1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period Commission file number 001-13337
ended September 30, 1997.
STONERIDGE, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Ohio 34-1598949
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
9400 East Market Street, Warren, Ohio 44484
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(Address of Principal Executive Offices) (Zip Code)
(330) 856-2443
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Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes __ No X . (The Registrant's Registration Statement on Form
8-A became effective on October 9, 1997).
The number of Common Shares, without par value, outstanding as of November 21,
1997: 22,397,311
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STONERIDGE, INC.
INDEX
Page No.
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of December 2
31, 1996 and September 30, 1997
Condensed Consolidated Statements of Income for the three 3
months and nine months ended September 30, 1996 and
1997
Condensed Consolidated Statements of Cash Flows for the 4
nine months ended September 30, 1996 and 1997
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of 8-11
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market 11
Risk
Part II -- Other Information 12-13
Signatures 14
Exhibit Index 15
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
Pro forma
December 31, September 30, September 30,
1996 (1) 1997 1997 (3)
---------------- -------------- ---------------
ASSETS (Unaudited)
------
CURRENT ASSETS:
Cash and cash equivalents $ 357 $ 82 $ 1,229
Accounts receivable, net 46,783 57,312 57,312
Inventories 30,158 32,793 32,793
Deferred income taxes -- -- 4,357
Prepaid expenses and other assets 5,357 8,791 8,791
---------------- -------------- ---------------
Total current assets 82,655 98,978 104,482
---------------- -------------- ---------------
PROPERTY, PLANT AND EQUIPMENT, net 55,200 54,809 54,809
OTHER ASSETS:
Goodwill and other intangible assets, net 30,769 29,906 29,906
Investments and other 9,863 11,067 11,067
---------------- -------------- ---------------
TOTAL ASSETS $178,487 $194,760 $200,264
================ ============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,001 $ 201 $ 201
Accounts payable 21,365 29,060 29,060
Accrued expenses and other 17,232 25,335 25,335
Accrued shareholder distributions 1,100 -- --
---------------- -------------- ---------------
Total current liabilities 42,698 54,596 54,596
---------------- -------------- ---------------
LONG-TERM DEBT, net of current portion 51,156 36,642 3,963
DEFERRED INCOME TAXES -- -- 6,468
---------------- -------------- ---------------
Total long term liabilities 51,156 36,642 10,431
---------------- -------------- ---------------
SHAREHOLDERS' EQUITY:
Common shares, without par value,
60,000,000 authorized, 13,964,448 issued
and outstanding at December 31, 1996 and
14,367,796 issued and outstanding at
September 30, 1997, stated at, -- -- --
Additional paid-in capital 9,195 12,084 135,237
Retained earnings 75,438 91,438 --
---------------- -------------- ---------------
Total shareholders' equity 84,633 103,522 135,237
---------------- -------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $178,487 $194,760 $200,264
================ ============== ===============
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated balance sheets.
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STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands)
Three months ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1996 1997 1996 1997
------------ ------------ ------------ ------------
NET SALES $ 89,442 $ 103,919 $ 268,407 $ 322,706
COSTS AND EXPENSES:
Cost of goods sold 71,180 77,883 211,034 243,493
Selling, general and administrative 11,906 13,777 37,700 38,989
expenses
------------ ------------ ------------ ------------
Operating income 6,356 12,259 19,673 40,224
Gain on sale of equipment -- -- -- (1,733)
Interest expense, net 1,049 875 2,910 2,738
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 5,307 11,384 16,763 39,219
Provision for state and local income 142 239 405 564
taxes
------------ ------------ ------------ ------------
NET INCOME $ 5,165 $ 11,145 $ 16,358 $ 38,655
============ ============ ============ ============
PRO FORMA INCOME DATA:
Income before income taxes $ 5,307 $ 11,384 $ 16,763 $ 39,219
Pro forma adjustment:
Income taxes 2,176 4,667 6,873 15,369
------------ ------------ ------------ ------------
Pro forma net income $ 3,131 $ 6,717 $ 9,890 $ 23,850
============ ============ ============ ============
Pro forma net income per share $ 0.14 $ 0.31 $ 0.46 $ 1.10
============ ============ ============ ============
Pro forma weighted average shares
outstanding 21,640,248 21,640,248 21,640,248 21,640,248
============ ============ ============ ============
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated balance sheets.
