##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarter ended September 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto
 Commission file number: 001 13337
 STONERIDGE, INC.
 (Exact name of registrant as specified in its charter)
 Ohio
    
    34-1598949(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)9400 East Market Street, Warren, Ohio
    
    44484(Address of principal executive offices)
    
    (Zip Code)
 (330) 856-2443  Registrants telephone number, including area code
 þ o
  o þ o
 o þ




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##### 



STONERIDGE, INC. AND SUBSIDIARIES
 INDEX
 Page No.PART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of September 30, 2007 (Unaudited) and December 31,
2006 (Audited)
    
    
    2Condensed Consolidated Statements of Operations (Unaudited) For the Three and Nine Months
Ended September 30, 2007 and September 30, 2006
    
    
    3Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended
September 30, 2007 and September 30, 2006
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    33PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3. Defaults Upon Senior Securities
    
    
    34Item 4. Submission of Matters to a Vote of Security Holders
    
    
    34Item 5. Other Information
    
    
    34Item 6. Exhibits
    
    
    34Signatures
    
    
    35Index to Exhibits
    
    
    36EX-31.1EX-31.2EX-32.1EX-32.2
  1




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 STONERIDGE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 September 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)
    
    
    (Audited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    67,649
    
    
    $
    65,882Accounts receivable, less allowances for doubtful accounts and other reserves of
$5,521 and $5,243, respectively
    
    
    123,916
    
    
    
    106,985Inventories, net
    
    
    57,591
    
    
    
    58,521Prepaid expenses and other
    
    
    19,925
    
    
    
    13,448Deferred income taxes
    
    
    9,305
    
    
    
    9,196Total current assets
    
    
    278,386
    
    
    
    254,032Long-Term Assets:Property, plant and equipment, net
    
    
    102,378
    
    
    
    114,586Other Assets:Goodwill
    
    
    65,176
    
    
    
    65,176Investments and other, net
    
    
    40,317
    
    
    
    30,875Deferred income taxes
    
    
    36,896
    
    
    
    37,138Total long-term assets
    
    
    244,767
    
    
    
    247,775Total Assets
    
    $
    523,153
    
    
    $
    501,807LIABILITIES
AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    65,753
    
    
    $
    72,493Accrued expenses and other
    
    
    53,949
    
    
    
    45,624Total current liabilities
    
    
    119,702
    
    
    
    118,117Long-Term Liabilities:Long-term debt
    
    
    200,000
    
    
    
    200,000Deferred income taxes
    
    
    2,030
    
    
    
    1,923Other liabilities
    
    
    3,800
    
    
    
    3,145Total long-term liabilities
    
    
    205,830
    
    
    
    205,068Shareholders Equity:Preferred Shares, without par value, authorized 5,000 shares, none issued
    
    
    
    
    
    
    Common Shares, without par value, authorized 60,000 shares, issued 24,599 and 23,990
shares and outstanding 24,227 and 23,804 shares, respectively, with no stated
value
    
    
    
    
    
    
    Additional paid-in capital
    
    
    153,585
    
    
    
    150,078Common Shares held in treasury, 373 and 186 shares, respectively, at cost
    
    
    (383
    )
    
    
    (151
    )Retained earnings
    
    
    31,891
    
    
    
    21,701Accumulated other comprehensive income
    
    
    12,528
    
    
    
    6,994Total shareholders equity
    
    
    197,621
    
    
    
    178,622Total Liabilities and Shareholders Equity
    
    $
    523,153
    
    
    $
    501,807
  2




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STONERIDGE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net Sales
    
    $
    172,814
    
    
    $
    172,351
    
    
    $
    541,644
    
    
    $
    537,484Costs and Expenses:Cost of goods sold
    
    
    134,944
    
    
    
    134,173
    
    
    
    422,045
    
    
    
    414,619Selling, general and administrative
    
    
    32,407
    
    
    
    29,074
    
    
    
    99,209
    
    
    
    92,044(Gain) loss on sale of property, plant and equipment,
net
    
    
    223
    
    
    
    15
    
    
    
    (1,465
    )
    
    
    (1,454
    )Operating Income
    
    
    5,240
    
    
    
    9,089
    
    
    
    21,855
    
    
    
    32,275Interest expense, net
    
    
    5,467
    
    
    
    5,710
    
    
    
    16,570
    
    
    
    17,462Equity in earnings of investees
    
    
    (3,506
    )
    
    
    (1,838
    )
    
    
    (7,924
    )
    
    
    (4,804
    )Other (income) loss, net
    
    
    273
    
    
    
    (55
    )
    
    
    785
    
    
    
    1,697Income Before Income Taxes
    
    
    3,006
    
    
    
    5,272
    
    
    
    12,424
    
    
    
    17,920Provision for income taxes
    
    
    381
    
    
    
    866
    
    
    
    2,234
    
    
    
    4,857Net Income
    
    $
    2,625
    
    
    $
    4,406
    
    
    $
    10,190
    
    
    $
    13,063Basic net income per share
    
    $
    0.11
    
    
    $
    0.19
    
    
    $
    0.44
    
    
    $
    0.57Basic weighted average shares outstanding
    
    
    23,213
    
    
    
    22,880
    
    
    
    23,106
    
    
    
    22,833Diluted net income per share
    
    $
    0.11
    
    
    $
    0.19
    
    
    $
    0.43
    
    
    $
    0.56Diluted weighted average shares outstanding
    
    
    23,694
    
    
    
    23,396
    
    
    
    23,656
    
    
    
    23,250
  3




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STONERIDGE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 Nine Months EndedSeptember 30,2007
    
    
    2006OPERATING
ACTIVITIES:Net income
    
    $
    10,190
    
    
    $
    13,063Adjustments to reconcile net income to net cash provided by (used for)
operating activities -Depreciation
    
    
    21,775
    
    
    
    19,124Amortization
    
    
    1,196
    
    
    
    1,238Deferred income taxes
    
    
    (1,272
    )
    
    
    2,726Equity in earnings of investees
    
    
    (7,924
    )
    
    
    (4,804
    )Gain on sale of property, plant and equipment
    
    
    (1,465
    )
    
    
    (1,454
    )Share-based compensation expense
    
    
    1,858
    
    
    
    1,380Postretirement benefit settlement gain
    
    
    
    
    
    
    (1,242
    )Changes in operating assets and liabilities -Accounts receivable, net
    
    
    (15,197
    )
    
    
    (19,499
    )Inventories, net
    
    
    756
    
    
    
    (3,094
    )Prepaid expenses and other
    
    
    (1,676
    )
    
    
    189Other assets
    
    
    (101
    )
    
    
    1,149Accounts payable
    
    
    (8,446
    )
    
