10-Q 1 sri-20240331.htm 10-Q sri-20240331
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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
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-13337
999.jpg
STONERIDGE, INC
(Exact name of registrant as specified in its charter)
Ohio34-1598949
(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 classTrading 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.

STONERIDGE, INC. AND SUBSIDIARIES
INDEXPage
2
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.
3
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, net179,891 187,758 
Prepaid expenses and other current assets32,716 34,246 
Total current assets431,343 429,390 
Long-term assets:
Property, plant and equipment, net106,170 110,126 
Intangible assets, net45,270 47,314 
Goodwill34,488 35,295 
Operating lease right-of-use asset9,552 10,795 
Investments and other long-term assets, net48,589 46,980 
Total long-term assets244,069 250,510 
Total assets$675,412 $679,900 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of debt$2,077 $2,113 
Accounts payable109,222 111,925 
Accrued expenses and other current liabilities68,947 64,203 
Total current liabilities180,246 178,241 
Long-term liabilities:
Revolving credit facility194,420 189,346 
Deferred income taxes6,849 7,224 
Operating lease long-term liability6,594 7,684 
Other long-term liabilities10,047 9,688 
Total long-term liabilities217,910 213,942 
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 capital223,856 227,340 
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 earnings190,383 196,509 
Accumulated other comprehensive loss(97,597)(92,788)
Total shareholders' equity277,256 287,717 
Total liabilities and shareholders' equity$675,412 $679,900 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
STONERIDGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
(in thousands, except per share data)20242023
Net sales$239,157 $241,325 
Costs and expenses:
Cost of goods sold190,800 198,523 
Selling, general and administrative30,423 29,863 
Design and development17,603 16,968 
Operating income (loss)331 (4,029)
Interest expense, net3,634 2,746 
Equity in loss of investee277 171 
Other expense, net2,036 1,148 
Loss before income taxes(5,616)(8,094)
Provision (benefit) for income taxes510 (708)
Net loss$(6,126)$(7,386)
Loss per share:
Basic$(0.22)$(0.27)
Diluted$(0.22)$(0.27)
Weighted-average shares outstanding:
Basic27,52927,349
Diluted27,52927,349
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
STONERIDGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
Three months ended
March 31,
(in thousands)20242023
Net loss$(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 $(62) for the three months ended March 31, 2024 and 2023, respectively.
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
STONERIDGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31, (in thousands)20242023
OPERATING ACTIVITIES:
Net loss$(6,126)$(7,386)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation6,601 6,573 
Amortization, including accretion and write-off of deferred financing costs2,164 1,946 
Deferred income taxes(2,279)(2,536)
Loss of equity method investee277 171 
Loss (gain) on sale of fixed assets266 (886)
Share-based compensation expense1,092 69 
Excess tax deficiency related to share-based compensation expense230 34 
Changes in operating assets and liabilities:
Accounts receivable, net(6,676)(16,833)
Inventories, net3,699 (15,228)
Prepaid expenses and other assets1,377 1,943 
Accounts payable(709)21,264 
Accrued expenses and other liabilities9,193 1,687 
Net cash provided by (used for) operating activities9,109 (9,182)
INVESTING ACTIVITIES:
Capital expenditures, including intangibles(5,795)(10,110)
Proceeds from sale of fixed assets81 1,355 
Net cash used for investing activities(5,714)(8,755)
FINANCING ACTIVITIES:
Revolving credit facility borrowings30,500 8,000 
Revolving credit facility payments(24,500)(8,568)
Proceeds from issuance of debt7,798 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 activities5,388 (2,119)
Effect of exchange rate changes on cash and cash equivalents(1,184)423 
Net change in cash and cash equivalents7,599 (19,633)
Cash and cash equivalents at beginning of period40,841 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.
7
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 27,3411,625$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 Shares234(234)— — — — — 
Repurchased Common Shares for treasury, net(62)62— 5,649 — — 5,649 
Share-based compensation, net——(6,802)— — — (6,802)
BALANCE MARCH 31, 202327,5131,453$225,956 $(44,717)$194,306 $(99,302)$276,243 
BALANCE DECEMBER 31, 202327,5491,417$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 Shares154(154)— — — — — 
Repurchased Common Shares for treasury, net(36)36— 3,958 — — 3,958 
Share-based compensation, net——(3,484)— — — (3,484)
BALANCE MARCH 31, 202427,6671,299$223,856 $(39,386)$190,383 $(97,597)$277,256 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
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.
9
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 DevicesElectronicsStoneridge BrazilConsolidated
Three months ended March 31,20242023202420232024202320242023
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 Pacific11,336 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.
10
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:
March 31,
2024		December 31,
2023
Raw materials$135,150 $142,744 
Work-in-progress9,843 11,907 
Finished goods34,898 33,107 
Total inventories, net$179,891 $187,758 
11
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
Inventory valued using the FIFO method was $168,094 and $176,033 at March 31, 2024 and December 31, 2023, respectively. Inventory valued using the average cost method was $11,797 and $11,725 at March 31, 2024 and December 31, 2023, respectively.
(5) Financial Instruments and Fair Value Measurements
Financial Instruments
A financial instrument is cash or a contract that imposes an obligation to deliver or conveys a right to receive cash or another financial instrument. The carrying values of cash and cash equivalents, accounts receivable and accounts payable are considered to be representative of fair value because of the short maturity of these instruments. The fair value of debt approximates the carrying value of debt, due to the variable interest rate on our Credit Facility and the maturity of the remaining outstanding debt.
Derivative Instruments and Hedging Activities
On March 31, 2024, the Company had open Mexican peso-denominated foreign currency forward contracts. The Company used foreign currency forward contracts solely for hedging and not for speculative purposes during 2024 and 2023. Management believes that its use of these instruments to reduce risk is in the Company’s best interest. The counterparties to these financial instruments are financial institutions with investment grade credit ratings.
Foreign Currency Exchange Rate Risk
Foreign currency transactions are remeasured into the functional currency using translation rates in effect at the time of the transaction with the resulting adjustments included on the condensed consolidated statements of operations within other expense, net. These foreign currency transaction losses, including the impact of hedging activities, were $1,944 and $1,102 for the three months ended March 31, 2024 and 2023, respectively.
The Company conducts business internationally and, therefore, is exposed to foreign currency exchange rate risk. The Company uses derivative financial instruments as cash flow hedges and used net investment hedges to manage its exposure to fluctuations in foreign currency exchange rates by reducing the effect of such fluctuations on foreign currency denominated intercompany transactions, inventory purchases and other foreign currency exposures.
Cash Flow Hedges
The Company entered into foreign currency forward contracts to hedge the Mexican peso currency in 2024 and 2023. These forward contracts were executed to hedge forecasted transactions and have been accounted for as cash flow hedges. As such, gains and losses on derivatives qualifying as cash flow hedges are recorded in accumulated other comprehensive loss, to the extent that hedges are effective, until the underlying transactions are recognized in earnings. Unrealized amounts in accumulated other comprehensive loss fluctuate based on changes in the fair value of hedge derivative contracts at each reporting period. The cash flow hedges were highly effective. The effectiveness of the transactions was measured using regression analysis and forecasted future purchases of the currency.
