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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
Commission file number 1-4743
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Standard Motor Products, Inc.
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(Exact name of registrant as specified in its charter)
New York 11-1362020
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(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
37-18 Northern Blvd., Long Island City, N.Y. 11101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 392-0200
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class registered
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Common stock New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the Common voting stock based on a closing
price on the New York Stock Exchange on February 28, 1994 of $21.875 per share
held by nonaffiliates of the registrant was $175,309,575. For purposes of the
foregoing calculation, all directors and officers have been deemed to be
affiliates, but the registrant disclaims that any of such are affiliates.
As of the close of business on February 28, 1994 there were 13,223,576
shares outstanding of the Registrant's Common Stock.
- Continued -
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Location in Form 10-K Document
- --------------------- --------
Part III, Item 10 1994 Annual Proxy Statement
Part III, Item 11 1994 Annual Proxy Statement
Part III, Item 12 1994 Annual Proxy Statement
Part III, Item 13 1994 Annual Proxy Statement
Part IV, Item 14(a)(3)(B)(3) Restated Certificate of Incorporation dated
July 25, 1984
Part IV, Item 14(a)(3)(B)(3) By Laws
Part IV, Item 14(a)(3)(B)(3) Restated Certificate of Incorporation dated
July 31, 1990
Part IV, Item 14(a)(3)(B)(4) Note Purchase Agreement dated January 15, 1987
between the Registrant and the Travelers
Insurance Company, the Great-West Life
Assurance Company, the Franklin Life Insurance
Company, the Franklin United Life Insurance
Company and Woodmen Accident and Life Company
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated January 25, 1989
amending the Note Agreement between the
Registrant and the Travelers Insurance
Company, the Great-West Life Assurance
Company, the Franklin Life Insurance Company,
the Franklin United Life Insurance Company and
the Woodmen Accident and Life Company dated
January 15, 1987
Part IV, Item 14(a)(3)(B)(4) Credit Agreement dated March 10, 1989 between
the Registrant and Chemical Bank
Part IV, Item 14(a)(3)(B)(4) Note Purchase Agreement dated October 15, 1989
between the Registrant and the American United
Life Insurance Company, the General American
Life Insurance Company, the Jefferson-Pilot
Life Insurance Company, the Ohio National Life
Insurance Company, the Crown Insurance
Company, the Great-West Life Assurance
Company, the Guarantee Mutual Life Company,
the Security Mutual Life Insurance Company
of Lincoln, Nebraska and the Woodmen Accident
and Life Company
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated January 15,
1990 amending the Note Agreement between the
Registrant and the Travelers Insurance
Company, the Great West Life Assurance
Company, the Franklin Life Insurance Company,
the Franklin United Life Insurance Comdated
January 15, 1987
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated July 20, 1990 amending
the Credit Agreement between the Registrant
and Chemical Bank dated March 10, 1989
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated September 30, 1990
amending the Note Agreement between the
Registrant and the Travelers Insurance
Company, the Great West Life Assurance
Company, the Franklin Life Insurance Company,
the Franklin United Life Insurance Company and
Woodmen Accident and Life Company dated
January 15, 1987
-1-
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Location in Form 10-K Document
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Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated March 4, 1991 amending the
Credit Agreement between the Registrant and
Chemical Bank dated March 10, 1989
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated December 20, 1991 amending
the Credit Agreement between the Registrant and
Chemical Bank dated March 10, 1989
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated February 28, 1992 amending
the Note Agreement between the Registrant and the
Travelers Insurance Company, the Great-West Life
Assurance Company, the Franklin Life Insurance
Company, the Franklin United Life Insurance
Company and the Woodmen Accident and Life
Company dated January 15, 1987.
Part IV, Item 14(a)(3)(B)(4) Letter Agreement of July 22, 1992 amending the
Note Agreement between the Registrant and the
Travelers Insurance Company, the Great-West
Life Assurance Company, the Franklin Life
Insurance Company, the Franklin United Life
Insurance Company and Woodmen Accident and Life
Company dated January 15, 1987.
Part IV, Item 14(a)(3)(B)(4) Letter Agreement dated October 30, 1992 amending
the Credit Agreement between the Registrant and
Chemical Bank, assigned to NBD Bank, N.A., with
amendment dated December 20, 1991, dated March
10, 1989.
Part IV, Item 14(a)(3)(B)(4) Note Agreement of November 15, 1992 between the
Registrant and Kemper Investors Life Insurance
Company, Federal Kemper Life Assurance Company,
Lumbermans Mutual Casualty Company, Fidelity Life
Association, American Motorists Insurance
Company, American Manufacturers Mutual Insurance
Company, Allstate Life Insurance Company,
Teachers Insurance & Annuity Association of
America and Phoenix Home Life Mutual Insurance
Company.
Part IV, Item 14(a)(3)(B)(4) Note Agreement of November 15, 1992 between the
Registrant and Principal Mutual Life Insurance
Company and Principal National Life Insurance
Company.
Part IV, Item 14(a)(3)(B)(5) Employee Stock Ownership Plan and Trust dated
January 1, 1989
-2-
PART I
ITEM 1. BUSINESS
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(a) General Development of Business
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Registrant manufactures replacement parts for automotive
ignition systems, wires and cables, fuel system parts, temperature control
systems, power steering parts and hydraulic brake systems parts, and
distributes a general service line of automotive related items.
In April 1993, the Company acquired, for approximately
$9,000,000, substantially all of the general service line inventory and certain
related other assets of APS, Inc., a national distributor of automotive parts,
along with a ten-year agreement to supply this product line to APS, Inc. on an
exclusive basis. The acquisition increased consolidated net sales by
approximately $10,900,000 and decreased net earnings by approximately
$1,500,000 in the same period primarily due to launch costs.
As of January 1, 1994 the Company entered into a Joint
Venture Agreement with Autoline Industries, Inc. for the remanufacture of
calipers and other brake related items. The new venture, a general partnership
named Eisline Manufacturing Company, will sell the products it remanufactures
exclusively to the co-venturers under a long-term supply agreement with each.
The Company's initial investment for fixed assets and working capital will be
approximately $250,000. The remanufacturing operations of the venture will be
located at the Company's Ontario, California facility.
Replacement Parts Market. The size of the replacement
parts market depends, in part, upon the average age and number of cars on the
road and the number of miles driven per year. According to the Motor Vehicle
Manufacturers Association and United States government sources, the average age
of registered automobiles increased from 1988 through 1993 and this trend is
projected to continue during the 1990's.
(b) Financial Information about Industry Segments
---------------------------------------------
Distribution of Sales. The table below shows the
registrant's sales by product groups.
[CAPTION]
Years Ended December 31,
(Dollars in thousands)
1993 1992 1991 1990 1989
% of % of % of % of % of
Amount Total Amount Total Amount Total Amount Total Amount Total
Ignition Parts $197,244 33.8% $180,111 33.6% $179,424 33.6% $170,076 33.5% $143,934 33.5%
Wires and Cables $ 53,703 9.2% $ 47,878 8.9% $ 50,607 9.5% $ 56,723 11.2% $ 49,149 11.4%
Fuel System Parts $ 45,000 7.7% $ 47,554 8.9% $ 54,055 10.1% $ 52,291 10.3% $ 41,042 9.6%
Temperature Control
Systems $ 89,031 15.3% $ 78,767 14.7% $ 89,311 16.7% $ 83,907 16.5% $ 54,760 12.8%
Champ Service Line $ 35,973 6.2% $ 26,189 4.9% $ 26,181 4.8% $ 27,689 5.5% $ 28,612 6.7%
Brake Parts $161,900 27.8% $155,054 29.0% $135,230 25.3% $117,134 23.0% $111,360 26.0%
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total $582,851 100.0% $535,553 100.0% $534,808 100.0% $507,820 100.0% $428,857 100.0%
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
-3-
No class of products other than those listed in the chart on page 3
accounted for more than ten percent (10%) of total sales in any of such years.
The business of the registrant is not dependent on any single customer. In the
year ended December 31, 1993, the registrant's five largest customers accounted
for approximately 28.1% of sales, or approximately one hundred and sixty-four
million ($164,000,000) dollars.
Ignition Parts. Replacement parts for automotive ignition and
emission systems account for about 34% of the registrant's revenues. These
parts include distributor caps and rotors, electronic ignition modules, voltage
regulators, coils and switches. The registrant is a basic manufacturer of most
of the ignition products it markets. These products cover a wide range of
applications, from 30-year old vehicles to current models, both domestic and
import, including passenger car, truck, farm, off-road and marine applications.
Registrant's parts are sold under numerous brands and several levels
of quality. The majority of the parts represent a level of quality equal to
original equipment. The registrant also sells a premium line of parts that are
better than original equipment and are priced proportionately higher. A lower
priced line has been made available under the Modern Mechanic label. This line
is marketed under other private labels as well.
The shift from breaker-point ignition systems to electronic ignition
systems started about 20 years ago, in response to pressures from the
government and environmental groups to reduce national fuel consumption as well
as the level of pollutants from auto exhausts. These systems enable the engine
to burn fuel more completely, which improves fuel efficiency, while reducing
the amounts of harmful substances in the exhaust gases.
Electronic components comprise a portion of the registrant's total
ignition sales. A major aspect of the program was the acquisition of the fixed
assets, inventory and certain proprietary information of the Hybrid Products
Division from Fairchild Semiconductor Corporation in 1986, which included a
highly-automated electronics assembly plant in Hong Kong. This offshore
facility is now producing electronic control modules and voltage regulators at
costs that enable the registrant to compete effectively in the electronic parts
replacement market.
Since the designation of a separate emission control parts line in
1986, the registrant's sales of such parts as sensors, valves and solenoids
have increased appreciably. The registrant is a basic manufacturer of throttle
position sensors, air pump check valves, coolant temperature sensors, air
charge temperature sensors and MAP sensors. New government emission laws are
expected to increase automotive repair activity creating an increase in parts
sales.
In recent years, the registrant has significantly enhanced its
position as a leading electronics manufacturer in the automotive aftermarket
as demonstrated by the recent production of distributorless electronic control
modules. The joint venture entered into in 1992 with Blue Streak Electronics,
Inc., a rebuilder of engine management computers and MAF sensors, has
positioned the registrant to take advantage of the fast growing remanufactured
electronics market.
-4-
Brake System Products. As of August 31, 1986, the registrant
acquired the EIS Brake Parts Division from Parker-Hannifin Corporation. In the
aftermarket, brake parts represent the single largest product group in a
warehouse distributor's inventory. In the registrant's view, this product
group could well surpass its ignition line as the largest single source of
revenue.
The division manufactures a full line of brake replacement parts and
also markets many special tools and fluids used by mechanics who perform brake
service. EIS has a long- established reputation in the industry for quality
products and engineering excellence.
Continued sales growth rates of the EIS division is based on several
factors: EIS's respected name as a supplier of reliable products; the expanded
opportunities for changeovers among registrant's existing customers of their
five other product lines; and the fact that, at the time of acquisition, the
division had a relatively small share of the market.
Sales in 1993 represented approximately a 4% increase over 1992. EIS
products account for approximately 28% of the registrant's revenues, making it
the second largest producer of revenues for the registrant. A major factor for
this increase has been the growth of private label business with Carquest, a
major traditional aftermarket distributor.
We anticipate that EIS's growth will be enhanced in 1994 and the
future as a result of its entry into the retail and other markets.
Wires and Cables. Wire and cable parts account for about 9% of the
registrant's revenues. Products include ignition (spark plug) wires, battery
cables and a wide range of electrical wire, terminals, connectors and tools for
servicing an automobile's electrical system.
A major part of this division's business is the sale of ignition wire
sets. Since 1980, the registrant has made strong advances in the aftermarket,
by developing and promoting a premium brand of ignition wires. Through a
variety of marketing programs and advertising campaigns, the registrant was
able to capitalize on the market's new awareness of the importance of quality.
The registrant also manufactures a second line of wire and cable
products, known as Modern Mechanic. In 1992, this line was expanded to include
import coverage and was made available to all customers who now carry the
Standard and GPS brands.
Fuel System Parts. Fuel system parts account for about 8% of the
registrant's revenues. The registrant manufactures and markets over 2,000
parts for the maintenance and repair of automotive fuel systems. These parts
are sold under various brand names which include parts for traditional
carburetors, feedback carburetors, fuel pumps, throttle body injection units
and multi-port fuel injection systems.
