2023
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Ohio |
| 34-1598949 | ||||||
(State or other jurisdiction of |
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| (I.R.S. Employer | ||||||
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39675 MacKenzie Drive, Suite 400, |
| 48377 | ||||||
(Address of principal executive offices) |
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Registrant’s telephone number, including area code |
Common Shares, without par valueSRINew York Stock Exchange
Title of each class Trading symbol(s) Name of each exchange on which registered
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Common Shares, without par value | SRI | New York Stock Exchange |
Large accelerated filer | Accelerated filer | Non-accelerated filer | ||||||
Smaller reporting company | Emerging growth company |
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If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐o
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•the ability of our suppliers to supply us with parts and components at competitive prices on a timely basis, including the impact of potential tariffs and trade considerations on their operations and output; •fluctuations in the cost and availability of key materials (including semiconductors, printed circuit boards, resin, aluminum, steel and copper) and components and our ability to offset cost increases through negotiated price increases with our customers or other cost reduction actions, as necessary; •global economic trends, competition and geopolitical risks, including impacts from the ongoing conflict between Russia and Ukraine and the related sanctions and other measures, or an escalation of sanctions, tariffs or other trade tensions between the U.S. and China or other countries; •our ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions; •the reduced purchases, loss or bankruptcy of a major customer or supplier; •the costs and timing of business realignment, facility closures or similar actions; •a significant change in automotive, commercial, off-highway or agricultural vehicle production; •competitive market conditions and resulting effects on sales and pricing; •foreign currency fluctuations and our ability to manage those impacts; •customer acceptance of new products; •our ability to successfully launch/produce products for awarded business; •adverse changes in laws, government regulations or market conditions, including tariffs, affecting our products or our customers’ products; •our ability to protect our intellectual property and successfully defend against assertions made against us; •liabilities arising from warranty claims, product recall or field actions, product liability and legal proceedings to which we are or may become a party, or the impact of product recall or field actions on our customers; •labor disruptions at our facilities or at any of our significant customers or suppliers; •business disruptions due to natural disasters or other disasters outside of our control; •the ability to refinance our existing revolving Credit Facility on a timely basis prior to its June 5, 2024 maturity; •the amount of our indebtedness and the restrictive covenants contained in the agreements governing our indebtedness, including our revolving Credit Facility; •capital availability or costs, including changes in interest rates or market perceptions; •the failure to achieve the successful integration of any acquired company or business; •risks related to a failure of our information technology systems and networks, and risks associated with current and emerging technology threats and damage from computer viruses, unauthorized access, cyber-attack and other similar disruptions; and •the items described in Part I, Item IA (“Risk Factors”) in the Company’s 2022 |
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.
| | | | | | |
| | September 30, | | December 31, | ||
(in thousands) |
| 2022 |
| 2021 | ||
| | | (Unaudited) | | | |
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 32,337 | | $ | 85,547 |
Accounts receivable, less reserves of $1,841 and $1,443, respectively | | | 166,861 | | | 150,388 |
Inventories, net | | | 150,704 | | | 138,115 |
Prepaid expenses and other current assets | | | 48,629 | | | 36,774 |
Total current assets | | | 398,531 | | | 410,824 |
Long-term assets: | | | | | | |
Property, plant and equipment, net | | | 101,897 | | | 107,901 |
Intangible assets, net | | | 43,116 | | | 49,863 |
Goodwill | | | 31,347 | | | 36,387 |
Operating lease right-of-use asset | | | 13,924 | | | 18,343 |
Investments and other long-term assets, net | | | 44,241 | | | 42,081 |
Total long-term assets | | | 234,525 | | | 254,575 |
Total assets | | $ | 633,056 | | $ | 665,399 |
| | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | |
Current liabilities: | | | | | | |
Current portion of debt | | $ | 2,826 | | $ | 5,248 |
Accounts payable | | | 106,297 | | | 97,679 |
Accrued expenses and other current liabilities | | | 68,827 | | | 70,139 |
Total current liabilities | | | 177,950 | | | 173,066 |
Long-term liabilities: | | | | | | |
Revolving credit facility | | | 165,695 | | | 163,957 |
Deferred income taxes | | | 8,324 | | | 10,706 |
Operating lease long-term liability | | | 10,903 | | | 14,912 |
Other long-term liabilities | | | 6,020 | | | 6,808 |
Total long-term liabilities | | | 190,942 | | | 196,383 |
Shareholders' equity: | | | | | | |
Preferred Shares, without par value, 5,000 shares authorized, none issued | | | - | | | - |
Common Shares, without par value, 60,000 shares authorized, 28,966 and 28,966 shares issued and 27,327 and 27,191 shares outstanding at September 30, 2022 and December 31, 2021, respectively, with no stated value | | | - | | | - |
Additional paid-in capital | | | 231,675 | | | 232,490 |
Common Shares held in treasury, 1,639 and 1,775 shares at September 30, 2022 and December 31, 2021, respectively, at cost | | | (50,772) | | | (55,264) |
Retained earnings | | | 201,465 | | | 215,748 |
Accumulated other comprehensive loss | | | (118,204) | | | (97,024) |
Total shareholders' equity | | | 264,164 | | | 295,950 |
Total liabilities and shareholders' equity | | $ | 633,056 | | $ | 665,399 |
(in thousands) | June 30, 2023 | December 31, 2022 | ||||||||||||
(Unaudited) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 34,705 | $ | 54,798 | ||||||||||
Accounts receivable, less reserves of $1,132 and $962, respectively | 185,296 | 158,155 | ||||||||||||
Inventories, net | 175,305 | 152,580 | ||||||||||||
Prepaid expenses and other current assets | 43,277 | 44,018 | ||||||||||||
Total current assets | 438,583 | 409,551 | ||||||||||||
Long-term assets: | ||||||||||||||
Property, plant and equipment, net | 106,227 | 104,643 | ||||||||||||
Intangible assets, net | 46,638 | 45,508 | ||||||||||||
Goodwill | 34,870 | 34,225 | ||||||||||||
Operating lease right-of-use asset | 12,225 | 13,762 | ||||||||||||
Investments and other long-term assets, net | 46,954 | 44,416 | ||||||||||||
Total long-term assets | 246,914 | 242,554 | ||||||||||||
Total assets | $ | 685,497 | $ | 652,105 | ||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Revolving credit facility | $ | 171,597 | $ | — | ||||||||||
Current portion of debt | — | 1,450 | ||||||||||||
Accounts payable | 136,457 | 110,202 | ||||||||||||
Accrued expenses and other current liabilities | 75,579 | 66,040 | ||||||||||||
Total current liabilities | 383,633 | 177,692 | ||||||||||||
Long-term liabilities: | ||||||||||||||
Revolving credit facility | — | 167,802 | ||||||||||||
Deferred income taxes | 7,975 | 8,498 | ||||||||||||
Operating lease long-term liability | 8,967 | 10,594 | ||||||||||||
Other long-term liabilities | 7,284 | 6,577 | ||||||||||||
Total long-term liabilities | 24,226 | 193,471 | ||||||||||||
Shareholders' equity: | ||||||||||||||
Preferred Shares, without par value, 5,000 shares authorized, none issued | — | — | ||||||||||||
Common Shares, without par value, 60,000 shares authorized, 28,966 and 28,966 shares issued and 27,522 and 27,341 shares outstanding at June 30, 2023 and December 31, 2022, respectively, with no stated value | — | — | ||||||||||||
Additional paid-in capital | 226,713 | 232,758 | ||||||||||||
Common Shares held in treasury, 1,444 and 1,625 shares at June 30, 2023 and December 31, 2022, respectively, at cost | (44,367) | (50,366) | ||||||||||||
Retained earnings | 191,314 | 201,692 | ||||||||||||
Accumulated other comprehensive loss | (96,022) | (103,142) | ||||||||||||
Total shareholders' equity | 277,638 | 280,942 | ||||||||||||
Total liabilities and shareholders' equity | $ | 685,497 | $ | 652,105 |
| | | | | | | | | | | | | |
| | | Three months ended | | Nine months ended | ||||||||
| | | September 30, | | September 30, | ||||||||
(in thousands, except per share data) | | | 2022 |
| 2021 | | 2022 |
| 2021 | ||||
| | | | | | | | | | | | | |
Net sales | | | $ | 226,757 | | $ | 181,680 | | $ | 668,751 | | $ | 566,809 |
Costs and expenses: | | | | | | | | | | | | | |
Cost of goods sold | | | | 177,317 | | | 145,680 | | | 539,304 | | | 441,882 |
Selling, general and administrative | | | | 27,444 | | | 28,481 | | | 83,781 | | | 89,237 |
Gain on sale of Canton Facility, net | | | | - | | | - | | | - | | | (30,718) |
Design and development | | | | 16,133 | | | 16,447 | | | 48,715 | | | 46,593 |
Operating income (loss) | | | | 5,863 | | | (8,928) | | | (3,049) | | | 19,815 |
Interest expense, net | | | | 1,845 | | | 1,447 | | | 4,848 | | | 5,073 |
Equity in (earnings) loss of investee | | | | (34) | | | (584) | | | 424 | | | (1,694) |
Other expense, net | | | | 2,332 | | | 41 | | | 3,067 | | | 127 |
Income (loss) before income taxes | | | | 1,720 | | | (9,832) | | | (11,388) | | | 16,309 |
Provision for income taxes | | | | 989 | | | 526 | | | 2,895 | | | 6,739 |
Net income (loss) | | | $ | 731 | | $ | (10,358) | | $ | (14,283) | | $ | 9,570 |
| | | | | | | | | | | | | |
Earnings (loss) per share: | | | | | | | | | | | | | |
Basic | | | $ | 0.03 | | $ | (0.38) | | $ | (0.52) | | $ | 0.35 |
Diluted | | | $ | 0.03 | | $ | (0.38) | | $ | (0.52) | | $ | 0.35 |
| | | | | | | | | | | | | |
Weighted-average shares outstanding: | | | | | | | | | | | | | |
Basic | | | | 27,281 | | | 27,147 | | | 27,250 | | | 27,100 |
Diluted | | | | 27,524 | | | 27,147 | | | 27,250 | | | 27,432 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
(in thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
Net sales | $ | 266,814 | $ | 220,936 | $ | 508,139 | $ | 441,994 | ||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||
Cost of goods sold | 206,326 | 182,372 | 404,849 | 361,987 | ||||||||||||||||||||||
Selling, general and administrative | 33,491 | 28,938 | 63,354 | 56,337 | ||||||||||||||||||||||
Design and development | 22,666 | 15,554 | 39,634 | 32,582 | ||||||||||||||||||||||
Operating income (loss) | 4,331 | (5,928) | 302 | (8,912) | ||||||||||||||||||||||
Interest expense, net | 3,120 | 1,217 | 5,866 | 3,003 | ||||||||||||||||||||||
Equity in loss of investee | 329 | 377 | 500 | 458 | ||||||||||||||||||||||
Other expense (income), net | 2,387 | (596) | 3,535 | 735 | ||||||||||||||||||||||
Loss before income taxes | (1,505) | (6,926) | (9,599) | (13,108) | ||||||||||||||||||||||
Provision for income taxes | 1,487 | 413 | 779 | 1,906 | ||||||||||||||||||||||
Net loss | $ | (2,992) | $ | (7,339) | $ | (10,378) | $ | (15,014) | ||||||||||||||||||
Loss per share: | ||||||||||||||||||||||||||
Basic | $ | (0.11) | $ | (0.27) | $ | (0.38) | $ | (0.55) | ||||||||||||||||||
Diluted | $ | (0.11) | $ | (0.27) | $ | (0.38) | $ | (0.55) | ||||||||||||||||||
Weighted-average shares outstanding: | ||||||||||||||||||||||||||
Basic | 27,452 | 27,269 | 27,400 | 27,234 | ||||||||||||||||||||||
Diluted | 27,452 | 27,269 | 27,400 | 27,234 |
INCOME (LOSS)
| | | | | | | | | | | | |
| | | Three months ended | | | Nine months ended | ||||||
| | | September 30, | | | September 30, | ||||||
(in thousands) | | | 2022 | | 2021 | | 2022 | | 2021 | |||
| | | | | | | | | | | | |
Net income (loss) | | $ | 731 | | $ | (10,358) | | $ | (14,283) | | $ | 9,570 |
| | | | | | | | | | | | |
Other comprehensive (loss) income, net of tax: | | | | | | | | | | | | |
Foreign currency translation (1) | | | (10,348) | | | (7,100) | | | (21,899) | | | (10,706) |
Unrealized (loss) gain on derivatives (2) | | | (276) | | | (133) | | | 719 | | | 124 |
Other comprehensive loss, net of tax | | | (10,624) | | | (7,233) | | | (21,180) | | | (10,582) |
| | | | | | | | | | | | |
Comprehensive loss | | $ | (9,893) | | $ | (17,591) | | $ | (35,463) | | $ | (1,012) |
| | | | | | | | | | | | |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
Net loss | $ | (2,992) | $ | (7,339) | $ | (10,378) | $ | (15,014) | ||||||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||
Foreign currency translation (1) | 2,992 | (15,712) | 7,064 | (11,551) | ||||||||||||||||||||||
Unrealized gain (loss) on derivatives (2) | 288 | (53) | 56 | 995 | ||||||||||||||||||||||
Other comprehensive income (loss), net of tax | 3,280 | (15,765) | 7,120 | (10,556) | ||||||||||||||||||||||
Comprehensive income (loss) | $ | 288 | $ | (23,104) | $ | (3,258) | $ | (25,570) |
(1) | Net of tax benefit of $411 and $267 for the |
(2) | Net of tax expense |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| | | | | | | |
Nine months ended September 30, (in thousands) |
| 2022 |
| 2021 |
| ||
| | | | | | | |
OPERATING ACTIVITIES: | | | | | | | |
Net (loss) income | | $ | (14,283) | | $ | 9,570 | |
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: | | | | | | | |
Depreciation | | | 20,183 | | | 20,831 | |
Amortization, including accretion and write-off of deferred financing costs | | | 6,187 | | | 4,767 | |
Deferred income taxes | | | (2,834) | | | 916 | |
Loss (earnings) of equity method investee | | | 424 | | | (1,694) | |
Gain on sale of fixed assets | | | (95) | | | (190) | |
Share-based compensation expense | | | 4,421 | | | 4,685 | |
Excess tax deficiency (benefit) related to share-based compensation expense | | | 266 | | | (295) | |
