SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999. Commission file number 001-13337
Ohio 34-1598949 ------------------------------- --------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation 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
The number of Common Shares, without par value, outstanding as of May 11, 1999:
22,397,311
STONERIDGE, INC.
INDEX
Page No. Part I Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets as of March 31, 1999 2 and December 31, 1998 Condensed Consolidated Statements of Income for the three 3 months ended March 31, 1999 and 1998 Condensed Consolidated Statements of Cash Flows for the 4 three months ended March 31, 1999 and 1998 Notes to Condensed Consolidated Financial Statements 5-7 Item 2. Management's Discussion and Analysis of 8-11 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosure About Market 11 Risk Part II Other Information 12 Signatures 13 Exhibit Index 14 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31, 1999 1998 ------------------ ----------------- (unaudited) (audited) ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 1,764 $ 1,876 Accounts receivable, net 102,398 84,655 Inventories 57,323 53,273 Prepaid expenses and other 8,010 5,983 Deferred income taxes 12,447 11,679 ------------------ ----------------- Total current assets 181,942 157,466 ------------------ ----------------- PROPERTY, PLANT AND EQUIPMENT, net 99,970 94,770 OTHER ASSETS: Goodwill, net 349,116 351,501 Other intangible assets, net 3,908 3,928 Investments and other 28,463 30,451 ------------------ ----------------- TOTAL ASSETS $663,399 $638,116 ================== ================= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Current portion of long-term debt $ 21,885 $ 21,213 Accounts payable 43,517 45,835 Accrued expenses and other 53,052 48,234 ------------------ ----------------- Total current liabilities 118,454 115,282 ------------------ ----------------- LONG-TERM DEBT, net of current portion 332,449 322,724 DEFERRED INCOME TAXES 9,544 8,088 OTHER LIABILITIES 1,552 1,480 ------------------ ----------------- Total long-term liabilities 343,545 332,292 ------------------ ----------------- SHAREHOLDERS' EQUITY: Preferred shares, without par value, 5,000 authorized, none issued -- -- Common shares, without par value, 60,000 authorized, 22,397 issued and -- -- outstanding at March 31, 1999 and December 31, 1998, stated at Additional paid-in capital 141,506 141,506 Retained earnings 60,103 49,330 Accumulated other comprehensive income (209) (294) ------------------ ----------------- Total shareholders' equity 201,400 190,542 ------------------ ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $663,399 $638,116 ================== ================= |
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated balance sheets.
STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands except for per share data)
Three months ended March 31, ----------------------------- 1999 1998 ------------ ------------ NET SALES $177,654 $131,216 COST AND EXPENSES: Cost of goods sold 128,214 99,513 Selling, general and administrative expenses 23,183 15,665 ------------ ------------ Operating income 26,257 16,038 Interest expense, net 8,250 274 ------------ ------------ INCOME BEFORE INCOME TAXES 18,007 15,764 Provision for income taxes 7,234 6,382 ------------ ------------ NET INCOME $ 10,773 $ 9,382 ============ ============ BASIC AND DILUTED NET INCOME PER SHARE $0.48 $0.42 ============ ============ WEIGHTED AVERAGE SHARES OUTSTANDING 22,397 22,397 ============ ============ |
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements.
STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
For the three months ended March 31, ------------------------------ 1999 1998 ------------- ------------- OPERATING ACTIVITIES: Net income $ 10,773 $ 9,382 Adjustments to reconcile net income to net cash from operating activities- Depreciation and amortization 7,106 3,559 Deferred income taxes 696 (997) Changes in operating assets and liabilities- Accounts receivable, net (13,385) (13,815) Inventories 945 (161) Prepaid expenses and other (1,531) (1,064) Other assets, net 796 (995) Accounts payable (4,656) 4,325 Accrued expenses and other 64 (1,027) ------------- ------------- Net cash from operating activities 808 (793) ------------- ------------- INVESTING ACTIVITIES: Capital expenditures (1,639) (1,734) Proceeds from sale of fixed assets -- 12 Business acquisitions (12,452) -- ------------- ------------- Net cash from investing activities (14,091) (1,722) ------------- ------------- FINANCING ACTIVITIES: Shareholder distributions paid -- (2,600) Net proceeds (repayments) of long-term debt and 2,722 (140) other Net borrowings under credit facility 10,391 4,871 ------------- ------------- Net cash from financing activities 13,113 2,131 ------------- ------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH 58 -- EQUIVALENTS NET CHANGE IN CASH AND CASH EQUIVALENTS (112) (384) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,876 1,338 ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,764 $ 954 ============= ============= |
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements.
STONERIDGE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except for share and per share data)
1. The accompanying condensed consolidated financial statements have been prepared by Stoneridge, Inc. (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the Commission). The information furnished in the condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Commission's rules and regulations. Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company's 1998 Annual Report to Shareholders.