For several decades, the registrant's most important product was the
carburetor rebuilding kit. Although these kits still represent a significant
portion of the registrant's business, their sales have been declining gradually
as car manufacturers change over to electronic fuel injection systems.
Anticipating the eventual phase-out of carburetors, the registrant introduced
in 1987 a line of fuel injection parts, including replacement fuel injectors.
The injectors incorporate new disc-type design that makes them virtually immune
to clogging, a known problem associated with O.E. injectors. Fuel injection
parts are still a small segment of total fuel system business but rapid growth
has developed over the last several years.
-5-
In 1988 the registrant introduced its fuel pump product group. By
offering a full line of mechanical and electrical fuel pumps to customers, the
registrant will enhance its position as a central source of replacement parts
for almost every part of today's and tomorrow's fuel systems. In 1993, the
registrant continued to aggressively pursue the increase in parts marketed by
its fuel pump product group. The registrant is expanding its activities in the
fuel systems area to include the manufacturing of electronic fuel pumps.
Temperature Control Systems & Power Steering Parts. The registrant
markets a line of replacement parts for automotive temperature control systems
(air conditioning and heating), under the brand name Four Seasons. Revenues
from Four Seasons accounted for approximately 15% of the registrant's total
sales.
Federal regulation of CFC (fluorocarbon) refrigerants is
revolutionizing the climate control industry. Legislation is gradually phasing
out R-12 refrigerant (DuPont's Freon and other brands) completely. This is
generating wide industry demand for refrigeration recycling equipment, retrofit
kits, and for training in recycling and retrofit techniques. In the near
future, vehicle air conditioners needing repair or recharge become candidates
for retrofit to use the new R-134a refrigerant, at a cost of several hundred
dollars per car. Installers are urgently seeking training and certification in
the new technology, and the Company's Four Seasons division has taken the lead
in providing these services.
These major technological changes require many new parts, as well as
new service equipment. As a result, our climate control division is enjoying
excellent growth opportunities.
Four Seasons also markets a full line of power steering products,
which currently number over 1,500 parts including replacement hose assemblies
and pumps.
Champ Service Line Products. In 1993, Champ accounted for
approximately 6% of the registrant's total sales. The division markets over
8,000 different automotive-related items, ranging from mirrors, window cranks
and antennas to cleaning and polishing materials, specialty tools and
maintenance supplies.
Champ purchases products from a wide range of manufacturers and
packages them under the Champ and Big A private brand label, enabling its
customers to conveniently order items in many separate product groups from a
single source. Ordering efficiency and effective shipping are considered key
benefits for the registrant's customers, and continue to impact favorably on
the Champ division's sales and continued prospects for growth.
Early in 1993, Champ's flexibility was enhanced by the designation of
its own management team and sales force.
(c) Narrative Description of Business
Sales and Distribution. The registrant sells its products throughout
the United States and Canada under its proprietary brand names, to
approximately 1,600 warehouse distributors, who distribute to approximately
27,000 jobber outlets. The jobbers sell the registrant's products primarily to
professional mechanics, and secondarily to consumers who perform their own
automobile repairs. The registrant has a direct field sales force of
approximately 550 persons.
-6-
The registrant generates demand for its products by directing the
major portion of its sales effort to its customers' customers (i.e. jobbers and
professional mechanics). In 1993 the registrant conducted approximately 4,000
instructional clinics, which teach mechanics how to diagnose and repair complex
new electronic ignition systems, including computerized ignition and emission
controls, automotive brake systems and temperature control systems. The
registrant also publishes and sells related service manuals and video/cassettes
and provides a free technical information bulletin service to registered
mechanics. In addition, our Standard Plus Club, a professional service dealer
network comprising approximately 12,000 members, offers technical and business
development support and has a technical service telephone hotline.
The registrant continued expansion into the retail market by selling
its products to large retail chains. The registrant expects continued growth
in the retail market in future years.
Production and Engineering. The registrant engineers, tools and
manufactures most of the components for its products, except for the Champ
Service Line, many air conditioner, brake hydraulic, brake system, fuel system
and certain commonly available small parts. It also performs its own plastic
and rubber molding operations, extensive screw machining and power press
operations, automated electronics assembly and a wide variety of other
processes.
The registrant has engineering departments staffed by 74 persons,
approximately 69% of whom are graduate engineers. The departments perform
product research and development and quality control and, wherever practical,
design machinery for automation of the registrant's factories.
As new models of automobiles, trucks, tractors, buses and other
equipment are introduced, the registrant engineers and manufactures replacement
parts for them. The registrant typically has a substantial lead time to
engineer and manufacture new products. The registrant employs and trains tool
and die makers needed in its manufacturing operations.
Competition. Although the registrant is a leading independent
manufacturer of automotive replacement parts and supplies, it faces substantial
competition in all markets that it serves. A number of major manufacturers of
replacement parts and supplies are divisions of companies having greater
financial resources than those of the registrant. In addition, automobile
manufacturers supply virtually every replacement part sold by the registrant.
The competitive factors affecting the registrant's products are
primarily product quality, customer service and price. The registrant's
business requires that it maintain inventory levels satisfactory for the rapid
delivery requirements of customers. Management believes that it is able to
compete effectively and that its trademarks and trade names are well known and
command respect in the industry and the marketplace.
Backlog. Backlog is maintained at minimal levels by the registrant.
The registrant fills orders, as received, from inventory and manufactures to
maintain inventory levels.
-7-
Supplies. The principal raw materials purchased by the registrant
consist of brass, electronic components, fabricated copper (primarily in the
form of magnet wire and insulated cable), ignition wire, stainless steel coils
and rods, aluminum coils and rods, lead, rubber molding compound, thermo-set
and thermo plastic molding powders, cast iron castings and friction lining
materials. All of these materials are purchased in the open market and are
available from a number of prime suppliers.
Insurance. In 1988 and 1989 the registrant maintained basic
liability coverage (general, product and automobile) of $1 million and umbrella
liability coverage of $10 million. In 1990, 1991 and 1992 the umbrella
coverage was increased to $20 million. In 1993 the umbrella coverage was
increased to $50 million and remains at $50 million for 1994. Historically,
the registrant has not experienced casualty losses in any year in excess of its
coverage. Management has no reason to expect this experience to change, but
can offer no assurances that liability losses in the future will not exceed the
registrant's coverage.
Employees. The registrant has approximately 3,450 employees in the
United States, Canada, Puerto Rico and Hong Kong. Of these, approximately
1,500 are production employees. Long Island City, New York production
employees are covered by a collective bargaining agreement with the United Auto
Workers, which expires on October 1, 1995. Edwardsville, Kansas production
employees are covered by a United Auto Workers contract that expires April 7,
1994. Berlin, Connecticut employees are covered by a collective bargaining
agreement with the United Auto Workers, which expires on June 1, 1995. The
registrant believes that its facilities are in favorable labor markets with
ready access to adequate numbers of skilled and unskilled workers. In the
opinion of management, employee relations have been good. There have been no
significant strikes or work stoppages in the last five years.
(d) Financial Information About Export Sales
The registrant sells its general line of products primarily through
Canada, Latin America, Europe and the Middle East. The table below shows the
registrant's export sales for the last three years:
(Dollars in thousands)
Years Ended December 31, 1993 1992 1991
Canada $32,341 $29,083 $27,438
All Others 12,746 12,209 13,729
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Total $45,087 $41,292 $41,167
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-8-
ITEM 2. PROPERTIES
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The registrant maintains its executive offices and a
manufacturing plant at 37-18 Northern Boulevard, Long Island City, NY.
The table below describes the registrant's major (a)
manufacturing and packaging properties and (b) warehousing properties. (For
information with respect to rentals, see note 16 of Notes to Consolidated
Financial Statements on page F11.).
[CAPTION]
(a) Manufacturing Properties
Approximate Products
Number of (See Key
Location Square Feet Owned or Leased Employees On Page 10)
Long Island City, 318,000 Owned (1) (2) (7) 529 A, I
New York
Edwardsville, 150,000 Owned (2) (3) 248 B, C, D
Kansas
Puerto Rico 114,000 Leased (expires in 1997) 296 A, B, H
Hong Kong 41,800 Leased (expires in 1994) 99 I
Grapevine, Texas 180,000 Owned (2) (5) (12) 267 E, J
Middletown, CT 161,700 Owned (9) -0- H
Berlin, CT 165,000 Owned (1) (9) 316 H
Manila, AR 119,300 Leased (expires in 1994) (11) 237 F
Manila, AR 150,000 Owned (2) (8) 37 F, H
Manila, AR 100,000 Owned (2) (10) 22 F
Rural Retreat, VA 72,300 Leased (expires in 2003) 48 F
West Bend, WI 110,600 Owned (6) -0-
Ontario, CA 107,600 Leased (expires in 2003) (13) 27 F
-Continued-
See Notes on page 11
-9-
[CAPTION]
(b) Warehousing Properties
Approximate Products
Number of (See Key
Location Square Feet Owned or Leased Employees On Page 10)
Disputanta, VA 411,000 Owned 249 A, I, D
Edwardsville, 205,000 Owned (1) (2) (3) 164 B, C, D
Kansas
Reno, Nevada 67,000 Owned (4) 22 A, B, C, E, I
Coppell, Texas 168,000 Owned (1) 120 E, J
Berlin, CT 66,000 Owned (9) 142 H
Mississauga, Canada 96,800 Leased (expires in 1996) (1) 41 A, B, C, D, E,
F, G, H, I
Calgary, Canada 33,500 Leased (expires in 1994) 8 A, B, C, D, E, F,
G, H, I
Ontario, CA 142,600 Leased (expires in 2003) (13) 24 A, B, C, E, F, G, H, I
Product Key: A) Ignition
B) Carburetor
C) Wire & Cable
D) Champ Service Line
E) Temperature Control System Parts
F) Friction - Brake Shoes & Pads
G) Drums & Rotors
H) Hydraulic Brake System Components
I) Electronic Ignition
J) Power Steering Parts
See Notes on page 11
-10-
NOTES TO PROPERTY SCHEDULE:
(1) Includes executive or division offices.
(2) While owned by the registrant for accounting purposes, these
properties were actually sold to local industrial development
authorities and leased to the registrant under the terms of
Industrial Revenue Bond ("IRB") financing agreements. Under those
agreements,title to these properties passes to the registrant at
maturity for little or no consideration. The rental payments made
by the registrant equal the principal and interest due under each
IRB.
(3) Financed with a bond issue in 1982 for $1,750,000 maturing in 1997.
(4) This property is owned subject to a mortgage held by the
Massachusetts Mutual Life Insurance Company, in the original
amount of $465,000, the final payment of which is due in 1995.
(5) Financed with a bond issue in 1980 for $2,670,000 fully paid off
in 1993 and a bond issue in 1984 for $2,000,000 maturing through 1999.
(6) As of January 1, 1987, the registrant vacated this facility. It
is now being leased by the registrant to a third party.
(7) This property was purchased on January 5, 1988.
(8) Financed with a bond issue in 1989 for $2,500,000 maturing through 1999.
(9) The manufacturing operations of the Middletown facility have been
consolidated with the existing manufacturing operations at the expanded
Berlin, CT facility. This facility is presently being offered for sale.
(10) Financed with a bond issue in 1990 for $1,800,000 maturing through 2000.
(11) Under terms of the lease, the registrant has an option to purchase the
property for $1,000 at the expiration of the lease.
(12) The registrant uses this facility for chemical storage.
(13) During 1993, the Gardena, CA and Rancho Cucamonga, CA facilities were
consolidated into the new Ontario, California facility.
-11-
ITEM 3. LEGAL PROCEEDINGS.
- ---------------------------------
Currently, there are no legal proceedings which management deems
would have a material economic impact on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- -------------------------------------------------------------------
None
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
- ------------------------------------------------------------
RELATED STOCKHOLDER MATTERS.
----------------------------
The Company's stock is listed on the New York Stock Exchange. The
number of Shareholders of record of Common stock on February 28, 1994 was
approximately 1,100 including brokers who hold approximately 7,186,265 shares
in street name. The quarterly market price and dividend information is
presented in the following chart.
Price Range of Common Stock and Dividends
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol SMP. The following table shows the high and low sale prices on the
composite tape of, and the dividend paid per share on, the Common Stock during
the periods indicated.
