Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2008 Stoneridge Earnings Conference Call. My name is Erica and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. (Operator Instructions). I would now like to turn the presentation over to your host for today's call, Mr. Ken Kure. You may proceed, sir.

Good morning, everyone, and thank you for joining us on today's call. By now you should have received our fourth quarter earnings release. The release has been filed with the SEC and has been posted at 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 Executive Vice President and 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 that 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 maybe found in our 10-K filed with the Securities and Exchange Commission under the heading forward-looking statements. During today's call, we will 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 to our results and his thoughts on the market conditions. George will discuss the financial details for the quarter and future outlook. After John and George have finished their formal remarks, we will then open up the call to questions. With that, I'd turn the call over to John.

Good morning. Before I begin to share with you the operating results of the company and the positive steps we are taking to address the uncertainty in our markets, I want to briefly explain the non-reoccurring after-tax non-cash goodwill impairment expense and the non-cash deferred tax asset valuation allowance that are included in our fourth quarter and year-end results. The 2008 results included an after-tax, non-cash goodwill impairment charge in the company's control device segment of 46.1 or $1.97 per share, and recorded an after-tax non-cash valuation allowance against the deferred tax assets of 62 million or 2.65 per share. Excluding these non-reoccurring items and the restructuring charges full year income from continuing operations was 22.8 million or $0.98 per share compared with 17.6 million or $0.75 cents per share from last year. George will provide more detail about the goodwill impairment charge and the valuation allowance for deferred taxes later. But it's important to note that these non-cash charges do not impact the company's ongoing business operations. Since our last conference call, the global transportation industry continues in turmoil. Our focus has been to manage the areas we can control and maintain flexibility to respond to the dynamic market in which we are operating. We are responding to the quick and the volatile market conditions by focusing on six key areas; market conditions and our response, restructuring programs executed and completed in 2008, additional cost measures taken in 2008, further cost reduction initiatives being worked on for 2009, ensuring liquidity and financial strength of the company and finally short term sales growth opportunities. We have all read about the shifts in U.S. light vehicle in North American and European commercial vehicle markets as the global recession expands and capital availability is largely non existent. In North America passenger cars…

Thank you John. Before we review the financial highlights for the fourth quarter and the outlook for 2009, I want to discuss the non-recurring, non-cash goodwill impairments and valuation allowance for deferred taxes that was recorded in the fourth quarter. The non-recurring, non-cash goodwill impairment was driven by adverse equity market conditions that caused a decrease in the current market multiples, the company's stock prices of December 31, 2008. The benchmark that has been established by the SEC from their common letters and releases in December 2008, measures the fair value derived by traditional valuation techniques of discounted cash flows and market multiples compared to a mark-to-market concept for market capitalization based on a point in time which was December 31, 2008. December 21, Stoneridge's stock price was at a very depressed state due to the overall conditions of the market resulting in a low point of Stoneridge stock price for the year. We do not believe the mark-to-market concept powerfully reflects the true value of the company and our outlook for the financial and operating performance of the company. In the case of the valuation allowance for the deferred tax asset, the valuation allowance is due to the impact of the goodwill impairment. It caused the company to be in a cumulative loss carry forward position. Recording the valuation allowances for financial statement purposes only will not impact the company's ability to utilize for tax purposes, net operational losses and tax credits in the future that its operating results permit. These non-cash charges do not impact the company's ongoing business operations. Now I would like to share a few financial highlights. The restructuring programs announced in November 2007 were completed on time and within plan. The cost of the Mitcheldean, UK and Sarasota facility manufacturing closures were $13.8 million.…

(Operator Instructions). And your first question comes from the line of Brett Hoselton from KeyBanc. You may proceed.

Hi John, hi George, how are you guys?

Hi Brett.

Doing very well, how are you?

Doing well, congratulations on actually making a profit on an adjusted basis in the quarter. Not many suppliers are doing that these days.

Thank you.

I wanted to -- can you run through the liquidity again George, just cash and then available lines and so forth.

Our cash is 927 in fact it's improved slightly in the year, Brett and our liquidity, we have a $100 million open revolver right now with our current its asset based. So we have availability under that line of roughly about $58 million and that's got a maturity in November 2011. And our long term bonds are presently at $183 million. As you remember we paid down $17 million earlier in 2008 which impacted our cash balance also, but that line goes out through May of 2012.

So, as of the end of the quarter you had $58 million available on a $100 million line, correct?

