Stoneridge Reports Strong Second-Quarter 2019 Results

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

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. 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.  

SOURCE Stoneridge, Inc.