<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, 1995
------------------------------------------------------
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 of incorporation (IRS Employer
or organization) Identification No.)
2401 South Gulley Road, Dearborn, Michigan 48124
------------------------------------------ ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313) 561-1100
--------------
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 New York Stock Exchange
--------------------------- -------------------------------------------
--------------------------- -------------------------------------------
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). $277,562,617 at August 21, 1995
-------------------------------
(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. 16,749,255 at August 21,
1995 ------------------------
----
(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).
1995 ANNUAL REPORT TO SHAREHOLDERS (PARTS I, II AND IV)
--------------------------------------------------------------------------------
PROXY STATEMENT FOR 1995 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 21 and 22 of the Company's 1995
Annual Report to Shareholders, incorporated herein by reference,
for additional financial information concerning the Company's
reportable business segments and geographic areas.
The Company formerly owned 20% of the shares of Itatiaia
Standard of Sao Paulo, Brazil, and in May, 1995 the Company
acquired the remaining 80% of the shares. Also, during 1995, the
Company incorporated Standard Products Brazil which is in the
process of building a new plant for the manufacture and supply of
automotive products for the Brazilian automotive original
equipment market.
Also, during 1995, the Company incorporated Standard
Products Mexico. This Company is in the early stages of plant
construction and when completed, this facility will manufacture
automotive parts for the Mexican automotive original equipment
market.
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 the foreign operations
of the Company.
In December 1992, the Company increased its ownership in
its North American joint venture, Nishikawa Standard Company
(NSC) 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
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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, painted 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.
MARKETS AND CUSTOMERS. The Company manufactures parts
and accessories for automotive and truck original equipment
manufacturers in the United States, Brazil, 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, Itatiaia Standard, Standard
Products (Canada) Limited, Standard Products Limited and Standard
Products Industriel. The Company's major customers include
automotive original equipment manufacturers. The percentage of
sales of each of these major customers to total consolidated
sales for the three year periods 1995, 1994 and 1993,
respectively, have been as follows: Chrysler - 15%, 13% and 11%;
Ford - 23%, 26% and 31%; General Motors - 18%, 17%, and 23%.
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. The Company does not have a backlog of
orders at any point in time. Instead, 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 133,000 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,
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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.
Working Capital
---------------
The Transportation Equipment Segment typically results in
a strong working capital position which provides adequate cash
flow. Accounts receivable are promptly paid and inventories turn
over rapidly. Seasonality becomes a factor during new model
conversions and summer vacation periods.
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,
Nishikawa Standard Company (NSC), 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, New Haven, 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 1995, precure tread
rubber represents approximately 78% of the tread rubber used by
the retreading industry and mold cure represents approximately
22%. 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.
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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 1995.
Working Capital
---------------
The Tread Rubber Segment sells to many small independent
customers. Accounts receivable and the extension of credit must
be monitored closely to reduce the risk of losses in collection.
Inventories include a supply of finished goods on hand to fill
customer orders from stock. Working capital requires careful
management but has generally been sufficient to fund operating
needs.
Other
-----
In 1992, Oliver acquired the assets of Salisbury Machine,
a manufacturer of equipment used in retreading tires.
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
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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, 1995, 225 engineers and technicians were
engaged in development and engineering activities. The Company
spent approximately $37,959,000 in 1995, $31,538,000 in 1994 and
$22,003,000 in 1993 on product engineering and development, of
which $4,748,000 in 1995, $2,688,000 in 1994 and $1,032,000 in
1993 were customer-reimbursed.
In 1995, the product engineering and development
expenditures, net of customer reimbursement, were 3.6% of
Transportation Equipment sales. In 1994 and 1993, the comparable
percentages were 3.6% and 3%, respectively. The percentage of
product engineering and development expenditures to Tread Rubber
Segment sales for 1995, 1994 and 1993 were 1.2%, 1.2% and 1.3%,
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 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, 1995, the Company employed approximately
10,308 persons, of whom approximately 7,746 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 permitted by the Michigan Department of Natural
Resources and the United States Environmental Protection Agency.
The costs 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 material adverse effect 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. The State has
reclassified the site based on the presence of several
contaminants
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and has requested the Company to perform certain actions. The
Company voluntarily completed interim actions and has petitioned
the State for a site reclassification that would not require
Company actions. The Company is awaiting a response from the
State of New York. 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 distribution 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 which had been engaged primarily in the
manufacture and distribution of tread rubber and rubber and
related products in Europe. This subsidiary has begun the
process of liquidation and is no longer actively engaged in
business.
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.
During 1995, the Company increased its presence in Brazil
by incorporating Standard Products Brazil (SPB) and by purchasing
the remaining 80% of Itatiaia Standard (the Company formerly
owned 20% of Itatiaia Standard). SPB is in the process of
constructing a new plant facility for the manufacture of rubber
and plastic automotive sealing products for Fiat's new model, the
178, which is scheduled to begin production in January, 1996.
The plant will be 260,000 square feet and will be located in
Varginha, Minas Gerais. Itatiaia Standard supplies the
automotive original equipment manufacturers with rubber sealing
products. Plants are located in the State of Sao Paulo with one
plant in Sao Paulo and a second in Itaquaquecetuba. Major
customers include Fiat, Ford, General Motors and Volkswagon.
Itatiaia Standard has an experienced management team and
expertise in technical design and engineering of automotive
sealing products and systems. Itatiaia's personnel also work
closely with their customers' engineering and styling
departments.
The Company also formed Standard Products de Mexico, S.A.
de C.V. (SPM) during 1995. Similar to SPB, SPM is in the process
of constructing 106,000 square foot plant which will manufacture
automotive parts for the Mexican automotive original equipment
manufacturers. Construction, however, has been deferred for a
minimum of six months. Operations are expected to begin in late
calendar 1996.
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The Company also has minority equity interests in and
licensing arrangements with firms in Australia, Japan, Korea,
India, Mexico and other countries throughout the world.
The Company's United States export sales in the aggregate
for the three fiscal years ended June 30, 1995, 1994 and 1993,
were $71,749,000, $41,472,000 and $42,800,000, 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.
With respect to Brazil, the Company expects that the
risks of conducting business in the Brazilian automotive original
equipment market will be similar to its other automotive markets.
The Company must deal with several new issues including
governmental regulation, and a potentially highly inflationary
economy. With the assistance of Itatiaia Standard's local
management, the Company believes that it can successfully conduct
business in Brazil.
ITEM 2. PROPERTIES
-------
The Company operates the properties described as follows:
<TABLE>
<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) 4.3 140,000
Bolbec, France (3)(4) 24.3 276,000
Cleveland, Ohio (4) 12.0 157,000
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
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
Itaquaquecetuba, Sao Paulo (4) 11.9 54,000
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
</TABLE>
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<TABLE>
<CAPTION>
Land Plant
Location (Acreage) (Square Feet)
-------- --------- -------------
<S> <C> <C>
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 --
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
Sao Paulo, Sao Paulo (3)(4) 2.2 97,000
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
</TABLE>
(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) The plant has been demolished and the land is held
for sale.
The Company operates a 283,000 square foot public
warehouse in Dearborn, Michigan of which the Company utilizes
approximately 133,000 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.
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 85% for
Transportation Equipment facilities and 74% for Tread Rubber
facilities.
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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 17, 1994. 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. 69 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 1991.
Theodore K. Zampetis 50 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.
Donald R. Sheley, Jr. 53 Vice President-Finance and Chief Financial Officer 1995
Formerly, Mr. Sheley was Vice President, Corporate
Controller, Cooper Industries, Inc. from 1988 until
joining the Company in July, 1995.
Larry J. Enders 53 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 41 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.
</TABLE>
-10-
<PAGE> 11
<TABLE>
<CAPTION>
Served In
Present
Office
Name Age Position with Registrant Since
---------------------- --- ------------------------------------------------------ ---------
<S> <C> <C> <C>
Stephan J. Mack 58 President, Holm Industries, Inc. 1986
Ted M. McQuade 41 Executive Vice President, North American 1995
Automotive Operations
Formerly, Mr. McQuade was Manager of Product
Support and Global Integration, Appliance
Business, General Electric from 1990.
Gerard Mesnel 56 Executive Vice President-Advanced Technology 1995
World Wide
Formerly, Mr. Mesnel was President/Consultant,
GSF Cie. since 1990.
Thomas J. Stecz 47 Corporate Controller 1995
Formerly, Mr. Stecz was Corporate Controller
and Assistant Secretary.
</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 19 and "Common Shares" on page
24 of the Annual Report to Shareholders for the year ended
June 30, 1995.
ITEM 6. SELECTED FINANCIAL DATA
------
The information required by Item 6 is incorporated
herein by reference to pages 10 and 11 of the Annual Report to
Shareholders for the year ended June 30, 1995.
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 9 through 12 of the Annual Report
to Shareholders for the year ended June 30, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------
Financial statements and statements required by Item
8 are incorporated herein by reference to pages 13 through 23
of the Annual Report to Shareholders for the year ended June
30, 1995.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
-------
None
-11-
<PAGE> 12
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 16, 1995. 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 9 of the
definitive Proxy Statement for the Annual Meeting of
Shareholders to be held October 16, 1995.
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 16, 1995.
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 page 9 of the definitive Proxy Statement for
the Annual Meeting of Shareholders to be held October 16,
1995.
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 1995 Annual Report to Shareholders
(pages 13 through 23):
Consolidated Balance Sheets - June 30, 1995 and 1994
Consolidated Statements of Income for the Years Ended June 30,
1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity for the Years
Ended June 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended June
30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Auditors' Report
(a) (2) Financial Statement Schedule:
-12-
<PAGE> 13
Report of Independent Public Accountants on the Financial
Statement Schedule
Schedule II -- Valuation and Qualifying
Accounts and Reserves for the
Years Ended June 30, 1995,
1994 and 1993
All schedules, other than Schedule II, 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, 1995.
(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>
-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>
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 Annual Report Form 10-K
of April 30, 1994, Among The (Filed with the SEC on
Standard Products Company, as September 14, 1995)
Borrower, and National City Bank,
Society National Bank, Comerica
Bank and NBD Bank, N.A. and
National City, as Agent.
4 4f Amendments to Senior Notes 20
Agreement - $25,000,000
aggregate principal amount (4e),
dated January 19, 1993 and,
January 31, 1995, between the
Company and Nationwide Life
Insurance Company, Aid Association
for Lutherans and Employers Life
Insurance Company of Wausau
4 4g Interest Rate and Currency 26
Exchange Agreement, dated
November 12, 1993, between the
Company and National City Bank
</TABLE>
-14-
<PAGE> 15
<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 4h Interest Rate and Currency 53
Exchange Agreement, Termination
of $7 million in principal
amount, dated June 16, 1995
between the Company and National
City Bank
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)
10 10d The Standard Products Company Form S-8 Registration
1989 Employee Incentive Stock No. 33-33612
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)
</TABLE>
-15-
<PAGE> 16
<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 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 56
for the Year Ended June 30, 1995
21 21 Subsidiaries of Registrant 84
23 23 Consent of Independent Public 85
Accountants
27 27 Financial Data Schedule 86
</TABLE>
(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.
-16-
<PAGE> 17
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/ Donald R. Sheley, Jr.
------------------------------------
Donald R. Sheley, Jr.
Vice President-Finance and Chief
Financial Officer
Date: September 13, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below on SEPTEMBER 13, 1995 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/ Donald R. Sheley, Jr. Vice President-Finance and Chief Financial Officer
---------------------------
Donald R. Sheley, Jr. Principal Financial Officer
/s/ Thomas J. Stecz Corporate Controller
----------------------------
Thomas J. Stecz Principal Accounting Officer
/s/ James C. Baillie
----------------------------
James C. Baillie 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>
-17-
<PAGE> 18
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON THE FINANCIAL STATEMENT SCHEDULE
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 1995 Annual Report to Shareholders
incorporated by reference in this Form 10-K, and have issued our report thereon
dated August 2, 1995. Our audit was made for the purpose of forming an opinion
on those statements taken as a whole. The schedule listed in the index of
financial statements is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
August 2, 1995.
-18-
<PAGE> 19
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
For the Years Ended June 30, 1995, 1994 and 1993
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column
-------------------------------- ---------- ---------- ---------- ---------- -------
Additions
Balance At Charged To Balance
Beginning Costs And At End
Description Of Period Expenses Recoveries Deductions Of Period
------------------------------- ---------- ---------- ---------- ------------ ---------
Year Ended June 30, 1995
<S> <C> <C> <C> <C> <C> <C>
Reserve for Plant Closing $ 3,975 $ 3,485 $ - $ 1,225 $ 6,235 (1)
======== ======== ========== ======== ========
Allowance for doubtful accounts $ 3,627 $ 4,074 $ 230 $ 2,953 $ 4,978
======== ======== ========= ======== ========
Year Ended June 30, 1994
Reserve for Plant Closing $ 9,111 $ - $ - $ 5,136 $ 3,975 (1)
======== ========== ========== ======== ========
Allowance for doubtful accounts $ 2,293 $ 459 $ 605 $ (270) $ 3,627
======== ========= ========= ========= ========
Year Ended June 30, 1993
Reserve for Plant Closing $ 22,885 $ - $ 734 $ 14,508 $ 9,111 (1)
======== ========== ========= ======== ========
Allowance for doubtful accounts $ 3,128 $ 885 $ - $ 1,720 $ 2,293
======== ======== ========== ======== ========
<FN>
(1) Of this amount, deductions of $13,717 reflect an amount reclassified to
accrued postretirement benefits other than pensions. The balance of $9,111, $3,975 and $6,235 has
been classified as a current liability in the accompanying consolidated balance sheet as of
June 30, 1993, 1994 and 1995, respectively.
</TABLE>
<PAGE> 1
Exhibit 4f
FOURTH AMENDMENT TO NOTE AGREEMENT
----------------------------------
FOURTH AMENDMENT TO NOTE AGREEMENT, dated as of January 31, 1995, by
and between THE STANDARD PRODUCTS COMPANY, an Ohio corporation (the "Company"),
and EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU (the "Purchaser").
WITNESSETH THAT:
---------------
WHEREAS, the Company and the Purchaser entered into a Note Agreement
dated as of June 30, 1989, as amended by the First Amendment to Note Agreement
dated as of February 22, 1991, the Second Amendment to Note Agreement dated as
of June 30, 1991, and the Third Amendment to Note Agreement dated as of January
19, 1993 (collectively, the "Note Agreement"), and under and subject to the
terms and provisions of the Note Agreement, the Company has issued its Senior
Note payable to the Purchaser; and
WHEREAS, the parties desire to amend the Note Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Effect of Amendment; Definitions.
---------------------------------
The Note Agreement shall be and hereby is amended as provided in
Section 2 hereof. Except as expressly amended in Section 2 hereof, the Note
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used therein, the terms "Note
Agreement", "Agreement", "this Agreement", "herein", "hereinafter", "hereto",
"hereof", and words of similar import shall, unless the context otherwise
requires, mean the Note Agreement as amended and modified by this Amendment.
Capitalized terms used but not defined in this Amendment (including the
recitals hereto) shall have the meanings given to them in the Note Agreement.
2. Amendment.
----------
(a) Section 5.7(a)(3)(ii) of the Note Agreement is hereby deleted
and the following is substituted therefor:
"(ii) in the case of the issuance of any Debt of a Subsidiary or
any Funded Debt of the Company secured by liens permitted by Section
5.8(i), the aggregate amount of (x) all Debt of Subsidiaries PLUS (y)
the aggregate amount of all Debt of the Company secured by liens
permitted by Section 5.8(i), shall not exceed 20% of Consolidated Net
Stockholder's Equity;"
(b) Section 8.1 of the Note Agreement is hereby amended by
inserting the following definitions in alphabetical order:
<PAGE> 2
"CONSOLIDATED NET STOCKHOLDER'S EQUITY" shall mean the excess
(as determined on a consolidated basis and in accordance with
generally accepted accounting principles) of the net book value of the
sum of all Tangible Assets plus all assets properly classified as
intangible assets, in accordance with generally accepted accounting
principles (without consideration to any reappraisal or write-up of
assets after December 31, 1994 and excluding all of the following that
are acquired or arise after December 31, 1994: goodwill, patents,
trade names, trade marks, copyrights, franchises, experimental
expense, organization expense, unamortized debt discount and expense,
deferred assets other than prepaid insurance and prepaid taxes, the
excess of cost of shares acquired over book value of related assets
and such other assets as are properly classified as "intangible
assets" in accordance with generally accepted accounting principles),
of the Company and its Subsidiaries on a consolidated basis over
Consolidated Total Liabilities.
"CONSOLIDATED TOTAL LIABILITIES" shall mean, as of the date of
any determination thereof, total liabilities (including, without
limitation thereof, all deferred charges and Minority Interests) of
the Company and its Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles.
3. Miscellaneous.
--------------
(a) This Amendment shall be construed in accordance with and
governed by the laws of the State of Ohio, without reference to principles of
conflicts of law.
(b) This Amendment may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed by their respective duly authorized officers as of the day and year
first above written.
THE STANDARD PRODUCTS COMPANY
By: /s/ Aubrey E. Arndt
------------------------
Title: VP - Finance
-----------------------
EMPLOYERS LIFE INSURANCE COMPANY
OF WAUSAU
By: /s/ Jeffrey G. Milburn
-------------------------
Title: JEFFREY G. MILBURN
------------------
ATTORNEY-IN-FACT
-2-
<PAGE> 3
FOURTH AMENDMENT TO NOTE AGREEMENT
----------------------------------
FOURTH AMENDMENT TO NOTE AGREEMENT, dated as of January 31, 1995, by
and between THE STANDARD PRODUCTS COMPANY, an Ohio corporation (the "Company"),
and NATIONWIDE LIFE INSURANCE COMPANY (the "Purchaser").
WITNESSETH THAT:
---------------
WHEREAS, the Company and the Purchaser entered into a Note Agreement
dated as of June 30, 1989, as amended by the First Amendment to Note Agreement
dated as of February 22, 1991, the Second Amendment to Note Agreement dated as
of June 30, 1991, and the Third Amendment to Note Agreement dated as of January
19, 1993 (collectively, the "Note Agreement"), and under and subject to the
terms and provisions of the Note Agreement, the Company has issued its Senior
Note payable to the Purchaser; and
WHEREAS, the parties desire to amend the Note Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Effect of Amendment; Definitions.
---------------------------------
The Note Agreement shall be and hereby is amended as provided in
Section 2 hereof. Except as expressly amended in Section 2 hereof, the Note
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used therein, the terms "Note
Agreement", "Agreement", "this Agreement", "herein", "hereinafter", "hereto",
"hereof", and words of similar import shall, unless the context otherwise
requires, mean the Note Agreement as amended and modified by this Amendment.
Capitalized terms used but not defined in this Amendment (including the
recitals hereto) shall have the meanings given to them in the Note Agreement.
