliver serves the trucking industry in North
America and Europe through its licensed dealer network for
precure retreading and through dealers who sell mold cure rubber.
Oliver also serves markets in other areas of the world, such as
India, through license arrangements and export sales. Truck
mileage, and therefore demand for tread rubber, correlate with
general economic conditions of the market served.
Oliver also supplies mold cure tread rubber for off-the-
road (OTR) construction equipment.
DISTRIBUTION. In North America, tread rubber products
are marketed by Oliver's sales force to retread dealers, some of
which are licensed by Oliver. Licensed dealers use Oliver's
patented precure system and market tread rubber under the name of
Tuff-Cure.
COMPETITION. The tread rubber industry is very
competitive with more than ten suppliers, of which three are
significant. Competition is based upon the price and quality of
the products supplied. While exact market share information is
not available, it is estimated that based on pounds shipped, the
largest supplier of precure tread rubber is Bandag, Incorporated
("Bandag"). Oliver, unlike Bandag, sells in North America, both
precure and mold cure tread rubber, and management believes it is
the largest supplier of mold cure rubber and it is the second
largest supplier of tread rubber in 1994.
Other
-----
In 1992, Oliver acquired the assets of Salisbury
Machine, a manufacturer of equipment used in retreading tires.
-4-
<PAGE> 5
DISCONTINUED OPERATIONS
In fiscal 1991, the Company discontinued the manufacture
of rubberized track for military vehicles. As a result, the
Company significantly curtailed operations at its Port Clinton
Division and recorded a provision of $30,000,000 for estimated
ongoing losses and estimated costs associated with closure and/or
sale of the division. During fiscal 1992, the Company completed
or subcontracted its contractual commitments, and losses incurred
were charged to the reserve. In 1993, the Company announced the
complete closure of the Port Clinton Division, which had been
involved in rubber mixing for other Company facilities following
its termination of the military business. Assets related to the
military operations have been sold, transferred to other Company
facilities or disposed. The accumulated postretirement benefits
of the Port Clinton employees had been recognized in the
provision for discontinued operations of $30,000,000 and has now
been reclassified to accrued postretirement benefits. The
remaining balance of the reserve represents reserves for building
and site work and closure costs.
RAW MATERIALS
The principal materials used by the Company and its
subsidiaries in its Transportation Equipment and Tread Rubber
Segments are synthetic rubber and rubber chemicals. In addition,
other significant materials used by the Company in its
Transportation Equipment Segment are plastic resins, woven
fabrics, flock fibers, coil steel, aluminum and adhesives. The
majority of these materials are purchased on the open market from
domestic suppliers.
The Company believes that it has adequate supplies of raw
materials available from reliable sources for the levels of
production presently anticipated.
ENGINEERING AND DEVELOPMENT
Product development is an essential part of the market
strength of the Company and its automotive subsidiaries. The
Company's sales and product development personnel work directly
with the engineering and styling departments of its major
customers in the engineering and development of new products. In
recent years, the Company's involvement with its automotive
customers has begun at the earlier model design stage with the
Company assuming an increasing share of engineering and design
capability and responsibility. The Company's main sales and
product development group is located in Dearborn, Michigan, close
to the purchasing and engineering groups of its customers. The
Company also has significant product development facilities at
Stratford, Ontario, Huntingdon, England and Courbevoie, France.
As of August 15, 1994, 231 engineers and technicians were
engaged in development and engineering activities. The Company
spent approximately $31,538,000 in 1994, $22,003,000 in 1993 and
$17,153,000 in 1992 on product engineering and development, of
which $2,688,000 in 1994, $1,032,000 in 1993 and $3,534,000 in
1992 were customer-reimbursed.
In 1994, the product engineering and development
expenditures, net of customer reimbursement, were 3.6% of
Transportation Equipment sales. In 1993 and 1992, the comparable
percentages were 3% and 2.3%, respectively. The percentage of
product engineering and development expenditures to Tread Rubber
Segment sales for 1994, 1993 and 1992 were 1.2%, 1.3% and .9%,
respectively.
PATENTS AND LICENSES
The Company holds numerous patents covering various
manufacturing processes and products of the Transportation
Equipment Segment and several patents relating to application
processes used by its tread rubber customers. The Company has
licensed certain of the patents. The Company has a license
agreement with Nishikawa Rubber Company for sales, marketing and
engineering services on certain products sold by
-5-
<PAGE> 6
the Company. While the Company considers some of its patents and
licenses to be important in certain aspects of its business, the
Company does not believe that the loss or expiration of any
particular patent or license would have an adverse effect on
either segment of its business. The Company actively pursues the
application for patents on new products and processes.
EMPLOYEES
As of June 30, 1994, the Company employed approximately
9,480 persons, of whom approximately 6,273 were hourly employees.
Employee relations at the Company's plants generally have been
good.
ENVIRONMENTAL MATTERS
The Company believes that it is in substantial compliance
with federal, state and local provisions regulating the discharge
of materials into the environment or otherwise relating to the
protection of the environment. The Company maintains personnel
whose function is to monitor compliance with environmental
protection regulations.
At the Company's Gaylord, Michigan plant, the Company is
correcting the condition of groundwater located under its plant
by injecting such water to underground depths well below and
separate from the drinking water aquifer. All corrective
activities are fully permitted by the Michigan Department of
Natural Resources and the United States Environmental Protection
Agency. The cost of installation and operation are not material
to the Company's financial position.
The Company has been previously designated as a
potentially responsible party in connection with several disposal
sites. Settlements with payment of an immaterial amount or no
amount at all have been obtained for all sites, except a site
located in Jamestown, North Carolina. The Company believes that
it was an insignificant contributor at this site and that this
matter will be resolved without a material adverse affect to the
Company's financial position.
The Company has been notified that the property occupied
by its Schenectady, New York plant is being investigated due to
allegations concerning possible contamination resulting from the
operations of the previous property owner. No determination of
liability to the Company, if any, can be made at this time.
FOREIGN OPERATIONS
The Company owns all of the outstanding shares of
Standard Products (Canada) Limited, a Canadian corporation which
is engaged primarily in the manufacture of parts and accessories
for United States and Canadian automotive original equipment
manufacturers and for the automotive replacement parts market and
the manufacture of tread rubber for the tire retreading industry.
The Company owns all of the outstanding shares (except
for qualifying shares held by nominees) of Standard Products
Limited, an English corporation which is engaged primarily in the
manufacture of parts and accessories for the North American,
United Kingdom and European automotive original equipment
manufacturers and for the automotive replacement parts market.
The Company owns all of the outstanding shares (except
for qualifying shares held by nominees) of Oliver Europa, an
English corporation engaged primarily in the manufacture and
distribution of tread rubber and rubber and related products in
Europe.
-6-
<PAGE> 7
In January 1993, the Company acquired all of the issued
and outstanding shares of capital stock of Standard Products
Industriel (SPI), a corporation organized under French law, and
all of the issued and outstanding shares of capital stock of
SPI's affiliated companies: Societe Lillebonnaise de
Caoutchoucs, Standard Products Atlantic and Central Auto, each of
which is a corporation organized under French law, Standard
Products Industriel SA, a corporation organized under Swiss law,
Rubber Industrial Holding Company, a Delaware corporation, "5"
Rubber Corporation, a Pennsylvania corporation and La Riviere
Corporation, a Pennsylvania corporation (SPI and such affiliated
companies collectively, the "SPI Group"). The SPI Group is
engaged in the business of designing, developing, manufacturing
and distributing automotive window weatherstrips, glass
weatherstrips, vehicle body and door seals and glass
encapsulation products to French, other European and North
American auto manufacturers. The SPI Group's customers include,
among others, PSA (Peugeot/Citroen), Renault, Fiat, Volvo,
Chrysler Corporation, General Motors Corporation, Volkswagen and
Saab. SPI's European customer base complements the customer base
of the Company's operations in the United Kingdom. The SPI Group
has an experienced management team and expertise in the technical
design and engineering of automotive sealing products and
systems. Similar to the Company, SPI's design personnel work
closely with the engineering and styling departments of its
customers.
The Company also has minority equity interests in and
licensing arrangements with firms in Australia, Brazil, Japan,
Korea, India and other countries throughout the world.
The Company's United States export sales in the aggregate
for the three fiscal years ended June 30, 1994 and 1993 and June
28, 1992, were $41,472,000, $42,800,000 and $37,400,000,
respectively, of which a substantial portion is represented by
sales to automotive original equipment manufacturers in Canada.
The Company's experience has been that its significant
foreign businesses in Canada and Western Europe do not present
materially different risks or problems from those encountered in
its United States markets. The risks of the Company, Standard
Products (Canada) Limited, Standard Products Limited and Standard
Products Industriel involve meeting the customers' expectations
as to the timely delivery of parts which meet their
specifications. The automotive business is directly affected by
the annual car production of original equipment manufacturers.
Standard Products (Canada) Limited, Standard Products Limited,
and Standard Products Industriel participate in the risk of
varying car builds similar to any of the Company's other
automotive plants which supply domestic assembly plants.
ITEM 2. PROPERTIES
- - ------
<TABLE>
The Company operates the properties described as follows:
<CAPTION>
Land Plant
Location (Acreage) (Square Feet)
-------- --------- -------------
<S> <C> <C>
Asheboro, North Carolina (1) 16.4 161,000
Athens, Georgia (1) 32.0 109,000
Athens, Georgia (1)(3) 3.3 37,000
Bezons, France (4) 4.3 140,00
Bolbec, France (3)(4) 24.3 276,000
Cleveland, Ohio (4) 12.0 157,000
Colsterworth, England (1)(3) .5 19,200
Courbevoie, France (3)(4) .5 23,000
Dallas, Texas (1)(3) 6.0 96,000
Dearborn, Michigan (Warehouse and Offices) (4) 13.9 358,000
Etobicoke, Ontario, Canada (3)(4) .8 33,000
Export, Pennsylvania (1)(3) 2.0 40,500
Gaylord, Michigan (4) 96.2 92,000
Georgetown, Ontario, Canada (4) 5.7 89,000
</TABLE>
-7-
<PAGE> 8
<TABLE>
<CAPTION>
Land Plant
Location (Acreage) (Square Feet)
-------- --------- -------------
<S> <C> <C>
Goldsboro, North Carolina (4) 6.6 140,000
Greenville, Michigan (4) 1.0 10,000
Griffin, Georgia (4) 17.5 190,000
Hartselle, Alabama (3)(4) 11.1 72,000
Huntingdon, England (4) 11.1 175,000
Kittanning, Pennsylvania (4) 6.1 80,000
Lexington, Kentucky (4) 5.9 115,000
Lillebonne, France (4) 9.1 100,000
Maesteg, Wales (4) 8.4 102,000
Mississauga, Ontario, Canada (3)(4) 5.0 97,000
Mitchell, Ontario, Canada (4) 10.5 88,000
New Ulm, Minnesota (4) 3.5 46,000
Oakland, California (1) 4.2 112,000
Paris, Texas (1) 28.5 31,000
Plymouth, England (3)(4) 9.0 127,000
Port Clinton, Ohio (5) 20.0 225,000
Rocky Mount, North Carolina (4) 24.2 222,000
St.Charles, Illinois (4) 2.3 47,000
San Diego, California (3)(4) -- 10,000
Salisbury, NC (1) 2.7 37,200
Schenectady, New York (4) 22.5 224,000
Scottsburg, Indiana (2)(4) 8.5 192,000
Spartanburg, South Carolina (4) 30.1 85,000
Stratford, Ontario, Canada (4) 20.0 80,000
Stratford, Ontario, Canada (1)(4) 5.4 94,000
Stratford, Ontario, Canada (4) 26.8 107,000
Vitre, France (3)(4) 16.6 207,000
Wadsworth, Ohio (1) 2.0 28,000
Winnsboro, South Carolina (4) 26.4 175,000
<FN>
(1) Facilities used in the Tread Rubber Segment.
(2) These facilities are encumbered by either capital
lease or mortgage agreements which provide for
payments sufficient to pay principal of and interest
on first mortgage industrial revenue bonds issued for
the purchase of the plants and equipment. These
agreements have been capitalized for financial
statement purposes.
(3) Leased from others. The leases are short to medium
term operating leases, some of which have options to
renew for additional periods. Rental rates are
competitive for the market in which the property is
located. The Company believes that all of these
leased facilities could be replaced for comparable
terms.
(4) Facilities used in the Transportation Equipment
Segment.
(5) Facilities are currently idle.
</TABLE>
The Company operates a 283,000 square foot public
warehouse in Dearborn, Michigan of which the Company utilized
approximately 138,000 square feet for its own products. The
Company has its automotive sales office and product
development and engineering division at this location, and
these facilities utilize approximately 61,000 square feet of
space.
-8-
<PAGE> 9
The Company believes that all of its properties,
machinery and equipment are in good operating condition and
suitable and adequate for the business of the Company as
presently conducted. The utilization of the Company's
Transportation Equipment facilities varies with the car build
production. The utilization of the Tread Rubber facilities
varies with demand for tread rubber product. Capacities of
each facility are adequate to meet current demands. During
the past year, utilization of capacity was 86% for
Transportation Equipment facilities and 77% for Tread Rubber
facilities.
ITEM 3. LEGAL PROCEEDINGS
- - ------
The Company was not a party to any pending legal
proceedings other than ordinary routine litigation incidental
to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - ------
No matter was submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The information below is included in this report
pursuant to instruction 3 to Item 401(B) of Regulation S-K.
The Executive Officers of the Company are elected
annually to serve for one-year terms or until their successors
are elected and qualified. The officers listed below were
elected on October 18, 1993. Their business experience,
principal occupations and employment during the last five
years are indicated in the table below.
<TABLE>
<CAPTION>
Served In
Present
Office
Name Age Position with Registrant Since
---------------------- --- ------------------------------------------------------ ---------
<S> <C> <C> <C>
James S. Reid, Jr. 68 Chairman and Chief Executive Officer 1962
In addition to his position as Chief Executive
Officer, Mr. Reid served as President from 1962
to 1988 and in 1990.
Theodore K. Zampetis 49 President and Chief Operating Officer 1991
Formerly, Mr. Zampetis was Vice President-
Manufacturing, North American Automotive
Operations from 1989 to 1990 and Executive Vice
President - President Standard Products Automotive
Operations from 1990.
Aubrey E. Arndt 54 Vice President-Finance 1992
Formerly, Mr. Arndt was Director of Audit,
Special Studies and Taxes from 1990 and Executive
Vice President/Chief Financial Officer, The
Westgate Group from 1989.
</TABLE>
-9-
<PAGE> 10
<TABLE>
<CAPTION>
Served In
Present
Office
Name Age Position with Registrant Since
---------------------- --- ------------------------------------------------------ ---------
<S> <C> <C> <C>
Larry J. Enders 52 Vice President of the Company and President 1993
and Chief Executive Officer, Oliver Rubber
Company
Formerly, Mr. Enders was Vice President-Sales
from 1988 to 1991 and Vice President-Purchasing
and Worldwide Supply from 1991.
James F. Keys 40 Vice President of the Company and Managing 1991
Director of Standard Products Limited
Formerly, Mr. Keys was Division Manager,
Product Development and Engineering
Division from 1987.
Stephan J. Mack 57 President, Holm Industries, Inc. 1986
James D. Pry 50 Vice President of the Company and President, 1991
Standard Products (Canada) Limited
Formerly, Mr. Pry was Division Manager,
Goldsboro Division from 1987.
Thomas J. Stecz 46 Corporate Controller and Assistant Secretary 1992
Formerly, Mr. Stecz was Corporate Controller.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
- - ------ MATTERS
The information required by Item 5 is incorporated
herein by reference to Note 4 of "Notes to Consolidated
Financial Statements" on page 22 and "Common Shares" on page
28 of the Annual Report to Shareholders for the year ended
June 30, 1994.
ITEM 6. SELECTED FINANCIAL DATA
- - ------
The information required by Item 6 is incorporated
herein by reference to pages 14 and 15 of the Annual Report to
Shareholders for the year ended June 30, 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- - ------ AND RESULTS OF OPERATIONS
The information required by Item 7 is incorporated
herein by reference to pages 12 through 16 of the Annual
Report to Shareholders for the year ended June 30, 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - ------
Financial statements and statements required by Item
8 are incorporated herein by reference to pages 17 through 27
of the Annual Report to Shareholders for the year ended June
30, 1994.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- - ------
None
-10-
<PAGE> 11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- - -------
The information required by Item 10 as to directors
of the Registrant is incorporated herein by reference to the
information set forth under the caption "Election of
Directors" on pages 3 through 5 of the definitive Proxy
Statement for the Annual Meeting of Shareholders to be held
October 17, 1994. As to Executive Officers, the information
required is included in Part I of this report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
- - -------
The information required by Item 11 is incorporated
herein by reference to the material under the caption
"Executive Compensation" on pages 6 through 11 of the
definitive Proxy Statement for the Annual Meeting of
Shareholders to be held October 17, 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- - -------
The information required by Item 12 is incorporated
herein by reference to the information set forth under the
captions "Security Ownership of Certain Beneficial Owners" on
pages 1 through 3 of the definitive Proxy Statement for the
Annual Meeting of Shareholders to be held October 17, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - -------
The information required by Item 13 is incorporated
herein by reference to the information set forth under the
caption "Compensation Committee Interlocks and Insider
Participation" on pages 9 and 10 of the definitive Proxy
Statement for the Annual Meeting of Shareholders to be held
October 17, 1994.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
- - ------- 8-K
(a) (1) Financial Statements:
The following consolidated financial statements and related
notes of the Registrant and its subsidiaries are incorporated
herein by reference to the 1994 Annual Report to Shareholders
(pages 17 through 27):
Consolidated Balance Sheets - June 30, 1994 and 1993
Consolidated Statements of Income for the Years Ended June 30,
1994 and 1993 and June 28, 1992
Consolidated Statements of Shareholders' Equity for the Years
Ended June 30, 1994 and 1993 and June 28, 1992
Consolidated Statements of Cash Flows for the Years Ended June
30, 1994 and 1993 and June 28, 1992
Notes to Consolidated Financial Statements
Auditors' Report
(a) (2) Financial Statement Schedules:
-11-
<PAGE> 12
Report of Independent Public Accountants on the Financial
Statement Schedules
Schedule V -- Property, Plant and
Equipment for the Years
Ended June 30, 1994 and
1993 and June 28, 1992
Schedule VI -- Accumulated Depreciation and
Amortization of Property,
Plant and Equipment for the
Years Ended June 30, 1994 and
1993 and June 28, 1992
Schedule VIII -- Valuation and Qualifying
Accounts and Reserves for the
Years Ended June 30, 1994 and
1993 and June 28, 1992
Schedule X -- Supplementary Income
Statement Information for the
Years Ended June 30, 1994 and
1993 and June 28, 1992
All schedules, other than Schedules V, VI, VIII and
X, are omitted since the information is not required or is
otherwise furnished.
