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

FORM 10-K

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). x

The aggregate market value of the Common Shares held by non-affiliates of the registrant based on the closing price as of June 28, 2002 was $249.8 million.

The number of Common Shares, without par value, outstanding as of March 21, 2003 was 22,401,311.

DOCUMENTS INCORPORATED BY REFERENCE

Definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 12, 2003, into Part III, Items 10, 11, 12 and 13.

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INDEX

STONERIDGE, INC. – FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2002

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Forward-Looking Statements

     Portions of this report may contain “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this report and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things, the Company’s (i) future product and facility expansion, (ii) acquisition strategy, (iii) investments and new product development, and (iv) growth opportunities related to awarded business.  Forward-looking statements may be identified by the words “will,” “may,” “designed to,” “believes,” “plans,” “expects,” “continue,” and similar expressions.  The forward-looking statements in this report are subject to risks and uncertainties that could cause actual events or results to differ materially from those expressed in or implied by the statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, among other factors:

PART I.

ITEM 1.     BUSINESS

The Company

          Founded in 1965, the Company is a leading, technology driven, independent designer and manufacturer of highly engineered electrical and electronic components, modules and systems for the automotive, medium- and heavy-duty truck, agricultural and off-highway vehicle markets.  Our custom-engineered products are predominantly sold on a sole-source basis and consist of application-specific control devices, sensors, vehicle management electronics and power and signal distribution systems.  These products comprise the elements of every vehicle’s electrical system, and individually interface with a vehicle’s mechanical and electrical systems to (i) activate equipment and accessories, (ii) display and monitor vehicle performance and (iii) control and distribute electrical power and signals.  Our products improve the performance, safety, convenience and environmental monitoring capabilities of our customers’ vehicles.  As such, the growth in many of the product areas in which we compete is driven by the increasing consumer desire for safety, security and convenience coupled with the need for original equipment manufacturers (“OEM”) to meet safety requirements in addition to the general trend of increased electrical and electronic content per vehicle.  Our technology and our partnership-oriented approach to product design and development enables us to develop next-generation products and be a leader in the transition from mechanical-based components and systems to electrical and electronic components, modules and systems.

Products

          The Company conducts its business in two operating segments: Vehicle Management & Power Distribution and Control Devices. The core products of the Vehicle Management & Power Distribution operating segment include vehicle electrical power and distribution systems and electronic instrumentation and information display products. The core products of the Control Devices operating segment include electronic and electrical switch products, actuator products and sensor products.   The Company designs and manufactures the following vehicle parts:

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Vehicle Management & Power Distribution. The Vehicle Management & Power Distribution operating segment produces electronic instrument clusters, electronic control units, driver information systems, and electrical distribution systems, primarily wiring harnesses and connectors for electrical power and signal distribution.  These products collect, store and display vehicle information such as speed, pressure, maintenance data, trip information, operator performance, temperature, distance traveled and driver messages related to vehicle performance.  In addition, power distribution systems regulate, coordinate and direct the operation of the entire electrical system within a vehicle compartment.  These products use state-of-the-art hardware, software and multiplexing technology and are sold principally to the medium- and heavy-duty truck, agricultural and off-highway vehicle markets.

Control Devices. The Control Devices operating segment produces products that monitor, measure or activate a specific function within the vehicle.  Product lines included within the Control Devices segment are sensors, switches, actuators as well as other electronic products.  Sensor products are employed in most major vehicle systems, including the emissions, safety, powertrain, braking, climate control, steering and suspension systems.  Switches transmit a signal that activates specific functions.  Hidden switches are not typically seen by vehicle passengers, but are used to activate or deactivate selected functions.  Customer activated switches are used by a vehicle’s operator or passengers to manually activate headlights, rear defrosters and other accessories.  In addition, the Company designs and manufactures electromechanical actuator products that enable users to deploy power functions in a vehicle and can be designed to integrate switching and control functions.  The Company sells these products principally to the automotive market.

See Note 11 to the Company’s consolidated financial statements for more information on the Company’s operating segments.