2. Amendment.
----------
(a) Section 5.7(a)(3)(ii) of the Note Agreement is hereby deleted
and the following is substituted therefor:
"(ii) in the case of the issuance of any Debt of a Subsidiary or
any Funded Debt of the Company secured by liens permitted by Section
5.8(i), the aggregate amount of (x) all Debt of Subsidiaries PLUS (y)
the aggregate amount of all Debt of the Company secured by liens
permitted by Section 5.8(i), shall not exceed 20% of Consolidated Net
Stockholder's Equity;"
(b) Section 8.1 of the Note Agreement is hereby amended by
inserting the following definitions in alphabetical order:
<PAGE> 4
"CONSOLIDATED NET STOCKHOLDER'S EQUITY" shall mean the excess
(as determined on a consolidated basis and in accordance with
generally accepted accounting principles) of the net book value of the
sum of all Tangible Assets plus all assets properly classified as
intangible assets, in accordance with generally accepted accounting
principles (without consideration to any reappraisal or write-up of
assets after December 31, 1994 and excluding all of the following that
are acquired or arise after December 31, 1994: goodwill, patents,
trade names, trade marks, copyrights, franchises, experimental
expense, organization expense, unamortized debt discount and expense,
deferred assets other than prepaid insurance and prepaid taxes, the
excess of cost of shares acquired over book value of related assets
and such other assets as are properly classified as "intangible
assets" in accordance with generally accepted accounting principles),
of the Company and its Subsidiaries on a consolidated basis over
Consolidated Total Liabilities.
"CONSOLIDATED TOTAL LIABILITIES" shall mean, as of the date of
any determination thereof, total liabilities (including, without
limitation thereof, all deferred charges and Minority Interests) of
the Company and its Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles.
3. Miscellaneous.
--------------
(a) This Amendment shall be construed in accordance with and
governed by the laws of the State of Ohio, without reference to principles of
conflicts of law.
(b) This Amendment may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed by their respective duly authorized officers as of the day and year
first above written.
THE STANDARD PRODUCTS COMPANY
By: /s/ Aubrey E. Arndt
-----------------------------
Title: VP - Finance
--------------------------
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Jeffrey G. Milburn
----------------------------
Title: Jeffrey G. Milburn
----------------------------
Vice President
Corporate Fixed-Income Securities
-2-
<PAGE> 5
FOURTH AMENDMENT TO NOTE AGREEMENT
FOURTH AMENDMENT TO NOTE AGREEMENT, dated as of January 31, 1995, by
and between THE STANDARD PRODUCTS COMPANY, an Ohio corporation (the "Company"),
and AID ASSOCIATION FOR LUTHERANS (the "Purchaser").
WITNESSETH THAT:
---------------
WHEREAS, the Company and the Purchaser entered into a Note Agreement
dated as of June 30, 1989, as amended by the First Amendment to Note Agreement
dated as of February 22, 1991, the Second Amendment to Note Agreement dated as
of June 30, 1991, and the Third Amendment to Note Agreement dated as of January
19, 1993 (collectively, the "Note Agreement"), and under and subject to the
terms and provisions of the Note Agreement, the Company has issued its Senior
Note payable to the Purchaser; and
WHEREAS, the parties desire to amend the Note Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Effect of Amendment; Definitions.
---------------------------------
The Note Agreement shall be and hereby is amended as provided in
Section 2 hereof. Except as expressly amended in Section 2 hereof, the Note
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used therein, the terms "Note
Agreement", "Agreement", "this Agreement", "herein", "hereinafter", "hereto",
"hereof", and words of similar import shall, unless the context otherwise
requires, mean the Note Agreement as amended and modified by this Amendment.
Capitalized terms used but not defined in this Amendment (including the
recitals hereto) shall have the meanings given to them in the Note Agreement.
2. Amendment.
----------
(a) Section 5.7(a)(3)(ii) of the Note Agreement is hereby deleted
and the following is substituted therefor:
"(ii) in the case of the issuance of any Debt of a Subsidiary or
any Funded Debt of the Company secured by liens permitted by Section
5.8(i), the aggregate amount of (x) all Debt of Subsidiaries PLUS (y)
the aggregate amount of all Debt of the Company secured by liens
permitted by Section 5.8(i), shall not exceed 20% of Consolidated Net
Stockholder's Equity;"
(b) Section 8.1 of the Note Agreement is hereby amended by
inserting the following definitions in alphabetical order:
<PAGE> 6
"CONSOLIDATED NET STOCKHOLDER'S EQUITY" shall mean the excess
(as determined on a consolidated basis and in accordance with
generally accepted accounting principles) of the net book value of the
sum of all Tangible Assets plus all assets properly classified as
intangible assets, in accordance with generally accepted accounting
principles (without consideration to any reappraisal or write-up of
assets after December 31, 1994 and excluding all of the following that
are acquired or arise after December 31, 1994: goodwill, patents,
trade names, trade marks, copyrights, franchises, experimental
expense, organization expense, unamortized debt discount and expense,
deferred assets other than prepaid insurance and prepaid taxes, the
excess of cost of shares acquired over book value of related assets
and such other assets as are properly classified as "intangible
assets" in accordance with generally accepted accounting principles),
of the Company and its Subsidiaries on a consolidated basis over
Consolidated Total Liabilities.
"CONSOLIDATED TOTAL LIABILITIES" shall mean, as of the date of
any determination thereof, total liabilities (including, without
limitation thereof, all deferred charges and Minority Interests) of
the Company and its Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles.
3. Miscellaneous.
--------------
(a) This Amendment shall be construed in accordance with and
governed by the laws of the State of Ohio, without reference to principles of
conflicts of law.
(b) This Amendment may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed by their respective duly authorized officers as of the day and year
first above written.
THE STANDARD PRODUCTS COMPANY
By: /s/ Aubrey E. Arndt
-----------------------
Title: VP - Finance
-----------------------
AID ASSOCIATION FOR LUTHERANS
By: /s/ Alan D. Onstad By: /s/ James Abitz
----------------------- ------------------------
Title: Assistant Vice President- Title: Vice President-Securities
----------------------- ------------------------
Securities
-----------------------
-2-
<PAGE> 1
Exhibit 4g
NATIONAL CITY
-------------
TO: The Standard Products Co.
FAX NO: (216) 281-8122
ATTN: Charles F. Nagy, Treasurer
DATE: November 10, 1993
CONFIRMATION
------------
This confirmation sets out the terms and conditions of the swap entered into
between us on the Trade Date specified below. This constitutes a confirmation
as referred to in the Interest Rate & Currency Exchange Agreement specified
below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swap Dealers Association Inc.) are incorporated
into this confirmation. In the event of any inconsistency between those
definitions and provisions and this confirmation, this confirmation will
govern.
This confirmation supplements, forms part of, and is subject to, the Interest
Rate and Currency Exchange Agreement to be negotiated (the Agreement) between
you and us. All provisions contained in the Agreement govern this confirmation
except as expressly modified below.
SCHEDULE
A) CURRENCY EXCHANGE TRANSACTION
-----------------------------
<TABLE>
<S> <C>
---------------------------------------------------------------------------------------------
Fixed Rate Payer 1
Principal Amount: USD 25,350,256 (Amortizing per attached schedule)
Fixed Rate Payer 2
Principal Amount: FRF 150,000,000 (Amortizing per attached schedule)
Initial Exchange on
Effective Date: National City to pay Standard Products FRF 150,000,000
and Standard Products to pay National City USD
25,350,256
Exchange on Amortization
Dates and Maturity Date: See Attached Schedules
</TABLE>
1
<PAGE> 2
<TABLE>
<S> <C>
Trade Date: November 12, 1993
---------------------------------------------------------------------------------------------------------------------------------
Effective Date: November 22, 1993
---------------------------------------------------------------------------------------------------------------------------------
Termination Date: November 22, 2000
---------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Payer 1: National City Bank
Fixed Rate Payer 1
Principal Amount: USD 25,350,256 (Amortizing as per attached schedule)
Fixed Rate Payer 1
Payment Dates: The 22nd of May and November of each year from (and including) May 22, 1994 to
(and including) November 22, 2000. Subject to Business Day Convention.
---------------------------------------------------------------------------------------------------------------------------------
Fixed Rate 1: 5.80%
---------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Payer 1
Day Count Fraction: 30/360 (No adjustment to period end dates)
---------------------------------------------------------------------------------------------------------------------------------
Compounding: Inapplicable
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
Fixed Rate Payer 2: Standard Products
Fixed Rate payer 2
Principal Amount: FRF 150,000,000 (Amortizing as per attached schedule)
---------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Payer 2
Payment Dates: The 22nd of May and November of each year from (and including) May 22, 1994
to (and including) November 22, 2003. Subject to Business Day Convention.
---------------------------------------------------------------------------------------------------------------------------------
Fixed Rate 2: 6,500
---------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Payer 2
Day Count Fraction: 30/360 (No adjustment to period end dates)
---------------------------------------------------------------------------------------------------------------------------------
Compounding: Inapplicable
---------------------------------------------------------------------------------------------------------------------------------
Business Days: New York and Paris
---------------------------------------------------------------------------------------------------------------------------------
Governing Law: Laws of New York
</TABLE>
________________________________________________________________________________
Initial Exchange Settlement Instructions:
National City Bank will wire transfer FRF 150,000,000 to:
Credit Lyonnais
Main Office, International Division
Boulevard des Italiens
75002
Paris, France
Account #0910000815
3
<PAGE> 4
Standard Products Co. will wire transfer USD 25,350,256 to
National City Bank
Natl City/Cleve/Inv.
ABA #041000124
Attention: Cindy Bracy
Inv. Ops./Swap Admins.
AMORTISATION SETTLEMENT INSTRUCTIONS:
Payments due National City Bank will be wire
transferred by Standard Products Co. to
Credit Lyonnais
Main Office, International Division
Boulevard des Italiens
75002
Paris, France
Account #0910000815
for the benefit of National City Bank, Cleveland
Payments due Standard Products will be wire transferred by National City Bank
to:
National City Bank
Cleveland, Ohio
Account No. 2000215
for the benefit of Standard Products Co.
Kindly confirm the above terms by signing this letter and returning it by
facsimile to National City Bank (216) 575-3355 BEFORE close of business today,
November 12, 1993.
Regards,
NATIONAL CITY BANK
By: /s/ William Mahnic
------------------------------------
William Mahnic, Vice President
THE STANDARD PRODUCTS, CO.
By: /s/ Charles F. Nagy
------------------------------------
Charles F. Nagy, Corporate Treasurer
4
<PAGE> 5
AMORTISATION SCHEDULE FOR USD25,350,256
<TABLE>
<CAPTION>
(1)
Payment Principal Interest Total
Date Payments Payments Payments
------- --------- -------- --------
<S> <C> <C> <C>
11/22/93 Effective Date And Exchange of Currencies
05/22/94 $0 $735,157 $735,157
11/22/94 $0 $735,157 $735,157
05/22/95 $0 $735,157 $735,157
11/22/95 $0 $735,157 $735,157
05/22/96 $0 $735,157 $735,157
11/22/96 $5,070,051 $735,157 $5,805,209
05/22/97 $0 $588,126 $588,126
11/22/97 $5,070,051 $588,126 $5,658,177
05/22/98 $0 $441,094 $441,094
11/22/98 $5,070,051 $441,094 $5,511,148
05/22/99 $0 $294,063 $294,063
11/22/99 $5,070,051 $294,063 $5,364,114
05/22/00 $0 $147,031 $147,031
11/22/00 $5,070,051 $147,031 $5,217,083
TOTALS $25,350,256 $7,351,574 $32,701,830
Payments
</TABLE>
<PAGE> 6
AMORTISATION SCHEDULE FOR FRF150,000,000
<TABLE>
<CAPTION>
(1)
Payment Principal Interest Total
Date Payments Payments Payments
------- --------- -------- --------
<S> <C> <C> <C>
11/22/93 Effective Date And Exchange of Currencies
05/22/94 0 4,875,000 4,875,000
11/22/94 0 4,875,000 4,875,000
05/22/95 0 4,875,000 4,875,000
11/22/95 0 4,875,000 4,875,000
05/22/96 0 4,875,000 4,875,000
11/22/96 30,000,000 4,875,000 34,875,000
05/22/97 0 3,900,000 3,900,000
11/22/97 30,000,000 3,900,000 33,900,000
05/22/98 0 2,925,000 2,925,000
11/22/98 30,000,000 2,925,000 32,925,000
05/22/99 0 1,950,000 1,950,000
11/22/99 30,000,000 1,950,000 31,950,000
05/22/00 0 975,000 975,000
11/22/00 30,000,000 975,000 30,975,000
TOTALS 150,000,000 48,750,000 198,750,000
Payments
</TABLE>
<PAGE> 7
Exhibit 4g (continued)
SCHEDULE
TO THE
INTEREST RATE AND CURRENCY EXCHANGE AGREEMENT
DATED AS OF NOVEMBER 12, 1993
Between National City Bank, Cleveland ("Party A") and The Standard Products Co.
("Party B").
PART I
TERMINATION PROVISIONS
In this Agreement:
1) "SPECIFIED ENTITY" means in relation to Part A for the purpose of:
Section 5(a)(iii) and (iv) and Section 5(b)(i), Inapplicable
Section 5(a)(v), Inapplicable
Section 5(a)(vi), Inapplicable
Section 5(a)(vii), Inapplicable
in relation to Party B for the purpose of:
Section 5(a)(iii) and (iv) and Section 5(b)(i), Inapplicable
Section 5(a)(v), Inapplicable
Section 5(a)(vi), Inapplicable
Section 5(a)(vii), Inapplicable
2) "SPECIFIED SWAP" means, in lieu of the meaning specified in Section
14, any currency and/or rate swap, cap, floor, or collar, currency
forward, currency exchange, forward rate, future rate, asset swap, or
commodity or securities-linked transaction or agreement, other
exchange or rate protection transaction or agreement or other similar
transaction or agreement (however designated), any combination of such
transactions or agreements, or any option with respect to any such
transaction or agreement, now existing or hereafter entered into
between Party A (or any applicable Specified Entity) and Party B (or
any applicable Specified Entity).
3) The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to Party
B.
If such provisions apply:
"SPECIFIED INDEBTEDNESS" will have the meaning set forth in Section 14.
"THRESHOLD AMOUNT" means aggregating more than $10,000,000 or its
equivalent in any other currency.
4) "TERMINATION CURRENCY" means United States Dollars for Party A and
French Francs for Party B.
5) The "CREDIT EVENT UPON MERGER" provisions of Section (b)(iv) will
apply to Party A and Party B.
1
<PAGE> 8
PART 2
TAX REPRESENTATIONS
1) PAYER TAX REPRESENTATION. For the purpose of Section 3(e), each party
required to make any payment pursuant to this Agreement represents to
the other that it is not required by any applicable law, as modified
by the practice of any relevant governmental revenue authority, of any
Relevant Jurisdiction to make any deduction or withholding for or on
account of any Tax from any payment (other than interest under Section
2(e)) to be made by it to the other party under this Agreement. In
making this representation, it may rely on:
a) the accuracy of any representation made by the other party
pursuant to Section 3(f);
b) the satisfaction of the agreement of
the other party contained in Section 4(a)(i) and the accuracy
and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i); and
c) the satisfaction of the agreement of the other party contained
in Section 4(d).
2) PAYEE TAX REPRESENTATIONS. For the purpose of Section 3(f):
a) Each party represents to the other that each payment received
or to be received by it in connection with this Agreement
relates to the regular business operations of the party (and
not to an investment of the party).
b) Party A represents to Party B that it is a national banking
association organized under the laws of the United States of
America.
c) Party B represents to Party A that is a corporation organized
under the laws of the United States of America.
PART 3
DOCUMENTS TO BE DELIVERED
For the purpose of Section 4(a):
1) Tax forms, documents or certificates to be delivered are:
Each party agrees to complete, accurately and in a manner reasonable
satisfactory to the other party, and to execute, arrange for any
required certification of, and deliver to the other party (or to such
government or taxing authority as the other party reasonably directs),
any form or document that may be required or reasonably requested in
order to allow the other party to make a payment under this Agreement
without any deduction or withholding for or on account of any Tax or
with such deduction or withholding at a reduced rate, promptly upon
reasonable demand by the other party.
2
<PAGE> 9
2) Other documents to be delivered are:
a) Each party shall promptly deliver to the other party,
certified evidence of the authority, incumbency and specimen
signature of each authorized person executing any document on
its behalf in connection with this Agreement upon execution of
each document by any person.
b) Each party upon request shall promptly deliver to the other
party, a copy of its most recent Annual Report containing
consolidated financial statements, prepared in accordance with
accounting principles that are generally accepted for
institutions of its type in the jurisdiction of its
organization and certified by independent public accounts.
c) Each party upon request shall promptly deliver to the other
party, a copy of its most recent unaudited interim
consolidated financial statements prepared in accordance with
accounting principles that are generally accepted for
institutions of its type in the jurisdiction of its
organization in each case consistently applied.
d) Party B shall promptly deliver to Party A an opinion of
counsel substantially in the form of Annex A and such other
public information respecting to its condition, or operations,
financial or otherwise, as Party A may reasonably request from
time to time.
PART 4
MISCELLANEOUS
1) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law doctrine.
2) "AFFILIATE" will have the meaning specified in Section 14.
3) MULTIBRANCH PARTY. For the purpose of Section 10:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
4) ADDRESSES FOR NOTICES. For the purpose of Section 12(a):
Address for notices or communications to Party A:
Address: 1900 East Ninth Street,
Cleveland, Ohio 44114
Attention: Swap Desk #1402
Facsimile Transmission No.: (216) 566-1887
For all purposes.
3
<PAGE> 10
Address for notices or communications to Party B:
Address: Mr. Charles F. Nagy
Attention: 2130 West 110th St.
Facsimile Transmission No: Cleveland, Ohio 44102
(216) 281-8122
For all purposes.
5) CREDIT SUPPORT DOCUMENT. Details of the Credit Support Document
entered into with Party A, dated January 19, 1993.
6) NETTING OF PAYMENTS. "Net Payments - Corresponding Payment Dates"
will apply for the purpose of Section 2(c) with effect from the date
of this Agreement.
7) NOTICES. Section 12(a) is hereby amended by: (a) adding in the
fourth line thereof (i) after the word "received" the words "or by
facsimile or similar telecommunications device" and (ii) after the
word "telex" the words "or facsimile"; and (b) adding in the first
line of Clause (i) thereof after the word "courier" and before the
comma the words "or by facsimile or similar telecommunications
device".
PART 5
OTHER PROVISIONS
1) ISDA DEFINITIONS. This Agreement and each Swap Transaction are
subject to the 1991 ISDA Definitions (as published by the
International Swap Dealers Association, Inc.) (the "Definitions"), and
will be governed in all relevant respects by the provisions set forth
in the Definitions, without regard to any amendments thereto
subsequent to the date hereof. The provisions of the Definitions are
incorporated by reference herein, and shall be deemed a part of, this
schedule and each Confirmation, as if set forth in full in this
schedule or that Confirmation. The Calculation Agent for purposes of
the Definitions will be Party A.
2) INTERPRETATION. In the event of any inconsistency between the
provisions of this Schedule and the Definitions, this Schedule will
prevail. In the event of any inconsistency between the provisions of
this Schedule and the printed Agreement of which it forms a part, this
Schedule will prevail. In the event of any inconsistency between the
provisions of any Confirmation and this Schedule, such Confirmation
will prevail for the purpose of the relevant Swap Transaction.
3) CONFIRMATION. a Confirmation may be substantially in the form of the
letter or telex attached hereto as Exhibit I (or in such other form as
the parties may agree).
4) ADDITIONAL REPRESENTATIONS. Party B represents and warrants to Party
A that there has been no material adverse change in its financial
condition since the last day of the one year period covered by its
most recently prepared year end financial statement.
4
<PAGE> 11
5) AFFECTED PARTIES. For the purpose of Section 6(e) (Payments on Early
Termination), (a) both parties shall be deemed to be Affected Parties
in connection with the Termination Events described in Section 5(b)(i)
and (ii), so that payments on early termination shall be calculated as
provided in Section 6(e)(ii).