Gain on settlement of net investment hedge | | | (3,716) | | | - | |
Gain on sale of Canton Facility, net | | | - | | | (30,718) | |
Gain on disposal of business, net | | | - | | | (740) | |
Change in fair value of earn-out contingent consideration | | | - | | | 1,453 | |
Changes in operating assets and liabilities: | | | | | | | |
Accounts receivable, net | | | (28,333) | | | (2,746) | |
Inventories, net | | | (24,333) | | | (36,580) | |
Prepaid expenses and other assets | | | (15,510) | | | (11,144) | |
Accounts payable | | | 18,366 | | | 20,657 | |
Accrued expenses and other liabilities | | | 15,119 | | | 1,539 | |
Net cash used for operating activities | | | (24,138) | | | (19,689) | |
| | | | | | | |
INVESTING ACTIVITIES: | | | | | | | |
Capital expenditures, including intangibles | | | (22,877) | | | (21,576) | |
Proceeds from sale of fixed assets | | | 95 | | | 656 | |
Proceeds from settlement of net investment hedge | | | 3,820 | | | - | |
Proceeds from disposal of business, net | | | - | | | 1,050 | |
Proceeds from sale of Canton Facility, net | | | - | | | 35,167 | |
Investment in venture capital fund, net | | | (700) | | | (2,349) | |
Net cash (used for) provided by investing activities | | | (19,662) | | | 12,948 | |
| | | | | | | |
FINANCING ACTIVITIES: | | | | | | | |
Revolving credit facility borrowings | | | 21,817 | | | 34,000 | |
Revolving credit facility payments | | | (18,000) | | | (40,000) | |
Proceeds from issuance of debt | | | 30,513 | | | 30,292 | |
Repayments of debt | | | (32,789) | | | (36,286) | |
Earn-out consideration cash payment | | | (6,276) | | | - | |
Repurchase of Common Shares to satisfy employee tax withholding | | | (760) | | | (2,658) | |
Net cash provided by (used for) financing activities | | | (5,495) | | | (14,652) | |
| | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | (3,915) | | | (2,525) | |
Net change in cash and cash equivalents | | | (53,210) | | | (23,918) | |
Cash and cash equivalents at beginning of period | | | 85,547 | | | 73,919 | |
| | | | | | | |
Cash and cash equivalents at end of period | | $ | 32,337 | | $ | 50,001 | |
| | | | | | | |
Supplemental disclosure of cash flow information: | | | | | | | |
Cash paid for interest, net | | $ | 4,992 | | $ | 4,962 | |
Cash paid for income taxes, net | | $ | 5,808 | | $ | 7,296 | |
Six months ended June 30, (in thousands) | 2023 | 2022 | ||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||
Net loss | $ | (10,378) | $ | (15,014) | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: | ||||||||||||||
Depreciation | 13,161 | 13,618 | ||||||||||||
Amortization, including accretion and write-off of deferred financing costs | 4,004 | 4,323 | ||||||||||||
Deferred income taxes | (3,782) | (1,868) | ||||||||||||
Loss of equity method investee | 500 | 458 | ||||||||||||
Gain on sale of fixed assets | (854) | (95) | ||||||||||||
Share-based compensation expense | 1,271 | 2,834 | ||||||||||||
Excess tax deficiency related to share-based compensation expense | 66 | 259 | ||||||||||||
Gain on settlement of net investment hedge | — | (3,716) | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||
Accounts receivable, net | (28,100) | (15,481) | ||||||||||||
Inventories, net | (23,142) | (11,864) | ||||||||||||
Prepaid expenses and other assets | 3,313 | (15,538) | ||||||||||||
Accounts payable | 27,069 | 16,577 | ||||||||||||
Accrued expenses and other liabilities | 12,184 | 7,689 | ||||||||||||
Net cash used for operating activities | (4,688) | (17,818) | ||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||
Capital expenditures, including intangibles | (18,025) | (14,890) | ||||||||||||
Proceeds from sale of fixed assets | 1,729 | 140 | ||||||||||||
Proceeds from settlement of net investment hedge | — | 3,820 | ||||||||||||
Investment in venture capital fund, net | — | (450) | ||||||||||||
Net cash used for investing activities | (16,296) | (11,380) | ||||||||||||
FINANCING ACTIVITIES: | ||||||||||||||
Revolving credit facility borrowings | 42,000 | 11,190 | ||||||||||||
Revolving credit facility payments | (38,068) | (16,500) | ||||||||||||
Proceeds from issuance of debt | 16,402 | 19,163 | ||||||||||||
Repayments of debt | (18,086) | (20,358) | ||||||||||||
Earn-out consideration cash payment | — | (6,276) | ||||||||||||
Repurchase of Common Shares to satisfy employee tax withholding | (1,325) | (699) | ||||||||||||
Net cash provided by (used for) financing activities | 923 | (13,480) | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (32) | (2,177) | ||||||||||||
Net change in cash and cash equivalents | (20,093) | (44,855) | ||||||||||||
Cash and cash equivalents at beginning of period | 54,798 | 85,547 | ||||||||||||
Cash and cash equivalents at end of period | $ | 34,705 | $ | 40,692 | ||||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||
Cash paid for interest, net | $ | 5,622 | $ | 3,022 | ||||||||||
Cash paid for income taxes, net | $ | 5,927 | $ | 3,936 |
| | | | | | | | | | | | | | | | | | | |
| | Number of | | | | | | | | | | | | Accumulated | |
| | ||
| | Common | | Number of | | Additional | | Common | | | | other | | Total | |||||
| | Shares | | treasury | | paid-in | | Shares held | | Retained | | comprehensive | | shareholders' | |||||
(in thousands) |
| outstanding |
| shares |
| capital |
| in treasury |
| earnings |
| loss |
| equity | |||||
| | | | | | | | | | | | | | | | | | | |
BALANCE DECEMBER 31, 2020 |
| 27,006 |
| 1,960 |
| $ | 234,409 |
| $ | (60,482) |
| $ | 212,342 |
| $ | (89,635) |
| $ | 296,634 |
Net income |
| — |
| — |
| | — |
| | — |
| | 130 |
| | — |
| | 130 |
Unrealized loss on derivatives, net |
| — |
| — |
| | — |
| | — |
| | — |
| | (129) |
| | (129) |
Currency translation adjustments |
| — |
| — |
| | — |
| | — |
| | — |
| | (10,778) |
| | (10,778) |
Issuance of Common Shares |
| 224 |
| (224) |
| | — |
| | — |
| | — |
| | — |
| | — |
Repurchased Common Shares for treasury, net |
| (68) |
| 68 |
| | — |
| | 4,392 |
| | — |
| | — |
| | 4,392 |
Share-based compensation, net | | — | | — | | | (5,577) | | | — | | | — | | | — | | | (5,577) |
BALANCE MARCH 31, 2021 |
| 27,162 |
| 1,804 | | $ | 228,832 | | $ | (56,090) | | $ | 212,472 | | $ | (100,542) | | $ | 284,672 |
| | | | | | | | | | | | | | | | | | | |
Net income |
| — |
| — |
| | — |
| | — |
| | 19,798 |
| | — |
| | 19,798 |
Unrealized gain on derivatives, net |
| — |
| — |
| | — |
| | — |
| | — |
| | 386 |
| | 386 |
Currency translation adjustments |
| — |
| — |
| | — |
| | — |
| | — |
| | 7,172 |
| | 7,172 |
Issuance of Common Shares |
| 2 |
| (2) |
| | — |
| | — |
| | — |
| | — |
| | — |
Repurchased Common Shares for treasury, net |
| — |
| — |
| | — |
| | 4 |
| | — |
| | — |
| | 4 |
Share-based compensation, net | | — | | — | | | 1,598 | | | — | | | — | | | — | | | 1,598 |
BALANCE JUNE 30, 2021 |
| 27,164 |
| 1,802 | | $ | 230,430 | | $ | (56,086) | | $ | 232,270 | | $ | (92,984) | | $ | 313,630 |
| | | | | | | | | | | | | | | | | | | |
Net loss |
| — |
| — |
| | — |
| | — |
| | (10,358) |
| | — |
| | (10,358) |
Unrealized loss on derivatives, net |
| — |
| — |
| | — |
| | — |
| | — |
| | (133) |
| | (133) |
Currency translation adjustments |
| — |
| — |
| | — |
| | — |
| | — |
| | (7,100) |
| | (7,100) |
Issuance of Common Shares |
| 27 |
| (27) |
| | — |
| | — |
| | — |
| | — |
| | — |
Repurchased Common Shares for treasury, net |
| (12) |
| 12 |
| | — |
| | 475 |
| | — |
| | — |
| | 475 |
Share-based compensation, net | | — | | — | | | 1,137 | | | — | | | — | | | — | | | 1,137 |
BALANCE SEPTEMBER 30, 2021 |
| 27,179 |
| 1,787 | | $ | 231,567 | | $ | (55,611) | | $ | 221,912 | | $ | (100,217) | | $ | 297,651 |
| | | | | | | | | | | | | | | | | | | |
BALANCE DECEMBER 31, 2021 | | 27,191 |
| 1,775 |
| $ | 232,490 |
| $ | (55,264) |
| $ | 215,748 |
| $ | (97,024) |
| $ | 295,950 |
Net loss |
| — |
| — |
| | — |
| | — |
| | (7,675) |
| | — |
| | (7,675) |
Unrealized gain on derivatives, net |
| — |
| — |
| | — |
| | — |
| | — |
| | 1,048 |
| | 1,048 |
Currency translation adjustments |
| — |
| — |
| | — |
| | — |
| | — |
| | 4,161 |
| | 4,161 |
Issuance of Common Shares |
| 161 |
| (161) |
| | — |
| | — |
| | — |
| | — |
| | — |
Repurchased Common Shares for treasury, net |
| (36) |
| 36 |
| | — |
| | 4,093 |
| | — |
| | — |
| | 4,093 |
Share-based compensation, net | | — | | — | | | (3,653) | | | — | | | — | | | — | | | (3,653) |
BALANCE MARCH 31, 2022 |
| 27,316 |
| 1,650 | | $ | 228,837 | | $ | (51,171) | | $ | 208,073 | | $ | (91,815) | | $ | 293,924 |
| | | | | | | | | | | | | | | | | | | |
Net loss |
| — |
| — |
| | — |
| | — |
| | (7,339) |
| | — |
| | (7,339) |
Unrealized loss on derivatives, net |
| — |
| — |
| | — |
| | — |
| | — |
| | (53) |
| | (53) |
Currency translation adjustments |
| — |
| — |
| | — |
| | — |
| | — |
| | (15,712) |
| | (15,712) |
Issuance of Common Shares |
| 4 |
| (4) |
| | — |
| | — |
| | — |
| | — |
| | — |
Repurchased Common Shares for treasury, net |
| (2) |
| 2 |
| | — |
| | 90 |
| | — |
| | — |
| | 90 |
Share-based compensation, net | | — | | — | | | 1,618 | | | — | | | — | | | — | | | 1,618 |
BALANCE June 30, 2022 |
| 27,318 |
| 1,648 | | $ | 230,455 | | $ | (51,081) | | $ | 200,734 | | $ | (107,580) | | $ | 272,528 |
| | | | | | | | | | | | | | | | | | | |
Net income |
| — |
| — |
| | — |
| | — |
| | 731 |
| | — |
| | 731 |
Unrealized loss on derivatives, net |
| — |
| — |
| | — |
| | — |
| | — |
| | (276) |
| | (276) |
Currency translation adjustments |
| — |
| — |
| | — |
| | — |
| | — |
| | (10,348) |
| | (10,348) |
Issuance of Common Shares |
| 13 |
| (13) |
| | — |
| | — |
| | — |
| | — |
| | — |
Repurchased Common Shares for treasury, net |
| (4) |
| 4 |
| | — |
| | 309 |
| | — |
| | — |
| | 309 |
Share-based compensation, net | | — | | — | | | 1,220 | | | — | | | — | | | — | | | 1,220 |
BALANCE SEPTEMBER 30, 2022 |
| 27,327 |
| 1,639 | | $ | 231,675 | | $ | (50,772) | | $ | 201,465 | | $ | (118,204) | | $ | 264,164 |
(in thousands) | Number of Common Shares outstanding | Number of treasury shares | Additional paid-in capital | Common Shares held in treasury | Retained earnings | Accumulated other comprehensive loss | Total shareholders' equity | |||||||||||||||||||||||||||||||||||||
BALANCE DECEMBER 31, 2021 | 27,191 | 1,775 | $ | 232,490 | $ | (55,264) | $ | 215,748 | $ | (97,024) | $ | 295,950 | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | (7,675) | — | (7,675) | |||||||||||||||||||||||||||||||||||||
Unrealized gain on derivatives, net | — | — | — | — | — | 1,048 | 1,048 | |||||||||||||||||||||||||||||||||||||
Currency translation adjustments | — | — | — | — | — | 4,161 | 4,161 | |||||||||||||||||||||||||||||||||||||
Issuance of Common Shares | 161 | (161) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Repurchased Common Shares for treasury, net | (36) | 36 | — | 4,093 | — | — | 4,093 | |||||||||||||||||||||||||||||||||||||
Share-based compensation, net | — | — | (3,653) | — | — | — | (3,653) | |||||||||||||||||||||||||||||||||||||
BALANCE MARCH 31, 2022 | 27,316 | 1,650 | $ | 228,837 | $ | (51,171) | $ | 208,073 | $ | (91,815) | $ | 293,924 | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | (7,339) | — | (7,339) | |||||||||||||||||||||||||||||||||||||
Unrealized loss on derivatives, net | — | — | — | — | — | (53) | (53) | |||||||||||||||||||||||||||||||||||||
Currency translation adjustments | — | — | — | — | — | (15,712) | (15,712) | |||||||||||||||||||||||||||||||||||||
Issuance of Common Shares | 4 | (4) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Repurchased Common Shares for treasury, net | (2) | 2 | — | 90 | — | — | 90 | |||||||||||||||||||||||||||||||||||||
Share-based compensation, net | — | — | 1,618 | — | — | — | 1,618 | |||||||||||||||||||||||||||||||||||||
BALANCE June 30, 2022 | 27,318 | 1,648 | $ | 230,455 | $ | (51,081) | $ | 200,734 | $ | (107,580) | $ | 272,528 | ||||||||||||||||||||||||||||||||
BALANCE DECEMBER 31, 2022 | 27,341 | 1,625 | $ | 232,758 | $ | (50,366) | $ | 201,692 | $ | (103,142) | $ | 280,942 | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | (7,386) | — | (7,386) | |||||||||||||||||||||||||||||||||||||
Unrealized loss on derivatives, net | — | — | — | — | — | (232) | (232) | |||||||||||||||||||||||||||||||||||||
Currency translation adjustments | — | — | — | — | — | 4,072 | 4,072 | |||||||||||||||||||||||||||||||||||||
Issuance of Common Shares | 234 | (234) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Repurchased Common Shares for treasury, net | (62) | 62 | — | 5,649 | — | — | 5,649 | |||||||||||||||||||||||||||||||||||||
Share-based compensation, net | — | — | (6,802) | — | — | — | (6,802) | |||||||||||||||||||||||||||||||||||||
BALANCE MARCH 31, 2023 | 27,513 | 1,453 | $ | 225,956 | $ | (44,717) | $ | 194,306 | $ | (99,302) | $ | 276,243 | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | (2,992) | — | (2,992) | |||||||||||||||||||||||||||||||||||||
Unrealized gain on derivatives, net | — | — | — | — | — | 288 | 288 | |||||||||||||||||||||||||||||||||||||
Currency translation adjustments | — | — | — | — | — | 2,992 | 2,992 | |||||||||||||||||||||||||||||||||||||
Issuance of Common Shares | 15 | (15) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Repurchased Common Shares for treasury, net | (6) | 6 | — | 350 | — | — | 350 | |||||||||||||||||||||||||||||||||||||
Share-based compensation, net | — | — | 757 | — | — | — | 757 | |||||||||||||||||||||||||||||||||||||
BALANCE June 30, 2023 | 27,522 | 1,444 | $ | 226,713 | $ | (44,367) | $ | 191,314 | $ | (96,022) | $ | 277,638 | ||||||||||||||||||||||||||||||||
(Unaudited)
The Company’s investment in Minda Stoneridge Instruments Ltd. (“MSIL”) for the three and nine months ended September 30, 2021 was determined to be an unconsolidated entity, and was therefore accounted for under the equity method of accounting based on the Company’s 49% ownership in MSIL. The Company sold its equity interest in MSIL on December 30, 2021.
have a material impact on the Company’s condensed consolidated financial statements.
