-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NTU5XDMx6EGenMZWqZgCJZuMUlm1XAPmPm/Ny9eMPYfADwKoUtHMBoupassKkfT8 a3rzjPlPO/JqT1zliiq2SA== /in/edgar/work/0001077604-00-000289/0001077604-00-000289.txt : 20001114 0001077604-00-000289.hdr.sgml : 20001114 ACCESSION NUMBER: 0001077604-00-000289 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STONERIDGE INC CENTRAL INDEX KEY: 0001043337 STANDARD INDUSTRIAL CLASSIFICATION: [3714 ] IRS NUMBER: 341598949 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13337 FILM NUMBER: 758226 BUSINESS ADDRESS: STREET 1: 9400 EAST MARKET ST CITY: WARREN STATE: OH ZIP: 44484 BUSINESS PHONE: 3308562443 MAIL ADDRESS: STREET 1: 9400 EAST MARKET ST CITY: WARREN STATE: OH ZIP: 44484 10-Q 1 0001.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000. Commission file number 001- 13337 STONERIDGE, INC. ----------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Ohio 34-1598949 ------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 9400 East Market Street, Warren, Ohio 44484 --------------------------------------- -------------- (Address of Principal Executive Offices) (Zip Code) (330) 856-2443 -------------------------------------------------- Registrant's Telephone Number, Including Area Code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __. The number of Common Shares, without par value, outstanding as of November 10, 2000 was 22,397,311. STONERIDGE, INC. INDEX
Page No. Part I Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 2 Condensed Consolidated Statements of Income for the three months and nine months ended September 30, 2000 and 1999 3 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 4 Notes to Condensed Consolidated Financial Statements 5-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Item 3. Quantitative and Qualitative Disclosure About Market Risk 12 Part II Other Information 13-14 Signatures 15 Exhibit Index 16
1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STONERIDGE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, December 31, 2000 1999 ------------------ ----------------- (Unaudited) (Audited) ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 6,650 $ 3,924 Accounts receivable, net 103,249 98,744 Inventories 65,663 65,701 Prepaid expenses and other 20,184 13,383 Deferred income taxes 9,834 10,564 ------------- --------------- Total current assets 205,580 192,316 ------------- --------------- PROPERTY, PLANT AND EQUIPMENT, net 108,946 106,163 OTHER ASSETS: Goodwill and other intangibles, net 360,056 369,265 Investments and other 27,849 30,565 ------------- --------------- TOTAL ASSETS $ 702,431 $ 698,309 ============= =============== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Current portion of long-term debt $ 32,913 $ 25,753 Accounts payable 47,908 42,337 Accrued expenses and other 47,910 47,114 ------------- --------------- Total current liabilities 128,731 115,204 ------------- --------------- LONG-TERM DEBT, net of current portion 289,061 331,898 DEFERRED INCOME TAXES 21,819 15,985 OTHER LIABILITIES 2,071 3,594 ------------- --------------- Total long-term liabilities 312,951 351,477 ------------- --------------- SHAREHOLDERS' EQUITY: Preferred shares, without par value, 5,000 authorized, none issued -- -- Common shares, without par value, 60,000 authorized, 22,397 issued and outstanding at September 30, 2000 and December 31, 1999, stated at -- -- Additional paid-in capital 141,506 141,506 Retained earnings 122,147 90,502 Accumulated other comprehensive loss (2,904) (380) ------------- --------------- Total shareholders' equity 260,749 231,628 ------------- --------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 702,431 $ 698,309 ============= =============== The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated balance sheets.