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STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
For the nine months
ended September 30,
--------------------
1996 1997
-------- --------
OPERATING ACTIVITIES:
Net income $ 16,358 $ 38,655
Adjustments to reconcile net income to net
cash from operating activities-
Depreciation and amortization 7,825 9,016
Gain on sale of equipment -- (1,733)
Other -- 575
Changes in operating assets and
liabilities-
Accounts receivable, net (7,500) (9,755)
Inventories (5,401) (2,624)
Prepaid expenses and other assets 2,204 (1,390)
Other assets, net (350) (2,163)
Accounts payable (5,594) 6,915
Accrued expenses and other liabilities 2,879 6,552
-------- --------
Net cash from operating 10,421 44,048
activities
-------- --------
INVESTING ACTIVITIES:
Equity investment (8,834) (1,000)
Capital expenditures (13,397) (8,058)
Proceeds from sale of property, plant and 936 2,514
equipment
-------- --------
Net cash from investing (21,295) (6,544)
activities
-------- --------
FINANCING ACTIVITIES:
Cash distributions paid (8,642) (22,655)
Proceeds from long-term debt 3,512 789
Repayments of long-term debt (304) (2,498)
Net borrowings (repayments) under credit 16,026 (15,729)
facility
Share options exercised, net -- 2,314
-------- --------
Net cash from financing 10,592 (37,779)
activities
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (282) (275)
CASH AND CASH EQUIVALENTS AT BEGINNING OF 282 357
PERIOD
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ -- $ 82
======== ========
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated balance sheets.
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STONERIDGE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except for share and per share data)
1. The accompanying condensed consolidated financial statements have been
prepared by Stoneridge, Inc. (the "Company"), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission.
The information furnished in the condensed consolidated financial
statements includes normal recurring adjustments and reflects all
adjustments which are, in the opinion of management, necessary for a
fair presentation of such financial statements. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Although
the Company believes that the disclosures are adequate to make the
information presented not misleading, it is suggested that these
condensed consolidated financial statements be read in conjunction with
the audited financial statements and the notes thereto included in the
Company's Registration Statement on Form S-1 (Registration No.
333-33285).
The results of operations for the three and nine months ended September
30, 1997 are not necessarily indicative of the results to be expected
for the full year.
2. On October 10, 1997, the Company completed an initial public offering
of 6,727,500 Common Shares at $17.50 per share (the "Offering"). The
Company received net cash proceeds of approximately $108,500 from the
Offering. Net proceeds of the Offering were used to fund a payment to
the pre-offering shareholders of approximately $83,000 as an S
Corporation Distribution ("S Corporation Distribution") and for the
partial repayment of debt. Certain officers and employees of the
Company reinvested $8,326 of the S Corporation Distribution in
conjunction with the Offering ("Management Reinvestment"). Immediately
prior to the completion of the Offering, the Company amended its
Articles of Incorporation to change the authorized capital shares of
the Company from 37,724 shares of Class A Common Shares (voting),
without par value, and 87,276 shares of Class B Common Shares
(non-voting), without par value, to 60,000,000 Common Shares, and
5,000,000 Preferred Shares, without par value. In addition, the amended
Articles of Incorporation provided that each Class A Common Share and
Class B Common Share automatically became 139.0856 Common Shares. All
applicable share and per share data in the accompanying unaudited
condensed consolidated financial statements have been adjusted
accordingly.
Upon completion of the Offering, the Company granted options to
purchase 488,000 Common Shares with an exercise price of $17.50 per
share to officers and other management employees. The options will vest
after two years.
Concurrent with the Offering, the Company acquired, through a share
exchange, an additional 51% of the outstanding stock of Berifors AB for
704,563 Common Shares. The Company expects to acquire the remaining 4%
of Berifors AB which it does not own for 52,500 Common Shares in
February 1998. The acquisition was accounted for as a purchase and the
excess of the cost over the fair value of assets acquired, totaling
approximately $10,500, was reflected as goodwill which will be
amortized over 40 years on a straight-line basis. As of October 10,
1997, the accounts of Berifors AB will be consolidated in the financial
statements of the Company.