9
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
The Company does not have any financing components or significant payment terms as payment occurs shortly after the point of sale. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by the Company from a customer are excluded from revenue. Amounts billed to customers related to shipping and handling costs are included in net sales in the condensed consolidated statements of operations. Shipping and handling costs associated with outbound freight after control over a product is transferred to the customer are accounted for as a fulfillment cost and are included in cost of sales.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Control Devices | | Electronics | | Stoneridge Brazil | | Consolidated | ||||||||||||||||
Three months ended September 30, |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||||
Net Sales: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
North America | | $ | 76,055 | | $ | 70,334 | | $ | 40,955 | | $ | 25,061 | | $ | - | | $ | - | | $ | 117,010 | | $ | 95,395 |
South America | |
| - | |
| - | |
| - | |
| - | |
| 13,790 | |
| 16,477 | |
| 13,790 | |
| 16,477 |
Europe | |
| - | |
| 3,048 | |
| 81,007 | |
| 51,003 | |
| - | |
| - | |
| 81,007 | |
| 54,051 |
Asia Pacific | |
| 12,846 | |
| 14,236 | |
| 2,104 | |
| 1,521 | |
| - | |
| - | |
| 14,950 | |
| 15,757 |
Total net sales | | $ | 88,901 | | $ | 87,618 | | $ | 124,066 | | $ | 77,585 | | $ | 13,790 | | $ | 16,477 | | $ | 226,757 | | $ | 181,680 |
| | | | | | | | | | | | | | | | | | | | | | | | |
2022:
10
Control Devices | Electronics | Stoneridge Brazil | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||
Net Sales: | ||||||||||||||||||||||||||||||||||||||||||||||||||
North America | $ | 78,745 | $ | 71,908 | $ | 56,845 | $ | 37,734 | $ | — | $ | — | $ | 135,590 | $ | 109,642 | ||||||||||||||||||||||||||||||||||
South America | — | — | — | — | 14,908 | 13,349 | 14,908 | 13,349 | ||||||||||||||||||||||||||||||||||||||||||
Europe | — | — | 99,169 | 83,578 | — | — | 99,169 | 83,578 | ||||||||||||||||||||||||||||||||||||||||||
Asia Pacific | 13,375 | 12,658 | 3,772 | 1,709 | — | — | 17,147 | 14,367 | ||||||||||||||||||||||||||||||||||||||||||
Total net sales | $ | 92,120 | $ | 84,566 | $ | 159,786 | $ | 123,021 | $ | 14,908 | $ | 13,349 | $ | 266,814 | $ | 220,936 |
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
The following tables disaggregate our revenue by reportable segment and geographical location(1) for the ninesix months ended SeptemberJune 30, 20222023 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Control Devices | | Electronics | | Stoneridge Brazil | | Consolidated | ||||||||||||||||
Nine months ended September 30, |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||||
Net Sales: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
North America | | $ | 219,453 | | $ | 215,820 | | $ | 111,027 | | $ | 72,809 | | $ | - | | $ | - | | $ | 330,480 | | $ | 288,629 |
South America | |
| - | |
| - | |
| - | |
| - | |
| 39,184 | |
| 42,788 | |
| 39,184 | |
| 42,788 |
Europe | |
| - | |
| 12,681 | |
| 256,370 | |
| 173,335 | |
| - | |
| - | |
| 256,370 | |
| 186,016 |
Asia Pacific | |
| 38,074 | |
| 45,080 | |
| 4,643 | |
| 4,296 | |
| - | |
| - | |
| 42,717 | |
| 49,376 |
Total net sales | | $ | 257,527 | | $ | 273,581 | | $ | 372,040 | | $ | 250,440 | | $ | 39,184 | | $ | 42,788 | | $ | 668,751 | | $ | 566,809 |
2022:
Control Devices | Electronics | Stoneridge Brazil | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||
Net Sales: | ||||||||||||||||||||||||||||||||||||||||||||||||||
North America | $ | 154,426 | $ | 143,398 | $ | 104,887 | $ | 70,072 | $ | — | $ | — | $ | 259,313 | $ | 213,470 | ||||||||||||||||||||||||||||||||||
South America | — | — | — | — | 29,164 | 25,394 | 29,164 | 25,394 | ||||||||||||||||||||||||||||||||||||||||||
Europe | — | — | 186,418 | 175,363 | — | — | 186,418 | 175,363 | ||||||||||||||||||||||||||||||||||||||||||
Asia Pacific | 23,636 | 25,228 | 9,608 | 2,539 | — | — | 33,244 | 27,767 | ||||||||||||||||||||||||||||||||||||||||||
Total net sales | $ | 178,062 | $ | 168,626 | $ | 300,913 | $ | 247,974 | $ | 29,164 | $ | 25,394 | $ | 508,139 | $ | 441,994 |
11
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
| | | | | | |
| | September 30, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Raw materials | | $ | 123,052 | | $ | 107,034 |
Work-in-progress | | | 6,206 | | | 9,755 |
Finished goods | | | 21,446 | | | 21,326 |
Total inventories, net | | $ | 150,704 | | $ | 138,115 |
June 30, 2023 | December 31, 2022 | |||||||||||||
Raw materials | $ | 133,491 | $ | 121,983 | ||||||||||
Work-in-progress | 10,337 | 7,812 | ||||||||||||
Finished goods | 31,477 | 22,785 | ||||||||||||
Total inventories, net | $ | 175,305 | $ | 152,580 |
12
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(2022 by $0.10 per share. The Company recorded the item in thousands, exceptthe three-months ended December 31, 2022 which resulted in decreased income per share data, unless otherwise stated)
(Unaudited)
The Company elected to assess hedge effectiveness of the net investment hedges under the spot method. Accordingly, periodic changes in the fair value of the derivative instruments attributable to factors other than spot exchange rate variability were excluded from the measurement of hedge ineffectiveness and reported directly in earnings each reporting period. The change in fair value of these derivative instruments was recorded in cumulative translation adjustment, which is a component of accumulated other comprehensive loss in the condensed consolidated balance sheets.
The Company had no outstanding net investment hedges at June 30, 2023 or December 31, 2022.
$0.
13
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
The notional amounts and fair values of derivative instruments in the condensed consolidated balance sheets were as follows:
| | | | | | | | | | | | | | | | | | |
| | | | | Prepaid expenses | | Accrued expenses and | |||||||||||
| | Notional amounts (A) | | and other current assets | | other current liabilities | ||||||||||||
| | September 30, | | December 31, | | September 30, | | December 31, | | September 30, | | December 31, | ||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||
Derivatives designated as hedging instruments: | | | | | | | | | | | | | | | | | | |
Cash flow hedges: | | | | | | | | | | | | | | | | | | |
Forward currency contracts | | $ | 5,167 | | $ | 23,923 | | $ | 561 | | $ | 730 | | $ | - | | $ | - |
Interest rate swap | | $ | 50,000 | | $ | 50,000 | | $ | 576 | | $ | - | | $ | - | | $ | 503 |
Net investment hedges: | | | | | | | | | | | | | | | | | | |
Cross-currency swaps | | $ | - | | $ | 50,000 | | $ | - | | $ | 1,450 | | $ | - | | $ | - |
Notional amounts (A) | Prepaid expenses and other current assets | |||||||||||||||||||||||||||||||||||||
June 30, 2023 | December 31, 2022 | June 30, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||||||||||||||||||||
Forward currency contracts | $ | 7,862 | $ | — | $ | 365 | $ | — | ||||||||||||||||||||||||||||||
Interest rate swap | $ | — | $ | 50,000 | $ | — | $ | 294 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | |
| | | | | Gain (loss) reclassified from | |||||||
| | Gain (loss) recorded in other | | other comprehensive (loss) | ||||||||
| | comprehensive (loss) income | | income into net (loss) income (A) | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Derivatives designated as cash flow hedges: | | | | | | | | | | | | |
Forward currency contracts | | $ | 97 | | $ | (150) | | $ | 496 | | $ | 155 |
Interest rate swap | | $ | 150 | | $ | (29) | | $ | 100 | | $ | (165) |
Derivatives designated as net investment hedges: | | | | | | | | | | | | |
Cross-currency swaps | | $ | - | | $ | 573 | | $ | - | | $ | - |
Gain recorded in other comprehensive income (loss) | Gain (loss) reclassified from other comprehensive income (loss) into net loss (A) | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Derivatives designated as cash flow hedges: | |||||||||||||||||||||||
Forward currency contracts | $ | 416 | $ | 72 | $ | 51 | $ | 506 | |||||||||||||||
Interest rate swap | $ | — | $ | 286 | $ | — | $ | (80) | |||||||||||||||
Derivatives designated as net investment hedges: | |||||||||||||||||||||||
Cross-currency swaps | $ | — | $ | 1,641 | $ | — | $ | 3,598 |
(A) | Gains reclassified from other comprehensive income (loss) |
14
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
Gross amounts recorded for the cash flow and net investment hedges in other comprehensive income (loss) income and in net (loss) incomeloss for the ninesix months ended SeptemberJune 30 were as follows:
| | | | | | | | | | | | |
| | | | | Gain (loss) reclassified from | |||||||
| | Gain (loss) recorded in other | | other comprehensive (loss) | ||||||||
| | comprehensive (loss) income | | income into net (loss) income (A) | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Derivatives designated as cash flow hedges: | | | | | | | | | | | | |
Forward currency contracts | | $ | 1,084 | | $ | 154 | | $ | 1,253 | | $ | 457 |
Interest rate swap | | $ | 946 | | $ | (27) | | $ | (133) | | $ | (486) |
Derivatives designated as net investment hedges: | | | | | | | | | | | | |
Cross-currency swaps | | $ | 2,328 | | $ | 573 | | $ | 3,598 | | $ | - |
Gain (loss) recorded in other comprehensive income (loss) | Gain (loss) reclassified from other comprehensive income (loss) into net loss (A) | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Derivatives designated as cash flow hedges: | |||||||||||||||||||||||
Forward currency contracts | $ | 416 | $ | 987 | $ | 51 | $ | 757 | |||||||||||||||
Interest rate swap | $ | (4) | $ | 796 | $ | 290 | $ | (233) | |||||||||||||||
Derivatives designated as net investment hedges: | |||||||||||||||||||||||
Cross-currency swaps | $ | — | $ | 2,328 | $ | — | $ | 3,598 |
(A) | Gains reclassified from other comprehensive income (loss) |
For the nine months ended September 30, 2022, the total net gains on the foreign currency contract cash flow hedges of $561 are expected to be included in COGS and SG&A within the next 12 months. Of the total net gains on the Interest Rate Swap cash flow hedge, $576 of gains are expected to be included in interest expense, net within the next 12 months.
15
(Unaudited)
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | September 30, | | | December 31, |
| | | | | 2022 | | 2021 | ||||||||
| | | | | Fair values estimated using | | | | |||||||
| | | Fair | | Level 1 | | Level 2 | | Level 3 | | | Fair | |||
|
| value |
| inputs |
| inputs |
| inputs |
| value | |||||
Financial assets carried at fair value: | | | | | | | | | | | | | | | |
Forward currency contract | | $ | 561 | | $ | - | | $ | 561 | | $ | - | | $ | 730 |
Cross-currency swaps | | | - | | | - | | | - | | | - | | | 1,450 |
Interest rate swap | | | 576 | | | - | | | 576 | | | - | | | - |
Total financial assets carried at fair value | | $ | 1,137 | | $ | - | | $ | 1,137 | | $ | - | | $ | 2,180 |
| | | | | | | | | | | | | | | |
Financial liabilities carried at fair value: | | | | | | | | | | | | | | | |
Interest rate swap | | $ | - | | $ | - | | $ | - | | $ | - | | $ | 503 |
Earn-out consideration | | | - | | | - | | | - | | | - | | | 7,351 |
Total financial liabilities carried at fair value | | $ | - | | $ | - | | $ | - | | $ | - | | $ | 7,854 |
June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||
Fair values estimated using | |||||||||||||||||||||||||||||
Fair value | Level 1 inputs | Level 2 inputs | Level 3 inputs | Fair value | |||||||||||||||||||||||||
Financial assets carried at fair value: | |||||||||||||||||||||||||||||
Forward currency contracts | $ | 365 | $ | — | $ | 365 | $ | — | $ | — | |||||||||||||||||||
Interest rate swap | — | — | — | — | 294 | ||||||||||||||||||||||||
Total financial assets carried at fair value | $ | 365 | $ | — | $ | 365 | $ | — | $ | 294 | |||||||||||||||||||
| | | | | | |
| | Stoneridge Brazil | ||||
|
| 2022 |
| 2021 | ||
Balance at January 1 | | $ | 7,351 | | $ | 5,813 |
Change in fair value | | | - | | | 1,215 |
Foreign currency adjustments | | | 921 | | | 236 |
Earn-out consideration cash payment | | | (8,272) | | | - |
Balance at September 30 | | $ | - | | $ | 7,264 |
Stoneridge Brazil | |||||||||||
2022 | |||||||||||
Balance at January 1 | $ | 7,351 | |||||||||
Foreign currency adjustments | 921 | ||||||||||
Earn-out consideration cash payment | (8,272) | ||||||||||
Balance at June 30 | $ | — |
respectively.
2023.
16
(Unaudited)
| | | | | | | | | | |
| | September 30, | | December 31, | | Interest rates at | | | ||
|
| 2022 |
| 2021 |
| September 30, 2022 |
| Maturity | ||
Revolving Credit Facility | | | | | | | | | | |
Credit Facility | | $ | 165,695 | | $ | 163,957 | | 4.93% | | June 2024 |
| | | | | | | | | | |
Debt | | | | | | | | | | |
Sweden short-term credit line | | | 14 | | | 2,099 | | 4.25% | | October 2022 |
Suzhou short-term credit line | | | 2,812 | | | 3,149 | | 3.70% - 4.00% | | October 2022 - June 2023 |
Total debt | | | 2,826 | | | 5,248 | | | | |
Less: current portion | | | (2,826) | | | (5,248) | | | | |
Total long-term debt, net | | $ | - | | $ | - | | | | |
2022:
June 30, 2023 | December 31, 2022 | Interest rates at June 30, 2023 | Maturity | |||||||||||||||||||||||
Debt | ||||||||||||||||||||||||||
Revolving Credit Facility | $ | 171,597 | $ | 167,802 | 8.00 | % | June 2024 | |||||||||||||||||||
Suzhou short-term credit line | — | 1,450 | ||||||||||||||||||||||||
Total debt | 171,597 | 169,252 | ||||||||||||||||||||||||
Less: current portion | (171,597) | (1,450) | ||||||||||||||||||||||||
Total long-term debt, net | $ | — | $ | 167,802 |
Due to the expected impact of the COVID-19 pandemic on the Company’s end-markets and the resulting expected financial impacts to the Company, on June 26, 2020, the Company entered into a Waiver and Amendment No. 1 to the Fourth Amended and Restated Credit Agreement (“Amendment No. 1”). Amendment No. 1 provided for certain covenant relief and restrictions during the “Covenant Relief Period” (the period ending on the date that the Company delivers a compliance certificate for the quarter ending June 30, 2021 in form and substance satisfactory to the administrative agent). The Covenant Relief Period ended on August 14, 2021. During the Covenant Relief Period:
17
(Unaudited)
Amendment No. 1 changed the leverage based LIBOR pricing grid through the maturity date of the Credit Facility and also provides for a LIBOR floor of 50 basis points on outstanding borrowings excluding any Specified Hedge Borrowings (as defined) which remain subject to a LIBOR floor of 0 basis points. As of September 30, 2022, Specified Hedge Borrowings were $50,000.