In certain instances, the foreign currency forward contracts may not qualify for hedge accounting or are not designated as hedges and, therefore, are marked-to-market with gains and losses recognized in the Company’s condensed consolidated statements of operations as a component of other expense, net. During 2023 and 2022, all of the Company’s foreign currency forward contracts were designated as cash flow hedges.
The Company’s foreign currency forward contracts offset a portion of the gains and losses on the underlying foreign currency denominated transactions as follows:
Mexican peso-denominated Foreign Currency Forward Contracts – Cash Flow Hedges
The Company holds Mexican peso-denominated foreign currency forward contracts with a notional amount at March 31, 2024 of $16,878 which expire ratably on a monthly basis from April 2024 to December 2024. The notional amounts at December 31, 2023 related to Mexican peso-denominated foreign currency forward contracts was $26,613.
The Company evaluated the effectiveness of the Mexican peso and U.S. dollar-denominated forward contracts held as of March 31, 2024 and concluded that the hedges were highly effective.
12
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
Interest Rate Risk
Interest Rate Risk – Cash Flow Hedge
On February 18, 2020, the Company entered into a floating-to-fixed interest rate swap agreement (the “Swap”) with a notional amount of $50,000 to hedge its exposure to interest payment fluctuations on a portion of its Credit Facility borrowings. The Swap matured on March 10, 2023. The Swap was designated as a cash flow hedge of the variable interest rate obligation under the Company's Fourth Amended and Restated Credit Agreement, as amended, (the “Fourth Amended and Restated Credit Agreement”). Accordingly, the change in fair value of the Swap was recognized in accumulated other comprehensive loss. The Swap agreement required monthly settlements on the same days that the Fourth Amended and Restated Credit Agreement interest payments were due and had a maturity date of March 10, 2023, which was prior to the Fourth Amended and Restated Credit Agreement maturity date of June 5, 2024. Under the Swap terms, the Company paid a fixed interest rate and received a floating interest rate based on the one-month LIBOR, with a floor. The critical terms of the Swap were aligned with the terms of the Fourth Amended and Restated Credit Agreement, resulting in no hedge ineffectiveness. The difference between amounts to be received and paid under the Swap were recognized as a component of interest expense, net on the consolidated statements of operations. The Swap settlements reduced interest expense, net by $290 for the three months ended March 31, 2023.
The notional amounts and fair values of derivative instruments in the condensed consolidated balance sheets were as follows:
Notional amounts (A)
Prepaid expenses
 and other current assets
March 31,
2024		December 31,
2023		March 31,
2024		December 31,
2023
Derivatives designated as hedging instruments:
Cash flow hedges:
Forward currency contracts$16,878 $26,613 $1,947 $1,858 
_____________________________
(A)Notional amounts represent the gross contract of the derivatives outstanding in U.S. dollars.
Gross amounts recorded for the cash flow hedges in other comprehensive loss and in net loss for the three months ended March 31 were as follows:
Gain recorded in other
comprehensive loss
Gain reclassified from
other comprehensive
loss into net loss (A)
2024202320242023
Derivatives designated as cash flow hedges:
Forward currency contracts$654 $— $743 $— 
Interest rate swap$— $(4)$— $290 
_____________________________
(A)
Gains reclassified from other comprehensive loss into net loss recognized in selling, general and administrative expenses (“SG&A”) in the Company’s condensed consolidated statements of operations were $117 and $0 for the three months ended March 31, 2024 and 2023, respectively. Gains reclassified from other comprehensive loss into net loss recognized in cost of goods sold (“COGS”) in the Company’s condensed consolidated statements of operations were $537 and $0 for the three months ended March 31, 2024 and 2023, respectively. Gains reclassified from other comprehensive loss into net loss recognized in interest expense, net in the Company’s condensed consolidated statements of operations were $0 and $290 for the three months ended March 31, 2024 and 2023, respectively.
13
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
Cash flows from derivatives used to manage foreign currency exchange and interest rate risks are classified as operating activities within the condensed consolidated statements of cash flows.
Fair Value Measurements
Certain assets and liabilities held by the Company are measured at fair value on a recurring basis and are categorized using the three levels of the fair value hierarchy based on the reliability of the inputs used. Fair values estimated using Level 1 inputs consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Fair values estimated using Level 2 inputs, other than quoted prices, are observable for the asset or liability, either directly or indirectly and include among other things, quoted prices for similar assets or liabilities in markets that are active or inactive as well as inputs other than quoted prices that are observable. For forward currency and cross-currency contracts, inputs include forward foreign currency exchange rates. For the interest rate swap, inputs included LIBOR. Fair values estimated using Level 3 inputs consist of significant unobservable inputs.
The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the three levels of the fair value hierarchy based on the reliability of inputs used.
March 31,
2024		December 31,
2023
Fair values estimated using
Fair
value		Level 1
inputs		Level 2
inputs		Level 3
inputs		Fair
value
Financial assets carried at fair value:
Forward currency contracts$1,947 $— $1,947 $— $1,858 
Total financial assets carried at fair value$1,947 $— $1,947 $— $1,858 
There were no transfers in or out of Level 3 from other levels in the fair value hierarchy for the three months ended March 31, 2024.
(6) Share-Based Compensation
Compensation expense for share-based compensation arrangements, which is recognized in the condensed consolidated statements of operations as a component of SG&A expense, was $1,092 and $69 for the three months ended March 31, 2024 and 2023, respectively. The three months ended March 31, 2023 included income from the forfeiture of certain grants associated with employee resignations.
(7) Debt
Debt consisted of the following at March 31, 2024 and December 31, 2023:
March 31,
2024		December 31,
2023		Interest rates at March 31, 2024Maturity
Revolving Credit Facility
Revolving Credit Facility$194,420 $189,346 8.01 %November 2026
Debt
Sweden short-term credit line— — 
Suzhou short-term credit line2,077 2,113 3.25 %August 2024
Total debt2,077 2,113 
Less: current portion(2,077)(2,113)
Total long-term debt, net$— $— 
14
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
Revolving Credit Facility
On June 5, 2019, the Company entered into the Fourth Amended and Restated Credit Agreement. The Fourth Amended and Restated Credit Agreement provided for a $300,000 senior secured revolving credit facility. As a result of entering into the Fourth Amended and Restated Credit Agreement and related amendments, the Company capitalized $332 of deferred financing costs during the year ended December 31, 2023.
On November 2, 2023, the Company entered into the Fifth Amended and Restated Credit Agreement (the “Credit Facility”). The Credit Facility provides for a $275,000 senior secured revolving credit facility and it replaced and superseded the Fourth Amended and Restated Credit Agreement. The Credit Facility has an accordion feature which allows the Company to increase the availability by up to $150,000 upon the satisfaction of certain conditions, including the consent of lenders providing the increase in commitments and also includes a letter of credit subfacility, swing line subfacility and multicurrency subfacility. The Credit Facility has a termination date of November 2, 2026. Borrowings under the Credit Facility bear interest at either the Base Rate or the SOFR rate, at the Company’s option, plus the applicable margin as set forth in the Credit Facility. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio.
As a result of entering into the Fifth Amended and Restated Credit Agreement, the Company capitalized $1,915 of deferred financing costs and wrote off $309 of previously recorded deferred financing costs during the year ended December 31, 2023.
