UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarter ended September 30, ~~2015~~2016

Commission file number: 001-13337

STONERIDGE, INC.

(Exact name of registrant as specified in its charter)

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

	9400 East Market Street, Warren, Ohio		44484
	(Address of principal executive offices)		(Zip Code)

	(330) 856-2443
	Registrant's telephone number, including area code

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¨No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

xYes¨No

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

Large accelerated filer ¨	Accelerated filer x	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

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

The number of Common Shares, without par value, outstanding as of October ~~30, 2015~~24, 2016 was ~~27,911,948.~~27,842,883.

STONERIDGE, INC. AND SUBSIDIARIES

INDEX		Page
PART I–FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, ~~2015~~2016 (Unaudited) and December 31, ~~2014~~2015	23
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015	34
	Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) (Unaudited) for the Three and Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015	45
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015	56
	Notes to Condensed Consolidated Financial Statements (Unaudited)	67
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2524
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3835
Item 4.	Controls and Procedures	3835

PART II–OTHER INFORMATION

Item 1.	Legal Proceedings	3836
Item 1A.	Risk Factors	3836
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3836
Item 3.	Defaults Upon Senior Securities	3936
Item 4.	Mine Safety Disclosures	3936
Item 5.	Other Information	3936
Item 6.	Exhibits	3936

Signatures		3937
~~Index to Exhibits~~		40

~~EX – 31.1~~

~~EX – 31.2~~

~~EX – 32.1~~

~~EX – 32.2~~

~~101~~	~~XBRL Exhibits~~:
~~101.INS~~		~~XBRL Instance Document~~Index to Exhibits
~~101.SCH~~	~~XBRL Schema Document~~
~~101.CAL~~	~~XBRL Calculation Linkbase Document~~
~~101.DEF~~	~~XBRL Definition Linkbase Document~~
~~101.LAB~~	~~XBRL Labels Linkbase Document~~
~~101.PRE~~	~~XBRL Presentation Linkbase Document~~	38

Forward-Looking Statements

Portions of this report 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 include statements regarding the intent, belief or current expectations of the Company, our directors or officers with respect to, among other things, our (i) future product and facility expansion, (ii) acquisition or divestiture strategy, (iii) investments and new product development, and (iv) growth opportunities related to awarded business. 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 in this report 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 reduced purchases, loss or bankruptcy of a major customer;

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

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

competitive market conditions and resulting effects on sales and pricing;

the impact on changes in foreign currency exchange rates on sales, costs and results, particularly the Brazilian real, euro, Argentinian peso, Swedish krona, Mexican peso and Chinese Renminbi;

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

a significant change in general economic conditions in any of the various countries in which we operate;

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

the ability of our suppliers to supply us with quality parts and components at competitive prices on a timely basis;

the amount of our indebtedness and the restrictive covenants contained in the agreements governing our indebtedness, including our credit facility;

customer acceptance of new products;

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

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

those items described in Part I, Item IA (“Risk Factors”) of the Company's 2015 Form 10-K.

In addition, 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.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,			September 30,			December 31,
(in thousands)	2015			2014			2016			2015
	(Unaudited)						(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	29,289		$	43,021		$	50,560		$	54,361
Accounts receivable, less reserves of $1,057 and $2,017, respectively		112,595			105,102
Accounts receivable, less reserves of $1,563 and $1,066, respectively								122,286			94,937
Inventories, net		71,381			71,253			65,200			61,009
Prepaid expenses and other current assets		22,273			26,135			31,677			21,602
Total current assets		235,538			245,511			269,723			231,909

Long-term assets:
Property, plant and equipment, net		83,258			85,311			90,746			85,264
Other assets:
Intangible assets, net		35,833			56,637
Goodwill		1,000			1,078
Intangible assets, net and goodwill								41,294			36,699
Investments and other long-term assets, net		10,237			10,214			11,839			10,380
Total long-term assets		130,328			153,240			143,879			132,343
Total assets	$	365,866		$	398,751		$	413,602		$	364,252

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of debt	$	17,913		$	19,655		$	9,901		$	13,905
Accounts payable		59,012			58,593			66,596			55,225
Accrued expenses and other current liabilities		39,372			42,066			50,032			38,920
Total current liabilities		116,297			120,314			126,529			108,050

Long-term liabilities:
Revolving credit facility		100,000			100,000			87,000			100,000
Long-term debt, net		4,982			10,651			8,264			4,458
Deferred income taxes		41,261			50,006			43,290			41,332
Other long-term liabilities		3,404			3,974			3,898			3,983
Total long-term liabilities		149,647			164,631			142,452			149,773

Shareholders' equity:
Preferred Shares, without par value, 5,000 shares authorized, none issued		-			-			-			-
Common Shares, without par value, 60,000 shares authorized, 28,907 and 28,853 shares issued and 27,912 and 28,221 shares outstanding at September 30, 2015 and December 31, 2014, respectively, with no stated value		-			-
Common Shares, without par value, 60,000 shares authorized, 28,966 and 28,907 shares issued and 27,843 and 27,912 shares outstanding at September 30, 2016 and December 31, 2015, respectively, with no stated value								-			-
Additional paid-in capital		198,090			192,892			203,976			199,254
Common Shares held in treasury, 995 and 632 shares at September 30, 2015 and December 31, 2014, respectively, at cost		(4,208	)		(1,284	)
Common Shares held in treasury, 1,123 and 995 shares at September 30, 2016 and December 31, 2015, respectively, at cost								(5,592	)		(4,208	)
Accumulated deficit		(38,189	)		(54,879	)		(3,011	)		(32,105	)
Accumulated other comprehensive loss		(70,044	)		(45,473	)		(64,456	)		(69,822	)
Total Stoneridge, Inc. shareholders' equity		85,649			91,256			130,917			93,119
Noncontrolling interest		14,273			22,550			13,704			13,310
Total shareholders' equity		99,922			113,806			144,621			106,429
Total liabilities and shareholders' equity	$	365,866		$	398,751		$	413,602		$	364,252

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended						Nine months ended						Three months ended						Nine months ended
	September 30,						September 30,						September 30,						September 30,
(in thousands, except per share data)	2015			2014			2015			2014			2016			2015			2016			2015

Net sales	$	162,057		$	170,338		$	490,171		$	493,768		$	173,846		$	162,057		$	523,365		$	490,171

Costs and expenses:
Cost of goods sold		116,912			120,788			355,432			347,795			124,098			116,912			375,705			355,432
Selling, general and administrative		26,331			31,204			85,555			93,587			27,817			26,331			82,836			85,555
Design and development		9,867			10,389			29,696			31,916			10,151			9,867			30,912			29,696
Goodwill impairment		-			(5,802	)		-			23,498

Operating income (loss)		8,947			13,759			19,488			(3,028	)
Operating income														11,780			8,947			33,912			19,488

Interest expense, net		1,747			5,057			4,683			15,059			1,684			1,747			5,038			4,683
Equity in earnings of investee		(160	)		(205	)		(492	)		(587	)		(307	)		(160	)		(603	)		(492	)
Loss on early extinguishment of debt		-			920			-			920
Other (income) expense, net		(83	)		23			(343	)		2,268
Other income, net														(497	)		(83	)		(722	)		(343	)

Income (loss) before income taxes from continuing operations		7,443			7,964			15,640			(20,688	)
Income before income taxes from continuing operations														10,900			7,443			30,199			15,640

Provision (benefit) for income taxes from continuing operations		32			(1,174	)		(202	)		(790	)
Income tax expense (benefit) from continuing operations														919			32			3,114			(202	)

Income (loss) from continuing operations		7,411			9,138			15,842			(19,898	)

Discontinued operations:
Income (loss) from discontinued operations, net of tax		-			(1,560	)		-			86
Loss on disposal, net of tax		(113	)		(6,548	)		(226	)		(7,781	)
Income from continuing operations														9,981			7,411			27,085			15,842

Loss from discontinued operations		(113	)		(8,108	)		(226	)		(7,695	)		-			(113	)		-			(226	)

Net income (loss)		7,298			1,030			15,616			(27,593	)
Net income														9,981			7,298			27,085			15,616

Net income (loss) attributable to noncontrolling interest		(69	)		1,160			(1,074	)		(7,039	)
Net loss attributable to noncontrolling interest														(303	)		(69	)		(2,009	)		(1,074	)

Net income (loss) attributable to Stoneridge, Inc.	$	7,367		$	(130	)	$	16,690		$	(20,554	)
Net income attributable to Stoneridge, Inc.													$	10,284		$	7,367		$	29,094		$	16,690

Earnings (loss) per share from continuing operations attributable to Stoneridge, Inc.:
Earnings per share from continuing operations attributable Stoneridge, Inc.:
Basic	$	0.27		$	0.30		$	0.62		$	(0.48	)	$	0.37		$	0.27		$	1.05		$	0.62
Diluted	$	0.27		$	0.29		$	0.61		$	(0.48	)	$	0.36		$	0.27		$	1.03		$	0.61

Loss per share attributable to discontinued operations:
Basic	$	(0.01	)	$	(0.30	)	$	(0.01	)	$	(0.28	)	$	0.00		$	(0.01	)	$	0.00		$	(0.01	)
Diluted	$	(0.01	)	$	(0.29	)	$	(0.01	)	$	(0.28	)	$	0.00		$	(0.01	)	$	0.00		$	(0.01	)

Earnings (loss) per share attributable to Stoneridge, Inc.:
Earnings per share attributable to Stoneridge, Inc.:
Basic	$	0.26		$	0.00		$	0.61		$	(0.76	)	$	0.37		$	0.26		$	1.05		$	0.61
Diluted	$	0.26		$	0.00		$	0.60		$	(0.76	)	$	0.36		$	0.26		$	1.03		$	0.60

Weighted-average shares outstanding:
Basic		27,444			26,954			27,299			26,914			27,792			27,444			27,753			27,299
Diluted		28,008			27,554			27,927			26,914			28,359			28,008			28,266			27,927

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

(Unaudited)

Three months ended Nine months ended
September 30, September 30,
(in thousands) 2015 2014 2015 2014

Net income (loss) $ 7,298 $ 1,030 $ 15,616 $ (27,593 )
Less: Income (loss) attributable to noncontrolling interest (69 ) 1,160 (1,074 ) (7,039 )
Net income (loss) attributable to Stoneridge, Inc. 7,367 (130 ) 16,690 (20,554 )

Other comprehensive loss, net of tax attributable to Stoneridge, Inc.:
Foreign currency translation (12,557 ) (12,528 ) (24,497 ) (6,164 )
Benefit plan liability tax adjustment - - (45 ) -
Unrealized loss on derivatives (236 ) (144 ) (29 ) (49 )
Other comprehensive loss, net of tax attributable to Stoneridge, Inc. (12,793 ) (12,672 ) (24,571 ) (6,213 )

Comprehensive loss attributable to Stoneridge, Inc. $ (5,426 ) $ (12,802 ) $ (7,881 ) $ (26,767 )
Three months ended Nine months ended
September 30, September 30,
(in thousands) 2016 2015 2016 2015

Net income $ 9,981 $ 7,298 $ 27,085 $ 15,616
Less: Net loss attributable to noncontrolling interest (303 ) (69 ) (2,009 ) (1,074 )
Net income attributable to Stoneridge, Inc. 10,284 7,367 29,094 16,690

Other comprehensive income (loss), net of tax attributable to Stoneridge, Inc.:
Foreign currency translation (638 ) (12,557 ) 5,923 (24,497 )
Benefit plan liability (84 ) - (84 ) (45 )
Unrealized loss on derivatives (64 ) (236 ) (473 ) (29 )
Other comprehensive income (loss), net of tax attributable to Stoneridge, Inc. (786 ) (12,793 ) 5,366 (24,571 )

Comprehensive income (loss) attributable to Stoneridge, Inc. $ 9,498 $ (5,426 ) $ 34,460 $ (7,881 )

The Company has combined comprehensive ~~loss~~income (loss) from continuing operations and comprehensive loss from discontinued operations herein.

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine months ended September 30, 2015 2014
Nine months ended September 30 (in thousands) 2016 2015

OPERATING ACTIVITIES:
Net income (loss) $ 15,616 $ (27,593 )
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Net income $ 27,085 $ 15,616
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation 14,843 19,106 14,717 14,843
Amortization, including accretion of debt discount 3,000 4,484
Amortization, including accretion of deferred financing costs 2,677 3,000
Deferred income taxes 202 (1,003 ) 714 202
Earnings of equity method investee (492 ) (587 ) (603 ) (492 )
Loss on sale of fixed assets 55 15
(Gain) loss on sale of fixed assets (409 ) 55
Share-based compensation expense 5,746 3,799 4,587 5,746
Goodwill impairment - 23,498
Loss on disposal of Wiring business 226 7,781 - 226
Loss on early extinguishment of debt - 920
Changes in operating assets and liabilities, net of effect of business acquisition:
Changes in operating assets and liabilities:
Accounts receivable, net (17,768 ) (21,563 ) (25,486 ) (17,768 )
Inventories, net (15,028 ) (8,285 ) 281 (15,028 )
Prepaid expenses and other (703 ) (1,615 )
Prepaid expenses and other assets (5,879 ) (703 )
Accounts payable 9,459 912 13,991 9,459
Accrued expenses and other 1,977 (715 )
Net cash provided by (used for) operating activities 17,133 (846 )
Accrued expenses and other liabilities 5,342 1,977
Net cash provided by operating activities 37,017 17,133

INVESTING ACTIVITIES:
Capital expenditures (23,521 ) (19,772 ) (18,484 ) (23,521 )
Proceeds from sale of fixed assets 53 99 652 53
Change in restricted cash - (52,692 )
Payment for working capital adjustment related to Wiring sale (1,230 ) -
Proceeds from sale of Wiring business - 71,386
Business acquisitions (469 ) (1,022 )
Payments related to sale of Wiring business - (1,230 )
Business acquisition - (469 )
Net cash used for investing activities (25,167 ) (2,001 ) (17,832 ) (25,167 )

FINANCING ACTIVITIES:
Extinguishment of senior notes - (17,500 )
Premium related to early extinguishment of senior notes - (525 )
Revolving credit facility payment (13,000 ) -
Proceeds from issuance of debt 19,116 20,462 13,317 19,116
Repayments of debt (20,015 ) (15,953 ) (21,312 ) (20,015 )
Noncontrolling interest shareholder distribution - (1,083 )
Other financing costs (49 ) (1,499 ) (339 ) (49 )
Repurchase of Common Shares to satisfy employee tax withholding (2,854 ) (765 ) (1,384 ) (2,854 )
Net cash used for financing activities (3,802 ) (16,863 ) (22,718 ) (3,802 )

Effect of exchange rate changes on cash and cash equivalents (1,896 ) (2,165 ) (268 ) (1,896 )
Net change in cash and cash equivalents (13,732 ) (21,875 ) (3,801 ) (13,732 )
Cash and cash equivalents at beginning of period 43,021 62,825 54,361 43,021

Cash and cash equivalents at end of period $ 29,289 $ 40,950 $ 50,560 $ 29,289

Supplemental disclosure of cash flow information:
Cash paid for interest $ 4,539 $ 11,441 $ 4,573 $ 4,539
Cash paid for income taxes, net $ 1,840 $ 2,285 $ 2,019 $ 1,840

Supplemental disclosure of non-cash operating and financing activities:
Change in fair value of interest rate swap $ - $ (468 )
Bank payment of vendor payables under short-term debt obligations $ 3,286 $ 3,617 $ 3,764 $ 3,286

The Company has combined cash flows from continuing operations and cash flows from discontinued operations within the operating, investing and financing categories.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(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 have been condensed or omitted pursuant to the SEC's rules and regulations. The results of operations for the three and nine months ended September 30, ~~2015~~2016 are not necessarily indicative of the results to be expected for the full year.

While the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's ~~2014~~2015 Form 10-K.
The Company entered into an asset purchase agreement to divest its Wiring business including substantially all of its assets and liabilities during the second quarter of 2014. The sale was completed on August 1, 2014. The Wiring business has been classified as discontinued operations for all periods presented in the condensed consolidated financial statements. Accordingly, the Wiring business is excluded from both continuing operations and segment results for all periods presented. The Wiring business designed and manufactured wiring harness products and assembled instruments panels for sale principally to the commercial, agricultural and off-highway vehicle markets.

(2) Recently Issued Accounting Standards

Accounting Standards Not Yet Adopted

In ~~September 2015,~~August 2016, the ~~FASBissued ASU 2015 – 16, “Business Combinations,~~Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic 230)” which ~~simplifies~~provides guidance on the presentation and classification of certain cash receipts and cash payments in the statement of cash flows in order to reduce diversity in practice. The ASU is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements.
In March 2016, the FASB issued Accounting Standards Update ASU 2016-09, “Compensation - Stock Compensation (Topic 718)” which is intended to simplify several aspects of the accounting for ~~measurement-period adjustments related to business combinations. ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period~~share-based payment award transactions including how excess tax benefits should be classified in the ~~reporting period in~~Company’s condensed consolidated financial statements. The new standard also permits companies to recognize forfeitures as they occur as an alternative to utilizing estimated forfeitures rates which has been the ~~adjustment amounts are determined.~~required practice. The ~~amendments in~~new accounting standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within that year. The Company is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016 – 02, “Leases (Topic 842)” which will require that a lessee recognize assets and liabilities on the ~~acquirer record, in~~balance sheet for all leases with a lease term of more than twelve months, with the ~~same period’s financial statements,~~result being the ~~effect on earnings~~recognition of ~~changes in depreciation, amortization, or other income effects, if any, as~~ a ~~result~~right of ~~the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.~~use asset and a lease liability. The amendment is effective for fiscal years beginning after December 15, 2018, including interim periods within that year. The Company expects to adopt this standard as of January 1, 2019. The Company is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements, which will require right of use assets and lease liabilities be recorded in the condensed consolidated balance sheet for operating leases.
In November 2015, the FASB issued ASU 2015 – 17, “Income Taxes (Topic 740)” which simplifies the presentation of deferred income taxes. Currently entities are required to separate deferred income tax liabilities and assets into current and noncurrent amounts in the balance sheet. ASU 2015-17 requires that all deferred income taxes be classified as noncurrent in the balance sheet. The amendment is effective for fiscal years beginning after December 15, 2016 including interim periods within those fiscal years and ~~is to~~may be applied either prospectively ~~to adjustments to provisional amounts that occur after the effective date of this ASU~~or retrospectively with ~~earlier application permitted for financial statements that have not been issued.~~early adoption permitted. The Company ~~will~~is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory” which requires that inventory be measured at the lower of cost or net realizable value. Prior to the issuance of the new guidance, inventory was measured at the lower of cost or market. Replacing the concept of market with the single measurement of net realizable value is intended to reduce cost and complexity. The new accounting standard is effective for fiscal years beginning after December 15, 2016. The Company expects to adopt this standard as of January 1, ~~2016,~~2017, which is not expected to have a material impact on the Company’s condensed consolidated financial statements or disclosures.
~~In January 2015, the Financial Accounting Standards Board (“FASB”)~~ issued Accounting Standards Update (“ASU”) 2015 – 01 “Income Statement – Extraordinary and Unusual Items,” that eliminates the concept of extraordinary items and their segregation from the results of ordinary operations and expands presentation and disclosure guidance to include items that are both unusual in nature and occur infrequently. The new accounting standard is effective for fiscal years beginning after December 15, 2015. The Company will adopt this standard as of January 1, 2016, which is not expected to have a material impact on the Company’s condensed consolidated financial statements or disclosures.
In June 2014, the FASB issued ASU 2014 – 12 “Stock Compensation - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” that requires performance targets that could be achieved after the requisite service period be treated as performance conditions that affect the vesting of the award. The new accounting standard is effective for fiscal years beginning after December 15, 2015. The Company will adopt this standard as of January 1, 2016, which is not expected to have an impact on the Company’s condensed consolidated financial statements or disclosures.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with ~~Customers,”~~Customers” which is the new comprehensive revenue recognition standard that will supersede existing revenue recognition guidance under U.S. GAAP. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to a customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.To achieve this principle, an entity identifies the contract with a customer, identifies the separate performance obligations in the contract, determines the transaction price, allocates the transaction price to the separate performance obligations and recognizes revenue when each separate performance obligation is satisfied.This ASU allows for both retrospective and prospective methods of adoption. In July 2015, the FASB approved a one-year deferral of the effective date of the standard. ~~As such,~~Therefore, the new standard will become effective for annual and interim periods beginning after December 15, 2017 with early adoption on the original effective date permitted.The Company is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements.

