UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2008

OR

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from________to ________

Commission file number: 001-13337
 
STONERIDGE, INC.
(Exact name of registrant as specified in its charter)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o
Accelerated filer x 
Non-accelerated filer o
Smaller reporting company o
   
(Do not check if a smaller reporting company)
  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No

The number of Common Shares, without par value, outstanding as of October 24, 2008 was 24,668,295.

 
STONERIDGE, INC. AND SUBSIDIARIES

INDEX

 
Page No.
PART I–FINANCIAL INFORMATION
 
Item 1.
Financial Statements
  
 
Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2008 and December 31, 2007
2
 
Condensed Consolidated Statements of Operations (Unaudited) For the Three and Nine Months Ended September 30, 2008 and September 30, 2007
3
 
Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2008 and September 30, 2007
4
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
5
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
21
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
30
Item 4.
Controls and Procedures
31
     
PART II–OTHER INFORMATION
     
Item 1.
Legal Proceedings
32
Item 1A.
Risk Factors
32
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
32
Item 3.
Defaults Upon Senior Securities
32
Item 4.
Submission of Matters to a Vote of Security Holders
32
Item 5.
Other Information
32
Item 6.
Exhibits
32
     
Signatures
  
33
Index to Exhibits
34

1

PART I–FINANCIAL INFORMATION

Item 1. Financial Statements.

STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)

   
September 30,
  
December 31,
  
   
2008
  
2007
  
ASSETS
          
           
Current Assets:
          
Cash and cash equivalents
  
$
89,611
  
$
95,924
  
Accounts receivable, less reserves of $5,029 and $4,736, respectively
   
115,324
    
122,288
  
Inventories, net
    
67,543
    
57,392
  
Prepaid expenses and other
    
16,812
    
15,926
  
Deferred income taxes
    
10,150
    
9,829
  
Total current assets
    
299,440
    
301,359
  
               
Long-Term Assets:
              
Property, plant and equipment, net
    
88,882
    
92,752
  
Other Assets:
              
Goodwill
    
65,656
    
65,176
  
Investments and other, net
    
46,435
    
39,454
  
Deferred income taxes
    
21,714
    
29,028
  
Total long-term assets
    
222,687
    
226,410
  
Total Assets
  
$
522,127
  
$
527,769
  
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
              
               
Current Liabilities:
              
Accounts payable
  
$
66,465
  
$
69,373
  
Accrued expenses and other
    
53,864
    
47,198
  
Total current liabilities
    
120,329
    
116,571
  
               
Long-Term Liabilities:
              
Long-term debt
    
183,000
    
200,000
  
Deferred income taxes
    
2,521
    
2,665
  
Other liabilities
    
1,926
    
2,344
  
Total long-term liabilities
    
187,447
    
205,009
  
               
Shareholders' Equity:
              
Preferred Shares, without par value, authorized 5,000 shares, none issued
    
-
    
-
  
Common Shares, without par value, authorized 60,000 shares, issued 24,772 and 24,601 shares and outstanding 24,668 and 24,209 shares, respectively, with no stated value
              
Additional paid-in capital
    
157,281
    
154,173
  
Common Shares held in treasury, 104 and 373 shares, respectively, at cost
    
(129
)
  
(383
)
Retained earnings
    
49,239
    
38,372
  
Accumulated other comprehensive income
    
7,960
    
14,027
  
Total shareholders’ equity
    
214,351
    
206,189
  
Total Liabilities and Shareholders' Equity
  
$
522,127
  
$
527,769
  

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)

   
Three Months Ended
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
   
2008
  
2007
  
2008
  
2007
  
Net Sales
  
$
178,434
  
$
172,814
  
$
594,733
  
$
541,644
  
                           
Costs and Expenses:
                          
Cost of goods sold
    
143,089
    
134,944
    
458,217
    
422,045
  
Selling, general and administrative
    
31,855
    
32,405
    
104,876
    
99,135
  
(Gain) Loss on sale of property, plant and equipment, net
    
(187
)
  
223
    
(42
)
  
(1,465
)
Restructuring charges
    
2,742
    
2
    
5,877
    
74
  
                           
Operating Income
    
935
    
5,240
    
25,805
    
21,855
  
                           
Interest expense, net
    
5,049
    
5,467
    
15,301
    
16,570
  
Equity in earnings of investees
    
(4,371
)
  
(3,506
)
  
(11,206
)
  
(7,924
)
Loss on early extinguishment of debt
    
-
    
-
    
770
    
-
  
Other expense (income), net
    
(234
)
  
273
    
44
    
785
  
                           
Income Before Income Taxes
    
491
    
3,006
    
20,896
    
12,424
  
                           
Provision for income taxes
    
855
    
381
    
10,029
    
2,234
  
                           
Net Income (Loss)
  
$
(364
)
$
2,625
  
$
10,867
  
$
10,190
  
                           
Basic net income (loss) per share
  
$
(0.02
)
$
0.11
  
$
0.47
  
$
0.44
  
Basic weighted average shares outstanding
   
23,405
    
23,213
    
23,353
    
23,106
  
                           
Diluted net income (loss) per share
  
$
(0.02
)
$
0.11
  
$
0.46
  
$
0.43
  
Diluted weighted average shares outstanding
   
23,405
    
23,694
    
23,728
    
23,656
  

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

STONERIDGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

    
Nine Months Ended
  
   
September 30,
  
   
2008
  
2007
  
OPERATING ACTIVITIES:
          
Net income
  
$
10,867
  
$
10,190
  
Adjustments to reconcile net income to net cash provided by (used for) operating activities -
              