2 STONERIDGE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands except for per share data)
For the three months For the nine months ended September 30, ended September 30, -------------------------- ------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- NET SALES $ 153,764 $ 156,985 $ 520,743 $ 512,688 COST AND EXPENSES: Cost of goods sold 115,754 112,952 380,393 369,404 Selling, general and administrative expenses 22,568 22,566 73,105 69,900 ------------ ------------- ------------ ----------- Operating income 15,442 21,467 67,245 73,384 Gain on sale of fixed asset 995 -- 995 -- Interest expense, net (7,178) (7,494) (22,756) (23,070) Other income 228 168 769 395 ------------ ------------- ------------ ----------- INCOME BEFORE INCOME TAXES 9,487 14,141 46,253 50,709 Provision for income taxes 1,949 5,451 14,609 20,038 ------------ ------------- ------------ ----------- NET INCOME $ 7,538 $ 8,690 $ 31,644 $ 30,671 ============ ============= ============ =========== BASIC AND DILUTED NET INCOME PER SHARE $ 0.34 $ 0.39 $ 1.41 $ 1.37 ============ ============= ============ =========== WEIGHTED AVERAGE SHARES OUTSTANDING 22,397 22,397 22,397 22,397 ============ ============= ============ =========== The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements.
3 STONERIDGE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
For the nine months ended September 30, -------------------------- 2000 1999 ------------- ----------- OPERATING ACTIVITIES: Net income $31,644 $30,671 Adjustments to reconcile net income to net cash from operating activities- Depreciation and amortization 20,726 21,624 Deferred income taxes 6,064 3,588 Gain on sale of property (995) -- Changes in operating assets and liabilities- Accounts receivable, net (6,453) (7,616) Inventories (1,614) (2,538) Prepaid expenses and other (7,462) (3,421) Other assets, net 1,660 1,408 Accounts payable 7,395 (5,410) Accrued expenses and other 430 (1,703) ------------- ----------- Net cash from operating activities 51,395 36,603 ------------- ----------- INVESTING ACTIVITIES: Capital expenditures (16,951) (9,664) Business acquisitions and other (631) (31,099) Proceeds from sale of property 2,176 -- ------------- ----------- Net cash from investing activities (15,406) (40,763) ------------- ----------- FINANCING ACTIVITIES: Proceeds from long-term debt 1,685 1,797 Repayments of long-term debt (570) (125) Net (repayments) borrowings under credit agreement (33,866) 5,130 ------------- ----------- Net cash from financing activities (32,751) 6,802 ------------- ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (512) 126 NET CHANGE IN CASH AND CASH EQUIVALENTS 2,726 2,768 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,924 1,876 ------------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,650 $ 4,644 ============= =========== The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements.
4 STONERIDGE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands) 1. The accompanying condensed consolidated financial statements have been prepared by Stoneridge, Inc. (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the Commission). The information furnished in the condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Commission's rules and regulations. Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company's 1999 Annual Report to Shareholders. The results of operations for the three and nine months ended September 30, 2000 are not necessarily indicative of the results to be expected for the full year. 2. Inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for approximately 89% of the Company's inventories at September 30, 2000 and December 31, 1999, and by the first-in, first-out (FIFO) method for all other inventories. Inventory cost includes material, labor and overhead. Inventories consist of the following:
September 30, December 31, 2000 1999 ----------------- ---------------- Raw materials $41,694 $42,876 Work in progress 8,775 9,636 Finished goods 15,297 13,400 Less-LIFO reserve (103) (211) ----------------- ---------------- Total $65,663 $65,701 ================= ================
3. On August 27, 1999, the Company purchased all the outstanding shares of TVI Europe Limited (TVI) for approximately $20,700. TVI is a United Kingdom manufacturer of vehicle information and management systems for the European commercial vehicle market. The transaction was accounted for as a purchase. On March 6, 1999, the Company purchased certain assets and assumed certain liabilities of Delta Schoeller, Limited (Delta) for approximately $12,200. Delta is a United Kingdom manufacturer of switches for the automotive industry. The transaction was accounted for as a purchase. 5 STONERIDGE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (Unaudited) (in thousands) 4. Other comprehensive (loss)/income includes foreign currency translation adjustments, net of related tax. Comprehensive income consists of the following:
Three months Nine months ended September 30, ended September 30, ---------------------- ---------------------- 2000 1999 2000 1999 ---------- ---------- ------------ ---------- Net income $7,538 $8,690 $31,644 $30,671 Other comprehensive (loss)/income (884) 855 (2,524) 484 ---------- ----------- ---------- ---------- Comprehensive income $6,654 $9,545 $29,120 $31,155 ========== =========== ========== ==========
