What changed in this filing

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Item 1. Business

2023-03-02 compared with 2022-02-28 · 78 added, 86 removed, 156 unchanged (51% of the section changed)

Founded in 1965, Stoneridge, Inc.

(the “Company”) is a global designer and manufacturer of highly engineered electrical and electronic components, modules and systems for the automotive, commercial, off-highway and agricultural vehicle markets.

Our products and systems are critical elements in the management of mechanical and electrical systems to improve overall vehicle performance, convenience and monitoring in areas such as safety and security, intelligence, efficiency and emissions.

(the “Company”) is a global designer and manufacturer of highly engineered electrical and electronic systems, components and modules for the automotive, commercial, off-highway and agricultural vehicle markets.

Our products and systems are critical elements in the management of systems to improve overall vehicle performance, convenience and monitoring in areas such as safety and security, intelligence, efficiency and emissions.

Our worldwide footprint is primarily comprised of 21 locations in 11 countries and enables us to supply global automotive, commercial, off-highway, agricultural and other vehicle markets.

Our custom-engineered products and systems are used to activate equipment and accessories, monitor and display vehicle performance and control, distribute electrical power and signals and provide vehicle security and convenience.

Our product offerings consist of actuators, sensors, switches and connectors, driver information systems, camera-based vision systems, connectivity and compliance products, electronic control units, vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices and telematics solutions.

Our product offerings consist of actuators, sensors, switches and connectors, driver information systems, vision and safety systems, connectivity and compliance products, electronic control units, vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices and telematics solutions.

We supply the majority of our products, predominantly on a sole-source basis, to many of the world’s leading automotive and commercial vehicle original equipment manufacturers (“OEMs”) and select non-vehicle OEMs, as well as certain automotive and commercial vehicle Tier 1 suppliers.

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As a result of this trend, per-vehicle electronic content has been increasing.

Our technology and our partnership-oriented approach to product design and development enables us to develop next-generation products and systems for this trend.

Beginning with the divestiture of our wiring business in 2014, we accelerated a shift in our product portfolio towards smart products, or those products which contain embedded electronics or logic.

Our technology and our partnership-oriented approach to product design and development enables us to develop next-generation products and systems aligned with these trends.

Beginning with the divestiture of our wiring business in 2014, we accelerated a shift in our product portfolio towards smart products, or those products that contain embedded electronics or logic.

While the wiring business was our largest single business, based on revenues and employees, and the business that the Company was founded on, its products were largely commodities that did not provide a technology platform to drive our expected future growth.

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In 2019, the Company’s Control Devices segment sold its non-core switches and connectors business (the “Non-core Products”) and in 2020 announced the strategic exit of our PM sensor business to further align with our strategic plan.

These activities have acted as a catalyst for the advancement of our smart product portfolio, increasing our smart content from just over 50 percent of our sales in 2014 to almost 75% of our sales in 2021.

These activities have acted as a catalyst for the advancement of our smart product portfolio, increasing our smart content from just over 50% of our sales in 2014 to almost 78 % of our sales in 2022.

Our product portfolio shift focuses on the megatrends driving the transportation industry.

In January 2019, the Company committed to a restructuring plan that resulted in the closure of the Canton, Massachusetts facility (“Canton Facility”) as of March 31, 2020 and the consolidation of manufacturing operations at that site into other Company locations (“Canton Restructuring”).

The costs for the Canton Restructuring included employee severance and termination costs, contract termination costs, professional fees and other related costs such as moving and set-up costs for equipment and costs to restore the engineering function previously located at the Canton Facility.

We recognized less than $0.1 million of expense as a result of these actions during the year ended December 31, 2021 and recognized $3.0 million and $12.5 million of expense during the years ended December 31, 2020 and 2019, respectively.

During the third quarter of 2020, we leased the Canton facility to a third party.

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See Note 7 and Note 2 to the consolidated financial statements for additional details regarding the third-party lease and sale, respectively, of the Canton Facility.

The Company does not expect to incur additional costs related to the Canton Restructuring.

On April 1, 2019, the Company entered into an Asset Purchase Agreement and sold product lines and assets related to certain Control Devices Non-core Products.

The Non-core Products were manufactured in Juarez, Mexico and Canton, Massachusetts, and include ball switches, ignition switches, rotary switches, courtesy lamps, toggle switches, headlamp switches and other related components.

