SRI
$32.74
Stoneridge
($.57)
(1.71%)
Earnings Details
2nd Quarter June 2019
Wednesday, July 31, 2019 5:43:00 PM
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Summary

Stoneridge Revises Guidance

Stoneridge (SRI) reported 2nd Quarter June 2019 earnings of $0.36 per share on revenue of $222.2 million. The consensus earnings estimate was $0.26 per share on revenue of $203.4 million. Revenue grew 0.7% on a year-over-year basis.

The company said it expects 2019 earnings of approximately $1.66 per share on revenue of approximately $840.0 million. The company's previous guidance was earnings of $1.70 to $1.90 per share on revenue of $855.0 million to $875.0 million and the current consensus earnings estimate is $1.59 per share on revenue of $842.6 million for the year ending December 31, 2019.

Stoneridge, Inc., is a designers and manufacturers of engineered electrical and electronic components, modules and systems for the commercial vehicle, automotive, agricultural, motorcycle and off-highway vehicle markets.

Results
Reported Earnings
$0.36
Earnings Whisper
-
Consensus Estimate
$0.26
Reported Revenue
$222.2 Mil
Revenue Estimate
$203.4 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Stoneridge Reports Strong Second-Quarter 2019 Results

NOVI, Mich., July 31, 2019 /PRNewswire/ --  

Stoneridge, Inc. logo (PRNewsFoto/Stoneridge, Inc.) (PRNewsfoto/Stoneridge, Inc.)

2019 Second-Quarter Results

  • Earnings per diluted share ("EPS") of $1.41
  • Adjusted EPS of $0.36
  • Sales of $222.2 million
  • Adjusted sales of $218.1 million
  • Gross profit of $56.8 million
  • Adjusted gross profit of $57.8 million (26.5% of adjusted sales)
  • Operating income of $49.2 million
  • Adjusted operating income of $11.9 million (5.5% of adjusted sales)
  • Adjusted EBITDA of $20.2 million (9.3% of adjusted sales)

Full-Year Guidance Update

  • Increasing midpoint of full-year adjusted EPS guidance to $1.66
  • Reducing midpoint of adjusted tax rate to 20.0% from 22.5%
  • Revised guidance includes favorable impact of share repurchase program
  • Reducing midpoint of adjusted revenue guidance by $7.5 million to $840 million
  • Reducing midpoint of adjusted gross margin, adjusted operating margin and adjusted EBITDA margin guidance by 50 basis points

Stoneridge, Inc. (NYSE: SRI) today announced financial results for the second quarter ended June 30, 2019, with sales of $222.2 million and earnings per diluted share of $1.41. Adjusted sales were $218.1 million and adjusted EPS was $0.36 for the second quarter, considering normalizing adjustments primarily related to expenses and the gain on the disposal of the assets of the previously announced divestiture, a favorable tax ruling in Brazil leading to a favorable tax position, fair value adjustments and restructuring expenses.  The exhibits attached hereto provide additional detail on the normalizing adjustments.       

For the second quarter of 2019, Stoneridge reported gross profit of $56.8 million and adjusted gross profit of $57.8 million (26.5% of adjusted sales). Operating income was $49.2 million and adjusted operating income was $11.9 million (5.5% of adjusted sales). Adjusted EBITDA was $20.2 million (9.3% of adjusted sales).       

"Stronger demand for our emissions products in China and off-highway vision systems drove increased revenue for the quarter compared to the second quarter of 2018. As a result, adjusted earnings per share outperformed our expectations," said Jon DeGaynor, president and chief executive officer. "In addition to the strong financial performance, we are announcing new awards that are significant to the business both financially and strategically. We continue to drive growth in our transmission actuation programs with the announcement of an extension and expansion of our Park-by-Wire programs bringing peak annual revenue for the product for awarded programs to approximately $48 million. We have also secured an additional Shift-by-Wire award that increases the peak annual revenue of programs launching in the next few years to over $20 million. Finally, our focus on growing our OEM business in Brazil resulted in business awards for the segment of more than $10 million this quarter. We are driving performance at each of our segments as we continue to position the Company for sustainable, long-term growth."      

Second Quarter in Review
Control Devices adjusted sales, excluding the impact of recently divested non-core product lines, totaled $102.9 million, a slight increase relative to the second quarter of 2018. The increase is due to higher sales volume in our China automotive market which was partially offset by decreased sales volume in the North American automotive market primarily due to the continued ramp-down of legacy Shift-by-Wire programs. Control Devices gross margin decreased primarily due to increased overhead and direct material costs.  The segment's adjusted operating income decreased due to a lower gross margin, partially offset by reduced SG&A and D&D costs, resulting in adjusted operating margin of 12.5%, excluding the impact of recently divested non-core product lines. 

