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Stoneridge Reports Second-Quarter 2014 Results

Companies mentioned in this article: Stoneridge, Inc.

WARREN, Ohio, Aug. 11, 2014 /PRNewswire/ --

    --  Continuing Positive Performance by Control Devices and Electronics; PST
        Performance Negatively Impacted by Weak Brazilian Economy
    --  Company Repositioned to Higher Value Added Products With the Completion
        of the Wiring Transaction on August 1, 2014
    --  Wiring Transaction Proceeds of $71.4 Million Expected to be Used to
        Deleverage the Company; Called 10% of 9.5% Senior Notes Outstanding
    --  Due to the Deteriorating Economic Conditions in Brazil, Company Records
        Non-Cash Goodwill Impairment Charge of $29.3 Million or $0.85 per Share

Stoneridge, Inc. (NYSE: SRI) today announced financial results for the second quarter ended June 30, 2014.

Second-quarter 2014 net sales were $162.1 million, a decrease of $7.7 million, or 4.6%, compared with $169.8 million for the second quarter of 2013. The decrease in the current quarter's net sales was due to decreased sales in the PST segment, which were partially offset by increased sales to European commercial vehicle customers in the Company's Electronics business segment and increased sales to North American automotive customers in the Company's Control Devices segment.

The Company's Control Devices segment recorded an increase in sales of $2.0 million, or 2.7%, and the Electronics segment recorded a $4.1 million, or 8.4%, increase compared with the second quarter of 2013. The increases reflect continued strength in these markets. These increases were offset by lower sales from the Company's PST business segment, which experienced a decrease of $13.8 million, or 29.5%, compared with the second quarter of 2013, caused by worsening economic conditions in Brazil and Argentina.

The second quarter 2014 net loss from continuing operations of $(0.79) per diluted share included a $29.3 million, or $0.85 per diluted share, non-cash goodwill impairment charge for PST. Excluding the PST goodwill impairment charge the Company would have recorded net income from continuing operations of $1.6 million, or $0.06 per share. In the second quarter of 2013 the Company had net income of $5.8 million, or $0.21 per diluted share. The decrease in net income was primarily due to lower sales by PST across all of its product lines sold in Brazil, the overall Brazilian economy which grew less than 2% GDP in the second quarter, a significant slowdown in the automotive market and mass merchandisers/dealers who experienced a significant drop-off in consumer spending in the second quarter.

As of June 30, 2014, Stoneridge's consolidated cash position was $45.8 million, a decrease of $17.1 million from December 31, 2013. The change in the cash balance was primarily due to increases in the Wiring business working capital of $6.8 million which occurred in the first quarter and higher inventories at PST from lower-than-expected sales.

John Corey, President and Chief Executive Officer, commented, "Our Electronics and Control Devices segments continued to perform well, though PST's sales were lower than we were expecting as the Brazilian economy has weakened further which resulted in consumer uncertainty. Our PST management team continues to execute additional aggressive cost reduction programs to reduce headcount, lower selling and administrative expenses, reduce overhead costs and source components from Asia directly from design houses to lower raw material costs and partially offset some of the impact from the economic slowdown."

Corey added, "We continue to reposition the Company with the completion of the Wiring transaction on August 1, 2014. Using proceeds from this transaction, we have begun the process to de-lever the Company by calling 10% of our Senior Secured Notes, or $17.5 million in principal, on August 1."

Corey concluded, "Though the Brazilian economy continued to deteriorate in the second quarter of 2014, PST actually performed better at the gross margin line in the second quarter through improved labor efficiency and better mix. We expect the cost reductions discussed previously, as well as lower debt balances, will better position us to deliver the results in line with our previous guidance. With a modest second-half improvement that we are expecting in the Brazilian market, we anticipate reaching our full-year 2014 guidance for earnings per share from continuing operations of $0.55-$0.75 per share. This guidance excludes the goodwill impairment charge and any non-recurring charges for deferred financing fees for the refinancing initiative we expect to accomplish early in the fourth quarter. Our estimate for continuing operations also includes lower expected interest expense from lower debt balances and interest rates estimated to be $0.10 per share."

Conference Call on the Web
A live Internet broadcast of Stoneridge's conference call regarding 2014 second-quarter results can be accessed at 10 a.m. Eastern time on Monday, August 11, 2014, at www.stoneridge.com, which will also offer a webcast replay.