The Credit Facility contains customary affirmative covenants and representations. The Credit Facility also contains customary negative covenants, which, among other things, are subject to certain exceptions, including restrictions on (i) indebtedness, (ii) liens, (iii) liquidations, mergers, consolidations and acquisitions, (iv) disposition of assets or subsidiaries, (v) affiliate transactions, (vi) continuation of or change in business, (vii) restricted payments, (viii) restrictions in agreements on dividends, intercompany loans and granting liens on the collateral, (ix) loans and investments and (x) changes in organizational documents and fiscal year. The Credit Facility contains customary events of default, subject to customary thresholds and exceptions, including, among other things, (i) non-payment of principal and non-payment of interest and fees, (ii) a material inaccuracy of a representation or warranty at the time made, (iii) a failure to comply with any covenant, subject to customary grace periods in the case of certain affirmative covenants, (iv) cross default of other debt, final judgments and other adverse orders in excess of $30,000, (v) any loan document shall cease to be a legal, valid and binding agreement, (vi) certain uninsured losses or proceedings against assets with a value in excess of $30,000, (vii) ERISA events, (viii) a change of control, or (ix) bankruptcy or insolvency proceedings.
Borrowings outstanding on the Credit Facility were $194,420 and $189,346 at March 31, 2024 and December 31, 2023, respectively.
The Company was in compliance with all Credit Facility covenants at March 31, 2024 and December 31, 2023.
The Company also has outstanding letters of credit of $1,586 at both March 31, 2024 and December 31, 2023.
Debt
The Company’s wholly owned subsidiary located in Stockholm, Sweden (the "Stockholm subsidiary"), has an overdraft credit line that allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20,000 Swedish krona, or $1,878 and $1,987, at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024 and December 31, 2023, there were no borrowings outstanding on this overdraft credit line. During the three months ended March 31, 2024, the subsidiary borrowed and repaid 80,988 Swedish krona, or $7,604. The Stockholm subsidiary has pledged certain of its assets as collateral in order to obtain a guarantee of certain of the Stockholm subsidiary’s obligations to third parties.
15
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
The Company’s wholly owned subsidiary located in Suzhou, China (the “Suzhou subsidiary”), has lines of credit (the “Suzhou credit line”) that allow up to a maximum borrowing level of 20,000 Chinese yuan, or $2,770 and $2,818 at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024 and December 31, 2023 there was $2,077 and $2,113, respectively, in borrowings outstanding on the Suzhou credit line with a weighted-average interest rate of 3.25%. The Suzhou credit line was included on the condensed consolidated balance sheet within current portion of debt. In addition, the Suzhou subsidiary has a bank acceptance draft line of credit which facilitates the extension of trade payable payment terms by 180 days. The bank acceptance draft line of credit allows up to a maximum borrowing level of 60,000 Chinese yuan, or $8,310 and $8,453 at March 31, 2024 and December 31, 2023, respectively. There was $2,149 and $2,387 utilized on the Suzhou bank acceptance draft line of credit at March 31, 2024 and December 31, 2023, respectively. The Suzhou bank acceptance draft line of credit is included on the condensed consolidated balance sheet within accounts payable.
(8) Loss Per Share
Basic loss per share was computed by dividing net loss by the weighted-average number of Common Shares outstanding for each respective period. Diluted loss per share was calculated by dividing net income by the weighted-average of all potentially dilutive Common Shares that were outstanding during the periods presented. However, for all periods in which the Company recognized a net loss, the Company did not recognize the effect of the potential dilutive securities as their inclusion would be anti-dilutive. Potential dilutive shares of 298,592 and 292,860 for the three months ended March 31, 2024 and 2023, respectively, were excluded from diluted loss per share because the effect would be anti-dilutive.
Weighted-average Common Shares outstanding used in calculating basic and diluted earnings per share were as follows:
Three months ended
March 31,
20242023
Basic weighted-average Common Shares outstanding27,528,83127,349,357
Effect of dilutive shares——
Diluted weighted-average Common Shares outstanding27,528,83127,349,357
There were 660,124 and 521,304 performance-based right to receive Common Shares outstanding at March 31, 2024 and 2023, respectively. The right to receive Common Shares are included in the computation of diluted earnings per share based on the number of Common Shares that would be issuable if the end of the quarter were the end of the performance period.
(9) Accumulated Other Comprehensive (Loss) Income
Changes in accumulated other comprehensive (loss) income for the three months ended March 31, 2024 and 2023 were as follows:
Foreign
currency
translation		Unrealized
gain (loss)
on derivatives		Total
Balance at January 1, 2024$(94,256)$1,468 $(92,788)
Other comprehensive (loss) income before reclassifications(4,879)587 (4,292)
Amounts reclassified from accumulated other comprehensive loss— (517)(517)
Net other comprehensive (loss) income, net of tax(4,879)70 (4,809)
Balance at March 31, 2024$(99,135)$1,538 $(97,597)
Balance at January 1, 2023$(103,374)$232 $(103,142)
Other comprehensive income (loss) before reclassifications4,072 (3)4,069 
Amounts reclassified from accumulated other comprehensive loss— (229)(229)
Net other comprehensive income (loss), net of tax4,072 (232)3,840 
Balance at March 31, 2023$(99,302)$— $(99,302)
16
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
(10) Commitments and Contingencies
From time to time, we are subject to various legal actions and claims incidental to our business, including those arising out of breach of contracts, product warranties, product liability, patent infringement, regulatory matters and employment-related matters. The Company establishes accruals for matters which it believes that losses are probable and can be reasonably estimated. Although it is not possible to predict with certainty the outcome of these matters, the Company is of the opinion that the ultimate resolution of these matters will not have a material adverse effect on its consolidated results of operations or financial position.
As a result of environmental studies performed at the Company’s former facility located in Sarasota, Florida, the Company became aware of soil and groundwater contamination at the site. The Company engaged an environmental engineering consultant to assess the level of contamination and to develop a remediation and monitoring plan for the site. Soil remediation at the site was completed during the year ended December 31, 2010. A remedial action plan was approved by the Florida Department of Environmental Protection and groundwater remediation began in the fourth quarter of 2015. During the three months ended March 31, 2024 and 2023, the Company did not recognize any expense related to groundwater remediation. At March 31, 2024 and December 31, 2023, the Company accrued $142 and $143, respectively, related to expected future remediation costs. At March 31, 2024 and December 31, 2023, $142 and $136, respectively, were recorded as a component of accrued expenses and other current liabilities in the condensed consolidated balance sheets while the remaining amount as of December 31, 2023 was recorded as a component of other long-term liabilities. Costs associated with the recorded liability will be incurred to complete the groundwater remediation and monitoring. The recorded liability is based on assumptions in the remedial action plan as well as estimates for future remediation activities. Although the Company sold the Sarasota facility and related property in December 2011, the liability to remediate the site contamination remains the responsibility of the Company. Due to the ongoing site remediation, the Company is currently required to maintain a $1,489 letter of credit for the benefit of the buyer.
The Company’s Stoneridge Brazil subsidiary has civil, labor and other tax contingencies (excluding income tax) for which the likelihood of loss is deemed to be reasonably possible, but not probable, by the Company’s legal advisors in Brazil. As a result, no provision has been recorded with respect to these contingencies, which amounted to R$40,755 ($8,158) and R$41,681 ($8,609) at March 31, 2024 and December 31, 2023, respectively. An unfavorable outcome on these contingencies could result in significant cost to the Company and adversely affect its results of operations and cash flows.
