Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
(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, 2016
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 000-54305
 
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  ¨    No  x
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, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
¨
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, 2016 was $1,069,326,019.
The number of the registrant’s shares of common stock, $0.001 par value per share, outstanding as of February 10, 2017 was 17,700,542 shares.
Documents Incorporated by Reference
Certain portions, as expressly described in this report, of the Registrant’s Proxy Statement for the 2017 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.




TABLE OF CONTENTS
 
 
Page        
PART I
 
 
 
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
 
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
 
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
 
PART IV
Item 15.
Exhibits and Financial Statement Schedules
Signatures





PART I
 
Item 1.        Business
Cooper-Standard Holdings Inc. (together with its consolidated subsidiaries, the “Company,” “Cooper Standard,” “we,” “our” or “us”) is a leading manufacturer of sealing, fuel and brake delivery, fluid transfer and anti-vibration systems. Our products are primarily for use in passenger vehicles and light trucks that are manufactured by global automotive original equipment manufacturers (“OEMs”) and replacement markets. We conduct substantially all of our activities through our subsidiaries.
Cooper Standard is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “CPS.” The Company has approximately 30,000 employees with 123 facilities in 20 countries. The Company is dedicated to four product lines. Based on this focused approach, we believe we are the largest global producer of sealing systems, the second largest global producer of the types of fuel and brake delivery products that we manufacture, the third largest global producer of fluid transfer systems, and one of the largest North American producers of anti-vibration systems. We design and manufacture our products in each major region of the world through a disciplined and sustained approach to engineering and operational excellence. We operate in 90 manufacturing locations and 33 design, engineering, administrative and logistics locations.
The Company has four operating segments: North America, Europe, Asia Pacific and South America. This operating structure allows us to offer our full portfolio of products and support our regional and global customers with complete engineering and manufacturing expertise in all major regions of the world. We have ongoing operational restructuring and expansion initiatives to improve competitiveness, primarily related to footprint optimization in Europe and expansion in Asia and Mexico. See “Segment Results of Operations” under Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 19. “Business Segments” to our consolidated financial statements included under Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K (the “Report”) for further information on our segments.
Approximately 84% of our sales in 2016 were to OEMs, including Ford Motor Company (“Ford”), General Motors Company (“GM”), Fiat Chrysler Automobiles (“FCA”), PSA Peugeot Citroën, Volkswagen Group, Daimler, Renault-Nissan, BMW, Toyota, Volvo, Jaguar/Land Rover, Honda and various other OEMs based in India and China. The remaining 16% of our 2016 sales were primarily to Tier I and Tier II automotive suppliers, non-automotive manufacturers, and replacement market distributors. The Company’s products can be found on over 450 nameplates globally.
Corporate History and Business Developments
Cooper-Standard Holdings Inc. was established in 2004 as a Delaware corporation and began operating on December 23, 2004 when it acquired the automotive segment of Cooper Tire & Rubber Company (the “2004 Acquisition”). Cooper-Standard Holdings Inc. operates the business primarily through its principal operating subsidiary, Cooper-Standard Automotive Inc. (“CSA U.S.”). Since the 2004 Acquisition, the Company has expanded and diversified its customer base through a combination of organic growth and strategic acquisitions.
In August 2009, following the onset of the financial crisis and economic downturn that severely impacted the global automotive industry, Cooper-Standard Holdings Inc. and its wholly-owned subsidiaries in the United States and Canada commenced reorganization proceedings in the United States (the “Chapter 11 proceedings”) and Canada. In May 2010, the Company consummated its reorganization pursuant to a court-confirmed plan of reorganization and emerged from the Chapter 11 proceedings and the Canadian proceedings.
From 2006 to 2013, the Company accelerated its growth through a number of strategic acquisitions including the Fluid Handling Systems Operations in North America, Europe and China (collectively, “FHS”) from ITT Industries, Inc.; Metzeler Automotive Profile Systems; a hose manufacturing operation in Mexico from the Gates Corporation; USi, Inc.; the sealing business of Sigit S.p.A.; a joint venture with Fonds de Modernisation des Equipementiers Automobiles (“FMEA”); and Jyco Sealing Technology.
In October 2013, Cooper Standard’s common stock was listed on the NYSE and began trading under the ticker symbol “CPS.” Prior to the NYSE listing, the Company’s common stock was traded on the Over-the-Counter (“OTC”) Bulletin Board under the symbol “COSH.”
We continued strategic acquisitions and partnerships in 2014 and 2015 with the acquisition of Cikautxo Borja, S.L.U. in Spain, a manufacturer of heating and cooling hoses; the purchase of an additional 47.5% of Huayu-Cooper Standard Sealing Systems Co. (“Shenya”), increasing our equity ownership to 95% and positioning the Company as a leader in sealing systems in the Chinese automotive market; the formation of a joint venture with Polyrub Extrusions (India) Private Limited to grow the

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Company’s fluid transfer systems business in Asia; and a joint venture with INOAC Corporation of Japan accelerating our fluid transfer systems strategy in Asia. In 2016, we acquired the North American fuel and brake business of AMI Industries to expand the Company’s fuel and brake business. We also gained control of our China-based joint venture, Shenya Sealing (Guangzhou) Company Limited.
In 2014 and 2015, the Company divested its thermal and emissions product line and hard coat plastic exterior trim business, respectively, to focus on the product lines where Cooper Standard holds leading market positions.
Business Strategy
In 2013, we set a clear vision for achieving profitable growth with a mission to become a Top 30 automotive supplier in terms of sales and top 5 in ROIC (return on invested capital).
In 2016, the leadership team refined this vision: Driving Value Through Culture, Innovation and Results to more closely represent the evolution of the Company’s culture and to provide the basis for delivering even greater value. The global leadership team also reshaped the supporting pillars in 2016 to align with the progress of the Company. These pillars are:
Voice of the Customer:
We design and develop our products to meet the current and future needs of our customers. We listen intently and adjust to customer feedback to ensure we are consistently providing customer-focused products while meeting their evolving needs. Cooper Standard is dedicated to serving its global customers and the automotive industry as a whole.
 
 
Superior Products:
With a focus on core products, we provide customers with market-leading solutions with predicable quality that meet or exceed expectations in sealing, fuel and brake delivery, fluid transfer and anti-vibration systems.
 
 
World-Class Operations:
We are committed to sustained excellence through the Cooper Standard Operating System (“CSOS”), the Company’s playbook of global best practice tools designed for optimization that are driving Cooper Standard’s global success.
 
 
Engaged Employees:
Our employees are the foundation of the Company and the key driver of our success. Committed to excellence and driven to succeed, our employees never lose sight of the Company’s overall vision and strategy.
Cooper Standard’s global alignment around these strategic pillars continues to drive further value in many areas of the business, including:
Operational and Strategic Initiatives
As part of the Cooper Standard’s world-class operations, the Company implemented the CSOS to fully position the Company for growth and ensure global consistency in engineering design, program management, manufacturing process, purchasing and IT systems. Standardization across all regions is especially critical in support of customers’ global platforms that require the same design, quality and delivery standards everywhere across the world.
CSOS consists of the following areas, with a strategic focus that aligns with the Company’s growth strategy:
CSOS Function
Strategic Focus
World-Class Safety
Implement globally consistent measurement system with zero incidents goal.
World-Class Operations
Optimize global performance by implementing best business practices across the organization.
Continuous Improvement
Implement lean manufacturing tools across all facilities to achieve cost savings and increased performance.
Global Purchasing
Develop an advantaged supply base to effectively leverage scale and optimize supplier quality.
Innovation Management
Focused innovation processes to create breakthrough technologies for market differentiation.
Global Program Management
Ensure consistent and flawless product launch process across all regions.
IT Systems
Implement common systems to effectively communicate information throughout the business.

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Leverage Technology for Innovative Solutions 
We utilize our technical expertise to provide customers with innovative solutions. Our engineers combine product design with a broad understanding of material characteristics for enhanced vehicle performance. We believe our reputation for successful innovation in product design and materials is the reason our customers consult us early in their vehicle development and design process of their next generation vehicles.
In 2016, Cooper Standard was recognized by Society of Plastics Engineers (SPE®) with the Automotive Innovation Award for the co-development of Cooper Standard’s High Performance Vacuum Brake Tube design with Royal DSM. This technology was created to replace traditional clamped rubber hoses, to simplify engine and undercarriage routing. The design offers significant space and weight savings while allowing for rapid assembly and ease of maintenance through the use of quick connectors.
Cooper Standard has evolved and further energized its approach to innovation with its i3 Innovation Process (Imagine, Initiate, Innovate). This approach is used as a mechanism to capture ideas from across our Company and supply partners while promoting a culture of innovation.
Ideas are carefully evaluated by a global technology council and those that are selected are put on an accelerated development cycle with a dedicated innovation team focused on breakthrough ideas. This team is developing game-changing technologies based on materials expertise, process know-how, and application vision, which may drive future product direction. Among recently announced technologies is ArmorHose™, a breakthrough technology which results in significantly more durable coolant hoses and eliminates the need for separate abrasion sleeves on under-hood hose assemblies. Several other significant technologies, especially related to advanced materials, processing and weight reduction, have recently been realized. These include: Fortrex™, a revolutionary material that provides higher performance and lower weight to weather seals; and MagAlloy™, a new processing technology for brake lines that increases long term durability through superior corrosion resistance.
Continued Emphasis on Global Platforms
We believe global platforms, which require the same design, quality and delivery standards globally, will drive increased growth for capable global suppliers. It is predicted that the top ten global platforms produced by automakers will account for about 30% of the world’s light vehicle volume by 2022, highlighting the importance of being well-positioned to participate in these high-volume, global programs. Based on our 2016 revenue, six of the top ten vehicle platforms on which we provide content are global platforms, which demonstrates that customers already look to us to support global platforms. Our global presence and technological capabilities ideally position us to continue to win business on global platforms.
Pursue Acquisitions and Alliances to Enhance Capabilities and Accelerate Growth
We intend to continue to selectively pursue complementary acquisitions and joint ventures to enhance our customer base, geographic penetration, scale and technology. Consolidation is an industry trend and is encouraged by the OEM’s desire for global automotive suppliers. We believe we have a strong platform for growth through acquisitions based on our past integration successes, experienced management team, global presence and operational excellence. Further, our operations currently include several successful joint ventures.
Industry
The automotive industry is one of the world’s largest and most competitive. Consumer demand for new vehicles largely determines sales and production volumes of global OEMs. Automotive suppliers gain market share by winning new platforms and by increasing their content per vehicle within these platforms.
The automotive supplier industry is generally characterized by high barriers to entry, significant start-up costs and long-standing customer relationships. The criteria by which OEMs judge automotive suppliers include quality, price, service, performance, design and engineering capabilities, innovation, timely delivery, financial stability and global footprint. Over the last decade, suppliers that have been able to achieve manufacturing scale, reduce structural costs, diversify their customer base and establish a global manufacturing footprint have been successful.
Markets Served
Our focus is on the passenger car and light truck market, up to and including Class 3 Full Size Frame trucks, better known as the light vehicle market. This is our largest market and accounts for approximately 96% of our global sales.