Electronics' sales of $101.9 million increased by 1.8% relative to the second quarter of 2018, primarily due to an increase in North American commercial vehicle and off-highway product sales. Electronics segment gross margin decreased due to an unfavorable product mix, as well as increased costs related to electronic component shortages resulting in increased direct material costs. The segment's adjusted operating income decreased as a result of a lower gross margin, partially offset by reduced SG&A costs. 

PST sales of $16.6 million decreased due to lower volumes in the Company's Argentina aftermarket channel, alarm and audio products, as well as lower monitoring products and service revenues. The segment's gross margin declined due to the reduction in sales, partially offset by lower overhead costs. PST adjusted operating margin decreased to 2.4% due to a lower gross margin and higher SG&A and D&D costs as a percentage of sales. 

Cash and Debt Balances
As of June 30, 2019, Stoneridge had cash and cash equivalent balances totaling $51.5 million. Total debt as of June 30, 2019, was $105.1 million. Total debt less cash and cash equivalents yielded a current net debt to trailing-twelve-month adjusted EBITDA ratio of approximately 0.6x.

2019 Outlook
Bob Krakowiak, executive vice president and chief financial officer, commented: "For the full-year 2019, we are increasing the previously provided adjusted EPS midpoint guidance by 3.5 cents to $1.66. The adjustment is due to the execution of our share repurchase program and an improved outlook for our adjusted tax rate partially offset by reduced revenue expectations and the expected unfavorable impact of foreign currency exchange rates for the remainder of the year. We continue to work to offset external factors and drive financial performance and operational efficiency by implementing cost controls and continuous improvement activities throughout the organization."

Conference Call on the Web
A live internet broadcast of Stoneridge's conference call regarding 2019 second-quarter results can be accessed at 9:00 a.m. Eastern Standard Time on Thursday, August 1, 2019, at www.stoneridge.com. A webcast replay will also be offered.

About Stoneridge, Inc.
Stoneridge, Inc., headquartered in Novi, Michigan, is an independent designer and manufacturer of highly engineered electrical and electronic components, modules and systems principally for the automotive, commercial, motorcycle, off-highway and agricultural vehicle markets. Additional information about Stoneridge can be found at www.stoneridge.com.

Forward-Looking Statements
Statements in this release contain "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this report and may include statements regarding the intent, belief or current expectations of the Company, with respect to, among other things, our (i) future product and facility expansion, (ii) acquisition strategy, (iii) investments and new product development, (iv) growth opportunities related to awarded business and (v) operational expectations.  Forward-looking statements may be identified by the words "will," "may," "should," "designed to," "believes," "plans," "projects," "intends," "expects," "estimates," "anticipates," "continue" and similar words and expressions.  The forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from those expressed in or implied by the statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, among other factors:

  • the reduced purchases, loss or bankruptcy of a major customer or supplier;
  • the costs and timing of business realignment, facility closures or similar actions;
  • a significant change in automotive, commercial, off-highway, motorcycle or agricultural vehicle production;
  • competitive market conditions and resulting effects on sales and pricing;
  • the impact of changes in foreign currency exchange rates on sales, costs and results, particularly the Argentinian peso, Brazilian real, Chinese renminbi, euro, Mexican peso and Swedish krona;
  • our ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions;
  • customer acceptance of new products;
  • our ability to successfully launch/produce products for awarded business;
  • adverse changes in laws, government regulations or market conditions, including tariffs, affecting our products or our customers' products;
  • our ability to protect our intellectual property and successfully defend against assertions made against us;
  • liabilities arising from warranty claims, product recall or field actions, product liability and legal proceedings to which we are or may become a party, or the impact of product recall or field actions on our customers;
  • 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, including the impact of potential tariffs and trade considerations on their operations and output;
  • the amount of our indebtedness and the restrictive covenants contained in the agreements governing our indebtedness, including our revolving credit facility;
  • capital availability or costs, including changes in interest rates or market perceptions;
  • the failure to achieve the successful integration of any acquired company or business;
  • risks related to a failure of our information technology systems and networks, and risks associated with current and emerging technology threats and damage from computer viruses, unauthorized access, cyber-attack and other similar disruptions; and
  • the items described in Part I, Item IA ("Risk Factors") of our 2018 10-K filed with the SEC.

