Stoneridge Reports Fourth-Quarter 2008 Results

- Proactive Restructuring Efforts Continue




WARREN, Ohio, Feb. 25  /PRNewswire-FirstCall/ -- Stoneridge, Inc. (NYSE: SRI) today announced net sales of $158.0 million and a net loss of $108.4 million, or $(4.63) per diluted share, for the fourth quarter ended December 31, 2008.  The loss for the quarter included an after-tax non-cash goodwill expense and non-cash deferred tax asset valuation allowance of $108.1 million or ($4.62) per share and $3.4 million or $(0.14) per share for after-tax expenses associated with previously announced restructuring initiatives. As indicated in the Company's press release of February 11, 2009 announcing a delay in its earnings release for the fourth quarter of 2008 to allow time to complete an asset impairment analysis, including goodwill, the effect of the goodwill impairment charges and deferred tax asset valuation allowance ("other non-recurring items") was not included in our previously affirmed guidance of $0.40 to $0.46.  Excluding the other non-recurring items, the Company would have reported earnings of $0.45 per diluted share for 2008.

The Company achieved income from continuing operations (excluding restructuring and other non-recurring items) in 2008 of $22.8 million, or $0.98 per share, compared with $17.6 million, or $0.75 per share, in 2007. The Company aggressively pursued restructuring efforts starting in late 2007 and during 2008 to adjust its cost structure and eliminate overhead centers to enhance profitability in robust economic times and protect profitability when market adversity occurs. The Company recorded after-tax restructuring expenses of $12.3 million, or $0.53 per share in 2008, as a result of these restructuring efforts.  In accordance with SFAS 142 (Accounting for Goodwill and Other Intangible Assets) and SFAS 109 (Accounting for Income Taxes), the 2008 results also include an after-tax non-cash goodwill impairment charge in the Company's control device segment of $46.1 million, or $1.97 per share, and a non-cash valuation allowance against deferred tax assets of $62.0 million or $2.65 per share. The impact of the non-cash impairment charge and deferred tax asset valuation allowance was driven by adverse equity market conditions that caused a decrease in current market multiples and the Company's stock price as of December 31, 2008.

Net sales decreased $27.5 million, or 14.8 percent, to $158.0 million, compared with $185.5 million for the fourth quarter of 2007.  The decrease in net sales was primarily caused by significantly reduced production volumes in the North American passenger car/light truck market, lower production in the European and North American commercial vehicle markets and the impact of foreign currency translation.  Foreign currency translation decreased fourth- quarter net sales by approximately $15.0 million compared with the same period in 2007.  The sales decrease was partially offset by the strength in the North American agricultural and off-road market.

Net income excluding the restructuring initiatives and the after-tax non- cash goodwill expense and non-cash valuation allowance for the fourth quarter was $3.1 million, or $0.13 per diluted share, compared with net income excluding restructuring charges of $7.3 million, or $0.31 per diluted share, in the fourth quarter of 2007.  The decrease in net income was due primarily to the reduced sales volumes described above and the loss of overhead recoveries because of lower production volumes which was the result of restructuring inventories built in the first half of 2008.

"While we are not satisfied with our reported operating results, given the volatility of the markets globally, we responded well in adjusting to lower volumes," said John C. Corey, president and chief executive officer.  "In addition, we completed the two significant restructuring initiatives announced in late 2007.  Beyond these, we further realigned our cost structure to the most recent market conditions.  Excluding restructuring costs and after-tax non-cash goodwill expense and non-cash valuation allowance in the fourth quarter, we earned $0.13 per share."

Corey added, "We are in an extremely volatile time for the transportation industry globally.  In this environment, we will continue to adjust our cost structure and target near-term revenue opportunities.  Because of our efforts to improve our liquidity, we have $92.7 million in cash available for operating needs or other uses.  While the year has not produced the results we expected, I am proud of the work our team has done in 2008."

For the year ended December 31, 2008, net sales were $752.7 million, an increase of $25.6 million or 3.5 percent compared with $727.1 million for the year ended December 31, 2007.  The net loss for 2008 was $97.5 million, or $(4.17) per diluted share, compared with net income of $16.7 million, or $0.71 of income per diluted share, in 2007.  Earnings per share for 2008 include $(5.15) per share for restructuring expenses, an after-tax non-cash goodwill expense and non-cash deferred tax asset valuation allowance.  For the year ended December 31, 2008, the Company achieved income from continuing operations (excluding restructuring and other non-recurring items) of $22.8 million compared with $17.6 million in 2007.

Net cash provided by operating activities for the year was $42.5 million, compared with net cash provided of $33.5 million for the prior year.  The increase of $9.0 million in cash provided by operating activities was primarily due to lower accounts receivable balances in the current year. Stoneridge has $92.7 million in cash at the end of 2008 available to support operations as needed. The Company's $183.0 million 11.5% senior notes and asset backed credit facility mature in May 2012 and November 2011, respectively.  The Company's asset-backed credit facility remains undrawn and does not contain restrictive performance covenants.

