<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________
AMENDMENT NO. 2
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 31, 1998
Stoneridge, Inc.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Ohio 001-13337 34-1598949
- ---------------------------- ------------------------ ------------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) 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)
<PAGE>
The undersigned Registrant hereby amends the following items, financial
statements, pro forma financial information and exhibits of its Current Report
on Form 8-K/A, dated January 26, 1999, as set forth in pages attached hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
The audited financial statements for Hi-Stat Manufacturing Co., Inc.,
the business acquired, as of and for each of the three years in the
period ended December 31, 1997, together with a report of independent
public accountants, and the unaudited financial statements as of
September 30, 1998 and for the nine months ended September 30, 1998
are hereby filed as part of this Report on Form 8-K/A in the form
attached as Exhibit A.
(b) Pro Forma Financial Information
The required pro forma information for the transaction that is the
subject of this Report, as prepared as of September 30, 1998, is
hereby filed as part of this Report on Form 8-K/A in the form
attached as Exhibit B.
(c) Exhibits. The following exhibit is filed with Amendment No. 2 to
this Report:
Exhibit No. Exhibit
----------- --------
23.1 Consent of Andersen, Metzger & Company, P.C.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused Amendment No. 2 to this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Stoneridge, Inc.
By: /s/ Kevin P. Bagby
---------------------------------
Date: March 16, 1999 Kevin P. Bagby
Treasurer and Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
<PAGE>
Exhibit A
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Hi-Stat Manufacturing Co., Inc.
We have audited the accompanying balance sheets of Hi-Stat Manufacturing Co.,
Inc. (the "Acquired Company") as of December 31, 1995, 1996 and 1997 and the
related statements of income, shareholders' equity and cash flows for each of
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The financial statements of the Acquired Company were prepared for the purpose
of complying with rules and regulations of the Securities and Exchange
Commission Rule 3-05, Regulation S-X.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hi-Stat Manufacturing Co., Inc.
as of December 31, 1995, 1996 and 1997, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
ANDERSEN, METZGER & COMPANY, P.C.
Warren, Ohio
May 15, 1998 (except with respect to the matters discussed
in Note 2 as to which the date is February 20, 1999)
<PAGE>
HI-STAT MANUFACTURING CO., INC.
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------- SEPTEMBER 30,
1995 1996 1997 1998
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 4 $ 6 $ 4 $ 5
Accounts receivable (net of allowance for
doubtful accounts of approximately $200,
$353, $400 and $400) 11,732 13,476 19,055 21,606
Current portion of notes receivable - employees 90 105 126 229
Inventories 9,883 10,755 11,365 14,844
Prepaid expenses 1,504 2,595 2,469 3,012
------- ------- ------- -------
Total current assets 23,213 26,937 33,019 39,696
------- ------- ------- -------
Property, plant and equipment, net 18,898 22,459 29,351 32,550
Other assets:
Notes receivable - employees 243 158 - -
Other 443 424 503 475
------- ------- ------- -------
Total assets $42,797 $49,978 $62,873 $72,721
======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current assets:
Current portion of long-term debt $13,273 $ 6,644 $11,081 $ 9,944
Accounts payable 3,831 4,212 6,251 8,297
Accounts payable to related parties 372 350 434 -
Accrued expenses 2,181 3,027 2,951 6,289
------- ------- ------- -------
Total current liabilities 19,657 14,233 20,717 24,530
------- ------- ------- -------
Long-term debt, less current portion - 10,101 8,331 7,027
Note payable - shareholder 388 251 237 227
------- ------- ------- -------
Total long-term liabilities 388 10,352 8,568 7,254
------- ------- ------- -------
Shareholders' equity:
Common stock, $1 par value, 7,500 shares
authorized, 300 shares issued and outstanding 65 65 65 65
Retained earnings 22,687 25,328 33,523 40,872
------- ------- ------- -------
22,752 25,393 33,588 40,937
------- ------- ------- -------
Total liabilities and shareholders' equity $42,797 $49,978 $62,873 $72,721
======= ======= ======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
<PAGE>
HI-STAT MANUFACTURING CO., INC.
