What changed in this filing

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Item 1. Business

2022-02-28 compared with 2021-02-24 · 49 added, 79 removed, 193 unchanged (40% 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, motorcycle 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.

Our worldwide footprint is primarily comprised of 26 locations in 12 countries and enables us to supply global and regional automotive, commercial, off-highway, motorcycle, agricultural and other vehicle markets.

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.

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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.

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

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.

In addition to the divestiture of the wiring business, we deployed capital in 2017 to make strategic investments including the acquisition of Orlaco, our partner on the development of MirrorEye, our camera-based vision system, and the acquisition of 100 percent of our Stoneridge Brazil business.

In 2019, the Company sold the Control Devices Non-core Products business to further align with our strategic plan.

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.

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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 $3.0 million and $12.5 million of expense as a result of these actions 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 and are evaluating the sale of the facility.

The Company expects additional costs to be immaterial 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 switches and connectors (the “Non-core Products”).

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.

On June 17, 2021, we sold the Canton facility.

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.

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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, contract termination costs, professional fees and other related costs such as potential commercial and supplier settlements.

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.

We recognized $3.4 million of expense as a result of this initiative during the year ended December 31, 2020.

The estimated range of additional cost of the plan to exit the PM sensor product line, that will impact the Control Devices segment, is approximately $2.8 million and $6.3 million and is related to employee severance and termination costs, contract terminations costs, other related costs such as potential commercial and supplier settlements and accelerated depreciation.

The Company expects the exit from the PM sensor product line to be completed in the fourth quarter of 2021.

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

On March 8, 2021, the Company entered into an Asset Purchase Agreement and sold the PM sensor product line and assets.

The PM sensor product line and assets were located in Lexington, Ohio and Tallinn, Estonia.

See Note 2 to the consolidated financial statements for additional details regarding the sale of the PM sensor business.

On November 2, 2021, the Company entered into a Share Purchase Agreement (the “SPA”) with Minda Corporation Limited (“Minda”), as the buyer, and Minda Stoneridge Instruments Ltd.

On December 30, 2021, pursuant to the SPA, the Company closed the sale of MSIL to Minda.

See Note 2 to the consolidated financial statements for additional details regarding the sale of MSIL.

We have positioned each of our segments for continued long-term success.

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 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 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.

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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 to drivers.

Camera-based vision 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.

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Stoneridge Brazil.

Our Stoneridge Brazil segment, formerly referred to as “PST”, 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.

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

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.

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.

These products improve the performance, safety and convenience features of our customers’ vehicles.

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The following table sets forth for the periods indicated, the percentage of net sales derived from our principal end markets:

Year ended December 31

Principal End Markets

Commercial vehicle

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The markets for products in each of our reportable segments have been cyclical.

Because these products are used principally in the production of vehicles for the automotive, commercial, off-highway, motorcycle 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, motorcycle and agricultural vehicle production of our principal customers could adversely impact the Company.

Our Control Devices and Electronics and segments are typically not affected by seasonality, however the demand for our Stoneridge Brazil segment consumer products is typically higher in the second half of the year, the fourth quarter in particular.

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.

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.

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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.

Sales related to the disposal of the Control Devices Non-core Products business are excluded from our estimated sourced future sales as of December 31, 2019.

There were no sales related to the disposal of the Control Devices Non-core Products business for the year ended December 31, 2020.

Due to the planned exit of the Control Devices particulate matter (“PM”) sensor products business, related sales are excluded from our estimated sourced future sales 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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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 against the following companies:

Control Devices.

Our primary competitors include Aisin Seiki, Dana Incorporated, EFI Automotive, Erich Jaeger, ETO:

Gruppe, Ficosa Corporation, Futronic, GHSP, Johnson Electric, Kongsberg Automotive, Korea Fuel Tech Corporation (KFTC), Mitsubishi Electronics (MELCO), Nidec, Sensata and Sonceboz.

Our primary competitors include Actia Group, Aptiv, Bosch, Continental, Delphi Technologies, Hella KGaA Hueck & Co., Magneti Marelli, Mekra Lang, Valeo, Visteon and ZF Frierichshafen.

Stoneridge Brazil.

Our primary competitors include Autotrac, Bosch, CalAmp, Car System, Continental, Harman Automotive, Hinor, Ituran, Magneti Marelli, Maxtrack, Onix, Pioneer Corporation, Quelink, Sascar, Suntech, Taramps, Tury and Visteon.

Product Development

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Novi, Michigan;

Pune, India, Stockholm, Sweden and Suzhou, China.

Stockholm, Sweden and Suzhou, China.

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

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● Employee wellness programs

● Opportunities for community and charitable involvement (reduced in 2020 due to COVID-19 pandemic)

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

● Employee mentoring program

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

In 2020, we 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 work in 2021.

It is always a top priority, but in 2020 employee health and safety was of paramount importance due to the COVID-19 global pandemic.

Where feasible, employees began working from home in March 2020 through the remainder of the year and into early 2021.

