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What changed in STONERIDGE INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of STONERIDGE INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+226 added−314 removedSource: 10-K (2024-03-01) vs 10-K (2023-03-02)

Top changes in STONERIDGE INC's 2023 10-K

226 paragraphs added · 314 removed · 173 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

40 edited+4 added−8 removed42 unchanged
Biggest changeThe following table sets forth for the periods indicated, the percentage of net sales derived from our principal end markets: Principal End Markets 2022 2021 2020 Commercial vehicle 48 % 39 % 36 % Automotive 34 % 41 % 45 % Off-highway and other 12 % 12 % 12 % Aftermarket distributors, mass merchandisers and monitoring services 6 % 8 % 7 % For further information related to our reportable segments and financial information about geographic areas, see Note 13 to the consolidated financial statements.
Biggest changeThe following table sets forth for the periods indicated, the percentage of net sales derived from our principal end markets: Principal End Markets 2023 2022 2021 Commercial vehicle 51 % 48 % 39 % Automotive 31 % 34 % 41 % Off-highway and other 12 % 12 % 12 % Aftermarket distributors and monitoring services 6 % 6 % 8 % For further information related to our reportable segments and financial information about geographic areas, see Note 13 to the consolidated financial statements. 2 Table of Contents Production Materials The principal production materials used in the Company’s manufacturing process are electrical components such as printed circuit boards, semiconductors, microprocessors, memory devices, resistors, capacitors, fuses, relays, monitors and cameras, molded plastic components and resins, copper, steel and precious metals.
Ferraiolo served as Director of European Commercial and Development, Autocam Corporation from 2005 to 2010. Robert J. Hartman Jr., Chief Accounting Officer. Mr. Hartman was appointed as Chief Accounting Officer and to the role of principal accounting officer in July 2016. Prior to that, Mr.
Prior to that, Mr. Ferraiolo served as Director of European Commercial and Development, Autocam Corporation from 2005 to 2010. Robert J. Hartman Jr., Chief Accounting Officer. Mr. Hartman was appointed as Chief Accounting Officer and to the role of principal accounting officer in July 2016. Prior to that, Mr.
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.
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 from 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.
Hartman served as Corporate Controller of the Company since 2006 and prior to that as Stoneridge’s Director of Internal Audit from 2003. Salvatore Orsini, Chief Procurement Officer. Mr. Orsini was appointed Chief Procurement Officer in July 2022. Prior to that Mr.
Hartman served as Corporate Controller of the Company since 2006 and prior to that as Stoneridge’s Director of Internal Audit from 2003. Salvatore D. Orsini, Chief Procurement Officer. Mr. Orsini was appointed Chief Procurement Officer in July 2022. Prior to that Mr.
Once a supplier has been selected to provide parts for a new program, an OEM customer will usually continue to purchase those parts from the selected supplier for the life of the program, although not necessarily for any model redesigns. We compete for aftermarket and mass merchandiser sales based on price, product functionality, quality and service.
Once a supplier has been selected to provide parts for a new program, an OEM customer will usually continue to purchase those parts from the selected supplier for the life of the program, although not necessarily for any model redesigns. We compete for aftermarket sales based on price, product functionality, quality and service.
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.
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, driver information systems and telematics products used for fleet management. These products improve the performance, safety and convenience features of our customers’ vehicles.
Stoneridge Brazil sells its products through the aftermarket distribution channel, to factory authorized dealer installers, also referred to as original equipment services, direct to OEMs and through mass merchandisers. In addition, monitoring services and tracking devices are sold directly to corporate and individual customers.
Stoneridge Brazil sells its products through the aftermarket distribution channel, to factory authorized dealer installers, also referred to as original equipment services and direct to OEMs. In addition, monitoring services and tracking devices are sold directly to corporate and individual customers.
Our products and systems are sold to numerous OEM and Tier 1 customers, as well as aftermarket distributors and mass merchandisers, for use on many different vehicle platforms. We supply multiple parts to many of our principal OEM and Tier 1 customers under requirements contracts for a particular vehicle model.
Our products and systems are sold to numerous OEM and Tier 1 customers, as well as aftermarket distributors, for use on many different vehicle platforms. We supply multiple parts to many of our principal OEM and Tier 1 customers under requirements contracts for a particular vehicle model.
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 3 Table of Contents the design and engineering departments of key customers.
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.
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. 5 Table of Contents Rajaey Kased, President of the Control Devices Division. Mr.
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. Mr.
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. Competition The markets for our products in our reportable segments are highly competitive. We compete based on technological innovation, price, quality, performance, service and delivery.
If we are unable to effectively manage production costs in the future to mitigate future pricing pressures, our financial condition and results of operations would be adversely affected. Competition The markets for our products in our reportable segments are highly competitive. We compete based on technological innovation, price, quality, performance, service and delivery.
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 Control Devices segment is increasingly well positioned with a focus on continued development and commercialization of actuation and powertrain agnostic applications that will drive future growth for the segment.
Orsini held various positions at Rolls-Royce Aerospace and Delphi. Peter Österberg, President of the Electronics Division. Mr. 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.
Orsini held various positions at Rolls-Royce Aerospace and Delphi. 5 Table of Contents Peter Österberg, President of the Electronics Division. Mr. 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.
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.
Our Stoneridge Brazil 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 and commercial vehicle markets.
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.
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. 1 Table of Contents We have positioned each of our segments for continued long-term success.
Ferraiolo was appointed to President of the Stoneridge Brazil Electronics Division in June 2017. Mr. Ferraiolo joined the Company in 2015 and previously served as the Chief Operating Officer of Stoneridge Brazil. From 2010 to 2015 he served as Vice President of Operations for Cannondale Sports Group in Brazil. Prior to that, Mr.
Ferraiolo, President of the PST Electronics Division. Mr. Ferraiolo was appointed to President of the Stoneridge Brazil Electronics Division in June 2017. Mr. Ferraiolo joined the Company in 2015 and previously served as the Chief Operating Officer of Stoneridge Brazil. From 2010 to 2015 he served as Vice President of Operations for Cannondale Sports Group in Brazil.
Our Stoneridge 1 Table of Contents 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.
Our Stoneridge Brazil segment continues to integrate into our global 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.
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.
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 diversity, equity and inclusion initiatives across its various sites and functions and report on progress to our executive leadership team and Board of Directors.
We seek diverse sources for candidates and we offer wages and benefits that are competitive in the markets where employees are located. Stoneridge is committed to creating diverse, equitable and inclusive workplaces that align with our core values and deliver sustainable business success.
We seek diverse sources for candidates and we offer wages and benefits that are competitive in the markets where employees are located. 4 Table of Contents Stoneridge is committed to creating diverse, equitable and inclusive workplaces that align with our core values and deliver sustainable business success.
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.
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 front-axle disconnect products.
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.
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 80 % of our sales in 2023. Our product portfolio shift focuses on the megatrends driving the transportation industry.
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 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 monitor system, and the acquisition of an additional 24 percent of our Stoneridge Brazil business resulting in 100 percent ownership.
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”). During the third quarter of 2020, we leased the Canton facility to a third party.
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”). On June 17, 2021, we sold the Canton facility.
Human Capital Management As of December 31, 2022, Stoneridge employed approximately 5,250 full time and temporary employees in 14 countries, with about 88 % located outside of the United States.
Human Capital Management As of December 31, 2023, Stoneridge employed approximately 4,850 full time and temporary employees in 14 countries, with about 86 % located outside of the United States.
The product development operations are executed by technology groups in Barneveld, Netherlands; Campinas, Brazil; Juarez, Mexico; Lexington, Ohio; Novi, Michigan; 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.
The product development operations are executed by technology groups in Barneveld, Netherlands; Campinas, Brazil; Juarez, Mexico; Lexington, Ohio; Novi, Michigan; Stockholm, Sweden; Suzhou, China and Tallinn, Estonia. We have invested, and will continue to invest heavily in technology aligned with our strategy to develop smart products that contain embedded electronics or logic.
Zizelman was employed at Delphi for more than 20 years, where he was last a Vice President of Engineering from 2016 to 2017. Matthew R. Horvath, Chief Financial Officer and Treasurer. Mr. Horvath was appointed Chief Financial Officer and Treasurer in August 2021.
Prior to joining Stoneridge, Mr. Zizelman served as the Vice President of Engineering and Program Management for Aptiv from December 2017 to March 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 to 2017. Matthew R. Horvath, Chief Financial Officer and Treasurer. Mr.
Refer to the 2 Table of Contents 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.
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.
Susan C. Benedict, Chief Human Resources Officer and Assistant General Counsel. Ms. Benedict was appointed Chief Human Resources Officer and Assistant General Counsel – Labor and Employment in June 2019. Ms. Benedict previously served as Stoneridge’s Director of Legal since November 2017. Prior to Stoneridge, Ms.
Benedict was appointed Chief Human Resources Officer and Assistant General Counsel in June 2019. Ms. Benedict previously served as Stoneridge’s Director of Legal since November 2017. Prior to Stoneridge, Ms. Benedict served as Senior Counsel for Koch Industries in October 2017 and Corporate Counsel for Guardian Industries from December 2012 to September 2017. Caetano R.
Such materials are available from multiple sources, but we generally establish collaborative relationships with a qualified supplier for each of our key production materials in order to lower costs and enhance service and quality. As global demand for our production materials increases, we may have difficulties obtaining adequate production materials from our suppliers to satisfy our customers.
We purchase production materials pursuant to both annual contract and spot purchasing methods. Such materials are available from multiple sources, but we generally establish collaborative relationships with a qualified supplier for each of our key production materials in order to lower costs and enhance service and quality.
On May 19, 2020, the Company committed to the strategic exit of its Control Devices particulate matter (“PM”) sensor product line (“PM Sensor Exit”).
See Note 2 to the consolidated financial statements for additional details regarding the sale of the Canton Facility. 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”).
Due to the competitive nature of the markets we serve, we face pricing pressures from our customers in the ordinary course of business.
Due to the competitive nature of the markets we serve, we face pricing pressures from our customers in the ordinary course of business. In response to these pricing pressures we manage our production costs by lowering certain costs and/or limiting the increase of others.
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 or developing new, innovative technologies aligned with industry megatrends or customer requests.
We compete based on strong customer relations and a fast and flexible organization that develops technically effective solutions at a competitive price. 3 Table of Contents 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 or developing new, innovative technologies aligned with industry megatrends or customer requests.
Our Chief Human Resources Officer reports directly to the Chief Executive Officer and interacts frequently with the Company’s Board of Directors.
Our Chief Human Resources Officer reports directly to the Chief Executive Officer and interacts frequently with the Company’s Board of Directors. Our Human Capital focus will continue to be on employee engagement, employee and leadership development, communications, and employee health and safety.
Kased was employed at Delphi from 2005 to 2017 where he served in roles of increasing responsibility. Available Information We make available, free of charge through our website (www.stoneridge.com), our Annual Report on Form 10-K (“Annual Report”), Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and other filings with the U.S.
Available Information We make available, free of charge through our website (www.stoneridge.com), our Annual Reports on Form 10-K (“Annual Report”), Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and other filings with the U.S. Securities and Exchange Commission (“SEC”), as soon as reasonably practicable after they are filed with the SEC.
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 a competitive price.
Our diversity in products creates a wide range of competitors, which vary depending on both market and geographic location.
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. Zizelman served as the Vice President of Engineering and Program Management for Aptiv from December 2017 to March 2019. Prior to that, Mr.
Orsini 54 Chief Procurement Officer Peter Österberg 55 President of the Electronics Division Rajaey Kased 44 President of the Control Devices Division James Zizelman, President, Chief Executive Officer and Director. Mr. 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.
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. 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.
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 from 2010 - 2016. Susan C. Benedict, Chief Human Resources Officer and Assistant General Counsel. Ms.
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 Electronics segment is expected to drive strong revenue growth through launches of previously awarded programs including launches for our MirrorEye camera monitor system in the European and North American commercial vehicle markets and our SE5000 Smart 2 tachograph product in the European commercial vehicle market for both OEM and aftermarket applications.
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.
These collaborative efforts have resulted in the development of new and complimentary products and the enhancement of existing products. Our product development investment and spending activities are globally coordinated to maximize utilization of resources and collaboration among engineering resources which are organized based on resource availability, capability and cost effectiveness.