6) RECORD KEEPING. Each party represents and warrants to the other that
it shall maintain this Agreement, this Schedule and all Confirmations
issued pursuant hereto with its records of binding business
transactions.
7) BANKRUPTCY PAYMENTS. For purposes of calculating payments due in
respect of an Early Termination Date (including any payments under
Section 6(d) and any Unpaid Amounts), an Event of Default specified in
Section 5(a)(vii) of this Agreement (Bankruptcy) shall be treated as
if it were a Termination Event with the Defaulting Party as the
Affected Party and for such purposes the proviso to the definition of
"Settlement Amount" shall be deemed to be of no force and effect.
Such Event of Default treated as a Termination Event shall take
precedence over any other Event of Default which is existing at the
time of the designation or deemed occurrence of such Early Termination
Date.
NATIONAL CITY BANK
By: /s/ William Mahnic
---------------------
Title: Vice President
---------------------
Date: December 15, 1993
---------------------
The Standard Products Co.
By: /s/ Charles F. Nagy
---------------------
Title: Corporate Treasurer
---------------------
Date: February 18, 1994
---------------------
5
<PAGE> 12
Annex A to Schedule
(Form of Opinion of Counsel for Party B)
(DATE)
National City Bank:
We have acted as counsel to_________________________________________________,
a_______________________corporation ("Party B") in connection with the
execution and delivery of the International Swap Dealers Association, Inc.
Interest Rate and Currency Exchange Agreement ("the Master Agreement") dated as
of ____________________, 19___ between National City Bank ("Party A") and Party
B. The Master Agreement is to be supplemented by confirmations of rate swap
transactions to be entered into by Party A and Party B from time to time (each
a "Confirmation") and the Master Agreement together with all such Confirmations
shall constitute one agreement.
In connection with this opinion, we have examined an executed copy of the Master
Agreement and the form of Confirmation attached thereto and such corporate
documents and records of Party B, certificates of public officials and officers
of Party B and such other documents as we have deemed necessary or appropriate
for the purposes of this opinion. In such opinion, we have assumed the
genuineness of all the signatures, the authenticity of all documents submitted
to us as originals and the conformity to authentic original documents of all
documents submitted to us as certified, confirmed or photostatic copies. I
have also assumed that each Confirmation will be in substantially the form of
Exhibit 1 to the Master Agreement and will not contain provisions not usual in
transactions of this type.
Based upon the foregoing, we are of the opinion that:
1. Party B is a corporation duly organized, validly existing and in good
standing under the laws of ______________________________________ .*
______________________________________________________________
* Jurisdiction of incorporation of Party B.
6
<PAGE> 13
Page 2
2. The execution, delivery and performance of the Master Agreement and
each Confirmation by Party B are within Party B's corporate power,
have been duly authorized by all necessary corporate action and do
not, or, in the case of each Confirmation, will not, conflict with any
provisions of Party B's articles of incorporation or by-laws.
3. The Master Agreement has been duly executed and delivered by Party B
and constitutes, and each Confirmation, upon due execution and
delivery by Party B, will constitute, a legally valid and binding
obligation of Party B enforceable against Party B in accordance with
its terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles
of general application (regardless of whether enforcement is sought in
a proceeding in equity or at law)).
4). To the best of our knowledge, no consent, authorization, license or
approval of, or registration or declaration with, any United States of
America federal or ___________________________________________________
governmental authority is required in connection with the execution,
delivery and performance of the Master Agreement and each Confirmation
by Party B.
The opinions expressed herein are limited to matters concerning the federal
laws of the United States of America and the laws of the State of
______________________________.
Very truly yours,
7
<PAGE> 14
Exhibit 4g (continued)
ISDA (R)
International Swap Dealers Association, Inc.
INTEREST RATE
AND
CURRENCY EXCHANGE AGREEMENT
Dated as of November 12, 1993
--------------------------------
National City Bank, Cleveland and The Standard Products Co.
------------------------------------ -------------------------------
have entered and/or anticipate entering into one or more transactions (each a
"Swap Transaction"). The parties agree that each Swap Transaction will be
governed by the terms and conditions set forth in this document (which includes
the schedule (the "Schedule")) and in the documents (each a "Confirmation")
exchanged between the parties confirming such Swap Transactions. Each
Confirmation constitutes a supplement to and forms part of this document and
will be read and construed as one with this document, so that this document and
all the Confirmations constitute a single agreement between the parties
(collectively referred to as this "Agreement"). The parties acknowledge that
all Swap Transactions are entered into in reliance on the fact that this
document and all Confirmations will form a single agreement between the
parties, it being understood that the parties would not otherwise enter into
any Swap Transactions.
Accordingly, the parties agree as follows:-
1. INTERPRETATION
(a) Definitions. The terms defined in Section 14 and in the Schedule
will have the meanings therein specified for the purpose of this Agreement.
(b) Inconsistency. In the event of any inconsistency between the
provisions of any Confirmation and this document, such Confirmation will
prevail for the purpose of the relevant Swap Transaction.
2. PAYMENTS
(a) Obligations and Conditions.
(i) Each party will make each payment specified in each
Confirmation as being payable by it.
(ii) Payments under this Agreement will be made not later than
the due date for value on that date in the place of the account
specified in the relevant Confirmation or otherwise pursuant to
this Agreement, in freely transferable funds and in the manner
customary for payments in the required currency.
(iii) Each obligation of each party to pay any amount due under
Section 2(a)(i) is subject to (1) the condition precedent that no
Event of Default or Potential Event of Default with respect to
the other party has occurred and is continuing and (2) each other
applicable condition precedent specified in this Agreement.
(b) Change of Account. Either party may change its account by giving
notice to the other party at least five days prior to the due date for payment
for which such change applies.
Copyright (C) 1987 by International Swap Dealers Association, Inc.
<PAGE> 15
(c) Netting. If on any date amounts would otherwise be payable:-
(i) in the same currency; and
(ii) in respect of the same Swap Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the
other party, replaced by an obligation upon the party by whom the larger
aggregate amount would have been payable to pay to the other party the excess
of the larger aggregate amount over the smaller aggregate amount.
If the parties specify "Net Payments--Corresponding Payment Dates" in a
Confirmation or otherwise in this Agreement, sub-paragraph (ii) above will
cease to apply to all Swap Transactions with effect from the date so specified
(so that a net amount will be determined in respect of all amounts due on the
same date in the same currency, regardless of whether such amounts are payable
in respect of the same Swap Transaction); provided that, in such case, this
Section 2(c) will apply separately to each Office through which a party makes
and receives payments as set forth in Section 10.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made
without any deduction or withholding for or on account of any Tax
unless such deduction or withholding is required by any
applicable law, as modified by the practice of any relevant
governmental revenue authority, then in effect. If a party is so
required to deduct or withhold, then that party ("X") will:-
(1)promptly notify the other party ("Y") of such
requirement;
(2)pay to the relevant authorities the full amount
required to be deducted or withheld (including the full
amount required to be deducted or withheld from any
additional amount paid by X to Y under this Section 2(d))
promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice
that such amount has been assessed against Y;
(3)promptly forward to Y an official receipt (or a
certified copy), or other documentation reasonably
acceptable to Y, evidencing such payment to such
authorities; and
(4)if such Tax is an Indemnifiable Tax, pay to Y, in
addition to the payment to which Y is otherwise entitled
under this Agreement, such additional amount as is
necessary to ensure that the net amount actually received
by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y
would have received had no such deduction or withholding
been required. However, X will not be required to pay
any additional amount to Y to the extent that it would
not be required to be paid but for:-
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i) or 4(d); or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure would
not have occurred but for a Change in Tax Law.
(ii) Liability. If:-
(1)X is required by any applicable law, as modified by
the practice of any relevant governmental revenue
authority, to make any deduction or withholding in
respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2)X does not so deduct or withhold; and
(3)a liability resulting from such Tax is assessed
directly against X.
then, except to the extent Y has satisfied or then satisfies
the liability resulting from such Tax, Y will promptly pay to
X the amount of such liability (including any related liability
for interest, but including any related liability for penalties
only if Y has failed to comply with or perform any agreement
contained in Section 4(a)(i) or (d)).
(e) Default Interest. A party that defaults in the payment of any
amount due will, to the extent permitted by law, be required to pay interest
(before as well as after judgment) on such amount to the other party on demand
in the same currency as the overdue amount, for the period from (and including)
2
<PAGE> 16
the original due date for payment to (but excluding) the date of actual
payment, at the Default Rate. Such interest will be calculated on the basis of
daily compounding and the actual number of days elapsed.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Swap Transaction is
entered into and, in the case of the representations in Section 3(f), at all
times until the termination of this Agreement) that:-
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under
the laws of the jurisdiction of its organisation or incorporation
and, if relevant under such laws, in good standing;
(ii) Powers. It has the power to execute and deliver this
Agreement and any other documentation relating to this Agreement
that it is required by this Agreement to deliver and to perform
its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has
taken all necessary action to authorise such execution, delivery
and performance;
(iii) No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law applicable to
it, any provision of its constitutional documents, any order or
judgment of any court or other agency of government applicable to
it or any of its assets or any contractual restriction binding on
or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are
required to have been obtained by it with respect to this
Agreement or any Credit Support Document to which it is a party
have been obtained and are in full force and effect and all
conditions of any such consents have been complied with; and
(v) Obligations Binding. Its obligations under this
Agreement and any Credit Support Document to which it is a party
constitute its legal, valid and binding obligations, enforceable
in accordance with their respective terms (subject to applicable
bankruptcy, reorganisation, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in
equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential
Event of Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would occur as a
result of its entering into or performing its obligations under this Agreement
or any Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its
knowledge, threatened against it or any of its Affiliates any action, suit or
proceeding at law or in equity or before any court, tribunal, governmental
body, agency or official or any arbitrator that purports to draw into question,
or is likely to affect, the legality, validity or enforceability against it of
this Agreement or any Credit Support Document to which it is a party or its
ability to perform its obligations under this Agreement of such Credit Support
Document.
(d) Accuracy of Specified Information. All applicable information
that is furnished in writing by or on behalf of it to the other party and is
identified for the purpose of this Section 3(d) in paragraph 2 of Part 3 of the
Schedule is, as of the date of the information, true, accurate and complete in
every material respect.
(e) Payer Tax Representation. Each representation specified in Part
2 of the Schedule as being made by it for the purpose of this Section 3(e) is
accurate and true.
(f) Payer Tax Representations. Each representation specified in Part
2 of the Schedule as being made by it for the purpose of this Section 3(f) is
accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as it has or may have any
obligation under this Agreement or under any Credit Support Document to which
it is a party:-
3
<PAGE> 17
(a) Furnish Specified Information. It will deliver to the other
party:-
(i) any forms, documents or certificates relating to taxation
specified in Part 3 of the Schedule or any Confirmation; and
(ii) any other documents specified in Part 3 of the Schedule
or any Confirmation, by the date specified in Part 3 of the Schedule or such
Confirmation or, if none is specified, as soon as practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to
maintain in full force and effect all consents of any governmental or other
authority that are required to be obtained by it with respect to this Agreement
or any Credit Support Document to which it is a party and will use all
reasonable efforts to obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with
all applicable laws and orders to which it may be subject if failure so to
comply would materially impair its ability to perform its obligations under
this Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a
representation made by it under Section 3(f) to be accurate and true promptly
upon learning of such failure.
(e) Payment of Stamp Tax. It will pay any Stamp Tax levied or
imposed upon it or in respect of its execution or performance of this Agreement
by a jurisdiction in which it is incorporated, organised, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) Events of Default. The occurrence at any time with respect to a
party or, if applicable, any Specified Entity of such party, of any of the
following events constitutes an event of default (an "Event of Default") with
respect to such party:-
(i) Failure to Pay. Failure by the party to pay, when due,
any amount required to be paid by it under this Agreement if such
failure is not remedied on or before the third Business Day after
notice of such failure to pay is given to the party;
(ii) Breach of Agreement. Failure by the party to comply with
or perform any agreement or obligation (other than an obligation
to pay any amount required to be paid by it under this Agreement
or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i) or 4(d)) to be complied with or
performed by the party in accordance with this Agreement if such
failure is not remedied on or before the thirtieth day after
notice of such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any applicable Specified
Entity to comply with or perform any agreement or
obligation to be complied with or performed by the party
or such Specified Entity in accordance with any Credit
Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document, or the ceasing of such Credit Support Document
to be in full force and effect, prior to the final
Scheduled Payment Date of each Swap Transaction to which
such Credit Support Document relates without the written
consent of the other party; or
(3) the party or such Specified Entity repudiates, or
challenges the validity of, such Credit Support
Document;
(iv) Misrepresentation. A representation (other than a
representation under Section 3(e) or (f)) made or repeated or
deemed to have been made or repeated by the party or any
applicable Specified Entity in this Agreement or any Credit
Support Document relating to this Agreement proves to have been
incorrect or misleading in any material respect when made or
repeated or deemed to have been made or repeated:
(v) Default under Specified Swaps. The occurrence of an
event of default in respect of the party or any applicable
Specified Entity under a Specified Swap which, following the
giving of any
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applicable notice or the lapse of any applicable grace period,
has resulted in the designation or occurrence of an early
termination date in respect of such Specified Swap;
(vi) Cross Default. If "Cross Default" is specified in Part 1
of the Schedule as applying to the party, (1) the occurrence or
existence of an event or condition in respect of such party or
any applicable Specified Entity under one or more agreements or
instruments relating to Specified Indebtedness of such party or
any such Specified Entity in an aggregate amount of not less than
the Threshold Amount (as specified in Part 1 of the Schedule)
which has resulted in such Specified Indebtedness becoming, or
becoming capable at such time of being declared, due and payable
under such agreements or instruments, before it would otherwise
have been due and payable or (2) the failure by such party or any
such Specified Entity to make one or more payments at maturity in
an aggregate amount of not less than the Threshold Amount under
such agreements or instruments (after giving effect to any
applicable grace period);
(vii) Bankruptcy. The party or any applicable Specified
Entity:-
(1) is dissolved; (2) becomes insolvent or fails or is
unable to or admits in writing its inability generally to
pay its debts as they become due; (3) makes a general
assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has
instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law
affecting creditors' rights, or a petition is presented
for the winding-up or liquidation of the party or any
such Specified Entity, and, in the case of any such
proceeding or petition instituted or presented against
it, such proceeding or petition (A) results in a judgment
of insolvency or bankruptcy or the entry of an order for
relief or the making of an order for the winding-up or
liquidation of the party or such Specified Entity or (B)
is not dismissed, discharged, stayed or restrained in
each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up or liquidation; (6) seeks or becomes subject
to the appointment of an administrator, receiver,
trustee, custodian or other similar official for it or
for all or substantially all its assets (regardless of
how brief such appointment may be, or whether any
obligations are promptly assumed by another entity or
whether any other event described in this clause (6) has
occurred and is continuing); (7) any event occurs with
respect to the party or any such Specified Entity which,
under the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in
clauses (1) to (6) (inclusive); or (8) takes any action
in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the foregoing acts;
other than in the case of clause (1) or (5) or, to the extent it
relates to those clauses, clause (8), for the purpose of a
consolidation, amalgamation or merger which would not constitute
an event described in (viii) below; or
(viii) Merger Without Assumption. The party consolidates or
amalgamates with, or merges into, or transfer all or
substantially all its assets to, another entity and, at the time
of such consolidation, amalgamation, merger or transfer:-
(1) the resulting, surviving or transferee entity fails
to assume all the obligations of such party under this
Agreement by operation of law or pursuant to an agreement
reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document relating
to this Agreement fail to extend (without the consent of
the other party) to the performance by such resulting,
surviving or transferee entity of its obligations under
this Agreement.
(b) Termination Events. The occurrence at any time with respect to a
party or, if applicable, any Specified Entity of such party of any event
specified below constitutes an Illegality if the event is specified in (i)
below, a Tax Event if the event is specified in (ii) below, a Tax Event Upon
Merger if the event is specified in (iii) below or a Credit Event Upon Merger
if the event is specified in (iv) below:-
(i) Illegality. Due to the adoption of, or any change in,
any applicable law after the date on which such Swap Transaction
is entered into, or due to the promulgation of, or any change in,
the interpretation by any court, tribunal or regulatory authority
with competent jurisdiction of any applicable law after such
date, it becomes unlawful (other than as a result of a breach by
the party of Section 4(b)) for such party (which will be the
Affected Party):-
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(1) to perform any absolute or contingent obligation to
make a payment or to receive a payment in respect of such
Swap Transaction or to comply with any other material
provision of this Agreement relating to such Swap
Transaction; or
(2) to perform, or for any applicable Specified Entity to
perform, any contingent or other obligation which the
party (or such Specified Entity) has under any Credit
Support Document relating to such Swap Transaction;
(ii) Tax Event.
(1) The party (which will be the Affected Party) will be
required on the next succeeding Schedule Payment Date to
pay to the other party an additional amount in respect of
an Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e)) as a result of a
Change in Tax Law; or
(2) there is a substantial likelihood that the party
(which will be the Affected Party) will be required on
the next succeeding Schedule Payment Date to pay to the
other party an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e)) and such
substantial likelihood results from an action taken by a
taxing authority, or brought in a court of competent
jurisdiction, on or after the date on which such Swap
Transaction was entered into (regardless of whether such
action was taken or brought with respect to a party to
this Agreement);
(iii) Tax Event Upon Merger. The party (the "Burdened Party")
on the next succeeding Schedule Payment Date will either (1) be
required to pay an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of
interest under Section 2(e)) or (2) receive a payment from which
an amount has been deducted or withheld for or on account of any
Indemnifiable Tax in respect of which the other party is not
required to pay an additional amount, in either case as a result
of a party consolidating or amalgamating with, or merging into,
or transferring all or substantially all its assets to, another
entity (which will be the Affected Party) where such action does
not constitute an event described in Section 5(a)(viii); or
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger"
is specified in Part 1 of the Schedule as applying to the party,
such party ("X") consolidates or amalgamates with, or merges
into, or transfers all or substantially all its assets to,
another entity and such action does not constitute an event
described in Section 5(a)(viii) but the creditworthiness of the
resulting, surviving or transferee entity (which will be the
Affected Party) is materially weaker than that of X immediately
prior to such action.
(c) Event of Default and Illegality. If an event or circumstance
which would otherwise constitute or give rise to an Event of Default also
constitutes an Illegality, it will be treated as an Illegality and will not
constitute an Event of Default.
6. EARLY TERMINATION
(a) Right to Terminate Following Event of Default. If at any time an
Event of Default with respect to a party (the "Defaulting Party") has occurred
and is then continuing, the other party may, by not more than 20 days notice to
the Defaulting Party specifying the relevant Event of Default, designate a day
not earlier than the day such notice is effective as an Early Termination Date
in respect of all outstanding Swap Transactions. However, an Early Termination
Date will be deemed to have occurred in respect of all Swap Transactions
immediately upon the occurrence of any Event of Default specified in Section
5(a)(vii)(1), (2), (3), (5), (6), (7) or (8) and as of the time immediately
preceding the institution of the relevant proceeding or the presentation of the
relevant petition upon the occurrence of any Event of Default specified in
Section 5(a)(vii)(4).
(b) Right to Terminate Following Termination Event.