STATEMENTS OF INCOME
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE NINE
DECEMBER 31, MONTHS ENDED
------------------------------ SEPTEMBER 30,
1995 1996 1997 1998
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales $100,900 $112,378 $135,459 $111,292
Costs and expenses:
Cost of goods sold 76,879 82,896 95,792 81,388
Selling, general and administrative expenses 17,528 22,287 26,171 17,261
-------- -------- -------- --------
Operating income 6,493 7,195 13,496 12,643
-------- -------- -------- --------
Other (income) expense:
Interest expense, net 833 841 1,188 858
Other, net (412) (496) (208) (54)
-------- -------- -------- --------
421 345 980 804
-------- -------- -------- --------
Income before income tax taxes 6,072 6,850 12,516 11,839
Provision for income taxes 354 209 321 365
-------- -------- -------- --------
Net Income $ 5,718 $ 6,641 $ 12,195 $ 11,474
======== ======== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
HI-STAT MANUFACTURING CO., INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------- ---------- -------
<S> <C> <C> <C>
Balance, December 31, 1994 $65 $20,969 $21,034
Net income - 5,718 5,718
Distributions - (4,000) (4,000)
-------- ------- -------
Balance, December 31, 1995 65 22,687 22,752
Net income - 6,641 6,641
Distributions - (4,000) (4,000)
-------- ------- -------
Balance, December 31, 1996 65 25,328 25,393
Net income - 12,195 12,195
Distributions - (4,000) (4,000)
-------- ------- -------
Balance, December 31, 1997 65 33,523 33,588
Net income (unaudited) - 11,474 11,474
Distributions (unaudited) - (4,125) (4,125)
-------- ------- -------
Balance, September 30, 1998 (unaudited) $65 $40,872 $40,937
======== ======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
HI-STAT MANUFACTURING CO., INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE NINE
DECEMBER 31, MONTHS ENDED
------------------------------ SEPTEMBER 30,
1995 1996 1997 1998
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,718 $ 6,641 $ 12,195 $11,474
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 2,751 3,360 4,241 4,533
Changes in operating assets and liabilities:
Accounts receivable, net 541 (1,744) (5,579) (2,551)
Inventories (1,275) (872) (610) (3,479)
Prepaid expenses - (1,091) 126 (543)
Other assets, net 24 17 (78) 28
Accounts payable (99) 382 2,038 2,046
Accounts payable to related parties 201 (21) 83 (434)
Accrued expenses 125 846 (76) 3,338
------- ------- -------- -------
Net cash from operating activities 7,986 7,518 12,340 14,412
------- ------- -------- -------
INVESTING ACTIVITIES:
Capital expenditures (4,390) (6,926) (11,133) (7,732)
Proceeds on sale of fixed assets - 5 - -
------- ------- -------- -------
Net cash from investing activities (4,390) (6,921) (11,133) (7,732)
------- ------- -------- -------
FINANCING ACTIVITIES:
Cash distributions paid (4,000) (4,000) (4,000) (4,125)
Net borrowings (repayments) on line of credit 817 (4,254) 4,435 (1,088)
Net borrowings (repayments) on note payable (825) 7,725 (1,766) (1,353)
Net borrowings (repayments ) on note
payable - shareholder (186) (136) (14) (10)
Net (borrowings) repayments on notes
receivable - employees 584 70 136 (103)
------- ------- -------- -------
Net cash from financing activities (3,610) (595) (1,209) (6,679)
------- ------- -------- -------
Net change in cash (14) 2 (2) 1
Cash at beginning of period 18 4 6 4
------- ------- -------- -------
Cash at end of period $ 4 $ 6 $ 4 $ 5
======= ======= ======== =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 815 $ 815 $ 1,178 $ 858
======= ======= ======== =======
Cash paid for income taxes $ 286 $ 149 $ 291 $ 390
======= ======= ======== =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
HI-STAT MANUFACTURING CO., INC.