The following table sets forth the names, ages, and positions of the executive officers of the Company: Name Age Position James Zizelman 62 President, Chief Executive Officer and Director Matthew R. Horvath 37 Chief Financial Officer and Treasurer Susan C. Benedict 56 Chief Human Resources Officer and Assistant General Counsel Laurent P.
Information About Our Executive Officers Each executive officer of the Company serves the Board of Directors at its pleasure. The Board of Directors appoints corporate officers annually. The following table sets forth the names, ages, and positions of the executive officers of the Company: Name Age Position James Zizelman 63 President, Chief Executive Officer and Director Matthew R.
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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. See Note 12 to the consolidated financial statements for additional details regarding the Canton Restructuring .
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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.
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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, monitors and cameras. We purchase production materials pursuant to both annual contract and spot purchasing methods.
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Horvath 38 Chief Financial Officer and Treasurer Susan C. Benedict 57 Chief Human Resources Officer and Assistant General Counsel Caetano R. Ferraiolo 56 President of the Stoneridge Brazil Division Robert J. Hartman Jr. 57 Chief Accounting Officer Salvatore D.
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In response to these pricing pressures we have been able to effectively manage our production costs by the combination of lowering certain costs and limiting the increase of others, the net impact of which has not been material.
Added
Horvath was appointed Chief Financial Officer and Treasurer in September 2021. He previously served as Stoneridge’s Executive Director of Corporate Strategy and Investor Relations from September 2020 to August 2021, and prior to that as Director of Investor Relations from November 2016 to August 2020. Prior to joining Stoneridge, Mr.
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Our Human Capital focus will continue to be on employee engagement, employee and leadership development, communications, and employee health and safety. 4 Table of Contents Information About Our Executive Officers Each executive officer of the Company serves the Board of Directors at its pleasure. The Board of Directors appoints corporate officers annually.
Added
Kased was employed at Delphi from 2005 to 2017 where he served in management and engineering roles of increasing responsibility.
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Borne 48 Chief Strategy Officer and Chief Technology Officer Caetano R. Ferraiolo 55 President of the Stoneridge Brazil Division Robert J. Hartman Jr. 56 Chief Accounting Officer 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. Mr.
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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 P. Borne, Chief Strategy Officer and Chief Technology Officer. Mr. Borne was appointed Chief Strategy Officer in March 2022. Prior to that he was the President of the Electronics Division from January 2019. Mr.
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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. Borne served as Vice President of Product Development at Whirlpool Corporation from 2014 until August 2018. Caetano R. Ferraiolo, President of the PST Electronics Division. Mr.
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Securities and Exchange Commission (“SEC”), as soon as reasonably practicable after they are filed with the SEC.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

42 edited+7 added−22 removed68 unchanged
Biggest changeThe prices that we can charge our customers are typically predetermined and we bear the risk of costs in excess of our estimates, in addition to the risk of adverse effects resulting from general customer demands for cost reductions and quality improvements. Our supply agreements with our customers typically require us to provide our products at predetermined prices.
Biggest changeIf we cannot obtain adequate raw materials and other supplies, or if we experience an increase in the price of raw materials and other supplies, our business, financial condition or results of operations could be materially adversely affected. 8 Table of Contents The prices that we can charge our customers are typically predetermined and we bear the risk of costs in excess of our estimates, in addition to the risk of adverse effects resulting from general customer demands for cost reductions and quality improvements.
We rely upon information technology networks and systems to process, transmit and store electronic information, and to manage or support a variety of business processes and/or activities. The secure operation of these IT networks and systems and the proper processing and maintenance of this information are critical to our business operations.
We rely upon information technology networks and systems to process, transmit and store electronic information, and to manage or support a variety of business processes and/or activities. The secure operation of these IT networks and systems and the proper processing and maintenance of this electronic information are critical to our business operations.
Our business benefits from free trade agreements, such as the United States-Mexico-Canada Agreement and the U.S. trade relationship with China and Brazil and efforts to withdraw from, or substantially modify such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs import or export licensing requirements, exchange controls or new barriers to entry, could adversely impact our production costs, customer demand and our relationships with customers and suppliers.
Our business benefits from free trade agreements, such as the United States-Mexico-Canada Agreement and the U.S. trade relationships with China and Brazil and efforts to withdraw from, or substantially modify such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs import or export licensing requirements, exchange controls or new barriers to entry, could adversely impact our production costs, customer demand and our relationships with customers and suppliers.
The availability and prices of raw materials and other supplies may be subject to curtailment or change due to, among other things, new laws or regulations, suppliers’ allocations to other purchasers and interruptions in production by suppliers, weather emergencies, natural disasters, commercial disputes, acts of terrorism or war, changes in exchange rates and worldwide price levels.
The availability and prices of raw materials, components and other supplies may be subject to curtailment or change due to, among other things, new laws or regulations, suppliers’ allocations to other purchasers and interruptions in production by suppliers, weather emergencies, natural disasters, commercial disputes, acts of terrorism or war, changes in exchange rates and worldwide price levels.
Our failure, or that of our supply base, to adequately meet stakeholder expectations may result in, among other things, the loss of business, diluted market valuation, an inability to attract customers or an inability to attract and retain top talent that could adversely affect our business, financial condition or results of operations. Item 1B. Unresolved Staff Comments.
Our failure, or that of our supply base, to adequately meet stakeholder expectations may result in, among other things, the loss of business, diluted market valuation, an inability to attract customers or an inability to attract and retain top talent that could adversely affect our business, financial condition or results of operations. Item 1B. Unresolved Staff Comments. None.
An emphasis on global climate change and other ESG matters by various stakeholders could negatively affect our business. Customer, investor, employee and other stakeholder expectations of us and our supply base in areas such as the environment, social matters and corporate governance have been rapidly evolving and increasing.
An emphasis on global climate change and other environmental, social, and corporate governance ("ESG") matters by various stakeholders could negatively affect our business. Customer, investor, employee and other stakeholder expectations of us and our supply base in areas such as the environment, social matters and corporate governance have been rapidly evolving and increasing.
In the case of pending patent applications, we may not be successful in securing issued patents, or securing patents that provide us with a competitive advantage for our businesses. In addition, our competitors may design products around our patents that avoid infringement and violation of our intellectual property rights.
In the case of pending patent applications, we may not be successful in securing issued patents or securing patents of a scope that provide us with a competitive advantage for our businesses. In addition, our competitors may design products around our patents that avoid infringement and violation of our intellectual property rights.
Our leverage and the terms of our indebtedness may have important consequences including the following: • we may have difficulty satisfying our obligations with respect to our indebtedness, and if we fail to comply with these requirements, an event of default could result; • we may be required to dedicate a substantial portion of our cash flow from operations to required payments on indebtedness, thereby reducing the availability of cash flow for working capital, capital expenditures and other general corporate activities; • covenants relating to our debt may limit our ability to obtain additional financing for working capital, capital expenditures and other general corporate activities; • covenants relating to our debt may limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • we may be placed at a competitive disadvantage against less leveraged competitors.
Our leverage and the terms of our indebtedness may have important consequences including the following: • we may have difficulty satisfying our obligations with respect to our indebtedness, and if we fail to comply with these requirements, an event of default could result; 7 Table of Contents • we may be required to dedicate a substantial portion of our cash flow from operations to required payments on indebtedness, thereby reducing the availability of cash flow for working capital, capital expenditures and other general corporate activities; • covenants relating to our debt may limit our ability to obtain additional financing for working capital, capital expenditures and other general corporate activities; • covenants relating to our debt may limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • we may be placed at a competitive disadvantage against less leveraged competitors.
Failure to successfully identify, complete and/or integrate acquisitions could have a material adverse effect on us. A portion of our growth in sales and earnings has been generated from acquisitions and subsequent improvements in the performance of the businesses acquired. We expect to continue a strategy of selectively identifying and acquiring businesses with complementary products.
Failure to successfully identify, complete and/or integrate acquisitions could have a material adverse effect on us. A portion of our growth in sales and earnings has been generated from acquisitions and subsequent improvements in the performance of the businesses acquired. We expect to follow a strategy of selectively identifying and acquiring businesses with complementary products.
While we have taken steps to protect the Company from cybersecurity risks and security breaches (including enhancing our firewall, workstation, email security and network monitoring with managed detection and response (MDR) and alerting capabilities, and training employees around phishing, malware and other cybersecurity risks), and we have policies and procedures to prevent or limit the impact of systems failures, interruptions, and security breaches, there 12 Table of Contents can be no assurance that such events will not occur or that they will be adequately addressed if they do.
While we have taken steps to protect the Company from cybersecurity risks and security breaches (including enhancing our firewall, workstation, email security and network monitoring with managed detection and response (MDR) and alerting capabilities, and training employees around phishing, malware and other cybersecurity risks), and we have policies and procedures to prevent or limit the impact of systems failures, interruptions, and security breaches, there can be no assurance that such events will not occur or that they will be adequately addressed if they do.
In addition, we continually expand and update our IT networks and systems in response to the changing needs of our business and periodically upgrade our ERP systems.
In addition, we continually update our IT networks and systems in response to the changing needs of our business and periodically upgrade our ERP systems.
We cannot be certain that we have rights to all intellectual property currently used in the conduct of our businesses or that we have complied with the terms of agreements by which we acquire such rights, which could expose us to infringement, misappropriation or other claims alleging violations of third party intellectual property rights.
We cannot be certain that we have rights to all intellectual property currently used in the conduct of our businesses or that we have complied with the terms of agreements by which we acquire such rights, which could expose us to infringement, misappropriation or other claims alleging violations of third party intellectual property rights, or customer indemnification claims.
Should our networks or systems not be implemented successfully, or if the systems do not perform in a satisfactory manner once implementation is complete, our business and operations could be disrupted and our results of operations could be adversely affected, including our ability to report accurate and timely financial results.
Should our networks or systems not be implemented or upgraded successfully, or if the systems do not perform in a satisfactory manner once implementation or upgrade is complete, our business and operations could be disrupted and our results of operations could be adversely affected, including our ability to report accurate and timely financial results.
Our business may, therefore, require significant recurring additional capital expenditures and investment in product development, manufacturing and management information systems. We cannot assure that we will be able to achieve technological advances or introduce new products that may be necessary to remain competitive.
Our business may, therefore, require significant recurring additional capital expenditures and investment in product development, manufacturing and information technology systems. We cannot assure that we will be able to achieve technological advances or introduce new products that may be necessary to remain competitive.
We require substantial amounts of raw materials and other supplies, and substantially all such materials we require are purchased from outside sources.
We require substantial amounts of raw materials, components and other supplies, and substantially all such materials we require are purchased from outside sources.
International sales and operations are subject to significant risks, including, among others: • political and economic instability; • restrictive trade policies; • economic conditions in local markets; • currency exchange rates and controls; • labor unrest; • difficulty in obtaining distribution support and potentially adverse tax consequences; and • the imposition of product tariffs and the burden of complying with a wide variety of international and U.S. export laws.
International sales and operations are subject to significant risks, including, among others: • political and economic instability and conflicts; • restrictive trade policies; • economic conditions in local markets; • currency exchange rates and controls; • labor or social unrest; • difficulty in obtaining distribution support and potentially adverse tax consequences; and • the imposition of product tariffs and the burden of complying with a wide variety of international and U.S. export laws.
Also, our business interruption insurance would not compensate us for the loss of opportunity and potential adverse impact on relations with our existing customers resulting from our inability to produce products for them. 9 Table of Contents We rely on independent dealers and distributors to sell certain products in the aftermarket sales channel and a disruption to this channel would harm our business.
Also, our business interruption insurance would not compensate us for the loss of opportunity and potential adverse impact on relations with our existing customers resulting from our inability to produce products for them. We rely on independent dealers and distributors to sell certain products in the aftermarket sales channel and a disruption to this channel would harm our business.
In addition, the interpretation and application of consumer and data protection laws in the U.S., Europe and elsewhere are often uncertain and in flux. Complying with these various laws could cause the Company to incur substantial costs. Environmental, Climate and Weather Risks Compliance with environmental and other governmental regulations could be costly and require us to make significant expenditures.