The results of operations for the three months ended March 31, 1999 are not necessarily indicative of the results to be expected for the full year.
2. Inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for approximately 69% and 76% of the Company's inventories at March 31, 1999 and December 31, 1998, respectively, and by the first-in, first-out (FIFO) method for all other inventories. Inventory cost includes material, labor and overhead. Inventories consist of the following:
March 31, 1999 December 31, 1998 -------------- ----------------- Raw materials $ 37,739 $32,453 Work in progress 8,340 10,673 Finished goods 13,426 12,379 Less-LIFO reserve (2,182) (2,232) ------------ ------------ Total $57,323 $53,273 ============ ============ |
3. On March 6, 1999, the Company purchased certain assets and assumed certain liabilities of Delta Schoeller, Ltd. (Delta), a United Kingdom manufacturer of switches for the automotive industry. The transaction was accounted for as a purchase. The preliminary purchase price approximates $12.0 million.
On December 31, 1998, the Company purchased all the outstanding common shares of Hi-Stat Manufacturing Company, Inc. (Hi-Stat) for approximately $362,000. Hi-Stat manufactures engineered sensors, switches and soleniods for the automotive industry. The transaction was accounted for as a purchase. Accordingly, the assets acquired and liabilities assumed of Hi- Stat are included in the consolidated balance sheet as of March 31, 1999 and December 31, 1998. The purchase price was funded with the Company's cash on hand and with proceeds from the Company's senior secured credit facility. The components of intangible assets included in the allocation of purchase price at December 31, 1998 and the related straight-line amortization periods is summarized as follows:
STONERIDGE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(in thousands, except for share and per share data)
Amortization Amount Period (years) ------------ -------------- Non-compete covenants $ 590 2 Patents 2,580 6-13 Goodwill 306,613 40 -------- Total $309,783 ======== |
The results of operations of Hi-Stat will be included in the accompanying financial statements from the date of acquisition. As such, Hi-Stat has no effect on fiscal year 1998 net income.
The unaudited proforma consolidated results of operations as though Hi-Stat had been acquired as of the beginning of fiscal 1998 is as follows:
Three months ended March 31, 1998 ------------------ Net sales $172,869 Operating income $ 22,741 Net income $ 7,330 Basic and diluted earnings per share $ 0.33 |
The pro forma data does not purport to be indicative of the results that would have been obtained had these events actually occurred at the beginning of the periods presented and is not intended to be a projection of future results. The pro forma amounts reflect the results of operations for the Company, Hi-Stat and the following assumed purchase accounting adjustments for the periods presented:
. Elimination of historical management costs and interest expense of
Hi-Stat.
. Interest expense on borrowings used to fund the acquisition
. Amortization of intangible assets based on the purchase price allocation
. Estimated income tax effect on the results of operations and the pro forma
adjustments assuming both companies were subject to tax as C corporations
4. Other comprehensive income includes foreign currency translation adjustments, net of related tax. Comprehensive income consists of the following:
March 31, 1999 March 31, 1998 ------------------- ------------------- Net income $10,773 $9,382 Other comprehensive income 85 90 ------------------- ------------------- Comprehensive income $10,858 $9,472 =================== =================== |
STONERIDGE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(in thousands, except for share and per share data)
5. The Company has a $425,000 credit agreement with a bank group. The credit agreement has three components: a $100,000 revolving credit facility, a $150,000 term facility and a $175,000 term facility. The $100,000 revolving facility and the $150,000 term facility expire on December 31, 2003, and require a commitment fee of 0.37% to 0.50% on the unused balance. Interest is payable quarterly at either (i) the prime rate plus a margin of .25% to 1.50% or (ii) LIBOR plus a margin of 1.75% to 3.00%, depending upon the Company's ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization, as defined. The $175,000 term facility expires on December 31, 2005. Interest is payable quarterly at either (i) the prime rate plus a margin of 2.00% or (ii) LIBOR plus a margin of 3.50%.
Long-term debt consists of the following:
March 31, 1999 December 31,1998 ------------------------- ------------------------- Borrowings under credit facility $352,541 $342,150 Other 1,793 1,787 ------------------------- ------------------------- 354,334 343,937 Less: Current maturities 21,885 21,213 ------------------------- ------------------------- $332,449 $322,724 ========================= ========================= |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Sales. Net sales for the first quarter of 1999 increased by $46.5 million, or 35.4%, to $177.7 million from $131.2 million for the same period in 1998. Sales of core products increased by $54.1 million, or 49.9%, to $162.5 million during the first quarter of 1999 compared to $108.4 million for the same period of 1998. Sales of core products from the recent acquisitions of Hi-Stat and Delta accounted for $47.1 million of the change, while sales of existing core products increased by $7.0 million, or 6.5%, compared to same period in 1998. Sales revenues for the quarter were favorably impacted by higher OEM production volumes in both the passenger car/light truck and the commercial vehicle markets which was offset by lower production volumes in the agricultural vehicle market.