Depreciation
    
20,706
    
21,775
  
Amortization
    
1,050
    
1,196
  
Deferred income taxes
    
7,039
    
(1,272
)
Equity in earnings of investees
    
(11,206
)
  
(7,924
)
(Gain) Loss on sale of property, plant and equipment
    
(42
)
  
(1,465
)
Share-based compensation expense
    
2,666
    
1,858
  
Loss on extinguishment of debt
    
770
    
-
  
Changes in operating assets and liabilities -
              
Accounts receivable, net
    
5,235
    
(15,197
)
Inventories, net
    
(12,179
)
  
756
  
Prepaid expenses and other
    
(1,654
)
  
(1,777
)
Accounts payable
    
(1,652
)
  
(8,446
)
Accrued expenses and other
    
9,068
    
8,215
  
Net cash provided by operating activities
    
30,668
    
7,909
  
               
INVESTING ACTIVITIES:
              
Capital expenditures
    
(17,956
)
  
(14,259
)
Proceeds from sale of property, plant and equipment
    
435
    
5,042
  
Business acquisitions and other
    
(980
)
  
-
  
Net cash used for investing activities
   
(18,501
)
  
(9,217
)
               
FINANCING ACTIVITIES:
              
Repayments of long-term debt
   
(17,000
)
  
-
  
Share-based compensation activity, net
   
1,305
    
1,956
  
Premiums related to early extinguishment of debt
    
(553
)
  
-
  
Net cash provided by (used for) financing activities
   
(16,248
)
  
1,956
  
               
Effect of exchange rate changes on cash and cash equivalents
   
(2,232
)
  
1,119
  
               
Net change in cash and cash equivalents
   
(6,313
)
  
1,767
  
               
Cash and cash equivalents at beginning of period
   
95,924
    
65,882
  
               
Cash and cash equivalents at end of period
 
$
89,611
  
$
67,649
  

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

(1) Basis of Presentation

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 U.S. generally accepted accounting principles have been condensed or omitted pursuant to the Commission’s rules and regulations. The results of operations for the nine months ended September 30, 2008 are not necessarily indicative of the results to be expected for the full year.

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 consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2007.

The Company has reclassified the presentation of certain prior-period information to conform to the current presentation.

(2) Inventories

Inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out (“LIFO”) method for approximately 64% and 66% of the Company’s inventories at September 30, 2008 and December 31, 2007, 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:

    
September 30,
  
December 31,
  
   
2008
  
2007
  
Raw materials
  
$
35,741
  
$
36,678
  
Work-in-progress
    
11,394
    
9,065
  
Finished goods
    
23,065
    
13,700
  
Total inventories
    
70,200
    
59,443
  
Less: LIFO reserve
    
(2,657
)
  
(2,051
)
Inventories, net
  
$
67,543
  
$
57,392
  
 
(3) Fair Value of Financial Instruments

Financial Instruments

A financial instrument is cash or a contract that imposes an obligation to deliver, or conveys a right to receive cash or another financial instrument. The carrying values of cash and cash equivalents, accounts receivable and accounts payable are considered to be representative of fair value because of the short maturity of these instruments. The estimated fair value of the Company’s senior notes (fixed rate debt) at September 30, 2008 and December 31, 2007, per quoted market sources, was $179.3 million and $199.2 million, respectively. The carrying value was $183.0 million and $200.0 million as of September 30, 2008 and December 31, 2007, respectively.

Derivative Instruments and Hedging Activities

The Company makes use of derivative instruments in foreign exchange and commodity price hedging programs. Derivative instruments currently in use are foreign currency forward and commodity swap contracts. These contracts are used strictly for hedging and not for speculative purposes. Management believes that the use of these instruments in order to reduce risk is in the Company’s best interest.

5

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

As a result of the Company’s international business presence it is exposed to foreign currency exchange risk. The Company uses derivative instruments, including foreign currency forward contracts, to mitigate the effect that fluctuations in foreign currency exchange rates have on foreign currency denominated intercompany transactions and other known foreign currency exposures. The principal currency hedged by the Company is the British pound. In certain instances, foreign currency forward contracts are marked to market, with gains and losses recognized in the Company’s condensed consolidated statement of operations as a component of other expense (income), net. The Company’s foreign currency forward contracts substantially offset gains and losses on underlying foreign currency denominated transactions.

The Company’s foreign currency forward contracts had a notional value of $8,239 and $8,551 at September 30, 2008 and December 31, 2007, respectively. At September 30, 2008, the purpose of the foreign currency forward contracts is to reduce the exposure related to the Company’s British pound-denominated receivables. At December 31, 2007, the Company also used forward currency contracts to reduce the exposure related to the Company’s Mexican peso- and Swedish krona-denominated receivables. The estimated fair value of the existing contracts at September 30, 2008 and December 31, 2007, per quoted market sources, was approximately $760 and $(28), respectively. For the nine months ended September 30, 2008, the Company recognized an $854 gain related to these contracts in the condensed consolidated statement of operations as a component of other expense (income), net. In 2007, the Company used foreign currency option contracts to reduce the exposure to the Mexican peso. The Company’s foreign currency option contracts expired as of December 31, 2007.