Right.

Okay. The cash flow positive, is that operating or free cash flow being less CapEx?

Well there is the $43 million is operating cash flow and the capital would be net of that. And I think one thing that we have indicated today that we are managing capital very tightly, looking at our customer products and platform launches and so that will be flexible item as we move forward. But for the current year and 2008, our operating cash flow was 42.5 and our capital expenditures were 24.6.

And I apologize George, what I was referring to is 2009, your outlook, you're anticipating positive cash flow and I am just wondering is that a positive operating cash flow or is that net of CapEx in your mind?

That's net of CapEx.

Okay. And then there is you call out restructuring in some of your release here. And I am wondering is that something that you would hope for us to do as we move forward or is it just something that you generally indicated? I mean, historically you have identified it, but you haven't necessarily called it out as a unique or one-time charge.

Well, but I think we called it out in the fourth quarter because we had such significant adjustments for restructuring the goodwill and the valuation allowance. So we laid them all out of separate items so that you had clear visibility what was going on in operations versus the three unusual items and then actually non-recurring items.

Okay. And then I saw a gain on sale of about $0.5 million. Is that the Sarasota facility or is that something else?

No we're still well that was something else, and I'm not sure exactly what that one is. But Sarasota we can see it too work on that one as you know we forecast originally have that completed in '08, but we're still working on that and hopefully we can sell that in 2009.

Okay. And then as you think about your outlook and your assumptions for production and so forth. And can you give us a general sense of what you are thinking in the light vehicle side of the business? What are you thinking about commercial vehicle side of business in North America and Europe may be percentage changes or absolute numbers or something along those lines. What's baked in your thought process?

Well we're looking at the north American light vehicle market somewhere between 10 and 10.5 probably towards the lower end of that range. Certainly the first quarter January sales were 9.8 so on an annualized basis, so it's a very difficult to predict for that segment of the market. On the medium and heavy duty truck we're looking at probably at 10 to 15% decline in the North American markets. And then in Europe it's more like a 30 to 40% decline. I mean I don't think the conditions are fully manifested themselves in Europe yet in terms of future production plans. So we got to watch that very closely.

As you think about your Ag business obviously, doing quite well but John Deere, as you think about that in 2009 your thoughts could that up-down, that sort of thing?

I think well overall, we'll expect that business to continue to be up. I think that's what John Deere is forecasting. I mean, I think in some of their businesses they are probably not as optimistic about it, but I think in the Ag business, I think they still remain optimistic on that business.

Okay. And then from a restructuring standpoint, you talked about some additional charges for the first quarter of '09. Is there an expectation that you may do some additional restructuring as you move through 2009 at this point in time or based on what you are currently looking at, are you thinking that, what we're doing with the Juarez facility is going to basically be the last of the restructuring charges?

No, I mean and we are going to be either -- I can't say that there will be additional restructuring charges but I won't rule it out. I think as we look at European volumes and we look at what's happening over there, we may have to take additional measures over there. And as we continue to look at what's going on here. Now one of the things that we talked about as we're looking at near term revenue opportunities and in our wiring business there may be -- that's where we can generate some revenue pretty quickly, if the business awards are out there, so we are aggressively pursuing that. But we also continue to downsize our factories to try to get to the right volume of level of expectation. The real dilemma is there comes a point in time where volume might be down for the first quarter or the first half and you might say Well I need to take a major restructuring. Only that say the volumes coming back and then you have to add all that back in. So the key here is to take the restructuring and try to keep it permanently out of the cost base. So when volume comes back up you leverage yourself.

All right. Thank you John, I appreciate it George.

You are welcome.

And your next question comes from the line of Brian Sponheimer, from Gabelli & Company. You may proceed.

Hi good morning John and George how are you?

Hi Brian.

Hi Brian.

Just on the restructuring side. I am not sure I picked up on this. How much exactly that was a cash outlay?

The cash outlay, the total expense we incurred was about 15.4 million...

Right.

In the P&L and the cash was very close to that. It was probably in the range of around 14 million Brian.

That was just housekeeping. Just moving along outside of Ag you spoke about some other areas that you were seeking some opportunities. I want to ask specifically about military business. You benefited tremendously due to the rise of the MRAP program, and then started carrying off. You see, your success MRAP kind of piggy backing on to the new potential programs at the MATV (ph) and others that are on the horizon?