    
    12,020Accrued expenses and other
    
    
    8,215
    
    
    
    1,814Net cash provided by operating
activities
    
    
    7,909
    
    
    
    22,610INVESTING ACTIVITIES:Capital expenditures
    
    
    (14,259
    )
    
    
    (19,794
    )Proceeds from sale of property, plant and equipment
    
    
    5,042
    
    
    
    2,266Business acquisitions and other
    
    
    
    
    
    
    (668
    )Net cash used for investing activities
    
    
    (9,217
    )
    
    
    (18,196
    )FINANCING ACTIVITIES:Repayments of long-term debt
    
    
    
    
    
    
    (44
    )Share-based compensation activity, net
    
    
    1,956
    
    
    
    47Other financing costs
    
    
    
    
    
    
    (150
    )Net cash provided by (used for) financing
activities
    
    
    1,956
    
    
    
    (147
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    1,119
    
    
    
    1,679Net change in cash and cash equivalents
    
    
    1,767
    
    
    
    5,946Cash and cash equivalents at beginning of period
    
    
    65,882
    
    
    
    40,784Cash and cash equivalents at end of period
    
    $
    67,649
    
    
    $
    46,730
  4




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STONERIDGE, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 (1) Basis of Presentation
     (2) Inventories
  September 30,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    38,239
    
    
    $
    39,832Work-in-progress
    
    
    9,263
    
    
    
    8,196Finished goods
    
    
    11,919
    
    
    
    12,614Total
inventories
    
    
    59,421
    
    
    
    60,642Less: LIFO
reserve
    
    
    (1,830
    )
    
    
    (2,121
    )Inventories,
net
    
    $
    57,591
    
    
    $
    58,521
 (3) Fair Value of Financial Instruments
 Financial Instruments
  5




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STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 Derivative Instruments and Hedging Activities
     (4) Share-Based Compensation
   6




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STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 (5) Comprehensive Income (Loss)
 Reporting Comprehensive Income
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    2,625
    
    
    $
    4,406
    
    
    $
    10,190
    
    
    $
    13,063Other comprehensive income:Currency translation adjustments
    
    
    3,019
    
    
    
    249
    
    
    
    5,001
    
    
    
    3,608Pension liability adjustments
    
    
    (24
    )
    
    
    (41
    )
    
    
    (60
    )
    
    
    (275
    )Unrealized gain (loss) on marketable securities
    
    
    (22
    )
    
    
    10
    
    
    
    39
    
    
    
    32Unrecognized gain (loss) on derivatives
    
    
    (547
    )
    
    
    
    
    
    
    554
    
    
    
    Total other comprehensive income
    
    
    2,426
    
    
    
    218
    
    
    
    5,534
    
    
    
    3,365Comprehensive income
    
    $
    5,051
    
    
    $
    4,624
    
    
    $
    15,724
    
    
    $
    16,428
  September 30,
    
    
    December 31,2007
    
    
    2006Foreign currency translation
adjustments
    
    $
    13,526
    
    
    $
    8,525Pension liability adjustments
    
    
    (1,527
    )
    
    
    (1,467
    )Unrealized loss on marketable
securities
    
    
    (25
    )
    
    
    (64
    )Unrecognized gain on derivatives
    
    
    554
    
    
    
    Accumulated other comprehensive
income
    
    $
    12,528
    
    
    $
    6,994
 6) Long-Term Debt
 Senior Notes
  7




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STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 Credit Agreement
   (7) Net Income Per Share
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Basic
weighted-average
shares
outstanding
    
    
    23,213,240
    
    
    
    22,880,325
    
    
    
    23,105,561
    
    
    
    22,833,392Effect of dilutive
securities
    
    
    481,190
    
    
    
    515,368
    
    
    
    550,038
    
    
    
    416,626Diluted
weighted-average shares
outstanding
    
    
    23,694,430
    
    
    
    23,395,693
    
    
    
    23,655,599
    
    
    
    23,250,018
   8




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STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
  (8) Restructuring
   Asset-Severance
    
    
    RelatedCosts
    
    
    Charges
    
    
    TotalTotal expected restructuring
charges
    
    $
    966
    
    
    $
    127
    
    
    $
    1,093Balance at December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    First quarter charge to expense
    
    
    88
    
    
    
    127
    
    
    
    215Second quarter charge to expense
    
    
    9
    
    
    
    
    
    
    
    9Third quarter charge to expense
    
    
    356
    
    
    
    
    
    
    
    356Fourth quarter charge to expense
    
    
    70
    
    
    
    
    
    
    
    70Cash payments
    
    
    (111
    )
    
    
    
    
    
    
    (111
    )Non-cash utilization
    
    
    
    
    
    
    (127
    )
    
    
    (127
    )Balance at December 31, 2005
    
    $
    412
    
    
    $
    
    
    
    $
    412First quarter charge to expense
    
    
    176
    
    
    
    
    
    
    
    176Second quarter charge to expense
    
    
    (370
    )
    
    
    
    
    
    
    (370
    )Third quarter charge to expense
    
    
    127
    
    
    
    
    
    
    
    127Fourth quarter charge to expense
    
    
    436
    
    
    
    
    
    
    
    436Cash payments
    
    
    (343
    )
    
    
    
    
    
    
    (343
    )Balance at December 31, 2006
    
    $
    438
    
    
    $
    
    
    
    $
    438First quarter charge to expense
    
    
    41
    
    
    
    
    
    
    
    41Second quarter charge to expense
    
    
    31
    
    
    
    
    
    
    
    31Third quarter charge to expense
    
    
    2
    
    
    
    
    
    
    
    2Cash payments
    
    
    (512
    )
    
    
    
    
    
    
    (512
    )Balance at September 30, 2007
    
    $
    
    
    
    $
    
    
    
    $
    Remaining expected restructuring
charge
    
    $
    
    
    
    $
    
    
    
    $
    
 9




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
  Asset-
    
    
    FacilitySeverance
    
    
    Related
    
    
    Closure
    
    
    Other ExitCosts
    
    
    Charges
    
    
    Costs
    
    
    Costs
    
    
    TotalTotal expected restructuring
charges
    
    $
    3,665
    
    
    $
    983
    
    
    $
    1,137
    
    
    $
    653
    
    
    $
    6,438Balance at March 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Second quarter charge to expense
    
    
    
    
    
    
    205
    
    
    
    
    
    
    
    
    
    
    
    205Third quarter charge to expense
    
    
    
    
    
    
    202
    
    
    
    
    
    
    
    118
    
    
    
    320Fourth quarter charge to expense
    
    
    1,068
    
    
    
    207
    
    
    
    
    
    
    
    287
    
    
    
    1,562Cash payments
    
    
    (590
    )
    
    
    
    
    
    
    
    
    