In addition, the interpretation and application of consumer and data protection laws in the U.S., Europe and elsewhere are often uncertain and frequently change. Complying with these various laws could cause the Company to incur substantial costs. Environmental, Climate and Weather Risks Compliance with environmental and other governmental regulations could be costly and require us to make significant expenditures.
Third parties have asserted and may assert or prosecute infringement claims against us in connection with the services and products that we offer, and we may or may not be able to successfully defend these claims.
Third parties have asserted and may assert or prosecute infringement claims against us or our customers in connection with the services and products that we offer, and we may or may not be able to successfully defend these claims.
We cannot assure that 11 Table of Contents our product liability insurance will be adequate for liabilities ultimately incurred or that it will continue to be available on terms acceptable to us. In addition, if any of our products prove to be defective, we may be required to participate in government-imposed or customer OEM-instituted recalls involving such products.
We cannot assure that our product liability insurance will be adequate for liabilities ultimately incurred or that it will continue to be available on terms acceptable to us. In addition, if any of our products prove to be defective, we may be required to participate in government-imposed or customer OEM-instituted recalls involving such products.
Our inability to effectively manage the timing, quality and costs of these new program launches could adversely affect our business, financial condition or results of operations. We may not be able to successfully integrate acquisitions into our business or may otherwise be unable to benefit from pursuing acquisitions.
Our inability to effectively manage the timing, quality and costs of these new program launches could adversely affect our business, financial condition or results of operations. 10 Table of Contents We may not be able to successfully integrate acquisitions into our business or may otherwise be unable to benefit from pursuing acquisitions.
An economic downturn or other adverse industry conditions that result in a decline in automotive, commercial, off-highway or agricultural vehicle production, or a 6 Table of Contents material decline in market share by our significant customers, could adversely affect our results of operations and financial condition.
An economic downturn or other adverse industry conditions that result in a decline in automotive, commercial, off-highway or agricultural vehicle production, or a material decline in market share by our significant customers, could adversely affect our results of operations and financial condition.
Any of the foregoing factors could affect the willingness of buyers of our products to select GPS-based products instead of products based on competing technologies, which could adversely affect our operational revenues, financial condition and results of operation. Geopolitical Uncertainties We are subject to risks related to our international operations.
Any of the foregoing factors could affect the willingness of buyers of our products to select GPS-based products instead of products based on competing technologies, which could adversely affect our business, financial condition and results of operation. Geopolitical Uncertainties We are subject to risks related to our international operations.
Any of these consequences could have a material adverse effect on our business, financial condition or results of operations. 10 Table of Contents Strategic Performance Risks Our inability to effectively manage the timing, quality and costs of new program launches could adversely affect our financial performance.
Any of these consequences could have a material adverse effect on our business, financial condition or results of operations. Strategic Performance Risks Our inability to effectively manage the timing, quality and costs of new program launches could adversely affect our financial performance.
Uncertain Economic and Market Conditions Our business is cyclical and a downturn in the automotive, commercial, off-highway and agricultural vehicle markets as well as overall economic conditions could reduce our sales and profitability. The demand for products is largely dependent on the domestic and foreign production of automotive, commercial, off-highway and agricultural vehicles.
Item 1A. Risk Factors. Uncertain Business, Economic and Market Conditions Our business is cyclical and a downturn in the automotive, commercial, off-highway and agricultural vehicle markets as well as overall economic conditions could reduce our sales and profitability. The demand for products is largely dependent on the domestic and foreign production of automotive, commercial, off-highway and agricultural vehicles.
We may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future. Privacy and security concerns relating to the Company’s current or future products and services could damage its reputation and deter current and potential users from using them.
We may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future. 12 Table of Contents Privacy and security concerns relating to the Company’s current or future products and services could damage its reputation and deter current and potential users from using them.
In 2022, approximately 94% of our net sales were derived from automotive, commercial, off-highway and agricultural vehicle markets while approximately 6% were derived from aftermarket distributors, mass merchandisers and monitoring services markets.
In 2023, approximately 94% of our net sales were derived from automotive, commercial, off-highway and agricultural vehicle markets while approximately 6% were derived from aftermarket distributors and monitoring services markets.
Non-current assets outside of North America accounted for approximately 62% of our non-current assets as of December 31, 2022.
Non-current assets outside of North America accounted for approximately 63% of our non-current assets as of December 31, 2023.
The satellites and their ground control and monitoring stations are maintained and operated by the United States Department of Defense. The Department of Defense does not currently charge users for access to the satellite signals. These satellites and their ground support systems are complex electronic systems subject to electronic and mechanical failures and possible sabotage.
The satellites and their ground control and monitoring stations are maintained and operated by the United States Department of Defense. The Department of Defense does not currently charge users for access to the satellite signals.
If a significant number of satellites were to become inoperable, unavailable or are not replaced, it would impair the current utility of our GPS products and the growth of market opportunities.
These satellites and their ground support systems are complex electronic systems subject to electronic and mechanical failures and possible sabotage. 9 Table of Contents If a significant number of satellites were to become inoperable, unavailable or are not replaced, it would impair the current utility of our GPS products and the growth of market opportunities.
Any such claims and resulting litigation could require us to enter into licensing agreements (if available on acceptable terms or at all), pay damages and cease making or selling certain products and could result in a loss of our intellectual property protection.
As a result of such claims, we could enter into licensing agreements (if available on acceptable terms or at all), be forced to pay damages or cease making or selling certain products, lose our intellectual property protection, or suffers some combination of these effects.
Our debt obligations could limit our flexibility in managing our business and expose us to risks. As of December 31, 2022, there was $167.8 million in borrowings outstanding on our Fourth Amended and Restated Credit Agreement, as amended, (the “Credit Facility”).
Our debt obligations could limit our flexibility in managing our business and expose us to risks. As of December 31, 2023, there was $189.3 million in borrowings outstanding on our Fifth Amended and Restated Credit Agreement (the “Credit Facility”). In addition, we are permitted under our Credit Facility to incur additional debt, subject to specified limitations.
Approximately 51% of our net sales in 2022 were derived from sales outside of North America. At December 31, 2022, significant concentrations of net assets outside of North America included $226.8 million in Europe and Other and $39.4 million in South America.
Approximately 49% of our net sales in 2023 were derived from sales outside of North America. At December 31, 2023, significant concentrations of net assets outside of North America included $228.7 million in Europe, $43.9 million in Asia Pacific and $51.0 million in South America.
In some cases, these prices decline over the course of the contract and may require us to meet certain productivity and cost reduction targets. In addition, our customers may require us to share productivity savings in excess of our cost reduction targets. The costs that we incur in fulfilling these contracts may vary substantially from our initial estimates.
Our supply agreements with our customers typically require us to provide our products at predetermined prices. In some cases, these prices decline over the course of the contract and may require us to meet certain productivity and cost reduction targets. In addition, our customers may require us to share productivity savings in excess of our cost reduction targets.
A successful claim brought against us that exceeds available insurance coverage or a requirement to participate in any product recall could have a material adverse effect on our business, financial condition or results of operations.
A successful claim brought against us that exceeds available insurance coverage or a requirement to participate in any product recall could have a material adverse effect on our business, financial condition or results of operations. 11 Table of Contents Intellectual Property Risks If we fail to protect our intellectual property rights or maintain our rights to use licensed intellectual property or are found liable for infringing the rights of others, our business could be adversely affected.
However, cost overruns that we cannot pass on to our customers could adversely affect our business, financial condition or results of operations.
In some cases, we are permitted to pass on to our customers the cost increases associated with specific materials. However, cost overruns that we cannot pass on to our customers and the inability to achieve productivity and cost reduction targets could adversely affect our business, financial condition or results of operations.
Unanticipated cost increases or the inability to meet certain cost reduction targets may occur as a result of several factors, including increases in the costs of labor, components or materials. In some cases, we are permitted to pass on to our customers the cost increases associated with specific materials.
The costs that we incur in fulfilling these contracts may vary substantially from our initial estimates. Unanticipated cost increases or the inability to meet certain cost reduction targets may occur as a result of several factors, including increases in the costs of labor, components or materials and operating inefficiencies.
As a result, changes in the mix of earnings between jurisdictions and changes in the recognition and/or release of valuation allowances, among other factors, could have a significant effect on our overall effective tax rate. 8 Table of Contents Risks Related to Products, Pricing and Supply We are dependent on the availability and price of raw materials and other supplies.
As a result of future changes in our effective tax rate our business, financial condition or results of operations could be materially adversely affected. Risks Related to Products, Pricing and Supply We are dependent on the availability and price of raw materials and other supplies.
In 2022, our top five customers were PACCAR, Volvo, VW Group, Ford Motor Company and Daimler AG, which comprised 15%, 11%, 9%, 7% and 7% of our net sales, respectively. In 2022, our top ten customers accounted for 63 % of our net sales.
We are dependent on several principal customers for a significant percentage of our net sales. In 2023, our top five customers were PACCAR, Traton, Volvo, Daimler Truck and Ford, which comprised 16%, 15%, 10%, 8% and 6% of our net sales, respectively. In 2023, our top ten customers accounted for 66% of our net sales.
It has disrupted, and may continue to disrupt for an indefinite period of time, the global vehicle industry and customer sales, production volumes and purchases of automotive, commercial, off-highway and agricultural vehicles by end-consumers.
For example, the COVID-19 pandemic disrupted the global vehicle industry and customer sales, production volumes, supply of components critical to our business, and purchases of automotive, commercial, off-highway and agricultural vehicles by end-consumers. Any future significant public health crisis could adversely impact the global economy, our industry and the overall demand for our products.
Item 1A. Risk Factors. Risks Related to the Coronavirus (COVID-19) Pandemic Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt our business, which could adversely affect our results of operation and financial condition. Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt, the global economy.
Public health crises and other global health pandemics, epidemics or disease outbreaks could adversely impact our business, results of operation and financial condition. A significant public health crisis, pandemic or disease outbreak, such as COVID-19, could adversely impact our business as well as those of our suppliers and customers.
Our annual effective tax rate could be volatile and materially change as a result of changes in the mix of earnings and other factors including changes in the recognition and/or release of valuation allowances against deferred tax assets. Our overall effective tax rate is computed by dividing our total tax expense (benefit) by our total earnings (loss) before tax.
Our effective tax rate and future cash tax liability could be impacted by various factors, such as changes in the mix of earnings between jurisdictions, changes in the recognition and/or release of valuation allowances, and the enactment of tax laws or changes in tax laws, regulations, or accounting principles.
Removed
In late 2019, a novel strain of the coronavirus (COVID-19) was reported to have been detected in Wuhan, China and on March 11, 2020 it was declared by the World Health Organization to be a global pandemic.
Added
In addition, preventative or reactionary measures taken by governmental authorities may disrupt the ability of our employees, suppliers and other business partners to perform their respective functions and obligations relative to the conduct of our business.
Removed
The COVID-19 pandemic has negatively affected the global economy, disrupting the financial markets and increasing volatility, and has impeded global supply chains, restricted manufacturing operations and resulted in significantly reduced economic activity and higher unemployment rates.
Added
Our ability to predict and respond to future changes resulting from potential health crises is uncertain as are the ultimate potential impacts on our business. The extent to which a pandemic or similar significant health crises will impact our business in the future is uncertain.
Removed
International, federal, state and local public health and governmental authorities have taken and may continue to take actions to contain the outbreak and spread of COVID-19 throughout most regions of the world, including travel bans, quarantines, "work-from-home" orders and similar mandates that have caused many businesses to modify normal operations.
Added
In addition, to the extent such significant health crises may adversely affect our business, financial condition, results of operations and cash flows, they may also have the effect of heightening many of the other risk factors in this section. 6 Table of Contents The loss or insolvency of any of our principal customers would adversely affect our future results.
Removed
Beginning in 2020 we took actions to enhance our financial flexibility and minimize the impact on our business, such as the ramping down of certain production facilities in response to customer plant closures and changes in vehicle production schedules, imposing certain travel restrictions, amending our existing Credit Facility three times providing covenant relief through September 2023 and actively managing costs, capital spending and working capital to further strengthen our liquidity.
Added
Unanticipated changes in our effective tax rate, the adoption of U.S. or international tax legislation, or exposure to additional tax liabilities could adversely affect our profitability.