Yeah, we do if our customer wins the award. So it's really depended on that, but we are working hand-in-hand with our partner and supporting them to develop those products and deliver those to the military for evaluation.

You are expecting that sometime in May?

I think, well I think so. I'm not again I am -- we've delivered a couple of -- they've delivered a couple of prototype samples, I think they are delivering them here shortly, and I am not sure how long the evaluation period will be.

Okay, I just wanted an update on that, thank you guys.

You are welcome Brian.

Your next question comes from the line of David Leiker from Robert W. Baird. You may proceed.

Hi it's Keith Schicker

Hi Keith.

Just a quick question regarding the sort of end market outlook that you detailed John. It looks like in the North American commercial vehicle market you were looking for a 10 to 15% year-over-year decline. We are wondering, what the basis for that assumption is, especially with order rates in recent months tracking much-much worse than that phase on an annualized basis?

Well, I think you've got a couple of -- yeah, the order rates have been down but I think you -- eventually, we are going to have to replace the truck fleet and remember we've had three down years now in this market where we haven't seen an up tick in the volumes as projected. So I think that's going to be a big driver. Also you've got the new environmental regulation that has to come in 2010 and that may have -- drive some purchases towards the end of the year, particularly in the last quarter. So that's kind of what our basis is. Now again, conditional on all of this is that the credit markets free up and there is available capital that starts to come back into businesses. I mean without that we are going to continue to see tremendous pressure on this and so that -- what we've assumed that by that there will be that transition will happen. I mean we're certainly -- the government is certainly pumping enough money into the system, and hopefully it gets into the right places and credit becomes available again and businesses start to invest where they see fit. And I think, when you look at things like the international ProStar, that is more fuel efficient vehicle, I think there is opportunity there as people look at how to manage their cost and their maintenance that there may be opportunities, there too that will stimulate some demand.

Okay, that's great. Thanks. And if we look at depreciation and amortization in 2009, can you comment either quantitatively or qualitatively where you see that headed?

Keith, I think, it will run in the range of about 23 million for 2009.

And that's the D&A or just D?

That's just D and I think the amortization is I think it was running around 300,000 at core ph] so it'd be about a million dollar.

Okay. I think when you were talking about the 2009 outlook you said that you thought SG&A could be down I missed this a little bit, SG&A could be down as much as 38 million year-over-year?

Well what we said Keith is that if you go back to '07 to '09, we've reduced our overall cost structure to $38 million between direct labor, fixed and variable overheads and SG&A as a composite. I didn't give a breakdown.

Okay.

Each one of those groups and then if you look at the cost incurred in '08 versus the benefit in '09, that swing is almost about $63 million between '08 to '09.

Okay. That's great and then if we wanted to try and put some parameters around the size of your military business, that's included in that -- when you break it down by segment, that's included in the commercial vehicle revenue, is that correct?

Yeah that's in our electronic segment in the commercial vehicle.

And is there anyway that you could frame the size of that business in 2008?

No we don't disclose that.

Okay, thanks.

Thanks Keith.

(Operator Instructions) And your next question comes from the line of Gary Mormon from Alpine Associates (ph) you may proceed.

Hi guys in your cash flow assumption and being cash flow positive for '09 what do you have baked in there for working capital, is that going to be a source or use and can you give me an idea of how much?

It will be a source in, 2009 a lot of it reflects on what happens to the top-line sales.

Sure.

But we see as the markets coming down that that would be a source for us.

Can you give me a rough idea of how much?

Yeah, I would view that working capital is probably going to be in the range of somewhere around $20 million improvement for '09.

Okay. Thank you very much.

You are welcome.

And we have no questions in queue this concludes the question and answer portion of the call. I will now like to turn it over to Mr. John Corey for closing remarks.

Well, thank you. I think that as you all know, it's just a very turbulent and uncertain time and in those times, I mean you've got to be fast and flexible and adaptable and that's exactly what our program is and that's what we have been trying to here. And I think that we've been very proactive in taking the action early, and trying to get through this period and hopefully this period, we're -- our outlook say that it's going to be a difficult 2009. And I think that's probably consistent with a lot of the industry and we will just continue on these initiatives that we've outlined here and looking at how we can position the business to come out stronger when the recovery happens. So with that I would like to thank and again I would like to thank our team, because I think they've done the great job here in this year 2008. And we look forward to them doing the similar job in 2009. So thank you all for joining us.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. And have a wonderful day.