<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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 (IRS Employer
Incorporation 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
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes. /X/ No.
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF FEBRUARY 6, 1997 WAS
16,807,723 SHARES.
================================================================================
This report consists of 10 pages.
<PAGE> 2
THE STANDARD PRODUCTS COMPANY
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Operations .................................................. 3
Consolidated Balance Sheets ............................................................ 4
Consolidated Statements of Cash Flows .................................................. 5
Notes to Consolidated Financial Statements ............................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .. 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................................................... 9
Item 2. Changes in Securities .................................................................. 9
Item 3. Defaults upon Senior Securities ........................................................ 9
Item 4. Submission of Matters to a Vote of Security-Holders .................................... 9
Item 5. Other Information ...................................................................... 9
Item 6. Exhibits and Reports on Form 8-K ....................................................... 9
SIGNATURES ....................................................................................... 10
</TABLE>
Unless otherwise indicated, references to "Company" mean The Standard Products
Company and its subsidiaries and reference to a fiscal year means the Company's
year ended June 30 of the same year (e.g., "fiscal 1997" refers to the period
beginning July 1, 1996 and ending June 30, 1997).
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31,
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
1996 1995 1996 1995
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales.................................................. $266,620 $264,747 $532,231 $503,507
Cost of Goods Sold:........................................
Materials, wages and other manufacturing costs............ 222,813 232,441 453,558 452,219
Research, engineering and development expenses............ 12,111 10,537 21,685 20,113
--------- -------- -------- --------
234,924 242,978 475,243 472,332
--------- -------- -------- --------
Gross income............................................ 31,696 21,769 56,988 31,175
Selling, General and Administrative Expenses .............. 16,901 16,749 34,204 33,892
--------- -------- -------- --------
14,795 5,020 22,784 (2,717)
--------- -------- -------- --------
Other (Income) Expense:
Royalty and dividend income............................... (198) (121) (444) (240)
Net interest expense...................................... 3,031 3,064 6,278 6,797
Other, net................................................ 139 (69) (316) 366
--------- -------- -------- --------
2,972 2,874 5,518 6,923
--------- -------- -------- --------
Income (Loss) before Taxes on Income....................... 11,823 2,146 17,266 (9,640)
Provision for Taxes on Income 5,479 601 9,525 (1,402)
--------- -------- -------- --------
Net Income (Loss)......................................... $ 6,344 $ 1,545 $ 7,741 $ (8,238)
========= ======== ======== ========
Earnings (Loss) Per Common Share........................... $ 0.38 $ 0.09 $ 0.46 $ (0.49)
========= ======== ======== ========
Weighted average shares outstanding (in thousands)......... 16,807 16,755 16,800 16,750
========= ======== ======== ========
Dividends declared per share............................... $ 0.17 $ 0.17 $ 0.34 $ 0.34
========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JUNE 30,
1996 1996
--------------- ----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................................. $ 564 $ -
Receivables, less allowances of $2,685 at December 31 and
$2,958 at June 30 (Note 4)............................................. 153,193 180,787
Inventories............................................................ 68,959 60,377
Prepaid insurance, taxes, etc.......................................... 23,572 19,680
--------- ---------
Total current assets................................................. 246,288 260,844
Property, Plant and Equipment, at cost................................. 573,615 548,816
Less - Accumulated depreciation........................................ (274,257) (250,278)
--------- ---------
299,358 298,538
Goodwill, net........................................................... 70,297 71,653
Other Assets............................................................ 53,544 53,660
--------- ---------
$ 669,487 $ 684,695
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term notes payable............................................... $ 9,798 $ 1,198
Current maturities of long-term debt................................... 1,831 2,450
Accounts payable....................................................... 74,246 99,093
Accrued payrolls....................................................... 24,213 26,651
Accrued expenses....................................................... 83,068 74,565
Dividend payable....................................................... 2,857 2,853
--------- ---------
Total current liabilities............................................ 196,013 206,810
--------- ---------
Long-term Debt, net of current maturities............................... 128,476 143,041
Other Postretirement Benefits........................................... 26,762 26,023
Deferred Income Taxes and Other Credits................................. 55,401 50,056
Commitments and Contingent Liabilities (Note 3)
Shareholders' Equity:
Serial preferred shares, without par value, authorized 6,000,000 voting
and 6,000,000 non-voting shares, none issued.......................... - -
Common shares, par value $1 per share; authorized 50,000,000 shares,
issued and outstanding, 16,806,723 shares at December 31 and
16,784,867 at June 30................................................. 16,807 16,785
Paid-in capital........................................................ 97,632 96,906
Retained earnings...................................................... 156,546 154,669
Foreign currency translation adjustments............................... (4,873) (6,318)
