UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, ~~2023~~2024

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-13337

STONERIDGE, INC

(Exact name of registrant as specified in its charter)


Ohio						34-1598949
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

39675 MacKenzie Drive, Suite 400, Novi, Michigan						48377
(Address of principal executive offices)						(Zip Code)


			(248) 489-9300
			Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares,, without par value

SRI

New York Stock Exchange

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.

xYes oNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

xYes oNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer o	Accelerated filer x	Non-accelerated filer o
Smaller reporting company o	Emerging growth company o

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). oYes xNo

The number of Common Shares, without par value, outstanding as of April ~~28, 2023~~26, 2024 was ~~27,513,330.~~27,671,231.

Table of Contents

STONERIDGE, INC. AND SUBSIDIARIES

INDEX

Page

PART I–FINANCIAL INFORMATION

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets as of March 31, ~~2023~~2024 (Unaudited) and December 31, ~~2022~~202 3

Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31 ~~2023~~, 202 4 and ~~2022~~202 3

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the Three Months Ended March 31 ~~2023~~, 202 4 and ~~2022~~202 3

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31 ~~2023~~, 202 4 and ~~2022~~202 3

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) for the Three Months Ended March 31 ~~2023~~, 202 4 and ~~2022~~202 3

Notes to Condensed Consolidated Financial Statements (Unaudited)

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2422

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

3129

Item 4.

Controls and Procedures

3129

PART II–OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

3330

Item 3.

Defaults Upon Senior Securities

3330

Item 4.

Mine Safety Disclosures

Forward-Looking Statements

Portions of this report on Form 10-Q contain “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this report and may include statements regarding the intent, belief or current expectations of the Company, with respect to, among other things, our (i) future product and facility expansion, (ii) acquisition strategy, (iii) investments and new product development, (iv) growth opportunities related to awarded business and (v) operational expectations. Forward-looking statements may be identified by the words “will,” “may,” “should,” “designed to,” “believes,” “plans,” “projects,” “intends,” “expects,” “estimates,” “anticipates,” “continue,” and similar words and expressions. The forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from those expressed in or implied by the statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, among other factors:

•the ability of our suppliers to supply us with parts and components at competitive prices on a timely basis, including the impact of potential tariffs and trade considerations on their operations and output;

•fluctuations in the cost and availability of key materials (including semiconductors, printed circuit boards, resin, aluminum, steel and copper) and components and our ability to offset cost increases through negotiated price increases with our customers or other cost reduction actions, as necessary;

•global economic trends, competition and geopolitical risks, including impacts from ~~the~~ ongoing ~~conflict between Russia~~or potential global conflicts and ~~Ukraine and the~~any related sanctions and other measures, or an escalation of sanctions, tariffs or other trade tensions between the U.S. and ~~China or~~ other countries;

•our ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions;

•~~the impact of COVID-19, or other future pandemics, on the global economy, and on our customers, suppliers, employees, business and cash flows;~~

•the reduced purchases, loss or bankruptcy of a major customer or supplier;

•the costs and timing of business realignment, facility closures or similar actions;

•a significant change in automotive, commercial, off-highway or agricultural vehicle production;

•competitive market conditions and resulting effects on sales and pricing;

•foreign currency fluctuations and our ability to manage those impacts;

•customer acceptance of new products;

•our ability to successfully launch/produce products for awarded business;

•adverse changes in laws, government regulations or market conditions ~~including tariffs,~~ affecting our products, our suppliers, or our customers’ products;

•our ability to protect our intellectual property and successfully defend against assertions made against us;

•liabilities arising from warranty claims, product recall or field actions, product liability and legal proceedings to which we are or may become a party, or the impact of product recall or field actions on our customers;

•labor disruptions at our facilities, or at any of our significant customers or suppliers;

•business disruptions due to natural disasters or other disasters outside of our control;

•the amount of our indebtedness and the restrictive covenants contained in the agreements governing our indebtedness, including our revolving Credit Facility;

•capital availability or costs, including changes in interest ~~rates or market perceptions;~~rates;

•the failure to achieve the successful integration of any acquired company or business;

•risks related to a failure of our information technology systems and networks, and risks associated with current and emerging technology threats and damage from computer viruses, unauthorized access, cyber-attack and other similar disruptions; and

•the items described in Part I, Item IA (“Risk Factors”) in the Company’s ~~2022~~2023 Form 10-K.

The forward-looking statements contained herein represent our estimates only as of the date of this filing and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, whether to reflect actual results, changes in assumptions, changes in other factors affecting such forward-looking statements or otherwise.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

STONERIDGE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands)	(in thousands)		March 31, 2023		December 31, 2022		(in thousands)	March 31, 2024	December 31, 2023
			(Unaudited)
		(Unaudited)
ASSETS
ASSETS
ASSETS	ASSETS
Current assets:	Current assets:
Current assets:
Current assets:
Cash and cash equivalents	Cash and cash equivalents		$	35,165	$	54,798
Accounts receivable, less reserves of $853 and $962, respectively			175,666		158,155
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable, less reserves of $932 and $1,058, respectively
Inventories, net	Inventories, net		168,701		152,580
Prepaid expenses and other current assets	Prepaid expenses and other current assets		43,604		44,018
Total current assets	Total current assets		423,136		409,551
Long-term assets:	Long-term assets:
Property, plant and equipment, net
Property, plant and equipment, net
Property, plant and equipment, net	Property, plant and equipment, net		107,591		104,643
Intangible assets, net	Intangible assets, net		45,585		45,508
Goodwill	Goodwill		34,659		34,225
Operating lease right-of-use asset	Operating lease right-of-use asset		13,352		13,762
Investments and other long-term assets, net	Investments and other long-term assets, net		46,415		44,416
Total long-term assets	Total long-term assets		247,602		242,554
Total assets	Total assets		$	670,738	$	652,105

LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:	Current liabilities:
Current liabilities:
Current liabilities:

Current portion of debt

Current portion of debt

Current portion of debt	Current portion of debt		$	1,456	$	1,450
Accounts payable	Accounts payable		131,996		110,202
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities		68,547		66,040
Total current liabilities	Total current liabilities		201,999		177,692
Long-term liabilities:	Long-term liabilities:
Revolving credit facility
Revolving credit facility
Revolving credit facility	Revolving credit facility		167,393		167,802
Deferred income taxes	Deferred income taxes		8,310		8,498
Operating lease long-term liability	Operating lease long-term liability		10,043		10,594
Other long-term liabilities	Other long-term liabilities		6,750		6,577
Total long-term liabilities	Total long-term liabilities		192,496		193,471
Shareholders' equity:	Shareholders' equity:
Preferred Shares, without par value, 5,000 shares authorized, none issued	Preferred Shares, without par value, 5,000 shares authorized, none issued		—		—
Common Shares, without par value, 60,000 shares authorized, 28,966 and 28,966 shares issued and 27,513 and 27,341 shares outstanding at March 31, 2023 and December 31, 2022, respectively, with no stated value			—		—
Preferred Shares, without par value, 5,000 shares authorized, none issued
Preferred Shares, without par value, 5,000 shares authorized, none issued
Common Shares, without par value, 60,000 shares authorized, 28,966 and 28,966 shares issued and 27,667 and 27,549 shares outstanding at March 31, 2024 and December 31, 2023, respectively, with no stated value
Additional paid-in capital	Additional paid-in capital		225,956		232,758
Common Shares held in treasury, 1,453 and 1,625 shares at March 31, 2023 and December 31, 2022, respectively, at cost			(44,717)		(50,366)
Common Shares held in treasury, 1,299 and 1,417 shares at March 31, 2024 and December 31, 2023, respectively, at cost
Retained earnings	Retained earnings		194,306		201,692
Accumulated other comprehensive loss	Accumulated other comprehensive loss		(99,302)		(103,142)
Total shareholders' equity	Total shareholders' equity		276,243		280,942
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity		$	670,738	$	652,105

The accompanying notes are an integral part of these condensed consolidated financial statements.

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STONERIDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three months ended
March 31,

(in thousands, except per share data)

2023

2022

Net sales

241,325

221,058

Net sales

Costs and expenses:

Cost of goods sold

198,523

179,615

Cost of goods sold

Selling, general and administrative

29,863

27,399

Design and development

16,968

17,028

Operating loss

(4,029)

(2,984)

Design and development

Operating income (loss)

Interest expense, net

2,746

1,786

Equity in loss of investee

171

Equity in loss of investee

Other expense, net

1,148

1,331

Loss before income taxes

(8,094)

(6,182)

(Benefit) provision for income taxes

(708)

1,493

Loss before income taxes

Provision (benefit) for income taxes

Net loss

(7,386)

(7,675)

Loss per share:

Basic

(0.27)

(0.28)

Basic

Diluted

(0.27)

(0.28)

Weighted-average shares outstanding:

Basic

27,349

27,199

Diluted

27,349

27,199

Diluted

The accompanying notes are an integral part of these condensed consolidated financial statements.

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STONERIDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

Three months ended
March 31,
(in thousands) 2023 2022
Net loss $ (7,386) $ (7,675)
Other comprehensive income (loss), net of tax:
Foreign currency translation (1)
4,072 4,161
Unrealized (loss) gain on derivatives (2)
(232) 1,048
Other comprehensive income, net of tax 3,840 5,209
Comprehensive loss $ (3,546) $ (2,466)


	Three months ended March 31,
(in thousands)	2024		2023

Net loss	$	(6,126)	$	(7,386)

Other comprehensive (loss) income, net of tax:
Foreign currency translation	(4,879)		4,072
Unrealized gain (loss) on derivatives (1)	70		(232)
Other comprehensive (loss) income, net of tax	(4,809)		3,840

Comprehensive loss	$	(10,935)	$	(3,546)


(1)			Net of tax expense (benefit) of ~~$144~~$19 and $(62) for the three months ended March 31, ~~2022.~~


~~(2)~~			~~Net of tax (benefit) expense of $(62)~~2024 and ~~$279 for the three months ended March 31,~~ 2023, ~~and 2022,~~ respectively.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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STONERIDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Three months ended March 31, (in thousands)	Three months ended March 31, (in thousands)	2023		2022		Three months ended March 31, (in thousands)	2024	2023

OPERATING ACTIVITIES:	OPERATING ACTIVITIES:
OPERATING ACTIVITIES:
OPERATING ACTIVITIES:
Net loss	Net loss	$	(7,386)	$	(7,675)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Net loss
Net loss
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation
Depreciation
Depreciation	Depreciation	6,573		6,877
Amortization, including accretion and write-off of deferred financing costs	Amortization, including accretion and write-off of deferred financing costs	1,946		2,357
Deferred income taxes	Deferred income taxes	(2,536)		(605)
Loss of equity method investee	Loss of equity method investee	171		81
Gain on sale of fixed assets		(886)		(94)
Loss (gain) on sale of fixed assets
Share-based compensation expense	Share-based compensation expense	69		1,098
Excess tax deficiency related to share-based compensation expense	Excess tax deficiency related to share-based compensation expense	34		265

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:

Changes in operating assets and liabilities:

Changes in operating assets and liabilities:
Accounts receivable, net
Accounts receivable, net
Accounts receivable, net	Accounts receivable, net	(16,833)		(6,129)
Inventories, net	Inventories, net	(15,228)		(9,812)
Prepaid expenses and other assets	Prepaid expenses and other assets	1,943		(12,842)
Accounts payable	Accounts payable	21,264		6,581
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,687		87
Net cash used for operating activities		(9,182)		(19,811)
Net cash provided by (used for) operating activities

INVESTING ACTIVITIES:	INVESTING ACTIVITIES:
INVESTING ACTIVITIES:
INVESTING ACTIVITIES:
Capital expenditures, including intangibles
Capital expenditures, including intangibles
Capital expenditures, including intangibles	Capital expenditures, including intangibles	(10,110)		(7,368)
Proceeds from sale of fixed assets	Proceeds from sale of fixed assets	1,355		132

Net cash used for investing activities	Net cash used for investing activities	(8,755)		(7,236)

Net cash used for investing activities

Net cash used for investing activities

FINANCING ACTIVITIES:	FINANCING ACTIVITIES:
FINANCING ACTIVITIES:
FINANCING ACTIVITIES:
Revolving credit facility borrowings
Revolving credit facility borrowings
Revolving credit facility borrowings	Revolving credit facility borrowings	8,000		—
Revolving credit facility payments	Revolving credit facility payments	(8,568)		(16,000)
Proceeds from issuance of debt	Proceeds from issuance of debt	8,148		9,834
Repayments of debt	Repayments of debt	(8,475)		(10,311)

Repurchase of Common Shares to satisfy employee tax withholding	Repurchase of Common Shares to satisfy employee tax withholding	(1,224)		(669)
Net cash used for financing activities		(2,119)		(17,146)
Repurchase of Common Shares to satisfy employee tax withholding
Repurchase of Common Shares to satisfy employee tax withholding
Net cash provided by (used for) financing activities

Effect of exchange rate changes on cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	423		34
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(19,633)		(44,159)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	54,798		85,547

Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	35,165	$	41,388
Cash and cash equivalents at end of period
Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:
Supplemental disclosure of cash flow information:
Supplemental disclosure of cash flow information:
Cash paid for interest, net
Cash paid for interest, net
Cash paid for interest, net	Cash paid for interest, net	$	2,494	$	1,435
Cash paid for income taxes, net	Cash paid for income taxes, net	$	2,611	$	1,491

The accompanying notes are an integral part of these condensed consolidated financial statements.