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3. The pro forma balance sheet data presented assumes on September 30,
1997, (i) termination of the Company's S Corporation status, and in
connection therewith, reinstatement of $6,468 of deferred income tax
liabilities, and $4,357 of deferred income tax assets, (ii) net cash
proceeds of approximately $108,500 from the Offering of 6,727,500
Common Shares, (iii) an $83,000 S Corporation Distribution and (iv) a
$8,326 Management Reinvestment.
Pro forma net income assumes that the Company is subject to income
taxes as a C Corporation for all income statement periods presented.
Pro forma net income per share has been calculated by dividing pro
forma net income per share by the weighted average number of Common
Shares outstanding as of September 30, 1996 (13,964,448), the number of
Common Shares issued in connection with the exercise of stock options
on August 7, and October 10, 1997 (438,119), the number of Common
Shares issued in conjunction with the Offering (6,727,500), and the
number of Common Shares issued in connection with the Management
Reinvestment (510,181)
4. Inventories are valued at the lower of cost or market, determined by
using the last-in, first-out (LIFO) method of inventory accounting.
Inventory cost includes material, labor and overhead and consists of
the following:
December 31, 1996 September 30, 1997
----------------- ------------------
Raw materials $17,983 $23,608
Work in progress 6,063 5,893
Finished goods 8,224 5,552
Less-LIFO reserve (2,112) (2,260)
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Total $30,158 $32,793
======= =======
5. Historical earnings per share have not been presented since such
information is not meaningful as the Company was an S Corporation for
all periods presented.
During March 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share", which requires the disclosure of basic earnings
per share and diluted earnings per share. The Company expects to adopt
SFAS in December 1997 and anticipates it will not have a material
impact on previously reported earnings per share.
6. On October 27, 1997, the Company entered into an agreement to acquire
50% of the outstanding stock of PST Industrial Eletronica da Amazonia
Ltda, a Brazilian electronics components business which specializes in
vehicle security devices. Total cash consideration paid by the Company
with respect to this acquisition was $17,500. The acquisition was
financed through the Company's credit facility. As of September 30,
1997, the Company had escrowed $1,000 as advance payment related to
this transaction.
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7. On September 15, 1997, the Company entered into a new credit agreement.
The new credit facility has a $125,000 borrowing limit. The credit
facility expires on June 30, 2002 and requires a commitment fee of
1/10% to 1/4% on the unused balance. Interest is payable quarterly at
the Company's option at either (i) the prime rate or (ii) LIBOR plus a
margin of 0.75% to 2.0%, depending upon the Company's fixed charge
coverage ratio, as defined in the credit facility.
The Company has entered into a $25,000 interest rate swap agreement
with a member of its bank group whereby its contractual interest rate
was swapped through February 1999 for a fixed rate of 5.795% plus a
margin of 1% to 1.5%, depending upon the Company's fixed charge
coverage ratio, as defined. The notional amount under the swap
agreement remains at $25,000 through maturity. Additionally, the
Company has entered into a separate $20,000 interest rate swap
agreement with a member of its bank group whereby its contractual
interest rate was swapped through August 1999 for a fixed rate of 6.28%
plus a margin of 1% to 1.5%, depending upon the Company's fixed charge
coverage ratio, as defined, provided the LIBOR rate is less than 7.50%.
This swap agreement is ineffective when the LIBOR rate is equal to or
greater than 7.50%. The notional amount under the swap agreement
remains at $20,000 through maturity. The Company is exposed to credit
loss under the swap agreements in the event of nonperformance by the
bank.
The interest rate swap agreements convert floating rate debt under the
Company's revolving credit facility to fixed rate debt. The difference
between the floating interest rate and the fixed interest rate which is
to be paid or received is recognized in interest expense as the
floating interest rate changes over the life of the agreement.
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ITEM 2.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
- --------------------------------------------------------------------------------
1996
- ----
Net Sales. Net sales for the first nine months of 1997 increased by $54.3
million, or 20.2%, to $322.7 million from $268.4 million for the same period in
1996. Sales of door lock actuator products increased by $29.3 million to $46.2
million from $16.9 million. Full production of door lock actuator products
(acquired in late 1995) was not reached until approximately November 1996. The
1997 launch of a new four wheel drive actuator product increased net sales $10.1
million. Sales of power distribution products, exclusive of contract
manufacturing, increased by $18.4 million, or 30.1%, due to increased market
penetration in the medium and heavy duty truck market and higher net sales to
the agricultural vehicle market of $10.7 million and $5.4 million, respectively.
