##### 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 June 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 Commission file number: 001 13337
 STONERIDGE, INC.
 (Exact name of registrant as specified in its charter)
 Ohio
    
    34-1598949(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    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 June 30, 2007 (Unaudited) and December 31, 2006 (Audited)
    
    
    2Condensed Consolidated Statements of Operations (Unaudited) For the 3 and 6 Months Ended June 30, 2007 and
13 and 26 Weeks Ended July 1, 2006
    
    
    3Condensed Consolidated Statements of Cash Flows (Unaudited) For the 6 Months Ended June 30, 2007 and 26
Weeks Ended July 1, 2006
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    31PART IIOTHER INFORMATIONItem 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    32Item 4. Submission of Matters to a Vote of Security Holders
    
    
    32Item 5. Other Information
    
    
    33Item 6. Exhibits
    
    
    33Signatures
    
    
    34Index to Exhibits
    
    
    35EX-3.1EX-10.1EX-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)
 June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)
    
    
    (Audited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    66,066
    
    
    $
    65,882Accounts receivable, less allowances for doubtful accounts and other reserves of
$5,747 and $5,243, respectively
    
    
    113,818
    
    
    
    106,985Inventories, net
    
    
    57,261
    
    
    
    58,521Prepaid expenses and other
    
    
    21,037
    
    
    
    13,448Deferred income taxes
    
    
    8,820
    
    
    
    9,196Total current assets
    
    
    267,002
    
    
    
    254,032Long-Term Assets:Property, plant and equipment, net
    
    
    106,016
    
    
    
    114,586Other Assets:Goodwill
    
    
    65,176
    
    
    
    65,176Investments and other, net
    
    
    36,138
    
    
    
    30,875Deferred income taxes
    
    
    36,133
    
    
    
    37,138Total long-term assets
    
    
    243,463
    
    
    
    247,775Total Assets
    
    $
    510,465
    
    
    $
    501,807LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    66,499
    
    
    $
    72,493Accrued expenses and other
    
    
    46,597
    
    
    
    45,624Total current liabilities
    
    
    113,096
    
    
    
    118,117Long-Term Liabilities:Long-term debt
    
    
    200,000
    
    
    
    200,000Deferred income taxes
    
    
    1,921
    
    
    
    1,923Other liabilities
    
    
    3,695
    
    
    
    3,145Total long-term liabilities
    
    
    205,616
    
    
    
    205,068Shareholders Equity:Preferred Shares, without par value, authorized 5,000 shares, none issued
    
    
    
    
    
    
    Common Shares, without par value, authorized 60,000 shares, issued 24,582 and
23,990
shares and outstanding 24,224 and 23,804 shares, respectively, with no stated value
    
    
    
    
    
    
    Additional paid-in capital
    
    
    152,754
    
    
    
    150,078Common Shares held in treasury, 358 and 186 shares, respectively, at cost
    
    
    (369
    )
    
    
    (151
    )Retained earnings
    
    
    29,266
    
    
    
    21,701Accumulated other comprehensive income
    
    
    10,102
    
    
    
    6,994Total shareholders equity
    
    
    191,753
    
    
    
    178,622Total Liabilities and Shareholders Equity
    
    $
    510,465
    
    
    $
    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
    
    
    Six Months EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Net Sales
    
    $
    183,802
    
    
    $
    185,499
    
    
    $
    368,830
    
    
    $
    365,133Costs and Expenses:Cost of goods sold
    
    
    144,920
    
    
    
    141,504
    
    
    
    287,101
    
    
    
    280,447Selling, general and administrative
    
    
    33,629
    
    
    
    31,151
    
    
    
    66,802
    
    
    
    62,971(Gain) Loss on sale of property, plant and equipment, net
    
    
    (1,653
    )
    
    
    20
    
    
    
    (1,688
    )
    
    
    (1,469
    )Operating Income
    
    
    6,906
    
    
    
    12,824
    
    
    
    16,615
    
    
    
    23,184Interest expense, net
    
    
    5,619
    
    
    
    5,833
    
    
    
    11,103
    
    
    
    11,752Equity in earnings of investees
    
    
    (2,298
    )
    
    
    (1,550
    )
    
    
    (4,418
    )
    
    
    (2,966
    )Other loss, net
    
    
    224
    
    
    
    1,745
    
    
    
    512
    
    
    
    1,750Income Before Income Taxes
    
    
    3,361
    
    
    
    6,796
    
    
    
    9,418
    
    
    
    12,648Provision for income taxes
    
    
    666
    
    
    
    1,906
    
    
    
    1,853
    
    
    
    3,993Net Income
    
    $
    2,695
    
    
    $
    4,890
    
    
    $
    7,565
    
    
    $
    8,655Basic net income per share
    
    $
    0.12
    
    
    $
    0.21
    
    
    $
    0.33
    
    
    $
    0.38Basic weighted average shares outstanding
    
    
    23,114
    
    
    
    22,861
    
    
    
    23,052
    
    
    
    22,824Diluted net income per share
    
    $
    0.11
    
    
    $
    0.21
    
    
    $
    0.32
    
    
    $
    0.38Diluted weighted average shares outstanding
    
    
    23,702
    
    
    
    22,902
    
    
    
    23,603
    
    
    
    22,884
  3




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STONERIDGE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (in thousands)
 Six Months EndedJune 30,
    
    
    July 1,2007
    
    
    2006OPERATING
ACTIVITIES:Net income
    
    $
    7,565
    
    
    $
    8,655Adjustments to reconcile net income to net cash provided by (used for)
operating activities -Depreciation
    
    
    14,513
    
    
    
    12,608Amortization
    
    
    799
    
    
    
    821Deferred income taxes
    
    
    (325
    )
    