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STONERIDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


(in thousands)	(in thousands)	Number of Common Shares outstanding	Number of treasury shares	Additional paid-in capital		Common Shares held in treasury		Retained earnings		Accumulated other comprehensive loss		Total shareholders' equity		(in thousands)	Number of Common Shares outstanding	Number of treasury shares	Additional paid-in capital	Common Shares held in treasury	Retained earnings	Accumulated other comprehensive loss	Total shareholders' equity

BALANCE DECEMBER 31, 2021		27,191	1,775	$	232,490	$	(55,264)	$	215,748	$	(97,024)	$	295,950
Net loss		—	—	—		—		(7,675)		—		(7,675)
Unrealized gain on derivatives, net		—	—	—		—		—		1,048		1,048
Currency translation adjustments		—	—	—		—		—		4,161		4,161
Issuance of Common Shares		161	(161)	—		—		—		—		—
Repurchased Common Shares for treasury, net		(36)	36	—		4,093		—		—		4,093
Share-based compensation, net		—	—	(3,653)		—		—		—		(3,653)
BALANCE MARCH 31, 2022		27,316	1,650	$	228,837	$	(51,171)	$	208,073	$	(91,815)	$	293,924
BALANCE

BALANCE DECEMBER 31, 2022		27,341	1,625	232,758		(50,366)		201,692		(103,142)		280,942

BALANCE

BALANCE
Net loss	Net loss	—	—	—		—		(7,386)		—		(7,386)
Unrealized loss on derivatives, net	Unrealized loss on derivatives, net	—	—	—		—		—		(232)		(232)
Currency translation adjustments	Currency translation adjustments	—	—	—		—		—		4,072		4,072
Issuance of Common Shares	Issuance of Common Shares	234	(234)	—		—		—		—		—
Repurchased Common Shares for treasury, net	Repurchased Common Shares for treasury, net	(62)	62	—		5,649		—		—		5,649
Share-based compensation, net	Share-based compensation, net	—	—	(6,802)		—		—		—		(6,802)
BALANCE MARCH 31, 2023	BALANCE MARCH 31, 2023	27,513	1,453	$	225,956	$	(44,717)	$	194,306	$	(99,302)	$	276,243

BALANCE DECEMBER 31, 2023

BALANCE DECEMBER 31, 2023

BALANCE DECEMBER 31, 2023
Net loss
Unrealized gain on derivatives, net
Currency translation adjustments
Issuance of Common Shares
Repurchased Common Shares for treasury, net
Share-based compensation, net
BALANCE MARCH 31, 2024

The accompanying notes are an integral part of these condensed consolidated financial statements.

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)

(1) Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by Stoneridge, Inc. (the “Company”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished in the condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations. The results of operations for the three months ended March 31, ~~2023~~2024 are not necessarily indicative of the results to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s ~~2022~~2023 Form 10-K.

Reclassifications

Certain prior period amounts have been reclassified to conform to their ~~2023~~2024 presentation in the condensed consolidated financial statements.

(2) Recently Issued Accounting Standards

Accounting Standards Not Yet Adopted

In ~~March 2020,~~November 2023, the FASB issued ASU ~~2020-04, “Reference Rate Reform~~No. 2023-07, "Segment Reporting (Topic ~~848)~~280) – ~~Facilitation~~Improvements to Reportable Segment Disclosures", which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026. Early adoption is permitted. We are currently evaluating the ~~Effects of Reference Rate Reform~~impact that the updated standard will have on ~~Financial Reporting.” The guidance in~~our financial statement disclosures.

In December 2023, the FASB issued ASU ~~2020-04 provides temporary optional expedient and exceptions~~No. 2023-09, “Income Taxes (Topic 740) – Improvements to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”) (also known as the “reference rate reform”). The guidance allowsIncome Tax Disclosures," which requires companies to ~~elect not~~disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, companies are required to ~~apply certain modification accounting requirements~~disclose additional information about income taxes paid. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to ~~contracts affected by~~be adopted on a prospective basis; however, retrospective application is permitted. We are currently evaluating the reference rate reform, if certain criteria are met. The guidance will also allow companies to elect various optional expedients, which would allow them to continue to apply hedge accounting for hedging relationships affected by the reference rate reform, if certain criteria are met. The new standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2023. As of March 31, 2023, the Company has not yet had contracts modified due to rate reform.impact on our annual consolidated financial statement disclosures.

(3) Revenue

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our products and services, which is usually when the parts are shipped or delivered to the customer’s premises. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. The transaction price will include estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. Incidental items that are not significant in the context of the contract are recognized as expense. The expected costs associated with our base warranties continue to be recognized as expense when the products are sold. Customer returns only occur if products do not meet the specifications of the contract and are not connected to any repurchase obligations of the Company.

The Company does not have any financing components or significant payment terms as payment occurs shortly after the point of sale. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by the Company from a customer are excluded from revenue. Amounts billed to customers related to shipping and handling costs are included in net sales in the condensed consolidated statements of operations. Shipping and handling costs associated with outbound freight after control over a product is transferred to the customer are accounted for as a fulfillment cost and are included in cost of sales.

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)

Revenue by Reportable Segment

Control Devices. Our Control Devices segment designs and manufactures products that monitor, measure or activate specific functions within a vehicle. This segment includes product lines such as actuators, sensors, switches and connectors. We sell these products principally to the automotive market in the North American and Asia Pacific regions. To a lesser extent, we also sell these products to the commercial vehicle and agricultural markets in the North American and Asia

~~Table of Contents~~

~~STONERIDGE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data, unless otherwise stated)~~

~~(Unaudited)~~

Pacific regions. Our customers included in these markets primarily consist of original equipment manufacturers (“OEM”) and companies supplying components directly to the OEMs (“Tier 1 supplier”).

Electronics. Our Electronics segment designs and manufactures driver information systems, vision and safety systems, connectivity and compliance products and electronic control units. These products are sold principally to the commercial vehicle market primarily through our OEM and aftermarket channels in the European, North American and Asia Pacific regions. The vision and safety systems are sold principally to the commercial vehicle and off-highway vehicle markets in the European and North American regions.

Stoneridge Brazil. Our Stoneridge Brazil segment primarily serves the South American region and specializes in the design, manufacture and sale of vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices, driver information systems and telematics solutions. Stoneridge Brazil sells its products through the aftermarket distribution channel, to factory authorized dealer installers, also referred to as original equipment services and directly to ~~OEMs and through mass merchandisers.~~OEMs. In addition, monitoring services and tracking devices are sold directly to corporate customers and individual consumers.

The following tables disaggregate our revenue by reportable segment and geographical location(1) for the three months ended March 31, ~~2023~~2024 and ~~2022:~~2023:


			Control Devices				Electronics				Stoneridge Brazil				Consolidated
		Control Devices																				Control Devices			Electronics		Stoneridge Brazil			Consolidated
Three months ended March 31,	Three months ended March 31,		2023		2022		2023		2022		2023		2022		2023		2022		Three months ended March 31,	2024	2023		2024	2023		2024		2023	2024		2023
Net Sales:	Net Sales:
North America
North America
North America	North America		$	75,681	$	71,490	$	48,045	$	32,338	$	—	$	—	$	123,726	$	103,828
South America	South America		—		—		—		—		14,256		12,045		14,256		12,045
Europe	Europe		—		—		87,246		91,785		—		—		87,246		91,785
Asia Pacific	Asia Pacific		10,261		12,570		5,836		830		—		—		16,097		13,400
Total net sales	Total net sales		$	85,942	$	84,060	$	141,127	$	124,953	$	14,256	$	12,045	$	241,325	$	221,058

~~___________________________~~_______________________

(1)Company sales based on geographic location are where the sale originates not where the customer is located.

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)

Performance Obligations

For OEM and Tier 1 supplier customers, the Company typically enters into contracts to provide serial production parts that consist of a set of documents including, but not limited to, an award letter, master purchase agreement and master terms and conditions. For each production product, the Company enters into separate purchase orders that contain the product specifications and an agreed-upon price. The performance obligation does not exist until a customer release is received for a specific number of parts. The majority of the parts sold to OEM and Tier 1 supplier customers are customized to the specific customer, with the exception of camera monitoring systems (“CMS”) sold through our aftermarket channel that are common across all customers. The transaction price is equal to the contracted price per part and there is no expectation of material variable consideration in the transaction price. For most customer contracts, the Company does not have an enforceable right to payment at any time prior to when the parts are shipped or delivered to the customer; therefore, the Company recognizes revenue at the point in time it satisfies a performance obligation by transferring control of a part to the customer. Certain customer contracts contain an enforceable right to payment if the customer terminates the contract for convenience and therefore are recognized over time using the cost to complete input method.

Our aftermarket products are focused on meeting the demand for ~~repair~~safety, compliance and entertainment applications. Including products, accessories and replacement parts ~~compliance parts and accessories~~ and are sold primarily to aftermarket distributors ~~and mass retailers~~ in our South American and European ~~and~~markets, as well as direct to aftermarket customers in North ~~American markets.~~America. Aftermarket products have one type of performance obligation which is the delivery of aftermarket parts and spare parts. For aftermarket customers, the Company typically has standard terms and conditions for all customers. In addition, aftermarket products have alternative use as they can be sold to multiple customers. Revenue for aftermarket part production contracts is recognized at a point in time when the control of the parts transfers to the customer which is based on the shipping terms. Aftermarket contracts may include variable consideration related to discounts and rebates which is included in the transaction price upon recognizing the product revenue.

A small portion of the Company’s sales are comprised of monitoring services that include both monitoring devices and fees to individual, corporate, fleet and cargo customers in our Stoneridge Brazil segment. These monitoring service contracts are

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~~STONERIDGE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data, unless otherwise stated)~~

~~(Unaudited)~~

generally not capable of being distinct and are accounted for as a single performance obligation. We recognize revenue for our monitoring products and services contracts over the life of the contract. There is no variable consideration associated with these contracts. The Company has the right to consideration from a customer in the amount that corresponds directly with the value to the customer of the Company’s performance to date. Therefore, the Company recognizes revenue over time using the practical expedient ASC 606-10-55-18 in the amount the Company has a “right to invoice” rather than selecting an output or input method.

Contract Balances

The Company had no material contract assets, contract liabilities or capitalized contract acquisition costs as of March 31, ~~2023~~2024 and December 31, ~~2022.~~2023.

(4) Inventories

Inventories are valued at the lower of cost (using either the first-in, first-out (“FIFO”) or average cost methods) or net realizable value. The Company evaluates and adjusts as necessary its excess and obsolescence reserve on a quarterly basis. Excess inventories are quantities of items that exceed anticipated sales or usage for a reasonable period. The Company has guidelines for calculating provisions for excess inventories based on the number of months of inventories on hand compared to anticipated sales or usage. Management uses its judgment to forecast sales or usage and to determine what constitutes a reasonable period. Inventory cost includes material, labor and overhead. Inventories consist of the following:


			March 31, 2023		December 31, 2022
		March 31, 2024					March 31, 2024	December 31, 2023
Raw materials	Raw materials		$	132,302	$	121,983
Work-in-progress	Work-in-progress		9,414		7,812
Finished goods	Finished goods		26,985		22,785
Total inventories, net	Total inventories, net		$	168,701	$	152,580

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)

Inventory valued using the FIFO method was ~~$154,203~~$168,094 and ~~$139,996~~$176,033 at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. Inventory valued using the average cost method was ~~$14,498~~$11,797 and ~~$12,584~~$11,725 at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively.

(5) Financial Instruments and Fair Value Measurements

Financial Instruments

A financial instrument is cash or a contract that imposes an obligation to deliver or conveys a right to receive cash or another financial instrument. The carrying values of cash and cash equivalents, accounts receivable and accounts payable are considered to be representative of fair value because of the short maturity of these instruments. The fair value of debt approximates the carrying value of debt, due to the variable interest rate on ~~the~~our Credit Facility and the maturity of the remaining outstanding debt.

Derivative Instruments and Hedging Activities

On March 31, ~~2023,~~2024, the Company had no open Mexican peso-denominated foreign currency forward contracts. The Company used foreign currency forward contracts solely for hedging and not for speculative purposes during ~~2022.~~2024 and 2023. Management believes that its use of these instruments to reduce risk is in the Company’s best interest. The counterparties to these financial instruments ~~have been~~are financial institutions with investment grade credit ratings.

Foreign Currency Exchange Rate Risk

Foreign currency transactions are remeasured into the functional currency using translation rates in effect at the time of the transaction with the resulting adjustments included on the condensed consolidated statements of operations within other expense, net. These foreign currency transaction losses, including the impact of hedging activities, were $1,944 and $1,102 for the three months ended March 31, 2024 and 2023, respectively.

The Company conducts business internationally and, therefore, is exposed to foreign currency exchange rate risk. The Company uses derivative financial instruments as cash flow hedges and used net investment hedges to manage its exposure to fluctuations in foreign currency exchange rates by reducing the effect of such fluctuations on foreign currency denominated intercompany transactions, inventory purchases and other foreign currency exposures.

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~~STONERIDGE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data, unless otherwise stated)~~

~~(Unaudited)~~

~~Net Investment Hedges~~

During 2021, the Company entered into two cross-currency swaps, designated as net investment hedges, with notional values of $25,000 each that were scheduled to mature in August 2026 and August 2028. These swaps hedged a portion of the net investment in a certain euro-denominated subsidiary.

The Company elected to assess hedge effectiveness of the net investment hedges under the spot method. Accordingly, periodic changes in the fair value of the derivative instruments attributable to factors other than spot exchange rate variability were excluded from the measurement of hedge ineffectiveness and reported directly in earnings each reporting period. The change in fair value of these derivative instruments was recorded in cumulative translation adjustment, which is a component of accumulated other comprehensive loss in the condensed consolidated balance sheets. The Company had no outstanding net investment hedges at March 31, 2023 or December 31, 2022.

Cash Flow Hedges

The Company entered into foreign currency forward contracts to hedge the Mexican peso currency in ~~2022.~~2024 and 2023. These forward contracts were executed to hedge forecasted transactions and have been accounted for as cash flow hedges. As such, gains and losses on derivatives qualifying as cash flow hedges are recorded in accumulated other comprehensive loss, to the extent that hedges are effective, until the underlying transactions are recognized in earnings. Unrealized amounts in accumulated other comprehensive loss fluctuate based on changes in the fair value of hedge derivative contracts at each reporting period. The cash flow hedges were highly effective. The effectiveness of the transactions was measured using regression analysis and forecasted future purchases of the currency.

In certain instances, the foreign currency forward contracts may not qualify for hedge accounting or are not designated as hedges and, therefore, are marked-to-market with gains and losses recognized in the Company’s condensed consolidated statements of operations as a component of other expense, net. During 2023 and 2022, all of the Company’s foreign currency forward contracts were designated as cash flow hedges.

The Company’s foreign currency forward contracts offset a portion of the gains and losses on the underlying foreign currency denominated transactions as follows:

Mexican peso-denominated Foreign Currency Forward Contracts – Cash Flow Hedges

The Company ~~held~~holds Mexican peso-denominated foreign currency forward contracts ~~that expired~~with a notional amount at March 31, 2024 of $16,878 which expire ratably on a monthly basis from ~~January 2022~~April 2024 to December ~~2022.~~2024. The notional ~~amount~~amounts at December 31, ~~2022~~2023 related to Mexican peso-denominated foreign currency forward contracts was ~~$0.~~$26,613.

