<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended Commission file number 001-13337
September 30, 1999.
STONERIDGE, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Ohio 34-1598949
------------------------------ -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
9400 East Market Street, Warren, Ohio 44484
- ---------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
(330) 856-2443
--------------------------------------------------------------------
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No .
----- -----
The number of Common Shares, without par value, outstanding as of November 8,
1999 : 22,397,311
<PAGE>
STONERIDGE, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
Part I Financial Information
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998 2
Condensed Consolidated Statements of Income for the three
months and nine months ended September 30, 1999 and 1998 3
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1999 and 1998 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-12
Item 3. Quantitative and Qualitative Disclosure About Market Risk 12
Part II Other Information 13
Signatures 14
Exhibit Index 15
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------ ------------
(unaudited) (audited)
ASSETS
- ------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,644 $ 1,876
Accounts receivable, net 100,785 84,655
Inventories 63,615 53,273
Prepaid expenses and other 9,914 5,983
Deferred income taxes 11,793 11,679
----------- ----------
Total current assets 190,751 157,466
----------- ----------
PROPERTY, PLANT AND EQUIPMENT, net 101,628 94,770
OTHER ASSETS:
Goodwill, net 365,333 351,501
Other intangible assets, net 3,435 3,928
Investments and other 29,979 30,451
----------- ----------
TOTAL ASSETS $ 691,126 $ 638,116
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 23,689 $ 21,213
Accounts payable 45,914 45,835
Accrued expenses and other 55,442 48,234
----------- ----------
Total current liabilities 125,045 115,282
----------- ----------
LONG-TERM DEBT, net of current portion 328,574 322,724
DEFERRED INCOME TAXES 11,693 8,088
OTHER LIABILITIES 4,117 1,480
----------- ----------
Total long term liabilities 344,384 332,292
----------- ----------
SHAREHOLDERS' EQUITY:
Preferred shares, without par value, 5,000 authorized, none issued -- --
Common shares, without par value, 60,000 authorized, 22,397 issued and --
outstanding at September 30, 1999 and December 31, 1998, stated at --
Additional paid-in capital 141,506 141,506
Retained earnings 80,001 49,330
Accumulated other comprehensive income 190 (294)
----------- ----------
Total shareholders' equity 221,697 190,542
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 691,126 $ 638,116
=========== ==========
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated balance sheets.
2
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands except for per share data)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
-------------------------------- ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 156,985 $ 118,194 $ 512,688 $ 371,173
COST AND EXPENSES:
Cost of goods sold 112,952 89,036 369,404 280,692
Selling, general and administrative expenses 22,566 16,994 69,900 47,598
------------ ------------ ------------ ------------
Operating income 21,467 12,164 73,384 42,883
Interest expense, net 7,494 20 23,070 560
Other income 168 -- 395 --
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 14,141 12,144 50,709 42,323
Provision for income taxes 5,451 4,932 20,038 16,936
------------ ------------ ------------ ------------
NET INCOME $ 8,690 $ 7,212 $ 30,671 $ 25,387
============ ============ ============ ============
BASIC AND DILUTED NET INCOME PER SHARE $ 0.39 $ 0.32 $ 1.37 $ 1.13
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 22,397 22,397 22,397 22,397
============ ============ ============ ============
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
3
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
------------------------------
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 30,671 $ 25,387
Adjustments to reconcile net income to net cash from operating activities-
Depreciation and amortization 21,624 10,769
Deferred income taxes 3,588 (658)
Changes in operating assets and liabilities-
Accounts receivable, net (7,616) (23,831)
Inventories (2,538) (2,466)
Prepaid expenses and other (3,421) (1,497)
Other assets, net 1,408 15
Accounts payable (5,410) 5,412
Accrued expenses and other (1,703) 3,367
--------- ---------
Net cash from operating activities 36,603 16,498
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (9,664) (7,339)
Proceeds from sale of fixed assets -- 2,091
Increase in notes to affiliates -- (5,857)
Business acquisitions, net of cash acquired (31,099) --
--------- ---------
Net cash from investing activities (40,763) (11,105)
--------- ---------
FINANCING ACTIVITIES:
Shareholder distributions paid -- (2,600)
Proceeds from long-term debt 1,797 230
Repayments of long-term debt (125) (7,716)
Net borrowings under credit agreement 5,130 4,659
--------- ---------
Net cash from financing activities 6,802 (5,427)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 126 --
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,768 (34)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,876 1,338
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,644 $ 1,304
========= =========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
4
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except for share and per share data)
1. The accompanying condensed consolidated financial statements have been
prepared by Stoneridge, Inc. (the Company), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission (the
Commission). The information furnished in the condensed consolidated
financial statements includes normal recurring adjustments and reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of such financial statements. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the Commission's rules and regulations.
Although the Company believes that the disclosures are adequate to make the
information presented not misleading, it is suggested that these condensed
consolidated financial statements be read in conjunction with the audited
financial statements and the notes thereto included in the Company's 1998
Annual Report to Shareholders.
The results of operations for the three and nine months ended September 30,
1999 are not necessarily indicative of the results to be expected for the
full year.
2. Inventories are valued at the lower of cost or market. Cost is determined
by the last-in, first-out (LIFO) method for approximately 68% and 76% of
the Company's inventories at September 30, 1999 and December 31, 1998,
respectively, and by the first-in, first-out (FIFO) method for all other
inventories. Inventory cost includes material, labor and overhead.
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Raw materials $ 42,978 $ 32,453
Work in progress 9,047 10,673
Finished goods 13,964 12,379
Less-LIFO reserve (2,374) (2,232)
----------- ------------
Total $63,615 $53,273
=========== ============
</TABLE>
3. On August 27, 1999, the Company purchased all the outstanding shares of TVI
Europe Limited (TVI), a United Kingdom manufacturer of vehicle information
and management systems for the European commercial vehicle market. The
transaction was accounted for as a purchase. The preliminary purchase
price approximates $20,000.
On March 6, 1999, the Company purchased certain assets and assumed certain
liabilities of Delta Schoeller, Ltd. (Delta), a United Kingdom manufacturer
of switches for the automotive industry. The transaction was accounted for
as a purchase. The preliminary purchase price approximates $12,000.