    
    (405
    )
    
    
    (995
    )Non-cash utilization
    
    
    
    
    
    
    (614
    )
    
    
    
    
    
    
    
    
    
    
    (614
    )Balance at December 31, 2004
    
    $
    478
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    478First quarter charge to expense
    
    
    1,698
    
    
    
    206
    
    
    
    
    
    
    
    7
    
    
    
    1,911Second quarter charge to expense
    
    
    586
    
    
    
    163
    
    
    
    746
    
    
    
    174
    
    
    
    1,669Third quarter charge to expense
    
    
    214
    
    
    
    
    
    
    
    218
    
    
    
    35
    
    
    
    467Fourth quarter charge to expense
    
    
    (57
    )
    
    
    
    
    
    
    140
    
    
    
    (18
    )
    
    
    65Cash payments
    
    
    (2,722
    )
    
    
    
    
    
    
    (140
    )
    
    
    (198
    )
    
    
    (3,060
    )Non-cash utilization
    
    
    
    
    
    
    (369
    )
    
    
    
    
    
    
    
    
    
    
    (369
    )Balance at December 31, 2005
    
    $
    197
    
    
    $
    
    
    
    $
    964
    
    
    $
    
    
    
    $
    1,161First quarter charge to
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    48Second quarter charge to expense
    
    
    204
    
    
    
    
    
    
    
    14
    
    
    
    2
    
    
    
    220Third quarter charge to expense
    
    
    (48
    )
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    (47
    )Fourth quarter charge to expense
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18Cash payments
    
    
    (353
    )
    
    
    
    
    
    
    (569
    )
    
    
    (50
    )
    
    
    (972
    )Balance at December 31, 2006
    
    $
    
    
    
    $
    
    
    
    $
    428
    
    
    $
    
    
    
    $
    428First quarter charge to
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Second quarter charge to
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Third quarter charge to
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash payments
    
    
    
    
    
    
    
    
    
    
    (428
    )
    
    
    
    
    
    
    (428
    )Balance at September 30,
2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Remaining expected restructuring
charge
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  (9) Commitments and Contingencies
  10




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STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 Product Warranty and Recall
   2007
    
    
    2006Product warranty and recall at beginning of period
    
    $
    5,825
    
    
    $
    6,220Accruals for products shipped during period
    
    
    2,131
    
    
    
    3,185Changes in estimates of existing liabilities
    
    
    1,197
    
    
    
    525Settlements made during the period (in cash or in
kind)
    
    
    (2,518
    )
    
    
    (3,167
    )Product warranty and recall at end of period
    
    $
    6,635
    
    
    $
    6,763
 (10) Employee Benefit Plans
  Defined Benefit PlanThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    44
    
    
    $
    34
    
    
    $
    129
    
    
    $
    98Interest cost
    
    
    523
    
    
    
    308
    
    
    
    1,544
    
    
    
    893Expected return on plan
assets
    
    
    (585
    )
    
    
    (331
    )
    
    
    (1,725
    )
    
    
    (959
    )Amortization of actuarial
loss
    
    
    114
    
    
    
    79
    
    
    
    335
    
    
    
    228Net periodic benefit
cost
    
    $
    96
    
    
    $
    90
    
    
    $
    283
    
    
    $
    260
 Postretirement Benefit PlanThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    3
    
    
    $
    12
    
    
    $
    10
    
    
    $
    40Interest cost
    
    
    5
    
    
    
    17
    
    
    
    17
    
    
    
    58Settlement gain
    
    
    
    
    
    
    (1,242
    )
    
    
    
    
    
    
    (1,242
    )Amortization of actuarial
gain
    
    
    (1
    )
    
    
    
    
    
    
    (4
    )
    
    
    Net periodic benefit cost
    
    $
    7
    
    
    $
    (1,213
    )
    
    $
    23
    
    
    $
    (1,144
    )
  11




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 (11) Income Taxes
  Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109 Accounting for Income Taxes
     Jurisdiction
    
    Open Tax YearsU.S. Federal
    
    
    2003-2006France
    
    
    2003-2006Mexico
    
    
    2001-2006Spain
    
    
    2002-2006Sweden
    
    
    2001-2006United Kingdom
    
    
    2002-2006
 12




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 (12) Accounting Pronouncements
 Fair Value Measurements ,
 The Fair Value Option for Financial Assets and
Financial Liabilities - Including an Amendment of FASB Statement No. 115
 Definition of Settlement in FASB Interpretation No.
48
 13




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 (13) Segment Reporting
 Disclosures about Segments of an Enterprise and Related Information,
     Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net SalesElectronics
    
    $
    103,021
    
    
    $
    111,860
    
    
    $
    321,497
    
    
    $
    335,072Inter-segment sales
    
    
    3,806
    
    
    
    3,422
    
    
    
    13,139
    
    
    
    11,073Electronics net sales
    
    
    106,827
    
    
    
    115,282
    
    
    
    334,636
    
    
    
    346,145Control Devices
    
    
    69,793
    
    
    
    60,491
    
    
    
    220,147
    
    
    
    202,412Inter-segment sales
    
    
    1,077
    
    
    
    1,267
    
    
    
    3,560
    
    
    
    4,375Control Devices net
sales
    
    
    70,870
    
    
    
    61,758
    
    
    
    223,707
    
    
    
    206,787Eliminations
    
    
    (4,883
    )
    
    
    (4,689
    )
    
    
    (16,699
    )
    
    
    (15,448
    )Total consolidated net
sales
    
    $
    172,814
    
    
    $
    172,351
    
    
    $
    541,644
    
    
    $
    537,484Income Before Income TaxesElectronics
    
    $
    3,005
    
    
    $
    7,764
    
    
    $
    9,146
    
    
    $
    22,160Control Devices
    
    
    2,714
    
    
    
    479
    
    
    
    13,601
    
    
    
    10,032Other corporate activities
    
    
    2,827
    
    
    
    2,715
    
    
    
    6,348
    
    
    
    2,913Corporate interest expense
    
    
    (5,540
    )
    
    
    (5,686
    )
    
    
    (16,671
    )
    
    
    (17,185
    )Total consolidated income before income
taxes
    
    $
    3,006
    
    
    $
    5,272
    
    
    $
    12,424
    
    
    $
    17,920
 14




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Depreciation and AmortizationElectronics
    
    $
    3,400
    
    
    $
    2,638
    
    
    $
    10,164
    
    
    $
    7,548Control Devices
    
    
    3,812
    
    
    
    3,789
    
    
    
    11,495
    
    
    
    11,435Corporate activities
    
    
    96
    
    
    
    157
    
    
    
    270
    
    
    
    345Total consolidated depreciation and amortization(A)
    
