Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  ___________________________________ 
FORM 10-Q
  ___________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
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)
(248) 596-5900
(Registrant’s telephone number, including area code)
 ______________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.001 per share
 
CPS
 
New York Stock Exchange
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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ý    No  ¨
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
ý
Accelerated filer
¨
Non-accelerated filer
¨
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  ý
As of April 26, 2019, there were 17,522,372 shares of the registrant’s common stock, $0.001 par value, outstanding.




COOPER-STANDARD HOLDINGS INC.
Form 10-Q
For the period ended March 31, 2019
 
 
 
Page
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
 
 
Item 2.
Item 6.


2



PART I — FINANCIAL INFORMATION
Item 1.         Financial Statements
COOPER-STANDARD HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollar amounts in thousands except per share amounts) 
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Sales
 
$
880,038

 
$
967,391

Cost of products sold
 
762,490

 
796,511

Gross profit
 
117,548

 
170,880

Selling, administration & engineering expenses
 
86,974

 
80,440

Amortization of intangibles
 
3,775

 
3,406

Restructuring charges
 
17,715

 
7,125

Operating profit
 
9,084

 
79,909

Interest expense, net of interest income
 
(11,932
)
 
(9,800
)
Equity in earnings of affiliates
 
2,358

 
1,687

Loss on refinancing and extinguishment of debt
 

 
(770
)
Other expense, net
 
(796
)
 
(1,719
)
(Loss) income before income taxes
 
(1,286
)
 
69,307

Income tax expense
 
2,331

 
11,891

Net (loss) income
 
(3,617
)
 
57,416

Net loss (income) attributable to noncontrolling interests
 
157

 
(624
)
Net (loss) income attributable to Cooper-Standard Holdings Inc.
 
$
(3,460
)
 
$
56,792

 
 
 
 
 
(Loss) earnings per share:
 
 
 
 
Basic
 
$
(0.20
)
 
$
3.16

Diluted
 
$
(0.20
)
 
$
3.07

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


3



COOPER-STANDARD HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollar amounts in thousands) 
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Net (loss) income
 
$
(3,617
)
 
$
57,416

Other comprehensive income:
 
 
 
 
Currency translation adjustment
 
2,219

 
12,692

Benefit plan liabilities adjustment, net of tax
 
1,387

 
1,307

Fair value change of derivatives, net of tax
 
1,253

 
3,612

Other comprehensive income, net of tax
 
4,859

 
17,611

Comprehensive income
 
1,242

 
75,027

Comprehensive income attributable to noncontrolling interests
 
(247
)
 
(1,573
)
Comprehensive income attributable to Cooper-Standard Holdings Inc.
 
$
995

 
$
73,454

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


4



COOPER-STANDARD HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except share amounts)
 
March 31, 2019
 
December 31, 2018
 
(unaudited)
 

Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
262,169

 
$
264,980

Accounts receivable, net
480,828

 
418,607

Tooling receivable
162,769

 
141,106

Inventories
186,272

 
175,572

Prepaid expenses
33,206

 
36,878

Other current assets
104,200

 
108,683

Assets held for sale
122,966

 
103,898

Total current assets
1,352,410

 
1,249,724

Property, plant and equipment, net
990,665

 
984,241

Operating lease right-of-use assets
92,508



Goodwill
142,106

 
143,681

Intangible assets, net
95,611

 
99,602

Other assets
141,522

 
145,855

Total assets
$
2,814,822

 
$
2,623,103

 
 
 
 
Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Debt payable within one year
$
169,087

 
$
101,323

Accounts payable
452,979

 
452,320

Payroll liabilities
108,236

 
92,604

Accrued liabilities
107,707

 
98,907

Current operating lease liabilities
26,216



Liabilities held for sale
75,830

 
71,195

Total current liabilities
940,055

 
816,349

Long-term debt
738,077

 
729,805

Pension benefits
134,863

 
138,771

Postretirement benefits other than pensions
41,875

 
40,901

Long-term operating lease liabilities
68,905



Other liabilities
36,945

 
37,775

Total liabilities
1,960,720

 
1,763,601

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; 19,587,709 shares issued and 17,521,900 shares outstanding as of March 31, 2019, and 19,620,546 shares issued and 17,554,737 outstanding as of December 31, 2018
17

 
17

Additional paid-in capital
499,458

 
501,511

Retained earnings
565,864

 
576,025

Accumulated other comprehensive loss
(241,633
)
 
(246,088
)
Total Cooper-Standard Holdings Inc. equity
823,706

 
831,465

Noncontrolling interests
30,396

 
28,037

Total equity
854,102

 
859,502

Total liabilities and equity
$
2,814,822

 
$
2,623,103

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

5



COOPER-STANDARD HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
(Dollar amounts in thousands except share amounts)

 
Total Equity
 
Common Shares
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Cooper-Standard Holdings Inc. Equity
 
Noncontrolling Interests
 
Total Equity
Balance as of December 31, 2018
17,554,737

 
$
17

 
$
501,511

 
$
576,025

 
$
(246,088
)
 
$
831,465

 
$
28,037

 
$
859,502

Cumulative effect of change in accounting principle

 

 

 
(2,607
)
 

 
(2,607
)
 

 
(2,607
)
Repurchase of common stock
(118,774
)
 

 
(2,057
)
 
(3,880
)
 

 
(5,937
)
 

 
(5,937
)
Share-based compensation, net
85,937

 

 
4

 
(214
)
 

 
(210
)
 

 
(210
)
Contribution from noncontrolling interests

 

 

 

 

 

 
2,112

 
2,112

Net (loss) income

 

 

 
(3,460
)
 

 
(3,460
)
 
(157
)
 
(3,617
)
Other comprehensive income

 

 

 

 
4,455

 
4,455

 
404

 
4,859

Balance as of March 31, 2019
17,521,900

 
$
17

 
$
499,458

 
$
565,864

 
$
(241,633
)
 
$
823,706

 
$
30,396

 
$
854,102


 
Total Equity
 
Common Shares
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Cooper-Standard Holdings Inc. Equity
 
Noncontrolling Interests
 
Total Equity
Balance as of December 31, 2017
17,914,599

 
$
18

 
512,815

 
$
511,367

 
$
(197,631
)
 
$
826,569

 
$
28,520

 
$
855,089

Cumulative effect of change in accounting principle

 

 

 
8,639

 
(8,639
)
 

 

 

Share-based compensation, net
151,288

 

 
(73
)
 
(4,714
)
 

 
(4,787
)
 

 
(4,787
)
Purchase of noncontrolling interest

 

 
(2,682
)
 

 

 
(2,682
)
 
312

 
(2,370
)
Net income

 

 

 
56,792

 

 
56,792

 
624

 
57,416

Other comprehensive income

 

 

 

 
16,662

 
16,662

 
949

 
17,611

Balance as of March 31, 3018
18,065,887

 
$
18

 
$
510,060

 
$
572,084

 
$
(189,608
)
 
$
892,554

 
$
30,405

 
$
922,959

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

6



COOPER-STANDARD HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollar amounts in thousands)
 
 
Three Months Ended March 31,
 
2019
 
2018
Operating Activities:
 
 
 
Net (loss) income
$
(3,617
)
 
$
57,416

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation
32,830

 
32,853

Amortization of intangibles
3,775

 
3,406

Share-based compensation expense
3,186

 
3,875

Equity in earnings of affiliates, net of dividends related to earnings
2,559

 
2,821

Loss on refinancing and extinguishment of debt

 
770

Other
531

 
1,242

Changes in operating assets and liabilities
(41,112
)
 