NOTES TO FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AS OF SEPTEMBER 30, 1998 AND FOR THE PERIOD
THEN ENDED ARE UNAUDITED.)
(in thousands)
1. Summary of significant accounting policies:
Description of Business:
Hi-Stat Manufacturing Co., Inc. (the Company) is primarily engaged in the
manufacture of sensors, switches and solenoids for the automotive industry.
The Company sells products principally to customers in North America and
operates in one business segment.
Basis of presentation:
The accompanying balance sheet as of September 30, 1998, and the related
statements of income, shareholders' equity and cash flows for the nine month
period then ended are unaudited. In the opinion of management, such
financial statements include all adjustments, consisting solely of normal
recurring adjustments, necessary for a fair presentation of results for this
interim period. The results of the nine month period ended September 30,
1998 are not necessarily indicative of results to be expected for the entire
year.
Accounts receivable:
Revenues are principally generated from the automotive industry. Due to the
nature of the industry, a significant portion of sales and the related
accounts receivables are concentrated in a relatively low number of
customers. In 1995, three customers accounted for approximately 18%, 18%
and 6% of net sales, while the top five customers accounted for 49% of net
sales. The same three customers accounted for approximately 21%, 17% and 6%
of the Company's 1996 net sales, and its top five customers accounted for
approximately 48% of its 1996 net sales. In 1997, three customers accounted
for approximately 31%, 15% and 6% of the Company's net sales, and its top
five customers accounted for approximately 58% of its 1997 net sales.
Accounts receivable from the Company's five largest customers aggregated
approximately $6,212, $6,175 and $10,338 at December 31, 1995, 1996 and 1997
respectively.
Inventories:
Inventories are stated at the lower of cost or market, with cost being
determined on the first-in, first-out (FIFO) method, and consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------------------------
1995 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Raw materials $5,060 $ 5,518 $ 5,707 $ 7,499
Work in progress 1,530 1,398 1,766 1,938
Finished goods 3,293 3,839 3,892 5,407
------ ------- ------- -------
$9,883 $10,755 $11,365 $14,844
====== ======= ======= =======
</TABLE>
<PAGE>
HI-STAT MANUFACTURING CO., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF SEPTEMBER 30, 1998 AND FOR THE PERIOD
THEN ENDED ARE UNAUDITED.)
(in thousands)
1. Summary of significant accounting policies (continued):
Property, plant and equipment:
Property, plant and equipment are stated at cost and consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------------------
1995 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Land $ 2,098 $ 2,098 $ 2,098 $ 2,098
Buildings and improvements 7,022 7,022 7,022 7,026
Leasehold improvements 2,311 2,825 3,179 3,269
Machinery and equipment 16,382 19,333 29,194 33,719
Tooling 1,886 2,129 3,016 4,258
Furniture and fixtures 1,609 1,750 2,055 2,108
Computer equipment 2,663 2,771 3,041 4,283
Autos and trucks 438 508 570 703
Airplane and airplane equipment 1,747 1,823 1,823 1,823
------- ------- ------- -------
36,156 40,259 51,998 59,287
Less: Accumulated depreciation
and amortization 17,467 19,722 23,575 27,819
------- ------- ------- -------
18,689 20,537 28,423 31,468
Construction in progress 209 1,922 928 1,082
------- ------- ------- -------
$18,898 $22,459 $29,351 $32,550
======= ======= ======= =======
</TABLE>
Depreciation and amortization is provided using the straight-line method
over the estimated useful lives of the assets. Depreciation and
amortization expense for the years ended December 31, 1995, 1996 and 1997
was $2,751, $3,360 and $4,241, and for the nine months ended September 30,
1998, $4,533, respectively. Depreciable lives within each property
classification are as follows:
Buildings and improvements 18 - 31 1/2 years
Leasehold improvements 3 - 6 years
Machinery and equipment 5 - 10 years
Tooling 2 - 3 years
Furniture and fixtures 5 - 10 years
Computer equipment 5 - 10 years
Autos and trucks 5 years
Airplane and airplane equipment 8 years
Repairs and maintenance expenditures which do not extend the useful life of
property are charged to expense as incurred. Expenditures for improvements
and significant refurbishings 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
credited or charged to income.