    $
    7,308
    
    
    $
    6,584
    
    
    $
    21,929
    
    
    $
    19,328Interest Expense (Income)Electronics
    
    $
    (69
    )
    
    $
    25
    
    
    $
    (96
    )
    
    $
    282Control Devices
    
    
    (4
    )
    
    
    (1
    )
    
    
    (5
    )
    
    
    (5
    )Corporate activities
    
    
    5,540
    
    
    
    5,686
    
    
    
    16,671
    
    
    
    17,185Total consolidated interest expense, net
    
    $
    5,467
    
    
    $
    5,710
    
    
    $
    16,570
    
    
    $
    17,462Capital ExpendituresElectronics
    
    $
    1,569
    
    
    $
    3,880
    
    
    $
    6,562
    
    
    $
    10,489Control Devices
    
    
    1,641
    
    
    
    2,454
    
    
    
    7,051
    
    
    
    8,946Corporate activities
    
    
    235
    
    
    
    310
    
    
    
    646
    
    
    
    359Total consolidated capital expenditures
    
    $
    3,445
    
    
    $
    6,644
    
    
    $
    14,259
    
    
    $
    19,794
 September 30,
    
    
    December 31,2007
    
    
    2006Total AssetsElectronics
    
    $
    205,874
    
    
    $
    213,846Control Devices
    
    
    191,149
    
    
    
    187,004Corporate(B)
    
    
    282,823
    
    
    
    265,986Eliminations
    
    
    (156,693
    )
    
    
    (165,029
    )Total consolidated assets
    
    $
    523,153
    
    
    $
    501,807
 
 (A)
    
    These amounts represent depreciation and amortization on fixed and certain intangible assets.(B)
    
    Assets located at Corporate consist primarily of cash, deferred taxes and equity investments.  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net SalesNorth America
    
    $
    126,882
    
    
    $
    130,941
    
    
    $
    393,392
    
    
    $
    415,356Europe and other
    
    
    45,932
    
    
    
    41,410
    
    
    
    148,252
    
    
    
    122,128Total consolidated net sales
    
    $
    172,814
    
    
    $
    172,351
    
    
    $
    541,644
    
    
    $
    537,484
 September 30,
    
    
    December 31,2007
    
    
    2006Non-Current AssetsNorth America
    
    $
    219,749
    
    
    $
    215,429Europe and other
    
    
    25,018
    
    
    
    32,346Total consolidated non-current assets
    
    $
    244,767
    
    
    $
    247,775
 15




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 (14)
    
    Investments
 PST Indústria Eletrônica da Amazônia Ltda.
   Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Revenues
    
    $
    36,278
    
    
    $
    24,598
    
    
    $
    94,908
    
    
    $
    66,612Cost of sales
    
    $
    16,704
    
    
    $
    12,095
    
    
    $
    44,210
    
    
    $
    33,433Total pre-tax income
    
    $
    7,462
    
    
    $
    4,381
    
    
    $
    17,827
    
    
    $
    12,206The Companys share of pre-tax income
    
    $
    3,731
    
    
    $
    2,191
    
    
    $
    8,914
    
    
    $
    6,103
  Minda Instruments Ltd.
  (15) Guarantor Financial Information
    16




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 September 30, 2007Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    31,750
    
    
    $
    56
    
    
    $
    35,843
    
    
    $
    
    
    
    $
    67,649Accounts receivable, net
    
    
    54,732
    
    
    
    33,068
    
    
    
    36,116
    
    
    
    
    
    
    
    123,916Inventories, net
    
    
    25,404
    
    
    
    13,617
    
    
    
    18,570
    
    
    
    
    
    
    
    57,591Prepaid expenses and other
    
    
    (284,742
    )
    
    
    285,926
    
    
    
    18,741
    
    
    
    
    
    
    
    19,925Deferred income taxes
    
    
    2,932
    
    
    
    4,978
    
    
    
    1,395
    
    
    
    
    
    
    
    9,305Total current assets
    
    
    (169,924
    )
    
    
    337,645
    
    
    
    110,665
    
    
    
    
    
    
    
    278,386Long-Term Assets:Property, plant and equipment, net
    
    
    57,051
    
    
    
    26,055
    
    
    
    19,272
    
    
    
    
    
    
    
    102,378Other Assets:Goodwill
    
    
    44,585
    
    
    
    20,591
    
    
    
    
    
    
    
    
    
    
    
    65,176Investments and other, net
    
    
    39,650
    
    
    
    324
    
    
    
    343
    
    
    
    
    
    
    
    40,317Deferred income taxes
    
    
    39,741
    
    
    
    (2,862
    )
    
    
    17
    
    
    
    
    
    
    
    36,896Investment in subsidiaries
    
    
    430,739
    
    
    
    
    
    
    
    
    
    
    
    (430,739
    )
    
    
    Total long-term assets
    
    
    611,766
    
    
    
    44,108
    
    
    
    19,632
    
    
    
    (430,739
    )
    
    
    244,767Total Assets
    
    $
    441,842
    
    
    $
    381,753
    
    
    $
    130,297
    
    
    $
    (430,739
    )
    
    $
    523,153LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    22,357
    
    
    $
    20,840
    
    
    $
    22,556
    
    
    $
    
    
    
    $
    65,753Accrued expenses and other
    
    
    21,361
    
    
    
    8,571
    
    
    
    24,017
    
    
    
    
    
    
    
    53,949Total current liabilities
    
    
    43,718
    
    
    
    29,411
    
    
    
    46,573
    
    
    
    
    
    
    
    119,702Long-Term Liabilities:Long-term debt
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    2,030
    
    
    
    
    
    
    
    2,030Other liabilities
    
    
    503
    
    
    
    473
    
    
    
    2,824
    
    
    
    
    
    
    
    3,800Total long-term liabilities
    
    
    200,503
    
    
    
    473
    
    
    
    4,854
    
    
    
    
    
    
    
    205,830Shareholders Equity
    
    
    197,621
    
    
    
    351,869
    
    
    
    78,870
    
    
    
    (430,739
    )
    
    
    197,621Total Liabilities and Shareholders Equity
    
    $
    441,842
    
    
    $
    381,753
    
    
    $
    130,297
    
    
    $
    (430,739
    )
    
    $
    523,153
 17




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
  December 31, 2006Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    28,937
    
    
    $
    12
    
    
    $
    36,933
    
    
    $
    
    
    
    $
    65,882Accounts receivable, net
    
    
    48,187
    
    
    
    28,376
    
    
    
    30,422
    
    
    
    
    
    
    
    106,985Inventories, net
    
    
    26,173
    
    
    
    12,502
    
    
    
    19,846
    
    
    
    
    
    
    
    58,521Prepaid expenses and other
    
    
    (273,206
    )
    
