Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K/A
Amendment No. 1
 
(Mark one)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
Commission file number 001-36127
 
COOPER-STANDARD HOLDINGS INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
20-1945088
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
39550 Orchard Hill Place Drive
Novi, Michigan 48375
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (248) 596-5900
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Exchange on Which Registered
Common Stock, par value $0.001 per share
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x
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  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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.  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer (Do not check if a smaller reporting company)
¨
Smaller reporting company
¨
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
The aggregate market value of voting and non-voting common stock held by non-affiliates as of June 30, 2017 was $1,361,808,044.
The number of the registrant’s shares of common stock, $0.001 par value per share, outstanding as of February 9, 2018 was 17,914,599 shares.




Explanatory Note
This Amendment No. 1 on Form 10-K/A (the “Amendment”) amends Cooper-Standard Holdings Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the “Form 10-K”), as filed with the Securities and Exchange Commission on February 20, 2018, and is being filed solely to amend both of the reports titled “Report of Independent Registered Public Accounting Firm” contained in Item 8 of the Form 10-K (the “Audit Reports”) to correct a typographical error in the second paragraph of both reports. The second paragraph in both reports incorrectly referenced the date of the Audit Reports as February 16, 2018. The correct date of the Audit Reports in the Form 10-K is February 20, 2018.
Pursuant to Rule 12b-15 promulgated under the Securities and Exchange Act of 1934, as amended, we have included the entire text of Item 8 of the Form 10-K in this Amendment. However, there have been no changes made to the text of such item other than the change stated in the immediately preceding paragraph. Furthermore, there have been no changes to the XBRL data filed in Exhibit 101 of the Form 10-K.
Except as expressly set forth above, this Amendment does not, and does not purport to, amend, update or restate the information in the remainder of the Form 10-K or reflect any events that have occurred after the filing of the original Form 10-K.





TABLE OF CONTENTS
 
 
Page        
 
PART II
Item 8.
Financial Statements and Supplementary Data
 
PART IV
Item 15.
Exhibits and Financial Statement Schedules
Signatures





PART II
 
Item 8.        Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Annual Financial Statements
 
 
 
 
Page
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, Internal Control over Financial Reporting
Consolidated statements of net income for the years ended December 31, 2017, 2016 and 2015
Consolidated statements of comprehensive income (loss) for the years ended December 31, 2017, 2016 and 2015
Consolidated balance sheets as of December 31, 2017 and December 31, 2016
Consolidated statements of changes in equity for the years ended December 31, 2017, 2016 and 2015
Consolidated statements of cash flows for the years ended December 31, 2017, 2016 and 2015
Notes to consolidated financial statements
Schedule II—Valuation and Qualifying Accounts


4



Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Cooper-Standard Holdings Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cooper-Standard Holdings Inc. (the Company) as of December 31, 2017 and 2016, the related consolidated statements of net income, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 20, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2005.
Detroit, Michigan
February 20, 2018


5



Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Cooper-Standard Holdings Inc.
Opinion on Internal Control over Financial Reporting
We have audited Cooper-Standard Holdings Inc.’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Cooper-Standard Holdings Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of net income, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 and our report dated February 20, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Detroit, Michigan
February 20, 2018


6



COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF NET INCOME
(Dollar amounts in thousands except per share amounts)
 
 
Year Ended December 31,
 
2017
 
2016
 
2015
Sales
$
3,618,126

 
$
3,472,891

 
$
3,342,804

Cost of products sold
2,946,828

 
2,808,049

 
2,755,691

Gross profit
671,298

 
664,842

 
587,113

Selling, administration & engineering expenses
349,496

 
359,782

 
329,922

Amortization of intangibles
14,056

 
13,566

 
13,892

Impairment charges
14,763

 
1,273

 
21,611

Restructuring charges
35,137

 
46,031

 
53,844

Other operating loss (profit)

 
155

 
(8,033
)
Operating profit
257,846

 
244,035

 
175,877

Interest expense, net of interest income
(42,112
)
 
(41,389
)
 
(38,331
)
Equity in earnings of affiliates
5,519

 
7,877

 
5,683

Loss on refinancing and extinguishment of debt
(1,020
)
 
(5,104
)
 

Other (expense) income, net
(7,133
)
 
(10,659
)
 
9,759

Income before income taxes
213,100

 
194,760

 
152,988

Income tax expense
74,527

 
54,321

 
41,218

Net income
138,573

 
140,439

 
111,770

Net (income) loss attributable to noncontrolling interests
(3,270
)
 
(1,451
)
 
110

Net income attributable to Cooper-Standard Holdings Inc.
$
135,303

 
$
138,988

 
$
111,880

 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
Basic
$
7.61

 
$
7.96

 
$
6.50

Diluted
$
7.21

 
$
7.42

 
$
6.08

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


7



COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollar amounts in thousands)
 
 
Year Ended December 31,
 
2017
 
2016
 
2015
Net income
$
138,573

 
$
140,439

 
$
111,770

Other comprehensive income (loss):
 
 
 
 
 
Currency translation adjustment
49,600

 
(13,930
)
 
(80,331
)
Benefit plan liabilities adjustment, net of tax
(3,137
)
 
(13,488
)
 
2,737

Fair value change of derivatives, net of tax
73

 
810

 
(269
)
Other comprehensive income (loss), net of tax
46,536

 
(26,608
)
 
(77,863
)
Comprehensive income
185,109

 
113,831

 
33,907

Comprehensive (income) loss attributable to noncontrolling interests
(4,874
)
 
(341
)
 
451

Comprehensive income attributable to Cooper-Standard Holdings Inc.
$
180,235

 
$
113,490

 
$
34,358

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


8



COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except share amounts)
 
December 31,
 
2017
 
2016
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
515,952

 
$
480,092

Accounts receivable, net
494,049

 
460,503

Tooling receivable
112,561

 
90,974

Inventories
170,196

 
146,449

Prepaid expenses
33,205

 
37,142

Other current assets
100,778

 
81,021

Total current assets
1,426,741

 
1,296,181

Property, plant and equipment, net
952,178

 
832,269

Goodwill
171,852

 
167,441

Intangible assets, net
69,091

 
81,363

Deferred tax assets
33,834

 
46,419

Other assets
71,952

 
68,029

Total assets
$
2,725,648

 
$
2,491,702

 
 
 
 
Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Debt payable within one year
$
34,921

 
$
33,439

Accounts payable
523,296

 
475,426

Payroll liabilities
123,090

 
144,812

Accrued liabilities
145,650

 
105,665

Total current liabilities
826,957

 
759,342

Long-term debt
723,325

 
729,480

Pension benefits
180,173

 
172,950

Postretirement benefits other than pensions
61,921

 
54,225

Deferred tax liabilities
9,511

 
9,241

Other liabilities
68,672

 
44,673

Total liabilities
1,870,559

 
1,769,911

7% Cumulative participating convertible preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding

 

Equity:
 
 
 
Common stock, $0.001 par value, 190,000,000 shares authorized; 19,920,805 shares issued and 17,914,599 outstanding as of December 31, 2017 and 19,686,917 shares issued and 17,690,611 outstanding as of December 31, 2016
18

 
17

Additional paid-in capital
512,815

 
513,934

Retained earnings
511,367

 
425,972

Accumulated other comprehensive loss
(197,631
)
 
(242,563
)
Total Cooper-Standard Holdings Inc. equity
826,569

 
697,360

Noncontrolling interests
28,520

 
24,431

Total equity
855,089

 
721,791

Total liabilities and equity
$
2,725,648

 
$
2,491,702

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

9



COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollar amounts in thousands except share amounts)
 
 
Total Equity
 
Redeemable Noncontrolling Interests
Common Shares
Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Cooper-Standard Holdings Inc. Equity
Noncontrolling Interest
Total Equity
Balance as of December 31, 2014
$
3,981

17,039,328

$
17

$
492,959

$
195,233

$
(139,243
)
$
548,966

$
(252
)
$
548,714

Shares issued under stock option plans

20,960


(289
)


(289
)

(289
)
Warrant exercise

344,159


9,277



9,277


9,277

Share-based compensation, net

54,498


8,635

(400
)

8,235


8,235

Excess tax benefit on stock options



320



320


320

Acquisition







11,836

11,836

Purchase of noncontrolling interest
(3,936
)


2,862


(300
)
2,562

192

2,754

Net income (loss) for 2015
(45
)



111,880


111,880

(65
)
111,815

Other comprehensive loss





(77,522
)
(77,522
)
(341
)
(77,863
)
Balance as of December 31, 2015

17,458,945

17

513,764

306,713

(217,065
)
603,429

11,370

614,799

Cumulative effect of change in accounting principle




(473
)

(473
)

(473
)
Repurchase of common stock

(350,000
)

(8,470
)
(15,330
)

(23,800
)

(23,800
)
Warrant exercise

332,873


2,810



2,810


2,810

Share-based compensation, net

248,793


5,830

(3,926
)