5. The Company has a $425,000 credit agreement with a bank group. The credit agreement, as amended on May 25, 2000, has the following components: a $100,000 revolving credit facility, including a $5,000 swing line facility, a $150,000 term facility and a $175,000 term facility. The $100,000 revolving facility and the $150,000 term facility expire on December 31, 2003 and require a commitment fee of 0.37% to 0.50% on the unused balance. The revolving facility permits the Company to borrow up to half its borrowing in specified foreign currencies. Interest is payable quarterly at either (i) the prime rate plus a margin of .00% to 1.00% or (ii) LIBOR plus a margin of 1.25% to 2.50%, depending upon the Company's ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA), as defined. The $5,000 swing line facility expires on December 31, 2003. Interest is payable monthly at an overnight money market borrowing rate. The $175,000 term facility expires on December 31, 2005. Interest is payable quarterly at either (i) the prime rate plus a margin of 2.00% or (ii) LIBOR plus a margin of 3.50%. Long-term debt consists of the following:
September 30, December 31, 2000 1999 -------------- -------------- Borrowings under credit agreement $312,999 $346,862 Borrowings payable to foreign banks 6,673 7,917 Other 2,302 2,872 -------------- -------------- 321,974 357,651 Less: Current portion 32,913 25,753 -------------- -------------- $289,061 $331,898 ============== ==============
6. The Company presents basic and diluted earnings per share in accordance with Statement of Financial Accounting Standard No. 128, "Earnings Per Share". Potentially dilutive securities are not significant and do not create differences between reported basic and diluted earnings per share for all periods presented. 6 STONERIDGE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (Unaudited) (in thousands) 7. Based on the criteria set forth in Statement of Financial Accounting Standard No. 131, "Disclosures about Segments of an Enterprise and Related Information," the Company operates in one business segment. The following table presents net sales and non-current assets for each of the geographic areas in which the Company operates:
Three months Nine months ended September 30, ended September 30, -------------------------------- ----------------------------- 2000 1999 2000 1999 --------------- ------------- ------------- ------------ Net Sales: North America $134,751 $142,086 $454,735 $466,888 Europe and other 19,013 14,899 66,008 45,800 --------------- ------------- ------------- ----------- Total $153,764 $156,985 $520,743 $512,688 =============== ============= ============= =========== September 30, December 31, 2000 1999 ---------------- ---------------- Non-current assets: North America $442,453 $452,774 Europe and other 54,398 53,219 ---------------- ---------------- Total $496,851 $505,993 ================ ================
8. Effective January 1, 2000 the Company adopted Emerging Issues Task Force Issue No. 99-5 (EITF 99-5), "Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements." EITF 99-5 establishes new accounting rules for costs related to the design and development of products and for costs incurred to develop molds, dies and other tools to be used to produce products that will be sold under long-term supply agreements. The Company elected to adopt the requirements of EITF 99-5 on a prospective basis, as permitted. In accordance with the criteria set forth in EITF 99-5, the Company is now required to expense as incurred certain costs that were previously capitalized. The adoption of EITF 99-5 did not have a significant impact on the Company's financial statements during the three and nine months ended September 30, 2000; however, the impact could be significant in future periods. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Nine Months Ended September 30, 2000 Compared To Nine Months Ended September 30, 1999 - -------------------------------------------------------------------------------- Net Sales. Net sales for the nine months ended September 30, 2000 increased by $8.1 million, or 1.6%, to $520.7 million from $512.7 million for the same period in 1999. Sales of core products increased by $29.9 million, or 6.1%, to $520.7 million during the first nine months of 2000 compared to $490.8 million for the same period of 1999. Sales of core products from the recent acquisition of TVI accounted for $18.0 million of the change, while sales of existing core products increased by $12.0 million, or 2.4%, compared to the same period in 1999. Contract manufacturing sales, which were phased out during the second quarter of 1999, accounted for 4.3% of total sales for the nine months ended September 30, 1999. Sales revenues for the nine months ended September 30, 2000 were driven by the strong demand in the automotive market and improving demand in the agricultural equipment market, while sales to the commercial vehicles industry were lower compared to