Sales for the first quarter of 1999 for North America increased $40.6 million to $161.2 million from $120.6 million for the same period in 1998. North American sales accounted for 90.7% of total sales for the first quarter of 1999 compared with 91.9% for the same period in 1998. Sales for the first quarter of 1999 outside North America increased $5.9 million to $16.5 million from $10.6 million for the same period in 1998. Sales outside North America accounted for 9.3% of total sales for the first quarter of 1999 compared with 8.1% for the same period in 1998.
As expected, contract manufacturing sales for the first quarter of 1999 declined by $7.6 million to $15.2 million, or 8.6%, of the Company's total sales revenue compared with $22.8 million, or 17.4%, of total sales revenue for the same period in 1998.
Cost of Goods Sold. Cost of goods sold for the first quarter of 1999 increased by $28.7 million, or 28.8%, to $128.2 million from $99.5 million in the first quarter of 1998. As a percentage of sales, cost of goods sold decreased to 72.2% in 1999 from 75.8% in 1998. The decrease as a percent of sales was due primarily to a shift in product mix to higher value added electrical and electronic core products and lower contract manufacturing sales.
Selling, General and Administrative Expenses. Selling, general and administrative (SG&A) expenses increased by $7.5 million to $23.2 million in the first quarter of 1999 from $15.7 million for the same period in 1998. As a percentage of sales, SG&A expenses increased to 13.1% for the first quarter of 1999 from 12.0% for the same period in 1998. The increase is primarily attributable to costs from the recent acquisitions.
Interest Expense. Interest expense for the first quarter of 1999 was $8.2 million compared with $0.3 million in 1998. Average outstanding indebtedness was $349.1 million and $12.2 million for the first three months of 1999 and 1998, respectively. The increase in average outstanding indebtedness was primarily due to borrowings to finance recent acquisitions.
Income Before Income Taxes. As a result of the foregoing, income before taxes increased by $2.2 million for the first quarter of 1999 to $18.0 million from $15.8 million in 1998.
Provision for Income Taxes. The Company recognized provisions for income taxes of $7.2 million and $6.4 million for federal, state and foreign income taxes for the first quarters of 1999 and 1998, respectively.
Net Income. As a result of the foregoing, net income increased by $1.4 million, or 14.9%, to $10.8 million for the first quarter of 1999 from $9.4 million in 1998.
Liquidity and Capital Resources
Net cash provided from operating activities was $0.8 million for the quarter ended March 31, 1999 as compared to net cash used in operating activities of $0.8 million for the quarter ended March 31, 1998. The increase in net cash from operating activities of $1.6 million was due to the increase in net income of $1.4 million and the increase in depreciation and amortization of $3.5 million which was offset by the increase in working capital and other operating assets of $3.3 million.
Net cash used for investing activities was $14.1 million and $1.7 million for the quarters ended March 31, 1999 and 1998, respectively. The increase in cash used for investing activities of $12.4 million was primarily the result of the acquisition of Delta. The acquisition of Delta was financed with funds from the Company's $425.0 million credit agreement.
Net cash provided by financing activities was $13.1 million and $2.1 million for the quarters ended March 31, 1999 and 1998, respectively. Primarily as a result of the Delta acquisition, long-term debt increased $13.1 million for the quarter ended March 31, 1999.
The Company has a $425.0 million credit agreement (of which $352.5 million
was outstanding at March 31, 1999) with a bank group. The credit agreement has
three components: a $100.0 million revolving facility, a $150.0 million term
facility, and a $175.0 million term facility. The $100.0 million revolving
facility and the $150.0 million term facility expire on December 31, 2003, and
require a commitment fee of 0.37% to 0.50% on the unused balance. Interest is
payable quarterly at either (i) the prime rate plus a margin of .25% to 1.50% or
(ii) LIBOR plus a margin of 1.75% to 3.00%, depending upon the Company's ratio
of consolidated total debt to consolidated earnings before interest, taxes,
depreciation and amortization, as defined. The $175.0 million term facility
expires on December 31, 2005. Interest is payable quarterly at either (i) the
prime rate plus a margin of 2.00% or (ii) LIBOR plus a margin of 3.50%.
The Company has entered into five interest rate swap agreements with a total notional amount of $345.0 million. The interest rate swap agreements exchange variable interest rates on the senior secured credit facility for fixed interest rates. The Company does not use derivatives for speculative or profit- motivated purposes. To the extent that the notional amount of the swap agreements exceed the carrying value of the underlying debt, a mark to market adjustment is reflected in the financial statements.