Minimum pension liability.............................................. (3,277) (3,277)
--------- ---------
Total shareholders' equity............................................. 262,835 258,765
--------- ---------
$ 669,487 $ 684,695
========= =========
</TABLE>
The accompanying notes are an integral part of these statements
4
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THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Net cash provided by (used for) operating activities:
Net income (loss).................................................................... $ 7,741 $ (8,238)
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Depreciation and amortization....................................................... 30,268 26,067
Deferred taxes and other credits.................................................... 3,835 (221)
Effect of changes in foreign currency............................................... (149) (2,587)
Other operating items............................................................... 352 (328)
-------- --------
Net cash provided by operations.................................................... 42,047 14,693
-------- --------
Net cash provided by (used for) changes in operating assets and liabilities:
Receivables (Note 4)................................................................ 27,594 48,040
Inventories......................................................................... (8,180) (498)
Accounts payable and accrued expenses............................................... (19,182) (2,183)
Other............................................................................... (3,887) 456
-------- --------
Net cash provided by (used for) changes in operating assets and liabilities (3,655) 45,815
-------- --------
Net cash provided by operating activities........................................... 38,392 60,508
Net cash (used for) investments:
Purchase of property, plant and equipment, net...................................... (25,743) (36,373)
Investment in nonconsolidated entities.......................................... (164) -
-------- --------
Net cash (used for) investments.................................................... (25,907) (36,373)
Net cash provided by (used for) financing:
Proceeds of long-term borrowings.................................................... 14,716 27,218
Repayment of long-term borrowings (Note 4).......................................... (29,336) (51,110)
Net increase (decrease) in short-term borrowings.............................. 8,600 (2,288)
Cash dividends...................................................................... (5,864) (5,697)
-------- --------
Net cash (used for) financing...................................................... (11,884) (31,877)
Effect of exchange rate changes on cash.............................................. (37) 330
-------- --------
Increase (decrease) in cash and cash equivalents..................................... 564 (7,412)
Cash and cash equivalents at the beginning of the period............................. - 19,546
-------- --------
Cash and cash equivalents at the end of the period................................... $ 564 $ 12,134
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by
management and, in the opinion of management, contain all adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
financial position of the Company as of December 31, 1996 and June 30, 1996,
and the results of its operations for the three and six months ended December
31, 1996 and 1995 and cash flows for the six months ended December 31, 1996 and
1995. The consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996.
Results for interim periods are not necessarily indicative of those to be
expected for the year.
(2) 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. The major components of inventory are as follows:
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1996
----------------- -------------
<S> <C> <C>
Raw materials..................... $27,878 $27,186
Work-in-process and finished goods 41,081 33,191
------- -------
Totals........................... $68,959 $60,377
======= =======
</TABLE>
(3) COMMITMENTS AND CONTINGENCIES
At December 31, 1996, management believes that the Company was in
compliance with its various financial covenants. During the current quarter,
the Company has renegotiated its debt covenants with various lenders to reduce
the ratio of assets to liabilities which must be maintained for the payment of
dividends from 1.25 to 1.00. No other terms were changed on the debt
agreements. Under the most restrictive of the revised covenants of the
Company's various loan agreements, principally the Revolving Credit Agreement,
$57,827 of retained earnings were not restricted at December 31, 1996 for the
payment of dividends. Management expects that the Company will remain in
compliance with its financial covenants in all material respects through the
period ending December 31, 1997.
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.
(4) ACCOUNTS RECEIVABLE SECURITIZATION
In September 1995, the Company and certain of its U.S. subsidiaries
entered into an agreement to sell, on an ongoing basis, all of their accounts
receivable to The Standard Products Funding Corporation (Funding Co.), a wholly
owned subsidiary of the Company. Accordingly, the Company and those
subsidiaries, irrevocably and without recourse, transferred all of their U.S.
dollar denominated trade accounts receivable (principally representing amounts
owed by original equipment customers in the U.S. automotive and related
industries) to the Funding Co. The Funding Co. has sold and, subject to certain
conditions, may from time to time sell an undivided interest in those
receivables to the Clipper Receivables Corporation. The Funding Co. is
permitted to receive advances of up to $50,000 for the sale of such undivided
interest. At December 31, 1996, $50,000 had been advanced to the Funding
Company. Unless extended by amendment, the agreement expires in September
1998.
6
<PAGE> 7
Proceeds from the sales of receivables have been used to reduce
outstanding borrowings under the Company's Revolving Credit Agreement and are
reflected as operating cash flows in the accompanying consolidated statement of
cash flows. Costs of the program, which primarily consist of the purchasers'
financing and administrative costs, have been classified as Selling, General
and Administrative Expenses in the accompanying consolidated statement of
income.