On August 12, 2020, the Brazilian Administrative Counsel for Economic Defense (“CADE”) issued a ruling against Stoneridge Brazil for abuse of dominance and market foreclosure through its prior use of exclusivity provisions in agreements with its distributors. The CADE tribunal imposed a R$7,995 ($1,600) fine which is included in the reasonably possible contingencies noted above. The Company continues to challenge this ruling in Brazilian federal court to reverse this decision by the CADE tribunal.
Long Term Supply Commitment
In 2022, the Company entered into a long term supply agreement, as amended, with a supplier for the purchase of certain electronic semiconductor components through December 31, 2027. Pursuant to the agreement, the Company paid capacity deposits of $1,000 in December 2022 and June 2023, respectively. The capacity deposits are recognized in prepaid and other current assets on our condensed consolidated balance sheet. This long term supply agreement requires the Company to purchase minimum annual volumes while requiring the supplier to sell these components at a fixed price. The Company purchased $196 and $665 of these components during the three months ended March 31, 2024 and 2023, respectively. The Company is required to purchase $3,914, $10,764, $10,764 and $3,914 of these components in each of the years 2024 through 2027, respectively.
17
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
Product Warranty and Recall
Amounts accrued for product warranty and recall claims are established based on the Company’s best estimate of the amounts necessary to settle existing and future claims on products sold as of the balance sheet dates. These accruals are based on several factors including past experience, production changes, industry developments and various other considerations. Our estimate is based on historical trends of units sold and claim payment amounts, combined with our current understanding of the status of existing claims, forecasts of the resolution of existing claims, expected future claims on products sold and commercial discussions with our customers. The key factors in our estimate are the warranty period and the customer source. The Company can provide no assurances that it will not experience material claims or that it will not incur significant costs to defend or settle such claims beyond the amounts accrued. The current portion of the product warranty and recall reserve is included as a component of accrued expenses and other current liabilities on the condensed consolidated balance sheets. Product warranty and recall reserve included $7,414 and $7,228 of a long-term liability at March 31, 2024 and December 31, 2023, respectively, which is included as a component of other long-term liabilities on the condensed consolidated balance sheets.
During the second quarter of 2023, the Company received a demand for arbitration from one of our customers seeking recovery for warranty claims related to past sales of PM sensor products, a product line we exited in 2019. In March 2024, pursuant to the arbitration process, the customer submitted a formal statement of claim notification for 29,340 euro ($31,557) as of March 31, 2024. Based on our review of the technical merits and specific claims as well as prior discussions with the customer, we believe these claims lack merit and are significantly overstated. While no assurances can be made as to the ultimate outcome of this matter, or any other future claims, we do not currently believe a material loss is probable.
The following provides a reconciliation of changes in product warranty and recall reserve liability:
Three months ended March 31,20242023
Product warranty and recall reserve at beginning of period$21,610 $13,477 
Accruals for warranties established during period5,398 4,329 
Aggregate changes in pre-existing liabilities due to claim developments283 141 
Settlements made during the period(3,217)(2,025)
Foreign currency translation(692)66 
Product warranty and recall reserve at end of period$23,382 $15,988 
(11) Business Realignment and Restructuring
The Company regularly evaluates the performance of its businesses and cost structures, including personnel, and makes necessary changes thereto in order to optimize its results. The Company also evaluates the required skill sets of its personnel and periodically makes strategic changes. As a consequence of these actions, the Company incurs severance related costs that are referred to as business realignment charges.
Business realignment charges incurred by reportable segment were as follows:
Three months ended
March 31,
20242023
Electronics (A)
— 309 
Unallocated Corporate (B)
— 953 
Total business realignment charges$— $1,262 
_____________________________________
(A)
Severance costs for the three months ended March 31, 2023 related to COGS and SG&A were $175 and $134, respectively.
(B)
Employee separation related costs for the three months ended March 31, 2023 related to SG&A were $953.
18
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
Business realignment charges incurred, classified by statement of operations line item were as follows:
Three months ended
March 31,
20242023
Cost of goods sold$— $175 
Selling, general and administrative— 1,087 
Total business realignment charges$— $1,262 
(12) Income Taxes
For interim tax reporting, we estimate our annual effective tax rate and apply it to our year to date ordinary income. Tax jurisdictions with a projected or year to date loss for which a benefit cannot be realized are excluded.
For the three months ended March 31, 2024, income tax expense of $510 was attributable to the mix of earnings among tax jurisdictions as well as U.S. taxes on foreign earnings, offset by tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives. The effective tax rate of (9.1)% varies from the statutory rate primarily due to U.S. taxes on foreign earnings offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.
For the three months ended March 31, 2023, income tax benefit of $(708) was attributable to the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of 8.7% varies from the statutory rate primarily due to U.S. taxes on foreign earnings and non-deductible expenses offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.
The OECD (Organisation for Economic Co-operation and Development) implemented a 15% global corporate minimum tax (Pillar Two) to ensure that large multinational enterprises pay a minimum level of tax in the countries they operate. During 2023, many countries took steps to incorporate Pillar Two into their domestic laws. In 2024, we do not expect a material change to our income tax provision in connection with Pillar Two. As additional jurisdictions implement this legislation, our effective tax rate and cash tax payments could increase in future years.
(13) Segment Reporting
Operating segments are defined as components of an enterprise that are evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chief Executive Officer.
The Company has three reportable segments, Control Devices, Electronics and Stoneridge Brazil, which also represent its operating segments. The Control Devices reportable segment produces actuators, sensors, switches and connectors. The Electronics reportable segment produces driver information systems, vision and safety systems, connectivity and compliance products and electronic control units. The Stoneridge Brazil reportable segment designs and manufactures vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices, driver information systems and telematics solutions.
The accounting policies of the Company’s reportable segments are the same as those described in Note 2, “Summary of Significant Accounting Policies” of the Company’s 2023 Form 10-K. The Company’s management evaluates the performance of its reportable segments based primarily on revenues from external customers, capital expenditures and operating income. Inter-segment sales are accounted for on terms similar to those to third parties and are eliminated upon consolidation.
The financial information presented below is for our three reportable operating segments and includes adjustments for unallocated corporate costs and intercompany eliminations, where applicable. Such costs and eliminations do not meet the requirements for being classified as an operating segment. Corporate costs include various support functions, such as accounting/finance, executive administration, human resources, information technology and legal.