Removed
Despite these measures, the ultimate impact to our business continues to remain highly uncertain and we have experienced, and may continue to experience, delays in the production and distribution of our products, supply chain disruptions affecting the availability of production materials and the loss or delay of customers’ sales.
Added
The Organization for Economic Cooperation and Development (“OECD”) issued new guidelines to implement a 15% global corporate minimum tax to ensure that large multinational enterprises pay a minimum level of tax in the countries they operate. Our effective tax rate and cash tax liabilities could increase in future years, depending on which countries enact the legislation and in what manner.
Removed
Due to the overall global economic conditions in 2022 and 2021, largely as a result of supply chain issues and the impact of the COVID-19 pandemic and resulting supply chain issues, the automotive, commercial, off-highway and agricultural vehicle markets experienced volatility in global customer sales and production volumes.
Added
Because of the interconnectedness of the global economy, a financial crisis, economic downturn or recession, natural disaster, war, geopolitical crises, or other significant events in one area of the world can have an immediate and material adverse impact on markets around the world. These uncertainties could have a material adverse effect on our business, financial condition or results of operations.
Removed
As a result, we have experienced and may continue to experience reductions in orders from our customers in certain regions.
Added
The Company is aware of claims being made against manufacturers of vehicles by alleged owners of patents related to connectivity-enabled products (frequently referred to as "standard essential patents"). Customers may seek indemnification related to such claims from the Company.
Removed
The loss or insolvency of any of our principal customers would adversely affect our future results. We are dependent on several principal customers for a significant percentage of our net sales.
Removed
In addition, we are permitted under our Credit Facility to incur additional 7 Table of Contents debt, subject to specified limitations.
Removed
On March 1, 2023, we amended the Credit Facility.
Removed
As amended the Credit Facility provides for certain financial covenant relief and additional covenant restrictions during the “Amendment No. 4 Specified Period” (the period from March 1, 2023 until the date that the Company delivers a compliance certificate for the quarter ending September 30, 2023 in form and substance satisfactory to the administrative agent).
Removed
During the Amendment No. 4 Specified Period: • the maximum net leverage ratio was changed to 4.75 to 1.00 for the quarter ended March 31, 2023 and 4.25 to 1.00 for the quarter ended June 30, 2023; • the minimum interest coverage ratio of 3.50 was reduced to 3.00 for the quarters ended March 31, 2023 and June 30, 2023; • drawing on the Credit Facility continues to be restricted if the Company's total of 100% of domestic and 65% of foreign cash and cash equivalents exceeds $70.0 million; • there continue to be certain additional restrictions on Restricted Payments (as defined); and • consistent with Amendment No. 3, a Permitted Acquisition (as defined) may not be consummated unless the net leverage ratio is below 3.50 to 1.00 during the Amendment No. 4 Specified Period.
Removed
However, tax expense and benefits are not recognized on a global basis, but rather on a jurisdictional or legal entity basis. Losses in certain jurisdictions may not provide a current financial statement tax benefit as a result of the need to maintain a valuation allowance against the associated deferred tax asset.
Removed
Also, management periodically evaluates the realizability of our deferred tax assets which may result in the recognition and/or release of valuation allowances.
Removed
If we cannot obtain adequate raw materials and other supplies, or if we experience an increase in the price of raw materials and other supplies, our business, financial condition or results of operations could be materially adversely affected.
Removed
The adverse impacts of the COVID-19 pandemic led to a significant vehicle production slowdown in the first half of 2020, which was followed by increased consumer demand and vehicle production schedules in the second half of 2020.
Removed
This surge in demand led to a worldwide semiconductor supply shortage at the end of 2020 and through 2022, as semiconductor suppliers have been unable to rapidly reallocate production lines to serve the transportation industry. In addition, we have experienced longer lead-times, higher costs and delays in procuring other component parts and raw materials.
Removed
As a result, we are currently experiencing supply chain disruptions. We are assessing the potential supply chain impacts, which may directly or indirectly impact various suppliers, and correspondingly, OEM production.
Removed
We are working closely with our suppliers and customers to minimize any potential adverse impacts, and we continue to closely monitor the availability of semiconductor microchips and other component parts and raw materials, customer vehicle production schedules and any other supply chain inefficiencies that may arise, due to this or any other issue.
Removed
However, any direct or indirect supply chain disruptions may have an adverse impact on our business, financial condition, results of operations or cash flows.
Removed
Intellectual Property Risks If we fail to protect our intellectual property rights or maintain our rights to use licensed intellectual property or are found liable for infringing the rights of others, our business could be adversely affected.
Removed
The Company has seen an increase in customer requests for indemnification in connection with third party patent claims related to connectivity-enabled products. These claims are being made by patent-holders seeking royalties and who may enter into litigation based on patent infringement allegations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table provides information regarding our facilities: Location Owned/ Leased Use Square Footage Control Devices Juarez, Mexico (A) Owned Manufacturing/Engineering 235,035 Lexington, Ohio Owned Manufacturing/Engineering 219,612 Suzhou, China (A) Leased Manufacturing/Engineering/Sales Office 145,033 El Paso, Texas (A) Leased Warehouse 57,000 Lexington, Ohio Leased Warehouse 15,000 Novi, Michigan Leased Engineering 6,398 Electronics Tallinn, Estonia Leased Manufacturing/Engineering 85,911 Orebro, Sweden Leased Manufacturing 77,472 Barneveld, Netherlands Owned Manufacturing/Engineering 62,700 Stockholm, Sweden Leased Engineering/Division Office 41,248 Bayonne, France Leased Sales Office/Warehouse 9,655 Jasper, Georgia Leased Sales Office/Warehouse 6,250 Dundee, Scotland Leased Sales Office/Engineering 4,683 Ottobrunn, Germany Leased Sales Office 1,119 Stoneridge Brazil Manaus, Brazil Owned Manufacturing 102,247 Campinas, Brazil Owned Engineering/Division Office 45,467 Hortolândia, Brazil Leased Sales Office 3,229 Buenos Aires, Argentina Leased Sales Office 2,906 Serra, Brazil Leased Sales Office 344 Corporate and Other Novi, Michigan (B) Leased Headquarters/Division Office 37,713 Esslingen, Germany Leased Sales Office 1,722 __________________________________ (A) This facility is also used in the Electronics reportable segment.
Biggest changeThe following table provides information regarding our facilities: Location Owned/ Leased Use Square Footage Control Devices Lexington, Ohio Owned Manufacturing/Engineering 219,612 Suzhou, China (A) Leased Manufacturing/Engineering/Sales Office 145,033 El Paso, Texas (A) Leased Warehouse 57,000 Lexington, Ohio Leased Warehouse 15,000 Novi, Michigan Leased Engineering 6,398 Electronics Juarez, Mexico (B) Owned Manufacturing/Engineering 235,035 Tallinn, Estonia Leased Manufacturing/Engineering 85,911 Orebro, Sweden Leased Manufacturing/Engineering 77,472 Barneveld, Netherlands Owned Manufacturing/Engineering 62,700 Stockholm, Sweden Leased Engineering/Division Office 41,248 Bayonne, France Leased Sales Office/Warehouse 9,655 Dundee, Scotland Leased Sales Office/Engineering 4,683 Gothenburg, Sweden Leased Engineering 710 Stoneridge Brazil Manaus, Brazil Owned Manufacturing 94,103 Campinas, Brazil Owned Engineering/Division Office 45,467 Hortolândia, Brazil Leased Sales Office 3,229 Buenos Aires, Argentina Leased Sales Office 4,532 Serra, Brazil Leased Sales Office 344 Corporate and Other Novi, Michigan (A, B) Leased Headquarters/Division Office 37,713 Esslingen, Germany Leased Sales Office 1,722 __________________________________ (A) This facility is also used in the Electronics reportable segment.
Item 2. Properties. At December 31, 2022, the Company owned or leased seven manufacturing facilities, which together contain approximately 0.9 million square feet of manufacturing space. Of these manufacturing facilities, three are used by our Control Devices reportable segment, three are used by our Electronics reportable segment and one is used by our Stoneridge Brazil reportable segment.
Item 2. Properties. At December 31, 2023, the Company owned or leased seven manufacturing facilities, which together contain approximately 0.9 million square feet of manufacturing space. Of these manufacturing facilities, two are used by our Control Devices reportable segment, four are used by our Electronics reportable segment and one is used by our Stoneridge Brazil reportable segment.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNot Applicable. 14 Table of Contents PART II
Biggest changeNot Applicable. 15 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−0 removed1 unchanged
Biggest changeThere were 1,403 Common Shares delivered to us by employees as payment for withholding taxes due upon vesting of performance share awards and share unit awards during the three months ended December 31, 2022.
Biggest changeThe following table presents information with respect to repurchases of Common Shares made by us during the three months ended December 31, 2023. There were 1,236 Common Shares delivered to us by employees as payment for withholding taxes due upon vesting of performance share awards and share unit awards during the three months ended December 31, 2023.
For information on “Related Stockholder Matters” required by Item 201(d) of Regulation S-K, refer to Item 12 of this report. 15 Table of Contents Performance Graph Set forth below is a line graph comparing the cumulative total return of a hypothetical investment in our Common Shares with the cumulative total return of hypothetical investments in the Dow Jones U.S.
For information on “Related Stockholder Matters” required by Item 201(d) of Regulation S-K, refer to Item 12 of this report. 16 Table of Contents Performance Graph Set forth below is a line graph comparing the cumulative total return of a hypothetical investment in our Common Shares with the cumulative total return of hypothetical investments in the Dow Jones U.S.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “SRI.” As of February 24, 2023, we had 27,348,198 Common Shares, without par value, outstanding that were owned by approximately 190 shareholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “SRI.” As of February 26, 2024, we had 27,553,610 Common Shares, without par value, outstanding that were owned by approximately 165 shareholders of record.
Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs 10/1/22-10/31/22 — $ — N/A N/A 11/1/22-11/30/22 — $ — N/A N/A 12/1/22-12/31/22 1,403 $ 21.56 N/A N/A Total 1,403 Other than the repurchase of Common Shares of 42,100 and 79,434, respectively, to satisfy employee tax withholdings associated with the delivery of Common Shares earned by employees pursuant to equity-base awards under the Company’s Long-Term Incentive Plan there were no other repurchases of Common Shares made by us during the years ended December 31, 2022 or 2021.
Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs 10/1/23-10/31/23 394 $ 18.66 N/A N/A 11/1/23-11/30/23 — $ — N/A N/A 12/1/23-12/31/23 842 $ 19.51 N/A N/A Total 1,236 Other than the repurchase of Common Shares of 87,387 and 42,100, respectively, to satisfy employee tax withholdings associated with the delivery of Common Shares earned by employees pursuant to equity-based awards under the Company’s Long-Term Incentive Plan there were no other repurchases of Common Shares made by us during the years ended December 31, 2023 or 2022.
The graph is based on the respective market price of each investment as of December 31, 2017, 2018, 2019, 2020, 2021 and 2022 assuming in each case an initial investment of $100 on December 31, 2017, and reinvestment of dividends. 2017 2018 2019 2020 2021 2022 Stoneridge, Inc. $ 100 $ 108 $ 128 $ 132 $ 86 $ 94 Dow Jones U.S.
The graph is based on the respective market price of each investment as of December 31, 2018, 2019, 2020, 2021, 2022 and 2023 assuming in each case an initial investment of $100 on December 31, 2018, and reinvestment of dividends. 2018 2019 2020 2021 2022 2023 Stoneridge, Inc. $ 100 $ 119 $ 123 $ 80 $ 87 $ 79 Dow Jones U.S.
This does not include persons whose stock is in nominee or “street name” accounts held by banks, brokers and other nominees. The following table presents information with respect to repurchases of Common Shares made by us during the three months ended December 31, 2022.
This does not include persons whose stock is in nominee or “street name” accounts held by banks, brokers and other nominees. There were no sales of unregistered securities by the Company or its affiliates during the fiscal year ended December 31, 2023.