Passenger/light truck market product introductions increased power distribution
sales by $2.3 million. Sales of instrumentation and information displays
increased by $5.0 million, or 17.3%, due principally to the introduction of new
information clusters for the medium and heavy duty truck market. Sales of switch
products increased by $4.7 million, or 6.0%, reflecting higher production levels
in served markets and new product launches. The increase in net sales was
partially offset by a sales decrease of $13.3 million, or 16.1%, under contract
manufacturing arrangements.
Cost of Goods Sold. Cost of goods sold for the first nine months of 1997
increased by $32.5 million, or 15.4%, to $243.5 million from $211.0 million for
the same period in 1996. As a percentage of sales, cost of goods sold decreased
to 75.5% in 1997 from 78.6% in 1996 while the corresponding gross profit margin
increased to 24.5% from 21.4% in 1996. The improvement in gross profit margin
primarily resulted from improved operating leverage associated with increased
actuator product sales. The consolidation of two power distribution/contract
manufacturing facilities eliminated certain fixed costs that also contributed to
the increase in gross margin. Lastly, gross margin was favorably impacted by
increased efficiencies resulting from higher production of power distribution,
switch and instrumentation and information display products.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the first nine months of 1997 increased by $1.3
million, or 3.4%, to $39.0 million from $37.7 million for the same period in
1996. As a percentage of sales, SG&A expenses decreased to 12.1% for the first
nine months of 1997 from 14.0% for the same period in 1996. SG&A expenses
increased $2.5 million due to the launch of the actuator product line which
included certain development, marketing and administration costs. Other
marketing support and administrative overhead costs increased an additional $2.4
million due to higher sales levels and expenditures related to information
technology. In addition, development and design costs of medium and heavy duty
truck instrumentation and information display products were responsible for $0.7
million of the increase. These increases were offset by a $4.3 million decrease
in expenses due to the expiration of the actuator products transition services
agreement in October 1996.
Interest Expense. Interest expense for the first nine months of 1997 decreased
by $0.2 million, or 6.9%, to $2.7 million from $2.9 million for the same period
in 1996. The decrease was due to a lower average outstanding indebtedness.
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Other Income. Other income of $1.7 million for the first nine months of 1997
represents a gain on the sale of certain transportation equipment. The Company
received cash proceeds of $2.3 million from the sale which were used to retire a
note payable collateralized by the transportation equipment.
Income Before Income Taxes. As a result of the foregoing, income before taxes
increased by $22.4 million for the first nine months in 1997 to $39.2 million
from $16.8 million for the same period in 1996.
Provision for Income Taxes. Prior to October 10, 1997, the Company was an S
corporation for federal and, where qualified, state income tax purposes.
Accordingly, the Company recognized income taxes of $0.6 million and $0.4
million for foreign and state franchise taxes for the first nine months of 1997
and 1996, respectively. Had the Company been subject to federal and state income
taxes at the corporate level, the Company would have recorded provisions for
income taxes of $15.4 million and $6.9 million for the first nine months of 1997
and 1996, respectively.
Net Income. As a result of the foregoing, net income increased by $22.3 million
or 136.0%, to $38.7 million in the first nine months in 1997 from $16.4 million
for the same period in 1996. Had the Company been subject to federal and state
income taxes at the corporate level, the Company's net income would have been
$23.8 million and $9.9 million for the first nine months of 1997 and 1996,
respectively.
Three Months Ended September 30, 1997 Compared to Three Months Ended September
- ------------------------------------------------------------------------------
30, 1996
- --------
Net Sales. Net sales for the third quarter of 1997 increased by $14.5 million,
or 16.2%, to $103.9 million from $89.4 million for the same period in 1996.
Sales of power distribution products, exclusive of contract manufacturing
increased by $8.0 million, or 44.4%, due to increased market penetration in the
medium and heavy duty truck market and higher net sales to the agricultural
vehicle market of $4.8 million and $1.8 million, respectively. New product
introductions for the automotive and light truck market increased sales of power
distribution products by $1.4 million. The launch of a new four wheel drive
actuator product increased net sales $5.1 million. Sales of actuator products
increased by $2.4 million to $14.3 million from $11.9 million. Full production
of door lock actuator products (acquired in late 1995) was not reached until
approximately November 1996. Sales of switch products increased by $1.7 million,
or 6.5%, reflecting higher production levels in served markets and new product
introductions. Sales of instrumentation and information displays increased by
$1.5 million, or 15.1%, due to the introduction of new information clusters for
the medium and heavy duty truck market. These increases were partially offset by
a sales decrease of $4.2 million, or 17.6%, under contract manufacturing
arrangements.