The Company maintains an allowance for accounts receivable ($2,685 and
$2,958 at December 31, 1996 and June 30, 1996 respectively) based on the
expected collectibility of all trade accounts receivable, including receivables
sold.
(5) NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This standard
requires that long-lived assets held by and used by an entity may be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 121 also requires
that long-lived assets to be disposed of be reported at the lower of carrying
amount or fair value less costs to sell.
The FASB also issued SFAS No. 123, "Accounting for Stock-Based
Compensation" which was effective for the Company beginning July 1, 1996. SFAS
No. 123 requires expanded disclosures of stock-based compensation arrangements
with employees and encourages (but does not require) compensation cost to be
measured based on the fair value of the equity instrument awarded. Companies
are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to
its stock based compensation awards to employees and will disclose the required
pro forma effect on net income and earnings per share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(1) RESULTS OF OPERATIONS
The Company's net sales for the second quarter of fiscal 1997 increased by
0.7%, or $1.9 million, to $266.6 million compared to the second quarter of
fiscal year 1996. Sales for the Company's Transportation Equipment segment
totaled $233.9 million for the second quarter of fiscal 1997 compared with
$235.0 million for the same period last year. Sales by our North American
automotive operations declined $5.5 million, or 3.7%, due primarily to the
strike by Canadian autoworkers against General Motors in Canada. Automotive
sales in Europe also declined $0.9 million, or 1.5%, led by weaker demand in
France. Current quarter results include sales of $11.5 million from our
Brazilian subsidiaries, a 66.1% increase over the second quarter of last year,
which was prior to the commencement of production at our new plant in Brazil.
Sales for the Company's Tread Rubber segment increased 10.0% to $32.7 million,
reflecting the impact of new business from the previously announced contract
with Treadco, Inc., the nation's largest independent truck-tire retreader.
Based on published industry data, management believes that car and light
truck production for the United States and Canada decreased by almost 3% during
the quarter when compared to the same period in the prior year. Car production
decreased by over 7%, while light truck production actually increased over 2%.
Vehicles for which the Company supplies components that were particularly
strong during the quarter included the Chrysler minivan, Ford Taurus and Ford
F-Series light truck.
For the first half of fiscal 1997, sales of the Transportation Equipment
segment were $463.7 million or 4.8% ahead of the first half of fiscal 1996.
Virtually all of the year-over-year sales increase was experienced in the first
quarter. Chrysler minivan and Ford Taurus were especially strong in the first
half of the year and our new plant in Brazil was not in production until the
third quarter of fiscal 1996. Sales in the Tread Rubber segment for the first
half of fiscal 1997 were $68.5 million, up $7.4 million from the same period in
fiscal 1996. The 12.1% sales gain is attributable to the Treadco contract noted
above.
7
<PAGE> 8
Gross income for the second quarter of fiscal 1997 increased $9.9 million
to $31.7 million, or 11.9% of net sales, from $21.8 million, or 8.2% of net
sales for the same period in fiscal 1996. The increase in gross income occurred
in each business unit. Principal factors affecting the improvement were: (1)
reduction in launch costs from the prior year period, (2) a reduction in raw
material costs, and (3) continued benefit from cost reduction and process
improvement programs. This continued improvement brought gross income as a
percentage of sales from a first quarter rate of 9.5% to a year-to-date rate of
10.7%. This compares to 6.2% for the first six months of fiscal 1996.
Research, engineering and development expenses for the quarter and for the
first six months of fiscal 1997 exceeded those of the same periods in the prior
year. The increase relates primarily to the Company's effort to introduce a
significantly improved vehicle sealing system that will have cosmetic, weight
and performance characteristics that are superior to current products as well
as allow for cycle time improvements in production. Even when completed, use of
this process and product in production will be dependent on customers'
acceptance of its benefits. At this time, development is expected to continue
through calendar 1997.
Selling, general and administrative expenses increased $0.2 million, or
1.2%, to $16.9 million compared to $16.7 million in fiscal 1996. As a
percentage of sales, these costs remained flat at 6.3% for the period.
For the first half of fiscal 1997, the increase in Other, net is
attributable to better performance at Nishikawa Standard Company, primarily in
the first quarter of the year.
The Company's tax provision for the second quarter of fiscal 1997 reflects
a tax rate of 46.3%. This compares with a year-to-date rate of 55.2%. This high
effective rate continues to demonstrate the Company's inability to utilize net
operating losses generated in certain of its foreign operations. The
improvement in the rate reflects the fact that these operations are getting
closer to profitable status. The recognition of tax benefits related to the
losses will be reported in future periods as opportunities to utilize these
carryforwards become more certain.