(112,939
)
Net cash used in operating activities
(1,848
)
 
(10,556
)
Investing activities:
 
 
 
Capital expenditures
(59,633
)
 
(67,858
)
Acquisition of businesses, net of cash acquired
(452
)
 
(3,223
)
Proceeds from sale of fixed assets and other
102

 
889

Net cash used in investing activities
(59,983
)
 
(70,192
)
Financing activities:
 
 
 
Principal payments on long-term debt
(1,012
)
 
(887
)
Increase (decrease) in short-term debt, net
65,791

 
(1,123
)
Purchase of noncontrolling interests

 
(2,450
)
Repurchase of common stock
(6,550
)
 

Taxes withheld and paid on employees' share-based payment awards
(2,706
)
 
(9,621
)
Contribution from noncontrolling interest and other
1,827

 
(881
)
Net cash provided by (used in) financing activities
57,350

 
(14,962
)
Effects of exchange rate changes on cash, cash equivalents and restricted cash
1,477

 
(69
)
Changes in cash, cash equivalents and restricted cash
(3,004
)
 
(95,779
)
Cash, cash equivalents and restricted cash at beginning of period
267,399

 
518,461

Cash, cash equivalents and restricted cash at end of period
$
264,395

 
$
422,682

 
 
 
 
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:
 
Balance as of
 
March 31, 2019
 
December 31, 2018
Cash and cash equivalents
$
262,169

 
$
264,980

Restricted cash included in other current assets
20

 
18

Restricted cash included in other assets
2,206

 
2,401

Total cash, cash equivalents and restricted cash shown in the statement of cash flows
$
264,395

 
$
267,399

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

7

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


1. Overview
Basis of Presentation
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, and fluid transfer 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.
During the first quarter of 2019 and in prior periods, the Company also operated an anti-vibration systems product line. Subsequent to the end of the first quarter, on April 1, 2019, the Company completed the divestiture of its anti-vibration systems product line. See Note 3. "Acquisitions and Divestitures" and Note 4. "Assets Held for Sale".
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”), as filed with the SEC. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. These financial statements include all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of the Company. The operating results for the interim period ended March 31, 2019 are not necessarily indicative of results for the full year. In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
2. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
ASU 2016-02, Leases (Topic 842)
On January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) 842, Leases, and all related amendments using the modified retrospective method whereby the cumulative effect of adopting the standard was recognized in equity at the date of initial application. Comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The most prominent among the changes in the standard is the recognition of right-of-use assets and lease liabilities for all leases (except for short-term leases). The Company made a policy election for all asset classes to exclude the balance sheet recognition of leases with a lease term, at lease commencement, of 12 months or less and no purchase option reasonably certain to be exercised. 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. The new standard resulted in a material increase in right-of-use assets and lease liabilities on the Company’s condensed consolidated balance sheet beginning in 2019, and had no impact on our condensed consolidated income statement or to cash from (used in) operating, financing or investing activities on our condensed consolidated cash flow statements.

8

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

The difference between the lease assets and lease liabilities was recorded as an adjustment to the opening balance of retained earnings. The cumulative effects of the changes made to the Company’s condensed consolidated balance sheet as of January 1, 2019 were as follows:
 
Balance as of December 31, 2018
 
Adjustments due to adoption of ASC 842
 
Balance as of January 1, 2019
 
 
 
 
 
 
Prepaid expenses
$
36,878

 
$
(2,704
)
 
$
34,174

Assets held for sale
103,898

 
9,559

 
113,457

Operating lease right-of-use assets

 
102,268

 
102,268

Accrued liabilities
98,907

 
(336
)
 
98,571

Current operating lease liabilities

 
27,229

 
27,229

Liabilities held for sale
71,195

 
9,561

 
80,756

Long-term operating lease liabilities

 
75,276

 
75,276

Retained earnings
576,025

 
(2,607
)
 
573,418

The following table summarizes the impact of adopting the new standard on the Company’s condensed consolidated balance sheet as of March 31, 2019.
 
March 31, 2019
Assets held for sale
$
9,136

Operating lease right-of-use assets
92,508

Current operating lease liabilities
26,216

Liabilities held for sale
8,884

Long-term operating lease liabilities
68,905

The Company elected the package of practical expedients on existing leases as of the effective date which permits the Company to carry forward lease classification and not reassess existing contracts in order to determine if the contracts contain a lease. The Company did not elect the hindsight practical expedient. Additionally, the Company elected the practical expedient to not reassess whether any expired or existing land easements contain leases.

9

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

The Company adopted the following Accounting Standard Updates (“ASU”) during the three months ended March 31, 2019, which related to the fair value and financial instruments footnote disclosures:
Standard
Description
Impact
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.
Adoption resulted in the removal of the disclosure of the ineffective portion of the gain (loss) reclassified from Accumulated Other Comprehensive Income (“AOCI”) to income.
January 1, 2019
ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting
Adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate risk hedging strategies for both risk management and hedge accounting purposes.
No impact
January 1, 2019
Recently Issued Accounting Pronouncements
The Company considered the recently issued accounting pronouncement summarized as follows, which could have a material impact on its condensed consolidated financial statements or disclosures:
Standard
Description
Impact
Effective Date
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement

This amendment modifies the disclosure requirements for ASC Topic 820 by removing and modifying existing disclosure requirements as well as adding new disclosures.

The Company is undertaking a comprehensive evaluation of the impacts of adopting this standard and expects that the adoption of this standard will primarily result in additional quantitative disclosures for Level 3 fair value measurements.
January 1, 2020

3. Acquisitions and Divestitures
AMI Acquisition
In the first quarter of 2018, the Company finalized its purchase of 100% equity interest of the China fuel and brake business of AMI Industries (“AMI China”) for cash consideration of $3,900. This acquisition directly aligns with the Company’s growth strategy by expanding the Company’s fuel and brake business. The results of operations of AMI China are included in the Company’s condensed consolidated financial statements from the date of acquisition, February 1, 2018, and reported within the Asia Pacific segment. The pro forma effect of this acquisition would not have materially impacted 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, with the total purchase price allocated using information available. The fair value of identifiable assets acquired and liabilities assumed exceeded the fair value of the consideration transferred by an immaterial amount.
INOAC Acquisition
Also in the first quarter of 2018, the Company purchased the remaining 49% equity interest of Cooper-Standard INOAC Pte. Ltd., a fluid transfer systems joint venture, at a purchase price of $2,450. This acquisition was accounted for as an equity transaction. Subsequent to the transaction, the Company owns 100% of the equity interests of Cooper-Standard INOAC Pte. Ltd.