See Note 2 to the consolidated financial statement for additional details regarding the disposal of Non-core Products.

See Note 12 to the consolidated financial statements for additional details regarding the Canton Restructuring .

On May 19, 2020, the Company committed to the strategic exit of its Control Devices particulate matter (“PM”) sensor product line (“PM Sensor Exit”).

The decision to exit the PM sensor product line was made after the consideration of the decline in the market outlook for diesel passenger vehicles, the current and expected profitability of the product line and the Company’s strategic focus on aligning resources with the greatest opportunities.

The estimated costs for the PM Sensor Exit include employee severance and termination costs, professional fees and other related costs such as potential commercial and supplier settlements.

Non-cash charges include impairment of fixed assets and accelerated depreciation associated with PM sensor production.

See Note 12 to the consolidated financial statements for additional details regarding the PM Sensor Exit.

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Our Control Devices segment is increasingly well positioned with a focus on continued development and commercialization of actuation and electrified powertrain applications that will drive future growth for the segment.

Our Electronics segment is expected to drive strong revenue growth through previously awarded new program launches including our first two launches for our MirrorEye® camera-based vision system in the OEM market, as well as our continued investment in current and future technologies.

Our Stoneridge Brazil segment continues to integrate into our global Electronics strategy as we leverage our global engineering footprint and prepare for continued expansion of our local OEM presence.

Overall, we will continue to focus our resources on the areas of largest opportunity for the Company and drive long-term value creation for our shareholders.

Our Electronics segment is expected to drive strong revenue growth through previously awarded new program launches including launches for our MirrorEye® camera-based vision system in the OEM market, our digital driver information systems and our connectivity products globally.

Our Stoneridge

Brazil segment continues to integrate into our global Electronics strategy as we leverage our global engineering footprint and prepare for continued expansion of our local OEM presence.

Overall, we will continue to focus our resources on the areas of largest opportunity for the Company to drive long-term value creation for our shareholders.

Segments and Products

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This segment includes product lines such as actuators, sensors, switches and connectors.

Actuator products enable OEMs to deploy power functions in a vehicle and can be designed to integrate switching and control functions including our park lock and shift by wire products.

Sensor products are employed in major vehicle systems such as the emissions, safety, powertrain, braking, climate control, steering and suspension systems.

Actuator products enable OEMs to deploy power functions in a vehicle and can be designed to integrate switching and control functions including our park lock, front-axle disconnect and shift by wire products.

Sensor products are employed in major vehicle systems such as the emissions, safety, powertrain, braking, climate control, steering and suspension systems and are now being applied to electric vehicle thermal management systems.

Switches and connectors transmit signals that activate specific functions.

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To a lesser extent, we also sell these products to the commercial vehicle and agricultural markets.

Our Electronics segment designs and manufactures driver information systems, camera-based vision systems, connectivity and compliance products and electronic control units.

Our Electronics segment designs and manufactures driver information systems, vision and safety systems, connectivity and compliance products and electronic control units.

Driver information systems and connectivity and compliance products collect, store and display vehicle information such as speed, pressure, maintenance data, trip information, operator performance, temperature, distance traveled, and driver messages related to vehicle performance.

Camera-based vision products provide enhanced vehicle visibility and safety to drivers.

Vision and safety products provide enhanced vehicle visibility and safety to drivers.

Electronic control units regulate, coordinate, monitor and direct the operation of the electrical system within a vehicle.

These products are sold principally to the commercial vehicle market through both the OEM and aftermarket channels.

In addition, camera-based vision systems are sold to the off-highway and commercial vehicle markets.

In addition, vision and safety systems are sold to the off-highway and commercial vehicle markets.

Stoneridge Brazil.

Our Stoneridge Brazil (“SRB”) segment primarily serves the South American market and specializes in the design, manufacture and sale of vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices and telematics solutions primarily for the automotive and motorcycle markets.

Our Stoneridge Brazil (“SRB”) segment primarily serves the South American market and specializes in the design, manufacture and sale of vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices, driver information systems and telematics solutions primarily for the automotive market.

This segment includes product lines such as vehicle monitoring and tracking devices, security alarms, convenience applications such as parking sensors and rearview cameras, audio and infotainment systems and telematics products used for fleet management.