Cost of Goods Sold. Cost of goods sold for the third quarter of 1997 increased
by $6.7 million, or 9.4%, to $77.9 million from $71.2 million for the same
period in 1996. As a percentage of sales, cost of goods sold decreased to 74.9%
in the third quarter of 1997 from 79.6% in 1996 while the corresponding gross
profit margin increased to 25.1% in 1997 from 20.4% in 1996. The improvement in
gross profit margin primarily resulted from improved operating leverage
associated with increased actuator product sales. The consolidation of a power
distribution facility eliminated certain fixed costs that also contributed to
the increase in gross margin. Lastly, gross margin was favorably impacted by
increased efficiencies resulting from higher production of power distribution,
switch and instrumentation and information display products.
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Selling, General and Administrative Expenses. SG&A expenses for the third
quarter of 1997 increased by $1.9 million, or 16.0%, to $13.8 million from $11.9
million for the same period in 1996. As a percentage of net sales, SG&A expenses
remained constant at 13.3% for the third quarters of 1997 and 1996. SG&A
expenses increased $0.8 million due to the launch of the actuator product line
which included certain development, marketing and administration costs. Other
marketing support and administrative overhead costs increased an additional $2.0
million due to higher sales levels and expenditures related to information
technology. In addition, development and design costs of medium and heavy duty
truck instrumentation and information display products and automotive/light
truck switch products increased $0.5 million. These increases were offset by a
$1.4 million decrease in expenses due to the expiration of the actuator product
transition services agreement in October 1996.
Interest Expense. Interest expense for the third quarter of 1997 decreased by
$0.1 million, or 10.0%, to $0.9 million from $1.0 million for the same period in
1996. The decrease was due to a lower average outstanding indebtedness.
Income Before Income Taxes. As a result of the foregoing, income before taxes
increased by $6.1 million for the third quarter of 1997 to $11.4 million from
$5.3 million for the same period in 1996.
Provision for Income Taxes. Prior to October 10, 1997, the Company was an S
corporation for federal and, where qualified, state income tax purposes.
Accordingly, the Company recognized income taxes of $0.2 million and $0.1
million for foreign and state franchise taxes for the third quarters of 1997 and
1996, respectively. Had the Company been subject to federal and state income
taxes at the corporate level, the Company would have recorded provisions for
income taxes of $4.7 million and $2.2 million for the third quarters of 1997 and
1996, respectively.
Net Income. As a result of the foregoing, net income increased by $5.9 million,
or 113.5%, to $11.1 million in the third quarter of 1997 from $5.2 million for
the same period in 1996. Had the Company been subject to federal and state
income taxes at the corporate level, the Company's net income would have been
$6.7 million and $3.1 million for the third quarters of 1997 and 1996,
respectively.
Liquidity and Capital Resources
- -------------------------------
The net cash provided by operating activities for the first nine months of 1997
and 1996 was $44.0 million and $10.4 million respectively. The increase in cash
provided by operating activities for the first nine months of 1997 as compared
to the first nine months of 1996, was $33.6 million. The increase in cash
provided by operating activities was the result of higher net income of $22.3
million and a decrease in working capital requirements and other operating
assets of $11.3 million.
The net cash used by investing activities for the first nine months of 1997 and
1996 was $6.5 million and $21.3 million, respectively. The decrease in cash used
from investing activities of $14.8 million for the first nine months of 1997 as
compared with the same period in 1996 was a result of lower net capital
expenditures of $6.9 million and nonrecurring investments in Berifors AB of $8.8
million in April of 1996 and in PST Industrial Eletronica da Amazonia Ltda. of
$1.0 million in July of 1997.
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Net cash used for financing activities for first nine months of 1997 was $37.8
million while net cash provided by financing activities for the same period of
1996 was $10.6 million. Cash distributions for the first nine months of 1997 and
1996 were $22.7 million and $8.6 million, respectively. Proceeds from the
exercise of share options were $2.3 million for the nine months ended September
30, 1997.