1993 Quarter High Low Dividend 1992 Quarter High Low Dividend
- -------------------------------------- --------------------------------------
1st $17.38 $13.13 $.08 1st $12.25 $9.50 $.08
2nd 20.25 16.13 .08 2nd 13.25 10.38 .08
3rd 24.13 18.88 .08 3rd 13.50 11.50 .08
4th 26.88 21.00 .08 4th 13.63 11.38 .08
- --------------------------------------------------------------------------------
The Board of Directors will consider the payment of future dividends on the
basis of earnings, capital requirements and the financial condition of the
Company. The Company's loan agreements limit dividends and distributions by
the Company. As of December 31, 1993, approximately $8,434,000 of retained
earnings was available under those agreements for payment of cash dividends and
purchase of capital stock.
-12-
PART II (CONT'D)
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ITEM 6. SELECTED FINANCIAL DATA.
- ---------------------------------------
The following summary financial information has been extracted from the audited
financial statements of the Company.
[CAPTION]
Years Ended December 31,
1993 1992 1991 1990 1989
(In thousands, except per share data)
Net sales $582,851 $535,553 $534,808 $507,820 $428,857
Earnings before cumulative effect of $ 18,598 $ 8,878 $ 6,667 $ 7,734 $ 13,143
changes in accounting principles
Net earnings $ 17,508 $ 8,878 $ 6,667 $ 7,734 $ 13,143
Earnings per share before cumulative $ 1.41 $ .68 $ .51 $ .59 $ 1.00
effect of changes in accounting
principles
Net earnings per share $ 1.32 $ .68 $ .51 $ .59 $ 1.00
Working capital $204,232 $190,896 $131,137 $145,893 $164,255
Total assets $423,337 $374,930 $392,755 $422,099 $406,037
Long-term debt (excluding current $130,514 $136,111 $ 73,338 $ 90,230 $103,238
portion)
Stockholders' equity $178,183 $161,128 $155,328 $151,035 $145,682
Stockholders' equity per share $ 13.47 $ 12.28 $ 11.84 $ 11.51 $ 11.10
Cash dividends per common share $ .32 $ .32 $ .32 $ .32 $ .32
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources - During 1993, stockholders' equity increased
$17,055,000 to $178,183,000 and working capital increased $13,336,000 to
$204,232,000. Cash provided by operations in 1991 amounted to $50,573,000,
primarily due to the decrease in inventories of $35,775,000. In 1992, cash
provided by operations amounted to $31,550,000, primarily due to the
$25,358,000 reduction in inventories. In 1993, cash provided by operations
amounted to $20,105,000 primarily due to net income of $17,508,000. Cash used
in investing activities in 1991 was $7,126,000 primarily due to capital
expenditures partially offset by proceeds from sales of marketable securities.
Cash used in investing activities, primarily due to capital expenditures, was
$15,048,000 in 1992 and $11,899,000 in 1993. Cash used in financing
activities, primarily due to repayment of debt and dividend payments, was
$30,099,000 in 1991 and $23,519,000 in 1992. In December 1992, the Company
secured $80,000,000 in long-term financing which was used to reduce short-term
bank borrowings. Cash used in financing activities in 1993 was $12,879,000
which consisted primarily of repayments of debt and dividend payments. In
1993, cash provided by the exercise of employee stock options was almost
entirely offset by the repurchase of treasury stock.
The Company expects capital expenditures to be approximately
$14,000,000 for new machinery and equipment. At December 31, 1993, the
Company had unused lines of credit aggregating approximately $105,000,000
which will be used as a source of funding capital expenditures and working
capital requirements.
Comparison of 1993 to 1992 - Property, plant and
equipment additions of $12,329,000 were primarily attributable to
expenditures for new machinery and equipment.
-13-
PART II (CONT'D)
Short-term notes payable increased $5,100,000 primarily due to principal
payments of long-term debt and capital expenditures. Long-term debt (current
and non-current) decreased $16,010,000. In 1994, required long-term debt
payments will be approximately $4,935,000.
Net sales increased $47,298,000 or 8.8%. The sales increase was primarily
attributable to increased sales at the Standard Division, Four Seasons Division
and the Champ Service Line Division. The sales increase at the Champ Service
Line Division was primarily due to the acquisition of substantially all of the
General Service Line inventory and certain other related assets of APS, Inc. in
the second quarter of 1993 (see Note 2). Excluding the sales resulting from
the acquisition, revenues increased by 6.8% in 1993 compared to a year ago.
Cost of goods sold increased $27,018,000 from $346,570,000 to $373,588,000.
Cost of sales, as a percentage of net sales, decreased from 64.7% to 64.1%.
The improvement was attributable to continuous cost reduction programs, and
increased absorption of manufacturing overhead partially offset by the lower
gross margins of the new product line acquired by the Champ Service Line
Division.
Selling, general and administrative expenses increased by 1.5% or $2,460,000.
This increase was primarily due to costs to support the service line expansion,
higher variable costs due to increased sales, higher administrative expenses,
ongoing postretirement expenses and increased employee profit sharing
contributions due to the higher level of earnings. This increase was partially
offset by lower new customer acquisition costs.
Restructuring charges of $2,781,000 were incurred in 1993 primarily due to the
consolidation of the EIS Brake Parts operation within Connecticut and the
rationalization of the Company's manufacturing operations involving the
relocation of several product lines.
Other income (expense), net increased $951,000 primarily due to income from
Blue Streak Electronics, Inc., a decrease on the loss on sale of receivables
and realized gains on investments sold.
Interest expense was virtually unchanged versus the year earlier period. The
interest expense reduction resulting from a lower level of borrowings was
offset by an increase in the average maturity of borrowings resulting in a
greater portion of borrowings with higher interest rates associated with such
longer-term borrowings.
Taxes based on earnings increased by $6,265,000 due to increased earnings and a
higher effective tax rate. The higher effective tax rate in 1993 was primarily
due to an increase in tax rates resulting from the Omnibus Budget
Reconciliation Act of 1993 and lower United States tax exempt earnings of the
Company's Puerto Rican operation relative to the Company's Domestic operations.
Cumulative effect of changes in accounting for postretirement benefits and
income taxes, net is the result of the Company adopting, as of January 1, 1993
two changes in accounting principles, Statement of Financial Accounting
Standards (SFAS) No. 106 - "Employers' Accounting for Postretirement Benefits
Other Than Pensions" and SFAS No. 109 - "Accounting for Income Taxes". The
aftertax charge for SFAS No. 106 of $6,135,000 (after an income tax benefit of
$4,090,000), combined with the tax benefit for SFAS No. 109 of $5,045,000
reduced net earnings by $1,090,000.
Comparison of 1992 to 1991 - Property, plant and equipment additions of
$15,257,000 were attributable to new building construction in Connecticut and
Texas and expenditures for new machinery and equipment.
-14-
PART II (CONT'D)
-------
Short-term notes payable to the banks decreased $82,200,000, primarily due to
refinancing and inventory reductions, partially offset by principal payments of
long-term debt and capital expenditures.
Long-term debt (current and non-current) increased $61,218,000. This was
attributable to the issuance of $80,000,000 in long-term financing partially
offset by principal payments of $18,782,000. In 1993, required long-term debt
payments will be approximately $15,348,000.
Net sales increased $745,000 or 0.1%. Sales increases in the brake parts line
were offset by sales decreases in temperature control systems, fuel systems and
wire and cable. Ignition parts had a modest increase while Champ Service Line
was flat.
Cost of goods sold decreased $951,000, from $347,521,000 to $346,570,000. Cost
of sales, as a percentage of net sales, decreased from 65.0% to 64.7%. The
improvement was attributable to achieving strict cost controls and
implementation of "Just in Time" manufacturing. Provisions for slow-moving and
excess inventories negatively affected the cost of sales percentage in both
1992 and 1991.
Selling, general and administrative expenses increased $3,774,000. This
increase was primarily due to the provisions for bad debts, marketing programs
and allowances, workmen's compensation expenses and plant consolidation
expenses. Offsetting these increases were lower customer acquisition costs and
cost reduction programs.
Other income (expense) - net increased $221,000 primarily due to a reduction in
loss on sale of receivables offset by lower returns on investments.
Interest expense decreased $4,833,000 primarily due to lower interest rates on
bank loans and a lower level of borrowings.
Taxes based on earnings increased $765,000 due to higher earnings and a higher
effective tax rate.
Net income increased $2,211,000 from $6,667,000 to $8,878,000.
Impact of Inflation - Although inflation is not a significant issue, the
Company's management believes it will be able to continue to minimize any
adverse effect of inflation on earnings. This will be achieved principally by
cost reduction programs and, where competitive situations permit, selling price
increases.
Future Results of Operations - The Company expects to continue the inventory
reduction program initiated in 1991. From December 1990 through December 1993
inventory has been reduced approximately $50 million.
The company is facing increased price pressures in certain areas and has
reduced prices in its Four Seasons Temperature Control, EIS Brake Parts and
Champ Service Lines. These price reductions are expected to total
approximately $7 million in 1994. Cost reduction programs are being
implemented and are anticipated to offset most of the loss due to these price
reductions.
-15-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- -----------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Standard Motor Products, Inc.
We have audited the consolidated balance sheets of Standard Motor Products,
Inc. and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of earnings, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Standard Motor
Products, Inc. and subsidiaries as of December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles.
New York, New York David Berdon & Co.