To mitigate the risk of future price volatility and, consequently, fluctuations in gross margins, the Company has entered into fixed price commodity swaps with a bank to fix the cost of a portion of its copper purchases. In December 2007, we entered into a fixed price swap contract for 1.0 million pounds of copper, which will last through December 2008. In September 2008, we entered into a fixed price swap contract for 1.4 million pounds of copper, which will last from January 2009 to December 2009. Because these contracts were executed to hedge forecasted transactions, the contracts are accounted for as cash flow hedges. The unrealized gain or loss for the effective portion of the hedge is deferred and reported in the Company’s condensed consolidated balance sheets as a component of accumulated other comprehensive income. The Company deems these cash flow hedges to be highly effective. The effectiveness of the transactions has been and will be measured on an ongoing basis using regression analysis. The ineffectiveness of the transactions is measured using the dollar-offset test. The fair value of the fixed price commodity swap contract, per quoted market sources, was approximately $32 and $57 at September 30, 2008 and December 31, 2007, respectively. For the nine months ended September 30, 2008, the Company recognized a $523 gain related to these contracts in the condensed consolidated statement of operations as a component of cost of goods sold.

Statement of Financial Accounting Standard No. 157, Fair Value Measurements
 
Effective January 1, 2008, we adopted Statement of Financial Accounting Standard (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and expands disclosures about the use of fair value measurements. In accordance with Financial Accounting Standards Board Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 ("FSP FAS 157-2”), we have deferred the adoption of SFAS 157 for our nonfinancial assets and nonfinancial liabilities until January 1, 2009. Deferring adoption is not expected to have a material impact on the Company’s financial statements. On October 10, 2008, FSP No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP FAS 157-3”),was issued. FSP FAS 157-3 clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 became effective upon issuance and was adopted by the Company for the reporting period ending September 30, 2008 without material impact on the Company’s financial statements.

The following table presents the Company’s assets that are measured at fair value on a recurring basis and that are categorized using the fair value hierarchy. As of September 30, 2008 the Company does not have liabilities that are measured at fair value. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.

    
Fair Value Measurements at September 30, 2008
  
       
Quoted Prices
  
Significant Other
  
Significant
  
       
in Active Markets
  
Observable
  
Unobservable
  
       
for Identical Assets
  
Inputs
  
Inputs
  
Assets
  
Total
  
(Level 1)
  
(Level 2)
  
(Level 3)
  
Available-for-sale equity investments
  
$
267
  
$
267
  
$
-
  
$
-
  
Derivatives
    
792
    
-
    
792
    
-
  
Total fair value of assets
  
$
1,059
  
$
267
  
$
792
  
$
-
  

6

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

Equity investments are valued using a market approach based on the quoted market prices of identical instruments when available or other observable inputs such as trading prices of identical instruments in active markets.  Our foreign currency forward contracts are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount. Commodity swap contracts are valued using an income approach based on the present value of the commodity index prices less the contract rate multiplied by the notional amount.
 
(4) Share-Based Compensation

Total compensation expense recognized in the condensed consolidated statements of operations for share-based compensation arrangements was $764 and $606 for the three months ended September 30, 2008 and 2007, respectively. For the nine months ended September 30, 2008 and 2007, total compensation expense recognized in the condensed consolidated statements of operations for share-based compensation arrangements was $2,666 and $1,858, respectively.

(5) Comprehensive Income (Loss)

SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and disclosure of comprehensive income.

The components of comprehensive income (loss), net of tax are as follows:

   
Three Months Ended
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
   
2008
  
2007
  
2008
  
2007
  
Net income (loss)
  
$
(364
)
$
2,625
  
$
10,867
  
$
10,190
  
Other comprehensive income (loss):
                          
Currency translation adjustments
    
(11,230
)
  
3,019
    
(6,120
)
  
5,001
  
Pension and postretirement liability adjustments
    
48
    
(24
)
  
38
    
(60
)
Unrealized gain (loss) on marketable securities
    
11
    
(22
)
  
(1
)
  
39
  
Unrecognized gain (loss) on derivatives
    
(332
)
  
(547
)
  
16
    
554
  
Total other comprehensive income (loss)
    
(11,503
)
  
2,426
    
(6,067
)
  
5,534
  
Comprehensive income (loss)
  
$
(11,867
)
$
5,051
  
$
4,800
  
$
15,724
  

Accumulated other comprehensive income, net of tax is comprised of the following:

   
September 30,
  
December 31,
  
   
2008
  
2007
  
Foreign currency translation adjustments
  
$
8,392
  
$
14,512
  
Pension and postretirement liability adjustments
    
(390
)
  
(428
)
Unrealized loss on marketable securities
    
(21
)
  
(20
)
Unrecognized loss on derivatives
    
(21
)
  
(37
)
Accumulated other comprehensive income
 
$
7,960
  
$
14,027
  

(6) Long-Term Debt

Senior Notes

The Company had $183.0 million and $200.0 million of senior notes outstanding at September 30, 2008 and December 31, 2007, respectively. During 2008, the Company purchased and retired $17.0 million in face value of the senior notes. The outstanding senior notes bear interest at an annual rate of 11.50% and mature on May 1, 2012. The senior notes are redeemable, at the Company’s option, at 103.833 percent of the principal amount until April 30, 2009. The senior notes will remain redeemable at various levels until the maturity date. Interest is payable on May 1 and November 1 of each year.