The Company capitalized $1,086 of deferred financing costs as a result of entering into Amendment No. 1.
On December 17, 2021, the Company entered into Amendment No. 2 to the Fourth Amended and Restated Credit Agreement (“Amendment No. 2”). Amendment No. 2 implemented non-LIBOR interest reference rates for borrowings in euros and British pounds.
(Unaudited)
the maximum net leverage ratio was changed to 4.00 to 1.00 for the year ended December 31, 2021, suspended for the quarters ending March 31, 2022 through September 30, 2022 and could not exceed 4.75 to 1.00 for the quarter ended December 31, 2022 or 3.50 to 1.00 for the quarter ended March 31, 2023;
the maximum net leverage ratio was changed to 4.75 to 1.00 for the quarter ended March 31, 2023 and 4.25 to 1.00 for the quarter ended June 30, 2023;
18
(Unaudited)
$15,948.
(8) Leases
The Company, as lessor, entered into a lease with a third-party lessee effective July 1, 2020, for our Canton, Massachusetts facility. In conjunction with the Canton restructuring plan outlined in Note 12, the Company ceased operations at this facility in March 2020. As discussed in Note 16, the Company sold the Canton facility and assigned the lease to the buyer on June 17, 2021. The Company recognized lease income on a straight-line basis over the lease term until the time of the sale. The Company recognized operating and variable lease income from the lease in our condensed consolidated statements of operations of $602 and $199, respectively, for the nine months ended September 30, 2021.
19
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
| | | | | | | | |
| | Three months ended | | Nine months ended | ||||
| | September 30, | | September 30, | ||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
Basic weighted-average Common Shares outstanding | | 27,280,883 | | 27,147,150 | | 27,249,500 | | 27,100,484 |
Effect of dilutive shares | | 243,557 | | - | | - | | 331,034 |
Diluted weighted-average Common Shares outstanding | | 27,524,440 | | 27,147,150 | | 27,249,500 | | 27,431,518 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Basic weighted-average Common Shares outstanding | 27,451,623 | 27,268,938 | 27,400,490 | 27,233,808 | |||||||||||||||||||
Effect of dilutive shares | — | — | — | — | |||||||||||||||||||
Diluted weighted-average Common Shares outstanding | 27,451,623 | 27,268,938 | 27,400,490 | 27,233,808 |
| | | | | | | | | |
| | | Foreign | | | Unrealized | | | |
| | | currency | | | gain (loss) | | | |
|
| | translation |
| | on derivatives |
| Total | |
Balance at July 1, 2022 | | $ | (108,754) | | $ | 1,174 | | $ | (107,580) |
Other comprehensive (loss) income before reclassifications | | | (10,348) | | | 195 | | | (10,153) |
Amounts reclassified from accumulated other comprehensive loss | | | - | | | (471) | | | (471) |
Net other comprehensive loss, net of tax | | | (10,348) | | | (276) | | | (10,624) |
Balance at September 30, 2022 | | $ | (119,102) | | $ | 898 | | $ | (118,204) |
| | | | | | | | | |
Balance at July 1, 2021 | | $ | (92,401) | | $ | (583) | | $ | (92,984) |
Other comprehensive loss before reclassifications | | | (7,100) | | | (141) | | | (7,241) |
Amounts reclassified from accumulated other comprehensive loss | | | - | | | 8 | | | 8 |
Net other comprehensive loss, net of tax | | | (7,100) | | | (133) | | | (7,233) |
Balance at September 30, 2021 | | $ | (99,501) | | $ | (716) | | $ | (100,217) |
20
Foreign currency translation | Unrealized gain (loss) on derivatives | Total | |||||||||||||||
Balance at April 1, 2023 | $ | (99,302) | $ | — | $ | (99,302) | |||||||||||
Other comprehensive income before reclassifications | 2,992 | 328 | 3,320 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | (40) | (40) | ||||||||||||||
Net other comprehensive income, net of tax | 2,992 | 288 | 3,280 | ||||||||||||||
Balance at June 30, 2023 | $ | (96,310) | $ | 288 | $ | (96,022) | |||||||||||
Balance at April 1, 2022 | $ | (93,042) | $ | 1,227 | $ | (91,815) | |||||||||||
Other comprehensive (loss) income before reclassifications | (12,870) | 283 | (12,587) | ||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | (2,842) | (336) | (3,178) | ||||||||||||||
Net other comprehensive loss, net of tax | (15,712) | (53) | (15,765) | ||||||||||||||
Balance at June 30, 2022 | $ | (108,754) | $ | 1,174 | $ | (107,580) |
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
Changes in accumulated other comprehensive (loss) income for the ninesix months ended SeptemberJune 30, 20222023 and 20212022 were as follows:
| | | | | | | | | |
| | Foreign | | Unrealized | | | | ||
| | currency | | gain (loss) | | | | ||
|
| translation |
| on derivatives |
| Total | |||
Balance at January 1, 2022 | | $ | (97,203) | | $ | 179 | | $ | (97,024) |
Other comprehensive (loss) income before reclassifications | | | (19,057) | | | 1,604 | | | (17,453) |
Amounts reclassified from accumulated other comprehensive loss | | | (2,842) | | | (885) | | | (3,727) |
Net other comprehensive (loss) income, net of tax | | | (21,899) | | | 719 | | | (21,180) |
Balance at September 30, 2022 | | $ | (119,102) | | $ | 898 | | $ | (118,204) |
| | | | | | | | | |
Balance at January 1, 2021 | | $ | (88,795) | | $ | (840) | | $ | (89,635) |
Other comprehensive (loss) income before reclassifications | | | (10,706) | | | 100 | | | (10,606) |
Amounts reclassified from accumulated other comprehensive loss | | | - | | | 24 | | | 24 |
Net other comprehensive (loss) income, net of tax | | | (10,706) | | | 124 | | | (10,582) |
Balance at September 30, 2021 | | $ | (99,501) | | $ | (716) | | $ | (100,217) |
(11)
Foreign currency translation | Unrealized gain (loss) on derivatives | Total | |||||||||||||||
Balance at January 1, 2023 | $ | (103,374) | $ | 232 | $ | (103,142) | |||||||||||
Other comprehensive income before reclassifications | 7,064 | 325 | 7,389 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | (269) | (269) | ||||||||||||||
Net other comprehensive income, net of tax | 7,064 | 56 | 7,120 | ||||||||||||||
Balance at June 30, 2023 | $ | (96,310) | $ | 288 | $ | (96,022) | |||||||||||
Balance at January 1, 2022 | $ | (97,203) | $ | 179 | $ | (97,024) | |||||||||||
Other comprehensive (loss) income before reclassifications | (8,709) | 1,409 | (7,300) | ||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | (2,842) | (414) | (3,256) | ||||||||||||||
Net other comprehensive (loss) income, net of tax | (11,551) | 995 | (10,556) | ||||||||||||||
Balance at June 30, 2022 | $ | (108,754) | $ | 1,174 | $ | (107,580) |
21
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
On August 12, 2020, the Brazilian Administrative Counsel for Economic Defense (“CADE”) issued a ruling against Stoneridge Brazil for abuse of dominance and market foreclosure through its prior use of exclusivity provisions in agreements with its distributors. The CADE tribunal imposed a R$7,995 ($1,479)1,659) fine which is included in the reasonably possible contingencies noted above. The Company is challenging this ruling in Brazilian federal court to reverse this decision by the CADE tribunal.
| | | | | | |
Nine months ended September 30, |
| 2022 |
| 2021 | ||
Product warranty and recall at beginning of period | | $ | 9,846 | | $ | 12,691 |
Accruals for warranties established during period | | | 7,395 | | | 5,125 |
Aggregate changes in pre-existing liabilities due to claim developments | | | 1,158 | | | 49 |
Settlements made during the period | | | (5,762) | | | (7,990) |
Foreign currency translation | | | (934) | | | (317) |
Product warranty and recall at end of period | | $ | 11,703 | | $ | 9,558 |
Brazilian Indirect Tax
In 2019, the Company received judicial notification that the Superior Judicial Court of Brazil rendered a favorable decision on Stoneridge Brazil’s case granting the Company the right to recover, through offset of federal tax liabilities, amounts collected by the government from June 2010 to February 2017. As a result, the Company recorded a pre-tax benefit of $6,473 in the year ended December 31, 2019.
The Brazilian tax authorities have sought clarification before the Supreme Court of Brazil (in a leading case involving another taxpayer) of certain matters that could affect the rights of Brazilian taxpayers regarding these credits. The leading case was decided on May 13, 2021. The Company does not expect any impact to amounts previously recognized as a result of the Supreme Court decision.
(12)
Six months ended June 30, | 2023 | 2022 | ||||||||||||
Product warranty and recall reserve at beginning of period | $ | 13,477 | $ | 9,846 | ||||||||||
Accruals for warranties established during period | 7,636 | 5,951 | ||||||||||||
Aggregate changes in pre-existing liabilities due to claim developments | 327 | — | ||||||||||||
Settlements made during the period | (3,784) | (4,503) | ||||||||||||
Foreign currency translation | (196) | (479) | ||||||||||||
Product warranty and recall reserve at end of period | $ | 17,460 | $ | 10,815 |
On May 19, 2020, the Company committed to the strategic exit of its Control Devices particulate matter (“PM”) sensor product line. The decision to exit the PM sensor product line was made after consideration of the decline in the market outlook for diesel passenger vehicles, the current and expected profitability of the product line and the Company’s strategic focus on aligning resources with the greatest opportunities. In conjunction with the strategic exit of the PM sensor product line, the Company entered into an asset purchase agreement related to the sale of the PM sensor product line during the first quarter of 2021. Refer to Note 16 of the condensed consolidated financial statements for additional details regarding the sale.
22
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
As a result of the PM sensor restructuring actions, the Company recognized expense of $675 for the three months ended September 30, 2021 for non-cash fixed asset charges, including impairment and accelerated depreciation of PM sensor related fixed assets, employee severance and termination costs and other related costs. For the three months ended September 30, 2021 restructuring related costs of $605, $(31) and $101 were recognized in COGS, SG&A and D&D, respectively. The Company recognized expense of $2,329 for the nine months ended September 30, 2021 for non-cash fixed asset charges, including impairment and accelerated depreciation of PM sensor related fixed assets, employee severance and termination costs and other related costs. For the nine months ended September 30, 2021 restructuring related costs of $1,505, $642 and $182 were recognized in COGS, SG&A and D&D, respectively. The only remaining costs relate to potential commercial settlements and legal fees which we continue to negotiate. The estimated range of additional cost related to these settlements and fees is up to $4,200.
The expenses and liabilities for the exit of the PM sensor line that relate to the Control Devices reportable segment include the following:
| | | | | | | | | | | | | | | |
| | Accrual as of | | 2022 Charge | | | Utilization | | Accrual as of | ||||||
| | January 1, 2022 | | to Expense | | Cash | | Non-Cash | | September 30, 2022 | |||||
Fixed asset impairment and | | $ | - | | $ | - | | $ | - | | $ | - | | $ | - |
Employee termination benefits | | | 35 | | | - | | | (35) | | | - | | | - |
Other related costs | | | - | | | - | | | - | | | - | | | - |
Total | | $ | 35 | | $ | - | | $ | (35) | | $ | - | | $ | - |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | Accrual as of | | 2021 Charge | | | Utilization | | Accrual as of | ||||||
| | January 1, 2021 | | to Expense | | Cash | | Non-Cash | | September 30, 2021 | |||||
Fixed asset impairment and | | $ | - | | $ | 188 | | $ | - | | $ | (188) | | $ | - |
Employee termination benefits | | | - | | | 139 | | | (139) | | | - | | | - |
Other related costs | | | - | | | 2,002 | | | (2,002) | | | - | | | - |
Total | | $ | - | | $ | 2,329 | | $ | (2,141) | | $ | (188) | | $ | - |
| | | | | | | | | | | | | | | |
On January 10, 2019, the Company committed to a restructuring plan that resulted in the closure of the Canton, Massachusetts facility (“Canton Facility”) on March 31, 2020 and the consolidation of manufacturing operations at that site into other Company locations (“Canton Restructuring”). The costs for the Canton Restructuring included employee severance and termination costs, contract terminations costs, professional fees and other related costs such as moving and set-up costs for equipment and costs to restore the engineering function previously located at the Canton facility.
As a result of the Canton Restructuring actions, the Company recognized expense of $13 for the nine months ended September 30, 2021 for employee termination costs and other restructuring related costs. For the nine months ended September 30, 2021 other restructuring related costs of $13 were recognized in D&D in the condensed consolidated statements of operations. We do not expect to incur additional costs related to the Canton Restructuring. Refer to Note 8 and Note 16 to the condensed consolidated financial statements for additional details regarding the third-party lease and sale, respectively,
23
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
The expensesliabilities associated with for the Canton Restructuring that relate to the Control Devices reportable segment include the following:
| | | | | | | | | | | | | | | |
| | Accrual as of | | 2022 Charge | | | Utilization | | Accrual as of | ||||||
| | January 1, 2022 | | to Expense | | Cash | | Non-Cash | | September 30, 2022 | |||||
Employee termination benefits | | $ | 93 | | $ | - | | $ | (93) | | $ | - | | $ | - |
Other related costs | | | - | | | - | | | - | | | - | | | - |
Total | | $ | 93 | | $ | - | | $ | (93) | | $ | - | | $ | - |
| | | | | | | | | | | | | | | |
| | Accrual as of | | 2021 Charge | | | Utilization | | Accrual as of | ||||||
| | January 1, 2021 | | to Expense | | Cash | | Non-Cash | | September 30, 2021 | |||||
Employee termination benefits | | $ | 165 | | $ | - | | $ | (25) | | $ | - | | $ | 140 |
Other related costs | | | - | | | 13 | | | (13) | | | - | | | - |
Total | | $ | 165 | | $ | 13 | | $ | (38) | | $ | - | | $ | 140 |
| | | | | | | | | | | | | | | |
In the fourth quarter of 2018, the Company undertook restructuring actions for the Electronics segment affecting the European Aftermarket business and China operations. In the second quarter of 2020, the Company finalized plans to move its European Aftermarket sales activities in Dundee, Scotland to a new location which resulted in incurring contract termination costs as well as employee severance and termination costs. In addition, the Company announced a restructuring program to transfer the European production of its’ controls product line to China. As a result of these actions, the Company recognized expense of $36 for the three months ended September 30, 2021 for employee severance and termination costs and other related costs. Electronics segment restructuring costs recognized in COGS and SG&A in the condensed consolidated statement of operations for the three months ended September 30, 2021 were $34 and $2, respectively. The Company recognized expense of $256 for the nine months ended September 30, 2021 for employee severance and termination costs and other related costs. Electronics segment restructuring costs recognized in COGS, SG&A and D&D in the condensed consolidated statement of operations for the nine months ended September 30, 2021 were $37, $176 and $43, respectively. The Company does not expect to incur additional costs related to these Electronics segment restructuring actions.