Auto Parts Total Return Index $ 100 $ 69 $ 88 $ 104 $ 126 $ 92 NYSE Composite Index $ 100 $ 91 $ 115 $ 123 $ 148 $ 134 Item 6. [Reserved] 16 Table of Contents
Auto Parts Total Return Index $ 100 $ 127 $ 150 $ 181 $ 133 $ 133 NYSE Composite Index $ 100 $ 126 $ 135 $ 162 $ 147 $ 167 Item 6. [Reserved] 17 Table of Contents
Added
The Company did not have a Board approved share repurchase program in effect in either 2023 or 2022.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 6. [Reserved] 16 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 33 Item 8. Financial Statements and Supplementary Data 34 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 73 Item 9A. Controls and Procedures 73 Item 9B.
Biggest changeItem 6. [Reserved] 17 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 31 Item 8. Financial Statements and Supplementary Data 32 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 69 Item 9A. Controls and Procedures 69 Item 9B.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

76 edited+41 added−111 removed61 unchanged
Biggest changeOur unallocated corporate operating loss was lower due to lower incentive compensation benefits as a result of Company performance and the gain on the disposal of the MSIL joint venture offset by higher business realignment costs of $0.8 million and higher professional service costs. 26 Table of Contents Operating income (loss) by geographic location is summarized in the following table (in thousands): Year ended December 31, 2021 2020 Dollar increase / (decrease) Percent increase / (decrease) North America $ 13,072 $ (22,179) $ 35,251 158.9 % South America 995 3,766 (2,771) (73.6) % Europe and Other 1,344 10,749 (9,405) (87.5) % Operating income (loss) $ 15,411 $ (7,664) $ 23,075 301.1 % Our North American operating income increased due to the gain on sales of the Canton Facility, the PM sensor business and the MSIL joint venture, higher sales in our automotive and commercial vehicle markets and lower restructuring costs offsetting higher costs from supply chain disruptions.
Biggest changeOperating income (loss) by geographic location is summarized in the following table (in thousands): Year ended December 31, 2023 2022 Dollar increase / (decrease) Percent increase / (decrease) North America $ (13,566) $ (2,066) $ (11,500) 556.6 % South America 4,454 3,150 1,304 41.4 % Europe and Other 21,948 1,851 20,097 1085.7 % Operating income $ 12,836 $ 2,935 $ 9,901 337.3 % Our North American operating loss increased due to higher material and labor costs, higher business realignment, higher incentive compensation and a 2022 favorable legal settlement offset by a 2023 gain on disposal of fixed assets.
Net sales for our reportable segments, excluding inter-segment sales are summarized in the following table (in thousands): Year ended December 31, 2022 2021 Dollar increase / (decrease) Percent increase / (decrease) Control Devices $ 342,596 38.1 % $ 355,775 46.1 % $ (13,179) (3.7) % Electronics 505,097 56.1 357,910 46.5 147,187 41.1 % Stoneridge Brazil 52,230 5.8 56,777 7.4 (4,547) (8.0) % Total net sales $ 899,923 100.0 % $ 770,462 100.0 % $ 129,461 16.8 % Our Control Devices segment net sales decreased $13.2 million due to lower sales volumes in our served markets and unfavorable foreign currency translation of $20.0 million and $2.3 million, respectively, which were offset by negotiated price increases of $9.1 million.
Net sales for our reportable segments, excluding inter-segment sales are summarized in the following table (in thousands): Year ended December 31, 2022 2021 Dollar increase / (decrease) Percent increase / (decrease) Control Devices $ 342,596 38.1 % $ 355,775 46.2 % $ (13,179) (3.7) % Electronics 505,097 56.1 357,910 46.5 147,187 41.1 % Stoneridge Brazil 52,230 5.8 56,777 7.4 (4,547) (8.0) % Total net sales $ 899,923 100.0 % $ 770,462 100.0 % $ 129,461 16.8 % Our Control Devices segment net sales decreased $13.2 million due to lower sales volumes in our served markets and unfavorable foreign currency translation of $20.0 million and $2.3 million, respectively, which were offset by negotiated price increases of $9.1 million.
The effective tax rate of 72.6% is greater than the statutory tax rate primarily due to the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions, the tax impact of the sale of the Company’s minority interest in MSIL, partially offset by tax incentives.
The effective tax rate of 72.6% was greater than the statutory tax rate primarily due to the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions, the tax impact of the sale of the Company’s minority interest in MSIL, partially offset by tax incentives.
Equity loss (earnings) for Autotech were $0.8 million and $(1.9) million for the years ended December 31, 2022 and 2021 . The decrease in Autotech earnings was due to unfavorable 2022 fair value adjustments to fund investments. Equity earnings for MSIL were $1.8 million for the year ended December 31, 2021.
Equity loss (earnings) for Autotech Fund II were $0.8 million and $(1.9) million for the years ended December 31, 2022 and 2021. The decrease in Autotech Fund II earnings was due to unfavorable 2022 fair value adjustments to fund investments. Equity earnings for MSIL were $1.8 million for the year ended December 31, 2021.
This segment includes results of operations that manufacture actuators, sensors, switches and connectors. Electronics. This segment includes results of operations from the production of driver information systems, vision and safety systems, connectivity and compliance products and electronic control units. Stoneridge Brazil (“SRB”).
This segment includes results of operations that manufacture actuators, sensors, switches and connectors. Electronics. This segment includes results of operations from the production of driver information systems, vision and safety systems, connectivity and compliance products and electronic control units. Stoneridge Brazil.
Liquidity and Capital Resources Summary of Cash Flows for the years ended December 31, 2022 and 2021 (in thousands): Year ended December 31, 2022 2021 Dollar increase / (decrease) Net cash provided by (used for): Operating activities $ 6,806 $ (36,248) $ 43,054 Investing activities (28,581) 28,041 (56,622) Financing activities (7,297) 22,876 (30,173) Effect of exchange rate changes on cash and cash equivalents (1,677) (3,041) 1,364 Net change in cash and cash equivalents $ (30,749) $ 11,628 $ (42,377) Cash provided by operating activities increased compared to 2021 primarily due to a reduction in cash used to fund working capital levels primarily for inventory due to supply chain disruptions and new product launches.
Summary of Cash Flows for the years ended December 31, 2022 and 2021 (in thousands): Years ended December 31, 2022 2021 Dollar increase / (decrease) Net cash provided by (used for): Operating activities $ 6,806 $ (36,248) $ 43,054 Investing activities (28,581) 28,041 (56,622) Financing activities (7,297) 22,876 (30,173) Effect of exchange rate changes on cash and cash equivalents (1,677) (3,041) 1,364 Net change in cash and cash equivalents $ (30,749) $ 11,628 $ (42,377) Cash provided by operating activities increased compared to 2021 primarily due to a reduction in cash used to fund working capital levels primarily for inventory due to supply chain disruptions and new product launches.
The guidance will also allow companies to elect various optional expedients which would allow them to continue to apply hedge accounting for hedging relationships affected by the reference rate reform, if certain criteria are met. The new standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022.
The guidance will also allow companies to elect various optional expedients which would allow them to continue to apply hedge accounting for hedging relationships affected by the reference rate reform, if certain criteria are met. The new standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2023.
The Company has contributed $8.1 million to the Autotech Fund II since December 2018. Management will continue to focus on efficiently managing its weighted-average cost of capital and believes that cash flows from operations and the availability of funds from our Credit Facility provides sufficient liquidity to meet our future growth and operating needs.
The Company has contributed $8.4 million to the Autotech Fund II since December 2018. Management will continue to focus on efficiently managing its weighted-average cost of capital and believes that cash flows from operations and the availability of funds from our Credit Facility provides sufficient liquidity to meet our future growth and operating needs.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to 2021 and our gross margin decreased to 19.4% in 2022 compared to 21.7% in 2021.
Cost of Goods Sold and Gross Marg in. Cost of goods sold increased compared to 2021 and our gross margin decreased to 19.4% in 2022 compared to 21.7% in 2021.
Our Stoneridge Brazil segment gross margin as a percentage of sales was consistent with the prior year as adverse leverage of fixed costs from lower product sales was offset by favorable sales mix from a greater percentage of monitoring service fees. Selling, General and Administrative (“SG&A”).
Our Stoneridge Brazil segment gross margin as a percentage of sales was consistent with the prior year as adverse leverage of fixed costs from lower product sales was offset by favorable sales mix from a greater percentage of monitoring service fees. Selling, General and Administrative .
D&D costs decreased by $0.9 million due to higher customer reimbursements for ongoing development activities in our Electronics segment of $8.3 million that were offset by increased spend for awarded business program launches and development of advanced technologies and systems in our Electronics, Control Devices and Stoneridge Brazil segments. Operating Income (Loss).
D&D costs decreased by $0.9 million due to higher customer reimbursements for ongoing development activities in our Electronics segment of $8.3 million that were offset by increased spend for awarded business program launches and development of advanced technologies and systems in our Electronics, Control Devices and Stoneridge Brazil segments. 25 Table of Contents Operating Income (Loss).
Our critical accounting policies, those most important to the financial presentation and those that are the most complex, subjective or require significant judgment, are as follows. For additional information, see Item 8 of Part II, “Financial Statements and Supplementary Data — Note 2 — Summary of Significant Accounting Policies.” 31 Table of Contents Revenue Recognition and Sales Commitments.
Our critical accounting policies, those most important to the financial presentation and those that are the most complex, subjective or require significant judgment, are as follows. For additional information, see Item 8 of Part II, “Financial Statements and Supplementary Data — Note 2 — Summary of Significant Accounting Policies.” Revenue Recognition and Sales Commitments.
Offsetting these favorable items were the 2021 gain on disposal of the MSIL joint venture, the 2021 gain on disposal of the PM Sensor business and unfavorable net adjustments for Brazilian indirect tax credits. Design and Development (“D&D”).
Offsetting these favorable items were the 2021 gain on disposal of the MSIL joint venture, the 2021 gain on disposal of the PM Sensor business and unfavorable net adjustments for Brazilian indirect tax credits. Design and Development.
In 2022, cost of goods sold increased by $58.4 million, or 6.5% of net sales, due to semiconductor spot buy purchases that was offset by customer recoveries. The impact of these spot buy 22 Table of Contents purchases reduced gross margin percent by 1.4%.
In 2022, cost of goods sold increased by $58.4 million, or 6.5% of net sales, due to semiconductor spot buy purchases that was offset by customer recoveries. The impact of these spot buy purchases reduced gross margin percent by 1.4%.
Our U.S. federal general business credits, if unused, begin to expire in 2026, and the state and foreign tax credits expire at various times.
Our U.S. federal general business credits, if unused, begin to expire in 2027, and the state and foreign tax credits expire at various times.
At December 31, 2022 and 2021 there was $1.5 million and $3.1 million, respectively, in borrowings outstanding recorded within current portion of debt. In addition, the Suzhou subsidiary has a bank acceptance draft line of credit which facilitates the extension of trade payable payment terms by 180 days.
At December 31, 2023 and 2022 there was $2.1 million and $1.5 million, respectively, in borrowings outstanding recorded within current portion of debt. In addition, the Suzhou subsidiary has a bank acceptance draft line of credit which facilitates the extension of trade payable payment terms by 180 days.
(B) In December 2018, the Company entered into an agreement to make a $10.0 million investment in a fund (“Autotech Fund II”) managed by Autotech Ventures (“Autotech”), a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten year life of the fund.
(B) In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech, a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten year life of the fund.
We record certain foreign currency transaction losses (gains) as a component of other income, net on the consolidated statement of operations.
We record certain foreign currency transaction losses (gains) as a component of other expense, net on the consolidated statement of operations.
Year Ended December 31, 2022 Compared To Year Ended December 31, 2021 Consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands): Year ended December 31, 2022 2021 Dollar increase / (decrease) Net sales $ 899,923 100.0 % $ 770,462 100.0 % $ 129,461 Costs and expenses: Cost of goods sold 724,997 80.6 603,604 78.3 121,393 Selling, general and administrative 106,695 11.9 116,000 15.1 (9,305) Gain on sale of Canton Facility, net — — (30,718) (4.0) 30,718 Design and development 65,296 7.3 66,165 8.6 (869) Operating income 2,935 0.3 15,411 2.0 (12,476) Interest expense, net 7,097 0.8 5,189 0.7 1,908 Equity in loss (earnings) of investee 823 0.1 (3,658) (0.5) 4,481 Other expense, net 5,711 0.6 1,444 0.3 4,267 (Loss) income before income taxes (10,696) (1.2) 12,436 1.5 (23,132) Provision for income taxes 3,360 0.4 9,030 1.2 (5,670) Net (loss) income $ (14,056) (1.6) % $ 3,406 0.3 % $ (17,462) 21 Table of Contents Net Sales.