    
    275,577
    
    
    
    11,077
    
    
    
    
    
    
    
    13,448Deferred income taxes
    
    
    3,724
    
    
    
    4,379
    
    
    
    1,093
    
    
    
    
    
    
    
    9,196Total current assets
    
    
    (166,185
    )
    
    
    320,846
    
    
    
    99,371
    
    
    
    
    
    
    
    254,032Long-Term Assets:Property, plant and equipment, net
    
    
    61,320
    
    
    
    31,643
    
    
    
    21,623
    
    
    
    
    
    
    
    114,586Other Assets:Goodwill
    
    
    44,585
    
    
    
    20,591
    
    
    
    
    
    
    
    
    
    
    
    65,176Investments and other, net
    
    
    30,874
    
    
    
    131
    
    
    
    170
    
    
    
    (300
    )
    
    
    30,875Deferred income taxes
    
    
    40,713
    
    
    
    (3,341
    )
    
    
    (234
    )
    
    
    
    
    
    
    37,138Investment in subsidiaries
    
    
    411,366
    
    
    
    
    
    
    
    
    
    
    
    (411,366
    )
    
    
    Total long-term assets
    
    
    588,858
    
    
    
    49,024
    
    
    
    21,559
    
    
    
    (411,666
    )
    
    
    247,775Total Assets
    
    $
    422,673
    
    
    $
    369,870
    
    
    $
    120,930
    
    
    $
    (411,666
    )
    
    $
    501,807LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    
    26,690
    
    
    
    19,044
    
    
    
    26,759
    
    
    
    
    
    
    
    72,493Accrued expenses and other
    
    
    17,291
    
    
    
    7,314
    
    
    
    21,019
    
    
    
    
    
    
    
    45,624Total current liabilities
    
    
    43,981
    
    
    
    26,358
    
    
    
    47,778
    
    
    
    
    
    
    
    118,117Long-Term Liabilities:Long-term debt
    
    
    200,000
    
    
    
    
    
    
    
    300
    
    
    
    (300
    )
    
    
    200,000Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,923
    
    
    
    
    
    
    
    1,923Other liabilities
    
    
    70
    
    
    
    450
    
    
    
    2,625
    
    
    
    
    
    
    
    3,145Total long-term liabilities
    
    
    200,070
    
    
    
    450
    
    
    
    4,848
    
    
    
    (300
    )
    
    
    205,068Shareholders Equity
    
    
    178,622
    
    
    
    343,062
    
    
    
    68,304
    
    
    
    (411,366
    )
    
    
    178,622Total Liabilities and Shareholders Equity
    
    $
    422,673
    
    
    $
    369,870
    
    
    $
    120,930
    
    
    $
    (411,666
    )
    
    $
    501,807
 18




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
  For the Three Months Ended September 30, 2007Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Sales
    
    $
    83,251
    
    
    $
    50,588
    
    
    $
    57,843
    
    
    $
    (18,868
    )
    
    $
    172,814Costs and Expenses:Cost of goods sold
    
    
    69,451
    
    
    
    40,369
    
    
    
    43,342
    
    
    
    (18,218
    )
    
    
    134,944Selling, general and administrative
    
    
    13,597
    
    
    
    7,417
    
    
    
    12,043
    
    
    
    (650
    )
    
    
    32,407(Gain) loss on sale of property, plant
and equipment, net
    
    
    231
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    223Operating Income (Loss)
    
    
    (28
    )
    
    
    2,802
    
    
    
    2,466
    
    
    
    
    
    
    
    5,240Interest expense (income), net
    
    
    5,830
    
    
    
    
    
    
    
    (363
    )
    
    
    
    
    
    
    5,467Other (income) loss, net
    
    
    (3,696
    )
    
    
    
    
    
    
    463
    
    
    
    
    
    
    
    (3,233
    )Equity earnings from subsidiaries
    
    
    (4,285
    )
    
    
    
    
    
    
    
    
    
    
    4,285
    
    
    
    Income Before Income Taxes
    
    
    2,123
    
    
    
    2,802
    
    
    
    2,366
    
    
    
    (4,285
    )
    
    
    3,006Provision (benefit) for income taxes
    
    
    (502
    )
    
    
    4
    
    
    
    879
    
    
    
    
    
    
    
    381Net Income
    
    $
    2,625
    
    
    $
    2,798
    
    
    $
    1,487
    
    
    $
    (4,285
    )
    
    $
    2,625
 For the Three Months Ended September 30, 2006Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Sales
    
    $
    86,662
    
    
    $
    52,953
    
    
    $
    54,496
    
    
    $
    (21,760
    )
    
    $
    172,351Costs and Expenses:Cost of goods sold
    
    
    75,571
    
    
    
    39,867
    
    
    
    39,798
    
    
    
    (21,063
    )
    
    
    134,173Selling, general and administrative
    
    
    13,354
    
    
    
    6,858
    
    
    
    9,559
    
    
    
    (697
    )
    
    
    29,074Loss on sale of property, plant
and equipment, net
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Operating Income (Loss)
    
    
    (2,278
    )
    
    
    6,228
    
    
    
    5,139
    
    
    
    
    
    
    
    9,089Interest expense (income), net
    
    
    5,896
    
    
    
    
    
    
    
    (186
    )
    
    
    
    
    
    
    5,710Other (income) loss, net
    
    
    (1,948
    )
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    (1,893
    )Equity earnings from subsidiaries
    
    
    (10,243
    )
    
    
    
    
    
    
    
    
    
    
    10,243
    
    
    
    Income Before Income Taxes
    
    
    4,017
    
    
    
    6,228
    
    
    
    5,270
    
    
    
    (10,243
    )
    
    
    5,272Provision (benefit) for income taxes
    
    
    (389
    )
    
    
    
    
    
    
    1,255
    
    
    
    
    
    
    
    866Net Income
    
    $
    4,406
    
    
    $
    6,228
    
    
    $
    4,015
    
    
    $
    (10,243
    )
    
    $
    4,406
 19




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
  For the Nine Months Ended September 30, 2007Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Sales
    
    $
    257,119
    
    
    $
    157,187
    
    
    $
    186,914
    
    
    $
    (59,576
    )
    
    $
    541,644Costs and Expenses:Cost of goods sold
    
    
    217,081
    
    
    
    123,231
    
    
    
    139,251
    
    
    
    (57,518
    )
    
    
    422,045Selling, general and administrative
    
    
    40,719
    
    
    
    23,090
    
    
    
    37,458
    
    
    
    (2,058
    )
    
    
    99,209Gain on sale of property, plant
and equipment, net
    
    
    (116
    )
    
    
    (1,349
    )
    
    
    
    
    
    
    
    
    
    
    (1,465
    )Operating Income (Loss)
    