On December 31, 1998, the Company purchased all the outstanding common
shares of Hi-Stat Manufacturing Company, Inc. (Hi-Stat) for approximately
$362,000. Hi-Stat manufactures engineered sensors, switches and solenoids
for the automotive industry. The transaction was accounted for as a
purchase. Accordingly, the assets acquired and liabilities assumed of Hi-
Stat are included in the consolidated balance sheet as of September 30,
1999 and December 31, 1998. The purchase price was funded with the
Company's cash on hand and with proceeds from the Company's senior secured
credit agreement. The components of intangible assets included in the
allocation of purchase price at December 31, 1998 and the related straight-
line amortization periods is summarized as follows:
5
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(in thousands, except for share and per share data)
<TABLE>
<CAPTION>
Amortization
Amount Period (years)
------------ --------------
<S> <C> <C>
Non-compete covenants $ 590 2
Patents 2,580 6-13
Goodwill 309,613 40
--------
Total $312,783
========
</TABLE>
The results of operations of Hi-Stat have been included in the accompanying
financial statements from the date of acquisition. As such, Hi-Stat has no
effect on fiscal year 1998 net income.
The unaudited pro forma consolidated results of operations as though
Hi-Stat had been acquired as of the beginning of fiscal 1998 is as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Net sales $151,204 $482,519
Operating income $ 15,724 $ 59,158
Net income $ 4,424 $ 20,398
Basic and diluted earnings per share $ 0.20 $ 0.91
</TABLE>
The pro forma data does not purport to be indicative of the results that
would have been obtained had these events actually occurred at the
beginning of the periods presented and is not intended to be a projection
of future results. The pro forma amounts reflect the results of operations
for the Company, Hi-Stat and the following assumed purchase accounting
adjustments for the periods presented:
. Elimination of historical management costs and interest expense of
Hi-Stat
. Interest expense on borrowings used to fund the acquisition
. Amortization of intangible assets based on the purchase price allocation
. Estimated income tax effect on the results of operations and the pro
forma adjustments assuming both companies were subject to tax as C
corporations
4. Other comprehensive income includes foreign currency translation
adjustments. Comprehensive income consists of the following:
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
----------------------- ------------------------
1999 1998 1999 1998
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income $8,690 $7,212 $30,671 $25,387
Other comprehensive income 855 254 484 251
------ ------ ------- -------
Comprehensive income $9,545 $7,466 $31,155 $25,638
====== ====== ======= =======
</TABLE>
6
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(in thousands, except for share and per share data)
5. The Company has a $425,000 credit agreement with a bank group. The credit
agreement has three components: a $100,000 revolving credit facility, a
$150,000 term facility and a $175,000 term facility. The $100,000 revolving
facility and the $150,000 term facility expire on December 31, 2003, and
require a commitment fee of 0.37% to 0.50% on the unused balance. Interest
is payable quarterly at either (i) the prime rate plus a margin of 0.00% to
1.00% or (ii) LIBOR plus a margin of 1.25% to 2.50%, depending upon the
Company's ratio of consolidated total debt to consolidated earnings before
interest, taxes, depreciation and amortization, as defined. The $175,000
term facility expires on December 31, 2005. Interest is payable quarterly
at either (i) the prime rate plus a margin of 2.00% or (ii) LIBOR plus a
margin of 3.50%.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Borrowings under credit agreement $347,042 $342,150
Other 5,221 1,787
------------- --------------
352,263 343,937
Less: Current maturities 23,689 21,213
------------- --------------
$328,574 $322,724
============= ==============
</TABLE>
6. The Company presents basic and diluted earnings per share in accordance
with Statement of Financial Accounting Standard No. 128, "Earnings Per
Share". Potentially dilutive securities are not significant and do not
create differences between reported basic and diluted earnings per share
for all periods presented.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Nine Months Ended September 30, 1999 Compared To Nine Months Ended September 30,
- --------------------------------------------------------------------------------
1998
- ----
Net Sales. Net sales for the nine months ended September 30, 1999 increased by
$141.5 million, or 38.1%, to $512.7 million from $371.2 million for the same
period in 1998. Sales of core products increased by $177.5 million, or 56.7%,
to $490.8 million during the first nine months of 1999 compared to $313.3
million for the same period of 1998. Sales of core products from the recent
acquisitions of Hi-Stat, Delta and TVI accounted for $150.8 million of the
change, while sales of existing core products prior to the acquisitions
increased by $26.7 million, or 7.2%, compared to same period in 1998. Sales
revenues for the nine months ended September 30, 1999 were favorably impacted by
strong OEM production volumes in both the automotive and the commercial vehicle
markets which was offset in part by lower production volumes in the agricultural
vehicle market.
Sales for the nine months ended September 30, 1999 for North America increased
by $129.2 million to $466.9 million from $337.7 million for the same period in
1998. North American sales accounted for 91.1% of total sales for the nine
months ended September 30, 1999 compared with 91.0% for the same period in 1998.
Sales for the first nine months of 1999 outside North America increased by $12.3
million to $45.8 million from $33.5 million for the same period in 1998. Sales
outside North America accounted for 8.9% of total sales for the nine months
ended September 30, 1999 compared with 9.0% for the same period in 1998.
During the second quarter of 1999, the Company completed the planned phase out
of its contract manufacturing business. As expected, contract manufacturing
sales for the first nine months of 1999 declined by $36.0 million to $21.9
million, or 4.3% of the Company's total sales revenue compared with $57.9
million, or 15.6% of total sales revenue for the same period in 1998.
Cost of Goods Sold. Cost of goods sold for the first nine months of 1999
increased by $88.7 million, or 31.6%, to $369.4 million from $280.7 million in
the first nine months of 1998. As a percentage of sales, cost of goods sold
decreased to 72.1% for the first nine months of 1999 from 75.6% for the same
period in 1998. The decrease as a percent of sales was due primarily to
increased operating leverage, a shift in product mix to higher value added
electrical and electronic core products and lower contract manufacturing sales.
Selling, General and Administrative Expenses. Selling, general and
administrative (SG&A) expenses increased by $22.3 million to $69.9 million in
the first nine months of 1999 from $47.6 million for the same period in 1998.
As a percentage of sales, SG&A expenses increased to 13.6% for the first nine
months of 1999 from 12.8% for the same period in 1998. The majority of the
increase was attributable to additional SG&A expenses of the newly acquired
businesses.
Interest Expense. Interest expense for the first nine months of 1999 was $23.1
million compared with $0.6 million for the same period in 1998. Average
outstanding indebtedness was $342.6 million and $9.9 million for the first nine
months of 1999 and 1998, respectively. The increase in average outstanding
indebtedness was primarily due to borrowings to finance recent acquisitions.
Income Before Income Taxes. As a result of the foregoing, income before taxes
increased by $8.4 million for the first nine months of 1999 to $50.7 million
from $42.3 million for the same period in 1998.
Provision for Income Taxes. The Company recognized provisions for income taxes
of $20.0 million and $16.9 million for federal, state and foreign income taxes
for the first nine months of 1999 and 1998, respectively.
Net Income. As a result of the foregoing, net income increased by $5.3 million,
or 20.9%, to $30.7 million for the first nine months of 1999 from $25.4 million
for the same period in 1998.