Separate financial statements of the Registrant have
been omitted since restricted net assets of consolidated
subsidiaries and unconsolidated investees and the Company's
share of the unconsolidated subsidiaries' equity is less than
25% of the Company's net assets at June 30, 1994.
(a) (3) Exhibits:
<TABLE>
<CAPTION>
If Incorporated by
Exhibit No. Reference, Documents
Under Reg. S-K Form 10-K with which Exhibit Sequential
Item 601 Exhibit No. Description Was Previously Filed Page
- - -------------- ----------- --------------------------------- ----------------------- ----------
<S> <C> <C> <C>
2 2a Stock Sale Agreement, Dated Form 8-K, Dated January
December 19, 1992 with respect 26, 1993
to the acquisition of the Standard (Filed with the SEC on
Products Industriel Group. February 8, 1993;
see Exhibit 2 therein)
3 3a Second Amended and Restated Quarterly Report Form 10-Q
Articles of Incorporation (Filed with the SEC on
November 1, 1993;
see Exhibit 3a therein)
3 3b Amended and Restated Code of Form S-3 Registration
Regulations No. 33-62054
(Filed with the SEC on
May 5, 1993;
see Exhibit 3.2 therein)
4 4a Senior Notes Agreement - Quarterly Report Form 10-Q
$75,000,000 6.55% Senior Notes due (Filed with the SEC on
December 16, 2003, by and among February 11, 1994;
The Standard Products Company and see Exhibit 4 therein)
Metropolitan Life Insurance Company
and certain of its Affiliates
</TABLE>
-12-
<PAGE> 13
<TABLE>
<CAPTION>
Exhibit No. Reference, Documents
Under Reg. S-K Form 10-K with which Exhibit Sequential
Item 601 Exhibit No. Description Was Previously Filed Page
- - -------------- ----------- --------------------------------- ----------------------- ----------
<S> <C> <C> <C> <C>
4 4b Senior Notes Agreement - Annual Report Form 10-K
$25,000,000 aggregate principal (Filed with the SEC on
amount Dated as of June 30, 1989, September 25, 1989;
between the Company and see Exhibit 4b therein)
Nationwide Life Insurance Company,
Aid Association for Lutherans and
Employers Life Insurance Company
of Wausau
4 4c Amendments to the Senior Notes Annual Report Form 10-K
Agreement - $25,000,000 (Filed with the SEC on
aggregate principal amount (4e), September 15, 1992;
dated February 22, 1991 and, see Exhibit 4f therein)
June 30, 1991, between the Company
and Nationwide Life Insurance
Company, Aid Association for
Lutherans and Employers Life
Insurance Company of Wausau
4 4d Credit Agreement, Dated as of Annual Report Form 10-K
January 19, 1993, Among The (Filed with the SEC on
Standard Products Company, as September 13, 1993;
Borrower, and National City Bank, see Exhibit 4c therein)
Society National Bank, Comerica
Bank and NBD Bank, N.A. and
National City, as Agent.
4 4e Agreement of Amendment, Dated as 25
of April 30, 1994, Among The
Standard Products Company, as
Borrower, and National City Bank,
Society National Bank, Comerica
Bank and NBD Bank, N.A. and
National City, as Agent.
10 10a Supplemental Salaried Pension Annual Report Form 10-K
Plan (Filed with the SEC on
September 23, 1986;
see Exhibit 10a therein)
10 10b The Standard Products Company Form S-8 Registration
1985 Employee Incentive Stock No. 33-01558
Option Plan (Filed with the SEC on
November 15, 1985;
see Exhibit 4a therein)
10 10c The Standard Products Company Annual Report Form 10-K
1981 Employee Incentive Stock (Filed with the SEC on
Option Plan September 1, 1982;
see Exhibit 10 therein)
</TABLE>
-13-
<PAGE> 14
<TABLE>
<CAPTION>
Exhibit No. Reference, Documents
Under Reg. S-K Form 10-K with which Exhibit Sequential
Item 601 Exhibit No. Description Was Previously Filed Page
- - -------------- ----------- --------------------------------- ----------------------- ----------
<S> <C> <C> <C> <C>
10 10d The Standard Products Company Form S-8 Registration
1989 Employee Incentive Stock No. 33-33617
Option Plan (Filed with the SEC on
February 28, 1990;
see Exhibit 4a therein)
10 10e The Standard Products Company Form S-8 Registration
1991 Employee Stock Option Plan No. 33-51556
(Filed with the SEC on
September 2, 1992;
see Exhibit 4c therein)
10 10f The Standard Products Company Form S-8 Registration
1991 Restricted Stock Plan No. 33-51554
(Filed with the SEC on
September 2, 1992;
see Exhibit 4c therein)
10 10g The Standard Products Company Annual Report Form 10-K
Restricted Stock Agreement between (Filed with the SEC on
the Company and the Chairman and September 15, 1992;
Chief Executive Officer see Exhibit 10h therein)
10 10h The Standard Products Company Annual Report Form 10-K
Restricted Stock Agreement between (Filed with the SEC on
the Company and the President and September 15, 1992;
Chief Operating Officer see Exhibit 10i therein)
10 10i The Standard Products Company Form S-8 Registration
1993 Employee Stock Option Plan No. 33-53989
(Filed with the SEC on
June 6, 1994;
see Exhibit 4 therein)
13 13 Annual Report to Shareholders 29
for the Year Ended June 30, 1994
21 21 Subsidiaries of Registrant 64
23 23 Consent of Independent Public 65
Accountants
27 27 Financial Data Schedule 66
<FN>
(b) Reports on Form 8-K: No reports have been filed during the last
quarter of the fiscal year covered by this report on Form 10-K.
</TABLE>
-14-
<PAGE> 15
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE STANDARD PRODUCTS COMPANY
BY /s/ Aubrey E. Arndt
--------------------------
Aubrey E. Arndt
Vice President-Finance
Date: September 14, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below on SEPTEMBER 14, 1994 by the following
persons on behalf of the Registrant and in the capacities indicated.
<TABLE>
<S> <C>
/s/ James S. Reid, Jr. Chairman and Chief Executive Officer; Director
- - -----------------------------
James S. Reid, Jr.
/s/ Theodore K. Zampetis President and Chief Operating Officer; Director
- - -------------------------
Theodore K. Zampetis
/s/ Aubrey E. Arndt Vice President-Finance
- - --------------------------- Principal Financial Officer
Aubrey E. Arndt
/s/ Thomas J. Stecz Corporate Controller and Assistant Secretary
- - ---------------------------- Principal Accounting Officer
Thomas J. Stecz
/s/ Richard J. Boland
- - ----------------------------
Richard J. Boland Director
/s/ Edward B. Brandon
- - -------------------------
Edward B. Brandon Director
/s/ John D. Drinko
- - ---------------------------
John D. Drinko Director
/s/ Curtis E. Moll
- - -----------------------------
Curtis E. Moll Director
/s/ Malcolm R. Myers
- - -------------------------
Malcolm R. Myers Director
/s/ Leigh H. Perkins, Sr.
- - ----------------------------
Leigh H. Perkins, Sr. Director
/s/ Alfred M. Rankin, Jr.
- - --------------------------
Alfred M. Rankin, Jr. Director
/s/ Alan E. Riedel
- - -----------------------------
Alan E. Riedel Director
/s/ John D. Sigel
- - -----------------------------
John D. Sigel Director
/s/ W. Hayden Thompson
- - ----------------------
W. Hayden Thompson Director
</TABLE>
-15-
<PAGE> 16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
ON THE FINANCIAL STATEMENT SCHEDULES
------------------------------------
To: The Standard Products Company
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in The Standard
Products Company and Subsidiary Companies 1994 Annual Report to Shareholders
incorporated by reference in this Form 10-K, and have issued our report thereon
dated August 2, 1994. Our audit was made for the purpose of forming an opinion
on those statements taken as a whole. The schedules listed in the index of
financial statements are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN & CO.
Cleveland, Ohio
August 2, 1994.
-16-
<PAGE> 17
<TABLE>
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
PROPERTY, PLANT AND EQUIPMENT
SCHEDULE V
For The Year Ended June 30, 1994
(Thousands of Dollars)
<CAPTION>
Column A Column B Column C Column D Column E Column F
- - ----------------------------- --------- -------- ---------- ------------ --------
Other
Charges
Add (Deduct)
Balance At Primarily Balance
Beginning Additions Translation At End
Classification Of Period At Cost Retirements Adjustments Of Period
- - ------------------------------- ---------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Land and land improvements..... $ 5,973 $ 226 $ (59) $ 611 $ 6,751
Building and improvements...... 74,227 5,138 (997) 6,717 85,085
Machinery and equipment
(autos included)............. 246,771 36,836 (8,268) (11,474) 263,865
Furniture and fixtures......... 22,551 11,575 (940) (869) 32,317
Capital projects in process.... 28,042 7,604 - (1,088) 34,558
-------- ------- --------- --------- --------
Total....................... $377,564 $61,379 $ (10,264) $ (6,103) $422,576
======== ======= ========= ========= --------
<FN>
The useful lives used in computing depreciation expense are as follows:
Building and improvements 20 to 30 Years
Machinery and equipment 3 to 15 Years
Furniture and fixtures 5 to 15 Years
NOTE: Column E represents the following:
- - ----------------------------------------
Translation adjustment totaling $4,841,000 represents the effect of
varying exchange rates between years used to translate the foreign owned
assets to U.S. funds.
Other changes totaling $1,260,000 represent the revaluation of purchased
business assets from the original preliminary valuation.
</TABLE>
<PAGE> 18
<TABLE>
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
PROPERTY, PLANT AND EQUIPMENT
SCHEDULE V
For The Year Ended June 30, 1993
(Thousands of Dollars)
<CAPTION>
Column A Column B Column C Column D Column E Column F
- - ----------------------------- --------- --------------------------- ---------- ------------ --------
Additions
----------------------------
Balance At Other Balance
Beginning Purchased Changes At End
Classification Of Period At Cost Business Retirements Add (Deduct) Of Period
- - ------------------------------- ---------- --------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Land........................... $ 3,141 $ - $ 2,814 $ - $ 18 $ 5,973
Building and improvements...... 54,503 1,937 20,424 (19) (2,618) 74,227
Machinery and equipment........ 195,695 17,533 46,320 (3,718) (9,059) 246,771
Furniture and fixtures......... 17,906 2,435 3,712 (484) (1,018) 22,551
Capital projects in process.... 8,585 17,685 2,300 - (528) 28,042
---------- ---------- ---------- ----------- ------------ ----------
Total....................... $ 279,830 $ 39,590 $ 75,570 $ (4,221) $ (13,205) $ 377,564
========== ========== ========== =========== ============ ==========
<FN>
The useful lives used in computing depreciation expense are as follows:
Building and improvements 20 to 30 Years
Machinery and equipment 3 to 15 Years
Furniture and fixtures 5 to 15 Years
Note: Column E represents the following
- - ----------------------------------------
Translation adjustment totaling $13,205,000 represents the effect of
varying exchange rates between years used to translate the foreign owned
assets to U.S. funds.
</TABLE>
<PAGE> 19
<TABLE>
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
PROPERTY, PLANT AND EQUIPMENT
SCHEDULE V
For The Year Ended June 28, 1992
(Thousands of Dollars)
<CAPTION>
Column A Column B Column C Column D Column E Column F
- - ----------------------------- --------- --------------------------- ---------- ------------ --------
Additions
----------------------------
Balance At Other Balance
Beginning Purchased Changes At End
Classification Of Period At Cost Business Retirements Add (Deduct) Of Period
- - ------------------------------- ---------- --------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Land........................... $ 3,083 $ - $ 50 $ - $ 8 $ 3,141
Building and improvements...... 50,827 1,131 394 (124) 2,275 54,503
Machinery and equipment........ 173,703 16,262 182 (7,010) 12,557 195,695
Furniture and fixtures......... 15,726 1,718 35 (149) 576 17,906
Capital projects in process.... 7,812 95 - - 678 8,585
--------- --------- ---------- ----------- ----------- ---------
Total...................... $ 251,151 $ 19,207 $ 661 $ (7,283) $ 16,094 $ 279,830
========= ========= ========== =========== =========== =========
<FN>
The useful lives used in computing depreciation expense are as follows:
Building and improvements 20 to 30 Years
Machinery and equipment 3 to 15 Years
Furniture and fixtures 5 to 15 Years
Note: Column E represents the following
- - ----------------------------------------
Translation adjustment totaling $2,968,000 represents the effect of
varying exchange rates between years used to translate the foreign owned
assets to U.S. funds.
The Port Clinton reclassification totaling $13,126,000 represents the
assets devoted to the mixing operation which will remain in service.
Other changes totaling $447,000 represent reclassification of
miscellaneous assets among account classifications.
</TABLE>
<PAGE> 20
<TABLE>
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT SCHEDULE VI
For The Year Ended June 30, 1994
(Thousands of Dollars)
<CAPTION>
Column A Column B Column C Column D Column E Column F
- - ---------------------------- ---------- ---------- ----------- ----------- ----------
Other
Charges
Additions Add (Deduct)
Balance At Charged To Primarily Balance
Beginning Costs and Translation At End
Classification Of Period Expenses Retirements Adjustments Of Period
- - ---------------------------- ---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Buildings and improvements... $ 21,955 $ 4,165 $ (301) $ (97) $ 25,722
Machinery and equipment...... 119,152 27,562 (7,012) (1,033) 138,669
Furniture and fixtures....... 12,030 4,834 (694) 6 16,176
-------- ------- -------- -------- --------
Total.................... $153,137 $36,561 $ (8,007) $ (1,124) $180,567
======== ======= ======== ======== ========
<FN>
NOTE: Column E represents the following:
- - -----------------------------------------
Translation adjustment totaling $1,439,000 represents the effect of
varying exchange rates between years used to translate the foreign owned
assets to U.S. funds and $315,000 represents adjustments of reserves from
purchased businesses.
</TABLE>
<PAGE> 21
<TABLE>
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
SCHEDULE VI
For The Year Ended June 30, 1993
(Thousands of Dollars)
<CAPTION>
Column A Column B Column C Column D Column E Column F
- - ----------------------------- --------- ---------- ---------- ------------ --------
Additions
Balance At Charged To Other Balance
Beginning Costs and Changes At End
Classification Of Period Expenses Retirements Add (Deduct) Of Period
- - ------------------------------- ---------- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Building and improvements..... $ 19,172 $ 3,530 $ (14) $ (733) $ 21,955
Machinery and equipment....... 100,604 25,000 (2,170) (4,282) 119,152
Furniture and fixtures........ 10,634 2,422 (462) (564) 12,030
---------- ---------- ---------- ---------- ---------
Total................... $ 130,410 $ 30,952 $ (2,646) $ (5,579) $ 153,137
========== ========== ========== ========== =========
<FN>
Note: Column E represents the following
- - ----------------------------------------
Translation adjustment totaling $5,579,000 represents the effect of
varying exchange rates between years used to translate the foreign owned
assets to U.S. funds.
</TABLE>
<PAGE> 22
<TABLE>
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
SCHEDULE VI
For The Year Ended June 28, 1992
(Thousands of Dollars)
<CAPTION>
Column A Column B Column C Column D Column E Column F
- - ------------------------------------ ---------- ---------- ----------- ------------ --------
Additions
Balance At Charged To Other Balance
Beginning Costs and Changes At End
Classification Of Period Expenses Retirements Add (Deduct) Of Period
- - --------------------------------------- ---------- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Buildings and improvements......... $ 15,684 $ 2,669 $ (87) $ 906 $ 19,172
Machinery and equipment............ 78,787 20,262 (4,960) 6,515 100,604
Furniture and fixtures............. 8,082 1,965 (124) 711 10,634
---------- ---------- ---------- ------------ ---------
Total......................... $ 102,553 $ 24,896 $ (5,171) $ 8,132 $ 130,410
========== ========== ========== ============ =========
<FN>
Note: Column E represents the following:
- - ----------------------------------------
Translation adjustments totaling $43,000 represent the effect of foreign
exchange rates between years used to translate the foreign owned assets to
U.S. funds.
The Port Clinton reclassification totaling $8,089,000 represents the
assets devoted to the mixing operation which will remain in service.
Other changes totaling $10,000 represent reclassification of miscellaneous
expenses among account classifications.