10

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

Lauren Acquisition
In the third quarter of 2018, the Company acquired the assets and liabilities of Lauren Manufacturing and Lauren Plastics (together, “Lauren”), extruders and molders of organic, silicone, thermoplastic and engineered polymer products with expertise in sealing solutions, to further expand the Company’s Industrial and Specialty Group and non-automotive and adjacent markets. The base purchase price of the acquisition was $92,700, which is subject to certain adjustments. The results of operations of Lauren are included in the Company’s condensed consolidated financial statements from the date of acquisition and reported within the North America segment. The pro forma effect of this acquisition would not have materially impacted 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 $34,810 and tax deductible goodwill of $26,080. The total purchase price was allocated on a preliminary basis which is subject to change as the Company finalizes application of opening balance sheet adjustments. Since completion of initial estimates in the third quarter of 2018, the Company has recorded insignificant measurement period adjustments to increase the provisional identifiable net assets acquired, which resulted in a decrease to goodwill.
LS Mtron Automotive Parts Acquisition
In the fourth quarter of 2018, the Company acquired 80.1% of LS Mtron Ltd.’s automotive parts business, now named Cooper Standard Automotive and Industrial, Inc. The acquisition adds jounce brake lines and charge air cooling technology to the Company’s automotive fluid transfer, and fuel and brake delivery systems product lines and further expands core product offerings. The base purchase price was approximately $25,750, subject to certain adjustments. The noncontrolling interest was determined to have a fair value of $6,400. The results of operations of Cooper Standard Automotive and Industrial, Inc., are included in the Company’s condensed consolidated financial statements from the date of acquisition and reported within the Asia Pacific segment. The pro forma effect of this acquisition would not have materially impacted 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, with the total purchase price allocated on a preliminary basis which is subject to change as the Company continues its review of potential purchase price adjustments during the measurement period. The fair value of identifiable assets acquired and liabilities assumed approximated the fair value of the consideration transferred. Since completion of initial estimates in the fourth quarter of 2018, the Company has recorded insignificant measurement period adjustments due to working capital adjustments, which resulted in an increase to the base purchase price.
Hutchings Automotive Products Acquisition
In the fourth quarter of 2018, the Company acquired the assets and liabilities of Hutchings Automotive Products, LLC (“Hutchings”), a North American supplier of high quality fluid carrying products for automotive powertrain and coolant systems applications. The base purchase price was approximately $42,100, subject to certain adjustments. The results of operations of Hutchings are included in the Company's condensed consolidated financial statements from the date of acquisition and reported within the North America segment. The pro forma effect of this acquisition would not have materially impacted 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 $11,100 and tax deductible goodwill of $5,200. The total purchase price was allocated on a preliminary basis which is subject to change as the Company continues its review of potential purchase price adjustments during the measurement period.
Subsequent Event
On April 1, 2019, the Company completed the divestiture of its anti-vibration systems product line. The sale price was $265,500, subject to certain adjustments. See Note 4. "Assets Held for Sale".
4. Assets Held for Sale
In the third quarter of 2018, management approved a plan to sell the anti-vibration systems (“AVS”) product line within its North America, Europe and Asia Pacific segments. The business and its associated assets and liabilities met the criteria for presentation as held for sale as of September 1, 2018, and as such the assets and liabilities associated with the transaction are separately classified as held for sale in the condensed consolidated balance sheet as of March 31, 2019 and depreciation of long-lived assets ceased. The divestiture did not meet the criteria for presentation as a discontinued operation.
On November 2, 2018, the Company entered into a definitive agreement to divest the AVS product line. Subsequent to the end of the first quarter, on April 1, 2019, the Company completed its sale of the AVS product line to Continental AG. The total sale price of the transaction was $265,500, subject to certain adjustments. The estimated net cash proceeds after taxes and transaction-related expenses and fees are expected to be approximately $220,000 to $225,000.

11

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

The major classes of assets and liabilities held for sale were as follows:
 
 
March 31, 2019
 
December 31, 2018
Accounts receivable, net
 
$
47,613

 
$
35,498

Tooling receivable
 
1,976

 
3,797

Inventories
 
14,149

 
13,774

Prepaid expenses
 
1,474

 
1,759

Other current assets
 
939

 
1,197

Property, plant and equipment, net
 
30,846

 
31,148

Operating lease right-of-use assets
 
9,136

 

Goodwill
 
13,500

 
13,500

Other assets
 
3,333

 
3,225

Total assets held for sale
 
$
122,966

 
$
103,898

 
 
 
 
 
Accounts payable
 
$
41,546

 
$
38,065

Payroll liabilities
 

 
6,826

Accrued liabilities
 
573

 
1,000

Current operating lease liabilities
 
1,617

 

Pension benefits
 
15,993

 
15,894

Postretirement benefits other than pensions
 
8,696

 
9,281

Long-term operating lease liabilities
 
7,267

 

Other liabilities
 
138

 
129

Total liabilities related to assets held for sale
 
$
75,830

 
$
71,195

5. Revenue
Revenue by customer group for the three months ended March 31, 2019 was as follows:
 
North America
 
Europe
 
Asia Pacific
 
South America
 
Consolidated
Automotive
$
436,866

 
$
225,451

 
$
127,398

 
$
23,192

 
$
812,907

Commercial
6,339

 
8,425

 

 
23

 
14,787

Other
31,502

 
20,723

 
97

 
22

 
52,344

Revenue
$
474,707

 
$
254,599

 
$
127,495

 
$
23,237

 
$
880,038

Revenue by customer group for the three months ended March 31, 2018 was as follows:
 
North America
 
Europe
 
Asia Pacific
 
South America
 
Consolidated
Automotive
$
488,737

 
$
260,656

 
$
149,169

 
$
26,450

 
$
925,012

Commercial
5,353

 
9,580

 
6

 
145

 
15,084

Other
5,088

 
22,165

 

 
42

 
27,295

Revenue
$
499,178

 
$
292,401

 
$
149,175

 
$
26,637

 
$
967,391

The automotive group consists of sales to automotive OEMs and automotive suppliers, while the commercial group represents sales to OEMs of on- and off-highway commercial equipment and vehicles. The other customer group includes sales related to specialty and adjacent markets.
Substantially all of the Company’s revenues were generated from sealing, fuel and brake delivery, fluid transfer and anti-vibration systems for use in passenger vehicles and light trucks manufactured by global OEMs.

12

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

A summary of the Company’s products as of March 31, 2019 is as follows:
Product Line
 
Description
Sealing Systems
 
Protect vehicle interiors from weather, dust and noise intrusion for improved driving experience; provide aesthetic and functional class-A exterior surface treatment
Fuel & Brake Delivery Systems
 
Sense, deliver and control fluids to fuel and brake systems
Fluid Transfer Systems
 
Sense, deliver and control fluids and vapors for optimal powertrain & HVAC
operation
Anti-Vibration Systems
 
Control and isolate vibration and noise in the vehicle to improve ride and
handling
Revenue by product line for the three months ended March 31, 2019 was as follows:
 
North America
 
Europe
 
Asia Pacific
 
South America
 
Consolidated
Sealing systems
$
156,516

 
$
155,560

 
$
85,490

 
$
17,828

 
$
415,394

Fuel and brake delivery systems
131,703

 
35,298

 
25,191

 
5,335

 
197,527

Fluid transfer systems
113,448

 
22,798

 
15,361

 
74

 
151,681

Anti-vibration systems
56,457

 
20,649

 
1,453

 

 
78,559

Other
16,583

 
20,294

 

 

 
36,877

Consolidated
$
474,707

 
$
254,599

 
$
127,495

 
$
23,237

 
$
880,038

Revenue by product line for the three months ended March 31, 2018 was as follows:
 
North America
 
Europe
 
Asia Pacific
 
South America
 
Consolidated
Sealing systems
$
172,811

 
$
184,452

 
$
117,890

 
$
19,909

 
$
495,062

Fuel and brake delivery systems
138,801

 
38,953

 
22,095

 
6,603

 
206,452

Fluid transfer systems
119,673

 
23,009

 
6,614

 
125

 
149,421

Anti-vibration systems
67,521

 
21,182

 
2,576

 

