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 June 30, 2000. Commission file number 001-13337
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 August 11,
2000 was 22,397,311.
<PAGE>
STONERIDGE, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2000
and December 31, 1999 2
Condensed Consolidated Statements of Income for the three
months and six months ended June 30, 2000 and 1999 3
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 2000 and 1999 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosure About Market
Risk 11
Part II Other Information 12-13
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>
June 30, December 31,
2000 1999
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 8,480 $ 3,924
Accounts receivable, net 109,892 98,744
Inventories 65,456 65,701
Prepaid expenses and other 17,873 13,383
Deferred income taxes 9,149 10,564
--------- ---------
Total current assets 210,850 192,316
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, net 109,742 106,163
OTHER ASSETS:
Goodwill and other intangibles, net 363,093 369,265
Investments and other 30,605 30,565
--------- ---------
TOTAL ASSETS $714,290 $698,309
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 31,197 $ 25,753
Accounts payable 48,930 42,337
Accrued expenses and other 53,031 47,114
--------- ---------
Total current liabilities 133,158 115,204
--------- ---------
LONG-TERM DEBT, net of current portion 307,179 331,898
DEFERRED INCOME TAXES 17,388 15,985
OTHER LIABILITIES 2,470 3,594
--------- ---------
Total long-term liabilities 327,037 351,477
--------- ---------
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 June 30, 2000 and December 31, 1999,
stated at -- --
Additional paid-in capital 141,506 141,506
Retained earnings 114,608 90,502
Accumulated other comprehensive loss (2,019) (380)
--------- ---------
Total shareholders' equity 254,095 231,628
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $714,290 $698,309
========= =========
</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 six months
ended June 30, ended June 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $182,768 $178,048 $366,979 $355,703
COST AND EXPENSES:
Cost of goods sold 132,090 128,237 264,639 256,451
Selling, general and administrative expenses 25,468 24,150 50,538 47,334
-------- -------- -------- --------
Operating income 25,210 25,661 51,802 51,918
Interest expense, net 7,646 7,326 15,577 15,576
Other income 228 225 542 225
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 17,792 18,560 36,767 36,567
Provision for income taxes 6,202 7,352 12,661 14,586
-------- -------- -------- --------
NET INCOME $ 11,590 $ 11,208 $ 24,106 $ 21,981
======== ======== ======== ========
BASIC AND DILUTED NET INCOME PER SHARE $ .52 $ 0.50 $ 1.08 $ 0.98
======== ======== ======== ========
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 six months
ended June 30,
--------------------
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 24,106 $ 21,981
Adjustments to reconcile net income to net cash from
operating activities-
Depreciation and amortization 13,682 14,748
Deferred income taxes 2,301 1,644
Changes in operating assets and liabilities-
Accounts receivable, net (12,085) (11,670)
Inventories (494) 961
Prepaid expenses and other (4,642) (3,426)
Other assets, net (221) 735
Accounts payable 7,306 (3,856)
Accrued expenses and other 5,383 4,662
--------- --------
Net cash from operating activities 35,336 25,779
--------- --------
INVESTING ACTIVITIES:
Capital expenditures (10,669) (5,241)
Business acquisitions and other (592) (12,038)
--------- --------
Net cash from investing activities (11,261) (17,279)
--------- --------
FINANCING ACTIVITIES:
Proceeds from long-term debt -- 3,166
Repayments of long-term debt (1,947) (83)
Net repayments under credit agreement (17,328) (9,207)
--------- --------
Net cash from financing activities (19,275) (6,124)
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS (244) (20)
NET CHANGE IN CASH AND CASH EQUIVALENTS 4,556 2,356
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,924 1,876
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,480 $ 4,232
========= ========
</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)
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 accounting principles generally accepted in the United
States 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 1999 Annual Report to Shareholders.
The results of operations for the three and six months ended June 30, 2000
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 88% of the
Company's inventories at June 30, 2000 and December 31, 1999, 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>
June 30, December 31,
2000 1999
----------- ------------
<S> <C> <C>
Raw materials $41,932 $42,876
Work in progress 10,649 9,636
Finished goods 13,187 13,400
Less-LIFO reserve (312) (211)
----------- ------------
Total $65,456 $65,701
=========== ============
</TABLE>
3. On August 27, 1999, the Company purchased all the outstanding shares of
TVI Europe Limited (TVI) for approximately $20,700. TVI is a United
Kingdom manufacturer of vehicle information and management systems for the
European commercial vehicle market. The transaction was accounted for as a
purchase.
On March 6, 1999, the Company purchased certain assets and assumed certain
liabilities of Delta Schoeller, Limited (Delta) for approximately $12,200.
