EX-99.1 2 v451475_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

STONERIDGE REPORTS STRONG THIRD-QUARTER 2016 RESULTS

| · | Reports Earnings Per Diluted Share From Continuing Operations of $0.36, an increase of $0.09 per share or 33.3% compared with 3Q15

| · | Sales of $173.8 million increased by $11.8 million or 7.3% compared with 3Q15

| · | Operating Income of $11.8 million increased by $2.8 million or 31.7% compared with 3Q15

| · | PST generated positive operating profit in 3Q15; a $0.7 million improvement over 3Q15

| · | Reaffirmed 2016 full-year gross margin, operating margin, earnings per share and EBITDA guidance; revised sales guidance slightly lower to range of $690.0-$700.0 million

WARREN, Ohio – October 27, 2016 – Stoneridge, Inc. (NYSE: SRI) today announced financial results for the third quarter ended September 30, 2016, with sales of $173.8 million and earnings per diluted share from continuing operations attributable to Stoneridge, Inc. of $0.36, an increase of $0.09 per share or 33.3% compared with the third quarter of 2015.

The Control Devices segment sales increased by $16.7 million, or 19.2%, to $103.7 million. The sales increase in the Control Devices segment in 2016 reflects sales of new programs primarily in the North American passenger car market.

The Electronics segment sales of $47.8 million declined by $2.9 million or 5.7% compared with the third quarter of 2015. Electronics sales primarily decreased due to lower volumes in the North American commercial vehicle market. The Electronics segment exposure to the North American commercial vehicle market decreased significantly as a result of the Wiring business divestiture in August 2014.

PST experienced a sales decrease of $2.0 million, or 8.2%, to $22.3 million, compared with the third quarter of 2015, due to the continued economic downturn in Brazil. On a constant currency basis, in the third quarter of 2016, the PST segment sales decreased by $4.0 million, or 16.4%, compared with the third quarter of 2015 because of the continued adverse effects of the deteriorated economic conditions in Brazil (see Exhibit 1 for a reconciliation of this non-GAAP financial measure). During the third quarter of 2016, the average Brazilian Real per U.S. Dollar rate strengthened from R$3.51 per USD to R$3.25 per USD, or 7.5%, compared with the third quarter of 2015. This increased U.S. Dollar reported sales for PST by approximately $2.0 million and helped partially offset the local currency sales decline.

Earnings per diluted share attributable to Stoneridge, Inc. was $0.36 for the third quarter of 2016 compared with earnings per diluted share attributable to Stoneridge, Inc. of $0.26 for the third quarter of 2015, an improvement of $0.10 per share or 38.5%.

During the third quarter of 2016, Stoneridge’s operating cash flow was $19.2 million, a $3.7 million or 23.9% increase from operating cash flow of $15.5 million for the third quarter of 2015. At September 30, 2016, Stoneridge’s consolidated cash position was $50.6 million, a decrease of $3.8 million from December 31, 2015. Cash decreased primarily as a result of paying down the outstanding balance on the Company’s revolving line of credit to optimize its net interest expense. Net debt has been reduced by $39.0 million, to $54.6 million at September 30, 2016, from $93.6 million at September 30, 2015. Stoneridge’s Debt to Adjusted EBITDA from Continuing Operations ratio improved to 1.6x compared with 2.4x in the third quarter of 2015 (see Exhibit 2 for a reconciliation of this non-GAAP financial measure).

Jon DeGaynor, President and Chief Executive Officer, commented, “This quarter, Stoneridge continued its trend of improved quarter-on-quarter operating performance. Our 130 basis point increase to operating margin in the third quarter was due to higher sales in our Control Devices segment, currency tailwinds and operating improvements in our Electronics and PST segments.”

DeGaynor added, “PST’s efforts to mitigate the effect of the downturn continue to add value and generate cash. PST improved its operating income by $0.7 million in the third quarter of 2016, compared with the third quarter of 2015, despite a sales decrease of $2.0 million. In the third quarter, PST generated its first quarterly operating profit of the year (excluding non-cash intangible amortization expense related to the purchase of PST), with an operating margin of 5.0%, and it expects to accelerate this in the fourth quarter of 2016. The PST management team continues to demonstrate the ability to manage in a very difficult business environment.”

