2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Stoneridge, Inc. and its wholly-owned and majority-owned subsidiaries (collectively, the “Company”). Intercompany transactions and balances have been eliminated in consolidation. The Company analyzes its ownership interests in accordance with Accounting Standards Codification (“ASC”) Topic 810 (Consolidations) to determine whether they are VIE’s and, if so, whether the Company is the primary beneficiary.

The Company’s investment in Minda Stoneridge Instruments Ltd. (“Minda”) for the years ended December 31, 2015, 2014 and 2013 was determined to be an unconsolidated entity, and therefore was accounted for under the equity method of accounting based on our 49% ownership.

The Company had a 74% controlling interest in PST Eletrônica Ltda. (“PST”) for the years ended December 31, 2015, 2014 and 2013 which was accounted for a consolidated subsidiary.

The Company sold substantially all of the assets and liabilities of its Wiring business on August 1, 2014. As a result, the Wiring business has been classified as discontinued operations for all periods presented in the Company’s financial statements herein, and therefore has been excluded from both continuing operations and segment results for all periods presented. The Wiring business designed and manufactured wiring harness products and assembled instruments panels for sale principally to the commercial, agricultural and off-highway vehicle markets.

Accounting Estimates

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including certain self-insured risks and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Because actual results could differ from those estimates, the Company revises its estimates and assumptions as new information becomes available.

Cash and Cash Equivalents

The Company’s cash and cash equivalents are actively traded money market funds with short-term investments in marketable securities, primarily U.S. government securities. Cash and cash equivalents are stated at cost, which approximates fair value, due to the highly liquid nature and short-term duration of the underlying securities.

Accounts Receivable and Concentration of Credit Risk

Revenues are principally generated from the automotive, commercial, motorcycle, off-highway and agricultural vehicle markets. The Company’s largest customers were Ford Motor Company and Scania Group, primarily related to the Control Devices and Electronics reportable segments, respectively, and accounted for the following percentages of consolidated net sales for the years ended December 31, 2015, 2014 and 2013:


	2015		2014		2013
Ford Motor Company	14	%	11	%	10	%
Scania Group	7	%	8	%	8	%

Accounts receivable are recorded at the invoice price, net of an estimate of allowance for doubtful accounts and other reserves.

Allowance for Doubtful Accounts

The Company evaluates the collectability of accounts receivable based on a combination of factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific allowance for doubtful accounts is recorded against amounts due to reduce the net recognized receivable to the amount the Company reasonably believes will be collected. Additionally, the Company reviews historical trends for collectability in determining an estimate for its allowance for doubtful accounts. If economic circumstances change substantially, estimates of the recoverability of amounts due to the Company could be reduced by a material amount. The Company does not have collateral requirements with its customers.

Sales of Accounts Receivable

The Company’s PST segment sells selected accounts receivable on a full recourse basis to an unrelated financial institution in Brazil. PST accounts for these transactions as sales of accounts receivable. As such, in accordance with ASC 860, “Transfers and Servicing”, the sales of accounts receivable are reflected as a reduction of accounts receivable in the consolidated balance sheets and the loss on sale is recorded within interest expense, net in the consolidated statements of operations while the proceeds received from the sale are included in the cash flows from operating activities in the consolidated statements of cash flows.

During 2015 PST sold $6,401 (24,994 Brazilian real) of accounts receivable at a loss of $156 (540 Brazilian real), which represents the implicit interest on the transaction, and received proceeds of $6,245 (24,454 Brazilian real). PST has a remaining credit exposure of $2,657 (10,376 Brazilian real) at December 31, 2015 related to the receivables sold for which payment from the customer was not yet due.

Inventories

Inventories are valued at the lower of cost (using either the first-in, first-out (“FIFO”) or average cost methods) or market. 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:



As of December 31		2015		2014
Raw materials	$	36,021	$	41,767
Work-in-progress		7,162		8,779
Finished goods		17,826		20,707
Total inventories, net	$	61,009	$	71,253

Inventory valued using the FIFO method was $35,378 and $34,636 at December 31, 2015 and 2014, respectively. Inventory valued using the average cost method was $25,631 and $36,617 at December 31, 2015 and 2014, respectively.