~~Accounting Standards Adopted~~
In April 2015, the FASBissued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which amends the current presentation of debt issuance costs in the balance sheet. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, instead of as an asset. The recognition and measurement of debt issuance costs are not affected by the amendments in this ASU. The guidance in ASU 2015-03 did not address the presentation or subsequent measurement of debt issuance costs related to line of credit arrangements. Given the absence of authoritative guidance, in June 2015 the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” which states that the SEC will not object to an entity deferring and presenting debt issuance costs related to revolving credit arrangements as an asset and subsequently amortizing them. These amendments are to be applied retrospectively and are effective for public companies for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. As permitted by the ASU, the Company adopted these standards in the third quarter of 2015, which had no impact on the Company’s condensed consolidated financial statements. The Company has elected to continue to present deferred financing costs related to its revolving credit facility, which had balances of $1,525 and $1,767 at September 30, 2015 and December 31, 2014, respectively, within long-term assets in the Company’s condensed consolidated balance sheets.
(3) Discontinued Operations

Wiring Business
On May 26, 2014, the Company entered into an asset purchase agreement to sell substantially all of the assets and liabilities of the former Wiring segment to Motherson Sumi Systems Ltd., an India-based manufacturer of diversified products for the global automotive industry and a limited company incorporated under the laws of the Republic of India, and MSSL (GB) LIMITED, a limited company incorporated under the laws of the United Kingdom (collectively, “Motherson”), for$65,700 in cash and the assumption of certain related liabilities of the Wiring business.

On August 1, 2014, the Company completed the sale of substantially all of the assets and liabilities of its Wiring business to Motherson Sumi Systems Ltd., an India-based manufacturer of diversified products for the global automotive industry, and MSSL (GB) LIMITED (collectively, “Motherson”), for $71,386 in cash that consisted of the stated purchase price and estimated working capital on the closing date. The final purchase price was subject to post-closing working capital and other adjustments. Upon the final resolution of the working capital and other adjustments in the second quarter of 2015, the Company returned $1,230 in cash to Motherson.

The Company also entered into short-term transition services agreements with Motherson substantially all of which concluded in the second quarter of 2015 associated with information systems, accounting, administrative, occupancy and support services as well as contract manufacturing and production support in Estonia.

The Company had post-disposition sales to the Wiring business acquired by Motherson for the three and nine months ended September 30, 2016 of $4,627 and $15,378, respectively, and $7,299 and $21,574 for the three and nine months ended September 30, 2015, respectively. The Company had post-disposition purchases from the Wiring business acquired by Motherson of $121 and $315 for the three and nine months ended September 30, 2016, respectively, and $242 and $583 for the three and nine months ended September 30, 2015, respectively.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(in thousands, except per share data, unless otherwise indicated)~~
~~(Unaudited)~~
~~The Company had post-disposition sales (for the period August 1, 2014 through September 30, 2014)~~There was no activity related to discontinued operations for the Wiring business ~~acquired by Motherson~~in the condensed consolidated statements of ~~$5,244~~operations for the three and nine months ended September 30, ~~2014. The Company had post-disposition purchases from the Wiring business acquired by Motherson of $587 for the three and nine months ended September 30, 2014.~~2016.

The following ~~tables display~~table displays summarized activity in ~~our~~the condensed consolidated statements of operations for discontinued operations related to the Wiring business:

Three months ended Nine months ended
September 30, September 30,
2015 2014 2015 2014
Net sales $ - $ 21,142 $ - $ 167,434
Cost of goods sold^(B) - 21,669 - 154,787
Selling, general and administrative^(B) - 2,048 - 12,645
Interest expense, net - 43 - 69
Other expense, net - (147 ) - (58 )
Loss from operations of discontinuedoperations before income taxes^{(A) (B)} - (2,471 ) - (9 )
Income tax benefit on discontinued operations - 911 - 95
Income (loss) from discontinued operations, net of tax^(C) - (1,560 ) - 86

Loss on disposal^(C) (118 ) (4,263 ) (230 ) (6,160 )
Income tax (provision) benefit on gain (loss) on disposal 5 (2,285 ) 4 (1,621 )
Loss on disposal, net of tax (113 ) (6,548 ) (226 ) (7,781 )

Loss from discontinued operations $ (113 ) $ (8,108 ) $ (226 ) $ (7,695 )
Three months ended Nine months ended
September 30, September 30,
2015 2015

Loss on disposal^(A) $ (118 ) $ (230 )
Income tax expense on loss on disposal 5 4
Loss from discontinued operations $ (113 ) $ (226 )

(A) The ~~operations of the Wiring business were included only for the one and seven months ended July 31, 2014 as the sale was completed on August 1, 2014.~~
~~(B)~~ The assets and liabilities of the Wiring business were reclassified to held for sale effective May 26, 2014. Accordingly, depreciation and amortization for the Wiring assets were not recorded after that date.
~~(C)~~ ~~Included in~~ loss on disposal for the three ~~months ended September 30, 2015~~ and ~~2014 were transaction costs of $94 and $377, respectively, and $192 and $1,274 for the~~ nine months ended September 30, 2015 included transaction costs of $94 and ~~2014,~~$192, respectively. The loss on disposal also ~~includes~~included a working capital and other adjustments of $24 and $38 for the three and nine months ended September 30, 2015, respectively. ~~In addition, the loss on disposal included $2,734 in previously deferred foreign currency translation for the three and nine months ended September 30, 2014.~~
Three months Nine months
ended September 30, ended September 30,
2014 2014
Depreciation and amortization $ - $ 2,111
Capital expenditures 397 1,238

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

Pre-disposition intercompany sales to the Wiring business (for the period January 1, 2014 through July 31, 2014) were $2,158 and $17,448 for the three and nine months ended September 30, 2014, respectively. Pre-disposition intercompany purchases from the Wiring business were $481 and $4,025 for the three and nine months ended September 30, 2014, respectively.
(4) ~~Goodwill~~
The Company conducts its annual goodwill impairment test on October 1. During the second quarter of 2014, however, indicators of potential impairment for its majority owned subsidiary, PST Eletrônica Ltda. (“PST”) required the Company to conduct an interim impairment test. Those indicators included a decline in recent operating results and lower growth expectations primarily due to the weakening of the Brazilian economy and automotive market.
In accordance with ASC 350, the Company completed “step one” of the impairment analysis and concluded that, as of June 30, 2014, the fair value of the PST reportable segment was below its carrying value, including goodwill. In “step one” the Company used an income approach to estimate the fair value of PST. The income approach used a discounted cash flow valuation technique which incorporated the Company's projected future estimates of after-tax cash flows attributable to its future growth rates, terminal value amounts and the weighted average cost of capital. As a result, “step two” of the impairment test was initiated in accordance with ASC 350. Due to its time intensive nature, the “step two” analysis was not completed until the third quarter ended September 30, 2014. In accordance with ASC 350, the Company recorded its best estimate of $29,300 as a non-cash goodwill impairment charge (of which $6,436 was attributable to noncontrolling interest) as of June 30, 2014, which was included in the Company’s condensed consolidated statements of operations.
Based on the Company’s completed “step two” analysis in the third quarter of 2014, the final goodwill impairment as of June 30, 2014 was $23,498 (of which $5,162 was attributable to noncontrolling interest). As such, the Company recorded an adjustment to reduce the goodwill impairment by $5,802 (of which $1,274 was attributable to noncontrolling interest) as of September 30, 2014 which was included in the Company’s condensed consolidated statements of operations for the three months ended September 30, 2014.
The “step two” of the PST goodwill impairment test used the following methodologies in determining fair value. Buildings and machinery were valued at an estimated replacement cost for an asset of comparable age and condition. PST finite lived identified intangible assets are customer relationships, tradenames and technology. Customer relationships were valued using an excess earnings method, using various inputs such as the estimated customer attrition rate, future earnings forecast, the amount of contributory asset charges, and a discount rate. Tradenames and technology intangibles are valued using a relief from royalty method, which is based upon comparable market royalty rates for tradenames of similar value. Other working capital items are generally recorded at carrying value, unless there were known conditions that would impact the ultimate settlement amount of a particular item.
As a result of the Company’s annual goodwill impairment testing in the fourth quarter of 2014, the remaining PST goodwill balance was written-off due to significantly lower sales and earnings growth expectations which were primarily a result of lower forecasted growth in the Brazilian economy and automotive market.
The fair value measurement of the reporting unit under the “step one” analysis and the “step two” analysis (a non-recurring fair value measure) in their entirety are classified as Level 3 inputs. The estimates and assumptions underlying the fair value calculations used in the Company's impairment test are uncertain by their nature and can vary significantly from actual results. Factors that management must estimate include, but are not limited to, industry and market conditions, sales volume and pricing, raw material costs, capital expenditures, working capital changes, cost of capital, debt-equity mix and tax rates. The estimates and assumptions that most significantly affect the fair value calculation are sales volume and the associated cash flow assumptions, market growth and weighted average cost of capital. The estimates and assumptions used in the estimate of fair value were consistent with those the Company uses in its internal planning.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(in thousands, except per share data, unless otherwise indicated)~~
~~(Unaudited)~~
~~The carrying amount of goodwill related to our Electronics segment decreased by $78 for the nine months ended September 30, 2015 to $1,000 due to foreign currency translation.~~
~~The change in the carrying amount of goodwill for the nine months ended September 30, 2014 was as follows:~~
Electronics PST Total
Balance at January 1, 2014 $ 604 $ 53,744 $ 54,348
Acquisition of business 664 - 664
Goodwill impairment charge - (23,498 ) (23,498 )
Currency translation (124 ) (69 ) (193 )
Balance at September 30, 2014 $ 1,144 $ 30,177 $ 31,321
~~(5)~~ Inventories

Inventories are valued at the lower of cost (using either the first-in, first-out (“FIFO”) or average cost methods) or market. 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 consisted of the following:

September 30, December 31, September 30, December 31,
2015 2014 2016 2015
Raw materials $ 39,829 $ 41,767 $ 36,707 $ 36,021
Work-in-progress 9,587 8,779 8,568 7,162
Finished goods 21,965 20,707 19,925 17,826
Total inventories, net $ 71,381 $ 71,253 $ 65,200 $ 61,009

Inventory valued using the FIFO method was ~~$41,532~~$41,452 and ~~$34,636~~$35,378 at September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. Inventory valued using the average cost method was ~~$29,849~~$23,748 and ~~$36,617~~$25,631 at September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively.

~~(6)~~(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.

Derivative Instruments and Hedging Activities

On September 30, ~~2015,~~2016, the Company had open foreign currency forward contracts which are used solely for hedging and not for speculative purposes. Management believes that its use of these instruments to reduce risk is in the Company's best interest. The counterparties to these financial instruments are financial institutions with investment grade credit ratings.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(in thousands, except per share data, unless otherwise indicated)~~
~~(Unaudited)~~

Foreign Currency Exchange Rate Risk

The Company conducts business internationally and therefore is exposed to foreign currency exchange rate risk. The Company uses derivative financial instruments as cash flow and fair value 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. The currencies hedged by the Company during 2016 and 2015 included the euro and ~~2014 include~~Mexican peso. In addition, the Company hedged the U.S. dollar against the Swedish krona and euro on behalf of its European subsidiaries in 2016 and ~~Mexican peso.~~2015.

These forward contracts were executed to hedge forecasted transactions and ~~were~~have been accounted for as cash flow hedges. As such, the effective portion of the unrealized gain or loss was deferred and reported in the Company’s condensed consolidated balance sheets as a component of accumulated other comprehensive loss. The cash flow hedges were highly effective. The effectiveness of the transactions has been and will be measured on an ongoing basis using regression analysis and forecasted future purchases of the ~~U.S. dollar and Mexican peso.~~currency.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

In certain instances, the foreign currency forward contracts do 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 statement of operations as a component of other ~~(income) expense,~~income, net.

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

Euro-denominated Foreign Currency Forward Contract

~~As of~~At September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, the Company held a foreign currency forward contract with underlying notional amounts of ~~$1,694~~$1,711 and ~~$3,523,~~$1,647, respectively, to reduce the exposure related to the Company's euro-denominated intercompany loans. This contract expires in December ~~2015.~~2016. The euro-denominated foreign currency forward contract was not designated as a hedging instrument. The Company recognized a gain of $1 and a loss of $9 ~~and a gain of $1,064~~ for the three months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively, in the condensed consolidated statements of operations as a component of other ~~(income) expense,~~income, net related to the euro-denominated ~~contracts. The Company recognized a gain of $307 and $1,089, respectively, related to this contract for~~contract. For the nine months ended September 30, 2016 and 2015, the Company recognized a loss of $38 and ~~2014.~~a gain of $307, respectively, related to this contract.

U.S. dollar-denominated Foreign Currency Forward Contracts – Cash Flow Hedges

The Company entered into on behalf of one of its European Electronics subsidiaries whose functional currency is the Swedish krona, U.S. dollar-denominated currency contracts with a notional amount at September 30, ~~2015~~2016 of ~~$2,940~~$2,655 which expire ratably on a monthly basis from October ~~2015~~2016 through December ~~2015,~~2016, compared to a notional amount of ~~$11,718~~$10,007 at December 31, ~~2014.~~2015.

The Company entered into on behalf of one of its European Electronics subsidiaries whose functional currency is the euro, U.S. dollar-denominated currency contracts with a notional amount at September 30, ~~2015~~2016 of ~~$1,071~~$608 which expire ratably on a monthly basis from October ~~2015~~2016 through December ~~2015,~~2016, compared to a notional amount of ~~$4,266~~$2,421 at December 31, ~~2014.~~2015.

~~On October 15, 2015~~The Company evaluated the ~~Company entered into on behalf~~effectiveness of ~~one of its European Electronics subsidiaries whose functional currency is~~ the ~~Swedish krona,~~ U.S. dollar-denominated foreign currency forward contracts ~~with a notional amount~~held as of ~~$10,007 which expire ratably on a monthly basis from January~~September 30, 2016 ~~through~~and December ~~2016. On~~31, 2015 and concluded that the same date the Company also entered into on behalf of one of its European Electronics subsidiaries whose functional currency is the euro, U.S. dollar-denominated currency contracts with a notional amount of $2,421 which expire ratably on a monthly basis from January 2016 through December 2016.

hedges were effective.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(in thousands, except per share data, unless otherwise indicated)~~
~~(Unaudited)~~
Mexican peso-denominated Foreign Currency Forward Contracts – Cash Flow Hedge

The Company holds Mexican peso-denominated foreign currency forward contracts with notional amounts at September 30, ~~2015~~2016 of ~~$9,674~~$2,417 which expire ratably on a monthly basis from October ~~2015~~2016 through December 2016, compared to a notional amount of ~~$10,282~~$9,780 at December 31, ~~2014.~~2015.

The Company evaluated the effectiveness of the Mexican peso-denominated foreign currency forward contracts held as of June 30, 2014. As a result of the sale of the Wiring business, the Company forecasted that it would purchase Mexican pesos to fulfill only two of the five contracts for the period August 2014 through December 2014. As the purchase of Mexican pesos related to three of the five contracts was not probable, these three contracts attributed to the Wiring business were de-designated at June 30, 2014, and the associated unrecognized $320 gain at that date was reclassified from accumulated other comprehensive loss and recorded in discontinued operations in the Company’s condensed consolidated statements of operations for the nine months ended September 30, ~~2014.~~
~~Commodity Price Risk - Cash Flow Hedge~~
~~To mitigate the risk of future price volatility~~2016 and consequently, fluctuations in gross margins, the Company sometimes enters into fixed price commodity contracts with financial institutions to fix the cost of a portion of the Company’s copper purchases. Copper is a raw material used in a number of the Company’s products.
~~The Company did not have any fixed price commodity contracts at September 30, 2015 compared to an aggregate notional amount of 317 pounds at~~ December 31, ~~2014.~~
~~The unrealized gain or loss for the effective portion of~~2015 and concluded that the hedges were deferred and reported in the Company’s condensed consolidated balance sheets as a component of accumulated other comprehensive loss while the ineffective portion, if any, was reported in the condensed consolidated statements of operations. The effectiveness of the transactions is measured on an ongoing basis using regression analysis and forecasted future copper purchases.
The Company evaluated the effectiveness of the copper fixed price commodity contracts as of June 30, 2014. As a result of the sale of the Wiring business, the Company forecasted that it would not purchase the quantities of copper to fulfill the two contracts for the period August 2014 through March 2015. As the purchase of copper quantities related to these contracts was not probable, the contracts primarily associated with the Wiring segment not expected to be fulfilled were de-designated at June 30, 2014, and the associated unrecognized $77 gain at that date was reclassified from accumulated other comprehensive loss and recorded in discontinued operations in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2014.
~~Interest Rate Risk - Fair Value Hedge~~
The Company had a fixed-to-floating interest rate swap agreement (the “Swap”) with a notional amount of $45,000 to hedge its exposure to fair value fluctuations on a portion of its senior notes. The Swap was designated as a fair value hedge of the fixed interest rate obligation under the Company's $175,000 9.5% senior notes due October 15, 2017. Under the Swap, the Company paid a variable interest rate equal to the six-month London Interbank Offered Rate (“LIBOR”) plus 7.2% and it received a fixed interest rate of 9.5%.  The difference between amounts received and paid under the Swap was recognized as a component of interest expense, net on the condensed consolidated statements of operations.
In connection with the Company’s notice of redemption issued on September 15, 2014 to redeem all remaining outstanding senior notes, the interest rate fair value hedge was de-designated on that date. On October 23, 2014, the Company terminated the interest rate swap resulting in a gain of $371 recognized in the fourth quarter of 2014.
~~The Swap reduced interest expense by $194 and $625 for the three and nine months ended September 30, 2014, respectively.~~effective.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

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

Prepaid expenses
Notional and other current assets / Accrued expenses and
amounts^(A) other long-term assets other current liabilities
September 30, December 31, September 30, December 31, September 30, December 31,
2015 2014 2015 2014 2015 2014
Derivatives designated as hedging instruments
Cash Flow Hedges:
Forward currency contracts $ 13,685 $ 26,266 $ 400 $ 479 $ 428 $ 478

Derivatives not designated as hedging instruments
Forward currency contracts $ 1,694 $ 3,523 - - $ 8 $ 13
Fixed price commodity contracts - 317 - - - $ 69
Notional Prepaid expenses Accrued expenses and
amounts ^(A) and other current assets other current liabilities
September 30, December 31, September 30, December 31, September 30, December 31,
2016 2015 2016 2015 2016 2015
Derivatives designated as hedging instruments:
Cash flow hedges:
Forward currency contracts $ 5,680 $ 22,208 $ 163 $ 474 $ 246 $ 84

Derivatives not designated as hedging instruments:
Forward currency contracts $ 1,711 $ 1,647 $ – $ – $ 13 $ 9

(A) Notional amounts represent the gross contract ~~/ notional amount~~in U.S. dollars of the derivatives outstanding. ~~The fixed price commodity contract notional amounts are in pounds.~~

Amounts recorded for the cash flow hedges in other comprehensive ~~loss~~income (loss) and in net income for the three months ended September 30 are as follows:

Loss recorded Loss reclassified from
in other comprehensive other comprehensive income
Loss recorded in other
comprehensive loss Loss reclassified from
other comprehensive
loss into net income income (loss) (loss) into net income
2015 2014 2015 2014 2016 2015 2016 2015
Derivatives designated as cash flow hedges:
Forward currency contracts $ (578 ) $ (457 ) $ (342 ) $ (290 ) $ (129 ) $ (578 ) $ (65 ) $ (342 )
Fixed price commodity contracts - (20 ) - (43 )
Total derivatives designated as cash flow hedges $ (578 ) $ (477 ) $ (342 ) $ (333 ) $ (129 ) $ (578 ) $ (65 ) $ (342 )

Amounts recorded for the cash flow hedges in other comprehensive ~~loss~~income (loss) and in net income ~~(loss)~~ for the nine months ended September 30 are as follows:

Loss recorded Loss reclassified from
in other comprehensive other comprehensive income
Gain (loss) recorded in other
comprehensive loss Loss reclassified from
other comprehensive
loss into net income (loss) income (loss) (loss) into net income
2015 2014 2015 2014 2016 2015 2016 2015
Derivatives designated as cash flow hedges:
Forward currency contracts $ (681 ) $ 77 $ (652 ) $ (48 ) $ (656 ) $ (681 ) $ (183 ) $ (652 )
Fixed price commodity contracts - (338 ) - (164 )
Total derivatives designated as cash flow hedges $ (681 ) $ (261 ) $ (652 ) $ (212 ) $ (656 ) $ (681 ) $ (183 ) $ (652 )

Gains and losses reclassified from other comprehensive ~~loss~~income (loss) into net income ~~(loss)~~ were recognized in cost of goods sold in the Company's condensed consolidated statements of operations.