the nine months ended September 30, 1999. In addition, sales revenues were adversely affected this year as a result of the recent Bridgestone/Firestone tire recall. Sales of core products for the nine months ended September 30, 2000 for North America decreased by $12.2 million to $454.7 million from $466.9 million for the same period in 1999. North American sales accounted for 87.3% of total sales for the nine months ended September 30, 2000 compared with 91.1% for the same period in 1999. Sales for the nine months ended September 30, 2000 outside North America increased $20.2 million to $66.0 million from $45.8 million for the same period in 1999. Sales outside North America accounted for 12.7% of total sales for the nine months ended September 30, 2000 compared with 8.9% for the same period in 1999. Cost of Goods Sold. Cost of goods sold for the first nine months of 2000 increased by $11.0 million, or 3.0%, to $380.4 million from $369.4 million in the first nine months of 1999. As a percentage of sales, cost of goods sold increased to 73.0% for the first nine months of 2000 from 72.1% for the same period in 1999. The increase as a percent of sales was primarily attributable to material shortages and their related impact on production costs, a shift in product mix, and cost related to new program launches. In addition, unfavorable exchange rate fluctuations contributed to this increase. Selling, General and Administrative Expenses. Selling, general and administrative (SG&A) expenses increased by $3.2 million to $73.1 million in the first nine months of 2000 from $69.9 million for the same period in 1999. As a percentage of sales, SG&A expenses increased to 14.0% for the first nine months of 2000 from 13.6% for the same period in 1999. The increase is due primarily to higher development costs to support new program launches for safety-related products, including the seat track position sensor, fuel cut-off switch, and a new modular assembly program entitled the Next Generation Vehicle. In addition, the commercial costs related to the newly acquired companies and geographical expansion also contributed to this increase. Other Income. Other income of $1.0 million for the first nine months of 2000 represents a gain on the sale of idle property. The Company received cash proceeds of $2.2 million from the sale which were used to pay down the credit facility. 8 Interest Expense. Interest expense for the first nine months of 2000 was $22.8 million compared with $23.1 million for the same period in 1999. Average outstanding indebtedness was $335.4 million and $342.6 million for the first nine months of 2000 and 1999, respectively. Income Before Income Taxes. As a result of the foregoing, income before taxes decreased by $4.5 million for the first nine months of 2000 to $46.3 million from $50.7 million in 1999. Provision for Income Taxes. The Company recognized provisions for income taxes of $14.6 million and $20.0 million for federal, state and foreign income taxes for the first nine months of 2000 and 1999, respectively. The decline in the effective tax rate in 2000 is primarily a result of more income being generated in jurisdictions with lower tax burdens, the implementation of certain tax planning strategies, and non-recurring tax refunds generated in the third quarter of 2000. Net Income. As a result of the foregoing, net income increased by $1.0 million, or 3.2%, to $31.6 million for the first nine months of 2000 from $30.7 million in 1999. Three Months Ended September 30, 2000 Compared To Three Months Ended September 30, 1999 - -------------------------------------------------------------------------------- Net Sales. Net sales for the quarter ended September 30, 2000 decreased by $3.2 million, or 2.1%, to $153.8 million from $157.0 million for the same period in 1999. Sales from the recent acquisition of TVI accounted for $5.4 million of the change, while sales of existing products decreased by $8.6 million, or 5.5%, compared to the same period in 1999. Sales revenues for the third quarter ended September 30, 2000 were favorably impacted by improving demand in the agricultural equipment market, while sales to the commercial vehicles industry were lower compared to the third quarter ended September 30, 1999. In addition, sales revenues were adversely affected this quarter as a result of the recent Bridgestone/Firestone tire recall. Sales for the quarter ended September 30, 2000 for North America decreased by $7.3 million to $134.8 million from $142.1 million for the same period in 1999. North American sales accounted for 87.6% of total sales for the third quarter ended September 30, 2000 compared with 90.5% for the same period in 1999. Sales for the third quarter of 2000 outside North America increased by $4.1 million to $19.0 million from $14.9 million for the same period in 1999. Sales outside North America accounted for 12.4% of total sales for the third quarter of 2000 compared with 9.5% for the same period in 1999. Cost of Goods Sold. Cost of goods sold for the third quarter of 2000 increased by $2.8 million, or 2.5%, to $115.8 million from $113.0 million in the third quarter of 1999. As a percentage of sales, cost of goods sold increased to 75.3% in 2000 from 71.9% in 1999. The increase as a percent of sales was primarily attributable to material shortages and their related impact on production costs, a shift in product mix, and cost related to new program launches. Selling, General and Administrative Expenses. SG&A expenses for the third quarter of 2000 and 1999 were $22.6 million. As a percentage of sales, SG&A expenses increased to 14.7% for the third quarter of 2000 from 14.4% for the same period in 1999. Interest Expense. Interest expense for the third quarter of 2000 was $7.2 million compared with $7.5 million in 1999. Average outstanding indebtedness was $321.9 million and $337.1 million for the third quarter of 2000 and 1999, respectively. 