~~Interest Rate Risk~~

~~Interest Rate Risk – Cash Flow Hedge~~

~~On February 18, 2020,~~The Company evaluated the Company entered into a floating-to-fixed interest rate swap agreement (the “Interest Rate Swap”) with a notional amount of $50,000 to hedge its exposure to interest payment fluctuations on a portion of its Credit Facility borrowings. The Interest Rate Swap matured on March 10, 2023. The Interest Rate Swap was designated as a cash flow hedgeeffectiveness of the ~~variable interest rate obligation under the Company's Credit Facility that has a current balance~~Mexican peso and U.S. dollar-denominated forward contracts held as of ~~$167,393 at~~ March 31, 2023. Accordingly, the change in fair value of the Interest Rate Swap was recognized in accumulated other comprehensive loss. The Interest Rate Swap agreement required monthly settlements on the same days2024 and concluded that the Credit Facility interest payments are due and had a maturity date of March 10, 2023, which was prior to the Credit Facility maturity date of June 4, 2024. Under the Interest Rate Swap terms, the Company paid a fixed interest rate and received a floating interest rate based on the one-month LIBOR, with a floor. The critical terms of the Interest Rate Swaphedges were aligned with the terms of the Credit Facility, resulting in no hedge ineffectiveness. The difference between amounts to be received and paid under the Interest Rate Swap were recognized as a component of interest expense, net on the condensed consolidated statements of operations. The Interest Rate Swap settlements reduced interest expense, net by ~~$290~~ ~~and increased interest expense, net by $153 for the three months ended March 31, 2023 and 2022, respectively.~~highly effective.

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)

Interest Rate Risk

Interest Rate Risk – Cash Flow Hedge

On February 18, 2020, the Company entered into a floating-to-fixed interest rate swap agreement (the “Swap”) with a notional amount of $50,000 to hedge its exposure to interest payment fluctuations on a portion of its Credit Facility borrowings. The Swap matured on March 10, 2023. The Swap was designated as a cash flow hedge of the variable interest rate obligation under the Company's Fourth Amended and Restated Credit Agreement, as amended, (the “Fourth Amended and Restated Credit Agreement”). Accordingly, the change in fair value of the Swap was recognized in accumulated other comprehensive loss. The Swap agreement required monthly settlements on the same days that the Fourth Amended and Restated Credit Agreement interest payments were due and had a maturity date of March 10, 2023, which was prior to the Fourth Amended and Restated Credit Agreement maturity date of June 5, 2024. Under the Swap terms, the Company paid a fixed interest rate and received a floating interest rate based on the one-month LIBOR, with a floor. The critical terms of the Swap were aligned with the terms of the Fourth Amended and Restated Credit Agreement, resulting in no hedge ineffectiveness. The difference between amounts to be received and paid under the Swap were recognized as a component of interest expense, net on the consolidated statements of operations. The Swap settlements reduced interest expense, net by $290 for the three months ended March 31, 2023.

The notional amounts and fair values of derivative instruments in the condensed consolidated balance sheets were as follows:


	Notional amounts (A)
	Notional amounts (A)
	Notional amounts (A)
	March 31, 2024
	March 31, 2024
	March 31, 2024
Derivatives designated as hedging instruments:
Derivatives designated as hedging instruments:
Derivatives designated as hedging instruments:
Cash flow hedges:
Cash flow hedges:
Cash flow hedges:
Forward currency contracts
Forward currency contracts
Forward currency contracts

	Notional amounts (A)				Prepaid expenses and other current assets
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Derivatives designated as hedging instruments:
Cash flow hedges:
Forward currency contracts	$	—	$	—	$	—	$	—
Interest rate swap	$	—	$	50,000	$	—	$	294
Net investment hedges:
Cross-currency swaps	$	—	$	—	$	—	$	—

_____________________________

(A)Notional amounts represent the gross contract of the derivatives outstanding in U.S. dollars.

Gross amounts recorded for the cash flow ~~and net investment~~ hedges in other comprehensive ~~income~~loss and in net loss for the three months ended March 31 were as follows:


	Gain recorded in other comprehensive loss										Gain recorded in other comprehensive loss			Gain reclassified from other comprehensive loss into net loss (A)
	2024									2024		2023	2024		2023
Derivatives designated as cash flow hedges:
Forward currency contracts
Forward currency contracts
Forward currency contracts
Interest rate swap

		Gain (loss) recorded in other comprehensive income				Gain (loss) reclassified from other comprehensive income into net loss (A)
		2023		2022		2023		2022
Derivatives designated as cash flow hedges:
Forward currency contracts		$	—	$	915	$	—	$	251
Interest rate swap		$	(4)	$	510	$	290	$	(153)
Derivatives designated as net investment hedges:
Cross-currency swaps		$	—	$	687	$	—	$	—

_____________________________


(A)			Gains reclassified from other comprehensive ~~income~~loss into net loss recognized in selling, general and administrative expenses (“SG&A”) in the Company’s condensed consolidated statements of operations were $0$117 and ~~$51~~$0 for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. Gains reclassified from other comprehensive ~~income~~loss into net loss recognized in cost of goods sold (“COGS”) in the Company’s condensed consolidated statements of operations were $0$537 and ~~$199~~$0 for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. Gains ~~(losses)~~ reclassified from other comprehensive ~~income~~loss into net loss recognized in interest expense, net in the Company’s condensed consolidated statements of operations were ~~$290~~$0 and ~~$(153)~~$290 for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)

Cash flows from derivatives used to manage foreign currency exchange and interest rate risks are classified as operating activities within the condensed consolidated statements of cash flows.

Fair Value Measurements

Certain assets and liabilities held by the Company are measured at fair value on a recurring basis and are categorized using the three levels of the fair value hierarchy based on the reliability of the inputs used. Fair values estimated using Level 1 inputs consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Fair values estimated using Level 2 inputs, other than quoted prices, are observable for the asset or liability, either directly or indirectly and include among other things, quoted prices for similar assets or liabilities in markets that are active or inactive as well as inputs other than quoted prices that are observable. For forward currency and cross-currency contracts, inputs include forward foreign currency exchange rates. For the interest rate swap, inputs ~~include~~included LIBOR. Fair values estimated using Level 3 inputs consist of significant unobservable inputs.

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~~STONERIDGE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data, unless otherwise stated)~~

~~(Unaudited)~~

The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the three levels of the fair value hierarchy based on the reliability of inputs used.

March 31,
2023

December 31,
2022

~~Fair values estimated using~~

Fair
value

Level 1
inputs

Level 2
inputs

Level 3
inputs

Fair
value

~~Financial assets carried at fair value:~~

~~Interest rate swap~~

—

~~294~~

~~Total financial assets carried at fair value~~

—

~~294~~

The following table sets forth a summary of the change in fair value of the Company’s Level 3 financial liabilities related to earn-out consideration that are measured at fair value on a recurring basis.


	~~Stoneridge Brazil~~
		~~2022~~
~~Balance at January 1~~		$	~~7,351~~

~~Foreign currency adjustments~~		~~1,308~~

~~Balance at March 31~~		$	~~8,659~~

The Company was required to pay the Stoneridge Brazil earn-out consideration based on Stoneridge Brazil’s financial performance in 2021. The fair value of the Stoneridge Brazil earn-out consideration was based on earnings before interest, taxes, depreciation and amortization (“EBITDA”) in 2021. The Stoneridge Brazil earn-out consideration obligation was recorded within accrued expenses and other current liabilities in the condensed consolidated balance sheets as of December 31, 2021. The earn-out consideration obligation of $8,272 was paid in April 2022 and recorded in the condensed consolidated statement of cash flows within operating and financing activities in the amounts of $1,996 and $6,276, respectively.

~~The foreign currency impact related to the Stoneridge Brazil earn-out consideration was included in other expense, net in the condensed consolidated statements of operations.~~


			March 31, 2024						December 31, 2023
			Fair values estimated using
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs		Fair value
Financial assets carried at fair value:
Forward currency contracts	$	1,947	$	—	$	1,947	$	—	$	1,858


Total financial assets carried at fair value	$	1,947	$	—	$	1,947	$	—	$	1,858

There were no transfers in or out of Level 3 from other levels in the fair value hierarchy for the three months ended March 31, ~~2023.~~2024.

(6) Share-Based Compensation

Compensation expense for share-based compensation arrangements, which is recognized in the condensed consolidated statements of operations as a component of SG&A ~~expenses,~~expense, was ~~$69~~$1,092 and ~~$1,098~~$69 for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. The three months ended March 31, 2023 included income from the forfeiture of certain grants associated with employee resignations.

(7) Debt

Debt consisted of the following at March 31, 2024 and December 31, 2023:


	March 31, 2024		December 31, 2023		Interest rates at March 31, 2024		Maturity
Revolving Credit Facility
Revolving Credit Facility	$	194,420	$	189,346	8.01	%	November 2026

Debt
Sweden short-term credit line	—		—
Suzhou short-term credit line	2,077		2,113		3.25	%	August 2024
Total debt	2,077		2,113
Less: current portion	(2,077)		(2,113)
Total long-term debt, net	$	—	$	—

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)

~~(7) Debt~~

~~Debt consisted of the following at March 31, 2023 and December 31, 2022:~~

March 31,
2023 December 31,
2022 Interest rates at March 31, 2023 Maturity
Revolving Credit Facility
Credit Facility $ 167,393 $ 167,802 7.16 % June 2024
Debt
Sweden short-term credit line — —
Suzhou short-term credit line 1,456 1,450 3.70% June 2023
Total debt 1,456 1,450
Less: current portion (1,456) (1,450)
Total long-term debt, net $ — $ —

Revolving Credit Facility

On June 5, 2019, the Company entered into the Fourth Amended and Restated Credit Agreement. The Fourth Amended and Restated Credit Agreement provided for a $300,000 senior secured revolving credit facility. As a result of entering into the Fourth Amended and Restated Credit Agreement and related amendments, the Company capitalized $332 of deferred financing costs during the year ended December 31, 2023.

On November 2, 2023, the Company entered into the Fifth Amended and Restated Credit Agreement (the “Credit Facility”). The Credit Facility ~~provided~~provides for a ~~$400,000~~$275,000 senior secured revolving credit facility ~~(which, as described below in the discussion of Amendment No. 3 to the Credit Facility was amended to be a $300,000 credit commitment)~~ and it replaced and superseded the ~~Third~~Fourth Amended and Restated Credit ~~Agreement that provided for a $300,000 revolving credit facility.~~Agreement. The Credit Facility ~~had~~has an accordion feature ~~that allowed~~which allows the Company to increase the availability by up to $150,000 upon the satisfaction of certain conditions, including the consent of lenders providing the increase in commitments and also includes a letter of credit subfacility, swing line subfacility and multicurrency subfacility. The Credit Facility has a termination date of ~~June 5, 2024.~~November 2, 2026. Borrowings under the Credit Facility bear interest at either the Base Rate or the ~~LIBOR~~SOFR rate, at the Company’s option, plus the applicable margin as set forth in the Credit Facility. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio.

As a result of entering into the Fifth Amended and Restated Credit Agreement, the Company capitalized $1,915 of deferred financing costs and wrote off $309 of previously recorded deferred financing costs during the year ended December 31, 2023.

The Credit Facility contains customary affirmative covenants and representations. The Credit Facility also contains customary negative covenants, which, among other things, are subject to certain exceptions, including restrictions on (i) indebtedness, (ii) liens, (iii) liquidations, mergers, consolidations and acquisitions, (iv) disposition of assets or subsidiaries, (v) affiliate transactions, (vi) ~~creation or ownership of certain subsidiaries, partnerships and joint ventures, (vii)~~ continuation of or change in business, ~~(viii)~~(vii) restricted payments, ~~(ix) prepayment of subordinated and junior lien indebtedness, (x)~~(viii) restrictions in agreements on dividends, intercompany loans and granting liens on the collateral, ~~(xi)~~(ix) loans and investments ~~(xii) sale~~ and ~~leaseback transactions, (xiii)~~(x) changes in organizational documents and fiscal ~~year and (xiv) transactions with respect to bonding subsidiaries.~~year. The Credit Facility contains customary events of default, subject to customary thresholds and exceptions, including, among other things, (i) non-payment of principal and non-payment of interest and fees, (ii) a material inaccuracy of a representation or warranty at the time made, (iii) a failure to comply with any covenant, subject to customary grace periods in the case of certain affirmative covenants, (iv) cross default of other debt, final judgments and other adverse orders in excess of $30,000, (v) any loan document shall cease to be a legal, valid and binding agreement, (vi) certain uninsured losses or proceedings against assets with a value in excess of $30,000, (vii) ERISA events, (viii) a change of control, or (ix) bankruptcy or insolvency proceedings.

~~Due to the ongoing impacts of the COVID-19 pandemic and supply chain disruptions~~Borrowings outstanding on the Credit Facility were $194,420 and $189,346 at March 31, 2024 and December 31, 2023, respectively.

The Company was in compliance with all Credit Facility covenants at March 31, 2024 and December 31, 2023.

The Company also has outstanding letters of credit of $1,586 at both March 31, 2024 and December 31, 2023.

Debt

The Company’s ~~end-markets and the resulting financial impacts~~wholly owned subsidiary located in Stockholm, Sweden (the "Stockholm subsidiary"), has an overdraft credit line that allows overdrafts on the ~~Company, on February 28, 2022, the Company entered into Amendment No. 3~~subsidiary’s bank account up to ~~the Fourth Amended~~a daily maximum level of 20,000 Swedish krona, or $1,878 and Restated Credit Agreement (“Amendment No. 3”). Amendment No. 3 reduced the total revolving credit commitments from $400.0 million to $300.0 million and the maximum permitted amount of swing loans from $40.0 million to $30.0 million. Amendment No. 3 provides for certain financial covenant relief and additional covenant restrictions during the “Specified Period” (the period from February 28, 2022 until the date that the Company delivers a compliance certificate for the quarter ending$1,987, at March 31, 2024 and December 31, 2023, ~~in form~~respectively. At March 31, 2024 and ~~substance satisfactory to the administrative agent).~~December 31, 2023, there were no borrowings outstanding on this overdraft credit line. During the ~~Specified Period:~~

•the maximum net leverage ratio was changed to 4.00 to 1.00 for the year ended December 31, 2021, suspended for the quarters ending March 31, 2022 through September 30, 2022 and could not exceed 4.75 to 1.00 for the quarter ended December 31, 2022 or 3.50 to 1.00 for the quarterthree months ended March 31, ~~2023;~~2024, the subsidiary borrowed and repaid 80,988 Swedish krona, or $7,604. The Stockholm subsidiary has pledged certain of its assets as collateral in order to obtain a guarantee of certain of the Stockholm subsidiary’s obligations to third parties.