    
    (565
    )
    
    
    12,215
    
    
    
    10,205
    
    
    
    
    
    
    
    21,855Interest expense (income), net
    
    
    17,498
    
    
    
    
    
    
    
    (928
    )
    
    
    
    
    
    
    16,570Other (income) loss, net
    
    
    (7,594
    )
    
    
    
    
    
    
    455
    
    
    
    
    
    
    
    (7,139
    )Equity earnings from subsidiaries
    
    
    (20,819
    )
    
    
    
    
    
    
    
    
    
    
    20,819
    
    
    
    Income Before Income Taxes
    
    
    10,350
    
    
    
    12,215
    
    
    
    10,678
    
    
    
    (20,819
    )
    
    
    12,424Provision for income taxes
    
    
    160
    
    
    
    11
    
    
    
    2,063
    
    
    
    
    
    
    
    2,234Net Income
    
    $
    10,190
    
    
    $
    12,204
    
    
    $
    8,615
    
    
    $
    (20,819
    )
    
    $
    10,190
 For the Nine Months Ended September 30, 2006Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Sales
    
    $
    267,904
    
    
    $
    172,622
    
    
    $
    162,051
    
    
    $
    (65,093
    )
    
    $
    537,484Costs and Expenses:Cost of goods sold
    
    
    230,745
    
    
    
    128,076
    
    
    
    118,785
    
    
    
    (62,987
    )
    
    
    414,619Selling, general and administrative
    
    
    39,671
    
    
    
    25,677
    
    
    
    28,802
    
    
    
    (2,106
    )
    
    
    92,044(Gain) loss on sale of property, plant
and equipment, net
    
    
    (1,457
    )
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (1,454
    )Operating Income (Loss)
    
    
    (1,055
    )
    
    
    18,869
    
    
    
    14,461
    
    
    
    
    
    
    
    32,275Interest expense (income), net
    
    
    17,665
    
    
    
    
    
    
    
    (203
    )
    
    
    
    
    
    
    17,462Other (income) loss, net
    
    
    (3,645
    )
    
    
    
    
    
    
    538
    
    
    
    
    
    
    
    (3,107
    )Equity earnings from subsidiaries
    
    
    (28,852
    )
    
    
    
    
    
    
    
    
    
    
    28,852
    
    
    
    Income Before Income Taxes
    
    
    13,777
    
    
    
    18,869
    
    
    
    14,126
    
    
    
    (28,852
    )
    
    
    17,920Provision for income taxes
    
    
    714
    
    
    
    19
    
    
    
    4,124
    
    
    
    
    
    
    
    4,857Net Income
    
    $
    13,063
    
    
    $
    18,850
    
    
    $
    10,002
    
    
    $
    (28,852
    )
    
    $
    13,063
 20




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
  For the Nine Months Ended September 30, 2007Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used for) operating activities
    
    $
    8,237
    
    
    $
    (1,561
    )
    
    $
    1,533
    
    
    $
    (300
    )
    
    $
    7,909INVESTING ACTIVITIES:Capital expenditures
    
    
    (7,772
    )
    
    
    (3,038
    )
    
    
    (3,449
    )
    
    
    
    
    
    
    (14,259
    )Proceeds from the sale of fixed assets
    
    
    392
    
    
    
    4,643
    
    
    
    7
    
    
    
    
    
    
    
    5,042Business acquisitions and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash (used for) provided by investing activities
    
    
    (7,380
    )
    
    
    1,605
    
    
    
    (3,442
    )
    
    
    
    
    
    
    (9,217
    )FINANCING ACTIVITIES:Borrowings (repayments) of long-term debt
    
    
    
    
    
    
    
    
    
    
    (300
    )
    
    
    300
    
    
    
    Share-based compensation activity, net
    
    
    1,956
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,956Other financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used for) financing activities
    
    
    1,956
    
    
    
    
    
    
    
    (300
    )
    
    
    300
    
    
    
    1,956Effect of exchange rate changes on cash
and cash equivalents
    
    
    
    
    
    
    
    
    
    
    1,119
    
    
    
    
    
    
    
    1,119Net change in cash and cash equivalents
    
    
    2,813
    
    
    
    44
    
    
    
    (1,090
    )
    
    
    
    
    
    
    1,767Cash and cash equivalents at beginning
of period
    
    
    28,937
    
    
    
    12
    
    
    
    36,933
    
    
    
    
    
    
    
    65,882Cash and cash equivalents at end of period
    
    $
    31,750
    
    
    $
    56
    
    
    $
    35,843
    
    
    $
    
    
    
    $
    67,649
 For the Nine Months Ended September 30, 2006Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used for) operating activities
    
    $
    (4,799
    )
    
    $
    5,075
    
    
    $
    33,353
    
    
    $
    (11,019
    )
    
    $
    22,610INVESTING ACTIVITIES:Capital expenditures
    
    
    (9,273
    )
    
    
    (4,840
    )
    
    
    (5,681
    )
    
    
    
    
    
    
    (19,794
    )Proceeds from the sale of fixed assets
    
    
    2,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,266Business acquisitions and other
    
    
    (110
    )
    
    
    (50
    )
    
    
    388
    
    
    
    (896
    )
    
    
    (668
    )Net cash used for investing activities
    
    
    (7,117
    )
    
    
    (4,890
    )
    
    
    (5,293
    )
    
    
    (896
    )
    
    
    (18,196
    )FINANCING ACTIVITIES:Borrowings (repayments) of long-term debt
    
    
    1,556
    
    
    
    
    
    
    
    (12,619
    )
    
    
    11,019
    
    
    
    (44
    )Share-based compensation activity, net
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47Shareholder distributions
    
    
    10,850
    
    
    
    
    
    
    
    (10,850
    )
    
    
    
    
    
    
    Other financing costs
    
    
    7,544
    
    
    
    (186
    )
    
    
    (8,404
    )
    
    
    896
    
    
    
    (150
    )Net cash provided by (used for) financing activities
    
    
    19,997
    
    
    
    (186
    )
    
    
    (31,873
    )
    
    
    11,915
    
    
    
    (147
    )Effect of exchange rate changes on cash
and cash equivalents
    
    
    
    
    
    
    
    
    
    
    1,679
    
    
    
    
    
    
    
    1,679Net change in cash and cash equivalents
    
    
    8,081
    
    
    
    (1
    )
    
    
    (2,134
    )
    
    
    
    
    
    
    5,946Cash and cash equivalents at beginning
of period
    
    
    7,754
    
    
    
    47
    
    
    
    32,983
    
    
    
    
    
    
    
    40,784Cash and cash equivalents at end of period
    
    $
    15,835
    
    
    $
    46
    
    
    $
    30,849
    
    
    $
    
    
    