Pre-production Costs Related to Long-term Supply Arrangements

Engineering, research and development and other design and development costs for products sold on long-term supply arrangements are expensed as incurred unless the Company has a contractual guarantee for reimbursement from the customer. Costs for molds, dies and other tools used to make products sold on long-term supply arrangements for which the Company either has title to the assets or has the noncancelable right to use the assets during the term of the supply arrangement are capitalized in property, plant and equipment and amortized to cost of sales over the shorter of the term of the arrangement or over the estimated useful lives of the assets, typically three to five years. Costs for molds, dies and other tools used to make products sold on long-term supply arrangements for which the Company has a contractual guarantee to a lump sum reimbursement from the customer are capitalized as a component of prepaid expenses and other current assets within the consolidated balance sheets. Capitalized pre-production costs were $9,405 and $10,067 at December 31, 2015 and 2014, respectively.

Discontinued Operations

Wiring Business

On May 26, 2014, the Company entered into an asset purchase agreement to sell substantially all of the assets and liabilities of the former Wiring segment to Motherson Sumi Systems Ltd., an India-based manufacturer of diversified products for the global automotive industry and a limited company incorporated under the laws of the Republic of India, and MSSL (GB) LIMITED, a limited company incorporated under the laws of the United Kingdom (collectively, “Motherson”), for $65,700 in cash and the assumption of certain related liabilities of the Wiring business.

On August 1, 2014, the Company completed the sale of substantially all of the assets and liabilities of its Wiring business to Motherson for $71,386 in cash that consisted of the stated purchase price and estimated working capital on the closing date. The final purchase price was subject to post-closing working capital and other adjustments. Upon the final resolution of the working capital and other adjustments in the second quarter of 2015, the Company returned $1,230 in cash to Motherson.

The Company recorded a loss on disposal, net of tax of $8,576 for the year ended December 31, 2014 which included the recognition of previously deferred foreign currency translation of $2,734, income tax on the sale of Wiring’s Mexican businesses of $1,621 and transaction costs of $1,384.

The Company also entered into short-term transition services agreements with Motherson substantially all of which concluded in the second quarter of 2015 associated with information systems, accounting, administrative, occupancy and support services as well as contract manufacturing and production support in Estonia.

The Company had post-disposition sales to the Wiring business acquired by Motherson of $26,952 and $12,230 for the years ended December 31, 2015 and 2014, respectively. The Company had post-disposition purchases from the Wiring business acquired by Motherson of $689 and $269 for the years ended December 31, 2015 and 2014, respectively. The amounts related to 2014 cover the period from August through December 2014 as the sale of the Wiring business occurred on August 1, 2014.

The following tables display summarized activity in our consolidated statements of operations for discontinued operations during the years ended December 31, 2015, 2014 and 2013, related to the Wiring business.



Years ended December 31		2015		2014 (A)		2013
Net sales	$	-	$	167,434	$	288,344
Cost of goods sold (C)		-		154,787		268,278
Selling, general and administrative (C)		-		12,697		22,765
Interest expense, net		-		69		250
Other expense, net		-		(58)		(357)
Loss from operations of discontinued
operations before income taxes (C) (D)		-		(61)		(2,592)
Income tax expense on discontinued operations		-		(750)		(1,429)
Loss from discontinued operations, net of tax		-		(811)		(4,021)

Loss on disposal (B)		(241)		(6,955)		-
Income tax expense on gain (loss) on disposal (E)		31		(1,621)		-
Loss on disposal, net of tax		(210)		(8,576)		-

Loss from discontinued operations	$	(210)	$	(9,387)	$	(4,021)

(A)The operations of the Wiring business were presented only for the seven months ended July 31, 2014 as the sale was completed on August 1, 2014.