For jobs that could not be done remotely, extensive safety measures were implemented, including temperature and health screenings, distanced workstations, plexiglass barriers, enhanced cleaning and disinfection protocols, required face coverings, contact tracing when needed, published Safe Workplace Guidelines, and employee training.

Our safety measures are aligned with the recommendations of US and global health organizations, and have continued into 2021.

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.

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

Our Chief Human Resources Officer reports directly to the Chief Executive Officer and interacts frequently with the Company’s Board of Directors.

In 2021, our Human Capital focus will continue to be on employee engagement, employee and leadership development, communications, and employee health and safety.

Joint Ventures

We form joint ventures in various global markets in order to achieve several strategic objectives including (i) diversifying our business by expanding in high-growth regions, (ii) employing complementary design processes, growth technologies and intellectual capital, and (iii) realizing cost savings from combined sourcing.

We have a 49% noncontrolling equity interest in Minda Stoneridge Instruments Ltd.

Based in India, MSIL manufactures electromechanical/electronic instrumentation equipment and sensors primarily for the automotive, motorcycle and commercial vehicle markets.

We leverage our investment in MSIL by sharing our knowledge and expertise in electrical components and systems and expanding MSIL’s product offering through the joint development of our products designed for the market in India.

Our Human Capital focus will continue to be on employee engagement, employee and leadership development, communications, and employee health and safety.

Information About Our Executive Officers

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President, Chief Executive Officer and Director

Executive Vice President, Chief Financial Officer and Treasurer

Susan Benedict

Chief Financial Officer and Treasurer

Chief Human Resources Officer and Assistant General Counsel

Laurent Borne

President of the Electronics Division and Chief Technology Officer

Chief Legal Officer and Secretary

President of the PST Electronics Division

President of the Stoneridge Brazil Division

Chief Accounting Officer

Vice President of Operations

Chief Procurement Officer

Senior Vice President of Integrated Supply Chain

James Zizelman

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

Krakowiak, Executive Vice President, Chief Financial Officer and Treasurer.

Krakowiak was appointed as Executive Vice President in October 2018 and Chief Financial Officer and Treasurer in August 2016.

Horvath, Chief Financial Officer and Treasurer.

Horvath was appointed Chief Financial Officer and Treasurer in August 2021.

He previously served as Stoneridge’s Executive Director of Corporate Strategy and Investor Relations, and prior to that as Director of Investor Relations.

Prior to joining Stoneridge, Mr.

Krakowiak served as Vice President, Treasurer and Investor Relations at Visteon Corporation from 2012 until August 2016.

Prior to that, Mr.

Krakowiak held the following positions at Owens Corning:

from 2009 until 2012, Vice President of Finance (Composite Solutions Business);

from 2008 until 2009, Vice President–Corporate Financial Planning and Analysis;

from 2006 until 2008, Vice President and Controller (Roofing and Asphalt);

and from 2005 until 2006, Assistant Treasurer.

Susan Benedict, Chief Human Resources Officer and Assistant General Counsel.

Horvath spent six years at EY, formerly known as Ernst & Young, in the Transaction Advisory practice, primarily focused on business and asset valuation with a focus on the automotive and transportation industry.

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.

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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.

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

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

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

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Borne served as Vice President of Product Development at Whirlpool Corporation from 2014 until August 2018.

Dono, Jr., Chief Legal Officer and Secretary.

Dono was appointed as Chief Legal Officer and Secretary in January 2018.

Prior to joining Stoneridge, Mr.

Dono served as Executive Vice President, General Counsel and Corporate Secretary at Metaldyne Performance Group, Inc.

from July 2016 to April 2017.

Prior to that, Mr.

Dono served as Senior Vice President, Legal Affairs, General Counsel and Corporate Secretary at Key Safety Systems, Inc.

from May 2009 to July 2016.

Ferraiolo, President of the PST Electronics Division.

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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.

Kevin Heigel, Vice President of Operations.

Heigel, Vice President of Operations.

Heigel was appointed Vice President of Operations in January 2020.

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

Kusiak, Chief Procurement Officer.

Kusiak was appointed as Chief Procurement Officer in October 2018.

Prior to that, Mr.

Kusiak served as Vice President of Global Procurement since he joined Stoneridge in 2015.

Prior to that, he served as head of Strategic Business Initiatives at Sypris Technologies, Inc.

Prior to that, Kusiak was employed at Meritor, Inc.

where he held positions of increasing responsibility in the purchasing function over a 10-year tenure.

James Zizelman, President of the Control Devices Division.

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Securities and Exchange Commission (“SEC”), as soon as reasonably practicable after they are filed with the SEC.

Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for Senior Financial Officers, Whistleblower Policy and Procedures and the charters of the Board of Director’s Audit, Compensation and Nominating and Corporate Governance Committees are posted on our website as well.

Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for Senior Financial Officers, Whistleblower Policy and Procedures and the charters of the Board of Director’s Audit, Compensation, Nominating and Corporate Governance and Compliance and Ethics Committees are posted on our website as well.

Copies of these documents will be available to any shareholder upon request.

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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