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Commercial vehicle 48 % 39 % 36 %

Automotive 34 % 41 % 45 %

Off-highway and other 12 % 12 % 12 %

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Production Materials

The principal production materials used in the Company’s manufacturing process are molded plastic components and resins, copper, steel, precious metals and certain electrical components such as printed circuit boards, semiconductors, microprocessors, memory devices, resistors, capacitors, fuses, relays, infotainment devices and cameras.

We purchase production materials pursuant to both annual contract and spot purchasing methods.

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As global demand for our production materials increases, we may have difficulties obtaining adequate production materials from our suppliers to satisfy our customers.

Refer to the Risk Factors for risks related to the current supply chain disruption related to semiconductors and other production materials.

Any extended period of time for which we cannot obtain adequate production material or which we experience an increase in the price of production material would materially affect our results of operations and financial condition.

Risk Factors for risks related to the current supply chain disruption related to semiconductors and other production materials.

Any extended period for which we cannot obtain adequate production material or which we experience an increase in the price of production material would materially affect our results of operations and financial condition.

Patents, Trademarks and Intellectual Property

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and foreign patents, trademarks, and other rights to intellectual property relating to the reportable segments of our business, which we believe are appropriate to protect the Company’s interests in existing products, new inventions, manufacturing processes and product developments.

We do not believe any single patent is material to our business, nor would the expiration or invalidity of any patent have a material adverse effect on our business or ability to compete.

We do not believe any single patent is material to our overall business success, nor would the expiration or invalidity of any patent have a material adverse effect on our business or ability to compete.

Industry Cyclicality and Seasonality

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Because these products are used principally in the production of vehicles for the automotive, commercial, off-highway and agricultural vehicle markets, revenues and therefore results of operations, are significantly dependent on the general state of the economy and other factors, like the impact of environmental regulations on our customers and end market consumers, which affect these markets.

A significant decline in automotive, commercial, off-highway and agricultural vehicle production of our principal customers could adversely impact the Company.

Our Control Devices and Electronics and segments are moderately seasonal, impacted by mid-year and year-end shutdowns and the ramp-up of new model production at key customers.

A significant decline in automotive, commercial, off-highway and agricultural vehicle production of our principal customers could adversely affect the Company.

Our Control Devices and Electronics segments are moderately seasonal, impacted by mid-year and year-end shutdowns and the ramp-up of new model production at key customers.

In addition, the demand for our Stoneridge Brazil segment consumer products is typically higher in the second half of the year.

We have several customers which account for a significant percentage of our sales.

We have several customers that account for a significant percentage of our sales.

The loss of any significant portion of our sales to these customers, or the loss of a significant customer, would have a material adverse impact on our financial condition and results of operations.

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However, if we are unable to effectively manage production costs in the future to mitigate future pricing pressures, our results of operations would be adversely affected.

The Company typically enters into customer agreements at the beginning of a vehicle life cycle with the intent to fulfill customer-purchasing requirements for the entire vehicle production life cycle.

The vehicle life cycle usually includes the two to four year pre-production period and production for a term covering the life of such vehicle model or platform, generally between three to seven years, although there is no guarantee that this will occur.

Our customers make no firm commitments regarding volume and may terminate these agreements or orders at any time.

The Company’s estimated sourced future sales may also be impacted by various assumptions, including new program vehicle production levels, customer price reductions, foreign currency exchange rates and program launch timing.

The Company’s customer agreements may be terminated by customers at any time and, accordingly, estimated sourced future sales information does not represent firm orders or firm commitments.

The Company defines backlog as the estimated cumulative awarded sales for the next five years (or “estimated sourced future sales”).

The Company’s estimated sourced future sales were $3.4 billion as of December 31, 2021, compared to $3.0 billion as of December 31, 2020.

Due to the exit of the Control Devices PM sensor products business, related sales were excluded from our estimated sourced future sales as of December 31, 2020.

The markets for our products in our reportable segments are highly competitive.

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Our diversity in products creates a wide range of competitors, which vary depending on both market and geographic location.

We compete based on strong customer relations and a fast and flexible organization that develops technically effective solutions at or below target price.

We compete based on strong customer relations and a fast and flexible organization that develops technically effective solutions at a competitive price.

Product Development

Our research and development efforts for our reportable segments are largely product design and development oriented and consist primarily of applying known technologies to customer requests.

We work closely with our customers to solve customer requests using innovative approaches.

The majority of our development expenses are related to customer-sponsored programs where we are involved in designing custom-engineered solutions for specific applications or for next generation technology.