19
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
A summary of financial information by reportable segment is as follows:
Three months ended
March 31,
20242023
Net Sales:
Control Devices$77,158 $85,942 
Inter-segment sales831 734 
Control Devices net sales77,989 86,676 
Electronics149,783 141,127 
Inter-segment sales6,341 8,516 
Electronics net sales156,124 149,643 
Stoneridge Brazil12,216 14,256 
Inter-segment sales— — 
Stoneridge Brazil net sales12,216 14,256 
Eliminations(7,172)(9,250)
Total net sales$239,157 $241,325 
Operating Income (Loss):
Control Devices$2,164 $2,087 
Electronics7,089 1,400 
Stoneridge Brazil204 1,343 
Unallocated Corporate (A)
(9,126)(8,859)
Total operating income (loss)$331 $(4,029)
Depreciation and Amortization:
Control Devices$2,863 $3,174 
Electronics3,861 3,464 
Stoneridge Brazil1,276 1,085 
Unallocated Corporate584 602 
Total depreciation and amortization (B)
$8,584 $8,325 
Interest Expense (Income), net:
Control Devices$— $18 
Electronics603 485 
Stoneridge Brazil(370)(270)
Unallocated Corporate3,401 2,513 
Total interest expense, net$3,634 $2,746 
Capital Expenditures:
Control Devices$1,517 $1,956 
Electronics1,377 6,207 
Stoneridge Brazil940 636 
Unallocated Corporate(C)
434 112 
Total capital expenditures$4,268 $8,911 
20
STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data, unless otherwise stated)
(Unaudited)
March 31,
2024		December 31,
2023
Total Assets:
Control Devices$156,424 $159,612 
Electronics407,326 404,994 
Stoneridge Brazil59,782 66,318 
Corporate (C)
422,257 419,469 
Eliminations(370,377)(370,493)
Total assets$675,412 $679,900 
The following tables present net sales and long-term assets for each of the geographic areas in which the Company operates:
Three months ended
March 31,
20242023
Net Sales:
North America$118,116 $123,726 
South America12,216 14,256 
Europe and Other108,825 103,343 
Total net sales$239,157 $241,325 
March 31,
2024		December 31,
2023
Long-term Assets:
North America$93,228 $92,419 
South America31,253 32,679 
Europe and Other119,588 125,412 
Total long-term assets$244,069 $250,510 
__________________________________________________________
(A)Unallocated Corporate expenses include, among other items, accounting/finance, human resources, information technology and legal costs as well as share-based compensation.
(B)These amounts represent depreciation and amortization on property, plant and equipment and certain intangible assets.
(C)Assets located at Corporate consist primarily of cash, intercompany loan receivables, fixed assets for the corporate headquarter building, leased assets, information technology assets, equity investments and investments in subsidiaries.
(14) Investments
In December 2018, the Company entered into an agreement to make a $10,000 investment in a fund (“Autotech Fund II”) managed by Autotech Ventures (“Autotech”), a venture capital firm focused on ground transportation technology which is accounted for under the equity method of accounting. The Company’s $10,000 investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. The Company has contributed $8,400 to the Autotech Fund II as of March 31, 2024. The Company did not contribute to or receive distributions from Autotech Fund II during the three months ended March 31, 2024 or 2023. The Company has a 6.6% interest in Autotech Fund II. The Company recognized losses of $277 and $171 during the three months ended March 31, 2024 and 2023, respectively. The Autotech Fund II investment recorded in investments and other long-term assets in the condensed consolidated balance sheets was $8,195 and $8,472 as of March 31, 2024 and December 31, 2023, respectively.
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We are a global designer and manufacturer of highly engineered electrical and electronic systems, components and modules primarily for the automotive, commercial, off-highway and agricultural vehicle markets.
The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes related thereto and other financial information included elsewhere herein.
Segments
We are organized by products produced and markets served. Under this structure, our operations have been reported using the following segments:
Control Devices. This segment includes results of operations that manufacture actuators, sensors, switches and connectors.
Electronics. This segment includes results of operations from the production of driver information systems, vision and safety systems, connectivity and compliance products and electronic control units.
Stoneridge Brazil. This segment includes results of operations that design and manufacture vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices, driver information systems and telematics solutions.
First Quarter Overview
During the first quarter of 2024, we benefited from increased volumes in both our North American and European commercial vehicle markets, compared to the prior year quarter, due to improvements in end market demand and the continued ramp-up of recently launched programs including for our MirrorEye® camera monitoring system and our SE 5000 Smart 2 tachograph.
The Company had net loss of $6.1 million, or $(0.22) per diluted share, for the three months ended March 31, 2024.
Net loss for the quarter ended March 31, 2024 improved by $1.3 million, or $0.05 per diluted share, from net loss of $7.4 million, or $(0.27) per diluted share, for the three months ended March 31, 2023. Net loss improved due to contribution from higher sales partially offset by increased selling, general and administrative expenses ("SG&A") and design and development ("D&D") spending, higher interest costs, the incremental unfavorable impact of non-operating foreign currency losses and an increase in the provision for income taxes. Net sales decreased by $2.2 million, or 0.9%, primarily from lower volumes in our North American automotive market for Control Devices and lower required electronic component spot buy purchases in our Electronics segment, partially offset by higher volumes in our Electronics segment commercial vehicle market.
Our Control Devices segment net sales decreased by 10.2% compared to the first quarter of 2023 primarily as a result of decreases in our North American automotive market. The decrease in our North American automotive market was primarily due to the expected wind down of end-of-life programs and reduced demand for electric vehicles impacting actuation product revenue during the quarter. These decreases were offset by increases in our China commercial vehicle and automotive markets. Segment gross margin as a percentage of sales increased due to favorable mix resulting in lower direct material costs. Segment operating income increased due to higher gross margin and slightly lower D&D and SG&A spending, partially offset by the gain on sale of disposed assets recognized in the first quarter of 2023.
Our Electronics segment net sales increased by 6.1% compared to the first quarter of 2023 primarily due to higher sales volumes in our European and North American commercial vehicle markets, including our recently launched SE 5000 Smart 2 tachograph, as well as an increase in our North American off-highway vehicle market. These increases were offset by relatively less spot buy purchases, which are material purchases reimbursed by customers and recorded as both revenue and offsetting material cost. As such, spot buy purchases do not impact gross profit. In addition, we experienced lower sales volumes in our European off-highway vehicle market. Segment gross margin as a percent of sales increased primarily due to higher contribution from higher sales levels, a reduction in material purchase variances, including the effect of foreign currency, and the impact of lower required electronic component spot buy purchases offset by an increase in overhead costs. Operating income for the segment increased compared to the first quarter of 2023 primarily due to higher gross margin offset by higher SG&A and D&D spending, including support for new product launches.
Our Stoneridge Brazil segment net sales decreased by 14.3% compared to the first quarter of 2023 primarily due to lower sales in local OEM products, as a result of one-time revenue opportunities recognized in the first quarter of 2023 which were not expected to recur in 2024. Operating income decreased due to lower gross margin from lower sales contribution.
22
In the first quarter of 2024, SG&A expenses increased by $0.6 million compared to the first quarter of 2023 primarily due to the 2023 gain on sale of fixed assets of $0.8 million.
In the first quarter of 2024, D&D costs increased by $0.6 million compared to the prior year first quarter due to incremental engineering spending primarily related to product launches and lower customer reimbursements offset by increased capitalized software development costs.
At March 31, 2024 and December 31, 2023, we had cash and cash equivalents balances of $48.4 million and $40.8 million, respectively, and we had $194.4 million and $189.3 million, respectively, in borrowings outstanding on our Credit Facility. The 2024 increase in cash and cash equivalents was mostly due to cash generated from operating activities, including the reduction of inventory levels.