(2) FINANCIAL CONDITION
Cash provided by operations for the first half of fiscal 1997 was $38.4
million. This represents a decrease from the same period in fiscal 1996 of
$22.1 million. The major factor resulting in the net decline is the accounts
receivable transaction described in Note 4 that took place in fiscal 1996. This
was partially offset by improved operating results, higher depreciation and
amortization and the one-time benefit of a change in payment terms with a major
customer. The first half of fiscal 1997 ended with higher inventories that
could be expected due to the holiday shutdown period; however, management
believes they will come down from these levels through the end of the year.
Capital spending for the first six months of fiscal 1997 totaled $25.7
million compared to $36.4 million for the same period last year. The total
capital spending for fiscal 1996 was $79.7 million. The Company expects capital
spending to approximate $65.0 million. This includes capital required in
connection with the start-up of an operation in Mexico. Construction has been
started on this project with estimated completion of the first phase estimated
for the fall of calendar 1997. This operation is owned 70% by the Company and
30% by Nishikawa Rubber Company of Japan.
At December 31, 1996, debt represented 34.8% of total capitalization
compared with 36.2% at June 30, 1996. This improvement is the result of net
cash generation from the business used to pay down debt.
(3) SUBSEQUENT EVENT
On January 27, 1997, the Company announced plans to close two
manufacturing facilities in the United States. These closings will result in
the termination of approximately 500 employees. Business currently conducted at
these locations will be moved to other U.S. manufacturing locations owned by
the Company. The Company expects to record a significant charge against
earnings in the third quarter of fiscal 1997 related to this decision. The cost
of closing the facilities will depend on several factors, including
negotiations with employee groups. The Company
8
<PAGE> 9
anticipates estimated costs will be reflected in third quarter results for
fiscal 1997. Any costs incurred in the closing process that will benefit future
operations, such as moving machinery and equipment to another location, will be
charged to operations as incurred.
(4) CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR" UNDER THE PRIVATE
SECURITIES REFORM ACT OF 1995
This document may include projections, forecasts and other forward-looking
statements about the Company, the industry in which it competes and the markets
it serves. The achievement of such projections, forecasts and other
forward-looking statements is subject to certain risks and uncertainties, fully
detailed in the "Cautionary Statements for Purposes of "Safe Harbor" Under the
Private Securities Reform Act of 1995" in the Company's Annual Report on Form
10-K for the year ended June 30, 1996, which is on file with the Securities and
Exchange Commission.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No.
Under Reg. S-K Form 10-Q
Item 601 Exhibit No. Description
-------------- ----------- -----------------------------------------------------
<S> <C> <C>
10 10a Second Amendment to Receivables Purchase Agreement
10 10b Third Agreement of Amendment to the Standard Products
Revolving Credit Facility
10 10c Amendment of Agreement of the Note Purchase Agreement
dated December 16, 1993 between The Standard Products
Co. and the Metropolitan Life Insurance Company
27 27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None.
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE STANDARD PRODUCTS COMPANY
Dated: February 10, 1997 by /s/ Donald R. Sheley, Jr.
----------------------------
Donald R. Sheley, Jr.
Vice President, Finance
Chief Financial Officer
/s/ Bernard J. Theisen
----------------------------
Bernard J. Theisen
Corporate Controller
Prinicpal Accounting Officer
10
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
Under Reg. S-K Form 10-Q
Item 601 Exhibit No. Description
-------------- ----------- -----------------------------------------------------
<S> <C> <C>
10 10a Second Amendment to Receivables Purchase Agreement
10 10b Third Agreement of Amendment to the Standard Products
Revolving Credit Facility
10 10c Amendment of Agreement of the Note Purchase Agreement
dated December 16, 1993 between The Standard Products
Co. and the Metropolitan Life Insurance Company
27 27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10a
EXECUTION COPY
SECOND AMENDMENT
TO
RECEIVABLES PURCHASE AGREEMENT
This Second Amendment to Receivables Purchase Agreement, dated as of
October 1, 1996 (this "Amendment") is among THE STANDARD PRODUCTS FUNDING
CORPORATION, a Delaware corporation ("Seller"), THE STANDARD PRODUCTS COMPANY,
an Ohio corporation ("Standard"), CLIPPER RECEIVABLES CORPORATION, a Delaware
corporation ("Purchaser"), STATE STREET BOSTON CAPITAL CORPORATION, a
Massachusetts corporation ("Administrator") and NATIONAL CITY BANK a national
bank ("NCB"), and is consented to by the financial institutions listed under
the caption "Facility Banks" on the signature pages hereto (the "Facility
Banks"). Unless otherwise indicated, terms defined in Appendix A to the
Receivables Purchase Agreement have the same meanings when used herein.
