Stoneridge Incorporated (SRI)
Q2 2010 Earnings Call
July 28, 2010 11:00 am ET
Mr. Ken Kure, Corporate Treasurer and Director for Finance
John Corey, President and Chief Executive Officer
George Strickler, Chief Financial Officer.
Matthew Mishan – KeyBanc
Keith Schicker – Robert W. Baird
Steve DeNichilo – ACK Asset
Good day ladies and Gentlemen and welcome to the first quarter 2010 Stoneridge Earnings Conference Call. My name is Twanda and I will be your coordinator for today.
At this time all participants are in listen-only mode. We will facilitate a question-and-answer session towards the end of today’s conference. (Operator Instructions)
As a reminder this conference is being recorded for replay purposes.
I would now like to turn the presentation over to Mr. Ken Kure, Corporate Treasurer and Director for Finance; you may precede sir.
Good afternoon everyone and thank you for joining us on today’s call. By now you should’ve received our first quarter earnings release. The release is in the file at the SEC and it is posted on our website at www.stoneridge.com.
Joining me on today’s call are John Corey, our President and Chief Executive Officer and George Strickler, our Chief Financial Officer.
Before we begin I need to inform you that certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature and include information concerning our future results or plans. Although we believe such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties and actual results may differ materially.
Additional information about such factors and uncertainties that could cause actual results to differ may be found in our 10K file with the Securities and Exchange Commission under the heading forward-looking statements.
During today’s call I’ll also be referring to certain non-GAAP financial measures. Please see the Investor Relations section of our website for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures.
John will begin the call with an update of our growth strategy and business development and his thoughts on market conditions.
George will discuss the financial and operational details of the quarter and future outlook.
After John and George have finished the formal remarks we will then open up the call to questions. With that I’ll turn the call over to John.
John C. Corey
Thank you, good afternoon. In February when we reported our fourth quarter and 2009 year-end results, I reviewed our trend of improved operating and financial performance which started in the third quarter of 2009.
As stated then and affirmed now, we have adjusted our cost structure to operate at a lower volume level and to leverage volume increases as the market rebounds. I am pleased to report that our first quarter results continued the positive trend started in the third quarter of last year.
First quarter sales of 148 million support our sales guidance for 2010 of between 590 million and 610 million, a projected increase of 26% for the year. Gross margin was 22.7% in the quarter at the low end of our targeted range of 23% to 25%.
We achieved operating income of $4 million as our marginal…and our marginal contribution was nearly $0.53 of sales at the gross margin line.
We recorded a net income of 1.5 million and a positive EPS of $0.06 a share, our first positive EPS since the second quarter of 2008.
Even as we maintained our liquidity and reduced our cost, we did not lose sight of our growth objectives. In the first quarter we got 32 million in new business wins which further diversify our customer base and address the growing…and address the growing and emerging markets. Our net new business wins now stand at 140 million over the next three years and 206 million in the next five excluding the impact of the BCS acquisition.
Thanks to the third quarter of 2009 we have continued the trend of positive operating income in every quarter and have recorded an improvement in the first quarter of 2010 over the prior two quarters. This performance reflects the cost improvements implemented across the company and the volume increases we are experiencing.
Cash at the end of the first quarter was 80 million, down from 91.1 million at the end of 2009. The liquidity use was primarily driven by higher accounts receivables which resulted from higher sales.
We believe we are well positioned to take advantage of the market turnaround. Our objectives are to maintain our growth by managing our cost structure to continue the volume leverage financial improvement on the business as volumes do improve.
Last year we booked new business of 134 million with 99 million from non-traditional customers. In the first quarter of 2010 we’ve continued that tend as we were awarded 32.2 million of gross business of which 26.3 million was new business and six million was replacement. Of the 32.2 million amount 11.2 million was represented by customers outside of our top four customers, a continuation of our diversification efforts where we made great strides last year.
Over the last two years we have realigned the company around two business segments; Electronics and Control Devices. In August of last year we announced the integration of our Control Devices division into one management team. With the consolidation of Control Devices we have prioritized their DND investments to better focus our development efforts and resources on targeted growth segments and global opportunities.