(i) Notice. Upon the occurrence of a Termination Event, an
Affected Party will, promptly upon becoming aware of the same,
notify the other party thereof, specifying the nature of such
Termination Event and the Affected Transactions relating thereto.
The Affected Party will also give such other information to the
other party with regard to such Termination Event as the other
party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an
Illegality under Section 5(b)(i)(1) or a Tax Event occurs and
there is only on Affected Party, or if a Tax Event Upon Merger
occurs and the Burdened Party is the Affected Party, the Affected
Party will as a condition to its right to designate an Early
Termination Date under Section 6(b)(iv) use all reasonable
efforts (which
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will not require such party to incur a loss, excluding
immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected
Transactions to another of its offices, branches or Affiliates so
that such Termination Event ceases to exist. If the Affected
Party is not able to make such a transfer it will give notice to
the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30
days after the notice is given under Section 6(b)(i). Any such
transfer by a party under this Section 6(b)(ii) will be subject
to and conditional upon the prior written consent of the other
party, which consent will not be withheld if such other party's
policies in effect at such time would permit it to enter into
swap transactions with the transferee on the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section
5(b)(i)(1) or a Tax Event occurs and there are two Affected
Parties, each party will use all reasonable efforts to reach
agreement within 30 days after notice thereof is given under
Section 6(b)(i) on action that would cause such Termination Event
to cease to exist.
(iv) Right to Terminate. If:-
(1) a transfer under Section 6(b)(ii) or an agreement
under Section 6(b)(iii), as the case may be, has not been
effected with respect to all Affected Transactions within
30 days after an Affected Party gives notice under
Section 6(b((i); or
(2) an Illegality under Section 5(b)(i)(2) or a Credit
Event Upon Merger occurs, or a Tax Event Upon Merger
occurs and the Burdened Party is not the Affected Party,
either party in the case of an Illegality, the Burdened Party in
the case of a Tax Event Upon Merger, any Affected Party in the
case of a Tax Event, or the party which is not the Affected Party
in the case of a Credit Event Upon Merger, may, by not more than
20 days notice to the other party and provided that the relevant
Termination Event is then continuing, designate a day not earlier
than the day such notice is effective as an Early Termination
Date in respect of all Affected Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given
under Section 6(a) or (b), the Early Termination Date will occur
on the date so designated, whether or not the relevant Event of
Default or Termination Event is continuing on the relevant early
Termination Date.
(ii) Upon the effectiveness of notice designating an Early
Termination Date (or the deemed occurrence of an Early
Termination Date), the obligations of the parties to make any
further payments under Section 2(a)(i) in respect of the
Terminated Transactions will terminate, but without prejudice to
the other provisions of this Agreement.
(d) Calculations.
(i) Statement. Following the occurrence of an Early
Termination Date, each party will make the calculations
(including calculation of applicable interest rates) on its part
contemplated by Section 6(e) and will provide to the other party
a statement (1) showing, in reasonable detail, such calculations
(including all relevant quotations) and (2) giving details of the
relevant account to which any payment due to it under Section
6(e) is to be made In the absence of written confirmation of a
quotation obtained in determining a Market Quotation from the
source providing such quotation, the records of the party
obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) Due Date. The amount calculated as being payable under
Section 6(e) will be due on the day that notice of the amount
payable is effective (in the case of an Early Termination Date
which is designated or deemed to occur as a result of an Event of
Default) and not later than the day which is two Business Days
after the day on which notice of the amount payable is effective
(in the case of an Early Termination Date which is designated as
a result of a Termination Event). Such amount will be paid
together with (to the extent permitted under applicable law)
interest thereon in the Termination Currency from (and including)
the relevant Early Termination Date to (but excluding) the
relevant due date, calculated as follows:-
(1) if notice is given designating an Early Termination
Date or if an Early Termination Date is deemed to occur,
in either case as a result of an Event of Default, at the
Default Rate; or
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(2) if notice is given designating an Early Termination
Date as a result of a Termination Event, at the Default
Rate minus 1% per annum.
Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(e) Payments on Early Termination.
(i) Defaulting Party or One Affected Party. If notice is
given designating an Early Termination Date or if an Early
Termination Date is deemed to occur and there is a Defaulting
Party or only one Affected Party, the other party will determine
the Settlement Amount in respect of the Terminated Transactions
and:-
(1) if there is a Defaulting Party, the Defaulting Party
will pay to the other party the excess, if a positive
number, of (A) the sum of such Settlement Amount and the
Termination Currency Equivalent of the Unpaid Amounts
owing to the other party over (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the
Defaulting Party; and
(2) if there is an Affected Party, the payment to be made
will be equal to (A) the sum of such Settlement Amount
and the Termination Currency Equivalent of the Unpaid
Amounts owing to the party determining the Settlement
Amount ("X") less (B) the Termination Currency Equivalent
of the unpaid Amounts owing to the party not determining
the Settlement Amount ("Y").
(ii) Two Affected Parties. If notice is given of an Early
Termination Date and there are two Affected Parties, each party
will determine a Settlement Amount in respect of the Terminated
Transactions and the payment to be made will be equal to (1) the
sum of (A) one-half of the difference between the Settlement
Amount of the party with the higher Settlement Amount ("X") and
the Settlement Amount of the party with the lower Settlement
Amount ("Y") and (B) the Termination Currency Equivalent of the
Unpaid Amounts owing to X less (2) the Termination Currency
Equivalent of the Unpaid Amounts owing to Y.
(iii) Party Owing. If the amount calculated under Section
6(e)(i)(2) or (ii) is a positive number, Y will pay such amount
to X; if such amount is a negative number, X will pay the
absolute value of such amount to Y. (iv) Adjustment for
Bankruptcy. In circumstances where an Early Termination Date is
deemed to occur, the amount determined under Section 6(3)(i) will
be subject to such adjustments as are appropriate and permitted
by law to reflect any payments made by one party to the other
under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date
for payment determined under Section 6(d)(ii).
(v) Pre-Estimate of Loss. The parties agree that the amounts
recoverable under this Section 6(e) are a reasonable pre-
estimate of loss and not a penalty. Such amounts are payable for
the loss of bargain and the loss of protection against future
risks and except as otherwise provided in this Agreement neither
party will be entitled to recover any additional damages as a
consequence of such losses.
7. TRANSFER
Subject to Section 6(b) and to any exception provided in the Schedule, neither
this Agreement nor any interest or obligation in or under this Agreement may be
transferred by either party without the prior written consent of the other
party (other than pursuant to a consolidation or amalgamation with, or merger
into, or transfer of all or substantially all its assets to, another entity)
and any purported transfer without such consent will be void.
8. CONTRACTUAL CURRENCY
(a) Payment in the Contractual Currency. Each payment under this
Agreement will be made in the relevant currency specified in this Agreement for
that payment (the "Contractual Currency"). To the extent permitted by
applicable law, any obligation to make payments under this Agreement in the
Contractual Currency will not be discharged or satisfied by any tender in any
currency other than the Contractual Currency, except to the extent such tender
results in the actual receipt by the party to which payment is owed, acting in
a reasonable manner and in good faith in converting the currency so tendered
into the Contractual Currency, of the full amount in the Contractual Currency
of all amounts due in respect of this Agreement. If for any reason the amount
in the Contractual Currency so received falls short of the amount
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in the Contractual Currency due in respect of this Agreement, the party
required to make the payment will, to the extent permitted by applicable law,
immediately pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall. If for any reason the amount in the
Contractual Currency so received exceeds the amount in the Contractual Currency
due in respect of this Agreement, the party receiving the payment will refund
promptly the amount of such excess.
(b) Judgements. To the extent permitted by applicable law, if any
judgment or order expressed in a currency other than the Contractual Currency
is rendered (i) for the payment of any amount owing in respect of this
Agreement, (ii) for the payment of any amount relating to any early termination
in respect of this Agreement or (iii) in respect of a judgment or order of
another court for the payment of any amount described in (i) or (ii) above, the
party seeking recovery, after recovery in full of the aggregate amount to which
such party is entitled pursuant to the judgment or order, will be entitled to
receive immediately from the other party the amount of any shortfall of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency and will refund promptly to the other party any excess of
the Contractual Currency received by such party as a consequence of sums paid
in such other currency if such shortfall or such excess arises or results from
any variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such
party. The term "rate of exchange" includes, without limitation, any premiums
and costs of exchange payable in connection with the purchase of or conversion
into the Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law,
these indemnities constitute separate and independent obligations from the
other obligations in this Agreement, will be enforceable as separate and
independent causes of action, will apply notwithstanding any indulgence grated
by the party to which any payment is owed and will not be affected by judgment
being obtained or claim or proof being made for any other sums due in respect
of this Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
9. MISCELLANEOUS
(a) Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties with respect to its subject matter
and supersedes all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of
this Agreement will be effective unless in writing and executed by each of the
parties or confirmed by an exchange of telexes.
(c) Survival of Obligations. Except as provided in Section 6(c)(ii),
the obligations of the parties under this Agreement will survive the
termination of any Swap Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the
rights, powers, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies and privileges
provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement may be executed in counterparts, each of
which will be deemed an original.
(ii) A Confirmation may be executed in counterparts or be
created by an exchange of telexes, which in either case will be
sufficient for all purposes to evidence a binding supplement to
this Agreement. Any such counterpart or telex will specify that
it constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right,
power or privilege in respect of this Agreement will not be presumed to operate
as a waiver, and a single or partial exercise of any right, power or privilege
will not be presumed to preclude any subsequent or further exercise of that
right, power or privilege or the exercise of any other right, power or
privilege.
(g) Headings. The headings used in this Agreement are for
convenience of reference only and are not to affect the construction of or to
be taken into consideration in interpreting this Agreement.
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10. MULTIBRANCH PARTIES
If a party is specified as a Multibranch Party in Part 4 of the Schedule, such
Multibranch Party may make and receive payments under any Swap Transaction
through any of its branches or offices listed in the Schedule (each an
"Office"). The Office through which it so makes and receives payments for the
purpose of any Swap Transaction will be specified in the relevant Confirmation
and any change of Office for such purpose requires the prior written consent of
the other party. Each Multibranch Party represents to the other party that,
notwithstanding the place of payment, the obligations of each Office are for
all purposes under this Agreement the obligations of such Multibranch Party.
This representation will be deemed to be repeated by such Multibranch Party on
each date on which a Swap Transaction is entered into.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or by reason of the early
termination of any Swap Transaction, including, but not limited to, costs of
collection.
12. NOTICES
(a) Effectiveness. Any notice or communication in respect of this
Agreement will be sufficiently given to a party if in writing and delivered in
person, sent by certified or registered mail (airmail, if overseas) or the
equivalent (with return receipt requested) or by overnight courier or given by
telex (with answerback received) at the address or telex number specified in
Part 4 of the Schedule. A notice or communication will be effective:-
(i) if delivered by hand or sent by overnight courier, on the
day it is delivered (or if that day is not a day on which
commercial banks are open for business in the city specified in
the address for notice provided by the recipient (a "Local
Banking Day"), or if delivered after the close of business on a
Local Banking Day, on the first following day that is a Local
Banking Day);
(ii) if sent by telex, on the day the recipient's answerback
is received (or if that day is not a Local Banking Day, or if
after the close of business on a Local Banking Day, on the first
following day that is a Local Banking Day); or
(iii) if sent by certified or registered mail (airmail, if
overseas) or the equivalent (return receipt requested), three
Local Banking Days after despatch if the recipient's address for
notice is in the same country as the place of despatch and
otherwise seven Local Banking Days after despatch.
(b) Change of Addresses. Either party may by notice to the other
change the address or telex number at which notices or communications are to be
given to it.
13. GOVERNING LAW AND JURISDICTION
(a) Governing Law. This Agreement will be governed by and construed
in accordance with the law specified in Part 4 of the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings
relating to this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if
this Agreement is expressed to be governed by English law, or to
the non-exclusive jurisdiction of the courts of the State of New
York and the United States District Court located in the Borough
of Manhattan in New York City, if this Agreement is expressed to
be governed by the laws of the State of New York; and
(ii) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court,
waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with
respect to such Proceedings, that such court does not have
jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section I(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process
Agent (if any) specified opposite its name in Part 4 of the Schedule to
receive, for it and on its behalf, service of process in any Proceedings. If
for any reason any party's Process Agent is unable to act as such, such party
will
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promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to
service of process given in the manner provided for notices in Section 12.
Nothing in this Agreement will affect the right of either party to serve
process in any other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the
fullest extent permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended use), all immunity
on the grounds of sovereignty or other similar grounds from (i) suit, (ii)
jurisdiction of any court, (iii) relief by way of injunction, order for specific
performance or for recovery of property, (iv) attachment of its assets (whether
before or after judgment) and (v) execution or enforcement of any judgment to
which it or its revenues or assets might otherwise be entitled in any
Proceedings in the courts of any jurisdiction and irrevocably agrees, to the
extent permitted by applicable law, that it will not claim any such immunity in
any Proceedings.
14. DEFINITIONS
As used in this Agreement:-
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Swap
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Swap Transactions.
"AFFILIATE" means, subject to Part 4 of the Schedule, in relation to any
person, any entity controlled, directly or indirectly, by the person, any
entity that controls, directly or indirectly, the person or any entity under
common control with the person. For this purpose, "control" of any entity or
person means ownership of a majority of the voting power of the entity or
person.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"BUSINESS DAY" means (a) in relation to any payment due under Section 2(a)(i),
a day on which commercial banks and foreign exchange markets are open for
business in the place(s) specified in the relevant Confirmation and (b) in
relation to any other payment, a day on which commercial banks and foreign
exchange markets are open for business in the place where the relevant account
is located and, if different, in the principal financial centre of the currency
of such payment.
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after the
date on which the relevant Swap Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument which is specified
as such in this Agreement.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) of
funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date specified as such in a notice given
under Section 6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a).
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former
connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to such
recipient (including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organised, present or engaged in a trade
or business in such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such recipient
11
<PAGE> 25
or related person having executed, delivered, performed its obligations or
received a payment under, or enforced, this Agreement or a Credit Support
Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority)
and "LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOSS" means, with respect to a Terminated Transaction and a party, an amount
equal to the total amount (expressed as a positive amount) required, as
determined as of the relevant Early Termination Date (or, if an Early
Termination Date is deemed to occur, as of a time as soon thereafter as
practicable) by the party in good faith, to compensate if for any losses and
costs (including loss of bargain and costs of funding but excluding legal fees
and other out-of-pocket expenses) that it may incur as a result of the early
termination of the obligations of the parties in respect of such Terminated
Transaction. If a party determines that it would gain or benefit from such
early termination, such party's Loss will be an amount (expressed as a negative
amount) equal to the amount of the gain or benefit as determined by such party.
"MARKET QUOTATION" means, with respect to a Terminated Transaction and a party
to such Terminated Transaction making the determination, an amount (which may
be negative) determined on the basis of quotations from Reference Market-makers
for the amount that would be or would have been payable on the relevant Early
Termination Date, either by the party to the Terminated Transaction making the
determination (to be expressed as a positive amount) or to such party (to be
expressed as a negative amount), in consideration of an agreement between such
party and the quoting Reference Market-maker and subject to such documentation
as they may in good faith agree, with the relevant Early Termination Date as
the date of commencement of such agreement (or, if later, the date specified as
the effective date of such Terminated Transaction in the relevant
Confirmation), that would have the effect of preserving for such party the
economic equivalent of the payment obligations of the parties under Section
2(a)(i) in respect of such Terminated Transaction that would, but for the
occurrence of the relevant Early Termination Date, fall due after such Early
Termination Date (excluding any Unpaid Amounts in respect of such Terminated
Transaction but including, without limitation, any amounts that would, but for
the occurrence of the relevant Early Termination Date, have been payable
(assuming each applicable condition precedent had been satisfied) after such
Early Termination Date by reference to any period in which such Early
Termination Date occurs). The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
practicable as of the same time (without regard to different time zones) on the
relevant Early Termination Date (or, if an Early Termination Date is deemed to
occur, as of a time as soon thereafter as practicable). The time as of which
such quotations are to obtained will, if only one party is obliged to make a
determination under Section 6(e), be selected in good faith by that party and
otherwise will be agreed by the parties. If more than three such quotations
are provided, the Market Quotation will be the arithmetic mean of the
Termination Currency Equivalent of the quotations, without regard to the
quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the quotations having the highest and lowest values. If
fewer than three quotations are provided, it will be deemed that the Market
Quotation in respect of such Terminated Transaction cannot be determined.
"OFFICE" has the meaning specified in Section 10.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant swap
market selected by the party determining a Market Quotation in good faith(a)
from among dealers of the highest credit standing which satisfy all the
criteria that such party applies generally at the time in deciding whether to
offer or to make an extension of credit and (b) to the extent practicable, from
amount such dealers having an office in the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a)
in which the party is incorporated, organised, managed and controlled or
considered to have its seat, (b) where a branch or office through which the
party is acting for purposes of this Agreement is located, (c) in which the
party executes this Agreement and (d) in relation to any payment, from or
through which such payment is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment is due under Section
2(a)(i) with respect to a Swap Transaction.
12
<PAGE> 26
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:-
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction for which a Market
Quotation is determine; and
(b) for each Terminated Transaction for which a Market Quotation is not,
or cannot be, determined, the Termination Currency Equivalent of such party's
Loss (whether positive or negative);
provided that if the parties agree that an amount may be payable under Section
6(e) to a Defaulting Party by the other party, no account shall be taken of a
Settlement Amount expressed as a negative number.
"SPECIFIED ENTITY" has the meaning specified in Part 1 of the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to Part 1 of the Schedule, any
obligation (whether present or future, contingent or otherwise, as principal or
surety or otherwise) in respect of borrowed money.
"SPECIFIED SWAP" means, subject to Part 1 of the Schedule, any rate swap or
currency exchange transaction now existing or hereafter entered into between
one party to this Agreement (or any applicable Specified Entity) and the other
party to this Agreement (or any applicable Specified Entity).
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment
or fee of any nature (including interest, penalties and additions thereto) that
is imposed by any government or other taxing authority in respect of any
payment under this Agreement other than a stamp, registration, documentation or
similar tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means (a) with respect to any Early Termination Date
occurring as a result of a Termination Event, all Affected Transactions and (b)
with respect to any Early Termination Date occurring as a result of an Event of
Default, all Swap Transactions, which in either case are in effect as of the
time immediately preceding the effectiveness of the notice designating such
Early Termination Date (or, in the case of an Event of Default specified in
Section 5(a)(vii), in effect as of the time immediately preceding such Early
Termination Date).
"TERMINATION CURRENCY" has the meaning specified in Part 1 of the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated
in the Termination Currency, such Termination Currency amount and, in respect
of any amount denominated in a currency other than the Termination Currency
(the "Other Currency"), the amount in the Termination Currency determined by
the party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date with
the Termination Currency at the rate equal to the spot exchange rate of the
foreign exchange agent (selected as provided below) for the purchase of such
Other Currency with the Termination Currency at or about 11:00 a.m. (in the
city in which such foreign exchange agent is located) on such date as would be
customary for the determination of such a rate for the purchase of such Other
Currency for value the relevant Early Termination Date. The foreign exchange
agent will, of only one party is obliged to make a determination under Section
6(e), be selected in good faith by that party and otherwise will be agreed by
the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event, a Tax Event Upon Merger
or a Credit Event Upon Merger.