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In addition to the global light vehicle market, we also have dedicated sales and engineering teams in North America and Europe to leverage core product technology into adjacent markets to profitably grow Cooper Standard. The adjacent markets include: commercial vehicle (on-highway and off-highway), specialty markets and technical rubber. 
Customers
We are a leading supplier to the following OEMs and are increasing our presence with major OEMs throughout the world. The following table shows the approximate percentage of sales to our top customers for the years ended December 31, 2016, 2015 and 2014:
Customer
 
2016
 
2015
 
2014
Ford
 
27%
 
26%
 
24%
GM
 
17%
 
16%
 
16%
FCA
 
12%
 
12%
 
13%
PSA Peugeot Citroën
 
6%
 
5%
 
6%
Volkswagen Group
 
5%
 
5%
 
5%
Our other customers include OEMs such as Daimler, Renault-Nissan, BMW, Toyota, Volvo, Jaguar/Land Rover, Honda and various other OEMs based in India and China. Our business with any given customer is typically split among several contracts for different parts on a number of platforms.
Segment Information
See Note 19. “Business Segments” to the consolidated financial statements for segment information.
Products
We have four distinct product lines. These products are produced and supplied globally to a broad range of customers in multiple markets. The percentage of sales by product line for the years ended December 31, 2016, 2015 and 2014 are as follows:
 
 
Percentage of Sales
Product Lines
 
2016
 
2015
 
2014
Sealing systems
 
52%
 
53%
 
52%
Fuel and brake delivery systems
 
21%
 
20%
 
20%
Fluid transfer systems
 
14%
 
14%
 
14%
Anti-vibration systems
 
9%
 
8%
 
8%
In addition to these product lines, we also have sales to other adjacent markets.
Product Lines
 
  
 
 
 
 
Market Position
SEALING SYSTEMS
 
Protect vehicle interiors from weather, dust and noise intrusion for improved driving experience; provide aesthetic and functional class-A exterior surface treatment
 
Global leader
 
 
Products:
 
 
 
 
 
 
Fortrex™
Stainless steel trim
 
 
 
 
Dynamic seals
Flush glass systems
 
 
 
 
Static seals
Variable extrusion
 
 
 
 
Encapsulated glass
Specialty sealing products
 
 
 
 
 
 
 
 
FUEL & BRAKE DELIVERY SYSTEMS
 
Sense, deliver and control fluids to fuel and brake systems
 
Top 2 globally
 
Products:
 
 
 
 
 
 
Chassis and tank fuel lines and bundles (fuel lines, vapor lines and bundles)
Direct injection & port fuel rails (fuel rails and fuel charging assemblies)
 
 
 
 
Metallic brake lines and bundles
Gen III Posi-Lock Quick Connect
 
 
 
 
Quick connects
 
 
 
 
 
 
 
 
 
 

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Product Lines
 
  
 
 
 
 
Market Position
FLUID TRANSFER SYSTEMS
 
Sense, deliver and control fluid and vapors for optimal powertrain & HVAC operation
 
Top 3 globally
 
 
Products:
 
 
 
 
 
 
Heater/coolant hoses
Turbo charger hoses
 
 
 
 
Quick connects
Secondary air hoses
 
 
 
 
DPF and SCR emission lines
Brake and clutch hoses
 
 
 
 
Degas tanks
ArmorHose™
 
 
 
 
Air intake and charge
ArmorHose™ TPV
 
 
 
 
Transmission Oil Cooling Hoses
 
 
 
 
 
 
 
 
 
 
ANTI-VIBRATION SYSTEMS
 
Control and isolate vibration and noise in the vehicle to improve ride and
handling
 
North America Leader
 
 
Products:
 
 
 
 
 
 
Powertrain Mount Systems: Multi-state Vacuum Switchable Hydraulic Engine Mounts, Bi-state Electric Switchable Hydraulic Engine Mounts, Conventional Hydraulic Mounts, Elastomeric Mount
 
 
 
 
Suspension Mounts: Conventional & Hydraulic Bushings, Strut Mounts, Spring Seats & Bumpers, Mass Dampers, Dual Durometer (Bi-compound) Bushings
 
 
Competition
We believe that the principal competitive factors in our industry are quality, price, service, performance, design and engineering capabilities, innovation, timely delivery, financial stability and global footprint. We believe that our capabilities in these core competencies are integral to our position as a market leader in each of our product lines. Our sealing systems products compete with Toyoda Gosei, Hutchinson, Henniges and Standard Profil, among others. Our fuel and brake delivery products compete with TI Automotive, Sanoh, Martinrea, Maruyasu and Usui. Our fluid transfer products compete with Conti-Tech, Hutchinson, Teklas, Tristone and Hwaseung R&A. Our anti-vibration systems compete with Trelleborg/Vibracoustic, Hutchinson, Tokai Rubber, Bridgestone and ContiTech.
Joint Ventures and Strategic Alliances
Joint ventures represent an important part of our business, both operationally and strategically. We have utilized joint ventures to enter into new geographic markets such as China, India and Thailand, to acquire new customers and to develop new technologies. When entering new geographic markets, teaming with a local partner can reduce capital investment by leveraging pre-existing infrastructure. In addition, local partners in these markets can provide knowledge and insight into local practices and access to local suppliers of raw materials and components.
The following table shows our significant unconsolidated joint ventures:
Country
  
Name
  
Ownership Percentage  
India
  
Sujan Cooper Standard AVS Private Limited
  
50%
United States
  
Nishikawa Cooper LLC
  
40%
India
 
Polyrub Cooper Standard FTS Private Limited
 
35%
Thailand
  
Nishikawa Tachaplalert Cooper Ltd.
  
20%
Research and Development
We have a dedicated team of technical and engineering resources in each region, some of which are located at our customers’ facilities. We utilize Design for Six Sigma and other methodologies that emphasize manufacturability and quality. Our development teams work closely with our customers to design and deliver innovative solutions. We continue to add technical resources throughout the world as required to support our customers, including a technical center in Shanghai, China and, with the Sujan Cooper Standard joint venture, in Maharashtra, India. We spent $117.8 million, $108.8 million, and $102.0 million in 2016, 2015 and 2014, respectively, on engineering, research and development.

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Intellectual Property
We believe that one of our key competitive advantages is our ability to translate customer needs and our game-changing ideas into innovation through the development of intellectual property. We hold a significant number of patents and trademarks worldwide.
Our patents are grouped into two major categories: (1) specific product invention claims and (2) specific manufacturing processes that are used for producing products. The vast majority of our patents fall within the product invention category. We consider these patents to be of value and seek to protect our rights throughout the world against infringement. While in the aggregate these patents are important to our business, we do not believe that the loss or expiration of any one patent would materially affect our Company. We continue to seek patent protection for our new products and have an incentive program to recognize employees whose inventions are patented. Additionally, we develop significant technologies that we treat as trade secrets and choose not to disclose to the public through the patent process, but which nonetheless provide significant competitive advantages and contribute to our global leadership position in various markets. We believe that our trademarks, including ArmorHose™, Ultra Pro Coat™, MagAlloy™ and Fortrex™, help differentiate us and lead customers to seek our partnership.
We also have technology sharing and licensing agreements with various third parties, including Nishikawa Rubber Company, one of our joint venture partners in sealing products. We have mutual agreements with Nishikawa Rubber Company for sales, marketing and engineering services on certain sealing products. Under those agreements, each party pays for services provided by the other and royalties on certain products for which the other party provides design or development services.
Supplies and Raw Materials
Cooper Standard is committed to building strong relationships with our supply partners. We recognize the importance of engaging with suppliers to create value for our customers.
The principal raw materials for our business include ethylene propylene diene monomer M-Class rubber (“EPDM”) and synthetic rubber, components manufactured from carbon steel, plastic resins and components, carbon black, process oils, components manufactured from aluminum and natural rubber. We manage the procurement of our raw materials to assure supply and to obtain the most favorable total cost of ownership. Procurement arrangements include short-term and long-term supply agreements that may contain formula-based pricing based on commodity indices. These arrangements provide quantities needed to satisfy normal manufacturing demands. We believe we have adequate sources for the supply of raw materials and components for our products with suppliers located around the world. We often use offshore suppliers for machined components, die castings and other labor-intensive, economically freighted products in our North American and European facilities.
Raw material prices are subject to fluctuations and we have implemented strategies with both our suppliers and our customers to help manage these fluctuations. These actions include material substitutions and leveraging global purchases. Global supply chain optimization includes using benchmarks and selective sourcing from strategic suppliers. We have also made process improvements to ensure the efficient use of materials through scrap reduction, as well as standardization of material specifications to maximize leverage over higher volume purchases. With some customers, on certain raw materials, we have implemented indices that allow price changes as underlying material costs fluctuate.
Geographic Information
See Note 19. “Business Segments” to the consolidated financial statements for geographic information.
Seasonality
Historically, sales to OEMs are lowest during the months prior to model changeovers and during assembly plant shutdowns. However, economic conditions and consumer demand may change the traditional seasonality of the industry and lower production may result without the impact of seasonality. In the past, model changeover periods have typically resulted in lower sales volumes during July, August and December. During these periods of lower sales volumes, profits may decline but working capital often improves due to the continued collection of accounts receivable.
Backlog
Our OEM sales are generally based upon purchase orders issued by the OEMs, with updated releases for volume adjustments. As such, we typically do not have a backlog of orders at any point in time. Once selected to supply products for a particular platform, we typically supply those products for the platform life, which is normally three to five years, although there is no guarantee that this will occur. In addition, when we are the incumbent supplier to a given platform, we believe we have a competitive advantage in winning the redesign or replacement platform.