7

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

Credit Facility

On November 2, 2007, the Company entered into an asset-based credit facility, which permits borrowing up to a maximum level of $100.0 million. At September 30, 2008, there were no borrowings on this asset-based credit facility. The available borrowing capacity on this credit facility is based on eligible current assets, as defined. At September 30, 2008, the Company had borrowing capacity of $67.8 million based on eligible current assets. The asset-based credit facility does not contain financial performance covenants; however, restrictions include limits on capital expenditures, operating leases and dividends. The asset-based credit facility expires on November 1, 2011. The credit facility provides that a commitment fee of 0.25% is due on the unused balance and that interest is payable quarterly at either (i) the higher of the prime rate or the Federal Funds rate plus 0.50%, plus a margin of 0.00% to 0.25% or (ii) LIBOR plus a margin of 1.00% to 1.75%, depending upon the Company’s undrawn availability, as defined. 

(7) Net Income (Loss) Per Share

Basic net income (loss) per share was computed by dividing net income (loss) by the weighted-average number of Common Shares outstanding for each respective period. Diluted net income (loss) per share was calculated by dividing net income (loss) by the weighted-average of all potentially dilutive Common Shares that were outstanding during the periods presented.

Actual weighted-average shares outstanding used in calculating basic and diluted net income (loss) per share are as follows:
 
    
Three Months Ended
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
   
2008
  
2007
  
2008
  
2007
  
Basic weighted-average shares outstanding
    
23,405,209
    
23,213,240
    
23,353,085
    
23,105,561
  
Effect of dilutive securities
    
-
    
481,190
    
374,829
    
550,038
  
Diluted weighted-average shares outstanding
    
23,405,209
    
23,694,430
    
23,727,914
    
23,655,599
  

For the three months ended September 30, 2008 and 2007, options to purchase 50,000 and 139,500 Common Shares at an average price of $15.73 and $15.56, respectively, were not included in the computation of diluted net income (loss) per share because their respective exercise prices were greater than the average market price of Common Shares and, therefore, their effect would have been anti-dilutive. Share options not included in the computation of diluted net income (loss) per share to purchase 61,000 and 139,500 Common Shares at an average price of $15.54 and $15.56, respectively, were outstanding during the nine months ended September 30, 2008 and 2007, respectively. In addition, the calculation of diluted earnings per share for  the quarter ended September 30, 2008, would have included 147,500 shares for assumed exercise of options under the Company’s share incentive plans, except that the Company was in a net loss position and no anti-dilution is permitted under SFAS No. 128, Earnings Per Share.

As of September 30, 2008, 628,275 performance-based restricted shares were outstanding. These shares were not included in the computation of diluted net income (loss) per share because not all vesting conditions were achieved as of September 30, 2008. These shares may or may not become dilutive based on the Company’s ability to exceed future earnings thresholds.
 
(8) Restructuring

In January 2005, the Company announced restructuring initiatives related to the rationalization of certain manufacturing facilities in Europe and North America. These restructuring initiatives were completed in 2007.

8

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

On October 29, 2007, the Company announced restructuring initiatives to improve manufacturing efficiency and cost position by ceasing manufacturing operations at its Sarasota, Florida, and Mitcheldean, United Kingdom, locations. In the third quarter of 2008, the Company announced restructuring initiatives at our Canton, Massachusetts, location. These rationalizations are part of the Company’s cost reduction initiatives. In connection with these initiatives, the Company recorded restructuring expenses of $4,828 for the three months ended September 30, 2008. Restructuring expenses for the nine months ended September 30, 2008 were $11,005. Restructuring expenses that were general and administrative in nature were included in the Company’s condensed consolidated statements of operations as restructuring charges, while the remaining restructuring related expenses were included in cost of goods sold.

The expenses related to the restructuring initiatives announced on October 29, 2007 that belong to the Electronics reportable segment include the following:

   
Severance
Costs
  
Contract
Termination
Costs
  
Other
Associated
Costs
  
Total
  
Total expected restructuring charges
  
$
3,331
  
$
1,681
  
$
2,863
  
$
7,875
  
                           
Fourth quarter 2007 charge to expense
  
$
468
  
$
-
  
$
103
  
$
571
  
Cash payments
    
-
    
-
    
(103
)
  
(103
)
                           
Accrued balance at December 31, 2007
    
468
    
-
    
-
    
468
  
                           
First quarter 2008 charge to expense
    
873
    
-
    
614
    
1,487
  
Second quarter 2008 charge to expense
    
819
    
-
    
822
    
1,641
  
Third quarter 2008 charge to expense
    
590
    
703
    
570
    
1,863
  
Cash payments
    
(649
)
  
-
    
(1,737
)
  
(2,386
)
                           
Accrued balance at September 30, 2008
  
$
2,101
  
$
703
  
$
269
  
$
3,073
  
                           
Remaining expected restructuring charge
  
$
581
  
$
978
  
$
754
  
$
2,313
  

The expenses related to the restructuring initiatives announced on October 29, 2007 that belong to the Control Devices reportable segment include the following:

   
Severance
Costs
  
Fixed-Asset
Costs
  
Other
Associated
Costs
  
Total (A)
  
Total expected restructuring charges
  
$
2,352
  
$
-
  
$
5,711
  
$
8,063
  
                           
Fourth quarter 2007 charge to expense
  
$
357
  
$
-
  
$
99
  
$
456
  
Cash payments
    
-
    
-
    
-
    
-
  
                           
Accrued balance at December 31, 2007
    
357
    
-
    
99
    
456
  
                           
First quarter 2008 charge to expense
    
365
    
-
    
668
    
1,033
  
Second quarter 2008 charge to expense
    
375
    
-
    
1,641
    
2,016
  
Third quarter 2008 charge to expense
    
694
    
-
    
2,271
    
2,965
  
Cash payments
    
(274
)
  
-
    
(4,168
)
  
(4,442
)
                           
Accrued balance at September 30, 2008
  
$
1,517
  
$
-
  
$
511
  
$
2,028
  
                           
Remaining expected restructuring charge
  
$
561
  
$
-
  
$
1,032
  
$
1,593
  

(A) Total expected restructuring charges does not include the expected gain from the future sale of the Company’s Sarasota, Florida, facility.