 
91,279

Other
372

 
24,805

 

 

 
25,177

Consolidated
$
499,178

 
$
292,401

 
$
149,175

 
$
26,637

 
$
967,391

Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account for revenue. The Company has one major performance obligation category: manufactured parts.
A contract’s transaction price is allocated to each distinct performance obligation and recognized when the performance obligation is satisfied. It is not unusual for the Company’s contracts to include multiple performance obligations. For such contracts, the Company generally allocates the contract’s transaction price to each performance obligation based on the purchase order or other arranged pricing.
The Company recognizes revenue at a point in time, generally when products are shipped or delivered. The point at which revenue is recognized often depends on the shipping terms.
The Company usually enters into agreements with customers to produce products at the beginning of a vehicle’s life. Blanket purchase orders received from customers and related documents generally establish the annual terms, including pricing, related to a vehicle model. Although purchase orders do not usually specify quantities, fulfillment of customers’ purchasing requirements can be the Company’s obligation for the entire production life of the vehicle. These agreements generally may be terminated by the Company’s customer at any time, but such cancellations have historically been minimal. Customers typically pay for parts based on customary business practices with payment terms generally between 30 and 90 days. The Company has no significant financing arrangements with customers.
The Company applies the optional exemption to forgo disclosing information about its remaining performance obligations because its contracts usually have an original expected duration of one year or less. It also applies an accounting policy to treat shipping and handling costs that are incurred after revenue is recognizable as a fulfillment activity by expensing such costs as incurred, instead of as a separate performance obligation. This approach is consistent with the Company’s

13

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

historical accounting practices. The Company has chosen to present revenue net of sales and other similar taxes, which is also consistent with its historical accounting practices.
Contract Estimates
The amount of revenue recognized is usually based on the purchase order price and adjusted for variable consideration, including pricing concessions. The Company accrues for pricing concessions by reducing revenue as products are shipped or delivered. The accruals are based on historical experience, anticipated performance and management’s best judgment. The Company also generally has ongoing adjustments to customer pricing arrangements based on the content and cost of its products. Such pricing accruals are adjusted as they are settled with customers. Customer returns are usually related to quality or shipment issues and are recorded as a reduction of revenue. The Company generally does not recognize significant return obligations due to their infrequent nature.
Contract Balances
The Company’s contract assets consist of unbilled amounts associated with variable pricing arrangements in its Asia Pacific region. Once pricing is finalized, contract assets are transferred to accounts receivable. As a result, the timing of revenue recognition and billings, as well as changes in foreign exchange rates, will impact contract assets on an ongoing basis. Changes during the three months ended March 31, 2019 were not materially impacted by any other factors.
The Company’s contract liabilities consist of advance payments received and due from customers. Net contract assets (liabilities) consisted of the following:
 
 
March 31, 2019
 
December 31, 2018
 
Change
Contract assets
 
$
11,934

 
$
14,757

 
$
(2,823
)
Contract liabilities
 
(135
)
 
(143
)
 
8

Net contract assets (liabilities)
 
$
11,799


$
14,614


$
(2,815
)
Other
The Company provides assurance-type warranties to its customers. Such warranties provide customers with assurance that the related product will function as intended and complies with any agreed-upon specifications, and are recognized in costs of products sold.
6. 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.
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.

14

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

Restructuring expense by segment for the three months ended March 31, 2019 and 2018 was as follows:
 
Three Months Ended March 31,
 
2019
 
2018
North America
$
7,133

 
$
1,104

Europe
7,553

 
5,529

Asia Pacific
2,886

 
438

South America
143

 
54

Total
$
17,715

 
$
7,125

Restructuring activity for the three months ended March 31, 2019 was as follows:
 
Employee Separation Costs
 
Other Exit Costs
 
Total
Balance as of December 31, 2018
$
9,398

 
$
3,829

 
$
13,227

Expense
14,177

 
3,538

 
17,715

Cash payments
(4,798
)
 
(2,107
)
 
(6,905
)
Foreign exchange translation and other
(168
)
 
(520
)
 
(688
)
Balance as of March 31, 2019
$
18,609

 
$
4,740

 
$
23,349

7. Inventories
Inventories consist of the following:
 
March 31, 2019
 
December 31, 2018
Finished goods
$
55,061

 
$
50,999

Work in process
43,127

 
37,815

Raw materials and supplies
88,084

 
86,758

 
$
186,272

 
$
175,572

8. Leases
On January 1, 2019, the Company adopted ASC 842, Leases, and all related amendments using the modified retrospective method. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and long-term operating lease liabilities on the Company’s condensed consolidated balance sheet as of March 31, 2019. Finance leases are included in property, plant and equipment, net, debt payable within one year, and long-term debt on the Company’s condensed consolidated balance sheets.
Lease right-of-use assets are recognized at commencement date based upon the present value of the remaining future minimum lease payments over the lease term. The Company’s lease terms include options to renew or terminate the lease when it is reasonably certain that it will exercise the option. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based upon information available at the commencement date to determine the present value of future lease payments. The Company applies the portfolio approach for the incremental borrowing rate on its leases based upon similar lease terms and payments. The lease right-of-use asset also includes lease payments made in advance of lease commencement and excludes lease incentives. Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
The Company has lease agreements with lease and non-lease components. For real estate leases, these components are accounted for separately, while for equipment leases commencing on or after January 1, 2019, the Company accounts for the lease and non-lease components as a single lease component.
Variable lease cost includes payments based upon changes in a rate or index, such as consumer price indexes, as well as usage of the leased asset. Short-term lease cost includes leases with terms, at lease commencement, of 12 months or less and no purchase option reasonably certain to be exercised, including leases with a duration of one month or less. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

15

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


The Company primarily has operating and finance leases for certain manufacturing facilities, corporate offices and certain equipment. The Company’s leases have remaining lease terms of less than one year to 15 years, some of which may include one or more options to extend the leases for up to five years for each renewal. As of March 31, 2019, assets recorded under finance leases, net of accumulated depreciation were $21,643, which includes $62 held for sale.
The components of lease expense were as follows:
 
 
Three Months Ended March 31, 2019
Operating lease cost
 
$
8,680

Short-term lease cost
 
679

Variable lease cost
 
215

Finance lease cost:
 
 
Amortization of right-of-use assets
 
443

Interest on lease liabilities
 
455

Total lease cost
 
$
10,472

Other information related to leases was as follows:
 
Three Months Ended March 31, 2019
Supplemental Cash Flows Information
 
Cash paid for amounts included in the measurement of lease liabilities:
 
     Operating cash flows for operating leases
$
8,656

     Operating cash flows for finance leases
323

     Financing cash flows for finance leases
267

Non-cash right-of-use assets obtained in exchange for lease obligations:
 
     Operating leases
164

     Finance leases
9,452

 
 
Weighted Average Remaining Lease Term (in years)
 
Operating leases
5.5

Finance leases
12.0

 
 
Weighted Average Discount Rate
 
Operating leases
4.7
%
Finance leases
9.6
%
 
 

16

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


Future minimum lease payments under non-cancellable leases as of March 31, 2019 were as follows:
Year
 
Operating Leases
 
Finance Leases
Remainder of 2019
 
$
24,480

 
$
2,056

2020
 
25,444

 
2,920

2021
 
17,580

 
2,717

2022
 
13,649

 
2,544

2023
 
11,844

 
2,305

Thereafter
 
25,897

 
21,494

    Total future minimum lease payments
 
118,894

 
34,036

Less imputed interest
 
(14,889
)
 