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Employees
As of December 31, 2016, we had approximately 30,000 full-time and temporary employees. We maintain good relations with both our union and non-union employees, and, in the past ten years, have not experienced any major work stoppages. We have renegotiated some of our domestic and non-domestic union agreements in 2016, and have several contracts set to expire in the next twelve months.
Environmental
We are subject to a broad range of federal, state, and local environmental and occupational safety and health laws and regulations in the United States and other countries, including regulations governing: emissions to air, discharges to water, noise and odor emissions; the generation, handling, storage, transportation, treatment, reclamation and disposal of chemicals and waste materials; the cleanup of contaminated properties; and human health and safety. We have made, and will continue to make, expenditures to comply with environmental requirements. While our costs to defend and settle known claims arising under environmental laws are not currently estimated to be material, such costs may be material in the future.
Market Data
Some market data and other statistical information used throughout this Annual Report on Form 10-K is based on data from independent firms such as IHS Automotive and Boston Consulting Group. Other data is based on good faith estimates, which are derived from our review of internal analyses, as well as third party sources. Although we believe these third party sources are reliable, we have not independently verified the information and cannot guarantee its accuracy and completeness. To the extent that we have been unable to obtain information from third party sources, we have expressed our belief on the basis of our own internal analyses of our products and capabilities in comparison to our competitors.
Available Information
We make available free of charge on or through our website (www.cooperstandard.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (“SEC”). The information on our website is not incorporated by reference into this Report.
Forward-Looking Statements
This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of U.S. federal securities laws, and we intend that such forward-looking statements be subject to the safe harbor created thereby. We make forward-looking statements in this Annual Report on Form 10-K and may make such statements in future filings with the SEC. We may also make forward-looking statements in our press releases or other public or stockholder communications. These forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends, and other information that is not historical information and, in particular, appear under “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” When used in this report, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” or future or conditional verbs, such as “will,” “should,” “could,” “would,” or “may,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management’s examination of historical operating trends and data are based upon our current expectations and various assumptions. Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, we cannot assure you that these expectations, beliefs and projections will be achieved. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this Annual Report on Form 10-K. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this report are set forth in this Annual Report on Form 10-K, including under Item 1A. “Risk Factors.”
There may be other factors beyond the factors set forth in this Annual Report on Form 10-K, including under Item 1A. “Risk Factors,” that may cause our actual results to differ materially from the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this Annual Report on Form 10-K or other reports we file with the SEC, as applicable, and are expressly qualified in their entirety by the cautionary statements

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included herein and therein. We undertake no obligation to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.
Item 1A.    Risk Factors
We have listed below (not necessarily in order of importance or probability of occurrence) the most significant risk factors that could cause our actual results to vary materially from recent or anticipated results and could materially and adversely affect our business, results of operations, financial condition and cash flows.
We are highly dependent on the automotive industry. A prolonged or material contraction in automotive sales and production volumes could adversely affect our business, results of operations and financial condition.
Automotive sales and production are cyclical and depend on, among other things, general economic conditions and consumer spending, vehicle demand and preferences (which can be affected by a number of factors, including fuel costs, employment levels and the availability of consumer financing). As the volume of automotive production fluctuates, the demand for our products also fluctuates. Prolonged or material contraction in automotive sales and production volumes could cause our customers to reduce orders of our products, which could adversely affect our business, results of operations and financial condition.
We may not realize sales represented by awarded business, which could adversely affect our business, financial condition, results of operations and cash flows.
The realization of future sales from awarded business is subject to risks and uncertainties inherent in the cyclicality of vehicle production. In addition, our customers generally have the right to resource awarded business without penalty. Therefore, the ultimate amount of our sales are not guaranteed. If actual production orders from our customers are not consistent with the projections we use in calculating the amount of awarded business, we could realize substantially less sales and profit over the life of these awards than currently projected.
Escalating pricing pressures may adversely affect our business.
Pricing pressure in the automotive supply industry has been substantial and is likely to continue. Nearly all vehicle manufacturers seek price reductions in both the initial bidding process and during the term of the contract. Price reductions have adversely impacted our sales and profit margins and are expected to do so in the future. If we are not able to offset continued price reductions through improved operating efficiencies and reduced expenditures, those price reductions may have a negative impact on our financial condition.
Our business could be adversely affected if we lose any of our largest customers or significant platforms.
While we provide parts to virtually every major global OEM for use on a wide range of different platforms, sales to our three largest customers, Ford, GM and FCA, on a worldwide basis represented approximately 56% of our sales for the year ended December 31, 2016. Our ability to reduce the risks inherent in certain concentrations of business will depend, in part, on our ability to continue to diversify our sales on a customer, product, platform and geographic basis. Although business with each customer is typically split among numerous contracts, the loss of a major customer, significant reduction in purchases of our products by such customer, or any discontinuance or resourcing of a significant platform could adversely affect our business, results of operations and financial condition.
We operate in a highly competitive industry and efforts by our competitors to gain market share could adversely affect our financial performance.
The automotive parts industry is highly competitive. We face numerous competitors in each of our product lines. In general, there are three or more significant competitors and numerous smaller competitors for most of the products we offer. We also face competition for certain of our products from suppliers producing in lower-cost regions such as Asia and Eastern Europe. Our competitors’ efforts to grow market share could exert downward pressure on the pricing of our products and our margins.

10



Increases in the costs, or reduced availability, of raw materials and manufactured components may adversely affect our profitability.
Raw material costs can be volatile. The principal raw materials we purchase include EPDM and synthetic rubber, components manufactured from carbon steel, plastic resins and components, carbon black, process oils, components manufactured from aluminum and natural rubber. Raw materials are the largest component of our costs, representing approximately 50% of our total cost of products sold in 2016. The availability of raw materials and manufactured components can fluctuate due to factors beyond our control. A significant increase in the price of these items, or a restriction in their availability, could materially increase our operating costs and adversely affect our profitability because it is generally difficult to pass through these increased costs to our customers.
Disruptions in the supply chain could have an adverse effect on our business, financial condition, results of operations and cash flows.
We obtain components and other products and services from numerous suppliers and other vendors throughout the world. We are responsible for managing our supply chain, including suppliers that may be the sole sources of products that we require, that our customers direct us to use or that have unique capabilities that would make it difficult and/or expensive to re-source. In certain instances, entire industries may experience short-term capacity constraints. Any significant disruption in supply could adversely affect our financial performance. Furthermore, unfavorable economic or industry conditions could result in financial distress within our supply base, thereby increasing the risk of supply disruption. Although market conditions generally have improved in recent years, uncertainty remains, and another economic downturn or other unfavorable industry conditions in one or more of the regions in which we operate could cause a supply disruption and thereby adversely affect our financial condition, operating results and cash flows.
If a customer experiences a material supply shortage, either directly or as a result of a supply shortage at another supplier, that customer may halt or limit the purchase of our products, which could adversely affect our business, results of operations and financial condition.
Our working capital requirements may negatively affect our liquidity and capital resources.
Our working capital requirements can vary significantly, depending in part on the level, variability and timing of our customers’ worldwide vehicle production and the payment terms with our customers and suppliers. If our working capital needs exceed our cash provided by operating activities, we would look to our cash balances and availability under our borrowing arrangements to satisfy those needs, as well as potential sources of additional capital, which may not be available on satisfactory terms and in adequate amounts, if at all.
We are subject to other risks associated with our international operations.
We have significant manufacturing operations outside the United States, including joint ventures and other alliances. Our operations are located in 20 countries, and we export to several other countries. In 2016, approximately 75% of our sales were attributable to products manufactured outside the United States. Risks inherent in our international operations include:
currency exchange rate fluctuations, currency controls and restrictions, and the ability to hedge currencies;
changes in local economic conditions;
repatriation restrictions or requirements, including tax increases on remittances and other payments by our foreign subsidiaries;
global sovereign fiscal uncertainty and hyperinflation in certain foreign countries;
changes in laws and regulations, including laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs, or taxes or the imposition of embargos on imports from countries where we manufacture products;
exposure to possible expropriation or other government actions; and
exposure to local political or social unrest including resultant acts of war, terrorism, or similar events.
Expanding our sales and manufacturing operations in the Asia Pacific region, particularly in China, is an integral part of our strategy, and, as a result, our exposure to the risks described above is substantial. The occurrence of any of these risks may adversely affect the results of operations and financial condition of our international operations and our business as a whole.
Foreign currency exchange rate fluctuations could materially impact our operating results.
Our sales and manufacturing operations outside the United States expose us to currency risks. For our consolidated financial statements, our sales and earnings denominated in foreign currencies are translated into U.S. dollars. This translation is calculated based on average exchange rates during the reporting period. Accordingly, our reported international sales and earnings could be adversely impacted in periods of a strengthening U.S. dollar.