(B)Included in loss on disposal for the years ended December 31, 2015 and 2014 were transaction costs of $223 and $1,384, respectively. The loss on disposal also includes a working capital and other adjustments of $18 for the year ended December 31, 2015. In addition, the loss on disposal included $2,734 in previously deferred foreign currency translation for the year ended December 31, 2014.

(C)The assets and liabilities of the Wiring business were reclassified as held for sale effective May 26, 2014. Accordingly, depreciation and amortization for the related Wiring assets were not recorded after that date.

(D)Management fees, which had been reported in the Wiring business in prior periods, of $7,482 for the year ended December 31, 2013 have been excluded as they were not directly attributable to the business.

(E)Gains and losses from foreign currency remeasurement related to income taxes were included as a component of income tax (expense) benefit.

Predisposition intercompany sales to the Wiring business were $17,448 and $25,353 for the periods ended July 31, 2014 and December 31, 2013, respectively. Predisposition intercompany purchases from the Wiring business were $4,025 and $7,593 for the periods ended July 31, 2014 and December 31, 2013, respectively.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost and consist of the following:


As of December 31		2015		2014
Land and land improvements	$	3,538	$	4,036
Buildings and improvements		32,904		34,517
Machinery and equipment		160,721		154,204
Office furniture and fixtures		6,541		6,247
Tooling		68,101		67,135
Information technology		24,035		22,132
Vehicles		422		65
Leasehold improvements		2,581		2,207
Construction in progress		23,914		16,933
Total property, plant, and equipment		322,757		307,476
Less: accumulated depreciation		(237,493)		(222,165)
Property, plant and equipment, net	$	85,264	$	85,311

Depreciation is provided using the straight-line method over the estimated useful lives of the assets. Depreciation expense for the years ended December 31, 2015, 2014 and 2013 was $18,829, $22,299 and $24,099, respectively. Depreciable lives within each property classification are as follows:


Buildings and improvements		10-40 years
Machinery and equipment		3-10 years
Office furniture and fixtures		3-10 years
Tooling		2-5 years
Information technology		3-5 years
Vehicles		3-5 years
Leasehold improvements	shorter of lease term or 3-10 years

Maintenance and repair expenditures that are not considered improvements and do not extend the useful life of the property, plant and equipment are charged to expense as incurred. Expenditures for improvements and major renewals are capitalized. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss on the disposition is recorded in the consolidated statements of operations as a component of selling, general and administrative expenses.

Impairment of Long-Lived or Finite-Lived Assets

The Company reviews the carrying value of its long-lived assets and finite-lived intangible assets for impairment when events or circumstances indicate that their carrying value may not be recoverable. Factors the Company considers important that could trigger testing of the related asset groups for an impairment include current period operating or cash flow losses combined with a history of operating or cash flow losses, a projection or forecast that demonstrates continuing losses, significant adverse changes in the business climate within a particular business or current expectations that a long-lived asset will be sold or otherwise disposed of significantly before the end of its estimated useful life. To test for impairment, the estimated undiscounted cash flows expected to be generated from the use and disposal of the asset or asset group is compared to its carrying value. An asset group is established by identifying the lowest level of cash flows generated by the group of assets that are largely independent of cash flows of other assets. If cash flows cannot be separately and independently identified for a single asset, we will determine whether an impairment has occurred for the group of assets for which we can identify projected cash flows. If these undiscounted cash flows are less than their respective carrying values, an impairment charge would be recognized to the extent that the carrying values exceed estimated fair values. The estimation of undiscounted cash flows and fair value requires us to make assumptions regarding future operating results over the life of the asset or the life of the primary asset in the asset group. The results of the impairment testing are dependent on these estimates which require judgment. The occurrence of certain events, including changes in economic and competitive conditions, could impact cash flows eventually realized and management’s ability to accurately assess whether an asset is impaired.