8
<PAGE>
Three Months Ended September 30, 1999 Compared To Three Months Ended September
- ------------------------------------------------------------------------------
30, 1998
- --------
Net Sales. Net sales for the quarter ended September 30, 1999 increased by $38.8
million, or 32.8%, to $157.0 million from $118.2 million for the same period in
1998. Sales of core products increased by $56.6 million, or 56.4%, to $157.0
million during the third quarter of 1999 compared to $100.4 million for the same
period of 1998. Sales of core products from the recent acquisitions of Hi-Stat,
Delta and TVI accounted for $50.9 million of the change, while sales of existing
core products prior to the acquisitions increased by $5.7 million, or 5.7%,
compared to same period in 1998. Sales revenues for the third quarter of 1999
were favorably impacted by strong OEM production volumes in both the automotive
and the commercial vehicle markets which was offset in part by lower production
volumes in the agricultural vehicle market.
Sales for the quarter ended September 30, 1999 for North America increased by
$35.1 million to $142.1 million from $107.0 million for the same period in 1998.
North American sales accounted for 90.5% of total sales for the third quarters
of 1999 and 1998. Sales for the third quarter of 1999 outside North America
increased by $3.7 million to $14.9 million from $11.2 million for the same
period in 1998. Sales outside North America accounted for 9.5% of total sales
for the third quarters of 1999 and 1998.
As previously mentioned, the Company completed its planned phase out of the
contract manufacturing business. As expected, the Company had no contract
manufacturing sales in the third quarter of 1999, compared with $17.8 million,
or 15.1% of total sales revenue for the same period in 1998.
Cost of Goods Sold. Cost of goods sold for the third quarter of 1999 increased
by $23.9 million, or 26.9%, to $112.9 million from $89.0 million in the third
quarter of 1998. As a percentage of sales, cost of goods sold decreased to
71.9% in 1999 from 75.3% in 1998. The decrease as a percent of sales was due
primarily to increased operating leverage, a shift in product mix to higher
value added electrical and electronic core products and lower contract
manufacturing sales.
Selling, General and Administrative Expenses. Selling, general and
administrative (SG&A) expenses increased by $5.6 million to $22.6 million in the
third quarter of 1999 from $17.0 million for the same period in 1998. As a
percentage of sales, SG&A expenses were 14.4% for the third quarters of 1999 and
1998.
Interest Expense. Interest expense for the third quarter of 1999 was $7.5
million compared with $0.0 million for the same period in 1998. Average
outstanding indebtedness was $337.1 million and $5.4 million for the third
quarters of 1999 and 1998, respectively. The increase in average outstanding
indebtedness was primarily due to borrowings to finance recent acquisitions.
Income Before Income Taxes. As a result of the foregoing, income before taxes
increased by $2.0 million for the third quarter of 1999 to $14.1 million from
$12.1 million in 1998.
Provision for Income Taxes. The Company recognized provisions for income taxes
of $5.4 million and $4.9 million for federal, state and foreign income taxes for
the third quarters of 1999 and 1998, respectively.
Net Income. As a result of the foregoing, net income increased by $1.5 million,
or 20.5%, to $8.7 million for the third quarter of 1999 from $7.2 million for
the same period in 1998.
9
<PAGE>
Liquidity and Capital Resources
Net cash provided by operating activities was $36.6 million and $16.5
million for the nine months ended September 30, 1999 and 1998, respectively.
The increase in net cash from operating activities of $20.1 million was due to
increases in net income of $5.3 million and depreciation and amortization of
$10.8 million and decreases in working capital and other operating assets of
$4.0 million.
Net cash used for investing activities was $40.8 million and $11.1 million
for the nine months ended September 30, 1999 and 1998, respectively. The
increase in cash used for investing activities of $29.7 million was primarily
the result of the acquisitions of Delta and TVI. The acquisitions of Delta and
TVI were financed with funds from the Company's $425.0 million credit agreement.
Net cash provided by financing activities was $6.8 million for the nine
months ended September 30, 1999 as compared to net cash used for financing
activities of $5.4 million for the nine months ended September 30, 1998.
The Company has a $425.0 million credit agreement (of which $347.0 million
was outstanding at September 30, 1999) with a bank group. The credit agreement
has three components: a $100.0 million revolving facility (of which $59.6
million is currently available), a $150.0 million term facility, and a $175.0
million term facility. The $100.0 million revolving facility and the $150.0
million term facility expire on December 31, 2003, and require a commitment fee
of 0.37% to 0.50% on the unused balance. Interest is payable quarterly at either
(i) the prime rate plus a margin of 0.00% to 1.00% or (ii) LIBOR plus a margin
of 1.25% to 2.50%, depending upon the Company's ratio of consolidated total debt
to consolidated earnings before interest, taxes, depreciation and amortization,
as defined. The $175,000 term facility expires on December 31, 2005. Interest
is payable quarterly at either (i) the prime rate plus a margin of 2.00% or (ii)
LIBOR plus a margin of 3.50%.
The Company has entered into five interest rate swap agreements with a
total notional amount of $314.8 million. The interest rate swap agreements
exchange variable interest rates on the senior secured credit facility for fixed
interest rates. The Company does not use derivatives for speculative or profit-
motivated purposes. To the extent that the notional amount of the swap
agreements exceed the carrying value of the underlying debt, a mark to market
adjustment is reflected in the financial statements.
Management believes that cash flows from operations and the availability of
funds from the Company's credit facilities will provide sufficient liquidity to
meet the Company's growth and operating needs.
Inflation and International Presence
Management believes that the Company's operations have not been adversely
affected by inflation. By operating internationally, the Company is affected by
the economic conditions of certain countries. Based on the current economic
conditions in these countries, management believes the Company is not
significantly exposed to adverse economic conditions.
10
<PAGE>
Recently Issued Accounting Standards
Effective January 1, 1998 the Company adopted Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 requires the financial statement
disclosures for operating segments, products and services, and geographic areas.
The Company operates in one business segment based on the criteria set forth in
SFAS 131. Therefore, SFAS 131 will not affect the Company's financial position,
results of operations or financial statement disclosures.
The Company is required to adopt Statement of Financial Accounting
Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities". SFAS 133 establishes new accounting and reporting standards for
derivatives and hedging activities. In May 1999, the Financial Accounting
Standards Board announced a deferral in the implementation date of SFAS 133 to
January 1, 2001. The Company has not yet evaluated the financial accounting
and reporting impact of SFAS 133.