Management believes that cash flows from operations and the availability of funds from the Company's credit facilities will provide sufficient liquidity to meet the Company's growth and operating needs.
Inflation and International Presence
Management believes that the Company's operations have not been adversely affected by inflation. By operating internationally, the Company is affected by the economic conditions of certain countries. Based on the current economic conditions in these countries, management believes they are not significantly exposed to adverse economic conditions.
Recently Issued Accounting Standards
Effective January 1, 1998 the Company adopted Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related Information." SFAS 131 requires the financial statement disclosures for operating segments, products and services, and geographic areas. The Company operates in one business segment based on the criteria set forth in SFAS 131. Therefore, SFAS 131 will not affect the Company's financial position, results of operations or financial statement disclosures.
The Company is required to adopt Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities" for its fiscal year ending 2000. SFAS 133 establishes new accounting and reporting standards for derivatives and hedging activities. The Company has not yet evaluated the financial accounting and reporting impact of SFAS 133.
Year 2000 Initiative
The Company has conducted an evaluation of the actions necessary in order to gain assurance that its information and non-information technology systems will be able to function without disruption with respect to the application of dating systems in the Year 2000. As a result of this evaluation, the Company is engaged in the process of upgrading, replacing and testing information systems, computer applications and other systems to be able to operate without disruption due to Year 2000 issues. The Company's remedial actions are scheduled to be completed by the end of the third quarter of 1999.
There can be no assurance that the remedial actions being implemented by the Company will be able to be completed by the time necessary to avoid Year 2000 dating systems problems or that the cost of doing so will not be in excess of the amounts discussed below. If the Company is unable to complete its remedial actions in the planned timeframe, contingency plans will be developed to address systems that may not be Year 2000 compliant. These contingency plans could include accelerating the implementation of third party Year 2000 compliant software.
The Company estimates total historical Year 2000 expenditures to be approximately $2.0 million. Year 2000 expenditures relate to modifying software, purchasing new software and hardware, and replacing non-compliant software and hardware. Year 2000 expenditures to be incurred through December 31, 1999 are estimated to be an additional $1.6 million. These costs include both internal and external personnel costs related to the assessment process, as well as the cost of purchasing certain hardware and software. There can be no guarantee that these estimates will be achieved, and actual results may differ from those planned. The cost of remedial actions to rectify non-information technology systems is not anticipated to be material to the Company's financial position or results of operations. The Company intends to use cash provided from operations to fund expenditures related to Year 2000 issues.
The Company currently believes the most likely worst case scenario with respect to the Year 2000 issue is a disruption in the supply of products and services from the Company's vendors, including utility providers. Such a supply disruption could result in the Company not being able to produce certain products for a period of time, which could have a material adverse effect on the financial condition and results of operations of the Company.
The Company intends to develop contingency plans to address potential third party system failures resulting from a Year 2000 problem. The Company has an ongoing assessment process to gain assurances and certifications of customers' and suppliers' Year 2000 readiness programs. Based on the results of the assessment process, the Company will develop contingency plans for those suppliers who are unable or unwilling to develop remediation plans to become Year 2000 compliant. Although these plans are not yet complete, the Company expects that these plans will include a combination of the resourcing of materials to Year 2000 compliant vendors and the stockpiling of components. The Company expects the implementation of these plans to occur by the end of the third quarter of 1999.
Portions of this Year 2000 section contain statements that constitute forward-looking statements. The forward-looking statements include statements regarding the Company's intent, belief and expectations with respect to, among other things, the timing of the Company's Year 2000 remedial actions and the development of the Company's contingency plans, and the future expenses related to the Company's Year 2000 compliance programs. Investors are cautioned that any such forward-looking statement is not a guarantee and involves risks and uncertainties, and that actual events may differ materially from those in the forward-looking statement as a result of various factors, including, among others, the discovery of a currently unknown material Year 2000 issue, the failure of third parties to address Year 2000 issues, the failure to implement the Company's Year 2000 plan as scheduled, and a material increase in the costs of external consultants.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to certain market risks, primarily resulting from the effects of changes in interest rates. To reduce exposures to market risks resulting from fluctuations in interest rates, the Company uses derivative financial instruments. Specifically, the Company uses interest rate swap agreements to mitigate the effects of interest rate fluctuations on net income by changing the floating interest rates on certain portions of the Company's debt to fixed interest rates. The effect of changes in interest rates on the Company's net income generally has been small relative to other factors that also affect net income, such as sales and operating margins. Management believes that its use of these financial instruments to reduce risk is in the Company's best interest. The Company does not enter into financial instruments for trading purposes.
The Company's risks related to commodity price and foreign currency exchange risks have historically not been material. The Company does not expect the effects of these risks to be material based on current operating and economic conditions in the countries and markets in which it operates.