1,904


1,904

Consolidation of joint venture







13,300

13,300

Dividends paid to noncontrolling interests







(580
)
(580
)
Net income for 2016




138,988


138,988

1,451

140,439

Other comprehensive loss





(25,498
)
(25,498
)
(1,110
)
(26,608
)
Balance as of December 31, 2016

17,690,611

17

513,934

425,972

(242,563
)
697,360

24,431

721,791

Repurchase of common stock

(513,801
)
(1
)
(12,434
)
(43,512
)

(55,947
)

(55,947
)
Warrant exercise
 
568,702

1

2,372



2,373


2,373

Share-based compensation, net

169,087

1

8,943

(6,396
)

2,548


2,548

Dividends declared to noncontrolling interests







(785
)
(785
)
Net income for 2017




135,303


135,303

3,270

138,573

Other comprehensive income





44,932

44,932

1,604

46,536

Balance as of December 31, 2017
$

17,914,599

$
18

$
512,815

$
511,367

$
(197,631
)
$
826,569

$
28,520

$
855,089

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

10



COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
 
Year Ended December 31,
 
2017
 
2016
 
2015
Operating Activities:
 
 
 
 
 
Net income
$
138,573

 
$
140,439

 
$
111,770

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation
124,032

 
109,094

 
100,535

Amortization of intangibles
14,056

 
13,566

 
13,892

Impairment charges
14,763

 
1,273

 
21,611

Share-based compensation expense
24,963

 
24,032

 
13,955

Equity in earnings, net of dividends related to earnings
(137
)
 
(4,855
)
 
(3,766
)
Loss on refinancing and extinguishment of debt
1,020

 
5,104

 

Gain on divestitures and sale of investment in affiliate

 

 
(8,033
)
Gain on remeasurement of previously held equity interest

 

 
(14,199
)
Deferred income taxes
11,076

 
9,082

 
(2,698
)
Other
1,286

 
1,591

 
725

Changes in operating assets and liabilities:
 
 
 
 
 
Accounts and tooling receivable
(26,428
)
 
(579
)
 
(72,546
)
Inventories
(13,929
)
 
6,651

 
12,848

Prepaid expenses
5,981

 
(7,010
)
 
5,348

Accounts payable
11,415

 
70,066

 
61,063

Payroll and accrued liabilities
8,879

 
5,612

 
75,424

Other
(2,066
)
 
(10,369
)
 
(45,544
)
Net cash provided by operating activities
313,484

 
363,697

 
270,385

Investing activities:
 
 
 
 
 
Capital expenditures
(186,795
)
 
(164,368
)
 
(166,267
)
Proceeds from divestitures and sale of investment in affiliate

 

 
33,500

Acquisition of businesses, net of cash acquired
(478
)
 
(37,478
)
 
(34,396
)
Investment in joint ventures

 

 
(4,300
)
Cash from consolidation of joint venture

 
3,395

 

Other
(13,349
)
 
185

 
5,069

Net cash used in investing activities
(200,622
)
 
(198,266
)
 
(166,394
)
Financing activities:
 
 
 
 
 
Proceeds from issuance of long-term debt, net of debt issuance costs

 
393,060

 

Repayment and refinancing of term loan facility

 
(397,196
)
 

Principal payments on long-term debt
(19,866
)
 
(10,747
)
 
(8,863
)
Purchase of noncontrolling interest

 

 
(1,262
)
Repurchase of common stock
(55,123
)
 
(23,800
)
 

Proceeds from exercise of warrants
2,373

 
2,810

 
9,277

Increase (decrease) in short term debt, net
10,683

 
(12,223
)
 
(9,008
)
Borrowings on long-term debt

 

 
151

Taxes withheld and paid on employees' share-based payment awards
(13,297
)
 
(12,624
)
 
(2,028
)
Other
(297
)
 
(2,196
)
 
143

Net cash used in financing activities
(75,527
)
 
(62,916
)
 
(11,590
)
Effects of exchange rate changes on cash and cash equivalents
(1,475
)
 
(666
)
 
18,572

Changes in cash and cash equivalents
35,860

 
101,849

 
110,973

Cash and cash equivalents at beginning of period
480,092

 
378,243

 
267,270

Cash and cash equivalents at end of period
$
515,952

 
$
480,092

 
$
378,243

Supplemental Disclosure:
 
 
 
 
 
Cash paid for interest
$
47,424

 
$
38,550

 
$
39,192

Cash paid for income taxes, net of refunds
36,883

 
38,334

 
55,547

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

11


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share and share amounts)


1. Description of Business
Cooper-Standard Holdings Inc. (together with its consolidated subsidiaries, the “Company” or “Cooper Standard”), through its wholly-owned subsidiary, Cooper-Standard Automotive Inc. (“CSA U.S.”), is a leading manufacturer of sealing, fuel and brake delivery, fluid transfer, and anti-vibration systems. The Company’s products are primarily for use in passenger vehicles and light trucks that are manufactured by global automotive original equipment manufacturers (“OEMs”) and replacement markets. The Company conducts substantially all of its activities through its subsidiaries.
The Company believes it is the largest global producer of sealing systems, the second largest global producer of the types of fuel and brake delivery products that it manufactures, the third largest global producer of fluid transfer systems, and one of the largest North American producers of anti-vibration systems. The Company designs and manufactures its products in each major region of the world through a disciplined and sustained approach to engineering and operational excellence. The Company operates in 92 manufacturing locations and 32 design, engineering, administrative and logistics locations in 20 countries around the world.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
Summary of Significant Accounting Policies
Principles of Consolidation – The consolidated financial statements include the accounts of the Company and the wholly-owned and less than wholly-owned subsidiaries controlled by the Company. All material intercompany accounts and transactions have been eliminated. Acquired businesses are included in the consolidated financial statements from the dates of acquisition or when the Company gained control.
The equity method of accounting is followed for investments in which the Company does not have control, but does have the ability to exercise significant influence over operating and financial policies. Generally, this occurs when ownership is between 20% to 50%. The cost method is followed in those situations where the Company does not have the ability to exercise significant influence over operating and financial policies, generally when ownership is less than 20%.
Foreign Currency – The financial statements of foreign subsidiaries are translated to U.S. dollars at the end-of-period exchange rates for assets and liabilities and at a weighted average exchange rate for each period for revenues and expenses. Translation adjustments for those subsidiaries whose local currency is their functional currency are recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Transaction related gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized in earnings as incurred, except for those intercompany balances which are designated as long-term.
Cash and Cash Equivalents – The Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents as of December 31, 2017 includes $36,248 of cash collected on behalf of a factoring provider in connection with receivables sold under the Company’s accounts receivable factoring program. See Note 10. “Accounts Receivable Factoring.”
Accounts Receivable – The Company records trade accounts receivable when revenue is recorded in accordance with its revenue recognition policy and relieves accounts receivable when payments are received from customers. Accounts receivable are written off when it is apparent such amounts are not collectible. Generally, the Company does not require collateral for its accounts receivable, nor is interest charged on accounts receivable balances.
Allowance for Doubtful Accounts – An allowance for doubtful accounts is established through charges to the provision for bad debts when it is probable that the outstanding receivable will not be collected. The Company evaluates the adequacy of the allowance for doubtful accounts on a periodic basis, including historical trends in collections and write-offs, management’s judgment of the probability of collecting accounts and management’s evaluation of business risk. This evaluation is inherently subjective, as it requires estimates that are susceptible to revision as more information becomes available. The allowance for doubtful accounts was $4,199 and $7,124 as of December 31, 2017 and 2016, respectively.
Advertising Expense – Expenses incurred for advertising are generally expensed when incurred. Advertising expense was $3,769, $3,553 and $3,418 for the years ended December 31, 2017, 2016 and 2015, respectively.

12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Inventories – Inventories are valued at lower of cost or net realizable value. Cost is determined using the first-in, first-out method. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs. The Company records inventory reserves for inventory in excess of production and/or forecasted requirements and for obsolete inventory.
 
