STONERIDGE INC
For the period ended Dec 31, 2024. Filed Mar 3, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 3, 2025
SRI$4.99+4.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-01.
0001043337-24-000007
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-03.
0001043337-25-000012
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 139 previous paragraphs and 115 current paragraphs.
38 unchanged; 40 reworded; 36 added; 53 removed; 8 previous and 1 current paragraphs rearranged.
Tables are not compared: 13 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (36)
Current report
Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of operations, financial condition, and cash flows of the Company. MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s consolidated financial statements and related notes appearing in Item 8 of this Form 10-K “Financial Statements and Supplementary Data”. For discussion related to changes in financial condition and the results of operations for fiscal year 2023-related items, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for fiscal year 2023, which was filed with the Securities and Exchange Commission on March 1, 2024.
Current report
We are a global supplier of safe and efficient electronics systems and technologies. Our systems and products power vehicle intelligence, while enabling safety and security for global commercial, automotive, off-highway and agricultural vehicle markets.
Current report
During 2024, we were adversely affected by lower volumes from lower customer demand in most of our served markets, which was offset by sales in our Electronics segment related to the launches of a European OEM MirrorEye program and out next generation tachograph. Lower sales levels adversely affected gross margin contribution, however we were able to mitigate a portion of the adverse impact through material cost improvement and structural cost reduction actions. We have continued to optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend. Further we significantly increased cash provided by operating activities by reducing working capital levels, specifically lowering inventory.
Current report
Our Control Devices segment net sales decreased by 14.5% primarily as a result of decreases in our North American automotive market, including the impact of expected end of life production for certain programs as well as decreases in our China commercial vehicle market. These decreases were offset by increases in our off-highway, North American commercial vehicle and China automotive markets. Segment gross margin decreased due to lower contribution from lower sales, however, gross margin as a percentage of sales remained consistent with the prior year. Segment operating income decreased from lower contribution from lower sales levels and higher selling, general and administrative expenses ("SG&A") due to a 2023 gain on sale of fixed assets offset by lower D&D from higher customer reimbursements.
Current report
Our Electronics segment net sales decreased by 1.8% primarilydue to the 2023 impact of lower customer recoveries of required electronic component spot buy purchases, a reduction in retroactive price increases, and lower sales in our agricultural, North American commercial vehicle and European off-highway vehicle markets from lower customer demand. Offsetting these decreases were higher sales volumes in our European commercial vehicle market, including sales related to the launches of a European OEM MirrorEye program and our next generation tachograph as well as our China commercial vehicle and North American off-highway vehicle markets. Segment gross margin as a percent of sales slightly improved due to material cost improvement actions and lower required electronic component spot buy purchases being offset by an increase in overhead costs including higher warranty related expense. Operating income for the segment decreased due to higher D&D as reduced product launch activity resulted in customer reimbursements decreasing more than spending.
Current report
Our Stoneridge Brazil segment net sales decreased by 13.2% primarily as a result of unfavorable foreign currency translation and lower sales of our OEM products and monitoring service fees and tracking devices. Segment gross margin decreased due to lower contribution from lower sales and adverse sales mix. Operating income decreased due lower sales and lower gross margin offset by lower SG&A because of a reduction in incentive compensation.
Current report
In 2024, SG&A expenses increased slightly compared to 2023 primarily due to higher self-insured medical costs, wages and legal fees as well as a 2023 gain on the sale of fixed assets being offset by lower business realignment costs and incentive compensation benefits as a result of Company performance.
Current report
D&D costs increased in 2024 because of lower launch activities and a shift to platform development resulting in lower customer reimbursements and capitalization of software development costs that were offset by lower consulting spend compared to 2023 for our Electronics and Control Devices segments. In addition, higher business realignment costs were incurred in our Electronics segment.
Current report
The tariffs on Mexico and China proposed on February 1, 2025 by the U.S. government, should they be implemented and sustained for an extended period of time, could have a significant adverse effect on the Company. Should the tariffs be implemented, we would implement mitigation actions to reduce the impact of tariffs including but not limited to passing any incremental costs to our customers.
Current report
Based on IHS Market production forecasts, the North American automotive market is expected to slightly decrease from approximately 15.4 million units in 2024 to 15.1 million units in 2025. We expect our Control Devices segment revenues to decrease as a result of the expected reduction in North American production volumes and the impact of end of life programs. In our Control Devices segment, we remain focused on drivetrain agnostic technologies to drive new business awards as the market continues to evolve. This strategy is highlighted by our recent new business award for a leak detection module product which provides further global opportunities primarily for hybrid vehicle applications, a market that we expect to continue to grow, and is also applicable to traditional powertrain vehicles. We continue to focus on material cost reduction and improved manufacturing performance in order to stabilize margin performance.
Current report
Based on IHS Market production forecasts, in 2025 the European commercial vehicle end market volumes are forecasted to increase 3.9% and North American commercial vehicle end market volumes are forecasted to decrease 3.3%. Over the long-term, we expect our Electronics’ segment sales to continue to outperform forecasted changes in production volumes due to strong demand for our existing products including our OEM MirrorEye programs in North America and Europe as well as our next generation tachograph in Europe. In addition, over the long-term we expect revenue growth and margin contribution from our off-highway products. We continue to focus on margin improvement through material cost reduction and product quality initiatives. We continue to invest in the development of advanced system capabilities that are complementary to our driver information solutions and vision systems such as integrated driver assistance technologies and an intelligent connected trailer system.
Current report
Our Control Devices segment net sales decreased $49.5 million primarily as a result of decreases in our North American automotive market of $52.9 million, including the impact of expected end of life production for certain programs as well as decreases in our China commercial vehicle market of $5.3 million. These decreases were offset by increases in our off-highway, North American commercial vehicle and China automotive markets of $3.7 million, $2.6 million and $2.3 million, respectively, as well as the favorable impact of negotiated price increases of $0.9 million. In addition, 2024 net sales were impacted by unfavorable foreign currency translation of $0.7 million compared to 2023.
Current report
Our Electronics segment net sales decreased $10.5 million primarily due to the 2023 impact of lower customer recoveries of required electronic component spot buy purchases of $14.4 million, a reduction in retroactive price increases of $2.3 million, and lower sales volumes in our agricultural, North American commercial vehicle and European off-highway vehicle markets of $1.8 million, $1.4 million and $1.3 million, respectively. Offsetting these decreases were higher sales volumes in our European commercial vehicle market of $6.2 million, including sales related to the launches of a European OEM MirrorEye program and our next generation tachograph and higher sales in our North American off-highway and China commercial vehicle markets of $2.0 million and $1.3 million, respectively. In addition, 2024 net sales were favorably impacted by foreign currency translation of $1.4 million compared to 2023.
Current report
Our Stoneridge Brazil segment net sales decreased $7.6 million primarily as a result of unfavorable foreign currency translation of $3.8 million and lower sales of our OEM products and monitoring service fees and tracking devices.