Year 2000 Initiative
The Company has conducted an evaluation of the actions necessary in order
to gain assurance that its information and non-information technology systems
will be able to function without disruption with respect to the application of
dating systems in the Year 2000. As a result of this evaluation, the Company is
engaged in the process of upgrading, replacing and testing information systems,
computer applications and other systems to be able to operate without disruption
due to Year 2000 issues. The Company's remedial actions for systems critical to
daily operations and manufacturing capability are substantially complete.
Certain systems not critical to daily operations and manufacturing capability
require additional remedial actions. These remedial actions are scheduled to be
complete by December 31, 1999.
There can be no assurance that the remedial actions being implemented by
the Company will be able to be completed by the time necessary to avoid Year
2000 dating systems problems or that the cost of doing so will not be in excess
of the amounts discussed below. If the Company is unable to complete all
remedial actions in the planned timeframe, contingency plans to address systems
that may not be Year 2000 compliant will be developed. These contingency plans
could include developing non-system procedures and controls or accelerating the
implementation of third party Year 2000 compliant software.
The Company estimates total historical Year 2000 expenditures to be
approximately $3.6 million. Year 2000 expenditures relate to modifying software,
purchasing new software and hardware, and replacing non-compliant software and
hardware. Year 2000 expenditures to be incurred through December 31, 1999 are
estimated to be an additional $0.3 million. These costs include both internal
and external personnel costs related to the assessment process, as well as the
cost of purchasing certain hardware and software. There can be no guarantee that
these estimates will be achieved, and actual results may differ from those
planned. The cost of remedial actions to rectify non-information technology
systems is not anticipated to be material to the Company's financial position or
results of operations. The Company intends to use cash provided from operations
to fund expenditures related to Year 2000 issues.
The Company currently believes the most likely worst case scenario with
respect to the Year 2000 issue is a disruption in the supply of products and
services from the Company's vendors, including utility providers. Such a supply
disruption could result in the Company not being able to produce certain
products for a period of time, which could have a material adverse effect on the
financial condition and results of operations of the Company.
The Company intends to continue to refine contingency plans developed to
address potential third party system failures resulting from a Year 2000
problem. The Company continues to monitor its assessment process to gain
assurances and certifications of customers' and suppliers' Year 2000 readiness
programs. Based on the results of the assessment process, the Company will
refine contingency plans for those suppliers who are unable or unwilling to
complete remediation plans to become Year 2000 compliant.
11
<PAGE>
Although these plans continue to be refined, the Company's current plan includes
a combination of the resourcing of materials to Year 2000 compliant vendors and
the stockpiling of components. The Company will continue to monitor these plans
up to December 31, 1999.
The Company intends to assess the status of customers' and suppliers' Year
2000 compliance in early January 2000. Based on the results of this assessment,
the Company will implement certain elements of the contingency plans discussed
above to attempt to minimize operational disruptions.
Portions of this Year 2000 section contain statements that constitute
forward-looking statements. The forward-looking statements include statements
regarding the Company's intent, belief and expectations with respect to, among
other things, the timing of the Company's Year 2000 remedial actions and the
development of the Company's contingency plans, and the future expenses related
to the Company's Year 2000 compliance programs. Investors are cautioned that any
such forward-looking statement is not a guarantee and involves risks and
uncertainties, and that actual events may differ materially from those in the
forward-looking statement as a result of various factors, including, among
others, the discovery of a currently unknown material Year 2000 issue, the
failure of third parties to address Year 2000 issues, the failure to implement
the Company's Year 2000 plan as scheduled, and a material increase in the costs
of external consultants.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to certain market risks, primarily resulting from
the effects of changes in interest rates. To reduce exposures to market risks
resulting from fluctuations in interest rates, the Company uses derivative
financial instruments. Specifically, the Company uses interest rate swap
agreements to mitigate the effects of interest rate fluctuations on net income
by changing the floating interest rates on certain portions of the Company's
debt to fixed interest rates. The effect of changes in interest rates on the
Company's net income generally has been small relative to other factors that
also affect net income, such as sales and operating margins. Management believes
that its use of these financial instruments to reduce risk is in the Company's
best interest. The Company does not enter into financial instruments for
trading purposes.
The Company's risks related to commodity price and foreign currency
exchange risks have historically not been material. The Company does not expect
the effects of these risks to be material based on current operating and
economic conditions in the countries and markets in which it operates.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -----------------------------
In the ordinary course of business, the Company is involved in various legal
proceedings, workers' compensation and product liability disputes. The Company
is of the opinion that the ultimate resolution of these matters will not have a
material adverse effect on the results of operations or the financial position
of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- -----------------------------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- -------------------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ---------------------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
- -----------------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------
(a) Exhibits
10.15 Amendment No. 1 dated as of January 28, 1999 to Credit Agreement
dated as of December 30, 1998 among Stoneridge, Inc. as Borrower,
the Lenders named therein as Lenders, DLJ Capital Funding, Inc. as
Syndication Agent, National City Bank, as a Lender, a Letter of
Credit Issuer, the Administrative Agent and the Collateral Agent,
PNC Bank NA as Documentation Agent.
10.16 Amendment No. 2 dated as of September 7, 1999 to Credit Agreement
dated as of December 30, 1998 among Stoneridge, Inc. as Borrower,
the Lenders named therein as Lenders, DLJ Capital Funding, Inc. as
Syndication Agent, National City Bank, as a Lender, a Letter of
Credit Issuer, the Administrative Agent and the Collateral Agent,
PNC Bank NA as Documentation Agent.
27.1 Financial Data Schedule for the nine months ended September 30, 1999
(b) Reports on Forms 8-K
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STONERIDGE, INC.
Date: November 15, 1999 /s/ Cloyd J. Abruzzo
--------------------
Cloyd J. Abruzzo
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 15, 1999 /s/ Kevin P. Bagby
--------------------
Kevin P. Bagby
Treasurer and Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
14
<PAGE>
STONERIDGE, INC.
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- -------
10.15 Amendment No. 1 dated as of January 28, 1999 to Credit Agreement
dated as of December 30, 1998 among Stoneridge, Inc. as Borrower,
the Lenders named therein as Lenders, DLJ Capital Funding, Inc. as
Syndication Agent, National City Bank, as a Lender, a Letter of
Credit Issuer, the Administrative Agent and the Collateral Agent,
PNC Bank NA as Documentation Agent.
10.16 Amendment No. 2 dated as of September 7, 1999 to Credit Agreement
dated as of December 30, 1998 among Stoneridge, Inc. as Borrower,
the Lenders named therein as Lenders, DLJ Capital Funding, Inc. as
Syndication Agent, National City Bank, as a Lender, a Letter of
Credit Issuer, the Administrative Agent and the Collateral Agent,
PNC Bank NA as Documentation Agent.
27.1 Financial Data Schedule for the nine months ended September 30,
1999, filed herewith.