RECITALS
1. The parties hereto have entered into that certain Receivables Purchase
Agreement, dated as of September 22, 1995 (the "Original Receivables Purchase
Agreement") as amended by this Amendment (as amended, the "Amended Agreement").
2. No Liquidity Loans have been made under the related Liquidity Agreement
up to and including the date hereof.
3. Pursuant to this Amendment, the parties wish to amend certain
definitions and financial covenants in the Original Receivables Purchase
Agreement.
NOW THEREFORE, the parties agree that the Original Receivables Purchase
Agreement shall be amended on the terms herein provided:
SECTION 1 AMENDMENTS. The following amendments to the Receivables
Purchase Agreement shall be effective upon satisfaction of the conditions in
Section 3 of this Amendment.
SECTION 1.1 Amendments to Appendix A: Definitions. Each of the
following definitions set forth in Appendix A to the Original Receivables
Purchase Agreement shall be amended and restated in its entirety as
follows:
"General Liquidation Cost Reserve" means, on any day an amount equal
to the product of
(a) (x) 1.25 times (y) the Average Days' Sales Outstanding of
all Pool Receivables (other than Tooling Receivables), calculated
as of the Cut-Off Date for the next preceding Settlement Period,
divided by (z) 360; times
(b) the sum of (i) 2% over the Alternate Base Rate in effect
on such day, plus (ii) the percentage as may be in effect for the
purposes of calculating the Program Fee applicable to the
Purchaser's Total Investment, plus (iii) 1.00% (or, if greater,
such other percentage as may be in effect for purposes of clause
(b) (x) of the definition of "Master Servicer's Fee"); times
(c) the General Percentage of the Purchaser's Total
Investment on such day.
<PAGE> 2
"Special Liquidation Cost Reserve" means, on any day, an amount
equal to the product of
(a) (x) 2.5 times (y) the Average Days' Sales Outstanding of
all Pool Receivables (other than Tooling Receivables), calculated
as of the Cut-Off Date for the next preceding Settlement Period,
divided by (z) 360; times
(b) the sum of (i) 2% over the Alternate Base Rate in effect
on such day, plus (ii) the percentage as may be effect for the
purposes of calculating the Program Fee applicable to the
Purchaser's Total Investment, plus (iii) 1.00% (or, if greater,
such clause (b) (x) of the definition of "Master Servicer's Fee"),
plus (iv) the percentage as may be in effect for the purposes of
calculating the Concentration Fees; times
(c) the Special Percentage of the Purchaser's Total
Investment on such day.
"Default Ratio" means the ratio (expressed as a percentage) computed
as of each Cut-Off Date by dividing (x) the sum of (i) the aggregate
Unpaid Balance of all Pool Receivables (other than Tooling Receivables)
that are Defaulted Receivables on such Cut-Off Date by application of
clauses (a) or (e) of the definition of Defaulted Receivable, except, in
the case of Receivables that are Defaulted Receivables by application of
clause (e), to the extent such Receivable (or portion thereof) is the
subject of a good faith dispute between the applicable Obligor and
Originator, plus (ii) the aggregate Unpaid Balance of all Pool
Receivables (other than Tooling Receivables) that are Defaulted
Receivables and became Defaulted Receivables solely by application of
clause (b), (c) or (d) of the definition of Defaulted Receivable during
the Settlement Period ended on such Cut-Off Date by (y) the Unpaid
Balance of all Pool Receivables (other than Tooling Receivables) as of
such Cut-Off Date.
SECTION 1.2 Other Amendments. Section 7.05 (c) of the Original
Receivables Purchase Agreement shall be amended and restated in its entirety as
follows:
(c) Current Ratio. Not permit the Current Ratio to be less
than 1.00 to 1.00 at any time
SECTION 2 REPRESENTATIONS AND WARRANTIES. Seller and Standard hereby
represent and warrant to the Purchaser, Administrator and NCB that:
(a) The execution and delivery by them of this Amendment and the
performance of their obligations under the Amended Agreement, are within
their corporate powers, have been duly authorized by all necessary
corporate action, have received all necessary governmental and other
consents and approvals (if any shall be required) and do not and will not
contravene or conflict with, or create a lien under, (i) any provision of
law, (ii) their constituent documents, (iii) any court or administrative
decree applicable to them, or (iv) any contractual restriction binding
upon them or their property.
(b) The representations and warranties of Seller contained in
Section 6.01 of the Receivables Purchase Agreement are true and correct
as of the date of Seller's execution and delivery of this Amendment and
after giving effect hereto (except for those representations and
warranties that relate solely to an earlier date).
(c) This Amendment has been duly executed and delivered by them, and
the Amended Agreement is their legal, valid and binding obligation,
enforceable against them in accordance with its terms.