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)

•the minimum interest coverage ratio of 3.50 was reduced to 2.50 for the quarter ended March 31, 2022, 2.25 for the quarter ended June 30, 2022 and 3.00 for the quarters ended September 30, 2022 and December 31, 2022;

•an additional condition to drawing on the Credit Facility has been added that restricts borrowings if the Company’s total of 100% of domestic and 65% of foreign cash and cash equivalents exceeds $70.0 million;

•~~there are certain additional restrictions on Restricted Payments (as defined); and~~

•~~a Permitted Acquisition (as defined) may not be consummated unless the net leverage ratio is below 3.50 to 1.00 during the Specified Period.~~

Amendment No. 3 changed the leverage based LIBOR pricing grid through the maturity date and also retained a LIBOR floor of 50 basis points on outstanding borrowings excluding any Specified Hedge Borrowings (as defined) which remain subject to a LIBOR ~~floor~~ ~~of 0 basis points.~~

~~Amendment No. 3 also incorporated hardwired mechanics to permit a future replacement of LIBOR as the interest reference rate without lender consent.~~

The Company capitalized $484 of deferred financing costs as a result of entering into Amendment No. 3. In connection with Amendment No. 3, the Company wrote off a portion of the previously recorded deferred financing costs of $365 in interest expense, net during the year ended December 31, 2022.

Due to continued supply chain disruptions and macroeconomic challenges on the Company’s end-markets and the resulting financial impacts on the Company, on March 1, 2023, the Company entered into Amendment No. 4 to the Fourth Amended and Restated Credit Agreement (“Amendment No. 4”). Amendment No. 4 provides for certain financial covenant relief and additional covenant restrictions during the “Amendment No. 4 Specified Period” (the period from March 1, 2023 until the date that the Company delivers a compliance certificate for the quarter ending September 30, 2023 in form and substance satisfactory to the administrative agent). During the Amendment No. 4 Specified Period:

•~~the maximum net leverage ratio~~ ~~was changed to 4.75 to 1.00 for the quarter ended March 31, 2023 and 4.25 to 1.00 for the quarter ended June 30, 2023;~~

•~~the minimum interest coverage ratio of 3.50 was reduced to 3.00 for the quarters ended March 31, 2023 and June 30, 2023;~~

•~~drawing on the Credit Facility continues to be restricted if the Company’s total of 100% of domestic and 65% of foreign cash and cash equivalents exceeds $70.0 million;~~

•~~there continue to be certain additional restrictions on Restricted Payments (as defined); and~~

•~~consistent with Amendment No. 3, a Permitted Acquisition (as defined) may not be consummated unless the net leverage ratio is below 3.50 to 1.00 during the~~ ~~Amendment No. 4~~ ~~Specified Period.~~

~~The Company capitalized $332 of deferred financing costs as a result of entering into Amendment No. 4.~~

~~Borrowings outstanding on the Credit Facility were $167,393 and $167,802 at March 31, 2023 and December 31, 2022, respectively.~~

~~As a result of the amendments, the Company was in compliance with all Credit Facility covenants at March 31, 2023 and December 31, 2022.~~

~~The Company also has outstanding letters of credit of~~ ~~$1,626~~ ~~at both March 31, 2023 and December 31, 2022.~~

~~Debt~~

The Company’s wholly owned subsidiary located in Stockholm, Sweden, has an overdraft credit line that allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20,000 Swedish krona, or $1,928 and $1,922, at March 31, 2023 and December 31, 2022, respectively. At March 31, 2023 and December 31, 2022, there were no borrowings outstanding on this overdraft credit line. During the three months ended March 31, 2023, the subsidiary borrowed and repaid 85,054 Swedish krona, or $8,197.

The Company’s wholly owned subsidiary located in Suzhou, China (the “Suzhou subsidiary”), has lines of credit (the “Suzhou credit line”) that allow up to a maximum borrowing level of 20,000 Chinese yuan, or ~~$2,912~~$2,770 and ~~$2,900~~$2,818 at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023 there was ~~$1,456~~$2,077 and ~~$1,450,~~$2,113, respectively, in borrowings outstanding on the Suzhou credit line with a weighted-average interest ~~rates~~rate of ~~3.70% at both March 31, 2023 and December 31, 2022, respectively.~~3.25%. The Suzhou credit line iswas included on the condensed

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~~STONERIDGE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data, unless otherwise stated)~~

~~(Unaudited)~~

consolidated balance sheet within current portion of debt. In addition, the Suzhou subsidiary has a bank acceptance draft line of credit which facilitates the extension of trade payable payment terms by 180 days. The bank acceptance draft line of credit allows up to a maximum borrowing level of 60,000 Chinese yuan, or ~~$8,737~~$8,310 and ~~$8,699~~$8,453 at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. There was ~~$4,004~~$2,149 and ~~$1,998~~$2,387 utilized on the Suzhou bank acceptance draft line of credit at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. The Suzhou bank acceptance draft line of credit is included on the condensed consolidated balance sheet within accounts payable.

(8) Loss Per Share

Basic loss per share was computed by dividing net loss by the weighted-average number of Common Shares outstanding for each respective period. Diluted loss per share was calculated by dividing net income by the weighted-average of all potentially dilutive Common Shares that were outstanding during the periods presented. However, for all periods in which the Company recognized a net loss, the Company did not recognize the effect of the potential dilutive securities as their inclusion would be anti-dilutive. Potential dilutive shares of ~~292,860~~298,592 and ~~218,727~~292,860 for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively, were excluded from diluted loss per share because the effect would be anti-dilutive.

Weighted-average Common Shares outstanding used in calculating basic and diluted earnings per share were as follows:


		Three months ended March 31,
		2023	2022
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2024
		2024
		2024
Basic weighted-average Common Shares outstanding
Basic weighted-average Common Shares outstanding
Basic weighted-average Common Shares outstanding	Basic weighted-average Common Shares outstanding	27,349,357	27,198,677
Effect of dilutive shares	Effect of dilutive shares	—	—
Effect of dilutive shares
Effect of dilutive shares
Diluted weighted-average Common Shares outstanding	Diluted weighted-average Common Shares outstanding	27,349,357	27,198,677
Diluted weighted-average Common Shares outstanding
Diluted weighted-average Common Shares outstanding

There were ~~521,304~~660,124 and ~~797,873~~521,304 performance-based right to receive Common Shares outstanding at March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. The right to receive Common Shares are included in the computation of diluted earnings per share based on the number of Common Shares that would be issuable if the end of the quarter were the end of the ~~contingency~~performance period.

(9) Accumulated Other Comprehensive (Loss) Income

Changes in accumulated other comprehensive (loss) income for the three months ended March 31, ~~2023~~2024 and ~~2022~~2023 were as follows:


	Foreign currency translation							Foreign currency translation	Unrealized gain (loss) on derivatives	Total
Balance at January 1, 2024
Other comprehensive (loss) income before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Net other comprehensive (loss) income, net of tax
Balance at March 31, 2024
		Foreign currency translation		Unrealized gain (loss) on derivatives		Total
Balance at January 1, 2023
Balance at January 1, 2023
Balance at January 1, 2023	Balance at January 1, 2023	$	(103,374)	$	232	$	(103,142)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	4,072		(3)		4,069
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	—		(229)		(229)
Net other comprehensive income (loss), net of tax	Net other comprehensive income (loss), net of tax	4,072		(232)		3,840
Balance at March 31, 2023	Balance at March 31, 2023	$	(99,302)	$	—	$	(99,302)

Balance at January 1, 2022		$	(97,203)	$	179	$	(97,024)
Other comprehensive income before reclassifications		4,161		1,126		5,287
Amounts reclassified from accumulated other comprehensive loss		—		(78)		(78)
Net other comprehensive income, net of tax		4,161		1,048		5,209
Balance at March 31, 2022		$	(93,042)	$	1,227	$	(91,815)

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)

(10) Commitments and Contingencies

From time to time, we are subject to various legal actions and claims incidental to our business, including those arising out of breach of contracts, product warranties, product liability, patent infringement, regulatory matters and employment-related matters. The Company establishes accruals for matters which it believes that losses are probable and can be reasonably

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~~STONERIDGE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data, unless otherwise stated)~~

~~(Unaudited)~~

estimated. Although it is not possible to predict with certainty the outcome of these matters, the Company is of the opinion that the ultimate resolution of these matters will not have a material adverse effect on its consolidated results of operations or financial position.

As a result of environmental studies performed at the Company’s former facility located in Sarasota, Florida, the Company became aware of soil and groundwater contamination at the site. The Company engaged an environmental engineering consultant to assess the level of contamination and to develop a remediation and monitoring plan for the site. Soil remediation at the site was completed during the year ended December 31, 2010. A remedial action plan was approved by the Florida Department of Environmental Protection and groundwater remediation began in the fourth quarter of 2015. During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the Company ~~recognized~~did not recognize any expense ~~of $125 and $0 respectively,~~ related to groundwater remediation. At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company accrued ~~$278~~$142 and ~~$246,~~$143, respectively, related to expected future remediation costs. At March 31, ~~2023~~2024 and December 31, ~~2022, $271~~2023, $142 and ~~$132,~~$136, respectively, were recorded as a component of accrued expenses and other current liabilities in the condensed consolidated balance sheets while the remaining ~~amounts~~amount as of ~~March~~December 31, 2023 ~~and December 31, 2022 were~~was recorded as a component of other long-term liabilities. Costs associated with the recorded liability will be incurred to complete the groundwater remediation and monitoring. The recorded liability is based on assumptions in the remedial action plan as well as estimates for future remediation activities. Although the Company sold the Sarasota facility and related property in December 2011, the liability to remediate the site contamination remains the responsibility of the Company. Due to the ongoing site remediation, the Company is currently required to maintain a $1,489 letter of credit for the benefit of the buyer.

The Company’s Stoneridge Brazil subsidiary has civil, labor and other tax contingencies (excluding income tax) for which the likelihood of loss is deemed to be reasonably possible, but not probable, by the Company’s legal advisors in Brazil. As a result, no provision has been recorded with respect to these contingencies, which amounted to R$~~47,898~~40,755 ($~~9,428)~~8,158) and R$~~47,820~~41,681 ($~~9,165)~~8,609) at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. An unfavorable outcome on these contingencies could result in significant cost to the Company and adversely affect its results of ~~operations.~~operations and cash flows.

On August 12, 2020, the Brazilian Administrative Counsel for Economic Defense (“CADE”) issued a ruling against Stoneridge Brazil for abuse of dominance and market foreclosure through its prior use of exclusivity provisions in agreements with its distributors. The CADE tribunal imposed a R$7,995 ($~~1,574)~~1,600) fine which is included in the reasonably possible contingencies noted above. The Company ~~is challenging~~continues to challenge this ruling in Brazilian federal court to reverse this decision by the CADE tribunal.

Long Term Supply Commitment

In 2022, the Company entered into a long term supply agreement, as amended, with a supplier for the purchase of certain electronic semiconductor components through December 31, 2027. Pursuant to the agreement, the Company paid capacity deposits of $1,000 in December 2022 and June 2023, respectively. The capacity deposits are recognized in prepaid and other current assets on our condensed consolidated balance sheet. This long term supply agreement requires the Company to purchase minimum annual volumes while requiring the supplier to sell these components at a fixed price. The Company purchased $196 and $665 of these components during the three months ended March 31, 2024 and 2023, respectively. The Company is required to purchase $3,914, $10,764, $10,764 and $3,914 of these components in each of the years 2024 through 2027, respectively.

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)

Product Warranty and Recall

Amounts accrued for product warranty and recall claims are established based on the Company’s best estimate of the amounts necessary to settle existing and future claims on products sold as of the balance sheet dates. These accruals are based on several factors including past experience, production changes, industry developments and various other considerations. Our estimate is based on historical trends of units sold and claim payment amounts, combined with our current understanding of the status of existing claims, forecasts of the resolution of existing claims, expected future claims on products sold and commercial discussions with our customers. The key factors in our estimate are the warranty period and the customer source. The Company can provide no assurances that it will not experience material claims or that it will not incur significant costs to defend or settle such claims beyond the amounts accrued. The current portion of the product warranty and recall reserve is included as a component of accrued expenses and other current liabilities on the condensed consolidated balance sheets. Product warranty and recall reserve included ~~$4,979~~$7,414 and ~~$4,437~~$7,228 of a long-term liability at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively, which is included as a component of other long-term liabilities on the condensed consolidated balance sheets.

During the second quarter of 2023, the Company received a demand for arbitration from one of our customers seeking recovery for warranty claims related to past sales of PM sensor products, a product line we exited in 2019. In March 2024, pursuant to the arbitration process, the customer submitted a formal statement of claim notification for 29,340 euro ($31,557) as of March 31, 2024. Based on our review of the technical merits and specific claims as well as prior discussions with the customer, we believe these claims lack merit and are significantly overstated. While no assurances can be made as to the ultimate outcome of this matter, or any other future claims, we do not currently believe a material loss is probable.

The following provides a reconciliation of changes in product warranty and recall reserve liability:


Three months ended March 31,	Three months ended March 31,	2023		2022		Three months ended March 31,	2024	2023
Product warranty and recall reserve at beginning of period	Product warranty and recall reserve at beginning of period	$	13,477	$	9,846
Accruals for warranties established during period	Accruals for warranties established during period	4,329		3,058
Aggregate changes in pre-existing liabilities due to claim developments	Aggregate changes in pre-existing liabilities due to claim developments	141		—
Settlements made during the period	Settlements made during the period	(2,025)		(2,992)
Foreign currency translation	Foreign currency translation	66		(94)
Product warranty and recall reserve at end of period	Product warranty and recall reserve at end of period	$	15,988	$	9,818

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~~STONERIDGE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data, unless otherwise stated)~~

~~(Unaudited)~~

(11) Business Realignment and Restructuring

~~On May 19, 2020, the Company committed to the strategic exit of its Control Devices particulate matter (“PM”) sensor product line.~~ The decision to exit the PM sensor product line was made after consideration of the decline in the market outlook for diesel passenger vehicles, the current and expected profitability of the product line and the Company’s strategic focus on aligning resources with the greatest opportunities. In conjunction with the strategic exit of the PM sensor product line, the Company entered into an asset purchase agreement related to the sale of the PM sensor product line during the first quarter of 2021.

The only remaining costs relate to potential commercial settlements and legal fees which we continue to negotiate. The estimated range of additional cost related to these settlements and fees is up to $4,200.