The expenses for the restructuring activities that relate to the Electronics reportable segment include the following:
| | | | | | | | | | | | | | | |
| | Accrual as of | | 2021 Charge to | | | Utilization | | Accrual as of | ||||||
| | January 1, 2021 | | Expense | | Cash | | Non-Cash | | September 30, 2021 | |||||
Employee termination benefits | | $ | 227 | | $ | 50 | | $ | (212) | | $ | - | | $ | 65 |
Other related costs | | | - | | | 206 | | | (206) | | | - | | | - |
Total | | $ | 227 | | $ | 256 | | $ | (418) | | $ | - | | $ | 65 |
| | | | | | | | | | | | | | | |
Accrual as of January 1, 2022 | 2022 Charge to Expense | Utilization | Accrual as of June 30, 2022 | ||||||||||||||||||||||||||
Cash | Non-Cash | ||||||||||||||||||||||||||||
Employee termination benefits | $ | 93 | $ | — | $ | (93) | $ | — | $ | — | |||||||||||||||||||
Total | $ | 93 | $ | — | $ | (93) | $ | — | $ | — |
Realignment expense for the three months ended June 30, 2023 was primarily related to the centralization of the product line management and sales functions.
| | | | | | | | | | | | |
| | | Three months ended | | | Nine months ended | ||||||
| | | September 30, | | | September 30, | ||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Control Devices (A) | | $ | - | | $ | - | | $ | - | | $ | 192 |
Electronics (B) | | | - | | | (16) | | | - | | | (3) |
Stoneridge Brazil (C) | | | 64 | | | - | | | 98 | | | 59 |
Unallocated Corporate (D) | | | 190 | | | 1,096 | | | 190 | | | 1,138 |
Total business realignment charges | | $ | 254 | | $ | 1,080 | | $ | 288 | | $ | 1,386 |
| | | | | | | | | | | | |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Control Devices (A) | $ | 379 | $ | — | $ | 379 | $ | — | |||||||||||||||
Electronics (B) | 1,347 | — | 1,656 | — | |||||||||||||||||||
Stoneridge Brazil (C) | — | — | — | 34 | |||||||||||||||||||
Unallocated Corporate (D) | 184 | — | 1,137 | — | |||||||||||||||||||
Total business realignment charges | $ | 1,910 | $ | — | $ | 3,172 | $ | 34 |
(A) | Severance costs for the |
(B) | Severance costs for the three months ended June 30, 2023 related to COGS and SG&A were $82 and $1,265, respectively. Severance costs for the six months ended June 30, 2023 related to COGS and SG&A were $257 and $1,399, respectively. |
(C) | Severance costs for the six months ended June 30, 2022 related to SG&A were |
24
(Unaudited)
Business realignment charges incurred, classified by statement of operations line item were as follows:
| | | | | | | | | | | | |
| | | Three months ended | | | Nine months ended | ||||||
| | | September 30, | | | September 30, | ||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Cost of goods sold | | $ | - | | $ | 1 | | $ | - | | $ | 8 |
Selling, general and administrative | | | 254 | | | 1,105 | | | 288 | | | 1,369 |
Design and development | | | - | | | (26) | | | - | | | 9 |
Total business realignment charges | | $ | 254 | | $ | 1,080 | | $ | 288 | | $ | 1,386 |
(13)
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Cost of goods sold | $ | 451 | $ | — | $ | 626 | $ | — | |||||||||||||||
Selling, general and administrative | 1,444 | — | 2,531 | 34 | |||||||||||||||||||
Design and development | 15 | — | 15 | — | |||||||||||||||||||
Total business realignment charges | $ | 1,910 | $ | — | $ | 3,172 | $ | 34 |
For the three months ended September 30, 2021, income tax expense of $526 was attributable to an update to the estimated tax impact on the gain on the sale of the Canton facility, the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of (5.4)% is less than the statutory rate primarily due to the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions as well as an update to the gain on the sale of the Canton facility.
For the nine months ended September 30, 2022, income tax expense of $2,895$1,487 was attributable to the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of (25.4)(98.8)% varies from the statutory rate primarily due to U.S. taxes on foreign earnings and non-deductible expenses offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions.
jurisdictions and tax credits and incentives.
25
(Unaudited)
26
(Unaudited)
| | | | | | | | | | | | |
| | Three months ended | | Nine months ended | ||||||||
| | September 30, | | September 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Net Sales: | | | | | | | | | | | | |
Control Devices | | $ | 88,901 | | $ | 87,618 | | $ | 257,527 | | $ | 273,581 |
Inter-segment sales | | | 474 | | | 414 | | | 1,855 | | | 2,768 |
Control Devices net sales | | | 89,375 | | | 88,032 | | | 259,382 | | | 276,349 |
Electronics | | | 124,066 | | | 77,585 | | | 372,040 | | | 250,440 |
Inter-segment sales | | | 5,948 | | | 6,319 | | | 21,027 | | | 19,527 |
Electronics net sales | | | 130,014 | | | 83,904 | | | 393,067 | | | 269,967 |
Stoneridge Brazil | | | 13,790 | | | 16,477 | | | 39,184 | | | 42,788 |
Inter-segment sales | | | 22 | | | - | | | 22 | | | - |
Stoneridge Brazil net sales | | | 13,812 | | | 16,477 | | | 39,206 | | | 42,788 |
Eliminations | | | (6,444) | | | (6,733) | | | (22,904) | | | (22,295) |
Total net sales | | $ | 226,757 | | $ | 181,680 | | $ | 668,751 | | $ | 566,809 |
Operating (Loss) Income: | | | | | | | | | | | | |
Control Devices | | $ | 7,522 | | $ | 2,899 | | $ | 18,416 | | $ | 50,129 |
Electronics | | | 5,416 | | | (5,113) | | | 180 | | | (7,793) |
Stoneridge Brazil | | | 908 | | | 909 | | | 2,370 | | | 112 |
Unallocated Corporate (A) | | | (7,983) | | | (7,623) | | | (24,015) | | | (22,633) |
Total operating (loss) income | | $ | 5,863 | | $ | (8,928) | | $ | (3,049) | | $ | 19,815 |
Depreciation and Amortization: | | | | | | | | | | | | |
Control Devices | | $ | 3,325 | | $ | 3,840 | | $ | 10,291 | | $ | 11,777 |
Electronics | | | 3,372 | | | 3,102 | | | 10,495 | | | 8,970 |
Stoneridge Brazil | | | 968 | | | 737 | | | 2,991 | | | 2,783 |
Unallocated Corporate | | | 589 | | | 532 | | | 1,717 | | | 1,587 |
Total depreciation and amortization (B) | | $ | 8,254 | | $ | 8,211 | | $ | 25,494 | | $ | 25,117 |
Interest Expense (Income), net: | | | | | | | | | | | | |
Control Devices | | $ | 30 | | $ | 122 | | $ | 73 | | $ | 362 |
Electronics | | | 279 | | | 228 | | | 580 | | | 523 |
Stoneridge Brazil | | | (298) | | | (101) | | | (989) | | | (198) |
Unallocated Corporate | | | 1,834 | | | 1,198 | | | 5,184 | | | 4,386 |
Total interest expense, net | | $ | 1,845 | | $ | 1,447 | | $ | 4,848 | | $ | 5,073 |
Capital Expenditures: | | | | | | | | | | | | |
Control Devices | | $ | 3,536 | | $ | 2,305 | | $ | 9,297 | | $ | 7,046 |
Electronics | | | 2,293 | | | 3,353 | | | 7,052 | | | 7,264 |
Stoneridge Brazil | | | 757 | | | 744 | | | 2,684 | | | 2,163 |
Unallocated Corporate(C) | | | (52) | | | 249 | | | 649 | | | 947 |
Total capital expenditures | | $ | 6,534 | | $ | 6,651 | | $ | 19,682 | | $ | 17,420 |
| | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | September 30, | | December 31, | | ||
| | | | | | |
| 2022 |
| 2021 | | ||
Total Assets: | | | | | | | | | | | | | |
Control Devices | | | | | | | | $ | 175,365 | | $ | 181,968 | |
Electronics | | | | | | | | | 347,694 | | | 338,080 | |
Stoneridge Brazil | | | | | | | | | 60,907 | | | 59,100 | |
Corporate (C) | | | | | | | | | 419,709 | | | 438,175 | |
Eliminations | | | | | | | | | (370,619) | | | (351,924) | |
Total assets | | | | | | | | $ | 633,056 | | $ | 665,399 | |
27
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Net Sales: | |||||||||||||||||||||||
Control Devices | $ | 92,120 | $ | 84,566 | $ | 178,062 | $ | 168,626 | |||||||||||||||
Inter-segment sales | 970 | 451 | 1,704 | 1,381 | |||||||||||||||||||
Control Devices net sales | 93,090 | 85,017 | 179,766 | 170,007 | |||||||||||||||||||
Electronics | 159,786 | 123,021 | 300,913 | 247,974 | |||||||||||||||||||
Inter-segment sales | 8,491 | 7,368 | 17,007 | 15,079 | |||||||||||||||||||
Electronics net sales | 168,277 | 130,389 | 317,920 | 263,053 | |||||||||||||||||||
Stoneridge Brazil | 14,908 | 13,349 | 29,164 | 25,394 | |||||||||||||||||||
Inter-segment sales | — | — | — | — | |||||||||||||||||||
Stoneridge Brazil net sales | 14,908 | 13,349 | 29,164 | 25,394 | |||||||||||||||||||
Eliminations | (9,461) | (7,819) | (18,711) | (16,460) | |||||||||||||||||||
Total net sales | $ | 266,814 | $ | 220,936 | $ | 508,139 | $ | 441,994 | |||||||||||||||
Operating Income (Loss): | |||||||||||||||||||||||
Control Devices | $ | 5,074 | $ | 4,118 | $ | 7,161 | $ | 10,894 | |||||||||||||||
Electronics | 7,444 | (2,524) | 8,844 | (5,236) | |||||||||||||||||||
Stoneridge Brazil | 899 | 970 | 2,242 | 1,462 | |||||||||||||||||||
Unallocated Corporate (A) | (9,086) | (8,492) | (17,945) | (16,032) | |||||||||||||||||||
Total operating income (loss) | $ | 4,331 | $ | (5,928) | $ | 302 | $ | (8,912) | |||||||||||||||
Depreciation and Amortization: | |||||||||||||||||||||||
Control Devices | $ | 3,099 | $ | 3,405 | $ | 6,273 | $ | 6,966 | |||||||||||||||
Electronics | 3,503 | 3,530 | 6,967 | 7,123 | |||||||||||||||||||
Stoneridge Brazil | 1,201 | 1,032 | 2,286 | 2,023 | |||||||||||||||||||
Unallocated Corporate | 605 | 567 | 1,207 | 1,128 | |||||||||||||||||||
Total depreciation and amortization (B) | $ | 8,408 | $ | 8,534 | $ | 16,733 | $ | 17,240 | |||||||||||||||
Interest Expense (Income), net: | |||||||||||||||||||||||
Control Devices | $ | 65 | $ | 18 | $ | 83 | $ | 43 | |||||||||||||||
Electronics | 511 | 228 | 996 | 301 | |||||||||||||||||||
Stoneridge Brazil | (319) | (533) | (589) | (691) | |||||||||||||||||||
Unallocated Corporate | 2,863 | 1,504 | 5,376 | 3,350 | |||||||||||||||||||
Total interest expense, net | $ | 3,120 | $ | 1,217 | $ | 5,866 | $ | 3,003 | |||||||||||||||
Capital Expenditures: | |||||||||||||||||||||||
Control Devices | $ | 2,019 | $ | 1,916 | $ | 3,975 | $ | 5,761 | |||||||||||||||
Electronics | 2,334 | 1,926 | 8,541 | 4,759 | |||||||||||||||||||
Stoneridge Brazil | 782 | 1,258 | 1,418 | 1,927 | |||||||||||||||||||
Unallocated Corporate(C) | 217 | 680 | 329 | 701 | |||||||||||||||||||
Total capital expenditures | $ | 5,352 | $ | 5,780 | $ | 14,263 | $ | 13,148 |
(Unaudited)
June 30, 2023 | December 31, 2022 | ||||||||||
Total Assets: | |||||||||||
Control Devices | $ | 173,580 | $ | 174,535 | |||||||
Electronics | 396,649 | 369,232 | |||||||||
Stoneridge Brazil | 67,173 | 60,861 | |||||||||
Corporate (C) | 418,852 | 419,469 | |||||||||
Eliminations | (370,757) | (371,992) | |||||||||
Total assets | $ | 685,497 | $ | 652,105 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Net Sales: | |||||||||||||||||||||||
North America | $ | 135,590 | $ | 109,642 | $ | 259,313 | $ | 213,470 | |||||||||||||||
South America | 14,908 | 13,349 | 29,164 | 25,394 | |||||||||||||||||||
Europe and Other | 116,316 | 97,945 | 219,662 | 203,130 | |||||||||||||||||||
Total net sales | $ | 266,814 | $ | 220,936 | $ | 508,139 | $ | 441,994 |
June 30, 2023 | December 31, 2022 | ||||||||||
Long-term Assets: | |||||||||||
North America | $ | 92,604 | $ | 92,149 | |||||||
South America | 33,850 | 31,796 | |||||||||
Europe and Other | 120,460 | 118,609 | |||||||||
Total long-term assets | $ | 246,914 | $ | 242,554 |
| | | | | | | | | | | | |
| | Three months ended | | Nine months ended | ||||||||
| | September 30, | | September 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Net Sales: | | | | | | | | | | | | |
North America | | $ | 117,010 | | $ | 95,395 | | $ | 330,480 | | $ | 288,629 |
South America | | | 13,790 | | | 16,477 | | | 39,184 | | | 42,788 |
Europe and Other | | | 95,957 | | | 69,808 | | | 299,087 | | | 235,392 |
Total net sales | | $ | 226,757 | | $ | 181,680 | | $ | 668,751 | | $ | 566,809 |
Unallocated Corporate expenses include, among other items, accounting/finance, human resources, information technology and legal costs as well as share-based compensation.
| | | | | | | | | | | | | |
| | | | | | | | September 30, | | December 31, | | ||
| | | | | | |
| 2022 |
| 2021 | | ||
Long-term Assets: | | | | | | | | | | | | | |
North America | | | | | | | | $ | 92,722 | | $ | 91,039 | |
South America | | | | | | | | | 31,106 | | | 30,272 | |
Europe and Other | | | | | | | | | 110,697 | | | 133,264 | |
Total long-term assets | | | | | | | | $ | 234,525 | | $ | 254,575 | |
These amounts represent depreciation and amortization on property, plant and |
(15) Investments
Minda Stoneridge Instruments Ltd.