Outlook
The Company believes that focusing on products that address industry megatrends has had and will continue to have a positive effect on both our top-line growth and underlying margins. For example, the Company is aligned with platforms likely to perform well against overall market dynamics including light-trucks, SUVs and crossover vehicles and our continued focus on safety, vehicle intelligence and connectivity based products, such as the recent release of our next generation tachograph in Europe as well as current and future launches of our MirrorEye programs in North America and Europe for both OEM and aftermarket applications.
Material and production cost inflation has begun to moderate, however we expect continued cost inflation to persist throughout 2024 which will continue to put pressure on margins. In order to minimize the impact of these incremental costs, we have taken several actions, including negotiating price increases and cost recoveries with our customers. Additionally, we continued to focus on improving manufacturing performance and optimizing our global cost structure to both reduce costs and improve operational efficiency. We expect these actions will benefit our current and future financial performance.
Based on IHS Market production forecasts, the North American automotive market is expected to increase from 15.6 million units in 2023 to 16.0 million units in 2024 as this market continues to recover from economic headwinds. In our Control Devices segment, we expect lower than previously anticipated growth rates for sales of products used in electric vehicle platforms due to reduced production expectations with some of our key customers. We continue to focus on improved manufacturing execution, supply chain strategy, material cost improvement actions and enterprise-wide cost improvement plans and will continue to react to changes in our end-markets as needed to maintain and improve our margins. During 2024, our Control Devices segment has incurred $0.7 million of support costs for a troubled supplier. We expect these costs to moderate for the remainder of 2024. We will continue to focus on growing our core product portfolio aligned with industry megatrends by investing in our actuation and system-level sensor products as we anticipate greater opportunities as powertrains become increasingly electrified and efficient.
In 2024, our European and North American commercial vehicle end market volumes are forecasted to decrease 10.5% and 7.6%, respectively. We expect our Electronics’ segment sales to outperform forecasted changes in production volumes due to strong demand for our existing products and the ramp-up of recently launched programs, including our next generation tachograph product in Europe for both OEM and aftermarket applications and our first North American OEM MirrorEye program, as well as expected program launches, including our next OEM MirrorEye program launch in Europe in 2024. Based on European regulatory requirements and the competitive landscape for our tachograph product, we expect significant growth over the next several years. We continue to work with all of our OEM customers, their dealer networks and the fleets to drive MirrorEye adoption. We expect continued growth as we launch new OEM programs, increase take rates for existing OEM programs and continue to expand our fleet activities. Recovery from customers related to spot buys of materials purchased by the Company on behalf of those customers, which is recognized as revenue and material costs, increased net sales by $14.6 million for the full year 2023. As a result of supply chains normalizing and material availability improving, the Company did not incur any spot buy material purchases in the first quarter 2024 and does not expect to incur additional spot buy material purchases.
In 2024, we expect net D&D spend to increase modestly driven by spend for the development of next generation products as we expect new product launch related spend to decrease in the second half of 2024. As a result of reduced launch activities we expect lower customer reimbursements and capitalization of software development costs. We continue to evaluate and optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend.
23
In April 2024, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.2% in 2024. We expect our served market channels to remain relatively stable in 2024 based on current market conditions. Stoneridge Brazil will focus on continuing to grow our OEM capabilities in-region to better support our global customers. This focus will provide opportunities for future growth and provide a platform to continue to rotate our local portfolio to more closely align with our global business.
We remain focused on improving cash generation and the reduction of debt through efficient operating performance and targeted actions to reduce net working capital, particularly our inventory levels, as the impacts from product launches and material availability normalizes.
We expect higher interest expense in 2024 driven by higher outstanding balances on our Credit Facility.
Our future effective tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles and our jurisdictional mix of earnings. We monitor these factors and the impact on our effective tax rate.
Other Matters
A significant portion of our sales are outside of the United States. These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars. A significant portion of our raw materials purchased by our Electronics and Stoneridge Brazil segments are denominated in U.S. dollars, and therefore movements in foreign currency exchange rates can also have a significant effect on our results of operations. The U.S. Dollar strengthened against the euro, Swedish krona, Chinese yuan, Brazilian real and Argentine peso in 2024 and the Argentine peso in 2023, unfavorably impacting our reported results.
We regularly evaluate the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto in order to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. As a consequence of these actions, we incur severance and resignation related costs that we refer to as business realignment charges. No business realignment costs were incurred during the three months ended March 31, 2024. Business realignment costs of $1.3 million were incurred during the three months ended March 31, 2023.
Because of the competitive nature of the markets we serve, we face pricing pressures from our customers in the ordinary course of business. In response to these pricing pressures we have been able to effectively manage our production costs by the combination of lowering certain costs and limiting the increase of others, the net impact of which to date has not been material. However, if we are unable to effectively manage production costs in the future to mitigate future pricing pressures, our results of operations would be adversely affected.
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Condensed consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):
Three months ended March 31,20242023Dollar
increase
(decrease)
Net sales$239,157 100.0 %$241,325 100.0 %$(2,168)
Costs and expenses:
Cost of goods sold190,800 79.8 198,523 82.3 (7,723)
Selling, general and administrative30,423 12.7 29,863 12.4 560 
Design and development17,603 7.4 16,968 7.0 635 
Operating income (loss)331 0.1 (4,029)(1.7)4,360 
Interest expense, net3,634 1.5 2,746 1.1 888 
Equity in loss of investee277 0.1 171 0.1 106 
Other expense, net2,036 0.9 1,148 0.5 888 
Loss before income taxes(5,616)(2.3)(8,094)(3.4)2,478 
Provision (benefit) for income taxes510 0.2 (708)(0.3)1,218 
Net loss$(6,126)(2.6)%$(7,386)(3.1)%$1,260 
24
Net Sales. Net sales for our reportable segments, excluding inter-segment sales, are summarized in the following table (in thousands):
Three months ended March 31,20242023Dollar
increase		Percent
increase
Control Devices$77,158 32.3 %$85,942 35.6 %$(8,784)(10.2)%
Electronics149,783 62.6 141,127 58.5 8,656 6.1 %
Stoneridge Brazil12,216 5.1 14,256 5.9 (2,040)(14.3)%
Total net sales$239,157 100.0 %$241,325 100.0 %$(2,168)(0.9)%
Our Control Devices segment net sales decreased $8.8 million due to a decrease in our North American automotive market of $12.6 million. The decrease in our North American automotive market was primarily due to the expected wind down of end-of-life programs and reduced demand for electric vehicles impacting actuation product revenue during the quarter. These decreases were offset by increases in our China commercial vehicle and automotive markets of $0.9 million and $0.6 million, respectively, as well as an increase in other markets of $3.0 million. In addition, first quarter of 2024 net sales were adversely impacted by an increase in unfavorable foreign currency translation of $0.5 million.
Our Electronics segment net sales increased $8.7 million due to higher production volumes in our European and North American commercial vehicle markets of $11.8 million and $5.0 million, respectively, including sales related to the launch of a next generation tachograph for our European markets, as well as an increase in our North American off-highway vehicle market of $1.5 million. These increases were offset by the impact of lower required electronic component spot buy purchases of $9.1 million in the first quarter of 2024 compared to the first quarter of 2023. In addition, we experienced lower sales volumes in our European off-highway vehicle markets of $1.1 million and a net reduction in pricing actions of $1.1 million. First quarter of 2024 net sales were favorably impacted by euro and Swedish krona foreign currency translation of $0.6 million compared to the prior year quarter.