Current report
The decrease in net sales in Europe and Other was primarily due to the 2023 impact of lower customer recoveries of required electronic component spot buys of $11.7 million, and a reduction in retroactive price increases of $2.2 million and lower sales in our China commercial vehicle, European agricultural and European off-highway markets of $4.0 million, $1.4 million and $1.3 million, respectively. Offsetting these decreases were higher sales volumes in our European commercial vehicle market of $6.2 million, including sales related to the launches of a European OEM MirrorEye program and our next generation tachograph and our China automotive market of $2.3 million. 2024 net sales were favorably impacted by foreign currency translation of $0.7 million compared to 2023.
Current report
Our Control Devices segment gross margin decreased from lower contribution from lower sales levels.
Current report
Our Electronics segment gross margin slightly improved due to material cost improvement actions and lower required electronic component spot buy purchases being offset by an increase in overhead costs including higher warranty related expense.
Current report
Our Stoneridge Brazil segment gross margin decreased because of lower contribution from lower sales levels and adverse sales mix.
Current report
Selling, General and Administrative. SG&A expenses increased by $0.1 million compared to 2023 due to higher self-insured medical costs, wages and legal fees as well as a 2023 gain on the sale of fixed assets being offset by lower business realignment costs and incentive compensation benefits due to Company performance.
Current report
Design and Development. D&D costs increased by $1.1 million because of a reduction in launch activities and a shift in platform development resulting in lower customer reimbursements andcapitalization of software development costs that were offset by lower consulting spending compared to 2023 for our Electronics and Control Devices segments. In addition, higher business realignment costs were incurred in our Electronics segment.
Current report
Our Control Devices segment operating income decreased primarily as a result of lower contribution from lower sales levels and higher SG&A due to a 2023 gain on sale of fixed assets offset by lower D&D spending.
Current report
Our Electronics segment operating income decreased primarily due to higher D&D as reduced product launch activity resulted in customer reimbursements decreasing more than spending.
Current report
Our Stoneridge Brazil segment operating income decreased primarily as a result of lower contribution from lower sales levels and adverse sales mix offset by lower SG&A because of a reduction in incentive compensation due to Company performance.
Current report
Our unallocated corporate operating loss increased due to higher self-insured medical costs and wages offset by lower incentive compensation due to Company performance and business realignment costs.
Current report
Interest Expense, net. Interest expense, net increased by $1.4 million compared to 2023. The increase was the result of higher outstanding Credit Facility balances.
Current report
Cash provided by operating activities increased compared to 2023 primarily due to a reduction in working capital levels. Cash provided by receivables was favorable to 2023 as the result of lower sales levels while collection terms remained consistent. Cash provided by inventory improved from the prior year due to the ramp up of product launches occurring in the second half of 2023 and first half of 2024, lower production levels and the impact of our inventory reduction actions.
Current report
On February 26, 2025, the Company entered into Amendment No. 1 to the Fifth Amended and Restated Credit Agreement and Waiver (“Amendment No. 1”). Amendment No. 1 provides for certain covenant relief and restrictions during the “Covenant Relief Period” (the period ending on the date that the Company delivers a compliance certificate for the quarter ending December 31, 2025). During the Covenant Relief Period:
Current report
•the maximum leverage ratio of 3.50 was increased to 6.00 for the quarter ended March 31, 2025, 5.50 for the quarter ended June 30, 2025, 4.50 for the quarter ended September 30, 2025 and 3.50 for the quarter ended December 31, 2025;
Current report
•the minimum interest coverage ratio of 3.50 was waived for the quarter ended December 31, 2024 and was reduced to 2.00 for the quarters ended March 31 and June 30, 2025, and 2.50 and 3.50 for the quarter ended September 30, 2025 and December 31, 2025, respectively;
Current report
•the sale of significant assets (as defined) will require repayment in the amount of any net cash proceeds received and result in the reduction of the Credit Facility commitment, at the lesser of $100.0 million or the net cash proceeds;
Current report
Goodwill. We test goodwill, all of which relates to our Electronics segment, for impairment on at least an annual basis, or more frequently if a triggering event indicates that an impairment may exist. In qualitatively assessing impairment, the primary qualitative factors include, but are not limited to, the results of prior year fair value calculations, changes in our market capitalization, the reporting unit and overall financial performance, and macroeconomic and industry conditions. We consider the qualitative factors and weight of the evidence obtained to determine if it is more likely than not that a reporting unit’s fair value is less than the carrying amount. If not, no further goodwill impairment testing is performed. If it is more likely than not that a reporting unit’s fair value is less than its carrying amount, or if we elect not to perform a qualitative assessment of a reporting unit, we then perform a quantitative assessment.
Current report
For the quantitative assessment, we utilize the income approach, or a combination of, the income approach and market approach to estimate the fair value of the reporting unit. The income approach uses a discounted cash flow method and the market approach uses valuation multiples observed for the reporting unit’s guideline public companies. The determination of discounted cash flows are based on management’s estimates of revenue growth rates and earnings before interest, taxes, depreciation and amortization (“EBITDA”) margin, taking into consideration business and market conditions for the countries and markets in which the reporting unit operates. We calculate the discount rate based on a market-participant, risk-adjusted weighted average cost of capital, which considers industry specific rates of return on debt and equity capital for a target industry capital structure, adjusted for risks associated with business size, geography and other factors specific to the reporting unit. Our quantitative assessment is affected by the uncertainty of revenue growth rates and EBITDA margin, especially in the outer years of a forecast. Further, affecting our quantitative assessment are future changes in the discount rate, as a result of a change in economic conditions or otherwise, which could result in the carrying value of the reporting unit exceeding its respective fair value.
Current report
We performed our annual goodwill impairment analysis for our Electronics reporting unit at the beginning of the fourth quarter of 2024. Based on this analysis, we determined that the fair value of this reporting unit substantially exceeded its carrying value. We performed a sensitivity analysis for the significant assumptions used in the goodwill impairment testing analysis for the Electronics reporting unit. The sensitivities were calculated in isolation using the income approach and keeping all other assumptions constant. The cash flow sensitivities do not consider the offsetting impact of a lower discount rate assumption to reflect the reduced risk in estimated future cash flow growth used under the income approach or the related impacts on pricing multiples used under the market approach.
Current report
•A hypothetical increase in the discount rate of 100 basis points would not result in goodwill impairment; and
Current report
•A hypothetical decrease in EBITDA margin of 100 basis points for each year in the forecast period would not result in goodwill impairment.
Current report
In addition to our annual goodwill impairment analysis, we identified impairment triggering events during our fourth quarter 2024 interim evaluation, which was associated with a decrease in our publicly quoted share price and market capitalization. As such, we quantitatively assessed our Electronics reporting unit as of December 31, 2024, and we determined the fair value of the reporting unit substantially exceeded its carrying value and that no impairment of goodwill was needed.
Removed paragraphs (53)
Previous report
We are a global designer and manufacturer of highly engineered electrical and electronic systems, components and modules primarily for the automotive, commercial, off-highway and agricultural vehicle markets.
Previous report
During 2023, we benefited from increased volumes in both our North American and European commercial vehicle markets, compared to the prior year, due to improvements in end market demand and launches of previously awarded programs including launches for our MirrorEye camera monitor system and our SE5000 Smart 2 tachograph. We continued to benefit from both previously agreed pricing actions, as well as incremental actions taken within the year, with the majority of our customers, which offset a portion of the incremental material, supply chain and other input costs we incurred.