 
December 31,
 
2017
 
2016
Finished goods
$
47,613

 
$
43,511

Work in process
35,455

 
32,839

Raw materials and supplies
87,128

 
70,099

 
$
170,196

 
$
146,449

Derivative Financial Instruments – Derivative financial instruments are utilized by the Company to reduce foreign currency exchange and interest rate risks. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. On the date the derivative is established, the Company designates the derivative as either a fair value hedge, a cash flow hedge or a net investment hedge in accordance with its established policy. The Company does not enter into derivative financial instruments for trading or speculative purposes.
Income Taxes – Deferred tax assets or liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax laws and rates. A valuation allowance is provided on deferred tax assets if the Company determines that it is more likely than not that the asset will not be realized.
Long-lived Assets – Property, plant and equipment are recorded at cost and depreciated using primarily the straight-line method over estimated useful lives. Leasehold improvements are amortized over the expected life of the asset or term of the lease, whichever is shorter. Intangibles with finite lives, which include technology and customer relationships, are amortized over estimated useful lives. The Company evaluates the recoverability of long-lived assets when events and circumstances indicate that the assets may be impaired and the undiscounted net cash flows estimated to be generated by those assets are less than their carrying value. If the net carrying value exceeds the fair value, an impairment loss exists and is calculated based on a discounted cash flow analysis or estimated salvage value. Discounted cash flows are estimated using internal budgets and assumptions regarding discount rates and other factors.
Pre-production Costs Related to Long Term Supply Arrangements – Costs for molds, dies and other tools owned by the Company to produce products under long-term supply arrangements are recorded at cost in property, plant and equipment and amortized over the lesser of three years or the term of the related supply agreement. The amounts capitalized were $2,091 and $2,874 as of December 31, 2017 and 2016, respectively. The Company expenses all pre-production tooling costs related to customer-owned tools for which reimbursement is not contractually guaranteed by the customer. Reimbursable tooling costs are recorded in tooling receivable in the accompanying consolidated balance sheets if considered to be receivable in the next twelve months, and in other assets if considered to be receivable beyond twelve months. Tooling receivable for customer-owned tooling as of December 31, 2017 and 2016 was $112,561 and $90,974, respectively. Reimbursable tooling costs included in other assets in the accompanying consolidated balance sheets were $21,506 and $16,393 as of December 31, 2017 and 2016, respectively.
Goodwill – The Company tests goodwill for impairment on an annual basis in the fourth quarter, or more frequently if an event occurs or circumstances indicate the carrying amount may be impaired. Goodwill impairment testing is performed at the reporting unit level. The impairment test involves first qualitatively assessing goodwill for impairment. If the qualitative assessment is not met, a quantitative assessment is performed by comparing the estimated fair value of each reporting unit to its carrying value. If the carrying value exceeds the fair value, then impairment may exist and further evaluation is required.
In the fourth quarter of 2017, the Company completed a qualitative goodwill impairment assessment for each of its reporting units, and after evaluating the results, events and circumstances of the Company, the Company concluded that sufficient evidence existed to assert qualitatively that it was more likely than not that the estimated fair value of each reporting unit remained in excess of its carrying value. Therefore, a quantitative assessment was not necessary. In the fourth quarter of 2016, the Company completed a quantitative assessment and the estimated fair value of each reporting unit exceeded its respective carrying value. No goodwill impairments were recorded in 2017, 2016 or 2015.
Business Combinations – The purchase price of an acquired business is allocated to its identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. Determining the fair values of assets acquired and liabilities assumed requires management’s judgment, the utilization of independent appraisal firms and often involves the use of significant estimates and assumptions with respect to the timing and amount of future cash flows, market rate assumptions, actuarial assumptions, and appropriate discount rates, among other items.

13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Revenue Recognition and Sales Commitments – Revenue is recognized when there is persuasive evidence of a sales agreement, the delivery of the goods has occurred, the sales price is fixed and determinable and collectability is reasonably assured. The Company generally enters into agreements with its customers to produce products at the beginning of a vehicle’s life. Although such agreements do not generally provide for minimum quantities, once the Company enters into such agreements, fulfillment of its customers’ purchasing requirements can be the Company’s obligation for an extended period or the entire production life of the vehicle. These agreements generally may be terminated by the customer at any time. Historically, terminations of these agreements have been minimal. In certain limited instances, the Company may be committed under existing agreements to supply products to its customers at selling prices which are not sufficient to cover the direct cost to produce such products. In such situations, the Company recognizes losses as they are incurred.
The Company receives blanket purchase orders from many of its customers on an annual basis. Generally, such purchase orders and related documents set forth the annual terms, including pricing, related to a particular vehicle model. Such purchase orders generally do not specify quantities. The Company recognizes revenue based on the pricing terms included in the annual purchase orders generally as products are shipped to the customers. As part of certain agreements, the Company is asked to provide its customers with annual cost reductions. The Company recognizes such amounts as a reduction of revenue as products are shipped to customers. In addition, the Company has ongoing adjustments to pricing arrangements with its customers based on the related content and cost of the products. Such pricing adjustments are recorded when probable and estimable.
Shipping and Handling – Amounts billed to customers related to shipping and handling are included in sales in the Company’s consolidated statements of net income. Shipping and handling costs are included in cost of products sold in the Company’s consolidated statements of net income.
Research and Development – Costs are charged to selling, administration and engineering expenses as incurred and totaled $127,974, $117,791 and $108,764 for the years ended December 31, 2017, 2016 and 2015, respectively.
Share-based Compensation – The Company measures share-based compensation expense at fair value and generally recognizes such expenses on a straight-line basis over the vesting period of the share-based employee awards. See Note 18. “Share-Based Compensation” for additional information.
Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect amounts reflected in the consolidated financial statements, as well as disclosure of contingent assets and liabilities. Considerable judgment is often involved in making such estimates, and the use of different assumptions could result in different conclusions. Management believes its assumptions and estimates are reasonable and appropriate. However, actual results could differ from those estimates.
3. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
The Company adopted the following accounting standard update (“ASU”) in 2017, which did not have a material impact on its consolidated financial statements:
Standard
Description
Effective Date
ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory
This ASU amended the guidelines for the measurement of inventory from lower of cost or market to the lower of cost and net realizable value.
January 1, 2017

14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Recently Issued Accounting Pronouncements
The Company considered the recently issued accounting pronouncements summarized as follows, which could have a material impact on its consolidated financial statements or disclosures:
Standard
Description
Impact
Effective Date
ASU 2014-09, Revenue from Contracts with Customers (Topic 606)
Replaces existing revenue recognition guidance with a five-step model and additional financial statement disclosures.
The Company’s implementation plan included analyzing customer contracts and historical accounting policies, drafting new accounting policies and making changes to business processes and controls. Throughout the implementation process, the Company closely monitored FASB activities and worked with various non-authoritative groups to conclude on specific interpretative issues. The Company has concluded that adopting the new standard will not materially impact its consolidated financial statements, but will require additional disclosures. The Company will adopt the guidance using the modified retrospective method.
January 1, 2018
ASU 2016-02, Leases (Topic 842)
Requires lessees to recognize right-of-use assets and lease liabilities for all leases (except for short-term leases). The standard also requires additional disclosures to help financial statement users better understand the amount, timing and uncertainty of cash flows arising from lease transactions. A modified retrospective transition approach is required with certain practical expedients available.
The Company continues to perform a comprehensive evaluation on the impacts of adopting this standard and believes this standard will primarily result in a material increase in assets and liabilities on its consolidated balance sheet and will not have a material impact on its consolidated income statement or statement of cash flows. The Company is in the process of implementing lease administration software and assessing the impact to our systems, processes and internal controls.
January 1, 2019

15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

The Company considered the recently issued accounting pronouncements summarized as follows, none of which are expected to have a material impact on its consolidated financial statements:
Standard
Description
Effective Date
ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
Eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item.
January 1, 2019
ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting
Clarifies that modification accounting is required only if there is a change in the fair value, vesting conditions, or classification (as equity or liability) of a share-based payment award due to changes in the terms or conditions.
January 1, 2018
ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
Requires the service cost component of net periodic benefit cost to be recorded in the same income statement line item as other employee compensation costs arising from services rendered during the period. Other components of the net periodic benefit cost must be presented separately outside of operating income.
January 1, 2018
ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
Eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value.
January 1, 2020
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash
Requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should now be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.
January 1, 2018
ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
Requires companies to recognize the income tax effects of intercompany sales and transfers of assets other than inventory in the period in which the transfer occurs.
January 1, 2018
ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
Provide guidance on eight specific cash flow issues, thereby reducing diversity in practice.
January 1, 2018
4. Acquisitions and Divestitures
AMI Acquisition
In 2016, the Company acquired the North American fuel and brake business of AMI Industries (the “AMI Business”) for cash consideration of $32,000 (the “AMI Acquisition”). This acquisition directly aligns with the Company’s growth strategy by expanding the Company’s fuel and brake business. The results of operations of the AMI Business are included in the Company’s consolidated financial statements from the date of acquisition, August 15, 2016, and reported within the North America segment. The pro forma effect of this acquisition would not materially impact the Company’s reported results for any periods presented, and as a result no pro forma information has been presented. This acquisition was accounted for as a business combination, resulting in the recognition of intangible assets of $19,410 and goodwill of $7,175. See Note 7. “Goodwill and Intangibles” for additional information. On January 31, 2018, the Company finalized its purchase of the China fuel and brake business of AMI Industries for cash consideration of $4,124.
Shenya Acquisition
In the first quarter of 2015, the Company completed the acquisition of an additional 47.5% of Huayu-Cooper Standard Sealing Systems Co. (“Shenya”), increasing its ownership to 95%, for cash consideration of $59,320, of which $41,474 was paid in 2015 and $17,846 was paid in 2014. The acquisition was accounted for as a business combination. The business acquired in the transaction is included in the Company’s Asia Pacific segment and is operated from Shenya’s manufacturing locations in China. Shenya primarily supplies sealing systems and components to the automotive industry. This acquisition is directly aligned with the Company’s growth strategy by strengthening important customer relationships in the automotive sealing systems