Production Materials

          The principal production materials used in both operating segments of the Company’s manufacturing processes include: wire, cable, plastics, printed circuit boards, metal stamping and certain electrical components such as microprocessors, memories, resistors, capacitors, fuses, relays and connectors.  The Company typically purchases such materials pursuant to annual contracts.  Such materials are readily available from multiple sources, but the Company generally establishes collaborative relationships with a qualified supplier for each of its key production materials in order to lower costs and enhance service and quality.

Patents and Intellectual Property

          Both of the Company’s operating segments maintain and have pending various U.S. and foreign patents and other rights to intellectual property relating to its business, which the Company believes are appropriate to protect the Company’s interests in existing products, new inventions, manufacturing processes and product developments. The Company does not believe any single patent is material to its business, nor would the expiration or invalidity of any patent have a material adverse effect on its business or its ability to compete. The Company is not currently engaged in any material infringement litigation, nor are there any material infringement claims pending by or against the Company.

Industry Cyclicality and Seasonality

          The markets for both operating segments of the Company’s products have historically been cyclical. Because the Company’s products are used principally in the production of vehicles for the automotive, medium- and heavy-duty truck, agricultural and off-highway vehicle markets, its sales, and therefore its results of operations, are significantly dependent on the general state of the economy and other factors which affect these markets. A decline in automotive, medium- and heavy-duty truck, agricultural and off-highway vehicle production of the Company’s principal customers could adversely impact the Company. Approximately 57%, 58% and 62% of the Company’s net sales in 2002, 2001 and 2000, respectively, were made to the automotive market. Approximately 43%, 42% and 38% of the Company’s net sales in 2002, 2001 and 2000, respectively, were derived from the medium- and heavy-duty truck, agricultural and off-highway vehicle markets.

          The Company typically experiences decreased sales during the third calendar quarter of each year due to the impact of scheduled OEM plant shutdowns in July for vacations and new model changeovers. The fourth quarter is similarly impacted by plant shutdowns for the holidays.

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Reliance on Major Customers

          The Company is dependent on a small number of principal customers for a significant percentage of its sales. The loss of any significant portion of its sales to these customers or the loss of a significant customer would have a material adverse impact on the financial condition and results of operations of the Company.   The Company supplies numerous different parts to each of its principal customers.  The contracts the Company has entered into with many of its customers provide for supplying the customers’ requirements for a particular model, rather than for manufacturing a specific quantity of products. Such contracts range from one year to the life of the model, which is generally three to seven years. Therefore, the loss of a contract for a major model or a significant decrease in demand for certain key models or group of related models sold by any of the Company’s major customers could have a material adverse impact on the Company. The Company may also enter into contracts to supply parts, the introduction of which may then be delayed or not used at all.  The Company also competes to supply products for successor models and is subject to the risk that the customer will not select the Company to produce products on any such model, which could have a material adverse impact on the financial condition and results of operations of the Company.

          The following table presents the Company’s major customers, as a percentage of net sales, for the years ended December 31, 2002, 2001 and 2000:

Backlog

          The majority of the Company’s products are not on a backlog status. They are produced from readily available materials and have a relatively short manufacturing cycle. Each production facility of the Company maintains its own inventories and production schedules.  Production capacity is adequate to handle current requirements and will be expanded to handle increased growth where needed.

Competition

          Markets for the Company’s products in both operating segments are highly competitive. The Company competes on the basis of quality, service, price, timely delivery and technological innovation. The Company competes for new business both at the beginning of the development of new models and upon the redesign of existing models. New model development generally begins two to five years before the marketing of such models to the public. Once a supplier has been selected to provide parts for a new program, an OEM usually will continue to purchase those parts from the selected supplier for the life of the program, although not necessarily for any model redesigns. 

          Our diversity in products creates a wide range of competitors, which vary depending on both market and geographic location.  The Company competes successfully based on its strong customer relations and a fast and flexible organization that develops technically effective solutions at or below target price.