<PAGE>
HI-STAT MANUFACTURING CO., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF SEPTEMBER 30, 1998 AND FOR THE PERIOD
THEN ENDED ARE UNAUDITED.)
(in thousands)
1. Summary of significant accounting policies (continued):
Accrued expenses:
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------------
1995 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Compensation related obligations $1,291 $1,596 $1,408 $5,289
Insurance related obligations 517 632 721 485
State and local income tax - 60 115 40
obligations
Other 373 739 707 475
------ ------ ------ ------
$2,181 $3,027 $2,951 $6,289
====== ====== ====== ======
</TABLE>
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these estimates.
Income taxes:
The Company and its shareholders have elected to be taxed as a partnership
under the provision of Subchapter S of the Internal Revenue Code. As such,
the taxable income of the Company will be included in the individual tax
returns of the shareholders for federal income tax purposes. Accordingly,
net income for the years ended December 31, 1995, 1996 and 1997 and the nine
months ended September 30, 1998 does not include provisions for federal
income taxes. Certain state and local income taxes continue to be payable
directly by the Company.
Research and development activities:
The Company has expensed research and development costs of $601, $701 and
$633 for the years ended December 31, 1995, 1996 and 1997 and $345 for the
nine months ended September 30, 1998, respectively.
Reclassifications:
Certain reclassifications have been made to the prior periods' financial
statements to conform with the current period's presentation.
Revenue recognition:
The Company recognizes revenues from the sale of products at the point of
passage of title, which is generally at the time of shipment.
Financial instruments:
Financial instruments held by the Company include cash, accounts receivable,
accounts payable and long-term debt. The book value of cash, accounts
receivable and payables are considered to be representative of fair value
because of the short maturity of these instruments. The fair value of long-
term debt is based on rates available to the Company for debt with
comparable terms and maturities. In management's opinion, the estimated
fair value of the Company's long-term debt approximates book value, as under
the terms of the borrowing arrangements, a significant portion of the
obligations are subject to fluctuating market rates of interest.
<PAGE>
HI-STAT MANUFACTURING CO., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF SEPTEMBER 30,1998 AND FOR THE PERIOD
THEN ENDED ARE UNAUDITED.)
(in thousands)
1. Summary of significant accounting policies (continued):
Accounting standards:
The Company adopted Statement of Financial Accounting Standard No. 121 (SFAS
121) "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" in 1996. SFAS 121 requires long-lived assets and
certain identifiable intangible assets to be reviewed for impairment
whenever circumstances indicate that the carrying amount of an asset may not
be recoverable. The adoption of this standard did not have an effect on the
Company's financial statements. Management periodically reviews the
realizability of long-lived assets of the Company in accordance with SFAS
121.
2. Sale of business:
On December 31, 1998, the shareholders of the Company sold all outstanding
shares of stock to Stoneridge, Inc. in accordance with the Stock Purchase
Agreement dated December 7, 1998.