Previous report
Our Control Devices segment net sales decreased by 0.2% primarily due to a decrease in our North American automotive market, which was adversely impacted in the fourth quarter of 2023 by the UAW strike and a slower than expected penetration rate for electric vehicle platforms, as well as a decrease in our agricultural market. These decreases were offset by negotiated price increases and an increase in our China commercial vehicle and automotive markets. Segment gross margin as a percentage of sales decreased due to higher direct material costs from inflation and support costs for a troubled supplier. Segment operating income decreased due to lower gross margin and higher SG&A and D&D spending.
Previous report
Our Electronics segment net sales increased by 14.1% primarilydue to higher sales volumes in our European and North American commercial vehicle markets, including the launches of a next generation tachograph product for OEM and aftermarket applications in Europe and our first OEM MirrorEye program in North America, and the impact of negotiated price increases offset by lower required electronic component spot buy purchases. Segment gross margin as a percent of sales increased primarily due to higher contribution from higher sales levels, negotiated price increases, lower material costs including the favorable effect of foreign currency and lower required electronic component spot buy purchases offset by an increase in labor and overhead costs. Operating income for the segment increased primarily due to higher gross margin partially offset by higher SG&A and D&D spending, including support for new product launches and business realignment expense of $2.9 million focused on centralizing critical functions in order to effectively utilize global resources.
Previous report
Our Stoneridge Brazil segment net sales increased by 9.5% due to favorable foreign currency translation and higher sales of our OEM products offset by lower sales demand for our other product lines. Segment gross margin increased due to increased contribution margin from higher sales and favorable foreign currency fluctuations. Operating income increased due to higher gross margin offset by an increase in SG&A spending.
Previous report
In 2023, SG&A expenses increased compared to 2022 due to higher business realignment costs of $3.0 million, higher incentive compensation due to the achievement of performance targets, consulting and professional service fees and travel related costs.
Previous report
D&Dcosts increased in 2023 due to lower customer reimbursements as a result of a shift to platform development and higher costs related to product launch preparations offset by increased capitalized software development costs.
Previous report
Based on IHS Market production forecasts, the North American automotive market is expected to increase from 15.6 million units in 2023 to 15.8 million units in 2024 as this market continues to recover from the effects of prior supply chain disruptions, the impact of the UAW strike in the fourth quarter of 2024 and economic headwinds. In our Control Devices segment, we expect lower than previously anticipated growth rates for sales of products used in electric vehicle platforms due to reduced production expectations with some of our key customers. We continue to focus on improved manufacturing execution, supply chain strategy, material cost improvement actions and enterprise-wide cost improvement plans and will continue to react to changes in our end-markets as needed to maintain and improve our margins. During 2023, our Control Devices segment incurred $2.5 million of support costs for a troubled supplier. We expect these costs to moderate in the first half of 2024. We will continue to focus on growing our core product portfolio aligned with industry megatrends by investing in our actuation and system-level sensor products as we anticipate greater opportunities as powertrains become increasingly electrified and efficient.
Previous report
In 2024, our European and North American commercial vehicle end market volumes are forecasted to decrease 10.5% and 7.6%, respectively. We expect our Electronics’ segment sales to outperform forecasted changes in production volumes due to strong demand for our existing products and the ramp-up of recently launched programs, including our next generation tachograph product in Europe for both OEM and aftermarket applications and our first North American OEM MirrorEye program, as well as expected program launches, including our next OEM MirrorEye program launch in Europe in 2024. Recovery from customers related to spot buys of materials purchased by the Company on behalf of those customers increased net sales by$14.6 million and $58.4 million for 2023 and 2022, respectively. Spot buy material purchasing activity, which is recognized as revenue and material costs, was mostly passed through to customers and was driven by electronic component shortages. The Company expects spot buy activity to continue to decline as supply chains normalize and material availability improves.
Previous report
We expect higher interest expense in 2024 driven by higher outstanding balances on our Credit Facility.
Previous report
On November 2, 2021, the Company entered into a Share Purchase Agreement (the “SPA”) with Minda Corporation Limited (“Minda”), as the buyer, and MSIL. Pursuant to the SPA, the Company agreed to sell to Minda the Company’s minority interestin MSIL for approximately $21.5 million equivalent Indian Rupee which was payable in U.S. dollars at closing. On December 30, 2021, pursuant to the SPA, the Company closed the sale of MSIL to Minda for $21.6 million. The Company recognized net proceeds of $21.0 million and a gain, net of direct selling costs, of $1.8 million.
Previous report
On March 8, 2021, the Company entered into an Asset Purchase Agreement (the “APA”) by and among the Company, the Company’s wholly owned subsidiary, Stoneridge Electronics AS, as the Sellers, and Standard Motor Products, Inc. (“SMP”) and SMP Poland SP Z O.O., as the Buyers. Pursuant to the APA, the Company agreed to sell to the Buyers the Company’s assets located in Lexington, Ohio and Tallinn, Estonia related to the manufacturing of particulate matter sensor products and related service part operations (together, the “PM sensor business”). The Buyers did not acquire any of the Company’s locations or employees. The purchase price for the sale of the PM sensor business was $4.0 million (subject to a post-closing inventory adjustment, which was a payment to SMP of $1.1 million) plus the assumption of certain liabilities. The purchase price was allocated among PM sensor product lines, Gen 1 and Gen 2 as defined under the APA. The purchase price allocated to Gen 1 fixed assets and inventory and Gen 2 fixed assets was $3.2 million and $0.8 million, respectively. The sale of the Gen 2 assets occurred during November 2021 as the Company’s supply commitments to certain customers were completed in September 2021. The Company and SMP also entered into certain ancillary agreements, including a contract manufacturing agreement, a transitional services agreement, and a supply agreement, pursuant to which the Company provided and was compensated for certain manufacturing, transitional, administrative and support services to SMP on a short-term basis.
Previous report
On May 19, 2020, the Company committed to the strategic exit of its Control Devices particulate matter sensor product line (“PM Sensor Exit”). The costs for the PM Sensor Exit included employee severance and termination costs and other related costs including supplier settlements. Non-cash charges included impairment and accelerated depreciation of fixed assets associated with PM sensor production. We recognized $2.4 million of expense as a result of this initiative during the year ended December 31, 2021.
Previous report
Our Control Devices segment net sales decreased $0.5 million due to a decrease in our North American automotive market of $6.3 million, including the adverse impact of the UAW strike in the fourth quarter of 2023 and a slower than expected penetration rate for electric vehicle platforms, as well as a decrease in our agricultural market of $1.1 million. These decreases were offset by increases in our China commercial vehicle and automotive markets of $2.6 million and $2.2 million, respectively. In addition, net sales for the year ended December 31, 2023 were impacted by negotiated price increases of $5.4 million offset by an increase in unfavorable foreign currency translation of $2.5 million.
Previous report
Our Electronics segment net sales increased $71.4 million due to higher sales volumes in our European and North American commercial vehicle markets of $55.2 million and$52.4 million, respectively, including the launches of a next generation tachograph product in Europe for both OEM and aftermarket applications and our first OEM MirrorEye program in North America, and the impact of negotiated price increases of $7.5 million. These increases were offset by the impact of lower required electronic component spot buy purchases of $40.8 million compared to 2022. In addition, we experienced lower sales volumes in North American off-highway vehicle market of $3.5 million and unfavorable foreign currency translation of $3.2 million, mostly from euro and Swedish krona, compared to the prior year.