2
<PAGE> 3
(d) After giving effect to this Amendment, no Liquidation Event or
Unmatured Liquidation Event shall have occurred and be continuing.
SECTION 3 CONDITIONS TO EFFECTIVENESS. This Amendment shall be
effective as of the date hereof when the following conditions shall have been
satisfied (the "Condition Satisfaction Date"):
SECTION 3.1 Delivery of Counterparts. The Administrator shall have
received (by telecopy or otherwise) counterparts of this Amendment or the
signature pages hereto, executed by each Seller, Standard, Purchaser,
Administrator, NCB and Facility Banks holding 66-2/3% of the Liquidity
Commitments and Concentration Commitments (as each is defined in the
Liquidity Agreement) at the time such counterparts are received.
SECTION 3.2 Other Conditions. The conditions set forth in Section
5.02 of the Receivables Purchase Agreement shall be satisfied with the
same effect as if a Purchase were to be made on the the Condition
Satisfaction Date.
SECTION 4 MISCELLANEOUS PROVISIONS.
SECTION 4.1 Reaffirmation. As hereby amended, the Receivables
Purchase Agreement is hereby ratified and reaffirmed by Seller and
Standard and the guarantee of Standard set forth in Section 12.1 of the
Purchase Agreement is also hereby ratified and reaffirmed and shall
continue in full force and effect after the Condition Satisfaction Date.
SECTION 4.2 Costs and Expenses. Seller and Standard, jointly and
severally, hereby agree to pay on demand all costs and expenses incurred
by the Administrator and NCB (including legal fees and other charges of
counsel to the Administrator and NCB) in connection with the preparation,
execution and delivery of this Amendment.
SECTION 4.3 Captions. The various captions in this Amendment are
included for convenience only and shall not affect the meaning or
interpretation of any provision of this Amendment.
SECTION 4.4 GOVERNING LAW. THIS AMENDMENT AND THE AMENDED
AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF
LAW, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF
PURCHASER IN THE RECEIVABLES OR RELATED PROPERTY IS GOVERNED BY THE LAWS
OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 4.5 Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by the different parties
hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall
constitute one and the same Amendment.
[SIGNATURE PAGES FOLLOW]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their respective officers thereunto duly authorized.
THE STANDARD PRODUCTS FUNDING
CORPORATION
By: /s/ C. F. Nagy
--------------------------------
Title: Treasurer
------------------------------
THE STANDARD PRODUCTS COMPANY
By: /s/ Donald R. Sheley, Jr.
--------------------------------
Title: V.P. Finance and CFO
------------------------------
CLIPPER RECEIVABLES CORPORATION
By: /s/ Tiffany Perorval
--------------------------------
Title: Vice President
-----------------------------
STATE STREET BOSTON CAPITAL
CORPORATION
By: /s/ Pauliina Girsen
--------------------------------
Title: Associate
------------------------------
NATIONAL CITY BANK
By: /s/ Marybeth Howe
--------------------------------
Title: Vice President
-----------------------------
4
<PAGE> 5
Acknowledged and FACILITY BANKS:
Consented to: -------------------
NATIONAL CITY BANK,
as a Liquidity Bank, a Ford
Concentration Bank and a Chrysler
Concentration Bank
By: /s/ Marybeth S. Howe
------------------------------
Name: Marybeth S. Howe
------------------------------
Title: Vice President
-----------------------------
Address: 1900 East Ninth Street
Cleveland, Ohio 44114
Attention: Marybeth S. Howe
Facsimile No.: (216) 575-9396
Percentage for
Liquidity Commitment Amount 31.4285715%
Percentage for
Ford Commitment Amount 31.4285715%
Percentage for
Chrysler Commitment Amount 31.4285715%
5
<PAGE> 6
Acknowledged and FACILITY BANKS:
Consented to: ---------------
COMERICA BANK,
as a Liquidity Bank, a Ford
Concentration Bank and a Chrysler
Concentration Bank
By: /s/ Michael T. Shea
---------------------------
Name: Michael T. Shea
-------------------------
Title: Vice President
------------------------
Address: 500 Woodward Avenue
Detroit, Michigan 48226
Attention: Mike Shea
Facsimile No.: (313) 222-3776
Percentage for
Liquidity Commitment Amount 20.0000000%
Percentage for
Ford Commitment Amount 20.0000000%
Percentage for
Chrysler Commitment Amount 20.0000000%
6
<PAGE> 7
Acknowledged and FACILITY BANKS:
Consented to: ----------------------------
NBD BANK,
as a Liquidity Bank, a Ford
Concentration Bank and a Chrysler
Concentration Bank
By: /s/ Teresa A. Kalil
--------------------------
Name: Teresa A. Kalil
------------------------
Title: Vice President
-----------------------