11



Although we generally produce in the same geographic region as our products are sold, we also produce in countries that predominately sell in another currency. Further, some of our commodities are purchased in or tied to the U.S. dollar; therefore our earnings could be adversely impacted during the periods of a strengthening U.S. dollar relative to other foreign currencies. While we employ financial instruments to hedge certain portions of our foreign currency exposures, our efforts to manage these risks may not be successful and may not completely insulate us from the effects of currency fluctuation.
A portion of our operations are conducted by joint ventures which have unique risks.
Certain of our operations are carried out by joint ventures. In joint ventures, we share the management of the company with one or more partners who may not have the same goals, resources or priorities as we do. The operations of our joint ventures are subject to agreements with our partners, which typically include additional organizational formalities as well as requirements to share information and decision making, and may also limit our ability to sell our interest. Additional risks include one or more partners failing to satisfy contractual obligations, a change in ownership of any of our partners and our limited ability to control our partners’ compliance with applicable laws, including the Foreign Corrupt Practices Act. Any such occurrences could adversely affect our financial condition, operating results, cash flow or reputation.
We have a substantial amount of indebtedness, which could have a material adverse effect on our financial condition and our ability to obtain financing in the future and to react to changes in our business.
For discussion of our debt and financing arrangements, including our senior term loan facility (“Term Loan Facility”), 5.625% Senior Notes due 2026 (“Senior Notes”), our senior asset-based revolving credit facility (“ABL Facility”) and debt of certain foreign subsidiaries, see “Liquidity and Capital Resources - Financing Arrangements” in Item 7 and Note 7 of this Report.
Our significant amount of debt and our debt service obligations could limit our ability to satisfy our obligations, limit our ability to operate our business and impair our competitive position. For example, it could:
increase our vulnerability to adverse economic and general industry conditions, including interest rate fluctuations, because a portion of our borrowings are at variable rates of interest;
require us to dedicate a substantial portion of our cash flows from operations to payments on our debt, which would reduce the availability of cash to fund working capital, capital expenditures or other general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and industry;
place us at a disadvantage compared to competitors that may have proportionately less debt;
limit our ability to obtain additional debt or equity financing due to applicable financial and restrictive covenants in our debt agreements; and
increase our cost of borrowing.
Our ability to make scheduled payments on our debt or to refinance these obligations depends on our financial condition, operating performance and our ability to generate cash in the future. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, sell material assets, seek additional capital or restructure or refinance our indebtedness, any of which could have a material adverse effect on our business, results of operations and financial condition. In addition, we may not be able to effect any of these actions, if necessary, on commercially reasonable terms or at all. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments, including the credit agreements governing the Term Loan Facility and the ABL Facility and the indenture governing the Senior Notes, may limit or prevent us from taking any of these actions. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness on commercially reasonable terms or at all. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have an adverse effect, which could be material, on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations in respect of the Term Loan Facility, the ABL Facility or the Senior Notes.
Although the credit agreements governing the Term Loan Facility and the ABL Facility contain certain limitations on our ability to incur additional indebtedness, they do not prohibit us from incurring obligations that do not constitute indebtedness as defined therein. To the extent that we incur additional indebtedness or such other obligations, the risk associated with our substantial indebtedness described above, including our potential inability to service our debt, will increase.

12



Our debt instruments impose significant operating and financial restrictions on us and our subsidiaries.
The credit agreements governing the Term Loan Facility and the ABL Facility impose significant operating and financial restrictions and limit our ability, among other things, to:
incur, assume or permit to exist additional indebtedness (including guarantees thereof);
pay dividends or certain other distributions on our capital stock or repurchase our capital stock or prepay subordinated indebtedness;
incur liens on assets;
make certain investments or other restricted payments;
allow to exist certain restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us;
engage in transactions with affiliates;
alter the business that we conduct; and
sell certain assets or merge or consolidate with or into other companies.
Moreover, our ABL Facility provides the agent considerable discretion to impose reserves, which could materially reduce the amount of borrowings that would otherwise be available to us.
The indenture governing the Senior Notes also imposes restrictions and limits our ability, among other things, to:
incur liens on assets;
make certain restricted payments;
sell certain assets or merge or consolidate with or into other companies; and
enter into certain sale-leaseback transactions.
As a result of these covenants and restrictions (including borrowing base availability), we are limited in how we conduct our business, and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities or acquisitions. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants in such agreements. Our failure to comply with the restrictive covenants described above as well as others contained in our future debt instruments from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms, our financial condition, results of operations and cash flows could be adversely affected.
If there were an event of default under any of the agreements relating to our outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. Our assets or cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. Further, if we are unable to repay, refinance or restructure our indebtedness under our secured debt, the holders of such debt could proceed against the collateral securing that indebtedness. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments. As a result, any default by us on our indebtedness could have a material adverse effect on our business, financial condition and results of operation.
Our pension plans are currently underfunded, and we may have to make cash payments to the plans, reducing the cash available for our business.
We sponsor various pension plans worldwide that are underfunded and will require cash payments. Additionally, if the performance of the assets in our pension plans does not meet our expectations, or if other actuarial assumptions are modified, our required contributions may be higher than we expect. As of December 31, 2016, our pension plans were underfunded by $177.9 million. If our cash flow from operations is insufficient to fund our worldwide pension liabilities, it could have an adverse effect on our financial condition and results of operations.

13



Significant changes in discount rates, the actual return on pension assets and other factors could adversely affect our liquidity, results of operations and financial condition.
Our earnings may be positively or negatively impacted by the amount of income or expense recorded related to our pension plans. Generally accepted accounting principles in the United States (“U.S. GAAP”) require that income or expense related to the pension plans be calculated at the annual measurement date using actuarial calculations, which reflect certain assumptions. Because these assumptions have fluctuated and will continue to fluctuate in response to changing market conditions, the amount of gains or losses that will be recognized in subsequent periods, the impact on the funded status of the pension plans and the future minimum required contributions, if any, could adversely affect our liquidity, results of operations and financial condition.
The benefits of our continuous improvement program and other cost savings plans may not be fully realized.
Our operations strategy includes continuous improvement programs and implementation of lean manufacturing tools across all facilities to achieve cost savings and increased performance. Further, we have and may continue to initiate restructuring actions designed to improve future profitability and competitiveness. The cost savings that we anticipate from these initiatives may not be achieved on schedule or at the level we anticipate. If we are unable to realize these anticipated savings, our operating results and financial condition may be adversely affected.
We may incur significant costs related to manufacturing facility closings or consolidation which could have an adverse effect on our financial condition.
If we must close or consolidate manufacturing locations, the exit costs associated with such closures or consolidation, including employee termination costs, may be significant. Such costs could negatively affect our cash flows, results of operations and financial condition.
Our inability to effectively manage the timing, quality and costs of new program launches could adversely affect our financial performance.
In connection with the award of new business, we may obligate ourselves to deliver new products that are subject to our customers’ timing, performance and quality standards. Given the number and complexity of new program launches, we may experience difficulties managing product quality, timeliness and associated costs. In addition, new program launches require a significant ramp up of costs. However, our sales related to these new programs generally are dependent upon the timing and success of our customers’ introduction of new vehicles. Our inability to effectively manage the timing, quality and costs of these new program launches could adversely affect our financial condition, operating results and cash flows.
Our success depends in part on our development of improved products, and our efforts may fail to meet the needs of customers on a timely or cost-effective basis.
Our continued success depends on our ability to maintain advanced technological capabilities and knowledge necessary to adapt to changing market demands, as well as to develop and commercialize innovative products. We may be unable to develop new products successfully or to keep pace with technological developments by our competitors and the industry in general. In addition, we may develop specific technologies and capabilities in anticipation of customers’ demands for new innovations and technologies. If such demand does not materialize, we may be unable to recover the costs incurred in such programs. If we are unable to recover these costs or if any such programs do not progress as expected, our business, results of operations and financial condition could be adversely affected.
Any acquisitions or divestitures we make may be unsuccessful, may take longer than anticipated or may negatively impact our business, financial condition, results of operations and cash flows.
We may pursue acquisitions or divestitures in the future as part of our strategy. Acquisitions and divestitures involve numerous risks, including identifying attractive target acquisitions, undisclosed risks affecting the target, difficulties integrating acquired businesses, the assumption of unknown liabilities, potential adverse effects on existing customer or supplier relationships, and the diversion of management’s attention from day-to-day business. We may not have, or be able to raise on acceptable terms, sufficient financial resources to make acquisitions. Our ability to make investments may also be limited by the terms of our existing or future financing arrangements. Any acquisitions or divestitures we pursue may not be successful or prove to be beneficial to our operations and cash flow.
We may incur material losses and costs as a result of product liability and warranty and recall claims that may be brought against us.
We may be exposed to product liability and warranty claims in the event that our products actually or allegedly fail to perform as expected or the use of our products results, or is alleged to result, in bodily injury and/or property damage.