    
    2,269Equity in earnings of investees
    
    
    (4,418
    )
    
    
    (2,980
    )Gain on sale of property, plant and equipment
    
    
    (1,688
    )
    
    
    (1,469
    )Share-based compensation expense
    
    
    1,252
    
    
    
    926Changes in operating assets and liabilities -Accounts receivable, net
    
    
    (6,506
    )
    
    
    (24,274
    )Inventories, net
    
    
    1,538
    
    
    
    (2,372
    )Prepaid expenses and other
    
    
    (3,910
    )
    
    
    (219
    )Other assets
    
    
    (6
    )
    
    
    985Accounts payable
    
    
    (6,112
    )
    
    
    15,489Accrued expenses and other
    
    
    1,317
    
    
    
    1,776Net cash provided by operating activities
    
    
    4,019
    
    
    
    12,215INVESTING ACTIVITIES:Capital expenditures
    
    
    (10,814
    )
    
    
    (13,150
    )Proceeds from sale of property, plant and equipment
    
    
    4,951
    
    
    
    2,266Business acquisitions and other
    
    
    
    
    
    
    (673
    )Net cash used for investing activities
    
    
    (5,863
    )
    
    
    (11,557
    )FINANCING ACTIVITIES:Repayments of long-term debt
    
    
    
    
    
    
    (44
    )Share-based compensation activity, net
    
    
    1,796
    
    
    
    13Other financing costs
    
    
    
    
    
    
    (150
    )Net cash provided by (used for) financing activities
    
    
    1,796
    
    
    
    (181
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    232
    
    
    
    1,730Net change in cash and cash equivalents
    
    
    184
    
    
    
    2,207Cash and cash equivalents at beginning of period
    
    
    65,882
    
    
    
    40,784Cash and cash equivalents at end of period
    
    $
    66,066
    
    
    $
    42,991
  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
  June 30,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    36,586
    
    
    $
    39,832Work-in-progress
    
    
    8,778
    
    
    
    8,196Finished goods
    
    
    13,591
    
    
    
    12,614Total inventories
    
    
    58,955
    
    
    
    60,642Less: LIFO reserve
    
    
    (1,694
    )
    
    
    (2,121
    )Inventories, net
    
    $
    57,261
    
    
    $
    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
    
    
    Six Months EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    2,695
    
    
    $
    4,890
    
    
    $
    7,565
    
    
    $
    8,655Other comprehensive income:Currency translation adjustments
    
    
    1,533
    
    
    
    2,325
    
    
    
    1,982
    
    
    
    3,359Pension liability adjustments
    
    
    (28
    )
    
    
    (197
    )
    
    
    (36
    )
    
    
    (234
    )Unrealized gain (loss) on marketable securities
    
    
    10
    
    
    
    (19
    )
    
    
    61
    
    
    
    22Unrecognized gain on derivatives
    
    
    629
    
    
    
    
    
    
    
    1,101
    
    
    
    Total other comprehensive income
    
    
    2,144
    
    
    
    2,109
    
    
    
    3,108
    
    
    
    3,147Comprehensive income
    
    $
    4,839
    
    
    $
    6,999
    
    
    $
    10,673
    
    
    $
    11,802
  June 30,
    
    
    December 31,2007
    
    
    2006Foreign currency translation adjustments
    
    $
    10,507
    
    
    $
    8,525Pension liability adjustments
    
    
    (1,503
    )
    
    
    (1,467
    )Unrealized loss on marketable securities
    
    
    (3
    )
    
    
    (64
    )Unrecognized gain on derivatives
    
    
    1,101
    
    
    
    Accumulated other comprehensive income
    
    $
    10,102
    
    
    $
    6,994
 7




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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)
 (6) Long-Term Debt
 Senior Notes
  Credit Agreement
  (7) Net Income Per Share
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Basic weighted-average shares outstanding
    
    
    23,113,827
    
    
    
    22,861,311
    
    
    
    23,051,721
    
    
    
    22,824,135Effect of dilutive securities
    
    
    588,522
    
    
    
    40,932
    
    
    
    551,096
    
    
    
    59,968Diluted weighted-average shares outstanding
    
    
    23,702,349
    
    
    
    22,902,243
    
    
    
    23,602,817
    
    
    
    22,884,103
  8




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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)
  (8) Restructuring
   Asset-Severance
    
    
    RelatedCosts
    
    
    Charges
    
    
    TotalTotal expected restructuring charges
    
    $
    964
    
    
    $
    127
    
    
    $
    1,091Balance 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
    
    
    
    
    
    
    
    31Cash payments
    
    
    (493
    )
    
    
    
    
    
    
    (493
    )Balance at June 30, 2007
    
    $
    17
    
    
    $
    
    
    
    $
    17Remaining expected restructuring charge
    
    $
    
    
    
    $
    
    
    
    $
    
 9




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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

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash
payments
    
    
    
    
    

    
    
    

    

    
    (324
    )
    

    
    
    

    
   
    (324
    )Balance at June 30,
2007
    
    $
    
    
    
    $
    
    
    
    $
    104
    
    
    $
    
    
    
    $
    104Remaining 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
    
    
    1,228
    
    
    
    2,019Changes in estimates of existing liabilities
    
    
    847
    
    
    
    96Settlements made during the period (in cash or in kind)
    
    
    (2,069
    )
    
    
    (2,291
    )Product warranty and recall at end of period
    
    $
    5,831
    
    
    $
    6,044
 (10) Employee Benefit Plans
  Defined Benefit PlanThree Months Ended
    
    
    Six Months EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    43
    
    
    $
    36
    
    
    $
    85
    
    
    $
    64Interest cost
    
    
    514
    
    
    
    331
    
    
    
    1,021
    
    
    
    585Expected return on plan assets
    
    
    (574
    )
    