Our Stoneridge Brazil segment net sales decreased $2.0 million due to lower sales in local OEM products as well as slightly lower sales in the monitoring service and aftermarket products. This decrease was offset by favorable foreign currency translation and slightly higher sales demand for our other product lines.
Net sales by geographic location are summarized in the following table (in thousands):
Three months ended March 31,20242023Dollar
increase		Percent
increase
North America$118,116 49.4 %$123,726 51.3 %$(5,610)(4.5)%
South America12,216 5.1 14,256 5.9 (2,040)(14.3)%
Europe and Other108,825 45.5 103,343 42.8 5,482 5.3 %
Total net sales$239,157 100.0 %$241,325 100.0 %$(2,168)(0.9)%
The decrease in North American net sales was mostly attributable to a decrease in sales volume in our automotive and agricultural markets of $12.5 million and $1.1 million, respectively, and a decrease in negotiated price increases of $1.9 million as well as decreased customer recoveries of electronic component spot buys of $1.5 million. These decreases were offset by higher sales in our commercial vehicle and off-highway markets of $6.9 million and $4.5 million, respectively.
The decrease in net sales in South America was primarily due to lower sales in local OEM products as well as slightly lower sales in the monitoring service and aftermarket products. This decrease was offset by favorable foreign currency translation and slightly higher sales demand for our other product lines.
The increase in net sales in Europe and Other was due to an increase in our European commercial vehicle and automotive markets of $11.9 million and $1.8 million, respectively, as wells as increases in our China commercial vehicle and automotive markets of $1.2 million and $0.6 million, respectively. These increases were offset by decreased customer recoveries of electronic component spot buys of $7.4 million, decreases in our European off-highway market of $1.1 million and a decrease in negotiated price increases of $1.3 million.
25
Cost of Goods Sold and Gross Margin. Cost of goods sold decreased compared to the first quarter of 2023 and our gross margin increased from 17.7% in the first quarter of 2023 to 20.2% in the first quarter of 2024. Our material cost as a percentage of net sales decreased to 58.9% in the first quarter of 2024 from 62.6% in the first quarter of 2023. The decrease in material cost percentage was mostly due to the impact of required electronic component spot buy purchases in 2023, reimbursed by customers. The impact of these spot buy purchases increased cost of goods sold by $9.1 million, or 3.8% of net sales, for the first quarter of 2023, which reduced gross margin percent by 0.7%. Other factors contributing to the reduction in material costs were favorable product mix and material cost improvement actions. Overhead as a percentage of net sales was 16.2% and 14.8% for the first quarter of 2024 and 2023, respectively. The increase in overhead as a percentage of sales was attributable to higher indirect wage inflation.
Our Control Devices segment gross margin increased primarily due to lower direct material costs.
Our Electronics segment gross margin increased due to the contribution from higher sales levels, the reduction of the adverse effect of required electronic component spot buy purchases, net of customer recoveries and lower direct material and labor costs relative to sales.
Our Stoneridge Brazil segment gross margin decreased primarily due to lower sales and higher overhead costs offset by favorable sales mix.
Selling, General and Administrative. SG&A expenses increased by $0.6 million primarily due to the 2023 gain on sale of fixed assets of $0.8 million.
Design and Development. D&D costs increased by $0.6 million due to incremental engineering spending primarily related to product launches and lower customer reimbursements offset by increased capitalized software development costs in our Electronics segment.
Operating Income (loss). Operating income (loss) by segment is summarized in the following table (in thousands):
Three months ended March 31,20242023Dollar
increase
(decrease)		Percent
increase
(decrease)
Control Devices$2,164 $2,087 $77 3.7 %
Electronics7,089 1,400 5,689 406.4 
Stoneridge Brazil204 1,343 (1,139)(84.8)
Unallocated corporate(9,126)(8,859)(267)(3.0)
Operating income (loss)$331 $(4,029)$4,360 (108.2)%
Our Control Devices segment operating income increased slightly due to lower direct material costs and lower D&D and SG&A spending offset by the gain on sale of fixed assets recognized in the first quarter of 2023.
Our Electronics segment operating income increased primarily due to higher contribution from higher sales and lower business realignment expense offset by higher SG&A and D&D spending.
Our Stoneridge Brazil segment operating income decreased due to lower sales and higher overhead costs offset by favorable sales mix.
Our unallocated corporate operating loss increased slightly from higher SG&A incentive compensation offset by lower business realignment costs.
Operating income (loss) by geographic location is summarized in the following table (in thousands):
Three months ended March 31,20242023Dollar
increase
(decrease)		Percent
increase
(decrease)
North America$(5,606)$(6,871)$1,265 18.4 %
South America204 1,343 (1,139)(84.8)
Europe and Other5,733 1,499 4,234 282.5 
Operating income (loss)$331 $(4,029)$4,360 (108.2)%
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Our North American operating loss decreased due to favorable margin offset by higher SG&A and D&D spending. Operating income in South America decreased due to lower sales levels offset by lower direct material costs. Our operating results in Europe and Other increased primarily due to contribution from higher sales levels and lower business realignment expense offset by higher SG&A and D&D spending.
Interest Expense, net. Interest expense, net was $3.6 million and $2.7 million for the three months ended March 31, 2024 and 2023, respectively. The increase for the quarter ended March 31, 2024, was the result of higher outstanding balance on the Credit Facility and higher benchmark rates affecting the Company’s floating rate Credit Facility debt.
Equity in Loss of Investee. Equity loss for Autotech Fund II was $0.3 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.
Other Expense, net. We record certain foreign currency transaction losses (gains) as a component of other expense, net on the condensed consolidated statement of operations. Other expense, net of $2.0 million increased by $0.9 million compared to the first quarter of 2023 due to foreign currency transaction losses in our Electronics and Control Devices segments from the weakening of the U.S. dollar.
Provision (Benefit) for Income Taxes. For the three months ended March 31, 2024, income tax expense of $0.5 million was attributable to the mix of earnings among tax jurisdictions as well as U.S. taxes on foreign earnings, offset by tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives. The effective tax rate of (9.1)% varies from the statutory tax rate primarily due to U.S. taxes on foreign earnings offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.
For the three months ended March 31, 2023, income tax benefit of $(0.7) million was attributable to the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of 8.7% varies from the statutory tax rate primarily due to U.S. taxes on foreign earnings and non-deductible expenses offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.
Liquidity and Capital Resources
Summary of Cash Flows:
Three months ended March 31,20242023
Net cash provided by (used for):
Operating activities$9,109 $(9,182)
Investing activities(5,714)(8,755)
Financing activities5,388 (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 provided by operating activities increased compared to 2023 primarily due to a reduction in cash used for accounts receivables. Cash provided by inventory improved compared to 2023 due to the impact in the prior year of new product launches and mitigation of historical supply chain disruptions, as well as the impact of our current inventory reduction actions.
Net cash used for investing activities decreased compared to 2023 due to lower capital expenditures.
Net cash provided by financing activities increased compared to 2023 due to higher net Credit Facility borrowings.