~~The settlement of liabilities associated with the exit of the PM sensor line that relate to the Control Devices reportable segment include the following:~~

Accrual as of
January 1, 2022 2022 Charge
to Expense Utilization Accrual as of
March 31, 2022
Cash Non-Cash
Employee termination benefits 35 — (35) — —
Total $ 35 $ — $ (35) $ — $ —

On January 10, 2019, the Company committed to a restructuring plan that resulted in the closure of the Canton, Massachusetts facility (“Canton Facility”) on March 31, 2020 and the consolidation of manufacturing operations at that site into other Company locations (“Canton Restructuring”). The costs for the Canton Restructuring included employee severance and termination costs, contract terminations costs, professional fees and other related costs such as moving and set-up costs for equipment and costs to restore the engineering function previously located at the Canton facility. We do not expect to incur additional costs related to the Canton Restructuring.

~~The settlement of liabilities associated with for the Canton Restructuring that relate to the Control Devices reportable segment include the following:~~

Accrual as of
January 1, 2022 2022 Charge
to Expense Utilization Accrual as of
March 31, 2022
Cash Non-Cash
Employee termination benefits $ 93 $ — $ (93) $ — $ —
Total $ 93 $ — $ (93) $ — $ —

~~In addition to specific restructuring activities, the~~ Company regularly evaluates the performance of its businesses and cost structures, including personnel, and makes necessary changes thereto in order to optimize its results. The Company also evaluates the required skill sets of its personnel and periodically makes strategic changes. As a consequence of these actions, the Company incurs severance related costs that are referred to as business realignment charges.

Business realignment charges incurred by reportable segment were as follows:

Three months ended
March 31,
2023 2022
Electronics (A)
309 —
Stoneridge Brazil (B)
— 34
Unallocated Corporate (C)
953 —
Total business realignment charges $ 1,262 $ 34


	Three months ended March 31,
	2024		2023

Electronics (A)	—		309

Unallocated Corporate (B)	—		953
Total business realignment charges	$	—	$	1,262


(A)			Severance costs for the three months ended March 31, 2023 related to COGS and SG&A were $175 and $134, respectively.


(B)			Employee separation related costs for the three months ended March 31, 2023 related to SG&A were $953.

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)


~~(B)~~			~~Severance costs for the three months ended March 31, 2022 related to SG&A were $34.~~


~~(C)~~			~~Employee separation related costs for the three months ended March 31, 2023 related to SG&A were $953.~~

Business realignment charges incurred, classified by statement of operations line item were as follows:


		Three months ended March 31,
		2023		2022
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2024
		2024
		2024
Cost of goods sold	Cost of goods sold	$	175	$	—
Cost of goods sold
Cost of goods sold
Selling, general and administrative
Selling, general and administrative
Selling, general and administrative	Selling, general and administrative	1,087		34

Total business realignment charges	Total business realignment charges	$	1,262	$	34

Total business realignment charges

Total business realignment charges

(12) Income Taxes

For interim tax reporting, we estimate our annual effective tax rate and apply it to our year to date ordinary income. Tax jurisdictions with a projected or year to date loss for which a benefit cannot be realized are excluded.

For the three months ended March 31, 2024, income tax expense of $510 was attributable to the mix of earnings among tax jurisdictions as well as U.S. taxes on foreign earnings, offset by tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives. The effective tax rate of (9.1)% varies from the statutory rate primarily due to U.S. taxes on foreign earnings offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.

For the three months ended March 31, 2023, income tax benefit of ~~$708~~$(708) was attributable to the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of 8.7% varies from the statutory rate primarily due to U.S. taxes on foreign earnings and non-deductible expenses offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.

~~For~~The OECD (Organisation for Economic Co-operation and Development) implemented a 15% global corporate minimum tax (Pillar Two) to ensure that large multinational enterprises pay a minimum level of tax in the ~~three months ended March 31, 2022,~~countries they operate. During 2023, many countries took steps to incorporate Pillar Two into their domestic laws. In 2024, we do not expect a material change to our income tax ~~expense of $1,493 was attributable to the mix of earnings among tax~~provision in connection with Pillar Two. As additional jurisdictions ~~as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The~~implement this legislation, our effective tax rate ~~of (24.2)% varies from the statutory rate primarily due to the impact of~~and cash tax ~~losses for which no benefit is recognized due to valuation allowances~~payments could increase in ~~certain jurisdictions as well as U.S. tax on foreign earnings offset by tax credits and incentives.~~future years.

(13) Segment Reporting

Operating segments are defined as components of an enterprise that are evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chief Executive Officer.

The Company has three reportable segments, Control Devices, Electronics and Stoneridge Brazil, which also represent its operating segments. The Control Devices reportable segment produces actuators, sensors, switches and connectors. The Electronics reportable segment produces driver information systems, vision and safety systems, connectivity and compliance products and electronic control units. The Stoneridge Brazil reportable segment designs and manufactures vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices, driver information systems and telematics solutions.

The accounting policies of the Company’s reportable segments are the same as those described in Note 2, “Summary of Significant Accounting Policies” of the Company’s ~~2022~~2023 Form 10-K. The Company’s management evaluates the performance of its reportable segments based primarily on revenues from external customers, capital expenditures and operating income. Inter-segment sales are accounted for on terms similar to those to third parties and are eliminated upon consolidation.

The financial information presented below is for our three reportable operating segments and includes adjustments for unallocated corporate costs and intercompany eliminations, where applicable. Such costs and eliminations do not meet the requirements for being classified as an operating segment. Corporate costs include various support functions, such as accounting/finance, executive administration, human resources, information technology and legal.

2019

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)

A summary of financial information by reportable segment is as follows:

Three months ended March 31,

2023

2022

Three months ended
March 31,

2024

Net Sales:

Control Devices

85,942

84,060

Control Devices

Inter-segment sales

734

930

Control Devices net sales

86,676

84,990

Control Devices net sales

Electronics

141,127

124,953

Inter-segment sales

8,516

7,711

Inter-segment sales

Electronics net sales

149,643

132,664

Stoneridge Brazil

14,256

12,045

Stoneridge Brazil

Inter-segment sales

—

Stoneridge Brazil net sales

14,256

12,045

Stoneridge Brazil net sales

Eliminations

(9,250)

(8,641)

Total net sales

241,325

221,058

Operating (Loss) Income:

Total net sales

Operating Income (Loss):

Control Devices

2,087

6,776

Electronics

1,400

(2,712)

Electronics

Stoneridge Brazil

1,343

492

Unallocated Corporate (A)

(8,859)

(7,540)

Total operating loss

(4,029)

(2,984)

Unallocated Corporate (A)

Total operating income (loss)

Depreciation and Amortization:

Control Devices

3,174

3,561

Control Devices

Electronics

3,464

3,593

Stoneridge Brazil

1,085

991

Stoneridge Brazil

Unallocated Corporate

602

561

Total depreciation and amortization (B)

8,325

8,706

Total depreciation and amortization (B)

Interest Expense (Income), net:

Control Devices

Electronics

485

Stoneridge Brazil

(270)

(158)

Stoneridge Brazil

Unallocated Corporate

2,513

1,846

Total interest expense, net

2,746

1,786

Total interest expense, net

Capital Expenditures:

Control Devices

1,956

3,845

Control Devices

Electronics

6,207

2,833

Stoneridge Brazil

636

669

Stoneridge Brazil

Unallocated Corporate(C)

112

Total capital expenditures

8,911

7,368

Total capital expenditures

2120

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data, unless otherwise stated)

(Unaudited)


		March 31, 2023		December 31, 2022
	March 31, 2024					March 31, 2024	December 31, 2023
Total Assets:	Total Assets:
Control Devices
Control Devices
Control Devices	Control Devices	$	177,154	$	174,535
Electronics	Electronics	380,666		369,232
Stoneridge Brazil	Stoneridge Brazil	64,128		60,861
Corporate (C)	Corporate (C)	421,554		419,469
Eliminations	Eliminations	(372,764)		(371,992)
Total assets	Total assets	$	670,738	$	652,105

The following tables present net sales and long-term assets for each of the geographic areas in which the Company operates:


Three months ended March 31,	Three months ended March 31,	2023		2022
		Three months ended March 31,
		Three months ended March 31,
		2024
		2024
		2024
Net Sales:
Net Sales:
Net Sales:	Net Sales:
North America	North America	$	123,726	$	103,828
North America
North America
South America
South America
South America	South America	14,256		12,045
Europe and Other	Europe and Other	103,343		105,185
Europe and Other
Europe and Other
Total net sales	Total net sales	$	241,325	$	221,058
Total net sales
Total net sales


		March 31, 2023		December 31, 2022
	March 31, 2024					March 31, 2024	December 31, 2023
Long-term Assets:	Long-term Assets:
North America
North America
North America	North America	$	94,451	$	92,149
South America	South America	32,471		31,796
Europe and Other	Europe and Other	120,680		118,609
Total long-term assets	Total long-term assets	$	247,602	$	242,554

(A)Unallocated Corporate expenses include, among other items, accounting/finance, human resources, information technology and legal costs as well as share-based compensation.

(B)These amounts represent depreciation and amortization on property, plant and equipment and certain intangible assets.

(C)Assets located at Corporate consist primarily of cash, intercompany loan receivables, fixed assets for the corporate headquarter building, leased assets, information technology assets, equity investments and investments in subsidiaries.

(14) Investments

~~PST Eletrônica Ltda.~~

The Company had a 74% controlling interest in Stoneridge Brazil from December 31, 2011 through May 15, 2017. On May 16, 2017, the Company acquired the remaining 26% noncontrolling interest in Stoneridge Brazil. As part of the acquisition agreement, the Company was required to pay additional earn-out consideration based on Stoneridge Brazil’s financial performance in 2021. The final earn-out consideration of $8,272 was paid on April 29, 2022. See Note 5 for the fair value and foreign currency adjustments of the earn-out consideration in prior periods.

~~Other Investments~~

In December 2018, the Company entered into an agreement to make a $10,000 investment in a fund (“Autotech Fund II”) managed by Autotech Ventures (“Autotech”), a venture capital firm focused on ground transportation technology which is accounted for under the equity method of accounting. The Company’s $10,000 investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. The Company has contributed $8,400 to the Autotech Fund II as of March 31, 2024. The Company did not contribute to or receive distributions from

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~~STONERIDGE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data, unless otherwise stated)~~

~~(Unaudited)~~

Autotech Fund II during the three months ended March 31, ~~2023~~2024 or ~~2022.~~2023. The Company has a ~~6.5%~~6.6% interest in Autotech Fund II. The Company recognized losses of ~~$171~~$277 and ~~$81~~$171 during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. The Autotech Fund II investment recorded in investments and other long-term assets in the condensed consolidated balance sheets was ~~$8,473~~$8,195 and ~~$8,644~~$8,472 as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a global designer and manufacturer of highly engineered electrical and electronic systems, components and modules primarily for the automotive, commercial, off-highway and agricultural vehicle markets.

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes related thereto and other financial information included elsewhere herein.

Segments

We are organized by products produced and markets served. Under this structure, our operations have been reported using the following segments:

Control Devices. This segment includes results of operations that manufacture actuators, sensors, switches and connectors.

Electronics. This segment includes results of operations from the production of driver information systems, vision and safety systems, connectivity and compliance products and electronic control units.

Stoneridge Brazil. This segment includes results of operations that design and manufacture vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices, driver information systems and telematics solutions.

First Quarter Overview

During the first quarter of ~~2023,~~2024, we benefited from ~~both~~ increased volumes in both our North American and European commercial ~~and North American automotive~~vehicle markets, compared to the prior year quarter, due to improvements in ~~material availability, customer production schedules and~~ end market ~~demand. We continue to benefit from~~demand and the ~~negotiated pricing actions previously agreed to with the majority~~continued ramp-up of recently launched programs including for our ~~customers which continue to offset a portion of the incremental material~~MirrorEye® camera monitoring system and ~~supply chain related costs we have continued to incur. The Company continues to work with~~ our customers to preserve gross margin through price increases aligned with current market conditions and is executing on initiatives to reduce supply chain related costs and improve working capital. In the first quarter of 2023, we experienced some moderation of commercial and operational challenges including material availability, material costs and customer production schedules volatility. While these challenges continue, we are focusing on our long-term growth initiatives that we expect will drive profitable growth in 2023 and beyond.SE 5000 Smart 2 tachograph.

The Company had net loss of ~~$(7.4)~~$6.1 million, or $(0.22) per diluted share, for the three months ended March 31, 2024.

Net loss for the quarter ended March 31, 2024 improved by $1.3 million, or $0.05 per diluted share, from net loss of $7.4 million, or $(0.27) per diluted share, for the three months ended March 31, 2023.

Net loss for the quarter ended March 31, 2023 decreased by $0.3 million, or $0.01 per diluted share, from net loss of $(7.7) million, or $(0.28) per diluted share, for the three months ended March 31, 2022. Net loss decreased primarilyimproved due to ~~additional~~ contribution from higher sales ~~levels~~partially offset by increased selling, general and administrative expenses ("SG&A") and design and development ("D&D") spending, higher ~~business realignment~~interest costs, the incremental unfavorable impact of non-operating foreign currency losses and ~~interest costs.~~an increase in the provision for income taxes. Net sales ~~increased~~decreased by ~~$20.3~~$2.2 million, or ~~9.2%~~0.9%, primarily from ~~higher~~lower volumes in our ~~served markets offset by~~North American automotive market for Control Devices and lower required electronic component spot buy purchases ~~and adverse foreign currency movements~~ in our Electronics ~~segment. During the first quarter, the overall transportation industry continued to be challenged~~segment, partially offset by ~~on-going supply chain disruptions including electronic component shortages even though these conditions have improved relative to prior quarters.~~higher volumes in our Electronics segment commercial vehicle market.

Our Control Devices segment net sales ~~increased~~decreased by ~~2.2%~~10.2% compared to the first quarter of ~~2022~~2023 primarily as a result of ~~higher~~decreases in our North American automotive ~~volumes including production ramp-up~~market. The decrease in our North American automotive market was primarily due to the expected wind down of ~~new products~~end-of-life programs and ~~negotiated price increases~~reduced demand for electric vehicles impacting actuation product revenue during the quarter. These decreases were offset by ~~lower~~increases in our China commercial vehicle and automotive ~~volumes.~~markets. Segment gross margin ~~decreased~~as a percentage of sales increased due to favorable mix resulting in lower direct material costs. Segment operating income increased due to higher ~~material costs~~gross margin and ~~unfavorable sales mix. Segment operating income decreased due to~~slightly lower ~~gross margin.~~D&D and SG&A spending, partially offset by the gain on sale of disposed assets recognized in the first quarter of 2023.