    $
    46,730
 21




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)
 (16) Subsequent Events
 PST Filing
 Comissão de Valores Mobiliários
 Restructuring Initiatives
  New Credit Agreement
  22




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
          23




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##### Table of Contents



Results of Operations
    Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006
 Net Sales.
 Three Months EndedSeptember 30,
    
    
    September 30,
    
    
    $ Increase /
    
    
    % Increase /2007
    
    
    2006
    
    
    (Decrease)
    
    
    (Decrease)Electronics
    
    $
    103,021
    
    
    
    59.6
    %
    
    $
    111,860
    
    
    
    64.9
    %
    
    $
    (8,839
    )
    
    
    (7.9
    )%Control Devices
    
    
    69,793
    
    
    
    40.4
    
    
    
    60,491
    
    
    
    35.1
    
    
    
    9,302
    
    
    
    15.4
    %Total net sales
    
    $
    172,814
    
    
    
    100.0
    %
    
    $
    172,351
    
    
    
    100.0
    %
    
    $
    463
    
    
    
    0.3
    %
   24




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##### Table of Contents



Three Months EndedSeptember 30,
    
    
    September 30,
    
    
    $ Increase /
    
    
    % Increase /2007
    
    
    2006
    
    
    (Decrease)
    
    
    (Decrease)North America
    
    $
    126,882
    
    
    
    73.4
    %
    
    $
    130,941
    
    
    
    76.0
    %
    
    $
    (4,059
    )
    
    
    (3.1
    )%Europe and other
    
    
    45,932
    
    
    
    26.6
    
    
    
    41,410
    
    
    
    24.0
    
    
    
    4,522
    
    
    
    10.9
    %Total net sales
    
    $
    172,814
    
    
    
    100.0
    %
    
    $
    172,351
    
    
    
    100.0
    %
    
    $
    463
    
    
    
    0.3
    %
   Three Months EndedSeptember 30,
    
    
    September 30,
    
    
    $ Increase /2007
    
    
    2006
    
    
    (Decrease)Net Sales
    
    $
    172,814
    
    
    
    100.0
    %
    
    $
    172,351
    
    
    
    100.0
    %
    
    $
    463Costs and Expenses:Cost of goods sold
    
    
    134,944
    
    
    
    78.1
    
    
    
    134,173
    
    
    
    77.8
    
    
    
    771Selling, general and administrative
    
    
    32,407
    
    
    
    18.8
    
    
    
    29,074
    
    
    
    16.9
    
    
    
    3,333Loss on sale of property, plant & equipment, net
    
    
    223
    
    
    
    0.1
    
    
    
    15
    
    
    
    0.0
    
    
    
    208Operating Income
    
    
    5,240
    
    
    
    3.0
    
    
    
    9,089
    
    
    
    5.3
    
    
    
    (3,849
    )Interest expense, net
    
    
    5,467
    
    
    
    3.2
    
    
    
    5,710
    
    
    
    3.3
    
    
    
    (243
    )Equity in earnings of investees
    
    
    (3,506
    )
    
    
    (2.0
    )
    
    
    (1,838
    )
    
    
    (1.1
    )
    
    
    (1,668
    )Other (income) expense, net
    
    
    273
    
    
    
    0.2
    
    
    
    (55
    )
    
    
    
    
    
    
    328Income Before Income Taxes
    
    
    3,006
    
    
    
    1.6
    
    
    
    5,272
    
    
    
    3.1
    
    
    
    (2,266
    )Provision for income taxes
    
    
    381
    
    
    
    0.2
    
    
    
    866
    
    
    
    0.5
    
    
    
    (485
    )Net Income
    
    $
    2,625
    
    
    
    1.4
    %
    
    $
    4,406
    
    
    
    2.6
    %
    
    $
    (1,781
    )
 Cost of Goods Sold.
 Selling, General and Administrative Expenses.
  25




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##### Table of Contents



Equity in Earnings of Investees.
 Income Before Income Taxes.
 Three Months EndedSeptember 30,
    
    
    September 30,
    
    
    $ Increase /
    
    
    % Increase /2007
    
    
    2006
    
    
    (Decrease)
    
    
    (Decrease)Electronics
    
    $
    3,005
    
    
    $
    7,764
    
    
    $
    (4,759
    )
    
    
    (61.3
    )%Control Devices
    
    
    2,714
    
    
    
    479
    
    
    
    2,235
    
    
    
    466.6
    %Other corporate activities
    
    
    2,827
    
    
    
    2,715
    
    
    
    112
    
    
    
    4.1
    %Corporate interest expense
    
    
    (5,540
    )
    
    
    (5,686
    )
    
    
    146
    
    
    
    2.6
    %Income before income taxes
    
    $
    3,006
    
    
    $
    5,272
    
    
    $
    (2,266
    )
    
    
    (43.0
    )%
     Three Months EndedSeptember 30,
    
    
    September 30,
    
    
    $ Increase /
    
    
    % Increase /2007
    
    
    2006
    
    
    (Decrease)
    
    
    (Decrease)North America
    
    $
    1,842
    
    
    
    61.3
    %
    
    $
    669
    
    
    
    12.7
    %
    
    $
    1,173
    
    
    
    175.3
    %Europe and other
    
    
    1,164
    
    
    
    38.7
    
    
    
    4,603
    
    
    
    87.3
    
    
    
    (3,439
    )
    
    
    (74.7
    )%Income before income taxes
    
    $
    3,006
    
    
    
    100.0
    %
    
    $
    5,272
    
    
    
    100.0
    %
    
    $
    (2,266
    )
    
    
    (43.0
    )%
  Provision for Income Taxes.
 26




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##### Table of Contents



Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006
 Net Sales.
 Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    $ Increase /
    
    
    % Increase /2007
    
    
    2006
    
    
    (Decrease)
    
    
    (Decrease)Electronics
    
    $
    321,497
    
    
    
    59.4
    %
    
    $
    335,072
    
    
    
    62.3
    %
    
    $
    (13,575
    )
    
    
    (4.1
    )%Control Devices
    
    
    220,147
    
    
    
    40.6
    
    
    
    202,412
    
    
    
    37.7
    
    
    
    17,735
    
    
    
    8.8
    %Total net sales
    
    $
    541,644
    
    
    
    100.0
    %
    
    $
    537,484
    
    
    
    100.0
    %
    
    $
    4,160
    
    
    
    0.8
    %
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    $ Increase /
    
    
    % Increase /2007
    
    
    2006
    
    
    (Decrease)
    
    
    (Decrease)North America
    
    $
    393,392
    
    
    
    72.6
    %
    
    $
    415,356
    
    
    
    77.3
    %
    
    $
    (21,964
    )
    
    
    (5.3
    )%Europe and other
    
    
    148,252
    
    
    