All restructuring expenses, except for asset-related charges, result in cash outflows. Severance costs relate to a reduction in workforce. Other associated costs include premium direct labor, inventory and equipment move costs, relocation expenses, increased inventory carrying costs and miscellaneous expenditures associated with exiting business activities. No fixed-asset impairment charges were incurred because assets are being transferred to other locations for continued production.

9

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

(9) Commitments and Contingencies

In the ordinary course of business, the Company is involved in various legal proceedings and 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, cash flows or the financial position of the Company.
 
Product Warranty and Recall

Amounts accrued for product warranty and recall claims are established based on the Company’s best estimate of the amounts necessary to settle existing and probable future claims on products sold as of the balance sheet dates. These accruals are based on several factors including past experience, production changes, industry developments and various other considerations. The Company can provide no assurances that it will not experience material claims in the future or that it will not incur significant costs to defend or settle such claims beyond the amounts accrued or beyond what the Company may recover from its suppliers.

The following provides a reconciliation of changes in product warranty and recall liability for the nine months ended September 30, 2008 and 2007:

   
2008
  
2007
  
Product warranty and recall at beginning of period
  
$
5,306
  
$
5,825
  
Accruals for products shipped during period
    
4,257
    
2,131
  
Aggregate changes in pre-existing liabilities due to claims developments
    
988
    
1,197
  
Settlements made during the period (in cash or in kind)
    
(4,262
)
  
(2,518
)
Product warranty and recall at end of period
  
$
6,289
  
$
6,635
  

(10) Employee Benefit Plans

The Company has a single defined benefit pension plan that covers certain employees in the United Kingdom and a postretirement benefit plan that covers certain employees in the U.S. The components of net periodic benefit cost under the defined benefit pension plan are as follows:

    
Defined Benefit  Pension Plan
  
   
Three Months Ended
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
   
2008
  
2007
  
2008
  
2007
  
Service cost
  
$
35
  
$
44
  
$
105
  
$
129
  
Interest cost
    
316
    
523
    
948
    
1,544
  
Expected return on plan assets
    
(361
)
  
(585
)
  
(1,083
)
  
(1,725
)
Amortization of actuarial loss
    
-
    
114
    
-
    
335
  
Net periodic (benefit) cost
  
$
(10
)
$
96
  
$
(30
)
$
283
  

The Company previously disclosed in its financial statements for the year ended December 31, 2007 that it expected to contribute $259 to its defined benefit pension plan in 2008. Of this amount, contributions of $194 have been made to the defined benefit pension plan as of September 30, 2008.

(11) Income Taxes

The Company recognized a provision for income taxes of $855, or 174.1% of pre-tax income, and $381, or 12.7% of pre-tax income, for federal, state and foreign income taxes for the three months ended September 30, 2008 and 2007, respectively. The Company recognized a provision for income taxes of $10,029, or 48.0% of pre-tax income, and $2,234, or 18.0% of pre-tax income, for federal, state and foreign income taxes for the nine months ended September 30, 2008 and 2007, respectively. The increase in the effective tax rate for both the three and nine months ended September 30, 2008 compared to similar periods in 2007 was primarily attributable to the costs incurred to restructure the Company’s United Kingdom operations. As the Company does not believe that the related tax benefit of those losses will be realized, a valuation allowance was recorded against the deferred tax assets associated with those foreign losses. In addition, the effective tax rate was unfavorably impacted due to the expiration of the federal research and development tax credit at December 31, 2007.

10

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

As of December 31, 2007, the Company provided a liability of $4,618, excluding interest and penalties, for unrecognized tax benefits related to various federal, state and foreign income tax matters. The liability for uncertain tax positions is classified as a non-current income tax liability unless it is expected to be paid within one year. At September 30, 2008 the Company has classified $1,032 as a current liability and $3,415 as a reduction to non-current deferred income tax assets. The liability for unrecognized tax positions decreased by $408 for the three months ended September 30, 2008 and decreased by $557 for the nine months ended September 30, 2008 resulting in a balance at September 30, 2008 of $4,061. Through a combination of anticipated state audit settlements and the expiration of certain statutes of limitation, the amount of unrecognized tax benefits could decrease by approximately $70 to $200 within the next 12 months.

If the Company’s tax positions are sustained by the taxing authorities in favor of the Company, approximately $3,907 would reduce the Company’s provision for income taxes.

The Company classifies interest expense and, if applicable, penalties which could be assessed related to unrecognized tax benefits as a component of income tax expense. For the nine months ended September 30, 2008 and 2007, the Company recognized approximately $52 and $6 of gross interest and penalties, respectively. The Company has accrued approximately $724 and $672 for the payment of interest and penalties at September 30, 2008 and December 31, 2007, respectively.

The Company conducts business globally and, as a result, the Company or a subsidiary of the Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business the Company is subject to examination by taxing authorities throughout the world. The following table summarizes the open tax years for each significant jurisdiction:

Jurisdiction
  
Open Tax Years
U.S. Federal
  
2004-2007
France
  
2003-2007
Mexico
  
2002-2007
Spain
  
2003-2007
Sweden
  
2002-2007
United Kingdom
  
2003-2007

During the third quarter of 2007 the U.S. Internal Revenue Service commenced an examination of the Company’s 2005 federal income tax return. It is anticipated that this examination should be completed during the fourth quarter of 2008. The Company is also under examination for income and non-income tax filings in various state and foreign jurisdictions that should be completed at various times throughout 2008.