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

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

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    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (Unaudited)


                                                                           Three months ended          Six months ended

                                                                                     June 30,                  June 30,

    (in thousands, except per share data)                                   2014                  2013             2014     2013
    ------------------------------------                                    ----                  ----             ----     ----



    Net sales                                                           $162,099              $169,833         $323,430 $328,695


    Costs and expenses:

      Cost of goods sold                                                 113,814               115,530          227,007  223,112

      Selling, general and administrative                                 42,206                42,551           83,910   85,340

      Goodwill impairment                                                 29,300                     -          29,300        -
      -------------------                                                 ------                   ---          ------      ---


    Operating income (loss)                                             (23,221)               11,752         (16,787)  20,243


      Interest expense, net                                                5,072                 4,504           10,001    8,954

      Equity in earnings of investee                                       (144)                 (96)           (382)   (297)

      Other expense, net                                                     330                   156            2,246      539
      ------------------                                                     ---                   ---            -----      ---


    Income (loss) before income taxes from continuing operations        (28,479)                7,188         (28,652)  11,047


    Provision for income taxes from continuing operations                     90                   775              385    1,466
    -----------------------------------------------------                    ---                   ---              ---    -----


    Income (loss) from continuing operations                            (28,569)                6,413         (29,037)   9,581
    ----------------------------------------                             -------                 -----          -------    -----


    Discontinued operations:

      Income from discontinued operations, net of tax                        594                  (22)           1,647    1,093

      Loss of disposal, net of tax                                       (1,138)                    -         (1,233)       -
      ----------------------------                                        ------                   ---          ------      ---

    Income (loss) from discontinued operations                             (544)                 (22)             414    1,093
    ------------------------------------------                              ----                   ---              ---    -----


    Net income (loss)                                                   (29,113)                6,391         (28,623)  10,674


    Net income (loss) attributable to noncontrolling interest            (7,221)                  634          (8,199)     794
    ---------------------------------------------------------             ------                   ---           ------      ---


    Net income (loss) attributable to Stoneridge, Inc.                 $(21,892)               $5,757        $(20,424)  $9,880
    --------------------------------------------------                  --------                ------         --------   ------


    Earnings (loss) per share from continuing operations attributable

    to Stoneridge, Inc.:

      Basic                                                              $(0.79)                $0.22          $(0.78)   $0.33
      -----                                                               ------                 -----           ------    -----

      Diluted                                                            $(0.79)                $0.21          $(0.78)   $0.32
      -------                                                             ------                 -----           ------    -----


    Earnings (loss) per share attributable to discontinued operations:

      Basic                                                              $(0.02)                $0.00            $0.02    $0.04
      -----                                                               ------                 -----            -----    -----

      Diluted                                                            $(0.02)                $0.00            $0.02    $0.04
      -------                                                             ------                 -----            -----    -----


    Earnings (loss) per share attributable to Stoneridge, Inc.:

      Basic                                                              $(0.81)                $0.22          $(0.76)   $0.37
      -----                                                               ------                 -----           ------    -----

      Diluted                                                            $(0.81)                $0.21          $(0.76)   $0.36
      -------                                                             ------                 -----           ------    -----


    Weighted-average shares outstanding:

      Basic                                                               26,934                26,692           26,894   26,649
      -----                                                               ------                ------           ------   ------

      Diluted                                                             26,934                27,348           26,894   27,358
      -------                                                             ------                ------           ------   ------


    CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                                                June 30, December 31,

    (in thousands)                                                                                  2014          2013
    -------------                                                                                   ----          ----

                                                                                             (Unaudited)

    ASSETS


    Current assets:

      Cash and cash equivalents                                                                  $45,757       $62,825

      Accounts receivable, less reserves of $2,155 and $2,625, respectively                      102,892       102,449

      Inventories, net                                                                            97,126        79,528

      Prepaid expenses and other current assets                                                   32,572        27,831

      Current assets of discontinued operations                                                  106,347        96,969
      -----------------------------------------                                                  -------        ------

    Total current assets                                                                         384,694       369,602
    --------------------                                                                         -------       -------


    Long-term assets:

      Property, plant and equipment, net                                                          89,060        86,323

      Other assets

     Intangible assets, net                                                                       70,845        68,498

     Goodwill                                                                                     28,651        54,348

     Investments and other long-term assets, net                                                  10,358         9,551
     -------------------------------------------                                                  ------         -----

    Total long-term assets                                                                       198,914       218,720
    ----------------------                                                                       -------       -------

    Total assets                                                                                $583,608      $588,322
    ------------                                                                                --------      --------


    LIABILITIES AND SHAREHOLDERS' EQUITY


    Current liabilities:

      Current portion of debt                                                                    $22,213       $12,187

      Accounts payable                                                                            63,834        57,471

      Accrued expenses and other current liabilities                                              48,563        47,310