The forward-looking statements contained herein represent our estimates only as of the date of this release and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, whether to reflect actual results, changes in assumptions, changes in other factors affecting such forward-looking statements or otherwise.

Use of Non-GAAP Financial Information 
This press release contains information about Stoneridge's financial results which is not presented in accordance with accounting principles generally accepted in the United States ("GAAP"). Such non-GAAP financial measures are reconciled to their closest GAAP financial measures at the end of this press release. The provision of these non-GAAP financial measures for 2018 and 2019 is not intended to indicate that Stoneridge is explicitly or implicitly providing projections on those non-GAAP financial measures, and actual results for such measures are likely to vary from those presented. The reconciliations include all information reasonably available to the Company at the date of this press release and the adjustments that management can reasonably predict.

Management believes the non-GAAP financial measures used in this press release are useful to both management and investors in their analysis of the Company's financial position and results of operations.  In particular, management believes that adjusted gross profit, adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA are useful measures in assessing the Company's financial performance by excluding certain items that are not indicative of the Company's core operating performance or that may obscure trends useful in evaluating the Company's continuing operating activities.  Management also believes that these measures are useful to both management and investors in their analysis of the Company's results of operations and provide improved comparability between fiscal periods.

Adjusted sales, adjusted sales excluding divested non-core product lines, Adjusted gross profit, adjusted operating income, adjusted operating income excluding divested non-core product lines, adjusted net income, adjusted earnings per diluted share and adjusted EBITDA should not be considered in isolation or as a substitute for gross profit, operating income, net income, earnings per diluted share, cash provided by operating activities or other income statement or cash flow statement data prepared in accordance with GAAP.  

 CONSOLIDATED STATEMENTS OF OPERATIONS 






















































Three months ended


Six months ended



June 30,


June 30,

(in thousands, except per share data)


2019


2018


2019


2018














Net sales


$

222,241


$

220,602


$

440,538


$

446,532

Costs and expenses:













Cost of goods sold



165,414



153,184



322,858



311,145

Selling, general and administrative



27,522



35,256



63,110



72,517

Gain on disposal of non-core products, net



(33,921)



-



(33,599)



-

Design and development



14,040



12,981



27,284



26,842














Operating income



49,186



19,181



60,885



36,028

Interest expense, net



1,001



1,170



2,004



2,524

Equity in earnings of investee



(548)



(665)



(912)



(1,186)

Other income, net



(97)



(264)



(529)



(863)

Income before income taxes



48,830



18,940



60,322



35,553

Provision for income taxes



9,066



3,820



10,901



7,053

Net income



39,764



15,120


$

49,421


$

28,500

Earnings per share:













Basic


$

1.43


$

0.53


$

1.75


$

1.01

Diluted


$

1.41


$

0.52


$

1.72


$

0.99

Weighted-average shares outstanding:













Basic



27,887



28,449



28,208



28,349

Diluted



28,294



28,978



28,716



28,907

 

 CONSOLIDATED BALANCE SHEETS 
















June 30,


December 31,

(in thousands)


2019


2018




 (Unaudited) 




ASSETS







Current assets:







Cash and cash equivalents


$

51,503


$

81,092

Accounts receivable, less reserves of $1,592 and $1,243, respectively



151,687



139,076

Inventories, net



100,751



79,278

Prepaid expenses and other current assets



32,148



20,731

Total current assets



336,089



320,177

Long-term assets:







Property, plant and equipment, net



116,954



112,213

Intangible assets, net



58,890



62,032

Goodwill



36,377



36,717

Operating lease right-of-use asset



18,970



-

Investments and other long-term assets, net



28,767



28,380

Total long-term assets



259,958



239,342

Total assets


$

596,047


$

559,519








LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities:







Current portion of debt


$

869


$

1,533

Accounts payable



100,659



87,894

Accrued expenses and other current liabilities



61,987



57,880

Total current liabilities



163,515



147,307

Long-term liabilities:







Revolving credit facility



103,500



96,000

Long-term debt, net



732



983

Deferred income taxes



15,042



14,895

Operating lease long-term liability



14,565



-

Other long-term liabilities



17,194



17,068

Total long-term liabilities



151,033



128,946

Shareholders' equity:







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



-



-

Common Shares, without par value, 60,000 shares authorized, 28,966 and 28,966 shares issued and 27,367 and 28,488

shares outstanding at June 30, 2019 and December 31, 2018, respectively, with no stated value



