Stoneridge Reports Strong Second-Quarter 2015 Results

Jul 30, 2015, 08:54 ET from Stoneridge Inc.

WARREN, Ohio, July 30, 2015 /PRNewswire/ -- 

  • EPS from Continuing Operations of $0.25 Significantly Improved Compared with Adjusted Earnings Per Share of $0.06 in the Second Quarter of 2014
  • Continued Earnings Performance in 2015 Post the Sale of Wiring Business in 2014
  • Debt Refinancing Reduces Interest Expense and Strengthens Balance Sheet
  • Electronics and PST Sales and Earnings Negatively Affected by Foreign Currency Movements

Stoneridge, Inc. (NYSE: SRI) today announced financial results for the second quarter ended June 30, 2015.

Second-quarter 2015 net sales were $165.3 million, an increase of $3.2 million, or 2.0%, compared with $162.1 million for the second quarter of 2014.

The Company's Control Devices segment sales increased by $8.0 million, or 10.4%, and the Electronics segment sales increased by $5.1 million, or 9.7%, while the PST segment sales decreased by $9.9 million, or 30.1%, compared with the second quarter of 2014.  The sales increases in the Control Devices and Electronics segments reflect continued strength in the markets the Company serves.  Electronics sales in the second quarter of 2015 included $6.8 million of post-disposition sales to the Company's former Wiring business, which it sold in 2014 to Motherson Sumi Systems Limited ("Motherson").  Prior to the disposition, these sales were accounted for as intercompany transactions and eliminated in consolidation.  Electronics sales were negatively affected during the quarter by approximately $8.7 million as a result of foreign currency translation.  Excluding sales to Motherson and adjusting for constant second-quarter 2014 foreign exchange rates, Electronics sales have risen 13.3%. (See Exhibit 1 for reconciliation of this non-GAAP financial measure.) Including Motherson sales and the impact of unadjusted foreign exchange rates, Electronics segment sales increased by 9.7%. 

The Company's PST business segment experienced a sales decrease of $9.9 million, or 30.1%, compared with the second quarter of 2014, primarily due to unfavorable foreign currency exchange translation.  The Brazilian Real depreciated 37.7% to the U.S. dollar, quarter-to-quarter, which reduced U.S. dollar reported sales for PST by approximately 26.3%, or $8.7 million.  PST sales were also adversely affected by the continued deterioration of economic conditions in Brazil.  On a local currency basis, PST sales decreased by 3.8%.

The earnings per share from continuing operations attributable to Stoneridge, Inc. was $0.25 for the second  quarter of 2015 compared with adjusted earnings per share of $0.06 in the second quarter of 2014. (See Exhibit 2 for a reconciliation of this non-GAAP financial measure.)  The second-quarter 2014 net loss from continuing operations attributable to Stoneridge, Inc. of ($21.3) million, or ($0.79) per diluted share, included a non-cash expense of $29.3 million, or $0.85 per diluted share, for a non-cash goodwill impairment charge for the PST business.

Earnings were favorably affected by a lower effective tax rate compared with the second quarter of 2014 due to a higher mix of U.S. earnings, primarily caused by lower interest expense, which does not attract U.S. tax expense because of the utilization of a tax loss carry forward.

As of June 30, 2015, Stoneridge's consolidated cash position was $22.9 million, a decrease of $20.2 million from December 31, 2014.  Cash decreased due primarily to capital expenditures to facilitate new business programs, seasonal working capital increases and repayment of debt in Brazil.  Stoneridge's Debt to Adjusted EBITDA ratio improved to 2.5x compared with 3.3x in the second quarter of 2014. (See Exhibit 3 for a reconciliation of this non-GAAP financial measure.)

Jon DeGaynor, President and Chief Executive Officer, commented, "Our Control Devices and Electronics segments continued to perform well in the second quarter.  Our Control Devices business was able to capitalize on continued strong North American passenger car production.  Our Electronics business also nearly maintained its performance despite significant foreign exchange headwinds. PST's sales on a local currency basis performed below our expectations for this year and were below prior year by 3.8%.  While both our Electronics business and PST continue to be affected by adverse foreign exchange movements, PST was able to maintain its gross profit percentage compared to prior year through a more favorable sales mix and cost reduction initiatives. This is a significant accomplishment in the face of Brazil's severely unfavorable economic conditions."

DeGaynor concluded, "During my first four months with Stoneridge, I have visited every business unit at least once and initiated a series of actions in conjunction with the senior leadership team to identify new opportunities where we can improve profitability, cash flow and return on invested capital. We will pursue these opportunities without compromising flawless execution of our organic growth plans, and we are continuing to seek new growth opportunities like the recent announcement that we made regarding our exciting mirror replacement technology." 