16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

market. The results of operations of Shenya are included in the Company’s consolidated financial statements from the date of acquisition, February 27, 2015. The pro forma effect of this acquisition would not materially impact the Company’s reported results for any periods presented, and as a result no pro forma information has been presented. Prior to the acquisition, the Company held a 47.5% unconsolidated equity interest in Shenya. The estimated fair value of the equity interest at the date of acquisition was $41,378, resulting in a gain of $14,199 recorded in other (expense) income, net for the year ended December 31, 2015. The fair value of the Company’s previous 47.5% equity interest, 47.5% purchased and 5% noncontrolling interest in Shenya were estimated using income and market approaches based on financial analysis methodologies (including the discounted cash flow analysis), projected financial information, management’s estimates, available information, and reasonable and supportable assumptions. These fair value measurements are classified within Level 3 of the fair value hierarchy.
The following table summarizes the estimated fair value of Shenya assets acquired and liabilities assumed at the date of acquisition, updated as of December 31, 2015:
Cash and cash equivalents
$
7,079

Accounts receivable
24,197

Inventories
12,708

Prepaid expenses
11,624

Other current assets
23,396

Property, plant, and equipment
70,082

Goodwill
19,812

Intangibles
15,340

Other assets
14,834

Total assets acquired
199,072

Debt payable within one year
19,164

Accounts payable
45,159

Other current liabilities
15,877

Other liabilities
9,005

Total liabilities assumed
89,205

Noncontrolling interest
9,386

Net assets acquired including noncontrolling interest
$
100,481

Cash and cash equivalents, accounts receivable, prepaid expenses, other current assets, accounts payable and other current liabilities were stated at historical carrying values, which management believes approximates fair value given the short-term nature of these assets and liabilities. Inventories were recorded at fair value which is estimated for finished goods and work-in-process based upon the expected selling price less costs to complete, selling, and disposal costs, and a normal profit margin. Raw material inventory was recorded at historical carrying value as such value approximates the replacement cost. Deferred income taxes have been provided in the consolidated balance sheet based on the Company’s estimates of the tax versus book basis of the estimated fair value of the assets acquired and liabilities assumed. The Company has estimated the fair value of property, plant and equipment, intangibles, certain other assets, certain liabilities and noncontrolling interest based upon third party valuations, management’s estimates, available information and reasonable and supportable assumptions. Goodwill represents the excess of the acquisition price over the fair value of the identifiable assets acquired and liabilities assumed.
In the second quarter of 2016, the Company acquired a business in furtherance of the Company’s Shenya operations. The total purchase price of the acquisition was $5,478. The Company recognized $2,972 of goodwill as a result of this acquisition.
In the third quarter of 2016, the Company obtained control of its 51%-owned joint venture, Shenya Sealing (Guangzhou) Company Limited (“Guangzhou”) through an amendment of the joint venture governing document. This joint venture was previously accounted for as an investment under the equity method. The results of operations of Guangzhou are included in the Company’s consolidated financial statements from the date of consolidation, August 4, 2016, and reported within the Asia Pacific segment. Business combination accounting was completed, resulting in the recognition of intangible assets of $6,605 and goodwill of $9,741. See Note 7. “Goodwill and Intangibles” for additional information. There was no gain or loss recognized on the remeasurement of the Company’s equity method investment in Guangzhou.

17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Divestitures
In 2015, the Company completed the sale of its hard coat plastic exterior trim business, a non-core operation, to allow the Company to focus resources on its core product groups. The Company received proceeds of $33,500 and recognized a gain of $8,033, which is recorded in other operating loss (profit) in the consolidated statement of net income for the year ended December 31, 2015. This divestiture did not meet the discontinued operations criteria.
Subsequent Event
On February 7, 2018, the Company agreed to purchase the remaining 49% equity interest of Cooper-Standard INOAC Pte. Ltd., a fluid transfer systems joint venture, at a purchase price of $2,450.
5. Restructuring
On an ongoing basis, the Company evaluates its business and objectives to ensure that it is properly configured and sized based on changing market conditions. Accordingly, the Company has implemented several restructuring initiatives, including closure or consolidation of facilities throughout the world and the reorganization of its operating structure.
In January 2015, the Company announced its intention to further restructure its European manufacturing footprint based on anticipated market demands. This initiative will be substantially complete by December 31, 2018. The estimated cost of this initiative is $119,000 to $124,000, of which approximately $108,000 has been incurred to date. We expect to incur total employee separation costs of approximately $61,000 to $64,000, other related exit costs of approximately $57,000 to $59,000 and non-cash asset impairments related to restructuring activities of approximately $500.
The Company’s restructuring charges consist of severance, retention and outplacement services, and severance-related postemployment benefits (collectively, “employee separation costs”), other related exit costs and asset impairments related to restructuring activities.
Restructuring expense by segment for the years ended December 31, 2017, 2016 and 2015 was as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
North America
$
5,963

 
$
1,680

 
$
5,232

Europe
25,862

 
42,008

 
47,868

Asia Pacific
2,324

 
2,343

 
744

South America
988

 

 

Total
$
35,137

 
$
46,031

 
$
53,844

Restructuring activity for all restructuring initiatives for the years ended December 31, 2017 and 2016 was as follows:
 
Employee Separation Costs
 
Other Exit Costs
 
Total
Balance as of December 31, 2015
$
32,707

 
$
1,768

 
$
34,475

Expense
18,017

 
28,014

 
46,031

Cash payments
(28,665
)
 
(27,434
)
 
(56,099
)
Foreign exchange translation and other
(132
)
 
(37
)
 
(169
)
Balance as of December 31, 2016
$
21,927

 
$
2,311

 
$
24,238

Expense
16,245

 
18,892

 
35,137

Cash payments
(25,077
)
 
(14,473
)
 
(39,550
)
Foreign exchange translation and other
1,996

 
514

 
2,510

Balance as of December 31, 2017
$
15,091

 
$
7,244

 
$
22,335


18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

6. Property, Plant and Equipment
Property, plant and equipment consists of the following:
 
 
 December 31,
 
 Estimated
 
2017
 
2016
 
 Useful Lives
Land and improvements
$
73,419

 
$
71,002

 
 10 to 25 years
Buildings and improvements
305,231

 
265,824

 
 10 to 40 years
Machinery and equipment
1,022,279

 
864,337

 
 5 to 10 years
Construction in progress
198,358

 
153,924

 
 
 
$
1,599,287

 
$
1,355,087

 
 
Accumulated depreciation
(647,109
)
 
(522,818
)
 
 
Property, plant and equipment, net
$
952,178

 
$
832,269

 
 
    
Due to the deterioration of financial results and equipment no longer being utilized at certain locations, the Company impaired property, plant and equipment of $10,493, $1,273, and $13,630, for the years ended December 31, 2017, 2016 and 2015, respectively. Fair value of buildings and machinery and equipment was determined using market value and estimated salvage value, respectively, which was deemed the highest and best use of the assets. Further, due to the Company’s decision to divest two of its inactive European sites, the Company recorded impairment charges of $4,270 for the year ended December 31, 2017. Fair value was determined based on current real estate market conditions. A summary of these asset impairment charges is as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
North America
$
1,895

 
$

 
$

Europe
6,327

 

 
2,285

Asia Pacific
6,541

 
1,273

 

South America

 

 
11,345

Total
$
14,763

 
$
1,273

 
$
13,630

7. Goodwill and Intangibles
Goodwill
Changes in the carrying amount of goodwill by reportable operating segment for the years ended December 31, 2017 and 2016 were as follows:
 
 
North America
 
Europe
 
Asia Pacific
 
Total
Balance as of December 31, 2015
$
114,109

 
$
11,056

 
$
24,054

 
$
149,219

Acquisitions
7,175

 

 
2,972

 
10,147

Consolidation of joint venture

 

 
9,741

 
9,741

Foreign exchange translation
712

 
(303
)
 
(2,075
)
 
(1,666
)
Balance as of December 31, 2016
$
121,996

 
$
10,753

 
$
34,692

 
$
167,441

Acquisitions
178

 
236

 

 
414

Foreign exchange translation
221

 
1,465

 
2,311

 
3,997

Balance as of December 31, 2017
$
122,395

 
$
12,454

 
$
37,003

 
$
171,852

 

19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Intangible Assets
Intangible assets and accumulated amortization balances as of December 31, 2017 and 2016 were as follows:
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Customer relationships
$
135,927

 
$
(86,342
)
 
$
49,585

Developed technology
2,893

 
(2,893
)
 

Other
22,298

 
(2,792
)
 