To further our vehicle platform penetration, we have also developed collaborative relationships with the design and engineering departments of key customers.

Our research and development efforts for our reportable segments are largely product design and development oriented and consist primarily of applying known technologies to customer requests or developing new, innovative technologies aligned with industry megatrends or customer requests.

A large portion of our development expenses are related to customer-sponsored programs where we are involved in designing custom-engineered solutions for specific applications or for next generation technology.

To further our vehicle platform penetration, we have also developed collaborative relationships with

the design and engineering departments of key customers.

These collaborative efforts have resulted in the development of new and complimentary products and the enhancement of existing products.

While our engineering and product development departments are organized by market, our segments interact and collaborate on new products.

The product development operations are complimented by technology groups in Barneveld, Netherlands;

The product development operations are executed by technology groups in Barneveld, Netherlands;

Campinas, Brazil;

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Novi, Michigan;

Stockholm, Sweden and Suzhou, China.

Stockholm, Sweden;

Suzhou, China and Tallinn, Estonia.

We have invested, and will continue to invest heavily in technology to develop new products for our customers.

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• New employee orientation with globally consistent and locally flexible messaging

● Frequent global “townhall” meetings and other communications

• Frequent global “town hall” meetings and other communications

• Employee wellness programs

● Opportunities for community and charitable involvement (reduced recently due to COVID-19 pandemic)

• Opportunities for community and charitable involvement

• Employee mentoring program

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We seek diverse sources for candidates and we offer wages and benefits that are competitive in the markets where employees are located.

We believe a diverse workforce and an inclusive work environment is required for us to achieve our full potential as an organization.

We further recognize the importance of having a strong Diversity, Equity & Inclusion (“DEI”) strategy.

We have recently embarked on an initiative to reassess our DEI strategy, identify gaps between our ideal and current states, and develop goals and actions to realize measurable improvement.

We look forward to continuing this important work in 2022.

It is always a top priority, but the COVID-19 global pandemic has brought even greater focus on employee health and safety.

We instituted a global Safe Workplace Committee that meets regularly to assess, monitor, and update safety measures as needed related to COVID-19 for each location.

At the start of the pandemic, where possible employees began working from home, and extensive safety measures were implemented, including temperature and health screenings, distanced workstations, plexiglass barriers, enhanced cleaning and disinfection protocols, required face coverings, and contact tracing when needed.

Over time, the Safe Workplace Committee has adapted our safety protocols as local regulations and changing conditions have warranted.

Our safety measures continue to be aligned with the recommendations of US and global health organizations.

Stoneridge is committed to creating diverse, equitable and inclusive workplaces that align with our core values and deliver sustainable business success.

It is our mission to attract, advance and advocate for a diverse workforce that represents the communities around us.

To this end, Stoneridge created a steering committee to drive DEI initiatives across its various sites and functions and report on progress to our executive leadership team and Board of Directors.

Additionally, we are challenging and responding to bias and eliminating barriers through fair policies and practices.

We are building an inclusive Stoneridge where all employees can grow, excel, and contribute to our success in a meaningful way.

The Human Resources function at Stoneridge is an active and visible partner to the business at all levels.

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The following table sets forth the names, ages, and positions of the executive officers of the Company:

President, Chief Executive Officer and Director

Chief Financial Officer and Treasurer

Chief Human Resources Officer and Assistant General Counsel

President of the Electronics Division and Chief Technology Officer

President of the Stoneridge Brazil Division

Name Age Position

James Zizelman 62 President, Chief Executive Officer and Director

Horvath 37 Chief Financial Officer and Treasurer

Benedict 56 Chief Human Resources Officer and Assistant General Counsel

Borne 48 Chief Strategy Officer and Chief Technology Officer

Ferraiolo 55 President of the Stoneridge Brazil Division

56 Chief Accounting Officer

Senior Vice President of Integrated Supply Chain

James Zizelman

President of the Control Devices Division

DeGaynor, President, Chief Executive Officer and Director.

DeGaynor was appointed as President and Chief Executive Officer in March 2015.

He has served as a director since May 2015.

Salvatore Orsini 53 Chief Procurement Officer

Peter Österberg 54 President of the Electronics Division

Rajaey Kased 43 President of the Control Devices Division

James Zizelman, President, Chief Executive Officer and Director.

Zizelman was appointed as President and Chief Executive Officer and elected as Director in January 2023.

