Stoneridge Reports Strong Third-Quarter 2016 Results

Stoneridge Reports Strong Third-Quarter 2016 Results

PR Newswire

WARREN, Ohio, Oct. 27, 2016

WARREN, Ohio, Oct. 27, 2016 /PRNewswire/ -- 

  • Reports Earnings Per Diluted Share From Continuing Operations of $0.36, an increase of $0.09 per share or 33.3% compared with 3Q15
  • Sales of $173.8 million increased by $11.8 million or 7.3% compared with 3Q15
  • Operating Income of $11.8 million increased by $2.8 million or 31.7% compared with 3Q15
  • PST generated positive operating profit in 3Q15; a $0.7 million improvement over 3Q15
  • Reaffirmed 2016 full-year gross margin, operating margin, earnings per share and EBITDA guidance; revised sales guidance slightly lower to range of $690.0-$700.0 million

Stoneridge, Inc. (NYSE: SRI) today announced financial results for the third quarter ended September 30, 2016, with sales of $173.8 million and earnings per diluted share from continuing operations attributable to Stoneridge, Inc. of $0.36, an increase of $0.09 per share or 33.3% compared with the third quarter of 2015. 

Stoneridge, Inc. logo

The Control Devices segment sales increased by $16.7 million, or 19.2%, to $103.7 million.  The sales increase in the Control Devices segment in 2016 reflects sales of new programs primarily in the North American passenger car market.

The Electronics segment sales of $47.8 million declined by $2.9 million or 5.7% compared with the third quarter of 2015.  Electronics sales primarily decreased due to lower volumes in the North American commercial vehicle market.  The Electronics segment exposure to the North American commercial vehicle market decreased significantly as a result of the Wiring business divestiture in August 2014.

PST experienced a sales decrease of $2.0 million, or 8.2%, to $22.3 million, compared with the third quarter of 2015, due to the continued economic downturn in Brazil.  On a constant currency basis, in the third quarter of 2016, the PST segment sales decreased by $4.0 million, or 16.4%, compared with the third quarter of 2015 because of the continued adverse effects of the deteriorated economic conditions in Brazil (see Exhibit 1 for a reconciliation of this non-GAAP financial measure).  During the third quarter of 2016, the average Brazilian Real per U.S. Dollar rate strengthened from R$3.51 per USD to R$3.25 per USD, or 7.5%, compared with the third quarter of 2015.  This increased U.S. Dollar reported sales for PST by approximately $2.0 million and helped partially offset the local currency sales decline.

Earnings per diluted share attributable to Stoneridge, Inc. was $0.36 for the third quarter of 2016 compared with earnings per diluted share attributable to Stoneridge, Inc. of $0.26 for the third quarter of 2015, an improvement of $0.10 per share or 38.5%.

During the third quarter of 2016, Stoneridge's operating cash flow was $19.2 million, a $3.7 million or 23.9% increase from operating cash flow of $15.5 million for the third quarter of 2015.  At September 30, 2016, Stoneridge's consolidated cash position was $50.6 million, a decrease of $3.8 million from December 31, 2015.  Cash decreased primarily as a result of paying down the outstanding balance on the Company's revolving line of credit to optimize its net interest expense.  Net debt has been reduced by $39.0 million, to $54.6 million at September 30, 2016, from $93.6 million at September 30, 2015.  Stoneridge's Debt to Adjusted EBITDA from Continuing Operations ratio improved to 1.6x compared with 2.4x in the third quarter of 2015 (see Exhibit 2 for a reconciliation of this non-GAAP financial measure).

Jon DeGaynor, President and Chief Executive Officer, commented, "This quarter, Stoneridge continued its trend of improved quarter-on-quarter operating performance.  Our 130 basis point increase to operating margin in the third quarter was due to higher sales in our Control Devices segment, currency tailwinds and operating improvements in our Electronics and PST segments."  

DeGaynor added, "PST's efforts to mitigate the effect of the downturn continue to add value and generate cash.  PST improved its operating income by $0.7 million in the third quarter of 2016, compared with the third quarter of 2015, despite a sales decrease of $2.0 million. In the third quarter, PST generated its first quarterly operating profit of the year (excluding non-cash intangible amortization expense related to the purchase of PST), with an operating margin of 5.0%, and it expects to accelerate this in the fourth quarter of 2016.  The PST management team continues to demonstrate the ability to manage in a very difficult business environment." 

DeGaynor concluded, "During the quarter, we continued to deliver the operating leverage our incremental sales implied in our 2016 guidance (see Exhibit 3).   We look forward to continued strong execution for the remainder of 2016 and into 2017."

