sri-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarter ended March 31, 2024

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

Commission file number: 001-13337

STONERIDGE, INC

(Exact name of registrant as specified in its charter)


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

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


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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, without par value

SRI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

xYes oNo

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

xYes oNo

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


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

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

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

The number of Common Shares, without par value, outstanding as of April 26, 2024 was 27,671,231.

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STONERIDGE, INC. AND SUBSIDIARIES

INDEX

Page

PART I–FINANCIAL INFORMATION

Item 1.

Financial Statements

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

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

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

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

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II–OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Forward-Looking Statements

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

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

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

•global economic trends, competition and geopolitical risks, including impacts from ongoing or potential global conflicts and any related sanctions and other measures, or an escalation of sanctions, tariffs or other trade tensions between the U.S. and 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 affecting our products, our suppliers, or our customers’ products;

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

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

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

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

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

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

•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 2023 Form 10-K.

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

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

STONERIDGE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands)	March 31, 2024		December 31, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	48,440	$	40,841
Accounts receivable, less reserves of $932 and $1,058, respectively	170,296		166,545
Inventories, net	179,891		187,758
Prepaid expenses and other current assets	32,716		34,246
Total current assets	431,343		429,390
Long-term assets:
Property, plant and equipment, net	106,170		110,126
Intangible assets, net	45,270		47,314
Goodwill	34,488		35,295
Operating lease right-of-use asset	9,552		10,795
Investments and other long-term assets, net	48,589		46,980
Total long-term assets	244,069		250,510
Total assets	$	675,412	$	679,900

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:

Current portion of debt	$	2,077	$	2,113
Accounts payable	109,222		111,925
Accrued expenses and other current liabilities	68,947		64,203
Total current liabilities	180,246		178,241
Long-term liabilities:
Revolving credit facility	194,420		189,346
Deferred income taxes	6,849		7,224
Operating lease long-term liability	6,594		7,684
Other long-term liabilities	10,047		9,688
Total long-term liabilities	217,910		213,942
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 27,667 and 27,549 shares outstanding at March 31, 2024 and December 31, 2023, respectively, with no stated value	—		—
Additional paid-in capital	223,856		227,340
Common Shares held in treasury, 1,299 and 1,417 shares at March 31, 2024 and December 31, 2023, respectively, at cost	(39,386)		(43,344)
Retained earnings	190,383		196,509
Accumulated other comprehensive loss	(97,597)		(92,788)
Total shareholders' equity	277,256		287,717
Total liabilities and shareholders' equity	$	675,412	$	679,900

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

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STONERIDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended March 31,
(in thousands, except per share data)	2024		2023

Net sales	$	239,157	$	241,325
Costs and expenses:
Cost of goods sold	190,800		198,523
Selling, general and administrative	30,423		29,863
Design and development	17,603		16,968
Operating income (loss)	331		(4,029)
Interest expense, net	3,634		2,746
Equity in loss of investee	277		171
Other expense, net	2,036		1,148
Loss before income taxes	(5,616)		(8,094)
Provision (benefit) for income taxes	510		(708)
Net loss	$	(6,126)	$	(7,386)

Loss per share:
Basic	$	(0.22)	$	(0.27)
Diluted	$	(0.22)	$	(0.27)

Weighted-average shares outstanding:
Basic	27,529		27,349
Diluted	27,529		27,349

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

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STONERIDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


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

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

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

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


(1)			Net of tax expense (benefit) of $19 and $(62) for the three months ended March 31, 2024 and 2023, respectively.