(12) Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”). This standard improves reporting by creating greater consistency in the accounting and financial reporting of business combinations. Additionally, SFAS 141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS 141(R) is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption of this standard is prohibited. In the absence of any planned future business combinations, management does not currently expect SFAS 141(R) to have a material impact on the Company’s financial position, results of operations or cash flows.

11

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”). This standard improves the relevance, comparability and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way. Additionally, SFAS 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption of this standard is prohibited. In the absence of any noncontrolling (minority) interests, management does not currently expect SFAS 160 to have a material impact on the Company’s financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133, (“SFAS 161”). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities, including (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This standard becomes effective on January 1, 2009. Earlier adoption of SFAS 161 and, separately, comparative disclosures for earlier periods at initial adoption are encouraged. As SFAS 161 only requires enhanced disclosures, this standard will have no impact on the Company’s financial position, results of operations or cash flows.

In May 2008, the FASB issued Financial Accounting Standard (FAS) No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” The statement is intended to improve financial reporting by identifying a consistent hierarchy for selecting accounting principles to be used in preparing financial statements that are prepared in conformance with generally accepted accounting principles. Unlike Statement on Auditing Standards (SAS) No. 69, “The Meaning of Present in Conformity With GAAP,” FAS No. 162 is directed to the entity rather than the auditor. The statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with GAAP,” and is not expected to have any impact on the Company’s financial position, results of operations or cash flows.

12

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

(13) Segment Reporting

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise that are evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the president and chief executive officer.

The Company has two reportable segments: Electronics and Control Devices. The Company’s operating segments are aggregated based on sharing similar economic characteristics. Other aggregation factors include the nature of the products offered and management and oversight responsibilities. The Electronics reportable segment produces electronic instrument clusters, electronic control units, driver information systems and electrical distribution systems, primarily wiring harnesses and connectors for electrical power and signal distribution. The Control Devices reportable segment produces electronic and electromechanical switches, control actuation devices and sensors.

The accounting policies of the Company’s reportable segments are the same as those described in Note 2, “Summary of Significant Accounting Policies” of the Company’s December 31, 2007 Form 10-K. The Company’s management evaluates the performance of its reportable segments based primarily on revenues from external customers, capital expenditures and income before income taxes. Inter-segment sales are accounted for on terms similar to those to third parties and are eliminated upon consolidation.

A summary of financial information by reportable segment is as follows:
 
    
Three Months Ended
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
 
  
2008
  
2007
  
2008
  
2007
  
Net Sales
                  
Electronics
  
$
126,636
  
$
103,021
  
$
409,268
  
$
321,497
  
Inter-segment sales
    
2,464
    
3,806
    
10,211
    
13,139
  
Electronics net sales
    
129,100
    
106,827
    
419,479
    
334,636
  
                           
Control Devices
    
51,798
    
69,793
    
185,465
    
220,147
  
Inter-segment sales
    
1,067
    
1,077
    
3,671
    
3,560
  
Control Devices net sales
    
52,865
    
70,870
    
189,136
    
223,707
  
                           
Eliminations
    
(3,531
)
  
(4,883
)
  
(13,882
)
  
(16,699
)
Total consolidated net sales
  
$
178,434
  
$
172,814
  
$
594,733
  
$
541,644
  
                           
Income (Loss) Before Income Taxes
                  
Electronics
  
$
7,001
  
$
3,005
  
$
32,976
  
$
9,146
  
Control Devices
    
(6,523
)
  
2,714
    
(5,432
)
  
13,601
  
Other corporate activities
    
5,129
    
2,827
    
8,775
    
6,348
  
Corporate interest expense, net
    
(5,116
)
  
(5,540
)
  
(15,423
)
  
(16,671
)
Total consolidated income before income taxes
  
$
491
  
$
3,006
  
$
20,896
  
$
12,424
  
                           
Depreciation and Amortization
                  
Electronics
  
$
2,724
  
$
3,400
  
$
9,646
  
$
10,164
  
Control Devices
    
3,690
    
3,812
    
11,191
    
11,495
  
Corporate activities
    
26
    
96
    
21
    
270
  
Total consolidated depreciation and amortization(A)
  
$
6,440
  
$
7,308
  
$
20,858
  
$
21,929
  

(A) These amounts represent depreciation and amortization on fixed and certain intangible assets.

13

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

    
Three Months Ended
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
 
  
2008
  
2007
  
2008
  
2007
  
Interest Expense (Income)
                  
Electronics
  
$
(60
)
$
(69
)
$
(113
)
$
(96
)
Control Devices
    
(7
)
  
(4
)
  
(9
)
  
(5
)
Corporate activities
    
5,116
    
5,540
    
15,423
    
16,671
  
Total consolidated interest expense, net
  
$
5,049
  
$
5,467
  
$
15,301
  
$
16,570
  
                           
Capital Expenditures, Net
                          
Electronics
  
$
2,736
  
$
1,569
  
$
7,480
  
$
6,562
  
Control Devices
    
3,580
    
1,641
    
10,512
    
7,051
  
Corporate activities
    
(1
)
  
235
    
(36
)
  
646
  
Total consolidated capital expenditures, net
  
$
6,315
  
$
3,445
  
$
17,956
  
$
14,259
  

    
September 30,
  
December 31,
  
 
  
2008
  
2007
  
Total Assets
          
Electronics
  
$
215,761
  
$
214,119
  
Control Devices
    
176,741
    
180,785
  
Corporate(B)
    
287,930
    
282,695
  
Eliminations
    
(158,305
)
  
(149,830
)
Total consolidated assets
  
$
522,127
  
$
527,769
  

(B) Assets located at Corporate consist primarily of cash, deferred taxes and equity investments.