14



Accordingly, we could experience material warranty or product liability expenses in the future and incur significant costs to defend against these claims. In addition, if any of our products are, or are alleged to be, defective, we may be required to participate in a recall of that product if the defect or the alleged defect relates to automotive safety. Product recalls could cause us to incur material costs and could harm our reputation or cause us to lose customers, particularly if any such recall causes customers to question the safety or reliability of our products. Also, while we possess considerable historical warranty and recall data with respect to the products we currently produce, we do not have such data relating to new products, assembly programs or technologies, including any new fuel and emissions technology and systems being brought into production, to allow us to accurately estimate future warranty or recall costs. 
In addition, the increased focus on systems integration platforms utilizing fuel and emissions technology with more sophisticated components from multiple sources could result in an increased risk of component warranty costs over which we have little or no control and for which we may be subject to an increasing share of liability to the extent any of the other component suppliers are in financial distress or are otherwise incapable of fulfilling their warranty or product recall obligations. Our costs associated with providing product warranties and responding to product recall claims could be material, and we do not have insurance covering product recalls. Product liability, warranty and recall costs may adversely affect our business, results of operations and financial condition.
We may be adversely affected by laws and regulations, including environmental, health and safety laws and regulations.
We are subject to various U.S. federal, state and local, and non-U.S. laws and regulations, including those related to environmental, health and safety, financial, tax, customs and other matters. We cannot predict the substance or impact of pending or future legislation or regulations, or the application thereof. The introduction of new laws or regulations or changes in existing laws or regulations, or the interpretations thereof, could increase the costs of doing business for us or our customers or suppliers or restrict our actions and adversely affect our financial condition, results of operations and cash flows.
In particular, we are subject to a broad range of laws and regulations governing emissions to air; discharges to water; noise and odor emissions; the generation, handling, storage, transportation, treatment, reclamation and disposal of chemicals and waste materials; the cleanup of contaminated properties; and health and safety. We may incur substantial costs in complying with these laws and regulations. Many of our current and former facilities have been subject to certain environmental investigations and remediation activities, and we maintain environmental reserves for certain of these sites. Through various acquisitions, we have acquired a number of manufacturing facilities, and we cannot assure that we will not incur material costs or liabilities relating to activities that predate our ownership. Material future expenditures may be necessary if compliance standards change or material unknown conditions that require remediation are discovered. Environmental laws could also restrict our ability to expand our facilities or could require us to acquire costly equipment or to incur other significant expenses. If we fail to comply with present and future environmental laws and regulations, we could be subject to future liabilities, which could adversely affect our financial condition, operating results and cash flows.
We are involved from time to time in legal proceedings, claims or investigations which could have an adverse impact on our profitability and financial condition.
We are involved in legal proceedings, claims or investigations that, from time to time, may be significant. These matters typically arise in the normal course of business including, without limitation, commercial or contractual disputes, including warranty claims and other disputes with customers and suppliers; intellectual property matters; personal injury claims; environmental issues; tax matters; employment matters; or allegations relating to legal compliance by us or our employees.
For further information regarding our legal matters, see Item 3. Legal Proceedings. No assurance can be given that such proceedings, claims and investigations will not have a material adverse effect on our profitability and financial condition.
Work stoppages or similar difficulties could disrupt our operations and negatively affect our operations and financial performance.
We may be subject to work stoppages and may be affected by other labor disputes. A number of our collective bargaining agreements expire in any given year. There is no certainty that we will be successful in negotiating new agreements with these unions that extend beyond the current expiration dates or that these new agreements will be on terms as favorable to us as past labor agreements. Failure to renew these agreements when they expire or to establish new collective bargaining agreements on terms acceptable to us and the unions could result in work stoppages or other labor disruptions which may have an adverse effect on our operations, customer relationships and financial results. Additionally, a work stoppage at one or more of our suppliers or our customers’ suppliers could adversely affect our operations if an alternative source of supply were not readily available. Work stoppages by our customers’ employees could result in reduced demand for our products and could have an adverse effect on our business. In addition, it is possible that our workforce will become more unionized in the future. Unionization activities could increase our costs, which could negatively affect our profitability.

15



If we are unable to protect our intellectual property or if a third party challenges our intellectual property rights, our business could be adversely affected.
We own or have rights to proprietary technology that is important to our business. We rely on intellectual property laws, patents, trademarks and trade secrets to protect such technology. Such protections, however, vary among the countries in which we market and sell our products, and as a result, we may be unable to prevent third parties from using our intellectual property without authorization. Any infringement or misappropriation of our technology could have an adverse effect on our business and results of operations. We also face exposure to claims by others for infringement of intellectual property rights and could incur significant costs or losses related to such claims. In addition, many of our supply agreements require us to indemnify our customers from third-party infringement claims. These claims, regardless of their merit or resolution, are frequently costly to prosecute, defend or settle and divert the efforts and attention of our management and employees. If any such claim were to result in an adverse outcome, we could be required to take actions which may include: ceasing the manufacture, use or sale of the infringing products; paying substantial damages to third parties, including to customers to compensate them for the discontinued use of a product or to replace infringing technology with non-infringing technology; or expending significant resources to develop or license non-infringing products, any of which could adversely affect our operations, business and financial condition.
A disruption in, or the inability to successfully implement upgrades to, our information technology systems, including disruptions relating to cybersecurity, could adversely affect our business and financial performance.
We rely upon information technology networks, systems and processes to manage and support our business. We have implemented a number of procedures and practices designed to protect against breaches or failures of our systems. Despite the security measures that we have implemented, including those measures to prevent cyber-attacks, our systems could be breached or damaged by computer viruses or unauthorized physical or electronic access. A breach of our information technology systems could result in theft of our intellectual property, disruption to business or unauthorized access to customer or personal information. Such a breach could adversely impact our operations and/or our reputation and may cause us to incur significant time and expense to cure or remediate the breach.
Further, we continually update and expand our information technology systems to enable us to more efficiently run our business. If these systems are not implemented successfully, our operations and business could be disrupted and our ability to report accurate and timely financial results could be adversely effected.
Our expected annual effective tax rate could be volatile and could materially change as a result of changes in many items including mix of earnings, debt and capital structure and other factors.
Many items could impact our effective tax rate including changes in our debt and capital structure, mix of earnings and many other factors. Our overall effective tax rate is based upon the consolidated tax expense as a percentage of consolidated earnings before tax. However, tax expenses and benefits are not recognized on a consolidated or global basis, but rather on a jurisdictional, legal entity basis. Further, certain jurisdictions in which we operate generate losses where no current financial statement benefit is realized. In addition, certain jurisdictions have statutory rates greater than or less than the United States statutory rate. As such, changes in the mix and source of earnings between jurisdictions could have a significant impact on our overall effective tax rate in future years. Changes in rules related to accounting for income taxes, changes in tax laws and rates or adverse outcomes from tax audits that occur regularly in any of our jurisdictions could also have a significant impact on our overall effective tax rate in future periods.
Impairment charges relating to our goodwill, long-lived assets or intangible assets could adversely affect our results of operations.
We regularly monitor our goodwill, long-lived assets and intangible assets for impairment indicators. In conducting our goodwill impairment testing, we compare the fair value of each of our reporting units to the related net book value. In conducting our impairment analysis of long-lived and intangible assets, we compare the undiscounted cash flows expected to be generated from the long-lived or intangible assets to the related net book values. Changes in economic or operating conditions impacting our estimates and assumptions could result in the impairment of our goodwill, long-lived assets or intangible assets. In the event that we determine that our goodwill, long-lived assets or intangible assets are impaired, we may be required to record a significant charge to earnings, which could adversely affect our results of operations.
We operate as a holding company and depend on our subsidiaries for cash to satisfy the obligations of the holding company.
     Cooper-Standard Holdings Inc. is a holding company. Our subsidiaries conduct all of our operations and own substantially all of our assets. Our cash flow and our ability to meet our obligations depend on the cash flow of our subsidiaries. In addition, the payment of funds in the form of dividends, intercompany payments, tax sharing payments and otherwise may be subject to restrictions under the laws of the countries of incorporation of our subsidiaries or the by-laws of the subsidiary.