</TABLE>
<PAGE> 23
<TABLE>
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE VIII
For the Years Ended June 30, 1994 and 1993 and June 28, 1992
(Thousands of Dollars)
<CAPTION>
Column A Column B Column C Column D Column E Column F
- - -------------------------------- --------- ---------- ---------- ---------- ---------
Additions
Balance At Charged To Balance
Beginning Costs And At End
Description Of Period Expenses Recoveries Deductions Of Period
- - -------------------------------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1994
Valuation Allowance - Deferred Tax Asset $ 25,812 $ 1,798 $ - $ - $ 27,610
======== ======== ======== ======== ========
Reserve for Plant Closing $ 9,111 $ - $ - $ 5,136 $ 3,975
======== ======== ======== ======== ========
Allowance for doubtful accounts $ 2,293 $ 459 $ 605 $ (270) $ 3,627
======== ======== ======== ======== ========
Year Ended June 30, 1993
Valuation Allowance - Deferred Tax Asset $ - $ 32,338 $ - $ 6,526 $ 25,812 (1)
======== ======== ======== ======== ========
Reserve for Plant Closing $ 22,885 $ - $ 734 $ 14,508 $ 9,111 (2)
======== ======== ======== ======== ========
Allowance for doubtful accounts $ 3,128 $ 885 $ - $ 1,720 $ 2,293
======== ======== ======== ======== ========
Year Ended June 28, 1992
Reserve for Plant Closing $ 30,000 $ 1,320 $ - $ 8,435 $ 22,885 (3)
======== ======== ======== ======== ========
Allowance for doubtful accounts $ 2,312 $ 1,165 $ 133 $ 482 $ 3,128
======== ======== ======== ======== ========
<FN>
(1) In connection with the adoption of SFAS No. 109 in 1993, a valuation
allowance was recorded equal to the deferred tax asset recorded for
United Kingdom net operating loss carryforwards.
(2) Of this amount, deductions of $13,717 reflect an amount reclassified to
accrued postretirement benefits other than pensions. The balance of
$9,111 has been classified as a current liability in the accompanying
consolidated balance sheet as of June 30, 1993.
(3) Of this amount, $8,635 has been classified as a current liability, and
the remainder, $14,250, is classified as a long-term liability in the
accompanying consolidated balance sheet as of June 28, 1992.
</TABLE>
<PAGE> 24
<TABLE>
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
SCHEDULE X
For the Years Ended June 30, 1994 and 1993 and June 28, 1992
(Thousands of Dollars)
<CAPTION>
Column A Column B
- - ---------------------------- --------------------------------------
Charged to Costs and Expenses
--------------------------------------
Item 1994 1993 1992
- - ---------------------------- --------- --------- ---------
<S> <C> <C> <C>
Maintenance and repair...... $44,803 $34,069 $ 29,008
======= ======= ========
</TABLE>
<PAGE> 1
Exhibit 4e
AGREEMENT OF AMENDMENT
This Agreement of Amendment ("Amendment") is executed at
Cleveland, Ohio as of April 30, 1994 by and among THE STANDARD PRODUCTS COMPANY
("Borrower") and NATIONAL CITY BANK ("NCB"), as agent (the "Agent") for itself,
SOCIETY NATIONAL BANK ("Society"), COMERICA BANK ("Comerica"), and NBD BANK,
N.A. ("NBD") (hereinafter collectively referred to as "Banks").
WHEREAS, Borrower, Banks and Agent entered into a credit
agreement dated as of January 19, 1993 (the "Agreement") wherein Banks agreed
to make revolving loans to Borrower, under certain terms and conditions,
aggregating not more than the principal amount of One Hundred Seventy-Five
Million Dollars ($175,000,000), which amount was reduced on June 30, 1993 to
One Hundred Twenty-Five Million Dollars ($125,000,000) and which may be reduced
from time to time under the Agreement; and
WHEREAS, Borrower, Banks and Agent want to make certain changes
in and to the Agreement;
NOW, THEREFORE, Borrower, Banks and Agent agree as follows:
1. Subsection 2.03(a) of the Agreement (captioned
"CONVERSION TO TERM LOANS") is hereby amended in its entirety to
read as follows:
2.03(a) CONVERSION TO TERM LOANS -- Subject to the
terms and conditions hereof, each Bank agrees that, upon
the Borrower's satisfaction of the conditions set forth
in Section 3.02, the Borrower may, at its option and at
any time during the life of the facility, request that up
to Fifty Million Dollars ($50,000,000), but not less than
Five Million Dollars ($5,000,000) (or the equivalent
thereof in the Alternate Currency) in the aggregate of
the Banks' then outstanding Revolving Credit Loans be
converted to Term Loans as of the first Business Day of
any calendar month. On the Term Loan conversation Date,
the proceeds of each Bank's Term Loans shall be applied
to the payment of each Bank's then outstanding Revolving
Credit Loans and the Revolving Credit Commitment of each
Bank shall be permanently reduced by the aggregate amount
of such Bank's Term Loans.
2. Subsection 2.03(d) (captioned "AMORTIZATION AND MATURITY
OF TERM LOANS") is hereby amended in its entirety to read as
follows:
2.03(d) AMORTIZATION AND MATURITY OF TERM LOANS -- The
outstanding principal amount of each Bank's Term Loans
will be payable in equal quarterly installments of
principal commencing on the first Repayment Date which
occurs after the Term Loan Conversion Date, with the
final quarterly installment due no later than five (5)
years after the Term Loan Conversion Date.
3. Subsection 2.05(c) (captioned "REDUCTION FEE") is hereby
deleted in its entirety.
4. Schedule 2.06(b) is hereby amended in its entirety to
read as follows:
<PAGE> 2
SCHEDULE 2.06(B)
<TABLE>
<CAPTION>
Reduction IF the AND the THEN the
Standard Leverage EBIT Ratio Eurocurrency
Applicable is if Margin is
- - ---------- ----------- -------------- -------------
<S> <C> <C> <C>
I Greater than or equal to 55% Greater than 3.0 to 1.0 1.125%
II Greater than or equal to 45% Greater than 3.0 to 1.0 0.875%
but less than 55%
III Greater than or equal to 35% Greater than 3.0 to 1.0 0.625%
but less than 45%
IV Greater than or equal to 45% Less than 3.0 to 1.0 1.0%
but less than 55%
V Greater than or equal to 35% Less than 3.0 to 1.0 0.75%
but less than 45%
VI Less than 35% Greater than 3.0 to 1.0 0.50%
VII Less than 35% Less than 3.0 to 1.0 0.625%
</TABLE>
5. Subsection 2.06(c) (captioned "INCREASED INTEREST RATING") is
hereby deleted in its entirety.
6. Subsection 2.08(d) (captioned "LETTER OF CREDIT FEES AND
COMMISSIONS") is hereby amended such that the Letter of Credit
commission rate is reduced from one percent (1%) per annum to
three-quarters of one percent (3/4%) per annum.
7. Subsection 5.04(b) (captioned "CREDIT EXTENSIONS") is hereby
amended in its entirety to read as follows:
5.04(b) CREDIT EXTENSIONS -- The Borrower shall not and
shall not permit any of its Subsidiaries to make or keep any
investment in any notes, bonds or other obligations of any
kind for the payment of money or make or have outstanding at
any time any advance or loan to anyone; PROVIDED, HOWEVER,
that this subsection shall not apply to
(A) any existing or future advance, commission or
relocation payment, or other loan or advance made to
any employee in the ordinary course of business and
consistent with past practice or to a director or
officer of any Company; PROVIDED, HOWEVER, that the
aggregate made to all directors and officers shall
not exceed Five Hundred Thousand Dollars ($500,000)
(or the equivalent thereof in any other currency) at
any one time outstanding,
(B) any existing or future investment in any such
notes, bonds or other obligations consisting of
Acceptable Marketable Securities,
(C) any Letter of Credit,
(D) any existing investment, advance or loan fully
disclosed in the Borrower's June 28, 1992 audited
financial statements or in the Supplemental Schedule
or the Revised Supplement Schedule, or
<PAGE> 3
(E) any endorsement of a check or other medium of
payment for deposit or collection, or any similar
transaction in the normal course of business.
8. Subsection 5.04(c) (captioned "INDEBTEDNESS") is hereby
amended in its entirety to read as follows:
5.04(c) INDEBTEDNESS -- The Borrower shall not and shall not
permit any of its Subsidiaries to create, assume or have
outstanding at any time any Indebtedness of any kind;
PROVIDED, HOWEVER, that this Subsection shall not apply to (i)
the Obligations, (ii) any Indebtedness owing by a Company to a
Company, (iii) short term Indebtedness denominated in Dollars
or in a currency other than Dollars in the aggregate amount
not to exceed Twenty-Five Million Dollars ($25,000,000) (or
the Dollar equivalent thereof to the extent such Indebtedness
is not denominated in Dollars), (iv) any existing or future
Indebtedness secured by a Purchase Money Security Interest
permitted by Subsection 5.04(d) so long as the aggregate
unpaid principal balance of all such Indebtedness does not
exceed Twenty-Five Million Dollars ($25,000,000) (or the
Dollar equivalent thereof) at any one time outstanding, (v)
any existing Indebtedness that is fully disclosed in the
Borrower's June 28, 1992 audited financial statements or in
the Supplemental Schedule or the Revised Supplemental
Schedule, or any renewal or extension thereof (without any
increase) in whole or in part, (vi) publicly or privately
issued Funded Indebtedness or equity of the Borrower in the
aggregate amount of up to One Hundred Fifty Million Dollars
($150,000,000) or (vii) private Indebtedness or other
Indebtedness not otherwise permitted hereby so long as said
Indebtedness does not exceed an amount equal to ten percent
(10%) of stockholders' equity.
9. Clause (M) of subsection 5.04(d) (captioned "LIENS, LEASES")
is hereby amended in its entirety to read as follows:
5.04(d)(M) LIENS, LEASES -- any lien or encumbrance which is
not otherwise permitted hereunder so long as the Indebtedness
secured thereby does not exceed an amount equal to ten percent
(10%) of stockholders' equity at any one time outstanding, or
10. Subsection 5.05(c) (captioned "INTEREST COVERAGE") is hereby
amended in its entirety to read as follows:
5.05(c) INTEREST COVERAGE -- If the Borrower suffers or
permits its Leverage to exceed 45%, then, at the end of each
Fiscal Quarter, the EBIT Ratio of the Borrower and its
Subsidiaries on a consolidated basis for the period consisting
of the immediately preceding four Fiscal Quarters shall not be
less than 2.0 to 1.0.
11. Pursuant to subsection 2.02(k) (captioned "EXTENSION OF
REVOLVING CREDIT TERMINATION DATE") the Revolving Credit Termination
Date is hereby extended one year from January 19, 1996 to January 19,
1997.
12. Section 1.01 (captioned "CERTAIN DEFINED TERMS") is hereby
amended such that the definitions of "ACCEPTABLE MARKET SECURITIES"
and "ALTERNATIVE CURRENCY" shall now read as follows:
"ACCEPTABLE MARKET SECURITIES" means securities that are
direct obligations of the United States of America or any
agency thereof, or certificates of deposit issued by any Bank,
or any other money-market investment if it carries the highest
quality of rating of any nationally-recognized rating agency
including, without limitation, the Rating Agency; provided,
however, that no such security shall mature more than one (1)
year after the date when made.
<PAGE> 4
"ALTERNATIVE CURRENCY" means the currency of Canada, France,
or England, as the case may be.
13. In all other respects the credit agreement shall remain in
full effect.
14. Upon the execution and delivery of this Amendment, the
Borrower will not be in default under the Agreement as so
Amended.
IN WITNESS WHEREOF, borrowers, banks and Agent have executed this
Agreement of Amendment at the time and place first above mentioned.
THE STANDARD PRODUCTS COMPANY
By: /s/ Aubrey E. Arndt
-------------------------------
Title: Vice President-Finance
------------------------------
NATIONAL CITY BANK, AS AGENT
By: /s/ Paul Harris
-------------------------------
Title: Vice President
------------------------------
NATIONAL CITY BANK
By: /s/ Paul Harris
-------------------------------
Title: Vice President
------------------------------
SOCIETY NATIONAL BANK
By: /s/ William Kysela
-------------------------------
Title: Vice President
------------------------------
COMERICA BANK
By: /s/ Ian Hogan
-------------------------------
Title: Vice President
------------------------------
NBD BANK, N.A.
By: /s/ Fred J. Crawford
-------------------------------
Title: Second Vice President
------------------------------
<PAGE> 1
Exhibit 13 Serving the Global Auto Industry
THE STANDARD PRODUCTS COMPANY
<PAGE> 2
OUR STRATEGIC FOCUS. The Standard Products Co. has pursued a strategic focus
on rubber and plastic laminated extrusion technology to grow related businesses
into leadership positions in their industries and to build value for
shareholders. Today we operate 39 facilities in North America and Europe and
benefit from a 24-year partnership with Nishikawa Rubber Company of Hiroshima,
Japan. AUTOMOTIVE INDUSTRY. We are one of the leading suppliers of complete
sealing, trimming and vibration-control systems to the worldwide automotive
industry. Our rubber and plastic components protect and decorate more than 100
car, van and light truck models manufactured by North American, European and
Asian auto companies. APPLIANCE AND WINDOW/DOOR INDUSTRY. Through
acquisitions and continuous growth we have become the major North American
supplier of seals for home and commercial refrigerators and freezers, while
growing as a supplier of seals to the residential door and window industry.
TRUCK TIRE RETREAD INDUSTRY. Through our Oliver Rubber Company subsidiary we
manufacture truck tire precure and mold cure rubber and offer fully integrated
equipment and tooling support facilities to the retread industry.
<PAGE> 3
<TABLE>
<CAPTION>
FISCAL YEAR HIGHLIGHTS
(Thousands of Dollars Except Share Data) 1994 1993 1992
- - ------------------------------------------------------------------- ---------- ---------- ---------
<S> <C> <C> <C>
Net Sales.............................................................. $872,367 $763,796 $657,036
Income Before Extraordinary Item and Cumulative Effect on
Prior Years of Change in Accounting Principle........................ 33,032 33,423 23,305
Extraordinary Item, Early Repayment of Debt, Net of Tax................ - (2,559) -
Cumulative Effect on Prior Years of Change in Accounting
Principle, Adoption of SFAS No. 106, Net of Tax...................... - (8,301) -
-------- -------- --------
Net Income............................................................. $ 33,032 $ 22,563 $ 23,305
======== ======== ========
Earnings Per Common Share:
Income Before Extraordinary Item and Cumulative Effect on
Prior Years of Change in Accounting Principle..................... $1.99 $2.21 $1.79
Extraordinary Item, Early Repayment of Debt, Net of Tax........ - (.17) -
Cumulative Effect on Prior Years of Change in Accounting
Principle, Adoption of SFAS No. 106, Net of Tax.................... - (.55) -
-------- -------- --------
$1.99 $1.49 $1.79
-------- -------- --------
Cash Dividends Declared Per Common Share............................... $ .65 $ .54 $ .38
Shareholders' Equity................................................... $242,677 $224,436 $177,753
Book Value Per Common Share............................................ $ 14.55 $ 13.56 $ 11.82
Shares Outstanding at Year-End......................................... 16,674 16,552 15,044
<FN>
____________________________________________________________________________________________________________________________
o Sales for fiscal 1994 increased 14% as we realized the full benefit of
the 1993 acquisition of Standard Products Industriel. Earnings were
flat with comparable 1993 results due to the transition to new model
launches and the balancing out of certain car and light truck models.
o We launched 18 new programs worldwide, including the Mustang, Neon and
Windstar in North America, and we are in the midst of the Lumina
launch. As a result of the transition to new models and the slow
acceleration to full production, our total North American automotive
sales rose only marginally compared with 1993.
o Our European operations reported higher sales and profits in fiscal
1994 compared with the prior 12-month period. We benefited from an
improving auto market in Europe and our participation on some of the
most popular models introduced in the last 12 months.
o We have completed a private placement of $75 million of 6.55% Senior
Notes to Metropolitan Life Insurance Company. Proceeds from the
placement were used to refinance a portion of existing debt, extending
maturities and reducing rates.
o In the fourth quarter, we increased the regular dividend by 6.25% to
17 cents a share. The payment brings the total dividends for fiscal
1994 to 65 cents a share, an increase of 19.5% compared with the
previous fiscal year.
</TABLE>
<PAGE> 4
(Across pages 2 and 3 reads "1994 continued a period of major business
expansion" in large print.)
TO OUR SHAREHOLDERS:
Fiscal 1994 continued a period of major business expansion for The Standard
Products Co. We successfully integrated our acquisition of Standard Products
Industriel (SPI), achieving a broader global presence. Concurrently, we met
the challenge of launching 18 new programs worldwide, part of a continuing
expansion that will almost double the size of the Company between 1991 and
1996. In delivering on these programs, we made important progress in
streamlining the business and improving operations, as we gear up for the even
more intensive schedule of new programs ahead.
Sales in fiscal 1994 increased 14% to $872,367,000 compared with $763,796,000
the prior year. Net income for the year was $33,032,000, equal to $1.99 per
share on 16,627,000 shares outstanding. That compares with income before
nonrecurring items of $33,423,000, or $2.21 per share last year, on 15,114,000
shares outstanding. Sales included $161,825,000 from SPI and 5 Rubber
Corporation compared with a contribution to sales of $46,411,000 in fiscal
1993, which covered only four months of the year. A large part of 5 Rubber's
1994 contribution was new business from the launch of Chrysler's Neon four-door
model.
North American automotive operations recorded fiscal 1994 sales of $461,794,000
compared with $457,821,000 last year. Sales for 1994 included $32,935,000 from
5 Rubber and its launch of the four-door Neon. The continued acceleration of
successful launches of the Ford Mustang and Ford Windstar minivan also
contributed to revenues during the year. These gains, however, were offset by
a drop in the build of certain car and light truck models carrying Standard
Products' parts. Also, revenues from the parts supplied for the Chevrolet
Lumina were off $26,300,000 compared with the prior year due to a customer
delay in the ramp up of the new model. General Motors is now forecasting that
the Lumina will reach full production by the end of September 1994. As a
result of these factors, profits from North American automotive operations were
down for the year.