The Company had a 49% equity interest in Minda Stoneridge Instruments Ltd. (“MSIL”), a company based in India that manufactures electronics, instrumentation equipment and sensorscertain intangible assets.
subsidiaries.
28
(Unaudited)
(Unaudited)
(16) Disposals
Disposal of Particulate Matter Sensor Business
On March 8, 2021, the Company entered into an Asset Purchase Agreement (the “APA”) by and among the Company, the Company’s wholly owned subsidiary, Stoneridge Electronics AS, as the Sellers, and Standard Motor Products, Inc. (“SMP”) and SMP Poland SP Z O.O., as the Buyers. Pursuant to the APA the Company agreed to sell to the Buyers the Company’s assets located in Lexington, Ohio and Tallinn, Estonia related to the manufacturing of particulate matter sensor products and related service part operations (together, the “PM sensor business”). In the past, the Company has sometimes referred to the PM sensor assets as the Company’s soot sensing business. The Buyers did not acquire any of the Company’s locations or employees. The purchase price for the sale of the PM sensor assets was $4,000 (subject to a post-closing inventory adjustment which was a payment to SMP of $1,133) plus the assumption of certain liabilities. The purchase price was allocated among PM sensor product lines, Gen 1 and Gen 2 as defined under the APA. The purchase price allocated to Gen 1 fixed assets and inventory and Gen 2 fixed assets was $3,214 and $786, respectively. The sale of the Gen 2 assets occurred during November 2021, upon completion of the Company’s supply commitments to certain customers. The Company and SMP also entered into certain ancillary agreements, including a contract manufacturing agreement, a transitional services agreement, and a supply agreement, pursuant to which the Company provided and was compensated for certain manufacturing, transitional, administrative and support services to SMP on a short-term basis.
On March 8, 2021 the Company’s Control Devices segment recognized net sales and cost of goods sold of $971 and $898, respectively, for the one-time sale of Gen 1 inventory and a gain on disposal of $740 for the sale of Gen 1 fixed assets less transaction costs of $60 within SG&A during the three months ended March 31, 2021.
Pursuant to the contract manufacturing agreement, the Company produced and sold PM sensor Gen 1 finished goods inventory to SMP for net sales of $3,228 in the three months ended September 30, 2021. In addition, the Company received $228 for services provided pursuant to the transition services agreement which were recognized as a reduction in SG&A for the three months ended September 30, 2021. Pursuant to the contract manufacturing agreement, the Company produced and sold PM sensor Gen 1 finished goods inventory to SMP for net sales of $6,298 in the nine months ended September 30, 2021. The Company received $82 and $293 for the three and nine months ended September 30, 2022, respectively, and $564 for the nine months ended September 30, 2021, for services provided pursuant to the transition services agreement which were recognized as a reduction in SG&A.
PM sensor Gen 1 net sales to SMP pursuant to the contract manufacturing agreement were $3,228 and operating income was $302 for the three months ended September 30, 2021. PM sensor Gen 1 net sales, including sales of $6,298 to SMP pursuant to the contract manufacturing agreement and the one time sale of Gen 1 finished goods inventory of $971, and operating income were $9,536 and $1,168, respectively, for the nine months ended September 30, 2021.
29
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
Sale of Canton Facility
On May 7, 2021, the Company, entered into a Real Estate Purchase and Sale Agreement (the “Agreement”) with Sun Life Assurance Company of Canada, a Canadian corporation (the “Buyer”), to sell the Canton Facility for $38,200 (subject to adjustment pursuant to the Agreement).
On June 17, 2021, pursuant to the Agreement, as amended after May 7, 2021, the Company closed the sale of the Canton Facility to the Buyer for an adjusted purchase price of $37,900. The Company recognized in the Control Devices segment, net proceeds of $35,167 and a gain, net of direct selling costs, of $30,718.
30
Global Market Conditions
The ongoing supply chain disruptions, primarily related to semiconductor shortages, and the continued impacts of the coronavirus pandemic (“COVID-19”), have had a negative impact on the global economy since the first quarter of 2020. In addition, the global economy more recently has been negatively affected by geopolitical conflicts, primarily related to the Russia-Ukraine war, beginning in the first quarter of 2022. These situations have disrupted, and likely will continue to disrupt, the global vehicle industry and customer sales, production volumes and purchases of automotive, commercial, off-highway and agricultural vehicles by end-consumers.
The adverse effects of the supply chain disruptions, geopolitical conflicts and COVID-19 have resulted in higher material cost inflation, delays in procuring raw materials and component parts, especially electronic components, production volume uncertainty and volatile currency markets. We are working closely with our suppliers and customers to minimize any potential adverse impacts, and we continue to closely monitor the availability of semiconductor microchips and other component parts and raw materials, customer vehicle production schedules and any other supply chain inefficiencies that may arise, due to these or any other issues. During the third quarter of 2022, the Company recognized $12.8 million of cost recoveries related to spot buys of materials purchased from electronic component brokers for our customers and $7.4 million of negotiated price increases to offset material cost inflation.
In the third quarter of 2022, vehicle volumes began to increase in our key served markets as supply chain disruptions moderated. These volumes are expected to continue to improve in the fourth quarter of 2022 due to a combination of higher consumer demand and historically low OEM inventory levels. Although ongoing supply chain disruptions including semiconductor shortages have moderated, we expect that these factors will continue to negatively affect vehicle production volumes. The magnitude of the adverse impact on our financial condition, results of operations and cash flows depends on the evolution of the semiconductor supply shortage, vehicle production schedules, supply chain impacts, material cost inflation and adverse fluctuations in foreign currencies.
31
ThirdSecond Quarter Overview
schedule volatility.
2023.
segment.
contribution from higher sales slightly offset by higher D&D spending.
gross margin offset by higher D&D spending caused by lower customer reimbursements.
compensation
due to achievement of financial targets, and unfavorable net adjustments for Brazilian indirect tax credits.32
At SeptemberJune 30, 20222023 and December 31, 2021,2022, we had cash and cash equivalents balances of $32.3$34.7 million and $85.5$54.8 million, respectively, and we had $165.7$171.6 million and $164.0$167.8 million, respectively, in borrowings outstanding on theour Credit Facility. The 20222023 decrease in cash and cash equivalents was mostly due to capital expenditures for new product launches and relatively higher working capital to support higher working capital levels, specifically inventory as a result of supply chain disruptionssales and expectations for increased production and accounts receivable from higher sales levels, capital expenditures to support product launches and the payment of the Stoneridge Brazil earn-out.
levels.
Beginning in the first quarter of 2020, COVID-19 caused worldwide adverse economic conditionsplatforms and uncertainty in our served markets. continued focus on safety-based products.
grow.
financial performance.
In 2021 and continuing throughout 2022,first half of 2023, our gross D&D spend increased to support near term launches of awarded business in both our Electronics and Control Devices segments. In the second half of 2023, we expect our engineering expense and Electronics segments.customer reimbursements to return to more normalized levels. We expect that our D&D spending will stabilize as we continue to align our global engineering capabilities in order to develop advanced technologies and systems within our portfolio of products and recognize increased levelsproducts.
33
Beginning in 2021, global transportation vehicle production was impacted by supply chain disruptions, including semiconductor shortages, primarily affecting our commercial vehicle and automotive end-markets. Based on the current market conditions, we expect continued impacts on production in 2022. We expect incremental costs related to supply chain disruptionshigher interest expense in 2023 driven by higher benchmark rates on our Credit Facility.
jurisdictional mix of earnings. We continued to effectively offset a significant portion of incremental materialmonitor these factors and supply chain related costs through pricing and supply chain actions resulting in cost pass-throughs and the recovery of both current and historical costs in the quarter. While incremental material costs have started to moderate, we expect material cost inflation to persist for the remainder of the year and into 2023. We will continue to evaluate macroeconomic conditions and expect ongoing discussions with our customers regarding price increases and other cost recovery actions to help continue to improve our margin performance.
As a result of these supply chain disruptions and production schedule volatilities, our working capital balances, specifically inventory, have increased significantly compared to historical levels. We continue to support initiatives to reduce on hand inventory by refining our procurement process which we expect will improve liquidity.
Throughout 2022, we expectadjust our effective tax rate to remain elevated primarily due to the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions.
accordingly.
On November 2, 2021, the Company entered into a Share Purchase Agreement (the “SPA”) with Minda Corporation Limited (“Minda”), as the buyer, and MSIL. Pursuant to the SPA the Company agreed to sell to Minda the Company’s minority interest in MSIL for approximately $21.5 million equivalent Indian Rupee which was payable in U.S. dollars at closing. On December 30, 2021, pursuant to the SPA, the Company closed the sale of MSIL to Minda for $21.6 million. The Company recognized net proceeds of $21.0 million and a gain, net of direct selling costs, of $1.8 million.
On March 8, 2021, the Company entered into an Asset Purchase Agreement (the “APA”) by and among the Company, the Company’s wholly owned subsidiary, Stoneridge Electronics AS, as the Sellers, and Standard Motor Products, Inc. (“SMP”) and SMP Poland SP Z O.O., as the Buyers. Pursuant to the APA the Company agreed to sell to the Buyers the Company’s assets located in Lexington, Ohio and Tallinn, Estonia related to the manufacturing of particulate matter sensor products and related service part operations (together, the “PM sensor business”). In the past, the Company has sometimes referred to the PM sensor assets as the Company’s soot sensing business. The Buyers did not acquire any of the Company’s locations or employees. The purchase price for the sale of the PM sensor assets was $4.0 million (subject to a post-closing inventory adjustment which was a payment to SMP of $1.1 million) plus the assumption of certain liabilities. The purchase price was allocated among PM sensor product lines, Gen 1 and Gen 2 as defined under the APA. The purchase price allocated to Gen 1 fixed assets and inventory and Gen 2 fixed assets was $3.2 million and $0.8 million, respectively. The sale of the Gen 2 assets occurred during November 2021, upon completion of the Company’s supply commitments to certain customers. The Company and SMP also entered into certain ancillary agreements, including a contract manufacturing agreement, a transitional services agreement, and a supply agreement, pursuant to which the Company will provide and be compensated for certain manufacturing, transitional, administrative and support services to SMP on a short-term basis.
34
On May 19, 2020, the Company committed to the strategic exit of its Control Devices particulate matter sensor product line (“PM Sensor Exit”). The decision to exit the PM sensor product line was made after the consideration of the decline in the market outlook for diesel passenger vehicles, the current and expected profitability of the product line and the Company’s strategic focus on aligning resources with the greatest opportunities. The costs for the PM Sensor Exit included employee severance and termination costs, contract termination costs, professional fees and other related costs such as potential commercial and supplier settlements. Non-cash charges included impairment of fixed assets and accelerated depreciation associated with PM sensor production. We did not recognize any expense as a result of these actions during the three months ended September 30, 2022 and we recognized $0.7 million of expense as a result of this initiative during the three months ended September 30, 2021. The only remaining costs relate to potential commercial settlements and legal fees which we continue to negotiate. The estimated additional cost related to these settlements and fees is up to $4.2 million.
We regularly evaluate the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto in order to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. As a consequence of these actions, we incur severance and resignation related costs whichthat we refer to as business realignment charges. Business realignment costs of $0.3$1.9 million and $1.1$0.0 million were incurred induring the three months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively. Business realignment costs of $0.3 million and $1.4 million were incurred in the nine months ended September 30, 2022 and 2021, respectively.
We are being adversely affected by increased material costs associated with both supply chain disruptions, including spot purchases of electronic components, and overall inflation. In response to these material cost increases we have and continue to negotiate price increases with our customers and lowering certain controllable costs where feasible. However, if we are unable to effectively offset material price increases in the future, our results of operations will be further adversely affected.
2022
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | Dollar | |
| | | | | | | | | | | | | increase / | |
Three months ended September 30, |
| 2022 |
| 2021 |
| (decrease) | ||||||||
Net sales | | $ | 226,757 |
| | 100.0 | % | $ | 181,680 |
| 100.0 | % | $ | 45,077 |
Costs and expenses: | | | | | | | | | | | | | | |
Cost of goods sold | | | 177,317 | | | 78.2 | | | 145,680 | | 80.2 | | | 31,637 |
Selling, general and administrative | | | 27,444 | | | 12.1 | | | 28,481 | | 15.7 | | | (1,037) |
Design and development | | | 16,133 | | | 7.1 | | | 16,447 | | 9.1 | | | (314) |
Operating income (loss) | | | 5,863 | | | 2.6 | | | (8,928) | | (5.0) | | | 14,791 |
Interest expense, net | | | 1,845 | | | 0.8 | | | 1,447 | | 0.8 | | | 398 |
Equity in earnings of investee | | | (34) | | | - | | | (584) | | (0.2) | | | 550 |
Other expense, net | | | 2,332 | | | 1.0 | | | 41 | | - | | | 2,291 |
Income (loss) before income taxes | | | 1,720 | | | 0.8 | | | (9,832) | | (5.6) | | | 11,552 |
Provision for income taxes | | | 989 | | | 0.4 | | | 526 | | 0.3 | | | 463 |
Net income (loss) | | $ | 731 | | | 0.4 | % | $ | (10,358) | | (5.9) | % | $ | 11,089 |
Three months ended June 30, | 2023 | 2022 | Dollar increase (decrease) | |||||||||||||||||||||||||||||
Net sales | $ | 266,814 | 100.0 | % | $ | 220,936 | 100.0 | % | $ | 45,878 | ||||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||
Cost of goods sold | 206,326 | 77.3 | 182,372 | 82.5 | 23,954 | |||||||||||||||||||||||||||
Selling, general and administrative | 33,491 | 12.6 | 28,938 | 13.1 | 4,553 | |||||||||||||||||||||||||||
Design and development | 22,666 | 8.5 | 15,554 | 7.0 | 7,112 | |||||||||||||||||||||||||||
Operating income (loss) | 4,331 | 1.6 | (5,928) | (2.6) | 10,259 | |||||||||||||||||||||||||||
Interest expense, net | 3,120 | 1.2 | 1,217 | 0.6 | 1,903 | |||||||||||||||||||||||||||
Equity in loss of investee | 329 | 0.1 | 377 | 0.3 | (48) | |||||||||||||||||||||||||||
Other expense, net | 2,387 | 0.9 | (596) | (0.3) | 2,983 | |||||||||||||||||||||||||||
Loss before income taxes | (1,505) | (0.6) | (6,926) | (3.2) | 5,421 | |||||||||||||||||||||||||||
Provision for income taxes | 1,487 | 0.6 | 413 | 0.2 | 1,074 | |||||||||||||||||||||||||||
Net loss | $ | (2,992) | (1.1) | % | $ | (7,339) | (3.4) | % | $ | 4,347 |
| | | | | | | | | | | | | | | | | |
| | | | | Dollar | | Percent | | |||||||||
| | | | | | | | | | | | | increase | | increase | | |
Three months ended September 30, | | 2022 |
| 2021 |
| (decrease) |
| (decrease) |
| ||||||||
Control Devices | | $ | 88,901 |
| | 39.2 | % | $ | 87,618 |
| 48.2 | % | $ | 1,283 | | 1.5 | % |
Electronics | | | 124,066 | | | 54.7 | | | 77,585 | | 42.7 | | | 46,481 | | 59.9 | % |
Stoneridge Brazil | | | 13,790 | | | 6.1 | | | 16,477 | | 9.1 | | | (2,687) | | (16.3) | % |
Total net sales | | $ | 226,757 | | | 100.0 | % | $ | 181,680 | | 100.0 | % | $ | 45,077 | | 24.8 | % |
35
Three months ended June 30, | 2023 | 2022 | Dollar increase | Percent increase | ||||||||||||||||||||||||||||||||||
Control Devices | $ | 92,120 | 34.5 | % | $ | 84,566 | 38.3 | % | $ | 7,554 | 8.9 | % | ||||||||||||||||||||||||||
Electronics | 159,786 | 59.9 | 123,021 | 55.7 | 36,765 | 29.9 | % | |||||||||||||||||||||||||||||||
Stoneridge Brazil | 14,908 | 5.6 | 13,349 | 6.0 | 1,559 | 11.7 | % | |||||||||||||||||||||||||||||||
Total net sales | $ | 266,814 | 100.0 | % | $ | 220,936 | 100.0 | % | $ | 45,878 | 20.8 | % |
Our Control Devices segment net sales increased $1.3$7.6 million due to an increase in our North American automotive market of $4.3$3.6 million offsetand an increase in China automotive and other markets of $0.8 million and $0.8 million, respectively, as well as negotiated price increases of $3.1 million. In addition, second quarter of 2023 net sales were adversely impacted by a decreasean increase in unfavorable foreign currency translation of $0.7 million.