3. Long-term debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------------
1995 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Line of credit $ 9,131 $ 4,877 $ 9,311 $ 8,223
Notes payable to banks 4,142 11,868 10,101 8,748
------- ------- ------- -------
13,273 16,745 19,412 16,971
Less: Current portion 13,273 6,644 11,081 9,944
------- ------- ------- -------
$ - $10,101 $ 8,331 $ 7,027
======= ======= ======= =======
</TABLE>
The Company has a $15,000 bank line of credit bearing interest at the
lender's daily cost of funds plus 0.90%, payable monthly. The rate in
effect at the years ended December 31, 1995, 1996 and 1997 was 6.755%,
8.15% and 7.9%, respectively. Borrowings on the line of credit are secured
by monies and accounts in the possession of the bank, accounts receivable,
inventory, and equipment. The agreement contains various restrictive
covenants which require, among other things, the maintenance of minimum net
worth levels, the ratio of liabilities to net worth as defined and the
ratio of cash flow to current maturity of long-term debt plus interest
expense. The covenants also limit the Company's ability to incur new
indebtedness. At December 31, 1995, 1996 and 1997, the Company was in
compliance with its covenants except for the requirement to keep the
Company's ratio of cash flow to current maturity of long-term debt plus
interest expense at least 1.5 to 1.0. The ratio was 1.49 to 1.0 at
December 31, 1996 and 1997. The line of credit is classified as a current
liability as it is due on demand.
In September, 1996, the Company consolidated two bank notes payable secured
by monies and accounts in the possession of the bank, accounts receivable,
inventory, and equipment. The renegotiated note payable bears interest at
the Company's discretion of rates, as defined in the agreement, and is
payable monthly. The rate in effect at December 31, 1996 and 1997 was
6.8437% and 6.9375%, respectively. The monthly principal payment of $143 is
computed using a seven year amortization with a balloon payment of $3,442
due on September 11, 2001.
The Company purchased equipment in 1996 which was subject to an existing
loan from a finance company. The note payable bears interest at the rate
of 8.42% and is secured by the equipment. The monthly payment of $4
includes both principal and interest through March, 1999.
<PAGE>
HI-STAT MANUFACTURING CO., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF SEPTEMBER 30, 1998 AND FOR THE PERIOD
THEN ENDED ARE UNAUDITED.)
(in thousands)
3. Long-term debt: (continued)
Required annual principal payments on long-term debt after December 31,
1997 are as follows:
1998 $11,081
1999 1,735
2000 1,721
2001 4,875
-------
$19,412
=======
4. Related party transactions:
The Company purchases raw materials and component parts from several
companies related by common ownership and control. During the years ended
December 31, 1995, 1996 and 1997, the Company purchased approximately
$3,636, $4,458 and $4,264, respectively, of inventory from these companies.
At December 31, 1995, 1996 and 1997, the Company owed approximately $372,
$350 and $434, respectively, to these companies.
The Company from time to time makes loans to officers and employees. These
loans are secured and bear interest at the applicable federal rates. The
Company had loans outstanding to employees of $333, $263 and $126 at
December 31, 1995, 1996 and 1997, respectively. Management estimates the
fair value of the notes receivable to be their carrying value.
The Company has a note payable to the majority shareholder that amounted to
$388, $251 and $237 at December 31, 1995, 1996 and 1997, respectively. This
note is unsecured and bears interest at the applicable federal rate. The
note is subordinate to the bank notes payable and, as such, is classified
as long-term debt in the accompanying balance sheets.
5. Other assets:
During 1990, the Company obtained the right to enter into a license
agreement with an unrelated company for $100. The license agreement,
exercised in 1991, allows the Company to use certain proprietary measuring
technology for a specified period of time. In connection with the exercise
of the agreement, the Company paid an additional $250. The combined
investment of $350 is included on the accompanying balance sheet as other
assets. The license agreement is carried net of accumulated amortization
of $171, $213 and $250 for December 31, 1995, 1996 and 1997, respectively.
The license agreement requires royalty payments to the licensor for use of
the technology. The Company paid royalties of $7, $16 and $7 for the
years ended December 31, 1995, 1996 and 1997, respectively, for products
sold with this technology.
6. Commitments and contingencies:
Operating leases:
The Company leases operating and storage facilities from a shareholder
and/or the shareholder's family under operating leases. Rent expense for
the years ended December 31, 1995, 1996 and 1997 was approximately $551,
$644 and $644, each year, respectively. One of the leases is
noncancellable and has a term of 10 years beginning January, 1996. The
other leases are renewable on a short-term basis.