Our European operations, Standard Products Limited (SPL) in the United Kingdom
and SPI in France, reported higher volumes and improved profits in fiscal 1994
compared with the prior 12-month period. We benefited from an improving
European auto market and our participation on some of the most popular models
introduced in the last 12 months.
We brought our new worldwide engineering and development capabilities to bear
in the European market last year. A European team lead by SPL, with support
from SPI, our North American operations and our joint-venture partner Nishikawa
Rubber, took on an assignment from Ford of Europe to redesign the sealing
system of the European Escort. Our redesign reached "best in class"
performance levels, and as a result, SPL and SPI were awarded a portion of the
Escort business. This project should have positive long-term implications with
our key customers in Germany.
Looking ahead, both SPI and SPL have solid schedules of new business for the
coming year, and their key models are selling well. They also stand to gain
from an improving European auto market.
NISCO, our 50%-owned joint venture with Nishikawa Rubber Company of Japan, was
profitable in fiscal 1994. This marked NISCO's first full year of
profitability after seven years of investment. Our share of NISCO's profits is
50%, but NISCO's sales are not consolidated in the Standard Products income
statement.
Sales at our Oliver Rubber Company subsidiary were $124,169,000, marginally
higher than last year. Earnings, however, were off substantially due to higher
manufacturing costs, more sales of lower-margin products and problems at its
Oliver Europa operation based in the United Kingdom. To create greater synergy
between Oliver and our automotive business, we are coordinating company-wide
rubber mixing operations and integrating Oliver more fully into the Standard
Products organization. Oliver is also in the process of relocating its
headquarters from Oakland, California, to Athens, Georgia. The move will bring
Oliver's management and customer service functions closer to the majority of
the Company's retread customers and to its largest precure production
facilities.
Sales at Holm Industries rose 10% to $87,044,000, while profits increased by a
comparable percentage. The improvement was due to increased volume from Holm's
primary customers and growth at Jarrow Products, which Holm acquired in 1992.
<PAGE> 5
In May 1994, we announced the transfer of our corporate finance and human
resources departments from Cleveland, Ohio, to our Dearborn, Michigan, office.
The move, to be completed by April 1995, will consolidate and integrate our
corporate operations functions and bring all our operating executives nearer to
our major customers.
Directors of the Company voted in June 1994 to increase the regular quarterly
dividend by 6.25% to 17 cents a share, payable July 25, 1994. The payment
brings the total dividends for fiscal 1994 to 65 cents a share, an increase of
19.5% compared with the previous fiscal year. Earlier in the year, we
completed the placement of $75 million of 6.55% Senior Notes, due December 16,
2003, to Metropolitan Life Insurance Company, with principal payments to begin
in December 1998. Proceeds from the placement have been used to refinance a
portion of existing debt under our revolving credit agreement.
Fiscal 1995 will be another challenging transition year for us. We will launch
major new programs, such as the Lumina, the European Ford Escort, the Chrysler
Cirrus/Stratus, the Ford Taurus/Sable, the new Chrysler NS minivan and many
other models. At the same time, we continue to streamline the Company with
plant adjustments, personnel transfers, productivity improvements and cost
reduction programs. We see the possibility that some delays at the customer
level will affect results in the first quarter of fiscal 1995. All in all,
this is an exciting time. With new business coming in at a rapid pace and
opportunities developing all over the world, we expect continuing improvement
as the year progresses and into fiscal 1996.
/s/ James S. Reid, Jr.
-------------------------------------------------------
James S. Reid, Jr., Chairman and Chief Executive Officer
/s/ Theodore K. Zampetis
-------------------------------------------------------
Theodore K. Zampetis, President and Chief Operating Officer
<PAGE> 6
NEW GLOBAL RESOURCES
NEW GLOBAL PROGRAMS
In the next 21 months, Standard Products plants will produce sealing and
trimming systems for a number of major new auto models for North American,
European and Japanese manufacturers. Together with other smaller programs,
including the Lumina but not including NISCO, these new contracts represent
some $350 million in annual new business, replacing $105 million in existing
volume.
<PAGE> 7
PROGRAM MANAGEMENT
New model programs represent the greatest source of sales growth at Standard
Products but also the greatest challenge. The demands have expanded in the
1990's, as the U.S. auto industry has shortened the design-to-production cycle
time and sought to shift much of the responsibility for engineering, testing
and systems-integration to the suppliers. In 1991, anticipating the heavy
schedule of launches, we developed our Program Management system. More than
two years in advance of the launch date, a dedicated team is created and its
executive manager given full responsibility and authority to get the job done.
While no amount of planning can prevent all disruptions, the Program Management
approach clearly proved its worth this past year in three major launches - the
Mustang, Neon and Windstar. The Neon launch in particular highlighted our
global capabilities. The sealing system for the Neon was designed by SPI in
France for production in the U.S. With the help of a team of our engineers and
managers from France, the U.K., the U.S. and Canada, we overcame the challenge
of a new plant, workforce, equipment and production methods to meet Chrysler's
accelerated production schedule.
<PAGE> 8
CHRYSLER NEON
From the new 5 Rubber plant in Griffin, Georgia, we are producing channels,
weatherstripping and door seals for Chrysler's new four-door Neon. Griffin
launches the two-door Neon this fall, and is installing manufacturing equipment
in preparation for the introduction of Chrysler's NS minivan later in the
fiscal year.
<PAGE> 9
ADVANCED TECHNOLOGY
Worldwide leadership in rubber and plastic laminated extrusion technology is
the foundation of Standard Products' business and essential to the Company's
long-term success. In support of this position, we have established design and
development centers in the U.S., Canada, England and France, and we enjoy a
link to Asia through our longstanding joint venture with Nishikawa Rubber of
Japan. To coordinate this transcontinental expertise, the Company last year
named Gerard H. Mesnel, an experienced European automotive industry executive,
to the new position of executive vice president, advanced technology,
worldwide. Advanced technology and superior design and engineering services
have enabled us to win a growing share of new programs and increase our content
per car. In Europe, our U.K. subsidiary was awarded a major contract from Ford
of Germany after we redesigned the sealing system of the European Escort to
"best in class" performance levels. Demonstrating our technology leadership in
laminated plastic extrusion, we have developed new, more efficient processes
for making extruded bodyside moldings for the Ford Mustang and Chrysler
Cirrus/Dodge Stratus.
<PAGE> 10
FORD MUSTANG
The sealing and trimming systems on the new Ford Mustang include some 20
different parts manufactured by eight different Standard Products and NISCO
plants. NISCO's preeminence in the design and engineering of sponge rubber
dynamic door seals has made it a preferred supplier to Ford as well as the U.S.
plants owned by Honda, Toyota and other Japanese OEMs.
<PAGE> 11
CONTINUOUS IMPROVEMENT
As important as it is, capital investment alone will not provide the ongoing
breakthroughs in technology and efficiency that the marketplace demands. For
this reason, we place great emphasis on the concepts of employee involvement
and kaizen, or continuous improvement. These programs have been adopted in our
operations worldwide. They are paying off in higher quality and in dramatic
reductions in work-in-process inventories, manufacturing space and lead times.
Our ability to achieve continuous improvements, combined with the synergy of
our worldwide resources, is becoming a key competitive advantage for our
future. One area where we continue to focus more attention is purchasing and
materials management. By marshaling our corporate-wide purchasing power, we
hope to take advantage of the fact that we are among the largest buyers in the
world of certain materials and equipment. Providing additional leverage is our
increasingly sophisticated rubber-manufacturing capability. We are making more
of our own rubber, and by coordinating all our rubber-mixing operations -
retread and automotive - we expect to achieve further improvements in this
area.
<PAGE> 12
CHEVROLET LUMINA
The new Chevrolet Lumina features bodyside moldings, rubber glass-run channels
and weatherstripping supplied by Standard Products plants in Canada and the
United States. Always focused on continuous improvement, we developed a
one-piece integrated glass-run channel assembly for the Lumina that had
previously required five separate components.
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Company's Transportation Equipment Segment is engaged in the production of
a variety of extruded and molded rubber and plastic products for the
automotive, construction and marine industries and plastic and magnetic parts
for the appliance and building products industries. Operations of the
Transportation Equipment Segment are conducted in Canada, Europe and the United
States, serving the automotive industry in each of these geographic areas.
The Tread Rubber Segment manufactures and distributes precure and mold cure
tread rubber, bonding gum, repair materials, retread tire molds and equipment
for the tire retreading industry. Operations are conducted in North America,
Europe and other countries by the Company's subsidiary, Oliver Rubber Company.
The primary market for tread rubber is the over-the-road trucking industry. In
addition, this segment provides tread rubber for off-the-road construction
equipment and custom mixes rubber for both internal and external customers.
RESULTS OF OPERATIONS
Sales for fiscal 1994 increased $108,571,000, or 14.2%, to $872,367,000. Net
income was $33,032,000, or $1.99 a share, compared to income before an
accounting change and an extraordinary item in 1993 of $33,423,000, or $2.21 a
share. In 1993, the Company adopted Statement of Financial Accounting Standard
(SFAS) No. 106, and the cumulative effect of the change to this accounting
principle was $8,301,000, net of tax. The Company also prepaid a portion of
its Senior Notes, incurring a prepayment charge of $4,128,000, or $2,559,000
after tax. Net income, therefore, was $22,563,000, or $1.49 a share.
SALES PERFORMANCE - 1994 AND 1993
Sales of the Transportation Equipment Segment for fiscal 1994 amounted to
$753,764,000, an increase of $103,709,000, or 16%, over fiscal 1993. Fiscal
year 1994 includes a full year effect of the Company's acquisition in fiscal
1993 of Standard Products Industriel (SPI) and its subsidiary in the United
States, 5 Rubber Corporation. In 1993, sales of SPI and 5 Rubber Corporation
since the date of acquisition were $46,411,000. In 1994, full year sales of
SPI and 5 Rubber Corporation were $161,825,000.
In North America, sales, including 5 Rubber Corporation, amounted to
$461,794,000, an increase of $3,973,000 over the previous year. A full year of
sales of 5 Rubber Corporation combined with the launch of 5 Rubber
Corporation's new products on the Chrysler Neon resulted in increased sales of
$26,812,000. The sales of parts for the Neon amounted to $20,672,000.
Offsetting these gains were sales declines in Canada. General Motors ceased
production of the former Lumina model in November 1993 to begin conversion of
plant facilities for the new Lumina/Monte Carlo models. Sales volumes of the
Company's Canadian subsidiary, therefore, declined by a net $11,033,000 with
the decline of $26,300,000 related to the Lumina offset partially by other new
production. In addition, over the course of fiscal 1994, the rate of exchange
of the U.S./Canadian dollar declined, and the effect of the decline was to
reduce sales by $10,600,000. For fiscal 1994, sales of U.S. operations other
than 5 Rubber Corporation declined $1,200,000, and this resulted from model
changeovers and declines in units of production of some models which are
assembled with parts manufactured by the Company. Car and light truck build
advanced 10.2% over the build of fiscal 1993. The decline in the Lumina build,
as well as several other models, caused the Company's sales to lag behind the
pace of the North American production of fiscal 1994.
Sales of the Company's United Kingdom subsidiary, Standard Products Limited
(SPL), increased $2,834,000 to $75,706,000. New business with European
automotive manufacturers, including Saab, Volkswagen and Japanese transplant
Toyota, and increased volumes of production resulted in sales increases of
$8,498,000. These gains were offset by a decline in the rate of exchange of
the British pound sterling and the U.S. dollar.
SPI recorded full year sales of $128,890,000 compared to fiscal 1993's short
period of $40,288,000. A sales comparison for a full twelve month period of
fiscal 1993 reveals year-to-year improvement of 8.6%. SPI has benefited from
new business and rising production volumes realized during the period of
economic recovery in Europe, which became evident in the fourth quarter.
<PAGE> 14
Holm Industries, Inc., the Company's subsidiary that supplies the appliance and
building products industries, recorded sales increases of $7,890,000, or 10%,
to $87,044,000. Holm Industries' sales increases were attributable to
increased demand in the residential and commercial appliance market and the
broadening of its product line in building products.
In the Tread Rubber Segment, sales in fiscal 1994 were $124,169,000, including
intersegment sales of $5,566,000. Sales increased 5.9%, or $6,945,000.
Increased sales were realized in this segment's mold cure and mixed rubber
products, while precure sales were approximately even with a year ago. Prices
were generally stable in 1994 compared to 1993.
SALES PERFORMANCE - 1993 AND 1992
In the Transportation Equipment Segment, sales were $650,055,000 in fiscal 1993
compared to $551,768,000 in 1992. The increase of 18%, or $98,287,000,
included $46,411,000 related to the acquisition of SPI and $11,773,000 related
to the acquisition of Jarrow Products. Global automotive sales were
$570,981,000 in 1993 compared to $490,589,000 in 1992. In North America, sales
were $457,821,000, an increase of $46,000,000, or 11%. The SPI subsidiary in
North America represented $6,123,000 of the 1993 sales gain. In addition, the
increase in the Company's sales due to increased 1993 car and light truck
production was $50,285,000, or 12%. Offsetting these increases was the 7%
decline in the rate of exchange of the Canadian dollar to the U.S. dollar,
resulting in a reduction of sales of $10,407,000. For 1993, the production of
cars and light trucks advanced 9.4% over 1992 with light truck production ahead
by 14.7% and car production ahead by 5.9%.
In the United Kingdom, sales of the Company's subsidiary, SPL, declined by
$5,897,000 to $72,872,000. The majority of the decline in sales was related to
the 7% decline in the rate of exchange between British pound sterling and the
U.S. dollar. Sales volume for the year was even with 1992. SPL experienced a
variation in the mix of sales as their volume improved in line with
strengthening United Kingdom car sales. SPL's shipments to North America,
however, declined as the Crown Victoria/Grand Marquis production experienced
production interruptions during 1993.
Holm Industries recorded sales of $79,154,000, an increase of $19,155,000 over
1992. The acquisition of Jarrow Products contributed $11,773,000 of the
increase with the balance due to strengthening appliance sales in 1993.
The Tread Rubber Segment reported sales of $117,224,000 including intersegment
sales of $3,483,000. These results represent an increase of $9,735,000, or
9.1% over 1992 sales. Oliver increased sales volume in North America by 7%
with new dealer programs and improved national account sales.
OPERATING EXPENSE ANALYSIS
Consolidated gross margins of 13.7% for fiscal 1994 decreased from 14.2% in
1993 and 14.3% in 1992. The costs of material, wages and manufacturing
expenses were $724,090,000 in 1994, $634,218,000 in 1993 and $549,164,000 in
1992. Research, engineering and development expenses were $28,850,000 in
fiscal 1994, an increase of $7,879,000 over 1993's research, engineering and
development expenditures of $20,971,000. These expenses were $13,619,000 in
1992. Gross income was $119,427,000 in 1994, $108,607,000 in 1993 and
$94,253,000 in 1992.
Gross income was favorably affected by the inclusion of SPI and 5 Rubber
Corporation for a full year period compared to last year's four month period.
In addition, these locations experienced rising volumes of sales related to
increased production and new model introductions. SPI also benefited from an
improved European economy. The incremental gross income from SPI and 5 Rubber
Corporation represented 2.7% of fiscal 1994 sales. Similarly, SPL benefited
from its new business and the increasing volumes of its European car base,
contributing .5% of 1994 sales to improved gross income. North American
automotive operations adversely affected gross income. Canadian operations
experienced a significant decline in sales with the conversion of General
Motors assembly plants to the new Lumina/Monte Carlo models. In addition, the
introduction of the new models was later than originally expected. United
States operations also were down from the preceding year as production volumes
were off for several car models which use the Company's parts. Further, the
U.S. plants began preparing for upcoming new product introductions. North
American operations adversely affected gross income by .8% of fiscal 1994
sales. The increase in research, engineering and development expenditures
included $5,067,000 of incremental expenses associated with the acquisition of
SPI. These expenses and the preparation for new model introductions noted
previously are expected to continue at high levels and without immediate
revenue contribution. Holm Industries' profitability for the year was ahead of
fiscal 1993 on sales volume increases.
Margins in the Tread Rubber Segment declined. Profitability was affected by a
shift in sales mix to lower margin products. In addition, two plants
experienced problems in the introduction of new manufacturing processes. The
Tread Rubber Segment decline represented .4% of fiscal 1994 sales.
<PAGE> 15
In fiscal 1993, sales volume increases were realized in the automotive and
appliance units of the Transportation Equipment Segment and in the Tread Rubber
Segment. The increases resulted from the stronger North American car build,
improved level of home appliance sales and the gradual improvement in business
conditions which had begun in the fourth quarter of fiscal 1992. The effect of
volume increases on profitability represented 1.6% of fiscal 1993 sales.
Incremental sales resulting from the Company's SPI acquisition and from Holm
Industries' acquisition of Jarrow Products produced incremental gross profits
as well and amounted to 1.4% of sales. Gross income was affected by the
increase in corporate research, engineering and development expenses,
representing 1% of 1993 sales. This increase included the incremental effect
of the SPI acquisition. Gross income was also adversely affected by increased
material costs representing .2% of 1993 sales.
Selling, general and administrative expenses increased $12,443,000 to
$62,211,000 in fiscal 1994. SPI and 5 Rubber Corporation were responsible for
$8,531,000 of the increase. In addition, the Company recorded reserves for the
relocation of two administrative areas, the corporate finance and human
resources areas, from Cleveland, Ohio to the Dearborn, Michigan location and
the Oliver's Oakland, California headquarters to Athens, Georgia. Each
relocation positions corporate activities nearer to customer bases and
consolidates distant departments. The accrual amounting to $2,424,000 consists
of relocation, severance and other employee related costs. Approximately 65
employees are involved in these moves, which will be completed by April 1995.