9 Other Income. Other income of $1.0 million for the first nine months of 2000 represents a gain on the sale of idle property. The Company received cash proceeds of $2.2 million from the sale which were used to pay down the credit facility. Income Before Income Taxes. As a result of the foregoing, income before taxes decreased by $4.6 million for the third quarter of 2000 to $9.5 million from $14.1 million in 1999. Provision for Income Taxes. The Company recognized provisions for income taxes of $1.9 million and $5.5 million for federal, state and foreign income taxes for the third quarter of 2000 and 1999, respectively. The decline in the effective tax rate in 2000 is primarily a result of more income being generated in jurisdictions with lower tax burdens, the implementation of certain tax planning strategies, and non-recurring tax refunds generated in the third quarter of 2000. Net Income. As a result of the foregoing, net income decreased by $1.2 million, or 13.3%, to $7.5 million for the third quarter of 2000 from $8.7 million in 1999. Liquidity and Capital Resources Net cash provided by operating activities was $51.4 million and $36.6 million for the nine months ended September 30, 2000 and 1999, respectively. The increase in net cash from operating activities of $14.8 million was primarily attributable to improved cash flow management of working capital and the increase in net income of $1.0 million. Net cash used for investing activities was $15.4 million and $40.8 million for the nine months ended September 30, 2000 and 1999, respectively. The decrease in cash used for investing activities of $25.4 million was primarily the result of the acquisition of Delta in the first quarter and the acquisition of TVI in the third quarter of 1999. Both acquisitions were financed with funds from the Company's $425.0 million credit agreement. Net cash used for financing activities was $32.8 for the nine months ended September 30, 2000 as compared to net cash provided by financing activities of $6.8 million for the nine months ended September 30, 1999. Improved cash flows from operations for the nine months ended September 30, 2000 were used primarily to pay down debt. The Company has a $425.0 million credit agreement (of which $308.5 and $346.9 million was outstanding at September 30, 2000 and December 31, 1999, respectively) with a bank group. The credit agreement, as amended on May 25, 2000, has the following components: a $100.0 million revolving facility (of which $60.7 million is currently available) including a $5.0 million swing line facility, a $150.0 million term facility, and a $175.0 million term facility. The $100.0 million revolving facility and the $150.0 million term facility expire on December 31, 2003, and require a commitment fee of 0.37% to 0.50% on the unused balance. The revolving facility permits the Company to borrow up to half its borrowing in specified foreign currencies. Interest is payable quarterly at either (i) the prime rate plus a margin of .00% to 1.00% or (ii) LIBOR plus a margin of 1.25% to 2.50%, depending upon the Company's ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization, as defined. The $5.0 million swing line facility expires on December 31, 2003. Interest is payable monthly at an overnight money market borrowing rate. The $175.0 million term facility expires on December 31, 2005. Interest is payable quarterly at either (i) the prime rate plus a margin of 2.00% or (ii) LIBOR plus a margin of 3.50%. 10 The Company has entered into four interest rate swap agreements with a total notional amount of $257.4 million. These interest rate swap agreements will all expire by December 31, 2000. The interest rate swap agreements exchange variable interest rates on the senior secured credit facility for fixed interest rates. The Company does not use derivatives for speculative or profit-motivated purposes. Management anticipates the current slowdown in the market to continue into the fourth quarter; however, management still believes that cash flows from operations and the availability of funds from the Company's credit facilities will provide sufficient liquidity to meet the Company's growth and operating needs. Inflation and International Presence Management believes that the Company's operations have not been adversely affected by inflation. By operating internationally, the Company is affected by the economic