    
    (355
    )
    
    
    (1,140
    )
    
    
    (628
    )Amortization of actuarial loss
    
    
    111
    
    
    
    84
    
    
    
    221
    
    
    
    149Net periodic benefit cost
    
    $
    94
    
    
    $
    96
    
    
    $
    187
    
    
    $
    170
 Postretirement Benefit PlanThree Months Ended
    
    
    Six Months EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    4
    
    
    $
    4
    
    
    $
    7
    
    
    $
    8Interest cost
    
    
    6
    
    
    
    4
    
    
    
    12
    
    
    
    8Amortization of actuarial gain
    
    
    (2
    )
    
    
    
    
    
    
    (3
    )
    
    
    Net periodic benefit cost
    
    $
    8
    
    
    $
    8
    
    
    $
    16
    
    
    $
    16
  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 YearsFederal
    
    
    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 ,
 Accounting for
Planned Major Maintenance Activities
 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
    
    
    Six Months EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Net SalesElectronics
    
    $
    98,248
    
    
    $
    105,543
    
    
    $
    199,049
    
    
    $
    205,907Inter-segment sales
    
    
    5,359
    
    
    
    4,534
    
    
    
    10,490
    
    
    
    9,003Electronics net sales
    
    
    103,607
    
    
    
    110,077
    
    
    
    209,539
    
    
    
    214,910Control Devices
    
    
    85,554
    
    
    
    79,956
    
    
    
    169,781
    
    
    
    159,226Inter-segment sales
    
    
    590
    
    
    
    1,193
    
    
    
    1,391
    
    
    
    2,111Control Devices net sales
    
    
    86,144
    
    
    
    81,149
    
    
    
    171,172
    
    
    
    161,337Eliminations
    
    
    (5,949
    )
    
    
    (5,727
    )
    
    
    (11,881
    )
    
    
    (11,114
    )Total consolidated net sales
    
    $
    183,802
    
    
    $
    185,499
    
    
    $
    368,830
    
    
    $
    365,133Income Before Income TaxesElectronics
    
    $
    1,884
    
    
    $
    8,847
    
    
    $
    8,990
    
    
    $
    15,044Control Devices
    
    
    5,510
    
    
    
    4,497
    
    
    
    8,038
    
    
    
    8,906Other corporate activities
    
    
    1,572
    
    
    
    (735
    )
    
    
    3,521
    
    
    
    197Corporate interest expense
    
    
    (5,605
    )
    
    
    (5,813
    )
    
    
    (11,131
    )
    
    
    (11,499
    )Total consolidated income before income taxes
    
    $
    3,361
    
    
    $
    6,796
    
    
    $
    9,418
    
    
    $
    12,648Depreciation and AmortizationElectronics
    
    $
    2,427
    
    
    $
    1,977
    
    
    $
    4,757
    
    
    $
    3,767Control Devices
    
    
    4,885
    
    
    
    4,359
    
    
    
    9,690
    
    
    
    8,789Corporate activities
    
    
    88
    
    
    
    97
    
    
    
    173
    
    
    
    188Total consolidated depreciation and
amortization(A)
    
    $
    7,400
    
    
    $
    6,433
    
    
    $
    14,620
    
    
    $
    12,744
 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
    
    
    Six Months EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Interest Expense (Income)Electronics
    
    $
    (137
    )
    
    $
    (131
    )
    
    $
    (225
    )
    
    $
    (237
    )Control Devices
    
    
    151
    
    
    
    151
    
    
    
    197
    
    
    
    490Corporate activities
    
    
    5,605
    
    
    
    5,813
    
    
    
    11,131
    
    
    
    11,499Total consolidated interest expense, net
    
    $
    5,619
    
    
    $
    5,833
    
    
    $
    11,103
    
    
    $
    11,752Capital ExpendituresElectronics
    
    $
    1,446
    
    
    $
    2,834
    
    
    $
    4,173
    
    
    $
    5,034Control Devices
    
    
    2,817
    
    
    
    3,750
    
    
    
    6,231
    
    
    
    8,067Corporate activities
    
    
    (256
    )
    
    
    3
    
    
    
    410
    
    
    
    49Total consolidated capital expenditures
    
    $
    4,007
    
    
    $
    6,587
    
    
    $
    10,814
    
    
    $
    13,150
 June 30,
    
    
    December 31,2007
    
    
    2006Total AssetsElectronics
    
    $
    172,237
    
    
    $
    184,327Control Devices
    
    
    220,653
    
    
    
    216,523Corporate(B)
    
    
    275,775
    
    
    
    265,986Eliminations
    
    
    (158,200
    )
    
    
    (165,029
    )Total consolidated assets
    
    $
    510,465
    
    
    $
    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
    
    
    Six Months EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Net SalesNorth America
    
    $
    132,449
    
    
    $
    143,391
    
    
    $
    266,510
    
    
    $
    284,415Europe and other
    
    
    51,353
    
    
    
    42,108
    
    
    
    102,320
    
    
    
    80,718Total consolidated net sales
    
    $
    183,802
    
    
    $
    185,499
    
    
    $
    368,830
    
    
    $
    365,133
 June 30,
    
    
    December 31,2007
    
    
    2006Non-Current AssetsNorth America
    
    $
    216,406
    
    
    $
    215,429Europe and other
    
    
    27,057
    
    
    
    32,346Total consolidated non-current assets
    
    $
    243,463
    
    
    $
    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
June 30,
    
    Six Months Ended
June 30,2007
    
    2006
    
    2007
    
    2006Revenues
    
    $
    31,279
    
    
    $
    21,014
    
    
    $
    58,630
    
    
    $
    42,013Cost of sales
    
    $
    14,683
    
    
    $
    10,664
    
    
    $
    27,506
    
    
    $
    21,338Total pre-tax income
    
    $
    5,040
    
    
    $
    3,628
    
    
    $
    10,365
    
    
    $
    7,824The Companys share of pre-tax income
    
    $
    2,520
    
    
    $
    1,814
    
    
    $
    5,183
    
    
    $
    3,912
  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)
 June 30, 2007Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    28,474
    