February 25, 1994 Certified Public Accountants
-F1-
[CAPTION]
Standard Motor Products, Inc. and Subsidiaries
Statements of Consolidated Earnings
(Dollars in thousands, except per share amounts)
Years Ended December 31,
--------------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------
Net sales $582,851 $535,553 $534,808
Cost of sales 373,588 346,570 347,521
- -----------------------------------------------------------------------------------------------
Gross profit on sales 209,263 188,983 187,287
Selling, general and administrative expenses 168,981 166,521 162,747
Provision for restructuring charges (Note 17) 2,781 -- --
- -----------------------------------------------------------------------------------------------
37,501 22,462 24,540
Other income (expense), net (Note 13) 1,648 697 476
- -----------------------------------------------------------------------------------------------
39,149 23,159 25,016
Interest expense 12,344 12,339 17,172
- -----------------------------------------------------------------------------------------------
Earnings before taxes and cumulative effect of
changes in accounting principles 26,805 10,820 7,844
- -----------------------------------------------------------------------------------------------
Taxes based on earnings (Note 14)
Current:
Federal 11,475 1,996 2,493
State and local 2,275 522 533
- -----------------------------------------------------------------------------------------------
13,750 2,518 3,026
Deferred (5,543) (576) (1,849)
- -----------------------------------------------------------------------------------------------
8,207 1,942 1,177
Earnings before cumulative effect of
changes in accounting principles 18,598 8,878 6,667
Cumulative effect of changes in accounting for postretirement
benefits and income taxes, net (Notes 12 and 14) (1,090) -- --
- -----------------------------------------------------------------------------------------------
Net earnings $ 17,508 $ 8,878 $ 6,667
- -----------------------------------------------------------------------------------------------
Cash dividends paid:
Common stock $.32 per share $ 4,211 $ 4,199 $ 4,198
- -----------------------------------------------------------------------------------------------
Per share data:
Earnings before cumulative effect of changes in
accounting principles $ 1.41 $ .68 $ .51
Cumulative effect of changes in accounting principles (.09) -- --
- -----------------------------------------------------------------------------------------------
Net earnings per common and
common equivalent share (Note 1) $ 1.32 $ .68 $ .51
- -----------------------------------------------------------------------------------------------
Average number of common and
common equivalent shares 13,226,678 13,130,733 13,121,229
- -----------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
-F2-
[CAPTION]
Standard Motor Products, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
December 31,
--------------------
1993 1992
- -----------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents (Notes 1 and 15) $ 12,346 $ 17,025
Marketable securities (Note 1) 11 --
Accounts receivable, less allowances for discounts and
doubtful accounts of $5,536 (1992 $5,321) (Note 3) 97,754 83,788
Inventories (Notes 1 and 4) 164,150 153,198
Prepaid taxes based on earnings 974 1,233
Deferred income taxes (Notes 1 and 14) 17,460 2,427
Prepaid expenses and other current assets 11,100 7,646
- -----------------------------------------------------------------------------------------------
Total current assets 303,795 265,317
- -----------------------------------------------------------------------------------------------
Property, plant and equipment, net (Notes 1, 5 and 8) 103,004 101,529
- -----------------------------------------------------------------------------------------------
Other assets:
Receivables due after one year 2,645 634
Sundry (Note 6) 13,893 7,450
- -----------------------------------------------------------------------------------------------
Total other assets 16,538 8,084
- -----------------------------------------------------------------------------------------------
Total assets $423,337 $374,930
- -----------------------------------------------------------------------------------------------
Current liabilities:
Notes payable banks (Note 7) $ 5,100 $ --
Current portion of long-term debt (Notes 8 and 15) 4,935 15,348
Accounts payable 41,373 27,145
Sundry payables and accrued expenses 32,033 21,142
Taxes based on earnings 4,617 1,762
Taxes (other than those based on earnings) 1,332 1,362
Payroll and commissions 10,173 7,662
- -----------------------------------------------------------------------------------------------
Total current liabilities 99,563 74,421
- -----------------------------------------------------------------------------------------------
Long-term debt (current portion shown above) (Notes 8 and 15) 130,514 136,111
- -----------------------------------------------------------------------------------------------
Deferred income taxes (Notes 1 and 14) 3,625 3,270
- -----------------------------------------------------------------------------------------------
Postretirement benefits other than pensions (Note 12) 11,452 --
- -----------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 8, 9, 15 and 16)
Stockholders equity (Notes 1, 8, 9, 10 and 11):
Common Stock par value $2.00 per share:
Authorized 30,000,000 shares, issued 13,309,976 shares in 1993 and
13,228,788 shares in 1992 (including 5,000 and 107,262 shares
held as treasury shares in 1993 and 1992, respectively) 26,620 26,458
Capital in excess of par value 2,120 1,654
Loan to E.S.O.P. (8,385) (10,065)
Minimum pension liability adjustment (581) (664)
Retained earnings 158,456 145,159
Foreign currency translation adjustment 69 --
- -----------------------------------------------------------------------------------------------
178,299 162,542
Less: Treasury stock at cost 116 1,414
- -----------------------------------------------------------------------------------------------
Total stockholders equity 178,183 161,128
- -----------------------------------------------------------------------------------------------
Total liabilities and stockholders equity $423,337 $374,930
- -----------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
-F3-
[CAPTION]
Standard Motor Products, Inc. and Subsidiaries
Statements of Consolidated Cash Flows
(In thousands)
Years Ended December 31,
--------------------------------
1993 1992 1991
---------------------------------------------------------------------------------------------------
Cash Flows Net Income $17,508 $ 8,878 $ 6,667
From ---------------------------------------------------------------------------------------------------
Operating Adjustments to reconcile net income to net cash
Activities provided by operating activities:
Cumulative effect of changes in accounting for postretirement
benefits and income taxes, net 1,090 -- --
Depreciation and amortization 10,523 9,688 8,867
Loss on disposal of property, plant & equipment 204 191 439
(Gain) loss on sale of marketable securities (324) (157) 373
Tax benefits applicable to E.S.O.P. 124 123 125
Tax benefits applicable to the exercise of employee stock options 1,240 -- --
Change in assets and liabilities:
(Increase) decrease in accounts receivable (14,127) (5,474) 2,859
(Increase) decrease in inventories (11,120) 25,358 35,775
(Increase) decrease in prepaid taxes based on earnings 259 (97) (1,136)
(Increase) decrease in other assets (8,542) (3,025) 2,458
Increase (decrease) in accounts payable 14,237 (6,792) 1,216
Increase (decrease) in taxes based on earnings 2,856 1,269 (68)
(Decrease) in deferred income taxes (5,543) (576) (1,849)
Increase (decrease) in other current assets and liabilities (469) 714 (2,885)
Increase (decrease) in sundry payables and accrued expenses 12,189 1,450 (2,268)
---------------------------------------------------------------------------------------------------
Total adjustments 2,597 22,672 43,906
---------------------------------------------------------------------------------------------------
Net cash provided by operating activities 20,105 31,550 50,573
---------------------------------------------------------------------------------------------------
Cash Flows Proceeds from sales of marketable securities 18,283 23,533 7,903
From Purchases of marketable securities (17,970) (23,376) (3,169)
Investing Sale of fixed assets 117 52 189
Activities Capital expenditures (12,329) (15,257) (12,049)
---------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (11,899) (15,048) (7,126)
---------------------------------------------------------------------------------------------------
Cash Flows Net borrowings (repayments) under line-of-credit agreements 5,100 (82,200) (12,800)
From Proceeds from issuance of long-term debt -- 80,000 --
Financing Principal payments of long-term debt (16,010) (18,782) (14,800)
Activities Reduction of loan to E.S.O.P. 1,680 1,680 1,679
Proceeds from exercise of employee stock options 5,086 20 20
Purchase of treasury stock (4,524) (38) --
Dividends paid (4,211) (4,199) (4,198)
---------------------------------------------------------------------------------------------------
Net cash (used in) financing activities (12,879) (23,519) (30,099)
---------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (6) -- --
---------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (4,679) (7,017) 13,348
Cash and cash equivalents at beginning of year 17,025 24,042 10,694
---------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $12,346 $17,025 $24,042
---------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $12,160 $13,284 $17,911
Income taxes 10,635 1,346 4,230
---------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
-F4-
[CAPTION]
Standard Motor Products, Inc. and Subsidiaries
Statements of Consolidated Changes in Stockholders Equity
(In thousands)
Years Ended December 31, 1993, 1992 and 1991
- --------------------------------------------------------------------------------------------------------------------------------
Minimum Foreign
Capital in Loan Pension Currency
Common Excess of to Liability Retained Translation Treasury
Stock Par Value E.S.O.P. Adjustment Earnings Adjustment Stock Total
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1990 $26,458 $1,417 $(13,424) $138,011 $(1,427) $151,035
Net earnings 1991 6,667 6,667
Cash dividends paid (4,198) (4,198)
Exercise of employee stock options (6) 26 20
Tax benefits applicable to
Employee Stock Ownership Plan 125 125
Employee Stock Ownership Plan 1,679 1,679
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1991 26,458 1,536 (11,745) 140,480 (1,401) 155,328
Net earnings 1992 8,878 8,878
Cash dividends paid (4,199) (4,199)
Exercise of employee stock options (5) 25 20
Minimum pension liability adjustment $(664) (664)
Tax benefits applicable to
Employee Stock Ownership Plan 123 123
Employee Stock Ownership Plan 1,680 1,680
Purchase of treasury stock (38) (38)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 26,458 1,654 (10,065) (664) 145,159 (1,414) 161,128
Net earnings 1993 17,508 17,508
Cash dividends paid (4,211) (4,211)
Exercise of employee stock options 162 (898) 5,822 5,086
Minimum pension liability adjustment 83 83
Tax benefits applicable to
Employee Stock Ownership Plan 124 124
Tax benefits applicable to the exercise
of employee stock options 1,240 1,240
Employee Stock Ownership Plan 1,680 1,680
Purchase of treasury stock (4,524) (4,524)
Foreign currency translation adjustment $69 69
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 $26,620 $2,120 $(8,385) $(581) $158,456 $69 $(116) $178,183
- --------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
-F5-
Standard Motor Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation
The Company is engaged in the manufacture and sale of automotive
replacement parts.
The consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries, all of which are
wholly owned. As more fully described in Note 2, the Companys
investment in an unconsolidated affiliate is accounted for on the
equity method. All significant intercompany items have been
eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
a maturity of three months or less to be cash equivalents.
Marketable Securities
Marketable securities are stated at the lower of cost or market
values, determined by means of the first-in, first-out method. The
valuation allowances for the excess of cost over market value was
$13,000 at December 31, 1993.
Inventories
Inventories are stated at the lower of cost (determined by means of
the first-in, first-out method) or market values.
Property, Plant and Equipment
These assets are recorded at cost and are depreciated over their
respective useful lives using the straight-line method of
depreciation.
Stock Options
In general, no accounting is made for options until they are
exercised, at which time the difference between the option price
and the par value of the capital stock issued or the cost of
treasury stock issued is reflected in the capital in excess of par
value account.
Net Earnings Per Common and Common Equivalent Share
Net earnings per common and common equivalent share are calculated
using the daily weighted average number of common shares
outstanding during each year and on the net additional number of
shares which would be issuable upon the exercise of stock options,
assuming that the Company used the proceeds received to purchase
additional shares at market value. Shares held by the ESOP are
considered outstanding and are included in the calculation to
determine earnings per share.
Income Taxes
Deferred income taxes result from timing differences in methods of
recording certain revenues and expenses for financial reporting and
for income tax purposes (see Note 14).
Customer Acquisition Costs
Costs associated with the acquisition of new customer accounts are
deferred and amortized over a twelve-month period.
Foreign Currency Translation
Accounts of foreign subsidiaries are measured using local currency
as the functional currency. Assets and liabilities are translated
into U.S. dollars at year end exchange rates and revenues and
expenses are translated at average exchange rates during the year.
The resulting translation adjustments are recorded in a separate
component of stockholders equity.
2. Acquisitions
The Company acquired, as of September 1, 1992, 50% ownership in
Blue Streak Electronics, Inc. for approximately $360,000. Blue
Streak Electronics, Inc., located in Concord, Canada, is a
remanufacturer of automotive on-board computers, sensors and
related parts. The investment is accounted for under the equity
method. The accompanying consolidated Financial Statements include
the investment in subsidiary at December 31, 1993 and 1992 of
approximately $597,000 and $263,000, respectively in Other assets:
Sundry. The gain of approximately $352,000 in 1993 and the loss of
approximately $97,000 in 1992 attributed to this investment are
included in Other income (expense), net.
In April 1993, the Company acquired, for approximately
$9,000,000, substantially all of the general service line inventory
and certain other related assets of APS, Inc., a national
distributor of automotive parts, along with a ten-year agreement to
supply this product line to APS, Inc. on an exclusive basis. This
acquisition has been accounted for as a purchase. The acquisition
increased consolidated net sales by approximately $10,900,000 in
1993 and decreased net earnings by approximately $1,500,000 in the
same period primarily due to launch costs.
Subsequent to year end 1993, the Company entered into a Joint
Venture Agreement for the remanufacture of calipers and other brake
related items. The Companys initial investment was approximately
$250,000.
3. Sale of Accounts Receivables
On July 10, 1990, the Company entered into a three-year agreement
whereby it can sell up to a $25,000,000 undivided interest in a
designated pool of certain eligible accounts receivable. On July 8,
1993, the termination date on this agreement was extended to
October 10, 1993. On December 20, 1993, the Company entered into a
new three-year agreement with a different lending institution. At
December 31, 1993, 1992 and 1991, net receivables amounting to
$25,000,000 had been sold under these agreements. As collections
reduce previously sold undivided fractional interest, new
receivables are customarily sold up to the $25,000,000 level. At
the expiration of the agreement, the Company and the purchaser
share a proportionate risk of loss as the eligible pool of accounts
receivable is liquidated (see Note 13).
-F6-
4. Inventories
(In thousands)
December 31,
---------------------
1993 1992
----------------------------------------------------------
Inventories consist of:
Finished goods $103,886 $95,418
Work in process 18,249 19,123
Raw materials 42,015 38,657
----------------------------------------------------------
Total inventory $164,150 $153,198
----------------------------------------------------------
5. Property, Plant and Equipment
(In thousands)
December 31,
---------------------
1993 1992
----------------------------------------------------------
Property, plant and equipment consist of the following:
Land and buildings $ 67,470 $ 67,045
Machinery and equipment 55,341 50,087
Tools, dies and auxiliary equipment 6,526 5,427
Furniture and fixtures 13,756 12,496
Leasehold improvements 4,622 4,714
Construction in progress 8,147 4,692
---------------------
155,862 144,461
Less, accumulated depreciation
and amortization 52,858 42,932
----------------------------------------------------------
Total property, plant and
equipment, net $103,004 $101,529
----------------------------------------------------------
6. Other Assets Sundry
(In thousands)
December 31,
---------------------
1993 1992
----------------------------------------------------------
Other assets sundry consist of the following:
Unamortized customer supply
agreements $ 7,558 $3,142
Long-term investments 4,560 2,600
Equity in Blue Streak Electronics, Inc. 597 263
Pension assets 713 771
Deferred charges and other 465 674
----------------------------------------------------------
Total other assets sundry $13,893 $7,450
----------------------------------------------------------
7. Notes Payable Banks
The maximum amount of short-term bank borrowings outstanding at any
month-end was $27,700,000 in 1993 and $105,800,000 in 1992, and
averaged $16,958,000 and $96,100,000, respectively. The weighted
average short-term interest rate was 3.99% for 1993 and 5.15% for
1992. At December 31, 1993, the Company had unused lines of credit
aggregating approximately $105,000,000.