"UNPAID AMOUNTS" owing to any party means, with respect to any Early
Termination Date, the aggregate of the amounts that became due and payable (or
that would have become due and payable but for Section 2(a)(iii) or the
designation or occurrence of such Early Termination Date) to such party under
Section 2(a)(i) in respect of all Terminated Transactions by reference to all
periods ended on or prior to such Early Termination Date and which remain
unpaid as at such Early Termination Date, together with (to the extent
permitted under applicable law and in lieu of any interest calculated under
Section 2(e)) interest thereon, in the currency of such amounts, from (and
including) the date such amounts became due and payable or would have become
due and payable to (but excluding) such Early Termination Date, calculated as
follows:-
(a) in the case of notice of an Early Termination Date given as a result
of an Event of Default:-
13
<PAGE> 27
(i) interest on such amounts due and payable by a Defaulting Party
will be calculated at the Default Rate; and
(ii) interest on such amounts due and payable by the other party
will be calculated at a rate per annum equal to the cost to such other
party (as certified by it) if it were to fund such amounts (without
proof or evidence of any actual cost); and
(b) in the case of notice of an Early Termination Date given as a result
of a Termination Event, interest on such amounts due and payable by either
party will be calculated at a rate per annum equal to the arithmetic mean of
the cost (without proof or evidence of any actual cost) to each party (as
certified by such party and regardless of whether due and payable by such
party) if it were to fund or of funding such amounts.
Such amounts of interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
IN WITNESS WHEREOF the parties have executed this document as of the date
specified on the first page of this document.
National City Bank, Cleveland The Standard Products Co.
----------------------------- -------------------------------
(Name of party) (Name of party)
By: /s/ William Mahnic By: /s/ Charles F. Nagy
--------------------- ------------------------
Name: William Mahnic Name: Charles F. Nagy
Title: Vice President Title: Corporate Treasurer
14
<PAGE> 1
NATCITY NATCITY INVESTMENTS, INC.
Investments 1965 East Sixth Street
Cleveland, OH 44114
Exhibit 4h
June 16, 1995
Mr. Charles F. Nagy
Corporate Treasurer
The Standard Products Co.
Dearborn, Michigan
VIA FAX
Re: Termination of $7 million in principal amount of an original
$25,350,256 currency swap dated November 10, 1993.
Dear Chuck:
This letter will confirm the agreement between National City Bank
("NCB") and Standard Products Co. ("Standard Products") to terminate $ 7
million in principal amount of the original balance of $25,350,256 on a
currency swap entered into between NCB and Standard Products dated November 10,
1993. The terms of the termination as as follows:
Trade Date: June 14, 1995
Effective Date: June 26, 1995
Settlement Date: June 28, 1995
National City Bank Will Pay
Standard Products Co.:
Principal USD 7,033,000.00
Accrued Interest USD 40,600.00
-----------------
Total Due USD 7,073,600.00
Standard Products Will Pay
National City Bank:
Principal FRD 41,419,700.00
Accrued Interest FRF 269,228.05
-----------------
Total Due FRF 41,688,928.05
Please evidence your confirmation of this trade by executing this
Confirmation Letter and faxing it to the attention of Bill Mahnic, at
216/575-3355.
For: National City Bank For: The Standard Products Co.
By: /s/ Michael T. Whalen By: /s/ Charles F. Nagy
------------------------- -------------------------
Mike Whalen, Vice President Charles F. Nagy, Corporate Treasurer
MEMBER NASD o MEMBER SIPC
<PAGE> 2
<TABLE>
ORIGINAL AMORT.
CASH FLOW SCHEDULE (SELL/MARK-TO-MARKET)
<CAPTION>
PERIOD PAYMENT NCB PAYS USD FIXED DISCOUNT DISCOUNT
DATE DATE TOTAL PAYMENTS RATE FACTOR
------------ ------------ ------------------ --------- --------
<S> <C> <C> <C> <C>
22-NOV-95 22-NOV-95 735,157.42 6.0661736 .97286889
22-MAY-96 22-MAY-96 735,157.42 5.9586661 .94531143
22-NOV-96 22-NOV-96 5,805,208.62 5.9351203 .9181216
22-MAY-97 22-MAY-97 588,125.94 5.972081 .891265
22-NOV-97 24-NOV-97 5,658,177.14 6.0271054 .86379632
22-MAY-98 22-MAY-98 441,094.45 6.0933657 .8374109
22-NOV-98 23-NOV-98 5,511,145.65 6.1602482 .81049447
22-MAY-99 25-MAY-99 294,062.97 6.2278053 .78417109
22-NOV-99 22-NOV-99 5,364,114.17 6.2932862 .75853068
22-MAY-00 22-MAY-00 147,031.48 6.3622806 .73306674
22-NOV-00 22-NOV-00 5,217,082.68 6.3782234 .7097452
NPV (ACT/ACT SA) PCT
07-JUN-95 25,097,895.02
<CAPTION>
PERIOD PAYMENT STAN PAYS FRF FIXED DISCOUNT DISCOUNT
DATE DATE TOTAL PAYMENTS RATE FACTOR
------------ ------------ ------------------ --------- --------
<S> <C> <C> <C> <C>
22-NOV-95 22-NOV-95 4,875,000.00 7.0925828 .9684293
22-MAY-96 22-MAY-96 4,875,000.00 6.6573021 .93919883
22-NOV-96 22-NOV-96 34,875,000.00 6.5290817 .91042976
22-MAY-97 22-MAY-97 3,900,000.00 6.4320315 .88352097
22-NOV-97 24-NOV-97 33,900,000.00 6.4895489 .85429816
22-MAY-98 22-MAY-98 2,925,000.00 6.561246 .82625853
22-NOV-98 23-NOV-98 32,925,000.00 6.6412837 .79751671
22-MAY-99 25-MAY-99 1,950,000.00 6.7211379 .76945533
22-NOV-99 22-NOV-99 31,950,000.00 6.791504 .74238297
22-MAY-00 22-MAY-00 975,000.00 6.8614979 .71571238
22-NOV-00 22-NOV-00 30,975,000.00 6.9157279 .68986731
NPV (ACT/ACT SA) PCT
07-JUN-95 149,418,441.41
</TABLE>
<PAGE> 3
NEW AMORT.
CASH FLOW SCHEDULE (SELL/MARK-TO-MARKET)
<TABLE>
<CAPTION>
PERIOD PAYMENT NCB PAYS USD FIXED DISCOUNT DISCOUNT
DATE DATE TOTAL PAYMENTS RATE FACTOR
------------ ------------ ------------------ --------- --------
<S> <C> <C> <C> <C>
22-NOV-95 22-NOV-95 532,157.42 6.0661736 .97286889
22-MAY-96 22-MAY-96 532,157.42 5.9586661 .94531143
22-NOV-96 22-NOV-96 4,202,208.62 5.9351203 .9181216
22-MAY-97 22-MAY-97 425,725.94 5.972081 .891265
22-NOV-97 24-NOV-97 4,095,777.14 6.0271054 .86379632
22-MAY-98 22-MAY-98 319,294.45 6.0933657 .8374109
23-NOV-98 23-NOV-98 3,989,345.65 6.1602482 .81049447
22-MAY-99 25-MAY-99 212,862.97 6.2278053 .78417109
22-NOV-99 22-NOV-99 3,882,914.17 6.2932862 .75853068
22-MAY-00 22-MAY-00 106,431.48 6.3622806 .73306674
22-NOV-00 22-NOV-00 3,776,482.68 6.3782234 .7097452
NPV (ACT/ACT SA) PCT
07-JUN-95 18,167,579.79
<CAPTION>
PERIOD PAYMENT STAN PAYS FRF FIXED DISCOUNT DISCOUNT
DATE DATE TOTAL PAYMENTS RATE FACTOR
------------ ------------ ------------------ --------- --------
<S> <C> <C> <C> <C>
22-NOV-95 22-NOV-95 3,528,859.74 7.0925828 .9684293
22-MAY-96 22-MAY-96 3,528,859.74 6.6573021 .93919883
22-NOV-96 22-NOV-96 25,244,919.70 6.5290817 .91042976
22-MAY-97 22-MAY-97 2,823,087.79 6.4320315 .88352097
22-NOV-97 24-NOV-97 24,539,147.75 6.4895489 .85429816
22-MAY-98 22-MAY-98 2,117,315.85 6.561246 .82625853
22-NOV-98 23-NOV-98 23,833,375.81 6.6412837 .79751671
22-MAY-99 25-MAY-99 1,411,543.90 6.7211379 .76945533
22-NOV-99 22-NOV-99 23,127,603.86 6.791504 .74238297
22-MAY-00 22-MAY-00 705,771.95 6.8614979 .71571238
22-NOV-00 22-NOV-00 22,421,831.89 6.9157279 .68986731
NPV (ACT/ACT SA) PCT
07-JUN-95 108,159,327.74
</TABLE>
<PAGE> 1
Exhibit 13
THE STANDARD PRODUCTS CO.
EXPANDING OUR GLOBAL POSITION
ANNUAL REPORT 1995
<PAGE> 2
The Standard Products Co. has pursued a strategic focus to grow related
businesses in rubber and plastic laminated extrusion technology into leadership
positions in their industries and to build value for shareholders. Standard
Products is one of the world's leading suppliers of sealing, trim and
vibration-control systems for the worldwide original equipment automotive
industry. We are also the major North American supplier of seals for home and
commercial refrigerators and freezers, as well as an important supplier to the
residential door and window industry. Through our Oliver Rubber subsidiary, we
are a leading manufacturer of tread rubber and equipment for the truck retread
industry.
<PAGE> 3
<TABLE>
FISCAL YEAR HIGHLIGHTS
<CAPTION>
(Thousands of Dollars Except Share Data) 1995 1994 1993
------------------------------------------------------------------- ---------- ---------- ---------
<S> <C> <C> <C>
Net Sales.............................................................. $995,926 $872,367 $763,796
Income Before Extraordinary Item and Cumulative Effect on
Prior Years of Change in Accounting Principle........................ 20,066 33,032 33,423
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............................................................. $ 20,066 $ 33,032 $ 22,563
======== ======== ========
Earnings Per Common Share:
Income Before Extraordinary Item and Cumulative Effect on
Prior Years of Change in Accounting Principle..................... $1.20 $1.99 $2.21
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)
----- ----- -----
$1.20 $1.99 $1.49
----- ----- -----
Cash Dividends Declared Per Common Share............................... $ .68 $ .65 $ .54
Shareholders' Equity................................................... $ 260,495 $242,677 $224,436
Book Value Per Common Share............................................ $15.56 $14.55 $13.56
Shares Outstanding at Year End......................................... 16,736 16,674 16,552
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
TO OUR SHAREHOLDERS
As we write this letter, Standard Products is in the midst of the largest
single new-vehicle launch in the Company's history--the Ford Taurus/Mercury
Sable. This launch culminates the most intensive three-year schedule of new
programs ever for Standard Products--some two dozen launches worth $350 million
in new business, replacing $105 million in existing volume. We have also
embarked on a major new initiative in Brazil, part of an ongoing global
expansion of our business, and we continue to remake the Company in response to
the demands of our primary customers for competitiveness, global sourcing and
full-service design and engineering capability.
We had a difficult year and profits were squeezed, but we believe our
investments will ultimately be positively reflected in our bottom line. As we
have said, this is the price of admission to the future. We are building a
billion dollar-plus global automotive supplier for the next century. We have
confidence in our strategy.
Sales for the year reached $995.9 million, a 14% increase over 1994. Of that
increase, $15.9 million, or approximately 13%, was due to the net effect of
foreign currency exchange rates. Net income was $20.1 million, or $1.20 per
share, compared with $33.0 million, or $1.99 per share, in the prior year. Net
earnings for the year reflected a net tax credit of $2.8 million compared with
a tax charge of $17.2 million for the prior year.
The normal income tax provision for fiscal 1995 of $7.3 million was more than
offset by a tax benefit related to the previously announced closing of Oliver
Rubber's European subsidiary and the recognition of benefits associated with
tax loss carryforwards at our United Kingdom subsidiary, Standard Products
Limited (SPL). As a consequence, all future earnings of SPL will be taxable.
For the fiscal year, our largest unit, North American automotive operations,
had sales of $531 million, a 15% increase over the prior year. The increase
was driven primarily by new automobile programs launched during the prior 18
months, including the Chevrolet Lumina, Ford Crown Victoria/Mercury Grand
Marquis and Chrysler's Neon, Cirrus/Stratus and NS minivan. Production for the
new Taurus/Sable began in June, and is going well at this time. The new
Taurus/Sable is worth $125 million in annualized sales to Standard Products,
including sales of NISCO, our joint venture with Nishikawa Rubber Company of
Japan.
Fiscal 1995 sales from our European automotive operations increased $35.5
million to $240 million. This was a 17% improvement over fiscal 1994.
However, favorable currency exchange rates against the weak U.S. dollar
accounted for half of the gain. Although the European auto market was flat for
the 12 months, our European operations benefited from participation on the Fiat
Punto and other popular new models.
Oliver Rubber reported annual sales of $127 million, a 7% increase. Holm
Industries contributed $94 million to total sales, an 8% increase over last
year. NISCO also enjoyed increased sales and late in the fiscal year added a
third plant outside Fort Wayne, Indiana, to handle anticipated volume
increases. Our share of NISCO's profits is 50%, but the sales are not
consolidated in our income statement.
A number of factors accounted for the decline in fiscal 1995 profits--raw
material price increases that we have not been able to pass on to our
customers, start-up costs related to new launches, intermittent automotive OEM
production shutdowns of key models, and higher interest costs. We also
experienced operating problems at our Spartanburg, South Carolina, plastics
plant, which we are addressing. In addition, we incurred one-time charges to
consolidate our North American automotive plastics production facilities and,
as a result of the decision a year ago, to close Oliver Rubber's European
operation.
Standard Products handled eight major new-model launches during the year. It
is worth noting that new business typically comes in at lower margins than the
business it is replacing, and it takes time to bring down the startup
production costs. At the same time, the automotive OEMs are placing higher
demands on their suppliers than ever before.
No longer just parts producers, preferred suppliers are now expected to handle
the full range of design and engineering responsibilities related to their
systems and components. Today we bear much of the
<PAGE> 5
cost of the 2-3 years of product definition, design, prototyping and testing
that precede Job 1, along with the additional engineering changes that
typically accompany the ramp-up to full production.
As a result of these market pressures, our spending on research, engineering
and development has increased from $10 million in fiscal 1990 to $33 million in
fiscal 1995.
In addition, we have taken a number of steps to make the Company more
efficient, more competitive and more technologically capable.
We have restructured our North American automotive operations, appointing a new
executive vice president, reassigning our best managers, flattening the
manufacturing organization, and starting the process of consolidating our
plastics production facilities. We have consolidated administrative and
operational functions in our Dearborn, Michigan, offices. We have also created
the Standard Products Worldwide Technology Organization. The mission of WTO is
to develop new products and processes, share our technological expertise across
the Company on a worldwide basis, and ensure worldwide consistency of equipment
and technology. WTO will invest in equipment and a facility to manufacture
tooling for Company plants around the world.
In recognition of our efforts to elevate Standard Products to a world-class
automotive parts company, Ford Motor Co. last year designated us as a Full
Service Supplier for glass sealing and exterior ornamentation. Standard
Products was one of the first nine of Ford's 1,600 suppliers worldwide to be so
acknowledged.
During 1995, at the request of our automotive OEM customers, we initiated
actions to begin manufacturing products in South America and Mexico. The
Mexican venture is temporarily on hold, but we are moving ahead in Brazil on a
$25 million plant in Varginha, in the state of Minas Gerais, to manufacture
glass run channels, weatherstripping and door seals. The plant, scheduled to
begin production in January 1996, initially will be dedicated to supplying Fiat
with parts for its new Mercosur "world car." To strengthen our position in
Brazil, we acquired 100% of Itatiaia Standard, a Sao Paulo-based supplier of
automotive sealing systems, where we had long been a 20% joint venture partner.
Itatiaia has annual sales of approximately $30 million. The acquisition
provides us with an experienced local sales and engineering team supplying all
of the auto makers in Brazil.
For automotive suppliers, Brazil is one of the most attractive markets in the
world. Ford, General Motors, Volkswagen, Renault and Fiat have all announced
multi-billion dollar investments there. Total vehicle production has risen 47%
since 1992 to 1.58 million vehicles last year and is expected to double again
by the year 2000. That would make Brazil the fifth largest automotive producer
in the world by the turn of the century, ahead of Italy, Britain and Canada.
Looking ahead, the first quarter is traditionally our weakest, due to model
changeovers and vacation closings at our automotive OEM customer plants. With
the added burden this year of heavy launch costs on the Taurus/Sable, high
initial costs associated with our Brazilian investments and some softness in
the car build in many of our major world markets, including Brazil, we
anticipate a loss in the first quarter.
For the year, we expect sales to exceed $1 billion for the first time in the
Company's history. However, earnings will continue to be under pressure and,
while they may improve over last year, we still expect fiscal 1996 will be
another difficult year for the Company.
/s/ James S. Reid, Jr. /s/ Theodore K. Zampetis
---------------------- ------------------------
James S. Reid, Jr. Theodore K. Zampetis
Chairman and Chief Executive Officer President and Chief Operating Officer
August 18, 1995
<PAGE> 6
DESIGN & ENGINEERING TECHNOLOGY
WE HAVE MADE CONSIDERABLE INVESTMENTS TO STRENGTHEN OUR TECHNOLOGICAL
CAPABILITIES. TODAY, WE ARE NOT ONLY RESPONSIBLE FOR DESIGN AND
ENGINEERING, BUT ARE ALSO DEEPLY INVOLVED IN THE PRE-DESIGN STAGES OF
BENCHMARKING, PRODUCT DEFINITION AND COST-BENEFIT ANALYSIS.
<PAGE> 7
TESTING & QUALITY ASSURANCE
WORKING CLOSELY WITH OUR OEM CUSTOMERS, WE DESIGN AND TEST OUR AUTOMOTIVE
SEALING SYSTEMS, EXTERIOR TRIM AND OTHER PRODUCTS TO ENSURE THAT THEY
MEET DEMANDING SPECIFICATIONS FOR FIT, FUNCTIONALITY, APPEARANCE AND
DURABILITY.
<PAGE> 8
MANUFACTURING & PROGRAM LAUNCH
WE ARE WORKING TO IMPROVE OUR MANUFACTURING OPERATIONS BY BETTER
UTILIZING OUR DIVERSE RESOURCES, ESPECIALLY THE EXPERTISE OF OUR
PEOPLE. WE SEE TREMENDOUS OPPORTUNITIES FOR IMPROVEMENT THROUGH
WORLDWIDE CONSISTENCY OF EQUIPMENT AND TECHNOLOGY AND WORLDWIDE
SHARING OF BEST PRACTICES.
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Sales for fiscal 1995 were $995,926,000, an increase of $123,559,000, or 14%,
over the prior year. Net income was $20,066,000, or $1.20 a share, compared to
$33,032,000, or $1.99 a share, a year ago.
SALES PERFORMANCE - 1995 AND 1994
Fiscal 1995 sales of the Transportation Equipment Segment were $868,892,000, an
increase of $115,128,000, or 15%, over the prior year.