Due to the lower actual and forecasted financial results from weakness in the Brazilian economy and automotive market, the Company performed an evaluation of PST’s long-lived assets in 2015 and 2014, and concluded that the carrying amount of the asset group was recoverable as the undiscounted cash flows of the asset group exceeded its carrying amount.

There we no material impairment charges recorded for long-lived or finite-lived intangible assets in 2015, 2014 or 2013.

Goodwill and Other Intangible Assets

Goodwill

The total purchase price associated with acquisitions is allocated to the acquisition date fair values of identifiable assets acquired and liabilities assumed with the excess purchase price assigned to goodwill. Goodwill is subject to an annual assessment for impairment (or more frequently if impairment indicators arise) by applying a fair value-based test.

The Company recorded goodwill related to the acquisition of controlling interest in PST in 2011, all of which was deemed to be impaired in 2014. The remaining goodwill balance at December 31, 2015 and 2014 relates to the acquisition of two European aftermarket distributors, which is included within the Electronics segment.

The carrying amount of goodwill related to our Electronics segment decreased by $97 for the year ended December 31, 2015 to $981 due to foreign currency translation.

Goodwill and changes in the carrying amount of goodwill by segment for the year then ended December 31, 2014 was as follows:


				Control
		Electronics		Devices		PST		Total
Balance at January 1, 2014	$	604	$	-	$	53,744	$	54,348
Acquisition of aftermarket business		664		-		-		664
Goodwill impairment		-				(51,458)		(51,458)
Currency translation		(190)		-		(2,286)		(2,476)
Balance at December 31, 2014	$	1,078		-	$	-	$	1,078

The Company’s cumulative goodwill impairment loss since inception was $300,083 at December 31, 2015 and 2014, respectively. In addition to PST’s 2014 goodwill impairment, the cumulative goodwill impairment loss includes the goodwill impairment recorded by the Company’s Control Devices segment in 2008 and 2004.

PST Goodwill Impairment Assessments

The Company conducted its annual goodwill impairment test for its majority owned subsidiary, PST Eletrônica Ltda. (“PST”) on October 1, 2013 without a need to expand the impairment test to “step two” of ASC 350 as PST’s calculated fair value exceeded its carrying value by approximately 10% and no indicators of impairment were identified as disclosed in the Company’s 2013 Form 10-K.

During the second quarter of 2014, however, indicators of potential impairment required the Company to conduct an interim impairment test. Those indicators included a decline in recent operating results and lower growth expectations primarily due to the weakening of the Brazilian economy and automotive market. In accordance with ASC 350, the Company completed “step one” of the impairment analysis and concluded that, as of June 30, 2014, the fair value of the PST reportable segment was below its carrying value, including goodwill. As a result, “step two” of the impairment test was initiated in accordance with ASC 350. The Company recorded its best estimate of $29,300 as a non-cash goodwill impairment charge (of which $6,436 was attributable to noncontrolling interest) as of June 30, 2014. Based on the Company’s completed “step two” analysis in the third quarter of 2014, the final goodwill impairment as of June 30, 2014 was $23,498 (of which $5,162 was attributable to noncontrolling interest). As such, the Company recorded an adjustment to reduce the goodwill impairment by $5,802 (of which $1,274 was attributable to noncontrolling interest) as of September 30, 2014.

In the fourth quarter of 2014, the Company conducted its annual goodwill impairment test for PST and completed “step one” of the impairment test concluding that as of October 1, 2014 the fair value of the PST reportable segment was less than its carrying value, including goodwill. PST’s fair value decreased further due to significantly lower sales and earnings growth expectations which were a result of lower forecasted growth in the Brazilian economy and automotive market and a forecasted decline in currency exchange rates thereby increasing PST’s material costs. Based on the completed “step two” analysis, a goodwill impairment charge of $27,960 (of which $6,142 was attributable to noncontrolling interest) was recorded in the fourth quarter of 2014 which represented all of the remaining PST goodwill. The aggregate goodwill impairment for the year ended December 31, 2014 was $51,458 (of which $11,304 was attributable to noncontrolling interest).