(14,006
)
    Total
 
$
104,005

 
$
20,030

 
 
 
 
 
Amounts recognized in the condensed consolidated balance sheet as of March 31, 2019
Debt payable within one year
 
$

 
$
1,937

Current operating lease liabilities
 
26,216

 

Liabilities held for sale
 
8,884

 
48

Long-term debt
 

 
18,045

Long-term operating lease liabilities
 
68,905

 

 
 
$
104,005

 
$
20,030

As of March 31, 2019, the Company had additional operating leases, primarily for real estate, that have not yet commenced with undiscounted lease payments of approximately $55,323. These operating leases will commence between 2019 and 2020 with lease terms up to 15 years.
9. Property, Plant and Equipment
Property, plant and equipment consists of the following:
 
March 31, 2019
 
December 31, 2018
Land and improvements
$
72,210

 
$
72,931

Buildings and improvements
314,061

 
313,722

Machinery and equipment
1,097,801

 
1,076,369

Construction in progress
194,401

 
192,533

 
1,678,473

 
1,655,555

Accumulated depreciation
(687,808
)
 
(671,314
)
Property, plant and equipment, net
$
990,665

 
$
984,241


17

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

10. Goodwill and Intangible Assets
Goodwill
The balance of goodwill relates to the North America reporting unit. Changes in the carrying amount of goodwill by reportable operating segment for the three months ended March 31, 2019 were as follows:
 
North America
Balance as of December 31, 2018
$
143,681

Acquisitions
(1,689
)
Foreign exchange translation
114

Balance as of March 31, 2019
$
142,106

Goodwill is tested for impairment by reporting unit annually or more frequently if events or circumstances indicate that an impairment may exist. There were no indicators of potential impairment during the three months ended March 31, 2019.
Intangible Assets
Intangible assets and accumulated amortization balances as of March 31, 2019 and December 31, 2018 were as follows:
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Customer relationships
$
156,884

 
$
(102,524
)
 
$
54,360

Other
46,170

 
(4,919
)
 
41,251

Balance as of March 31, 2019
$
203,054

 
$
(107,443
)
 
$
95,611

 
 
 
 
 
 
Customer relationships
$
157,286

 
$
(98,937
)
 
$
58,349

Other
45,401

 
(4,148
)
 
41,253

Balance as of December 31, 2018
$
202,687

 
$
(103,085
)
 
$
99,602

11. Debt
A summary of outstanding debt as of March 31, 2019 and December 31, 2018 is as follows:
 
March 31, 2019
 
December 31, 2018
Senior Notes
394,578

 
394,399

Term Loan
327,879

 
328,485

ABL Facility
75,000

 
50,000

Finance leases
19,982

 
10,297

Other borrowings
89,725

 
47,947

Total debt
907,164

 
831,128

Less current portion
(169,087
)
 
(101,323
)
Total long-term debt
738,077

 
729,805

5.625% Senior Notes due 2026
In November 2016, the Company issued $400,000 aggregate principal amount of its 5.625% Senior Notes due 2026 (the “Senior Notes”). 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.
Debt issuance costs related to the Senior Notes are amortized into interest expense over the term of the Senior Notes. As of March 31, 2019 and December 31, 2018, the Company had $5,422 and $5,601 of unamortized debt issuance costs, respectively, related to the Senior Notes, which are presented as direct deductions from the principal balance in the condensed consolidated balance sheets.

18

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

Term Loan Facility
Also in November 2016, the Company entered into Amendment No. 1 to its senior term loan facility (“Term Loan Facility”), which 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 the ABL Facility (as defined below) to the extent commitments are reduced, not funded from proceeds of long-term indebtedness. The Term Loan Facility matures on November 2, 2023, unless earlier terminated.
On May 2, 2017, the Company entered into Amendment No. 2 to the Term Loan Facility to modify the interest rate. Subsequently, on March 6, 2018, the Company entered into Amendment No. 3 to the Term Loan Facility to further 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 2.0% 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 1.0% per annum. As a result of Amendment No. 3, the Company recognized a loss on refinancing and extinguishment of debt of $770 in the twelve months ended December 31, 2018, which was due to the partial write off of new and unamortized debt issuance costs and unamortized original issue discount.
As of March 31, 2019 and December 31, 2018, the Company had $2,718 and $2,866 of unamortized debt issuance costs, respectively, and $1,753 and $1,849 of unamortized original issue discount, respectively, related to the Term Loan Facility, which are presented as direct deductions from the principal balance in the condensed consolidated balance sheets. Both the debt issuance costs and the original issue discount are amortized into interest expense over the term of the Term Loan Facility.
ABL Facility
In November 2016, the Company entered into a $210,000 Third Amended and Restated Loan Agreement of its senior asset-based revolving credit facility (“ABL Facility”).
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 under the ABL Facility and the lenders agree to fund such increase. No consent of any lender is required to effect any such increase, except for those participating in the increase. As of March 31, 2019, $75,000 was drawn under the ABL Facility, and subject to borrowing base availability, the Company had $120,088 in availability, less outstanding letters of credit of $10,783. Subsequent to the AVS divestiture on April 1, 2019, the borrowing base was reduced by $27,400.
Any borrowings under our ABL Facility will mature, and the commitments of the lenders under our ABL Facility will terminate, on November 2, 2021.
As of March 31, 2019 and December 31, 2018, the Company had $925 and $1,015, respectively, of unamortized debt issuance costs related to the ABL Facility, which are presented in other assets in the condensed consolidated balance sheets.
Debt Covenants
The Company was in compliance with all covenants of the Senior Notes, Term Loan Facility and ABL Facility as of March 31, 2019.
Other
Other borrowings as of March 31, 2019 and December 31, 2018 reflect borrowings under local bank lines classified in debt payable within one year on the condensed consolidated balance sheet.

19

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

12. 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 assets and liabilities measured or disclosed at fair value on a recurring basis as of March 31, 2019 and December 31, 2018 were as follows:
 
March 31, 2019
 
December 31, 2018
 
Input
Forward foreign exchange contracts - other current assets
$
1,037

 
$
277

 
Level 2
Forward foreign exchange contracts - accrued liabilities
(33
)
 
(925
)
 
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 3. "Acquisitions and Divestitures".
Items Not Carried at Fair Value
Fair values of the Company’s Senior Notes and Term Loan Facility were as follows:
 
March 31, 2019
 
December 31, 2018
Aggregate fair value
$
681,656

 
$
684,687

Aggregate carrying value (1)
732,350

 
733,200

(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.
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 condensed 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 condensed consolidated statements of operations.