15
<PAGE>
EXHIBIT 10.15
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT, dated as of January 28, 1999
("this Amendment"), among
(i) STONERIDGE, INC., an Ohio corporation (herein, together
with its successors and assigns, the "Borrower"):
(ii) the financial institutions listed on the signature pages
hereof (the "Lenders");
(iii) DLJ CAPITAL FUNDING, INC., as Syndication Agent;
(iv) PNC BANK, NATIONAL ASSOCIATION, as Documentation Agent; and
(v) NATIONAL CITY BANK, a national banking association, as
Administrative Agent and Collateral Agent;
PRELIMINARY STATEMENTS:
(1) The parties hereto entered into the Credit Agreement, dated as of
December 30, 1998 (herein, the "Credit Agreement"; with the terms defined
therein, or the definitions of which are incorporated therein, being used herein
as so defined).
(2) The parties hereto desire to amend the terms and provisions of the
Credit Agreement to (i) change the time for the commencement of the mandatory
prepayments based on Excess Cash Flow, and (ii) correct an error in the amount
of the last four Scheduled Repayments of the Term B Loans, all as more fully set
forth below.
NOW, THEREFORE, the parties hereby agree as follows:
1. The reference in section 5.2(c) of the Credit Agreement to "the fiscal
year ended December 31, 1998" is changed to "the fiscal year ended December 31,
1999".
2. The amount "$30,375,000", which appears in the table in section 5.2(a)
of the Credit Agreement as the Scheduled Repayment for Term B Loans on March 31,
June 30, September 30 and December 31, 2005, is changed in each such instance to
"$30,312,500".
3. This Amendment shall become effective if and when counterparts hereof
shall have been executed by the parties hereto and delivered to the
Administrative Agent.
4. The terms and provisions set forth in this Amendment shall modify and
supersede all inconsistent terms and provisions set forth in the Credit
Agreement, and except as expressly modified and superseded by this Amendment,
the terms and provisions of the Credit Agreement are ratified and confirmed and
shall continue in full force and effect.
<PAGE>
5. This Amendment shall be binding upon and inure to the benefit of the
Borrower, each Lender and the Agents and their respective permitted successors
and assigns. This Amendment shall be governed by and construed in accordance
with the laws of the State of Ohio. This Amendment is specifically limited to
the matters expressly set forth herein. This Amendment may be executed by the
parties hereto in one or more counterparts, and by different parties on separate
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as
of the date first above written.
STONERIDGE, INC.
By: /s/ Kevin P. Bagby
-----------------------------
Kevin P. Bagby
Vice President-Finance
& Chief Financial Officer
NATIONAL CITY BANK, DLJ CAPITAL FUNDING, INC.
individually and as Administrative individually and as Syndication
Agent and as Collateral Agent Agent
By: /s/ Michael P. McCuen By: /s/ Eric Swanson
----------------------------- -----------------------------
Title: Senior Vice President Managing Director
PNC BANK, NATIONAL ASSOCIATION,
individually and as Documentation Agent
By: /s/ Joseph G. Moran
-----------------------------
Title: Vice President
<PAGE>
EXHIBIT 10.16
================================================================================
STONERIDGE, INC.
as Borrower
THE LENDERS NAMED THEREIN
as Lenders
DLJ CAPITAL FUNDING, INC.
as Syndication Agent
NATIONAL CITY BANK
as a Lender, a Letter of Credit Issuer,
the Administrative Agent and the Collateral
Agent
PNC BANK, NATIONAL ASSOCIATION
as Documentation Agent
_____________________
AMENDMENT NO. 2
dated as of
September 7, 1999
to
CREDIT AGREEMENT
dated as of
December 30, 1998
_____________________
================================================================================
<PAGE>
AMENDMENT NO. 2 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT, dated as of September 7, 1999
("this Amendment"), among the following:
(i) STONERIDGE, INC., an Ohio corporation (herein, together with its
successors and assigns, the "Borrower");
(ii) the Lenders signatory hereto;
(iii) DLJ CAPITAL FUNDING, INC., a Delaware corporation, as
Syndication Agent;
(iv) NATIONAL CITY BANK, a national banking association, as a Lender,
the Letter of Credit Issuer, and as the Administrative Agent and the
Collateral Agent under the Credit Agreement; and
(v) PNC BANK, NATIONAL ASSOCIATION, a national banking association,
as the Documentation Agent:
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders named therein, and the Agents entered into
the Credit Agreement, dated as of December 30, 1998, as amended by Amendment No.
1 thereto, dated as of January 28, 1999 (as so amended and in effect immediately
prior to the effective date of this Amendment, the "Credit Agreement"; with the
terms defined therein, or the definitions of which are incorporated therein,
being used herein as so defined).
(2) The parties hereto desire to change certain of the terms and provisions
of the Credit Agreement, all as more fully set forth below.
(3) For the avoidance of doubt, insofar as the Lenders are concerned, is
noted that in accordance with the provisions of section 12.12 of the Credit
Agreement, the changes in the Credit Agreement effected by this Amendment which
relate only to the Revolving Loans, the Revolving Commitments, the Term A Loans
and the Term A Commitments, must be approved by Lenders whose Revolving
Commitments and Term A Commitments represent 100% of the Total Revolving
Commitment and 100% of the Total Term A Commitment, respectively.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. AMENDMENTS, ETC.