The net deferred loss of ~~$28~~$83 on the cash flow hedge derivatives will be reclassified from other comprehensive ~~loss~~income (loss) to the condensed consolidated statements of operations through December 2016.  The Company has measured the ineffectiveness of the forward currency and commodity contracts and any amounts recognized in the condensed consolidated financial statements were immaterial for the three and nine months ended September 30, 2015 and 2014.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(in thousands, except per share data, unless otherwise indicated)~~
~~(Unaudited)~~

Fair Value Measurements

The ~~following table presents our~~Company’s 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 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 contracts, inputs include foreign currency exchange rates. Fair values estimated using Level 3 inputs consist of significant unobservable inputs.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
September 30, December 31,
2015 2014
Fair values estimated using
Level 1 Level 2 Level 3
Fair value inputs ^(A) inputs^(B) inputs^(C) Fair value

Financial assets carried at fair value:
Forward currency contracts $ 400 $ - $ 400 $ - $ 479

Total financial assets carried at fair value $ 400 $ - $ 400 $ - $ 479

Financial liabilities carried at fair value:
Forward currency contracts $ 436 $ - $ 436 $ - $ 491
Fixed price commodity contracts - - - - 69

Total financial liabilities carried at fair value $ 436 $ - $ 436 $ - $ 560
(Unaudited)
~~(A)~~ Fair values estimated using Level 1 inputs, which consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The Company did not have any recurring fair value estimates using Level 1 inputs at September 30, 2015 or December 31, 2014.
~~(B)~~ Fair values estimated using Level 2 inputs, other than quoted prices, that 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 fixed price commodity contracts, inputs include foreign currency exchange rates and commodity indexes.
~~(C)~~
Fair values estimated using Level 3 inputs consist of significant unobservable inputs. The Company did not have any recurring fair value estimates using Level 3 inputs at September 30, 2015 or December 31, 2014.

The Company ~~recorded a non-recurring~~did not have any financial assets or liabilities fair ~~value adjustment of $23,498 related to PST goodwill during the nine months ended September 30, 2014. The Company utilized~~valued using Level 1 or Level 3 inputs ~~to estimate the~~at September 30, 2016 or December 31, 2015. The fair value ~~adjustment for nonfinancial assets. For additional information, see the discussion~~ of ~~Goodwill in Note 4. No non-recurring~~financial assets using Level 2 inputs related to forward currency contracts were $163 and $474 at September 30, 2016 and December 31, 2015, respectively. The fair value ~~adjustments~~of financial liabilities using Level 2 inputs related to forward currency contracts were ~~required for nonfinancial assets for the nine months ended~~$259 and $93 at September 30, ~~2015.~~2016 and December 31, 2015, respectively.

~~(7)~~(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 selling, general and administrative expenses, was ~~$1,264~~$1,699 and ~~$1,499~~$1,264 for the three months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively. For the nine months ended September 30, ~~2015~~2016 total share-based compensation was $4,587 compared to $5,746 ~~including~~for the nine months ended September 30, 2015.
The nine months ended September 30, 2016 included $545 related to the modification of the retirement notice provisions of certain awards. The nine months ended September 30, 2015 included $2,225 from the accelerated vesting in connection with the retirement of the Company’s former President and Chief Executive ~~Officer, and $3,799 for the nine months ended September 30, 2014.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(in thousands, except per share data, unless otherwise indicated)~~
~~(Unaudited)~~Officer.

~~(8)~~(7) Debt

Debt consisted of the following at September 30, ~~2015~~2016 and December 31, ~~2014:~~2015:

Interest rates at Interest rates at
September 30, December 31, September 30, September 30, December 31, September 30,
2015 2014 2015 Maturity 2016 2015 2016 Maturity
Revolving Credit Facility
Credit facility $ 100,000 $ 100,000 2.12% September - 2019 $ 87,000 $ 100,000 1.80 % September 2021

Debt
PST short-term obligations 15,632 11,249 5.5% - 24.0% Various 2015 and 2016 7,401 11,556 4.27% - 20.37 % 2016 - 2017
PST long-term notes 6,810 16,770 6.17% - 8.0% 2016 - 2021 10,573 6,428 6.20% - 18.00 % 2017 - 2021
Suzhou note - 1,450 N/A April 2015
Other 453 837 191 379
Total debt 22,895 30,306 18,165 18,363
Less: current portion (17,913 ) (19,655 ) (9,901 ) (13,905 )
Total long-term debt, net $ 4,982 $ 10,651 $ 8,264 $ 4,458

Revolving Credit Facility

On November 2, 2007, the Company entered into an asset-based credit facility, which permits borrowing up to a maximum level of $100,000. The Company entered into an Amended and Restated Credit and Security Agreement and a Second Amended and Restated Credit and Security Agreement on September 20, 2010 and December 1, 2011, respectively.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

On September 12, 2014, the Company entered into a Third Amended and Restated Credit Agreement (the “Amended Agreement” or “Credit Facility”). The Amended Agreement provides for a $300,000 revolving credit facility, which replaced the Company’s existing $100,000 asset-based credit facility and includes a letter of credit subfacility, swing line subfacility and multicurrency subfacility. The Amended Agreement also has an accordion feature which allows the Company to increase the availability by up to $80,000 upon the satisfaction of certain conditions.The Amended Agreement extended the termination date to September 12, 2019 from December 1, 2016. ~~The Company capitalized $1,499 of deferred financing costs and recognized a $100 loss on extinguishment of previously deferred financing costs associated with the Amended Agreement.~~ On March 26, 2015, the Company entered into Amendment No. 1 ~~(the “Amendment”)~~ to the Amended Agreement which modified the definition of Consolidated EBITDA to allow for the add back of cash premiums and other non-cash charges related to the amendment and restatement of the Amended Agreement and the early extinguishment of the Company’s 9.5% Senior Secured ~~Notes totaling $10,507 both of which occurred in second half of 2014.~~Notes. Consolidated EBITDA is used in computing the Company’s leverage ratio and interest coverage ratio which are covenants within the Amended Agreement. On February 23, 2016, the Company entered into Amendment No. 2 to the Amended Agreement which amended and waived any default or potential defaults with respect to the pledging as collateral additional shares issued by a wholly owned subsidiary and newly issued shares associated with the formation of a new subsidiary. On August 12, 2016, the Company entered into Amendment No. 3 (the “Amendment”) to the Amended Agreement which extended of the expiration date of the Agreement by two years to September 12, 2021, increased the borrowing sub-limit for the Company’s foreign subsidiaries by $30,000 to $80,000, increased the basket of permitted loans and investments in foreign subsidiaries by $5,000 to $30,000, and provided additional flexibility to the Company for certain permitted corporate transactions involving its foreign subsidiaries as defined in the Agreement. As a result of Amendment No. 3, the Company capitalized deferred financing costs of $339, which will be amortized over the remaining term of the Credit Facility.

Borrowings under the Amended Agreement ~~will~~ bear interest at either the Base Rate, as defined, or the LIBOR Rate, at the Company’s option, plus the applicable margin as set forth in the Amended Agreement. The Company is also subject to a commitment fee ranging from 0.20% to 0.35% based on the Company’s leverage ratio. The ~~agreement governing our Credit Facility~~Amended Agreement requires the Company to maintain a maximum leverage ratio of 3.00 to 1.00, and a minimum interest coverage ratio of 3.50 to 1.00 and places a maximum annual limit on capital expenditures. The Amended Agreement also contains other affirmative and negative covenants and events of default that are customary for credit arrangements of this type including covenants which place restrictions and/or limitations on the Company’s ability to borrow money, make capital expenditures and pay dividends. Borrowings outstanding on the Credit Facility decreased from $100,000 at December 31, 2015 to $87,000 at September 30, 2016 as a result of an unplanned partial repayment made against the Credit Facility during the three months ended September 30, 2016.

The Company was in compliance with all ~~credit facility~~Credit Facility covenants at September 30, ~~2015~~2016 and December 31, ~~2014.~~2015.
15
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(in thousands, except per share data, unless otherwise indicated)~~
~~(Unaudited)~~
Debt
On October 4, 2010, the Company issued $175,000 of senior secured notes which bore interest at an annual rate of 9.5% and were scheduled to mature on October 15, 2017. On September 2, 2014, the Company redeemed $17,500, or 10.0%, of its senior secured notes at a price of 103.0% of the principal amount. As a result of the redemption, the Company recognized a loss on extinguishment of debt of $820 in the third quarter of 2014, which included a premium of $525 and the acceleration of both the associated deferred financing costs and original issue discount totaling $295.
On October 15, 2014, the Company redeemed the remaining $157,500 of its senior secured notes at a price of 104.75% of the principal amount discharging the corresponding senior notes indenture. As a result of the redemption, the Company recognized a loss on extinguishment of debt of $9,687 in the fourth quarter of 2014, which included a premium of $7,481, the acceleration of the remaining deferred financing costs of $535 and original issue discount of $2,019 and de-designation date unrecognized gain on the interest rate swap of $348.

PST maintains several short-term obligations and long-term notes used for working capital purposes which have fixed annual interest rates. The weighted-average interest rates of short-term and long-term debt of PST at September 30, ~~2015~~2016 were ~~16.8%~~11.1% and ~~7.4%~~13.2%, respectively. Depending on the specific note, interest is payable either monthly or annually. Principal ~~payments~~repayments on PST debt at September 30, ~~2015~~2016 are as follows: ~~$17,460 from October 2015 through September 2016, $600~~$9,710 from October 2016 through September 2017, $963 from October 2017 through December ~~2016, $1,841 in~~ 2017, ~~$969~~$3,972 in 2018, ~~$948~~$2,566 in 2019, ~~$325~~$398 in 2020 and ~~$299~~$365 in 2021.
On February 25, 2014, the Company's wholly-owned subsidiary located in Suzhou, China entered into a term loan for 9,000 Chinese yuan (the “Suzhou note”) which matured in August 2014. On October 17, 2014, this subsidiary entered into a new term loan for 9,000 Chinese yuan (the "Suzhou note") which matured and was repaid in April 2015. The U.S. dollar equivalent outstanding loan balance was $1,450 at December 31, 2014 which was included in the condensed consolidated balance sheets as a component of current portion of long-term debt. Interest was payable quarterly at 120.0% of the one-year lending rate published by The People's Bank of China.
~~The Company~~ PST was in compliance with all ~~note~~debt covenants at September 30, ~~2015~~2016 and December 31, ~~2014.~~2015.

The Company's wholly-owned subsidiary located in Stockholm, Sweden, has an overdraft credit line which allows overdrafts on the subsidiary's bank account up to a maximum level of 20,000 Swedish krona, or ~~$2,390~~$2,333 and ~~$2,562,~~$2,369, at September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. At September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, there was no balance outstanding on this bank account.

~~(9)~~(8) Earnings ~~(Loss)~~ Per Share

Basic earnings ~~(loss)~~ per share was computed by dividing net income ~~(loss)~~ by the weighted-average number of Common Shares outstanding for each respective period. Diluted earnings ~~(loss)~~ per share was calculated by dividing net income ~~(loss)~~ 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 loss from continuing operations, the Company did not recognize the effect of potentially dilutive securities as their inclusion would have been anti-dilutive.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

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

Three months ended Nine months ended Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2015 2014 2015 2014 2016 2015 2016 2015
Basic weighted-average Common Shares outstanding 27,444,221 26,953,596 27,299,319 26,913,880 27,792,469 27,444,221 27,753,015 27,299,319
Effect of dilutive shares 563,988 600,543 627,723 - 566,808 563,988 513,074 627,723
Diluted weighted-average Common Shares outstanding 28,008,209 27,554,139 27,927,042 26,913,880 28,359,277 28,008,209 28,266,089 27,927,042

~~There were no options outstanding at September 30, 2015 or December 31, 2014.~~
~~There were 134,250 and 466,650 performance-based~~Performance-based restricted Common Shares outstanding at September 30, 2016 and 2015 were 0 and ~~2014,~~134,250, respectively. There were also ~~573,885~~843,140 and ~~374,400~~573,885 performance-based right to receive Common Shares outstanding at September 30, ~~2015~~2016 and ~~2014,~~2015, respectively. These performance-based restricted and 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 period.

~~(10)~~(9) Changes in Accumulated Other Comprehensive Loss by Component

Changes in accumulated other comprehensive loss for the three months ended September 30, ~~2015~~2016 and ~~2014~~2015 were as follows:

Foreign Unrealized Benefit Foreign Unrealized Benefit
currency gain (loss) plan currency gain (loss) plan
translation on derivatives liability Total translation on derivatives liability Total
Balance at July 1, 2015 $ (57,543 ) $ 208 $ 84 $ (57,251 )
Balance at July 1, 2016 $ (63,735 ) $ (19 ) $ 84 $ (63,670 )

Other comprehensive loss before reclassifications (12,557 ) (578 ) - (13,135 ) (638 ) (129 ) - (767 )
Amounts reclassified from accumulated other comprehensive loss - 342 - 342 - 65 (84 ) (19 )
Net other comprehensive loss, net of tax (12,557 ) (236 ) - (12,793 ) (638 ) (64 ) (84 ) (786 )

Balance at September 30, 2015 $ (70,100 ) $ (28 ) $ 84 $ (70,044 )
Balance at September 30, 2016 $ (64,373 ) $ (83 ) $ - $ (64,456 )

Balance at July 1, 2014 $ (23,971 ) $ (16 ) $ (12 ) $ (23,999 )

Balance at July 1, 2015 $ (57,543 ) $ 208 $ 84 $ (57,251 )
Other comprehensive loss before reclassifications (15,262 ) (477 ) - (15,739 ) (12,557 ) (578 ) - (13,135 )
Amounts reclassified from accumulated other comprehensive loss 2,734 333 - 3,067 - 342 - 342
Net other comprehensive loss, net of tax (12,528 ) (144 ) - (12,672 ) (12,557 ) (236 ) - (12,793 )

Balance at September 30, 2014 $ (36,499 ) $ (160 ) $ (12 ) $ (36,671 )
Balance at September 30, 2015 $ (70,100 ) $ (28 ) $ 84 $ (70,044 )

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

Changes in accumulated other comprehensive loss for the nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 were as follows:

Foreign Unrealized Benefit Foreign Unrealized Benefit
currency gain (loss) plan currency gain (loss) plan
translation on derivatives liability Total
Balance at January 1, 2016 $ (70,296 ) $ 390 $ 84 $ (69,822 )

Other comprehensive income (loss) before reclassifications 5,923 (656 ) - 5,267
Amounts reclassified from accumulated other comprehensive loss - 183 (84 ) 99
Net other comprehensive income (loss), net of tax 5,923 (473 ) (84 ) 5,366

Balance at September 30, 2016 $ (64,373 ) $ (83 ) $ - $ (64,456 )
translation on derivatives liability Total
Balance at January 1, 2015 $ (45,603 ) $ 1 $ 129 $ (45,473 ) $ (45,603 ) $ 1 $ 129 $ (45,473 )

Other comprehensive loss before reclassifications (24,497 ) (681 ) (45 ) (25,223 ) (24,497 ) (681 ) (45 ) (25,223 )
Amounts reclassified from accumulated other comprehensive loss - 652 - 652 - 652 - 652
Net other comprehensive loss, net of tax (24,497 ) (29 ) (45 ) (24,571 ) (24,497 ) (29 ) (45 ) (24,571 )

Balance at September 30, 2015 $ (70,100 ) $ (28 ) $ 84 $ (70,044 ) $ (70,100 ) $ (28 ) $ 84 $ (70,044 )

Balance at January 1, 2014 $ (30,335 ) $ (111 ) $ (12 ) $ (30,458 )

Other comprehensive loss before reclassifications (8,898 ) (261 ) - (9,159 )
Amounts reclassified from accumulated other comprehensive loss 2,734 212 - 2,946
Net other comprehensive loss, net of tax (6,164 ) (49 ) - (6,213 )

Balance at September 30, 2014 $ (36,499 ) $ (160 ) $ (12 ) $ (36,671 )

~~(11)~~(10) Commitments and Contingencies

In the ordinary course of business, the Company is subject to a broad range of claims and legal proceedings that relate to contractual allegations, product liability, tax audits, patent infringement, employment-related matters and environmental matters. The Company establishes accruals for matters which it believes that losses are probable and can be reasonably estimable. 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. As the remedial action plan has been approved by the Florida Department of Environmental Protection, ~~ground water~~groundwater remediation ~~is expected to begin~~began in the fourth quarter of ~~2015 once all property access approvals have been received. Environmental remediation costs paid for~~2015. During the three and nine months ended September 30, 2016 and 2015, environmental remediation costs incurred were ~~$155.~~immaterial. At September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, the Company accrued a remaining undiscounted liability of ~~$715~~$488 and ~~$876,~~$532, respectively, related to future remediation costs. At September 30, ~~2015~~2016 and December 31, ~~2014, $651~~2015, $396 and ~~$813,~~$469, respectively, was recorded as a component of accrued expenses and other current liabilities onin the condensed consolidated balance sheets while the remaining amount was recorded as a component of other long-term liabilities. A majority of the costs associated with the recorded liability will be incurred at the start of the groundwater remediation which is expected to begin in November 2016, with the balance relating to monitoring costs to be incurred over multiple years. The recorded liability is based on assumptions in the remedial action plan. 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 closing terms of the sale agreement included a requirement for the Company to maintain a $2,000 letter of credit for the benefit of the buyer.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