In North America, automotive sales were $531,086,000, an increase of 15%. The
1995 results reflect a full year of sales of parts for the General Motors
Lumina/Monte Carlo models. Production of these models began late in fiscal
1994 at slow rates of production. During 1995, production levels have
increased to normal production rates and, as a result, sales of the Company's
parts to General Motors increased $45,000,000 compared to 1994. Similarly,
Chrysler began production of the Neon models in mid-fiscal 1994 with rates of
production gradually increasing. Fiscal 1995 includes a full year of sales of
the Company's products for the Neon. The increase in sales over 1994 was
$26,038,000. These sales gains were partially offset by lower production
volumes of certain models and the conclusion of production of models for which
the Company does not continue to supply parts.
In Europe, sales increased by $35,504,000 to $240,100,000, an increase of 17%.
During fiscal 1995, the U.S. dollar has weakened in relation to the currencies
of the Company's European subsidiaries. For the year, the effect of the
varying currency exchange rates contributed 56% of the increased sales in
Europe, measured in U.S. funds. The remainder of the increase in sales is due
to the sales of parts on new models and strong builds for the year compared to
fiscal 1994.
In May, the Company completed its acquisition of Itatiaia Standard. Its sales
for June were $2,640,000.
For fiscal 1995, sales of Oliver Rubber Company, the Company's subsidiary which
comprises the Tread Rubber Segment, were $133,656,000, including intersegment
sales of $6,622,000. Sales increased by 7.6%, or $9,487,000, over fiscal 1994.
In North America, sales increased $13,150,000. Sales volumes increased over
1994 in both precure and mold cure rubber. In addition, Oliver increased
selling prices, primarily in the second half of fiscal 1995, partially to
offset raw material cost increases which occurred during the year. Increased
sales in North America were offset by a decrease in sales in Europe of
$3,663,000. Oliver has concluded its European operations.
Holm Industries, the Company's subsidiary which serves the appliance and
building products industries, recorded sales of $94,217,000, an increase of
$7,173,000, or 8.2%, over the prior year. The increase in sales was due to
strong refrigeration appliance sales during fiscal 1995, sales of new products
and sales to new customers. In addition, Holm partially recovered raw material
cost increases through increased selling prices.
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 included 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
<PAGE> 10
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. 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. SPI benefited from new business and rising production
volumes realized during the period of economic recovery in Europe during 1994.
Holm Industries recorded sales increases of $7,890,000, or 10%, to $87,044,000.
The 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.
OPERATING EXPENSE ANALYSIS
For 1995, consolidated gross margins were 10%, a decrease from 13.7% in fiscal
1994 and 14.2% in fiscal 1993. The costs of materials, wages and manufacturing
expenses were $863,260,000 in 1995, $724,090,000 in 1994 and $634,218,000 in
1993. Research, engineering and development expenses were $33,211,000 in 1995,
and $28,850,000 in 1994 for an increase of $4,361,000. In 1993, research,
engineering and development was $20,971,000.
Automotive production volume increased significantly during 1995 compared to
the prior year. Volume increases were led by the production of parts for the
Lumina/Monte Carlo and Neon models as well as volume gains for the year in
Europe, contributing 1.7% of fiscal 1995 sales. These gains were offset,
however, by lower margins on new production programs compared to those which
were replaced. This decline represented 1.6% of fiscal 1995 sales. The
Company experienced significant raw material price increases during fiscal 1995
throughout its operating units with rubber, plastics and chemicals increasing
significantly. The effect of increases in raw material costs was .9% of fiscal
1995 sales. The Company believes that raw material costs have stabilized. The
Company encountered manufacturing and production problems at its Spartanburg,
South Carolina plant throughout 1995. The resulting excessive manufacturing
costs and tooling expenses were .7% of fiscal 1995 sales. The Company has
instituted corrective actions at this plant and believes that these problems
will not materially affect fiscal 1996. The increase in research, engineering
and development expenses represents .5% of 1995 sales. During the year, design
and development expenses were incurred for current year new programs as well as
future year programs in the development of new business opportunities. The
Company expects that these expenses will remain at current levels. In the
Tread Rubber Segment, the effect of volume increases exceeded profitability
decreases, representing .1% of fiscal 1995 sales. The effect of foreign
currency variations on gross margins in 1995 was minor.
For 1994 compared to 1993, consolidated gross margins were favorably affected
by the inclusion of SPI and 5 Rubber Corporation for a full year period
compared to last year's four-month period and by 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. The incremental gross income from SPL represented .5% of fiscal 1994
<PAGE> 11
sales. North American automotive operations adversely affected gross income due
to a significant decline in sales with the conversion of General Motors
assembly plants to the new Lumina/Monte Carlo models and related delayed start
up. 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. 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.
Selling, general and administrative expenses were $60,121,000 for fiscal 1995,
an increase of $2,334,000 over 1994's level of $57,787,000 as reclassified. As
a percent of sales, these expenses were 6.0% in 1995 and 6.6% in 1994.
Selling, general and administrative expenses were $49,768,000 or 6.5% of sales,
in 1993. Expenditures increased over the prior year by 4% in 1995 and 16% in
1994, with the inclusion of a 1993 acquisition for a complete year. Increases
have occurred in order to support the higher level of sales and support
activities.
The Company reported expenses of $8,832,000 in 1995 and $4,424,000 in 1994
related to rationalization of business units. In 1995, the Company concluded
its European tread rubber operations with the closure of the Oliver Rubber
subsidiary in the United Kingdom. The Company has reduced assets to net
realizable value, accrued closure costs for severance, liquidation and other
expenses, and recognized deferred currency losses formerly included in the
foreign currency translation account. Total losses recorded to conclude this
subsidiary amounted to $5,347,000 with $2,309,000 recorded in the first quarter
and the balance recorded in the fourth quarter. The Company attempted to
realize as much value as possible on remaining assets before beginning formal
liquidation. The Company also recorded $3,485,000 to provide for the reduction
of its plastics plant in Canada. Charges included severance, idle assets and
remaining lease commitments.
In 1994, expenses of $4,424,000 were reclassified from selling, general and
administrative expenses. These included reserves for two departmental
relocations which were announced in 1994 and completed in 1995 for $2,424,000,
and $2,000,000 for accounting irregularities which were identified at Oliver
Rubber's European subsidiary.
Interest expense, net in fiscal 1995 was $13,010,000 compared to $9,093,000 in
1994. In 1995, interest expense was $14,135,000 and interest income was
$1,125,000. In 1994, interest expense was $9,982,000 and interest income was
$899,000. Interest expense increased as interest rates and the level of
borrowed funds increased since 1994. Interest income increased on a higher
level of invested funds at the Company's United Kingdom subsidiary, Standard
Products Limited (SPL).
Interest expense, net in 1993 was $8,214,000, with interest expense of
$9,684,000 and interest income of $1,470,000. Interest expense in 1994 and
1993 are comparable while interest income declined on a lower level of invested
funds.
Royalty and dividend income were comparable for each of the last three years.
Other, net was expense of $1,047,000 in 1995 compared to income of $1,322,000
in 1994 and expense of $1,150,000 in 1993. The results of the Company's joint
venture, Nishikawa Standard Company, were below those of last year but better
than the operating loss recorded in 1993. In 1995, the Company also recorded
losses of $942,000 in disposing of fixed assets.
The Company's tax provision reflects the recognition of the benefit of the
remaining net operating loss carryforward of $3,181,000 from its subsidiary,
SPL. Previously, the Company reserved for this net operating loss carryforward
asset as its realization was not assured. However, recent performance of SPL
indicates that realization is more likely than not. In addition, the Company
recognized a tax benefit of $4,441,000 related to the write-off for tax
purposes of Oliver Rubber's investment in its United Kingdom subsidiary.
Absent these two transactions, the Company's effective tax rate would have been
28% and this rate compares favorably with 1994's rate of 34.2% and 1993's rate
of 33.5%. Tax benefits available to the Company in several countries have
reduced 1995's effective rate.
<PAGE> 12
EFFECT OF INFLATION
During the three year period ended June 30, 1995, inflation has been reasonable
and operating costs reflect current costs for raw materials and inventory,
operating expenses and depreciation.
FINANCIAL CONDITION
At June 30, 1995, the total capitalization of the Company was $451,017,000.
Long-term debt represented 42.2% of capitalization while shareholders' equity
was 57.8%. Working capital at year end was $118,450,000 and the ratio of
current assets to current liabilities was 1.63 to 1. Average working capital
to support a dollar of sales remained at $.10 and the Company's liquidity is
adequate to meet its near-term requirements.
Cash provided by operations amounted to $56,043,000 including funds provided by
depreciation and amortization of $46,839,000. Depreciation reflected the high
level of capital spending in recent years. Working capital variations required
the use of $2,934,000. Accounts receivable provided $9,436,000, a function of
normal collections and reduction of sales in the fourth quarter. Inventories,
however, have risen as the Company prepares for the increased production
volumes to follow for the current launch and vacation shutdown periods.
Cash used for investments included $54,671,000 for property, plant and
equipment and $8,679,000 for investments in the Company's Brazilian and Mexican
operations. Long-term debt increased $44,189,000 net of decreases in
short-term borrowings. Normal debt repayments were $1,914,000 and cash
dividends required $11,445,000.
Capital expenditures for fiscal 1996 are budgeted to be $79,000,000, including
the investments in Brazil and Mexico. Cash flow from operations and the
Company's borrowing capability under its Revolving Credit Agreement and other
sources are expected to be adequate to finance operating needs and capital
requirements.
Cash on hand at year end is invested in bank deposits at varying rates of
interest with maturities less than 30 days.
OUTLOOK
The Company believes that the results of operations for the first quarter of
fiscal 1996 will be a loss, based upon the Company's continuing launch costs
related to products being introduced for the new Ford Taurus/Sable, the
seasonally lower activity throughout the Company, high initial costs associated
with its Brazilian investments, and some softness in the car build in many of
the major world markets, including Brazil.
For the year, the Company expects sales to exceed $1 billion for the first time
in its history. However, earnings will continue to be under pressure and,
while they may improve over last year, the Company still expects fiscal 1996 to
be another difficult year.
<PAGE> 13
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Thousands of Dollars Except Share Data) 1995 1994 1993 1992
------------------------------------------------------------------------
INCOME STATEMENT
<S> <C> <C> <C> <C>
Net Sales............................................................... $995,926 $872,367 $763,796 $657,036
Gross Income............................................................ 99,455 119,427 108,607 94,253
Selling, General & Administrative Expenses.............................. 60,121 57,787 49,768 41,760
Rationalization of Business Units....................................... 8,832 4,424 - -
Interest Income (Expense), net.......................................... (13,010) (9,093) (8,214) (13,659)
Other Income (Expense), net............................................. (233) 2,092 (399) (54)
Provision for Taxes on Income........................................... (2,807) 17,183 16,803 15,475
Income (Loss) from Continuing Operations and Before Extraordinary Item
and Cumulative Effect on Prior Years of Change in Accounting Principle 20,066 33,032 33,423 23,305
Income (Loss) from Operations and Disposal of Discontinued Division,
Net of Tax............................................................ - - - -
Income (Loss) Before Extraordinary Item and Cumulative Effect on Prior
Years of Change in Accounting Principle............................... 20,066 33,032 33,423 23,305
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)....................................................... $ 20,066 $ 33,032 $ 22,563 $ 23,305
Percent Net Income to Sales............................................. 2.0 3.8 3.0 3.5
Percent Net Income to Average Shareholders' Equity...................... 8.0 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 $ 1.20 $ 1.99 $ 2.21 $ 1.79
Income (Loss) from Discontinued Operations.............................. - - - -
Extraordinary Item, Net of Tax.......................................... - - $ (.17) -
Cumulative Effect on Prior Years of Change in Accounting Principle, Net
of Tax................................................................ - - $ (.55) -
Net Income (Loss)....................................................... $ 1.20 $ 1.99 $ 1.49 $ 1.79
Cash Dividends Declared................................................. $ .68 $ .65 $ .54 $ .38
Book Value.............................................................. $ 15.56 $ 14.55 $ 13.56 $ 11.82
BALANCE SHEET
Property, Plant & Equipment............................................. $489,534 $422,576 $377,564 $279,830
Accumulated Depreciation................................................ 220,095 180,567 153,137 130,410
Total Assets............................................................ 701,889 624,314 564,850 398,793
Working Capital......................................................... 118,450 87,922 79,396 97,303
Long-term Debt.......................................................... 190,522 135,381 115,607 69,289
Shareholders' Equity.................................................... 260,495 242,677 224,436 177,753
Cash Dividends Declared................................................. $ 11,445 $ 10,821 $ 8,450 $ 5,103
OTHER
Additions to Property, Plant & Equipment................................ $ 59,750 $ 61,380 $ 39,574 $ 19,207
Depreciation & Amortization............................................. $ 46,839 $ 40,495 $ 29,887 $ 26,228
Shares Outstanding...................................................... 16,736 16,674 16,552 15,044
Average Shares Outstanding.............................................. 16,711 16,627 15,114 13,010
(Thousands of Dollars Except Share Data) 1991 1990 1989 1988
------------------------------------------------------------------------
INCOME STATEMENT
<S> <C> <C> <C> <C>
Net Sales............................................................... $592,090 $590,699 $527,896 $473,035
Gross Income............................................................ 38,946 65,316 81,452 83,878
Selling, General & Administrative Expenses.............................. 40,073 35,011 27,111 23,694
Rationalization of Business Units....................................... - - - -
Interest Income (Expense), net.......................................... (11,663) (8,608) (3,125) (1,430)
Other Income (Expense), net............................................. (285) (1,846) (2,062) (1,612)
Provision for Taxes on Income........................................... 7,879 8,060 18,333 20,373
Income (Loss) from Continuing Operations and Before Extraordinary Item
and Cumulative Effect on Prior Years of Change in Accounting Principle (20,954) 11,791 30,821 36,769
Income (Loss) from Operations and Disposal of Discontinued Division,
Net of Tax............................................................ (24,655) - (2,132) (2,712)
Income (Loss) Before Extraordinary Item and Cumulative Effect on Prior
Years of Change in Accounting Principle............................... (45,609) 11,791 28,689 34,057
Extraordinary Item, Net of Tax.......................................... - - - -
Cumulative Effect on Prior Years of Change in Accounting Principle, Net
of Tax................................................................ - - - -
Net Income (Loss)....................................................... $ (45,609) $ 11,791 $ 28,689 $ 34,057
Percent Net Income to Sales............................................. - 2.0 5.4 7.2
Percent Net Income to Average Shareholders' Equity...................... - 7.7 18.8 25.5
PER SHARE
Income (Loss) from Continuing Operations and Before Extraordinary Item
and Cumulative Effect on Prior Years of Change in Accounting Principle $ (1.65) $ .93 $ 2.33 $ 2.71
Income (Loss) from Discontinued Operations.............................. $ (1.94) - $ (.16) $ (.20)
Extraordinary Item, Net of Tax.......................................... - - - -
Cumulative Effect on Prior Years of Change in Accounting Principle, Net
of Tax................................................................ - - - -
Net Income (Loss)....................................................... $ (3.59) $ .93 $ 2.17 $ 2.51
Cash Dividends Declared................................................. $ .47 $ .74 $ .69 $ .61
Book Value.............................................................. $ 8.06 $ 12.05 $ 12.05 $ 10.96
BALANCE SHEET
Property, Plant & Equipment............................................. $251,151 $239,773 $200,801 $154,623
Accumulated Depreciation................................................ 102,553 91,739 76,591 65,922
Total Assets............................................................ 369,272 362,399 333,741 255,211
Working Capital......................................................... 61,594 90,014 88,937 74,759
Long-term Debt.......................................................... 113,298 99,480 75,213 16,577
Shareholders' Equity.................................................... 102,366 152,829 156,348 145,800
Cash Dividends Declared................................................. $ 5,992 $ 9,365 $ 9,084 $ 8,194
OTHER
Additions to Property, Plant & Equipment................................ $ 23,532 $ 39,676 $ 33,077 $ 22,300
Depreciation & Amortization............................................. $ 24,747 $ 19,975 $ 14,196 $ 11,078
Shares Outstanding...................................................... 12,695 12,689 12,975 13,293
Average Shares Outstanding.............................................. 12,694 12,753 13,250 13,571
(Thousands of Dollars Except Share Data) 1987 1986
------------------------------------------------------------------------
INCOME STATEMENT
<S> <C> <C>
Net Sales............................................................... $412,507 $377,870
Gross Income............................................................ 81,911 67,032
Selling, General & Administrative Expenses.............................. 21,388 20,113
Rationalization of Business Units....................................... - -
Interest Income (Expense), net.......................................... 86 501
Other Income (Expense), net............................................. 1,720 1,530
Provision for Taxes on Income........................................... 29,165 21,695
Income (Loss) from Continuing Operations and Before Extraordinary Item
and Cumulative Effect on Prior Years of Change in Accounting Principle 33,164 27,255
Income (Loss) from Operations and Disposal of Discontinued Division,
Net of Tax............................................................ (1,639) (71)
Income (Loss) Before Extraordinary Item and Cumulative Effect on Prior
Years of Change in Accounting Principle............................... 31,525 27,184
Extraordinary Item, Net of Tax.......................................... - -
Cumulative Effect on Prior Years of Change in Accounting Principle, Net
of Tax................................................................ - -
Net Income (Loss)....................................................... $ 31,525 $ 27,184
Percent Net Income to Sales............................................. 7.6 7.2
Percent Net Income to Average Shareholders' Equity...................... 25.5 25.9
PER SHARE
Income (Loss) from Continuing Operations and Before Extraordinary Item
and Cumulative Effect on Prior Years of Change in Accounting Principle $ 2.33 $ 1.88
Income (Loss) from Discontinued Operations.............................. $ (.11) $ (.01)
Extraordinary Item, Net of Tax.......................................... - -
Cumulative Effect on Prior Years of Change in Accounting Principle, Net
of Tax................................................................ - -
Net Income (Loss)....................................................... $ 2.22 $ 1.87
Cash Dividends Declared................................................. $ .46 $ .38
Book Value.............................................................. $ 9.14 $ 8.06
BALANCE SHEET
Property, Plant & Equipment............................................. $131,036 $105,484
Accumulated Depreciation................................................ 55,878 46,697
Total Assets............................................................ 226,009 199,252
Working Capital......................................................... 74,572 78,280
Long-term Debt.......................................................... 18,180 17,504
Shareholders' Equity.................................................... 127,359 117,383
Cash Dividends Declared................................................. $ 6,516 $ 5,583
OTHER
Additions to Property, Plant & Equipment................................ $ 24,133 $ 16,069
Depreciation & Amortization............................................. $ 9,437 $ 7,581
Shares Outstanding...................................................... 13,928 14,551
Average Shares Outstanding.............................................. 14,241 14,525
</TABLE>
<PAGE> 14
<TABLE>
CONSOLIDATED BALANCE SHEETS
The Standard Products Company and Subsidiary Companies,
June 30, 1995 and 1994
<CAPTION>
(Thousands of Dollars) 1995 1994
---------------------------------------------------------------------------------- ---------- --------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents..................................................... $ 19,546 $ -
Receivables, less allowances of $4,978 in 1995 and $3,627 in 1994............. 196,613 202,363
Inventories................................................................... 69,458 53,018
Prepaid insurance, taxes, etc................................................. 21,820 15,305
-------- --------
Total current assets...................................................... 307,437 270,686
-------- --------
Property, Plant and Equipment, at cost:
Land......................................................................... 7,553 6,751
Buildings and improvements................................................... 92,907 85,085
Machinery and equipment...................................................... 332,729 263,865
Furniture and fixtures....................................................... 37,407 32,317
Capital projects in process.................................................. 18,938 34,558
-------- --------
489,534 422,576