Delta is a United Kingdom manufacturer of switches for the automotive
industry. The transaction was accounted for as a purchase.
5
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(in thousands)
4. Other comprehensive loss includes foreign currency translation
adjustments, net of related tax. Comprehensive income consists of the
following:
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $11,590 $11,208 $24,106 $21,981
Other comprehensive loss (1,014) (456) (1,639) (371)
-------- -------- -------- --------
Comprehensive income $10,576 $10,752 $22,467 $21,610
======== ======== ======== ========
</TABLE>
5. The Company has a $425,000 credit agreement with a bank group. The
credit agreement, as amended on May 25, 2000, has the following
components: a $100,000 revolving credit facility, including a $5,000 swing
line 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. The revolving facility permits the Company to borrow up to
half its borrowing in specified foreign currencies. Interest is payable
quarterly at either (i) the prime rate plus a margin of .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 (EBITDA), as defined. The $5,000
swing line facility expires on December 31, 2003. Interest is payable
monthly at an overnight money market borrowing rate. 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>
June 30, December 31,
2000 1999
----------- ------------
<S> <C> <C>
Borrowings under credit agreement $329,534 $346,862
Borrowings payable to foreign banks 6,401 7,917
Other 2,441 2,872
----------- ------------
338,376 357,651
Less: Current portion 31,197 25,753
----------- ------------
$307,179 $331,898
=========== ============
</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.
6
<PAGE>
STONERIDGE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(in thousands)
7. Based on the criteria set forth in Statement of Financial Accounting
Standard No. 131, "Disclosures about Segments of an Enterprise and Related
Information," the Company operates in one business segment. The following
table presents net sales and noncurrent assets for each of the geographic
areas in which the Company operates:
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
-------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales:
North America $161,864 $161,048 $319,984 $322,203
Europe and other 20,904 17,000 46,995 33,500
-------- -------- -------- --------
Total $182,768 $178,048 $366,979 $355,703
======== ======== ======== ========
<CAPTION>
June 30, December 31,
2000 1999
---------- -----------
<S> <C> <C>
Noncurrent assets:
North America $447,982 $452,774
Europe and other 55,458 53,219
---------- ----------
Total $503,440 $505,993
========== ==========
</TABLE>
8. Effective January 1, 2000 the Company adopted Emerging Issues Task Force
Issue No. 99-5 (EITF 99-5), "Accounting for Pre-Production Costs Related
to Long-Term Supply Arrangements." EITF 99-5 establishes new accounting
rules for costs related to the design and development of products and for
costs incurred to develop molds, dies and other tools to be used to
produce products that will be sold under long-term supply agreements. The
Company elected to adopt the requirements of EITF 99-5 on a prospective
basis, as permitted. In accordance with the criteria set forth in EITF
99-5, the Company is now required to expense as incurred certain costs
that were previously capitalized. The adoption of EITF 99-5 did not have
a significant impact on the Company's financial statements during the
three and six months ended June 30, 2000; however, the impact could be
significant in future periods.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
---------------------
Six Months Ended June 30, 2000 Compared To Six Months Ended June 30, 1999
-------------------------------------------------------------------------
Net Sales. Net sales for the six months ended June 30, 2000 increased by $11.3
million, or 3.2%, to $367.0 million from $355.7 million for the same period in
1999. Sales of core products increased by $33.2 million, or 9.9%, to $367.0
million during the first six months of 2000 compared to $333.8 million for the
same period of 1999. Sales of core products from the recent acquisition of TVI
accounted for $12.6 million of the change, while sales of existing core products
increased by $20.6 million, or 6.2%, compared to the same period in 1999.
Contract manufacturing sales, which were phased out during the second quarter
of 1999, accounted for 6.2% of total sales for the six months ended June 30,
1999. Sales revenues for the six months ended June 30, 2000 were driven by the
strong demand in the automotive market and an improving agricultural equipment
market, while sales to the commercial vehicles industry were lower compared to
the six months ended June 30, 1999.
Sales of core products for the six months ended June 30, 2000 for North America
decreased by $2.2 million to $320.0 million from $322.2 million for the same
period in 1999. North American sales accounted for 87.2% of total sales for the
six months ended June 30, 2000 compared with 90.6% for the same period in 1999.
Sales for the six months ended June 30, 2000 outside North America increased
$13.5 million to $47.0 million from $33.5 million for the same period in 1999.
Sales outside North America accounted for 12.8% of total sales for the six
months ended June 30, 2000 compared with 9.4% for the same period in 1999.
Cost of Goods Sold. Cost of goods sold for the first six months of 2000
increased by $8.1 million, or 3.2%, to $264.6 million from $256.5 million in the
first six months of 1999. As a percentage of sales, cost of goods sold remained
the same at 72.1% for the first six months of 2000 and 1999, respectively.