The Company has a legal proceeding,Verde v. Stoneridge, Inc. et al., currently pending in the United States District Court for the Eastern District of Texas, Cause No. 6:14-cv-00225- KNM. ~~Plaintiff~~The plaintiff filed this putative class action against the Company and others on March 26, 2014. ~~Plaintiff~~The plaintiff alleges that the Company was involved in the vertical chain of manufacture, distribution, and sale of a control device (“CD”) that was incorporated into a Dodge Ram truck purchased by Plaintiff in 2006. Plaintiff alleges that the Company breached express warranties and indemnification provisions by supplying a defective CD that was not capable of performing its intended function. The putative class consists of all Texas residents who own manual transmission Chrysler vehicles model years ~~1994–~~1997–2007 equipped with the subject CD. Plaintiff seeks recovery of economic loss damages incurred by him and the putative class members associated with inspecting and replacing the allegedly defective CD, as well as attorneys’ fees and costs. Plaintiff filed ~~his~~a motion for class certification seeking to certify a class of Texas residents who own or lease certain automobiles sold by Chrysler from ~~1998–~~1997–2007. Plaintiff alleges this putative class would include approximately 120,000 people. In the motion for class certification, the Plaintiff states that damages are no more than $1 per person. A hearing on the Plaintiff’s motion for class certification ~~is set~~was held on November 16, 2015, and the United States District Court has not yet ruled on class certification. On April 8, 2016, the Magistrate Judge granted the Company’s motion for ~~November 12, 2015.~~ partial summary judgment dismissing the Plaintiff’s indemnification claim; that ruling was later adopted by the United States District Court.
Similarly,Royal v. Stoneridge, Inc. et al. is another legal proceeding currently pending in the United States District Court for the Western District of Oklahoma, ~~Cause~~Case No. 5:14-cv-01410-F. Plaintiffs filed this putative class action against the Company, Stoneridge Control Devices, Inc., and others on December 19, 2014. Plaintiffs ~~alleges~~allege that the Company was involved in the vertical chain of manufacture, distribution, and sale of a CD that was incorporated into Dodge Ram trucks purchased by ~~Plaintiff~~Plaintiffs between 1999 and 2006. Plaintiffs allege that the Company and Stoneridge Control Devices, Inc. breached various express and implied warranties, including the implied warranty of merchantability. Plaintiffs also seek indemnity from the Company and Stoneridge Control Devices, Inc. The putative class consists of all owners of vehicles equipped with the subject CD, which includes various Dodge Ram trucks and other manual transmission vehicles manufactured from 1997–2007, which Plaintiffs allege is more than ~~1,000,000~~one million vehicles. Plaintiffs ~~seeks~~seek recovery of economic loss damages associated with inspecting and replacing the allegedly defective CD, diminished value of the subject CDs and the trucks in which they were installed, and attorneys’ fees and costs. The amount of compensatory or other damages sought by Plaintiffs and the putative class members is unknown. On January 12, 2016, the United States District Court granted in part the Company’s and Stoneridge Control Devices, Inc.’s motions to dismiss, and dismissed four of the Plaintiffs’ five claims against the Company and Stoneridge Control Devices, Inc. Plaintiffs filed a motion for reconsideration of the United States District Court’s ruling, which was denied. The Company is vigorously defending itself against ~~these~~the Plaintiffs’ allegations, and has and will continue to challenge the claims as well as class action certification. The Company believes the likelihood of loss is not probable or reasonably estimable, and therefore no liability has been recorded for these claims at September 30, ~~2015.~~2016.

In September 2013, two legal proceedings were initiated by Actia Automotive (“Actia”) in a French court (the tribunal de grande instance de Paris) alleging infringement of its patents by the Company’s Electronics segment. The euro (“€”) and U.S. dollar equivalent (“$”) that Actia iswas seeking has been €7,000 ($~~7,800)~~7,900) for each claim for injunctive relief and monetary damages resulting from such alleged infringement. The Company ~~believes~~believed that its products did not infringe on any of the patents claimed by Actia, and the claims ~~are~~were without merit. The Company is vigorously ~~defending~~defended itself against these allegations, and ~~it has~~ challenged certain Actia patents in the European Patent Office. In September 2015, the French court ruled in favor of the Company on one claim, which iswas subject to appeal by Actia. ~~There have~~However, on July 28, 2016 the Company reached a settlement with Actia with regard to both claims. Under the settlement the Company agreed to forego a payment by Actia of €50 ($56) that had been ~~no significant changes~~ordered by the French Court and Actia agreed (i) not to appeal the French court’s ruling against it on the first claim and (ii) to dismiss its infringement claims against the Company with respect to the ~~facts~~second claim. Under the settlement Actia agreed not to enforce any of the patents in question against the Company, or the Company’s successors and ~~circumstances related to the remaining claim for the three or nine months ended September 30, 2015. The Company believes the likelihood of loss is not probable between its defenses~~assigns. As a result this matter has been settled and ~~challenges to Actia’s patents. As such,~~ no liability has been recorded for these ~~claims.~~claims at September 30, 2016.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

On May 24, 2013, the State Revenue Services of São Paulo issued a tax deficiency notice against PST claiming that the vehicle tracking and monitoring services it provides should be classified as communication services, and therefore subject to the State Value Added Tax – ICMS. The State Revenue Services assessment imposed the 25.0% ICMS tax on all revenues of PST related to the vehicle tracking and monitoring services rendered during the period from January 2009 through December 2010. The Brazilian real (“R$”) and U.S. dollar equivalent (“$”) of the aggregate tax assessment is approximately R$92,500 ($~~23,300)~~28,500) which is comprised of Value Added Tax – ICMS of R$13,200 ($~~3,300),~~4,100) interest of R$11,400 ($~~2,900)~~3,500) and penalties of R$67,900 ($~~17,100)~~20,900).

The Company believes that the vehicle tracking and monitoring services are non-communication services, as defined under Brazilian tax law, subject to the municipal ISS tax, not communication services subject to state ICMS tax as claimed by the State Revenue Services of São Paulo. PST has, and will continue to collect the municipal ISS tax on the vehicle tracking and monitoring services in compliance with Brazilian tax law and will defend its tax position. PST has received a legal opinion that the merits of the case are favorable to PST, determining among other things that the imposition on the subsidiary of the State ICMS by the State Revenue Services of São Paulo is not in accordance with the Brazilian tax code. In April 2015, the Tribunal of Taxes and Imposts of the State of São Paulo ruled in favor of PST that its tracking and monitoring services are not subject to state ICMS tax, which is subject to appeal by the State Revenue Services of São Paulo to a higher court. Management believes, based on the legal opinion of the Company’s Brazilian legal counsel ~~the recent favorable legal ruling in favor of PST~~ and the results of the Brazil Administrative Court's ~~binding~~ ruling in favor of another vehicle tracking and monitoring company related to the tax deficiency notice it received, the likelihood of loss is not probable although it may take years to resolve. As a result of the above, as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, no accrual has been recorded with respect to the tax assessment. An unfavorable judgment on this issue for the years assessed and for subsequent years could result in significant costs to PST and adversely affect its results of operations.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(in thousands, except per share data, unless otherwise indicated)~~
~~(Unaudited)~~ There have been no significant changes to the facts and circumstances related to this notice for the three or nine months ended September 30, 2016.

In addition, PST has civil, labor and other tax contingencies 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$~~21,712~~34,600 ($~~5,500)~~10,700) and R$~~37,237~~25,400 ($~~14,000)~~6,500) at September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. An unfavorable outcome on these contingencies could result in significant cost to PST and adversely affect its results of operations.

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 including insurance coverage. 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 or beyond what the Company may recover from its suppliers. The current portion of product warranty and recall is included as a component of accrued expenses and other current liabilities in the condensed consolidated balance sheets. Product warranty and recall included ~~$777~~$2,293 and ~~$1,204~~$1,973 of a long-term liability at September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively, which is included as a component of other long-term liabilities in the condensed consolidated balance sheets.

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

Nine months ended September 30 2015 2014 2016 2015
Product warranty and recall at beginning of period $ 7,601 $ 6,414 $ 6,419 $ 7,601
Accruals for products shipped during period 2,716 3,329 3,010 2,716
Aggregate changes in pre-existing liabilities due to claim developments (122 ) 194 (272 ) (122 )
Settlements made during the period (3,715 ) (2,414 ) (1,332 ) (3,715 )
Product warranty and recall at end of period $ 6,480 $ 7,523 $ 7,825 $ 6,480
(11) Headquarter Relocation
In March 2016, the Company announced the relocation of its corporate headquarters from Warren, Ohio to Novi, Michigan which will primarily occur during the fourth quarter of 2016. As a result, the Company incurred relocation costs of $726 and $998 for the three and nine months ended September 2016, respectively. The relocation costs incurred included employee retention, relocation, severance, recruiting, duplicate wages and professional fees.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)
In April 2016, the Company entered into a long-term lease agreement for its new corporate headquarters. The Company establishes assets and liabilities for the estimated construction costs incurred under build-to-suit lease arrangements to the extent the Company was involved in the construction of structural improvements or takes construction risk prior to the commencement of a lease. As of September 30, 2016, the Company recorded a non-cash build-to-suit lease asset under construction of $4,322 (within Prepaid and other currents assets) and a corresponding obligation (within accrued expenses and other current liabilities) in the condensed consolidated balance sheet.
Also, the Company concluded that the Warren, Ohio headquarter building, which had a net book value of $481 at September 30, 2016 and is actively marketed for sale, met the criteria for held for sale accounting treatment. As such, it was reclassified from Property, plant and equipment, net to Prepaid and other current assets at September 30, 2016.

(12) Business Realignment
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 which are referred to as business realignment charges.
Business realignment charges by reportable segment were as follows:
Three months ended Nine months ended
September 30, September 30,
2016 2015 2016 2015
Electronics^(A) $ - $ 317 $ 1,180 $ 317
PST^(B) 211 403 1,242 403
Unallocated Corporate^(C) - 309 - 309
Total business realignment charges $ 211 $ 1,029 $ 2,422 $ 1,029
(A) Severance costs for the nine months ended September 30, 2016 related to selling, general and administrative (“SG&A”) and design and development (“D&D”) were $196 and $984, respectively. Severance costs for both the three and nine months ended September 30, 2015 related to SG&A and D&D were $102 and $215, respectively.
(B) Severance costs for the three months ended September 30, 2016 related to cost of goods sold (“COGS”) and SG&A were $20 and $191, respectively. Severance costs for the nine months ended September 30, 2016 related to COGS, SG&A and D&D were $307, $819 and $116, respectively. Severance costs for both the three and nine months ended September 30, 2015 related to COGS, SG&A and D&D were $172, $117 and $114, respectively.
(C) Severance costs for both the three and nine months ended September 30, 2015 related to SG&A were $309.
Business realignment charges classified by statement of operations line item were as follows:
Three months ended Nine months ended
September 30, September 30,
2016 2015 2016 2015
Cost of goods sold $ 20 $ 171 $ 307 $ 171
Selling, general and administrative 191 529 1,015 529
Design and development - 329 1,100 329
Total business realignment charges $ 211 $ 1,029 $ 2,422 $ 1,029
18
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)
(13) Income Taxes

The Company computes its consolidated income tax provision each quarter based on a projected annual effective tax rate, as required. The Company is required to reduce deferred tax assets by a valuation allowance if, based on all available evidence, it is considered more likely than not that some portion or all of the benefit of the deferred tax assets will not be realized in future periods. The Company also records the income tax impact of certain discrete, unusual or infrequently occurring items including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.

When a company maintains a valuation allowance in a particular jurisdiction, no net income tax ~~provision~~expense or (benefit) will typically be provided on ~~the~~ income (loss) for that jurisdiction on an annual basis. Jurisdictions with projected income that maintain a valuation allowance typically will form part of the projected annual effective tax rate calculation discussed above. However, jurisdictions with a projected loss for the year that maintain a valuation allowance are excluded from the projected annual effective income tax rate calculation. Instead, the income tax for these jurisdictions is computed separately.

The actual year to date income tax ~~provision~~expense (benefit) is the product of the most current projected annual effective income tax rate and the actual year to date pre-tax income (loss) adjusted for any discrete tax items. The income tax ~~provision~~expense (benefit) for a particular quarter is the difference between the year to date calculation of income tax ~~provision~~expense (benefit) and the year to date calculation for the prior quarter.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(in thousands, except per share data, unless otherwise indicated)~~
~~(Unaudited)~~

Therefore, ~~the actual income tax provision (benefit) and~~ the actual effective income tax rate ~~for~~during a particular quarter can vary significantly based upon the jurisdictional mix and timing of actual earnings ~~the most current~~compared to projected annual earnings, ~~compared to the projected annual earnings at the prior quarter,~~ permanent items, earnings for those jurisdictions that maintain a valuation allowance, tax associated with jurisdictions excluded from the projected annual effective income tax rate calculation and discrete items.

Projected annual earnings as well as actual earnings were significantly different at September 30, 2014 compared to June 30, 2014 due to the anticipated debt refinancing, the adjustment to the non-tax deductible goodwill impairment and the significant reduction in forecasted results for our Brazilian operations due to the continued economic weakness in Brazil. These factors caused a significant change in the projected annual tax rate for the third quarter of 2014 compared to that used for the second quarter of 2014, which as discussed above, the cumulative impact of such change in projected annual effective tax rate yielded an unusual amount of tax benefit in the third quarter of 2014.
The Company recognized an income tax ~~provision (benefit)~~expense of ~~$32~~$919 and ~~$(1,174)~~$32 from continuing operations for federal, state and foreign income taxes for the three months ended September 30, 2016 and 2015, ~~and 2014,~~ respectively. The increase in income tax expense for the three months ended September 30, 2016 compared to the same period for 2015 was primarily due to the increase in consolidated earnings. Also, income tax expense increased due to PST’s operating loss which generated a benefit for the third quarter of 2015, however, due to the valuation allowance position taken in the fourth quarter of 2015, no longer provides a tax benefit in 2016. The effective tax rate increased to 8.4% in the third quarter of 2016 from 0.4% in the third quarter of 2015 ~~from (14.7)% in~~primarily due to a full valuation allowance on PST’s loss that negatively impacted the ~~third quarter~~effective tax rate. The impact of ~~2014. The increase in the income tax expense and~~PST on the effective tax rate ~~for~~was partially offset by the ~~three months ended September 30, 2015 compared to the same period for 2014 was primarily attributable to the factors discussed in the preceding paragraph as well as the improved earnings related to~~continued strong performance of the U.S. operations ~~reduced earnings of~~which, due to a full valuation allowance, positively impacted the ~~European operations and the smaller operating loss at PST.~~effective tax rate.

The Company recognized an income tax ~~benefit for income taxes~~expense (benefit) of $3,114 and $(202) ~~and $(790)~~from continuing operations for federal, state and foreign income taxes for the nine months ended September 30, 2016 and 2015, ~~and 2014,~~ respectively. The increase in income tax expense for the nine months ended September 30, 2016 compared to the same period for 2015 was primarily due to the increase in consolidated earnings. In addition, income tax expense increased due to PST’s operating loss which generated a benefit for the first nine months of 2015, however, due to the valuation allowance position taken in the fourth quarter of 2015, no longer provides a tax benefit in 2016. The effective tax rate ~~decreased~~increased to 10.3% in the first nine months of 2016 from (1.3)% in the first nine months of 2015 ~~from (3.8)% in~~primarily due to a full valuation allowance on PST’s loss that negatively impacted the ~~first nine months~~effective tax rate. The impact of ~~2014. The decrease in the income tax benefit and~~PST on the effective tax rate for the nine months ended September 30, 2015 compared to the same period for 2014 was primarily attributable to the impact of the non-tax deductible goodwill impairment charge in 2014. Also, the decrease in the income tax benefit and effective tax rate was due to the improved earnings related to the U.S. operations, reduced earnings of the European operations and the smaller operating loss at PST. The decrease was partially offset by ~~discrete~~the continued strong performance of the U.S. operations which, due to a full valuation allowance, positively impacted the effective tax ~~expense related to certain foreign operations during the first nine months of 2014 which did not recur in the first nine months of 2015.~~rate.

~~(13)~~
19
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)
(14) 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.
During the third quarter of 2014 the Company sold its Wiring business segment, which designed and manufactured wiring harness products and assembled instrument panels for sale principally to the commercial, agricultural and off-highway vehicle markets. As such, for all periods presented the Company reported this business as discontinued operations in the Company’s condensed consolidated financial statements and therefore excluded it from the segment disclosures herein. See Note 3 for additional details.

The Company has three reportable segments, Control Devices, Electronics and PST, which also represent its operating segments. The Control Devices reportable segment produces sensors, switches, valves and actuators. The Electronics reportable segment produces electronic instrument clusters, electronic control units and driver information systems. The PST reportable segment designs and manufactures electronic vehicle security alarms, convenience accessories, vehicle tracking devices and monitoring services and in-vehicle audio and video devices.

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 ~~2014~~2015 Form 10-K. The Company's management evaluates the performance of its reportable segments based primarily on revenues from external customers and operating income (loss). Inter-segment sales are accounted for on terms similar to those to third parties and are eliminated upon consolidation.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

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

Three months ended Nine months ended Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2015 2014 2015 2014 2016 2015 2016 2015
Net Sales:
Control Devices $ 87,030 $ 78,358 $ 251,299 $ 232,095 $ 103,700 $ 87,030 $ 304,957 $ 251,299
Inter-segment sales 482 640 1,814 2,133 430 482 1,448 1,814
Control Devices net sales 87,512 78,998 253,113 234,228 104,130 87,512 306,405 253,113

Electronics 50,688 54,951 165,015 157,808 47,804 50,688 158,201 165,015
Inter-segment sales 6,567 7,223 17,651 30,554 9,495 6,567 24,706 17,651
Electronics net sales 57,255 62,174 182,666 188,362 57,299 57,255 182,907 182,666

PST 24,339 37,029 73,857 103,865 22,342 24,339 60,207 73,857
Inter-segment sales - - - - - - - -
PST net sales 24,339 37,029 73,857 103,865 22,342 24,339 60,207 73,857

Eliminations (7,049 ) (7,863 ) (19,465 ) (32,687 ) (9,925 ) (7,049 ) (26,154 ) (19,465 )
Total net sales $ 162,057 $ 170,338 $ 490,171 $ 493,768 $ 173,846 $ 162,057 $ 523,365 $ 490,171
Operating Income (Loss):
Control Devices $ 12,197 $ 10,000 $ 33,787 $ 27,152 $ 15,319 $ 12,197 $ 47,133 $ 33,787
Electronics 2,767 4,370 9,413 14,038 3,735 2,767 12,050 9,413
PST (640 ) 4,467 (5,881 ) (30,057 ) 29 (640 ) (4,179 ) (5,881 )
Unallocated Corporate^(A) (5,377 ) (5,078 ) (17,831 ) (14,161 ) (7,303 ) (5,377 ) (21,092 ) (17,831 )
Total operating income (loss) $ 8,947 $ 13,759 $ 19,488 $ (3,028 )
Total operating income $ 11,780 $ 8,947 $ 33,912 $ 19,488
Depreciation and Amortization:
Control Devices $ 2,346 $ 2,412 $ 7,132 $ 7,165 $ 2,561 $ 2,346 $ 7,345 $ 7,132
Electronics 949 1,064 2,860 3,302 996 949 3,076 2,860
PST 2,282 3,501 7,421 10,123 2,307 2,282 6,388 7,421
Corporate 69 47 139 126 115 69 309 139
Total depreciation and amortization^(B) $ 5,646 $ 7,024 $ 17,552 $ 20,716 $ 5,979 $ 5,646 $ 17,118 $ 17,552
Interest Expense, net:
Control Devices $ 81 $ 83 $ 246 $ 216 $ 56 $ 81 $ 172 $ 246
Electronics 38 199 124 632 33 38 196 124
PST 839 731 2,063 2,191 934 839 2,686 2,063
Corporate 789 4,044 2,250 12,020 661 789 1,984 2,250
Total interest expense, net $ 1,747 $ 5,057 $ 4,683 $ 15,059 $ 1,684 $ 1,747 $ 5,038 $ 4,683
Capital Expenditures:
Control Devices $ 3,953 $ 4,094 $ 11,835 $ 9,356 $ 3,229 $ 3,953 $ 9,260 $ 11,835
Electronics 2,729 1,345 5,751 4,011 1,244 2,729 5,229 5,751
PST 1,477 1,306 4,889 5,035 640 1,477 2,516 4,889
Corporate 133 25 1,046 132 1,365 133 1,479 1,046
Total capital expenditures $ 8,292 $ 6,770 $ 23,521 $ 18,534 $ 6,478 $ 8,292 $ 18,484 $ 23,521

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

September 30, December 31, September 30, December 31,
2015 2014 2016 2015
Total Assets:
Control Devices $ 135,461 $ 115,703 $ 157,208 $ 127,649
Electronics 99,191 95,140 110,216 97,443
PST 108,803 159,980 111,935 100,143
Corporate^(C) 272,061 279,013 284,869 288,806
Eliminations (249,650 ) (251,085 ) (250,626 ) (249,789 )
Total assets $ 365,866 $ 398,751 $ 413,602 $ 364,252

~~(A)Unallocated Corporate expenses include, among other items, finance, legal, human resources and information technology 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, equity investments and investments in subsidiaries.~~
(A) Unallocated Corporate expenses include, among other items, finance, legal, human resources and information technology 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, equity investments and investments in subsidiaries.