Less - Accumulated depreciation.............................................. (220,095) (180,567)
-------- --------
269,439 242,009
Goodwill, net................................................................... 64,976 62,564
Other Assets.................................................................... 60,037 49,055
-------- --------
$701,889 $624,314
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term notes payable..................................................... $ 4,609 $ 10,373
Current maturities of long-term debt......................................... 2,176 1,690
Accounts payable............................................................. 102,066 94,514
Accrued payrolls............................................................. 26,360 24,433
Accrued expenses............................................................. 50,931 48,919
Dividend payable............................................................. 2,845 2,835
-------- --------
Total current liabilities................................................ 188,987 182,764
-------- --------
Long-term Debt, net of current maturities....................................... 190,522 135,381
-------- --------
Other Postretirement Benefits................................................... 25,907 25,649
-------- --------
Deferred Income Taxes and Other Credits......................................... 35,978 37,843
-------- --------
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 16,736,155 in 1995 and 16,674,016 in 1994 16,736 16,674
Paid-in capital............................................................. 96,237 95,614
Retained earnings........................................................... 151,492 142,871
Foreign currency translation adjustments.................................... (496) (10,359)
Minimum pension liability................................................... (3,474) (2,123)
-------- --------
Total shareholders' equity.............................................. 260,495 242,677
-------- --------
$701,889 $624,314
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 15
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
The Standard Products Company and Subsidiary Companies,
For the Years Ended June 30, 1995, 1994 and 1993
<CAPTION>
(Thousands of Dollars Except Share Data) 1995 1994 1993
------------------------------------------------------------ -------- -------- --------
<S> <C> <C> <C>
Net Sales.................................................. $995,926 $872,367 $763,796
Cost of Goods Sold:
Materials, wages and other manufacturing costs... 863,260 724,090 634,218
Research, engineering and development expenses 33,211 28,850 20,971
-------- -------- --------
896,471 752,940 655,189
-------- -------- --------
Gross Income................................ 99,455 119,427 108,607
Selling, General and Administrative Expenses............... 60,121 57,787 49,768
Rationalization of Business Units.......................... 8,832 4,424 -
-------- -------- --------
30,502 57,216 58,839
-------- -------- --------
Other Income (Deductions):
Royalty and dividend income....................... 814 770 751
Net interest expense.............................. (13,010) (9,093) (8,214)
Other, net........................................ (1,047) 1,322 (1,150)
-------- -------- ---------
(13,243) (7,001) (8,613)
-------- -------- ---------
Income before Taxes on Income, Extraordinary Item and
Cumulative Effect on Prior Years of Change in
Accounting Principle.................................... 17,259 50,215 50,226
Provision for Taxes on Income.............................. (2,807) 17,183 16,803
-------- -------- ---------
Income before Extraordinary Item and Cumulative
Effect on Prior Years of Change in Accounting
Principle...................................... 20,066 33,032 33,423
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........................................ $20,066 $ 33,032 $ 22,563
======== ======== ========
Earnings Per Common Share:
Income before Extraordinary Item and Cumulative
Effect on Prior Years of Change in Accounting
Principle......................................... $1.20 $1.99 $2.21
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........................................ $1.20 $1.99 $1.49
====== ====== ======
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 16
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
The Standard Products Company and Subsidiary Companies,
For the Years Ended June 30, 1995, 1994 and 1993
____________________________________________________________________________________________________________________________________
Foreign Total
Currency Minimum Share-
<CAPTION> Common Paid-In Retained Translation Pension holders'
(Thousands of Dollars Except Share Data) Shares Capital Earnings Adjustments Liability Equity
---------------------------------------------------- -------- ------- -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 28, 1992................................ $12,035 $53,222 $106,547 $ 6,264 $ (315) $177,753
Net income.......................................... - - 22,563 - - 22,563
Cash dividends ($.54 per share)..................... - - (8,450) - - (8,450)
Foreign currency translation adjustments............ - - - (12,914) - (12,914)
Restricted stock awards............................. - 866 - - - 866
Sale of 89,889 shares to option holders............. 90 1,121 - - - 1,211
Common stock offering net of recorded expenses...... 1,400 41,913 - - - 43,313
Minimum pension liability........................... - - - - 106 106
Par value of shares issued in connection with a
five-for-four stock split........................ 3,027 (3,039) - - - (12)
-------- ------- -------- ----------- --------- --------
BALANCE, JUNE 30, 1993................................ $16,552 $94,083 $120,660 $ (6,650) $ (209) $224,436
Net income.......................................... - - 33,032 - - 33,032
Cash dividends ($.65 per share)..................... - - (10,821) - - (10,821)
Foreign currency translation adjustments............ - - - (3,709) - (3,709)
Restricted stock awards............................. - 585 - - - 585
Sale of 122,042 shares to option holders............ 122 946 - - - 1,068
Minimum pension liability........................... - - - - (1,914) (1,914)
-------- ------- -------- ----------- --------- --------
BALANCE, JUNE 30, 1994................................ $16,674 $95,614 $142,871 $(10,359) $(2,123) $242,677
Net income.......................................... - - 20,066 - - 20,066
Cash dividends ($.68 per share)..................... - - (11,445) - - (11,445)
Foreign currency translation adjustments............ - - - 9,863 - 9,863
Restricted stock awards............................. - 208 - - - 208
Sale of 61,894 shares to option holders............. 62 415 - - - 477
Minimum pension liability........................... - - - - (1,351) (1,351)
-------- -------- -------- ----------- --------- ---------
BALANCE, JUNE 30, 1995................................ $ 16,736 $ 96,237 $151,492 $ (496) $(3,474) $260,495
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 17
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Standard Products Company and Subsidiary Companies,
For the Years Ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
(Thousands of Dollars) 1995 1994 1993
---------------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Net cash provided by (used for) operating activities:
Net income................................................... $ 20,066 $ 33,032 $ 22,563
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................ 46,839 40,495 29,887
Deferred taxes and other credits......................... (2,631) (7,839) 4,851
Equity in (income) loss of non-consolidated affiliate (786) (1,603) 363
Cumulative effect on prior years of change in
accounting principle.................................. - - 8,301
Effect of changes in foreign currency.................... (2,834) (627) (5,935)
Other operating items.................................... (4,611) (4,665) (967)
-------- -------- --------
Net cash provided by operations....................... 56,043 58,793 59,063
-------- -------- --------
Net cash provided by (used for) changes in operating
assets and liabilities:
Receivables.................................................. 9,436 (34,419) 5,403
Inventories.................................................. (14,790) (6,304) 982
Accounts payable and accrued expenses........................ 8,925 29,248 (7,993)
Other........................................................ (6,505) (981) (3,490)
-------- -------- --------
Net cash used for changes in operating assets and
liabilities........................................... (2,934) (12,456) (5,098)
-------- -------- --------
Net cash provided by operating activities................ 53,109 46,337 53,965
-------- -------- --------
Net cash provided by (used for) investments:
Purchase of property, plant and equipment, net............... (54,671) (59,120) (38,000)
Investments in affiliates.................................... (8,679) (1,500) (8,700)
Assets acquired by purchase of businesses.................... (840) - (128,438)
Utilization of industrial revenue bonds...................... - - 3,752
-------- -------- --------
Net cash used for investments......................... (64,190) (60,620) (171,386)
-------- -------- --------
Net cash provided by (used for) financing:
Proceeds of common stock offering............................ - - 43,313
Proceeds from exercise of stock options...................... 477 1,068 1,211
Proceeds of new long-term borrowings......................... 55,929 140,343 140,730
Net increase (decrease) in short-term borrowings............. (11,740) 2,247 7,834
Repayment of long-term borrowings............................ (1,914) (124,031) (105,993)
Cash dividends............................................... (11,445) (10,821) (8,450)
-------- -------- --------
Net cash provided by financing........................... 31,307 8,806 78,645
-------- -------- --------
Effect of exchange rate changes on cash......................... (680) (71) (18)
-------- -------- --------
Increase (decrease) in cash and cash equivalents................ 19,546 (5,548) (38,794)
Cash and cash equivalents at the beginning of the year.......... - 5,548 44,342
-------- -------- --------
Cash and cash equivalents at the end of the year................ $ 19,546 $ - $ 5,548
======== ======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Standard Products Company and Subsidiary Companies,
June 30, 1995, 1994 and 1993
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 bank deposits 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 Brazilian, Canadian, English and
French subsidiaries have been translated in accordance with Statement of
Financial Accounting Standards No. 52. Except for Brazil, 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. As the Company's Brazilian subsidiary
operates in a highly inflationary economy, the U.S. dollar has been used as the
functional currency in the translation of the Brazilian financial statements.
Accordingly, foreign currency gains or losses of the Brazilian subsidiary have
been reflected in income currently.
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. The Company periodically evaluates its accounting for goodwill,
considering historical and future profitability and business opportunities. At
June 30, 1995, the Company believes that the goodwill is realizable and that
the period of amortization is proper.
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. The
<PAGE> 19
Company has 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.
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 fiscal 1993, the Company adopted SFAS No. 106, Employers' Accounting For
Postretirement Benefits Other Than Pensions, and the accumulated postretirement
benefit obligation was recorded as a charge to earnings in 1993.
FINANCIAL INSTRUMENTS
The Company's financial instruments recorded on the balance sheet include cash
and cash equivalents, trade receivables and payables and debt obligations. 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 Company's trade accounts
receivable are heavily concentrated in automotive original equipment
manufacturers. The Company does not view such a concentration in the
automotive market as an unusual credit risk. The fair value of long-term debt
is based on rates available to the Company for debt with comparable terms and
maturities.
Off balance sheet derivative financial instruments include a currency and
interest rate swap transaction and foreign exchange contracts. The currency
and interest rate swap transaction protects the Company from fluctuations in
the value of the U.S. dollar in relation to the French franc and establishes a
fixed U.S. dollar rate of return on a loan from the Company to its French
subsidiary.
The Company and its subsidiaries enter into foreign exchange contracts to
manage exposure to foreign exchange fluctuations related to sales to foreign
customers or purchases of equipment or inventory from foreign suppliers. These
contracts hedge firm commitments to pay or receive European or Canadian foreign
currency within a one year period and the maturity coincides with the receipt
or payment of the foreign funds. The Company does not engage in speculation
and does not hedge foreign currency positions which are not related to specific
transactions. Recognition of gains and losses on the foreign exchange
contracts are generally deferred until settlement of the transaction being
hedged. The gains and losses on the contracts 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.
REVENUE RECOGNITION
The Company recognizes revenues as products are shipped to its customers.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to their 1995
presentation in the financial statements.
2. ACQUISITIONS
Prior to May 1995, the Company owned 20% of Itatiaia Standard (Itatiaia),
located in Brazil. At that time, the Company acquired the remaining 80% of
Itatiaia. 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 for June 1995. The
acquisition was completed for cash and notes payable plus future contingent
payments based on results of operations, not to exceed $3,200,000. A minor
amount of goodwill resulted from the preliminary allocation of the purchase
price. Pro forma sales and operating results are not material.
<PAGE> 20
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. 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 intangible assets of approximately $54,000,000.
In fiscal 1993, the Company increased its ownership in Nishikawa Standard
Company (NSC), 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 NSC was $8,700,000. In fiscal
1994, the Company invested $1,500,000 in NSC. The Company's investment in NSC
at June 30, 1995 was $16,140,000. In 1995, the Company's share of NSC's
operating income was $431,000, compared to $1,603,000 in 1994 and a loss of
$363,000 in 1993. The NSC 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 NSC's revolving credit and term loan facility, the joint venture
partners are required to guarantee 50% of NSC's borrowings. The Company's
share of the guarantee at year end was $6,500,000.
3. RATIONALIZATION OF BUSINESS UNITS AND DISCONTINUED OPERATIONS
In 1995, the Company has provided $8,832,000 to rationalize two business units.
The Company has submitted the remaining assets of Oliver Rubber's European
subsidiary for formal liquidation proceedings in the United Kingdom. As a
result, a provision of $5,347,000 was recorded to reduce asset values to net
realizable amounts, to accrue expenses of liquidation including severance for
several employees, and to recognize foreign currency losses which were formerly
deferred in the Company's foreign currency translation account. Of the amount
provided, $2,309,000 was recorded in the first quarter of fiscal 1995 with the
balance recorded in the fourth quarter. The Company attempted to realize as
much asset value as possible before beginning formal liquidation. Liquidation
is expected to be completed in fiscal 1996 and the Company believes that
proceeds of remaining assets will fund remaining liabilities.
The second business unit involves the Company's plastic plant in Canada. As
part of its formal plan, the Company recorded $3,485,000 to provide for a work
force reduction of 328 employees at this plant. Costs included in this
provision in the fourth quarter were pension curtailment, severance as required
by Canadian law, lease obligations for the idled portion of the leased
facility, removal costs of the Company owned equipment and reduction of idled
assets to net realizable value. Work force reductions will begin in the first
quarter of fiscal 1996.
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, 1995,
the remaining balance of the reserve of $2,750,000, 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, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1995 1994
---------------------- -------- --------
<S> <C> <C>
Senior notes..................... $100,000 $100,000
Revolving credit agreement....... 85,000 30,000
Other debt....................... 7,698 7,071
-------- --------
Total............................ 192,698 137,071
Less-current maturities.......... 2,176 1,690
-------- --------
$190,522 $135,381
</TABLE>
At June 30, 1995, 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 semiannually, and annual principal
payments of $12,500,000 begin in December 1998 through December 2002, with the
balance due on maturity in December 2003.
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
<PAGE> 21
to make available for borrowing up to $125,000,000 until January 1998 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, 1995, borrowings under the Credit Agreement bear interest at
6.68%. 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, 1995
are $2,176,000 in 1996, $2,963,000 in 1997, $86,318,000 in 1998, $13,742,000 in
1999 and $37,500,000 in 2000.
Under the most restrictive covenants of the Company's various loan agreements,
principally the Credit Agreement, $64,163,000 of retained earnings were not
restricted at June 30, 1995 for the payment of dividends, and the ratio of
current assets to current liabilities was 1.63 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 $35,000,000 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
1995, the average month-end borrowings were $17,800,000, and the highest
month-end balance was $23,000,000. Comparable amounts for 1994 were $8,400,000
and $13,400,000 and $4,800,000 and $12,300,000, for 1993. The effective annual
borrowing rate was 6.8% in 1995, 4.2% in 1994 and 4.9% in 1993. At year end,
the weighted average interest rate was 7.1%.
Interest payments with respect to all of the Company's borrowing arrangements
amounted to $13,935,000 in 1995, $9,655,000 in 1994 and $10,430,000 in 1993.
5. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's accounting policies with respect to financial instruments are
described in Note 1.
The carrying amounts and fair values of the Company's significant balance sheet
financial instruments at June 30, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
Carrying Fair
1995 (Thousands of Dollars) Amount Values
--------------------------- ------- -------
<S> <C> <C>
Cash and cash equivalents.......... $19,546 $19,546
Short-term bank debt............... 4,609 4,609
Long-term bank debt
(including current portion)...... 192,698 192,198
1994 (Thousands of Dollars)
---------------------------
Cash and cash equivalents.......... $ 0 $ 0
Short-term bank debt............... 10,373 10,373
Long-term bank debt
(including current portion)...... 137,071 132,571
</TABLE>
Off balance sheet derivative financial instruments at June 30, 1995 and 1994,
held for purposes other than trading, were as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------- ---------------------
Contract/ Contract/
Notional Fair Notional Fair
(Thousands of Dollars) Amount Values Amount Values
---------------------- -------- ------ -------- ------
<S> <C> <C> <C> <C>
Currency and interest
rate swap............... $18,350 $402 $25,350 $(816)
Foreign currency
exchange agreements..... 8,982 (186) 4,300 (88)
</TABLE>
With regard to the currency and interest rate swap agreement, the nominal
amount of 108,580,000 French francs is payable by the Company to a bank, while
the amount due from the bank to the Company is $18,350,000. Periodic payments
are made by the Company and the bank until maturity in November 2000. Interest
rates are fixed with a rate of 6.5% on payments to the bank and 5.8% on
payments from the bank. Exchange rate fluctuations of the French franc payable
to the bank are offset by the French franc receivable from the French
subsidiary.
Foreign exchange contracts hedging trade transactions mature over the next
twelve months. Exchange contracts hedging foreign denominated intercompany
loans mature no later than the maturity of the loan.
The counterparties to each of these agreements are major commercial banks.
Management believes that losses related to credit risk
<PAGE> 22
are remote.
6. RETIREMENT PLANS
The cost of providing pension, retirement and profit sharing benefits charged
to operations amounted to $5,444,000 in 1995, $4,932,000 in 1994 and $5,141,000
in 1993. For 1995, the expense of defined benefit plans equalled $1,207,000,
while the expense of defined contribution plans was $3,683,000 and
multi-employer plan expense was $508,000. Comparable figures for 1994 were
$533,000, $3,859,000 and $540,000, and for 1993, $105,000, $4,389,000 and
$607,000. The expense of defined benefit plans increased during 1995 as a
result of including employees of subsidiary companies in the Company's salaried
pension plan. Pension expense of defined benefit plans was 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) 1995 1994 1993
---------------------- ------ ------ ------
<S> <C> <C> <C>
Service cost....................... $2,753 $2,113 $1,772
Interest cost on projected benefit
obligation...................... 5,868 4,750 5,299
Actual loss (gain) on plan assets.. 457 (1,391) (8,206)
Net amortization and deferral...... (7,871) (4,939) 1,240
------ ------ ------
Net pension expense................ $1,207 $ 533 $ 105
====== ====== ======
</TABLE>
The funded status of the foreign and domestic defined benefit plans is
displayed below and is based on information supplied by the Company's actuary
as of March 31 of each year. For 1995, the calculations assume a
weighted-average discount rate of 8.5%, an anticipated long-term rate of return
of 10% and an increase in compensation levels of 5%. For 1994 and 1993, the
calculations assumed a weighted-average discount rate of 8%, an anticipated
long-term rate of return on plan assets of 9% and an increase in compensation
levels of 5%. 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 $1,095,000, included in Other Assets in the accompanying
consolidated balance sheet, and an equity reduction of $3,474,000.
<TABLE>
<CAPTION>
(Thousands of Dollars) 1995 1994
---------------------- ------------------ -----------------
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............. $41,143 $22,930 $41,776 $21,667
Non-vested benefits......... 1,373 639 1,303 600
------- ------- ------- -------
Accumulated benefit
obligation................. 42,516 23,569 43,079 22,267
Projected future
compensation increases 7,196 840 6,739 777
------- ------- ------- -------
Projected benefit
obligation................ 49,712 24,409 49,818 23,044
Plan assets at fair market
value..................... 52,870 19,145 56,915 18,452
------- ------- ------- -------
Projected benefit obliga-
tion (in excess of) or
less than plan assets..... 3,158 (5,264) 7,097 (4,592)
Unrecognized transition
asset..................... (6,268) (248) (6,876) (270)
Unrecognized loss........... 7,136 3,741 3,105 2,674
Adjustment required to
recognize minimum
liability................. - (4,569) - (3,188)
Unrecognized prior
service cost............... 2,320 1,611 2,526 1,562
------- ------- ------- -------
Prepaid Pension Cost,
(Liability) $ 6,346 $(4,729) $ 5,852 $(3,814)
======= ======= ======= =======
</TABLE>
The Company has accrued $11,175,000 for Workers' Compensation claims as of June
30, 1995, and this amount is included in Accrued Expenses in the accompanying
consolidated balance sheet. A year ago, the comparable figure was $8,224,000.