Conference Call on the Web
A live Internet broadcast of Stoneridge's conference call regarding 2016 third-quarter results can be accessed at 10 a.m. Eastern time on Thursday, October 27, 2016, 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.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



(Unaudited)











Three months ended

Nine months ended

September 30,

September 30,

(in thousands, except per share data)

2016

2015

2016

2015








Net sales

$

173,846

$

162,057

$

523,365

$

490,171








Costs and expenses:








Cost of goods sold

124,098

116,912

375,705

355,432

Selling, general and administrative

27,817

26,331

82,836

85,555

Design and development

10,151

9,867

30,912

29,696








Operating income

11,780

8,947

33,912

19,488

Interest expense, net

1,684

1,747

5,038

4,683

Equity in earnings of investee

(307)

(160)

(603)

(492)

Other income, net

(497)

(83)

(722)

(343)








Income before income taxes from continuing operations

10,900

7,443

30,199

15,640








Income tax expense (benefit) from continuing operations

919

32

3,114

(202)








Income from continuing operations

9,981

7,411

27,085

15,842








Loss from discontinued operations

-

(113)

-

(226)








Net income

9,981

7,298

27,085

15,616








Net loss attributable to noncontrolling interest

(303)

(69)

(2,009)

(1,074)








Net income attributable to Stoneridge, Inc.

$

10,284

$

7,367

$

29,094

$

16,690








Earnings per share from continuing operations attributable








Stoneridge, Inc.:








Basic

$

0.37

$

0.27

$

1.05

$

0.62

Diluted

$

0.36

$

0.27

$

1.03

$

0.61








Loss per share attributable to discontinued operations:






Basic

$

0.00

$

(0.01)

$

0.00

$

(0.01)

Diluted

$

0.00

$

(0.01)

$

0.00

$

(0.01)








Earnings per share attributable to Stoneridge, Inc.:








Basic

$

0.37

$

0.26

$

1.05

$

0.61

Diluted

$

0.36

$

0.26

$

1.03

$

0.60








Weighted-average shares outstanding:








Basic

27,792

27,444

27,753

27,299

Diluted

28,359

28,008

28,266

27,927








 

 

CONDENSED CONSOLIDATED BALANCE SHEETS













September 30,

December 31,

(in thousands)

2016

2015

(Unaudited)

ASSETS










Current assets:




Cash and cash equivalents

$

50,560

$

54,361

Accounts receivable, less reserves of $1,563 and $1,066, respectively

122,286

94,937

Inventories, net

65,200

61,009

Prepaid expenses and other current assets

31,677

21,602

Total current assets

269,723

231,909




Long-term assets:




Property, plant and equipment, net

90,746

85,264

Intangible assets, net and goodwill

41,294

36,699

Investments and other long-term assets, net

11,839

10,380

Total long-term assets

143,879

132,343

Total assets

$

413,602

$

364,252




LIABILITIES AND SHAREHOLDERS' EQUITY










Current liabilities:




Current portion of debt

$

9,901

$

13,905

Accounts payable

66,596

55,225

Accrued expenses and other current liabilities

50,032

38,920

Total current liabilities

126,529

108,050




Long-term liabilities:




Revolving credit facility

87,000

100,000

Long-term debt, net

8,264

4,458

Deferred income taxes

43,290

41,332

Other long-term liabilities

3,898

3,983

Total long-term liabilities

142,452

149,773




Shareholders' equity:




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

-

-

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




     28,966 and 28,907 shares issued and 27,843 and 27,912 shares outstanding at


September 30, 2016 and December 31, 2015, respectively, with no stated value

-

-

Additional paid-in capital

203,976

199,254

Common Shares held in treasury, 1,123 and 995 shares at September 30, 2016


 and December 31, 2015, respectively, at cost

(5,592)

(4,208)

Accumulated deficit

(3,011)

(32,105)

Accumulated other comprehensive loss

(64,456)

(69,822)

Total Stoneridge, Inc. shareholders' equity

130,917

93,119

Noncontrolling interest

13,704

13,310

Total shareholders' equity

144,621

106,429

Total liabilities and shareholders' equity

$

413,602

$

364,252

 

 











CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


(Unaudited)
































Three months ended

Nine months ended






September 30,

September 30,

(in thousands)




2016

2015

2016

2015














Net income



$

9,981

$

7,298

$

27,085

$

15,616

Less: Net loss attributable to noncontrolling interest

(303)

(69)

(2,009)

(1,074)

Net income attributable to Stoneridge, Inc.




10,284

7,367

29,094

16,690














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






Stoneridge, Inc.:












Foreign currency translation




(638)

(12,557)

5,923

(24,497)

Benefit plan liability




(84)

-

(84)

(45)

Unrealized loss on derivatives




(64)

(236)

(473)

(29)

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







Stoneridge, Inc.




