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Financial Instruments and Fair Value Measurements | 12 Months Ended
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Dec. 31, 2023
Fair Value Disclosures [Abstract] |
Financial Instruments and Fair Value Measurements | Financial Instruments and Fair Value Measurements Financial Instruments A financial instrument is cash or a contract that imposes an obligation to deliver or conveys a right to receive cash or another financial instrument. The carrying values of cash and cash equivalents, accounts receivable and accounts payable are considered to be representative of fair value because of the short maturity of these instruments. The fair value of debt approximates the carrying value of debt, due to the variable interest rate on the Credit Facility and the maturity of the remaining outstanding debt. Derivative Instruments and Hedging Activities On December 31, 2023, the Company had open Mexican peso-denominated foreign currency forward contracts. The Company used foreign currency forward contracts solely for hedging and not for speculative purposes during 2023 and 2022. Management believes that its use of these instruments to reduce risk is in the Company’s best interest. The counterparties to these financial instruments are financial institutions with investment grade credit ratings. Foreign Currency Exchange Rate Risk The Company conducts business internationally and, therefore, is exposed to foreign currency exchange rate risk. The Company uses derivative financial instruments as cash flow hedges and used net investment hedges to manage its exposure to fluctuations in foreign currency exchange rates by reducing the effect of such fluctuations on foreign currency denominated intercompany transactions, inventory purchases and other foreign currency exposures. Net Investment Hedges During 2021, the Company entered into two cross-currency swaps, designated as net investment hedges, with notional values of $25,000 each that were scheduled to mature in August 2026 and August 2028. These swaps hedged a portion of the net investment in a certain euro-denominated subsidiary. As a result of favorable market conditions during 2022 the Company unwound the two net investment hedges and recognized a net gain of $3,716, which was recorded on the Company’s consolidated balance sheet in accumulated other comprehensive loss. The cash received from the settlement of these swaps of $3,820 was classified in investing activities in the consolidated statement of cash flows. The Company elected to assess hedge effectiveness of the net investment hedges under the spot method. Accordingly, periodic changes in the fair value of the derivative instruments attributable to factors other than spot exchange rate variability were excluded from the measurement of hedge ineffectiveness and reported directly in earnings each reporting period. The change in fair value of these derivative instruments was recorded in cumulative translation adjustment, which is a component of accumulated other comprehensive loss in the consolidated balance sheets. The Company had no outstanding net investment hedges as of December 31, 2023 or 2022. Cash Flow Hedges The Company entered into foreign currency forward contracts to hedge the Mexican peso currency in 2023 and 2022. These forward contracts were executed to hedge forecasted transactions and have been accounted for as cash flow hedges. As such, gains and losses on derivatives qualifying as cash flow hedges are recorded in accumulated other comprehensive loss, to the extent that hedges are effective, until the underlying transactions are recognized in earnings. Unrealized amounts in accumulated other comprehensive loss will fluctuate based on changes in the fair value of hedge derivative contracts at each reporting period. The cash flow hedges were highly effective. The effectiveness of the transactions has been and will be measured on an ongoing basis using regression analysis and forecasted future purchases of the currency. In certain instances, the foreign currency forward contracts may not qualify for hedge accounting or are not designated as hedges and, therefore, are marked-to-market with gains and losses recognized in the Company’s consolidated statements of operations as a component of other expense, net. During 2023 and 2022, all of the Company’s foreign currency forward contracts were designated as cash flow hedges. The Company’s foreign currency forward contracts offset a portion of the gains and losses on the underlying foreign currency denominated transactions as follows: Mexican peso-denominated Foreign Currency Forward Contracts – Cash Flow Hedges The Company holds Mexican peso-denominated foreign currency forward contracts which expire ratably on a monthly basis from January 2024 to December 2024. The notional amounts at December 31, 2023 and 2022 related to Mexican peso-denominated foreign currency forward contracts were $26,613 and $0, respectively. The Company evaluated the effectiveness of the Mexican peso-denominated foreign currency forward contracts held as of December 31, 2023 and the year then ended, and concluded that the hedges were highly effective. Interest Rate Risk Interest Rate Risk – Cash Flow Hedge On February 18, 2020, the Company entered into a floating-to-fixed interest rate swap agreement (the “Swap”) with a notional amount of $50,000 to hedge its exposure to interest payment fluctuations on a portion of its Fourth Amended and Restated Credit Agreement borrowings. The Swap matured on March 10, 2023. The Swap was designated as a cash flow hedge of the variable interest rate obligation under the Company's Fourth Amended and Restated Credit Agreement. Accordingly, the change in fair value of the Swap was recognized in accumulated other comprehensive loss. The Swap agreement required monthly settlements on the same days that the Fourth Amended and Restated Credit Agreement interest payments were due and had a maturity date of March 10, 2023, which was prior to the Fourth Amended and Restated Credit Agreement maturity date of June 4, 2024. Under the Swap terms, the Company paid a fixed interest rate and received a floating interest rate based on the one-month LIBOR, with a floor. The critical terms of the Swap were aligned with the terms of the Fourth Amended and Restated Credit Agreement, resulting in no hedge ineffectiveness. The difference between amounts to be received and paid under the Swap were recognized as a component of interest expense, net on the consolidated statements of operations. The swap settlements (reduced) increased interest expense, net by $(290), $(156) and $651 for the years ended December 31, 2023, 2022 and 2021, respectively. The notional amounts and fair values of derivative instruments in the consolidated balance sheets were as follows:
|  | Notional amounts (A) |  | Prepaid expenses and other current assets |  |
As of December 31, |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Forward currency contracts |  | $ | 26,613 |  |  | $ | — |  |  | $ | 1,858 |  |  | $ | — |  |  |  |  |
Interest rate swap |  | $ | — |  |  | $ | 50,000 |  |  | $ | — |  |  | $ | 294 |  |  |  |  |
_____________________________ (A)Notional amounts represent the gross contract of the derivatives outstanding in U.S. dollars. Gross amounts recorded for the cash flow hedges in other comprehensive income (loss) and in net (loss) income for the years ended December 31 were as follows:
|  | Gain (loss) recorded in other comprehensive income (loss) |  | Gain (loss) reclassified from other comprehensive income (loss) income into net (loss) income (A)
|  | 2023 |  | 2022 |  | 2021 |  | 2023 |  | 2022 |  | 2021
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Forward currency contracts |  | $ | 2,304 |  |  | $ | 1,346 |  |  | $ | 923 |  |  | $ | 446 |  |  | $ | 2,076 |  |  | $ | 448 |
Interest rate swap |  | $ | (4) |  |  | $ | 953 |  |  | $ | 164 |  |  | $ | 290 |  |  | $ | 156 |  |  | $ | (651) |
Derivatives designated as net investment hedges: |  |  |  |  |  |  |  |  |  |  |  |
Cross-currency swaps |  | $ | — |  |  | $ | 2,446 |  |  | $ | 1,270 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
_____________________________ (A)Gains reclassified from comprehensive income (loss) into net (loss) income recognized in COGS in the Company’s consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021 were $337, $1,572 and $341, respectively. Gains reclassified from other comprehensive income (loss) into net (loss) income recognized in SG&A in the Company’s consolidated statements of operations were $109, $504 and $107 for the years ended December 31, 2023, 2022 and 2021, respectively. Gains (losses) reclassified from other comprehensive income (loss) into net (loss) income recognized in interest expense, net in the Company’s consolidated statements of operations were $290, $156 and $(651) for the years ended December 31, 2023, 2022 and 2021, respectively. Cash flows from derivatives used to manage foreign exchange and interest rate risks are classified as operating activities within the consolidated statements of cash flows. The Company has measured the ineffectiveness of the forward currency contracts and any amounts recognized in the consolidated financial statements were immaterial for the years ended December 31, 2023, 2022 and 2021. Fair Value Measurements Certain assets and liabilities held by the Company are measured at fair value on a recurring basis and are categorized using the three levels of the fair value hierarchy based on the reliability of the inputs used. Fair values estimated using Level 1 inputs consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Fair values estimated using Level 2 inputs, other than quoted prices, are observable for the asset or liability, either directly or indirectly and include among other things, quoted prices for similar assets or liabilities in markets that are active or inactive as well as inputs other than quoted prices that are observable. For forward currency and cross-currency contracts, inputs include forward foreign currency exchange rates. For the interest rate swap, inputs included LIBOR. Fair values estimated using Level 3 inputs consist of significant unobservable inputs. The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the three levels of the fair value hierarchy based on the reliability of inputs used.
December 31, |  |  | 2023 |  | 2022
|  |  | Fair values estimated using |  |
| Fair value |  | Level 1 inputs |  | Level 2 inputs |  | Level 3 inputs |  | Fair value
Financial assets carried at fair value: |  |  |  |  |  |  |  |  |
Forward currency contracts | $ | 1,858 |  |  | $ | — |  |  | $ | 1,858 |  |  | $ | — |  |  | $ | — |
Interest rate swap | — |  |  | — |  |  | — |  |  | — |  |  | 294 |
Total financial assets carried at fair value | $ | 1,858 |  |  | $ | — |  |  | $ | 1,858 |  |  | $ | — |  |  | $ | 294 |
The following table sets forth a summary of the change in fair value of the Company’s Level 3 financial liabilities related to earn-out consideration that are measured at fair value on a recurring basis.
| 2022
Balance at January 1 | $ | 7,351 |
Change in fair value | — |
Foreign currency adjustments | 921 |
Earn-out consideration cash payment | $ | (8,272) |
Balance at December 31 | $ | — |
The Company was required to pay the Stoneridge Brazil earn-out consideration based on Stoneridge Brazil’s financial performance in 2021. The fair value of the Stoneridge Brazil earn-out consideration was based on 2021 earnings before interest, taxes, depreciation and amortization. The Stoneridge Brazil earn-out consideration obligation was recorded within accrued expenses and other current liabilities in the consolidated balance sheet as of December 31, 2021. The earn-out consideration obligation of $8,272 was paid in April 2022 and recorded in the consolidated statement of cash flows within operating and financing activities in the amounts of $1,996 and $6,276, respectively, for the year ended December 31, 2022. There were no transfers in or out of Level 3 from other levels in the fair value hierarchy for the year ended December 31, 2023. No non-recurring fair value adjustments were required for nonfinancial assets for the years ended December 31, 2023 and 2022. Impairment of Long-Lived Assets 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.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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