STONERIDGE INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) | MarketScreener

2022-11-07 23:51:11 By : Ms. Jessie Zeng

We are a global designer and manufacturer of highly engineered electrical and electronic systems, components and modules primarily for the automotive, commercial, off-highway and agricultural vehicle markets.

We are organized by products produced and markets served. Under this structure, our operations have been reported using the following segments: PIC32MX795F512L-80I/PT

STONERIDGE INC  Management

Control Devices. This segment includes results of operations that manufacture actuators, sensors, switches and connectors.

Electronics. This segment includes results of operations from the production of driver information systems, camera-based vision systems, connectivity and compliance products and electronic control units.

The Company had net income of $0.7 million, or $0.03 per diluted share, for the three months ended September 30, 2022.

As a result of these supply chain disruptions and production schedule volatilities, our working capital balances, specifically inventory, have increased significantly compared to historical levels. We continue to support initiatives to reduce on hand inventory by refining our procurement process which we expect will improve liquidity.

Throughout 2022, we expect our effective tax rate to remain elevated primarily due to the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions.

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Condensed consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):

Net Sales. Net sales for our reportable segments, excluding inter-segment sales, are summarized in the following table (in thousands):

Our Stoneridge Brazil segment net sales decreased due to lower sales in most of our product lines offset by slightly higher sales of tracking devices and monitoring services.

Our Electronics segment gross margin increased primarily due to higher contribution from higher sales levels and the impact of negotiated price increases offset by increased material costs as a result of supply chain disruptions, adverse foreign exchange fluctuations and inflation.

Our Stoneridge Brazil segment gross margin as a percentage of sales was consistent with the prior period.

Operating Income (Loss). Operating income (loss) by segment is summarized in the following table (in thousands):

Our Control Devices segment operating income increased due to higher gross margin.

Our Electronics segment operating income increased primarily due to higher contribution from higher sales and the impact of negotiated price increases offset by higher material costs associated with supply chain disruptions, including spot purchases of electronic components net of recoveries, adverse foreign exchange fluctuations and inflation.

Our Stoneridge Brazil segment operating income was consistent with the prior period.

Our unallocated corporate operating loss increased primarily from higher incentive compensation costs offset by lower business realignment costs of $0.9 million.

Other Expense, net. We record certain foreign currency transaction losses (gains) as a component of other (income) expense, net on the condensed consolidated statement of operations. Other expense, net of $2.3 million increased by $2.3 million compared to the third quarter of 2021 due to foreign currency transaction losses in Electronics, Control Devices and Stoneridge Brazil segments from the strengthening of the U.S. dollar.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Condensed consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands):

Net Sales. Net sales for our reportable segments, excluding inter-segment sales, are summarized in the following table (in thousands):

Our Control Devices segment gross margin increased primarily due to lower overhead including the favorable impact from the PM sensor business exit.

Our Stoneridge Brazil segment gross margin as a percentage of sales was consistent with the prior year as adverse leverage of fixed costs was offset by favorable foreign currency translation.

Design and Development. D&D costs increased by $2.1 million due to increased spend for product launches in our Electronics and Control Devices segments offset by higher customer reimbursements for Electronics of $6.0 million.

Operating (Loss) Income. Operating (loss) income by segment is summarized in the following table (in thousands):

Our Control Devices segment operating income decreased due to the gain on the sale of the Canton Facility of $30.7 million in 2021.

Our Electronics segment operating income improved from higher contribution from increased sales levels and lower SG&A spending.

Our unallocated corporate operating loss increased primarily from higher incentive compensation and employee benefit costs offset by lower business realignment costs of $0.9 million.

Other Expense, net. We record certain foreign currency transaction losses (gains) as a component of other (income) expense, net on the condensed consolidated statement of operations. Other expense, net of $3.1 million increased by $2.9 million compared to the first nine months of 2021 due to foreign currency transaction losses in our Electronics and Control Devices segments from the strengthening of the U.S. dollar offsetting the 2022 gain on settlement of the net investment hedge of $3.7 million.

STONERIDGE INC  Management

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