The fair value measurement of the reporting unit under the “step one” analysis and the “step two” analysis (a non-recurring fair value measure) in their entirety are classified as Level 3 inputs. The estimates and assumptions underlying the fair value calculations used in the Company's impairment test are uncertain by their nature and can vary significantly from actual results. Factors that management must estimate include, but are not limited to, industry and market conditions, sales volume and pricing, raw material costs, capital expenditures, working capital changes, cost of capital, debt-equity mix and tax rates. The estimates and assumptions that most significantly affect the fair value calculation are sales volume and the associated cash flow assumptions, market growth and weighted average cost of capital. The estimates and assumptions used in the estimate of fair value are consistent with those the Company uses in its internal planning.

The “step two” of the PST goodwill impairment test utilized the following methodologies in determining fair value. Buildings and machinery were valued at an estimated replacement cost for an asset of comparable age and condition. PST finite lived identified intangible assets are customer relationships, tradenames and technology. Customer relationships were valued using an excess earnings method, using various inputs such as the estimated customer attrition rate, future earnings forecast, the amount of contributory asset charges, and a discount rate. Tradenames and technology intangibles are valued using a relief from royalty method, which is based upon comparable market royalty rates for tradenames of similar value. Other working capital items are generally recorded at carrying value, unless there were known conditions that would impact the ultimate settlement amount of a particular item.

Other Intangible Assets

Other intangible assets, net at December 31, 2015 and 2014 consisted of the following:


		Acquisition		Accumulated
As of December 31, 2015		cost		amortization		Net
Customer lists	$	23,003	$	(6,101)	$	16,902
Tradenames		15,129		(3,043)		12,086
Technology		9,066		(2,336)		6,730
Other		34		(34)		-
Total	$	47,232	$	(11,514)	$	35,718


		Acquisition		Accumulated
As of December 31, 2014		cost		amortization		Net
Customer lists	$	33,686	$	(6,687)	$	26,999
Tradenames		22,224		(3,338)		18,886
Technology		13,327		(2,575)		10,752
Other		50		(50)		-
Total	$	69,287	$	(12,650)	$	56,637

Other intangible assets, net at December 31, 2015 include customer lists, tradenames and technology of $16,602, $12,067 and $6,730, respectively, related to the PST segment with the remaining amounts related to the Electronics segment.

The Company recognized $3,445, $4,784 and $5,187 of amortization expense in 2015, 2014 and 2013, respectively. Amortization expense is included as a component of selling, general and administrative on the consolidated statements of operations. Annual amortization expense for intangible assets is estimated to be approximately $3,000 for the years 2016 through 2021. The weighted-average remaining amortization period is approximately 13 years.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:


As of December 31		2015		2014
Compensation related liabilities	$	17,878	$	17,431
Product warranty and recall obligations		4,446		6,397
Other (A)		16,596		18,238
Total accrued expenses and other current liabilities	$	38,920	$	42,066

(A)“Other” is comprised of miscellaneous accruals, none of which individually contributed a significant portion of the total.

Income Taxes

The Company accounts for income taxes using the liability method. Deferred income taxes reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not to occur. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.

Deferred tax assets are recognized to the extent that these assets are more-likely-than-not to be realized (See Note 5). In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations. Reversal of some or all of a valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the reversal is recorded.

The Company's policy is to provide for uncertain tax positions and the related interest and penalties based upon management's assessment of whether a tax benefit is more-likely-than-not to be sustained upon examination by tax authorities. At December 31, 2015, the Company believes it has appropriately accounted for any unrecognized tax benefits (see Note 5). To the extent the Company prevails in matters for which a liability for an unrecognized tax benefit is established or is required to pay amounts in excess of the liability, the Company's effective tax rate in a given financial statement period may be affected.