      Current liabilities of discontinued operations                                              33,084        36,754
      ----------------------------------------------                                              ------        ------

    Total current liabilities                                                                    167,694       153,722
    -------------------------                                                                    -------       -------


    Long-term liabilities:

      Long-term debt, net                                                                        182,889       185,045

      Deferred income taxes                                                                       58,180        57,026

      Other long-term liabilities                                                                  4,495         3,995
      ---------------------------                                                                  -----         -----

    Total long-term liabilities                                                                  245,564       246,066
    ---------------------------                                                                  -------       -------


    Shareholders' equity:

      Preferred Shares, without par value, authorized 5,000 shares, none issued                        -            -

      Common Shares, without par value, authorized 60,000 shares, issued 28,851 and 28,803

     shares and outstanding 28,244 and 28,483 shares at June 30, 2014 and December 31, 2013,

     respectively, with no stated value                                                                -            -

      Additional paid-in capital                                                                 190,049       187,742

      Common Shares held in treasury, 607 and 320 shares at June 30, 2014 and

      December 31, 2013, respectively, at cost                                                   (1,183)        (519)

      Accumulated deficit                                                                       (28,195)      (7,771)

      Accumulated other comprehensive loss                                                      (23,999)     (30,458)
      ------------------------------------                                                       -------       -------

    Total Stoneridge Inc. shareholders' equity                                                   136,672       148,994

      Noncontrolling interest                                                                     33,678        39,540
      -----------------------                                                                     ------        ------

    Total shareholders' equity                                                                   170,350       188,534
    --------------------------                                                                   -------       -------

    Total liabilities and shareholders' equity                                                  $583,608      $588,322
    ------------------------------------------                                                  --------      --------


     CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

     (Unaudited)


                                                             Three months ended Six months ended

                                                                       June 30,         June 30,

     (in thousands)                                                        2014              2013        2014        2013
     -------------                                                         ----              ----        ----        ----


     Net income (loss)                                                $(29,113)           $6,391   $(28,623)    $10,674
     ----------------                                                  --------            ------    --------     -------

     Other comprehensive income (loss), net of tax:

       Foreign currency translation adjustments                           2,186          (14,359)      6,364    (12,114)

       Unrealized gain (loss) on derivatives                                238           (2,937)         95     (2,678)
       -------------------------------------                                ---            ------         ---      ------

     Other comprehensive income (loss), net of tax                        2,424          (17,296)      6,459    (14,792)
     ---------------------------------------------                        -----           -------       -----     -------

     Consolidated comprehensive income (loss)                          (26,689)         (10,905)   (22,164)    (4,118)

       Income (loss) attributable to noncontrolling interest            (7,221)              634     (8,199)        794
       -----------------------------------------------------             ------               ---      ------         ---


     Comprehensive loss attributable to Stoneridge, Inc.              $(19,468)        $(11,539)  $(13,965)   $(4,912)
     ---------------------------------------------------               --------          --------    --------     -------


    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    (Unaudited)


    Six months ended June 30 (in thousands)              2014      2013
    --------------------------------------               ----      ----


    OPERATING ACTIVITIES:

    Net cash provided by (used for) operating
     activities                                      $(7,059)   $3,243
    -----------------------------------------         -------    ------


    INVESTING ACTIVITIES:

    Capital expenditures                             (12,605) (10,701)

    Proceeds from sale of fixed assets                     73        83

    Business acquisitions                             (1,022)        -

    Net cash used for investing activities           (13,554) (10,618)
    --------------------------------------            -------   -------


    FINANCING ACTIVITIES:

    Revolving credit facility payments                      -  (1,160)

    Proceeds from issuance of other debt               13,067    19,234

    Repayments of other debt                          (7,465) (16,953)

    Noncontrolling interest shareholder distribution  (1,083)        -

    Repurchase of Common Shares to satisfy employee
     tax withholding                                    (664)    (670)
    -----------------------------------------------      ----      ----

    Net cash provided by financing activities           3,855       451
    ----------------------------------------            -----       ---


    Effect of exchange rate changes on cash and cash
     equivalents                                        (310)    (608)
    ------------------------------------------------     ----      ----


    Net change in cash and cash equivalents          (17,068)    2,169


    Cash and cash equivalents at beginning of period   62,825    44,555
    ----------------------------------------           ------    ------


    Cash and cash equivalents at end of period        $45,757   $46,724
    ----------------------------------------          -------   -------


    Supplemental disclosure of non-cash financing
     activities:

    Change in fair value of interest rate swap           $106  $(1,394)
    ----------------------------------------             ----   -------

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SOURCE Stoneridge, Inc.