Previous report
Our Stoneridge Brazil segment net sales increased $5.0 million due to higher sales in our OEM product line and favorable foreign currency translation offset by lower sales demand for our other product lines.
Previous report
The increase in North American net sales was attributable to increased sales volume in our commercial vehicle market of $51.5 million and by negotiated price increases of $10.7 million. These increases were offset by lower sales volume in our North American automotive, off-highway and agricultural markets.
Previous report
The increase in net sales in South America was primarily due to higher sales in our OEM product line and favorable foreign currency translation offset by lower sales demand for our other product lines.
Previous report
The increase in net sales in Europe and Other was due toincreases in our European and China commercial vehicle marketsof $55.2 million and $4.5 million, respectively, China automotive of $2.2 million and negotiated price increases of $2.2 million. These increases were offset by lower required customer recoveries of electronic component spot buys of $39.7 million. In addition, we experienced unfavorable foreign currency translation of $5.7 million.
Previous report
Our Control Devices segment gross margin decreased primarily due to higher direct material costs associated with inflation and financial support for a troubled supplier as well as unfavorable sales mix.
Previous report
Our Electronics segment gross margin increased due to the contribution from higher sales levels, including negotiated price increases, and the reduction of the adverse effect of required electronic component spot buy purchases, net of customer recoveries, offset by higher labor and overhead costs including wages and warranty expense.
Previous report
Our Stoneridge Brazil segment gross margin increased primarily due to increased contribution from higher sales and favorable foreign currency fluctuations.
Previous report
Selling, General and Administrative. SG&A expenses increased by $10.7 million compared to 2022 due to higher business realignment costs of $3.0 million, higher incentive compensation due to achievement of performance targets, consulting and professional service fees and travel related costs. In addition, our Control Devices segment recognized 2022 favorable legal settlements offset by a 2023 gain on the sale of fixed assets of an idled sensor production line.
Previous report
Design and Development. D&D costs increased by $5.8 million due tolower customer reimbursements and higher costs related to product launch preparations offset by increases in capitalized software development costs for our Electronics segment. All other segments also incurred slightly higher spending attributable to product launch activities.
Previous report
Our Control Devices segment operating income decreased due to lower gross margin primarily resulting from higher material costs associated with inflation and troubled supplier support costs, unfavorable sales mix and a 2022 favorable legal settlement offset by a 2023 gain on disposal of fixed assets.
Previous report
Our Electronics segment operating income increased primarily due to higher contribution from higher sales and negotiated pricing and favorable foreign exchange fluctuations offset by higher labor and overhead costs as well as higher SG&A and D&D spending including business realignment costs.
Previous report
Our Stoneridge Brazil segment operating income increased due to contribution from higher sales levels offset by higher SG&A and D&D spending.
Previous report
Our unallocated corporate operating loss increased primarily from higher service related costs, business realignment costs associated with employee separation related costs of $0.9 million and higher incentive compensation due to achievement of performance targets.
Previous report
Interest Expense, net. Interest expense, net increased by $5.9 million compared to 2022 due to both higher interest rates and outstanding balances for our Credit Facility in addition to the write-off of $0.3 million of deferred financing fees as a result of entering into the Fifth Amended and Restated Credit Agreement.
Previous report
Our Control Devices segment net sales decreased $13.2 million due to lower sales volumes in our served markets and unfavorable foreign currency translation of $20.0 million and $2.3 million, respectively, which were offset by negotiated price increases of $9.1 million. Sales volumes decreased in our China commercial, North American commercial and China automotive markets of $5.8 million, $3.4 million and $2.3 million, respectively. European automotive and commercial vehicle markets decreased by $10.3 million and $2.4 million, respectively, due to our exit of the PM sensor business. Net sales for 2022 were favorably impacted by an increase in our North American automotive markets of $2.9 million compared to the prior year.
Previous report
Our Electronics segment net sales increased $147.2 million due to higher sales volumes in our European commercial, North American commercial, European off-highway vehicle and North American off-highway markets of $55.1 million, $33.8 million, $18.2 million and $6.0 million, respectively. In addition, 2022 net sales were favorably impacted by both customer pricing for recoveries of electronic component spot buy purchases and for negotiated price increases of $40.8 million and $23.0 million, respectively. These increases were offset by unfavorable euro and Swedish krona foreign currency translation compared to the prior year of $28.8 million.
Previous report
Our Stoneridge Brazil segment net sales decreased $4.5 million due to lower sales in most Stoneridge Brazil product lines of $7.8 million offset by favorable foreign currency translation of $2.6 million and higher sales of tracking devices and monitoring services fees of $0.7 million.
Previous report
The increase in net sales in Europe and Other was due to customer recoveries of semiconductor spot buy purchases and negotiated price increases of $40.1 million and $15.9 million, respectively and increases in our Electronics segment European commercial vehicle and European off-highway markets of $52.9 million and $18.2 million, respectively. This increase for Europe and Other was offset by decreases in our Control Devices European automotive and commercial vehicle markets of $10.4 million and $2.4 million, respectively, and China commercial vehicle and automotive markets of $5.8 million and $2.3 million, respectively. In addition, Europe and Other net sales decreased $31.1 million due to unfavorable foreign currency translation.
Previous report
Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to 2021 and our gross margin decreased to 19.4% in 2022 compared to 21.7% in 2021. Our material cost as a percentage of net sales increased by 4.8% to 61.8% in 2022 compared to 57.0% in 2021 primarily caused by costs associated with supply chain disruptions including spot purchases of electronic components and inflation. In 2022, cost of goods sold increased by $58.4 million, or 6.5% of net sales, due to semiconductor spot buy purchases that was offset by customer recoveries. The impact of these spot buy
Previous report
purchases reduced gross margin percent by 1.4%. Overhead as a percentage of net sales decreased by 1.9% to 14.2% for 2022 compared to 16.1% for 2021 primarily due to leverage of fixed costs from higher sales levels.
Previous report
Our Control Devices segment gross margin decreased due to higher material costs associated with supply chain disruptions and inflation offset by negotiated price increases and lower restructuring and realignment costs of $1.5 million.
Previous report
Our Electronics segment gross margin increased primarily due to increased contribution from higher sales levels and favorable negotiated pricing offset by higher material costs associated with supply chain disruptions including spot purchases of electronic components, adverse foreign exchange fluctuations and inflation.
Previous report
Our Stoneridge Brazil segment gross margin as a percentage of sales was consistent with the prior year as adverse leverage of fixed costs from lower product sales was offset by favorable sales mix from a greater percentage of monitoring service fees.
Previous report
Selling, General and Administrative. SG&A expenses decreased by $9.3 million compared to 2021 due to favorable non-recurring 2022 commercial and legal settlements, lower wages, incentive compensation, legal fees and selling costs. In addition, compared to 2021, SG&A was favorably impacted by an unfavorable adjustment to the fair value of the Stoneridge Brazil earn-out consideration in 2021, lower business realignment and restructuring costs and Sarasota environmental remediation costs incurred in 2021. Offsetting these favorable items were the 2021 gain on disposal of the MSIL joint venture, the 2021 gain on disposal of the PM Sensor business and unfavorable net adjustments for Brazilian indirect tax credits.