Currency Translation

The financial statements of foreign subsidiaries, where the local currency is the functional currency, are translated into U.S. dollars using exchange rates in effect at the period end for assets and liabilities and average exchange rates during each reporting period for the results of operations. Adjustments resulting from translation of financial statements are reflected as a component of accumulated other comprehensive loss in the Company’s consolidated balance sheets.

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 consolidated statements of operations within other expense, net. These foreign currency transaction losses, including the impact of hedging activities, were $1,693, $1,212 and $2,109 for the years ended December 31, 2015, 2014 and 2013, respectively.

Revenue Recognition and Sales Commitments

The Company recognizes revenues from the sale of products, net of actual and estimated returns, at the point of passage of title, which is either at the time of shipment or upon customer receipt based upon the terms of the sale. The Company recognizes monitoring service revenues as the services are provided to customers. The Company collects certain taxes and fees on behalf of government agencies and remits such collections on a periodic basis. The taxes are collected from customers but are not included in net sales. Estimated returns are based on historical authorized returns. The Company often enters into agreements with its customers at the beginning of a given vehicle’s expected production life. Once such agreements are entered into, it is the Company’s obligation to fulfill the customers’ purchasing requirements for the entire production life of the vehicle. These agreements are subject to potential renegotiation from time to time, which may affect product pricing.

Shipping and Handling Costs

Shipping and handling costs are included in cost of goods sold on the consolidated statements of operations.

Product Warranty and Recall Reserves

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 including insurance coverage. 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 or beyond what the Company may recover from its suppliers. The current portion of the product warranty and recall reserve is included as a component of accrued expenses and other current liabilities on the consolidated balance sheets. Product warranty and recall includes $1,973 and $1,204 of a long-term liability at December 31, 2015 and 2014, respectively, which is included as a component of other long-term liabilities on the consolidated balance sheets.

The following provides a reconciliation of changes in the product warranty and recall reserve:


Years ended December 31		2015		2014
Product warranty and recall at beginning of period	$	7,601	$	6,414
Accruals for products shipped during period		4,609		4,484
Aggregate changes in pre-existing liabilities due to claim developments		(156)		692
Settlements made during the period		(5,635)		(3,989)
Product warranty and recall at end of period	$	6,419	$	7,601

Design and Development Costs

Expenses associated with the development of new products, and changes to existing products are charged to expense as incurred, and are included in the Company’s consolidated statements of operations as a separate component of costs and expenses. These product development costs amounted to $38,792, $41,609 and $40,372 for the years ended December 31, 2015, 2014 and 2013, respectively, or 6.0%, 6.3% and 6.1% of net sales for these respective periods.

Research and Development Activities

The Company’s Electronics segment enters into research and development contracts with certain customers, which generally provide for reimbursement of costs. The Company incurred and was reimbursed for contracted research and development costs of $9,659, $12,319 and $16,982 for the years ended December 31, 2015, 2014 and 2013, respectively.

Share-Based Compensation

At December 31, 2015, the Company had two types of share-based compensation plans: (1) Long-Term Incentive Plan, as amended, for employees and (2) the Amended Directors’ Restricted Shares Plan, for non-employee directors. The Long-Term Incentive Plan is made up of the Long-Term Incentive Plan that was approved by the Company's shareholders on September 30, 1997, which expired on June 30, 2007, and the Amended and Restated Long-Term Incentive Plan, as amended, that was approved by shareholders on May 17, 2010, and expires on April 24, 2016.

Total compensation expense recognized as a component of selling, general and administrative expense on the consolidated statements of operations for share-based compensation arrangements was $7,224, including $2,225 from the accelerated vesting in connection with the retirement of the Company’s former President and Chief Executive Officer, $5,406 and $4,974 for the years ended December 31, 2015, 2014 and 2013, respectively. Of these amounts, $828, $243 and $155 for the years ended December 31, 2015, 2014 and 2013, respectively, were related to the Long-Term Cash Incentive Plan “Phantom Shares” discussed in Note 8. There was no share-based compensation expense capitalized in inventory during 2015, 2014 or 2013.