1.1. Definition of Permitted Acquisition. Clause (iii) of the definition
of the term "Permitted Acquisition" which appears in section 1.1 of the Credit
Agreement is amended by changing the dollar amount "$50,000,000" which appears
therein to "$75,000,000" and by changing the starting time for purposes thereof
from the Closing Date to August 15, 1999 (excluding the Acquisition of TVI
Europe Limited), with the result that such clause (iii) as so amended, will read
in its entirety as follows:
<PAGE>
(iii) the aggregate consideration for such Acquisition and all other
Acquisitions completed after August 15, 1999 (other than the Acquisition of
TVI Europe Limited, scheduled to be completed on or about August 20, 1999),
including the principal amount of any assumed Indebtedness and (without
duplication) any Indebtedness of any acquired person or persons, does not
exceed $75,000,000 (such amount being subject to annual increase,
commencing in the year 2000 (based on fiscal year ended December 31, 1999),
by an amount equal to (x) 12.5% of Excess Cash Flow for the preceding
fiscal year, minus (y) the amount expended for dividends and stock
repurchases during such preceding fiscal year as contemplated by section
9.6 hereof), unless the Required Lenders specifically approve or consent to
such Acquisition in writing;
1.2. Pricing Grid for Revolving Loans and Term A Loans. The Pricing Grid
Table which appears in section 2.7(g) of the Credit Agreement is amended to read
in its entirety as follows:
PRICING GRID TABLE
FOR
REVOLVING LOANS AND TERM A LOANS
(Expressed in Basis Points)
<TABLE>
<CAPTION>
Ratio of Applicable Prime Applicable Applicable
Consolidated Total Debt Rate Margin Eurodollar Margin Commitment Fee
to Rate
Consolidated EBITDA
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Greater than 3.00 to 1.00 100.00 250.00 50.00
- ---------------------------------------------------------------------------------------------------
Greater than 2.50 to 1.00
and less than or equal to 3.00 to 1.00 62.50 212.50 50.00
- ---------------------------------------------------------------------------------------------------
Greater than 2.00 to 1.00
and less than or equal to 2.50 to 1.00 25.00 175.00 50.00
- ---------------------------------------------------------------------------------------------------
Greater than 1.50 to 1.00
and less than or equal to 2.00 to 1.00 -0- 150.00 37.50
- ---------------------------------------------------------------------------------------------------
Less than or equal to 1.50 to 1.00 -0- 125.00 37.50
- ---------------------------------------------------------------------------------------------------
</TABLE>
1.3. Effectiveness of Pricing Changes. (a) Effective as of the
Effective Date of this Amendment, for all Revolving Loans and Term A Loans then
or thereafter outstanding, and until changed in accordance with the applicable
provisions of section 2.7(g) of the Credit Agreement based on the consolidated
financial statements of the Borrower for a fiscal quarter ended September 30,
1999 or thereafter, the Applicable Prime Rate Margin for Revolving Loans and
Term A Loans will be 100 basis points per annum, and the Applicable Eurodollar
Margin for Revolving Loans and Term A Loans will be 250 basis points per annum.
(b) Effective as of the Effective Date of this Amendment, and until changed
in accordance with the applicable provisions of section 4.1(a) of the Credit
Agreement based on the consolidated financial statements
2
<PAGE>
of the Borrower for a fiscal quarter ended September 30, 1999 or thereafter, the
Applicable Commitment Fee Rate will be 50 basis points per annum.
1.4. Incorporation of Amendment No. 1. For the convenience of the parties
and the avoidance of doubt, it is hereby confirmed that the only changes to the
Credit Agreement effected by Amendment No. 1 thereto, dated as of January 28,
1999, were the following:
(a) The reference in section 5.2(c) of the Credit Agreement to "the
fiscal year ended December 31, 1998" was changed to "the fiscal year ended
December 31, 1999".
(b) The amount "$30,375,000", which appears in the table in section
5.2(a) of the Credit Agreement as the Scheduled Repayment for Term B Loans
on March 31, June 30, September 30 and December 31, 2005, was changed in
each such instance to "$30,312,500".
SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants as follows:
2.1. Authorization and Validity of Amendment, etc. This Amendment has
been duly authorized by all necessary corporate action on the part of the
Borrower, has been duly executed and delivered by a duly authorized officer of
the Borrower, and constitutes the valid and binding agreement of the Borrower,
enforceable against the Borrower in accordance with its terms, except to the
extent that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law).
2.2. Representations and Warranties. The representations and warranties
of the Credit Parties contained in the Credit Agreement or in the other Credit
Documents are true and correct in all material respects on and as of the date
hereof as though made on and as of the date hereof, except to the extent that
such representations and warranties expressly relate to an earlier specified
date, in which case such representations and warranties are hereby reaffirmed as
true and correct in all material respects as of the date when made.
2.3. No Event of Default. No condition or event has occurred or exists
which constitutes or which, after notice or lapse of time or both, would
constitute an Event of Default.
2.4. Compliance. The Borrower is in full compliance with all covenants
and agreements contained in the Credit Agreement, as amended hereby, and the
other Credit Documents to which it is a party; and without limitation of the
foregoing, each Subsidiary of the Borrower which, as of the date hereof, is
required to be a Subsidiary Guarantor, has as on or prior to the date hereof
become a Subsidiary Guarantor under the Subsidiary Guaranty.
2.5. Financial Statements, etc. The Borrower has furnished to the Lenders
and the Administrative Agent complete and correct copies of:
(a) the audited consolidated balance sheets of the Borrower and its
consolidated subsidiaries as of December 31, 1997, and December 31, 1998,
and the related audited consolidated statements of income, stockholders'
equity, and cash flows for the fiscal years then ended, accompanied by the
unqualified report thereon of the Borrower's independent accountants; and
3
<PAGE>
(b) the unaudited condensed consolidated balance sheets of the
Borrower and its consolidated subsidiaries as of June 30, 1999, and the
related unaudited condensed consolidated statements of income and of cash
flows of the Borrower and its consolidated subsidiaries for the fiscal
quarter or quarters then ended, as contained in the Form 10-Q Quarterly
Report of the Borrower filed with the SEC.
All such financial statements have been prepared in accordance with GAAP,
consistently applied (except as stated therein), and fairly present the
financial position of the Borrower and its consolidated subsidiaries as of the
respective dates indicated and the consolidated results of their operations and
cash flows for the respective periods indicated, subject in the case of any such
financial statements which are unaudited, to the absence of footnotes and to
normal audit adjustments which the Borrower reasonably believes will not involve
a Material Adverse Effect.
SECTION 3. RATIFICATIONS.
Except as expressly modified and superseded by this Amendment, the terms
and provisions of the Credit Agreement are ratified and confirmed and shall
continue in full force and effect.
SECTION 4. BINDING EFFECT.
This Amendment shall become effective on a date (the "Effective Date"), on
or before September 7, 1999, if the following conditions shall have been
satisfied on and as of such date:
(a) this Amendment shall have been executed by the Borrower and the
Administrative Agent, and counterparts hereof as so executed shall have
been delivered to the Administrative Agent;
(b) the Acknowledgment and Consent appended hereto shall have been
executed by the Credit Parties named therein, and counterparts thereof as
so executed shall have been delivered to the Administrative Agent; and
(c) the Administrative Agent shall have been notified by the Required
Lenders that such Lenders have executed this Amendment (which notification
may be by facsimile or other written confirmation of such execution);
provided, however, that the particular amendments contained in sections 1.2
and 1.3 of this Amendment shall not become effective unless the
Administrative Agent shall have been so notified by Lenders whose Revolving
Commitments and Term A Commitments represent 100% of the Total Revolving
Commitment and 100% of the Total Term A Commitment, respectively, that such
Lenders have executed this Amendment;
and thereafter this Amendment shall be binding upon and inure to the benefit of
the Borrower, the Agents, and each Lender and their respective permitted
successors and assigns. After this Amendment becomes effective, the
Administrative Agent will promptly furnish a copy of this Amendment to each
Lender and the Borrower, advise them of the Effective Date, and also advise them
whether the amendments contained in sections 1.2 and 1.3 of this Amendment have
also become effective.