Previous report
Design and Development. D&D costs decreased by $0.9 million due to higher customer reimbursements for ongoing development activities in our Electronics segment of $8.3 million that were offset by increased spend for awarded business program launches and development of advanced technologies and systems in our Electronics, Control Devices and Stoneridge Brazil segments.
Showing the first 40 of 53 passages. Open the source sections for the rest.
Reworded paragraphs (40)
Previous wording
Electronics. This segment includes results of operations from the production of driver information systems, vision and safety systems, connectivity and compliance products and electronic control units.
Current wording
Electronics. This segment includes results of operations from the production of advanced driver information solutions, vision systems, connectivity and compliance solutions and control modules.
Previous wording
Stoneridge Brazil. This segment includes results of operations that design and manufacture vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices, driver information systems and telematics solutions.
Current wording
Stoneridge Brazil. This segment includes results of operations that design and manufacture vehicle tracking devices and monitoring services, driver information systems, vehicle security alarms and convenience accessories, telematics solutions and multimedia devices.
Previous wording
The Company had net loss of $5.2 million, or $(0.19) per diluted share, for the year ended December 31, 2023.
Current wording
The Company had net loss of $16.5 million, or $(0.60) per diluted share, for the year ended December 31, 2024.
Previous wording
Net loss in 2023 decreased by $8.9 million, or $0.33 per diluted share, from $14.1 million, or $(0.52) per diluted share, for the year ended December 31, 2022 primarily due to additional contribution from higher sales levels, including the benefit of negotiated price increases and favorable foreign exchange fluctuations offset by higher Selling, General and Administrative (“SG&A”) and Design and Development (“D&D”) spending, including higher business realignment costs, and interest expense.
Current wording
Net loss in 2024 increased by $11.3 million, or $(0.41) per diluted share, from $5.2 million, or $(0.19) per diluted share, for the year ended December 31, 2023 primarily due to lower contribution from lower sales levels and higher interest expense offset by other income from favorable foreign exchange fluctuations and lower business realignment costs.
Previous wording
In 2023, our net sales increased by $75.9 million, or 8.4%, while our operating income increased $9.9 million.
Current wording
In 2024, our net sales decreased by $67.5 million, or 6.9%, while our operating income decreased $13.2 million.
Previous wording
At December 31, 2023 and 2022, we had cash and cash equivalents of $40.8 million and $54.8 million, respectively. At December 31, 2023 and 2022, we had$189.3 million and$167.8 million, respectively, in borrowings outstanding on the Credit Facility. The 2023 decrease in cash and cash equivalents was due to capital expenditures for new product launches and relatively higher working capital levels to support higher sales and production levels as well as the residual impact of supply chain issues on inventory.
Current wording
At December 31, 2024 and 2023, we had cash and cash equivalents of $71.8 million and $40.8 million, respectively. At December 31, 2024 and 2023, we had$201.6 million and$189.3 million, respectively, in borrowings outstanding on the Credit Facility. The 2024 increase in cash and cash equivalents was due to reductions in working capital, specifically lower inventory and a higher outstanding balance on our Credit Facility.
Previous wording
The Company believes that focusing on products that address industry megatrends has had and will continue to have a positive effect on both our top-line growth and underlying margins. For example, the Company is aligned with platforms likely to perform well against overall market dynamics including light-trucks, SUVs and crossover vehicles and our continued focus on safety, vehicle intelligence and connectivity based products, such as the recent release of our next generation tachograph in Europe as well as current and future launches of our MirrorEye programs in North America and Europe for both OEM and aftermarket applications.
Current wording
The Company believes that focusing on products that address industry megatrends has had and will continue to have a positive effect on both our top-line growth and financial performance. For example, we continue to develop safety, vehicle intelligence and connectivity based products, such as our OEM MirrorEye programs in North America and Europe as well as our next generation tachograph in Europe.
Previous wording
Global inflation has increased significantly since 2021. Rising costs of materials, labor and other inputs used to manufacture and sell our products, have impacted, and may continue to impact, our results. While incremental material and production costs have started to moderate, we expect continued cost inflation to persist into 2024 which will continue to put pressure on margins. In order to minimize the impact of these incremental costs, we have taken several actions, including negotiating price increases and cost recoveries with our customers. Additionally, we continued to focus on improving manufacturing performance and optimizing our global cost structure to both reduce costs and improve operational efficiency. We expect these actions will benefit our future financial performance.
Current wording
Global inflation has increased significantly since 2021. As a result, rising costs of materials, labor and other inputs used to manufacture and sell our products have impacted our financial performance. In order to minimize the impact of these incremental costs, we have taken several actions, including negotiating price increases and cost recoveries with our customers. Additionally, we continue to focus on improving manufacturing performance and optimizing our global cost structure to both reduce costs and improve operational efficiency. We expect these actions will benefit our future financial performance.
Previous wording
In 2024, we expect net D&D spend to increase primarily driven by spend for the development of next generation products as new product launch related spend decreases in the second half of 2024. As a result of reduced launch activities we expect lower customer reimbursements and capitalization of software development costs. We continue to evaluate and optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend.
Current wording
In 2025, we expect net D&D spend to slightly increase driven by spend for the development of next generation products as opposed to new product launch related spend. As a result of reduced launch activities, we expect lower customer reimbursements and capitalization of software development costs. We continue to evaluate and optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend. For example, we expect to utilize our Stoneridge Brazil engineering resources to support Electronics segment projects.
Previous wording
In January 2024, the International Monetary Fund forecasted the Brazil gross domestic product to grow 1.7% in 2024. We expect our served market channels to remain relatively stable in 2024 based on current market conditions. Stoneridge Brazil will focus on continuing to grow our OEM capabilities in-region to better support our global customers. This focus will provide opportunities for future growth and provide a platform to continue to rotate our local portfolio to more closely align with our global business.
Current wording
In October 2024, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.2% in 2025, a decline from forecasted growth of 3.0% in 2024. We expect our served market channels to remain relatively stable in 2024 based on current market and economic conditions, however our sales of in region OEM products have been lower than expected due to lower customer demand and program delays. Stoneridge Brazil will focus on continuing to grow our OEM capabilities in-region to better support our global customers. This focus will provide opportunities for future growth and provide a platform to continue to rotate our local portfolio to more closely align with our global business.
Previous wording
We remain focused on improving cash generation and the reduction of debt through efficient operating performance and targeted actions to reduce net working capital, particularly our inventory levels, as the impacts from product launches and material availability normalizes.
Current wording
While we expect continued challenges across our end markets in 2025, we continue to focus on operating performance and enterprise-wide cost reduction. We remain focused on improving cash generation and the reduction of debt through efficient operating performance and targeted actions to reduce our inventory levels.
Previous wording
A significant portion of our sales are outside of the United States. These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars. A significant portion of our raw materials purchased by our Electronics and Stoneridge Brazil segments are denominated in U.S. dollars and, therefore, movements in foreign currency exchange rates can also have a significant effect on our results of operations. The U.S. Dollar strengthened against the Chinese yuan and Argentine peso in 2023 and the euro, Swedish krona, Chinese yuan and Argentine peso in 2022, unfavorably impacting our reported results.