Selling, General and Administrative Expenses. Selling, general and
administrative (SG&A) expenses increased by $3.2 million to $50.5 million in the
first six months of 2000 from $47.3 million for the same period in 1999. As a
percentage of sales, SG&A expenses increased to 13.8% for the first six months
of 2000 from 13.3% for the same period in 1999. The increase is due primarily to
higher development costs to support new product launches for safety-related
products, including the seat track position sensor, fuel cut-off switch, and a
new modular assembly program entitled the Next Generation Vehicle. In addition,
the commercial costs related to the newly acquired companies and geographical
expansion also contributed to this increase.
Interest Expense. Interest expense for the first six months of 2000 and 1999 was
$15.6 million. Average outstanding indebtedness was $342.1 million and $345.4
million for the first six months of 2000 and 1999, respectively.
Income Before Income Taxes. As a result of the foregoing, income before taxes
increased by $0.2 million for the first six months of 2000 to $36.8 million from
$36.6 million in 1999.
8
<PAGE>
Provision for Income Taxes. The Company recognized provisions for income taxes
of $12.7 million and $14.6 million for federal, state and foreign income taxes
for the first six months of 2000 and 1999, respectively. The decline in the
effective tax rate in 2000 is a result of more income being generated in
jurisdictions with lower tax burdens, and the implementation of certain tax
planning strategies.
Net Income. As a result of the foregoing, net income increased by $2.1 million,
or 9.5%, to $24.1 million for the first six months of 2000 from $22.0 million in
1999.
Three Months Ended June 30, 2000 Compared To Three Months Ended June 30, 1999
------------------------------------------------------------------------------
Net Sales. Net sales for the quarter ended June 30, 2000 increased by $4.8
million, or 2.7%, to $182.8 million from $178.0 million for the same period in
1999. Sales of core products increased by $11.4 million, or 6.7%, to $182.8
million during the second quarter of 2000 compared to $171.4 million for the
same period of 1999. Sales of core products from the recent acquisition of TVI
accounted for $6.4 million of the change, while sales of existing core products
increased by $5.0 million, or 2.9%, compared to the same period in 1999.
Contract manufacturing sales, which were phased out during the second quarter of
1999, accounted for 3.8% of total sales for the second quarter of 1999. Sales
revenues for the second quarter ended June 30, 2000 were driven by the strong
demand in the automotive market and an improving agricultural equipment market,
while sales to the commercial vehicles industry were lower compared to the
second quarter ended June 30, 1999.
Sales of core products for the quarter ended June 30, 2000 for North America
increased by $0.9 million to $161.9 million from $161.0 million for the same
period in 1999. North American sales accounted for 88.6% of total sales for the
second quarter ended June 30, 2000 compared with 90.4% for the same period in
1999. Sales for the second quarter of 2000 outside North America increased by
$3.9 million to $20.9 million from $17.0 million for the same period in 1999.
Sales outside North America accounted for 11.4% of total sales for the second
quarter of 2000 compared with 9.6% for the same period in 1999.
Cost of Goods Sold. Cost of goods sold for the second quarter of 2000 increased
by $3.9 million, or 3.0%, to $132.1 million from $128.2 million in the second
quarter of 1999. As a percentage of sales, cost of goods sold increased to 72.3%
in 2000 from 72.0% in 1999. The increase as a percent of sales was due primarily
to a shift in product mix and cost related to new product launches.
Selling, General and Administrative Expenses. SG&A expenses increased by $1.3
million to $25.5 million in the second quarter of 2000 from $24.2 million for
the same period in 1999. As a percentage of sales, SG&A expenses increased to
13.9% for the second quarter of 2000 from 13.6% for the same period in 1999. The
increase is due primarily to higher development costs to support new product
launches for safety-related products, including the seat track position sensor,
fuel cut-off switch, and a new modular assembly program entitled the Next
Generation Vehicle. In addition, the commercial costs related to the newly
acquired companies and geographical expansion also contributed to this increase.
Interest Expense. Interest expense for the second quarter of 2000 was $7.6
million compared with $7.3 million in 1999. Average outstanding indebtedness was
$337.9 million and $342.6 million for the second quarter of 2000 and 1999,
respectively.
Income Before Income Taxes. As a result of the foregoing, income before taxes
decreased by $0.8 million for the second quarter of 2000 to $17.8 million from
$18.6 million in 1999.
9
<PAGE>
Provision for Income Taxes. The Company recognized provisions for income taxes
of $6.2 million and $7.4 million for federal, state and foreign income taxes for
the second quarter of 2000 and 1999, respectively. The decline in the effective
tax rate in 2000 is a result of more income being generated in jurisdictions
with lower tax burdens, and the implementation of certain tax planning
strategies.