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Product Development

          Research and development within the Company is largely product development oriented and consists primarily of applying known technologies to customer generated problems and situations.  The Company works closely with its customers to creatively solve problems using innovative technologies.  The vast majority of the Company’s development expenses are related to customer sponsored programs where the Company is involved in designing custom-engineered solutions for specific applications or for next generation technology.  To further the Company’s vehicle platform penetration, it has also developed collaborative relationships with the design and engineering departments of its key customers.  These collaborative efforts have resulted in the development of new and complimentary products and the enhancement of existing products.

          Development work at the Company is largely performed on a decentralized basis.  The Company has engineering and product development departments located at a majority of its manufacturing facilities.  To ensure knowledge sharing among decentralized development efforts, the Company has instituted a number of mechanisms and practices whereby innovation and best practices can be shared.  The decentralized product development operations are complimented by larger technology groups in Stockholm, Sweden and Canton, Massachusetts.

          The Company uses efficient and quality oriented work processes to address its customers’ high standards.  The Company’s product development technical resources include a full compliment of computer-aided design and engineering (“CAD/CAE”) software systems, including (i) virtual three-dimensional modeling, (ii) functional simulation and analyses capabilities and (iii) data links for rapid prototyping.  These CAD/CAE systems enable the Company to expedite product design and the manufacturing process to shorten the development time and ultimately time to market.

          The Company is further strengthening its electrical engineering competencies through investment in equipment such as (i) automotive Electro-Magnetic Compliance test chambers, (ii) programmable automotive and commercial vehicle transient generators, (iii) circuit simulators and (iv) other environmental test equipment.  Additional investment in product machining equipment has allowed the Company to fabricate new product samples in a fraction of the time required historically.  The Company’s product development and validation efforts are supported by full service, on-site test labs at most manufacturing facilities, thus enabling its cross-functional engineering teams to optimize the product, process and system performance before tooling initiation.

          The Company has invested, and will continue to invest in technology to develop new products for its customers.  Research and development costs incurred in connection with the development of new products and manufacturing methods, to the extent not recoverable from the customer, are charged to selling, general and administrative expenses, as incurred.  Such costs amounted to approximately $25.3 million, $27.0 million and $26.8 million for 2002, 2001 and 2000, respectively, or 4.0%, 4.6% and 4.0% of net sales for these periods.

Environmental and Other Regulations

          The Company’s operations are subject to various federal, state, local and foreign laws and regulations governing, among other things, emissions to air, discharge to waters and the generation, handling, storage, transportation, treatment and disposal of waste and other materials. The Company believes that its business, operations and facilities have been and are being operated in compliance, in all material respects, with applicable environmental and health and safety laws and regulations, many of which provide for substantial fines and criminal sanctions for violations.

Employees

          As of December 31, 2002, the Company had approximately 5,500 employees, approximately 1,600 of whom were salaried and the balance of whom were paid on an hourly basis. Except for certain employees located in Chihuahua, Mexico, Orebro and Stockholm, Sweden, and Dundee, Scotland, the Company’s employees are not represented by a union. The Company believes that its relations with its employees are good.

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Executive Officers of the Registrant

          The executive officers of the Company are as follows:

          D.M. Draime, Chairman of the Board of Directors and Assistant Secretary.  Mr. Draime, founder of the Company, has served as Chairman of the Board of Directors of the Company and its predecessors since 1965.

          Cloyd J. Abruzzo, President, Chief Executive Officer, Assistant Treasurer and Director.  Mr. Abruzzo has served as President and Chief Executive Officer of the Company or its predecessor since June 1993 and as a Director of the Company since 1990.  From 1984 to June 1993, Mr. Abruzzo was the Vice President and Chief Financial Officer of the Company or its predecessor.  Mr. Abruzzo serves as a Director of Second National Bank of Warren.

          Kevin P. Bagby, Vice President, Chief Financial Officer and Treasurer.  Mr. Bagby has served as Vice President of the Company, Chief Financial Officer and Treasurer since joining the Company in July 1995. 