Current wording
A significant portion of our sales are outside of the United States. These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars. A significant portion of our raw materials purchased by our Electronics and Stoneridge Brazil segments are denominated in U.S. dollars and, therefore, movements in foreign currency exchange rates can also have a significant effect on our results of operations. The U.S. Dollar strengthened against the Argentine peso, Brazilian real, Mexican peso and Swedish krona in 2024 and the Chinese yuan and Argentine peso in 2023, unfavorably impacting our reported results.
Previous wording
In December 2018, the Company entered into an agreement to make a $10.0 million investment in a fund (“Autotech Fund II”) managed by Autotech Ventures (“Autotech”), a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten year life of the fund. The Company has contributed $8.4 million to the Autotech Fund II since December 2018.
Current wording
In December 2018, the Company entered into an agreement to make a $10.0 million investment in a fund (“Autotech Fund II”) managed by Autotech Ventures (“Autotech”), a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten year life of the fund. The Company has contributed $9.0 million to the Autotech Fund II since December 2018.
Previous wording
We regularly evaluatethe performance of our businesses and their cost structures, including personnel, and make necessary changes thereto in order to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. As a consequence of these actions, we incur severance related costs which we refer to as business realignment charges. Business realignment costs of $4.5 million and $0.3 million were incurred during the years ended December 31, 2023 and 2022, respectively. Realignment expense for the year ended December 31, 2023 was primarily related to the centralization of the product line management, sales and engineering funct ions and executive separation costs.
Current wording
We regularly evaluatethe performance of our businesses and their cost structures, including personnel, and make necessary changes thereto in order to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. As a consequence of these actions, we incur severance related costs which we refer to as business realignment charges. Business realignment costs of $2.6 million and $4.5 million were incurred during the years ended December 31, 2024 and 2023, respectively. Realignment expense for the year ended December 31, 2024 was primarily related to the optimization of our engineering footprint and executive separation costs. We expect to incur business realignment costs in 2025 related operations at our Juarez facility, which we expect will result in cost savings for direct and indirect labor and a more efficient overall operating structure.
Previous wording
The increase in North American net sales was mostly attributable to increases in sales volume in our Electronics segment commercial vehicle and off-highway markets of $33.8 million and $6.0 million, respectively and in our Control Devices segment automotive market of $2.9 million offset by sales volume decreases in our Control Devices segment commercial vehicle market of $3.4 million. In addition, North American net sales were favorably impacted by negotiated price increases of $16.1 million and customer recoveries of semiconductor spot buy purchases of $0.7 million.
Current wording
The decrease in North American net sales was mostly attributable to decreases in sales volume and the impact of expected end of life production for certain programs in our automotive market of $53.0 million as well as the 2023 impact of required electronic component spot buy purchases of $2.7 million. These decreases were offset by higher sales volume in our North American off-highway and commercial vehicle markets of $5.4 million and $1.2 million, respectively.
Previous wording
The decrease in net sales in South America was primarily due to lower sales in most Stoneridge Brazil product lines of $7.8 million offset by favorable foreign currency translation of $2.6 million and higher sales of tracking devices and monitoring service fees of $0.7 million.
Current wording
The decrease in net sales in South America was primarily as a result of unfavorable foreign currency translation of $3.8 million and lower sales of our OEM products and monitoring service fees and tracking devices.
Previous wording
Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to 2022 and our gross margin increased to 20.6% in 2023 compared to 19.4% in 2022. Our material cost as a percentage of net sales decreased by 2.4% to 59.4% in 2023 compared to 61.8% in 2022. The decrease in the material cost percentage was partially due to the impact of required electronic component spot buy purchases that were offset by customer recoveries. The impact of these spot buy purchases increased cost of goods sold by$14.6 million, or 1.5%of net sales, and $58.4 million, or 6.5% of sales, during 2023 and 2022, respectively, which reduced gross margin percent by 0.3% and 1.4% in 2023 and 2022, respectively. Other factors reducing the material cost percentage were favorable foreign currency fluctuations and favorable sales mix in our Electronics segment. Overhead as a percentage of net sales was 15.1% and 14.2% for 2023 and 2022, respectively. The increase in overhead as a percentage of sales was attributable to higher indirect wage inflation and warranty costs which offset favorable fixed cost leverage from higher sales levels.
Current wording
Cost of Goods Sold and Gross Margin. Cost of goods sold decreased compared to 2023 and our gross margin increased to 20.8% in 2024 compared to 20.6% in 2023. Our material cost as a percentage of net sales decreased by 1.8% to 57.6% in 2024 compared to 59.4% in 2023. The decrease in the material cost percentage was partially due to the impact of 2023 required electronic component spot buy purchases, reimbursed by customers. The impact of these spot buy purchases increased cost of goods sold by$14.6 million, or 1.5%of net sales during 2023 which reduced gross margin percent by 0.3% in 2023. Other factors contributing to the reduction the material cost percentage were material cost improvement actions. Overhead as a percentage of net sales was 17.0% and 15.1% for 2024 and 2023, respectively. The increase in overhead as a percentage of sales was attributable to higher overhead spending including higher warranty related expense and amortization for capitalized software development costs as well as adverse leverage from lower sales levels.
Previous wording
Operating Income (Loss). Operating income (loss) is summarized in the following table by reportable segment (in thousands):
Current wording
Operating (Loss) Income. Operating (loss) income is summarized in the following table by reportable segment (in thousands):
Previous wording
Operating income (loss) by geographic location is summarized in the following table (in thousands):
Current wording
Operating (loss) income by geographic location is summarized in the following table (in thousands):
Previous wording
Our North American operating loss increased due to higher material and labor costs, higher business realignment, higher incentive compensation and a 2022 favorable legal settlement offset by a 2023 gain on disposal of fixed assets. Operating income in South America increased due to higher sales levels offset by higher SG&A and D&D spending. Our operating results in Europe and Other increased primarily due to contribution from higher sales levels offset by higher D&D expense.
Current wording
Our North American operating loss increased primarily as a result of lower contribution from lower sales levels, higher overhead spending including warranty expense, higher self-insured medical costs, wages and a 2023 gain on disposal of fixed assets, offset by lower incentive compensation due to Company performance and lower business realignment costs. Operating income in South America decreased because of lower contribution from lower sales levels. Our operating results in Europe and Other increased primarily because of material cost actions and lower SG&A and D&D spending offset by lower contribution from lower sales levels.
Previous wording
Equity in Loss of Investee. Equity losses for Autotech Fund II were $0.5 million and $0.8 million for the years ended December 31, 2023 and 2022. The decrease in Autotech Fund II earnings was due to unfavorable 2023 and 2022 fair value adjustments to fund investments and fund expenses.
Current wording
Equity in Loss of Investee. Equity loss for Autotech Fund II was $1.3 million and $0.5 million for the years ended December 31, 2024 and 2023, respectively.
Previous wording
Other Expense, net. We record certain foreign currency transaction losses (gains) as a component of other expense, net on the consolidated statement of operations. Other expense, net of $1.2 million, decreased by $4.5 million in 2023 compared to other expense, net of $5.7 million for 2022 primarily due to the impact of favorable foreign currency movements in our Electronics and Control Devices segments from moderated strengthening of the U.S. dollar.