Net Income. As a result of the foregoing, net income increased by $.4 million,
or 3.6%, to $11.6 million for the second quarter of 2000 from $11.2 million in
1999.
Liquidity and Capital Resources
Net cash provided by operating activities was $35.3 million and $25.8
million for the six months ended June 30, 2000 and 1999, respectively. The
increase in net cash from operating activities of $9.5 million was due primarily
to the increase in net income of $2.1 million and improved cash flow management
of working capital.
Net cash used for investing activities was $11.3 million and $17.3 million
for the six months ended June 30, 2000 and 1999, respectively. The decrease in
cash used for investing activities of $6.0 million was primarily the result of
the acquisition of Delta in the first quarter of 1999. The acquisition of Delta
was financed with funds from the Company's $425.0 million credit agreement.
Net cash used for financing activities was $19.3 and $6.1 million for the
six months ended June 30, 2000 and 1999, respectively. The increase in cash used
for financing activities of $13.2 was primarily the result of the acquisition of
Delta in the first quarter of 1999. The acquisition of Delta was financed with
funds from the Company's $425.0 million credit agreement.
The Company has a $425.0 million credit agreement (of which $329.5 and
$346.9 million was outstanding at June 30, 2000 and December 31, 1999,
respectively) with a bank group. The credit agreement, as amended on May 25,
2000, has the following components: a $100.0 million revolving facility (of
which $55.1 million is currently available) including a $5,000 swing line
facility, 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. The revolving facility permits the Company to borrow up to
half its borrowing in specified foreign currencies. Interest is payable
quarterly at either (i) the prime rate plus a margin of .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 $5,000 swing line facility
expires on December 31, 2003. Interest is payable monthly at an overnight money
market borrowing rate. The $175.0 million 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 four interest rate swap agreements with a
total notional amount of $271.6 million. These interest rate swap agreements
will all expire by December 31, 2000. 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.
10
<PAGE>
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 they are not significantly
exposed to adverse economic conditions.
Recently Issued Accounting Standards
The Company is required to adopt Statement of Financial Accounting
Standard No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities" (as amended by SFAS 137) for its fiscal year ending 2001. SFAS 133
establishes new accounting and reporting standards for derivatives and hedging
activities. The Company does not expect the adoption of SFAS 133 to
significantly affect the financial statements.
Effective January 1, 2000 the Company adopted Emerging Issues Task Force
Issue No. 99-5 (EITF 99-5), "Accounting for Pre-Production Costs Related to
Long-Term Supply Arrangements." EITF 99-5 establishes new accounting rules for
costs related to the design and development of products and for costs incurred
to develop molds, dies and other tools to be used to produce products that will
be sold under long-term supply agreements. The Company elected to adopt the
requirements of EITF 99-5 on a prospective basis, as permitted. In accordance
with the criteria set forth in EITF 99-5, the Company is now required to expense
as incurred certain costs that were previously capitalized. The adoption of EITF
99-5 did not have a significant impact on the Company's financial statements
during the three and six months ended June 30, 2000; however, the impact could
be significant in future periods.
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. These agreements are in place through December 31,
2000. 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 significant. The Company does not
expect the effects of these risks to be significant based on current operating
and economic conditions in the countries and markets in which it operates.
11
<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
---------------------------------------------------------------
(a) The Annual Meeting of Shareholders of Stoneridge, Inc. was held on
May 8, 2000.
(b) The following matter was submitted to a vote at the meeting:
(1) The election of the following nominees as directors of the Company.
The vote with respect to each nominee was as follows:
<TABLE>
<CAPTION>
Nominee For Withheld
------------------ ---------- --------
<S> <C> <C>
D.M. Draime 20,085,461 53,862
Cloyd J. Abruzzo 20,085,461 53,862
Avery S. Cohen 20,083,761 55,562
Richard E. Cheney 20,083,261 56,062
Sheldon J. Epstein 18,629,435 1,509,888
C.J. Hire 19,898,861 240,462
Richard G. LeFauve 20,083,761 55,562
Earl L. Linehan 20,082,661 56,662
</TABLE>
No other matters were voted on at the Annual Meeting of Shareholders or
otherwise during the quarter.
ITEM 5. OTHER INFORMATION
-----------------------------
None.
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------------------
(a) Exhibits
10.1 Amendment No. 3 dated as of May 25, 2000 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 six months ended June 30, 2000
(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: August 11, 2000 /s/ Cloyd J. Abruzzo
-------------------------------------
Cloyd J. Abruzzo
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 2000 /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
-------- -------
10.1 Amendment No. 3 dated as of May 25, 2000 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 six months ended June 30, 2000, filed
herewith.
15