As additional jurisdictions implement this legislation, our effective tax rate and cash tax payments could increase in future years. 23 Table of Contents Year Ended December 31, 2022 Compared To Year Ended December 31, 2021 Consolidated statements of operations as a percentage of net sales are presented in the following table (in thousands): Year ended December 31, 2022 2021 Dollar increase / (decrease) Net sales $ 899,923 100.0 % $ 770,462 100.0 % $ 129,461 Costs and expenses: Cost of goods sold 724,997 80.6 603,604 78.3 121,393 Selling, general and administrative 106,695 11.9 116,000 15.1 (9,305) Gain on sale of Canton Facility, net — — (30,718) (4.0) 30,718 Design and development 65,296 7.3 66,165 8.6 (869) Operating income 2,935 0.3 15,411 2.0 (12,476) Interest expense, net 7,097 0.8 5,189 0.7 1,908 Equity in loss (earnings) of investee 823 0.1 (3,658) (0.5) 4,481 Other expense, net 5,711 0.6 1,444 0.2 4,267 (Loss) income before income taxes (10,696) (1.2) 12,436 1.6 (23,132) Provision for income taxes 3,360 0.4 9,030 1.2 (5,670) Net (loss) income $ (14,056) (1.6) % $ 3,406 0.4 % $ (17,462) Net Sales.
Although we believe that our warranty liability is adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable could differ materially from what will actually transpire in the future. Contingencies.
Although we believe that our warranty liability is adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable could differ materially from what will actually transpire in the future. 29 Table of Contents Contingencies.
The Company’s wholly-owned subsidiary located in Suzhou, China, has lines of credit which allow up to a maximum borrowing level of 20.0 million Chinese yuan, or $2.9 million at December 31, 2022 and 50.0 million Chinese yuan, or $7.9 million at December 31, 2021.
The Company’s wholly-owned subsidiary located in Suzhou, China, has lines of credit which allow up to a maximum borrowing level of 20.0 million Chinese yuan, or $2.8 million and $2.9 million, at December 31, 2023 and 2022, respectively.
The Company’s wholly-owned subsidiary located in Stockholm, Sweden, has an overdraft credit line which allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20.0 million Swedish krona, or $1.9 million and $2.2 million, at December 31, 2022 and 2021, respectively. At December 31, 2022, there were no borrowings outstanding on this overdraft credit line.
The Company’s wholly-owned subsidiary located in Stockholm, Sweden, has an overdraft credit line which allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20.0 million Swedish krona, or $2.0 million and $1.9 million, at December 31, 2023 and 2022, respectively.
Our future results could also be unfavorably affected by increased commodity prices as commodity fluctuations impact the cost of our raw material purchases. At December 31, 2022, we had a cash and cash equivalents balance of approximately $54.8 million, of which 91.4% was held in foreign locations.
Our future results could also be unfavorably affected by increased commodity prices as commodity fluctuations impact the cost of our raw material purchases. At December 31, 2023, we had a cash and cash equivalents balance of approximately $40.8 million, of which 94.1 % was held in foreign locations.
Net sales by geographic location are summarized in the following table (in thousands): Year ended December 31, 2022 2021 Dollar increase / (decrease) Percent increase / (decrease) North America $ 444,928 49.4 % $ 386,944 50.2 % $ 57,984 15.0 % South America 52,230 5.8 56,777 7.4 (4,547) (8.0) % Europe and Other 402,765 44.8 326,741 42.4 76,024 23.3 % Total net sales $ 899,923 100.0 % $ 770,462 100.0 % $ 129,461 16.8 % The increase in North American net sales was mostly attributable to increases in sales volume in our Electronics segment commercial vehicle and off-highway markets of $33.8 million and $6.0 million, respectively and in our Control Devices segment automotive market of $2.9 million offset by sales volume decreases in our Control Devices segment commercial vehicle market of $3.4 million.
Our Stoneridge Brazil segment net sales decreased $4.5 million due to lower sales in most Stoneridge Brazil product lines of $7.8 million offset by favorable foreign currency translation of $2.6 million and higher sales of tracking devices and monitoring services fees of $0.7 million. 24 Table of Contents Net sales by geographic location are summarized in the following table (in thousands): Year ended December 31, 2022 2021 Dollar increase / (decrease) Percent increase / (decrease) North America $ 444,928 49.4 % $ 386,944 50.2 % $ 57,984 15.0 % South America 52,230 5.8 56,777 7.4 (4,547) (8.0) % Europe and Other 402,765 44.8 326,741 42.4 76,024 23.3 % Total net sales $ 899,923 100.0 % $ 770,462 100.0 % $ 129,461 16.8 % The increase in North American net sales was mostly attributable to increases in sales volume in our Electronics segment commercial vehicle and off-highway markets of $33.8 million and $6.0 million, respectively and in our Control Devices segment automotive market of $2.9 million offset by sales volume decreases in our Control Devices segment commercial vehicle market of $3.4 million.
As a result of the amendments, the Company was in compliance with all covenants at December 31, 2022. The Company has not experienced a violation that would limit the Company’s ability to borrow under the Credit Facility, as amended and does not expect that the covenants under it will restrict the Company’s financing flexibility.
The Company was in compliance with all covenants at December 31, 2023. The Company has not experienced a violation that would limit the Company’s ability to borrow under the Credit Facility and does not expect that the covenants under it will restrict the Company’s financing flexibility.
The Credit Facility also contains affirmative and negative covenants and events of default that are customary for credit arrangements of this type 28 Table of Contents including covenants that place restrictions and/or limitations on the Company’s ability to borrow money, make capital expenditures and pay dividends. The Credit Facility had an outstanding balance of $167.8 million at December 31, 2022.
The Credit Facility also contains affirmative and negative covenants and events of default that are customary for credit arrangements of this type including covenants that place restrictions and/or limitations on the Company’s ability to borrow money, make capital expenditures and pay dividends. The Credit Facility had an outstanding balance of $189.3 million at December 31, 2023.
Offsetting 23 Table of Contents these gains were increased contribution from higher sales levels and 2022 non-recurring commercial and legal settlements.
Offsetting these gains were increased contribution from higher sales levels and 2022 non-recurring commercial and legal settlements.
Net cash provided by investing activities increased compared to 2020 due to proceeds from the sale of the Canton Facility, from the disposal of the MSIL joint venture and from the disposal of the PM sensor business as well as lower capital expenditures and capitalized software costs which were offset by higher investments in the Autotech Fund II.
Net cash used for investing activities increased compared to the prior year due to 2021 proceeds from the sale of the Canton Facility, from the disposal of the MSIL joint venture and from the disposal of the PM sensor business as well as higher capital expenditures and capitalized software costs which were offset by 2022 proceeds from the settlement of the net investment hedges and lower investments in the Autotech Fund II.
Dollar strengthened against the euro, Swedish krona 19 Table of Contents and Argentine peso in 2022 and the euro, Swedish krona, Brazilian real, Argentine peso and Mexican peso in 2021, unfavorably impacting our reported results. On November 2, 2021, the Company entered into a Share Purchase Agreement (the “SPA”) with Minda Corporation Limited (“Minda”), as the buyer, and MSIL.
Dollar strengthened against the Chinese yuan and Argentine peso in 2023 and the euro, Swedish krona, Chinese yuan and Argentine peso in 2022, unfavorably impacting our reported results. On November 2, 2021, the Company entered into a Share Purchase Agreement (the “SPA”) with Minda Corporation Limited (“Minda”), as the buyer, and MSIL.
Recently Issued Accounting Standards Not Yet Adopted as of December 31, 2021 In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance in ASU 2020-04 provides temporary optional expedient and exceptions to the guidance in U.S.
Recently Adopted Accounting Standards In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance in ASU 2020-04 provides temporary optional expedient and exceptions to the guidance in U.S.
The bank acceptance draft line of credit allows up to a maximum borrowing level of 60.0 million Chinese yuan, or $8.7 million, at December 31, 2022 and 15.0 million Chinese yuan, or $2.4 million at December 31, 2021.
The bank acceptance draft line of credit allows up to a maximum borrowing level of 60.0 million Chinese yuan, or $8.5 million, at December 31, 2023 and $8.7 million at December 31, 2022. There was $2.4 million and $2.0 million utilized on the Suzhou bank acceptance draft line of credit at December 31, 2023 and 2022, respectively.
As of December 31 2022, the Company’s cumulative investment in the Autotech Fund II was $8.1 million. The Company contributed $1.0 million and $3.2 million, net to the Autotech Fund II during the years ended December 31, 2022 and 2021, respectively. Our future results could also be adversely affected by unfavorable changes in foreign currency exchange rates.
The Company contributed $0.4 million and $1.0 million, net to the Autotech Fund II during the years ended December 31, 2023 and 2022, respectively. 28 Table of Contents Our future results could also be adversely affected by unfavorable changes in foreign currency exchange rates.
At December 31, 2022 and 2021, we had cash and cash equivalents of $54.8 million and $85.5 million, respectively. At December 31, 2022 and 2021 , we had $167.8 million and $164.0 million , respectively, in borrowings outstanding on the 2019 Credit Facility.
At December 31, 2023 and 2022, we had cash and cash equivalents of $40.8 million and $54.8 million, respectively. At December 31, 2023 and 2022 , we had $189.3 million and $167.8 million , respectively, in borrowings outstanding on the Credit Facility.
Net cash used for financing activities increased compared to the prior year primarily due to lower Credit Facility net borrowings and the 2022 cash payment of Stoneridge Brazil earn-out consideration.
Net cash provided by financing activities increased compared to the prior year primarily due to higher Credit Facility net borrowings, offset by the 2022 cash payment of Stoneridge Brazil earn-out consideration and 2023 debt issuance costs.
We monitor these factors and adjust our effective tax rate accordingly. Other Matters A significant portion of our sales are outside of the United States. These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars.
These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars.
In 2021, income tax expense of $9.0 million was attributable to the gain on the sale of the Canton facility, the gain on the sale of the Company’s minority interest in MSIL, the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions.
The effective tax rate of (31.4)% varies from the statutory tax rate primarily due to tax credits and incentives offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions as well as U.S. tax on foreign earnings. 26 Table of Contents In 2021, income tax expense of $9.0 million was attributable to the gain on the sale of the Canton facility, the gain on the sale of the Company’s minority interest in MSIL, the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions.
The 2022 decrease in cash and cash equivalents was due to capital expenditures for new product launches and to support higher working capital levels, mostly inventory as a result of supply chain disruptions, new product launches and expectations for increased production and new product launches.
The 2023 decrease in cash and cash equivalents was due to capital expenditures for new product launches and relatively higher working capital levels to support higher sales and production levels as well as the residual impact of supply chain issues on inventory.
In December 2018, the Company entered into an agreement to make a $10.0 million investment in a fund (“Autotech Fund II”) managed by Autotech Ventures (“Autotech”), a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund.
In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. As of December 31 2023, the Company’s cumulative investment in the Autotech Fund II was $8.4 million.
Based on IHS Market production forecast, the North American automotive market is expected to increase to 15.1 million units in 2023 from 14.3 million units in 2022 as this market continues to recover from supply chain disruptions and economic 18 Table of Contents headwinds.
Based on IHS Market production forecasts, the North American automotive market is expected to increase from 15.6 million units in 2023 to 15.8 million units in 2024 as this market continues to recover from the effects of prior supply chain disruptions, the impact of the UAW strike in the fourth quarter of 2024 and economic headwinds.
Our receivable terms and collections rates have remained consistent between periods presented. 27 Table of Contents Net cash used for investing activities increased compared to the prior year due to 2021 proceeds from the sale of the Canton Facility, from the disposal of the MSIL joint venture and from the disposal of the PM sensor business as well as higher capital expenditures and capitalized software costs which were offset by 2022 proceeds from the settlement of the net investment hedges and lower investments in the Autotech Fund II.