16



Item 1B.    Unresolved Staff Comments
None.
Item 2.        Properties
As of December 31, 2016, our operations were conducted through 123 wholly-owned, leased and joint venture facilities in 20 countries (North America: Canada, Mexico, United States; Asia Pacific: China, India, Japan, South Korea, Thailand; Europe: Czech Republic, France, Germany, Italy, Netherlands, Poland, Romania, Serbia, Spain, Sweden, United Kingdom; South America: Brazil), of which 90 are predominantly manufacturing facilities and 33 have design, engineering, administrative or logistics designation(s). Our corporate headquarters are located in Novi, Michigan. Our manufacturing facilities are located in North America, Europe, Asia and South America. We believe that substantially all of our properties are in generally good condition and there is sufficient capacity to meet current and projected manufacturing, product development and logistics requirements. The following table summarizes our key property holdings by geographic region:
Region
 
Type
 
Total Facilities*
 
Owned Facilities
North America
 
Manufacturing (a)
 
34

 
24

 
 
Other (b)
 
16

 
1

Asia Pacific
 
Manufacturing (a)
 
29

 
11

 
 
Other (b)
 
6

 

Europe
 
Manufacturing (a)
 
24

 
17

 
 
Other (b)
 
10

 
1

South America
 
Manufacturing (a)
 
3

 
1

 
 
Other (b)
 
1

 

(a)
Includes multi-activity sites which are predominantly manufacturing.
(b)
Includes design, engineering, administrative and logistics locations.
(*) Excludes 6 unutilized (owned) facilities: (2) Europe; (4) North America
(*) Includes 21 R&D facilities worldwide.
Item 3.        Legal Proceedings
The litigation process is subject to many uncertainties, and the outcome of individual matters is not predicable with assurance. See Note 13. “Contingent Liabilities” to the consolidated financial statements for discussion of loss contingencies.
On March 30, 2016, a putative class action complaint alleging conspiracy to fix the price of body sealing products used in automobiles and other light-duty vehicles was filed in Ontario against numerous automotive suppliers, including Cooper-Standard Holdings Inc., CSA U.S. and Cooper-Standard Automotive Canada Limited (“CS Defendants”) and Nishikawa Cooper LLC, a joint venture in which the Company holds a 40% interest. Plaintiffs purport to be indirect purchasers of body sealing products supplied by the CS Defendants and/or the other defendants during the relevant period. The plaintiffs seek recovery of damages on behalf of direct and indirect purchasers against all defendants in an amount to be determined, punitive damages, as well as pre-judgment and post-judgment interest and related costs and expenses of the litigation. The Company believes the claims asserted against the CS Defendants are without merit and intends to vigorously defend against these claims. Further, the Company does not believe that there is a material loss that is probable and reasonably estimable related to these claims.
Item 4.        Mine Safety Disclosures
Not applicable.


17



PART II
 
Item 5.        Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our common stock has been traded on the NYSE since October 17, 2013, under the symbol “CPS” and our warrants have been traded on the OTC Bulletin Board since June 4, 2010, under the symbol “COSHW.”
The following chart lists the high and low sale prices for shares of our common stock and warrants for the fiscal quarters indicated through December 31, 2016 and 2015. With respect to our warrants, these prices are between dealers and do not include retail markups, markdowns or other fees and commissions and may not represent actual transactions:
 
 
Common Stock
 
Warrants
2016
 
High      
 
Low      
 
High      
 
Low      
March 31, 2016
 
$
77.60

 
$
64.31

 
$
46.00

 
$
36.25

June 30, 2016
 
85.99

 
71.46

 
62.29

 
50.50

September 30, 2016
 
107.41

 
77.04

 
76.75

 
58.25

December 31, 2016
 
105.54

 
86.33

 
77.50

 
65.00

 
 
Common Stock
 
Warrants
2015
 
High      
 
Low      
 
High      
 
Low      
March 31, 2015
 
$
59.20

 
$
50.96

 
$
32.44

 
$
25.67

June 30, 2015
 
64.24

 
58.83

 
36.70

 
32.45

September 30, 2015
 
64.79

 
55.00

 
39.13

 
29.00

December 31, 2015
 
80.15

 
58.10

 
49.80

 
33.59

Holders of Common Stock
As of February 10, 2017, there were approximately 11 holders of record of our common stock. This stockholder figure does not include a substantially greater number of holders whose shares are held of record by banks, brokers and other financial institutions.
Dividends
Cooper-Standard Holdings Inc. has never paid or declared a dividend on its common stock. The declaration of any prospective dividends is at the discretion of the Board of Directors and would be dependent upon sufficient earnings, capital requirements, financial position, general economic conditions, state law requirements and other relevant factors. Additionally, our credit agreements governing our ABL Facility, Term Loan Facility and Senior Notes contain covenants that, among other things, restrict our ability to pay certain dividends and distributions subject to certain qualifications and limitations. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financing Arrangements.” We do not anticipate paying any dividends on our common stock in the foreseeable future.
Securities Repurchase Program
On March 14, 2016, the Company announced that its Board of Directors approved a securities repurchase program (the “Program”) authorizing the Company to repurchase, in the aggregate, up to $125 million of its outstanding common stock or warrants to purchase common stock. The authorization replaced the remaining balance of a previous $50 million repurchase program authorized in May 2013 pursuant to which the Company repurchased approximately 198,990 shares at a total cost (including fees) of $9.8 million. Under the Program, repurchases may be made on the open market or through private transactions, as determined by the Company’s management and in accordance with prevailing market conditions and federal securities laws and regulations. Of the $125 million authorization under the Program, the Company used $23.8 million of cash on hand to purchase 350,000 of the shares being offered in connection with the secondary offering of the Company’s common stock that was completed in March 2016. 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 Program may be discontinued at any time at the Company’s discretion. Approximately $101.2 million dollar value of shares may yet be purchased under the Program.


18



Performance Graph
The following graph compares the cumulative total stockholder return for Cooper-Standard Holdings Inc. to the Standard & Poor’s 500 Index and the Standard & Poor’s Supercomposite Auto Parts & Equipment Index based on currently available data. The graph assumes an initial investment of $100 on December 31, 2011 and reflects the cumulative total return on that investment, including the reinvestment of all dividends where applicable, through December 31, 2016.
Comparison of Cumulative Return
https://cdn.kscope.io/b320cdcf414a83d790706f2fdf1a7e31-a1231201610_chart-35261.jpg
 
 
Ticker
 
12/30/2011*
 
12/31/2012
 
12/31/2013
 
12/31/2014
 
12/31/2015
 
12/30/2016*
Cooper-Standard Holdings Inc.
 
CPS
 
$
100.00

 
$
110.14

 
$
142.35

 
$
167.77

 
$
224.90

 
$
299.65

S&P 500
 
SPX
 
$
100.00

 
$
115.99

 
$
153.32

 
$
173.72

 
$
175.67

 
$
196.35

S&P Supercomposite Auto Parts & Equipment Index
 
S15AUTP
 
$
100.00

 
$
98.75

 
$
165.57

 
$
170.88

 
$
159.39

 
$
102.69

* Represents last trading day of the year
 

19



Item 6.        Selected Financial Data
The selected financial data for the years ended December 31, 2016, 2015, 2014, 2013 and 2012 have been derived from our consolidated financial statements, which have been audited by Ernst & Young LLP, our Independent Registered Public Accounting Firm. You should read the following data in conjunction with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto included in Item 8 of this Report.
 
Year Ended December 31,
 
2016
 
2015
 
2014
 
2013
 
2012
 
(Dollar amounts in millions except per share amounts)
Statement of operations data:
 
 
 
 
 
 
 
 
 
Sales
$
3,472.9

 
$
3,342.8

 
$
3,244.0

 
$
3,090.5

 
$
2,880.9

Net income
140.4

 
111.8

 
45.5

 
45.2

 
98.8

Net income attributable to Cooper-Standard Holdings Inc.
139.0

 
111.9

 
42.8

 
47.9

 
102.8

Earnings per share:
 
 
 
 
 
 
 
 
 
Basic
$
7.96

 
$
6.50

 
$
2.56

 
$
2.39

 
$
4.40

Diluted
$
7.42

 
$
6.08

 
$
2.39

 
$
2.24

 
$
4.14

 
 
 
 
 
 
 
 
 
 
 
As of December 31,
 
2016
 
2015
 
2014
 
2013
 
2012
 
(Dollar amounts in millions)
Balance sheet data (at end of period):
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
480.1

 
$
378.2

 
$
267.3

 
$
184.4

 
$
270.6

Net working capital (1)
90.2

 
175.3

 
294.3

 
269.1

 
265.6

Total assets
2,491.7

 
2,304.3

 
2,125.6

 
2,102.8

 
2,026.0

Total non-current liabilities
1,010.6

 
1,008.1

 
1,044.9

 
911.9

 
774.0

Total debt (2)
762.9

 
777.9

 
778.7

 
684.4

 
483.4

Preferred stock

 

 

 

 
121.6

Total equity
721.8

 
614.8

 
548.7

 
615.6

 
629.2

 
 
 
 
 
 
 
 
 
 
Statement of cash flows data:
 
 
 
 
 
 
 
 
 
Net cash provided by (used in):
 
 
 
 
 
 
 
 
 
   Operating activities
$
363.7

 
$
270.4

 
$
171.0

 
$
133.3

 
$
84.4

   Investing activities
(198.3
)
 
(166.4
)
 
(157.4
)
 
(191.1
)
 
(117.6
)
   Financing activities
(62.9
)
 
(11.6
)
 
49.4

 
(23.0
)
 
(58.1
)
 
 
 
 
 
 
 
 
 
 
Other financial data:
 
 
 
 
 
 
 
 
 
Capital expenditures, including other intangible assets
$
164.4

 
$
166.3

 
$
192.1

 
$
183.3

 
$
131.1

(1)
Net working capital is defined as current assets (excluding cash and cash equivalents) less current liabilities (excluding debt payable within one year).
(2)
Includes $393.1 of our Senior Notes, $332.8 of Term Loan, $0.3 in capital leases, and $36.7 of other third-party debt as of December 31, 2016.

20



Item 7.        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 Item 1. “Business—Forward-Looking Statements” 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 Item 1A. “Risk Factors.” Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with Item 6.” Selected Financial Data” and our consolidated financial statements and the notes to those statements included in Item 8 of this Report.