As part of several of the loan arrangements, the Company has
verbal agreements whereby it is expected to maintain compensating
balances which amounted to $218,000 at December 31, 1993. The
compensating balances are held under agreements which do not
legally restrict the use of such funds and, therefore, the funds
are not segregated on the face of the balance sheet. In lieu of
maintaining these balances, the Company has paid fees of
approximately $113,000, $132,000 and $107,000 in 1993, 1992 and
1991, respectively.
8. Long-Term Debt
(In thousands)
December 31,
---------------------
1993 1992
-----------------------------------------------------------------
Long-term debt consists of:
7.85% senior notes payable $ 65,000 $ 65,000
11.50%-12.00% senior notes payable 6,000 18,000
9.47% senior notes payable 30,000 30,000
6.01% senior notes payable 15,000 15,000
Credit Agreement 8,394 10,074
7.00%-13.00% purchase obligations 9,862 12,006
Floating rate purchase obligation 1,100 1,240
9.50% mortgage payable 93 139
-----------------------------------------------------------------
135,449 151,459
Less current portion 4,935 15,348
-----------------------------------------------------------------
Total noncurrent portion of long-term debt $130,514 $136,111
-----------------------------------------------------------------
Under the terms of the $65,000,000 senior note agreement, the
Company is required to repay the loan in seven equal annual
installments beginning in 1996.
Under the terms of the $6,000,000 senior note agreement, the
Company is required to repay the remaining loan in three equal
annual installments ending in 1996. An optional prepayment of
$5,000,000 was made on March 1, 1993.
Under the terms of the $30,000,000 senior note agreement, the
Company is required to repay the loan in seven varying annual
installments beginning in 1998. Subject to certain restrictions,
the Company may make prepayments without premium beginning in 1998.
Under the terms of the $15,000,000 senior note agreement, the
Company is required to repay the loan in full in 1995. The Company
also entered into an interest rate swap agreement. The swap
agreement modifies the interest rate on the $15,000,000 senior note
agreement, adjusted favorably or unfavorably for the spread between
5.66% and the 6-month reserve unadjusted London Interbank Offering
Rate ("LIBOR").
The Credit Agreement matures in equal annual installments
through 1998 and bears interest at the lower of 91% of prime rate,
or 91% of the "LIBOR" plus 1.092%. The Company also entered into an
interest rate swap agreement to reduce the impact of changes in
interest rates on its Credit Agreement. The swap agreement modifies
the interest rate on $7,762,500 of the Credit Agreement, adjusted
favorably or unfavorably for the spread between 77.52% of the
3-month reserve unadjusted LIBOR and 7.69%. The proceeds of such
note were loaned to the Companys Employee Stock Ownership Plan
(ESOP) to purchase 1,000,000 shares of the Companys common stock
to be distributed in accordance with the terms of the ESOP
established in 1989 (see Note 11).
The purchase obligations, due under agreements with
municipalities, mature in annual installments through 2003, and are
secured by properties having a net book value of approximately
$23,513,000. An optional prepayment of $660,000 was made on
November 1, 1993.
-F7-
The floating rate purchase obligation matures in annual
installments through 1999, bears interest at sixty-five percent of
prime, and is secured by property having a net book value of
approximately $1,390,000.
The mortgage payable is due in installments through 1995.
Maturities of long-term debt during the five years ending
December 31, 1998 are $4,935,000, $19,987,000, $14,262,000,
$12,912,000, and $16,601,000 respectively.
The loan agreements require the maintenance of a specified
amount of working capital and limit, among other items,
investments, leases, indebtedness and distributions for the payment
of dividends and the acquisition of capital stock. Effective
December 31, 1993, the Company had unrestricted retained earnings
of $8,434,000.
9. Stockholders Equity
The Company has authority to issue 500,000 shares of preferred
stock, $20 par value, and the Board of Directors is vested with the
authority to establish and designate series of preferred, to fix
the number of shares therein and the variations in relative rights
as between series. No such shares are outstanding at December 31,
1993.
The Company announced on October 18, 1993 that the Board of
Directors has authorized the repurchase by the Company of up to
325,000 shares of its common stock to be used to meet present and
future requirements of its stock option program. As of December 31,
1993, 195,200 shares were repurchased at a cost of $4,524,000.
10. Stock Options
Under the Companys stock option plans, options are exercisable in
whole or in part anytime during the five years following the date
of grant and while the holder is an employee of the Company.
At December 31, 1993, 82,300 options were granted but have not
yet been exercised. No additional shares of common stock were
available under authorized stock option plans.
The changes in outstanding options were as follows:
-------------------------------------------------------------------
1993 1992 1991
------------------------------------------------------------------
Outstanding at beginning.. 437,700 441,600 491,865
Granted 32,000 72,000 22,000
Exercised (1993 $10.13 to
$16.88, 1992 and 1991
$10.13) (378,650) (2,000) (2,000)
Terminated and expired (8,750) (73,900) (70,265)
------------------------------------------------------------------
Outstanding at end 82,300 437,700 441,600
------------------------------------------------------------------
Aggregate option price $1,337,688 $5,968,938 $6,330,538
------------------------------------------------------------------
At a price range per share of:
1993 1992 1991
---------------------------------------------------------------------
Beginning $10.13 to $16.88 $10.13 to $17.56 $10.13 to $17.56
End $10.13 to $18.56 $10.13 to $16.88 $10.13 to $17.56
---------------------------------------------------------------------
11. Employee Benefit Plans
The Company has a defined benefit pension plan covering
substantially all of the unionized employees of the EIS Brake Parts
Division. The benefits are based on years of service. The Companys
funding policy is to contribute annually the maximum amount that
can be deducted for federal income tax purposes. Contributions are
intended to provide not only for benefits attributed to service to
date but also for those expected to be earned in the future.
The following table sets forth the plans funded status and
amounts recognized in the Companys statement of financial position
at December 31, 1993 and 1992:
(In thousands)
December 31,
---------------------
1993 1992
---------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $9,474 ($9,011-1992) $(10,032) $(9,531)
---------------------------------------------------------------------
Projected benefit obligation for
service rendered to date $(10,032) $(9,805)
Plan assets at fair value (primarily
debt securities, commercial mortgages
and listed stocks 8,738 8,095
---------------------------------------------------------------------
Plan assets (less than) projected
benefit obligation (1,294) (1,710)
Unrecognized net loss from past
experience (different from that assumed
and effects of changes in assumptions) 1,250 1,712
Unrecognized net obligation being
recognized over 15 years 198 225
Adjustment required to recognize
minimum liability (1,448) (1,663)
---------------------------------------------------------------------
Accrued pension cost included in
accrued expenses $(1,294) $(1,436)
---------------------------------------------------------------------
Net pension cost for 1993 and 1992
included the following components:
Service cost benefits earned
during the period $ 248 $ 220
Interest cost on projected
benefit obligation 613 590
Actual return on plan assets (960) (724)
Net amortization and deferral 391 59
---------------------------------------------------------------------
Net periodic pension cost $ 292 $ 145
---------------------------------------------------------------------
Assumptions used in accounting for the pension
plan at December 31, 1993 and 1992 were:
Discount rates 6.5% 6.6%
Expected long-term rate of return
on assets 8.0% 8.5%
---------------------------------------------------------------------
Pension expense for the year ended December 31, 1991 was
$121,000.
In addition, the Company participates in several multiemployer
plans which provide defined benefits to substantially all unionized
-F8-
workers. The Multiemployer Pension Plan Amendments Act of 1980
imposes certain liabilities upon employers associated with
multiemployer plans. The Company has not received information from
the plans administrators to determine its share, if any, of
unfunded vested benefits.
The Company and certain of its subsidiaries also maintain
various defined contribution plans providing retirement benefits
for other eligible employees.
The provisions for retirement expense in connection with the
plans are as follows:
Defined
Multi- Contribution
employer Plans and Other Plans
--------------------------------------------------------------------------
Year-end December 31,
1993 $358,000 $4,760,000
1992 498,000 1,895,000
1991 478,000 1,729,000
--------------------------------------------------------------------------
In January 1989, the Company established an Employee Stock
Ownership Plan (ESOP) and Trust for employees who are not covered
by a collective bargaining agreement. The ESOP authorized the Trust
to purchase up to 1,000,000 shares of the Companys common stock in
the open market. In 1989, the Company entered into an agreement
with a bank authorizing the Company to borrow up to $18,000,000 in
connection with the ESOP. Under this agreement, the Company
borrowed $16,729,000, payable in equal annual installments through
1998 (see Note 8), which was loaned on the same terms to the ESOP
for the purchase of common stock. During 1989, the ESOP made open
market purchases of 1,000,000 shares at an average cost of $16.78
per share. The ESOP allocated approximately 100,000 shares of
common stock per annum to participants from 1989 through 1993. At
December 31, 1993, the ESOP owned approximately 500,000 shares of
common stock. Future company contributions plus dividends earned
will be used to service the debt.
Contributions to the ESOP are based on a predetermined formula
which is primarily tied into dividends earned by the ESOP and loan
repayments. The expense was calculated by subtracting dividend and
interest income earned by the ESOP, which amounted to approximately
$305,000, $313,000 and $319,000 for the years ended December 31,
1993, 1992 and 1991, respectively, from the principal repayment on
the outstanding bank loan. Interest costs amounted to approximately
$772,000, $756,000 and $1,149,000 for the years ended December 31,
1993, 1992 and 1991, respectively.
At December 31, 1993 and 1992 indebtedness of the ESOP to the
Company in the amounts of $8,385,000 and $10,065,000, respectively,
are shown as deductions from shareholders equity in the
consolidated balance sheet.
Federal income tax benefits of $124,000 in 1993, $123,000 in
1992 and $125,000 in 1991, resulting from the
deductibility of certain dividends paid by the Company to the ESOP,
were credited directly to capital in excess of par. The provision
for expense in connection with the ESOP was approximately
$1,380,000 in 1993, $1,387,000 in 1992 and $1,378,000 in 1991.
12. Postretirement Benefits
Effective January 1, 1993 the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 106, Employers
Accounting for Postretirement Benefits Other Than Pensions. Prior
years financial statements have not been restated to apply the
provisions of SFAS No. 106.
The Company provides certain medical and dental care benefits
to eligible retired employees. Approximately 2,200 employees and
retirees are eligible under this plan. Salaried employees become
eligible for retiree health care benefits after reaching age 65 if
they retire at age 65 or older with at least 15 years of continuous
service. EIS Brake Parts unionized employees become eligible after
reaching age 65 if they retire at age 65 or older with at least 10
years of continuous service. Other unionized employees are covered
under union health care plans.
Generally, the health care plans pay a stated percentage of
most health care expenses reduced for any deductible and payments
made by government programs and other group coverage. The costs of
providing most of these benefits has been shared with retirees
since 1991. Retiree annual contributions will increase
proportionally if the Companys health care payments increase. The
plans are unfunded.
SFAS No. 106 requires that the expected cost of these
postretirement benefits be charged to expense during the years that
the employees render services. SFAS No. 106 was adopted using the
immediate recognition transition option; the accumulated
postretirement benefit obligation of $10,225,000, and related
deferred tax benefit of $4,090,000 (net of $6,135,000), has been
included in cumulative effect of changes in accounting for
postretirement benefits and income taxes, net in the statement of
consolidated earnings. This new accounting method has no effect on
the Companys cash outlays for retiree benefits.
For measuring the expected postretirement benefit obligation,
a 14 percent annual rate of increase in the per capita claims cost
was assumed for 1993. This rate was assumed to decrease 1 percent
per year to 7 percent in 2000, then 0.5 percent per year to 6
percent in 2002 and remain at that level thereafter. The
weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8 percent at January 1, 1993.
The postretirement benefits expense, excluding the cumulative
catch-up adjustment, was $1,472,000, $294,000 and $171,000 for
1993, 1992 and 1991, respectively. The 1993 figure includes
approximately $800,000 interest charges.