Conference Call on the Web A live Internet broadcast of Stoneridge's conference call regarding 2015 second-quarter results can be accessed at 10 a.m. Eastern time on Thursday, July 30, 2015, 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 automotive, commercial vehicle, motorcycle, agricultural 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 automotive, commercial vehicle, 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.

 

Exhibit 1

Stoneridge, Inc.

Reconciliation of Electronics Segment Sales to Adjusted Electronics Segment Sales

Three months ended June 30, 2015 and 2014

(Unaudited)

Increase /

Percent

2015

2014

(Decrease)

Increase

Electronics Segment Sales As Reported

$    57,895

$    52,766

$       5,129

9.7%

Plus: Constant Foreign Currency Translation Adjustment

8,711

-

8,711

Less: Post-disposition Sales to Wiring Business Acquired 

by Motherson

(6,845)

-

(6,845)

Adjusted Electronics Segment Sales

$    59,761

$    52,766

$       6,995

13.3%

 

 

Exhibit 2

Stoneridge, Inc.

Reconciliation of Earnings (Loss) and Earnings (Loss) Per Diluted Share to Adjusted Earnings and Earnings Per Share

Three months ended June 30, 2015 and 2014

(Unaudited)

2015

2014

2015

2014

Income (Loss) and Earnings (Loss) Per Diluted Share from 

Continuing Operations Attributable to Stoneridge, Inc.

$          6,924

$        (21,348)

$    0.25

$  (0.79)

Unusual Items - PST Goodwill Impairment

PST Goodwill Impairment

-

29,300

-

1.09

PST Goodwill Impairment Attributable to Noncontrolling Interest

-

(6,436)

-

(0.24)

     Net PST Goodwill Impairment Attributable to Stoneridge, Inc.

$            -

$          22,864

$       -

$    0.85

Adjusted Income and Earnings Per Diluted Share from 

Continuing Operations Attributable to Stoneridge, Inc.

$          6,924

$            1,516

$    0.25

$    0.06

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three months ended

Six months ended

June 30,

June 30,

(in thousands, except per share data)

2015

2014

2015

2014

Net sales

$

165,289

$

162,099

$

328,114

$

323,430

Costs and expenses:

Cost of goods sold

119,343

113,814

238,520

227,007

Selling, general and administrative

28,482

31,617

59,224

62,383

Design and development

10,049

10,589

19,829

21,527

Goodwill impairment

-

29,300

-

29,300

Operating income (loss)

7,415

(23,221)

10,541

(16,787)

Interest expense, net

1,658

5,072

2,936

10,001

Equity in earnings of investee

(143)

(144)

(332)

(382)

Other (income) expense, net

(47)

330

(260)

2,246

Income (loss) before income taxes from continuing operations

5,947

(28,479)

8,197

(28,652)

Provision (benefit) for income taxes from continuing operations

(381)

90

(234)

385

Income (loss) from continuing operations

6,328

(28,569)

8,431

(29,037)

Discontinued operations:

   Income from discontinued operations, net of tax

-

594

-

1,647

   Gain (loss) on disposal, net of tax

55

(1,138)

(113)

(1,233)

Income (loss) from discontinued operations

55

(544)

(113)

414

Net income (loss)

6,383

(29,113)

8,318

(28,623)

Net loss attributable to noncontrolling interest

(596)

(7,221)

(1,005)

(8,199)

Net income (loss) attributable to Stoneridge, Inc.

$

6,979

$

(21,892)

$

9,323

$

(20,424)

Earnings (loss) per share from continuing operations

attributable to Stoneridge, Inc.:

   Basic

$

0.26

$

(0.79)

$

0.35

$

(0.78)

   Diluted

$

0.25

$

(0.79)

$

0.34

$

(0.78)

Earnings (loss) per share attributable to discontinued operations:

   Basic

$

0.00

$

(0.02)

$

0.00

$

0.02

   Diluted

$

0.00

$

(0.02)

$

0.00

$

0.02

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

   Basic

$

0.26

$

(0.81)

$

0.35

$

(0.76)

   Diluted

$

0.25

$

(0.81)

$

0.34

$

(0.76)

Weighted-average shares outstanding:

   Basic

27,308

26,934

27,227

26,894

   Diluted

27,945

26,934

27,863

26,894

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30,

December 31,

(in thousands)

2015

2014

(Unaudited)

ASSETS

Current assets:

   Cash and cash equivalents

$

22,860

$

43,021

   Accounts receivable, less reserves of $1,464 and $2,017, respectively

114,456

105,102

   Inventories, net

82,117

71,253

   Prepaid expenses and other current assets

26,924

26,135

Total current assets

246,357

245,511

Long-term assets:

   Property, plant and equipment, net

86,930

85,311

   Other assets:

      Intangible assets, net

46,697

56,637

      Goodwill

1,003

1,078

      Investments and other long-term assets, net

10,511

10,214

Total long-term assets

145,141

153,240

Total assets

$

391,498

$

398,751

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

   Current portion of debt

$

20,618

$

19,655

   Accounts payable

66,682

58,593

   Accrued expenses and other current liabilities

39,832

42,066

Total current liabilities

127,132

120,314

Long-term liabilities:

   Revolving credit facility

100,000

100,000

   Long-term debt, net

7,014

10,651

   Deferred income taxes

45,157

50,006

   Other long-term liabilities

3,741

3,974

Total long-term liabilities

155,912

164,631

Shareholders' equity:

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

-

-

   Common Shares, without par value, 60,000 shares authorized,

       28,900 and 28,853 shares issued and 27,913 and 28,221 shares outstanding at          

       June 30, 2015 and December 31, 2014, respectively, with no stated value

-

-

   Additional paid-in capital

197,042

192,892

   Common Shares held in treasury, 987 and 632 shares at June 30, 2015

      and December 31, 2014, respectively, at cost

(4,134)

(1,284)

   Accumulated deficit

(45,556)

(54,879)

   Accumulated other comprehensive loss

(57,251)

(45,473)

Total Stoneridge Inc. shareholders' equity

90,101

91,256

   Noncontrolling interest

18,353

22,550

Total shareholders' equity

108,454

113,806

Total liabilities and shareholders' equity

$

391,498

$

398,751

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

Three months ended

Six months ended

June 30,

June 30,

(in thousands)

2015

2014

2015

2014

Net income (loss)

$

6,383

$

(29,113)

$

8,318

$

(28,623)

Less: Loss attributable to noncontrolling interest

(596)

(7,221)

(1,005)

(8,199)

Net income (loss) attributable to Stoneridge, Inc.

6,979

(21,892)

9,323

(20,424)

Other comprehensive income (loss), net of tax attributable to

Stoneridge, Inc.:

   Foreign currency translation

3,022

2,186

(11,940)

6,364

   Benefit plan liability adjustment

-

-

(45)

-

   Unrealized gain (loss) on derivatives

(728)

238

207

95

Other comprehensive income (loss), net of tax attributable to

Stoneridge, Inc.

2,294

2,424

(11,778)

6,459

Comprehensive income (loss) attributable to Stoneridge, Inc.

$

9,273

$

(19,468)

$

(2,455)

$

(13,965)

The Company has combined comprehensive income (loss) from continuing operations and comprehensive income (loss) from discontinued operations herein. 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six months ended June 30 (in thousands)

2015

2014

OPERATING ACTIVITIES:

Net cash proved by (used for) operating activities

$     1,632

$     (7,059)

INVESTING ACTIVITIES:

Capital expenditures

(15,229)

(12,605)

Proceeds from sale of fixed assets

36

73

Payment for working capital adjustment related to Wiring sale

(1,230)

-

Business acquisition

(469)

(1,022)

Net cash used for investing activities

(16,892)

(13,554)

FINANCING ACTIVITIES:

Proceeds from issuance of debt

12,088

13,067

Repayments of debt

(14,206)

(7,465)

Noncontrolling interest shareholder distribution

-

(1,083)

Other financing costs

(49)

-

Repurchase of Common Shares to satisfy employee tax withholding

(1,181)

(664)

Net cash (used for) provided by financing activities

(3,348)

3,855

Effect of exchange rate changes on cash and cash equivalents

(1,553)

(310)

Net change in cash and cash equivalents

(20,161)

(17,068)

Cash and cash equivalents at beginning of period

43,021

62,825

Cash and cash equivalents at end of period

$   22,860

$     45,757

The Company has combined cash flows from continuing operations and cash flows from discontinued operations within the operating, investing and financing categories.  

 

 

Exhibit 3

Stoneridge, Inc.

Reconciliation of Net Loss to Adjusted EBITDA from Continuing Operations

Twelve months ended June 30, 2015 and 2014

(Unaudited)

2015

2014

Net loss

$    (23,650)

$     (22,789)

Interest expense, net

9,814

19,143

Equity in earnings of investees

(764)

(562)

Other income, net

(1,942)

3,165

Provision (benefit) for income taxes

(2,474)

1,716

Depreciation and amortization

25,329

27,872

Share-based compensation impact of CEO Retirement

2,225

-

Discontinued operations

9,913

4,700

Loss on extinguishment of debt

10,607

-

Restructuring charges

-

-

PST purchase accounting and goodwill impairment

21,553

28,972

Adjusted EBITDA from continuing operations

$      50,611

$       62,217

Total Debt

$    127,632

$     205,103

Total Debt / Adjusted EBITDA from continuing operations

$            2.5

$             3.3

 

 

SOURCE Stoneridge Inc.



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http://www.stoneridge.com