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

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STONERIDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


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

OPERATING ACTIVITIES:
Net loss	$	(6,126)	$	(7,386)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation	6,601		6,573
Amortization, including accretion and write-off of deferred financing costs	2,164		1,946
Deferred income taxes	(2,279)		(2,536)
Loss of equity method investee	277		171
Loss (gain) on sale of fixed assets	266		(886)
Share-based compensation expense	1,092		69
Excess tax deficiency related to share-based compensation expense	230		34




Changes in operating assets and liabilities:
Accounts receivable, net	(6,676)		(16,833)
Inventories, net	3,699		(15,228)
Prepaid expenses and other assets	1,377		1,943
Accounts payable	(709)		21,264
Accrued expenses and other liabilities	9,193		1,687
Net cash provided by (used for) operating activities	9,109		(9,182)

INVESTING ACTIVITIES:
Capital expenditures, including intangibles	(5,795)		(10,110)
Proceeds from sale of fixed assets	81		1,355




Net cash used for investing activities	(5,714)		(8,755)

FINANCING ACTIVITIES:
Revolving credit facility borrowings	30,500		8,000
Revolving credit facility payments	(24,500)		(8,568)
Proceeds from issuance of debt	7,798		8,148
Repayments of debt	(7,790)		(8,475)

Repurchase of Common Shares to satisfy employee tax withholding	(620)		(1,224)
Net cash provided by (used for) financing activities	5,388		(2,119)

Effect of exchange rate changes on cash and cash equivalents	(1,184)		423
Net change in cash and cash equivalents	7,599		(19,633)
Cash and cash equivalents at beginning of period	40,841		54,798

Cash and cash equivalents at end of period	$	48,440	$	35,165

Supplemental disclosure of cash flow information:
Cash paid for interest, net	$	4,194	$	2,494
Cash paid for income taxes, net	$	2,653	$	2,611

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

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STONERIDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


(in thousands)	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	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

















BALANCE DECEMBER 31, 2023	27,549	1,417	$	227,340	$	(43,344)	$	196,509	$	(92,788)	$	287,717
Net loss	—	—	—		—		(6,126)		—		(6,126)
Unrealized gain on derivatives, net	—	—	—		—		—		70		70
Currency translation adjustments	—	—	—		—		—		(4,879)		(4,879)
Issuance of Common Shares	154	(154)	—		—		—		—		—
Repurchased Common Shares for treasury, net	(36)	36	—		3,958		—		—		3,958
Share-based compensation, net	—	—	(3,484)		—		—		—		(3,484)
BALANCE MARCH 31, 2024	27,667	1,299	$	223,856	$	(39,386)	$	190,383	$	(97,597)	$	277,256

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

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

(1) Basis of Presentation

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

Reclassifications

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

(2) Recently Issued Accounting Standards

Accounting Standards Not Yet Adopted

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

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures," which requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, companies are required to disclose additional information about income taxes paid. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to be adopted on a prospective basis; however, retrospective application is permitted. We are currently evaluating the impact on our annual consolidated financial statement disclosures.

(3) Revenue

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

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

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

Revenue by Reportable Segment

Control Devices. Our Control Devices segment designs and manufactures products that monitor, measure or activate specific functions within a vehicle. This segment includes product lines such as actuators, sensors, switches and connectors. We sell these products principally to the automotive market in the North American and Asia Pacific regions. To a lesser extent, we also sell these products to the commercial vehicle and agricultural markets in the North American and Asia Pacific regions. Our customers included in these markets primarily consist of original equipment manufacturers (“OEM”) and companies supplying components directly to the OEMs (“Tier 1 supplier”).

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

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

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


	Control Devices				Electronics				Stoneridge Brazil				Consolidated
Three months ended March 31,	2024		2023		2024		2023		2024		2023		2024		2023
Net Sales:
North America	$	65,822	$	75,681	$	52,294	$	48,045	$	—	$	—	$	118,116	$	123,726
South America	—		—		—		—		12,216		14,256		12,216		14,256
Europe	—		—		96,374		87,246		—		—		96,374		87,246
Asia Pacific	11,336		10,261		1,115		5,836		—		—		12,451		16,097
Total net sales	$	77,158	$	85,942	$	149,783	$	141,127	$	12,216	$	14,256	$	239,157	$	241,325

_______________________

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

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STONERIDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

Performance Obligations

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

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

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

Contract Balances

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

(4) Inventories

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

SEC Form 10-Q filed by Stoneridge Inc.