Use of Non-GAAP Financial Measures

A reconciliation of the Company's non-GAAP financial measures to the corresponding GAAP measures, and an explanation of the Company's use of non- GAAP measures, is included in the exhibits to this press release.

Outlook

"The environment for 2009 will most likely be the most challenging the Company has ever experienced," Corey said.  "The same is true for the entire industry given the interdependence of the supply chain to the OEMs.   Although we have positioned Stoneridge to weather the storm as we see it now, we have decided not to provide specific earnings guidance at this time, due to the uncertainty of market conditions.  However, we expect that Stoneridge should be both earnings and cash flow positive in 2009 based on our expected sales in 2009."

Conference Call on the Web

A live Internet broadcast of Stoneridge's conference call regarding 2008 fourth-quarter results can be accessed at 11 a.m. Eastern time on Wednesday, February 25, 2009, at http://www.stoneridge.com/, which will also offer a webcast replay.

About Stoneridge, Inc.

Stoneridge, Inc., headquartered in Warren, Ohio, is an independent designer and manufacturer of highly engineered electrical and electronic components, modules and systems principally for the automotive, medium- and heavy-duty truck, agricultural and off-highway vehicle markets.  Additional information about Stoneridge can be found at http://www.stoneridge.com/.

Forward-Looking Statements

Statements in this release that are not historical fact are forward- looking statements, which involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied in this release.  Things that may cause actual results to differ materially from those in the forward-looking statements include, among other factors, the loss of a major customer; a significant change in automotive, medium- and heavy-duty truck or agricultural and off-highway vehicle production; disruption in the OEM supply chain due to bankruptcies; a significant change in general economic conditions in any of the various countries in which the Company operates; labor disruptions at the Company's facilities or at any of the Company's significant customers or suppliers; the ability of the Company's suppliers to supply the Company with parts and components at competitive prices on a timely basis; customer acceptance of new products; and the failure to achieve successful integration of any acquired company or business.  In addition, this release contains time-sensitive information that reflects management's best analysis only as of the date of this release.  The Company does not undertake any obligation to publicly update or revise any forward- looking statements to reflect future events, information or circumstances that arise after the date of this release.  Further information concerning issues that could materially affect financial performance related to forward-looking statements contained in this release can be found in the Company's periodic filings with the Securities and Exchange Commission.

                    STONERIDGE, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF OPERATIONS

  (in thousands, except per share data)

                                For the Three Months    For the Fiscal Years
                                 Ended December 31,      Ended December 31,
                                   2008       2007        2008       2007
                               (Unaudited) (Unaudited) (Unaudited) (Audited)

  Net Sales                       $157,965  $185,476    $752,698  $727,120

  Costs and Expenses:
    Cost of goods sold             128,194   137,352     586,411   559,397
    Selling, general and
     administrative                 31,687    34,573     136,563   133,708
    Gain on sale of property, plant
     and equipment, net               (529)     (245)       (571)   (1,710)
    Goodwill impairment charge      65,175         -      65,175         -
    Restructuring charges            2,514       852       8,391       926

  Operating Income (Loss)          (69,076)   12,944     (43,271)   34,799

    Interest expense, net            5,274     5,189      20,575    21,759
    Equity in earnings of investees (2,284)   (2,969)    (13,490)  (10,893)
    Loss on early extinguishment of
     debt                                -         -         770         -
    Other (income) loss, net          (395)      (76)       (351)      709

  Income (Loss) Before Income
   Taxes                           (71,671)   10,800     (50,775)   23,224

    Provision for income taxes      36,723     4,319      46,752     6,553

  Net Income (Loss)              $(108,394)   $6,481    $(97,527)  $16,671

  Basic net income (loss) per
   share                            $(4.63)    $0.28      $(4.17)    $0.72
  Basic weighted average shares
   outstanding                      23,407    23,215      23,367    23,133

  Diluted net income (loss) per
   share                            $(4.63)    $0.28      $(4.17)    $0.71
  Diluted weighted average shares
   outstanding                      23,407    23,524      23,367    23,548



                    STONERIDGE, INC. AND SUBSIDIARIES

                       CONSOLIDATED BALANCE SHEETS

  (in thousands)

                                                        December 31,
                                                     2008          2007
  ASSETS                                          Unaudited

  Current Assets:
    Cash and cash equivalents                      $92,692       $95,924
    Accounts receivable, less reserves of
     $4,204 and $4,736, respectively                96,535       122,288
    Inventories, net                                54,800        57,392
    Prepaid expenses and other                       9,069        15,926
    Deferred income taxes                            1,495         9,829
        Total current assets                       254,591       301,359

  Long-Term Assets:
    Property, plant and equipment, net              87,701        92,752
    Other Assets:
      Goodwill                                         493        65,176
      Investments and other, net                    39,652        39,454
      Deferred income taxes                              -        29,028
        Total long-term assets                     127,846       226,410
  Total Assets                                    $382,437      $527,769

  LIABILITIES AND SHAREHOLDERS' EQUITY

  Current Liabilities:
    Accounts payable                               $50,719       $69,373
    Accrued expenses and other                      43,485        47,198
        Total current liabilities                   94,204       116,571