20

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

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 March 31, 2019 and December 31, 2018, the notional amount of these contracts was $110,665 and $154,237, respectively, and consisted of hedges of transactions up to December 2019.
Interest rate swaps - The Company has historically used interest rate swap contracts to manage cash flow variability associated with its variable rate Term Loan Facility. The interest rate swap contract, which fixes the interest payments of variable rate debt instruments, is used to manage exposure to fluctuations in interest rates. As of March 31, 2019, there were no interest rate swap contracts outstanding.
Pretax amounts related to the Company’s cash flow hedges that were recognized in other comprehensive income (loss) (“OCI”) were as follows:
 
Gain Recognized in OCI
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Forward foreign exchange contracts
 
$
1,943

 
$
4,925

Interest rate swaps
 

 
338

Total
 
$
1,943

 
$
5,263

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
 
 
 
Three Months Ended March 31,
 
Classification
 
2019
 
2018
Forward foreign exchange contracts
Cost of products sold
 
$
325

 
$
485

Interest rate swaps
Interest expense, net of interest income
 

 
(211
)
Total
 
 
$
325

 
$
274

 
 
 
 
 
 
13. Accounts Receivable Factoring
As a part of its working capital management, the Company sells certain receivables through a single third-party financial institution in a pan-European program (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 condensed consolidated statements of operations. 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 condensed consolidated balance sheet. Amounts outstanding under receivable transfer agreements entered into by various locations as of the period end were as follows:
 
March 31, 2019
 
December 31, 2018
Off-balance sheet arrangements
$
94,805

 
$
100,409


21

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

Accounts receivable factored and related costs throughout the period were as follows:
 
Off-Balance Sheet Arrangements
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Accounts receivable factored
 
$
173,703

 
$
216,571

Costs
 
325

 
400

The Company continues to service sold receivables and acts as collection agent for the Factor. As of March 31, 2019 and December 31, 2018, cash collections on behalf of the Factor that have yet to be remitted were $21,788 and $14,542, respectively, and are reflected in cash and cash equivalents in the condensed consolidated balance sheet.
14. Pension and Postretirement Benefits Other Than Pensions
The components of net periodic benefit (income) cost for the Company’s defined benefit plans and other postretirement benefit plans were as follows:
 
 Pension Benefits
 
Three Months Ended March 31,
 
2019
 
2018
 
 U.S.
 
 Non-U.S.
 
 U.S.
 
 Non-U.S.
Service cost
$
189

 
$
1,111

 
$
213

 
$
1,096

Interest cost
2,952

 
1,060

 
2,706

 
1,070

Expected return on plan assets
(4,155
)
 
(595
)
 
(4,354
)
 
(632
)
Amortization of prior service cost and actuarial loss
781

 
616

 
601

 
688

Net periodic benefit (income) cost
$
(233
)
 
$
2,192

 
$
(834
)
 
$
2,222

 
 
 Other Postretirement Benefits
 
Three Months Ended March 31,
 
2019
 
2018
 
 U.S.
 
 Non-U.S.
 
 U.S.
 
 Non-U.S.
Service cost
$
41

 
$
117

 
$
77

 
$
126

Interest cost
259

 
203

 
300

 
198

Amortization of prior service credit and actuarial gain
(742
)
 
38

 
(418
)
 
77

Other

 

 
1

 

Net periodic benefit (income) cost
$
(442
)
 
$
358

 
$
(40
)
 
$
401

The service cost component of net periodic benefit (income) cost is included in cost of products sold and selling, administrative and engineering expenses in the condensed consolidated statements of operations. All other components of net periodic benefit (income) cost are included in other expense, net in the condensed consolidated statements of operations for all periods presented.

22

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

15. Other Expense, Net
The components of other expense, net were as follows:
 
Three Months Ended March 31,
 
2019
 
2018
Foreign currency losses
$
(284
)
 
$
(1,588
)
Components of net periodic benefit cost other than service cost
(417
)
 
(237
)
Losses on sales of receivables
(325
)
 
(325
)
Miscellaneous income
230

 
431

Other expense, net
$
(796
)
 
$
(1,719
)
16. Income Taxes
The Company determines its effective tax rate each quarter based upon its estimated annual effective tax rate. The Company records the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year where no tax benefit can be recognized are excluded from the estimated annual effective tax rate.
Income tax expense, (loss) income before income taxes and the corresponding effective tax rate for the three months ended March 31, 2019 and 2018, were as follows:
 
Three Months Ended March 31,
 
2019
 
2018
Income tax expense
$
2,331

 
$
11,891

(Loss) income before income taxes
(1,286
)
 
69,307

Effective tax rate
(181
)%
 
17
%
The effective tax rate for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was lower primarily due to the geographic mix of pre-tax earnings and the inability to record a tax benefit for pre-tax losses in certain foreign jurisdictions. The income tax rate for the three months ended March 31, 2019 and 2018 varies from the U.S. statutory rate primarily due to the inability to record a tax benefit for pre-tax losses in certain foreign jurisdictions to the extent not offset by other categories of income, tax credits, the impact of income taxes on foreign earnings taxed at rates varying from the U.S. statutory rate, and other permanent items. Further, the Company’s current and future provision for income taxes may be impacted by the recognition of valuation allowances in certain countries. The Company intends to maintain these valuation allowances until it is more likely than not that the deferred tax assets will be realized.

23

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

17. Net (Loss) Income Per Share Attributable to Cooper-Standard Holdings Inc.
Basic net (loss) income per share attributable to Cooper-Standard Holdings Inc. was computed by dividing net (loss) income attributable to Cooper-Standard Holdings Inc. by the weighted average number of shares of common stock outstanding during the period. Diluted net (loss) income per share attributable to Cooper-Standard Holdings Inc. was computed using the treasury stock method by dividing diluted net (loss) income available to Cooper-Standard Holdings Inc. by the weighted average number of shares of common stock outstanding, including the dilutive effect of common stock equivalents, using the average share price during the period.
Information used to compute basic and diluted net (loss) income per share attributable to Cooper-Standard Holdings Inc. was as follows:
 
Three Months Ended March 31,
 
2019
 
2018
Net (loss) income attributable to Cooper-Standard Holdings Inc.
$
(3,460
)
 
$
56,792

Decrease in fair value of share-based awards

 
1

Diluted net (loss) income available to Cooper-Standard Holdings Inc. common stockholders
$
(3,460
)
 
$
56,793

 
 
 
 
Basic weighted average shares of common stock outstanding
17,535,195

 
17,991,488

Dilutive effect of common stock equivalents

 
519,625

Diluted weighted average shares of common stock outstanding
17,535,195

 
18,511,113

 
 
 
 
Basic net (loss) income per share attributable to Cooper-Standard Holdings Inc.
$
(0.20
)
 
$
3.16

 
 
 
 
Diluted net (loss) income per share attributable to Cooper-Standard Holdings Inc.
$
(0.20
)
 
$
3.07


24

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

18. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) by component, net of related tax, were as follows:
 
Three Months Ended March 31,
 
 
2019
 
2018
 
Foreign currency translation adjustment
 
 
 
 
Balance at beginning of period
$
(141,255
)
 
$
(95,485
)
 
Other comprehensive income before reclassifications
1,815

(1) 
11,743

(1) 
Balance at end of period
$
(139,440
)
 
$
(83,742
)
 
Benefit plan liabilities
 
 
 
 
Balance at beginning of period
$
(104,375
)
 
$
(100,749
)
 
Other comprehensive income (loss) before reclassifications
877

(2) 
(575
)
(2) 
Amounts reclassified from accumulated other comprehensive income (loss)
510

(3) 
(6,687
)
(4) 
Balance at end of period
$
(102,988
)
 
$
(108,011
)
 
Fair value change of derivatives
 
 
 
 
Balance at beginning of period
$
(458
)
 
$
(1,397
)
 
Other comprehensive income before reclassifications
1,490

(5) 
3,982

(5) 
Amounts reclassified from accumulated other comprehensive income (loss)
(237
)
(6) 
(440
)
(6) 
Balance at end of period
$
795

 
$
2,145

 
Accumulated other comprehensive loss, ending balance
$
(241,633
)
 