Financial Instruments and Derivative Financial Instruments

Financial instruments, including derivative financial instruments, held by the Company include cash and cash equivalents, accounts receivable, accounts payable, long-term debt, an interest rate swap, fixed price commodity contracts and foreign currency forward contracts. The carrying value of cash and cash equivalents, accounts receivable and accounts payable is considered to be representative of fair value because of the short maturity of these instruments. See Note 9 for fair value disclosures of the Company’s financial instruments.

Common Shares Held in Treasury

The Company accounts for Common Shares held in treasury under the cost method (applied on a FIFO basis) and includes such shares as a reduction of total shareholders’ equity.

Earnings (Loss) Per Share

Basic earnings (loss) per share was computed by dividing net income by the weighted-average number of Common Shares outstanding for each respective period. Diluted earnings (loss) per share was calculated by dividing net income (loss) attributable to Stoneridge, Inc. 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 from continuing operations, the Company did not recognize the effect of the potential dilutive securities as their inclusion would have been anti-dilutive.

Actual weighted-average Common Shares outstanding used in calculating basic and diluted net income (loss) per share were as follows:


Years ended December 31	2015	2014	2013
Basic weighted-average shares outstanding	27,337,954	26,923,809	26,670,501
Effect of dilutive securities	621,208	-	522,984
Diluted weighted-average shares outstanding	27,959,162	26,923,809	27,193,485

There were no outstanding options at December 31, 2015 and 2014. Options to purchase 20,000 Common Shares at a price of $15.73 per share were outstanding at December 31, 2013 but were not included in the computation of diluted earnings per share because their respective exercise prices were greater than the average closing market price of Company Common Shares and the effect would be anti-dilutive.

There were 134,250, 466,650 and 663,750 performance-based restricted Common Shares outstanding at December 31, 2015, 2014 and 2013, respectively. There were also 573,885 and 374,400 performance-based right to receive Common Shares outstanding at December 31, 2015 and 2014. These performance-based restricted and 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 year were the end of the contingency period. Restricted and right to receive Common Shares were not included in the computation of diluted earnings per share for the year ended December 31, 2014 as the Company had a net loss from continuing operations that year, and as such they would be anti-dilutive.

Deferred Finance Costs

Deferred finance costs are amortized over the life of the related financial instrument using the straight-line method, which approximates the effective interest method. The 2.5% discount to the initial purchasers of the Company’s senior notes was accreted using the effective interest rate of 10.0% through October 18, 2014, the date the senior notes were redeemed. During 2014, the Company redeemed the senior notes resulting in the acceleration of the remaining deferred financing costs of $597 which were included in loss on early extinguishment of debt in the statement of operations in 2014. Deferred finance cost amortization and debt discount accretion for the years ended December 31, 2015, 2014 and 2013 was $388, $850 and $908, respectively, and is included as a component of interest expense, net in the consolidated statements of operations. As of December 31, 2015 and 2014, deferred financing costs, net, all of which are associated with the revolving credit facility, were $1,428 and $1,767, respectively, and were included in the consolidated balance sheets as a component of investments and other long-term assets, net.

Changes in Accumulated Other Comprehensive Loss by Component

Changes in accumulated other comprehensive loss for the years ended December 31, 2015 and 2014 were as follows:



		Foreign		Unrealized		Benefit
		currency		gain (loss)		plan
		translation		on derivatives		liability		Total
Balance at January 1, 2015	$	(45,603)	$	1	$	129	$	(45,473)

Other comprehensive loss before reclassifications		(24,693)		(671)		(45)		(25,409)
Amounts reclassified from accumulated other
comprehensive loss		-		1,060		-		1,060
Net other comprehensive income (loss), net of tax		(24,693)		389		(45)		(24,349)

Balance at December 31, 2015	$	(70,296)	$	390	$	84	$	(69,822)