DeGaynor concluded, “During the quarter, we continued to deliver the operating leverage our incremental sales implied in our 2016 guidance (see Exhibit 3). We look forward to continued strong execution for the remainder of 2016 and into 2017.”

Conference Call on the Web

A live Internet broadcast of Stoneridge’s conference call regarding 2016 third-quarter results can be accessed at 10 a.m. Eastern time on Thursday, October 27, 2016, at www.stoneridge.com, which will also offer a webcast replay.

About Stoneridge, Inc.

Stoneridge, Inc., headquartered in Warren, Ohio, is an independent designer and manufacturer of highly engineered electrical and electronic components, modules and systems principally for the automotive, commercial vehicle, motorcycle, agricultural and off-highway vehicle markets. Additional information about Stoneridge can be found at www.stoneridge.com.

Forward-Looking Statements

Statements in this release that are not historical fact are forward-looking statements which involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied in this release. Things that may cause actual results to differ materially from those in the forward-looking statements include, among other factors, the loss of a major customer; a significant volume change in automotive, commercial vehicle, motorcycle, off-highway vehicle and agricultural equipment production; disruption in the OEM supply chain due to bankruptcies; a significant change in general economic conditions in any of the various countries in which the Company operates; labor disruptions at the Company’s facilities or at any of the Company’s significant customers or suppliers; the ability of the Company’s suppliers to supply the Company with parts and components at competitive prices on a timely basis; customer acceptance of new products; and the failure to achieve successful integration of any acquired company or business. In addition, this release contains time-sensitive information that reflects management’s best analysis only as of the date of this release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release. Further information concerning issues that could materially affect financial performance related to forward-looking statements contained in this release can be found in the Company’s periodic filings with the Securities and Exchange Commission.

For more information, contact:

Bob Krakowiak, Chief Financial Officer

248-489-9300

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

|  | Three months ended |  |  | Nine months ended |
|  | September 30, |  |  | September 30, |
(in thousands, except per share data) |  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
Net sales |  | $ | 173,846 |  |  | $ | 162,057 |  |  | $ | 523,365 |  |  | $ | 490,171 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold |  |  | 124,098 |  |  |  | 116,912 |  |  |  | 375,705 |  |  |  | 355,432 |
Selling, general and administrative |  |  | 27,817 |  |  |  | 26,331 |  |  |  | 82,836 |  |  |  | 85,555 |
Design and development |  |  | 10,151 |  |  |  | 9,867 |  |  |  | 30,912 |  |  |  | 29,696 |
Operating income |  |  | 11,780 |  |  |  | 8,947 |  |  |  | 33,912 |  |  |  | 19,488 |
Interest expense, net |  |  | 1,684 |  |  |  | 1,747 |  |  |  | 5,038 |  |  |  | 4,683 |
Equity in earnings of investee |  |  | (307 | ) |  |  | (160 | ) |  |  | (603 | ) |  |  | (492 | )
Other income, net |  |  | (497 | ) |  |  | (83 | ) |  |  | (722 | ) |  |  | (343 | )
Income before income taxes from continuing operations |  |  | 10,900 |  |  |  | 7,443 |  |  |  | 30,199 |  |  |  | 15,640 |
Income tax expense (benefit) from continuing operations |  |  | 919 |  |  |  | 32 |  |  |  | 3,114 |  |  |  | (202 | )
Income from continuing operations |  |  | 9,981 |  |  |  | 7,411 |  |  |  | 27,085 |  |  |  | 15,842 |
Loss from discontinued operations |  |  | - |  |  |  | (113 | ) |  |  | - |  |  |  | (226 | )
Net income |  |  | 9,981 |  |  |  | 7,298 |  |  |  | 27,085 |  |  |  | 15,616 |
Net loss attributable to noncontrolling interest |  |  | (303 | ) |  |  | (69 | ) |  |  | (2,009 | ) |  |  | (1,074 | )
Net income attributable to Stoneridge, Inc. |  | $ | 10,284 |  |  | $ | 7,367 |  |  | $ | 29,094 |  |  | $ | 16,690 |
Earnings per share from continuing operations attributable Stoneridge, Inc.: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.37 |  |  | $ | 0.27 |  |  | $ | 1.05 |  |  | $ | 0.62 |
Diluted |  | $ | 0.36 |  |  | $ | 0.27 |  |  | $ | 1.03 |  |  | $ | 0.61 |
Loss per share attributable to discontinued operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.00 |  |  | $ | (0.01 | ) |  | $ | 0.00 |  |  | $ | (0.01 | )
Diluted |  | $ | 0.00 |  |  | $ | (0.01 | ) |  | $ | 0.00 |  |  | $ | (0.01 | )
Earnings per share attributable to Stoneridge, Inc.: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.37 |  |  | $ | 0.26 |  |  | $ | 1.05 |  |  | $ | 0.61 |
Diluted |  | $ | 0.36 |  |  | $ | 0.26 |  |  | $ | 1.03 |  |  | $ | 0.60 |
Weighted-average shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 27,792 |  |  |  | 27,444 |  |  |  | 27,753 |  |  |  | 27,299 |
Diluted |  |  | 28,359 |  |  |  | 28,008 |  |  |  | 28,266 |  |  |  | 27,927 |