    
    $
    40
    
    
    $
    37,552
    
    
    $
    
    
    
    $
    66,066Accounts receivable, net
    
    
    47,693
    
    
    
    31,933
    
    
    
    34,192
    
    
    
    
    
    
    
    113,818Inventories, net
    
    
    24,382
    
    
    
    14,290
    
    
    
    18,589
    
    
    
    
    
    
    
    57,261Prepaid expenses and other
    
    
    (279,803
    )
    
    
    283,871
    
    
    
    16,969
    
    
    
    
    
    
    
    21,037Deferred income taxes
    
    
    2,939
    
    
    
    4,634
    
    
    
    1,247
    
    
    
    
    
    
    
    8,820Total current assets
    
    
    (176,315
    )
    
    
    334,768
    
    
    
    108,549
    
    
    
    
    
    
    
    267,002Long-Term Assets:Property, plant and equipment, net
    
    
    58,783
    
    
    
    27,144
    
    
    
    20,089
    
    
    
    
    
    
    
    106,016Other Assets:Goodwill
    
    
    44,585
    
    
    
    20,591
    
    
    
    
    
    
    
    
    
    
    
    65,176Investments and other, net
    
    
    35,567
    
    
    
    363
    
    
    
    208
    
    
    
    
    
    
    
    36,138Deferred income taxes
    
    
    39,244
    
    
    
    (3,069
    )
    
    
    (42
    )
    
    
    
    
    
    
    36,133Investment in subsidiaries
    
    
    426,283
    
    
    
    
    
    
    
    
    
    
    
    (426,283
    )
    
    
    Total long-term assets
    
    
    604,462
    
    
    
    45,029
    
    
    
    20,255
    
    
    
    (426,283
    )
    
    
    243,463Total Assets
    
    $
    428,147
    
    
    $
    379,797
    
    
    $
    128,804
    
    
    $
    (426,283
    )
    
    $
    510,465LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    21,277
    
    
    $
    20,880
    
    
    $
    24,342
    
    
    $
    
    
    
    $
    66,499Accrued expenses and other
    
    
    14,635
    
    
    
    8,241
    
    
    
    23,721
    
    
    
    
    
    
    
    46,597Total current liabilities
    
    
    35,912
    
    
    
    29,121
    
    
    
    48,063
    
    
    
    
    
    
    
    113,096Long-Term Liabilities:Long-term debt
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,921
    
    
    
    
    
    
    
    1,921Other liabilities
    
    
    482
    
    
    
    465
    
    
    
    2,748
    
    
    
    
    
    
    
    3,695Total long-term liabilities
    
    
    200,482
    
    
    
    465
    
    
    
    4,669
    
    
    
    
    
    
    
    205,616Shareholders Equity
    
    
    191,753
    
    
    
    350,211
    
    
    
    76,072
    
    
    
    (426,283
    )
    
    
    191,753Total Liabilities and Shareholders Equity
    
    $
    428,147
    
    
    $
    379,797
    
    
    $
    128,804
    
    
    $
    (426,283
    )
    
    $
    510,465
 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 June 30, 2007Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Sales
    
    $
    85,017
    
    
    $
    54,528
    
    
    $
    65,096
    
    
    $
    (20,839
    )
    
    $
    183,802Costs and Expenses:Cost of goods sold
    
    
    69,086
    
    
    
    46,281
    
    
    
    49,642
    
    
    
    (20,089
    )
    
    
    144,920Selling, general and administrative
    
    
    14,056
    
    
    
    7,640
    
    
    
    12,683
    
    
    
    (750
    )
    
    
    33,629Gain on sale of property, plant
and equipment, net
    
    
    (304
    )
    
    
    (1,349
    )
    
    
    
    
    
    
    
    
    
    
    (1,653
    )Operating Income
    
    
    2,179
    
    
    
    1,956
    
    
    
    2,771
    
    
    
    
    
    
    
    6,906Interest expense (income), net
    
    
    5,870
    
    
    
    
    
    
    
    (251
    )
    
    
    
    
    
    
    5,619Other income, net
    
    
    (1,865
    )
    
    
    (26
    )
    
    
    (183
    )
    
    
    
    
    
    
    (2,074
    )Equity earnings from subsidiaries
    
    
    (5,043
    )
    
    
    
    
    
    
    
    
    
    
    5,043
    
    
    
    Income Before Income Taxes
    
    
    3,217
    
    
    
    1,982
    
    
    
    3,205
    
    
    
    (5,043
    )
    
    
    3,361Provision for income taxes
    
    
    522
    
    
    
    3
    
    
    
    141
    
    
    
    
    
    
    
    666Net Income (Loss)
    
    $
    2,695
    
    
    $
    1,979
    
    
    $
    3,064
    
    
    $
    (5,043
    )
    
    $
    2,695
 For the Three Months Ended July 1, 2006Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Sales
    
    $
    90,915
    
    
    $
    60,809
    
    
    $
    54,955
    
    
    $
    (21,180
    )
    
    $
    185,499Costs and Expenses:Cost of goods sold
    
    
    77,376
    
    
    
    44,845
    
    
    
    39,734
    
    
    
    (20,451
    )
    
    
    141,504Selling, general and administrative
    
    
    9,605
    
    
    
    12,031
    
    
    
    10,244
    
    
    
    (729
    )
    
    
    31,151(Gain) Loss on sale of property, plant
and equipment, net
    
    
    (1,472
    )
    