PART II. OTHER INFORMATION
In the ordinary course of business, the Company is involved in various legal proceedings, workers' compensation and product liability disputes. The Company is of the opinion that the ultimate resolution of these matters will not have a material adverse effect on the results of operations or the financial position of the Company.
None.
None.
None.
None.
(a) Exhibits
3.1 Second Amended and Restated Articles of Incorporation of the Company
3.2 Amended and Restated Code of Regulations of the Company
27.1 Financial Data Schedule for the three months ended March 31, 1999
(b) Reports on Forms 8-K
1. The Registrant's Current Report on Form 8-K, dated January 15, 1999 that described the acquisition of Hi-Stat Manufacturing Co., Inc.
2. The Company's Amendment No. 1 to Current Report on Form 8-K/A, dated January 26, 1999 that described the acquisition of Hi-Stat Manufacturing Co., Inc.
3. The Company's Amendment No. 2 to Current Report on Form 8-K/A, dated March 16, 1999 that described the acquisition of Hi-Stat Manufacturing Co., Inc. including financial statements of the business acquired and pro forma financial information.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
STONERIDGE, INC.
Date: May 17, 1999 /s/ Cloyd J. Abruzzo -------------------- Cloyd J. Abruzzo President and Chief Executive Officer (Principal Executive Officer) Date: May 17, 1999 /s/ Kevin P. Bagby ------------------ Kevin P. Bagby Treasurer and Chief Financial Officer (Principal Financial and Chief Accounting Officer) |
STONERIDGE, INC.
EXHIBIT INDEX
Exhibit Number Exhibit -------- ------- 3.1 Second Amended and Restated Articles of Incorporation of the Company, filed herewith. 3.2 Amended and Restated Code of Regulations of the Company, filed herewith. 27.1 Financial Data Schedule for the three months ended March 31, 1999, filed herewith. |
Exhibit 3.1
FIRST: The name of the Corporation shall be "Stoneridge, Inc."
SECOND: The place in the State of Ohio where the principal office of the Corporation is to be located is in Howland Township, Trumbull County.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code and any amendments heretofore or hereafter made thereto.
FOURTH: The authorized number of shares of the Corporation is 65,000,000, consisting of 60,000,000 Common Shares, without par value (hereinafter referred to as "Common Shares"), and 5,000,000 Serial Preferred Shares, without par value (hereinafter referred to as "Serial Preferred Shares").
DIVISION A
The Serial Preferred Shares shall have the following express terms:
Section 1. Series. The Serial Preferred Shares may be issued from time to time in one or more series. All Serial Preferred Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. Subject to the provisions of Sections 2 through 6, both inclusive, of this Division, which provisions shall apply to all Serial Preferred Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section) the following:
(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except when otherwise provided in the creation of
the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which any such rate may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which any such date or period may be established;
(e) The redemption rights and redemption price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(b) of this Division) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Second Amended and Restated Articles of Incorporation fixing, with respect to each such series, the matters described in clauses (a) through (i), both inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
Section 2. Dividends.
(a) The holders of Serial Preferred Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Serial Preferred Shares, shall be entitled to receive out of any funds legally available for the payment of dividends on Serial Preferred Shares, when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 of this Division A and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to
such series. No dividends shall be paid upon or declared or set apart for any series of Serial Preferred Shares for any dividend period unless at the same time a like proportionate dividend payable for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Serial Preferred Shares of all series then issued and outstanding and entitled to receive such dividend.
(b) So long as any Serial Preferred Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to Serial Preferred Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to Serial Preferred Shares, nor shall any Common Shares or any other shares ranking junior to Serial Preferred Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to Serial Preferred Shares received by the Corporation subsequent to the date of first issuance of Serial Preferred Shares of any series, unless:
(1) All accrued and unpaid dividends on Serial Preferred Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart; and
(2) There shall be no arrearage with respect to the redemption of Serial Preferred Shares of any series from any sinking fund provided for shares of such series in accordance with Section 1 of this Division A.
Section 3. Redemption.
(a) Subject to the express terms of each series and the provisions of Subsection 5(c)(3) of this Division A, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Serial Preferred Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with Section 1 of this Division A; and
(2) Shall, from time to time, make such redemptions of each series of Serial Preferred Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption prices fixed in accordance with Section 1 of this Division A;
and shall in the case of any such redemption pay all accrued and unpaid dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of Serial Preferred Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Division A prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Serial Preferred Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $50,000,000, named in such notice and direct that there be paid to the respective holders of Serial Preferred Shares so to be redeemed amounts equal to the redemption price of Serial Preferred Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. If less than all of the outstanding Serial Preferred Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors .
(2) If the holders of Serial Preferred Shares which have been called for redemption shall not within five years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
(c) Any Serial Preferred Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation, shall resume the status of authorized but unissued Serial Preferred Shares without serial designation.