$
(189,608
)
 
(1)
Includes other comprehensive income (loss) related to intra-entity foreign currency balances that are of a long-term investment nature of $2,814 and $2,287 for the three months ended March 31, 2019 and 2018, respectively.
(2)
Net of tax expense (benefit) of $11 and $(286) for the three months ended March 31, 2019 and 2018, respectively.
(3)
Includes the effect of the amortization of prior service credits of $79, offset by the amortization of actuarial losses of $773, net of tax of $184. See Note 14. "Pension and Postretirement Benefits Other Than Pensions".
(4)
Includes the effect of the adoption of ASU 2018-12 of $8,569 and the amortization of prior service credits of $78, offset by curtailment loss of $1,188 and the amortization of actuarial losses of $1,025, net of tax of $253. See Note 14. "Pension and Postretirement Benefits Other Than Pensions".
(5)
Net of tax expense (benefit) of $453 and $1,281 for the three months ended March 31, 2019 and 2018, respectively. See Note 12. "Fair Value Measurements and Financial Instruments".
(6)
Includes the effect of the adoption of ASU 2018-02 of $70 for the three months ended March 31, 2018, net of tax expense (benefit) of $88 and $113 for the three months ended March 31, 2019 and 2018, respectively. See Note 12. "Fair Value Measurements and Financial Instruments".
19. Common Stock
Share Repurchase Program
In June 2018, the Company’s Board of Directors approved a common stock repurchase program (the “2018 Program”) authorizing the Company to repurchase, in the aggregate, up to $150.0 million of its outstanding common stock. Under the 2018 Program, repurchases may be made on the open market, through private transactions, accelerated share repurchases, round lot or block transactions on the New York Stock Exchange or otherwise, as determined by management and in accordance with prevailing market conditions and federal securities laws and regulations. The Company expects to fund any future repurchases from cash on hand and future cash flows from operations. The Company is not obligated to acquire a particular amount of securities, and the 2018 Program may be discontinued at any time at the Company’s discretion. The 2018 Program became effective in November 2018.
During the three months ended March 31, 2019, the Company repurchased 85,000 shares at an average purchase price of $69.85 per share, excluding commissions, for a total cost of $5,937. The Company did not make any repurchases during the three months ended March 31, 2018.

25

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

20. Share-Based Compensation
The Company’s long-term incentive plans allow for the grant of various types of share-based awards to key employees and directors of the Company and its affiliates. The Company generally awards grants on an annual basis.
In February 2019, the Company granted Restricted Stock Units (“RSUs”), Performance Units (“PUs”) and stock options. The RSUs cliff vest after three years, the PUs cliff vest at the end of their three-year performance period, and the stock options vest ratably over three years. The number of PUs that will vest depends on the Company’s achievement of target performance goals related to the Company’s return on invested capital (“ROIC”) and total shareholder return, which may range from 0% to 200% of the target award amount. The grant-date fair value of the RSUs was determined using the closing price of the Company’s common stock on the date of grant. The grant-date fair value of the PUs was determined using a lattice model. The grant-date fair value of the stock options was determined using the Black-Scholes option pricing model.
Share-based compensation expense was as follows:
 
Three Months Ended March 31,
 
2019
 
2018
PUs
$
649

 
$
295

RSUs
1,722

 
2,741

Stock options
815

 
839

Total
$
3,186

 
$
3,875

21. Related Party Transactions
A summary of the material related party transactions with affiliates accounted for under the equity method was as follows:
 
Three Months Ended March 31,
 
2019
 
2018
Sales(1)
$
7,434

 
$
8,073

Purchases(2)
325

 
174

Dividends received(3)
4,917

 
4,508

(1) Relates to transactions with Nishikawa Cooper LLC (“NISCO”)
(2) Relates to transactions with NISCO and Polyrub Cooper Standard FTS Private Limited
(3) From NISCO and Nishikawa Tachaplalert Cooper Ltd.
Amounts receivable from NISCO and Sujan Cooper Standard AVS Private Limited as of March 31, 2019 and December 31, 2018 were $6,959 and $6,066, respectively.
22. Commitments and Contingencies
The Company is periodically involved in claims, litigation and various legal matters that arise in the ordinary course of business. The Company accrues for litigation exposure when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified. As of March 31, 2019, the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for claims, litigation and various legal matters, if any, has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, the Company’s financial condition, results of operations or cash flows could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters.
In addition, the Company conducts and monitors environmental investigations and remedial actions at certain locations. As of March 31, 2019 and December 31, 2018, the undiscounted reserve for environmental investigation and remediation was approximately $5,099 and $4,668, respectively. While the Company’s costs to defend and settle known claims arising under environmental laws have not been material in the past and are not currently estimated to be material, such costs may be material in the future.

26

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

23. Segment Reporting
The Company has determined that it operates in four reportable segments: North America, Europe, Asia Pacific and South America. The Company’s principal products within each of these segments are sealing, fuel and brake delivery, and fluid transfer systems. During the first quarter of 2019 and in prior periods, the Company also operated an anti-vibration systems product line. Subsequent to the end of the first quarter, on April 1, 2019, the Company completed the divestiture of the anti-vibration systems product line.
Effective January 1, 2019, the Company changed the measurement of its operating segments to segment adjusted EBITDA. The results of each segment include certain allocations for general, administrative and other shared costs. Segment adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
Certain financial information on the Company’s reportable segments was as follows:
 
 
2019
 
2018
Three Months Ended March 31, 2019
 
External Sales
 
Intersegment Sales
 
Adjusted EBITDA
 
External Sales
 
Intersegment Sales
 
Adjusted EBITDA
North America
 
$
474,707

 
$
3,451

 
$
57,564

 
$
499,178

 
$
3,626

 
$
86,776

Europe
 
254,599

 
3,085

 
9,441

 
292,401

 
3,707

 
22,968

Asia Pacific
 
127,495

 
741

 
767

 
149,175

 
1,719

 
13,490

South America
 
23,237

 
5

 
(1,386
)
 
26,637

 
14

 
(597
)
Eliminations and other
 

 
(7,282
)
 

 

 
(9,066
)
 

Consolidated
 
$
880,038

 
$

 
$
66,386

 
$
967,391

 
$

 
$
122,637


 
 
Three Months Ended March 31,
 
 
2019
 
2018
Adjusted EBITDA
 
$
66,386

 
$
122,637

Restructuring charges
 
(17,715
)
 
(7,125
)
Project costs
 
(1,263
)
 

Loss on refinancing and extinguishment of debt
 

 
(770
)
EBITDA
 
$
47,408

 
$
114,742

Income tax expense
 
(2,331
)
 
(11,891
)
Interest expense, net of interest income
 
(11,932
)
 
(9,800
)
Depreciation and amortization
 
(36,605
)
 
(36,259
)
Net (loss) income attributable to Cooper-Standard Holdings Inc.
 