Balance at January 1, 2014	$	(30,335)	$	(111)	$	(12)	$	(30,458)

Other comprehensive loss before reclassifications		(18,002)		(454)		-		(18,456)
Amounts reclassified from accumulated other
comprehensive loss		2,734		566		141		3,441
Net other comprehensive income (loss), net of tax		(15,268)		112		141		(15,015)

Balance at December 31, 2014	$	(45,603)	$	1	$	129	$	(45,473)

Recently Issued Accounting Standards Not Yet Adopted as of December 31, 2015

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016 – 02, “Leases (Topic 842)”, which will require that a lessee recognize assets and liabilities on the balance sheet for all leases with a lease term of more than twelve months, with the result being the recognition of a right of use asset and a lease liability. The amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company expects to adopt this standard as of January 1, 2019. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements, which will require right of use assets and lease liabilities be recorded in the consolidated balance sheet for operating leases.

In November 2015, the FASB issued ASU 2015 – 17, “Income Taxes (Topic 740),” which simplifies the presentation of deferred income taxes. Currently entities are required to separate deferred income tax liabilities and assets into current and noncurrent amounts in the balance sheet. ASU 2015-17 requires that all deferred income taxes be classified as noncurrent in the balance sheet. The amendment is effective for fiscal years beginning after December 15, 2016 including interim periods within those fiscal years and may be applied either prospectively or retrospectively with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

In September 2015, the FASB issued ASU 2015 – 16, “Business Combinations,” which simplifies the accounting for measurement-period adjustments related to business combinations. ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in the ASU require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendment is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years and is to be applied prospectively to adjustments to provisional amounts that occur after the effective date of this ASU with earlier application permitted for financial statements that have not been issued. The Company will adopt this standard as of January 1, 2016, which is not expected to have a material impact on the Company’s consolidated financial statements or disclosures.

In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory” which requires that inventory be measured at the lower of cost or net realizable value. Prior to the issuance of the new guidance, inventory was measured at the lower of cost or market. Replacing the concept of market with the single measurement of net realizable value is intended to reduce cost and complexity. The new accounting standard is effective for fiscal years beginning after December 15, 2016. The Company expects to adopt this standard as of January 1, 2017, which is not expected to have a material impact on the Company’s consolidated financial statements or disclosures.

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers,” which is the new comprehensive revenue recognition standard that will supersede existing revenue recognition guidance under U.S. GAAP. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to a customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. To achieve this principle, an entity identifies the contract with a customer, identifies the separate performance obligations in the contract, determines the transaction price, allocates the transaction price to the separate performance obligations and recognizes revenue when each separate performance obligation is satisfied. This ASU allows for both retrospective and prospective methods of adoption. In July 2015, the FASB approved a one-year deferral of the effective date of the standard. As such, the new standard will become effective for annual and interim periods beginning after December 15, 2017 with early adoption on the original effective date permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

Recently Adopted Accounting Standards

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which amends the current presentation of certain debt issuance costs in the balance sheet. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, instead of as an asset. The recognition and measurement of debt issuance costs are not affected by the amendments in this ASU. The guidance in ASU 2015-03 did not address the presentation or subsequent measurement of debt issuance costs related to line of credit arrangements. Given the absence of authoritative guidance, in June 2015 the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” which states that the SEC will not object to an entity deferring and presenting debt issuance costs related to revolving credit arrangements as an asset and subsequently amortizing them. These amendments are to be applied retrospectively and are effective for public companies for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. As permitted by the ASU, the Company adopted these standards in the third quarter of 2015, which had no impact on the Company’s consolidated financial statements. The Company has elected to continue to present deferred financing costs related to its revolving credit facility, which had balances of $1,428 and $1,767 at December 31, 2015 and 2014, respectively, within long-term assets in the Company’s consolidated balance sheets.

Years ended December 31

Depreciation and amortization

Capital expenditures