Section 4. Liquidation.
(a) (1) In any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of
the Corporation, the holders of Serial Preferred Shares
of any series shall be entitled to receive in full out
of the assets of the Corporation, including its capital,
before any amount shall be paid or distributed among the
holders of Common Shares or any other shares ranking
junior to Serial Preferred Shares, the amounts fixed
with respect to shares of such series in accordance with
Section 1 of this Division, plus an amount equal to all
dividends accrued and unpaid thereon to the date of
payment of the amount due pursuant to such liquidation,
dissolution or winding up of the affairs of the
Corporation. If the net assets of the Corporation
legally available therefor are insufficient to permit
the payment upon all outstanding Serial Preferred Shares
of the full preferential amount to which they are
entitled pursuant to this subsection 4(a)(1), then such
net assets shall be distributed ratably upon all
outstanding Serial Preferred Shares in proportion to the
full preferential amount to which each such share is
entitled.
(2) After payment to the holders of Serial Preferred Shares of the full preferential amounts as aforesaid, the holders of Serial Preferred Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other corporation or entity, the merger of any other corporation or entity into the Corporation, or the sale, lease or conveyance of all or substantially all the assets of the Corporation, shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section 4 .
Section 5. Voting.
(a) The holders of Serial Preferred Shares shall have no voting rights, except as provided in this Section or as required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of the equivalent of the full dividends on any series of Serial Preferred Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods (whether or not consecutive) which in the aggregate contain at least 540 days, the holders of Serial Preferred Shares of all series, voting together as one separate class, shall be entitled to elect, as herein provided, two members of the Board of Directors of the Corporation; provided, however, that the holders of Serial Preferred Shares shall not have or exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not
less than 50% of the outstanding Serial Preferred Shares of all series then outstanding are present in person or by proxy; and provided further that the special class voting rights provided for in this subsection 5(b)(1) when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on Serial Preferred Shares of all series then outstanding shall have been paid, whereupon the holders of Serial Preferred Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights on another default of the type specified in this subsection 5(b)(1).
(2) In the event of default entitling the holders of Serial Preferred Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of Serial Preferred Shares of all series at the time outstanding, and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 120 days after the date of receipt of the foregoing written request from the holders of Serial Preferred Shares; provided further, however, that if that annual meeting is not so held within such 120-day period, a special meeting shall be called as soon as is practicable after the Corporation becomes aware that such annual meeting will not be so held. At any meeting at which the holders of Serial Preferred Shares shall be entitled to elect directors, the holders of 50% of Serial Preferred Shares of all series at the time outstanding, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which the holders of Serial Preferred Shares are entitled to elect as herein provided. Notwithstanding any provision of these Second Amended and Restated Articles of Incorporation or the Amended and Restated Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by the holders of Serial Preferred Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation nor require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by the holders of Serial
Preferred Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
(3) The terms of office of all directors then in office elected by holders of Serial Preferred Shares as provided in this Subsection shall terminate immediately upon the expiration of the term of office during which there occurs any divesting of the special class voting rights of these holders. If the office of any director elected by such holders becomes vacant by reason of death, resignation, removal from office or otherwise, the holders of a majority of Serial Preferred Shares of all series at the time outstanding, present in person or by proxy at a special meeting of shareholders called and held in accordance with Subsection (2) above, shall elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) The affirmative vote of the holders of at least two-thirds of Serial Preferred Shares at the time outstanding, voting together as one separate class, shall be necessary to effect any one or more of the following (but so far as the holders of Serial Preferred Shares are concerned, such action may be effected with such vote):
(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Second Amended and Restated Articles of Incorporation or of the Code of Regulations of the Corporation which affects adversely the preferences or voting or other rights of the holders of Serial Preferred Shares; provided, however, neither the amendment of the Second Amended and Restated Articles of Incorporation so as to authorize, create or change the authorized or outstanding number of Serial Preferred Shares or of any shares ranking on a parity with or junior to Serial Preferred Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely the preferences or voting or other rights of the holders of Serial Preferred Shares; and provided further, that if any amendment, alteration or repeal affects adversely the preferences or voting or other rights of one or more but not all series of Serial Preferred Shares at the time outstanding, only the affirmative vote of the holders of at least two-thirds of the number of shares at the time outstanding of the series so affected shall be required;
(2) The authorization, creation or increase in the authorized number of shares, or of any security convertible into shares, in either case ranking prior to the Serial Preferred Shares; or
(3) The purchase or redemption (for sinking fund purposes or otherwise) of less than all Serial Preferred Shares then outstanding
except in accordance with a share purchase offer made to all holders of record of Serial Preferred Shares, unless all dividends on all Serial Preferred Shares then outstanding for all previous dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
Section 6. Definitions. For the purposes of this Division:
(a) Whenever reference is made to shares "ranking prior to Serial Preferred Shares," such reference shall mean all shares of the Corporation in respect of which the rights of the holders thereof as to the payment of dividends or as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation are given preference over the rights of the holders of Serial Preferred Shares;
(b) Whenever reference is made to shares on a parity with Serial Preferred Shares, such reference shall mean all shares of the Corporation in respect of which the rights of the holders thereof as to the payment of dividends and as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of a Corporation rank equally (except as to the amounts fixed therefor) with the rights of the holders of Serial Preferred Shares; and
(c) Whenever reference is made to shares "ranking junior to Serial Preferred Shares," such reference shall mean all shares of the Corporation other than those defined under Subsections (a) and (b) of this Section 6 as shares "ranking prior to" or "on a parity with" Serial Preferred Shares.