    
    1,489
    
    
    
    3
    
    
    
    
    
    
    
    20Operating Income
    
    
    5,406
    
    
    
    2,444
    
    
    
    4,974
    
    
    
    
    
    
    
    12,824Interest expense (income), net
    
    
    5,890
    
    
    
    
    
    
    
    (57
    )
    
    
    
    
    
    
    5,833Other (income) loss, net
    
    
    (550
    )
    
    
    
    
    
    
    745
    
    
    
    
    
    
    
    195Equity earnings from subsidiaries
    
    
    (5,364
    )
    
    
    
    
    
    
    
    
    
    
    5,364
    
    
    
    Income Before Income Taxes
    
    
    5,430
    
    
    
    2,444
    
    
    
    4,286
    
    
    
    (5,364
    )
    
    
    6,796Provision for income taxes
    
    
    540
    
    
    
    
    
    
    
    1,366
    
    
    
    
    
    
    
    1,906Net Income
    
    $
    4,890
    
    
    $
    2,444
    
    
    $
    2,920
    
    
    $
    (5,364
    )
    
    $
    4,890
 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 Six Months Ended June 30, 2007Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Sales
    
    $
    173,868
    
    
    $
    106,599
    
    
    $
    129,071
    
    
    $
    (40,708
    )
    
    $
    368,830Costs and Expenses:Cost of goods sold
    
    
    147,630
    
    
    
    82,862
    
    
    
    95,909
    
    
    
    (39,300
    )
    
    
    287,101Selling, general and administrative
    
    
    27,122
    
    
    
    15,673
    
    
    
    25,415
    
    
    
    (1,408
    )
    
    
    66,802(Gain) Loss on sale of property, plant
and equipment, net
    
    
    (347
    )
    
    
    (1,349
    )
    
    
    8
    
    
    
    
    
    
    
    (1,688
    )Operating Income (Loss)
    
    
    (537
    )
    
    
    9,413
    
    
    
    7,739
    
    
    
    
    
    
    
    16,615Interest expense (income), net
    
    
    11,668
    
    
    
    
    
    
    
    (565
    )
    
    
    
    
    
    
    11,103Other income, net
    
    
    (3,898
    )
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (3,906
    )Equity earnings from subsidiaries
    
    
    (16,534
    )
    
    
    
    
    
    
    
    
    
    
    16,534
    
    
    
    Income Before Income Taxes
    
    
    8,227
    
    
    
    9,413
    
    
    
    8,312
    
    
    
    (16,534
    )
    
    
    9,418Provision for income taxes
    
    
    662
    
    
    
    7
    
    
    
    1,184
    
    
    
    
    
    
    
    1,853Net Income (Loss)
    
    $
    7,565
    
    
    $
    9,406
    
    
    $
    7,128
    
    
    $
    (16,534
    )
    
    $
    7,565
 For the Six Months Ended July 1, 2006Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Sales
    
    $
    181,242
    
    
    $
    119,669
    
    
    $
    107,555
    
    
    $
    (43,333
    )
    
    $
    365,133Costs and Expenses:Cost of goods sold
    
    
    155,174
    
    
    
    88,209
    
    
    
    78,986
    
    
    
    (41,922
    )
    
    
    280,447Selling, general and administrative
    
    
    26,318
    
    
    
    18,820
    
    
    
    19,244
    
    
    
    (1,411
    )
    
    
    62,971(Gain) Loss on sale of property, plant
and equipment, net
    
    
    (1,472
    )
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (1,469
    )Operating Income
    
    
    1,222
    
    
    
    12,640
    
    
    
    9,322
    
    
    
    
    
    
    
    23,184Interest expense (income), net
    
    
    11,770
    
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    11,752Other (income) loss, net
    
    
    (1,696
    )
    
    
    
    
    
    
    480
    
    
    
    
    
    
    
    (1,216
    )Equity earnings from subsidiaries
    
    
    (18,611
    )
    
    
    
    
    
    
    
    
    
    
    18,611
    
    
    
    Income Before Income Taxes
    
    
    9,759
    
    
    
    12,640
    
    
    
    8,860
    
    
    
    (18,611
    )
    
    
    12,648Provision for income taxes
    
    
    1,104
    
    
    
    20
    
    
    
    2,869
    
    
    
    
    
    
    
    3,993Net Income
    
    $
    8,655
    
    
    $
    12,620
    
    
    $
    5,991
    
    
    $
    (18,611
    )
    
    $
    8,655
 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 Six Months Ended June 30, 2007Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used for) operating activities
    
    $
    3,730
    
    
    $
    (1,949
    )
    
    $
    3,038
    
    
    $
    (800
    )
    
    $
    4,019INVESTING ACTIVITIES:Capital expenditures
    
    
    (6,090
    )
    
    
    (2,380
    )
    
    
    (2,344
    )
    
    
    
    
    
    
    (10,814
    )Proceeds from the sale of fixed assets
    
    
    308
    
    
    
    4,643
    
    
    
    
    
    
    
    
    
    
    
    4,951Business acquisitions and other
    
    
    (207
    )
    
    
    (286
    )
    
    
    (7
    )
    
    
    500
    
    
    
    Net cash provided by (used for) investing
activities
    
    
    (5,989
    )
    
    
    1,977
    
    
    
    (2,351
    )
    
    
    500
    
    
    
    (5,863
    )FINANCING ACTIVITIES:Borrowings (repayments) of long-term debt
    
    
    
    
    
    
    
    
    
    
    (300
    )
    
    
    300
    
    
    
    Share-based compensation activity, net
    
    
    1,796
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,796Other financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used for) financing
activities
    
    
    1,796
    
    
    
    
    
    
    
    (300
    )
    
    
    300
    
    
    