-F9-
13. Other Income (Expense), Net
(In thousands)
December 31,
--------------------------------
1993 1992 1991
------------------------------------------------------------------
Other income (expense), net consists of:
Interest and dividend income $1,648 $1,630 $2,024
Gains on investments in
marketable securities 311 157 150
(Loss) on sale of accounts
receivable (Note 3) (660) (997) (1,754)
Income (loss) from
Blue Streak Electronics, Inc. 352 (97) --
Other-net (3) 4 56
------------------------------------------------------------------
Total other income (expense), net $1,648 $ 697 $ 476
------------------------------------------------------------------
14. Taxes Based on Earnings
The effective tax rates for 1993, 1992 and 1991 were 30.6%, 17.9%
and 15.0%, respectively, which vary from the statutory federal
income tax rate of 35% in 1993 and 34% in 1992 and 1991. The
difference is accounted for as follows:
As a Percent of
Earnings Before Taxes
-------------------------------------------------------------------
1993 1992 1991
-------------------------------------------------------------------
Statutory federal income tax rates 35.0% 34.0% 34.0%
Increase (decrease) in tax rate
resulting from:
State and local income taxes, net
of federal income tax benefit 5.5 1.5 1.6
(Tax-exempt income)/
non-deductible items-net 0.2 0.2 (12.9)
Benefits of foreign taxes at lower
than statutory federal rate (9.7) (16.8) (6.3)
Other (0.4) (1.0) (1.4)
-------------------------------------------------------------------
Effective tax rate 30.6% 17.9% 15.0%
-------------------------------------------------------------------
The Company has not provided for federal income taxes on the
undistributed income of its foreign subsidiaries because of the
availability of foreign tax credits and/or the Companys intention
to permanently reinvest such undistributed income. Cumulative
undistributed earnings of foreign subsidiaries on which no United
States income tax has been provided were $10,011,000 at the end of
1993, $7,181,000 at the end of 1992 and $5,734,000 at the end of
1991.
Earnings of a subsidiary operating in Puerto Rico, amounting
to approximately $7,285,000 (1992 $6,941,000; 1991 $5,906,000),
which are not subject to United States income taxes, are partially
exempt from Puerto Rican income taxes under a tax exemption grant
expiring on December 31, 2002. The tax benefits of the exemption,
reduced by a minimum tollgate tax instituted in 1993, amounted to
$.22 per share in 1993 (1992 $.23; 1991 $.18).
Income earned (losses) incurred by foreign subsidiaries not
eliminated in consolidation amounted to approximately $453,000,
($29,000) and ($396,000) for the years ended December 31, 1993,
1992 and 1991.
Foreign income taxes amounted to approximately $838,000,
$697,000 and $363,000 for 1993, 1992 and 1991, respectively. These
foreign income taxes relate primarily to manufacturing facilities
whose operations are eliminated in consolidation.
Deferred income tax expense results from timing differences in
the recognition of income and expense for tax and financial
reporting purposes. The sources and tax effects of these timing
differences are presented below:
(In thousands)
December 31,
--------------------------------
1993 1992 1991
------------------------------------------------------------------
Installment sales $ -- $ -- $(1,679)
Allowance for doubtful accounts (28) (268) 299
Allowance for customer returns (1,252) (232) (483)
Accrued salaries 61 332 (187)
Restructuring charges (933) -- --
Promotional costs (722) (427) (120)
Postretirement benefits (488) -- --
Inventory (2,070) (14) 62
Depreciation (118) 101 96
Other net 7 (68) 163
------------------------------------------------------------------
Total deferred tax expense $ (5,543) $ (576) $(1,849)
------------------------------------------------------------------
Effective January 1, 1993 the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. Prior years financial statements have not been
restated to apply the provisions of SFAS No. 109.
Under SFAS No. 109, deferred tax balances are stated at tax
rates expected to be in effect when taxes are actually paid or
recovered. The cumulative catch-up adjustment resulted in a
deferred tax benefit of $5,045,000, which has been included in the
statements of consolidated earnings as cumulative effect of
changes in accounting for postretirement benefits and income taxes,
net.
The following is a summary of the components of the net
deferred tax asset and liability accounts recognized in the
accompanying consolidated balance sheets.
(In thousands)
December 31,
------------
1993
---------------------------------------------------------------------
Differences between tax and book amounts:
Deferred tax assets:
Inventory $ 9,291
Allowance for customer returns 5,412
Postretirement benefits 4,581
Allowance for doubtful accounts 1,348
Accrued salaries 1,424
Restructuring charges 1,023
Other 408
---------------------------------------------------------------------
Total $23,487
---------------------------------------------------------------------
-F10-
Deferred tax liabilities:
Depreciation $ 8,093
Promotional costs 728
Other 831
---------------------------------------------------------------------
Total 9,652
---------------------------------------------------------------------
Net deferred tax asset $13,835
---------------------------------------------------------------------
15. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and cash equivalents
The carrying amount approximates fair value because of the short
maturity of those instruments.
Long-term debt
The fair value of the Corporations long-term debt is estimated
based on the current rates offered to the Corporation for debt of
the same remaining maturities.
Interest rate swap agreements
The fair value of interest rate swaps (used for hedging purposes)
is the estimated amount that the Company would receive or pay to
terminate the swap agreements at the reporting dates, taking into
account current interest rates.
The estimated fair values of the Corporations financial
instruments are as follows:
(In thousands)
December 31, 1993 Carrying Fair
Amount Value
---------------------------------------------------------------------
Cash and cash equivalents $ 12,346 $ 12,346
Long-term debt (135,449) (151,587)
Unrecognized financial instruments:
Interest rate swaps:
In a net receivable position -- 415
In a net payable position -- (1,146)
---------------------------------------------------------------------
(In thousands)
December 31, 1992 Carrying Fair
Amount Value
---------------------------------------------------------------------
Cash and cash equivalents $ 17,025 $ 17,025
Long-term debt (151,459) (154,940)
Unrecognized financial instruments:
Interest rate swaps:
In a net receivable position -- 643
In a net payable position -- (1,328)
---------------------------------------------------------------------
16. Commitments
Total rent expense for the three years ended December 31, 1993 was
as follows:
(In thousands)
Real
Total Estate Other
---------------------------------------------------------------------
1993 $5,544 $2,320 $3,224
1992 5,931 2,618 3,313
1991 6,837 3,217 3,620
At December 31, 1993, the Company is obligated to make minimum
rental payments (exclusive of real estate taxes and certain other
charges) through 2003, under operating leases for real estate, as
follows:
(In thousands)
1994 $ 1,734
1995 1,377
1996 1,178
1997 965
1998 853
Thereafter 3,900
---------------------------------------------------------------------
$10,007
---------------------------------------------------------------------
The Companys receivables are primarily from United States
warehouse distributors in the automotive aftermarket industry.
At December 31, 1993, the Company had letters of credit
outstanding aggregating approximately $1,650,000.
17. Restructuring Charges
During 1993, the company recorded a $2,781,000 provision for
restructuring charges. Included in the restructuring plan are
charges for the expected costs of facility consolidations, asset
retirements, employee separations, relocations and related costs.
18. Quarterly Financial Data
The following selected quarterly financial data have not been
audited and, accordingly, the independent certified public
accountants express no opinion thereon:
Net Gross Net Per
Sales Profit Earnings Share
---------------------------------------------------------------------
(In thousands, except per share amounts)
---------------------------------------------------------------------
1993 Quarter:
First $127,755 $ 45,684 $ 1,763 $ .13
Second 161,201 56,760 6,779 .51
Third 161,340 56,786 5,703 .43
Fourth 132,555 50,033 3,263 .25
---------------------------------------------------------------------
Total $582,851 $209,263 $17,508 $1.32
---------------------------------------------------------------------
1992 Quarter:
First $128,794 $ 46,250 $ 1,068 $ .08
Second 150,805 52,402 2,000 .15
Third 138,276 47,917 2,813 .22
Fourth 117,678 42,414 2,997 .23
---------------------------------------------------------------------
Total $535,553 $188,983 $ 8,878 $ .68
---------------------------------------------------------------------
Net earnings in the first quarter of 1993 were adversely
impacted by $1,090,000 due to the net cumulative effect of changes
in accounting for postretirement benefits and income taxes. The
fourth quarter 1993 reflects an improved gross profit percentage,
compared to the prior 1993 quarters, primarily due to favorable
year-end inventory adjustments. The net earnings improvement in the
fourth quarter 1993 as compared to the same quarter in 1992 was
attributable to increased sales partially offset by restructuring
charges and an increase in amortized customer acquisition costs.
The fourth quarter 1992 reflects a slightly improved gross
profit percentage, compared to the prior 1992 quarters, primarily
due to favorable year-end inventory adjustments.
-F11-
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Standard Motor Products, Inc.
In connection with our audits of the consolidated financial statements of
Standard Motor Products, Inc. and subsidiaries for the years ended December
31, 1993, 1992 and 1991, we have also audited the financial statement
schedules listed in the accompanying index at Item 14(a) (2) for the years
ending December 31, 1993, 1992 and 1991. Our audits of the financial
statements were made for the purpose of forming an opinion on those
statements taken as a whole. The financial statement schedules are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements.
These financial statements schedules have been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in
our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
DAVID BERDON & CO.
New York, New York
February 25, 1994
-16-
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
- --------------------------------------------------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
Information relating to Directors and Executive Officers is set forth
in the 1994 Annual Proxy Statement.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS.
- -------- -----------------------------------------
Information relating to Management Remuneration and Transactions is
set forth in the 1994 Annual Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- ----------------------------------------------------------------
Information relating to Security Ownership of Certain Beneficial
Owners and Management is set forth in the 1994 Annual Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
Information relating to Certain Relationships and
Related Transactions is set forth under "Certain Transactions" in
the 1994 Annual Proxy Statement.
-17-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
- -------------------------------------------------------------------
FORM 8-K.
---------
14.(a)Document List
-------------
(a)(1) Among the responses to this Item 14(a) are the following
financial statements.
Report of Independent Certified Public Accountants
Financial Statements:
Consolidated Balance Sheets -
December 31, 1993 and 1992
Statements of Consolidated Earnings -
Years Ended December 31, 1993, 1992 and 1991
Statements of Consolidated Changes in Stockholders' Equity-
Years Ended December 31, 1993, 1992 and 1991
Statements of Consolidated Cash Flows -
Years Ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
(a)(2) The following financial schedules for the years 1993, 1992
and 1991 are submitted herewith:
Schedule Page
-------- ----
V. Property, Plant and Equipment 24
VI. Accumulated Depreciation and 25
Amortization of Property,
Plant and Equipment
VIII. Valuation and Qualifying Accounts 26
IX. Short-Term Borrowings 27
Selected Quarterly Financial Data, for the Years
Ended December 31, 1993 and 1992, are included
herein by reference to Part II, Item 8.
All other schedules are omitted because they are
not required, inapplicable or the information is
included in the financial statements or notes
thereto.
-18-
(a)(3) Exhibits required by Item 601 of Securities and Exchange
Commission Regulations S-K.
(A) The following such exhibits are filed as a separate
section of this report.
(11)Computation of Weighted Average of Common
and Common Equivalent shares Outstanding is
included on Page 28.
(22)List of Subsidiaries of Standard Motor Products,
Inc. is included on Page 29.
(B) The following such exhibits are incorporated herein by
reference.
(3) Restated Certificate of Incorporation, dated July
25, 1984, filed as an Exhibit of Registrant's
quarterly report on Form 10-Q for the quarter
ended September 30, 1984 is incorporated herein
by reference.
By-Laws filed as an Exhibit of Registrant's annual
report on Form 10-K for the year ended December
31, 1986 is incorporated herein by reference.
Restated Certificate of Incorporation, dated July
31, 1990, filed as an Exhibit of Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1990 is incorporated herein by
reference.
(4) Note Purchase Agreement of January 15, 1987
between the Registrant and the Travelers Insurance
Company, the Great-West Life Assurance
Company, the Franklin Life Insurance Company, the
Franklin United Life Insurance Company, and Woodmen
Accident and Life Company filed as an Exhibit of
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1986 is incorporated herein
by reference.
-19-
Letter Agreement of January 25, 1989 amending
the Note Agreement between the Registrant and
the Travelers Insurance Company, the Great-West
Life Assurance Company, the Franklin Life
Insurance Company, the Franklin United Life
Insurance Company, and Woodmen Accident and Life
Company dated January 15, 1987 filed as an Exhibit
of Registrant's Annual Report on Form 10-K for the
year ended December 31, 1987 filed as an Exhibit of
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989 is incorporated herein
by reference.
Credit Agreement dated March 10, 1989 between
the Registrant and Chemical Bank filed as an
Exhibit of Registrant's Annual Report on Form 10-
K for the year ended December 31, 1990 is
incorporated herein by reference.