19,506

Balance as of December 31, 2017
$
161,118

 
$
(92,027
)
 
$
69,091

 
 
 
 
 
 
Customer relationships
$
134,918

 
$
(73,088
)
 
$
61,830

Developed technology
8,762

 
(8,386
)
 
376

Other
20,965

 
(1,808
)
 
19,157

Balance as of December 31, 2016
$
164,645

 
$
(83,282
)
 
$
81,363

In 2016, the Company acquired intangible assets of $19,410 in conjunction with the AMI Acquisition. These consisted of $19,000 related to customer relationships and $410 related to patents with weighted average amortization periods of 12 and 15 years, respectively.
Also in 2016, the Company recorded intangible assets of $6,605 in conjunction with the consolidation of Guangzhou. These consisted of $1,313 related to customer relationships and $5,292 related to land-use right with weighted average amortization periods of approximately 7 and 45 years, respectively.
In 2015, the Company acquired intangible assets of $15,340 as a result of the Shenya acquisition. These consisted of $5,110 of customer relationships, $180 of patents and $10,050 of land-use rights with weighted average amortization periods of approximately 15, 3 and 30 years, respectively.
In 2015, the customer relationship intangible asset related to the Company’s South America segment was determined to be fully impaired as a result of the deterioration of the economic conditions in the region, resulting in an impairment charge of $7,981. Fair value was determined using the excess earnings method, based on the reporting unit’s cash flow expectations and consideration of the discount rate.
Estimated amortization expense for the next five years is shown in the table below:
                 
Year    
 
Expense    
2018
 
$
13,598

2019
 
13,572

2020
 
7,580

2021
 
3,316

2022
 
3,316

8. Debt
A summary of outstanding debt as of December 31, 2017 and 2016 was as follows:
 
December 31,
 
2017
 
2016
Senior Notes
$
393,684

 
$
393,060

Term Loan
330,781

 
332,827

Other borrowings
33,781

 
37,032

Total debt
$
758,246

 
$
762,919

Less current portion
(34,921
)
 
(33,439
)
Total long-term debt
$
723,325

 
$
729,480


20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

The principal maturities of debt, at nominal value, as of December 31, 2017 are as follows:
Year
 
Debt and Capital Lease Obligations
2018
 
$
35,964

2019
 
3,997

2020
 
3,810

2021
 
3,596

2022
 
3,414

Thereafter
 
719,600

Total
 
$
770,381

5.625% Senior Notes due 2026
On November 2, 2016, the Company’s wholly-owned subsidiary, CSA U.S. (the “Issuer”), issued $400,000 aggregate principal amount of its 5.625% Senior Notes due 2026 (the “Senior Notes”), pursuant to the Indenture, dated November 2, 2016 (the “Indenture”), by and among the Issuer, the Company and the other guarantors party thereto (collectively, the “Guarantors”) and U.S. Bank National Association, as trustee, in a transaction exempt from registration under Rule 144A and Regulation S of the Securities Act of 1933 (“the Securities Act”). The net proceeds from the Senior Notes were used to repay the non-extended term loan outstanding under the Term Loan Facility, defined below, and to pay fees and expenses related to the refinancing.
The Senior Notes are guaranteed by the Company, CS Intermediate HoldCo 1 LLC, as well as each of the Issuer’s wholly-owned existing or subsequently organized U.S. subsidiaries, subject to certain exceptions, to the extent such subsidiary guarantees the senior asset-based revolving credit facility (“ABL Facility”) and the senior term loan facility (“Term Loan Facility”).
The Issuer may redeem all or part of the Senior Notes at various points in time prior to maturity, as described in the Indenture. The Senior Notes mature on November 15, 2026. Interest on the Senior Notes is payable semi-annually in arrears in cash on May 15 and November 15 of each year.
Upon the occurrence of certain events constituting a Change of Control (as defined in the Indenture), the Issuer will be required to make an offer to repurchase all of the Senior Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any.
The Indenture contains certain covenants that limit the Issuer’s and its subsidiaries’ ability to, among other things, make restricted payments; sell assets; create or incur liens; enter into sale and lease-back transactions; and merge or consolidate with other entities. These covenants are subject to a number of important limitations and exceptions. The Indenture also provides for events of default, which, if any occur, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Notes to be due and payable immediately.
The Company paid approximately $7,055 of debt issuance costs in connection with the transaction. The debt issuance costs are being amortized into interest expense over the term of the Senior Notes. As of December 31, 2017 and 2016, the Company had $6,316 and $6,940, respectively, of unamortized debt issuance costs related to the Senior Notes, which is classified as a discount in the consolidated balance sheet.
ABL Facility
On November 2, 2016, CS Intermediate Holdco 1 LLC (“Parent”), CSA U.S. (the “U.S. Borrower”), Cooper-Standard Automotive Canada Limited (the “Canadian Borrower”), Cooper-Standard Automotive International Holdings B.V. (the “Dutch Borrower”, and, together with the U.S. Borrower and the Canadian Borrower, the “Borrowers”) and certain subsidiaries of the U.S. Borrower, entered into a $210,000 Third Amended and Restated Loan Agreement with certain lenders, which amended and restated the previous $180,000 senior secured asset-based revolving credit facility, dated as of April 4, 2014, among the Company, the U.S. Borrower, the Canadian Borrower, the lenders and other parties thereto.
The ABL Facility provides for an aggregate revolving loan availability of up to $210,000, subject to borrowing base availability, including a $100,000 letter of credit sub-facility and a $25,000 swing line sub-facility. The ABL Facility also provides for an uncommitted $100,000 incremental loan facility, for a potential total ABL Facility of $310,000 (if requested by the Borrowers and the lenders agree to fund such increase). No consent of any lender (other than those participating in the increase) is required to effect any such increase. On December 31, 2017, there were no borrowings under the ABL Facility, and subject to borrowing base availability, the Company had $206,935 in availability, less outstanding letters of credit of $8,542.

21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Maturity. Any borrowings under our ABL Facility will mature, and the commitments of the lenders under our ABL Facility will terminate, on November 2, 2021.
Borrowing Base. Loan and letter of credit availability under the ABL Facility is subject to a borrowing base, which at any time is limited to the lesser of: (A) the maximum facility amount (subject to certain adjustments) and (B) (i) up to 85% of eligible accounts receivable; plus (ii) the lesser of 70% of eligible inventory or 85% of the appraised net orderly liquidation value of eligible inventory; plus (iii) up to the lesser of $30.0 million and 75% of eligible tooling accounts receivable; minus reserves established by the Agent. The accounts receivable portion of the borrowing base is subject to certain formulaic limitations (including concentration limits). The inventory portion of the borrowing base is limited to eligible inventory, as determined by the Agent. The borrowing base is also subject to certain reserves, which are established by the Agent (which may include changes to the advance rates indicated above). Loan availability under the ABL Facility is apportioned as follows: $170,000 to the U.S. Borrower., which includes a $60,000 sublimit to the Dutch Borrower and $40,000 to the Canadian Borrower.
Guarantees; Security. The obligations of the U.S. Borrower, the Canadian Borrower and the Dutch Borrower under the ABL Facility, as well as certain cash management arrangements and interest rate, foreign currency or commodity swaps entered into by the such Borrowers and their subsidiaries, and certain credit lines entered into by non-U.S. subsidiaries, in each case with the lenders and their affiliates (collectively, “Additional ABL Secured Obligations”) are guaranteed on a senior secured basis by the Company and its U.S. subsidiaries (with certain exceptions), and the obligations of the Canadian Borrower under the ABL Facility and Additional ABL Secured Obligations of the Canadian Borrower and its Canadian subsidiaries are, in addition, guaranteed on a senior secured basis by the Canadian subsidiaries of the Canadian Borrower. The obligations under the ABL Facility and related guarantees are secured by (1) a first priority lien on all of each Borrower’s and each guarantor’s existing and future personal property consisting of accounts receivable, payment intangibles, inventory, documents, instruments, chattel paper and investment property, certain money, deposit accounts and securities accounts and certain related assets and proceeds of the foregoing, with various enumerated exceptions, including that: (i) the collateral owned by Canadian Borrower or any of its Canadian subsidiaries that are Guarantors only secure the obligations of Canadian Borrower and such subsidiaries arising under the ABL Facility and Additional ABL Secured Obligations and (ii) no liens have been granted on any assets or properties of the Dutch Borrower or any other non-U.S. subsidiaries of the Company (other than the Canadian Borrower and Canadian Guarantors, as otherwise specified above) in connection with the ABL Facility and (2) a second priority lien on all the capital stock in restricted subsidiaries directly held by the U.S. Borrower and each of the U.S. Guarantors, and equipment of the U.S. Borrower and the U.S.-domiciled guarantors and all other material personal property of the U.S. Borrower and the U.S.-domiciled guarantors.
Interest. Borrowings under the ABL Facility bear interest at a rate equal to, at the Borrowers’ option:
in the case of borrowings by the U.S. Borrower, LIBOR or the base rate plus, in each case, an applicable margin; or
in the case of borrowings by the Canadian Borrower, bankers’ acceptance (“BA”) rate, Canadian prime rate or Canadian base rate plus, in each case, an applicable margin; or
in the case of borrowings by the Dutch Borrower, LIBOR plus an applicable margin.
The initial applicable margin was 1.50% with respect to the LIBOR or Canadian BA rate-based borrowings and 0.50% with respect to U.S. base rate, Canadian prime rate and Canadian base rate borrowings, until April 1, 2017. The applicable margin may vary between 1.25% and 1.75% with respect to the LIBOR or Canadian BA rate-based borrowings and between 0.25% and 0.75% with respect to U.S. base rate, Canadian prime rate and Canadian base rate borrowings. The applicable margin is subject, in each case, to quarterly pricing adjustments (based on average facility availability).
Fees. The Borrowers are required to pay a fee in respect of committed but unutilized commitments. The ABL Facility also requires the payment of customary agency and administrative fees.
Voluntary Prepayments. The Borrowers are able to voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans, in each case, in whole or in part, at any time without premium or penalty (other than customary breakage and related reemployment costs with respect to repayments of LIBOR-based borrowings).
Covenants; Events of Default. The ABL Facility includes affirmative and negative covenants that will impose substantial restrictions on the Company’s financial and business operations, including its ability to incur and secure debt, make investments, sell assets, pay dividends or make acquisitions. The ABL Facility also includes a requirement to maintain a monthly fixed charge coverage ratio of no less than 1.0 to 1.0 when availability under the ABL Facility is less than specified levels. The ABL Facility also contains various events of default that are customary for comparable facilities.
Debt Issuance Costs. As of December 31, 2017 and 2016, the Company had $1,373 and $1,706, respectively, of unamortized debt issuance costs related to the ABL Facility.