(786)

(12,793)

5,366

(24,571)














Comprehensive income (loss) attributable to Stoneridge, Inc.

$

9,498

$

(5,426)

$

34,460

$

(7,881)


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

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 


Nine months ended September 30 (in thousands)

2016

2015



OPERATING ACTIVITIES:



Net cash provided by operating activities

$   37,017

$     17,133



INVESTING ACTIVITIES:



Capital expenditures

(18,484)

(23,521)

Proceeds from sale of fixed assets

652

53

Payments related to sale of Wiring business

-

(1,230)

Business acquisition

-

(469)

Net cash used for investing activities

(17,832)

(25,167)



FINANCING ACTIVITIES:



Revolving credit facility payment

(13,000)

-

Proceeds from issuance of debt

13,317

19,116

Repayments of debt

(21,312)

(20,015)

Other financing costs

(339)

(49)

Repurchase of Common Shares to satisfy employee tax withholding

(1,384)

(2,854)

Net cash used for financing activities

(22,718)

(3,802)



Effect of exchange rate changes on cash and cash equivalents

(268)

(1,896)



Net change in cash and cash equivalents

(3,801)

(13,732)



Cash and cash equivalents at beginning of period

54,361

43,021



Cash and cash equivalents at end of period

$   50,560

$     29,289



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

 

 

 

Exhibit 1













Stoneridge, Inc.












Reconciliation of Sales to Constant Currency Adjusted Sales





Three months ended September 30, 2016 and 2015 (in thousands)





(Unaudited)






















Increase /

Percent






2016

2015

(Decrease)

Increase













Electronics Segment Sales As Reported



$     47,804

$       50,688

$     (2,884)

(5.7)%













Plus: Constant Foreign Currency Translation Adjustment

1,193

-

1,193
















Adjusted Electronics Segment Sales



$     48,997

$       50,688

$     (1,691)

(3.3)%




























PST Segment Sales As Reported



$     22,342

$       24,339

$     (1,997)

(8.2)%













Less: Constant Foreign Currency Translation Adjustment

(2,004)

-

(2,004)
















Adjusted PST Segment Sales




$     20,338

$       24,339

$     (4,001)

(16.4)%




























Total Consolidated Sales As Reported



$   173,846

$     162,057

$     11,789

7.3%













Plus: Constant Foreign Currency Translation Adjustment

(811)

-

(811)
















Total Consolidated Constant Currency Adjusted Sales

$   173,035

$     162,057

$     10,978

6.8%

 

 






Exhibit 2






Stoneridge, Inc.






Reconciliation of Net Income (Loss) to Adjusted EBITDA from Continuing Operations

Twelve months ended September 30, 2016 and 2015 (in thousands)

(Unaudited)











2016

2015






Net income (loss)



$       32,033

$       (17,382)

Interest expense, net



6,720

6,504

Equity in earnings of investees



(719)

(719)

Other expense (income), net



1,452

(2,047)

Expense (benefit) for income taxes



2,769

(1,269)

Depreciation and amortization



22,347

23,941

Share-based compensation impact of CEO Retirement


-

2,225

Discontinued operations



(16)

1,918

Loss on early extinguishment of debt



-

9,687

PST purchase accounting and goodwill impairment


50

27,519






Adjusted EBITDA from continuing operations


$       64,636

$         50,377






Total Debt



$     105,165

$       122,895

Total Debt / Adjusted EBITDA from continuing operations


 1.6x 

 2.4x 

 

 


















Exhibit 3














August 2,  2016

October 27,  2016




*Guidance**

*Guidance***








Sales 

(in millons)



$705  -  $715

$690  -  $700

Gross Margin



26.0% - 28.5%

26.0% - 28.5%

Operating Margin



6.0% - 7.3%

6.0% - 7.3%

EPS/Adjusted EPS **


$1.25 - $1.40

$1.25 - $1.40

EBITDA %



9.5% - 11.3%

9.5% - 11.3%








FX Rates :


















BRL/USD



3.40

3.40

MXN/USD



17.80

18.35

USD/EUR



1.12

1.14

SEK/USD



8.25

8.32








* Both guidance scenarios assume no reversal of US Deferred Tax Valuation Allowance

** August 2, 2016 Guidance used adjusted EPS of $.31/share in 1Q16 and $.41/share as reported in 2Q16

*** October 27, 2016 Guidance used adjusted EPS of $.31/share in 1Q16 and $.41/share as reported in 2Q16 and

$.36/share as reported in 3Q16



 

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SOURCE Stoneridge, Inc.

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