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

Three months ended Nine months ended
September 30, September 30, Three months ended Nine months ended
2015 2014 2015 2014 September 30, September 30,
2016 2015 2016 2015
Net Sales:
North America $ 96,676 $ 86,744 $ 281,108 $ 246,260 $ 108,605 $ 96,676 $ 321,973 $ 281,108
South America 24,339 37,029 73,857 103,865 22,342 24,339 60,207 73,857
Europe and Other 41,042 46,565 135,206 143,643 42,899 41,042 141,185 135,206
Total net sales $ 162,057 $ 170,338 $ 490,171 $ 493,768 $ 173,846 $ 162,057 $ 523,365 $ 490,171

September 30, December 31,
2015 2014 September 30, December 31,
2016 2015
Long-term Assets:
North America $ 58,648 $ 53,406 $ 63,934 $ 60,099
South America 57,256 85,433 63,925 56,943
Europe and Other 14,424 14,401 16,020 15,301
Total long-term assets $ 130,328 $ 153,240 $ 143,879 $ 132,343

~~(14)~~(15) Investments

Minda Stoneridge Instruments Ltd.

The Company has a 49% interest in Minda Stoneridge Instruments Ltd. (“Minda”), a company based in India that manufactures electronics, instrumentation equipment and sensors primarily for the motorcycle and commercial vehicle market. The investment is accounted for under the equity method of accounting. The Company's investment in Minda, recorded as a component of investments and other long-term assets, net on the condensed consolidated balance sheets, was ~~$6,872~~$7,846 and ~~$6,653~~$6,929 at September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. Equity in earnings of Minda included in the condensed consolidated statements of operations was ~~$160~~$307 and ~~$205,~~$160, for the three months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively. Equity in earnings of Minda included in the condensed consolidated statements of operations was ~~$492~~$603 and ~~$587~~$492 for the nine months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively.

23 22

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise indicated)
(Unaudited)

PST Eletrônica Ltda.

The Company has a 74% controlling interest in PST. Noncontrolling interest in PST increased to $13,704 atSeptember 30, 2016 due to comprehensive income of $394 resulting from a favorable change in foreign currency translation of $2,403 partially offset by a proportionate share of its net loss of $2,009 for the nine months ended September 30, 2016. Noncontrolling interest in PST decreased to $14,273 at September 30, 2015 due to comprehensive loss of $8,277 resulting from a proportionate share of its net loss of $1,074 ~~for the nine months ended September 30, 2015~~ and an unfavorable change in foreign currency translation of $7,203. Noncontrolling interest in PST decreased to $31,383 at September 30, 2014 due to comprehensive loss of $8,157 resulting from a proportionate share of its net loss of $7,039 including goodwill impairment$7,203 for the nine months ended September 30, ~~2014 and an unfavorable change in foreign currency translation of $1,118.~~2015. Comprehensive loss related to PST noncontrolling interest was ~~$4,080~~$(467) and ~~$2,294~~$(4,080) for the three months ended September 30, 2016 and 2015, ~~and 2014,~~ respectively.
PST has dividends payable declared in previous years to noncontrolling interest of $10,842 Brazilian real ($3,340) at September 30, 2016.

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

Background

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

Segments

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

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

Electronics.This segment includes results of operations from the production of electronic instrument clusters, electronic control units and driver information systems.

PST.This segment includes results of operations that design and manufacture electronic vehicle alarms, convenience accessories, vehicle tracking devices and monitoring services and in-vehicle audio and video devices.

During the second quarter of 2014 we entered into an asset purchase agreement to divest our Wiring business, which designed and manufactured wiring harness products and assembled instrument panels principally for the commercial, agricultural and off-highway vehicle markets. On August 1, 2014, the Company completed the sale of substantially all of the assets and liabilities of the Wiring business. As a result of the sale, this business is classified as discontinued operations in our condensed consolidated financial statements and no discussion and analysis of financial condition and results of operations is provided herein.
Third Quarter Overview

Income from continuing operations attributable to ~~Stoneridge,~~Stoneridge. Inc. of $10.3 million, or $0.36 per diluted share for the three months ended September 30, 2016 increased by $2.8 million, or $0.09 per diluted share from $7.5 million, or $0.27 per diluted share for the three months ended September 30, ~~2015 decreased by $0.5 million, or $0.02 per diluted share from $8.0 million, or $0.29 per diluted share for the three months ended September 30, 2014.~~
2015. The ~~decrease~~increase in income from continuing operations ~~was~~is primarily due to ~~the fact that~~an increase in the third quarter of 2014 our PST segment recorded an adjustment to reduce the goodwill impairment by $4.5 million based on the completion of the “step two” process to measure actual impairment amount, which was partially offset by a loss on debt extinguishment of $0.9 million resulting from the refinancing of our debt. Excluding the impact of the PST goodwill impairment adjustment and loss on debt extinguishment, our income from continuing operations increased by $3.1 million, or $0.11 per diluted share, primarily due to lower interest expense of $3.3 million as a result of the debt refinancing which occurred in the late third and early fourth quarters of 2014. Also, our gross profit ~~decreased by $3.9~~of $4.6 million ~~primarily~~related to higher sales in our Control Devices segment and lower material costs in our Electronics and PST segments ~~due to higher material costs and an unfavorable~~resulting from a favorable change in foreign currency ~~translation, respectively,~~exchange rates. This was partially offset by a $1.5 million increase in selling, general and administrative costs primarily in our unallocated corporate segment (which included $0.7 million in costs associated with our headquarter relocation), and a ~~$1.2~~$0.9 million increase in income tax expense. These were substantially offset by a decrease in our selling, general and administrative costs of $4.9 million (primarily due to foreign currency translation related to our PST and Electronics segments).

Net sales ~~decreased~~increased by ~~$8.3~~$11.8 million, or ~~4.9%~~7.3%, ~~from~~compared to the third quarter of 2015 as higher sales in our Control Devices segment were partially offset by lower sales in our PST and Electronics ~~segments during the third quarter of 2015 as compared to the third quarter of 2014, which were partially offset by higher~~segments. The increase in sales in our Control Devices ~~segment. PST and Electronics~~ segment ~~sales declined~~was primarily due to ~~an unfavorable foreign currency translation while our Control Devices segment~~new product sales ~~increased due to higher~~in the North American automotive market ~~sales.~~
~~Loss from discontinued operations related~~while our PST segment sales decreased due to weakness in the Wiring business was $0.1 million, or $(0.01) per diluted share for the third quarter of 2015, an $8.0 million, or $0.28 per diluted share, decrease from loss from discontinued operations of $8.1 million, or $(0.29) per diluted share for the third quarter of 2014 primarily resulting from the after-tax loss on disposal of the Wiring business of $6.5 million.Brazilian economy and automotive market.

At September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, we had cash and cash equivalents ~~balance~~balances of ~~$29.3~~$50.6 million and ~~$43.0~~$54.4 million, respectively. The decrease during the first nine months of 2016 was primarily due to higher working capital, capital expenditures ~~primarily related to the launch of new products, seasonal working capital increases~~ and ~~repayments~~repayment of debt, ~~in Brazil.~~which was partially offset by net income. At September 30, ~~2015~~2016 and December 31, ~~2014~~2015 we had $87.0 million and $100.0 million, respectively, in borrowings outstanding on our $300.0 million Credit Facility.

Outlook

~~The~~We expect our financial performance to improve in the fourth quarter of 2016 compared to the fourth quarter of 2015 because of new product launches and savings from previously incurred business realignment activities.
We expect to continue to have significant growth in our North American automotive vehicle sales in 2016 related to new product launches primarily our shift by wire product in our Control Devices segment. Also, the North American automotive vehicle market production is ~~forecasted~~expected to ~~be in the range of 17.0 million~~increase to ~~17.5~~approximately 17.9 million units in ~~2015 compared to 17.0~~2016 (an increase from the 17.5 million units produced in ~~2014. The improvement in the North American automotive vehicle market and sales of new products had a favorable effect on our Control Devices segment’s results during the first nine months of 2015,~~2015), which we expect ~~will continue for the remainder of 2015.~~
~~The North American commercial vehicle market is forecasted to improve for the remainder of 2015. We expect this~~ to have a favorable effect on our Control Devices ~~and Electronics segments.~~segment.

The North American commercial vehicle market is expected to decline for the remainder of 2016 compared to the first nine months of 2016. The European commercial vehicle market is forecasted to have a modest ~~improvement throughout~~increase for the remainder of ~~2015 which is expected~~2016 compared to ~~have a favorable effect on our Electronics segment.~~the first nine months of 2016.

Our PST segment revenues and operating performance continue to be adversely impacted by weakness of the Brazilian economy and automotive market, and ~~was~~has been negatively impacted by unfavorable foreign currency translation. In October ~~2015,~~2016, the International Monetary Fund (IMF) ~~lowered its forecasts for~~forecasted the Brazil gross domestic product (“GDP”) to ~~declines of 3.0%~~decline 3.3% in ~~2015~~2016 and ~~1.0%~~increase 0.5% in ~~2016.~~2017. Based on the ~~weakness in PST’s sales and operating performance in the first nine months of 2015 and lower~~ forecasted negative GDP growth of the Brazilian economy in 2016, PST’s sales and earnings ~~growth~~ expectations ~~for the remainder of 2015~~ continue to be moderated. ~~Since~~Because there is significant uncertainty regarding the timing and magnitude of a recovery in the Brazilian economy and automotive market, ~~PST will continue~~the Company continues to realign ~~its~~PST’s cost structure to mitigate the effect on earnings and cash flows of possible continued weakened product demand and unfavorable foreign currency exchange rates.

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 related costs which we refer to as business realignment charges.

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 ~~non-U.S. based operations is~~Electronics and PST 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. While the U.S. dollar strengthened significantly against the Swedish krona, euro and Brazilian real in 2015 increasing our material costs and reducing our reported results, the U.S. dollar weakened against these currencies in the first nine months of 2016.

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 limiting the increase of others, the net impact of which 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.
In March 2016, we announced the relocation of our corporate headquarters from Warren, Ohio to Novi, Michigan, which will occur primarily during the fourth quarter of 2016. As a result, the Company will incur relocation costs of approximately $2.8 million to $3.4 million including employee retention, relocation, severance, recruiting, duplicate wages and professional fees. The new headquarters will expand our presence in the Detroit metropolitan area and improve access to key customers, decision makers and influencers in the automotive and commercial vehicle markets that we serve. In connection with the relocation, the Company is eligible for a Michigan Business Development Program grant of up to $1.4 million based upon the number of new jobs created in Michigan, along with talent services and training support from Oakland County Michigan Works!.

Three Months Ended September 30, ~~2015~~2016 Compared to Three Months Ended September 30, ~~2014~~2015

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

Dollar Dollar
increase / increase /
Three months ended September 30 2015 2014 (decrease) 2016 2015 (decrease)
Net sales $ 162,057 100.0 % $ 170,338 100.0 % $ (8,281 ) $ 173,846 100.0 % $ 162,057 100.0 % $ 11,789
Costs and expenses:
Cost of goods sold 116,912 72.1 120,788 70.9 (3,876 ) 124,098 71.4 116,912 72.1 7,186
Selling, general and administrative 26,331 16.2 31,204 18.3 (4,873 ) 27,817 16.0 26,331 16.2 1,486
Design and development 9,867 6.1 10,389 6.1 (522 ) 10,151 5.8 9,867 6.1 284
Goodwill impairment - - (5,802 ) (3.4 ) 5,802

Operating income 8,947 5.6 13,759 8.1 (4,812 ) 11,780 6.8 8,947 5.6 2,833
Interest expense, net 1,747 1.1 5,057 3.0 (3,310 ) 1,684 1.0 1,747 1.1 (63 )
Equity in earnings of investee (160 ) (0.1 ) (205 ) (0.1 ) 45 (307 ) (0.2 ) (160 ) (0.1 ) (147 )
Loss on early extinguishment of debt - - 920 0.5 (920 )
Other (income) expense, net (83 ) - 23 - (106 )
Other income, net (497 ) (0.3 ) (83 ) - (414 )
Income before income taxes from continuing operations 7,443 4.6 7,964 4.7 (521 ) 10,900 6.3 7,443 4.6 3,457
Provision (benefit) for income taxes from continuing operations 32 - (1,174 ) (0.7 ) 1,206
Income tax expense from continuing operations 919 0.5 32 - 887
Income from continuing operations 7,411 4.6 9,138 5.4 (1,727 ) 9,981 5.8 7,411 4.6 2,570
Discontinued operations:
Loss from discontinued operations, net of tax - - (1,560 ) (0.9 ) 1,560
Loss on disposal, net of tax (113 ) (0.1 ) (6,548 ) (3.9 ) 6,435
Loss from discontinued operations (113 ) (0.1 ) (8,108 ) (4.8 ) 7,995 - - (113 ) (0.1 ) 113

Net income 7,298 4.5 1,030 0.6 6,268 9,981 5.8 7,298 4.5 2,683

Net income (loss) attributable to noncontrolling interest (69 ) - 1,160 0.7 (1,229 )
Net income (loss) attributable to Stoneridge, Inc. $ 7,367 4.5 % $ (130 ) (0.1 )% $ 7,497
Net loss attributable to noncontrolling interest (303 ) (0.1 ) (69 ) - (234 )
Net income attributable to Stoneridge, Inc. $ 10,284 5.9 % $ 7,367 4.5 % $ 2,917

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

Dollar Percent Dollar Percent
increase / increase / increase / increase /
Three months ended September 30 2015 2014 (decrease) (decrease) 2016 2015 (decrease) (decrease)
Control Devices $ 87,030 53.7 % $ 78,358 46.0 % $ 8,672 11.1 % $ 103,700 59.7 % $ 87,030 53.7 % $ 16,670 19.2 %
Electronics 50,688 31.3 54,951 32.3 (4,263 ) (7.8 )% 47,804 27.4 50,688 31.3 (2,884 ) (5.7 )
PST 24,339 15.0 37,029 21.7 (12,690 ) (34.3 )% 22,342 12.9 24,339 15.0 (1,997 ) (8.2 )
Total net sales $ 162,057 100.0 % $ 170,338 100.0 % $ (8,281 ) (4.9 )% $ 173,846 100.0 % $ 162,057 100.0 % $ 11,789 7.3 %

Our Control Devices segment net sales increased primarily due to new product sales and growth in the North American automotive market of ~~$8.6 million. Also, our~~$18.3 million and new program sales and increased sales volume in the China automotive market of $1.4 million during the third quarter of 2016, which were offset by a decrease in commercial vehicle ~~market sales volume increased, which was offset by lower agricultural sales volume.~~and various other markets of $1.6 million and $0.8 million, respectively.

Our Electronics segment net sales ~~decreased primarily due to~~declined as the increase in sales volume in our European commercial vehicle products of $3.0 million was more than offset by a decrease in sales volume of our North American commercial vehicle and European off-highway vehicle products of $3.4 million and $1.2 million, respectively, and an unfavorable foreign currency translation of $6.6 million, which was partially offset by an increase in sales of our North American commercial vehicle products of $1.4 million (from higher post-disposition sales to the Wiring business acquired by Motherson of $2.1 million) and an increase in sales volume of our European off-road/construction products of $1.3$1.2 million.

Our PST segment net sales decreased primarily due to ~~an unfavorable~~continued weakness in the Brazilian economy and automotive market which was partially offset by a favorable foreign currency translation ~~which reduced~~that increased sales by ~~$13.2~~$2.0 million, or ~~35.7%, which~~8.2%. PST’s monitoring service sales modestly increased but was ~~slightly~~more than offset by ~~higher monitoring service volume as audio/car alarm~~a decline in product sales ~~volume remained flat.~~volume.

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

Dollar Percent Dollar Percent
increase / increase / increase / increase /
Three months ended September 30 2015 2014 (decrease) (decrease) 2016 2015 (decrease) (decrease)
North America $ 96,676 59.7 % $ 86,744 50.9 % $ 9,932 11.4 % $ 108,605 62.5 % $ 96,676 59.7 % $ 11,929 12.3 %
South America 24,339 15.0 37,029 21.7 (12,690 ) (34.3 )% 22,342 12.9 24,339 15.0 (1,997 ) (8.2 )
Europe and Other 41,042 25.3 46,565 27.4 (5,523 ) (11.9 )% 42,899 24.6 41,042 25.3 1,857 4.5
Total net sales $ 162,057 100.0 % $ 170,338 100.0 % $ (8,281 ) (4.9 )% $ 173,846 100.0 % $ 162,057 100.0 % $ 11,789 7.3 %

The increase in North American net sales was primarily attributable to ~~increased~~new product sales and growth in our North American automotive market of $18.3 million, which was partially offset by decreased sales volume in our North American ~~Control Devices segment automotive and Electronics segment~~ commercial vehicle market and various other markets of ~~$8.6~~$5.0 million and ~~$1.4~~$0.8 million, respectively. ~~Our~~The decrease in net sales in South America was primarily due to a decrease in product sales volume as a result of continued weakness in the ~~impact of an unfavorable~~Brazilian economy and automotive market which was partially offset by a favorable foreign currency translation. ~~Our decrease~~The increase in net sales in Europe and Other was primarily due to an increase in sales volume of our European commercial vehicle products of $3.0 million and new program sales and increased sales volume in our China automotive market of $1.4 million, which were partially offset by a sales volume decrease of our European off-highway vehicle products of $1.2 million as well as an unfavorable foreign currency translation of ~~$6.6 million, which was partially offset by increased sales of European off-road/construction products of $1.3~~$1.2 million.

Cost of Goods Sold and Gross Margin. Cost of goods sold ~~decreased~~increased by ~~3.2%~~6.1% primarily related to an increase in net sales in our Control Devices segment. Our gross margin improved by 0.7% to 28.6% for the ~~decrease in sales, which was partially offset by higher~~third quarter of 2016 compared to 27.9% for the third quarter of 2015 primarily due to lower material costs ~~resulting from unfavorable changes~~ in ~~foreign currency exchange rates.~~our Electronics and PST segments. Our material cost as a percentage of net sales ~~increased~~decreased by 0.7% to ~~51.0%~~50.7% for the third quarter of 2016 compared to 51.4% for the third quarter of 2015 ~~compared to 49.8% for the third quarter~~while our aggregated labor and overhead costs as a percentage of ~~2014. As a result, our gross margin decreased by 1.2% to 27.9% for the third quarter of 2015 compared to 29.1% for the third quarter of 2014.~~sales remained level. The ~~higher~~lower direct material costs ~~were primarily due to unfavorable movement in foreign currency exchange rates~~ in our Electronics ~~segment, which~~and PST segments were partially offset by ~~lower~~higher direct material costs in our Control Devices ~~segment.~~segment related to a change in product mix.