DIVISION B
The Common Shares shall have the following express terms:
The Common Shares shall be subject to the express terms of Serial Preferred Shares and any series thereof. Each Common Share shall be equal to each other Common Share and the holders thereof shall be entitled to one vote for each Common Share on all matters presented to the shareholders of the Corporation.
Each Class A and Class B Common Share issued and outstanding immediately prior to the filing of these Second Amended and Restated Articles of Incorporation, and each share held at such time by the Corporation as a treasury share, is changed, effective upon that filing, into 139.0856 Common Shares, with any fractional Common Share to which a holder would otherwise be entitled being rounded down to the nearest whole share.
FIFTH: No holder of shares of the Corporation of any class shall be entitled as such, as a matter of right, to subscribe for or purchase shares of the Corporation of any class, now or hereafter authorized, or to subscribe for or purchase securities convertible into or exchangeable for shares of the Corporation of any class or to which shall be attached or appertain any warrants or rights entitling the holder thereof to subscribe for or purchase shares of the Corporation of any class, except such rights of subscription or purchase, if any, for such consideration and upon such terms and conditions as its Board of Directors from time to time may determine.
SIXTH: To the extent permitted by law, the Corporation, by action of its Board of Directors and without action by its shareholders, may purchase or otherwise acquire shares of any class issued by it at such times, for such consideration and upon such terms and conditions as its Board of Directors may determine.
SEVENTH: Except as otherwise provided in these Second Amended and Restated Articles of Incorporation or the Code of Regulations of the Corporation as in effect from time to time, notwithstanding any provision of Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code and any amendments heretofore or hereafter made thereto, requiring for any purpose the vote, consent, waiver, or release of the holders of shares entitling them to exercise two-thirds or any other proportion of the voting power of the Corporation or of any class or classes of shares thereof, any action may be taken by the vote of the holders of shares entitling them to exercise a majority of the voting power of the Corporation, or of such class or classes, unless the proportion designated by such statute cannot be altered by these Second Amended and Restated Articles of Incorporation.
EIGHTH: No shareholder may cumulate such shareholder's voting power in the election of directors.
NINTH: No person who is serving or has served as a director of the Corporation shall be personally liable to the Corporation or any of its shareholders for monetary damages for breach of any fiduciary duty of such person as a director by reason of any act or omission of such person as a director; but the foregoing provision shall not eliminate or limit the liability of any person (a) for any breach of such person's duty of loyalty as a director to the Corporation or its shareholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 1701.95 of the Ohio Revised Code, (d) for any transaction from which such person derived any improper personal benefit, or (e) to the extent that such liability may not be limited or eliminated by virtue of Section 1701.13 of the Ohio Revised Code or any successor section or statute. Any repeal or modification of this NINTH Article by the shareholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.
TENTH: If any provision (or portion thereof) of these Second Amended and Restated Articles of Incorporation shall be found to be invalid, prohibited, or unenforceable for any reason, the remaining provisions (or portions thereof) of these Second Amended and Restated Articles of Incorporation shall remain in full force and effect, and shall be construed
as if such invalid, prohibited, or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of the Corporation and its shareholders that each such remaining provision (or portion thereof) of these Second Amended and Restated Articles of Incorporation remain, to the fullest extent permitted by law, applicable and enforceable as to all shareholders, notwithstanding any such finding.
ELEVENTH: These Second Amended and Restated Articles of Incorporation supersede and take the place of the heretofore existing Amended and Restated
Articles of Incorporation and all amendments thereto.
Exhibit 3.2
AMENDED AND RESTATED CODE OF REGULATIONS
OF
STONERIDGE, INC.
Amended and Restated Articles of Incorporation (as they may be amended from time to time, the "Articles of Incorporation") or these Regulations to be authorized or taken by the holders of a designated proportion of the shares of any particular class or of each class may be authorized or taken by a lesser proportion. The holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time until a quorum shall be present.