<PAGE>
HI-STAT MANUFACTURING CO., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AND DISCLOSURES AS OF SEPTEMBER 30, 1998 AND FOR THE PERIOD
THEN ENDED ARE UNAUDITED.)
(in thousands)
6. Commitments and contingencies (continued):
The Company was obligated under another noncancellable operating lease, for
land and buildings used for manufacturing and storage expiring in February,
1996. Rental expense under this lease was $21 and $3 for the years ended
December 31, 1995 and 1996, respectively.
Future minimum lease payments for noncancellable operating leases at
December 31, 1997 are as follows:
1998 $ 605
1999 605
2000 605
2001 605
2002 605
Thereafter 1,815
------
$4,840
======
Income taxes:
The Company reports certain income and expense items for income tax
purposes on a basis different from that reflected in the accompanying
financial statements. The principal items that result in temporary
differences are the use of accelerated depreciation methods and the
deduction of prepaid employee benefit contributions for tax purposes.
Litigation:
Included in accrued expenses at December 31, 1996 is an accrual of $325 for
a multi-party settlement of litigation between the Company and a former
employee.
Employee benefit plans:
The Company maintains a contributory flexible spending plan and employee
benefit plan for each full-time employee of the Company. The Company is
liable for losses on claims up to $100 per claim for the year. The Company
has third party insurance coverage for any losses in excess of such
amounts. Self-insurance costs are accrued based upon claims reported as of
the balance sheet date as well as an estimated liability for claims
incurred but not reported. The total accrued liability for self-insurance
costs was $398, $407 and $381 as of December 31, 1995, 1996 and 1997,
respectively.
7. Employee benefit plan:
The Company has a 401(k) retirement savings plan covering substantially all
full-time employees. Under the 401(k) provisions, employees may
voluntarily contribute a portion of their gross wages to the plan up to
12%. In July, 1997, the Company matching contribution changed to a 100%
match on the first 2% contributed and 50% on the next 6%. Total matching
contributions were approximately $397, $432 and $570, for the years ended
December 31, 1995, 1996 and 1997, respectively. Additional Company
contributions are permitted at the discretion of the board of directors.
There were no discretionary contributions during 1995, 1996 or 1997.
<PAGE>
Exhibit B
On December 31, 1998, Stoneridge, Inc. ("the Company") acquired all of the
issued and outstanding capital stock of Hi-Stat Manufacturing Co., Inc., a
privately held Florida corporation, ("Hi-Stat" or "Acquired Company") pursuant
to a Stock Purchase Agreement by and among the Registrant and the Shareholders
of Hi-Stat (the "Sellers") dated as of December 7, 1998 ("Stock Purchase
Agreement"). Hi-Stat designs and manufactures sensors, solenoids and switches
for measuring speed, pressure, temperature and fluid levels primarily for the
automotive market. Hi-Stat has manufacturing facilities in Ohio and Florida and
has approximately 1,700 employees. The Registrant currently intends to operate
Hi-Stat as a wholly owned subsidiary. The acquisition of Hi-Stat was accounted
for using the purchase method of accounting and, accordingly, the results of
operations of Hi-Stat will be consolidated with the results of operations of the
Company as of the date of the acquisition.
The following unaudited pro forma consolidated balance sheet as of September 30,
1998 reflects the acquisition of Hi-Stat as if it occurred on that date. The
following unaudited pro forma consolidated statement of income for the nine
months ended September 30, 1998 gives effect to the acquisition of Hi-Stat had
it occurred at the beginning of the period presented. The following unaudited
pro forma consolidated statement of income for the year ended December 31, 1997
gives effect to the acquisition of Hi-Stat had it occurred at the beginning of
the year and assumes that the Company had been subject to federal and state
income taxes at the corporate level from the beginning of the year. The
unaudited proforma consolidated financial statements are based on a preliminary
allocation of the purchase price of Hi-Stat and do not purport to represent what
the Company's results of operations would actually have been if such transaction
in fact had occurred at such dates or to project the Company's results of future
operations. The unaudited pro forma information should be read in conjunction
with the Company's audited historical consolidated financial statements and
notes thereto included in the Company's Form 10-K dated March 31, 1998 and Form
10-Q dated November 13, 1998 and with the audited historical financial
statements and note thereto of Hi-Stat filed herewith.