The Company also provided a reserve of $2,000,000 related to accounting
irregularities which were discovered in the course of the normal year-end
audit at Oliver Rubber's European subsidiary, Oliver Europa. The
irregularities involved the propriety of accounts receivable, inventory and
promotional expenses. The effect of these matters was not material to the
earnings previously reported by the Company, and therefore, a restatement of
quarterly earnings was not necessary.
As a percent of sales, selling, general and administrative expenses were 7.1%
in fiscal 1994 versus 6.5% in 1993 and 6.4% in 1992. Without the relocation
provisions and the Oliver Europa reserve, selling, general and administrative
expenses would have been 6.6% of sales.
Interest expense, net in fiscal 1994 was $9,093,000. Interest expense was
$9,982,000 and interest income was $889,000. In fiscal 1993, interest expense,
net was $8,214,000 and interest expense was $9,684,000, while interest income
was $1,470,000. Interest expense increased $298,000 and interest income
declined $581,000. During a portion of fiscal 1994, the Company incurred
interest expense at a lower short-term rate on a higher level of borrowings
under the Company's Revolving Credit Agreement. In mid-fiscal 1994, short-term
borrowings were reduced by the proceeds of a new senior note obligation at a
fixed rate of 6.55%, higher than prevailing short-term rates, but less than
previous fixed senior note rates. The decline in interest income was related
to a lower level of invested funds in fiscal 1994 compared to 1993.
In fiscal 1992, interest expense, net was $13,659,000. Interest expense that
year was $14,980,000, while interest income was $1,321,000. In comparison to
fiscal 1993, interest expense declined $5,296,000 and interest income increased
by $149,000. Expense in 1992 includes a prepayment charge of $2,600,000 paid
to senior note holders in connection with the early repayment of these
obligations. A similar charge incurred in fiscal 1993 was reported as an
extraordinary item due to its significance. The further reduction of interest
expense in fiscal 1993 compared to 1992 reflects the lower borrowing rates of
medium term Revolving Credit obligations in 1993 compared to the higher rate
obligations of senior notes in the United States and of SPL's borrowings in the
United Kingdom.
Royalty and dividend income were comparable for the periods. Other, net in
fiscal 1994 represents income of $1,322,000 compared to expense of $1,150,000
in 1993 and $753,000 in 1992. The Company's share of profitable results of the
Company's joint ventures, including NISCO, accounted for the improvement.
In fiscal 1994, the Company's effective tax rate was 34.2%, an increase over
1993's effective rate of 33.5% but less than 1992's effective rate of 40%.
Over the three year period, the effective rate has declined as a result of tax
credits for research and development available to the Company, primarily in its
overseas locations, and due to improved results at SPL which are without tax
expense as loss carryforwards of prior years are applied. The rate increased
in 1994, however, as a result of the reserves provided for Oliver Europa which
are not deductible.
EFFECT OF INFLATION
During the three year period ended June 30, 1994, rates of inflation have been
low and operating costs reflect current costs for expenses, inventory and
depreciation.
<PAGE> 16
FINANCIAL CONDITION
At June 30, 1994, capitalization of the Company totaled $378,058,000 with
long-term debt of $135,381,000 and shareholders' equity of $242,677,000. The
components of total capitalization were 35.8% debt and 64.2% equity. Working
capital at year end was $87,922,000, and the ratio of current assets to current
liabilities was 1.48 to 1. Average working capital to support a dollar of
sales was $.10 compared to $.09 a year ago.
Cash provided by operating activities amounted to $58,793,000 for fiscal 1994.
Non-cash charges included therein were $40,495,000 for depreciation and
amortization and $627,000 for foreign exchange variations. Depreciation and
amortization increased over the prior year reflecting the Company's recent
capital investment and the SPI acquisition. Investments in 1994 included
$59,120,000 in property, plant and equipment and $1,500,000 invested in NISCO.
During the year, new borrowings amounted to $140,343,000 and included the new
issue of Senior Notes of $75,000,000. Proceeds of the Senior Notes and other
borrowings were used to repay higher interest rate industrial revenue bonds and
to reduce borrowings under the Company's Revolving Credit Agreement. Cash and
cash equivalents at year end were nil, a decrease from last year's cash and
cash equivalents of $5,548,000.
Capital expenditures budgeted for fiscal 1995 are $62,000,000. Cash flow from
operations and borrowing capacity of the Company using the Revolving Credit
Agreement and short-term borrowing commitments are expected to be adequate to
meet operating and capital requirements for fiscal 1995.
<PAGE> 17
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
(Thousands of Dollars Except Share Data) 1994 1993 1992 1991
- - -------------------------------------------------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
INCOME STATEMENT
Net Sales.................................................................. $872,367 $763,796 $657,036 $592,090
Gross Income............................................................... 119,427 108,607 94,253 38,946
Selling, General & Administrative Expenses................................. 62,211 49,768 41,760 40,073
Interest Income (Expense), net............................................. (9,093) (8,214) (13,659) (11,663)
Other Income (Expense), net................................................ 2,092 (399) (54) (285)
Provision for Taxes on Income.............................................. 17,183 16,803 15,475 7,879
Income (Loss) from Continuing Operations and Before Extraordinary Item
and Cumulative Effect on Prior Years of Change in Accounting Principle 33,032 33,423 23,305 (20,954)
Income (Loss) from Operations and Disposal of Discontinued Division,
Net of Tax............................................................... - - - (24,655)
Income (Loss) Before Extraordinary Item and Cumulative Effect on Prior
Years of Change in Accounting Principle.................................. 33,032 33,423 23,305 (45,609)
Extraordinary Item, Net of Tax............................................. - (2,559) - -
Cumulative Effect on Prior Years of Change in Accounting Principle, Net
of Tax................................................................... - (8,301) - -
Net Income (Loss).......................................................... $ 33,032 $ 22,563 $ 23,305 (45,609)
Percent Net Income to Sales................................................ 3.8 3.0 3.5 -
Percent Net Income to Average Shareholders' Equity......................... 14.5 12.1 19.5 -
PER SHARE
Income (Loss) from Continuing Operations and Before Extraordinary Item
and Cumulative Effect on Prior Years of Change in Accounting Principle $ 1.99 $ 2.21 $ 1.79 $(1.65)
Income (Loss) from Discontinued Operations................................. $ - $ - $ - $(1.94)
Extraordinary Item, Net of Tax............................................. $ - $ (.17) $ - $ -
Cumulative Effect on Prior Years of Change in Accounting Principle, Net
of Tax................................................................... $ - $ (.55) $ - $ -
Net Income (Loss).......................................................... $ 1.99 $ 1.49 $ 1.79 $(3.59)
Cash Dividends Declared.................................................... $ .65 $ .54 $ .38 $ .47
Book Value................................................................. $14.55 $13.56 $11.82 $ 8.06
BALANCE SHEET
Property, Plant & Equipment................................................ $422,576 $377,564 $279,830 $251,151
Accumulated Depreciation................................................... 180,567 153,137 130,410 102,553
Total Assets............................................................... 624,314 564,850 398,793 369,272
Working Capital............................................................ 87,922 79,396 97,303 61,594
Long-term Debt............................................................. 135,381 115,607 69,289 113,298
Shareholders' Equity....................................................... 242,677 224,436 177,753 102,366
Cash Dividends Declared.................................................... $ 10,821 $ 8,450 $ 5,103 $ 5,992
OTHER
Additions to Property, Plant & Equipment................................... $ 61,380 $ 39,574 $ 19,207 $ 23,532
Depreciation & Amortization................................................ $ 40,495 $ 29,887 $ 26,228 $ 24,747
Shares Outstanding......................................................... 16,674 16,552 15,044 12,695
Average Shares Outstanding................................................. 16,627 15,114 13,010 12,694
</TABLE>
<TABLE>
<CAPTION>
(Thousands of Dollars Except Share Data) 1990 1989 1988 1987
- - -------------------------------------------------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
INCOME STATEMENT
Net Sales.................................................................. $590,699 $527,896 $473,035 $412,507
Gross Income............................................................... 65,316 81,452 83,878 81,911
Selling, General & Administrative Expenses................................. 35,011 27,111 23,694 21,388
Interest Income (Expense), net............................................. (8,608) (3,125) (1,430) 86
Other Income (Expense), net................................................ (1,846) (2,062) (1,612) 1,720
Provision for Taxes on Income.............................................. 8,060 18,333 20,373 29,165
Income (Loss) from Continuing Operations and Before Extraordinary Item
and Cumulative Effect on Prior Years of Change in Accounting Principle 11,791 30,821 36,769 33,164
Income (Loss) from Operations and Disposal of Discontinued Division,
Net of Tax............................................................... - (2,132) (2,712) (1,639)
Income (Loss) Before Extraordinary Item and Cumulative Effect on Prior
Years of Change in Accounting Principle.................................. 11,791 28,689 34,057 31,525
Extraordinary Item, Net of Tax............................................. - - - -
Cumulative Effect on Prior Years of Change in Accounting Principle, Net
of Tax................................................................... - - - -
Net Income (Loss).......................................................... $11,791 $28,689 $34,057 $31,525
Percent Net Income to Sales................................................ 2.0 5.4 7.2 7.6
Percent Net Income to Average Shareholders' Equity......................... 7.7 18.8 25.5 25.5
PER SHARE
Income (Loss) from Continuing Operations and Before Extraordinary Item
and Cumulative Effect on Prior Years of Change in Accounting Principle $ .93 $ 2.33 $ 2.71 $ 2.33
Income (Loss) from Discontinued Operations................................. $ - $ (.16) $ (.20) $ (.11)
Extraordinary Item, Net of Tax............................................. $ - $ - $ - $ -
Cumulative Effect on Prior Years of Change in Accounting Principle, Net
of Tax................................................................... $ - $ - $ - $ -
Net Income (Loss).......................................................... $ .93 $ 2.17 $ 2.51 $ 2.22
Cash Dividends Declared.................................................... $ .74 $ .69 $ .61 $ .46
Book Value...................................................................... $12.05 $12.05 $10.96 $ 9.14
BALANCE SHEET
Property, Plant & Equipment................................................ $239,773 $200,801 $154,623 $131,036
Accumulated Depreciation................................................... 91,739 76,591 65,922 55,878
Total Assets............................................................... 362,399 333,741 255,211 226,009
Working Capital............................................................ 90,014 88,937 74,759 74,572
Long-term Debt............................................................. 99,480 75,213 16,577 18,180
Shareholders' Equity....................................................... 152,829 156,348 145,800 127,359
Cash Dividends Declared.................................................... $ 9,365 $ 9,084 $ 8,194 $ 6,516
OTHER
Additions to Property, Plant & Equipment................................... $ 39,676 $ 33,077 $ 22,300 $ 24,133
Depreciation & Amortization................................................ $ 19,975 $ 14,196 $ 11,078 $ 9,437
Shares Outstanding......................................................... 12,689 12,975 13,293 13,928
Average Shares Outstanding................................................. 12,753 13,250 13,571 14,241
</TABLE>
<TABLE>
<CAPTION>
(Thousands of Dollars Except Share Data) 1986 1985
- - -------------------------------------------------------------------------------- -------- --------
<S> <C> <C>
INCOME STATEMENT
Net Sales.................................................................. $377,870 $314,483
Gross Income............................................................... 67,032 52,201
Selling, General & Administrative Expenses................................. 20,113 17,881
Interest Income (Expense), net............................................. 501 85
Other Income (Expense), net................................................ 1,530 957
Provision for Taxes on Income.............................................. 21,695 14,359
Income (Loss) from Continuing Operations and Before Extraordinary Item
and Cumulative Effect on Prior Years of Change in Accounting Principle 27,255 21,003
Income (Loss) from Operations and Disposal of Discontinued Division,
Net of Tax............................................................... (71) 1,731
Income (Loss) Before Extraordinary Item and Cumulative Effect on Prior
Years of Change in Accounting Principle.................................. 27,184 22,734
Extraordinary Item, Net of Tax............................................. - -
Cumulative Effect on Prior Years of Change in Accounting Principle, Net
of Tax................................................................... - -
Net Income (Loss).......................................................... $ 27,184 $ 22,734
Percent Net Income to Sales................................................ 7.2 7.2
Percent Net Income to Average Shareholders' Equity......................... 25.9 26.2
PER SHARE
Income (Loss) from Continuing Operations and Before Extraordinary Item
and Cumulative Effect on Prior Years of Change in Accounting Principle $1.88 $1.43
Income (Loss) from Discontinued Operations................................. $(.01) $ .12
Extraordinary Item, Net of Tax............................................. $ - $ -
Cumulative Effect on Prior Years of Change in Accounting Principle, Net
of Tax................................................................... $ - $ -
Net Income (Loss).......................................................... $1.87 $1.55
Cash Dividends Declared.................................................... $ .38 $ .34
Book Value................................................................. $8.06 $6.60
BALANCE SHEET
Property, Plant & Equipment................................................ $105,484 $ 91,206
Accumulated Depreciation................................................... 46,697 40,537
Total Assets............................................................... 199,252 168,090
Working Capital............................................................ 78,280 67,570
Long-term Debt............................................................. 17,504 20,588
Shareholders' Equity....................................................... 117,383 95,582
Cash Dividends Declared.................................................... $ 5,583 $ 5,026
OTHER
Additions to Property, Plant & Equipment................................... $ 16,069 $ 13,320
Depreciation & Amortization................................................ $ 7,581 $ 6,527
Shares Outstanding......................................................... 14,551 14,490
Average Shares Outstanding................................................. 14,525 14,616
</TABLE>
<PAGE> 18
<TABLE>
CONSOLIDATED BALANCE SHEETS
The Standard Products Company and Subsidiary Companies
June 30, 1994 and 1993
(Thousands of Dollars) 1994 1993
- - ----------------------------------------------------------------------------------- -------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................................................... $ - $ 5,548
Receivables, less allowances of $3,627 in 1994 and $2,293 in 1993............... 202,363 168,147
Inventories..................................................................... 53,018 46,677
Prepaid insurance, taxes, etc................................................... 15,305 13,965
-------- --------
Total current assets........................................................ 270,686 234,337
-------- --------
Property, Plant and Equipment, at cost:
Land............................................................................ 6,751 5,973
Buildings and improvements...................................................... 85,085 74,227
Machinery and equipment......................................................... 263,865 246,771
Furniture and fixtures.......................................................... 32,317 22,551
Capital projects in process..................................................... 34,558 28,042
-------- --------
422,576 377,564
Less - Accumulated depreciation................................................. (180,567) (153,137)
-------- --------
242,009 224,427
Goodwill, net...................................................................... 62,564 61,286
Other Assets....................................................................... 49,055 44,800
-------- --------
$624,314 $564,850
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term notes payable........................................................ $ 10,373 $ 7,834
Current maturities of long-term debt............................................ 1,690 5,856
Accounts payable................................................................ 94,514 75,693
Accrued payrolls................................................................ 24,433 21,400
Accrued expenses................................................................ 48,919 41,069
Dividend payable................................................................ 2,835 2,746
Accrued taxes on income......................................................... - 343
-------- --------
Total current liabilities................................................... 182,764 154,941
-------- --------
Long-term Debt, net of current maturities.......................................... 135,381 115,607
-------- --------
Other Postretirement Benefits...................................................... 25,649 25,627
-------- --------
Deferred Income Taxes and Other Credits............................................ 37,843 44,239
-------- --------
Commitments and Contingent Liabilities
Shareholders' Equity:
Serial preferred shares, without par value, authorized 6,000,000 voting
shares and 6,000,000 non-voting shares, none issued......................... - -
Common shares, par value $1 per share; authorized 50,000,000 shares,
issued and outstanding 16,674,016 in 1994, and issued and
outstanding 16,551,974 in 1993.............................................. 16,674 16,552
Paid-in capital................................................................. 95,614 94,083
Retained earnings............................................................... 142,871 120,660
Foreign currency translation adjustments........................................ (10,359) (6,650)
Minimum pension liability....................................................... (2,123) (209)
-------- --------
Total shareholders' equity.................................................. 242,677 224,436
-------- --------
$624,314 $564,850
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 19
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
The Standard Products Company and Subsidiary Companies
For the Years Ended June 30, 1994, 1993 and June 28, 1992
<CAPTION>
(Thousands of Dollars Except Share Data) 1994 1993 1992
- - ------------------------------------------------------------ -------- -------- --------
<S> <C> <C> <C>
Net Sales................................................... $872,367 $763,796 $657,036
Cost of Goods Sold:
Materials, wages and other manufacturing costs..... 724,090 634,218 549,164
Research, engineering and development expenses..... 28,850 20,971 13,619
-------- -------- --------
752,940 655,189 562,783
-------- -------- --------
Gross Income................................. 119,427 108,607 94,253
Selling, General and Administrative Expenses................ 62,211 49,768 41,760
-------- -------- --------
57,216 58,839 52,493
-------- -------- --------
Other Income (Deductions):
Royalty and dividend income........................ 770 751 699
Net interest expense............................... (9,093) (8,214) (13,659)
Other, net......................................... 1,322 (1,150) (753)
-------- -------- --------
(7,001) (8,613) (13,713)
-------- -------- --------
Income before Taxes on Income, Extraordinary Item and
Cumulative Effect on Prior Years of Change in
Accounting Principle..................................... 50,215 50,226 38,780
Provision for Taxes on Income............................... 17,183 16,803 15,475
-------- -------- --------
Income before Extraordinary Item and Cumulative
Effect on Prior Years of Change in Accounting
Principle....................................... 33,032 33,423 23,305
Extraordinary Item, Early Repayment of Debt, Less
Applicable Income Tax of $1,569.......................... - (2,559) -
Cumulative Effect on Prior Years of Change in Accounting