Current wording
Other (Income) Expense, net. We record certain foreign currency transaction (gains) losses as a component of other (income) expense, net on the consolidated statement of operations. Other income, net of $2.5 million, increased by $3.8 million in 2024 compared to other expense, net of $1.2 million for 2023 due to the impact of favorable foreign currency movements in our Electronics and Stoneridge Brazil segments from strengthening of the U.S. dollar.
Previous wording
Provision for Income Taxes. In 2023, the provision for income tax expense was $3.3 million, resulting in an effective tax rate of (169.7)%. In 2022, the provision for income tax expense was $3.4 million, resulting in an effective tax rate of (31.4)%. In 2023 and 2022, the provision for income taxes was impacted by jurisdictional earnings mix, U.S. taxes on foreign earnings, various tax credits and incentives and tax losses for which no benefit is recognized due to valuation allowances.
Current wording
Provision for Income Taxes. In 2024, the provision for income tax expense was $2.9 million, resulting in an effective tax rate of (21.5)%. In 2023, the provision for income tax expense was $3.3 million, resulting in an effective tax rate of (169.7)%. In 2024 and 2023, the provision for income taxes was impacted by jurisdictional earnings mix, U.S. taxes on foreign earnings, various tax credits and incentives and tax losses for which no benefit is recognized due to valuation allowances.
Previous wording
The OECD implemented a 15% global corporate minimum tax to ensure that large multinational enterprises pay a minimum level of tax in the countries they operate. While various countries have implemented the legislation as of January 1, 2024, we do not expect a material change to our income tax provision for the year ended December 31, 2024. As additional jurisdictions implement this legislation, our effective tax rate and cash tax payments could increase in future years.
Current wording
The OECD implemented a 15% global corporate minimum tax to ensure that large multinational enterprises pay a minimum level of tax in the countries they operate. A number of countries have passed legislation enacting the OECD Pillar Two model rules as issued, in a modified form or not at all which is effective in 2024. The OECD Pillar Two framework could have a material impact on our effective tax rate and cash tax payments depending on which countries enact the legislation and in what manner.
Previous wording
Net cash used for investing activities increased compared to the prior year due to higher capital expenditures and capitalized software development costs and cash proceeds from the 2022 settlement of the net investment hedges offset by increased proceeds from the sale of fixed assets.
Current wording
Net cash used for investing activities decreased compared to the prior year due to lower capital expenditures and capitalized software development costs as well as the 2023 impact of cash proceeds from the sale of equipment.
Previous wording
Net cash provided by financing activities increased compared to the prior year primarily due to higher Credit Facility net borrowings, offset by the 2022 cash payment of Stoneridge Brazil earn-out consideration and 2023 debt issuance costs.
Current wording
Net cash provided by financing activities decreased compared to the prior year primarily due to a decrease in Credit Facility borrowings net of repayments.
Previous wording
(B)In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech, a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten year life of the fund. The Company has contributed $8.4 million to the Autotech Fund II since December 2018.
Current wording
(B)In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech, a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten year life of the fund. The Company has contributed $9.0 million to the Autotech Fund II since December 2018.
Previous wording
Management will continue to focus on efficiently managing its weighted-average cost of capital and believes that cash flows from operations and the availability of funds from our Credit Facility provides sufficient liquidity to meet our future growth and operating needs.
Current wording
Management will continue to focus on efficiently managing its weighted-average cost of capital and believes that cash flows from operations and the availability of funds from our Credit Facility provide sufficient liquidity to meet our future growth and operating needs.
Previous wording
As outlined in Note 5 to our consolidated financial statements, the Credit Facility permits borrowing up to a maximum level of $275.0 million through November 2, 2026. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio. The Credit Facility also contains affirmative and negative covenants and events of default that are customary for credit arrangements of this type including covenants that place restrictions and/or limitations on the Company’s ability to borrow money, make capital expenditures and pay dividends. The Credit Facility had an outstanding balance of $189.3 million at December 31, 2023.
Current wording
As outlined in Note 5 to our consolidated financial statements, the Credit Facility permits borrowing up to a maximum level of $275.0 million through November 2, 2026. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio. The Credit Facility also contains affirmative and negative covenants and events of default that are customary for credit arrangements of this type including covenants that place restrictions and/or limitations on the Company’s ability to borrow money, make capital expenditures and pay dividends. The Credit Facility had an outstanding balance of $201.6 million at December 31, 2024.
Previous wording
The Company was in compliance with all covenants at December 31, 2023. The Company has not experienced a violation that would limit the Company’s ability to borrow under the Credit Facility and does not expect that the covenants under it will restrict the Company’s financing flexibility. However, it is possible that future borrowing flexibility under the Credit Facility may be limited as a result of lower than expected financial performance. The Company expects to make additional repayments on the Credit Facility when cash exceeds the amount needed for operations and to remain in compliance with all covenants.
Current wording
As a result of Amendment No. 1, the Company was in compliance with all covenants at December 31, 2024. The Company has not experienced a violation that would limit the Company’s ability to borrow under the Credit Facility, as amended, and does not expect that the covenants under it will restrict the Company’s financing flexibility. However, it is possible that future borrowing flexibility under the Credit Facility may be limited as a result of lower than expected financial performance. The Company expects to make additional repayments on the Credit Facility when cash exceeds the amount needed for operations and to remain in compliance with all covenants.
Previous wording
The Company’s wholly-owned subsidiary located in Stockholm, Sweden, has an overdraft credit line which allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20.0 million Swedish krona, or $2.0 million and $1.9 million, at December 31, 2023 and 2022, respectively. At December 31, 2023 and 2022, there were no borrowings outstanding on this overdraft credit line. During the year ended December 31, 2023, the subsidiary borrowed and repaid 358.5 million Swedish krona, or $35.6 million.
Current wording
The Company’s wholly-owned subsidiary located in Stockholm, Sweden, has an overdraft credit line which allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20.0 million Swedish krona, or $1.8 million and $2.0 million, at December 31, 2024 and 2023, respectively. At December 31, 2024 and 2023, there were no borrowings outstanding on this overdraft credit line. During the year ended December 31, 2024, the subsidiary borrowed and repaid 334.5 million Swedish krona, or $30.3 million. The Stockholm subsidiary has pledged certain of its assets as collateral in order to obtain a guarantee of certain of the Stockholm subsidiary’s obligations to third parties.
Previous wording
The Company’s wholly-owned subsidiary located in Suzhou, China, has lines of credit which allow up to a maximum borrowing level of 20.0 million Chinese yuan, or $2.8 million and $2.9 million, at December 31, 2023 and 2022, respectively. At December 31, 2023 and 2022 there was $2.1 million and $1.5 million, respectively, in borrowings outstanding recorded within current portion of debt. In addition, the Suzhou subsidiary has a bank acceptance draft line of credit which facilitates the extension of trade payable payment terms by 180 days. The bank acceptance draft line of credit allows up to a maximum borrowing level of 60.0 million Chinese yuan, or $8.5 million, at December 31, 2023 and $8.7 million at December 31, 2022. There was $2.4 million and $2.0 million utilized on the Suzhou bank acceptance draft line of credit at December 31, 2023 and 2022, respectively.