CONDENSED CONSOLIDATED BALANCE SHEETS

|  | September 30, |  |  | December 31, |
(in thousands) |  | 2016 |  |  | 2015 |
|  | (Unaudited) |  |  |  |
ASSETS |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 50,560 |  |  | $ | 54,361 |
Accounts receivable, less reserves of $1,563 and $1,066, respectively |  |  | 122,286 |  |  |  | 94,937 |
Inventories, net |  |  | 65,200 |  |  |  | 61,009 |
Prepaid expenses and other current assets |  |  | 31,677 |  |  |  | 21,602 |
Total current assets |  |  | 269,723 |  |  |  | 231,909 |
Long-term assets: |  |  |  |  |  |  |  |
Property, plant and equipment, net |  |  | 90,746 |  |  |  | 85,264 |
Intangible assets, net and goodwill |  |  | 41,294 |  |  |  | 36,699 |
Investments and other long-term assets, net |  |  | 11,839 |  |  |  | 10,380 |
Total long-term assets |  |  | 143,879 |  |  |  | 132,343 |
Total assets |  | $ | 413,602 |  |  | $ | 364,252 |
LIABILITIES AND SHAREHOLDERS' EQUITY |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Current portion of debt |  | $ | 9,901 |  |  | $ | 13,905 |
Accounts payable |  |  | 66,596 |  |  |  | 55,225 |
Accrued expenses and other current liabilities |  |  | 50,032 |  |  |  | 38,920 |
Total current liabilities |  |  | 126,529 |  |  |  | 108,050 |
Long-term liabilities: |  |  |  |  |  |  |  |
Revolving credit facility |  |  | 87,000 |  |  |  | 100,000 |
Long-term debt, net |  |  | 8,264 |  |  |  | 4,458 |
Deferred income taxes |  |  | 43,290 |  |  |  | 41,332 |
Other long-term liabilities |  |  | 3,898 |  |  |  | 3,983 |
Total long-term liabilities |  |  | 142,452 |  |  |  | 149,773 |
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 28,907 shares issued and 27,843 and 27,912 shares outstanding at September 30, 2016 and December 31, 2015, respectively, with no stated value |  |  | - |  |  |  | - |
Additional paid-in capital |  |  | 203,976 |  |  |  | 199,254 |
Common Shares held in treasury, 1,123 and 995 shares at September 30, 2016 and December 31, 2015, respectively, at cost |  |  | (5,592 | ) |  |  | (4,208 | )
Accumulated deficit |  |  | (3,011 | ) |  |  | (32,105 | )
Accumulated other comprehensive loss |  |  | (64,456 | ) |  |  | (69,822 | )
Total Stoneridge, Inc. shareholders' equity |  |  | 130,917 |  |  |  | 93,119 |
Noncontrolling interest |  |  | 13,704 |  |  |  | 13,310 |
Total shareholders' equity |  |  | 144,621 |  |  |  | 106,429 |
Total liabilities and shareholders' equity |  | $ | 413,602 |  |  | $ | 364,252 |