Our receivable terms and collections rates have remained consistent between periods presented. Net cash used for investing activities increased compared to the prior year due to higher capital expenditures and capitalized software development costs and cash proceeds from the 2022 settlement of the net investment hedges offset by increased proceeds from the sale of fixed assets.
Equity earnings for Autotech were $1.9 million and $0.1 million for the years ended December 31, 2021 and 2020 . The increase in Autotech earnings was due to favorable 2021 fair value adjustments to fund investments. Other Expense (Income), net .
Equity losses for Autotech Fund II were $0.5 million and $0.8 million for the years ended December 31, 2023 and 2022 . The decrease in Autotech Fund II earnings was due to unfavorable 2023 and 2022 fair value adjustments to fund investments and fund expenses. Other Expense, net .
This segment includes results of operations that design and manufacture vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices, driver information systems and telematics solutions. Overview The global macroeconomic environment in 2022 continued to provide a challenging backdrop for the global transportation industry and our served markets.
This segment includes results of operations that design and manufacture vehicle tracking devices and monitoring services, vehicle security alarms and convenience accessories, in-vehicle audio and infotainment devices, driver information systems and telematics solutions.
In October 2022, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.8% in 2022 and 1.0% in 2023. We expect our served market channels to remain stable based on current market conditions. Stoneridge Brazil will focus on continuing to grow our OEM capabilities in-region to better support our global customers.
We expect our served market channels to remain relatively stable in 2024 based on current market conditions. Stoneridge Brazil will focus on continuing to grow our OEM capabilities in-region to better support our global customers.
At December 31, 2021, there was 19.0 million Swedish krona, or $2.1 million outstanding on this overdraft credit line. During the year ended December 31, 2022, the subsidiary borrowed 380.7 million Swedish krona, or $36.6 million, and repaid 399.6 million Swedish krona, or $38.4 million.
At December 31, 2023 and 2022, there were no borrowings outstanding on this overdraft credit line. During the year ended December 31, 2023, the subsidiary borrowed and repaid 358.5 million Swedish krona, or $35.6 million.
Outlook The Company believes that focusing on products that address industry megatrends will have a positive effect on both our top-line growth and underlying margins. For example, the Company is aligned with platforms likely to perform well against overall market dynamics including our content on electrified vehicle platforms.
Outlook The Company believes that focusing on products that address industry megatrends has had and will continue to have a positive effect on both our top-line growth and underlying margins.
Our Stoneridge Brazil segment net sales decreased $4.5 million due to lower sales in most Stoneridge Brazil product lines of $7.8 million offset by favorable foreign currency translation of $2.6 million and higher sales of tracking devices and monitoring services fees of $0.7 million.
Our Stoneridge Brazil segment net sales increased $5.0 million due to higher sales in our OEM product line and favorable foreign currency translation offset by lower sales demand for our other product lines .
Segment gross margin as a percent of sales decreased primarily due to increased material costs associated with supply chain disruptions including spot purchases of electronic components, adverse foreign exchange fluctuations and inflation offset by increased contribution from higher sales levels and negotiated price increases.
Segment gross margin as a percent of sales increased primarily due to higher contribution from higher sales levels, negotiated price increases, lower material costs including the favorable effect of foreign currency and lower required electronic component spot buy purchases offset by an increase in labor and overhead costs.
Commitments and Contingencies See Note 11 to the consolidated financial statements for disclosures of the Company’s commitments and contingencies. Seasonality 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.
Seasonality 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 generally higher in the second half of the year.
Summary of Future Cash Flows The following table summarizes our future cash outflows resulting from financial contracts and commitments, as of December 31, 2022 (in thousands): Total Less than 1 year 2-3 years 4-5 years After 5 years Credit Facility $ 167,802 $ — $ 167,802 $ — $ — Debt 1,450 1,450 — — — Interest payments (A) 15,852 10,577 5,275 — — Operating leases 16,547 4,357 7,152 3,059 1,979 Total contractual obligations (B) $ 201,651 $ 16,384 $ 180,229 $ 3,059 $ 1,979 (A) Includes estimated payments under the Company’s Credit Facility and other debt obligations using the most current interest rate and principal balance information available at December 31, 2022, extended through the end of the term.
Net cash used for financing activities increased compared to the prior year primarily due to lower Credit Facility net borrowings and the 2022 cash payment of Stoneridge Brazil earn-out consideration. 27 Table of Contents Summary of Future Cash Flows The following table summarizes our future cash outflows resulting from financial contracts and commitments, as of December 31, 2023 (in thousands): Total Less than 1 year 2-3 years 4-5 years After 5 years Credit Facility $ 189,346 $ — $ 189,346 $ — $ — Debt 2,113 2,113 — — — Interest payments (A) 45,116 15,498 29,618 — — Operating leases 12,959 4,220 5,622 2,125 992 Total contractual obligations (B) $ 249,534 $ 21,831 $ 224,586 $ 2,125 $ 992 (A) Includes estimated payments under the Company’s Credit Facility and other debt obligations using the most current interest rate and principal balance information available at December 31, 2023, extended through the end of the term.
Furthermore, given the current economic climate and recent fluctuations in certain commodity prices, we believe that an increase in such items could significantly affect our profitability. See Note 10 to the consolidated financial statements for additional details on the Company’s commodity price and foreign currency exchange rate risks.
Inflation and International Presence By operating internationally, we are affected by foreign currency exchange rates and the economic conditions of certain countries. Furthermore, given the current economic climate and recent fluctuations in certain commodity prices, we believe that an increase in such items could significantly affect our profitability.
Business realignment costs of $0.3 million and $1.4 million were incurred during the years ended December 31, 2022 and 2021, respectively. Because of the competitive nature of the markets we serve, we face pricing pressures from our customers in the ordinary course of business.
Because of the competitive nature of the markets we serve, we face pricing pressures from our customers in the ordinary course of business.
Other expense (income), net of $1.4 million, increased by $2.9 million in 2021 compared to other income, net of $1.5 million for 2020 primarily due to 2021 foreign currency losses in our Electronics segment and 2020 foreign currency transaction gains in our Stoneridge Brazil and Electronics segments. Provision (Benefit) for Income Taxes.
Other expense, net of $1.2 million, decreased by $4.5 million in 2023 compared to other expense, net of $5.7 million for 2022 primarily due to the impact of favorable foreign currency movements in our Electronics and Control Devices segments from moderated strengthening of the U.S. dollar. Provision for Income Taxes.
The effective tax rate of (31.4)% varies from the statutory tax rate primarily due to tax credits and incentives offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions as well as U.S. tax on foreign earnings.
In 2023 and 2022, the provision for income taxes was impacted by jurisdictional earnings mix, U.S. taxes on foreign earnings, various tax credits and incentives and tax losses for which no benefit is recognized due to valuation allowances.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with U.S.
See Note 10 to the consolidated financial statements for additional details on the Company’s commodity price and foreign currency exchange rate risks. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with U.S.
However, it is possible that future borrowing flexibility under the Credit Facility may be limited as a result of lower than expected financial performance due to the adverse impact of supply chain disruptions and COVID-19 on the Company’s markets and general global demand.
However, it is possible that future borrowing flexibility under the Credit Facility may be limited as a result of lower than expected financial performance. The Company expects to make additional repayments on the Credit Facility when cash exceeds the amount needed for operations and to remain in compliance with all covenants.
The increase in net sales in Europe and Other was primarily due to increases in our European commercial vehicle and off-highway markets of $28.4 million and $14.4 million, respectively, and increases in our China automotive and agricultural vehicle markets of $3.8 million and $2.2 million, respectively.
The increase in net sales in Europe and Other was due to increases in our European and China commercial vehicle markets of $55.2 million and $4.5 million, respectively, China automotive of $2.2 million and negotiated price increases o f $2.2 million. These increases were offset by lower required customer recoveries of electronic component spot buys of $39.7 million.
Our Electronics segment net sales increased by 41.1% primarily due to higher sales volumes in our European commercial, North American commercial, European off-highway and North American off-highway vehicle markets as well as favorable customer pricing for recoveries of semiconductor spot buy purchases and negotiated price increases offset by unfavorable foreign exchange fluctuations .
Our Electronics segment net sales increased by 14.1% primarily due to higher sales volumes in our European and North American commercial vehicle markets, including the launches of a next generation tachograph product for OEM and aftermarket applications in Europe and our first OEM MirrorEye program in North America, and the impact of negotiated price increases offset by lower required electronic component spot buy purchases.
This will drive steady future growth and provide a platform to continue to rotate our local portfolio to more closely align with our global business. Our financial performance in our Stoneridge Brazil segment is also subject to uncertainty from movements in the Brazilian Real and Argentina Peso foreign currencies.
This focus will provide opportunities for future growth and provide a platform to continue to rotate our local portfolio to more closely align with our global business.
Segment operating income increased primarily due to higher sales and margin, lower SG&A spending and lower D&D cost from higher customer reimbursements. Our Stoneridge Brazil segment net sales decreased by 8.0% due to lower sales in most Stoneridge Brazil product lines offset by favorable foreign currency translation and slightly higher sales of tracking devices and monitoring services.
Our Stoneridge Brazil segment net sales increased by 9.5% due to favorable foreign currency translation and higher sales of our OEM products offset by lower sales demand for our other product lines. Segment gross margin increased due to increased contribution margin from higher sales and favorable foreign currency fluctuations.
Design and Development. D&D costs increased by $16.8 million mostly due to increased spend in our Electronics segment of $14.4 million comprised of higher consulting and prototype costs as well as lower customer reimbursements offset by higher capitalized software development costs for ongoing development activities for awarded business programs and development of advanced technologies and systems. Operating Income (Loss).
D&D costs increased by $5.8 million due to lower customer reimbursements and higher costs related to product launch preparations offset by increases in capitalized software development costs for our Electronics segment. All other segments also incurred slightly higher spending attributable to product launch activities. Operating Income.
This variable rate facility provides the flexibility to refinance other outstanding debt or finance acquisitions through June 2024. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio.
As outlined in Note 5 to our consolidated financial statements, the Credit Facility permits borrowing up to a maximum level of $275.0 million through November 2, 2026. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio.
Our Electronics segment operating loss increased primarily due to higher costs from supply chain disruptions including spot purchases of electronic components net of recoveries and higher D&D costs offset by higher sales.
Our Electronics segment gross margin increased due to the contribution from higher sales levels, including negotiated price increases, and the reduction of the adverse effect of required electronic component spot buy purchases, net of customer recoveries, offset by higher labor and overhead costs including wages and warranty expense.
We continue to engage in initiatives to reduce working capital including reducing on-hand inventory by refining our procurement process and managing the on-time collection of our accounts receivable balances. Our future effective tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles and our jurisdictional mix of earnings.
Our future effective tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles and our jurisdictional mix of earnings. We monitor these factors and the impact on our effective tax rate. Other Matters A significant portion of our sales are outside of the United States.
Net sales for our reportable segments, excluding inter-segment sales are summarized in the following table (in thousands): Year ended December 31, 2021 2020 Dollar increase / (decrease) Percent increase /(decrease) Control Devices $ 355,775 46.1 % $ 342,576 52.9 % $ 13,199 3.9 % Electronics 357,910 46.5 257,767 39.7 100,143 38.9 % Stoneridge Brazil 56,777 7.4 47,663 7.4 9,114 19.1 % Total net sales $ 770,462 100.0 % $ 648,006 100.0 % $ 122,456 18.9 % Our Control Devices segment net sales increased $13.2 million due to recovery from 2020 COVID-19 impacts in our North American automotive and agricultural vehicle markets of $23.4 million and $2.7 million, respectively, and an increase in our China automotive and commercial vehicle markets of $3.8 million and $0.4 million, respectively, as well as a favorable foreign currency translation of $3.2 million.
Net sales for our reportable segments, excluding inter-segment sales are summarized in the following table (in thousands): Year ended December 31, 2023 2022 Dollar increase / (decrease) Percent increase / (decrease) Control Devices $ 342,065 35.1 % $ 342,596 38.1 % $ (531) (0.2) % Electronics 576,539 59.0 505,097 56.1 71,442 14.1 % Stoneridge Brazil 57,214 5.9 52,230 5.8 4,984 9.5 % Total net sales $ 975,818 100.0 % $ 899,923 100.0 % $ 75,895 8.4 % Our Control Devices segment net sales decreased $0.5 million due to a decrease in our North American automotive market of $6.3 million, including the adverse impact of the UAW strike in the fourth quarter of 2023 and a slower than expected penetration rate for electric vehicle platforms, as well as a decrease in our agricultural market of $1.1 million.