Our Electronics segment net sales increased by ~~12.9%~~6.1% compared to the first quarter of ~~2022~~2023 primarily due to ~~increased~~ higher sales volumes in our European ~~commercial~~ and North American commercial vehicle markets, including ~~the continued ramp up of previously~~our recently launched ~~new products~~SE 5000 Smart 2 tachograph, as well as an increase in our North American off-highway vehicle market. These increases were offset by ~~lower required electronic component~~relatively less spot buy ~~purchases.~~purchases, which are material purchases reimbursed by customers and recorded as both revenue and offsetting material cost. As such, spot buy purchases do not impact gross profit. In addition, we experienced lower sales volumes in our European off-highway vehicle market. Segment gross margin as a percent of sales increased primarily due to higher contribution from higher sales levels, a reduction in material purchase variances, including the effect of foreign currency, and the impact of lower required electronic component spot buy purchases offset by an increase in ~~material and labor~~overhead costs. Operating income for the segment increased compared to the first quarter of ~~2022~~2023 primarily due to higher gross ~~margin.~~margin offset by higher SG&A and D&D spending, including support for new product launches.

Our Stoneridge Brazil segment net sales ~~increased~~decreased by ~~18.4%~~14.3% compared to the first quarter of ~~2022~~2023 primarily due to ~~higher~~lower sales ~~of our~~in local OEM products, ~~and tracking devices offset by~~as a result of one-time revenue opportunities recognized in the first quarter of 2023 which were not expected to recur in 2024. Operating income decreased due to lower gross margin from lower sales ~~demand for our other product lines. Segment gross margin increased due to increased contribution margin from higher sales. Operating income increased due to higher gross margin.~~contribution.

2422

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In the first quarter of ~~2023,~~2024, SG&A expenses increased by ~~$2.5~~$0.6 million compared to the first quarter of ~~2022~~2023 primarily due to ~~higher current quarter business realignment costs of $1.1 million and~~ ~~2022 favorable legal settlements offset by a~~the 2023 gain on ~~the disposal~~sale of fixed assets. of $0.8 million.

In the first quarter of ~~2023,~~2024, D&D costs ~~remained consistent with~~increased by $0.6 million compared to the prior year first quarter ~~as higher~~due to incremental engineering spending ~~was~~primarily related to product launches and lower customer reimbursements offset by ~~an increase in the capitalization of~~increased capitalized software development costs.

At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, we had cash and cash equivalents balances of ~~$35.2~~$48.4 million and ~~$54.8~~$40.8 million, respectively, and we had ~~$167.4~~$194.4 million and ~~$167.8~~$189.3 million, respectively, in borrowings outstanding on our Credit Facility. The ~~2023 decrease~~2024 increase in cash and cash equivalents was mostly due to ~~capital expenditures for new product launches and higher working capital~~cash generated from operating activities, including the ~~return to normalized sales and production levels after year end shut downs.~~reduction of inventory levels.

Outlook

The Company believes that focusing on products that address industry megatrends has had and will continue to have a positive effect on both our top-line growth and underlying margins. For example, the Company is aligned with platforms likely to perform well against overall market dynamics including ~~our content on electrified vehicle platforms~~light-trucks, SUVs and crossover vehicles and our continued focus on ~~safety-based products.~~

~~Since~~safety, vehicle intelligence and connectivity based products, such as the ~~first quarter~~recent release of ~~2021, we have been experiencing supply chain related disruptions, due to a worldwide semiconductor shortage,~~our next generation tachograph in Europe as well as ~~other material availability constraints, which continue~~current and ~~have resulted~~future launches of our MirrorEye programs in ~~longer lead-times, higher costs~~North America and ~~delays in procuring other component parts~~Europe for both OEM and ~~raw materials. In addition, global~~aftermarket applications.

Material and production cost inflation has increased significantly since 2021. Rising costs of materials, labor and other inputs used to manufacture and sell our products, including freight and logistics costs, have impacted, and may continue to impact, our results. While incremental material costs have startedbegun to moderate, however we expect ~~material~~continued cost inflation to persist throughout ~~2023~~2024 which will continue to put pressure on margins. In order to minimize the impact of these incremental costs, we have taken several actions, including ~~continuing to negotiate~~negotiating price increases and cost recoveries with our ~~customers~~customers. Additionally, we continued to focus on improving manufacturing performance and ~~implementing supply chain strategies. In addition, we have taken actions~~optimizing our global cost structure to ~~optimize our organizational structure,~~both reduce ~~discretionary spending~~costs and improve ~~operating leverage.~~operational efficiency. We expect these actions will ~~continue to evaluate macroeconomic conditions~~benefit our current and ~~expect ongoing discussions with our customers regarding price increases and other cost recovery actions to improve our margin~~future financial performance. ~~During the first quarter of 2023, we experienced sequential monthly revenue increases supporting our expectations for continued revenue growth in 2023.~~

Based on IHS Market production ~~forecast,~~forecasts, the North American automotive market is expected to increase ~~to 15.1~~from 15.6 million units in 2023 ~~from 14.3~~to 16.0 million units in ~~2022~~2024 as this market continues to recover from ~~supply chain disruptions and~~ economic headwinds. ~~The Company expects sales volumes in~~In our Control Devices segment, we expect lower than previously anticipated growth rates for sales of products used in electric vehicle platforms due to ~~increase from 2022 based~~reduced production expectations with some of our key customers. We continue to focus on ~~production forecasts~~improved manufacturing execution, supply chain strategy, material cost improvement actions and ~~market conditions~~enterprise-wide cost improvement plans and will continue to react to changes in our end-markets as ~~well as incremental revenue from high-demand powertrain actuation program launches.~~needed to maintain and improve our margins. During 2024, our Control Devices segment has incurred $0.7 million of support costs for a troubled supplier. We expect these costs to moderate for the remainder of 2024. We will continue to focus on growing our core product portfolio aligned with ~~powertrain electrification~~industry megatrends by investing in our actuation and ~~electrification focused~~system-level sensor ~~businesses~~products as we anticipate greater opportunities as powertrains become increasingly ~~electrified. However, on-going global supply chain disruptions, including the global semiconductor supply shortage, material~~electrified and ~~labor cost inflation could adversely impact~~efficient.

In 2024, our ~~sales~~European and North American commercial vehicle end market volumes are forecasted to decrease 10.5% and ~~gross margin for the remainder of 2023.~~

~~For 2023, we~~7.6%, respectively. We expect ~~an increase in~~ our Electronics’ segment sales ~~compared~~ to ~~2022 primarily~~outperform forecasted changes in production volumes due to strong demand for our existing products ~~in our commercial vehicle end markets~~ and the ramp-up of ~~new~~recently launched programs, including our next generation tachograph product ~~launches even though production volumes~~ in Europe for both OEM and aftermarket applications and our ~~European and~~first North American ~~commercial markets are~~OEM MirrorEye program, as well as expected ~~decrease approximately 2.0% to 3.5%. In addition,~~program launches, including our next OEM MirrorEye program launch in Europe in 2024. Based on European regulatory requirements and the competitive landscape for our tachograph product, we expect ~~increased sales from~~significant growth over the ~~continued roll out~~next several years. We continue to work with all of our OEM customers, their dealer networks and the fleets to drive MirrorEye ~~camera-based vision systems including the first~~adoption. We expect continued growth as we launch new OEM ~~launch of~~programs, increase take rates for existing OEM programs and continue to expand our ~~MirrorEye system in North America. Customer recoveries~~fleet activities. Recovery from customers related to spot buys of materials purchased ~~for our~~by the Company on behalf of those customers, ~~increased net sales by $58.4 million for the full year 2022 and $9.1 million for the first quarter ended March 31, 2023. Spot buy material purchasing activity,~~ which is recognized as revenue and material costs, ~~was mostly passed through~~increased net sales by $14.6 million for the full year 2023. As a result of supply chains normalizing and material availability improving, the Company did not incur any spot buy material purchases in the first quarter 2024 and does not expect to ~~the customer and was~~incur additional spot buy material purchases.

In 2024, we expect net D&D spend to increase modestly driven by ~~electronic component shortages. The Company expects spot buy activity~~spend for the development of next generation products as we expect new product launch related spend to ~~moderate but continue~~decrease in ~~2023~~the second half of 2024. As a result of reduced launch activities we expect lower customer reimbursements and ~~cannot predict the duration or magnitude~~capitalization of ~~continued spot buy activity due to volatile supply chains and component availability.~~software development costs. We ~~expect to~~ continue to ~~offset a significant majority~~evaluate and optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend.

Table of ~~spot buy related costs going forward and expect continued reduction in overall spot buy costs in 2023.~~ Contents

In ~~addition, we expect customer negotiated price increases to favorably impact sales and mitigate the impact of cost pressure on margin in 2023.~~

In 2022, our gross D&D spend increased to support near term launches of awarded business in both our Electronics and Control Devices segments. In 2023, we expect that our D&D spending will stabilize as we continue to align our global engineering capabilities in order to develop advanced technologies and systems within our portfolio of products and we expect to sustain current levels of customer reimbursement to support specific programs and products.

Our 2022 Stoneridge Brazil segment revenues decreased compared to the prior year due to lower sales of most of our product lines offset by favorable foreign currency translation and slightly higher sales of tracking devices and monitoring service fees. In October 2022,April 2024, the International Monetary Fund forecasted the Brazil gross domestic product to grow ~~2.8%~~2.2% in ~~2022 and 1.0% in 2023.~~2024. We expect our served market channels to remain relatively stable in ~~2023~~2024 based on current market

~~Table of Contents~~

conditions. Stoneridge Brazil will focus on continuing to grow our OEM capabilities in-region to better support our global customers. This focus will ~~drive steady~~provide opportunities for future growth and provide a platform to continue to rotate our local portfolio to more closely align with our global business. ~~Our financial~~

We remain focused on improving cash generation and the reduction of debt through efficient operating performance ~~in our Stoneridge Brazil segment is also subject~~and targeted actions to ~~uncertainty from movements in the Brazilian Real and Argentina Peso foreign currencies.~~

~~As a result of supply chain disruptions and production schedule volatility, our~~reduce net working capital, ~~balances, specifically~~particularly our inventory ~~have increased significantly compared to historical levels. In addition, inventory has also increased~~levels, as the impacts from product launches ~~in our Electronics~~ and Control Devices segments. We continue to engage in initiatives to reduce working capital including reducing on-hand inventory by refining our procurement process and managing the on-time collection of our accounts receivable balances.material availability normalizes.

We expect higher interest expense in ~~2023~~2024 driven by higher ~~benchmark rates~~outstanding balances on our Credit Facility.

Our future effective tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles and our jurisdictional mix of earnings. We monitor these factors and ~~adjust~~the impact on our effective tax ~~rate accordingly.~~rate.

Other Matters

A significant portion of our sales are outside of the United States. These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars. A significant portion of our raw materials purchased by our Electronics and Stoneridge Brazil segments are denominated in U.S. dollars, and therefore movements in foreign currency exchange rates can also have a significant effect on our results of operations. The U.S. Dollar strengthened against the ~~Mexican peso in 2023 and the~~ euro, Swedish krona, Chinese yuan, Brazilian real and Argentine peso in ~~2022,~~2024 and the Argentine peso in 2023, unfavorably impacting our reported results.

On May 19, 2020, the Company committed to the strategic exit of its Control Devices particulate matter sensor product line (“PM Sensor Exit”). The costs for the PM Sensor Exit included employee severance and termination costs and other related costs including supplier settlements. Non-cash charges included impairment and accelerated depreciation of fixed assets associated with PM sensor production. We did not recognize any expense as a result of this initiative during the three months ended March 31, 2023 and 2022. The only remaining costs relate to potential commercial settlements and legal fees that we continue to negotiate. The estimated additional cost related to these settlements and fees is up to $4.2 million.

We regularly evaluate the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto in order to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. As a consequence of these actions, we incur severance and resignation related costs that we refer to as business realignment charges. No business realignment costs were incurred during the three months ended March 31, 2024. Business realignment costs of $1.3 ~~million and less than $0.1~~ million were incurred during the three months ended March 31, ~~2023~~2023.

Because of the competitive nature of the markets we serve, we face pricing pressures from our customers in the ordinary course of business. In response to these pricing pressures we have been able to effectively manage our production costs by the combination of lowering certain costs and ~~2022, respectively.~~limiting the increase of others, the net impact of which to date has not been material. However, if we are unable to effectively manage production costs in the future to mitigate future pricing pressures, our results of operations would be adversely affected.

Three Months Ended March 31, ~~2023~~2024 Compared to Three Months Ended March 31, ~~2022~~2023

Condensed consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):


Three months ended March 31,	Three months ended March 31,	2023				2022				Dollar increase (decrease)		Three months ended March 31,	2024	2023	Dollar increase (decrease)
Net sales	Net sales	$	241,325	100.0	%	$	221,058	100.0	%	$	20,267
Costs and expenses:	Costs and expenses:
Cost of goods sold	Cost of goods sold	198,523		82.3		179,615		81.3		18,908
Cost of goods sold
Cost of goods sold
Selling, general and administrative	Selling, general and administrative	29,863		12.4		27,399		12.4		2,464
Design and development	Design and development	16,968		7.0		17,028		7.7		(60)
Operating loss		(4,029)		(1.7)		(2,984)		(1.3)		(1,045)
Operating income (loss)
Interest expense, net	Interest expense, net	2,746		1.1		1,786		0.8		960
Equity in loss of investee	Equity in loss of investee	171		0.1		81		—		90
Other expense, net	Other expense, net	1,148		0.5		1,331		0.6		(183)
Loss before income taxes	Loss before income taxes	(8,094)		(3.4)		(6,182)		(2.8)		(1,912)
(Benefit) provision for income taxes		(708)		(0.3)		1,493		0.7		(2,201)
Provision (benefit) for income taxes
Net loss	Net loss	$	(7,386)	(3.1)	%	$	(7,675)	(3.5)	%	$	289

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Net Sales. Net sales for our reportable segments, excluding inter-segment sales, are summarized in the following table (in thousands):


Three months ended March 31,	Three months ended March 31,	2023				2022				Dollar increase		Percent increase		Three months ended March 31,	2024						2023						Dollar increase				Percent increase
Control Devices	Control Devices	$	85,942	35.6	%	$	84,060	38.0	%	$	1,882	2.2	%	Control Devices	$	77,158	32.3	32.3	%			$	85,942	35.6		35.6		%		$	(8,784)		(10.2)		(10.2)	%
Electronics	Electronics	141,127		58.5		124,953		56.6		16,174		12.9	%	Electronics	149,783		62.6	62.6		141,127			141,127		58.5		58.5		8,656			8,656		6.1		6.1	%
Stoneridge Brazil	Stoneridge Brazil	14,256		5.9		12,045		5.4		2,211		18.4	%	Stoneridge Brazil	12,216		5.1	5.1		14,256			14,256		5.9		5.9		(2,040)			(2,040)		(14.3)		(14.3)	%
Total net sales	Total net sales	$	241,325	100.0	%	$	221,058	100.0	%	$	20,267	9.2	%	Total net sales	$	239,157	100.0	100.0	%			$	241,325	100.0		100.0		%		$	(2,168)		(0.9)		(0.9)	%

Our Control Devices segment net sales ~~increased $1.9~~decreased $8.8 million due to ~~an increase~~a decrease in our North American automotive market of ~~$3.7 million and negotiated price increases of $1.2 million offset by a~~$12.6 million. The decrease in our North American automotive market was primarily due to the expected wind down of end-of-life programs and reduced demand for electric vehicles impacting actuation product revenue during the quarter. These decreases were offset by increases in our China commercial vehicle and automotive markets of $0.9 million and $0.6 million, respectively, as well as an increase in other markets of ~~$1.4 million and $0.8 million, respectively.~~$3.0 million. In addition, first quarter of ~~2023~~2024 net sales were adversely impacted by an increase in unfavorable foreign currency translation of ~~$0.9~~$0.5 million.