    1,796Effect of exchange rate changes on cash
and cash equivalents
    
    
    
    
    
    
    
    
    
    
    232
    
    
    
    
    
    
    
    232Net change in cash and cash equivalents
    
    
    (463
    )
    
    
    28
    
    
    
    619
    
    
    
    
    
    
    
    184Cash and cash equivalents at beginning
of period
    
    
    28,937
    
    
    
    12
    
    
    
    36,933
    
    
    
    
    
    
    
    65,882Cash and cash equivalents at end of period
    
    $
    28,474
    
    
    $
    40
    
    
    $
    37,552
    
    
    $
    
    
    
    $
    66,066
 For the Six Months Ended July 1, 2006Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash
provided by (used for) operating activities
    
    $
    (6,911
    )
    
    $
    6,028
    
    
    $
    24,116
    
    
    $
    (11,018
    )
    
    $
    12,215INVESTING ACTIVITIES:Capital expenditures
    
    
    (6,586
    )
    
    
    (3,213
    )
    
    
    (3,351
    )
    
    
    
    
    
    
    (13,150
    )Proceeds from sale of fixed assets
    
    
    2,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,266Business acquisitions and other
    
    
    1,018
    
    
    
    (33
    )
    
    
    
    
    
    
    (1,658
    )
    
    
    (673
    )Net cash used for investing activities
    
    
    (3,302
    )
    
    
    (3,246
    )
    
    
    (3,351
    )
    
    
    (1,658
    )
    
    
    (11,557
    )FINANCING ACTIVITIES:Repayments of long-term debt
    
    
    1,556
    
    
    
    
    
    
    
    (12,619
    )
    
    
    11,019
    
    
    
    (44
    )Share-based compensation activity
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Shareholder distributions
    
    
    11,614
    
    
    
    
    
    
    
    (11,614
    )
    
    
    
    
    
    
    Other financing costs
    
    
    4,234
    
    
    
    (2,779
    )
    
    
    (3,262
    )
    
    
    1,657
    
    
    
    (150
    )Net cash provided by (used for) financing
activities
    
    
    17,417
    
    
    
    (2,779
    )
    
    
    (27,495
    )
    
    
    12,676
    
    
    
    (181
    )Effect of exchange rate changes on cash
and cash equivalents
    
    
    
    
    
    
    
    
    
    
    1,730
    
    
    
    
    
    
    
    1,730Net change in cash and cash equivalents
    
    
    7,204
    
    
    
    3
    
    
    
    (5,000
    )
    
    
    
    
    
    
    2,207Cash and cash equivalents at beginning
of period
    
    
    7,754
    
    
    
    47
    
    
    
    32,983
    
    
    
    
    
    
    
    40,784Cash and cash equivalents at end of period
    
    $
    14,958
    
    
    $
    50
    
    
    $
    27,983
    
    
    $
    
    
    
    $
    42,991
 21




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##### Table of Contents



STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 Overview
          Results of Operations
  22




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##### Table of Contents



Three Months Ended June 30, 2007 Compared to Three Months Ended July 1, 2006
 Net Sales.
 Three Months Ended
    
    
    $ Increase /
    
    
    % Increase /June 30, 2007
    
    
    July 1, 2006
    
    
    (Decrease)
    
    
    (Decrease)Electronics
    
    $
    98,248
    
    
    
    53.5
    %
    
    $
    105,543
    
    
    
    56.9
    %
    
    $
    (7,295
    )
    
    
    (6.9
    )%Control Devices
    
    
    85,554
    
    
    
    46.5
    
    
    
    79,956
    
    
    
    43.1
    
    
    
    5,598
    
    
    
    7.0
    %Total net sales
    
    $
    183,802
    
    
    
    100.0
    %
    
    $
    185,499
    
    
    
    100.0
    %
    
    $
    (1,697
    )
    
    
    (0.9
    )%
    Three Months Ended
    
    
    $ Increase /
    
    
    % Increase /June 30, 2007
    
    
    July 1, 2006
    
    
    (Decrease)
    
    
    (Decrease)North America
    
    $
    132,449
    
    
    
    72.1
    %
    
    $
    143,391
    
    
    
    77.3
    %
    
    $
    (10,942
    )
    
    
    (7.6
    )%Europe and other
    
    
    51,353
    
    
    
    27.9
    
    
    
    42,108
    
    
    
    22.7
    
    
    
    9,245
    
    
    
    22.0
    %Total net sales
    
    $
    183,802
    
    
    
    100.0
    %
    
    $
    185,499
    
    
    
    100.0
    %
    
    $
    (1,697
    )
    
    
    (0.9
    )%
  23




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##### Table of Contents



Three Months Ended
    
    
    $ Increase /June 30, 2007
    
    
    July 1, 2006
    
    
    (Decrease)Net Sales
    
    $
    183,802
    
    
    
    100.0
    %
    
    $
    185,499
    
    
    
    100.0
    %
    
    $
    (1,697
    )Costs and Expenses:Cost of goods sold
    
    
    144,920
    
    
    
    78.8
    
    
    
    141,504
    
    
    
    76.3
    
    
    
    3,416Selling, general and administrative
    
    
    33,629
    
    
    
    18.3
    
    
    
    31,151
    
    
    
    16.8
    
    
    
    2,478(Gain) loss on sale of property, plant & equipment, net
    
    
    (1,653
    )
    
    
    (0.9
    )
    
    
    20
    
    
    
    0.0
    
    
    
    (1,673
    )Operating Income
    
    
    6,906
    
    
    
    3.8
    
    
    
    12,824
    
    
    
    6.9
    
    
    
    (5,918
    )Interest expense, net
    
    
    5,619
    
    
    
    3.1
    
    
    
    5,833
    
    
    
    3.1
    
    
    