Our Stoneridge Brazil segment net sales decreased due to
| | | | | | | | | | | | | | | | | |
| | | | | | Dollar | | Percent | | ||||||||
| | | | | | increase | | increase | | ||||||||
Three months ended September 30, |
| 2022 |
| 2021 |
| | (decrease) |
| (decrease) |
| |||||||
North America | | $ | 117,010 |
| | 51.6 | % | $ | 95,395 |
| 52.5 | % | $ | 21,615 | | 22.7 | % |
South America | | | 13,790 | | | 6.1 | | | 16,477 | | 9.1 | | | (2,687) | | (16.3) | % |
Europe and Other | | | 95,957 | | | 42.3 | | | 69,808 | | 38.4 | | | 26,149 | | 37.5 | % |
Total net sales | | $ | 226,757 | | | 100.0 | % | $ | 181,680 | | 100.0 | % | $ | 45,077 | | 24.8 | % |
Three months ended June 30, | 2023 | 2022 | Dollar increase | Percent increase | ||||||||||||||||||||||||||||||||||
North America | $ | 135,590 | 50.8 | % | $ | 109,642 | 49.6 | % | $ | 25,948 | 23.7 | % | ||||||||||||||||||||||||||
South America | 14,908 | 5.6 | 13,349 | 6.0 | 1,559 | 11.7 | % | |||||||||||||||||||||||||||||||
Europe and Other | 116,316 | 43.6 | 97,945 | 44.4 | 18,371 | 18.8 | % | |||||||||||||||||||||||||||||||
Total net sales | $ | 266,814 | 100.0 | % | $ | 220,936 | 100.0 | % | $ | 45,878 | 20.8 | % |
translation of $2.9 million.
adverse foreign exchange fluctuations and inflation offset by higher labor costs.
Our Stoneridge Brazil segment gross margin as a percentage of sales was consistent with the prior period.
sales.
36
Design and Development. D&D costs decreased $0.3increased by $7.1 million due to higherlower customer reimbursements for Electronics of $2.2 millionand higher costs related to product launch preparation offset by increased spendincreases in capitalized software development costs for product launches in our Electronics andsegment. Control Devices segments.
D&D spend also increased by $0.4 million and was attributable to product launch activities.
| | | | | | | | | | | | |
| | | | | | | | Dollar | | Percent | | |
|
| | |
| | |
| increase / |
| increase / | | |
Three months ended September 30, | | 2022 | | 2021 | | (decrease) | | (decrease) |
| |||
Control Devices | | $ | 7,522 | | $ | 2,899 | | $ | 4,623 | | 159.5 | % |
Electronics | | | 5,416 | | | (5,113) | | | 10,529 | | 205.9 | |
Stoneridge Brazil | | | 908 | | | 909 | | | (1) | | (0.1) | |
Unallocated corporate | | | (7,983) | | | (7,623) | | | (360) | | (4.7) | |
Operating income (loss) | | $ | 5,863 | | $ | (8,928) | | $ | 14,791 | | 165.7 | % |
Three months ended June 30, | 2023 | 2022 | Dollar increase (decrease) | Percent increase (decrease) | ||||||||||||||||||||||
Control Devices | $ | 5,074 | $ | 4,118 | $ | 956 | 23.2 | % | ||||||||||||||||||
Electronics | 7,444 | (2,524) | 9,968 | 394.9 | ||||||||||||||||||||||
Stoneridge Brazil | 899 | 970 | (71) | (7.3) | ||||||||||||||||||||||
Unallocated corporate | (9,086) | (8,492) | (594) | (7.0) | ||||||||||||||||||||||
Operating income (loss) | $ | 4,331 | $ | (5,928) | $ | 10,259 | 173.1 | % |
contribution from higher sales, including negotiated pricing, slightly offset by higher D&D spending.
fluctuations.
decreased due to higher SG&A costs from unfavorable net adjustments for Brazilian indirect tax credits which were mostly offset by higher contribution from higher sales.
| | | | | | | | | | | | |
| | | | | | | | Dollar | | Percent | | |
|
| | |
| | |
| increase / |
| increase / |
| |
Three months ended September 30, | | 2022 | | 2021 | | (decrease) | | (decrease) | | |||
North America | | $ | (43) | | $ | (6,788) | | $ | 6,745 | | 99.4 | % |
South America | | | 908 | | | 909 | | | (1) | | (0.1) | |
Europe and Other | | | 4,998 | | | (3,049) | | | 8,047 | | 263.9 | |
Operating income (loss) | | $ | 5,863 | | $ | (8,928) | | $ | 14,791 | | 165.7 | % |
| | | | | | | | | | | | |
Three months ended June 30, | 2023 | 2022 | Dollar increase (decrease) | Percent increase (decrease) | ||||||||||||||||||||||
North America | $ | (489) | $ | (2,845) | $ | 2,356 | 82.8 | % | ||||||||||||||||||
South America | 899 | 970 | (71) | (7.3) | ||||||||||||||||||||||
Europe and Other | 3,921 | (4,053) | 7,974 | 196.7 | ||||||||||||||||||||||
Operating income (loss) | $ | 4,331 | $ | (5,928) | $ | 10,259 | 173.1 | % |
D&D.
debt.
37
Provision for Income Taxes. For the three months ended September 30, 2022 income tax expense of $1.0 million was attributable to the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions offset by tax credits and incentives. The effective tax rate of 57.5% varies from the statutory tax rate primarily due to the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions, U.S. taxes on foreign earnings and non-deductible expenses offset by tax credits and incentives.
For the three months ended September 30, 2021, income tax expense of $0.5 million was attributable to an update to the estimated tax impact on the gain on the sale of the Canton facility, the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of (5.4)% was less than the statutory tax rate primarily due to the impact of tax losses for which no benefit was recognized due to valuation allowances in certain jurisdictions as well as an update to the gain on the sale of the Canton facility.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
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, |
| 2022 |
| 2021 |
| (decrease) | ||||||||
Net sales | | $ | 668,751 |
| | 100.0 | % | $ | 566,809 |
| 100.0 | % | $ | 101,942 |
Costs and expenses: | | | | | | | | | | | | | | |
Cost of goods sold | | | 539,304 | | | 80.6 | | | 441,882 | | 78.0 | | | 97,422 |
Selling, general and administrative | | | 83,781 | | | 12.5 | | | 89,237 | | 15.7 | | | (5,456) |
Gain on sale of Canton Facility, net | | | - | | | - | | | (30,718) | | (5.4) | | | 30,718 |
Design and development | | | 48,715 | | | 7.3 | | | 46,593 | | 8.2 | | | 2,122 |
Operating (loss) income | | | (3,049) | | | (0.4) | | | 19,815 | | 3.5 | | | (22,864) |
Interest expense, net | | | 4,848 | | | 0.7 | | | 5,073 | | 0.9 | | | (225) |
Equity in loss (earnings) of investee | | | 424 | | | 0.1 | | | (1,694) | | (0.3) | | | 2,118 |
Other expense, net | | | 3,067 | | | 0.6 | | | 127 | | 0.1 | | | 2,940 |
(Loss) income before income taxes | | | (11,388) | | | (1.8) | | | 16,309 | | 2.8 | | | (27,697) |
Provision for income taxes | | | 2,895 | | | 0.4 | | | 6,739 | | 1.2 | | | (3,844) |
Net (loss) income | | $ | (14,283) | | | (2.2) | % | $ | 9,570 | | 1.6 | % | $ | (23,853) |
Net Sales. Net sales for our reportable segments, excluding inter-segment sales, are summarized in the following table (in thousands):
| | | | | | | | | | | | | | | | | |
| | | | | Dollar | | Percent | | |||||||||
| | | | | | | | | | | | | increase | | increase | | |
Nine months ended September 30, |
| 2022 |
| 2021 |
| (decrease) |
| (decrease) |
| ||||||||
Control Devices | | $ | 257,527 |
| | 38.5 | % | $ | 273,581 |
| 48.3 | % | $ | (16,054) | | (5.9) | % |
Electronics | | | 372,040 | | | 55.6 | | | 250,440 | | 44.2 | | | 121,600 | | 48.6 | % |
Stoneridge Brazil | | | 39,184 | | | 5.9 | | | 42,788 | | 7.5 | | | (3,604) | | (8.4) | % |
Total net sales | | $ | 668,751 | | | 100.0 | % | $ | 566,809 | | 100.0 | % | $ | 101,942 | | 18.0 | % |
Our Control Devices segment net sales decreased $16.1 million due to a decrease in our European automotive, North American commercial and European commercial vehicle markets of $10.3 million, $6.0 million and $2.4 million, respectively, as well as decreases in our China commercial vehicle and automotive markets of $5.9 million and $0.6 million, respectively. The decrease in our European markets was due to our exit of the PM sensor business. Net sales for the nine months ended September 30, 2022 were favorably impacted by an increase in our North American automotive markets and negotiated price increases of $4.1 million and $5.7 million, respectively compared to the prior year.
38
Our Electronics segment net sales increased due to higher sales volumes in our European commercial, North American commercial and European off-highway vehicle markets of $36.2 million, $27.8 million and $9.8 million, respectively. In addition, 2022 net sales were favorably impacted by both customer pricing for recoveries of electronic component spot buy purchases and for negotiated price increases of $52.4 million and $15.2 million, respectively. These increases were offset by unfavorable euro and Swedish krona foreign currency translation compared to the prior year of $20.9 million.
Our Stoneridge Brazil segment net sales decreased primarily due to lower sales in most Stoneridge Brazil product lines offset by favorable foreign currency translation of $1.8 million and slightly higher sales of tracking devices and monitoring services.
Net sales by geographic location are summarized in the following table (in thousands):
| | | | | | | | | | | | | | | | | |
| | | | | Dollar | | Percent | | |||||||||
| | | | | increase | | increase | | |||||||||
Nine months ended September 30, |
| 2022 |
| 2021 |
| (decrease) |
| (decrease) |
| ||||||||
North America | | $ | 330,480 |
| | 49.4 | % | $ | 288,629 |
| 50.9 | % | $ | 41,851 | | 14.5 | % |
South America | | | 39,184 | | | 5.9 | | | 42,788 | | 7.5 | | | (3,604) | | (8.4) | % |
Europe and Other | | | 299,087 | | | 44.7 | | | 235,392 | | 41.6 | | | 63,695 | | 27.1 | % |
Total net sales | | $ | 668,751 | | | 100.0 | % | $ | 566,809 | | 100.0 | % | $ | 101,942 | | 18.0 | % |
The increase in North American net sales was mostly attributable to increases in sales volume in our Electronics segment commercial vehicle market of $27.8 million and our Control Devices segment automotive market of $4.1 million offset by sales volume decreases in our Control Devices segment commercial vehicle market of $6.0 million. The decrease in net sales in South America was primarily due to lower sales in most Stoneridge Brazil product lines offset by favorable foreign currency translation and slightly higher sales of tracking devices and monitoring services. The increase in net sales in Europe and Other was due to customer recoveries of semiconductor spot buy purchases and contractual price increases of $49.3 million and $11.0 million, respectively and increases in our European commercial vehicle and European off-highway markets of $33.8 million and $9.8 million, respectively. This increase for Europe and Other was offset by decreases in our European automotive market of $10.3 million and China commercial vehicle and automotive markets of $5.7 million and $0.6 million, respectively. In addition, Europe and Other net sales decreased $21.6 million due to unfavorable foreign currency translation.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to the first nine months of 2021 and our gross margin decreased from 22.0% in the first nine months of 2021 to 19.4% in the first nine months of 2022. Our material cost as a percentage of net sales increased from 55.8% in the first nine months of 2021 to 61.8% in the first nine months of 2022. In 2022, cost of goods sold increased by $52.4 million, or 7.8% of net sales, due to electronic component spot buy purchases which were offset by customer recoveries. The impact of these spot purchases reduced gross margin percent by 1.6%. Also contributing to the increase in material cost as a percentage of sales were adverse foreign currency fluctuations and inflation. Overhead as a percentage of net sales decreased to 14.2% for the first nine months of 2022 compared to 16.6% for the first nine months of 2021 due to leverage of fixed costs from higher sales levels.
Our Control Devices segment gross margin increased primarily due to lower overhead including the favorable impact from the PM sensor business exit.
Our Electronics segment gross margin as a percentage of sales decreased primarily due to increased material costs associated with supply chain disruptions including spot purchases of electronic components, adverse foreign exchange fluctuations and inflation offsetting favorable negotiated pricing and higher contribution from higher sales levels.
Our Stoneridge Brazil segment gross margin as a percentage of sales was consistent with the prior year as adverse leverage of fixed costs was offset by favorable foreign currency translation.
Selling, General and Administrative. SG&A expenses decreased by $5.5 million compared to the first nine months of 2021 due to favorable 2022 non-recurring commercial and legal settlements, an unfavorable adjustment to the fair value of the SRB earn-out consideration in 2021, lower business realignment costs, the favorable net adjustments for Brazilian indirect tax credits and 2021 Sarasota environmental remediation costs in our Control Devices segment. Offsetting these favorable items were increases in incentive compensation and the 2021 gain on disposal of the PM Sensor business of $0.7 million.
39
Design and Development. D&D costs increased by $2.1 million due to increased spend for product launches in our Electronics and Control Devices segments offset by higher customer reimbursements for Electronics of $6.0 million.
Operating (Loss) Income. Operating (loss) income by segment is summarized in the following table (in thousands):
| | | | | | | | | | | | |
| | | | | | | | Dollar | | Percent | | |
| | | | | | | | increase / | | increase / | | |
Nine months ended September 30, |
| 2022 |
| 2021 |
| (decrease) |
| (decrease) |
| |||
Control Devices | | $ | 18,416 | | $ | 50,129 | | $ | (31,713) | | (63.3) | % |
Electronics | | | 180 | | | (7,793) | | | 7,973 | | 102.3 | % |
Stoneridge Brazil | | | 2,370 | | | 112 | | | 2,258 | | 2,016.1 | % |
Unallocated corporate | | | (24,015) | | | (22,633) | | | (1,382) | | (6.1) | % |
Operating (loss) income | | $ | (3,049) | | $ | 19,815 | | $ | (22,864) | | (115.4) | % |
Our Control Devices segment operating income decreased due to the gain on the sale of the Canton Facility of $30.7 million in 2021.