          Sten Forseke, Vice President of the Company and President of Stoneridge Electronics (formerly Berifors AB).   Mr. Forseke, a co-founder of Berifors AB, has served as Vice President of the Company since the acquisition of Berifors AB in 1997, Managing Director of Berifors AB from 1988 to 2002 and is currently serving as President of Stoneridge Electronics (formerly Berifors AB).

          Gerald V. Pisani, Vice President of the Company and President of Stoneridge Engineered Products Group.  Mr. Pisani has served as Vice President of the Company since 1989 and President of the Stoneridge Engineered Products Group since 1985.

          Thomas A. Beaver, Vice President of Sales and Marketing.  Mr. Beaver has served as Vice President of Sales and Systems Engineering of the Stoneridge Engineered Products Group from February 1995 to December 1999 and Vice President of Sales and Marketing since January 2000.

          Michael J. Bagby, Vice President and General Manager of Alphabet Group.  Mr. Bagby has served as Vice President of the Alphabet Group since March 1990 and Vice President and General Manager of the Alphabet Group since January 2000.

          Avery S. Cohen, Secretary and Director.  Mr. Cohen has served as Secretary and a Director of the Company since 1988.  Mr. Cohen is a partner in Baker & Hostetler LLP, a law firm which has served as general outside counsel for the Company since 1993 and is expected to continue to do so in the future.

Available Information

          The Company makes available, free of charge through its web site (www.stoneridge.com), its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and other filings with the Securities and Exchange Commission (“SEC”), as soon as reasonably practicable after they are filed with the SEC.

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ITEM 2.     PROPERTIES

          The Company currently owns or leases 16 manufacturing facilities, which together contain approximately 1.6 million square feet of manufacturing space. The following table provides information regarding the Company’s facilities:

ITEM 3.     LEGAL PROCEEDINGS

          There is no pending litigation which management believes will have a material adverse impact upon the Company. The Company is subject to the risk of exposure to product liability claims in the event that the failure of any of its products causes personal injury or death to users of the Company’s products and there can be no assurance that the Company will not experience any material product liability losses in the future.  In addition, if any of the Company’s products proves to be defective, the Company may be required to participate in a government-imposed or OEM-instituted recall involving such products. The Company maintains insurance against such liability claims.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          No matters were submitted to a vote of security holders during the fourth quarter of 2002.

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PART II.

ITEM 5.      MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

          On March 21, 2003, the Company had 22,401,311 Common Shares without par value, issued and outstanding, which were owned by 130 shareholders of record, including Common Shares held in “streetname” by nominees who are record holders and approximately 1,200 beneficial owners.

          The Company has not historically paid or declared dividends, which are restricted under both the senior notes and the credit agreement, on its Common Shares.  The Company may only pay cash dividends in the future if immediately prior to and immediately after the payment is made no event of default has occurred, the Company remains in compliance with certain leverage ratio requirements, and the amount paid does not exceed 5% of the Company’s excess cash flow for the preceding fiscal year.  The Company currently intends to retain earnings for acquisitions, working capital, capital expenditures, general corporate purposes and reduction in outstanding indebtedness.  Accordingly, the Company does not expect to pay cash dividends in the foreseeable future.

          High and low sales prices (as reported on the New York Stock Exchange “NYSE” composite tape) for the Company’s Common Shares for each quarter during 2002 and 2001 are as follows:

          The Company’s Common Shares are traded on the NYSE under the symbol SRI.

          In October 1997, the Company adopted a Long-Term Incentive Plan for its employees and in May 2002, the Company adopted a Director Share Option Plan for its directors.  Both plans were approved by the Company’s shareholders.  Equity compensation plan information, as of December 31, 2002, is as follows:

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ITEM 6.     SELECTED FINANCIAL DATA

          The following table sets forth selected historical financial data for the Company and should be read in conjunction with the consolidated financial statements and notes related thereto and other financial information included elsewhere herein.  The selected historical data was derived from the Company’s consolidated financial statements.