Current wording
The Company’s wholly-owned subsidiary located in Suzhou, China, had lines of credit that allowed up to a maximum borrowing level of 20.0 million Chinese yuan, or $2.7 million and $2.8 million, at December 31, 2024 and 2023, respectively. At December 31, 2024 and 2023 there was $0.0 million and $2.1 million, respectively, in borrowings outstanding recorded within current portion of debt. In addition, the Suzhou subsidiary had a bank acceptance draft line of credit that expired in October 2024 which facilitated the extension of trade payable payment terms by 180 days. The bank acceptance draft line of credit allowed up to a maximum borrowing level of 60.0 million Chinese yuan, or $8.5 million at December 31, 2023. There was $2.4 million utilized on the Suzhou bank acceptance draft line of credit at December 31, 2023 recorded on the consolidated balance sheet within accounts payable.
Previous wording
In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. As of December 31 2023, the Company’s cumulative investment in the Autotech Fund II was $8.4 million. The Company contributed $0.4 million and $1.0 million, net to the Autotech Fund II during the years ended December 31, 2023 and 2022, respectively.
Current wording
In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. As of December 31 2024, the Company’s cumulative investment in the Autotech Fund II was $9.0 million. The Company contributed $0.6 million and $0.4 million, net to the Autotech Fund II during the years ended December 31, 2024 and 2023, respectively.
Previous wording
At December 31, 2023, we had a cash and cash equivalents balance of approximately $40.8 million, of which 94.1% was held in foreign locations. The Company has approximately $85.7 million of undrawn commitments under the Credit Facility as of December 31, 2023, which results in total undrawn commitments and cash balances of more than $126.5 million.
Current wording
At December 31, 2024, we had a cash and cash equivalents balance of approximately $71.8 million, of which 65.8% was held in foreign locations. The Company has approximately $73.4 million of undrawn commitments under the Credit Facility as of December 31, 2024, which results in total undrawn commitments and cash balances of more than $145.3 million.
Previous wording
Accounting standards require that deferred tax assets be reduced by a valuation allowance if, based on all available evidence, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. This assessment requires significant judgment, and in making this evaluation, the Company considers available positive and negative evidence, including the potential to carryback net operating losses and credits, the future release of certain taxable temporary differences, actual and forecasted results, and tax planning strategies that are both prudent and feasible. Certain deferred tax assets are dependent on future taxable income to be realized. Risk factors include U.S. and foreign economic conditions that affect the automotive and commercial vehicle markets of which the Company has significant operations.
Current wording
Accounting standards require that deferred tax assets be reduced by a valuation allowance if, based on all available evidence, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. This assessment requires significant judgment, and in making this evaluation, the Company has considered historical pre-tax income or loss and the four sources of income in determining the need for a valuation allowance when the realization of its deferred tax assets are not more likely than not. The four sources of income considered are 1.) taxable income in prior carryback years where carryback is allowable, 2.) future reversals of existing temporary differences, 3.) consideration of reasonable and prudent tax planning strategies, and 4.) forecasts of future taxable income, exclusive of reversing temporary differences and carryforwards. In the cases where a valuation allowance has been recorded, the evidence described above did not result in a conclusion that the deferred tax assets are more likely than not to be realizable. Current and future provision for income taxes is significantly impacted by the initial recognition of and changes in valuation allowances. The Company intends to maintain these allowances until it is more likely than not that the deferred tax assets will be realized. The Company is significantly impacted by the Global Intangible Low-Taxed Income ("GILTI") tax provisions of the US tax code, and should those provisions change, it could have a material impact on our assessment of the realizability of general business credits in the US for which we currently believe are more likely than not to be realized based on the considerations noted above. Risk factors include U.S. and foreign economic conditions that affect the automotive and commercial vehicle markets of which the Company has significant operations.
Previous wording
The Company has recognized deferred taxes related to foreign withholding taxes and the expected foreign currency impact upon repatriation from foreign subsidiaries not considered indefinitely reinvested.
Current wording
The Company has recognized deferred taxes related to the expected foreign currency impact upon repatriation from foreign subsidiaries not considered indefinitely reinvested.
Previous wording
The Company has made an accounting policy election to reflect the impact of global intangible low-taxed income (“GILTI”) taxes, if any, as a current period tax expense when incurred.
Current wording
The Company has made an accounting policy election to reflect the impact of GILTI taxes, if any, as a current period tax expense when incurred.
Previous wording
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance in ASU 2020-04 provides temporary optional expedient and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”) (also known as the “reference rate reform”). The guidance allows companies to elect not to apply certain modification accounting requirements to contracts affected by the reference rate reform, if certain criteria are met. The guidance will also allow companies to elect various optional expedients which would allow them to continue to apply hedge accounting for hedging relationships affected by the reference rate reform, if certain criteria are met. The new standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2023.
Current wording
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance in ASU 2020-04 provides temporary optional expedient and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”) (also known as the “reference rate reform”). The guidance allows companies to elect not to apply certain modification accounting requirements to contracts affected by the reference rate reform, if certain criteria are met. The guidance also allowed companies to elect various optional expedients which would allow them to continue to apply hedge accounting for hedging relationships affected by the reference rate reform, if certain criteria are met. The new standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2023.
Previous wording
In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures", which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.
Current wording
In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures", which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026. Early adoption is permitted. We adopted this ASU retrospectively on December 31, 2024. Refer to Note 13, Segment Reporting for the inclusion of the new required disclosures.
Previous wording
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures," which requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, companies are required to disclose additional information about income taxes paid. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to be adopted on a prospective basis; however, retrospective application is permitted. We are currently evaluating the impact on our annual consolidated financial statement disclosures.
Current wording
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures," which requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, companies are required to disclose additional information about income taxes paid. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to be adopted on a prospective basis; however, retrospective application is permitted. This ASU will modify the Company's financial statement disclosures but will not have a significant impact on its consolidated financial statements.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
In November 2024, the FASB issued ASU No. 2024-03, "Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures," which requires companies to disclose certain costs and expenses within the notes to the financial statements. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact on our annual consolidated financial statement disclosures.
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
Operating Income. Operating income (loss) is summarized in the following table by reportable segment (in thousands):
Previous report — wording carried elsewhere
Year Ended December 31, 2022 Compared To Year Ended December 31, 2021
Previous report — wording carried elsewhere
Consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):
Previous report — wording carried elsewhere
Net Sales. Net sales for our reportable segments, excluding inter-segment sales are summarized in the following table (in thousands):
Previous report — wording carried elsewhere
Net sales by geographic location are summarized in the following table (in thousands):
Previous report — wording carried elsewhere
Operating income (loss) by geographic location is summarized in the following table (in thousands):
Previous report — wording carried elsewhere
Other Expense, net. We record certain foreign currency transaction losses (gains) as a component of other income, net on the consolidated statement of operations. Other expense, net of $5.7 million, increased by $4.3 million in 2022 compared to other expense, net of $1.4 million for 2021 primarily due to foreign currency transaction losses in our Electronics, Control Devices and Stoneridge Brazil segments from the strengthening of the U.S. dollar.
Previous report — wording carried elsewhere
Summary of Cash Flows for the years ended December 31, 2022 and 2021 (in thousands):