$
(3,460
)
 
$
56,792


 
March 31,
2019
 
December 31,
2018
Segment assets
 
 
 
North America
$
1,271,547

 
$
1,174,604

Europe
604,943

 
541,495

Asia Pacific
660,331

 
616,093

South America
61,744

 
54,629

Eliminations and other
216,257

 
236,282

Consolidated
$
2,814,822

 
$
2,623,103



27



Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations
This management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition. Our historical results may not indicate, and should not be relied upon as an indication of, our future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. See “Forward-Looking Statements” below for a discussion of risks associated with reliance on forward-looking statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed below and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission (“2018 Annual Report”) see Item 1A. “Risk Factors.” The following should be read in conjunction with our 2018 Annual Report and the other information included herein. Our discussion of trends and conditions supplements and updates such discussion included in our 2018 Annual Report. References in this quarterly report on Form 10-Q (the “Report”) to “we,” “our,” or the “Company” refer to Cooper-Standard Holdings Inc., together with its consolidated subsidiaries.
Executive Overview
Our Business
We design, manufacture and sell sealing, fuel and brake delivery, and fluid transfer systems for use primarily in passenger vehicles and light trucks manufactured by global automotive original equipment manufacturers (“OEMs”). We are primarily a “Tier 1” supplier, with approximately 85% of our sales in 2018 made directly to major OEMs. We operate our business along four segments: North America, Europe, Asia Pacific and South America.
During the first quarter of 2019 and in prior periods, the Company also operated an anti-vibration systems business. Subsequent to the end of the first quarter, on April 1, 2019, the Company completed the divestiture of the anti-vibration systems business.
Recent Trends and Conditions
General Economic Conditions and Outlook
The global automotive industry is susceptible to uncertain economic conditions that could adversely impact new vehicle demand. Business conditions may vary significantly from period to period or region to region.
In North America in 2019, economic growth in the U.S. is expected to continue, albeit at a more modest rate than 2018. Continued uncertainty regarding global trade relationships, among other factors, could dampen economic momentum. Modest economic growth is also expected to continue in Canada and Mexico in 2019. The mix of vehicles produced and sold in the region continues to shift away from passenger cars in favor of crossover utility vehicles and light trucks.
In Europe, economic momentum slowed in the second half of 2018. Geopolitical concerns and the implementation of new environmental regulations in the automotive industry likely contributed to the slow-down. Looking ahead, we expect the continuation of global trade tensions, financial pressures within some of the key European Union member countries and Britain’s pending separation from the European Union (“Brexit”) will continue to create a high level of uncertainty and challenge the regional economic outlook in 2019.
In Asia Pacific, the Chinese government continues to manage the nation’s economy with a goal of sustaining growth. For 2019, the official growth target was set at 6.0% - 6.5%. The range is lower than 2018 as rising debt, inflation and uncertainty are pressuring consumption and continuing tension within U.S.-China trade relationships is impacting exports. Fiscal tools such as tax cuts and increased investment in infrastructure may be used to in order to meet government growth targets.
In South America, the Brazilian economy is expected to grow by approximately 2.0% in 2019 compared to 1.1% in 2018. The stronger growth forecast is based on an improving labor market, rising credit growth and market-friendly government agenda. While our near-term outlook for South America is positive, we remain cautious for the mid to long-term outlook given the long history of political instability and economic volatility in the region.
The current domestic and international political environment, including existing and potential changes to U.S. policies related to global trade, tariffs and border enforcement, has resulted in increasing uncertainty surrounding the future state of the global economy. We continue to monitor the potential impacts of both foreign and domestic economic policies and we continue to expect adverse impacts to our material costs as a result of previously-announced and potential new tariffs.

28



Raw Materials
Our business is susceptible to inflationary pressures with respect to raw materials which may place operational and profitability burdens on the entire supply chain. Costs related to raw materials, such as steel, aluminum, and oil and oil-derived commodities, continue to be volatile. In addition, we continue to expect commodity cost volatility to have an impact on future earnings and operating cash flows. As such, on an ongoing basis, we work with our customers and suppliers to mitigate both inflationary pressures and our material-related cost exposures.
Production Levels
Our business is directly affected by the automotive vehicle production rates in North America, Europe, Asia Pacific and South America. New vehicle demand is driven by macroeconomic and other factors, such as interest rates, manufacturer and dealer sales incentives, fuel prices, consumer confidence, employment levels, income growth trends and government and tax incentives. The industry could face uncertainties that may adversely impact consumer demand for vehicles as well as the future production environment.
Light vehicle production in certain regions for the three months ended March 31, 2019 and 2018 was:
 
Three Months Ended March 31,
(In millions of units)
2019(1)
 
2018(1)
 
% Change
North America
4.3

 
4.4

 
(2.5)%
Europe
5.6

 
5.9

 
(4.9)%
Asia Pacific(2)
11.5

 
12.5

 
(7.5)%
South America
0.8

 
0.8

 
(4.7)%
(1)
Production data based on IHS Automotive, April 2019.
(2)
Includes Greater China units of 5.9 million and 6.8 million for the three months ended March 31, 2019 and 2018, respectively.
In North America, first quarter total vehicle production declined slightly compared to the first quarter of 2018. Continuing recent trends in consumer demand, production of passenger cars declined while production of sport utility vehicles and crossover vehicles increased. We expect these trends to continue in North America throughout 2019.
European and Asia Pacific light vehicle production declined as well, reflecting geopolitical instability, including uncertainty around tariffs and global trade relations in both regions and Brexit uncertainty in Europe. Accordingly, we remain cautious on the impact through the remainder of the year.
Results of Operations
 
Three Months Ended March 31,
 
2019
 
2018
 
Change
 
(dollar amounts in thousands)
Sales
$
880,038

 
$
967,391

 
$
(87,353
)
Cost of products sold
762,490

 
796,511

 
(34,021
)
Gross profit
117,548

 
170,880

 
(53,332
)
Selling, administration & engineering expenses
86,974

 
80,440

 
6,534

Amortization of intangibles
3,775

 
3,406

 
369

Restructuring charges
17,715

 
7,125

 
10,590

Operating profit
9,084

 
79,909

 
(70,825
)
Interest expense, net of interest income
(11,932
)
 
(9,800
)
 
(2,132
)
Equity in earnings of affiliates
2,358

 
1,687

 
671

Loss on refinancing and extinguishment of debt

 
(770
)
 
770

Other expense, net
(796
)
 
(1,719
)
 
923

(Loss) income before income taxes
(1,286
)
 
69,307

 
(70,593
)
Income tax expense
2,331

 
11,891

 
(9,560
)
Net (loss) income
(3,617
)
 
57,416

 
(61,033
)
Net loss (income) attributable to noncontrolling interests
157

 
(624
)
 
781

Net (loss) income attributable to Cooper-Standard Holdings Inc.
$
(3,460
)
 
$
56,792

 
$
(60,252
)

29



Three Months Ended March 31, 2019 Compared with Three Months Ended March 31, 2018
Sales
Sales for the three months ended March 31, 2019 decreased 9.0%, compared to the three months ended March 31, 2018.
 
Three Months Ended March 31,
 
 
Variance Due To:
 
2019
 
2018
 
Change
 
 
Volume / Mix*
 
Foreign Exchange
 
Other**
 
(dollar amounts in thousands)
Total sales
$
880,038

 
$
967,391

 
$
(87,353
)
 
 
$
(105,890
)
 
$
(36,540
)
 
$
55,077

* Net of customer price reductions
** Other includes the net impact of acquisitions
Gross Profit
 
Three Months Ended March 31,
 
 
Variance Due To:
 
2019
 
2018
 
Change
 
 
Volume / Mix*
 
Foreign Exchange
 
Cost Increases / (Decreases)**
 
(dollar amounts in thousands)
Cost of products sold
$
762,490

 
$
796,511

 
$
(34,021
)
 
 
$
(48,719
)
 
$
(33,635
)
 
$
48,333

Gross profit