Spot buy material purchasing activity, which is recognized as revenue and material costs, was mostly passed through to the customer and was driven by electronic component shortages. The Company expects spot buy activity to continue in 2023 but cannot predict the duration or magnitude of continued spot buy activity due to volatile supply chains and component availability.
Recovery from customers related to spot buys of materials purchased by the Company on behalf of those customers increased net sales by $14.6 million and $58.4 million for 2023 and 2022, respectively. Spot buy material purchasing activity, which is recognized as revenue and material costs, was mostly passed through to customers and was driven by electronic component shortages.
The magnitude of the adverse impact on our financial condition, results of operations and cash flows will depend on the evolution of the semiconductor supply shortage, vehicle production schedules and supply chain impacts. Segments We are organized by products produced and markets served. Under this structure, our operations have been reported using the following segments: Control Devices.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes related thereto and other financial information included elsewhere herein. Segments We are organized by products produced and markets served. Under this structure, our operations have been reported using the following segments: Control Devices.
Our operating results in Europe and Other decreased primarily due to higher costs from supply chain disruptions including spot purchases of electronic components net of recoveries and higher D&D costs offset by higher sales in our commercial vehicle and off-highway markets as well as a favorable foreign currency translation impact. Interest Expense, net.
Operating income in South America increased due to higher sales levels offset by higher SG&A and D&D spending. Our operating results in Europe and Other increased primarily due to contribution from higher sales levels offset by higher D&D expense. Interest Expense, net.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to 2020 and our gross margin decreased to 21.7% in 2021 compared to 23.8% in 2020.
In addition, we experienced unfavorable foreign currency translation of $5.7 million. Cost of Goods Sold and Gross Margin. Cost of goods sold increased compared to 2022 and our gross margin increased to 20.6% in 2023 compared to 19.4% in 2022.
Our Control Devices segment gross margin decreased due to costs associated with supply chain disruptions offset by lower restructuring and realignment costs of $1.7 million and favorable leverage of fixed costs from higher sales levels.
The increase in overhead as a percentage of sales was attributable to higher indirect wage inflation and warranty costs which offset favorable fixed cost leverage from higher sales levels. Our Control Devices segment gross margin decreased primarily due to higher direct material costs associated with inflation and financial support for a troubled supplier as well as unfavorable sales mix.
In 2021, cost of goods sold increased by $17.6 million, or 2.3% of net sales, due to semiconductor spot buy purchases which was offset by customer recoveries.
The impact of these spot buy purchases increased cost of goods sold by $14.6 million, or 1.5% of net sales, and $58.4 million, or 6.5% of sales, during 2023 and 2022, respectively, which reduced gross margin percent by 0.3 % and 1.4% in 2023 and 2022, respectively.
Summary of Cash Flows for the years ended December 31, 2021 and 2020 (in thousands): Years ended December 31, 2021 2020 Dollar increase / (decrease) Net cash provided by (used for): Operating activities $ (36,248) $ 28,641 $ (64,889) Investing activities 28,041 (33,885) 61,926 Financing activities 22,876 6,513 16,363 Effect of exchange rate changes on cash and cash equivalents (3,041) 3,247 (6,288) Net change in cash and cash equivalents $ 11,628 $ 4,516 $ 7,112 Cash used for operating activities increased compared to 2020 primarily due to an increase in cash used to fund working capital levels primarily for inventory, which was impacted by supply chain disruptions and production volatilities, offset by higher net income, net of the reconciling adjustment for the gain on the sale of the Canton Facility.
Liquidity and Capital Resources Summary of Cash Flows for the years ended December 31, 2023 and 2022 (in thousands): Year ended December 31, 2023 2022 Dollar increase / (decrease) Net cash provided by (used for): Operating activities $ 4,946 $ 6,806 $ (1,860) Investing activities (36,979) (28,581) (8,398) Financing activities 17,485 (7,297) 24,782 Effect of exchange rate changes on cash and cash equivalents 591 (1,677) 2,268 Net change in cash and cash equivalents $ (13,957) $ (30,749) $ 16,792 Cash provided by operating activities decreased compared to 2022 primarily due to an increase in cash used to fund working capital levels from a combination of higher inventory levels for new product launches and the residual impact of supply chain issues on inventory , lower accounts payable and the 2022 increase in assets for spot buys not yet invoiced.
The increase in net sales in South America was 25 Table of Contents due to higher volumes for all of our Stoneridge Brazil product lines and for our Argentina market channel offset by unfavorable Brazilian real foreign currency translation of $3.0 million.
These increases were offset by lower sales volume in our North American automotive, off-highway and agricultural markets. The increase in net sales in South America was primarily due to higher sales in our OEM product line and favorable foreign currency translation offset by lower sales demand for our other product lines .
Operating income (loss) is summarized in the following table by reportable segment (in thousands): Year ended December 31, 2021 2020 Dollar increase / (decrease) Percent increase / (decrease) Control Devices $ 54,933 $ 22,072 $ 32,861 148.9 % Electronics (12,502) (3,672) (8,830) (240.5) % Stoneridge Brazil 995 3,766 (2,771) (73.6) % Unallocated corporate (28,015) (29,830) 1,815 6.1 % Operating income (loss) $ 15,411 $ (7,664) $ 23,075 301.1 % Our Control Devices segment operating income increased due to the gain on sale of the Canton Facility of $30.7 million, the gain on disposal of the PM sensor business of $1.1 million and a decrease in restructuring expense of $4.0 million offset by higher costs from supply chain disruptions and higher Sarasota environmental remediation costs.
Operating income (loss) is summarized in the following table by reportable segment (in thousands): Year ended December 31, 2023 2022 Dollar increase / (decrease) Percent increase / (decrease) Control Devices $ 13,582 $ 23,917 $ (10,335) (43.2) % Electronics 27,309 5,128 22,181 432.5 % Stoneridge Brazil 4,454 3,150 1,304 41.4 % Unallocated corporate (32,509) (29,260) (3,249) (11.1) % Operating income $ 12,836 $ 2,935 $ 9,901 337.3 % Our Control Devices segment operating income decreased due to lower gross margin primarily resulting from higher material costs associated with inflation and troubled supplier support costs , unfavorable sales mix and a 2022 favorable legal settlement offset by a 2023 gain on disposal of fixed assets.
The Company had net loss of $14.1 million, or $(0.52) per diluted share, for the year ended December 31, 2022. 17 Table of Contents Net income in 2022 decreased by $17.5 million, or $(0.64) per diluted share, from $3.4 million, or $0.12 per diluted share, for the year ended December 31, 2021 primarily due to the 2021 pre-tax gain on sale of the Canton Facility of $30.7 million, or $0.93 per diluted share, offset by lower restructuring and business realignment costs of $3.8 million as well as the impact of higher net sales and gross margin in our Electronics segment.
Net loss in 2023 decreased by $8.9 million, or $0.33 per diluted share, from $14.1 million, or $(0.52) per diluted share, for the year ended December 31, 2022 primarily due to additional contribution from higher sales levels, including the benefit of negotiated price increases and favorable foreign exchange fluctuations offset by higher Selling, General and Administrative (“SG&A”) and Design and Development (“D&D”) spending, including higher business realignment costs, and interest expense.
Net sales by geographic location are summarized in the following table (in thousands): Year ended December 31, 2021 2020 Dollar increase Percent increase North America $ 386,944 50.2 % $ 330,528 51.0 % $ 56,416 17.1 % South America 56,777 7.4 47,663 7.4 9,114 19.1 % Europe and Other 326,741 42.4 269,815 41.6 56,926 21.1 % Total net sales $ 770,462 100.0 % $ 648,006 100.0 % $ 122,456 18.9 % The increase in North American net sales was attributable to sales volume increases in our North American commercial vehicle, automotive and off-highway markets of $24.5 million, $22.5 million and $6.2 million, respectively and customer pricing for recoveries of semiconductor spot buy purchases of $2.4 million.
Net sales by geographic location are summarized in the following table (in thousands): Year ended December 31, 2023 2022 Dollar increase / (decrease) Percent increase / (decrease) North America $ 495,541 50.8 % $ 444,928 49.4 % $ 50,613 11.4 % South America 57,214 5.9 52,230 5.8 4,984 9.5 % Europe and Other 423,063 43.3 402,765 44.8 20,298 5.0 % Total net sales $ 975,818 100.0 % $ 899,923 100.0 % $ 75,895 8.4 % 21 Table of Contents The increase in North American net sales was attributable to increased sales volume in our commercial vehicle market of $51.5 million and by negotiated price increases of $10.7 million.
For 2023, we expect an increase in our Electronics’ segment sales compared to 2022 primarily due to strong demand for our products in our off-highway and commercial vehicle end markets and the ramp-up of new product launches even though production volumes in our European and North American commercial markets are expected decrease approximately 2.0% to 3.5%.
We expect our Electronics’ segment sales to outperform forecasted changes in production volumes due to strong demand for our existing products and the ramp-up of recently launched programs, including our next generation tachograph product in Europe for both OEM and aftermarket applications and our first North American OEM MirrorEye program, as well as expected program launches, including our next OEM MirrorEye program launch in Europe in 2024.
Removed
The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes related thereto and other financial information included elsewhere herein. Global Market Conditions The coronavirus pandemic (“COVID-19”) and the ongoing supply chain disruptions, including the semiconductor shortages, have had a negative impact on the global economy since 2020.
Added
Overview During 2023, we benefited from increased volumes in both our North American and European commercial vehicle markets, compared to the prior year, due to improvements in end market demand and launches of previously awarded programs including launches for our MirrorEye camera monitor system and our SE5000 Smart 2 tachograph.
Removed
These conditions have disrupted, and likely will continue to disrupt, the global vehicle industry and customer sales, production volumes and purchases of automotive, commercial, off-highway and agricultural vehicles by end-consumers.
Added
We continued to benefit from both previously agreed pricing actions, as well as incremental actions taken within the year, with the majority of our customers, which offset a portion of the incremental material, supply chain and other input costs we incurred.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rates We are exposed to interest rate risk primarily from the effects of changes in interest rates. At December 31, 2022, approximately 99.1% of our outstanding debt was floating-rate and 0.9% was fixed-rate.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rates We are exposed to interest rate risk primarily from the effects of changes in interest rates. At December 31, 2023, approximately 98.9% of our outstanding debt was floating-rate and 1.1% was fixed-rate.
In the future, if we believe that the terms of a fixed price agreement become beneficial to us, we will enter into another such instrument. We may also consider pursuing alternative commodities or alternative suppliers to mitigate this risk over a period of time. 33 Table of Contents
In the future, if we believe that the terms of a fixed price agreement become beneficial to us, we will enter into another such instrument. We may also consider pursuing alternative commodities or alternative suppliers to mitigate this risk over a period of time. 31 Table of Contents
We estimate that a 10.0% unidirectional change in currency exchange rates relative to the U.S dollar would have changed our income before income taxes for the year ended December 31, 2022 by approximately $0.4 million. Commodity Price Risk The competitive marketplace in which we operate may limit our ability to recover increased costs through higher prices.
We estimate that a 10.0% unidirectional change in currency exchange rates relative to the U.S dollar would have changed our income before income taxes for the year ended December 31, 2023 by approximately $3.0 million. Commodity Price Risk The competitive marketplace in which we operate may limit our ability to recover increased costs through higher prices.
We estimate that a 1.0% change in the interest costs of our floating-rate debt outstanding as of December 31, 2022 would change interest expense on an annual basis by approximately $1.7 million. Currency Exchange Rates In addition to the United States, we have significant operations in Europe, South America, Mexico and China.
We estimate that a 1.0% change in the interest costs of our floating-rate debt outstanding as of December 31, 2023 would change interest expense on an annual basis by approximately $1.9 million. Currency Exchange Rates In addition to the United States, we have significant operations in Europe, South America, Mexico and China.

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