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Acquired
Company Company Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,304 $ 5 $ -- $ 1,309
Accounts receivable, net 81,702 21,606 (145)(a) 103,163
Inventories 41,061 14,844 (959)(a) 54,946
Deferred income taxes 5,860 -- 2,079 (f) 7,939
Prepaid expenses and other 8,313 3,241 493 (a) 12,047
---------- ---------- ---------- ----------
Total current assets 138,240 39,696 1,468 179,404
---------- ---------- ---------- ----------
Property, Plant and Equipment, net 54,960 32,550 2,925 (a) 90,435
Other Assets:
Goodwill and other intangible assets, net 45,977 -- 3,170 (b) 350,433
301,286 (c)
Investments and other 23,830 475 8,615 (d) 32,920
---------- ---------- ---------- ----------
Total Assets $ 263,007 $ 72,721 $ 317,464 $ 653,192
========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 37 $ 9,944 $ 10,556 (e) $ 20,537
Accounts payable 36,882 8,297 -- 45,179
Accrued expenses and other 32,849 6,289 1,325 (a) 40,463
---------- ---------- ---------- ----------
Total current liabilities 69,768 24,530 11,881 106,179
---------- ---------- ---------- ----------
Long-Term Debt, net of current portion 5,949 7,027 343,541 (e) 356,517
Deferred Income Taxes 2,839 -- 2,979 (f) 5,818
Other 1,603 227 -- 1,830
---------- ---------- ---------- ----------
Total long term liabilities 10,391 7,254 346,520 364,165
---------- ---------- ---------- ----------
Shareholders' Equity:
Preferred shares -- -- -- --
Common shares -- 65 (65)(g) --
Additional paid-in capital 141,506 -- -- 141,506
Retained earnings 41,317 40,872 (40,872)(g) 41,317
Cumulative currency translation adjustment 25 -- -- 25
---------- ---------- ---------- ----------
182,848 40,937 (40,937) 182,848
---------- ---------- ---------- ----------
Total Liabilities and Shareholders' Equity $ 263,007 $ 72,721 $ 317,464 $ 653,192
========== ========== ========== ==========
</TABLE>
The accompanying notes to the unaudited pro forma consolidated balance sheet are
an integral part of this unaudited pro forma consolidated balance sheet.
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
Pro Forma Adjustments:
(a) Represents the recognition of operating assets and liabilities at fair
value in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations" criteria.
(b) Represents the recognition of intangible assets at fair value in accordance
with Accounting Principles Board Opinion No. 16, "Business Combinations"
criteria. The intangible assets will be amortized on a straight-line basis
over their remaining lives ranging from two to thirteen years.
(c) Represents the recognition of the excess of the purchase price of the
Acquired Company over the fair value of the net assets acquired as
goodwill. The goodwill will be amortized on a straight-line basis over
forty years.
(d) Represents deferred financing costs incurred to finance the purchase of the
Acquired Company. These costs will be amortized over the life of the
agreement.
(e) Represents incremental borrowings incurred to finance the purchase of the
Acquired Company and related transaction costs.
(f) Represents the recognition of deferred income taxes in conjunction with the
acquisition.
(g) Represents the elimination of the historical shareholders' equity of the
Acquired Company in accordance with Accounting Principles Board Opinion No.
16, "Business Combinations" criteria.