Principle, Less Applicable Income Tax of $5,088.......... - (8,301) -
-------- -------- --------
Net Income......................................... $ 33,032 $ 22,563 $ 23,305
======== ======== ========
Earnings Per Common Share:
Income before Extraordinary Item and Cumulative
Effect on Prior Years of Change in Accounting
Principle.......................................... $1.99 $2.21 $1.79
Extraordinary Item, Early Repayment of Debt, Net of
Tax................................................ - (.17) -
Cumulative Effect on Prior Years of Change in Accounting
Principle, Net of Tax.................................. - (.55) -
-------- -------- --------
Net Income......................................... $1.99 $1.49 $1.79
======== ======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 20
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
The Standard Products Company and Subsidiary Companies
For the Years Ended June 30, 1994, 1993 and June 28, 1992
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
Foreign
Currency
Common Paid-In Retained Translation
(Thousands of Dollars Except Share Data) Shares Capital Earnings Adjustments
- - ---------------------------------------------------- -------- ------- -------- -----------
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1991.............................. $10,156 $ 60 $ 88,345 $ 4,680
Net income........................................ - - 23,305 -
Cash dividends ($.38 per share)................... - - (5,103) -
Foreign currency translation adjustments.......... - - - 1,584
Restricted stock awards........................... - 665 - -
Sale of 38,550 shares to option holders........... 39 690 - -
Common stock offering net of recorded expenses.... 1,840 51,807 - -
Minimum pension liability......................... - - - -
-------- ------- -------- -----------
BALANCE, JUNE 28, 1992.............................. $12,035 $53,222 $106,547 $ 6,264
Net income........................................ - - 22,563 -
Cash dividends ($.54 per share)................... - - (8,450) -
Foreign currency translation adjustments.......... - - - (12,914)
Restricted stock awards........................... - 866 - -
Sale of 89,889 shares to option holders........... 90 1,121 - -
Common stock offering net of recorded expenses.... 1,400 41,913 - -
Minimum pension liability......................... - - - -
Par value of shares issued in connection with a
five-for-four stock split...................... 3,027 (3,039) - -
-------- ------- -------- -----------
BALANCE, JUNE 30, 1993.............................. $16,552 $94,083 $120,660 $ (6,650)
Net income........................................ - - 33,032 -
Cash dividends ($.65 per share)................... - - (10,821) -
Foreign currency translation adjustments.......... - - - (3,709)
Restricted stock awards........................... - 585 - -
Sale of 122,042 shares to option holders.......... 122 946 - -
Minimum pension liability......................... - - - -
-------- ------- -------- -----------
BALANCE, JUNE 30, 1994.............................. $16,674 $95,614 $142,871 $ (10,359)
======== ======= ======== ===========
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
Total
Minimum Share-
Pension holders'
(Thousands of Dollars Except Share Data) Liability Equity
- - ---------------------------------------------------- --------- --------
<S> <C> <C>
BALANCE, JUNE 30, 1991.............................. $ (875) $102,366
Net income........................................ - 23,305
Cash dividends ($.38 per share)................... - (5,103)
Foreign currency translation adjustments.......... - 1,584
Restricted stock awards........................... - 665
Sale of 38,550 shares to option holders........... - 729
Common stock offering net of recorded expenses.... - 53,647
Minimum pension liability......................... 560 560
--------- --------
BALANCE, JUNE 28, 1992.............................. $ (315) $177,753
Net income........................................ - 22,563
Cash dividends ($.54 per share)................... - (8,450)
Foreign currency translation adjustments.......... - (12,914)
Restricted stock awards........................... - 866
Sale of 89,889 shares to option holders........... - 1,211
Common stock offering net of recorded expenses.... - 43,313
Minimum pension liability......................... 106 106
Par value of shares issued in connection with a
five-for-four stock split...................... - (12)
--------- --------
BALANCE, JUNE 30, 1993.............................. $ (209) $224,436
Net income........................................ - 33,032
Cash dividends ($.65 per share)................... - (10,821)
Foreign currency translation adjustments.......... - (3,709)
Restricted stock awards........................... - 585
Sale of 122,042 shares to option holders.......... - 1,068
Minimum pension liability......................... (1,914) (1,914)
--------- --------
BALANCE, JUNE 30, 1994.............................. $ (2,123) $242,677
========= ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 21
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Standard Products Company and Subsidiary Companies
For the Years Ended June 30, 1994, 1993 and June 28, 1992
<CAPTION>
(Thousands of Dollars) 1994 1993 1992
- - ------------------------------------------------------------------ -------- -------- --------
<S> <C> <C> <C>
Net cash provided by (used for) operating activities:
Net income..................................................... $ 33,032 $ 22,563 $ 23,305
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.............................. 40,495 29,887 26,228
Deferred taxes and other credits........................... (7,839) 4,851 2,207
Equity in (income) loss of non-consolidated affiliate (1,603) 363 1,111
Cumulative effect on prior years of change in
accounting principle.................................... - 8,301 -
Effect of changes in foreign currency...................... (627) (5,935) (54)
Other operating items...................................... (4,665) (967) 2,261
-------- -------- --------
Net cash provided by operations......................... 58,793 59,063 55,058
-------- -------- --------
Net cash provided by (used for) changes in operating
assets and liabilities:
Receivables.................................................... (34,419) 5,403 (15,215)
Inventories.................................................... (6,304) 982 (3,074)
Accounts payable and accrued expenses.......................... 29,248 (7,993) 4,794
Other.......................................................... (981) (3,490) (1,563)
-------- -------- --------
Net cash used for changes in operating assets and
liabilities.......................................... (12,456) (5,098) (15,058)
-------- -------- --------
Working capital provided by assets held for disposition........ - - 6,678
-------- -------- --------
Net cash provided by operating activities............... 46,337 53,965 46,678
-------- -------- --------
Net cash provided by (used for) investments:
Purchase of property, plant and equipment,net.................. (59,120) (38,000) (18,367)
Investments in affiliates...................................... (1,500) (8,700) -
Assets acquired by purchase of businesses...................... - (128,438) (2,318)
Utilization of industrial revenue bonds........................ - 3,752 -
-------- -------- --------
Net cash used for investments........................... (60,620) (171,386) (20,685)
-------- -------- --------
Net cash provided by (used for) financing:
Proceeds of common stock offering.............................. - 43,313 53,647
Proceeds from exercise of stock options........................ 1,068 1,211 729
Proceeds of new long-term borrowings........................... 140,343 140,730 8,267
Net increase (decrease) in short-term borrowings............... 2,247 7,834 (7,860)
Repayment of long-term borrowings.............................. (124,031) (105,993) (51,971)
Cash dividends................................................. (10,821) (8,450) (5,103)
-------- -------- --------
Net cash provided by (used for) financing............... 8,806 78,645 (2,291)
-------- -------- --------
Effect of exchange rate changes on cash........................... (71) (18) (161)
-------- -------- --------
Increase (decrease) in cash and cash equivalents.................. (5,548) (38,794) 23,541
Cash and cash equivalents at the beginning of the year............ 5,548 44,342 20,801
-------- -------- --------
Cash and cash equivalents at the end of the year.................. $ - $ 5,548 $ 44,342
======== ======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Standard Products Company and Subsidiary Companies
June 30, 1994, 1993 and June 28, 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. Major intercompany items have been
eliminated.
SHORT-TERM INVESTMENTS
Short-term investments include bankers acceptances and repurchase agreements at
varying rates of interest and with original maturities less than thirty days.
These investments are carried at cost which approximates market value. For
purposes of reporting the Company's cash flow, these investments are cash
equivalents.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's Canadian, English and French
subsidiaries have been translated in accordance with Statement of Financial
Accounting Standards No. 52. Current rates of exchange are used to translate
the balance sheets of these entities while the average exchange rate of each
fiscal year is used for the translation of income accounts. The resulting
unrealized gains and losses are recorded as a component of shareholders'
equity.
PROPERTY, PLANT AND EQUIPMENT
For financial reporting purposes, the Company provides for depreciation of
plant and equipment using the straight-line and sum-of-years' digits methods at
annual rates based on the estimated service lives of the property. Maintenance
and repair expenditures are charged to income as incurred. Expenditures for
improvements and major renewals are capitalized. When assets are retired, the
related cost and accumulated depreciation are removed from the accounts, and
any gain or loss on the disposition is credited or charged to income.
INVENTORIES
Inventories are stated at the lower of cost or market. The majority of
domestic inventories are valued using the last-in, first-out (LIFO) method, and
the remaining inventories are valued using the first-in, first-out (FIFO)
method.
INVESTMENTS IN AFFILIATES
The Company's investments in affiliate operations are accounted for by both the
equity and cost methods of accounting. The cost method is followed in those
situations where the Company's ownership is less than 20% and operations are
conducted by management of the affiliate. Income is recorded as received. The
equity method of accounting is followed in those situations of larger ownership
interests but less than 51%, and the Company's results of operations include
those of the affiliate to the extent of its ownership interest.
EXCESS OF COST OVER NET ASSETS OF ACQUIRED COMPANIES
The excess cost over the fair value of acquired net assets is amortized on the
straight-line method over the estimated useful life but not in excess of 40
years.
INCOME TAXES
In fiscal 1993, the Company adopted Statement of Financial Accounting Standard
(SFAS) No. 109, Accounting for Income Taxes. The effect of adopting SFAS No.
109 was immaterial, and prior years were not restated.
Income tax expense includes United States, foreign and state income taxes,
exclusive of taxes on the undistributed income of foreign subsidiaries where it
is the intention of the Company to have those subsidiaries reinvest the income
locally. For fiscal 1994 and 1993, the Company determined tax expense and
other deferred tax information using the liability method, which recognizes the
differences in financial reporting bases and tax bases of assets and
liabilities at tax rates currently in effect. For 1992, tax expense was based
upon transactions included in determining financial statement income. Deferred
taxes were provided for differences in the timing of reporting transactions for
tax and financial reporting purposes. Permanent differences are included in
the calculation of income tax expense currently.
<PAGE> 23
RETIREMENT PLANS
The Company and its subsidiary companies have a number of plans providing
pension, retirement or profit sharing benefits for substantially all employees.
These plans include defined benefit, defined contribution and multi-employer
plans. For defined benefit plans, those covering salaried employees provide
pension benefits based upon the individual employee's average compensation over
the last five years, while hourly plans provide benefits of stated amounts for
each year of service. The Company's policy is to fund the pension costs of the
defined benefit plans in accordance with Internal Revenue Service regulations.
The defined contribution and multi-employer plans are funded as accrued, and
the accrual is based upon hourly rates or a percentage of the unit's
performance.
POSTRETIREMENT MEDICAL BENEFITS
The Company provides postretirement health and life insurance benefits for
retired salaried and certain retired hourly employees. Benefits provided under
various plans, individually arranged by business unit, include health and life
insurance. The plans generally provide for a means to limit the cost of the
plans to the Company through cost sharing or spending limitations.
In the fourth quarter of fiscal 1993, the Company adopted SFAS No. 106,
Employers' Accounting For Postretirement Benefits Other Than Pensions,
retroactive to the beginning of fiscal 1993. As a result, the previously
reported quarterly results of operations were restated to reflect adoption of
the standard as of the beginning of the fiscal year and the recognition of the
expense of these plans on the accrual basis. The accumulated postretirement
benefit obligation was recorded as a charge to earnings in 1993. In 1992, the
expense of these plans was recognized as claims were paid.
FOREIGN EXCHANGE CONTRACTS
The Company enters into forward exchange contracts to hedge certain foreign
currency transactions for periods consistent with the terms of the underlying
transaction. The Company does not engage in speculation and does not hedge
foreign currency positions which are not related to specific transactions.
Gains and losses on the foreign exchange contracts generally offset losses and
gains of the transactions being hedged, resulting in protection from the risks
of foreign exchange movement for those transactions and avoiding losses
affecting results of operations.
POSTEMPLOYMENT BENEFIT PLANS
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 112, Employers' Accounting for Postemployment
Benefits. The standard becomes effective for fiscal years beginning after
December 15, 1993 with earlier adoption permitted. For the Company, adoption
is required for fiscal 1995. The Company's accounting method for
postemployment benefits has effectively complied with the provisions of SFAS
No. 112.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to their 1994
presentation in the financial statements.
2. ACQUISITIONS
In January 1993, the Company acquired all of the issued and outstanding shares
of capital stock of Standard Products Industriel (SPI), a French Company, and
its subsidiary companies. SPI designs, develops and manufactures window and
glass weatherstrips, vehicle body and door seals and glass encapsulation
products for French, other European and North American auto manufacturers.
The cost of the acquisition was approximately $125,500,000. The acquisition
has been accounted for under the purchase method of accounting, and the
financial statements of the Company include the acquired assets, assumed
liabilities and results of operations of SPI since the date of acquisition.
Valuation of the assets acquired and liabilities assumed in accordance with
Accounting Principles Board Opinion No. 16 resulted in goodwill and other
assets of approximately $54,000,000.
In 1993, incremental revenues related to SPI since the date of acquisition
amounted to $46,411,000. Results of operations, including the effects of
purchase valuations, reduced earnings per share by $.06. If the acquisition of
SPI had been reflected in the consolidated results of operations from the
beginning of the 1993 fiscal year, sales would have been $846,015,000, and
income before extraordinary items and changes in accounting principles would
have been $34,024,000, or $2.24 per share. For 1992, pro forma sales would
have been $779,000,000, and pro forma income before extraordinary items and
changes in accounting principles would have been $25,600,000, or $1.98 per
share. All pro forma amounts are unaudited.
<PAGE> 24
In July 1992, the Company's subsidiary, Holm Industries, Inc., acquired the
assets of Jarrow Products, Inc., a manufacturer of commercial refrigeration
gaskets and exterior door weatherstrip. The purchase price of $7,000,000
equalled the fair value of assets acquired. The financial statements of the
Company include the results of Jarrow since August 1, 1992. The pro forma
effect of the Jarrow acquisition was not material.
In fiscal 1993, the Company increased its ownership in NISCO, to 50% from 40%
by making additional capital contributions and by purchasing partnership units
from its joint venture partner, Nishikawa Rubber Company. The additional
investment in NISCO was $8,700,000. In fiscal 1994, the Company invested
$1,500,000 in its joint venture, Nishikawa Standard Company (NISCO). The
Company's investment in NISCO at June 30, 1994 was $15,700,000. In 1994, the
Company's share of NISCO's operating income was $1,603,000, compared to
$363,000 of losses in 1993. The NISCO investment is reported in Other Assets
in the accompanying consolidated balance sheet, and the operating results are
reported in Other, net in the accompanying consolidated statement of income.
Under the terms of NISCO's revolving credit and term loan facility, the joint
venture partners are required to guarantee 50% of NISCO's borrowings. The
Company's share of the guarantee at year end was $7,500,000.
3. DISCONTINUED OPERATIONS
The Company previously closed its Port Clinton Division, which had been
dedicated primarily to the Company's former military business. Reserves were
provided for the costs associated with the discontinuance. At June 30, 1994,
the remaining balance of the reserve of $3,975,000, which is included in
Accrued Expenses in the accompanying consolidated balance sheet, is for
building and site work and closure costs.
4. FINANCING ARRANGEMENTS
Long-term debt at June 30, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993
-------- --------
<S> <C> <C>
Senior notes................ $100,000 $ 25,000
Revolving credit agreement 30,000 75,000
Other debt.................. 6,534 8,319
First mortgage industrial
revenue bonds............. 537 13,144
-------- --------
Total....................... 137,071 121,463
Less-current maturities..... 1,690 5,856
-------- --------
$135,381 $115,607
</TABLE>
At June 30, 1994, Senior Notes outstanding of $100,000,000 include two issues,
$75,000,000 and $25,000,000. The $75,000,000 Senior Notes, placed directly
with three affiliated insurance companies, are unsecured and accrue interest at
6.55%. Interest payments are payable semi-annually, and annual principal
payments of $12,500,000 begin in December 1998 through December 2002, with the
balance due on maturity in December 2003.
Coinciding with the issuance of the $75,000,000 fixed rate Senior Notes, the
Company entered into a currency and interest rate swap transaction to establish
fixed interest rates on intercompany borrowings of its French subsidiary. The
nominal amount is 150,000,000 FF and the term extends to November 2000.
The $25,000,000 Senior Notes are also unsecured notes placed directly with the
holders. The interest rate is 9.81%, interest is paid semiannually and the
notes are payable July 1, 1999.
Each of the Senior Note agreements require the Company to maintain certain
financial covenants as to net worth, leverage and working capital.
The Revolving Credit Agreement (Credit Agreement) represents borrowings from a
group of banks that have committed to make available for borrowing up to
$125,000,000 until January 1997 with provisions for extending the agreement
beyond that date upon satisfaction of certain requirements. The Company has
the right to convert up to $50,000,000 of revolving loans into a five-year term
loan with quarterly repayments thereafter. The loans may be denominated in
either U.S. dollars or certain other currencies based upon Eurodollar interest
rates or the agent bank's base rate. At June 30, 1994, borrowings under the
Credit Agreement bear interest at 5.0%. A commitment fee of .25% is due on the
unused portion of the agreement. The terms of the Credit Agreement also
require the Company to maintain certain financial covenants as to net worth,
leverage and working capital.
The maturities of long-term debt for the five years subsequent to June 30, 1994
are $1,690,000 in 1995, $1,594,000 in 1996, $31,466,000 in 1997, $1,177,000 in
1998 and $13,613,000 in 1999.
<PAGE> 25
Under the most restrictive covenants of the Company's various loan agreements,
principally the Credit Agreement, $63,929,000 of retained earnings were not
restricted at June 30, 1994 for the payment of dividends, and the ratio of
current assets to current liabilities was 1.48 to 1, in excess of the minimum
requirement of 1.25 to 1.
The Company and its subsidiaries also have from various banking sources
approximately $38,000,000 of unused short-term lines of credit at rates of
interest approximating the prime commercial rate. These funds are available
subject to satisfying covenant restrictions as to funded debt limitations. In
1994, the average month-end borrowings were $8,400,000, and the highest
month-end balance was $13,400,000. Comparable amounts for 1993 were $4,800,000
and $12,300,000 and $4,600,000 and $11,357,000, for 1992. The effective annual
borrowing rate was 4.2% in 1994, 4.9% in 1993 and 8.6% in 1992.