Company Overview
We design, manufacture and sell sealing, fuel and brake delivery, fluid transfer and anti-vibration systems for use in passenger vehicles and light trucks manufactured by global OEMs. In 2016, approximately 84% of our sales consisted of original equipment sold directly to OEMs for installation on new vehicles. The remaining 16% of our sales were primarily to Tier I and Tier II suppliers and non-automotive manufacturers. Accordingly, sales of our products are directly affected by the annual vehicle production of OEMs and, in particular, the production levels of the vehicles for which we provide specific parts. Most of our products are custom designed and engineered for a specific vehicle platform. Our sales and product development personnel frequently work directly with the OEMs’ engineering departments in the design and development of our various products.
Although each OEM may emphasize different requirements as the primary criteria for judging its suppliers, we believe success as an automotive supplier generally requires outstanding performance with respect to quality, price, service, performance, design and engineering capabilities, innovation, timely delivery and an extensive global footprint. Also, we believe our continued commitment to invest in global common processes is an important factor in servicing global customers with the same quality and consistency of product wherever we produce in the world. This is especially important when supplying products for global platforms.
In addition, to remain competitive, we must also consistently achieve and sustain cost savings. In an ongoing effort to reduce our cost structure, we run a global continuous improvement program which includes training for our employees, as well as implementation of lean tools, structured problem solving, best business practices, standardized processes and change management. We also evaluate opportunities to consolidate facilities and to relocate certain operations to lower cost countries. We believe we will continue to be successful in our efforts to improve our design and engineering capability and manufacturing processes while achieving cost savings, including through our continuous improvement initiatives.
Our OEM sales are generally based upon purchase orders issued by the OEMs, with updated releases for volume adjustments. As such, we typically do not have a backlog of orders at any point in time. Once selected to supply products for a particular platform, we typically supply those products for the platform life, which is normally three to five years, although there is no guarantee that this will occur. In addition, when we are the incumbent supplier to a given platform, we believe we have a competitive advantage in winning the redesign or replacement platform.
In 2016, approximately 52% of our sales were generated in North America. Because of our significant international operations, we are subject to the risks associated with doing business in other countries, such as currency volatility, high interest and inflation rates, and the general political and economic risk that are associated with some of these markets.

Business Environment and Outlook
The global automotive industry remains susceptible to economic conditions that could adversely impact new vehicle demand. While the U.S. economy remains strong, and the European economy shows indications of improvement, global economic sentiment remains cautious given continued geopolitical uncertainty, oil supply and demand issues and foreign currency volatility. Ongoing emerging market dynamics, including economic conditions in Brazil and the pace of economic growth in China, have and will continue to impact light vehicle production volumes.
Our business is directly affected by the automotive build rates in North America, Europe, the Asia Pacific region and South America. New vehicle demand is driven by macroeconomic and other factors, such as interest rates, manufacturer and

21



dealer sales incentives, fuel prices, consumer confidence, employment levels, income growth trends and government and tax incentives.
According to the forecasting firm IHS Automotive, global light vehicle production was approximately 93 million units in 2016. This reflects growth of over 4% globally, led primarily by the Asia Pacific region. North America and Europe also experienced modest growth while production levels declined in South America.
We expect vehicle production to surpass 100 million units by 2020, with the growth being driven primarily in Asia and Europe. We anticipate that North America light vehicle sales will remain relatively stable over the next few years with the potential for slight contraction in 2017, followed by annual growth in the 1% to 2% range in 2018 and beyond.
Details on light vehicle production in certain regions for 2016 and 2015, as well as projections for 2017, are provided in the following table:
 
(In millions of units)
2017(1)
 
2016(1)
 
2015(1)
 
Projected % Change 2016-2017
 
% Change 2015-2016
North America
17.6
 
17.8
 
17.5
 
(1.5
)%
 
2.0
 %
Europe
21.8
 
21.5
 
20.9
 
1.5
 %
 
2.8
 %
Asia Pacific(2)
49.9
 
48.5
 
45.3
 
2.8
 %
 
7.2
 %
South America
2.8
 
2.8
 
3.1
 
1.0
 %
 
(9.8
)%
(1) Production data based on IHS Automotive, January 2017.
(2) Includes China units of 27.7, 27.0, and 23.7 for 2017, 2016 and 2015, respectively.
Several factors will present significant opportunities for automotive suppliers who are positioned for the changing environment, such as:
continued shift to global platforms;
consolidation of suppliers;
autonomous and connected vehicles;
increased government regulation; and
consumer preference for environmentally friendly products and technology.
Competition in the automotive supplier industry is intense and has increased in recent years as OEMs have demonstrated a preference for stronger relationships with fewer suppliers. There are typically three or more significant competitors and numerous smaller competitors for most of the products we produce. Automotive suppliers with a global manufacturing footprint capable of fully servicing customers around the world will continue to lead the supply industry going forward.
OEMs have shifted some research and development, design and testing responsibility to suppliers, while at the same time shortening new product cycle times. To remain competitive, suppliers must have state-of-the-art engineering and design capabilities and must be able to continuously improve their engineering, design and manufacturing processes to effectively service the customer. Suppliers are increasingly expected to collaborate on, or assume the product design and development of, key automotive components and to provide innovative solutions to meet evolving technologies aimed at improved emissions and fuel economy.
Pricing pressure has continued as competition for market share has reduced the overall profitability of the industry and resulted in continued pressure on suppliers for price reductions. Consolidations and market share shifts among vehicle manufacturers continues to put additional pressures on the supply chain. These pricing and market pressures will continue to drive our focus on reducing our overall cost structure through continuous improvement initiatives, capital redeployment, restructuring and other cost management processes.

Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in Note 2. “Summary of Significant Accounting Policies,” to the consolidated financial statements included in Item 8 of this Report. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. These policies require the most difficult, subjective or complex judgments that management makes in the preparation of the financial statements and accompanying notes. We consider an accounting estimate to be critical if (i) it requires us to make assumptions about matters that were uncertain at the time we were making the estimate, or (ii) changes in the estimate or different estimates

22



that we could have selected could have had a material impact on our financial condition or results of operations. Such critical accounting estimates are discussed below. For these, materially different amounts could be reported under varied conditions and assumptions. Other items in our consolidated financial statements require estimation, however, in our judgment, they are not as critical as those discussed below.
Goodwill. Our goodwill is tested for impairment as of October 1 of each year for all of our reporting units, and more frequently if events occur or circumstances change that would warrant such a review. For our goodwill analysis, fair values are based on the cash flows projected in the reporting units’ strategic plans and long-range planning forecasts, discounted at a risk-adjusted rate of return. Our long-range planning forecasts are based on our assessment of revenue growth rates generally based on industry specific data, external vehicle build assumptions published by widely used external sources, and customer market share data based on known and targeted awards over a five-year period. The projected profit margin assumptions included in the plans are based on the current cost structure and adjustments for anticipated cost reductions or increases. If different assumptions were used in these plans, the related cash flows used in measuring fair value could be different and impairment of goodwill might be recorded. We assess the reasonableness of the estimated fair values using market based multiples of comparable companies. Our annual goodwill impairment analysis resulted in no impairment for 2016 or 2015.
Long-Lived Assets. We monitor our long-lived assets for impairment indicators on an ongoing basis. If impairment indicators exist, we analyze the undiscounted cash flows expected to be generated from the long-lived assets compared to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Fair value is estimated based upon either a discounted cash flow analysis or estimated salvage values. Cash flows are estimated using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments, as well as assumptions related to discount rates. Changes in economic or operating conditions impacting these estimates and assumptions could result in the impairment of long-lived assets.
Restructuring. Specific accruals have been recorded in connection with restructuring initiatives. These accruals include estimates principally related to employee separation costs, the closure and/or consolidation of facilities and contractual obligations. Actual amounts recognized could differ from the original estimates. Restructuring-related reserves are reviewed on a quarterly basis, and changes to plans are appropriately recognized when identified. Changes to plans associated with the restructuring of existing businesses are generally recognized as employee separation and plant phase-out costs in the period the change occurs. See Note 4. “Restructuring” to the consolidated financial statements included in Item 8 of this Report for additional information.
Revenue Recognition and Sales Commitments. We generally enter into agreements with our customers to produce products at the beginning of a vehicle’s life. Although such agreements do not generally provide for minimum quantities, once we enter into such agreements, fulfillment of our customers’ purchasing requirements can be our obligation for an extended period or the entire production life of the vehicle. These agreements generally may be terminated by our customer at any time. Historically, terminations of these agreements have been minimal. In certain limited instances, we may be committed under existing agreements to supply products to our customers at selling prices which are not sufficient to cover the direct cost to produce such products. In such situations, we recognize losses as they are incurred.
We receive blanket purchase orders from many of our 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. We recognize revenue based on the pricing terms included in our annual purchase orders as our products are shipped to our customers. As part of certain agreements, we are asked to provide our customers with annual cost reductions. We accrue for such amounts as a reduction of revenue as our products are shipped to our customers. In addition, we generally have ongoing adjustments to our pricing arrangements with our customers based on the related content and cost of our products. Such pricing accruals are adjusted as they are settled with our customers.
Income Taxes. In determining the provision for income taxes for financial statement purposes, we make estimates and judgments which affect our evaluation of the carrying value of our deferred tax assets as well as our calculation of certain tax liabilities. We evaluate the carrying value of our deferred tax assets on a quarterly basis. In completing this evaluation, we consider all available positive and negative evidence. Such evidence includes historical operating results, the existence of cumulative earnings and losses in the most recent fiscal years, expectations for future pretax operating income, the time period over which our temporary differences will reverse, and the implementation of feasible and prudent tax planning strategies. Deferred tax assets are reduced by a valuation allowance if, based on the weight of this evidence, it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized in future periods.
Concluding that a valuation allowance is not required is difficult when there is significant negative evidence which is objective and verifiable, such as cumulative losses in recent years. We utilize three years’ cumulative pre-tax book results adjusted