22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Term Loan Facility
On November 2, 2016, CSA U.S., as borrower, entered into Amendment No. 1 to the Term Loan Facility. On May 2, 2017, the Company entered into Amendment No. 2 to the Term Loan Facility to modify the interest rate. In accordance with this amendment, borrowings under the Term Loan Facility bear interest, at the Company’s option, at either (1) with respect to Eurodollar rate loans, the greater of the applicable Eurodollar rate and 0.75%, plus 2.25% per annum, or (2) with respect to base rate loans, the base rate (which is the highest of the then-current federal funds rate plus 0.5%, the prime rate most recently announced by the administrative agent under the term loan, and the one-month Eurodollar rate plus 1.0%), plus 1.25% per annum. As a result of the amendment, the Company recognized a loss on refinancing and extinguishment of debt of $1,020 in the second quarter of 2017, which was due to the partial write off of new and unamortized debt issuance costs and unamortized original issue discount.
The Term Loan Facility provides for loans in an aggregate principal amount of $340,000. Subject to certain conditions, the Term Loan Facility, without the consent of the then-existing lenders (but subject to the receipt of commitments), may be expanded (or a new term loan or revolving facility added) by an amount that will not cause the consolidated secured net debt ratio to exceed 2.25 to 1.00 plus $400,000 plus any voluntary prepayments (including revolving facility and ABL Facility to the extent commitments are reduced) not funded from proceeds of long-term indebtedness.
Maturity. The Term Loan Facility matures on November 2, 2023, unless earlier terminated.
Guarantees. All obligations of the borrower under the Term Loan Facility are guaranteed jointly and severally on a senior secured basis by the direct parent company of the borrower and each existing and subsequently acquired or organized direct or indirect wholly owned U.S. restricted subsidiary of the borrower.
Security. The obligations under the Term Loan Facility are secured by (a) a first priority security interest (subject to permitted liens and other customary exceptions) on (i) all the capital stock in restricted subsidiaries directly held by the borrower and each of the guarantors, (ii) substantially all plant, material owned real property located in the U.S. and equipment of the borrower and the guarantors and (iii) all other personal property of the borrower and the guarantors, including, without limitation, accounts and investment property, contracts, patents, copyrights, trademarks, other general intangibles, intercompany notes and proceeds of the foregoing, and (b) a second priority security interest (subject to permitted liens and other customary exceptions) in accounts receivable of the borrowers and the guarantors arising from the sale of goods and services, inventory, tax refunds, cash, deposit accounts and books and records related to the foregoing and, in each case, proceeds thereof, in each case, excluding certain collateral and subject to certain limitations.
Interest. Borrowings under the Term Loan Facility bear interest, at the Company’s option, at either (1) with respect to Eurodollar rate loans, the greater of the applicable Eurodollar rate and 0.75%, plus 2.25% per annum, or (2) with respect to base rate loans, the base rate (which is the highest of the then-current federal funds rate plus 0.5%, the prime rate most recently announced by the administrative agent under the term loan, and the one-month Eurodollar rate plus 1.0%), plus 1.25% per annum.
Voluntary Prepayments. The borrower may voluntarily prepay loans in whole or in part, with prior notice and without premium or penalty, subject to the actual LIBOR breakage costs, payment of accrued and unpaid interest, and customary limitations as to minimum amounts of prepayments.
Covenants. The Term Loan Facility contains incurrence-based negative covenants customary for high yield senior secured debt securities, including, but not limited to, restrictions on the ability of the borrower and its restricted subsidiaries to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, pay dividends or make other restricted payments, sell or otherwise transfer assets, or enter into transactions with affiliates. These negative covenants are subject to exceptions, qualifications and certain carveouts.
Events of Default. The Term Loan Facility provides that, upon the occurrence of certain events of default, obligations thereunder may be accelerated. Such events of default include payment defaults to the lenders, material inaccuracies of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, voluntary and involuntary bankruptcy proceedings, material money judgments, material pension-plan events, certain change of control events and other customary events of default.
Debt Issuance Costs. As of December 31, 2017 and 2016, the Company had $3,537 and $4,352, respectively, of unamortized debt issuance costs and $2,281 and $2,821, respectively, of unamortized original issue discount related to the Term Loan Facility. Both the debt issuance costs and the original issue discount are amortized into interest expense over the term of the Term Loan Facility.

23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Debt Covenants 
The Company was in compliance with all covenants of the ABL Facility, Term Loan Facility and Senior Notes, as of December 31, 2017.
Repayment of the Term Loan Facility 
On November 2, 2016, the Company repaid the non-extended term loan outstanding under the Term Loan Facility of $393,125. As a result of the repayment, the Company recognized a loss on refinancing of $5,104, of which $4,071 was paid in cash, which was primarily due to the write off of unamortized original issue discount and debt issuance costs.
Other
Other borrowings as of December 31, 2017 and 2016 reflect borrowings under capital leases, local bank lines and accounts receivable factoring sold in on-balance sheet arrangements classified in debt payable within one year on the consolidated balance sheet.
9. Fair Value Measurements and Financial Instruments
Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy is utilized, which prioritizes the inputs used in measuring fair value as follows:
Level 1:
Observable inputs such as quoted prices in active markets;
Level 2:
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3:
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Items Measured at Fair Value on a Recurring Basis
Estimates of the fair value of foreign currency and interest rate derivative instruments are determined using exchange traded prices and rates. The Company also considers the risk of non-performance in the estimation of fair value, and includes an adjustment for non-performance risk in the measure of fair value of derivative instruments. In certain instances where market data is not available, the Company uses management judgment to develop assumptions that are used to determine fair value. Fair value measurements and the fair value hierarchy level for the Company’s liabilities measured or disclosed at fair value on a recurring basis as of December 31, 2017 and 2016, was as follows:
 
 
December 31, 2017
 
December 31, 2016
 
Input
Forward foreign exchange contracts - other current assets
 
$
761

 
$
764

 
Level 2
Forward foreign exchange contracts - accrued liabilities
 
(2,363
)
 
(535
)
 
Level 2
Interest rate swaps - accrued liabilities
 
(515
)
 
(2,458
)
 
Level 2
Interest rate swaps - other liabilities
 

 
(661
)
 
Level 2
Items Measured at Fair Value on a Nonrecurring Basis
In addition to items that are measured at fair value on a recurring basis, the Company measures certain assets and liabilities at fair value on a nonrecurring basis, which are not included in the table above. As these nonrecurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy. For further information on assets and liabilities measured at fair value on a nonrecurring basis see Note 2. “Summary of Significant Accounting Policies,” Note 4. “Acquisitions and Divestitures” and Note 6. “Property, Plant and Equipment.”