Our Electronics segment net sales increased ~~$16.2~~$8.7 million due to higher ~~sales~~production volumes in our European and North American ~~and China~~ commercial vehicle markets of ~~$26.1 million, $12.3~~$11.8 million and ~~$1.1~~$5.0 million, ~~respectively.~~respectively, including sales related to the launch of a next generation tachograph for our European markets, as well as an increase in our North American off-highway vehicle market of $1.5 million. These increases were offset by the impact of lower required electronic component spot buy purchases of $9.1 million in the first quarter of ~~$13.4 million~~2024 compared to the first quarter of ~~2022.~~2023. In addition, we experienced lower sales volumes in our European off-highway vehicle ~~market~~markets of ~~$3.7~~$1.1 million and ~~unfavorable~~a net reduction in pricing actions of $1.1 million. First quarter of 2024 net sales were favorably impacted by euro and Swedish krona foreign currency translation of ~~$6.6~~$0.6 million compared to the prior year quarter.

Our Stoneridge Brazil segment net sales ~~increased~~decreased $2.0 million due to ~~higher~~lower sales in ~~our~~local OEM products as well as slightly lower sales in the monitoring service and ~~tracking devices~~aftermarket products. This decrease was offset by favorable foreign currency translation and slightly ~~lower~~higher sales demand for our other product lines.

Net sales by geographic location are summarized in the following table (in thousands):


Three months ended March 31,	Three months ended March 31,	2023				2022				Dollar increase (decrease)		Percent increase (decrease)		Three months ended March 31,	2024						2023						Dollar increase				Percent increase
North America	North America	$	123,726	51.3	%	$	103,828	47.0	%	$	19,898	19.2	%	North America	$	118,116	49.4	49.4	%			$	123,726	51.3		51.3		%		$	(5,610)		(4.5)		(4.5)	%
South America	South America	14,256		5.9		12,045		5.4		2,211		18.4	%	South America	12,216		5.1	5.1		14,256			14,256		5.9		5.9		(2,040)			(2,040)		(14.3)		(14.3)	%
Europe and Other	Europe and Other	103,343		42.8		105,185		47.6		(1,842)		(1.8)	%	Europe and Other	108,825		45.5	45.5		103,343			103,343		42.8		42.8		5,482			5,482		5.3		5.3	%
Total net sales	Total net sales	$	241,325	100.0	%	$	221,058	100.0	%	$	20,267	9.2	%	Total net sales	$	239,157	100.0	100.0	%			$	241,325	100.0		100.0		%		$	(2,168)		(0.9)		(0.9)	%

The ~~increase~~decrease in North American net sales was mostly attributable to ~~an increase~~a decrease in sales volume in our ~~commercial vehicle market~~automotive and agricultural markets of ~~$11.7~~$12.5 million and $1.1 million, respectively, and a decrease in ~~our automotive market~~negotiated price increases of ~~$3.7~~$1.9 million as well as ~~negotiated price increases and higher required~~decreased customer recoveries of electronic component spot buys of ~~$1.4~~$1.5 million. These decreases were offset by higher sales in our commercial vehicle and off-highway markets of $6.9 million and ~~$0.8~~$4.5 million, respectively.

The ~~increase~~decrease in net sales in South America was primarily due to ~~higher~~lower sales in ~~our~~local OEM products as well as slightly lower sales in the monitoring service and ~~tracking devices~~aftermarket products. This decrease was offset by favorable foreign currency translation and slightly ~~lower~~higher sales demand for our other product lines.

The ~~decrease~~increase in net sales in Europe and Other was due to ~~decreases~~an increase in ~~required~~our European commercial vehicle and automotive markets of $11.9 million and $1.8 million, respectively, as wells as increases in our China commercial vehicle and automotive markets of $1.2 million and $0.6 million, respectively. These increases were offset by decreased customer recoveries of electronic component spot buys ~~and negotiated price increases~~ of ~~$18.2~~$7.4 million, ~~and $1.7 million, respectively. In addition, we experienced~~ decreases in our European off-highway ~~and China automotive markets~~market of ~~$3.7~~$1.1 million and ~~$1.4 million, respectively, as well as unfavorable foreign currency translation~~a decrease in negotiated price increases of ~~$7.5~~$1.3 million. ~~These decreases were offset by increases in our European commercial vehicle market~~

Table of ~~$26.1 million.~~Contents

Cost of Goods Sold and Gross ~~Margin.~~Margin. Cost of goods sold ~~increased~~decreased compared to the first quarter of ~~2022~~2023 and our gross margin ~~decreased~~increased from ~~18.7% in the first quarter of 2022 to~~ 17.7% in the first quarter of ~~2023.~~2023 to 20.2% in the first quarter of 2024. Our material cost as a percentage of net sales ~~increased from~~ ~~62.3%~~decreased to 58.9% in the first quarter of ~~2022 to~~2024 from 62.6% in the first quarter of 2023. The decrease in material cost percentage was mostly due to the impact of required electronic component spot buy purchases in 2023, ~~from higher material costs resulting from adverse foreign exchange fluctuations and material inflation. Cost~~reimbursed by customers. The impact of these spot buy purchases increased cost of goods sold ~~also increased~~ by $9.1 million,, or 3.8% of net sales, ~~and $24.4 million, or 11.0% of sales,~~ for the first quarter of 2023, ~~and 2022, respectively, from the impact of electronic component spot buy purchases,~~ which ~~were offset by customer recoveries. The impact of these spot buy purchases~~ reduced gross margin percent by 0.7%. Other factors contributing to the reduction in material costs were favorable product mix and material cost improvement actions. Overhead as a percentage of net sales was ~~14.8%~~16.2% and ~~14.4%~~14.8% for the first ~~quarters~~quarter of 2024 and 2023, ~~and 2022,~~ respectively. The increase in overhead as a percentage of sales was attributable to higher indirect wage inflation.

Our Control Devices segment gross margin ~~decreased~~increased primarily due to ~~higher~~lower direct material ~~costs associated with inflation and an unfavorable sales mix.~~

~~Table of Contents~~

costs.

Our Electronics segment gross margin increased due to the contribution from higher sales levels, ~~and~~ the reduction of the adverse effect of required electronic component spot buy purchases, net of customer recoveries ~~offset by higher~~and lower direct material and labor ~~costs.~~costs relative to sales.

Our Stoneridge Brazil segment gross margin ~~increased~~decreased primarily due to ~~increased contribution from~~lower sales and higher ~~sales.~~overhead costs offset by favorable sales mix.

Selling, General and Administrative. SG&A expenses increased by ~~$2.5~~$0.6 million primarily due to ~~higher business realignment costs of $1.1 million. In addition our Control Devices segment recognized 2022 favorable legal settlements offset by a~~the 2023 gain on ~~the~~ sale of fixed assets of ~~an idled sensor production line.~~$0.8 million.

Design and Development. D&D costs ~~were consistent with the prior year first quarter as higher~~increased by $0.6 million due to incremental engineering spending ~~was~~primarily related to product launches and lower customer reimbursements offset by ~~higher~~increased capitalized software development costs ~~of $1.2 million~~ in our Electronics segment.

Operating ~~Loss~~Income (loss). Operating income (loss) ~~income~~ by segment is summarized in the following table (in thousands):


Three months ended March 31,	Three months ended March 31,	2023		2022		Dollar increase (decrease)		Percent increase (decrease)		Three months ended March 31,	2024			2023			Dollar increase (decrease)			Percent increase (decrease)
Control Devices	Control Devices	$	2,087	$	6,776	$	(4,689)	(69.2)	%	Control Devices	$	2,164	$	$	2,087	$	$	77	3.7		3.7		%
Electronics	Electronics	1,400		(2,712)		4,112		151.6
Stoneridge Brazil	Stoneridge Brazil	1,343		492		851		173.0
Unallocated corporate	Unallocated corporate	(8,859)		(7,540)		(1,319)		(17.5)
Operating loss		$	(4,029)	$	(2,984)	$	(1,045)	(35.0)	%
Operating income (loss)										Operating income (loss)	$	331		$	(4,029)		$	4,360		(108.2)		%

Our Control Devices segment operating income ~~decreased~~increased slightly due to lower ~~gross margin primarily resulting from higher~~direct material costs ~~unfavorable sales mix~~ and ~~a 2022 favorable legal settlement~~lower D&D and SG&A spending offset by the gain on ~~disposal~~sale of fixed assets recognized in the first quarter of ~~$0.8 million.~~2023.

Our Electronics segment operating income increased primarily due to higher contribution from higher sales and lower business realignment expense offset by higher ~~material~~SG&A and ~~labor as well as adverse foreign exchange fluctuations.~~D&D spending.

Our Stoneridge Brazil segment operating income ~~increased~~decreased due to ~~contribution from~~lower sales and higher overhead costs offset by favorable sales ~~levels.~~mix.

Our unallocated corporate operating loss increased ~~primarily~~slightly from higher SG&A incentive compensation offset by lower business realignment ~~costs associated with employee separation related costs of $1.0 million.~~costs.

Operating income (loss) ~~income~~ by geographic location is summarized in the following table (in thousands):


Three months ended March 31,	Three months ended March 31,	2023		2022		Dollar increase (decrease)		Percent increase (decrease)		Three months ended March 31,	2024			2023			Dollar increase (decrease)			Percent increase (decrease)
North America	North America	$	(6,871)	$	(2,525)	$	(4,346)	(172.1)	%	North America	$	(5,606)	$	$	(6,871)	$	$	1,265	18.4		18.4		%
South America	South America	1,343		492		851		173.0
Europe and Other	Europe and Other	1,499		(951)		2,450		257.6
Operating loss		$	(4,029)	$	(2,984)	$	(1,045)	(35.0)	%
Operating income (loss)										Operating income (loss)	$	331		$	(4,029)		$	4,360		(108.2)		%

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Our North American operating loss ~~increased~~decreased due to ~~higher material and labor costs, higher business realignment costs and a 2022~~ favorable ~~legal settlement~~margin offset by ~~a gain on disposal of fixed assets.~~higher SG&A and D&D spending. Operating income in South America ~~increased~~decreased due to ~~higher~~lower sales ~~levels.~~levels offset by lower direct material costs. Our operating results in Europe and Other increased primarily due to contribution from higher sales ~~levels.~~levels and lower business realignment expense offset by higher SG&A and D&D spending.

Interest Expense, net. Interest expense, net was ~~$2.7~~$3.6 million and ~~$1.8~~$2.7 million for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. The increase for the quarter ended March 31, ~~2023,~~2024, was the result of higher outstanding balance on the Credit Facility and higher benchmark rates affecting the ~~company’s~~Company’s floating rate Credit Facility debt.

Equity in Loss of Investee. Equity loss for Autotech Fund II was ~~$0.2~~$0.3 million and ~~$0.1~~$0.2 million for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

~~Table of Contents~~

Other Expense, net. We record certain foreign currency transaction losses (gains) as a component of other expense, net on the condensed consolidated statement of operations. Other expense, net of ~~$1.1~~$2.0 million ~~decreased~~increased by ~~$0.2~~$0.9 million compared to the first quarter of ~~2022~~2023 due to foreign currency transaction losses in our Electronics and Control Devices ~~and Stoneridge Brazil~~ segments from the ~~strengthening~~weakening of the U.S. dollar.

Provision (Benefit) ~~Provision~~ for Income ~~Taxes~~Taxes. . For the three months ended March 31, 2024, income tax expense of $0.5 million was attributable to the mix of earnings among tax jurisdictions as well as U.S. taxes on foreign earnings, offset by tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives. The effective tax rate of (9.1)% varies from the statutory tax rate primarily due to U.S. taxes on foreign earnings offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.

For the three months ended March 31, 2023, income tax benefit of $(0.7) million was attributable to the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of 8.7% varies from the statutory tax rate primarily due to U.S. taxes on foreign earnings and non-deductible expenses offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.

For the three months ended March 31, 2022, income tax expense of $1.5 million was attributable to the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of (24.2)% varies from the statutory tax rate primarily due to the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions as well as U.S. taxes on foreign earnings offset by tax credits and incentives.

Liquidity and Capital Resources

Summary of Cash Flows:


Three months ended March 31,	Three months ended March 31,	2023		2022		Three months ended March 31,	2024	2023
Net cash provided by (used for):	Net cash provided by (used for):
Operating activities
Operating activities
Operating activities	Operating activities	$	(9,182)	$	(19,811)
Investing activities	Investing activities	(8,755)		(7,236)
Financing activities	Financing activities	(2,119)		(17,146)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	423		34
Net change in cash and cash equivalents	Net change in cash and cash equivalents	$	(19,633)	$	(44,159)

Cash ~~used for~~provided by operating activities ~~decreased~~increased compared to ~~2022~~2023 primarily due to a reduction in cash used for ~~assets related to customer recoveries of electronic component spot buys and customer funded tooling. Our receivable terms and collections rates have remained consistent between periods presented. Our~~accounts receivables. Cash provided by inventory ~~levels for both periods presented are elevated~~improved compared to ~~historical balances~~2023 due to ~~a combination~~the impact in the prior year of new product launches and mitigation of historical supply chain ~~disruptions.~~disruptions, as well as the impact of our current inventory reduction actions.