As a result of the foregoing operating, investing and financing activities, net
borrowings under the credit facility decreased $15.7 million for the first nine
months of 1997 while net borrowings under the credit facility increased $16.0
million for the same period in 1996.
The Company has a $125.0 million unsecured credit facility (of which $29.0
million was outstanding as of September 30, 1997), which expires on June 30,
2002. Interest on the credit facility is payable at the Company's option of
either prime or LIBOR plus 0.75% to 2.0%. Currently the Company is borrowing at
LIBOR plus 1.0%. The Company has entered into two interest rate swap agreements
with notional amounts of $25.0 and $20.0 million. The interest rate swap
agreements exchange the variable interest rate on the credit facility for fixed
rates. The Company does not use derivatives for speculative or profit motivated
purposes.
ITEM 3.
- -------
QUANTITIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -----------------------------
In the ordinary course of business, the Company is involved in various
legal proceedings, workers' compensation and product liability disputes. The
Company is of the opinion that the ultimate resolution of these matters will not
have a material adverse effect on the results of operations or the financial
position of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- -----------------------------------------------------
(a) Sale of Unregistered Securities
The Company has issued the following securities relying on the
exemption from registration contained in Section 4(2) of the Securities
Act of 1933:
(i) On August 7, 1997, certain management employees and directors exercised
options to purchase 403,342 Common Shares for an aggregate exercise
price of $2,314,200.
(ii) On October 9, 1997, a management employee exercised an option to
purchase 34,771 Common Shares for an aggregate exercise price of
$199,500.
(iii) On October 10, 1997, the Company issued 704,563 Common Shares in
connection with the acquisition of 51% of Berifors AB.
(b) Use of Proceeds
On October 9, 1997, the Company's Registration Statement on Form S-1
(commission file number 001-13337) became effective. On October 10,
1997, the Company completed an initial public offering. Managing
underwriters for the Offering were Morgan Stanley & Co. Incorporated
and Donaldson, Lufkin & Jenrette Securities Corporation. The Company
registered and sold 6,727,500 Common Shares and received gross proceeds
of approximately $117,700,000. Total expenses incurred in conjunction
with the Offering were $9,150,000 which included underwriting discounts
of approximately $7,950,000 and other expenses estimated at
approximately $1,200,000. Net proceeds from the Offering of
$108,550,000 were used to fund a payment to the pre-Offering
shareholders of $83,000,000 and for the partial repayment of debt.
All transactions above have been adjusted to give effect to the
amendment of the Company's Articles of Incorporation as discussed in Note 2.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- -------------------------------------------
None.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ---------------------------------------------------------------
In connection with the Offering, the pre-Offering shareholders approved
a number of resolutions by unanimous written consent on September 30, 1997,
including resolutions adopting the amendments to its Articles of Incorporation
and Code of Regulations, and approving the Company's Long-Term Incentive Plan.
ITEM 5. OTHER INFORMATION
- -----------------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------
(a) Exhibits
10.11 Agreement for the Purchase and Sale of Quotas of P.S.T.
Industria Eletronica da Amazonia Ltda.
10.12 Quotaholders' Agreement among Marcos Ferretti, Sergio De
Cerqueira Leite, Stoneridge, Inc. and P.S.T. Industria
Eletronica da Amazonia Ltda.
27.6 Financial Data Schedule for the nine months ended September
30, 1997
27.7 Financial Data Schedule for the nine months ended September
30, 1996
(b) Reports on Forms 8-K
None.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STONERIDGE, INC.
Date: November 21, 1997 /s/ CLOYD J. ABRUZZO
--------------------------------------
Cloyd J. Abruzzo
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 21, 1997 /s/ KEVIN P. BAGBY
--------------------------------------
Kevin P. Bagby
Treasurer and Chief Financial Officer
(Principal Accounting Officer)
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STONERIDGE, INC.
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
10.11 Agreement for the Purchase and Sale of Quotas of P.S.T.
Industria Eletronica da Amazonia Ltda.
10.12 Quotaholders' Agreement among Marcos Ferretti, Sergio De
Cerqueira Leite, Stoneridge, Inc. and P.S.T. Industria
Eletronica da Amazonia Ltda.
27.6 Financial Data Schedule for the nine months ended September
30, 1997
27.7 Financial Data Schedule for the nine months ended September
30, 1996
15