As outlined in Note 7 to our condensed consolidated financial statements, the Credit Facility permits borrowing up to a maximum level of $275.0 million. This variable rate facility provides the flexibility to refinance other outstanding debt or finance acquisitions through November 2026. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio. The Credit Facility also contains affirmative and negative covenants and events of default that are customary for credit arrangements of this type including covenants that place restrictions and/or limitations on the Company’s ability to borrow money, make capital expenditures and pay dividends. The Credit Facility had an outstanding balance of $194.4 million at March 31, 2024.
27
The Company was in compliance with all covenants at March 31, 2024 and December 31, 2023. The Company has not experienced a violation that would limit the Company’s ability to borrow under the Credit Facility and does not expect that the covenants under it will restrict the Company’s financing flexibility. However, it is possible that future borrowing flexibility under the Credit Facility may be limited as a result of lower than expected financial performance due to the adverse impact of macroeconomic conditions and supply chain disruptions on the Company’s markets and general global demand. The Company expects to make additional repayments on the Credit Facility when cash exceeds the amount needed for operations and to remain in compliance with all covenants.
The Company’s wholly owned subsidiary located in Stockholm, Sweden, has an overdraft credit line that allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20.0 million Swedish krona, or $1.9 million and $2.0 million at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024 and December 31, 2023 there were no borrowings outstanding on this overdraft credit line. During the three months ended March 31, 2024, the subsidiary borrowed and repaid 81.0 million Swedish krona, or $7.6 million.
The Company’s wholly owned subsidiary located in Suzhou, China, has lines of credit that allow up to a maximum borrowing level of 20.0 million Chinese yuan, or $2.8 million at both March 31, 2024 and December 31, 2023. At March 31, 2024 and at December 31, 2023 there was $2.1 million and $2.1 million, respectively, in borrowings outstanding on the Suzhou credit line with a weighted-average interest rate of 3.25%. The Suzhou credit line is included on the condensed consolidated balance sheet within current portion of debt. In addition, the Suzhou subsidiary has a bank acceptance draft line of credit which facilitates the extension of trade payable payment terms by 180 days. The bank acceptance draft line of credit allows up to a maximum borrowing level of 60.0 million Chinese yuan, or $8.3 million and $8.5 million at March 31, 2024 and December 31, 2023, respectively. There was $2.1 million and $2.4 million utilized on the Suzhou bank acceptance draft line of credit at March 31, 2024 and December 31, 2023, respectively. The Suzhou bank acceptance draft line of credit is included on the condensed consolidated balance sheet within accounts payable.
In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech, a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. As of March 31, 2024, the Company’s cumulative investment in the Autotech Fund II was $8.4 million. The Company did not contribute to Autotech Fund II during the three months ended March 31, 2024 or 2023.
Our future results could also be adversely affected by unfavorable changes in foreign currency exchange rates. We have significant foreign denominated transaction exposure in certain locations, especially in Brazil, Argentina, Mexico, Sweden, Estonia, the Netherlands, United Kingdom and China. Currently, we have foreign currency forward contracts in place for Mexican pesos. See Note 5 to the condensed consolidated financial statements for additional details. Our future results could also be unfavorably affected by increased commodity prices and material cost inflation as these fluctuations impact the cost of our raw material purchases.
At March 31, 2024, we had a cash and cash equivalents balance of approximately $48.4 million, of which 87.6% was held in foreign locations. The Company has approximately $80.6 million of undrawn commitments under the Credit Facility as of March 31, 2024, which results in total undrawn commitments and cash balances of more than $129.0 million. However, it is possible that future borrowing flexibility under our Credit Facility may be limited as a result of our financial performance.
Commitments and Contingencies
See Note 10 to the condensed consolidated financial statements for disclosures of the Company’s commitments and contingencies.
Seasonality
Our Control Devices and Electronics segments are moderately seasonal, impacted by mid-year and year-end shutdowns and the ramp-up of new model production at key customers. In addition, the demand for our Stoneridge Brazil segment consumer products is generally higher in the second half of the year.
Critical Accounting Policies and Estimates
The Company’s critical accounting policies, which include management’s best estimates and judgments, are included in Part II, Item 7, to the consolidated financial statements of the Company’s 2023 Form 10-K. These accounting policies are considered critical as disclosed in the Critical Accounting Policies and Estimates section of Management’s Discussion and Analysis of the Company’s 2023 Form 10-K because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates. There have been no material changes in our significant accounting policies or critical accounting estimates during the first quarter of 2023.
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Information regarding other significant accounting policies is included in Note 2 to our consolidated financial statements in Item 8 of Part II of the Company’s 2023 Form 10-K.
International Presence
By operating internationally, we are affected by foreign currency exchange rates and the economic conditions of certain countries. Furthermore, given the current economic climate and fluctuations in certain commodity prices, we believe that an increase in such items could significantly affect our profitability. See Note 5 to the condensed consolidated financial statements for additional details on the Company’s foreign currency exchange rate and interest rate risks.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the quantitative and qualitative information about the Company’s market risk from those previously presented within Part II, Item 7A of the Company’s 2023 Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of March 31, 2024, an evaluation was performed under the supervision and with the participation of the Company’s management, including the principal executive officer (“PEO”) and principal financial officer (“PFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the PEO and PFO, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2024.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2024 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II–OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in certain legal actions and claims primarily arising in the ordinary course of business. We establish accruals for matters which we believe that losses are probable and can be reasonably estimated. Although it is not possible to predict with certainty the outcome of these matters, we do not believe that any of the litigation in which we are currently engaged, either individually or in the aggregate, will have a material adverse effect on our business, consolidated financial position or results of operations. We are subject to litigation regarding civil, labor, regulatory and other tax contingencies in our Stoneridge Brazil segment for which we believe the likelihood of loss is reasonably possible, but not probable, although these claims might take years to resolve. We are also subject to product liability and product warranty claims. In addition, if any of our products prove to be defective, we may be required to participate in a government-imposed or customer OEM-instituted recall involving such products. There can be no assurance that we will not experience any material losses related to product liability, warranty or recall claims. See additional details of these matters in Note 10 to the condensed consolidated financial statements.
Item 1A. Risk Factors
There have been no material changes with respect to risk factors previously disclosed in the Company’s 2023 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information with respect to repurchases of Common Shares made by us during the three months ended March 31, 2024. There were 35,992 Common Shares delivered to us by employees as payment for withholding taxes due upon vesting of performance share awards and share unit awards.
PeriodTotal number of
shares purchased		Average price
paid per share		Total number of
shares purchased as
part of publicly
announced plans
or programs		Maximum number
of shares that may
yet be purchased
under the plans
or programs
1/1/24-1/31/241,990$17.91 N/AN/A
2/1/24-2/29/24—$— N/AN/A
3/1/24-3/31/2434,002$17.20 N/AN/A
Total35,992
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
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Item 6. Exhibits
Exhibit
Number		Exhibit
31.1
31.2
32.1
32.2
101XBRL Exhibits:
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
104
The cover page from our Quarterly Report on Form 10-Q for the period ended March 31, 2024, filed with the Securities and Exchange Commission on May 1, 2024, is formatted in Inline Extensible Business Reporting Language (“iXBRL”)
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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: May 1, 2024
/s/ James Zizelman
James Zizelman
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date: May 1, 2024
/s/ Matthew R. Horvath
Matthew R. Horvath
Chief Financial Officer and Treasurer
(Principal Financial Officer)
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