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. As a
result, the estimated cost of these benefits has been accrued based on the
employees' active service lives. The expense for postretirement benefits other
than pensions was $2,281,000 in 1995, $2,444,000 in 1994 and $2,172,000 in
1993. All plans under which these benefits are provided are unfunded.
<PAGE> 23
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) 1995 1994 1993
---------------------- ------ ------ ------
<S> <C> <C> <C>
Accumulated postretirement
benefit obligation (APBO):
Retirees........................ $19,874 $21,782 $22,725
Active participants
eligible to receive
benefits...................... 1,872 1,978 2,498
Other active plan
participants.................. 2,558 2,519 3,021
------- ------- -------
24,304 26,279 28,244
Unrecognized gain (loss)........ 3,689 1,522 (836)
------- ------- -------
$27,993 $27,801 $27,408
======= ======= =======
Periodic postretirement
benefit cost:
Current service cost............ $ 248 $ 243 $ 269
Interest on postretirement
benefit obligation............ 2,033 2,201 1,903
------- ------- -------
$ 2,281 $ 2,444 $ 2,172
======= ======= =======
Actuarial assumptions:
Discount rate................... 8.5% 8% 8%
1995 to 2003 - health care
cost trend rate............... 13.9%-5.5% 15%-5.5% 15%-5.5%
Effect of a 1% increase in
health care cost trend rate:
Increase year end APBO 6.3% 7.3% 7.2%
Increase expense.............. 7.3% 6.8% 8.0%
</TABLE>
8. INVENTORY
The major components of inventory are as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1995 1994 1993
---------------------- ------- ------- -------
<S> <C> <C> <C>
Raw Materials.................... $25,726 $20,477 $20,055
Work-in-process and
finished goods.................. 43,732 32,541 26,622
------- ------- -------
Total, at both FIFO and
LIFO cost..................... $69,458 $53,018 $46,677
------- ------- -------
Excess of FIFO cost over
LIFO cost....................... $14,427 $11,651 $11,045
======= ======= =======
</TABLE>
Approximately 50% 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 2005. Rental costs charged to operations amounted to
$14,209,000 in 1995, $11,844,000 in 1994 and $9,162,000 in 1993. At June 30,
1995, future commitments under the terms of non-cancelable operating leases for
minimum rentals are $8,735,000 in 1996, $6,600,000 in 1997, $4,480,000 in 1998,
$2,320,000 in 1999, $1,000,000 in 2000 and $2,890,000 in 2001 through 2005.
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.
<PAGE> 24
10. COMMON SHARES
Options to purchase common shares have been granted under employee stock option
plans adopted by shareholders in 1993, 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 and 1995.
<TABLE>
<CAPTION>
Shares Range of Option Prices
------- ----------------------
<S> <C> <C> <C>
Stock options
outstanding at
June 30, 1993 397,405 $13.50 - 36.99
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 - 36.99
Options granted 58,600 21.63
Options exercised (59,807) 13.50 - 17.70
Options cancelled (54,580) 13.50 - 33.63
--------
Stock options
outstanding at
June 30, 1995 333,571 13.50 - 36.99
--------
</TABLE>
At June 30, 1995, options for 137,622 shares were exercisable at an average
exercise price of $26.03 a share. Shares reserved for the future granting of
options were 369,978 at year end; 373,995 were reserved a year ago.
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 of earned restricted
shares 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 restricted period. Shares
awarded were 75,000 in 1995 and 187,500 in 1992. Of the shares awarded, 16,800
shares were earned in 1995, 20,800 shares in 1994 and 25,000 shares in 1993.
In 1995, $208,000 was charged to operations as compensation expense based upon
the market value of the earned shares. The similar charge to operations in
1994 and 1993 was $585,000 and $866,000, respectively. At year end, 112,500
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 1995, 1994 and
1993 were 16,711,451, 16,626,927 and 15,114,013, 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.
The Company's major customers include automotive original equipment
manufacturers. The percentage of sales of each of these major customers to
total consolidated sales for the three-year periods 1995, 1994 and 1993,
respectively, has been as follows: Chrysler - 15%, 13% and 11%; Ford -
23%, 26% and 31%; General Motors - 18%, 17%, and 23%. 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.
<PAGE> 25
<TABLE>
BUSINESS SEGMENT INFORMATION
<CAPTION>
(Thousands of Dollars) 1995 1994 1993
---------------------- -------- -------- --------
<S> <C> <C> <C>
Net Sales:
Transportation
equipment....................... $868,892 $753,764 $650,055
Tread rubber...................... 133,656 124,169 117,224
Less-intersegment
sales........................... (6,622) (5,566) (3,483)
-------- -------- --------
Net sales..................... $995,926 $872,367 $763,796
======== ======== ========
Operating Income:
Transportation
equipment....................... $ 41,882 $ 59,676 $ 53,067
Tread rubber...................... 1,727 6,114 9,308
Rationalization of
business units.................. (8,832) (4,424) -
General corporate
expenses........................ (4,275) (4,150) (3,536)
-------- -------- --------
Total operating
income........................ $ 30,502 $ 57,216 $ 58,839
-------- -------- --------
Other expense, net................ (13,243) (7,001) (8,613)
-------- -------- --------
Income from operations
before taxes.................. $ 17,259 $ 50,215 $ 50,226
======== ======== ========
Identifiable Assets:
Transportation
equipment....................... $595,109 $519,088 $468,236
Tread rubber...................... 74,229 81,365 75,770
General corporate
assets.......................... 32,551 23,861 20,844
-------- -------- --------
Total identifiable
assets......................... $701,889 $624,314 $564,850
======== ======== ========
Capital Expenditures*:
Transportation
equipment....................... $ 59,750 $ 57,291 $109,431
Tread rubber...................... 5,981 4,089 3,381
-------- -------- --------
Total capital
expenditures.................... $ 65,731 $ 61,380 $112,812
======== ======== ========
Depreciation and
Amortization:
Transportation
equipment....................... $ 42,951 $ 37,340 $ 26,529
Tread rubber...................... 3,888 3,155 3,358
-------- -------- --------
Total
depreciation and
amortization.................... $ 46,839 $ 40,495 $ 29,887
======== ======== ========
<FN>
* Includes assets acquired by purchase of businesses in 1995 and 1993.
</TABLE>
<TABLE>
GEOGRAPHIC AREA
<CAPTION>
(Thousands of Dollars) 1995 1994 1993
---------------------- -------- -------- --------
<S> <C> <C> <C>
Net Sales:
United States..................... $574,064 $532,546 $491,184
Canada............................ 203,265 153,484 166,102
Europe............................ 245,362 213,961 121,413
Brazil............................ 2,640 - -
Less--inter-area sales............ (29,405) (27,624) (14,903)
-------- -------- --------
Net sales..................... $995,926 $872,367 $763,796
======== ======== ========
</TABLE>
Net Income From Operations:
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
United States..................... $ 12,821 $ 19,691 $ 24,807
Canada............................ 1,946 7,114 9,991
Europe............................ 7,915 8,796 817
Brazil............................ (51) - -
General corporate
expenses, net of tax............ (2,565) (2,569) (2,192)
-------- -------- --------
Net income from
operations.................... $ 20,066 $ 33,032 $ 33,423
======== ======== ========
Identifiable Assets:
United States..................... $340,235 $311,947 $266,423
Canada............................ 81,979 62,193 65,121
Europe............................ 234,918 226,313 212,462
Brazil............................ 12,206 - -
General corporate
assets.......................... 32,551 23,861 20,844
-------- -------- --------
Total identifiable
assets........................ $701,889 $624,314 $564,850
======== ======== ========
</TABLE>
<TABLE>
13. INCOME TAXES
<CAPTION>
(Thousands of Dollars) 1995 1994 1993
---------------------- -------- -------- --------
<S> <C> <C> <C>
Income before taxes:
United States..................... $ 1,265 $ 36,097 $ 14,084
Foreign........................... 15,994 14,118 18,625
-------- -------- --------
$ 17,259 $ 50,215 $ 32,709
======== ======== ========
Amounts currently payable:
Federal........................... $ (3,174) $ 8,591 $ 8,252
Foreign........................... 5,779 4,139 5,904
State and local................... 1,038 1,262 2,130
-------- -------- --------
$ 3,643 $ 13,992 $ 16,286
======== ======== ========
Deferred taxes:
Federal........................... $ (233) $ 4,485 $ (3,413)
Foreign........................... (6,101) (1,317) (811)
State and local................... (116) 23 (1,916)
-------- -------- --------
(6,450) 3,191 (6,140)
-------- -------- --------
Total provision................. $ (2,807) $ 17,183 $ 10,146
======== ======== ========
Provision before non-
recurring items................... $ (2,807) $ 17,183 $ 16,803
Extraordinary item.................. - - (1,569)
Cumulative effect on
prior years of changes
in accounting principles.......... - - (5,088)
-------- -------- --------
Total provision................. $ (2,807) $ 17,183 $ 10,146
======== ======== ========
<FN>
A reconciliation of income tax expense to the U.S. statutory rate is as follows:
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Tax at U.S. statutory rate.......... 35.0% 35.0% 34.0%
Difference in effective
rate of international
operations, including
benefit of SPL.................... (34.3) (2.1) (3.8)
Write-off of investment............. (25.7) - -
State and local income
tax............................... 3.4 1.7 .4
Permanent book to tax dif-
ferences not deductible........... 6.0 - -
Other............................... (.7) (.4) .4
-------- -------- --------
Effective tax rate.................. (16.3)% 34.2% 31.0%
======== ======== ========
</TABLE>
<PAGE> 27
In accordance with the Company's policy, as of June 30, 1995, federal income
taxes have not been provided on the undistributed earnings of foreign
subsidiaries. If these earnings were distributed, approximately $12,800,000 of
tax would be payable.
In connection with cash flow information, the Company paid $3,600,000 in 1995,
$20,338,000 in 1994 and $16,022,000 in 1993 for federal, foreign and state
taxes on income.
Through its United Kingdom subsidiaries, the Company had available at the
beginning of the year net operating loss carryforwards of $28,000,000 for
income tax purposes with no limit as to expiration under United Kingdom tax
regulations. Of this amount, approximately $6,000,000 is attributable to the
operations of Oliver Rubber's subsidiary, Oliver Rubber Europa. This
subsidiary is being liquidated and the loss carryforward is no longer
available. The remainder of the net operating loss carryforward was
attributable to the Company's subsidiary, Standard Products Limited (SPL).
SPL's results of operations have been profitable, indicating that realization
of the net operating loss carryforward is more likely than not. Accordingly,
in 1995 the Company has reversed the full valuation allowance related to SPL's
tax loss carryforward, net of the portion of the carryforward used in 1995.
At June 30, 1995, deferred tax liabilities were $27,300,000 and deferred tax
assets, included in prepaids and other assets, were $26,100,000. The major
component of deferred tax liabilities is $23,600,000 for excess depreciation
and amortization. In addition to the loss carryforward of $3,668,000, deferred
tax assets include $3,100,000 for discontinued operations and rationalization
of business units and $14,600,000 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, 1995 and 1994:
<TABLE>
<CAPTION>
1995
------------------------------------------------------------
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................................................. $220,927 $243,808 $265,013 $266,178
Gross income.............................................. 21,598 26,385 26,015 25,457
Net income................................................ 2,898 5,331 6,851 4,986
Earnings per common share................................. $.17 $.32 $.41 $.30
==== ==== ==== ====
</TABLE>
<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
==== ==== ==== ====
</TABLE>
<PAGE> 28
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,
1995 and 1994, 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, 1995. 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, 1995 and 1994, and the
results of their operations and their cash flows for each of the three fiscal
years in the period ended June 30, 1995 in conformity with generally accepted
accounting principles.
As explained in Note 1 to the consolidated financial statements, in fiscal 1993
the Company changed its methods of accounting for postretirement benefits other
than pensions and income taxes.
ARTHUR ANDERSEN LLP
August 2, 1995,
Cleveland, Ohio.
<PAGE> 29
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 LLP, 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 LLP 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/ Donald R. Sheley, Jr.
---------------------- -------------------------
James S. Reid, Jr. Donald R. Sheley, Jr.
Chairman and Vice President - Finance and
Chief Executive Officer Chief Financial Officer
<PAGE> 30
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
----------------------------------- ------------------------
1995 1994 1995 1994
--------------- ---------------- ---- ----
High Low High Low
------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Quarter
1st................ $31.13 $24.88 $36.63 $29.63 $.17 $.16
2nd............... $25.25 $21.38 $36.00 $31.25 $.17 $.16
3rd................ $24.13 $18.50 $38.75 $32.50 $.17 $.16
4th................ $22.63 $19.13 $32.63 $26.25 $.17 $.17
---- ----
$.68 $.65
==== ====
</TABLE>
There were approximately 1,022 shareholders as of August 16, 1995.
<PAGE> 31
THE STANDARD PRODUCTS COMPANY
DIRECTORS
JAMES C. BAILLIE *
Partner, Tory Tory DesLauriers &
Binnington, Barristers & Solicitors
EDWARD B. BRANDON * +
Chairman - National City Corporation
(Bank holding company)
JOHN D. DRINKO o
Attorney - Baker & Hostetler,
Attorneys at Law
CURTIS E. MOLL * o
Chairman and Chief Executive Officer,
MTD Products, Inc.
(Manufacturer of outdoor power
equipment, and tools, dies and
stampings for the automotive
industry)
MALCOLM R. MYERS * +
Chairman and Chief Executive Officer,
Cloyes Gear & Products, Inc.
(Manufacturer of automotive timing
components)
LEIGH H. PERKINS + o
Chairman, The Orvis Company, Inc.
(Manufacturer and distributor of
fishing tackle and sporting goods)
ALFRED M. RANKIN, JR. *
Chairman, President and Chief
Executive Officer, NACCO Industries,
Inc.
(Holding company with operations in
mining, manufacturing of small
electrical appliances and fork lift
trucks and service parts)
JAMES S. REID, JR.
Chairman and Chief Executive Officer
ALAN E. RIEDEL + o
Retired Vice Chairman, Cooper
Industries, Inc.
(A worldwide diversified manufacturer
of electrical products, electric
power equipment, tools and hardware
and automotive products)
JOHN D. SIGEL *
Partner - Hale and Dorr
Attorneys at Law
W. HAYDEN THOMPSON * o
Chairman and Chief Executive Officer,
Solarflo Corporation
(Manufacturer of gas and electric
heating equipment)
THEODORE K. ZAMPETIS
President and Chief Operating Officer
* Audit Committee
o Finance Committee
+ Compensation Committee
DIRECTOR EMERITUS
RICHARD J. BOLAND
Consultant; Retired Senior
Partner, Arthur Andersen LLP
OFFICERS
JAMES S. REID, JR.
Chairman and Chief Executive
Officer
THEODORE K. ZAMPETIS
President and Chief Operating
Officer
TED M. MCQUADE
Executive Vice President-North
American Automotive Operations
GERARD MESNEL
Executive Vice President-Advanced
Technology Worldwide
DONALD R. SHELEY, JR.
Vice President-Finance and Chief
Financial Officer
JOHN C. BRANDMAHL
Vice President-Human Resources
LARRY J. ENDERS
Vice President and President and
Chief Executive Officer, Oliver
Rubber Company
JOSEPH FARKAS
President, Standard Products
Industriel
JAMES F. KEYS
Vice President and Managing
Director, Standard Products
Limited
STEPHAN J. MACK
President, Holm Industries, Inc.
WILLIAM A. RUSSELL
Vice President-Sales and
Marketing
J. RICHARD HAMILTON
Secretary
CHARLES F. NAGY
Treasurer
THOMAS J. STECZ
Corporate Controller
MARY S. KEYERLEBER
Assistant Secretary
FACILITIES
ADMINISTRATIVE, PRODUCT
DEVELOPMENT AND SALES OFFICES,
AND WESTBORN SERVICE CENTER
2401 South Gulley Road
Dearborn, Michigan 48124
(313) 561-1100
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
BRAZIL:
Itaquaquecetuba and Sao Paulo, Brazil
CANADA:
Etobicoke, Georgetown, Mississauga, Mitchell and
Stratford, Ontario
FRANCE:
Bezons, Bolbec, Lillebonne and Vitre, France
UNITED KINGDOM:
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 16, 1995 at the Company's Reid
Division, 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.
Donald R. Sheley, Jr., Vice President-Finance, at the
Company's administrative offices, 2401 South Gulley
Road, Dearborn, Michigan 48124.
COUNSEL
Baker & Hostetler
Cleveland, Ohio
AUDITORS
Arthur Andersen LLP
Cleveland, Ohio
INVESTOR RELATIONS COUNSEL
Edward Howard & Co.
Cleveland, Ohio
<PAGE> 32
THE STANDARD PRODUCTS CO.
Administrative Offices
2401 South Gulley Road
Dearborn, Michigan 48124
(313) 561-1100
<PAGE> 33
<TABLE>
APPENDIX TO ANNUAL REPORT TO SHAREHOLDERS
Paper Format
Photo No. Description Document Page
--------- ------------------------------------ -------------
<S> <C> <C>
1 Picture of Globe Front Cover
2 Chairman and CEO and President and COO 1
3 CAD Systems 2
4 Designer and work 3
5 Sealing systems parts 4
6 Water test on car 5
7 Model shop worker 6
8 Engineer and parts 7
9 Picture of Globe 8
Graphs
------
Bar Graph No. 1 10
Depicts comparison of Net Sales for the years 1986
through 1995 - refer to line entitled "Net Sales"
under caption "Income Statement" on table on page 11
for figures
Bar Graph No. 2 10
Total Company R,E&D
(Thousands of Dollars)
<S> <C>
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
1995 $33,211
Bar Graph No. 3 10
Depicts comparison of Capital Expenditures for the
years 1986 through 1995 - refer to line entitled
"Additions to Property, Plant & Equipment" under
caption "Other" on table on page 11 for figures
Bar Graph No. 4 10
Depicts comparison of Earnings Per Share for the
years 1986 through 1995 - 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 11 for figures
</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,
1995.
Jurisdiction
In Which
Name Incorporated
-------------------- ------------
Admiral Retread Equipment, Inc. Ohio
5 Rubber Corporation Pennsylvania
Holm Industries, Inc. Indiana
Itatiaia Standard Brazil
Nisco Holding Company Delaware
Oliver Europa United Kingdom
Oliver Rubber Company California
Standard Products Brazil Brazil
Standard Products Industriel France
Standard Products Limited United Kingdom
Standard Products (Canada) Limited Dominion of Canada
Standard Products International, Inc. Delaware
Standard Products de Mexico, S.A. de C.V. Mexico
Westborn Service Center, Inc. Michigan
Union Trucking Company Michigan
<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, 1995, 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 13, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 19,546
<SECURITIES> 0
<RECEIVABLES> 201,591
<ALLOWANCES> 4,978
<INVENTORY> 69,458
<CURRENT-ASSETS> 307,437
<PP&E> 489,534
<DEPRECIATION> 220,095
<TOTAL-ASSETS> 701,889
<CURRENT-LIABILITIES> 188,987
<BONDS> 190,522
<COMMON> 16,736
0
0
<OTHER-SE> 243,759
<TOTAL-LIABILITY-AND-EQUITY> 701,889
<SALES> 995,926
<TOTAL-REVENUES> 995,926
<CGS> 896,471
<TOTAL-COSTS> 965,424
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</TABLE>