Previously he served as President of the Control Devices Division since April 2020.

Prior to joining Stoneridge, Mr.

DeGaynor served as the Vice President of Strategic Planning and Innovation of Guardian Industries Corp.

(“Guardian”), from October 2014 until March 2015.

DeGaynor served as Vice President of Business Development, Managing Director Asia for SRG Global, Inc., a Guardian company, from 2008 through September 2014.

DeGaynor served as Chief Operating Officer, International for Autocam Corporation from 2005 to 2008.

Zizelman served as the Vice President of Engineering and Program Management for Aptiv from December 2017 to March 2019.

Prior to that, Mr.

DeGaynor held positions of increasing responsibility with Delphi Corporation from 1993 to 2005 .

Zizelman was employed at Delphi for more than 20 years, where he was last a Vice President of Engineering from 2016 to 2017.

Horvath, Chief Financial Officer and Treasurer.

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Benedict, Chief Human Resources Officer and Assistant General Counsel.

Benedict was appointed Chief Human Resources Officer and Assistant General Counsel – Labor and Employment (CHRO) in June 2019.

Benedict was appointed Chief Human Resources Officer and Assistant General Counsel – Labor and Employment in June 2019.

Benedict previously served as Stoneridge’s Director of Legal since November 2017.

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Benedict served as Senior Counsel for Koch Industries in October 2017 and Corporate Counsel for Guardian Industries from December 2012 to September 2017.

Borne, President of the Electronics Division and Chief Technology Officer.

Borne was appointed as President of the Electronics Division in January 2019.

Borne joined the Company in August 2018 and has been serving as the Company’s Chief Technology Officer and will continue to serve in this role.

Borne, Chief Strategy Officer and Chief Technology Officer.

Borne was appointed Chief Strategy Officer in March 2022.

Prior to that he was the President of the Electronics Division from January 2019.

Borne joined the Company in August 2018 as the Company’s Chief Technology Officer and has continued to serve in that role.

Prior to joining Stoneridge, Mr.

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Hartman served as Corporate Controller of the Company since 2006 and prior to that as Stoneridge’s Director of Internal Audit from 2003.

Heigel, Vice President of Operations.

Heigel was appointed Vice President of Operations in January 2020.

Salvatore Orsini, Chief Procurement Officer.

Orsini was appointed Chief Procurement Officer in July 2022.

Prior to that Mr.

Heigel had been employed at ALPHA Performance Group, LLC as its Co-Founder and Managing Director from 2009 until December 2019.

Orsini had been employed at Nexteer Automotive as Vice President, Global Chief Supply Management Officer from 2020 until June 2022.

From 2019 to 2020 Mr.

Orsini served as Supply Chain Director at Aptiv and from 2013 to 2019 Mr.

Orsini held various leadership roles at General Motors, most recently Global Commodity Director.

Prior to that Mr.

Heigel was at served in various roles at Delphi last serving as Managing Director, Delphi Electrical Centers from 2006 to 2009.

James Zizelman, President of the Control Devices Division.

Zizelman was appointed to President of the Control Devices Division in April 2020.

Until his employment with the Company, Mr.

Zizelman served as the Vice President of Engineering and Program Management for Aptiv from December 2017 to March 2019.

Orsini held various positions at Rolls-Royce Aerospace and Delphi.

Peter Österberg, President of the Electronics Division.

Österberg was appointed as president of the Electronics Division in March 2022.

Before joining Stoneridge, Peter served as vice president of Supplier Quality and Development at Volvo Group from 2017 to 2022.

Before that, he served in a variety of roles at Volvo including vice president of engineering at Volvo CE, global director Volvo Powertrain, and other positions with increasing responsibility over time.

Prior to that, he worked at Volvo Cars, both within product development and quality.

Rajaey Kased, President of the Control Devices Division.

Kased was appointed as President of the Control Devices Division in January 2023.

He previously was the Vice President of Sales, Strategy, and Product Line Management for the Control Devices Division in 2019.

Prior to joining Stoneridge, Mr.

Kased served as Head of Business Development, ADAS and Powertrain, North America, at Henkel from 2017 to 2019.

Prior to that, Mr.

Zizelman was employed at Delphi for more than 20 years, where he was last a Vice President of Engineering from 2016.

Kased was employed at Delphi from 2005 to 2017 where he served in roles of increasing responsibility.

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business