24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Items Not Carried At Fair Value
Fair values of the Company’s debt instruments were as follows:
 
December 31, 2017
 
December 31, 2016
Aggregate fair value
$
749,463

 
$
735,850

Aggregate carrying value (1)
736,600

 
740,000

(1) Excludes unamortized debt issuance costs and unamortized original issue discount.
Fair values were based on quoted market prices and are classified within Level 1 of the fair value hierarchy.
Derivative Instruments and Hedging Activities
The Company is exposed to fluctuations in foreign currency exchange rates, interest rates and commodity prices. The Company enters into derivative instruments primarily to hedge portions of its forecasted foreign currency denominated cash flows and designates these derivative instruments as cash flow hedges in order to qualify for hedge accounting. Gains or losses on derivative instruments resulting from hedge ineffectiveness are reported in earnings.
The Company formally documents its hedge relationships, including the identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the cash flow hedges. The Company also formally assesses whether a cash flow hedge is highly effective in offsetting changes in the cash flows of the hedged item. Derivatives are recorded at fair value in other current assets, other assets, accrued liabilities and other long-term liabilities. For a cash flow hedge, the effective portion of the change in fair value of the derivative is recorded in accumulated other comprehensive income (loss) (“AOCI”) in the consolidated balance sheet and reclassified into earnings when the underlying hedged transaction is realized. The realized gains and losses are recorded on the same line as the hedged transaction in the consolidated statements of net income.
The Company is exposed to credit risk in the event of nonperformance by its counterparties on its derivative financial instruments. The Company mitigates this credit risk exposure by entering into agreements directly with major financial institutions with high credit standards that are expected to fully satisfy their obligations under the contracts.
Cash Flow Hedges
Forward Foreign Exchange Contracts – The Company uses forward contracts to mitigate the potential volatility to earnings and cash flow arising from changes in currency exchange rates that impact the Company’s foreign currency transactions. The principal currencies hedged by the Company include various European currencies, the Canadian Dollar, the Mexican Peso, and the Brazilian Real. As of December 31, 2017, the notional amount of these contracts was $165,559 and consisted of hedges of transactions up to December 2018.
Interest Rate Swaps – The Company uses interest rate swap transactions to manage cash flow variability associated with its variable rate Term Loan Facility. The interest rate swap contracts, which fix the interest payments of variable rate debt instruments, are used to manage exposure to fluctuations in interest rates. As of December 31, 2017, the notional amount of these contracts was $150,000 with maturities through September 2018. The fair market value of all outstanding interest rate swap and other derivative contracts is subject to changes in value due to changes in interest rates.
Pretax amounts related to the Company’s cash flow hedges that were recognized in other comprehensive income (“OCI”) were as follows:
 
Gain (Loss) Recognized in OCI
 
Year Ended December 31,
 
2017
 
2016
Forward foreign exchange contracts
$
814

 
$
(3,295
)
Interest rate swaps
198

 
(1,638
)
Total
$
1,012

 
$
(4,933
)

25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Pretax amounts related to the Company’s cash flow hedges that were reclassified from AOCI were as follows:
 
 
 
Gain (Loss) Reclassified from AOCI to Income (Effective Portion)
 
Gain (Loss) Reclassified from AOCI to Income (Ineffective Portion)
 
 
 
Year Ended December 31,
 
Classification
 
2017
 
2016
 
2017
 
2016
Forward foreign exchange contracts
Cost of products sold
 
$
2,687

 
$
(2,678
)
 
$

 
$

Interest rate swaps
Interest expense, net of interest income
 
(2,398
)
 
(3,188
)
 
353

 
(562
)
Total
 
 
$
289

 
$
(5,866
)
 
$
353

 
$
(562
)
The amount of losses to be reclassified from AOCI into income in the next twelve months related to the interest rate swap is expected to be approximately $515.
10. Accounts Receivable Factoring
As a part of its working capital management, the Company previously sold certain receivables through third party financial institutions in on- and off-balance sheet arrangements. In December 2017, the Company completed the transition from multiple factoring providers to a pan-European program under a single third party financial institution (the “Factor”). The amount sold varies each month based on the amount of underlying receivables and cash flow needs of the Company. These are permitted transactions under the Company’s credit agreements governing the ABL Facility and Term Loan Facility and the indenture governing the Senior Notes. Costs incurred on the sale of receivables are recorded in other expense, net and interest expense, net of interest income in the consolidated statements of net income. The sale of receivables under this contract is considered an off-balance sheet arrangement to the Company and is accounted for as a true sale and is excluded from accounts receivable in the consolidated balance sheet. Receivables sold prior to December 2017 that were considered on-balance sheet arrangements were accounted for as secured borrowings and were recorded in debt payable within one year.
Amounts outstanding under receivable transfer agreements entered into by various locations as of the period end were as follows:
 
December 31, 2017
 
December 31, 2016
Off-balance sheet arrangements
$
96,588

 
$
56,936

On-balance sheet arrangements
$

 
$
5,258

Accounts receivable factored and related costs throughout the period were as follows:
 
Off-Balance Sheet Arrangements
 
On-Balance Sheet Arrangements
 
Year Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
2017
 
2016
Accounts receivable factored
$
544,060

 
$
507,321

 
$
23,794

 
$
24,053

 
Off-Balance Sheet Arrangements
 
On-Balance Sheet Arrangements
 
Year Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Costs
$
1,904

 
$
1,575

 
$
2,144

 
$
99

 
$
257

 
$
179

The Company continues to service sold receivables and acts as collection agent for the Factor. As of December 31, 2017, cash collections on behalf of the Factor that have yet to be remitted were $36,248 and are reflected in cash and cash equivalents in the consolidated balance sheet.
11. Pension
The Company maintains defined benefit pension plans covering employees located in the United States as well as certain international locations. The majority of these plans are frozen, and all are closed to new employees. Benefits generally are based

26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

on compensation, length of service and age for salaried employees and on length of service for hourly employees. The Company’s policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements and contribute amounts deductible for United States federal income tax purposes or amounts required by local statute.
The Company also sponsors voluntary defined contribution plans for certain salaried and hourly U.S. employees of the Company. The Company matches contributions of participants, up to various limits in all plans. The Company also sponsors retirement plans that include Company non-elective contributions. Non-elective and matching contributions under these plans totaled $16,747, $16,581 and $16,296 for the years ended December 31, 2017, 2016 and 2015, respectively.
Information related to the Company’s defined benefit pension plans was as follows:
 
 
 Year Ended December 31,
 
2017
 
2016
 
 U.S.
 
 Non-U.S.
 
 U.S.
 
 Non-U.S.
Change in projected benefit obligation:
 
 
 
 
 
 
 
Projected benefit obligations at beginning of period
$
303,446

 
$
191,184

 
$
306,760

 
$
179,896

Service cost
814

 
4,025

 
807

 
3,346

Interest cost
11,700

 
4,341

 
12,580

 
5,041

Actuarial loss
17,230

 
4,450

 
3,633

 
17,582

Benefits paid
(17,492
)
 
(7,048
)
 
(20,334
)
 
(7,735
)
Foreign exchange translation

 
20,809

 

 
(5,085
)
Settlements

 
(20,667
)
 

 
(1,950
)
Other

 
75

 

 
89

Projected benefit obligations at end of period
$
315,698

 
$
197,169

 
$
303,446

 
$
191,184

 
 
 
 
 
 
 
 
Change in plan assets:
 
 
 
 
 
 
 
Fair value of plan assets at beginning of period
$
253,483

 
$
63,220

 
$
248,387

 
$
64,940

Actual return on plan assets
35,233

 
5,039

 
18,109

 
2,560

Employer contributions
4,543

 
7,238

 
7,321

 
6,969

Benefits paid
(17,492
)
 
(7,048
)
 
(20,334
)
 
(7,735
)
Foreign exchange translation

 
4,008

 

 
(1,753
)
Settlements

 
(20,431
)
 

 
(1,761
)
Fair value of plan assets at end of period
$
275,767

 
$
52,026

 
$
253,483

 
$
63,220

 
 
 
 
 
 
 
 
Funded status of the plans
$
(39,931
)
 
$
(145,143
)
 
$
(49,963
)
 
$
(127,964
)

 
December 31, 2017
 
December 31, 2016
 
 U.S.
 
 Non-U.S.
 
 U.S.
 
 Non-U.S.
Amounts recognized in the consolidated balance sheet:
 
 
 
 
 
 
 
Other assets
$

 
$
405

 
$

 
$

Accrued liabilities
(1,011
)
 
(4,295
)
 
(1,030
)
 
(3,947
)
Pension benefits (long term)
(38,920
)
 
(141,253
)
 
(48,933
)
 
(124,017
)

27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Pre-tax amounts included in accumulated other comprehensive loss that have not yet been recognized in net periodic benefit (income) cost as of December 31, 2017 and 2016 were as follows:
 
December 31, 2017
 
December 31, 2016
 
 U.S.
 
 Non-U.S.
 
 U.S.
 
 Non-U.S.
Prior service costs
$
(136
)
 
$
(1,206
)
 
$
(156
)
 
$
(1,273
)
Actuarial losses
$
(74,711
)
 
$
(48,491
)
 
$
(78,552
)
 
$
(49,862
)
Pre-tax amounts included in accumulated other comprehensive loss that are expected to be recognized in net periodic benefit cost during the year ended December 31, 2018 are as follows:
 
 U.S.
 