Address: 611 Woodward Avenue
Detroit, Michigan 48226
Attention:
Facsimile No.: (313) 225-2290
Percentage for
Liquidity Commitment Amount 22.8571428%
Percentage for
Ford Commitment Amount 22.8571428%
Percentage for
Chrysler Commitment Amount 22.8571428%
7
<PAGE> 8
Acknowledged and FACILITY BANKS:
Consented to: ---------------
KEYBANK NATIONAL ASSOCIATION fka
SOCIETY NATIONAL BANK, as a Liquidity
Bank, a Ford Concentration Bank and a
Chrysler Concentration Bank
By: /s/ Thomas A. Crandell
----------------------------
Name: Thomas A. Crandell
--------------------------
Title: AVP
-------------------------
Address: 127 Public Square
Cleveland, Ohio 44114-1306
Attention:
Facsimile No.: (216) 689-4981
Percentage for
Liquidity Commitment Amount 25.7142857%
Percentage for
Ford Commitment Amount 25.7142857%
Percentage for
Chrysler Commitment Amount 25.7142857%
8
<PAGE> 1
EXHIBIT 10b
THIRD AGREEMENT OF AMENDMENT
This THIRD Agreement of Amendment ("Amendment") is executed at Cleveland,
Ohio as of October 25, 1996 by and among THE STANDARD PRODUCTS COMPANY (the
"Borrower") and NATIONAL CITY BANK ("National City"), as agent (the "Agent")
for itself, KEYBANK NATIONAL ASSOCIATION (formerly known as SOCIETY NATIONAL
BANK ("KeyBank")), COMERICA BANK ("Comerica"), and NBD BANK (formerly known as
NBD BANK, N.A.) ("NBD") (hereafter collectively referred to as "Banks").
WHEREAS, Borrower, Banks and Agent entered into a credit agreement dated
as of January 19, 1993 as amended by an Agreement of Amendment dated April 30,
1994 and by an Agreement of Amendment dated August 25, 1995 (the "Agreement")
wherein Banks agreed to make revolving loans to Borrower, under certain terms
and conditions, aggregating not more than the principal amount of One Hundred
Seventy-five Million Dollars ($175,000,000), which amount was reduced on June
30, 1993 to One Hundred Twenty-five Million Dollars ($125,000,000) and which
may be reduced from time to time under the Agreement; and
WHEREAS, Borrower, Banks and Agent want to make certain changes in and to
the Agreement;
NOW, THEREFORE, Borrower Banks and Agent agree as follows:
1. Section 1.01 (captioned "Certain Defined Terms") is hereby amended
such that the definitions of "Revolving Credit Termination Date" and
"Reduction Standard" shall now read as follows:
"Revolving Credit Termination Date" means January 18, 1999, as the
same may be extended pursuant to Section 2.02(k), or the earlier
date of the termination in whole of the aggregate amount of the
Revolving Credit Commitments pursuant to Section 2.04 or 6.02.
"Reduction Standard" means any one of the standards identified as
Reduction Standard I, II, III or IV in Schedule 2.06(b) hereto.
2. Section 2.05(a) captioned "Revolving Credit Commitment Fee" is
hereby amended in its entirety to read as follows:
(a) Revolving Credit Commitment Fee. The Borrower agrees to pay
to the Agent for the account of each Bank a commitment fee on the
average daily unused portion of such Bank's Revolving Credit
Commitment from the date of execution of this Agreement until the
Revolving Credit Termination Date at the rate per annum as shown
in the following schedule
<PAGE> 2
<TABLE>
<CAPTION>
IF the THEN the
Leverage is Commitment fee is
----------- -----------------
<S> <C>
Greater than or equal to 45% 1/4%
Greater than or equal to 40% but less 1/4%
than 45%
Greater than or equal to 35% but less 3/16%
than 40%
Less than 35% 3/16%
</TABLE>
The commitment fee shall be payable on the first day of each January,
April, July and October during the term of such Bank's Revolving Credit
Commitment, commencing January 1, 1997, and on the Revolving Credit
Termination Date.
3. Schedule 2.06(b) is hereby amended in its entirety to read as follows:
SCHEDULE 2.06(b)
<TABLE>
<CAPTION>
AND the EBIT Ratio is AND the EBIT Ratio
Reduction IF the Greater than or equal to 3.0 is less than 3.0 to 1.0
Standard Leverage to 1.0 THEN the THEN the
Applicable is Eurocurrency Margin is Eurocurrency Margin is
---------- --------- ---------------------------- -----------------------
<S> <C> <C> <C>
I Greater .75% .875%
than or equal to
45%
II Greater .625% .75%
than or equal to
40% but less
than 45%
III Greater .50% .625%
than or equal to
35% but less
than 40%
IV Less than to 35% .375% .50%
</TABLE>
4. Subsection 5.05 (d) (captioned "Current Ratio") is hereby amended
in its entirety to read as follows:
"5.05(d) Current Ratio. The Borrower will not suffer or permit
the Current Assets of the Borrower and its Subsidiaries at any
time to fall below an amount equal to one hundred percent (100%)
of the Current Liabilities of the Borrower and its Subsidiaries,
all as determined on a consolidated basis."