Our Control Devices segment gross margin ~~increased due to~~decreased as the benefit of increased sales ~~volume, lower commodity prices and a favorable mix of products sold, which were partially~~was more than offset by higher warranty related costs ~~principally related to one product.~~and was negatively impacted by an unfavorable mix of products sold.

Our Electronics segment gross margin ~~decreased~~improved primarily due to ~~higher~~lower material costs resulting from ~~an unfavorable~~ movement in foreign currency exchange ~~rates, which was moderated by our foreign currency hedges.~~rates.

Our PST segment gross margin ~~remained level as price increases, product redesign, new supplier sourcing,~~increased due to lower direct material costs related to a favorable ~~sales mix and lower business realignment charges were offset by higher material costs resulting from an unfavorable change~~movement in foreign currency exchange ~~rates. PST incurred business realignment charges of $0.2 million and $0.4 million~~rates, but was negatively impacted by a decrease in ~~the third quarter of 2015 and 2014, respectively.~~sales volume.

Selling, General and Administrative (“SG&A”).SG&A expenses ~~decreased~~increased by ~~$4.9~~$1.5 million compared to the third quarter of ~~2014 due to lower SG&A costs in our PST segment~~2015 primarily due to ~~foreign currency translation~~higher costs related to the corporate headquarter relocation (including employee retention, relocation, severance, recruiting and duplicate wages) totaling $0.7 million as well as higher wages, share-based compensation (partially resulting from ~~movement~~the modification of the retirement notice provisions of certain awards) and professional fees in ~~foreign currency exchange rates, which were~~our unallocated corporate segment. This increase was partially offset by ~~higher~~a slight decrease in SG&A expenses in our Control Devices, Electronics and unallocated corporate segments. SG&A expenses in our Control Devices segment increased primarily due to higher legal fees related to product litigation and lower bad debt recoveries. SG&A costs in our unallocated corporate segment increased duePST segments, a portion of which relates to business realignment ~~costs of~~charges which decreased by $0.3 million incurred in the third quarter of 2015. Total SG&A business realignment costs were $0.5 million related to our Electronics, PST and unallocated corporate segments for the quarter ended September 30, 2015 compared to $0.4 million related to PST for the third quarter of 2014.million.

Design and Development (“D&D”).D&D costs ~~decreased~~increased by ~~$0.5~~$0.3 million primarily due to ~~foreign currency translation resulting from movement in foreign currency exchange rates in our PST segment. An increase in~~higher costs related to new product ~~development costs~~launches in our Control Devices segment and ~~higher business realignment charges related to our Electronics and PST segments were substantially offset by lower~~product development costs in our Electronics segment ~~resulting from movement~~which were partially offset by lower employee costs in ~~foreign currency exchange rates. Business~~our PST segment as a result of business realignment ~~charges were $0.3 million related to our Electronics and PST segments for the quarter ended September 30, 2015 compared to $0.1 million related to PST for the third quarter of 2014.~~actions.

~~Goodwill Impairment.~~ In the second quarter of 2014, we recorded our best estimate of the “step two” goodwill impairment related to our PST segment. The impairment was the result of weakening of both the Brazilian economy and automotive market resulting in lower projected revenue growth. Based on completion of the Company’s “step two” analysis during the third quarter of 2014, the previously recorded goodwill impairment estimate of $29.3 million was reduced to the final amount of $23.5 million resulting in income of $5.8 million for the quarter ended September 30, 2014. This non-cash impairment charge is more fully described in Note 4 to our condensed consolidated financial statements.
Operating Income.Operating income (loss) is summarized in the following table by continuing reportable segment (in thousands):

Dollar Percent
increase / increase /
Three months ended September 30 2015 2014 (decrease) (decrease)
Control Devices $ 12,197 $ 10,000 $ 2,197 22.0 %
Electronics 2,767 4,370 (1,603 ) (36.7 )%
PST (640 ) 4,467 (5,107 ) NM
Unallocated corporate (5,377 ) (5,078 ) (299 ) (5.9 )%
Operating income $ 8,947 $ 13,759 $ (4,812 ) (35.0 )%
~~NM – not meaningful~~
Dollar Percent
increase / increase /
Three months ended September 30 2016 2015 (decrease) (decrease)
Control Devices $ 15,319 $ 12,197 $ 3,122 25.6 %
Electronics 3,735 2,767 968 35.0
PST 29 (640 ) 669 104.5
Unallocated corporate (7,303 ) (5,377 ) (1,926 ) (35.8 )
Operating income $ 11,780 $ 8,947 $ 2,833 31.7 %

Our Control Devices segment operating income increased primarily due to an increase in sales ~~lower commodity prices and a favorable change in product mix,~~ which ~~were~~was partially offset by higher D&D and warranty ~~SG&A and D&D~~related costs.

Our Electronics segment operating income ~~decreased~~increased despite lower sales primarily due to ~~a decrease in gross profit resulting from an increase in~~lower material and SG&A costs, ~~as well as business realignment charges of $0.3 million,~~ which were partially offset by ~~lower SG&A and~~higher D&D ~~costs resulting from movement in foreign currency exchange rates.~~costs.

Our PST segment operating performance ~~decreased due to the goodwill impairment benefit of $5.8 million that occurred in the third quarter of 2014. Excluding the benefit of the goodwill impairment adjustment, PST’s operating performance~~ improved ~~by $0.7 million~~ primarily due to lower D&D costs resulting from business realignment ~~charges of $0.5 million as~~actions and higher gross profit from lower material ~~cost reductions achieved from product redesign, new supplier sourcing~~costs and a ~~favorable sales mix were substantially offset by an unfavorable movement~~$0.2 million decrease in ~~foreign currency exchange rates. PST incurred~~ business realignment ~~charges of $0.4 million for~~costs. PST’s improved operating performance is expected to continue in the ~~third~~fourth quarter of ~~2015 compared to $0.9 million for the third quarter of 2014.~~2016.

Our unallocated corporate operating loss increased primarily due to ~~business realignment charges of $0.3 million in~~costs related to the ~~third quarter of 2015~~corporate headquarter relocation as ~~slightly~~well as higher ~~employee related costs were offset by lower~~wages, share-based ~~compensation.~~compensation and professional fees.

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

Dollar Percent Dollar Percent
increase / increase / increase / increase /
Three months ended September 30 2015 2014 (decrease) (decrease) 2016 2015 (decrease) (decrease)
North America $ 7,714 $ 6,493 $ 1,221 18.8 % $ 8,852 $ 7,714 $ 1,138 14.8 %
South America (640 ) 4,467 (5,107 ) NM 29 (640 ) 669 104.5
Europe and Other 1,873 2,799 (926 ) (33.1 )% 2,899 1,873 1,026 54.8
Operating income $ 8,947 $ 13,759 $ (4,812 ) (35.0 ) $ 11,780 $ 8,947 $ 2,833 31.7 %

Our North American operating results ~~increased~~improved primarily due to increased sales in the North American automotive ~~and commercial vehicle markets and lower material costs,~~market, which were partially offset by higher ~~warranty, SG&A~~wages, share-based compensation, professional fees and ~~D&D costs.~~costs related to the headquarter relocation. The ~~decrease in~~improved performance in South America was primarily due to lower D&D employee costs resulting from business realignment actions, higher gross profit resulting from lower material costs and a ~~favorable goodwill impairment adjustment of $5.8~~$0.2 million ~~recorded~~decrease in ~~the third quarter of 2014.~~business realignment costs. Our operating results in Europe and Other ~~declined~~improved due primarily to ~~higher~~lower material costs resulting from ~~an unfavorable~~a favorable movement in foreign currency exchange rates and ~~business realignment charges~~higher sales of ~~$0.3 million related to our Electronics segment during the third quarter of 2015.~~European commercial vehicle and China automotive products.

Interest Expense, net. Interest expense, net decreased by ~~$3.3~~$0.1 million ~~when~~ compared to the prior year third quarter primarily due to a lower ~~average debt balance outstanding and a lower weighted-average~~ interest ~~rate. We redeemed our $175.0 million 9.5% senior secured notes in September and October 2014 using borrowings of $100.0 million on~~rate related to our Credit ~~Facility (which bore annual interest of approximately 2.0% for the three months ended September 30, 2015), proceeds from the sale of the Wiring business and existing cash.~~Facility.

Equity in Earnings of Investee. Equity earnings for Minda were ~~$0.2~~$0.3 million ~~for both the three months ended September 30, 2015~~ and ~~2014.~~
~~Loss on Early Extinguishment of Debt.~~ ~~We recognized debt extinguishment loss of $0.9~~$0.2 million for the three months ended September 30, ~~2014 due~~2016 and 2015, respectively. The increase in Minda’s income from operations compared to the ~~redemption of $17.5 million of our senior secured notes and modification of our Credit Facility. The specific components of the debt extinguishment loss are described~~prior period was partially offset by an unfavorable change in ~~Note 8 to our condensed consolidated financial statements.~~foreign currency exchange rates.

Other ~~(Income) Expense,~~Income, net. We record certain foreign currency transaction and forward currency hedge contract (gains) losses as a component of other ~~(income) expense,~~income, net on the condensed consolidated statement of operations. Other ~~(income) expense,~~income, net ~~was $(0.1)~~increased by $0.4 million to $0.5 million for the third quarter of ~~2015 compared~~2016 primarily due to ~~less than $0.1 million for the third quarter of 2014.~~an increase in foreign currency gains and several other items. The favorable change in certain foreign currency exchange rates in our unallocated corporate and Electronics segments were partially offset by an unfavorable change in foreign currency exchange rates in our PST segment.

~~Provision (Benefit)~~Expense for Income Taxes from Continuing Operations. We recognized an income tax ~~provision (benefit)~~expense of $0.9 million and less than $0.1 ~~million and $(1.2)~~ million from continuing operations for federal, state and foreign income taxes for the third quarter of 2016 and 2015, ~~and 2014,~~ respectively. The increase in income tax expense for the three months ended September 30, 2016 compared to the same period for 2015 was primarily due to the increase in consolidated earnings. Also, income tax expense increased due to the PST operating loss which generated a benefit for the third quarter of 2015, however, due to the valuation allowance position taken in the fourth quarter of 2015, no longer provides a tax benefit in 2016. The effective tax rate increased to 8.4% in the third quarter of 2016 from 0.4% in the third quarter of 2015 ~~from (14.7)% in the third quarter of 2014. As discussed in more detail in Note 12~~primarily due to ~~our condensed consolidated financial statements, the increase in the income tax provision and~~a full valuation allowance on PST’s loss that negatively impacted the effective tax ~~rate for the three months ended September 30, 2015 compared to the same period in 2014 was primarily attributable to the~~rate. The impact ~~on 2014~~ of the significant change during the third quarter of 2014 in forecasted and actual earnings related to our debt refinancing, non-tax deductible goodwill impairment and Brazilian economic weakness. In addition, the increase in the income tax provision andPST on the effective tax rate was ~~also due to~~partially offset by the ~~improved earnings related to~~continued strong performance of our U.S. operations ~~reduced earnings of our European operations and~~which, due to a full valuation allowance, positively impacted the ~~smaller operating loss of our PST segment.~~effective tax rate.

We will continue to maintain a full valuation allowance on our U.S. deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance. As a result of the sale of the Wiring business and debt refinancing during the second half of 2014 and actual and anticipated earnings of the U.S. operations, we believe that there is a reasonable possibility that additional positive evidence may continue to develop in the near term that may allow us to reach a conclusion that some or all of the valuation allowance on our U.S. deferred tax assets will no longer be needed. Reversal of some or all of the U.S. valuation allowance would result in the recognition of certain deferred tax assets and an income tax benefit in the period the reversal is recorded. However, the exact timing and amount of a valuation allowance reversal ~~will depend~~depends upon the ~~weight~~level of ~~all positive and negative evidence considered at each reporting date.~~profitability that we are able to actually achieve.

Nine Months Ended September 30, ~~2015~~2016 Compared to Nine Months Ended September 30, ~~2014~~2015
Condensed consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):
Dollar
increase /
Nine months ended September 30 2015 2014 (decrease)
Net sales $ 490,171 100.0 % $ 493,768 100.0 % $ (3,597 )
Costs and expenses:
Cost of goods sold 355,432 72.5 347,795 70.4 7,637
Selling, general and administrative 85,555 17.5 93,587 19.0 (8,032 )
Design and development 29,696 6.0 31,916 6.4 (2,220 )
Goodwill impairment - - 23,498 4.8 (23,498 )

Operating income (loss) 19,488 4.0 (3,028 ) (0.6 ) 22,516
Interest expense, net 4,683 1.0 15,059 3.0 (10,376 )
Equity in earnings of investee (492 ) (0.1 ) (587 ) (0.1 ) 95
Loss on early extinguishment of debt - - 920 0.2 (920 )
Other (income) expense, net (343 ) (0.1 ) 2,268 0.5 (2,611 )
Income (loss) before income taxes from continuing operations 15,640 3.2 (20,688 ) (4.2 ) 36,328
Benefit for income taxes from continuing operations (202 ) - (790 ) (0.2 ) 588
Income (loss) from continuing operations 15,842 3.2 (19,898 ) (4.0 ) 35,740
Discontinued operations:
Income from discontinued operations, net of tax - - 86 - (86 )
Loss on disposal, net of tax (226 ) - (7,781 ) (1.6 ) 7,555
Loss from discontinued operations (226 ) - (7,695 ) (1.6 ) 7,469

Net income (loss) 15,616 3.2 (27,593 ) (5.6 ) 43,209

Net loss attributable to noncontrolling interest (1,074 ) (0.2 ) (7,039 ) (1.4 ) 5,965
Net income (loss) attributable to Stoneridge, Inc. $ 16,690 3.4 % $ (20,554 ) (4.2 )% $ 37,244

Dollar
increase /
Nine months ended September 30 2016 2015 (decrease)
Net sales $ 523,365 100.0 % $ 490,171 100.0 % $ 33,194
Costs and expenses:
Cost of goods sold 375,705 71.8 355,432 72.5 20,273
Selling, general and administrative 82,836 15.8 85,555 17.5 (2,719 )
Design and development 30,912 5.9 29,696 6.0 1,216

Operating income 33,912 6.5 19,488 4.0 14,424
Interest expense, net 5,038 0.9 4,683 1.0 355
Equity in earnings of investee (603 ) (0.1 ) (492 ) (0.1 ) (111 )
Other income, net (722 ) (0.1 ) (343 ) (0.1 ) (379 )
Income before income taxes from continuing operations 30,199 5.8 15,640 3.2 14,559
Income tax expense (benefit) from continuing operations 3,114 0.6 (202 ) - 3,316
Income from continuing operations 27,085 5.2 15,842 3.2 11,243
Loss from discontinued operations - - (226 ) - 226
Net income 27,085 5.2 15,616 3.2 11,469
Net loss attributable to noncontrolling interest (2,009 ) (0.4 ) (1,074 ) (0.2 ) (935 )
Net income attributable to Stoneridge, Inc. $ 29,094 5.6 % $ 16,690 3.4 % $ 12,404
31

Net Sales.Net sales for our reportable segments, excluding inter-segment sales, are summarized in the following table (in thousands):
Dollar Percent Dollar Percent
increase / increase / increase / increase /
Nine months ended September 30 2015 2014 (decrease) (decrease) 2016 2015 (decrease) (decrease)
Control Devices $ 251,299 51.2 % $ 232,095 47.0 % $ 19,204 8.3 % $ 304,957 58.3 % $ 251,299 51.2 % $ 53,658 21.4 %
Electronics 165,015 33.7 157,808 32.0 7,207 4.6 % 158,201 30.2 165,015 33.7 (6,814 ) (4.1 )%
PST 73,857 15.1 103,865 21.0 (30,008 ) (28.9 )% 60,207 11.5 73,857 15.1 (13,650 ) (18.5 )%
Total net sales $ 490,171 100.0 % $ 493,768 100.0 % $ (3,597 ) (0.7 )% $ 523,365 100.0 % $ 490,171 100.0 % $ 33,194 6.8 %

Our Control Devices segment net sales increased primarily due to new product sales and growth in the North American automotive market of $54.8 million and ~~higher~~new program sales and increased sales volume in ~~our~~the China automotive market of ~~$17.4~~$3.5 million, ~~and $2.4 million, respectively, as well as slightly higher volume in our commercial vehicle market during 2015. These~~which were partially offset by a decrease in ~~agricultural sales volume~~various other markets of ~~$0.9 million.~~$2.1 million and our North American commercial vehicle market of $0.5 million during the first nine months of 2016.

Our Electronics segment net sales ~~increased~~decreased primarily due to ~~an increase~~a decrease in sales ofvolume in our North American commercial vehicle products of ~~$18.4~~$9.6 million, ~~(from higher volume related to~~ an ~~increase~~unfavorable foreign currency translation of $1.7 million and a decrease in ~~post-disposition sales to the Wiring business acquired~~our European off-highway vehicle products of $0.9 million, which were partially offset by ~~Motherson of $16.1 million) and~~ an increase in sales volume ofin our European commercial vehicle products of ~~$13.4~~$5.9 million. ~~The sales volume growth in these markets were substantially offset by an unfavorable foreign currency translation of $24.0 million.~~

Our PST segment net sales decreased primarily due to an unfavorable foreign currency translation which reduced sales by ~~$27.4~~$7.9 million, or ~~26.4%~~10.7%, and lower product ~~volume. PST’s audio/car alarm sales~~ volume ~~declined due to further weakening~~as a result of continued weakness in the Brazilian economy and automotive market while monitoring service sales volume modestly increased.

Net sales by geographic location are summarized in the following table (in thousands):
Dollar Percent Dollar Percent
increase / increase / increase / increase /
Nine months ended September 30 2015 2014 (decrease) (decrease) 2016 2015 (decrease) (decrease)
North America $ 281,108 57.3 % $ 246,260 49.9 % $ 34,848 14.2 % $ 321,973 61.5 % $ 281,108 57.3 % $ 40,865 14.5 %
South America 73,857 15.1 103,865 21.0 (30,008 ) (28.9 )% 60,207 11.5 73,857 15.1 (13,650 ) (18.5 )%
Europe and Other 135,206 27.6 143,643 29.1 (8,437 ) (5.9 )% 141,185 27.0 135,206 27.6 5,979 4.4 %
Total net sales $ 490,171 100.0 % $ 493,768 100.0 % $ (3,597 ) (0.7 )% $ 523,365 100.0 % $ 490,171 100.0 % $ 33,194 6.8 %

The increase in North American net sales was primarily attributable to ~~increased~~new product sales ~~volume~~and growth in ~~our~~the North American ~~Electronics’ commercial vehicle and Control Devices’~~ automotive ~~markets~~market of ~~$18.4~~$54.8 million, ~~and $17.4 million, respectively,~~ which ~~were~~was partially offset by decreased ~~agricultural~~sales volume in the North American commercial vehicle market of ~~$0.9~~$9.6 million and decreased sales in various other markets of $2.1 million. The decrease in net sales in South America was ~~primarily~~ due to ~~the impact of~~ an unfavorable foreign currency translation as well as lower product sales ~~volume. Our decrease~~volume as a result of continued weakness in the Brazilian economy and automotive market. The increase in net sales in Europe and Other was primarily due to an increase in sales volume of our European commercial vehicle products of $5.9 million and new program sales and increased sales volume in our China automotive market of $3.5 million, which were partially offset by an unfavorable foreign currency translation of ~~$24.0~~$1.7 million ~~which was substantially offset by increased~~and lower sales of European ~~commercial~~off-highway vehicle ~~and Chinese automotive market~~ products of ~~$13.4 million and $2.4 million, respectively.~~$0.9 million.