-



-

Additional paid-in capital



223,831



231,647

Common Shares held in treasury, 1,599 and 478 shares at June 30, 2019 and December 31, 2018, respectively, at cost



(50,689)



(8,880)

Retained earnings



195,672



146,251

Accumulated other comprehensive loss



(87,315)



(85,752)

Total shareholders' equity



281,499



283,266

Total liabilities and shareholders' equity


$

596,047


$

559,519

 

 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 















Six months ended June 30,  (in thousands)


2019


2018








OPERATING ACTIVITIES:







Net income


$

49,421


$

28,500

Adjustments to reconcile net income to net cash provided by (used for) operating activities:







Depreciation



11,819



11,535

Amortization, including accretion and write-off of deferred financing costs 



3,464



3,503

Deferred income taxes



3,804



1,765

Earnings of equity method investee



(912)



(1,186)

Gain on sale of fixed assets



(26)



(18)

Share-based compensation expense



3,594



2,838

Tax benefit related to share-based compensation expense



(752)



(879)

Gain on disposal of non-core products, net



(33,599)



-

Change in fair value of earn-out contingent consideration



921



1,417

Changes in operating assets and liabilities, net of effect of business combination:







Accounts receivable, net



(13,440)



(11,594)

Inventories, net



(21,798)



(10,610)

Prepaid expenses and other assets



(9,678)



(8,417)

Accounts payable



13,604



8,678

Accrued expenses and other liabilities



242



3,379

Net cash provided by operating activities



6,664



28,911








INVESTING ACTIVITIES:







Capital expenditures



(17,479)



(16,845)

Proceeds from sale of fixed assets



49



41

Insurance proceeds for fixed assets



-



1,403

Proceeds from disposal of non-core products



34,386



-

Investment in venture capital fund



(1,200)



-

Net cash provided by (used for) investing activities



15,756



(15,401)








FINANCING ACTIVITIES:







Revolving credit facility borrowings



55,000



26,500

Revolving credit facility payments



(47,500)



(37,500)

Proceeds from issuance of debt



55



273

Repayments of debt



(999)



(2,459)

Earn-out consideration cash payment



(3,394)



-

Other financing costs



(873)



-

Common Share repurchase program



(50,000)




Repurchase of Common Shares to satisfy employee tax withholding



(3,209)



(4,242)

Net cash used for financing activities



(50,920)



(17,428)








Effect of exchange rate changes on cash and cash equivalents



(1,089)



(3,120)

Net change in cash and cash equivalents



(29,589)



(7,038)

Cash and cash equivalents at beginning of period



81,092



66,003








Cash and cash equivalents at end of period


$

51,503


$

58,965








Supplemental disclosure of cash flow information:







Cash paid for interest


$

2,198


$

2,679

Cash paid for income taxes, net


$

7,100


$

7,967

Supplemental disclosure of non-cash operating and financing activities:







Bank payment of vendor payables under short-term debt obligations


$

-


$

-

 

 

Regulation G Non-GAAP Financial Measures Reconciliations










Reconciliation to US GAAP












Exhibit 1 - Adjusted EPS












Reconciliation of Q2 2019 Adjusted EPS










(USD in millions)

Q2 2019

Q2 2019 EPS




Net Income

$                      39.8

$                       1.41










Add: After-Tax Step-Up in Fair Value of Earn-Out (PST)

0.5

0.02




Add: After-Tax Restructuring Costs

2.7

0.10




Add: After-Tax Write-Off of Deferred Financing Fees

0.2

0.01




Add: After-Tax Share-Based Comp Accelerated Vesting

0.4

0.01




Add: After-Tax Impact of State Tax Valuation Allowance Release

0.2

0.01




Less: After-Tax Gain from Disposal of Non-Core Products

(26.9)

(0.95)




Less: After-Tax One-Time Sale of Non-Core Product Inventory

(1.1)

(0.04)




Less: After-Tax Recovery of Brazilian Indirect Taxes

(5.6)

(0.20)




Adjusted Net Income

$                      10.1

$                       0.36
















Exhibit 2 – Adjusted Operating Income by Segment  












Reconciliation of Control Devices Adjusted Operating Income











(USD in millions)

Q2 2019





Control Devices Operating Income

$                      44.4











Add: Pre-Tax Restructuring Costs

3.5





Less: Pre-Tax Gain from Disposal of Non-Core Products

(33.6)





Less: Pre-Tax One-Time Sale of Non-Core Product Inventory

(1.4)





Control Devices Adjusted Operating Income

$                      12.9

















Reconciliation of Control Devices Adjusted Operating Income Excluding Disposed Non-Core Products