2
<PAGE> 3
5. In all other respects the credit agreement shall remain in full
effect.
6. Upon the execution and delivery of this Amendment, the Borrower will
not be in default under the Agreement as so amended.
IN WITNESS WHEREOF, Borrower, Banks and Agent have executed this Third
Agreement of Amendment at the time and place first above mentioned.
NATIONAL CITY BANK, AS AGENT THE STANDARD PRODUCTS COMPANY
By: /s/ Timothy J. Lathe By: /s/ Charles F. Nagy
- ---------------------------- -----------------------------
Title: SVP Title: Treasurer
- ---------------------------- -----------------------------
NATIONAL CITY BANK NBD BANK
By: /s/ Timothy J. Lathe By: /s/ Teresa A. Kalil
- ---------------------------- -----------------------------
Title: SVP Title: Vice President
- ---------------------------- -----------------------------
COMERICA BANK KEYBANK NATIONAL ASSOCIATION
By: /s/ Michael T. Shea By: /s/ Thomas A. Crandall
- ---------------------------- -----------------------------
Title: Vice President Title: AVP
- ---------------------------- -----------------------------
3
<PAGE> 1
EXHIBIT 10c
December 9, 1996
The Standard Products Company
2401 South Gulley Road
Dearborn, Michigan 48124
Attention: Mr. Charles F. Nagy
Treasurer
Dear Sir:
The undersigned are the holders of $75,000,000 aggregate principal amount of
the 6.55% Senior Notes due December 16, 2003, as amended (the "Notes"), issued
pursuant to the Note Purchase Agreement, dated December 16, 1993 (the
"Agreements"), between The Standard Products Company (the "Company") and the
undersigned.
As holders of the Notes and parties to the Agreements, and subject to the
Company's agreement herewith as evidenced by the signature of an authorized
officer of the Company at the foot hereof, Metropolitan hereby agrees with the
Company that Section 8.3 ("Current Ratio") of the Notes shall be amended by
deleting the percentage "one hundred twenty-five percent (125%)" appearing
therein and replacing it with the percentage "one hundred percent (100%)".
It is understood that no compensation has been paid to any other senior lenders
of the Company for agreement to the amendments referred to in this letter and
that all senior lenders have agreed to such amendments. It is further
understood that if any bank lenders of the Company subsequently increase the
current ratio required by such bank lenders to be maintained by the Company,
the current ratio referred to in Section 8.3 of the Notes shall be raised to
such levels.
If you are in agreement with the foregoing amendment please sign below and
return three of the enclosed copies of this letter to Metropolitan Life
Insurance Company, 334 Madison Avenue, Convent Station, New Jersey 07961-0633,
to the attention of Morian Mooers, whereupon such amendment shall be effective
as of the date first above written.
Very truly yours,
METROPOLITAN LIFE INSURANCE METROPOLITAN INSURANCE AND
COMPANY ANNUITY COMPANY
By: /s/ Joe A. Augustini By: /s/ James A. Wiviott
- ------------------------------------ --------------------------
Vice President
METROPOLITAN PROPERTY AND
CASUALTY INSURANCE COMPANY
By: /s/ James A. Wiviott
--------------------------
The foregoing amendment to the
Agreement is accepted and agreed to.
THE STANDARD PRODUCTS COMPANY.
By: /s/ Charles F. Nagy
- ------------------------------------
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 564
<SECURITIES> 0
<RECEIVABLES> 155,878
<ALLOWANCES> 2,685
<INVENTORY> 68,959
<CURRENT-ASSETS> 246,288
<PP&E> 573,615
<DEPRECIATION> 274,257
<TOTAL-ASSETS> 669,487
<CURRENT-LIABILITIES> 196,013
<BONDS> 128,476
0
0
<COMMON> 16,807
<OTHER-SE> 246,028
<TOTAL-LIABILITY-AND-EQUITY> 669,487
<SALES> 266,620
<TOTAL-REVENUES> 266,620
<CGS> 234,924
<TOTAL-COSTS> 251,825
<OTHER-EXPENSES> (59)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,031
<INCOME-PRETAX> 11,823
<INCOME-TAX> 5,479
<INCOME-CONTINUING> 6,344
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,344
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