Cost of Goods Sold and Gross Margin. Cost of goods sold increased by ~~2.2%~~5.7% primarily related to ~~higher material costs resulting from unfavorable changes~~an increase in ~~foreign currency exchange rates.~~sales in our Control Devices segment. Our gross margin improved by 0.7% to 28.2% for the first nine months of 2016 compared to 27.5% for the first nine months of 2015. Our material cost as a percentage of net sales increased by 0.1% to ~~51.3%~~51.5% for the first nine months of 2016 compared to 51.4% for the first nine months of 2015 ~~compared~~while aggregated labor and overhead costs as a percentage of sales improved by 0.8% due to ~~48.7% for the first nine months of 2014. As~~increased sales and a ~~result,~~change in product mix in our ~~gross margin decreased by 2.1% to 27.5% for the first nine months of 2015 compared to 29.6% for the first nine months of 2014.~~Control Devices segment. The ~~higher~~lower material costs ~~were~~in our Electronics and PST segments due to ~~unfavorable movement~~a favorable change in foreign currency exchange rates ~~in our Electronics segment, which~~ were ~~partially~~ offset by ~~lower~~higher direct material costs as a percentage of sales in our Control Devices ~~segment.~~segment due to a change in mix of products sold.

Our Control Devices segment gross margin ~~increased~~improved slightly primarily due to the benefit of increased sales ~~volume, lower commodity prices and a favorable mix of products sold,~~levels which ~~were~~was partially offset by higher warranty related costs ~~principally related to one product.~~and was negatively impacted by an unfavorable change in mix of products sold.
32

Our Electronics segment gross margin ~~decreased~~improved primarily due to ~~higher~~lower material costs resulting from ~~an unfavorable~~a favorable movement in foreign currency exchange rates.
Our PST segment gross margin improved due to lower material costs resulting from a favorable movement in foreign currency exchange rates, which was ~~moderated~~partially offset by ~~our foreign currency hedges.~~
~~Our PST segment gross margin increased slightly as~~lower sales volume and a ~~favorable sales mix, prices increases, product redesign, new supplier sourcing and lower~~$0.1 million increase in business realignment charges were substantially offset by higher material costs resulting from an unfavorable movement in foreign currency exchange rates. PST business realignment charges decreased to $0.2 million for the first nine months of 2015 compared to $0.9 million for the same period in 2014.charges.

Selling, General and Administrative. SG&A expenses decreased by ~~$8.0~~$2.7 million compared to the first nine months of ~~2014~~2015 as lower SG&A costs in our PST and Electronics segments were partially offset by higher ~~costs in our Control Devices and unallocated corporate segments.~~ SG&A costs in our unallocated corporate segment. PST ~~and Electronics segments~~SG&A costs decreased primarily due to lower employee costs as a result of business realignment actions, lower selling related expenses and professional fees and from movement in foreign currency ~~translation resulting~~exchange rates, which were partially offset by a $0.7 million increase in business realignment costs. SG&A expenses in our Electronics segment decreased primarily due from movement in foreign currency exchange rates. Unallocated corporate SG&A costs ~~in Control Devices segment~~ increased ~~primarily~~ due to ~~higher legal fees related to product litigation,~~costs associated with the corporate headquarter relocation (including employee retention, relocation, severance, recruiting, other professional fees and ~~performance-based compensation.~~duplicate wages) totaling $1.0 million as well as higher wages, incentive-based compensation (as a result of improved financial performance) and consulting fees. These higher unallocated corporate SG&A costs ~~in our unallocated corporate segment increased due to higher incentive-based compensation, business realignment charges of $0.3 million and higher~~were partially offset by lower share-based compensation ~~of $2.2 million in connection with~~expense as the ~~accelerated vesting associated with~~additional expense related to modification of the retirement notice provisions of ~~our former President and CEO in June 2015. SG&A business realignment charges related to our Electronics, PST and unallocated corporate segments were~~certain share-based awards of $0.5 million for the first nine months of ~~2015 compared to $0.6~~2016 were more than offset by $2.2 million ~~related to PST~~of expense for the acceleration of the vesting associated with the retirement of our President and Chief Executive Officer (“CEO”) during the first nine months of ~~2014.~~2015.

Design and Development.D&D costs ~~decreased~~increased by ~~$2.2~~$1.2 million primarily due to ~~foreign currency translation resulting from~~development costs related to new product launches in our Control Devices segment as well as higher product development costs and business realignment charges in our Electronics segment. Business realignment charges related to our Electronics segment increased by $0.8 million during the first nine months of 2016 compared to 2015. This increase in D&D costs in our Control Devices and Electronics segments was partially offset by lower employee costs as a result of business realignment actions, lower product design costs and movement in foreign currency exchange rates in our ~~Electronics and~~ PST segments while the Control Devices segment incurred lower product development costs. D&D business realignment charges related to our Electronics and PST segments were $0.3 million for the first nine months of 2015 compared to $0.2 million related to PST for the first nine months of 2014.segment.

~~Goodwill Impairment.~~ The Company recorded a charge of $23.5 million for the nine months ended September 30, 2014 related to a portion of the PST goodwill.  The impairment was due to the weakening of both the Brazilian economy and automotive market resulting in lower projected revenue and earnings growth. This non-cash impairment charge is more fully described in Note 4 to our condensed consolidated financial statements.
Operating ~~Income (Loss).~~Income.Operating income (loss) is summarized in the following table by continuing reportable segment (in thousands):
Dollar Percent Dollar Percent
increase / increase / increase / increase /
Nine months ended September 30 2015 2014 (decrease) (decrease) 2016 2015 (decrease) (decrease)
Control Devices $ 33,787 $ 27,152 $ 6,635 24.4 % $ 47,133 $ 33,787 $ 13,346 39.5 %
Electronics 9,413 14,038 (4,625 ) (32.9 )% 12,050 9,413 2,637 28.0 %
PST (5,881 ) (30,057 ) 24,176 80.4 % (4,179 ) (5,881 ) 1,702 28.9 %
Unallocated corporate (17,831 ) (14,161 ) (3,670 ) (25.9 )% (21,092 ) (17,831 ) (3,261 ) (18.3 )%
Operating income (loss) $ 19,488 $ (3,028 ) $ 22,516 NM
Operating income $ 33,912 $ 19,488 $ 14,424 74.0 %

Our Control Devices segment operating income increased primarily due to an increase in sales, ~~lower commodity prices, a favorable change in product mix, product redesign and lower D&D costs,~~ which ~~were~~was partially offset by higher D&D costs related to new product launches and higher warranty ~~and SG&A~~related costs.

Our Electronics segment operating income ~~decreased~~increased primarily due to ~~a decline in sales, a decrease in gross profit as~~lower material costs, ~~increased and~~which was partially offset by a $0.9 million increase in business realignment charges and lower sales during the first nine months of ~~$0.3 million in the current period, which were partially offset by lower SG&A and design and development costs resulting from movement in foreign currency exchange rates.~~2016 compared to 2015.

Our PST segment operating ~~loss decreased~~performance improved primarily due to ~~a goodwill impairment charge~~lower SG&A and D&D expenses due to business realignment actions, lower selling expenses and professional fees. These were partially offset by lower gross profit resulting from lower product sales volume as well as an increase in business realignment charges of ~~$23.5~~$0.8 million ~~that was recorded in~~for the first nine months of ~~2014. Excluding the goodwill impairment, PST’s operating performance improved by $0.7 million due~~2016 compared to lower business realignment charges of $1.2 million (which were $0.4 million and $1.6 million for the nine months ended September 30, 2015 and 2014, respectively) as price increases, significant material cost reductions achieved from product redesign and new supplier sourcing were more than offset by an unfavorable change in foreign currency exchange rates.2015.

Our unallocated corporate operating loss increased primarily due to higher costs associated with the corporate headquarter relocation as well as higher wages, incentive-based compensation and professional fees. These were partially offset by lower share-based compensation ~~primarily as a result~~expense because the first nine months of 2015 included $2.2 million of expense for the acceleration of the vesting associated with the ~~June 2015~~ retirement of our President and CEO ~~of $2.2 million in~~while the first nine months of ~~2015, higher performance-based compensation and business realignment charges~~2016 had $0.5 million of ~~$0.3 million in~~expense related to the ~~current period.~~modification of the retirement notice provisions of certain awards.

Operating income (loss) by geographic location is summarized in the following table (in thousands):
Dollar Percent Dollar Percent
increase / increase / increase / increase /
Nine months ended September 30 2015 2014 (decrease) (decrease) 2016 2015 (decrease) (decrease)
North America $ 19,310 $ 17,956 $ 1,354 7.5 % $ 27,303 $ 19,310 $ 7,993 41.4 %
South America (5,881 ) (30,057 ) 24,176 80.4 % (4,179 ) (5,881 ) 1,702 (28.9 )%
Europe and Other 6,059 9,073 (3,014 ) (33.2 )% 10,788 6,059 4,729 78.0 %
Operating income (loss) $ 19,488 $ (3,028 ) $ 22,516 NM %
Operating income $ 33,912 $ 19,488 $ 14,424 74.0 %
32

Our North American operating results ~~increased~~improved primarily due to ~~higher~~increased sales in the North American ~~commercial vehicle and~~ automotive ~~markets, lower material costs and a favorable change in product mix,~~market which was ~~substantially~~partially offset by higher ~~performance-based compensation~~SG&A expenses in our unallocated corporate segment and higher ~~share-based compensation expense as a result of the acceleration of the vesting of share-based awards~~D&D and warranty related costs in ~~connection with the retirement of~~ our ~~former President and CEO during the first nine months of 2015.~~Control Devices segment. The ~~increase~~improvement in performance in South America was primarily due to ~~the goodwill impairment charge of $23.5~~lower SG&A and D&D employee expenses resulting from business realignment actions, lower selling costs and professional fees which was partially offset by lower gross profit resulting from lower product sales volume and a $0.8 million ~~taken~~increase in ~~the first nine months of 2014.~~business realignment costs. Our results in Europe and Other ~~declined primarily due to~~improved as higher D&D costs, an increase in product development and business realignment charges were more than offset by higher gross profit benefiting from lower material costs ~~and an unfavorable movement in foreign currency exchange rates related to our Electronics segment.~~
~~Loss on Early Extinguishment of Debt.~~ The Company recognized debt extinguishment loss of $0.9 million for the nine months ended September 30, 2014 due to the redemption of $17.5 million of our senior secured notes and modification of our Credit Facility. The specific components of the debt extinguishment loss are described in Note 8 to our condensed consolidated financial statements.as well as lower SG&A expenses.

Interest Expense, net. Interest expense, net ~~decreased~~increased by ~~$10.4~~$0.4 million compared to the ~~same period in the~~ prior year first nine months primarily due to a ~~lower average debt balance outstanding and a lower~~higher weighted-average interest ~~rate. We redeemed~~rate related to our $175.0 million 9.5% senior secured notes in September and October 2014 using borrowings of $100.0 million on our Credit Facility (which bore annual interest for the first nine months of 2015 of approximately 2.0%), proceeds from the sale of the Wiring business and existing cash.PST debt.

Equity in Earnings of Investee. Equity earnings for Minda ~~was $0.5~~were $0.6 million and ~~$0.6~~$0.5 million for the nine months ended September 30, 2016 and 2015, ~~and 2014,~~ respectively. The increase in Minda’s income from operations compared to the prior period was partially offset by an unfavorable change in foreign currency exchange rates.

Other ~~(Income) Expense,~~Income, net. We record certain foreign currency transaction and forward currency hedge contract ~~gains and~~(gains) losses as a component of other ~~(income) expense,~~income, net on the condensed consolidated statement of operations. Other ~~(income) expense,~~income, net ~~was ($0.3)~~increased by $0.4 million ~~for~~compared to the first nine months of 2015 ~~compared to $2.3 million for the first nine months of 2014~~ due to ~~less volatility~~an increase in ~~certain~~ foreign currency gains and several other items. The favorable change in foreign currency exchange rates in ~~the current period particularly related to~~our unallocated corporate and Electronics segments were partially offset by an unfavorable change in foreign currency exchange rates in our PST segment. ~~Our PST segment was unfavorably affected by a significant foreign currency translation loss related to the Argentinian peso for the first nine months of 2014.~~

~~Benefit~~Expense (Benefit) for Income Taxes from Continuing Operations. We recognized an income tax ~~benefit~~expense (benefit) of ~~$(0.2)~~$3.1 million and ~~$(0.8)~~$(0.2) million from continuing operations for federal, state and foreign income taxes for the first nine months of 2016 and 2015, ~~and 2014,~~ respectively. The increase in income tax expense for the nine months ended September 30, 2016 compared to the same period for 2015 was primarily due to the increase in consolidated earnings. Also, income tax expense increased due to the PST operating loss which generated a benefit for the first nine months of 2015, however, due to the valuation allowance position taken in the fourth quarter of 2015, no longer provides a tax benefit in 2016. The effective tax rate increased to 10.3% in the first nine months of 2016 from (1.3)% in the first nine months of 2015 ~~from (3.8)% in~~primarily due to a full valuation allowance on PST’s loss that negatively impacted the ~~first nine months of 2014. The decrease in the income tax benefit and~~ effective tax ~~rate for the nine months ended September 30, 2015 compared to the same period in 2014 was primarily attributable to the~~rate. The impact of PST on the ~~non-tax deductible goodwill impairment charge in 2014. Also, the decrease in the income tax benefit and~~ effective tax rate was ~~due to~~partially offset by the ~~improved earnings in~~continued strong performance of our U.S. operations ~~reduced earnings of our European operations and~~which, due to a full valuation allowance, positively impacted the ~~smaller operating loss of our PST segment. The decrease was partially offset by discrete~~effective tax ~~expense related to certain foreign operations during the first nine months of 2014 which did not recur in the first nine months of 2015.~~rate.

We will continue to maintain a full valuation allowance on our U.S. deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance. As a result of the sale of the Wiring business and debt refinancing during the second half of 2014 and actual and anticipated earnings of the U.S. operations, we believe that there is a reasonable possibility that additional positive evidence may continue to develop in the near term that may allow us to reach a conclusion that some or all of the valuation allowance on our U.S. deferred tax assets will no longer be needed. Reversal of some or all of the U.S. valuation allowance would result in the recognition of certain deferred tax assets and an income tax benefit in the period the reversal is recorded. However, the exact timing and amount of a valuation allowance reversal ~~will depend~~depends upon the ~~weight~~level of ~~all positive and negative evidence considered at each reporting date.~~profitability that we are able to actually achieve.
33
Liquidity and Capital Resources

Summary of Cash Flows (in thousands):

Dollar Dollar
increase / increase /
Nine months ended September 30 2015 2014 (decrease)
Nine months ended September 30 (in thousands) 2016 2015 (decrease)
Net cash provided by (used for):
Operating activities $ 17,133 $ (846 ) $ 17,979 $ 37,017 $ 17,133 $ 19,884
Investing activities (25,167 ) (2,001 ) (23,166 ) (17,832 ) (25,167 ) 7,335
Financing activities (3,802 ) (16,863 ) 13,061 (22,718 ) (3,802 ) (18,916 )
Effect of exchange rate changes on cash and cash equivalents (1,896 ) (2,165 ) 269 (268 ) (1,896 ) 1,628
Net change in cash and cash equivalents $ (13,732 ) $ (21,875 ) $ 8,143 $ (3,801 ) $ (13,732 ) $ 9,931

Cash provided by operating activities, which includes cash flows from the Wiring discontinued operations in 2015, increased primarily due to lower working capital ~~required as a result of the sale of the Wiring business in August 2014~~movement and an increase in net ~~income excluding the impacts of the non-cash PST goodwill impairment and the loss on sale of the Wiring business in 2014.~~income. Our receivable terms and collections rates have remained consistent between periods presented.

Net cash used for investing activities ~~increased~~decreased primarily due to ~~higher~~lower capital expenditures ~~primarily~~in the current period. Also, there were payments related to support the launch of new products as well as a refund of excess proceeds received from Motherson based on the resolution of the working capital and other adjustments associated with the sale of the Wiring business. Also, $71.4 million in cash was received from the sale of the Wiring business in ~~2014, of~~the prior period which ~~$52.7 million was restricted for repayment of debt.~~did not recur in 2016.

Net cash used for financing activities ~~decreased~~increased primarily due ~~the fact that in 2014 we repurchased $17.5 million, or 10.0% of our outstanding senior secured notes and incurred refinancing costs associated with the modification~~to an unplanned partial repayment of our Credit Facility ~~which were offset by~~and lower ~~net debt~~PST borrowings ~~of $2.9 million and a $2.1 million increase~~incurred in ~~Repurchase of Common Shares to satisfy employee tax withholding obligations.~~the current period.

As outlined in Note 87 to our condensed consolidated financial statements, our Credit Facility permits borrowing up to a maximum level of $300.0 million which includes an accordion feature which allows the Company to increase the availability by up to $80.0 million upon the satisfaction of certain conditions. This variable rate facility provides the flexibility to refinance other outstanding debt or finance acquisitions through September ~~2019.~~2021. 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 which 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 ~~$100.0~~$87.0 million at September 30, ~~2015.~~2016. The Company was in compliance with all covenants at September 30, ~~2015.~~2016. The covenants included in our Credit Facility to date have not and are not expected to limit our financing flexibility.

PST maintains several short-term obligations and long-term loans used for working capital purposes. At September 30, ~~2015,~~2016, there was ~~$22.4~~$18.0 million ~~outstanding on the~~of PST ~~term loans. Principal payments~~debt outstanding. Scheduled principal repayments on PST debt at September 30, ~~2015 are~~2016 were as follows: ~~$17.5 million from October 2015 to September 2016, $0.6~~$9.7 million from October 2016 to~~December 2016, $1.8 million in~~ September 2017, $1.0 million from October 2017 to December 2017, $4.0 million in 2018, ~~$0.9~~$2.6 million in 2019, $0.4 million in 2020 and $0.3 million in ~~both 2020 and~~ 2021.

The Company's wholly owned subsidiary located in Stockholm, Sweden, has an overdraft credit line which allows overdrafts on the subsidiary's bank account up to a maximum level of 20.0 million Swedish krona, or ~~$2.4~~$2.3 million, at September 30, ~~2015.~~2016. At September 30, ~~2015,~~2016, there were no overdrafts on the bank account.
Due to the deterioration of the Brazilian economy and automotive market in 2015 and first nine months of 2016, PST had lower earnings and cash flows. Also, PST has experienced slower customer payments of receivables, which combined with lower earnings has made its liquidity more challenging. As such, PST has and continues to evaluate and utilize several funding sources including factoring receivables and short-term loans from banks to provide necessary funding.

Although the Company's notes and credit facilities contain various covenants, the violation of which would limit or preclude their use or accelerate the maturity, the Company has not experienced and does not expect these covenants to restrict our financing flexibility. The Company has been and expects to continue to remain in compliance with these covenants during the term of the notes and credit facilities.

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 and China. We have entered into foreign currency forward contracts to reduce our exposure related to certain foreign currency fluctuations. See Note 65 to the condensed consolidated financial statements for additional details. Our future results could also be unfavorably affected by increased commodity prices as commodity fluctuations impact the cost of our raw material purchases.

At September 30, ~~2015,~~2016, we had a cash and cash equivalents balance of approximately ~~$29.3~~$50.6 million, of which ~~$12.5~~$18.2 million was held in the United States and ~~$16.8~~$32.4 million was held in foreign locations. The decrease from ~~$43.0~~$54.4 million at December 31, ~~2014~~2015 was due to repayment of debt, higher working capital and capital expenditures ~~to support~~which were offset by net income during the ~~launch~~first nine months of ~~new products, repayment of debt and the repurchase of common shares to satisfy employee tax withholding obligations.~~2016.