Our Electronics segment operating income improved from higher contribution from increased sales levels and lower SG&A spending.
Our Stoneridge Brazil segment operating income increased primarily due to the unfavorable adjustment to the fair value of the SRB earn-out consideration in 2021 and favorable net adjustments for Brazilian indirect tax credits.
Our unallocated corporate operating loss increased primarily from higher incentive compensation and employee benefit costs offset by lower business realignment costs of $0.9 million.
Operating (loss) income by geographic location is summarized in the following table (in thousands):
| | | | | | | | | | | | |
| | | | | | | | Dollar | | Percent | | |
| | | | | | | | increase | | increase | | |
Nine months ended September 30, |
| 2022 |
| 2021 |
| (decrease) |
| (decrease) | | |||
North America | | $ | (3,640) | | $ | 16,522 | | $ | (20,162) | | (122.0) | % |
South America | | | 2,370 | | | 112 | | | 2,258 | | 2,016.1 | % |
Europe and Other | | | (1,779) | | | 3,181 | | | (4,960) | | (155.9) | % |
Operating (loss) income | | $ | (3,049) | | $ | 19,815 | | $ | (22,864) | | (115.4) | % |
Our North American operating income decreased due to the gain on the sale of the Canton Facility in 2021 and higher material costs associated with supply chain disruptions and inflation. The increase in operating income in South America was primarily due to an unfavorable adjustment in the fair value of earn-out consideration in 2021 and favorable net adjustments for Brazilian indirect tax credits. Our operating results in Europe and Other decreased primarily due to higher material costs from supply chain disruptions including spot purchases of electronic components net of recoveries, adverse foreign exchange fluctuations and inflation offsetting higher contribution from increased sales levels and the favorable impact of negotiated pricing.
Interest Expense, net. Interest expense, net was $4.8 million and $5.1 million for the nine months ended September 30, 2022 and 2021. Interest expense, net decreased due to higher interest income at Stoneridge Brazil offset by higher Credit Facility interest expense and $0.4 million related to the write-off of deferred financing fees as a result of Amendment No. 3 to the Credit Facility.
Equity in Loss (Earnings) of Investee. Equity earnings for MSIL were $1.3 million for the nine months ended September 30, 2021. As discussed in Note 15 to the condensed consolidated financial statements, the Company sold its equity interest in MSIL on December 30, 2021. Equity loss (earnings) for Autotech were $0.4 million and $(0.4) million for the nine months ended September 30, 2022 and 2021, respectively.
40
Other Expense, net. We record certain foreign currency transaction losses (gains) as a component of other (income) expense, net on the condensed consolidated statement of operations. Other expense, net of $3.1 million increasedwere offset by $2.9 million compared to the first nine months of 2021 due to foreign currency transaction losses in our Electronics and Control Devices segments from the strengtheningrecognition of the U.S. dollar offsetting the 2022 gain on settlement of the net investment hedge of $3.7 million.
million as income (see Note 5, Financial Instruments and Fair Value Measurements).
Forjurisdictions as well as tax credits and incentives offset by foreign rates that differ from the nine months ended SeptemberU.S. rate, U.S. taxes on foreign earnings and non-deductible expenses.
Six months ended June 30, | 2023 | 2022 | Dollar increase / (decrease) | |||||||||||||||||||||||||||||
Net sales | $ | 508,139 | 100.0 | % | $ | 441,994 | 100.0 | % | $ | 66,145 | ||||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||
Cost of goods sold | 404,849 | 79.7 | 361,987 | 81.9 | 42,862 | |||||||||||||||||||||||||||
Selling, general and administrative | 63,354 | 12.5 | 56,337 | 12.7 | 7,017 | |||||||||||||||||||||||||||
Design and development | 39,634 | 7.8 | 32,582 | 7.4 | 7,052 | |||||||||||||||||||||||||||
Operating income (loss) | 302 | — | (8,912) | (2.0) | 9,214 | |||||||||||||||||||||||||||
Interest expense, net | 5,866 | 1.2 | 3,003 | 0.7 | 2,863 | |||||||||||||||||||||||||||
Equity in loss (earnings) of investee | 500 | 0.1 | 458 | 0.1 | 42 | |||||||||||||||||||||||||||
Other expense, net | 3,535 | 0.8 | 735 | 0.3 | 2,800 | |||||||||||||||||||||||||||
(Loss) income before income taxes | (9,599) | (2.1) | (13,108) | (3.1) | 3,509 | |||||||||||||||||||||||||||
Provision for income taxes | 779 | 0.2 | 1,906 | 0.4 | (1,127) | |||||||||||||||||||||||||||
Net loss | $ | (10,378) | (2.3) | % | $ | (15,014) | (3.5) | % | $ | 4,636 |
Six months ended June 30, | 2023 | 2022 | Dollar increase (decrease) | Percent increase (decrease) | ||||||||||||||||||||||||||||||||||
Control Devices | $ | 178,062 | 35.0 | % | $ | 168,626 | 38.2 | % | $ | 9,436 | 5.6 | % | ||||||||||||||||||||||||||
Electronics | 300,913 | 59.2 | 247,974 | 56.1 | 52,939 | 21.3 | % | |||||||||||||||||||||||||||||||
Stoneridge Brazil | 29,164 | 5.7 | 25,394 | 5.7 | 3,770 | 14.8 | % | |||||||||||||||||||||||||||||||
Total net sales | $ | 508,139 | 100.0 | % | $ | 441,994 | 100.0 | % | $ | 66,145 | 15.0 | % |
Six months ended June 30, | 2023 | 2022 | Dollar increase | Percent increase | ||||||||||||||||||||||||||||||||||
North America | $ | 259,313 | 51.0 | % | $ | 213,470 | 48.3 | % | $ | 45,843 | 21.5 | % | ||||||||||||||||||||||||||
South America | 29,164 | 5.7 | 25,394 | 5.7 | 3,770 | 14.8 | % | |||||||||||||||||||||||||||||||
Europe and Other | 219,662 | 43.2 | 203,130 | 46.0 | 16,532 | 8.1 | % | |||||||||||||||||||||||||||||||
Total net sales | $ | 508,139 | 100.0 | % | $ | 441,994 | 100.0 | % | $ | 66,145 | 15.0 | % |
Six months ended June 30, | 2023 | 2022 | Dollar increase / (decrease) | Percent increase / (decrease) | ||||||||||||||||||||||
Control Devices | $ | 7,161 | $ | 10,894 | $ | (3,733) | (34.3) | % | ||||||||||||||||||
Electronics | 8,844 | (5,236) | 14,080 | 268.9 | % | |||||||||||||||||||||
Stoneridge Brazil | 2,242 | 1,462 | 780 | 53.4 | % | |||||||||||||||||||||
Unallocated corporate | (17,945) | (16,032) | (1,913) | (11.9) | % | |||||||||||||||||||||
Operating income (loss) | $ | 302 | $ | (8,912) | $ | 9,214 | (103.4) | % |
Six months ended June 30, | 2023 | 2022 | Dollar increase (decrease) | Percent increase (decrease) | ||||||||||||||||||||||
North America | $ | (7,359) | $ | (3,597) | $ | (3,762) | 104.6 | % | ||||||||||||||||||
South America | 2,242 | 1,462 | 780 | 53.4 | % | |||||||||||||||||||||
Europe and Other | 5,419 | (6,777) | 12,196 | (180.0) | % | |||||||||||||||||||||
Operating income (loss) | $ | 302 | $ | (8,912) | $ | 9,214 | (103.4) | % |
earnings.
| | | | | | | |
| | | | | | | |
| | | | | | | |
Nine months ended September 30, |
| 2022 |
| 2021 |
| ||
Net cash provided by (used for): | | | | | | | |
Operating activities | | $ | (24,138) | | $ | (19,689) | |
Investing activities | | | (19,662) | | | 12,948 | |
Financing activities | | | (5,495) | | | (14,652) | |
Effect of exchange rate changes on cash and cash equivalents | | | (3,915) | | | (2,525) | |
Net change in cash and cash equivalents | | $ | (53,210) | | $ | (23,918) | |
| | | | | | | |
Six months ended June 30, | 2023 | 2022 | ||||||||||||
Net cash provided by (used for): | ||||||||||||||
Operating activities | $ | (4,688) | $ | (17,818) | ||||||||||
Investing activities | (16,296) | (11,380) | ||||||||||||
Financing activities | 923 | (13,480) | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (32) | (2,177) | ||||||||||||
Net change in cash and cash equivalents | $ | (20,093) | $ | (44,855) |
disruptions.
offset by increased proceeds from the disposal of fixed assets.
41
Due to the expected impact of the COVID-19 pandemic on the Company’s end-markets and the resulting expected financial impacts on the Company, on June 26, 2020, the Company entered into a Waiver and Amendment No. 1 to the Fourth Amended and Restated Credit Agreement (“Amendment No. 1”). Amendment No. 1 provided for certain covenant relief and restrictions during the “Covenant Relief Period” (the period ending on the date that the Company delivers a compliance certificate for the quarter ending June 30, 2021 in form and substance satisfactory to the administrative agent). The Covenant Relief Period ended on August 14, 2021. During the Covenant Relief Period:
Amendment No. 1 increased the leverage based LIBOR pricing grid through the maturity date and also provided for a LIBOR floor of 50 basis points on outstanding borrowings excluding any Specified Hedge Borrowings (as defined) which remained subject to a LIBOR floor of 0 basis points.
On December 17, 2021, the Company entered into Amendment No. 2 to the Fourth Amended and Restated Credit Agreement (“Amendment No. 2”). Amendment No. 2 implemented non-LIBOR interest reference rates for borrowings in euros and British pounds.
Due to the ongoing impacts of the COVID-19 pandemic and supply chain disruptionsdisruptions on the Company’s end-markets and the resulting financial impacts on the Company, on February 28, 2022, the Company entered into Amendment No. 3.3 to the Fourth Amended and Restated Credit Agreement (“Amendment No. 3”). Amendment No. 3 reduced the total revolving credit commitments from $400.0 million to $300.0 million and the maximum permitted amount of swing loans from $40.0 million to $30.0 million. Amendment No. 3 providesprovided for certain financial covenant relief and additional covenant restrictions during the “Specified Period” (the period from February 28, 2022 until the date that the Company deliversdelivered a compliance certificate for the quarter ending March 31, 2023 in form and substance satisfactory to the administrative agent). During the Specified Period:
•the maximum net leverage ratio was changed to 4.00 to 1.00 for the year ended December 31, 2021, suspended for the quarters ending March 31, 2022 through September 30, 2022 and could not exceed 4.75 to 1.00 for the quarter ended December 31, 2022 or 3.50 to 1.00 for the quarter ended March 31, 2023; •the minimum interest coverage ratio of 3.50 was reduced to 2.50 for the quarter ended March 31, 2022, 2.25 for the quarter ended June 30, 2022 and 3.00 for the quarters ended September 30, 2022 and December 31, 2022; •an additional condition to drawing on the Credit Facility was added that restricted borrowings if the Company’s total of 100% of domestic and 65% of foreign cash and cash equivalents exceeded $70.0 million; •there were certain additional restrictions on Restricted Payments (as defined); and •a Permitted Acquisition (as defined) could not be consummated unless the net leverage ratio is below 3.50 to 1.00 during the Specified Period. Amendment |
Amendment No. 3 changed the leverage based LIBOR pricing grid through the maturity date and also retained a LIBOR floor of 50 basis points on outstanding borrowings excluding any Specified Hedge Borrowings (as defined) which remained subject to a LIBOR floor of 0 basis points.
to the Fourth Amended and Restated Credit Agreement (“Amendment No. 4”). Amendment No. 4 provides for certain financial covenant relief and additional covenant restrictions during the “Amendment No. 4 Specified Period” (the period from March 1, 2023 until the date that the Company delivers a compliance certificate for the quarter ending September 30, 2023 in form and substance satisfactory to the administrative agent). During the Amendment No. 4 Specified Period:
42
The Company’s wholly owned subsidiary located in Stockholm, Sweden, has an overdraft credit line whichthat allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20.0 million Swedish krona, or $1.8 million and $2.2$1.9 million at Septemberboth June 30, 20222023 and December 31, 2021, respectively.2022. At SeptemberJune 30, 2023 and December 31, 2022 there was 0.2 million Swedish krona, or less than $0.1 million outstanding on this overdraft credit line. At December 31, 2021, there was 19.0 million Swedish krona, or $2.1 millionwere no borrowings outstanding on this overdraft credit line. During the ninesix months ended SeptemberJune 30, 2022,2023, the subsidiary borrowed 290.0and repaid 171.9 million Swedish krona, or $26.2 million, and repaid 308.8 million Swedish krona, or $27.9$15.9 million.
On May 19, 2020, the Company committed to the strategic exit of its Control Devices PM sensor product line. The costs for the PM Sensor Exit included employee severance and termination costs, professional fees and other related costs such as potential commercial and supplier settlements. Non-cash charges included impairment of fixed assets and accelerated depreciation associated with PM sensor production. We recognized $0.7 million of expense as a result of this initiative during the three months ended September 30, 2021. The only remaining costs relate to potential commercial settlements and legal fees which we continue to negotiate. The estimated additional costs related to these settlements and fees is up to $4.2 million.
2023 or 2022.
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Critical Accounting Policies and Estimates
2023.
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 2021 2022 Form 10-K.
2023.
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| | | | | | | | | |
| | | | | | | Total number of | | Maximum number |
| | | | | | | shares purchased as | | of shares that may |
| | | | | | | part of publicly | | yet be purchased |
| | Total number of | | Average price | | announced plans | | under the plans | |
Period |
| shares purchased |
| paid per share |
| or programs |
| or programs | |
7/1/22-7/31/22 | | 3,549 | | $ | 17.35 | | N/A | | N/A |
8/1/22-8/31/22 | | - | | $ | - | | N/A | | N/A |
9/1/22-9/30/22 | | - | | $ | - | | N/A | | N/A |
Total | | 3,549 | | | | | | | |
awards.
Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Maximum number of shares that may yet be purchased under the plans or programs | ||||||||||||||||||||||
4/1/23-4/30/23 | 1,180 | $ | 18.70 | N/A | N/A | |||||||||||||||||||||
5/1/23-5/31/23 | — | $ | — | N/A | N/A | |||||||||||||||||||||
6/1/23-6/30/23 | 4,442 | $ | 17.77 | N/A | N/A | |||||||||||||||||||||
Total | 5,622 |
None
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| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||||||
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| 104 | The cover page from our Quarterly Report on Form 10-Q for the period ended June 30, | ||||||||
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STONERIDGE, INC.
| |||||
Date: | /s/ | ||||
| |||||
| President, Chief Executive Officer and Director | ||||
(Principal Executive Officer)
| |||||
Date: | /s/ Matthew R. Horvath | ||||
Matthew R. Horvath | |||||
Chief Financial Officer and Treasurer | |||||
(Principal Financial Officer) |
47