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT FOR
SHARE DATA)
<TABLE>
<CAPTION>
Acquired
Company Company Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 371,173 $ 111,292 $ -- $ 482,465
Costs and Expenses:
Cost of goods sold 280,692 81,388 -- 362,080
Selling, general and administrative expenses 47,598 17,261 (9,762)(b) 61,183
---------- ---------- ----------
5,651 (c)
435 (d)
Operating income 42,883 12,643 3,676 59,202
Interest expense, net 560 858 (858)(e) 25,078
23,231 (f)
1,287 (g)
Other, net -- (54) -- (54)
---------- ---------- ---------- ----------
Income Before Income Taxes 42,323 11,839 (19,984) 34,178
---------- ---------- ---------- ----------
Provision for income taxes 16,936 365 (3,630)(h) 13,671
---------- ---------- ---------- ----------
Net Income $ 25,387 $ 11,474 $ (16,354) $ 20,507
========== ========== ========== ==========
Basic and Diluted Net Income per Share $ 1.13 $ 0.92
========== ==========
Weighted Average Shares Outstanding 22,397 22,397
========== ==========
</TABLE>
The accompanying notes to unaudited pro forma consolidated statement of income
is an integral part of these consolidated statements.
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT FOR
SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma Pro Forma Acquired
Company Income Tax Company Company Pro Forma
Historical Adjustments Historical Historical Adjustments Pro Forma
---------- ----------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 449,506 $ -- $ 449,506 $ 135,459 $ -- $ 584,965
Costs and Expenses:
Cost of goods sold 341,314 -- 341,314 95,792 -- 437,106
Selling, general and
administrative expenses 55,826 -- 55,826 26,171 (15,539)(b) 74,573
---------- --------- ---------- ---------- ----------
7,535 (c)
580 (d)
Operating income 52,366 -- 52,366 13,496 7,424 73,286
Gain on sale of fixed
assets (1,733) -- (1,733) -- -- (1,733)
Interest expense, net 3,204 -- 3,204 1,187 (1,187)(e) 35,902
30,975 (f)
1,723 (g)
Other, net -- -- -- (208) -- (208)
---------- --------- ---------- ---------- ---------- ----------
Income Before Income Taxes 50,895 -- 50,895 12,517 (24,087) 39,325
---------- --------- ---------- ---------- ---------- ----------
Provision for income
taxes 5,098 16,083 (a) 21,181 321 (4,949)(h) 16,553
Income tax benefit from
the reinstatement
of deferred income taxes (1,167) 1,167 (a) -- -- -- --
---------- --------- ---------- ---------- ---------- ----------
Net Income $ 46,964 $ (17,250) $ 29,714 $ 12,196 $ (19,138) $ 22,772
========== ========= ========== ========== ========== ==========
Basic and Diluted Net
Income per Share $ 2.92 $ 1.36 $ 1.04
========== ========== ==========
Weighted Average Shares
Outstanding 16,073 21,830 21,830
========== ========== ==========
</TABLE>
The accompanying notes to unaudited pro forma consolidated statement of income
is an integral part of these consolidated statements.
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
Income Tax Adjustments:
(a) Represents the provision for income taxes had the Company been subject to
federal and state income taxes at the corporate level for the period
presented.
Pro Forma Adjustments:
(b) Represents the estimate of the Acquired Company salaries, commissions and
certain other operating expenses which will be eliminated as a result of
the acquisition.
(c) Represents the amortization of goodwill on a straight-line basis over forty
years.
(d) Represents the amortization of intangibles on a straight-line basis over
the remaining lives ranging from two to thirteen years.
(e) Represents the elimination of interest expense on Acquired Company debt
which was repaid in full in conjunction with the acquisition.
(f) Represents the interest expense (at an assumed interest rate of 8.55%) on
amounts drawn from the Company's credit facility to finance the
acquisition.
(g) Represents the amortization of debt issuance costs for the credit agreement
which financed the acquisition of the Acquired Company. Debt issuance
costs will be amortized over five years.
(h) Represents the tax effect of the Acquired Company's income had the Acquired
Company been subject to federal and state income taxes at the corporate
level, net of the unaudited pro forma income adjustments based upon the
estimated effective tax rate of approximately 40%.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion of our
report included in this Form 8-K/A.
ANDERSEN, METZGER & COMPANY, P.C.
Warren, Ohio
March 16, 1999