 Non-U.S.
Prior service costs
$
(20
)
 
$
(240
)
Actuarial losses
$
(2,383
)
 
$
(2,553
)
The Company uses the corridor approach when amortizing actuarial gains or losses. Under the corridor approach, net unrecognized actuarial losses in excess of 10% of the greater of i) the projected benefit obligation or ii) the fair value of plan assets are amortized over future periods. 
 
The accumulated benefit obligation for all domestic and international defined benefit pension plans was $315,698 and $185,179 as of December 31, 2017 and $303,446 and $179,854 as of December 31, 2016, respectively. As of December 31, 2017, the fair value of plan assets for one of the Company’s defined benefit plans exceeded the projected benefit obligation of $21,993 by $405.
The components of net periodic benefit (income) cost for the Company’s defined benefit plans were as follows:
 
 Year Ended December 31,
 
2017
 
2016
 
2015
 
 U.S.
 
 Non-U.S.
 
 U.S.
 
 Non-U.S.
 
 U.S.
 
 Non-U.S.
Service cost
$
814

 
$
4,025

 
$
807

 
$
3,346

 
$
926

 
$
3,489

Interest cost
11,700

 
4,341

 
12,580

 
5,041

 
12,334

 
5,084

Expected return on plan assets
(16,012
)
 
(2,617
)
 
(15,835
)
 
(3,133
)
 
(17,685
)
 
(3,373
)
Amortization of prior service cost and actuarial loss
1,871

 
2,898

 
1,714

 
2,186

 
1,110

 
2,666

Settlements

 
6,427

 

 
538

 

 
132

Other

 

 

 

 

 
221

Net periodic benefit (income) cost
$
(1,627
)
 
$
15,074

 
$
(734
)
 
$
7,978

 
$
(3,315
)
 
$
8,219

U.K. Pension Settlement
During 2016, the Company undertook an initiative to de-risk pension obligations in the U.K. by purchasing a bulk annuity policy designed to match the liabilities of the plan, and subsequently entered into a wind-up process. During the year ended December 31, 2017, the Company completed the wind-up process, resulting in a non-cash settlement charge of $5,717 and administrative expenses of $185, both of which are recorded in selling, administration & engineering expenses in the consolidated statements of net income. As a result of the settlement, the Company’s overall projected benefit obligation as of December 31, 2016 was reduced by $17,100.
Plan Assumptions
Weighted average assumptions used to determine benefit obligations as of December 31, 2017 and 2016 were as follows:
 
 
2017
 
2016
 
 U.S.
 
 Non-U.S.
 
 U.S.
 
 Non-U.S.
Discount rate
3.55
%
 
2.17
%
 
3.99
%
 
2.23
%
Rate of compensation increase
N/A

 
3.17
%
 
N/A

 
3.15
%

28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Weighted average assumptions used to determine net periodic benefit costs for the years ended December 31, 2017, 2016 and 2015 were as follows:
 
2017
 
2016
 
2015
 
 U.S.
 
 Non-U.S.
 
 U.S.
 
 Non-U.S.
 
 U.S.
 
 Non-U.S.
Discount rate
3.99
%
 
2.23
%
 
4.24
%
 
2.80
%
 
3.94
%
 
2.66
%
Expected return on plan assets
6.60
%
 
5.94
%
 
6.60
%
 
4.39
%
 
6.70
%
 
4.80
%
Rate of compensation increase
N/A

 
3.15
%
 
N/A

 
3.15
%
 
N/A

 
3.11
%
To develop the expected return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. As the U.S. plans are frozen, the rate of compensation increase was not applicable in determining net periodic benefit cost.
Plan Assets
The goals and investment objectives of the asset strategy are to ensure that there is an adequate level of assets to meet benefit obligations to participants and retirees over the life of the participants and maintain liquidity in the plan assets sufficient to cover monthly benefit obligations. Risk is managed by investing in a broad range of investment vehicles, e.g., equity mutual funds, bond mutual funds, real estate mutual funds, hedge funds, etc. There are no equity securities of the Company in the equity asset category.
Investments in equity securities and debt securities are valued at fair value using a market approach and observable inputs, such as quoted market prices in active markets (Level 1). Investments in balanced funds are valued at fair value using a market approach and inputs that are primarily directly or indirectly observable (Level 2). Investments in equity securities and balanced funds in which the Company holds participation units in a fund, the net asset value of which is based on the underlying assets and liabilities of the respective fund, are considered an unobservable input (Level 3). Investments in real estate funds are primarily valued at net asset value depending on the investment.
The fair value of the Company’s pension plan assets by category using the three-level hierarchy (see Note 9. “Fair Value Measurements and Financial Instruments”) as of December 31, 2017 and 2016 was as follows:
2017
 
Level 1
 
Level 2
 
Level 3
 
Total
Equity funds
 
$
41,080

 
$
22,419

 
$

 
$
63,499

Equity funds measured at net asset value (1)
 

 

 

 
76,405

Bond funds
 
34,997

 
29,607

 

 
64,604

Bond funds measured at net asset value (1)
 

 

 

 
69,823

Real estate measured at net asset value (1)
 

 

 

 
15,656

Hedge funds
 
3,603

 

 
110

 
3,713

Hedge funds measured at net asset value (1)
 

 

 

 
29,195

Insurance contracts
 

 

 

 

Cash and cash equivalents
 
4,898

 

 

 
4,898

Total
 
$
84,578

 
$
52,026

 
$
110

 
$
327,793


29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

 
2016
 
Level 1
 
Level 2
 
Level 3
 
Total
Equity funds
 
$
36,710

 
$
18,531

 
$

 
$
55,241

Equity funds measured at net asset value (1)
 

 

 

 
76,961

Bond funds
 
35,339

 
28,070

 

 
63,409

Bond funds measured at net asset value (1)
 

 

 

 
47,123

Real estate measured at net asset value (1)
 

 

 

 
14,472

Hedge funds
 
339

 

 
341

 
680

Hedge funds measured at net asset value (1)
 

 

 

 
30,676

Insurance contracts
 

 

 
16,113

 
16,113

Cash and cash equivalents
 
12,028

 

 

 
12,028

Total
 
$
84,416

 
$
46,601

 
$
16,454

 
$
316,703

(1) In accordance with ASC 820, investments measured at fair value using the net asset value (“NAV”) practical expedient are excluded from the fair value hierarchy. These fair value amounts are presented in this table to allow for reconciliation to the fair value of plan assets presented within the statement of financial position.
The reconciliation for which Level 3 inputs were used in determining fair value is as follows:
Beginning balance of assets classified as Level 3 as of January 1, 2016
$
4,709

Purchases, sales and settlements, net
(4,380
)
Total gain
12

Transfers into (out of) Level 3
16,113

Ending balance of assets classified as Level 3 as of December 31, 2016
$
16,454

Purchases, sales and settlements, net
(16,348
)
Total gain
4

Transfers into (out of) Level 3

Ending balance of assets classified as Level 3 as of December 31, 2017
$
110

Expected Future Benefit Payments
The Company estimates its benefit payments for its domestic and foreign pension plans during the next ten years to be as follows: 
Years Ending December 31,
 U.S
 
 Non-U.S
 
 Total
2018
$
21,183

 
$
6,337

 
$
27,520

2019
18,893

 
8,168

 
27,061

2020
18,875

 
7,908

 
26,783

2021
19,035

 
8,737

 
27,772

2022
19,236

 
10,767

 
30,003

2023-2027
95,413

 
57,731

 
153,144

Contributions
The Company estimates it will make minimum funding cash contributions of approximately $8,500 to its U.S. pension plans and funding cash contributions of approximately $6,210 to its non-U.S. pension plans in 2018.
12. Postretirement Benefits Other Than Pensions
The Company provides certain retiree health care and life insurance benefits covering certain U.S. salaried and hourly employees and employees in Canada. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. The Company’s policy is to fund the cost of these postretirement benefits as these benefits become payable.

30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)

Information related to the Company’s postretirement benefit plans was as follows:
 
 
 Year Ended December 31,
 
2017
 
2016
 
 U.S.
 
 Non-U.S.
 
 U.S.
 
 Non-U.S.
Change in benefit obligation:
 
 
 
 
 
 
 
Benefit obligations at beginning of year
$
33,877

 
$
18,350

 
$
33,955

 
$
16,455

Service cost
314

 
423

 
361

 
372

Interest cost
1,297

 
693

 
1,383

 
678

Actuarial loss
1,021

 
4,002

 
112

 
926

Benefits paid
(1,690
)
 
(651
)
 
(1,939
)
 
(601
)
Other
5

 

 
5

 

Foreign currency exchange rate effect

 
1,425

 

 
520

Benefit obligation at end of year
$
34,824

 
$
24,242

 
$
33,877

 
$
18,350