    (214
    )Equity in earnings of investees
    
    
    (2,298
    )
    
    
    (1.3
    )
    
    
    (1,550
    )
    
    
    (0.8
    )
    
    
    (748
    )Other loss, net
    
    
    224
    
    
    
    0.1
    
    
    
    1,745
    
    
    
    0.9
    
    
    
    (1,521
    )Income Before Income Taxes
    
    
    3,361
    
    
    
    1.9
    
    
    
    6,796
    
    
    
    3.7
    
    
    
    (3,435
    )Provision for income taxes
    
    
    666
    
    
    
    0.4
    
    
    
    1,906
    
    
    
    1.0
    
    
    
    (1,240
    )Net Income
    
    $
    2,695
    
    
    
    1.5
    %
    
    $
    4,890
    
    
    
    2.7
    %
    
    $
    (2,195
    )
 Cost of Goods Sold.
 Selling, General and Administrative Expenses.
  (Gain) Loss on Sale of Property, Plant and Equipment, net.
 Equity in Earnings of Investees.
 Income Before Income Taxes.
 Three Months Ended
    
    
    $ Increase /
    
    
    % Increase /June 30, 2007
    
    
    July 1, 2006
    
    
    (Decrease)
    
    
    (Decrease)Electronics
    
    $
    1,884
    
    
    $
    8,847
    
    
    $
    (6,963
    )
    
    
    (78.7
    )%Control Devices
    
    
    5,510
    
    
    
    4,497
    
    
    
    1,013
    
    
    
    22.5
    %Other corporate activities
    
    
    1,572
    
    
    
    (735
    )
    
    
    2,307
    
    
    
    313.9
    %Corporate interest expense
    
    
    (5,605
    )
    
    
    (5,813
    )
    
    
    208
    
    
    
    3.6
    %Income before income taxes
    
    $
    3,361
    
    
    $
    6,796
    
    
    $
    (3,435
    )
    
    
    (50.5
    )%
  24




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##### Table of Contents



Three Months Ended
    
    
    $ Increase /
    
    
    % Increase /June 30, 2007
    
    
    July 1, 2006
    
    
    (Decrease)
    
    
    (Decrease)North America
    
    $
    1,431
    
    
    
    42.6
    %
    
    $
    2,448
    
    
    
    36.0
    %
    
    $
    (1,017
    )
    
    
    (41.5
    )%Europe and other
    
    
    1,930
    
    
    
    57.4
    
    
    
    4,348
    
    
    
    64.0
    
    
    
    (2,418
    )
    
    
    (55.6
    )%Income before income taxes
    
    $
    3,361
    
    
    
    100.0
    %
    
    $
    6,796
    
    
    
    100.0
    %
    
    $
    (3,435
    )
    
    
    (50.5
    )%
  Provision for Income Taxes.
 Six Months Ended June 30, 2007 Compared to Six Months Ended July 1, 2006
 Net Sales.
 Six Months Ended
    
    
    $ Increase /
    
    
    % Increase /June 30, 2007
    
    
    July 1, 2006
    
    
    (Decrease)
    
    
    (Decrease)Electronics
    
    $
    199,049
    
    
    
    54.0
    %
    
    $
    205,907
    
    
    
    56.4
    %
    
    $
    (6,858
    )
    
    
    (3.3
    )%Control Devices
    
    
    169,781
    
    
    
    46.0
    
    
    
    159,226
    
    
    
    43.6
    
    
    
    10,555
    
    
    
    6.6
    %Total net sales
    
    $
    368,830
    
    
    
    100.0
    %
    
    $
    365,133
    
    
    
    100.0
    %
    
    $
    3,697
    
    
    
    1.0
    %
   25




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##### Table of Contents



Six Months Ended
    
    
    $ Increase /
    
    
    % Increase /June 30, 2007
    
    
    July, 2006
    
    
    (Decrease)
    
    
    (Decrease)North America
    
    $
    266,510
    
    
    
    72.3
    %
    
    $
    284,415
    
    
    
    77.9
    %
    
    $
    (17,905
    )
    
    
    (6.3)
    %Europe and other
    
    
    102,320
    
    
    
    27.7
    
    
    
    80,718
    
    
    
    22.1
    
    
    
    21,602
    
    
    
    26.8
    %Total net sales
    
    $
    368,830
    
    
    
    100.0
    %
    
    $
    365,133
    
    
    
    100.0
    %
    
    $
    3,697
    
    
    
    1.0
    %
   Six Months Ended
    
    
    $ Increase /June 30, 2007
    
    
    July 1, 2006
    
    
    (Decrease)Net Sales
    
    $
    368,830
    
    
    
    100.0
    %
    
    $
    365,133
    
    
    
    100.0
    %
    
    $
    3,697Costs and Expenses:Cost of goods sold
    
    
    287,101
    
    
    
    77.8
    
    
    
    280,447
    
    
    
    76.8
    
    
    
    6,654Selling, general and administrative
    
    
    66,802
    
    
    
    18.1
    
    
    
    62,971
    
    
    
    17.2
    
    
    
    3,831Gain on sale of property, plant & equipment, net
    
    
    (1,688
    )
    
    
    (0.4
    )
    
    
    (1,469
    )
    
    
    (0.4
    )
    
    
    (219
    )Operating Income
    
    
    16,615
    
    
    
    4.5
    
    
    
    23,184
    
    
    
    6.4
    
    
    
    (6,569
    )Interest expense, net
    
    
    11,103
    
    
    
    3.0
    
    
    
    11,752
    
    
    
    3.2
    
    
    
    (649
    )Equity in earnings of investees
    
    
    (4,418
    )
    
    
    (1.2
    )
    
    
    (2,966
    )
    
    
    (0.8
    )
    