The following table presents net sales and non-current assets for each of the geographic areas in which the Company operates:

   
Three Months Ended
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
 
  
2008
  
2007
  
2008
  
2007
  
Net Sales
                  
North America
  
$
131,966
  
$
126,882
  
$
435,265
  
$
393,392
  
Europe and other
    
46,468
    
45,932
    
159,468
    
148,252
  
Total consolidated net sales
  
$
178,434
  
$
172,814
  
$
594,733
  
$
541,644
  

   
September 30,
  
December 31,
  
 
  
2008
  
2007
  
Non-Current Assets
          
North America
  
$
202,718
  
$
204,556
  
Europe and other
    
19,969
    
21,854
  
Total consolidated non-current assets
  
$
222,687
  
$
226,410
  

(14) Investments

PST Eletrônica S.A .

The Company has a 50% equity interest in PST Eletrônica S.A. (“PST”), a Brazilian electronic system provider focused on security and convenience applications primarily for the vehicle and motorcycle industry. The investment is accounted for under the equity method of accounting. The Company’s investment in PST was $37,593 and $29,663 at September 30, 2008 and December 31, 2007, respectively.

14

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

Condensed financial information for PST is as follows:

   
Three Months Ended
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
   
2008
  
2007
  
2008
  
2007
  
Revenues
  
$
50,846
  
$
36,278
  
$
141,238
  
$
94,908
  
Cost of sales
  
$
23,073
  
$
16,704
  
$
66,042
  
$
44,210
  
                           
Pre-tax income
  
$
10,503
  
$
7,462
  
$
26,301
  
$
17,827
  
The Company's share of pre-tax income
  
$
5,251
  
$
3,731
  
$
13,151
  
$
8,914
  

Equity in earnings of PST included in the condensed consolidated statements of operations were $4,192 and $3,401 for the three months ended September 30, 2008 and 2007, respectively. For the nine months ended September 30, 2008 and 2007, equity in earnings of PST was $10,634 and $7,557, respectively.

Minda Stoneridge Instruments Ltd.

The Company has a 49% interest in Minda Stoneridge Instruments Ltd. (“Minda”), a company based in India that manufactures electronics and instrumentation equipment for the motorcycle and commercial vehicle market. The investment is accounted for under the equity method of accounting. The Company’s investment in Minda was $4,673 and $4,547 at September 30, 2008 and December 31, 2007, respectively. Equity in earnings of Minda included in the condensed consolidated statements of operations were $179 and $105, for the three months ended September 30, 2008 and 2007, respectively. For the nine months ended September 30, 2008 and 2007, equity in earnings of Minda was $572 and $367, respectively.

(15) Guarantor Financial Information

The senior notes and the credit facility are fully and unconditionally guaranteed, jointly and severally, by each of the Company’s existing and future domestic wholly owned subsidiaries (Guarantor Subsidiaries). The Company’s non-U.S. subsidiaries do not guarantee the senior notes or the credit facility (Non-Guarantor Subsidiaries).

Presented below are summarized consolidating financial statements of the Parent (which includes certain of the Company’s operating units), the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries and the Company on a condensed consolidated basis, as of September 30, 2008 and December 31, 2007 and for each of the three and nine months ended September 30, 2008 and 2007.

These summarized condensed consolidating financial statements are prepared under the equity method. Separate financial statements for the Guarantor Subsidiaries are not presented based on management’s determination that they do not provide additional information that is material to investors. Therefore, the Guarantor Subsidiaries are combined in the presentations on the subsequent pages.

15

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

   
September 30, 2008
  
   
Parent
  
Guarantor
Subsidiaries
  
Non-
Guarantor
Subsidiaries
  
Eliminations
  
Consolidated
  
ASSETS
                      
                       
Current Assets:
                      
Cash and cash equivalents
  
$
47,844
  
$
254
  
$
41,513
  
$
-
  
$
89,611
  
Accounts receivable, net
    
60,743
    
21,368
    
33,213
    
-
    
115,324
  
Inventories, net
    
32,141
    
11,251
    
24,151
    
-
    
67,543
  
Prepaid expenses and other
   
(299,865
)
  
304,054
    
12,623
    
-
    
16,812
  
Deferred income taxes
   
3,759
    
4,501
    
1,890
    
-
    
10,150
  
Total current assets
   
(155,378
)
  
341,428
    
113,390
    
-
    
299,440
  
                                 
Long-Term Assets:
                                
Property, plant and equipment, net
    
48,716
    
25,293
    
14,873
    
-
    
88,882
  
Other Assets:
                                
Goodwill
    
44,584
    
20,591
    
481
    
-
    
65,656
  
Investments and other, net
   
45,692
    
321
    
422
    
-
    
46,435
  
Deferred income taxes
   
25,766
    
(2,790
)
  
(1,262
)
  
-
    
21,714
  
Investment in subsidiaries
    
438,935
    
-
    
-
    
(438,935
)
  
-
  
Total long-term assets
   
603,693
    
43,415
    
14,514
    
(438,935
)
  