Note Purchase Agreement dated October 15, 1989
between the Registrant and the American United
Life Insurance Company, the General American
Life Insurance Company, the Jefferson-Pilot Life
Insurance Company, the Ohio National Life
Insurance Company, the Crown Insurance
Company, the Great-West Life Assurance
Company, the Guarantee Mutual Life Company,
the Security Mutual Life Insurance Company of
Lincoln, Nebraska, and the Woodmen Accident
and Life Company filed as an Exhibit of
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1990 is incorporated
herein by reference.
Letter Agreement of January 15, 1990 amending
the Note Agreement between the Registrant and
the Travelers Insurance Company dated January
15, 1987 filed as an Exhibit of Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1987 is incorporated herein by
reference.
Letter Agreement of July 20, 1990 amending the
Credit Agreement between the Registrant and
Chemical Bank dated March 10, 1989 filed as an
Exhibit of Registrant's Annual Report on Form 10-
K for the year ended December 31, 1989 is
incorporated herein by reference.
-20-
Letter Agreement of September 30, 1990 amending the
Note Agreement between the Registrant and the
Travelers Insurance Company, the Great-West Life
Assurance Company, The Franklin Life Insurance
Company, The Franklin United Life Insurance Company
and Woodmen Accident and Life Company January 15,
1987 filed as an Exhibit of Registrant's Annual
Report on Form 10-K for the year ended December 31,
1991 is incorporated herein by reference.
Letter Agreement of March 4, 1991 amending the
Credit Agreement between the Registrant and Chemical
Bank dated March 10, 1989 filed as an Exhibit of
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991 is incorporated herein by
reference.
Letter Agreement of December 20, 1991 amending the
Credit Agreement between the Registrant and Chemical
Bank dated March 10, 1989 filed as an Exhibit of
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991 is incorporated herein by
reference.
Letter Agreement of February 28, 1992 amending the
Note Agreement between the Registrant and the
Travelers Insurance Company, the Great-West Life
Assurance Insurance Company, the Franklin Life
Insurance Company, the Franklin United Life
Insurance Comapany and the Woodmen Accident and
Life Company dated January 15, 1987 filed as an
Exhibit of Registrant's Annual Report on Form
10-K for the year ended December 31, 1992 is
incorporated herein by reference.
Letter Agreement of July 22, 1992 amending the Note
Agreement between the Registrant and the Travelers
Insurance Company, the Great-West Life Assurance
Company, the Franklin Life Insurance Company, the
Franklin United Life Insurance Company and Woodmen
Accident and Life Company dated January 15, 1987
filed as an Exhibit of Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992 is
incorporated herein by reference.
Letter Agreement dated October 30, 1992 amending the
Credit Agreement between the Registrant and Chemical
Bank, assigned to NBD Bank, N.A. with amendment
dated December 20, 1991, dated March 10, 1989 filed
as an Exhibit of Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992 is
incorporated herein by reference.
-21-
Note Agreement of November 15, 1992 between the
Registrant and Kemper Investors Life Insurance
Company, Federal Kemper Life Assurance Company,
Lumbermens Mutual Casualty Company, Fidelity Life
Association, American Motorists Insurance Company,
American Manufacturers Mutual Insurance Company,
Allstate Life Insurance Company, Teachers Insurance &
Annuity Association of America and Phoenix Home Life
Mutual Insurance Company filed as an Exhibit of
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992 is incorporated herein by
reference.
Note Agreement of November 15, 1992 between the
Registrant and Principal Mutual Life Insurance Company
and Principal National Life Insurance Company filed as
an Exhibit of Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992 is incorporated
herein by reference.
(5) Employee Stock Ownership Plan and Trust dated January
1, 1989 filed as an Exhibit of Registrant's Annual Report
on Form 10-K for the year ended December 31, 1989 is
incorporated herein by reference.
(C) The following exhibits have been included in the filing made
with the SEC and are available upon request.
Letter Agreement dated December 27, 1993 amending the Credit
Agreement between the Registrant and Chemical Bank, assigned
to NBD Bank, N.A. with amendment dated December 20, 1991,
dated March 10, 1989 is included as Exhibit A.
14(b) Reports on Form 8-K
No reports on Form 8-K were required to be filed for the three months
ended December 31, 1993.
-22-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
STANDARD MOTOR PRODUCTS, INC.
(Registrant)
Lawrence I. Sills
-----------------------------------------------
Lawrence I. Sills, President
(Chief Operating Officer)
Michael J. Bailey
-----------------------------------------------
Michael J. Bailey, Vice President Finance,
Chief Financial Officer
David Kerner
-----------------------------------------------
David Kerner, Treasurer
Dated: New York, New York
March 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the Capacities and on the dates indicated:
March 25, 1994 Lawrence I. Sills
- -------------- -----------------------------------------------
(Dated) Lawrence I. Sills, President
(Chief Operating Officer)
March 25, 1994 Bernard Fife
- -------------- -----------------------------------------------
(Dated) Bernard Fife
Co-Chairman, Director
March 25, 1994 Nathaniel L. Sills
- -------------- -----------------------------------------------
(Dated) Nathaniel L. Sills
Co-Chairman, Director
March 25, 1994 Arlene R. Fife
- -------------- -----------------------------------------------
(Dated) Arlene R. Fife, Director
March 25, 1994 Ruth F. Sills
- -------------- -----------------------------------------------
(Dated) Ruth F. Sills, Director
-23-
[CAPTION]
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
Schedule V - Property, Plant and Equipment
Years ended December 31, 1993, 1992 and 1991
Balance at
beginning Additions Balance at
Classification of year at cost Retirements end of year
-------------- ---------- --------- ----------- -----------
Year ended December 31, 1993:
Land and buildings $ 67,045,000 $ 425,000 $ - $ 67,470,000
Machinery and equipment 50,087,000 5,788,000 534,000 55,341,000
Tools, dies and auxiliary equipment 5,427,000 1,099,000 - 6,526,000
Furniture and fixtures 12,496,000 1,358,000 98,000 13,756,000
Leasehold improvements 4,714,000 204,000 296,000 4,622,000
Construction in progress 4,692,000 3,455,000 - 8,147,000
------------ ------------ ----------- ------------
$144,461,000 $ 12,329,000 $ 928,000 $155,862,000
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Year ended December 31, 1992:
Land and buildings $ 57,774,000 $ 9,300,000 $ 29,000 $ 67,045,000
Machinery and equipment 46,713,000 5,560,000 2,186,000 50,087,000
Tools, dies and auxiliary equipment 5,216,000 914,000 703,000 5,427,000
Furniture and fixtures 12,255,000 1,049,000 808,000 12,496,000
Leasehold improvements 4,678,000 67,000 31,000 4,714,000
Construction in progress 6,325,000 (1,633,000) - 4,692,000
------------ ------------ ----------- ------------
$132,961,000 $15,257,000 $3,757,000 $144,461,000
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Year ended December 31, 1991:
Land and buildings $ 51,286,000 $ 6,607,000 $ 119,000 $ 57,774,000
Machinery and equipment 44,781,000 5,218,000 3,286,000 46,713,000
Tools, dies and auxiliary equipment 5,556,000 733,000 1,073,000 5,216,000
Furniture and fixtures 13,144,000 1,312,000 2,201,000 12,255,000
Leasehold improvements 4,873,000 38,000 233,000 4,678,000
Construction in progress 7,589,000 (1,264,000) - 6,325,000
Funds held for construction 595,000 (595,000) - -
------------ ------------ ----------- ------------
$127,824,000 $12,049,000 $6,912,000 $132,961,000
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Estimated useful lives used in computing depreciation are as follows:
Estimated Life
Buildings and improvements 15 to 33-1/3 years
Machinery and equipment 9-1/2 years
Furniture and fixtures 8 years
Tools, dies and auxiliary equipment3 to 8 years
Leasehold improvements Lesser of 10 years or life of lease
-24-
[CAPTION]
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
Schedule VI - Accumulated Depreciation and
Amortization of Property, Plant and Equipment
Years ended December 31, 1993, 1992 and 1991
Additions
Balance at charged to
beginning costs and Balance at
Description of year expenses Retirements end of year
-------------- ---------- --------- ----------- -----------
Year ended December 31, 1993:
Buildings $ 8,665,000 $ 2,552,000 $ - $11,217,000
Machinery and equipment 22,250,000 5,205,000 203,000 27,252,000
Tools, dies and auxiliary equipment 2,845,000 806,000 - 3,651,000
Furniture and fixtures 6,192,000 1,778,000 98,000 7,872,000
Leasehold improvements 2,980,000 182,000 296,000 2,866,000
------------ ------------ ----------- ------------
$42,932,000 $10,523,000 $ 597,000 $52,858,000
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Year ended December 31, 1992:
Buildings $ 6,719,000 $ 1,946,000 $ - $ 8,665,000
Machinery and equipment 19,495,000 4,871,000 2,116,000 22,250,000
Tools, dies and auxiliary equipment 2,770,000 778,000 703,000 2,845,000
Furniture and fixtures 5,354,000 1,502,000 664,000 6,192,000
Leasehold improvements 2,420,000 591,000 31,000 2,980,000
------------ ------------ ----------- ------------
$36,758,000 $9,688,000 $3,514,000 $42,932,000
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Year ended December 31, 1991:
Buildings $ 5,248,000 $1,590,000 $ 119,000 $ 6,719,000
Machinery and equipment 17,714,000 4,592,000 2,811,000 19,495,000
Tools, dies and auxiliary equipment 3,138,000 705,000 1,073,000 2,770,000
Furniture and fixtures 5,939,000 1,463,000 2,048,000 5,354,000
Leasehold improvements 2,136,000 517,000 233,000 2,420,000
------------ ------------ ----------- ------------
$34,175,000 $8,867,000 $6,284,000 $36,758,000
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
-25-
[CAPTION]
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
Schedule VIII - Valuation and Qualifying Accounts
Years ended December 31, 1993, 1992 and 1991
Additions
---------------------------
Balance at Charged to Charged to
beginning costs and other Balance at
Description of year expenses accounts Deductions end of year
----------- ---------- ---------- ---------- ---------- -----------
(a)
Year ended December 31, 1993:
Allowance for doubtful accounts $3,460,000 $2,112,000 $86,000 $2,190,000 $3,468,000
Allowance for discounts 1,861,000 207,000 - - 2,068,000
---------- ---------- ---------- ---------- -----------
$5,321,000 $2,319,000 $86,000 $2,190,000 $5,536,000
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
Year ended December 31, 1992:
Allowance for doubtful accounts $2,782,000 $4,116,000 $106,000 $3,544,000 $3,460,000
Allowance for discounts 1,736,000 189,000 - 64,000 1,861,000
---------- ---------- ---------- ---------- -----------
$4,518,000 $4,305,000 $106,000 $3,608,000 $5,321,000
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
Year ended December 31, 1991:
Allowance for doubtful accounts $3,740,000 $1,457,000 $80,000 $2,495,000(b) $2,782,000
Allowance for discounts 1,616,000 133,000 - 13,000 1,736,000
---------- ---------- ---------- ---------- -----------
$5,356,000 $1,590,000 $80,000 $2,508,000 $4,518,000
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
(a) Recoveries of accounts previously written off.
(b) Uncollectible accounts charged against the reserve.
-26-
[CAPTION]
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
Schedule IX - Short-Term Borrowings
Years ended December 31, 1993, 1992 and 1991
Maximum Average Weighted
Weighted amount amount average
average outstanding outstanding interest rate
Balance at interest during the during the during the
Category of Aggregate Short Term Borrowings end of year rate year year year
- ------------------------------------------- ----------- -------- ----------- ----------- -------------
Year ended December 31, 1993:
Notes payable - banks $ 5,100,000 3.69% $ 42,400,000 $ 16,958,000 3.99%
----------- ----- ------------ ------------ -----
----------- ----- ------------ ------------ -----
Year ended December 31, 1992:
Notes payable - banks $ 0 -0- $105,800,000 $ 96,100,000 5.15%
----------- --- ------------ ------------ -----
----------- --- ------------ ------------ -----
Year ended December 31, 1991:
Notes payable - banks $82,200,000 6.57% $134,000,000 $ 99,600,000 7.84%
----------- ----- ------------ ------------ -----
----------- ----- ------------ ------------ -----
(a) Computed using the daily outstanding principal balance during the
year.
(b) Computed using the total interest expense from short-term
borrowings and the average outstanding short-term borrowings
during the year.