Interest payments with respect to all of the Company's borrowing arrangements
amounted to $9,655,000 in 1994, $10,430,000 in 1993 and $17,225,000 in 1992.
5. FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and cash
equivalents, trade receivables and payables, debt obligations and swap
transactions, and foreign exchange forward contracts. The book value of cash
and cash equivalents, trade receivables and payables and short-term debt are
considered to be representative of fair value because of the short maturity of
these instruments. The fair value of long-term debt and the currency and
interest rate swap has been estimated using discounted cash flow analyses based
upon the incremental borrowing rates for similar types of borrowing
arrangements with comparable terms and maturities. At June 30, 1994, the
Company's long-term debt was $135,381,000, and this amount exceeded fair value
by approximately $4,500,000.
The Company and its subsidiaries have entered into foreign exchange forward
contracts to manage exposure to foreign exchange fluctuations. These contracts
hedge primarily firm commitments of less than one year that are denominated in
foreign currencies. At June 30, 1994, the Company had $4,300,000 of contracts
outstanding and the carrying value of these contracts was not materially
different from fair value.
6. RETIREMENT PLANS
The cost of providing pension, retirement and profit sharing benefits charged
to operations amounted to $4,932,000 in 1994, $5,141,000 in 1993 and $4,945,000
in 1992. For 1994, the expense of defined benefit plans equalled $533,000,
while the expense of defined contribution plans was $3,859,000 and
multi-employer plan expense was $540,000. Comparable figures for 1993 were
$105,000, $4,389,000 and $607,000, and for 1992, $767,000, $3,568,000 and
$610,000. Pension expense of domestic and foreign defined benefit plans were
based on the provisions of SFAS No. 87. Components of pension expense for
defined benefit plans included the following items:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Service cost........................ $2,113 $1,772 $2,070
Interest cost on projected benefit
obligation....................... 4,750 5,299 5,159
Actual (gain) on plan assets........ (1,391) (8,206) (9,037)
Net amortization and deferral....... (4,939) 1,240 2,575
------ ------ ------
Net pension expense................ $ 533 $ 105 $ 767
====== ====== ======
</TABLE>
The funded status of the foreign and domestic defined benefit plans is
displayed below and is based on information supplied by the actuary as of March
31 of each year. For 1994 and 1993, the calculations assume a weighted-average
discount rate of 8%, an anticipated long-term rate of return of 9% and an
increase in compensation levels of 5%. For 1992, the calculations assumed a
weighted-average discount rate of 8.5%, an anticipated long-term rate of return
on plan assets of 9.5% and an increase in compensation levels of 5.0%. The
assets of the plans consist of listed bonds, stocks, mutual investment funds
and cash securities. In connection with the recognition of the minimum
liability as required by SFAS No. 87, the Company has recorded an intangible
asset of $1,066,000, included in Other Assets in the accompanying consolidated
balance sheet, and an equity reduction of $2,123,000.
<PAGE> 26
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993
------------------ -----------------
Less Greater Less Greater
Than Than Than Than
Plan Plan Plan Plan
Accumulated benefits are: Assets Assets Assets Assets
- - ------------------------- ------- ------- ------- --------
<S> <C> <C> <C> <C>
Vested benefits.......... $41,776 $21,667 $51,486 $ 7,973
Non-vested benefits...... 1,303 600 1,388 356
------- ------- ------- --------
Accumulated benefit
obligation.............. 43,079 22,267 52,874 8,329
Projected future
compensation increases 6,739 777 6,984 236
------- ------- ------- --------
Projected benefit
obligation............. 49,818 23,044 59,858 8,565
Plan assets at fair
market value........... 56,915 18,452 72,662 6,490
------- ------- ------- --------
Projected benefit obliga-
tion (in excess of) or
less than plan assets.. 7,097 (4,592) 12,804 (2,075)
Unrecognized transition
(asset) liability...... (6,876) (270) (7,827) 53
Unrecognized (gain) loss 3,105 2,674 309 477
Adjustment required to
recognize minimum
liability.............. - (3,188) - (830)
Unrecognized prior
service cost............ 2,526 1,562 2,268 536
------- ------- ------- --------
Prepaid Pension Cost,
(Liability) $ 5,852 $(3,814) $ 7,554 $ (1,839)
======= ======= ======= ========
</TABLE>
The Company has accrued $8,224,000 for workers' compensation claims as of June
30, 1994, and this amount is included in Accrued Expenses in the accompanying
consolidated balance sheet.
7. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The cost of providing health and life insurance benefits for certain retired
employees has been determined under the provisions of SFAS No. 106 for 1994 and
1993. As a result, the estimated cost of these benefits has been accrued based
on the employees' active service lives. In 1992, the cost of these benefits,
which were primarily health care, were expensed as claims were paid. In 1994
and 1993, the expense for postretirement benefits other than pensions was
$2,443,900 and $2,172,000, respectively, while expenses in 1992 for claims paid
were $1,135,000. All plans under which these benefits are provided are
unfunded.
In 1993, the Company recognized this change in accounting on the immediate
recognition basis. The effect of adopting SFAS No. 106 as of the beginning of
1993 was to reduce pretax earnings by $13,389,000, and the accrual method of
accounting for postretirement health care costs was approximately equal to the
former claims paid method.
The Company continues to fund these benefits as claims are incurred. Spending
limitations per annum are in effect for several plans and future retirees of
other plans will pay a portion of these costs.
A summary of plan information is as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit
obligation (APBO):
Retirees....................... $21,782 $22,725
Active participants eligible to
receive benefits............. 1,978 2,498
Other active plan participants. 2,519 3,021
---------- ----------
26,279 28,244
Unrecognized gain/(loss)....... 1,522 (836)
---------- ----------
$27,801 $27,408
========== ==========
Periodic postretirement benefit
cost:
Current service cost........... $ 243 $ 269
Interest on postretirement
benefit benefit obligation... 2,201 1,903
---------- ----------
$ 2,444 $ 2,172
========== ==========
</TABLE>
<PAGE> 27
Actuarial assumptions:
Discount rate.................. 8% 8%
1993 to 2002 - health care cost
trend rate................... 15% to 5.5% 15% to 5.5%
Effect of a 1% increase in health
care cost trend rate:
Increase year end APBO......... 7.3% 7.2%
Increase expense............... 6.8% 8.0%
8. INVENTORY
The major components of inventory are as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Raw Materials............ $20,477 $20,055 $12,481
Work-in-process and
finished goods.......... 32,541 26,622 27,617
------- ------- -------
Total, at both FIFO and
LIFO cost............. $53,018 $46,677 $40,098
------- ------- -------
Excess of FIFO cost over
LIFO cost............... $11,651 $11,045 $11,126
======= ======= =======
</TABLE>
Approximately 60% of the Company's inventories are valued at LIFO cost.
9. COMMITMENTS AND CONTINGENT LIABILITIES
The Company and its subsidiaries have operating leases covering manufacturing
facilities and transportation and material handling equipment expiring at
various dates through 2004. Rental costs charged to operations amounted to
$11,844,000 in 1994, $9,162,000 in 1993 and $8,677,000 in 1992. At June 30,
1994, future commitments under the terms of non-cancelable operating leases for
minimum rentals are $7,640,000 in 1995, $7,000,000 in 1996; $5,850,000 in 1997,
$4,250,000 in 1998, $2,600,000 in 1999 and $8,300,000 in 2000 through 2004.
The Company and its subsidiaries are involved in certain legal actions and
claims. In the opinion of management, any liability which may ultimately be
incurred would not materially affect the financial position or results of
operations of the Company.
10. COMMON SHARES
In October 1993, shareholders approved The Standard Products Company 1993
Employee Stock Option Plan.
Options to purchase common shares are granted under the 1993 plan and similar
plans adopted in 1991, 1989 and 1985. For each plan, options are exercisable
over periods of five or ten years. The option price is either the fair market
value at the time the option is granted or 110% of the fair market value at the
time the option is granted for those individuals owning more than ten percent
of the common shares of the Company. Generally, options become exercisable one
year from the date of grant and annually thereafter. No more than 40% of the
grant can be exercised in any one plan year. Summarized below is stock option
activity for 1994.
<TABLE>
<CAPTION>
Shares Range of Option Prices
------- ----------------------
<S> <C> <C>
Stock options
outstanding at
June 30, 1993 397,405 $13.50 - 33.63
Options granted 105,500 29.13 - 32.05
Options exercised (108,479) 13.50 - 22.80
Options cancelled (5,068) 13.50 - 33.63
--------- ----------------
Stock options
outstanding at
June 30, 1994 389,358 $13.50 - 33.63
======= ================
</TABLE>
At June 30, 1994, options for 151,457 shares were exercisable at an average
exercise price of $23.07 a share. Shares reserved for the future granting of
options were 373,995 at year end; 174,430 were reserved a year ago.
<PAGE> 28
Under The Standard Products Company 1991 Restricted Stock Plan, 375,000 common
shares were reserved for restricted stock awards. Shares awarded are earned
ratably over the term of the restricted stock agreement, based upon achieving
specified performance goals. Generally, transferability of shares earned is
restricted for a specified number of years following the year in which they
were earned. Until the restrictions lapse, the recipient is entitled to all of
the rights of a shareholder, including the right to vote the shares, but the
shares are restricted as to transferability and subject to forfeiture to the
Company during the restriction period. In 1992, 187,500 shares were awarded.
Of those shares, 20,800 were earned in 1994 and 25,000 were earned in 1993 and
1992. In 1994, $585,000 was charged to operations as compensation expense
based upon the market value of the earned shares. The similar charge to
operations in 1993 and 1992 was $866,000 and $665,000, respectively. At year
end, 187,500 shares remain available for future awards.
11. EARNINGS PER COMMON SHARE
Earnings per common share have been determined based on the weighted average
common shares outstanding during the periods. The averages for 1994, 1993 and
1992 were 16,626,927, 15,114,013 and 13,009,741, respectively.
12. SEGMENT INFORMATION
The Company's operations are in two industry segments. The Transportation
Equipment Segment includes extruded and molded rubber and plastic products for
automotive, building and marine industries and plastic and magnetic door seals
for home appliances. The Tread Rubber Segment produces tread rubber for the
truck tire retreading industry.
Net sales by segment include both sales to unaffiliated customers, as reported
in the Company's consolidated statements of income, and intersegment sales.
Operating income consists of net sales less applicable operating costs and
expenses related to those sales. In computing operating income, general
corporate expenses are excluded. Identifiable assets by segment are those
assets that are used in the operations of each segment. General corporate
assets are those not identifiable with the operations of a segment.
Approximately 56%, 65% and 71% of the Company's annual revenues in 1994, 1993
and 1992, respectively, are represented by direct sales to automotive original
equipment customers - Chrysler, Ford and General Motors. Likewise, at year
end, 36% of accounts receivable are concentrated in the automotive market. The
Company does not view such a concentration in the automotive market as an
unusual credit risk. Sales to the automotive original equipment customers
include a number of different products and types of the same product, the sales
of which are not interdependent.
BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net Sales:
Transportation
equipment.............$753,764 $650,055 $551,768
Tread rubber............ 124,169 117,224 107,489
Less-intersegment
sales................. (5,566) (3,483) (2,221)
-------- -------- --------
Net sales...........$872,367 $763,796 $657,036
======== ======== ========
Operating Income:
Transportation
equipment.............$ 58,476 $ 53,067 $ 46,392
Tread rubber............ 2,890 9,308 9,346
General corporate
expenses.............. (4,150) (3,536) (3,245)
-------- -------- --------
Total operating
income..............$ 57,216 $ 58,839 $ 52,493
-------- -------- --------
Other expense, net...... (7,001) (8,613) (13,713)
-------- -------- --------
Income from operations
before taxes..........$ 50,215 $ 50,226 $ 38,780
======== ======== ========
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Identifiable Assets:
Transportation
equipment.............$519,088 $468,236 $303,097
Tread rubber............ 81,365 75,770 69,887
General corporate
assets................ 23,861 20,844 25,809
-------- -------- --------
Total identifiable
assets............... $624,314 $564,850 $398,793
======== ======== ========
Capital Expenditures*:
Transportation
equipment.............$ 57,291 $109,431 $ 16,810
Tread rubber............ 4,089 3,381 3,058
-------- -------- --------
Total capital
expenditures..........$ 61,380 $112,812 $ 19,868
======== ======== ========
Depreciation and
Amortization:
Transportation
equipment.............$ 37,340 $ 26,529 $ 23,106
Tread rubber............ 3,155 3,358 3,122
-------- -------- --------
Total
depreciation and
amortization..........$ 40,495 $ 29,887 $ 26,228
======== ======== ========
<FN>
* Includes assets acquired by purchase of businesses in 1993 and 1992.
</TABLE>
GEOGRAPHIC AREA
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net Sales:
United States...........$532,546 $491,184 $421,350
Canada.................. 153,484 166,102 160,568
Europe.................. 213,961 121,413 91,112
Less-interarea sales.... (27,624) (14,903) (15,994)
-------- -------- --------
Net sales...........$872,367 $763,796 $657,036
======== ======== ========
Income From Operations:
United States...........$ 19,691 $ 24,807 $ 14,903
Canada.................. 7,114 9,991 11,168
Europe.................. 8,796 817 (754)
General corporate
expenses, net of tax.. (2,569) (2,192) (2,012)
-------- -------- --------
Income from
operations.........$ 33,032 $ 33,423 $ 23,305
======== ======== ========
Identifiable Assets:
United States...........$311,947 $266,423 $220,327
Canada.................. 62,193 65,121 80,535
Europe.................. 226,313 212,462 72,122
General corporate
assets................ 23,861 20,844 25,809
-------- -------- --------
Total identifiable
assets..............$624,314 $564,850 $398,793
======== ======== ========
</TABLE>
13. INCOME TAXES
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Income before taxes:
United States...........$ 36,097 $ 14,084 $ 18,092
Foreign................. 14,118 18,625 20,688
-------- -------- --------
$ 50,215 $ 32,709 $ 38,780
======== ======== ========
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
Deferred
Liability Method Method
------------------ --------
<S> <C> <C> <C>
Amounts currently payable:
Federal.................$ 8,591 $ 8,252 $ 3,905
Foreign................. 4,139 5,904 9,104
State and local......... 1,262 2,130 917
-------- -------- --------
$ 13,992 $ 16,286 $ 13,926
======== ======== ========
Deferred taxes:
Federal.................$ 4,485 $ (3,413) $ 1,457
Foreign................. (1,317) (811) (508)
State and local......... 23 (1,916) 600
-------- -------- --------
3,191 (6,140) 1,549
-------- -------- --------
Total provision.......$ 17,183 $ 10,146 $ 15,475
======== ======== ========
Income before non-
recurring items.........$ 17,183 $ 16,803 $ 15,475
Extraordinary item........ - (1,569) -
Cumulative effect on
prior years of changes
in accounting principles - (5,088) -
-------- -------- --------
Total provision.......$ 17,183 $ 10,146 $ 15,475
======== ======== ========
</TABLE>
The components of deferred taxes and their tax effect are as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993 1992
-------- -------- --------
Deferred
Liability Method Method
------------------ --------
<S> <C> <C> <C>
Cumulative effect on prior
years of change in
accounting principles.. $ - $(5,088) $ -
Alternative minimum tax.. - (1,300) -
Discontinued operations.. 1,795 - 2,269
Excess of tax over book
depreciation........... 249 37 (1,246)
Employee benefits........ 630 (754) -
All other items, none of
which exceeds 5% of
of computed tax........ 517 965 526
-------- -------- --------
$ 3,191 $ (6,140) $ 1,549
======== ======== ========
</TABLE>
A reconciliation of income tax expense to the U.S. statutory rate is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Tax at U.S. statutory rate 35.0% 34.0% 34.0%
Difference in effective
rate of international
operations.............. (2.1) (3.8) 2.7
State and local income
tax..................... 1.7 .4 2.6
Other..................... (.4) .4 .6
-------- -------- --------
Effective tax rate........ 34.2% 31.0% 39.9%
======== ======== ========
</TABLE>
In accordance with the Company's policy, as of June 30, 1994, federal income
taxes have not been provided on the undistributed earnings of foreign
subsidiaries. If these earnings were distributed, approximately $8,000,000 of
tax would be payable.
In connection with cash flow information, the Company paid $20,338,000 in 1994,
$16,022,000 in 1993 and $12,200,000 in 1992 for federal, foreign and state
taxes on income.
Through its United Kingdom subsidiaries, the Company has available net
operating loss carryforwards of $28,000,000 for income tax purposes with no
limit as to expiration under United Kingdom tax regulations. For financial
reporting purposes and the adoption of SFAS No. 109, the Company has recognized
valuation allowances equal to the deferred tax assets related to these tax loss
carryforwards.
<PAGE> 31
At June 30, 1994, deferred tax liabilities were $25,600,000 and deferred tax
assets were $19,900,000. The major component of deferred tax liabilities is
$25,000,000 for excess depreciation and amortization. In addition to the loss
carryforward and valuation allowance noted above, deferred tax assets include
$1,400,000 for discontinued operations and $14,400,000 related to employee
benefits.
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth a summary of the quarterly results of operations
for the years ended June 30, 1994 and 1993. Amounts previously reported in the
first quarter of fiscal 1993 were restated to reflect the adoption of SFAS No.
106.