    
    (1,452
    )Other loss, net
    
    
    512
    
    
    
    0.1
    
    
    
    1,750
    
    
    
    0.5
    
    
    
    (1,238
    )Income Before Income Taxes
    
    
    9,418
    
    
    
    2.6
    
    
    
    12,648
    
    
    
    3.5
    
    
    
    (3,230
    )Provision for income taxes
    
    
    1,853
    
    
    
    0.5
    
    
    
    3,993
    
    
    
    1.1
    
    
    
    (2,140
    )Net Income
    
    $
    7,565
    
    
    
    2.1
    %
    
    $
    8,655
    
    
    
    2.4
    %
    
    $
    (1,090
    )
 Cost of Goods Sold.
 Selling, General and Administrative Expenses.
  26




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##### Table of Contents



Gain on Sale of Property, Plant and Equipment, net.
 Equity in Earnings of Investees.
 Income Before Income Taxes.
 Six Months Ended
    
    
    $ Increase /
    
    
    % Increase /June 30, 2007
    
    
    July 1, 2006
    
    
    (Decrease)
    
    
    (Decrease)Electronics
    
    $
    8,990
    
    
    $
    15,044
    
    
    $
    (6,054
    )
    
    
    (40.2
    )%Control Devices
    
    
    8,038
    
    
    
    8,906
    
    
    
    (868
    )
    
    
    (9.7
    )%Other corporate activities
    
    
    3,521
    
    
    
    197
    
    
    
    3,324
    
    
    
    1,687.3
    %Corporate interest expense
    
    
    (11,131
    )
    
    
    (11,499
    )
    
    
    368
    
    
    
    3.2
    %Income before income taxes
    
    $
    9,418
    
    
    $
    12,648
    
    
    $
    (3,230
    )
    
    
    (25.5
    )%
     Six Months Ended
    
    
    $ Increase /
    
    
    % Increase /June 30, 2007
    
    
    July 1, 2006
    
    
    (Decrease)
    
    
    (Decrease)North America
    
    $
    3,825
    
    
    
    40.6
    %
    
    $
    5,337
    
    
    
    42.2
    %
    
    $
    (1,512
    )
    
    
    (28.3
    )%Europe and other
    
    
    5,593
    
    
    
    59.4
    
    
    
    7,311
    
    
    
    57.8
    
    
    
    (1,718
    )
    
    
    (23.5
    )%Income before income taxes
    
    $
    9,418
    
    
    
    100.0
    %
    
    $
    12,648
    
    
    
    100.0
    %
    
    $
    (3,230
    )
    
    
    (25.5
    )%
  Provision for Income Taxes.
 27




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##### Table of Contents



Liquidity and Capital Resources
 Summary of Cash Flows (in thousands):
 Six Months Ended
    
    
    $ Increase /June 30, 2007
    
    
    July 1, 2006
    
    
    (Decrease)Cash provided by (used for):Operating activities
    
    $
    4,019
    
    
    $
    12,215
    
    
    $
    (8,196
    )Investing activities
    
    
    (5,863
    )
    
    
    (11,557
    )
    
    
    5,694Financing activities
    
    
    1,796
    
    
    
    (181
    )
    
    
    1,977Effect of exchange rate changes on cash and cash equivalents
    
    
    232
    
    
    
    1,730
    
    
    
    (1,498
    )Net change in cash and cash equivalents
    
    $
    184
    
    
    $
    2,207
    
    
    $
    (2,023
    )
       28




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##### Table of Contents



Critical Accounting Policies and Estimates
  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.
 29




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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
    30




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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
  31




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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.
 (a)
    
    The Annual Meeting of Shareholders of Stoneridge, Inc. was held on May 7, 2007.(b)
    
    The following matters were submitted to a vote at the meeting:The election of the following nominees as directors of the Company. The vote with respect to each nominee was as follows:
 Nominee
    
    For
    
    WithheldAvery S. Cohen
    
    
    21,421,415
    
    
    
    683,042John C. Corey
    
    
    22,051,531
    
    
    
    52,926Jeffrey P. Draime
    
    
    22,059,221
    
    
    
    45,236Sheldon J. Epstein
    
    
    22,056,721
    
    
    
    47,736Douglas C. Jacobs
    
    
    22,100,641
    
    
    
    3,816Kim Korth
    
    
    22,100,641
    
    
    
    3,816William M. Lasky
    
    
    22,100,621
    
    
    
    3,836Earl L. Linehan
    
    
    22,057,721
    
    
    
    46,736
  For
    
    Against
    
    AbstainRatify Appointment of Accounting Firm
    
    
    22,103,620
    
    
    
    400
    
    
    
    438
  For
    
    Against
    
    AbstainAdopt Annual Incentive Plan
    
    
    19,551,824
    
    
    
    66,318
    
    
    
    1,132
 32




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##### Table of Contents



For
    
    Against
    
    AbstainAmend Code of Regulations
    
    
    19,613,772
    
    
    
    4,202
    
    
    
    1,300
 
 Item 5. Other Information.
  
 Item 6. Exhibits.
  33




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##### Table of Contents



SIGNATURES
  STONERIDGE, INC.Date: August 9, 2007
    /s/ John C.  CoreyJohn C.  CoreyPresident, Chief Executive Officer and Director
(Principal Executive Officer) Date: August 9, 2007
    /s/ George E.  StricklerGeorge E.  StricklerExecutive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial Officer) 34




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit3. 1
    
    Amended Code of Regulations, filed herewith.10. 1
    
    Annual Incentive Plan, filed herewith.10. 2
    
    Severance Agreement and Release for Edward F. Mosel, dated
May 22, 2007, (incorporated by reference to Exhibit 99. 1
to the Companys Current Report on Form 8-K filed on May
25, 2007).31. 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.
 35