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

|  | Three months ended |  |  | Nine months ended |
|  | September 30, |  |  | September 30, |
(in thousands) |  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
Net income |  | $ | 9,981 |  |  | $ | 7,298 |  |  | $ | 27,085 |  |  | $ | 15,616 |
Less: Net loss attributable to noncontrolling interest |  |  | (303 | ) |  |  | (69 | ) |  |  | (2,009 | ) |  |  | (1,074 | )
Net income attributable to Stoneridge, Inc. |  |  | 10,284 |  |  |  | 7,367 |  |  |  | 29,094 |  |  |  | 16,690 |
Other comprehensive income (loss), net of tax attributable to Stoneridge, Inc.: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation |  |  | (638 | ) |  |  | (12,557 | ) |  |  | 5,923 |  |  |  | (24,497 | )
Benefit plan liability |  |  | (84 | ) |  |  | - |  |  |  | (84 | ) |  |  | (45 | )
Unrealized loss on derivatives |  |  | (64 | ) |  |  | (236 | ) |  |  | (473 | ) |  |  | (29 | )
Other comprehensive income (loss), net of tax attributable to Stoneridge, Inc. |  |  | (786 | ) |  |  | (12,793 | ) |  |  | 5,366 |  |  |  | (24,571 | )
Comprehensive income (loss) attributable to Stoneridge, Inc. |  | $ | 9,498 |  |  | $ | (5,426 | ) |  | $ | 34,460 |  |  | $ | (7,881 | )

The Company has combined comprehensive income (loss) from continuing operations and comprehensive loss from discontinued operations herein.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine months ended September 30 (in thousands) |  | 2016 |  |  | 2015 |
OPERATING ACTIVITIES: |  |  |  |  |  |  |  |
Net cash provided by operating activities |  | $ | 37,017 |  |  | $ | 17,133 |
INVESTING ACTIVITIES: |  |  |  |  |  |  |  |
Capital expenditures |  |  | (18,484 | ) |  |  | (23,521 | )
Proceeds from sale of fixed assets |  |  | 652 |  |  |  | 53 |
Payments related to sale of Wiring business |  |  | - |  |  |  | (1,230 | )
Business acquisition |  |  | - |  |  |  | (469 | )
Net cash used for investing activities |  |  | (17,832 | ) |  |  | (25,167 | )
FINANCING ACTIVITIES: |  |  |  |  |  |  |  |
Revolving credit facility payment |  |  | (13,000 | ) |  |  | - |
Proceeds from issuance of debt |  |  | 13,317 |  |  |  | 19,116 |
Repayments of debt |  |  | (21,312 | ) |  |  | (20,015 | )
Other financing costs |  |  | (339 | ) |  |  | (49 | )
Repurchase of Common Shares to satisfy employee tax withholding |  |  | (1,384 | ) |  |  | (2,854 | )
Net cash used for financing activities |  |  | (22,718 | ) |  |  | (3,802 | )
Effect of exchange rate changes on cash and cash equivalents |  |  | (268 | ) |  |  | (1,896 | )
Net change in cash and cash equivalents |  |  | (3,801 | ) |  |  | (13,732 | )
Cash and cash equivalents at beginning of period |  |  | 54,361 |  |  |  | 43,021 |
Cash and cash equivalents at end of period |  | $ | 50,560 |  |  | $ | 29,289 |

The Company has combined cash flows from continuing operations and cash flows from discontinued operations within the operating, investing and financing categories.

Exhibit 1

Stoneridge, Inc.