<TABLE>
<CAPTION>
1994
------------------------------------------------------------------------
Three Months Ended
-----------------------------------------------------------------
Sept. 30 Dec. 31 March 31 June 30
-------- ------- -------- -------
(Thousands of Dollars Except Per Share Data)
<S> <C> <C> <C> <C>
Net Sales...................................... $201,691 $198,335 $222,676 $249,665
Gross Income................................... 26,165 24,623 28,150 40,489
Net Income..................................... 4,852 6,187 8,178 13,815
Earnings Per Common Share...................... $.29 $.37 $.49 $.83
==== ==== ==== ====
1993
-----------------------------------------------------------
Three Months Ended
-----------------------------------------------------------
Sept. 27 Jan. 3 April 4 June 30
-------- -------- -------- --------
(Thousands of Dollars Except Per Share Data)
<S> <C> <C> <C> <C>
Net Sales...................................... $164,417 $174,795 $200,934 $223,650
Gross Income................................... 17,807 24,481 30,717 35,602
Income before extraordinary item and
cumulative effect on prior years of
changes in accounting principles............. 4,436* 7,813 10,147 11,027
Extraordinary item, Net of tax................. - - (2,559) -
Cumulative effect on prior years of change
in accounting principles, net of tax......... (8,301) - - -
-------- -------- -------- --------
Net Income (Loss).............................. $ (3,865) $ 7,813 $ 7,588 $ 11,027
======== ======== ======== ========
Earnings Per Common Share:
Income before extraordinary item and
cumulative effect on prior years of
changes in accounting principles............ $ .29* $ .52 $ .67 $ .73
Extraordinary item, net of tax................. - - (.17) -
Cumulative effect on prior years of change
in accounting principles, net of tax......... (.55) - - -
-------- -------- -------- --------
Net Income (Loss).............................. $ (.26) $ .52 $ .50 $ .73
======== ======== ======== ========
<FN>
* Represents the amount previously reported for the first quarter of fiscal 1993.
</TABLE>
<PAGE> 32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders and the Board of Directors,
The Standard Products Company:
We have audited the accompanying consolidated balance sheets of The Standard
Products Company (an Ohio corporation) and Subsidiary Companies as of June 30,
1994 and 1993, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three fiscal years in the period ended
June 30, 1994. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Standard
Products Company and Subsidiary Companies as of June 30, 1994 and 1993, and the
results of their operations and their cash flows for each of the three fiscal
years in the period ended June 30, 1994 in conformity with generally accepted
accounting principles.
As explained in Note 1 to the consolidated financial statements, effective June
29, 1992, the Company changed its methods of accounting for postretirement
benefits other than pensions and income taxes.
ARTHUR ANDERSEN & CO.
August 2, 1994,
Cleveland, Ohio.
<PAGE> 33
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The accompanying financial statements were prepared under management's
direction, which has responsibility for their integrity and objectivity. These
statements have been prepared in conformity with generally accepted accounting
principles consistently applied and, where appropriate, reflect estimates based
upon management's best judgment.
Management is further responsible for maintaining a system of internal
accounting controls, designed to provide reasonable assurance that the books
and records reflect the transactions of the companies and that its established
policies and procedures are carefully followed. The system is continually
reviewed for its effectiveness and is augmented by segregation of
responsibilities, written policies and guidelines, the careful selection and
training of qualified personnel and an internal audit program.
Management believes that the Company's accounting controls provide reasonable
assurance that errors or irregularities that could be material to the financial
statements do not occur or would be detected within a timely period by
employees performing their assigned functions. However, inherent limitations
exist in any system of internal controls and, of course, the cost of controls
should not exceed their benefits. Management believes that the Company's
balance between the costs and benefits of controls reasonably assures the
reliability of its financial reporting at reasonable costs.
Arthur Andersen & Co., independent public accountants, are engaged to audit the
financial statements of the Company and issue reports thereon. Their audit is
conducted in accordance with generally accepted auditing standards and,
accordingly, includes tests of accounting records and such other auditing
procedures as they consider necessary in the circumstances. The accountants'
report appears elsewhere.
The Board of Directors, through the Audit Committee of the Board, is
responsible for: (1) assuring that management fulfills its responsibilities in
the preparation of the financial statements; and (2) engaging the independent
public accountants with whom the Committee reviews the scope of the audit and
the accounting principles to be applied in financial reporting. The Audit
Committee, which is comprised entirely of seven outside Directors, meets
regularly (separately and jointly) with the independent public accountants,
representatives of management, and the internal auditors to review the
activities of each and to ensure that each is properly discharging its
responsibilities. To ensure complete independence, Arthur Andersen & Co. has
full and free access to meet with the Audit Committee, without management
representatives present, to discuss the results of their audit, accounting and
financial reporting matters and internal accounting controls.
/s/ James S. Reid, Jr. /s/ Aubrey E. Arndt
------------------ --------------------
James S. Reid, Jr. Aubrey E. Arndt
Chairman and Chief Vice President - Finance
Executive Officer
<PAGE> 34
COMMON SHARES
The Company's common shares are listed on the New York Stock Exchange.
Quarterly market and dividend data are shown in the following table.
<TABLE>
<CAPTION>
Cash Dividends
Price Range Declared
----------------------------------- ------------------------
1994 1993 1994 1993
--------------- ---------------- ---- ----
High Low High Low
------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Quarter
1st................ $36.63 $29.63 $28.50 $21.20 $.16 $.128
2nd............... $36.00 $31.25 $26.00 $19.80 $.16 $.128
3rd................ $38.75 $32.50 $32.40 $25.70 $.16 $.128
4th................ $32.63 $26.25 $35.63 $31.00 $.17 $.160
---- -----
$.65 $.544
==== =====
<FN>
There were approximately 893 shareholders as of August 18, 1994.
</TABLE>
IN MEMORIAM
This past year The Standard Products Co. lost a respected and well-loved
colleague when Director Emeritus Charles (Charlie) Brooks passed away. Mr.
Brooks became associated with Standard Products in 1967 following the
acquisition of his two companies, Campbell Plastics Company and Cee-Bee
Manufacturing Company. He became a senior executive of Standard Products and a
member of the Board of Directors. Through his dedication and knowledge, he
contributed significantly to the success of Standard Products. He is missed by
all of us.
<PAGE> 35
<TABLE>
<CAPTION>
DIRECTORS OFFICERS
<S> <C>
Richard J. Boland * + James S. Reid, Jr.
Consultant; Retired Senior Partner, Chairman and Chief Executive Officer
Arthur Andersen & Co.
Theodore K. Zampetis
Edward B. Brandon * + President and Chief Operating Officer
Chairman, President and Chief
Executive Officer, National Gerard Mesnel
City Corporation Executive Vice President-
(Bank holding company) Advanced Technology Worldwide
John D. Drinko -
Attorney - Baker & Hostetler, Aubrey E. Arndt
Attorneys at Law Vice President-Finance
Curtis E. Moll * - John C. Brandmahl
Chairman and Chief Executive Officer, Vice President-Human Resources
MTD Products, Inc.
(Manufacturer of outdoor power John C. Clegg
equipment, and tools, dies and Vice President-Information Services
stampings for the automotive industry)
Bruce G. Davis
Malcolm R. Myers * + Vice President-Purchasing &
Chairman and Chief Executive Officer, Supply, Worldwide
Cloyes Gear & Products, Inc.
(Manufacturer of automotive timing Larry J. Enders
components) Vice President and President and
Chief Executive Officer,
Leigh H. Perkins + - Oliver Rubber Company
Chairman, The Orvis Company, Inc.
(Manufacturer and distributor of Joseph Farkas
fishing tackle and sporting goods) President, Standard Products
Industriel
Alfred M. Rankin, Jr. *
Chairman, President and Chief James F. Keys
Executive Officer, NACCO Industries, Vice President and Managing Director,
Inc. (Holding company with operations Standard Products Limited
in mining, manufacturing of small
electrical appliances and fork lift Stephan J. Mack
trucks and service parts.) President, Holm Industries, Inc.
James S. Reid, Jr. Douglas N. Malm
Chairman and Chief Executive Officer Vice President-Plastics Operations
Alan E. Riedel + - Joel H. Nussbaum
Retired Vice Chairman, Vice President-Program Management
Cooper Industries, Inc. and Engineering and Development
(A worldwide diversified manufacturer
of electrical products, electric Valdis I. Petrovs
power equipment, tools and hardware, Vice President-Rubber Operations
automotive products and petroleum
and industrial equipment) James D. Pry
Group Vice President and President,
John D. Sigel * Standard Products (Canada) Limited
Partner - Hale and Dorr and 5 Rubber Corporation
Attorneys at Law
W. Hayden Thompson * - William A. Russell
Chairman and Chief Executive Officer, Vice President-Sales and Marketing
Solarflo Corporation
(Manufacturer of gas and electric
heating equipment) J. Richard Hamilton
Secretary
Theodore K. Zampetis
President and Chief Operating Officer Charles F. Nagy
Treasurer
* Audit Committee
- - - Finance Committee Thomas J. Stecz
+ Compensation Committee Corporate Controller and Assistant
Secretary
<CAPTION>
FACILITIES
<S> <C>
ADMINISTRATIVE OFFICES
2130 West 110th Street
Cleveland, Ohio 44102
(216) 281-8300
SALES OFFICE, PRODUCT DEVELOPMENT AND WESTBORN SERVICE CENTER
2401 South Gulley Road
Dearborn, Michigan 48124
PLANTS
UNITED STATES:
Hartselle, Alabama; Oakland and San Diego, California; Athens
and Griffin, Georgia; St. Charles, Illinois; Scottsburg,
Indiana; Lexington, Kentucky; Gaylord, Michigan; New Ulm,
Minnesota; Schenectady, New York; Asheboro, Goldsboro, Rocky
Mount and Salisbury, North Carolina; Cleveland and Wadsworth,
Ohio; Export and Kittanning, Pennsylvania; Spartanburg
and Winnsboro, South Carolina; Dallas and Paris, Texas.
CANADA:
Etobicoke, Georgetown, Mississauga, Mitchell and Stratford,
Ontario
FRANCE:
Bezons, Bolbec, Courbevoie, Lillebonne and Vitre, France.
UNITED KINGDOM:
Grantham, Huntingdon and Plymouth, England; Maesteg, Wales.
WAREHOUSE OPERATIONS:
Dearborn and Greenville, Michigan; Charlotte, North Carolina.
SHAREHOLDER INFORMATION
COMMON SHARES
New York Stock Exchange
(Symbol SPD)
REGISTRAR AND TRANSFER AGENT
National City Bank
Cleveland, Ohio
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at 9 a.m.,
Monday, October 17, 1994 at the Company's administrative
offices, 2130 West 110th Street, Cleveland, Ohio.
FORM 10-K
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS SUBMITTED
TO THE SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE TO
SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST. PLEASE
ADDRESS YOUR REQUEST TO MR. AUBREY E. ARNDT, VICE
PRESIDENT-FINANCE, AT THE COMPANY'S ADMINISTRATIVE OFFICES,
2130 WEST 110TH STREET, CLEVELAND, OHIO 44102.
COUNSEL
Baker & Hostetler
Cleveland, Ohio
AUDITORS
Arthur Andersen & Co.
Cleveland, Ohio
</TABLE>
<PAGE> 36
THE STANDARD PRODUCTS CO.
2130 West 110th Street
Cleveland, Ohio 44102
216-281-8300
Annual Report 1994
<PAGE> 37
<TABLE>
APPENDIX TO ANNUAL REPORT TO SHAREHOLDERS
<CAPTION>
Paper Format
Photo No. Description Document Page
- - --------- ------------------------------------------------ -------------
<S> <C> <C>
1 Row of cars Front Cover
2 Chairman and CEO and President and COO 4
3 Picture of the Globe 5
4 Passenger side of Chrysler Neon Transparent Sheet
over page 7
5 Chrysler Neon Transparent Sheet
over page 7
6 Machines at 5 Rubber's Griffin, Georgia Plant 7
(On page 6 appears the following description of
this photograph: "Every individual sealing system
assembly for Chrysler's four-door Neon receives a
final quality control check at the new Griffin,
Georgia, facility before it is shipped to the
customer's assembly plant.")
7 Passenger seat of Ford Mustang Transparent Sheet
over page 9
8 Ford Mustang Transparent Sheet
over page 9
9 Machines at NISCO's Bremen, Indiana Plant 9
(On page 8 appears the following description of
this photograph: "We manufacture the sponge rubber
sealing system for the new Ford Mustang and numerous
other models at our NISCO plant in Bremen, Indiana.
Here, a molded sponge rubber component is bonded
with the rubber extrusion to produce a one-piece
assembly for easy installation.")
10 Passenger side panel of Chevrolet Lumina Transparent Sheet
over page 11
11 Chevrolet Lumina Transparent Sheet
over page 11
12 Machines at Standard Products (Canada) Ltd., 11
Stratford, Ontario Plant (On page 10 appears the
following description of this photograph: "To help
maintain our leadership position in rubber extrusion
technology while controlling costs and improving
quality, we added a modern new rubber mixing facility
at one of our plants in Stratford, Ontario, during
the past fiscal year.")
Graphs
- - ------
Bar Graph No. 1 2
Depicts comparison of Net Sales for the years
1985 through 1994 - refer to line entitled "Net
Sales" under caption "Income Statement" on table
on page 15 for figures
Bar Graph No. 2 2
Depicts comparison of Earnings Per Share for the
years 1985 through 1994 - refer to the lines entitled
"Income (Loss) from Continuing Operations and Before
Extraordinary Item and Cumulative Effect on Prior Years
of Change in Accounting Principle" through "Net Income
(Loss)" under caption "Per Share" on table on page 15 for figures
</TABLE>
<PAGE> 38
-2-
<TABLE>
<CAPTION>
Paper Format
Graphs Description Document Page
- - ------ ------------------------------------------------ -------------
<S> <C>
Bar Graph No. 3 3
Depicts comparison of Capital Expenditures for the
years 1985 through 1994 - refer to line entitled
"Additions to Property, Plant & Equipment" under
caption "Other" on table on page 15 for figures
Bar Graph No. 4 3
Total Company R&D
(Thousands of Dollars)
1985 $ 4,461
1986 $ 4,888
1987 $ 4,137
1988 $ 6,296
1989 $10,079
1990 $10,038
1991 $10,181
1992 $13,619
1993 $20,971
1994 $28,850
Bar Graph No. 5 Transparent Sheet
Depicts Major New Model Programs: FY 1994-96, over page 5
the Launch Dates and the car model
Bar Graph No. 6 14
Depicts comparison of Dividends Declared Per Share
for the years 1985 through 1994 - refer to line
entitled "Cash Dividends Declared" under caption
"Per Share" on table on page 15 for figures
Bar Graph No. 7 14
Depicts comparison of Book Value Per Share for the
years 1985 through 1994 - refer to line entitled
"Book Value" under caption "Per Share" on table on
page 15 for figures
Bar Graph No. 8 14
Depicts comparison of Working Capital for the years
1985 through 1994 - refer to line entitled "Working
Capital" under caption "Balance Sheet" on table on
page 15 for figures
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
Paper Format
Graphs Description Document Page
- - ------ ------------------------------------------------ -------------
<S> <C>
Bar Graph No. 9 14
Total Capitalization
(Thousands of Dollars)
Long-term Shareholders'
Debt Equity Total
---------- ------------- ---------
1985 $ 20,588 $ 95,582 $116,170
1986 $ 17,504 $117,383 $134,887
1987 $ 18,180 $127,359 $145,539
1988 $ 16,577 $145,800 $162,377
1989 $ 75,213 $156,348 $231,561
1990 $ 99,480 $152,829 $252,309
1991 $113,298 $102,366 $215,664
1992 $ 69,289 $177,753 $247,042
1993 $115,607 $224,436 $340,043
1994 $135,381 $242,677 $378,058
</TABLE>
<PAGE> 1
EXHIBIT NO. 21
SUBSIDIARIES OF THE STANDARD PRODUCTS COMPANY
---------------------------------------------
The following is a list of all subsidiaries of the Registrant as of June 30,
1994.
<TABLE>
<CAPTION>
Jurisdiction
In Which
Name Incorporated
- - ------------------------ ------------
<S> <C>
Admiral Retread Equipment, Inc. Ohio
"5" Rubber Corporation Pennsylvania
Rubber Industrial Holding Company Delaware
La Riviere Corporation Pennsylvania
Holm Industries, Inc. Indiana
Nisco Holding Company Delaware
Oliver Europa United Kingdom
Oliver Rubber Company California
Standard Products International France
Standard Products Industriel France
Societe Lillebonnaise de Caoutchoucs France
Standard Products Atlantic France
Central Auto France
Standard Products Limited United Kingdom
Standard Products (Canada) Limited Dominion of Canada
Standard Products International, Inc. Delaware
Westborn Service Center, Inc. Michigan
Union Trucking Company Michigan
</TABLE>
<PAGE> 1
EXHIBIT NO. 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
of our reports dated August 2, 1994, included and incorporated by reference in
this Form 10-K, into the Company's previously filed Registration Statements on
Form S-8 File Numbers 33-53989, 33-51554, 33- 51556, 33-34437, 33-33612,
33-38348, 33-01558, 2-63498, 2-91928 and 2-86957.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
September 14, 1994.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-1-1993
<PERIOD-END> JUN-30-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 205,990
<ALLOWANCES> 3,627
<INVENTORY> 53,018
<CURRENT-ASSETS> 270,686
<PP&E> 422,576
<DEPRECIATION> 180,567
<TOTAL-ASSETS> 624,314
<CURRENT-LIABILITIES> 182,764
<BONDS> 135,381
<COMMON> 16,674
0
0
<OTHER-SE> 226,003
<TOTAL-LIABILITY-AND-EQUITY> 624,314
<SALES> 872,367
<TOTAL-REVENUES> 872,367
<CGS> 752,940
<TOTAL-COSTS> 815,151
<OTHER-EXPENSES> (2,092)
<LOSS-PROVISION> 459
<INTEREST-EXPENSE> 9,093
<INCOME-PRETAX> 50,215
<INCOME-TAX> 17,183
<INCOME-CONTINUING> 33,032
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,032
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 1.99
</TABLE>