Commitments and Contingencies

See Note 1110 to the condensed consolidated financial statements for disclosures of the Company’s commitments and contingencies.

Seasonality

Our Control Devices and Electronics segments are not typically affected by seasonality, however the demand for our PST segment consumer products is typically higher in the second half of the year, the fourth quarter in particular.

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 ~~2014~~2015 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 ~~2014~~2015 Form 10-K because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates.

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 ~~2014~~2015 Form 10-K.

Inflation and International Presence

Given the current economic conditions of countries and recent fluctuations in certain foreign currency exchange rates and commodity prices, we believe that a negative change in such items could significantly affect our profitability.
~~Forward-Looking Statements~~
Portions of this report 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 include statements regarding the intent, belief or current expectations of the Company, our directors or officers with respect to, among other things, our (i) future product and facility expansion, (ii) acquisition or divestiture strategy, (iii) investments and new product development, and (iv) growth opportunities related to awarded business. 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 in this report 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 reduced purchases, loss or bankruptcy of a major customer;~~
⋅ ~~the costs and timing of facility closures, business realignment activities, or similar actions;~~
⋅ ~~a significant change in automotive, commercial, motorcycle, off-highway or agricultural vehicle production;~~
⋅ ~~competitive market conditions and resulting effects on sales and pricing;~~
⋅ ~~the impact on changes in foreign currency exchange rates on sales, costs and results, particularly the Brazilian real, euro, Argentinian peso, Swedish krona, Mexican peso and Chinese Renminbi;~~
⋅ ~~our ability to achieve cost reductions that offset or exceed certain customer-mandated selling price reductions;~~
⋅ ~~a significant change in general economic conditions in any of the various countries in which we operate;~~
⋅ ~~labor disruptions at our facilities or at any of our significant customers or suppliers;~~
⋅ ~~the ability of our suppliers to supply us with quality parts and components at competitive prices on a timely basis;~~
⋅ ~~the amount of our indebtedness and the restrictive covenants contained in the agreements governing our indebtedness, including our credit facility;~~
⋅ ~~customer acceptance of new products;~~
⋅ ~~capital availability or costs, including changes in interest rates or market perceptions;~~
⋅ ~~the failure to achieve the successful integration of any acquired company or business; and~~
⋅ ~~those items described in Part I, Item IA (“Risk Factors”) of the Company's 2014 Form 10-K.~~

In addition, 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk presented within Part II, Item 7A of the Company's ~~2014~~2015 Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of September 30, ~~2015,~~2016, 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 September 30, ~~2015.~~2016.

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 September 30, ~~2015~~2016 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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. 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 a tax assessment in Brazil related to value added taxes on vehicle tracking and monitoring services for which the likelihood of loss is not probable although it may take years to resolve. In addition, we are subject to litigation regarding patent infringement. We are also subject to the risk of exposure to product liability claims in the event that the failure of any of our products causes personal injury or death to users of our products as well as product warranty and recall claims. There can be no assurance that we will not experience any material losses related to product liability, warranty or recall 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. See additional details of these matters in Note 1110 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 ~~2014~~2015 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 September 30, 2015. These shares were delivered to us by employees as payment for the withholding taxes due upon vesting of restricted share awards:None.

Maximum
Total number of number of
shares purchased shares that may
Total number as part of publicly yet be purchased
of shares Average price announced plans under the plans
Period purchased paid per share or programs or programs
7/1/15-7/31/15 - - N/A N/A
8/1/15-8/31/15 - - N/A N/A
9/1/15-9/30/15 6,448 $ 11.47 N/A N/A
Total 6,448

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

Reference is made to the separate, “Index to Exhibits,” filed herewith.

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:  ~~November 4, 2015~~October 28, 2016 /s/ Jonathan B. DeGaynor

Jonathan B. DeGaynor
President and Chief Executive Officer
(Principal Executive Officer)

Date:  ~~November 4, 2015~~October 28, 2016 /s/ ~~George E. Strickler~~Robert R. Krakowiak
~~George E. Strickler~~Robert R. Krakowiak
~~Executive Vice President,~~ Chief Financial Officer and Treasurer
(Principal Financial ~~and Accounting~~ Officer)

37

INDEX TO EXHIBITS

Exhibit
Number Exhibit

~~Number~~10.1 Amendment No. 3 to Third Amended and Restated Credit Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 17, 2016).

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~~ 101.INS XBRL Instance Document

101.SCH XBRL Schema Document

101.CAL XBRL Calculation Linkbase Document

101.DEF XBRL Definition Linkbase Document

101.LAB XBRL Labels Linkbase Document

101.PRE XBRL Presentation Linkbase Document

Nine months ended September 30,	2015			2014
Nine months ended September 30 (in thousands)							2016			2015

OPERATING ACTIVITIES:
Net income (loss)	$	15,616		$	(27,593	)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Net income							$	27,085		$	15,616
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation		14,843			19,106			14,717			14,843
Amortization, including accretion of debt discount		3,000			4,484
Amortization, including accretion of deferred financing costs								2,677			3,000
Deferred income taxes		202			(1,003	)		714			202
Earnings of equity method investee		(492	)		(587	)		(603	)		(492	)
Loss on sale of fixed assets		55			15
(Gain) loss on sale of fixed assets								(409	)		55
Share-based compensation expense		5,746			3,799			4,587			5,746
Goodwill impairment		-			23,498
Loss on disposal of Wiring business		226			7,781			-			226
Loss on early extinguishment of debt		-			920
Changes in operating assets and liabilities, net of effect of business acquisition:
Changes in operating assets and liabilities:
Accounts receivable, net		(17,768	)		(21,563	)		(25,486	)		(17,768	)
Inventories, net		(15,028	)		(8,285	)		281			(15,028	)
Prepaid expenses and other		(703	)		(1,615	)
Prepaid expenses and other assets								(5,879	)		(703	)
Accounts payable		9,459			912			13,991			9,459
Accrued expenses and other		1,977			(715	)
Net cash provided by (used for) operating activities		17,133			(846	)
Accrued expenses and other liabilities								5,342			1,977
Net cash provided by operating activities								37,017			17,133

INVESTING ACTIVITIES:
Capital expenditures		(23,521	)		(19,772	)		(18,484	)		(23,521	)
Proceeds from sale of fixed assets		53			99			652			53
Change in restricted cash		-			(52,692	)
Payment for working capital adjustment related to Wiring sale		(1,230	)		-
Proceeds from sale of Wiring business		-			71,386
Business acquisitions		(469	)		(1,022	)
Payments related to sale of Wiring business								-			(1,230	)
Business acquisition								-			(469	)
Net cash used for investing activities		(25,167	)		(2,001	)		(17,832	)		(25,167	)

FINANCING ACTIVITIES:
Extinguishment of senior notes		-			(17,500	)
Premium related to early extinguishment of senior notes		-			(525	)
Revolving credit facility payment								(13,000	)		-
Proceeds from issuance of debt		19,116			20,462			13,317			19,116
Repayments of debt		(20,015	)		(15,953	)		(21,312	)		(20,015	)
Noncontrolling interest shareholder distribution		-			(1,083	)
Other financing costs		(49	)		(1,499	)		(339	)		(49	)
Repurchase of Common Shares to satisfy employee tax withholding		(2,854	)		(765	)		(1,384	)		(2,854	)
Net cash used for financing activities		(3,802	)		(16,863	)		(22,718	)		(3,802	)

Effect of exchange rate changes on cash and cash equivalents		(1,896	)		(2,165	)		(268	)		(1,896	)
Net change in cash and cash equivalents		(13,732	)		(21,875	)		(3,801	)		(13,732	)
Cash and cash equivalents at beginning of period		43,021			62,825			54,361			43,021

Cash and cash equivalents at end of period	$	29,289		$	40,950		$	50,560		$	29,289

Supplemental disclosure of cash flow information:
Cash paid for interest	$	4,539		$	11,441		$	4,573		$	4,539
Cash paid for income taxes, net	$	1,840		$	2,285		$	2,019		$	1,840

Supplemental disclosure of non-cash operating and financing activities:
Change in fair value of interest rate swap	$	-		$	(468	)
Bank payment of vendor payables under short-term debt obligations	$	3,286		$	3,617		$	3,764		$	3,286

	Three months		Nine months
	ended September 30,		ended September 30,
	2014		2014
Depreciation and amortization	$	-	$	2,111
Capital expenditures		397		1,238

	Electronics			PST			Total
Balance at January 1, 2014	$	604		$	53,744		$	54,348
Acquisition of business		664			-			664
Goodwill impairment charge		-			(23,498	)		(23,498	)
Currency translation		(124	)		(69	)		(193	)
Balance at September 30, 2014	$	1,144		$	30,177		$	31,321

					Prepaid expenses
			Notional		and other current assets /				Accrued expenses and
	amounts^(A)				other long-term assets				other current liabilities
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2015		2014		2015		2014		2015		2014
Derivatives designated as hedging instruments
Cash Flow Hedges:
Forward currency contracts	$	13,685	$	26,266	$	400	$	479	$	428	$	478

Derivatives not designated as hedging instruments
Forward currency contracts	$	1,694	$	3,523		-		-	$	8	$	13
Fixed price commodity contracts		-		317		-		-		-	$	69

													Loss recorded						Loss reclassified from
													in other comprehensive						other comprehensive income
	Loss recorded in other comprehensive loss						Loss reclassified from other comprehensive loss into net income						income (loss)						(loss) into net income
	2015			2014			2015			2014			2016			2015			2016			2015
Derivatives designated as cash flow hedges:
Forward currency contracts	$	(578	)	$	(457	)	$	(342	)	$	(290	)	$	(129	)	$	(578	)	$	(65	)	$	(342	)
Fixed price commodity contracts		-			(20	)		-			(43	)
Total derivatives designated as cash flow hedges	$	(578	)	$	(477	)	$	(342	)	$	(333	)	$	(129	)	$	(578	)	$	(65	)	$	(342	)

~~(A)~~	Fair values estimated using Level 1 inputs, which consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The Company did not have any recurring fair value estimates using Level 1 inputs at September 30, 2015 or December 31, 2014.

~~(B)~~	Fair values estimated using Level 2 inputs, other than quoted prices, that 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 fixed price commodity contracts, inputs include foreign currency exchange rates and commodity indexes.

~~(C)~~	Fair values estimated using Level 3 inputs consist of significant unobservable inputs. The Company did not have any recurring fair value estimates using Level 3 inputs at September 30, 2015 or December 31, 2014.

							Interest rates at								Interest rates at
	September 30,			December 31,			September 30,		September 30,			December 31,			September 30,
	2015			2014			2015	Maturity	2016			2015			2016			Maturity
Revolving Credit Facility
Credit facility	$	100,000		$	100,000		2.12%	September - 2019	$	87,000		$	100,000			1.80	%	September 2021

Debt
PST short-term obligations		15,632			11,249		5.5% - 24.0%	Various 2015 and 2016		7,401			11,556			4.27% - 20.37	%	2016 - 2017
PST long-term notes		6,810			16,770		6.17% - 8.0%	2016 - 2021		10,573			6,428			6.20% - 18.00	%	2017 - 2021
Suzhou note		-			1,450		N/A	April 2015
Other		453			837					191			379
Total debt		22,895			30,306					18,165			18,363
Less: current portion		(17,913	)		(19,655	)				(9,901	)		(13,905	)
Total long-term debt, net	$	4,982		$	10,651				$	8,264		$	4,458

	Foreign			Unrealized			Benefit						Foreign			Unrealized			Benefit
	currency			gain (loss)			plan						currency			gain (loss)			plan
	translation			on derivatives			liability			Total			translation			on derivatives			liability			Total
Balance at July 1, 2015	$	(57,543	)	$	208		$	84		$	(57,251	)
Balance at July 1, 2016													$	(63,735	)	$	(19	)	$	84		$	(63,670	)

Other comprehensive loss before reclassifications		(12,557	)		(578	)		-			(13,135	)		(638	)		(129	)		-			(767	)
Amounts reclassified from accumulated other comprehensive loss		-			342			-			342			-			65			(84	)		(19	)
Net other comprehensive loss, net of tax		(12,557	)		(236	)		-			(12,793	)		(638	)		(64	)		(84	)		(786	)

Balance at September 30, 2015	$	(70,100	)	$	(28	)	$	84		$	(70,044	)
Balance at September 30, 2016													$	(64,373	)	$	(83	)	$	-		$	(64,456	)

Balance at July 1, 2014	$	(23,971	)	$	(16	)	$	(12	)	$	(23,999	)

Balance at July 1, 2015													$	(57,543	)	$	208		$	84		$	(57,251	)
Other comprehensive loss before reclassifications		(15,262	)		(477	)		-			(15,739	)		(12,557	)		(578	)		-			(13,135	)
Amounts reclassified from accumulated other comprehensive loss		2,734			333			-			3,067			-			342			-			342
Net other comprehensive loss, net of tax		(12,528	)		(144	)		-			(12,672	)		(12,557	)		(236	)		-			(12,793	)

Balance at September 30, 2014	$	(36,499	)	$	(160	)	$	(12	)	$	(36,671	)
Balance at September 30, 2015													$	(70,100	)	$	(28	)	$	84		$	(70,044	)

Nine months ended September 30	2015			2014			2016			2015
Product warranty and recall at beginning of period	$	7,601		$	6,414		$	6,419		$	7,601
Accruals for products shipped during period		2,716			3,329			3,010			2,716
Aggregate changes in pre-existing liabilities due to claim developments		(122	)		194			(272	)		(122	)
Settlements made during the period		(3,715	)		(2,414	)		(1,332	)		(3,715	)
Product warranty and recall at end of period	$	6,480		$	7,523		$	7,825		$	6,480

													Dollar													Dollar
													increase /													increase /
Three months ended September 30				2015						2014			(decrease)			2016					2015					(decrease)
Net sales	$	162,057			100.0	%	$	170,338			100.0	%	$	(8,281	)	$	173,846		100.0	%	$	162,057		100.0	%	$	11,789
Costs and expenses:
Cost of goods sold		116,912			72.1			120,788			70.9			(3,876	)		124,098		71.4			116,912		72.1			7,186
Selling, general and administrative		26,331			16.2			31,204			18.3			(4,873	)		27,817		16.0			26,331		16.2			1,486
Design and development		9,867			6.1			10,389			6.1			(522	)		10,151		5.8			9,867		6.1			284
Goodwill impairment		-			-			(5,802	)		(3.4	)		5,802

Operating income		8,947			5.6			13,759			8.1			(4,812	)		11,780		6.8			8,947		5.6			2,833
Interest expense, net		1,747			1.1			5,057			3.0			(3,310	)		1,684		1.0			1,747		1.1			(63	)
Equity in earnings of investee		(160	)		(0.1	)		(205	)		(0.1	)		45			(307	)	(0.2	)		(160	)	(0.1	)		(147	)
Loss on early extinguishment of debt		-			-			920			0.5			(920	)
Other (income) expense, net		(83	)		-			23			-			(106	)
Other income, net																	(497	)	(0.3	)		(83	)	-			(414	)
Income before income taxes from continuing operations		7,443			4.6			7,964			4.7			(521	)		10,900		6.3			7,443		4.6			3,457
Provision (benefit) for income taxes from continuing operations		32			-			(1,174	)		(0.7	)		1,206
Income tax expense from continuing operations																	919		0.5			32		-			887
Income from continuing operations		7,411			4.6			9,138			5.4			(1,727	)		9,981		5.8			7,411		4.6			2,570
Discontinued operations:
Loss from discontinued operations, net of tax		-			-			(1,560	)		(0.9	)		1,560
Loss on disposal, net of tax		(113	)		(0.1	)		(6,548	)		(3.9	)		6,435
Loss from discontinued operations		(113	)		(0.1	)		(8,108	)		(4.8	)		7,995			-		-			(113	)	(0.1	)		113

Net income		7,298			4.5			1,030			0.6			6,268			9,981		5.8			7,298		4.5			2,683

Net income (loss) attributable to noncontrolling interest		(69	)		-			1,160			0.7			(1,229	)
Net income (loss) attributable to Stoneridge, Inc.	$	7,367			4.5	%	$	(130	)		(0.1	)%	$	7,497
Net loss attributable to noncontrolling interest																	(303	)	(0.1	)		(69	)	-			(234	)
Net income attributable to Stoneridge, Inc.																$	10,284		5.9	%	$	7,367		4.5	%	$	2,917

											Dollar			Percent											Dollar			Percent
											increase /			increase /											increase /			increase /
Three months ended September 30			2015					2014			(decrease)			(decrease)			2016				2015				(decrease)			(decrease)
Control Devices	$	87,030		53.7	%	$	78,358		46.0	%	$	8,672			11.1	%	$	103,700	59.7	%	$	87,030	53.7	%	$	16,670			19.2	%
Electronics		50,688		31.3			54,951		32.3			(4,263	)		(7.8	)%		47,804	27.4			50,688	31.3			(2,884	)		(5.7	)
PST		24,339		15.0			37,029		21.7			(12,690	)		(34.3	)%		22,342	12.9			24,339	15.0			(1,997	)		(8.2	)
Total net sales	$	162,057		100.0	%	$	170,338		100.0	%	$	(8,281	)		(4.9	)%	$	173,846	100.0	%	$	162,057	100.0	%	$	11,789			7.3	%

													Dollar increase /
Nine months ended September 30				2016						2015			(decrease)
Net sales	$	523,365			100.0	%	$	490,171			100.0	%	$	33,194
Costs and expenses:
Cost of goods sold		375,705			71.8			355,432			72.5			20,273
Selling, general and administrative		82,836			15.8			85,555			17.5			(2,719	)
Design and development		30,912			5.9			29,696			6.0			1,216

Operating income		33,912			6.5			19,488			4.0			14,424
Interest expense, net		5,038			0.9			4,683			1.0			355
Equity in earnings of investee		(603	)		(0.1	)		(492	)		(0.1	)		(111	)
Other income, net		(722	)		(0.1	)		(343	)		(0.1	)		(379	)
Income before income taxes from continuing operations		30,199			5.8			15,640			3.2			14,559
Income tax expense (benefit) from continuing operations		3,114			0.6			(202	)		-			3,316
Income from continuing operations		27,085			5.2			15,842			3.2			11,243
Loss from discontinued operations		-			-			(226	)		-			226
Net income		27,085			5.2			15,616			3.2			11,469
Net loss attributable to noncontrolling interest		(2,009	)		(0.4	)		(1,074	)		(0.2	)		(935	)
Net income attributable to Stoneridge, Inc.	$	29,094			5.6	%	$	16,690			3.4	%	$	12,404

	STONERIDGE, INC.

Date: ~~November 4, 2015~~October 28, 2016	/s/ Jonathan B. DeGaynor
	Jonathan B. DeGaynor President and Chief Executive Officer
	(Principal Executive Officer)

Date: ~~November 4, 2015~~October 28, 2016	/s/ ~~George E. Strickler~~Robert R. Krakowiak
	~~George E. Strickler~~Robert R. Krakowiak
	~~Executive Vice President,~~ Chief Financial Officer and Treasurer
	(Principal Financial ~~and Accounting~~ Officer)

Exhibit Number	Exhibit

~~Number~~10.1	Amendment No. 3 to Third Amended and Restated Credit Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 17, 2016).

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~~	101.INS	XBRL Instance Document

101.SCH	XBRL Schema Document

101.CAL	XBRL Calculation Linkbase Document

101.DEF	XBRL Definition Linkbase Document

101.LAB	XBRL Labels Linkbase Document

101.PRE	XBRL Presentation Linkbase Document