4
<PAGE>
SECTION 5. MISCELLANEOUS.
5.1. Survival of Representations and Warranties. All representations and
warranties made in this Amendment shall survive the execution and delivery of
this Amendment, and no investigation by the Administrative Agent or any Lender
or any subsequent Loan or other Credit Event shall affect the representations
and warranties or the right of the Administrative Agent or any Lender to rely
upon them.
5.2. Reference to Credit Agreement. The Credit Agreement and any and all
other agreements, instruments or documentation now or hereafter executed and
delivered pursuant to the terms of the Credit Agreement as amended hereby, are
hereby amended so that any reference therein to the Credit Agreement shall mean
a reference to the Credit Agreement as amended hereby.
5.3. Expenses. As provided in the Credit Agreement, but without limiting
any terms or provisions thereof, the Borrower shall pay on demand all reasonable
costs and expenses incurred by the Administrative Agent in connection with the
preparation, negotiation, and execution of this Amendment, including without
limitation the reasonable costs and fees of the Administrative Agent's special
legal counsel, regardless of whether this Amendment becomes effective in
accordance with the terms hereof, and all reasonable costs and expenses incurred
by the Administrative Agent or any Lender in connection with the enforcement or
preservation of any rights under the Credit Agreement, as amended hereby.
5.4. Severability. Any term or provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the term or provision so held to be invalid or unenforceable.
5.5. Applicable Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Ohio.
5.6. Headings. The headings, captions and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
5.7. Entire Agreement. This Amendment is specifically limited to the
matters expressly set forth herein. This Amendment and all other instruments,
agreements and documentation executed and delivered in connection with this
Amendment embody the final, entire agreement among the parties hereto with
respect to the subject matter hereof and supersede any and all prior
commitments, agreements, representations and understandings, whether written or
oral, relating to the matters covered by this Amendment, and may not be
contradicted or varied by evidence of prior, contemporaneous or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto relating to the subject matter hereof or any other
subject matter relating to the Credit Agreement.
5.8. Jury Trial Waiver. EACH OF THE PARTIES TO THIS AMENDMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO
HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
5
<PAGE>
5.9. Counterparts. This Amendment may be executed by the parties hereto
separately in one or more counterparts, each of which when so executed shall be
deemed to be an original, but all of which when taken together shall constitute
one and the same agreement.
6
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as
of the date first above written.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
<S> <C>
NATIONAL CITY BANK, STONERIDGE, INC.
as a Lender, the letter of Credit Issuer,
the Administrative Agent and
the Collateral Agent
By: /s/ Michael P. McCuen By: /s/ Kevin P. Bagby
-------------------------- -------------------------
Michael P. McCuen Kevin P. Bagby
Senior Vice President Vice President-Finance
& Chief Financial Officer
- -------------------------------------------------------------------------------------------------------------
PNC BANK, NATIONAL ASSOCIATION, DLJ CAPITAL FUNDING, INC.,
as a Lender and as Documentation Agent as Syndication Agent
By: /s/ Joseph G. Moran By: /s/ Eric Swanson
-------------------------- -------------------------
Title: Vice President Title: Managing Director
- -------------------------------------------------------------------------------------------------------------
ABN AMRO BANK N. V. THE BANK OF NOVA SCOTIA,
Chicago Branch
By: /s/ Christopher S. Helmeci By: /s/ Eric Bergren
-------------------------- -------------------------
Title: Vice President Title: Relationship Manager
By: /s/ Patrick Pastore By: /s/ F.G.H. Ashby
-------------------------- -------------------------
Title: Vice President Title: Senior Manager Loan Operations
- -------------------------------------------------------------------------------------------------------------
MELLON BANK, N. A. COMERICA BANK
By: /s/ Jack Ligday By: /s/ Nicholas Mester
-------------------------- -------------------------
Title: Vice President Title: Account Officer
- -------------------------------------------------------------------------------------------------------------
BANK ONE, MICHIGAN FIRSTAR BANK, NATIONAL ASSOCIATION
(formerly NBD Bank) (formerly Star Bank, National Association)
By: /s/ Thomas Lakocy By: /s/ John D. Barrett
-------------------------- -------------------------
Title: Vice President Title: Senior Vice President
- -------------------------------------------------------------------------------------------------------------
HARRIS TRUST AND SAVINGS BANK BankBoston, N.A
By: /s/ Peter T. Krawchuk By: /s/ Richard D. Briggs Jr.
-------------------------- -------------------------
Title: Vice President Title: Director
- -------------------------------------------------------------------------------------------------------------
MERCANTILE BANK NA SunTrust Bank, Central Florida, National
Association
By: /s/ Tim Hassler By: /s/ Stephen L. Leister
-------------------------- -------------------------
Title: Vice President Title: Vice President
- -------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
<S> <C>
GENERAL ELECTRIC CAPITAL CORPORATION BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE,
INC
By: /s/ William Richardson By: /s/ Cathrine K. MacDonald
---------------------------- ---------------------------
Title: Title: Vice President
By: /s/ Richard B. Vuchanavage
---------------------------
Title: Senior Vice President
- -------------------------------------------------------------------------------------------------------------
SUMMIT BANK
By: /s/ Vincent Bagarozza
---------------------------
Title: Director
- -------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES FOR TERM B LENDERS SIGNATURES FOR TERM B LENDERS
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
BLACK DIAMOND CAPITAL MANAGEMENT MORGAN STANLEY DEAN WITTER
By: /s/ Chris Kappas By: /s/ Peter Gewirtz
------------------------ -------------------------
Name: Chris Kappas Name: Peter Gewirtz
Title: Loan Administrator Title:
- ----------------------------------------------------------------------------------------------------------------
FIRST DOMINION CAPITAL, L. L. C. NATIONAL WESTMINSTER BANK PLC
By: /s/ Michael Monteleone By: /s/ Dave Meyer
------------------------ -------------------------
Name: Michael Monteleone Name: Dave Meyer
Title: Title:
- ----------------------------------------------------------------------------------------------------------------
ANGELO, GORDON & CO. OASIS COLLATERAL HIGH INCOME
By: /s/ John Fraser By: /s/ Joe Rotondo
------------------------ -------------------------
Name: John Fraser Name: Joe Rotondo
Title: Title: Vice President
- ----------------------------------------------------------------------------------------------------------------
ARCHIMEDES FUNDING II, LTD. OSPREY INVESTMENTS PORTFOLIO
By: /s/ Michael Hatley By: /s/ Bob Ros
------------------------ -------------------------
Name: Michael Hatley Name: Bob Ros
Title: Senior Vice President Title:
- ----------------------------------------------------------------------------------------------------------------
CAPTIVA IV FINANCE LTD., SENIOR DEBT PORTFOLIO (BOSTON MANAGEMENT AND
as advised by Pacific Investment RESEARCH)
Management Co.