    27.4
    
    
    
    122,128
    
    
    
    22.7
    
    
    
    26,124
    
    
    
    21.4
    %Total net sales
    
    $
    541,644
    
    
    
    100.0
    %
    
    $
    537,484
    
    
    
    100.0
    %
    
    $
    4,160
    
    
    
    0.8
    %
  27




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##### Table of Contents



Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    $ Increase /2007
    
    
    2006
    
    
    (Decrease)Net Sales
    
    $
    541,644
    
    
    
    100.0
    %
    
    $
    537,484
    
    
    
    100.0
    %
    
    $
    4,160Costs and Expenses:Cost of goods sold
    
    
    422,045
    
    
    
    77.9
    
    
    
    414,619
    
    
    
    77.1
    
    
    
    7,426Selling, general and administrative
    
    
    99,209
    
    
    
    18.3
    
    
    
    92,044
    
    
    
    17.1
    
    
    
    7,165Gain on sale of property, plant & equipment, net
    
    
    (1,465
    )
    
    
    (0.2
    )
    
    
    (1,454
    )
    
    
    (0.3
    )
    
    
    (11
    )Operating Income
    
    
    21,855
    
    
    
    4.0
    
    
    
    32,275
    
    
    
    6.1
    
    
    
    (10,420
    )Interest expense, net
    
    
    16,570
    
    
    
    3.1
    
    
    
    17,462
    
    
    
    3.2
    
    
    
    (892
    )Equity in earnings of investees
    
    
    (7,924
    )
    
    
    (1.5
    )
    
    
    (4,804
    )
    
    
    (0.9
    )
    
    
    (3,120
    )Other expense, net
    
    
    785
    
    
    
    0.1
    
    
    
    1,697
    
    
    
    0.3
    
    
    
    (912
    )Income Before Income Taxes
    
    
    12,424
    
    
    
    2.3
    
    
    
    17,920
    
    
    
    3.5
    
    
    
    (5,496
    )Provision for income taxes
    
    
    2,234
    
    
    
    0.4
    
    
    
    4,857
    
    
    
    0.9
    
    
    
    (2,623
    )Net Income
    
    $
    10,190
    
    
    
    1.8
    %
    
    $
    13,063
    
    
    
    2.6
    %
    
    $
    (2,873
    )
 Cost of Goods Sold.
 Selling, General and Administrative Expenses.
  Gain on Sale of Property, Plant and Equipment, net.
 Equity in Earnings of Investees.
 28




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##### Table of Contents



Income Before Income Taxes.
 Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    $ Increase /
    
    
    % Increase /2007
    
    
    2006
    
    
    (Decrease)
    
    
    (Decrease)Electronics
    
    $
    9,146
    
    
    $
    22,160
    
    
    $
    (13,014
    )
    
    
    (58.7)
    %Control Devices
    
    
    13,601
    
    
    
    10,032
    
    
    
    3,569
    
    
    
    35.6
    %Other corporate
activities
    
    
    6,348
    
    
    
    2,913
    
    
    
    3,435
    
    
    
    117.9
    %Corporate interest
expense
    
    
    (16,671
    )
    
    
    (17,185
    )
    
    
    514
    
    
    
    3.0
    %Income before income
taxes
    
    $
    12,424
    
    
    $
    17,920
    
    
    $
    (5,496
    )
    
    
    (30.7)
    %
     Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    $ Increase /
    
    
    % Increase /2007
    
    
    2006
    
    

    (Decrease)
    
    
    (Decrease)North America
    
    $
    5,667
    
    
    
    45.6
    %
    
    $
    6,006
    
    
    
    33.5
    %
    
    $
    (339
    )
    
    
    (5.6
    )%Europe and other
    
    
    6,757
    
    
    
    54.4
    
    
    
    11,914
    
    
    
    66.5
    
    
    
    (5,157
    )
    
    
    (43.3
    )%Income before income
taxes
    
    $
    12,424
    
    
    
    100.0
    %
    
    $
    17,920
    
    
    
    100.0
    %
    
    $
    (5,496
    )
    
    
    (30.7
    )%
  Provision for Income Taxes.
 29




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##### Table of Contents



Liquidity and Capital Resources
 Summary of Cash Flows (in thousands):
 Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    $ Increase /2007
    
    
    2006
    
    
    (Decrease)Cash provided by (used for):Operating activities
    
    $
    7,909
    
    
    $
    22,610
    
    
    $
    (14,701
    )Investing activities
    
    
    (9,217
    )
    
    
    (18,196
    )
    
    
    8,979Financing activities
    
    
    1,956
    
    
    
    (147
    )
    
    
    2,103Effect of exchange rate changes on cash and cash equivalents
    
    
    1,119
    
    
    
    1,679
    
    
    
    (560
    )Net change in cash and cash equivalents
    
    $
    1,767
    
    
    $
    5,946
    
    
    $
    (4,179
    )
       Critical Accounting Policies and Estimates
  30




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##### Table of Contents



Inflation and International Presence
  Forward-Looking Statements
  
    
    the loss or bankruptcy of a major customer or supplier;
    
    the costs and timing of facility closures, business realignment, or similar actions;
    
    a significant change in automotive, medium- and heavy-duty, agricultural or off-highway
vehicle production;
    
    our ability to achieve cost reductions that offset or exceed customer-mandated selling
price reductions;
    
    a significant change in general economic conditions in any of the various countries in
which we operate;
    
    labor disruptions at our facilities or at any of our significant customers or suppliers;
    
    the ability of our suppliers to supply us with parts and components at competitive
prices on a timely basis;
    
    the amount of debt and the restrictive covenants contained in our credit facility;
    
    customer acceptance of new products;
    
    capital availability or costs, including changes in interest rates or market
perceptions;
    
    the successful integration of any acquired businesses;
    
    the occurrence or non-occurrence of circumstances beyond our control; and
    
    those items described in Part I, Item IA (Risk Factors) of the Companys 2006 Form
10-K.
 31




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 Interest Rate Risk
  Commodity Price Risk
    Foreign Currency Exchange Risk
    32




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##### Table of Contents



Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  33




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##### Table of Contents



PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
  34




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##### Table of Contents



SIGNATURES
  STONERIDGE, INC.Date:  November 9, 2007
    /s/ John C. CoreyJohn C. CoreyPresident, Chief Executive Officer and Director
(Principal Executive Officer)Date:  November 9, 2007
    /s/ George E. StricklerGeorge E. StricklerExecutive Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer) 35




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit31.1
    
    Chief Executive Officer certification pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, filed herewith.31.2
    
    Chief Financial Officer certification pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, filed herewith.32.1
    
    Chief Executive Officer certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.32.2
    
    Chief Financial Officer certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.
 36