Reconciliation of Sales to Constant Currency Adjusted Sales

Three months ended September 30, 2016 and 2015 (in thousands)

(Unaudited)

|  |  |  |  | Increase / |  |  | Percent |
|  | 2016 |  |  | 2015 |  |  | (Decrease) |  |  | Increase |
Electronics Segment Sales As Reported |  | $ | 47,804 |  |  | $ | 50,688 |  |  | $ | (2,884 | ) |  |  | (5.7 | )%
Plus: Constant Foreign Currency Translation Adjustment |  |  | 1,193 |  |  |  | - |  |  |  | 1,193 |  |  |  |  |
Adjusted Electronics Segment Sales |  | $ | 48,997 |  |  | $ | 50,688 |  |  | $ | (1,691 | ) |  |  | (3.3 | )%
PST Segment Sales As Reported |  | $ | 22,342 |  |  | $ | 24,339 |  |  | $ | (1,997 | ) |  |  | (8.2 | )%
Less: Constant Foreign Currency Translation Adjustment |  |  | (2,004 | ) |  |  | - |  |  |  | (2,004 | ) |  |  |  |
Adjusted PST Segment Sales |  | $ | 20,338 |  |  | $ | 24,339 |  |  | $ | (4,001 | ) |  |  | (16.4 | )%
Total Consolidated Sales As Reported |  | $ | 173,846 |  |  | $ | 162,057 |  |  | $ | 11,789 |  |  |  | 7.3 | %
Plus: Constant Foreign Currency Translation Adjustment |  |  | (811 | ) |  |  | - |  |  |  | (811 | ) |  |  |  |
Total Consolidated Constant Currency Adjusted Sales |  | $ | 173,035 |  |  | $ | 162,057 |  |  | $ | 10,978 |  |  |  | 6.8 | %

Exhibit 2

Stoneridge, Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA from Continuing Operations

Twelve months ended September 30, 2016 and 2015 (in thousands)

(Unaudited)

|  | 2016 |  |  | 2015 |
Net income (loss) |  | $ | 32,033 |  |  | $ | (17,382 | )
Interest expense, net |  |  | 6,720 |  |  |  | 6,504 |
Equity in earnings of investees |  |  | (719 | ) |  |  | (719 | )
Other expense (income), net |  |  | 1,452 |  |  |  | (2,047 | )
Expense (benefit) for income taxes |  |  | 2,769 |  |  |  | (1,269 | )
Depreciation and amortization |  |  | 22,347 |  |  |  | 23,941 |
Share-based compensation impact of CEO Retirement |  |  | - |  |  |  | 2,225 |
Discontinued operations |  |  | (16 | ) |  |  | 1,918 |
Loss on early extinguishment of debt |  |  | - |  |  |  | 9,687 |
PST purchase accounting and goodwill impairment |  |  | 50 |  |  |  | 27,519 |
Adjusted EBITDA from continuing operations |  | $ | 64,636 |  |  | $ | 50,377 |
Total Debt |  | $ | 105,165 |  |  | $ | 122,895 |
Total Debt / Adjusted EBITDA from continuing operations |  |  | 1.6 | x |  |  | 2.4 | x

Exhibit 3

|  | August 2, 2016 |  |  | October 27, 2016 |
|  | *Guidance** |  |  | *Guidance*** |
Sales (in millons) |  |  | $705 - $715 |  |  |  | $690 - $700 |
Gross Margin |  |  | 26.0% - 28.5% |  |  |  | 26.0% - 28.5% |
Operating Margin |  |  | 6.0% - 7.3% |  |  |  | 6.0% - 7.3% |
EPS/Adjusted EPS ** |  |  | $1.25 - $1.40 |  |  |  | $1.25 - $1.40 |
EBITDA % |  |  | 9.5% - 11.3% |  |  |  | 9.5% - 11.3% |
FX Rates : |  |  |  |  |  |  |  |
BRL/USD |  |  | 3.40 |  |  |  | 3.40 |
MXN/USD |  |  | 17.80 |  |  |  | 18.35 |
USD/EUR |  |  | 1.12 |  |  |  | 1.14 |
SEK/USD |  |  | 8.25 |  |  |  | 8.32 |

* Both guidance scenarios assume no reversal of US Deferred Tax Valuation Allowance

** August 2, 2016 Guidance used adjusted EPS of $.31/share in 1Q16 and $.41/share as reported in 2Q16

*** October 27, 2016 Guidance used adjusted EPS of $.31/share in 1Q16 and $.41/share as reported in 2Q16 and $.36/share as reported in 3Q16