(USD in millions)


Q2 2019




Adjusted Operating Income


$                       12.9










Less: Pre-Tax Impact from Disposed Non-Core Products


-




Adjusted Operating Income Excluding Disposed Non-Core Products


$                       12.9






















Reconciliation of Electronics Adjusted Operating Income











(USD in millions)

Q2 2019





Electronics Operating Income

$                        7.6











Add: Pre-Tax Restructuring Costs

0.1





Electronics Adjusted Operating Income

$                        7.7























Reconciliation of PST Adjusted Operating Income











(USD in millions)

Q2 2019





PST Operating Income

$                        6.4











Add: Pre-Tax Step-Up in Fair Value of Earn-Out (PST)

0.5





Less: Pre-Tax Recovery of Brazilian Indirect Taxes

(6.5)





PST Adjusted Operating Income

$                        0.4























Exhibit 3 – Adjusted Operating Income












Reconciliation of Adjusted Operating Income











(USD in millions)

Q2 2019





Operating Income

$                      49.2











Add: Pre-Tax Step-Up in Fair Value of Earn-Out (PST)

0.5





Add: Pre-Tax Restructuring Costs

3.6





Add: Pre-Tax Share-Based Comp Accelerated Vesting

0.5





Less: Pre-Tax Gain from Disposal of Non-Core Products

(33.9)





Less: Pre-Tax Recovery of Brazilian Indirect Taxes

(6.5)





Less: Pre-Tax One-Time Sale of Non-Core Product Inventory

(1.4)





Adjusted Operating Income

$                      11.9

















Exhibit 4 – Adjusted EBITDA  












Reconciliation of Adjusted EBITDA







(USD in millions)

Q3 2018

Q4 2018

Q1 2019

Q2 2019

TTM Q2 2019

Income Before Tax

$                      16.8

$                       12.7

$                    11.5

$              48.8

$                  89.8

Interest expense, net

1.2

1.0

1.0

1.0

4.2

Depreciation and amortization

7.1

7.4

7.2

7.6

29.4

EBITDA

$                      25.0

$                       21.2

$                    19.7

$              57.4

$                123.4

Add: Pre-Tax Step-Up in Fair Value of Earn-Out (PST)

0.5

(1.7)

0.5

0.5

(0.3)

Less: Pre-Tax Gain in Fair Value of Equity Investment



(0.0)


(0.0)

Add: Pre-Tax Restructuring Costs



2.8

3.6

6.3

Add: Pre-Tax Business Realignment Costs

(0.1)

3.4

1.1


4.4

Less: Pre-Tax Gain from Disposal of Non-Core Products




(33.9)

(33.9)

Less: Pre-Tax Recovery of Brazilian Indirect Taxes




(6.5)

(6.5)

Add: Pre-Tax Share-Based Comp Accelerated Vesting




0.5

0.5

Less: Pre-Tax One-Time Sale of Non-Core Product Inventory




(1.4)

(1.4)

Adjusted EBITDA

$                      25.4

$                       22.9

$                    24.1

$              20.2

$                  92.6



















Exhibit 5 – Adjusted Gross Profit












Reconciliation of Adjusted Gross Profit











(USD in millions)

Q2 2019





Gross Profit

$                      56.8











Add: Pre-Tax Restructuring Costs

2.4





Less: Pre-Tax One-Time Sale of Non-Core Product Inventory

(1.4)





Adjusted Gross Profit

$                      57.8

















Exhibit 6 – Adjusted Sales Control Devices












Reconciliation of Control Devices Adjusted Sales 











(USD in millions)

Q2 2019





Control Devices Sales

$                   116.1











Less: Pre-Tax One-Time Sale of Non-Core Product Inventory

(4.2)





Adjusted Control Devices Sales

$                   112.0























Reconciliation of Control Devices Adjusted Sales Excluding Disposed Non-Core Products











(USD in millions)

Q2 2019





Adjusted Control Devices Sales

$                   112.0











Less: Pre-Tax Impact from Disposed Non-Core Products

(9.1)





Adjusted Control Devices Sales Excluding Disposed Non-Core Products

$                   102.9























Exhibit 7 – Adjusted Sales 












Reconciliation of Adjusted Sales











(USD in millions)

Q2 2019





Sales

$                   222.2











Less: Pre-Tax One-Time Sale of Non-Core Product Inventory

(4.2)





Adjusted Sales

$                   218.1





 

 

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SOURCE Stoneridge, Inc.