By: /s/ Melissa Fejdasz By: /s/ Steven O'Brien
------------------------ -------------------------
Name: Melissa Fejadsz Name: Steven O'Brien
Title: Title:
- ----------------------------------------------------------------------------------------------------------------
ATHENA CDO, LIMITED SOMERS CO. LIMITED
by: Pacific Investment Management Co.,
as its investment advisor
By: /s/ Melissa Fejadsz By: /s/ Jill Fields
------------------------ -------------------------
Name: Melissa Fejadsz Name: Jill Fields
Title: Title: Managing Director
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES FOR TERM B LENDERS SIGNATURES FOR TERM B LENDERS
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
FREMONT INVESTMENT LOAN SRV-HIGHLAND
By: /s/ Randolph M. Ross By: /s/ Mark Okada
--------------------------- ---------------------------
Name: Randolph M. Ross Name: Mark Okada
Title: Vice President Title: Executive Vice President
- ----------------------------------------------------------------------------------------------------------------
FLEET NATIONAL BANK STEIN, ROE & FARNHAM, INC.
By: /s/ Michael J. Sullivan By: /s/ Brian W. Good
--------------------------- ---------------------------
Name: Michael J. Sullivan Name: Brian W. Good
Title: Vice President Title: Vice President
- ----------------------------------------------------------------------------------------------------------------
KZH ING--2 LLC STEIN ROE FLOATING RATE, LLC
By: /s/ Karen Morgan By: /s/ Brian W. Good
--------------------------- ---------------------------
Name: Karen Morgan Name: Brian W. Good
Title: Title: Vice President
- ----------------------------------------------------------------------------------------------------------------
KZH ING--3 LLC TEXAS COMMERCE BANK, N. A.
By: /s/ Shan McSweeney By: /s/ Ron Rehmeyer
--------------------------- ---------------------------
Name: Shan McSweeney Name: Ron Rehmeyer
Title: Title:
- ----------------------------------------------------------------------------------------------------------------
KZH LANGDALE LLC TORONTO DOMINION (N. Y.), INC.
By: /s/ Virginia Conway By: /s/ Jorge Garcia
--------------------------- ---------------------------
Name: Virginia Conway Name: Jorge Garcia
Title: Title:
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES FOR TERM B LENDERS SIGNATURES FOR TERM B LENDERS
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
KZH RIVERSIDE LLC TRAVELERS CORPORATE LOAN FUND
By: /s/ Shan Sweeney By: /s/ John Petchler
------------------------- -------------------------
Name: Shan Sweeney Name: John Petchler
Title: Title:
- ----------------------------------------------------------------------------------------------------------------
KZH SOLEIL LLC TRAVELERS INSURANCE COMPANY
By: /s/ Steven Staver By: /s/ John Petchler
------------------------- -------------------------
Name: Steven Staver Name: John Petchler
Title: Title: Second Vice President
- ----------------------------------------------------------------------------------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY VAN KAMPEN CLO I, LIMITED
By: /s/ Jill Fields By: /s/ Jeffrey W. Mailet
------------------------- -------------------------
Name: Jill Fields Name: Jeffrey W. Mailet
Title: Managing Director Title: Senior Vice President
- ----------------------------------------------------------------------------------------------------------------
MERRILL LYNCH SENIOR FLOATING RATE FUND VAN KAMPEN PRIME RATE INCOME
By: /s/ Janet S. Hanson By: /s/ Jeffrey W. Mailet
------------------------- -------------------------
Name: Janet S. Hanson Name: Jeffrey W. Mailet
Title: Title: Senior Vice President
- ----------------------------------------------------------------------------------------------------------------
MERRILL LYNCH PRIME RATE PORTFOLIO PILGRIM INVESTMENTS
By: Merrill Lynch Asset Management, L.P., as
investment advisor
By: /s/ Janet S. Hanson By: /s/ Michael Prince
------------------------- -------------------------
Name: Janet S. Hanson Name: Michael Prince
Title: Title: Vice President
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
ACKNOWLEDGMENT AND CONSENT
For the avoidance of doubt, and without limitation of the intent and effect
of sections 4 and 5 of the Subsidiary Guaranty (as such term is defined in the
Credit Agreement referred to in the Amendment No. 2 to Credit Agreement (the
"Amendment"), to which this Acknowledgment and Consent is appended), each of the
undersigned hereby unconditionally and irrevocably (i) acknowledges receipt of a
copy of the Credit Agreement and the Amendment, and (ii) consents to all of the
terms and provisions of the Credit Agreement as amended by the Amendment.
Capitalized terms which are used herein without definition shall have the
respective meanings ascribed thereto in the Credit Agreement referred to herein.
This Acknowledgment and Consent is for the benefit of the Lenders, the
Administrative Agent, the Collateral Agent and any Designated Hedge Creditor
(as defined in the Subsidiary Guaranty) which may be a third party beneficiary
of the Subsidiary Guaranty or any Security Document, in its capacity as such
third party beneficiary under any Credit Document, and their respective
successors and assigns. No term or provision of this Acknowledgment and Consent
may be modified or otherwise changed without the prior written consent of the
Administrative Agent, given as provided in the Credit Agreement. This
Acknowledgment and Consent shall be binding upon the successors and assigns of
each of the undersigned. This Acknowledgment and Consent may be executed by any
of the undersigned in separate counterparts, each of which shall be an original
and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the undersigned has duly executed and delivered
this Acknowledgment and Consent as of the date of the Amendment referred to
herein.
HI-STAT MANUFACTURING CO, INC.
By: /s/ Kevin Bagby
--------------------------
Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STONERIDGE,
INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF
SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,644
<SECURITIES> 0
<RECEIVABLES> 101,791
<ALLOWANCES> (1,006)
<INVENTORY> 63,615
<CURRENT-ASSETS> 190,751
<PP&E> 169,838
<DEPRECIATION> (68,210)
<TOTAL-ASSETS> 691,126
<CURRENT-LIABILITIES> 125,045
<BONDS> 328,574
0
0
<COMMON> 0
<OTHER-SE> 221,697
<TOTAL-LIABILITY-AND-EQUITY> 691,126
<SALES> 512,688
<TOTAL-REVENUES> 512,688
<CGS> 369,404
<TOTAL-COSTS> 369,404
<OTHER-EXPENSES> 69,505
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,070
<INCOME-PRETAX> 50,709
<INCOME-TAX> 20,038
<INCOME-CONTINUING> 30,671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,671
<EPS-BASIC> 1.37
<EPS-DILUTED> 1.37
</TABLE>