If a record date shall not be fixed, the record date for the determination of shareholders who are entitled to notice of, or who are entitled to vote at, a meeting of shareholders shall be the close of business on the date next preceding the day on which notice is given, or the close of business on the date next preceding the day on which the meeting is held, as the case may be.
shareholders, shall be six (6). The number of directors may be increased or decreased by action of the Board of Directors upon the vote of the majority of the board or by the vote of the shareholders that are present in person or by proxy at a meeting to elect directors at which a quorum is present and that are holders of a majority of the shares represented at the meeting and entitled to vote on the proposal; provided, however, that in no case shall the number be fewer than five (5) or more than twelve (12); and provided, further, that no decrease in the number of directors shall have the effect of removing any director prior to the expiration of his term of office. Notwithstanding the foregoing, the aggregate number of members of the Board of Directors shall automatically increase by the number of directors elected pursuant to Article Fourth, Division A, subsection 5(b) of the Articles of Incorporation of the Company, such directors to be elected and hold office in accordance with such provisions of the Articles of Incorporation of the Company, notwithstanding any other provision of this Code of Regulations.
At each meeting of shareholders for the election of directors, the candidates receiving the greatest number of votes entitled to be cast shall be elected as directors.
(i) such person is elected to fill a vacancy in the Board of Directors pursuant to section 6 of this Article II; or
(ii) such person is nominated for election as a director of the Corporation in accordance with this section.
Nominations of candidates for election as directors at any meeting of shareholders called for election of directors (an "Election Meeting") may be made by the Board of Directors or a committee thereof or any shareholder of record providing written notification to the Secretary of the Company of such nomination(s). At the request of the Secretary, each proposed nominee shall provide the Corporation with such information concerning himself as is required under the rules and regulations of the Securities and Exchange Commission (the "Commission") to be included in the Corporation's proxy statement soliciting proxies for the election of such nominee as a director.
or unwilling to stand for election to the Board of Directors, the Board of Directors or a committee thereof may designate a substitute nominee upon delivery, not fewer than five (5) days prior to the date of an Election Meeting, of a written notice of the Secretary setting forth such information regarding such substitute nominee as would have been required to be delivered to the Secretary pursuant to this Code of Regulations had such substitute nominee been initially proposed as a nominee.
give notice of each such resolution or by-law to any director who was not present at the time the same was adopted, but no further notice of such regular meeting need be given.
the name of the Corporation certificates for shares and deeds, mortgages, bonds, agreements, notes and other instruments shall be coordinate with like authority of the president.
The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers, to prescribe their authority and duties, and to fix their compensation.
whether disclosed upon such certificate or otherwise, nor shall they be obliged to see to the execution of any trust or obligation.
The fiscal year of the Corporation shall end on December 31 of each year, or on such other date as may be fixed from time to time by the Board of Directors.
The Board of Directors may provide a suitable seal containing the name of the Corporation. If deemed advisable by the Board of Directors, duplicate seals may be provided and kept for the purposes of the Corporation.
This Amended and Restated Code of Regulations may be amended, or new regulations may be adopted, at any meeting of shareholders called for such purpose by the affirmative vote of, or without a meeting by the written consent of, the holders of shares entitling them to exercise a majority of the voting
power of the Corporation on such proposal.
ARTICLE 5 |
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STONERIDGE, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 1999 AND FOR THE YEAR ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
MULTIPLIER: 1,000 |
PERIOD TYPE | 3 MOS |
FISCAL YEAR END | DEC 31 1999 |
PERIOD START | JAN 01 1999 |
PERIOD END | MAR 31 1999 |
CASH | 1,764 |
SECURITIES | 0 |
RECEIVABLES | 103,404 |
ALLOWANCES | (1,006) |
INVENTORY | 57,323 |
CURRENT ASSETS | 181,942 |
PP&E | 160,611 |
DEPRECIATION | (60,641) |
TOTAL ASSETS | 663,399 |
CURRENT LIABILITIES | 118,454 |
BONDS | 332,449 |
PREFERRED MANDATORY | 0 |
PREFERRED | 0 |
COMMON | 0 |
OTHER SE | 201,400 |
TOTAL LIABILITY AND EQUITY | 663,399 |
SALES | 177,654 |
TOTAL REVENUES | 177,654 |
CGS | 128,214 |
TOTAL COSTS | 128,214 |
OTHER EXPENSES | 23,183 |
LOSS PROVISION | 0 |
INTEREST EXPENSE | 8,250 |
INCOME PRETAX | 18,007 |
INCOME TAX | 7,234 |
INCOME CONTINUING | 10,773 |
DISCONTINUED | 0 |
EXTRAORDINARY | 0 |
CHANGES | 0 |
NET INCOME | 10,773 |
EPS PRIMARY | 0.48 |
EPS DILUTED | 0.48 |