conditions of certain countries. Based on the current economic conditions in these countries, management believes they are not significantly exposed to adverse economic conditions. Recently Issued Accounting Standards In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." SAB 101 provides guidance on applying generally accepted accounting principles to the recognition, presentation and disclosure of revenue in financial statements. The Company adopted the provisions of this bulletin when recognizing revenue. The Company is required to adopt Statement of Financial Accounting Standard No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities" (as amended by SFAS 137) for its fiscal year ending 2001. SFAS 133 establishes new accounting and reporting standards for derivatives and hedging activities. Based on the Company's derivative contracts currently in place, the Company does not expect the adoption of SFAS 133 to significantly affect the financial statements. Effective January 1, 2000 the Company adopted Emerging Issues Task Force Issue No. 99-5 (EITF 99-5), "Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements." EITF 99-5 establishes new accounting rules for costs related to the design and development of products and for costs incurred to develop molds, dies and other tools to be used to produce products that will be sold under long-term supply agreements. The Company elected to adopt the requirements of EITF 99-5 on a prospective basis, as permitted. In accordance with the criteria set forth in EITF 99-5, the Company is now required to expense as incurred certain costs that were previously capitalized. The adoption of EITF 99-5 did not have a significant impact on the Company's financial statements during the three and nine months ended September 30, 2000; however, the impact could be significant in future periods. 11 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company is exposed to certain market risks, primarily resulting from the effects of changes in interest rates. To reduce exposures to market risks resulting from fluctuations in interest rates, the Company uses derivative financial instruments. Specifically, the Company uses interest rate swap agreements to mitigate the effects of interest rate fluctuations on net income by changing the floating interest rates on certain portions of the Company's debt to fixed interest rates. These agreements are in place through December 31, 2000. The effect of changes in interest rates on the Company's net income generally has been small relative to other factors that also affect net income, such as sales and operating margins. Management believes that its use of these financial instruments to reduce risk is in the Company's best interest. The Company does not enter into financial instruments for trading purposes. The Company's risks related to commodity price and foreign currency exchange risks have historically not been significant. The Company does not expect the effects of these risks to be significant based on current operating and economic conditions in the countries and markets in which it operates. 12 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ----------------------------- In the ordinary course of business, the Company is involved in various legal proceedings, workers' compensation and product liability disputes. The Company is of the opinion that the ultimate resolution of these matters will not have a material adverse effect on the results of operations or the financial position of the Company. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - ----------------------------------------------------- None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES - ------------------------------------------- None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - --------------------------------------------------------------- None. ITEM 5. OTHER INFORMATION - ----------------------------- None. 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - -------------------------------------------- (a) Exhibits 27.1 Financial Data Schedule for the nine months ended September 30, 2000 (b) Reports on Forms 8-K None. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STONERIDGE, INC. Date: November 10, 2000 /s/ Cloyd J. Abruzzo ------------------------------- Cloyd J. Abruzzo President and Chief Executive Officer (Principal Executive Officer) Date: November 10, 2000 /s/ Kevin P. Bagby ------------------------------- Kevin P. Bagby Treasurer and Chief Financial Officer (Principal Financial and Chief Accounting Officer) 15 STONERIDGE, INC. EXHIBIT INDEX Exhibit Number Exhibit ------- ------- 27.1 Financial Data Schedule for the nine months ended September 30, 2000, filed herewith. 16 EX-27.1 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STONERIDGE, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2000 AND FOR THE QUARTER THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 6,650 0 104,488 (1,239) 65,663 205,580 197,883 (88,937) 702,431 128,731 289,061 0 0 0 260,749 702,431 520,743 520,743 380,393 380,393 71,039 302 22,756 46,253 14,609 31,644 0 0 0 31,644 1.41 1.41
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