  Long-Term Liabilities:
    Long-term debt                                 183,000       200,000
    Deferred income taxes                            7,002         2,665
    Other liabilities                                6,473         2,344
        Total long-term liabilities                196,475       205,009

  Shareholders' Equity:
    Preferred Shares, without par value,
     authorized 5,000 shares, none issued                -             -
    Common Shares, without par value,
     authorized 60,000 shares, issued
     24,772 and 24,601 shares and outstanding
     24,665 and 24,209 shares, respectively,
     with no stated value                                -             -
    Additional paid-in capital                     158,039       154,173
    Common Shares held in treasury, 107
     and 392 shares, respectively, at cost            (129)         (383)
    Retained (deficit) earnings                    (59,155)       38,372
    Accumulated other comprehensive income
     (loss)                                         (6,997)       14,027
        Total shareholders' equity                  91,758       206,189
  Total Liabilities and Shareholders' Equity      $382,437      $527,769



                    STONERIDGE, INC. AND SUBSIDIARIES

             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

  (in thousands)

                                                    For the Fiscal Years
                                                     Ended December 31,
                                                     2008          2007
                                                 (Unaudited)    (Audited)
  OPERATING ACTIVITIES:
      Net cash provided by operating activities    $42,456       $33,525

  INVESTING ACTIVITIES:
    Capital expenditures                           (24,573)      (18,141)
    Proceeds from sale of fixed assets               1,652        12,315
    Business acquisitions and other                   (980)            -
      Net cash used for investing activities       (23,901)       (5,826)

  FINANCING ACTIVITIES:
    Repayments of long-term debt                   (17,000)            -
    Share-based compensation activity                1,322         2,119
    Premiums related to early
     extinguishment of debt                           (553)            -
    Other financing costs                                -        (1,219)
      Net cash provided by (used for)
       financing activities                        (16,231)          900

  Effect of exchange rate changes on
   cash and cash equivalents                        (5,556)        1,443

  Net change in cash and cash equivalents           (3,232)       30,042

  Cash and cash equivalents at
   beginning of period                              95,924        65,882

  Cash and cash equivalents at end of period       $92,692       $95,924


              RECONCILIATION OF NON-GAAP FINANCIAL MEASURES



To supplement Stoneridge's condensed consolidated financial statements presented on a basis in accordance with generally accepted accounting principles (GAAP) in the United States, the Company's management also uses and discloses certain non-GAAP financial measures.  These non-GAAP financial measures are not in accordance with, nor are they alternatives for, GAAP-based financial measures.  The Company includes these non-GAAP financial measures because it believes they provide useful information with which to evaluate the performance of the Company.  The non-GAAP measures included in this press release have been reconciled to the comparable GAAP measures within the accompanying table, as required under Securities and Exchange Commission (SEC) rules regarding the use of non-GAAP financial measures. They should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

A reconciliation of GAAP net loss and EPS to adjusted net income before restructuring related expenses and other non-recurring costs and EPS is presented below:

                                            For the Three Months Ended
                                                    December 31,
                                              2008                 2007
                                        Dollars     EPS      Dollars   EPS
                                          (Unaudited)          (Unaudited)
  Adjusted net income per share
   before restructuring related
   expenses and other non-
   recurring items
  Net income (loss)                   $(108,394)  $(4.63)     $6,481  $0.28
  Total restructuring related
   expenses, net of tax benefits          3,386     0.14         867   0.04
  Goodwill impairment, net of
   tax benefits                          46,052     1.97           -      -
  Deferred tax asset valuation
   allowance                             62,006     2.65           -      -

  Adjusted net income before
   restructuring related
  expenses and other non-recurring
   items                                 $3,050    $0.13      $7,348  $0.31

  Diluted weighted average shares
   outstanding (1)                       23,407               23,524


                                             For the Fiscal Year Ended
                                                    December 31,
                                              2008                 2007
                                        Dollars     EPS      Dollars   EPS
                                           (Unaudited)          (Audited)
  Adjusted net income per share
   before restructuring related
   expenses and other non-
   recurring items
  Net income (loss)                    $(97,527)  $(4.17)    $16,671  $0.71
  Total restructuring related
   expenses, net of tax benefits         12,286     0.53         915   0.04
  Goodwill impairment, net of
   tax benefits                          46,052     1.97           -      -
  Deferred tax asset valuation
   allowance                             62,006     2.65           -      -

  Adjusted net income before
   restructuring related
  expenses and other non-recurring
   items                                $22,817    $0.98     $17,586  $0.75

  Diluted weighted average shares
   outstanding (1)                       23,367               23,548

  (1) - Basic and Diluted weighted average shares outstanding are the same
        for 2008 periods as a net loss caused the dilutive shares to have an
        anti-dilutive effect.


DATASOURCE: Stoneridge, Inc.



CONTACT: Kenneth A. Kure, Corporate Treasurer and Director of Finance,

[phone]



Web site:  http://www.stoneridge.com/ 

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