1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A 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. ------------------------------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) Ohio 34-1598949 -------------------------------- ------------------------ (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 9400 East Market Street, Warren, Ohio 44484 ---------------------------------------- ---------------------- (Address of Principal Executive Offices) (Zip Code) (330) 856-2443 -------------------------------------------------------------------- Registrant's Telephone Number, Including Area Code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 2 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 1 3 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 ------ 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. 2 4 STONERIDGE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except for share and per share data) 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 statements. 3 5 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 statements. 4 6 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 16, 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 were consolidated in the financial statements of the Company. 5 7 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 share 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) ------- ------- 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 128 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. 6 8 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 0.75% to 2.0%, 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 0.75% to 2.0%, 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. 7 9 ITEM 2. - ------ 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 $29.4 million to $46.3 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. 8 10 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. 9 11 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. 10 12 Net cash used for financing activities for the 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. 11 13 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 (Registration number 333-33285) became effective. On October 16, 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 as an S Corporation Distribution and for the 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. 12 14 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 dated October 29, 1997. 10.12 Quotaholders' Agreement among Marcos Ferretti, Sergio De Cerqueira Leite, Stoneridge, Inc. and P.S.T. Industria Eletronica da Amazonia Ltda dated October 29, 1997. 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 15 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) 14 16 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 dated October 29, 1997. 10.12 Quotaholders' Agreement among Marcos Ferretti, Sergio De Cerqueira Leite, Stoneridge, Inc. and P.S.T. Industria Eletronica da Amazonia Ltda dated October 29, 1997. 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