222,687
  
Total Assets
  
$
448,315
  
$
384,843
  
$
127,904
  
$
(438,935
)
$
522,127
  
                                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                
                                 
Current Liabilities:
                                
Accounts payable
 
$
26,366
  
$
18,625
  
$
21,474
  
$
-
  
$
66,465
  
Accrued expenses and other
   
24,075
    
9,246
    
20,543
    
-
    
53,864
  
Total current liabilities
   
50,441
    
27,871
    
42,017
    
-
    
120,329
  
                                 
Long-Term Liabilities:
                                
Long-term debt
   
183,000
    
-
    
-
    
-
    
183,000
  
Deferred income taxes
    
-
    
-
    
2,521
    
-
    
2,521
  
Other liabilities
   
523
    
393
    
1,010
    
-
    
1,926
  
Total long-term liabilities
   
183,523
    
393
    
3,531
    
-
    
187,447
  
                                 
Shareholders' Equity
    
214,351
    
356,579
    
82,356
    
(438,935
)
  
214,351
  
                                 
Total Liabilities and Shareholders’ Equity
  
$
448,315
  
$
384,843
  
$
127,904
  
$
(438,935
)
$
522,127
  

16

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

Supplemental condensed consolidating financial statements (continued):

   
December 31, 2007
  
   
Parent
  
Guarantor
Subsidiaries
  
Non-
Guarantor
Subsidiaries
  
Eliminations
  
Consolidated
  
ASSETS
                      
                       
Current Assets:
                      
Cash and cash equivalents
  
$
48,705
  
$
255
  
$
46,964
  
$
-
  
$
95,924
  
Accounts receivable, net
    
53,456
    
26,798
    
42,034
    
-
    
122,288
  
Inventories, net
    
25,472
    
12,637
    
19,283
    
-
    
57,392
  
Prepaid expenses and other
   
(293,632
)
  
294,298
    
15,260
    
-
    
15,926
  
Deferred income taxes
   
3,152
    
4,591
    
2,086
    
-
    
9,829
  
Total current assets
   
(162,847
)
  
338,579
    
125,627
    
-
    
301,359
  
                                 
Long-Term Assets:
                                
Property, plant and equipment, net
    
48,294
    
25,632
    
18,826
    
-
    
92,752
  
Other Assets:
                                
Goodwill
    
44,585
    
20,591
    
-
    
-
    
65,176
  
Investments and other, net
   
38,783
    
331
    
340
    
-
    
39,454
  
Deferred income taxes
   
33,169
    
(2,843
)
  
(1,298
)
  
-
    
29,028
  
Investment in subsidiaries
    
438,271
    
-
    
-
    
(438,271
)
  
-
  
Total long-term assets
   
603,102
    
43,711
    
17,868
    
(438,271
)
  
226,410
  
Total Assets
  
$
440,255
  
$
382,290
  
$
143,495
  
$
(438,271
)
$
527,769
  
                                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                
                                 
Current Liabilities:
                                
Accounts payable
 
$
20,924
  
$
19,533
  
$
28,916
  
$
-
  
$
69,373
  
Accrued expenses and other
   
12,546
    
9,198
    
25,454
    
-
    
47,198
  
Total current liabilities
   
33,470
    
28,731
    
54,370
    
-
    
116,571
  
                                 
Long-Term Liabilities:
                                
Long-term debt
   
200,000
    
-
    
-
    
-
    
200,000
  
Deferred income taxes
    
-
    
-
    
2,665
    
-
    
2,665
  
Other liabilities
   
596
    
393
    
1,355
    
-
    
2,344
  
Total long-term liabilities
   
200,596
    
393
    
4,020
    
-
    
205,009
  
                                 
Shareholders' Equity
    
206,189
    
353,166
    
85,105
    
(438,271
)
  
206,189
  
                                 
Total Liabilities and Shareholders’ Equity
  
$
440,255
  
$
382,290
  
$
143,495
  
$
(438,271
)
$
527,769
  

17

STONERIDGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share and per share data, unless otherwise indicated)

Supplemental condensed consolidating financial statements (continued):

   
For the Three Months Ended September 30, 2008
  
   
Parent
  
Guarantor
Subsidiaries
  
Non-
Guarantor
Subsidiaries
  
Eliminations
  
Consolidated
  
Net Sales
  
$
98,697
  
$
42,054
  
$
62,368
  
$
(24,685
)
$
178,434
  
                                 
Costs and Expenses:
                                
Cost of goods sold
    
83,677
    
34,053
    
49,205
    
(23,846
)
  
143,089
  
Selling, general and administrative
    
12,380
    
7,588
    
12,726
    
(839
)
  
31,855
  
(Gain) Loss on sale of property, plant and equipment, net
    
119
    
(3
)
  
(303
)
  
-
    
(187
)
Restructuring charges
    
1,448
    
-
    
1,294
    
-
    
2,742
  
                                 
Operating Income (Loss)
    
1,073
    
416
    
(554
)
  
-
    
935
  
                                 
Interest expense (income), net
    
5,313
    
-
    
(264
)
  
-
    
5,049
  
Other income, net
    
(4,371
)
  
-
    
(234
)
  
-
    
(4,605
)
Equity earnings from subsidiaries
    
(223
)
  
-
    
-
    
223
    
-
  
                                 
Income (Loss) Before Income Taxes
    
354
    
416
    
(56
)
  
(223
)
  
491
  
                                 
Provision for income taxes
    
718
    
-
    
137
    
-
    
855
  
                                 
Net Income (Loss)
  
$
(364
)
$
416
  
$
(193
)
$