Net cash used for investing activities decreased compared to 2023 due to lower capital expenditures.

Net cash provided by financing activities increased compared to ~~2022~~2023 due to higher ~~capital expenditures and capitalized software development costs slightly offset by increased proceeds from the disposal of fixed assets.~~

~~Net cash used for financing activities decreased compared to the prior year first quarter primarily due to higher 2022~~ net Credit Facility ~~payments.~~borrowings.

As outlined in Note 7 to our condensed consolidated financial statements, the Credit Facility permits borrowing up to a maximum level of ~~$300.0~~$275.0 million. This variable rate facility provides the flexibility to refinance other outstanding debt or finance acquisitions through ~~June 2024.~~November 2026. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio. The Credit Facility also contains affirmative and negative covenants and events of default that are customary for credit arrangements of this type including covenants that place restrictions and/or limitations on the Company’s ability to borrow money, make capital expenditures and pay dividends. The Credit Facility had an outstanding balance of ~~$167.4~~$194.4 million at March 31, ~~2023.~~

Due to the ongoing impacts of the COVID-19 pandemic and supply chain disruptions on the Company’s end-markets and the resulting financial impacts on the Company, on February 28, 2022, the Company entered into Amendment No. 3 to the Fourth Amended and Restated Credit Agreement (“Amendment No. 3”). Amendment No. 3 reduced the total revolving credit commitments from $400.0 million to $300.0 million and the maximum permitted amount of swing loans from $40.0 million to $30.0 ~~million~~. Amendment No. 3 provides for certain financial covenant relief and additional covenant restrictions during the “Specified Period” (the period from February 28, 2022 until the date that the Company delivers a compliance certificate for the quarter ending March 31, 2023 in form and substance satisfactory to the administrative agent). During the Specified Period:

•the maximum net leverage ratio was changed to 4.00 to 1.00 for the year ended December 31, 2021, suspended for the quarters ending March 31, 2022 through September 30, 2022 and cannot exceed 4.75 to 1.00 for the quarter ended December 31, 2022 or 3.50 to 1.00 for the quarter ended March 31, 2023;2024.

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•~~there are certain additional restrictions on Restricted Payments (as defined); and~~

•~~a Permitted Acquisition (as defined) may not be consummated unless the net leverage ratio is below 3.50 to 1.00 during the Specified Period.~~

~~Amendment~~ No. 3 changed the leverage based LIBOR pricing grid through the maturity date and also retained a LIBOR floor of 50 basis points on outstanding borrowings excluding any Specified Hedge Borrowings (as defined) which remained subject to a LIBOR floor of 0 basis points.

~~Amendment No. 3 also incorporated hardwired mechanics to permit a future replacement of LIBOR as the interest reference rate without lender consent.~~

Due to continued supply chain disruptions and macroeconomic challenges on the Company’s end-markets and the resulting financial impacts on the Company, on March 1, 2023, the Company entered into Amendment No. 4 ~~to the Fourth Amended and Restated Credit Agreement (“Amendment No. 4”)~~. Amendment No. 4 provides for certain financial covenant relief and additional covenant restrictions during the “Amendment No. 4 Specified Period” (the period from March 1, 2023 until the date that the Company delivers a compliance certificate for the quarter ending September 30, 2023 in form and substance satisfactory to the administrative agent). During the Amendment No. 4 Specified Period:

•~~the maximum net leverage ratio~~ ~~was changed to 4.75 to 1.00 for the quarter ended March 31, 2023 and 4.25 to 1.00 for the quarter ended June 30, 2023;~~

•~~the minimum interest coverage ratio of 3.50 was reduced to 3.00 for the quarters ended March 31, 2023 and June 30, 2023;~~

•~~drawing on the Credit Facility continues to be restricted if the Company's total of 100% of domestic and 65% of foreign cash and cash equivalents exceeds $70.0 million;~~

•~~there continue to be certain additional restrictions on Restricted Payments (as defined); and~~

•~~consistent with Amendment No. 3, a Permitted Acquisition (as defined) may not be consummated unless the net leverage ratio is below 3.50 to 1.00 during the Amendment No. 4 Specified Period.~~

~~As a result of the amendments, the~~The Company was in compliance with all covenants at March 31, ~~2023~~2024 and December 31, ~~2022.~~2023. The Company has not experienced a violation that would limit the Company’s ability to borrow under the Credit Facility ~~as amended~~ and does not expect that the covenants under it will restrict the Company’s financing flexibility. However, it is possible that future borrowing flexibility under the Credit Facility may be limited as a result of lower than expected financial performance due to the adverse impact of macroeconomic conditions and supply chain disruptions on the Company’s markets and general global demand. The Company expects to make additional repayments on the Credit Facility when cash exceeds the amount needed for operations and to remain in compliance with all covenants.

The Company’s wholly owned subsidiary located in Stockholm, Sweden, has an overdraft credit line that allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20.0 million Swedish krona, or $1.9 million and $2.0 million at ~~both~~ March 31, ~~2023~~2024 and December 31, ~~2022.~~2023, respectively. At March 31, ~~2023~~2024 and December 31, ~~2022~~2023 there were no borrowings outstanding on this overdraft credit line. During the three months ended March 31, ~~2023,~~2024, the subsidiary borrowed and repaid ~~85.1~~81.0 million Swedish krona, or ~~$8.2~~$7.6 million.

The Company’s wholly owned subsidiary located in Suzhou, China, has lines of credit that allow up to a maximum borrowing level of 20.0 million Chinese yuan, or ~~$2.9~~$2.8 million at both March 31, ~~2023~~2024 and December 31, ~~2022, respectively.~~2023. At ~~both~~ March 31, ~~2023~~2024 and at December 31, ~~2022~~2023 there was ~~$1.5~~$2.1 million and $2.1 million, respectively, in borrowings outstanding on the Suzhou credit line with a weighted-average interest ~~rates~~rate of ~~3.70%~~3.25%. The Suzhou credit line is included on the condensed consolidated balance sheet within current portion of debt. In addition, the Suzhou subsidiary has a bank acceptance draft line of credit which facilitates the extension of trade payable payment terms by 180 days. The bank acceptance draft line of credit allows up to a maximum borrowing level of 6060.0 million Chinese yuan, or ~~$8.7~~$8.3 million and $8.5 million at ~~both~~ March 31, ~~2023~~2024 and December 31, ~~2022.~~2023, respectively. There was ~~$4.0~~$2.1 million and ~~$2.0~~$2.4 million utilized on the Suzhou bank acceptance draft line of credit at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. The Suzhou bank acceptance draft line of credit is included on the condensed consolidated balance sheet within accounts payable.

On May 19, 2020, the Company committed to the strategic exit of its Control Devices PM sensor product line. The costs for the PM Sensor Exit included employee severance and termination costs, professional fees and other related costs such as potential commercial and supplier settlements. Non-cash charges included impairment of fixed assets and accelerated depreciation associated with PM sensor production. We did not recognized any expense as a result of this initiative during the three months ended March 31, 2023. The only remaining costs relate to potential commercial settlements and legal fees which we continue to negotiate. ~~The estimated additional costs related to these settlements and fees is up to $4.2 million.~~

~~Table of Contents~~

In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech, a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. As of March 31, ~~2023,~~2024, the Company’s cumulative investment in the Autotech Fund II was ~~$8.1~~$8.4 million. The Company did not contribute to ~~or receive distributions from~~ Autotech Fund II during the three months ended March 31, ~~2023~~2024 or ~~2022.~~2023.

Our future results could also be adversely affected by unfavorable changes in foreign currency exchange rates. We have significant foreign denominated transaction exposure in certain locations, especially in Brazil, Argentina, Mexico, Sweden, Estonia, the Netherlands, United Kingdom and China. Currently, we ~~do not~~ have ~~any~~ foreign currency forward contracts in place ~~but have historically entered into foreign currency forward contracts to reduce our exposure related to certain foreign currency fluctuations.~~for Mexican pesos. See Note 5 to the condensed consolidated financial statements for additional details. Our future results could also be unfavorably affected by increased commodity prices and material cost inflation as these fluctuations impact the cost of our raw material purchases.

At March 31, ~~2023,~~2024, we had a cash and cash equivalents balance of approximately ~~$35.2~~$48.4 million, of which ~~89.0%~~87.6% was held in foreign locations. The Company has approximately ~~$132.6~~$80.6 million of undrawn commitments under the Credit Facility as of March 31, ~~2023,~~2024, which results in total undrawn commitments and cash balances of more than ~~$167.8~~$129.0 million. However, it is possible that future borrowing flexibility under our Credit Facility may be limited as a result of our financial performance.

Commitments and Contingencies

See Note 10 to the condensed consolidated financial statements for disclosures of the Company’s commitments and contingencies.

Seasonality

Our Control Devices and Electronics segments are moderately seasonal, impacted by mid-year and year-end shutdowns and the ramp-up of new model production at key customers. In addition, the demand for our Stoneridge Brazil segment consumer products is generally higher in the second half of the year.

Critical Accounting Policies and Estimates

The Company’s critical accounting policies, which include management’s best estimates and judgments, are included in Part II, Item 7, to the consolidated financial statements of the Company’s ~~2022~~2023 Form 10-K. These accounting policies are considered critical as disclosed in the Critical Accounting Policies and Estimates section of Management’s Discussion and Analysis of the Company’s ~~2022~~2023 Form 10-K because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates. There have been no material changes in our significant accounting policies or critical accounting estimates during the first quarter of 2023.

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Information regarding other significant accounting policies is included in Note 2 to our consolidated financial statements in Item 8 of Part II of the Company’s ~~2022~~2023 Form 10-K.

~~Inflation and~~ International Presence

By operating internationally, we are affected by foreign currency exchange rates and the economic conditions of certain countries. Furthermore, given the current economic climate and fluctuations in certain commodity prices, we believe that an increase in such items could significantly affect our profitability. See Note 5 to the condensed consolidated financial statements for additional details on the Company’s foreign currency exchange rate and interest rate risks.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the quantitative and qualitative information about the Company’s market risk from those previously presented within Part II, Item 7A of the Company’s ~~2022~~2023 Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of March 31, ~~2023,~~2024, an evaluation was performed under the supervision and with the participation of the Company’s management, including the principal executive officer (“PEO”) and principal financial officer (“PFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the PEO and PFO, concluded that the Company’s disclosure controls and procedures were effective as of March 31, ~~2023.~~

~~Table of Contents~~

2024.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the three months ended March 31, ~~2023~~2024 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II–OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in certain legal actions and claims primarily arising in the ordinary course of business. We establish accruals for matters which we believe that losses are probable and can be reasonably estimated. Although it is not possible to predict with certainty the outcome of these matters, we do not believe that any of the litigation in which we are currently engaged, either individually or in the aggregate, will have a material adverse effect on our business, consolidated financial position or results of operations. We are subject to litigation regarding civil, labor, regulatory and other tax contingencies in our Stoneridge Brazil segment for which we believe the likelihood of loss is reasonably possible, but not probable, although these claims might take years to resolve. We are also subject to product liability and product warranty claims. In addition, if any of our products prove to be defective, we may be required to participate in a government-imposed or customer OEM-instituted recall involving such products. There can be no assurance that we will not experience any material losses related to product liability, warranty or recall claims. See additional details of these matters in Note 10 to the condensed consolidated financial statements.

Item 1A. Risk Factors

There have been no material changes with respect to risk factors previously disclosed in the Company’s ~~2022~~2023 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information with respect to repurchases of Common Shares made by us during the three months ended March 31, ~~2023.~~2024. There were ~~61,778~~35,992 Common Shares delivered to us by employees as payment for withholding taxes due upon vesting of performance share awards and share unit awards.

Period Total number of
shares purchased Average price
paid per share Total number of
shares purchased as
part of publicly
announced plans
or programs Maximum number
of shares that may
yet be purchased
under the plans
or programs
1/1/23-1/31/23 4,858 $ 23.26 N/A N/A
2/1/23-2/28/23 — $ — N/A N/A
3/1/23-3/31/23 56,920 $ 19.51 N/A N/A
Total 61,778


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
1/1/24-1/31/24	1,990	$	17.91	N/A	N/A
2/1/24-2/29/24	—	$	—	N/A	N/A
3/1/24-3/31/24	34,002	$	17.20	N/A	N/A
Total	35,992

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

~~None~~During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits


Exhibit Number	Exhibit

~~10.1~~	~~Amendment No. 4 to the Fourth Amended and Restated Credit Agreement (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022).~~

~~10.2~~	Consulting Services Agreement, dated January 30, 2023, by and between Stoneridge, Inc. and Jonathan DeGaynor (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 31, 2023).

~~10.3~~	~~Form of Stoneridge, Inc. Directors’ Restricted Shares Plan 2023 Grant Agreement, filed herewith.~~

~~10.4~~	~~Form of Stoneridge, Inc. Long-Term Incentive Plan 202~~3 ~~Performance Shares Grant Agreement, filed herewith.~~

~~10.5~~	~~Form of Stoneridge, Inc. Long-Term Incentive Plan 202~~3 ~~Restricted Share Units Agreement, filed herewith.~~

31.1	Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

31.2	Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1	Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.2	Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

	101	XBRL Exhibits:

	101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
	101.SCH	XBRL Taxonomy Extension Schema Document
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
	104	The cover page from our Quarterly Report on Form 10-Q for the period ended March 31, ~~2023,~~2024, filed with the Securities and Exchange Commission on May ~~3, 2023,~~1, 2024, is formatted in Inline Extensible Business Reporting Language (“iXBRL”)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			STONERIDGE, INC.

Date: May ~~3, 2023~~1, 2024			/s/ James Zizelman
			James Zizelman
			President, Chief Executive Officer and Director
			(Principal Executive Officer)

Date: May ~~3, 2023~~1, 2024			/s/ Matthew R. Horvath
			Matthew R. Horvath
			Chief Financial Officer and Treasurer
			(Principal Financial Officer)

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	March 31, 2023		December 31, 2022		Interest rates at March 31, 2023		Maturity
Revolving Credit Facility
Credit Facility	$	167,393	$	167,802	7.16	%	June 2024

Debt
Sweden short-term credit line	—		—
Suzhou short-term credit line	1,456		1,450		3.70%		June 2023
Total debt	1,456		1,450
Less: current portion	(1,456)		(1,450)
Total long-term debt, net	$	—	$	—


	Accrual as of January 1, 2022		2022 Charge to Expense		Utilization				Accrual as of March 31, 2022
					Cash		Non-Cash

Employee termination benefits	35		—		(35)		—		—

Total	$	35	$	—	$	(35)	$	—	$	—