-27-
[CAPTION]
EXHIBIT II
----------
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING
For the Years Ended December 31,
-------------------------------------------
1993 1992 1991
---------- ---------- ----------
Weighted average number
of shares outstanding 13,195,096 13,120,873 13,120,084
Weighted average of common
shares issuable on exercise
of stock options -
"treasury stock method" 31,582 9,860 1,145
---------- ---------- ----------
13,226,678 13,130,733 13,121,229
---------- ---------- ----------
---------- ---------- ----------
-28-
EXHIBIT 22
SUBSIDIARIES OF THE REGISTRANT
AS OF FEBRUARY 28, 1994
Percent
State or of Voting
Country of Securities
Name Incorporation Owned
- ---- ------------- ----------
Blue Streak-Hygrade Motor Products Ltd. Canada 100(1)
Marathon Auto Parts and Products, Inc. New York 100
Motortronics, Inc. New York 100
Reno Standard Incorporated Nevada 100
Stanric, Inc. Delaware 100
Mardevco Credit Corp. (2) New York 100
Standard Motor Products (Hong Kong) Limited Hong Kong 100
Industrial & Automotive Associates, Inc. California 100
All of the subsidiaries are included in the consolidated
financial statements.
- --------------------------------------------
(1) Except for directors' qualifying shares
(2) Wholly owned subsidiary of Stanric, Inc.
-29-
INDEX TO EXHIBITS
PAGE
Exhibit A - Letter Agreement dated December 27, 1993 31 - 37
amending the Credit Agreement between the
Registrant and Chemical Bank assigned to
NBD Bank, N.A. with amendment dated
December 20, 1991, dated March 10, 1989.
-30-
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT, dated as of December 27,
1993 (this "Amendment") is among Standard Motor Products, Inc., a New York
corporation (the "Borrower"), Stanric, Inc., Mardevco Credit Corp., Reno
Standard Incorporated, Marathon Auto Parts & Products, Inc., Industrial
and Automotive Associates, Inc., Motortronics, Inc., Standard Motor
Products (Hong Kong) Ltd., Blue Streak-Hygrade Motor Products, LTD. (each
of which is herein referred to as a "Guarantor" and collectively as the
"Guarantors") and NBD Bank, N.A., a national banking association (the
"Bank").
RECITALS
WHEREAS, Chemical Bank, the Borrower and the Guarantors entered into
a Credit Agreement dated as of March 10, 1989, as amended by a Conversion
and Reaffirmation Agreement dated January 30, 1990, as amended by a First
Amendment and Waiver Agreement dated July 20, 1990 and as amended by a
Second Amendment and Waiver Agreement dated as of March 4, 1991 (as now
and hereafter amended, the "Credit Agreement") pursuant to which Chemical
Bank agreed to extend to the Borrower, under and subject to the conditions
set forth therein, a credit facility of up to $18,000,000 (the "Credit
Facility") for the purchase of approximately 1,000,000 shares of the
Borrower's common stock, par value $2.00 per share, which stock is readily
tradeable and is registered on the New York Stock Exchange (the Borrower's
common stock is herein referred to as the "Employer's Securities" and the
shares o Employer's Securities purchased by the Borrower with the proceeds
of the Credit Facility are referred to herein as the "Shares"); and
WHEREAS, pursuant to the terms of the Credit Agreement, the Borrower
borrowed $15,111,733 (the "Credit Facility Borrowings") and on January 30,
1990, the Borrower, the Guarantors and Chemical Bank entered into a
Conversion and Reaffirmation Agreement (the "Conversion and Reaffirmation
Agreement") pursuant to which (1) the Credit Facility was terminated and
(2) the Credit Facility Borrowings were converted into the Term Loan (as
defined in the Credit Agreement), as evidenced by a Promissory Note (the
"Term Note") dated January 30, 1990 in the original principal amount of
the Credit Facility Borrowings; and
WHEREAS, Chemical Bank and NBD Bank, N.A. entered into an Assignment
Agreement dated as of December 20, 1991 wherein Chemical Bank assigned all
of its right, title and interest in the Credit Agreement and all other
documents executed in connection therewith to the Bank and the Bank assumed
all of Chemical Bank's obligations under the Credit Agreement and all other
documents executed in connection therewith; and
WHEREAS, the Bank and the Borrower then entered into a Third Amendment
to Credit Agreement dated as of December 20, 1991 and a Fourth Amendment to
Credit Agreement dated as of October 30, 1992;
-31-
WHEREAS, the Borrower has requested that the Bank waive certain
provisions of the Credit Agreement to permit the Borrower to enter into an
accounts receivable purchase transaction as evidenced by the Receivables
Purchase Agreement (as herein defined) and the Bank is willing to do so
strictly in accordance with the terms hereof.
TERMS
In consideration of the premises and of the mutual agreements herein
contained, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth
in Article IV hereof, the Credit Agreement shall be amended as follows:
1.1 Article I is hereby amended as follows:
(a) The definition of "Event of Investment
Ineligibility" shall be deleted in its entirety.
(b) The definition of "Sale Agreement" shall be deleted
in its entirety.
(c) The following definitions shall be added in
appropriate alphabetical order:
"Liquidation Event" shall have the meaning
assigned such term in the Receivables Purchase
Agreement.
"Receivables Purchase Agreement" shall mean the
receivables purchase agreement dated as of
December 20, 1993 between the Borrower as seller
and initial servicer, Clipper Receivables
Corporation, as purchaser, State Street Boston
Capital Corporation, as administrator, and State
Street Bank & Trust Company, as relationship
bank, and all documents and agreements executed
or delivered in connection therewith in each case as
amended, supplemented, restated or otherwise
modified from time to time.
1.2 Article VI shall be amended by adding a new Section 6.19 at the
end thereof to read as follows:
Section 6.19 Receivables Purchase Agreement. The
Borrower shall not extend the date set forth in
clause (c) of the definition of "Termination Date"
contained in the Receivables Purchase Agreement.
-32-
1.3 Article VII is hereby amended by deleting clause (iv) contained in
Section (f) therein and inserting the following in place thereof: "(iv) the
occurrence and continuance of a Liquidation Event under the Receivables
Purchase Agreement".
ARTICLE II. CONSENT AND WAIVER. The Bank hereby consents to the
execution, delivery and performance of the Receivables Purchase Agreement
by the Borrower. Without limiting the foregoing consent, Sections 6.06,
6.07 and 6.09 of the Credit Agreement are hereby waived solely to the
extent necessary to allow the Borrower to (a) sell an undivided interest in
certain of its accounts receivable and related assets to Clipper
Receivables Corporation for a total investment at any time outstanding of
up to $25,000,000, plus earned discount on such investment, plus applicable
loss, liquidation, yield, fee and other reserves, and plus all other fees,
costs, expenses, indemnities and other amounts owing from time to time by
the Borrower pursuant to the Receivables Purchase Agreement, (b) grant a
security interest in the Borrower's retained undivided interest in such
accounts receivable and related assets as security for all obligations of
the Borrower under and pursuant to the Receivables Purchase Agreement, and
(c) otherwise perform the Borrower's obligations under and pursuant to the
Receivables Purchase Agreement.
ARTICLE III. REPRESENTATIONS. The Borrower and the Guarantors
represent and warrant to the Bank that:
3.1 (a) The execution, delivery and performance of this Amendment and
all agreements and documents delivered pursuant hereto by Borrower have
been duly authorized by all necessary corporate action and do not and will
not require any consent or approval of its stockholders, violate any
provision of any law, rule, regulation, order, writ, judgement, injunction,
decree, determination or award presently in effect having applicability to
it or of its Articles of Incorporation or By-Laws, or result in a breach of
or constitute a default under any indenture or loan or credit agreement or
any other agreement, lease or instrument to which Borrower is a party or by
which it or its properties may be bound or affected; (b) no authorization,
consent, approval, license, exemption of, or filing or registration with
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary to the valid
execution, delivery or performance by Borrower of this Amendment and all
agreements and documents delivered pursuant hereto; and (c) this Amendment
and all agreements and documents delivered pursuant hereto by the Borrower
are legal, valid and binding obligations of Borrower enforceable against it
in accordance with the terms thereof.
3.2 The execution, delivery and performance of this Amendment by the
Guarantors (a) does not and will not violate any provision of any law,
rule, regulation, order, writ, judgement, injunction, decree, determination
or award presently in effect having applicability to any Guarantor or
result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which
the Guarantor is party or by which the Guarantor or any of their properties
may be bound or affected; (b) no authorization, consent, approval, license,
exemption of or filing a registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, is or will be necessary to the valid execution, deliverr or
performance by each of the Guarantors of this Amendment; (c) this Amendment
is the legal, valid and binding obligations of each of the Guarantors
enforceable against each in accordance with the terms thereof; and (d) the
execution of this Amendment by each of the Guarantors has been duly
authorized by all necessary corporate action.
-33-
3.3 The Borrower acknowledges and warrants that (i) the ESOP and the
ESOT each is in compliance in operation with all applicable requirements of
the Code and ERISA; and (ii) all amendments required to be made to the ESOT
and the ESOP in order for the ESOP and ESOT to continue to constitute a
qualified plan and trust under Section 401(a) of the Code have been made
and duly adopted.
3.4 After giving effect to the amendments contained herein and
effected pursuant hereto, the representations and warranties contained in
Article III of the Credit Agreement are true and correct on and as of the
effective date hereof with the same force and effect as if made on and as
of such effective date.
3.5 No event of default (as defined in Article VII of the Credit
Agreement) and no event which would become such event of default after the
lapse of time or the giving of notice, or both, shall have occurred and be
continuing or will exist under the Credit Agreement as the effective date
hereof after giving effect to the amendments and waivers herein.
ARTICLE IV. CONDITIONS OF EFFECTIVENESS. This Amendment shall not
become effective until each of the following has been satisfied:
4.1 The Borrower shall have delivered, or caused to be delivered, to
the Bank copies, certified as of the effective date hereof, of such
documents evidencing necessary corporate action by the Borrower and the
Guarantors with respect to this Amendment.
4.2 The Borrower and each of the Guarantors shall have executed this
Amendment.
4.3 Approval by the Bank of the form and substance of the final draft
of the Receivables Purchase Agreement.
4.4 Receipt by the Bank of a copy of the fully executed Receivables
Purchase Agreement reflecting no material changes from the final draft
thereof furnished to the Bank pursuant to Section 4.3 above.
ARTICLE V. MISCELLANEOUS.
5.1 The terms used but not defined herein shall have the respective
meanings ascribed thereto in the Credit Agreement. Except as expressly
amended hereby, the Credit Agreement, the Term Note and all other related
certificates, instruments and other documents, are hereby ratified and
confirmed and shall remain in full force and effect.
5.2 This amendment shall be governed by and construed in accordance
with the laws of the State of Michigan.
-34-
5.3 The Borrower agrees to pay and save the Bank harmless from
liability for the payment of all costs and expenses arising in connection
with this Amendment, including reasonable fees and expenses of Dickinson,
Wright, Moon, Van Dusen and Freeman, counsel to the Bank, in connection
with the preparation and review of this Amendment and all related documents.
5.4 This amendment may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument any of
the parties hereto may execute this Amendment by assigning any such
counterpart.
-35-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the 27th day of December, 1993.
STANDARD MOTOR PRODUCTS, INC.
By: Lawrence I. Sills
--------------------------------------
Its: President
---------------------------------
STANRIC, INC.
By: Lawrence I. Sills
--------------------------------------
Its: President
---------------------------------
MARDEVCO CREDIT CORP.
By: Lawrence I. Sills
--------------------------------------
Its: President
---------------------------------
RENO STANDARD INCORPORATED
By: Lawrence I. Sills
--------------------------------------
Its: President
---------------------------------
MARATHON AUTO PARTS & PRODUCTS, INC.
By: Lawrence I. Sills
--------------------------------------
Its: President
---------------------------------
-36-
INDUSTRIAL AND AUTOMOTIVE ASSOCIATES, INC.
By: Lawrence I. Sills
--------------------------------------
Its: President
---------------------------------
MOTORTRONICS, INC.
By: Lawrence I. Sills
--------------------------------------
Its: President
---------------------------------
STANDARD MOTOR PRODUCTS (HONG KONG) LTD.
By: Lawrence I. Sills
--------------------------------------
Its: President
---------------------------------
BLUE STREAK-HYGRADE MOTOR PRODUCTS, INC. LTD.
By: Lawrence I. Sills
--------------------------------------
Its: President
---------------------------------
NBD BANK, N.A.
By: Anna R. Hoffman
--------------------------------------
Its: Vice President
---------------------------------
-37-