23



for significant permanent book to tax differences as a measure of cumulative results in recent years. In certain foreign jurisdictions, our analysis indicates that we have cumulative three year historical losses on this basis. This is considered significant negative evidence which is difficult to overcome. However, the three-year loss position is not solely determinative, and, accordingly, management considers all other available positive and negative evidence in its analysis. Based upon this analysis, we concluded that it is more likely than not that the net deferred tax assets in certain foreign jurisdictions may not be realized in the future. Accordingly, we continue to maintain a valuation allowance related to those net deferred tax assets.
In addition, the calculation of our tax benefits and liabilities includes uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations. We recognize tax benefits and liabilities based on our estimate of whether, and the extent to which, additional taxes will be due. We adjust these liabilities based on changing facts and circumstances; however, due to the complexity of some of these uncertainties and the impact of any tax audits, the ultimate resolutions may be materially different from our estimated liabilities. See Note 10. “Income Taxes” to the consolidated financial statements for additional information.
Pensions and Postretirement Benefits Other Than Pensions. Included in our results of operations are significant pension and postretirement benefit costs, which are measured using actuarial valuations. Inherent in these valuations are key assumptions, including discount rates, expected returns on plan assets and health care cost trend rates. These assumptions are determined as of the current year measurement date. We are required to consider current market conditions, including changes in interest rates, in making these assumptions. Changes in pension and postretirement benefit costs may occur in the future due to changes in these assumptions. Our net pension and postretirement benefit costs were approximately $7.2 million and $0.7 million, respectively, for the year ended December 31, 2016.
To develop the discount rate for each pension plan, the expected cash flows underlying the plan’s benefit obligations were discounted using a December 31, 2016 pension index to determine a single equivalent rate. To develop our expected return on plan assets, we considered historical long-term asset return experience, the expected investment portfolio mix of plan assets and an estimate of long-term investment returns. To develop our portfolio of plan assets, we considered the duration of the plan liabilities and gave more weight to equity positions, including both public and private equity investments, than to fixed-income securities. Holding all other assumptions constant, a 1% increase or decrease in the discount rate would have decreased or increased the fiscal 2017 net periodic benefit cost expense by approximately $0.8 million or $0.9 million, respectively. Likewise, a 1% increase or decrease in the expected return on plan assets would have decreased or increased the fiscal 2017 net periodic benefit cost by approximately $3.1 million. Decreasing or increasing the discount rate by 1% would have increased or decreased the projected benefit obligations by approximately $68.8 million or $56.1 million, respectively. Aggregate pension net periodic benefit cost is forecasted to be approximately $6.4 million in 2017, excluding the impact of special events.
The expected annual rate of increase in health care costs is approximately 5.67% for 2016 (5.49% for the United States, 6.00% for Canada), grading down to 5% in 2018, and was held constant at 5.00% for years past 2018. These trend rates were assumed to reflect market trend, actual experience and future expectations. The health care cost trend rate assumption has a significant effect on the amounts reported. Only certain employees hired are eligible to participate in our subsidized postretirement plan. A 1% change in the assumed health care cost trend rate would have increased or decreased the fiscal 2017 service and interest cost components by $0.2 million in each case, and the projected benefit obligations would have increased or decreased by $3.3 million or $2.6 million, respectively. Aggregate other postretirement net periodic benefit cost is forecasted to be approximately $0.7 million in 2017.
During 2016, we 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. For the year ended December 31, 2016, we incurred £0.2 million (or $0.3 million) in settlement charges. The wind-up process will be completed in 2017, and we expect that settlement charges of approximately £4.5 million (or $5.6 million) will be incurred.
The general funding policy is to contribute amounts deductible for United States federal income tax purposes or amounts required by local statute. The Company estimates it will make funding cash contributions of approximately $5.2 million to its non-U.S. pension plans in 2017. The Company expects to make no contributions to its U.S. pension plans in 2017.

24



Results of Operations
 
Year Ended December 31,
 
Change
 
2016
 
2015
 
2014
 
2016
vs.
2015
 
2015
vs.
2014
 
(dollar amounts in thousands)
Sales
$
3,472,891

 
$
3,342,804

 
$
3,243,987

 
$
130,087

 
$
98,817

Cost of products sold
2,808,049

 
2,755,691

 
2,734,558

 
52,358

 
21,133

Gross profit
664,842

 
587,113

 
509,429

 
77,729

 
77,684

Selling, administration & engineering expenses
359,782

 
329,922

 
301,724

 
29,860

 
28,198

Amortization of intangibles
13,566

 
13,892

 
16,437

 
(326
)
 
(2,545
)
Impairment charges
1,273

 
21,611

 
26,273

 
(20,338
)
 
(4,662
)
Restructuring charges
46,031

 
53,844

 
17,414

 
(7,813
)
 
36,430

Other operating loss (profit)
155

 
(8,033
)
 
(16,927
)
 
8,188

 
8,894

Operating profit
244,035

 
175,877

 
164,508

 
68,158

 
11,369

Interest expense, net of interest income
(41,389
)
 
(38,331
)
 
(45,604
)
 
(3,058
)
 
7,273

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

 
(30,488
)
 
(5,104
)
 
30,488

Equity in earnings of affiliates
7,877

 
5,683

 
6,037

 
2,194

 
(354
)
Other (expense) income, net
(10,659
)
 
9,759

 
(6,170
)
 
(20,418
)
 
15,929

Income before income taxes
194,760

 
152,988

 
88,283

 
41,772

 
64,705

Income tax expense
54,321

 
41,218

 
42,810

 
13,103

 
(1,592
)
Net income
140,439

 
111,770

 
45,473

 
28,669

 
66,297

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

 
(2,694
)
 
(1,561
)
 
2,804

Net income attributable to Cooper-Standard Holdings Inc.
$
138,988

 
$
111,880

 
$
42,779

 
$
27,108

 
$
69,101

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015.
Sales. Sales for the year ended December 31, 2016 increased $130.1 million, or 3.9%, compared to the year ended December 31, 2015. Sales were favorably impacted by improved volume and product mix in North America and Asia Pacific, as well as our recent acquisitions and consolidation of a previously unconsolidated joint venture, partially offset by unfavorable foreign exchange of $56.5 million, lower volumes in South America, customer price reductions and the divestiture of our hard coat plastic exterior trim business in 2015.
Cost of Products Sold. Cost of products sold is primarily comprised of material, labor, manufacturing overhead, depreciation and amortization and other direct operating expenses. Cost of products sold for the year ended December 31, 2016, increased $52.4 million or 1.9%, compared to the year ended December 31, 2015. Materials comprise the largest component of our cost of products sold and represented approximately 50% of total cost of products sold for the years ended December 31, 2016 and 2015. Cost of sales was impacted by higher production volumes in North America, Europe and Asia Pacific, as well as our recent acquisitions. These items were partially offset by continuous improvement and material cost savings and lower volumes in South America.
Gross Profit. Gross profit for the year ended December 31, 2016 increased $77.7 million compared to the year ended December 31, 2015. As a percentage of sales, gross profit was 19.1% and 17.6% of sales for the years ended December 31, 2016 and 2015, respectively. The increase in gross profit was driven by continuous improvement, material costs savings, improved volume and product mix in North America and Asia Pacific. These items were partially offset by unfavorable foreign exchange, inflation, customer price reductions, the divestiture of our hard coat plastic exterior trim business, and lower volumes in South America.
Selling, Administration and Engineering. Selling, administration and engineering expense for the year ended December 31, 2016 were $359.8 million, or 10.4% of sales, compared to $329.9 million, or 9.9%, of sales for the year ended December 31, 2015. Selling, administration and engineering expenses for the year ended December 31, 2016 were impacted

25



primarily by incentive compensation due to favorable operating results, higher compensation costs, innovation spending, and expansion in Asia Pacific, partially offset by favorable foreign exchange.
Impairment Charges. Due to the deterioration of financial results, the undiscounted cash flows did not exceed the book value at one of our Asia Pacific facilities in 2016, and one of our European facilities and two of our South American facilities in 2015. This resulted in non-cash asset impairment charges of $1.3 million and $13.6 million being recorded for the years ended December 2016 and 2015, respectively. Additionally, due to the deterioration of the economic conditions in the region, customer relationships in South America were fully impaired in 2015, resulting in a non-cash impairment charge of $8.0 million.
Restructuring. Restructuring charges for the year ended December 31, 2016 decreased $7.8 million compared to the year ended December 31, 2015. The decrease was primarily driven by reduced activity related to our European and North American initiatives, resulting in lower restructuring charges of $5.8 million and $3.6 million, respectively, partially offset by higher restructuring charges attributed to Asia Pacific initiatives of $1.6 million.
Other Operating Loss (Profit). Other operating loss was $0.2 million for the year ended December 31, 2016 and other operating profit was $8.0 million for the year ended December 31, 2015. The prior year profit resulted from the sale of our hard coat plastic exterior trim business.
Interest Expense, net. Net interest expense for the year ended December 31, 2016 increased $3.1 million compared to the year ended December 31, 2015, which resulted primarily from higher interest rates.
Loss on Refinancing and Extinguishment of Debt. Loss on refinancing and extinguishment of debt for the year ended December 31, 2016 was $5.1 million which resulted primarily from expensing debt issuance costs associated with our amended Term Loan Facility.
Other (Expense) Income, net. Other expense for the year ended December 31, 2016 was $10.7 million, consisting of secondary offering underwriting fees of $5.9 million, foreign currency losses of $4.0 million and losses on sale of receivables of $0.8 million. Other income for the year ended December 31, 2015 was $9.8 million, consisting of a gain from remeasurement of our previously held equity interest in Shenya of $14.2 million, which was partially offset by $3.4 million of foreign currency losses and $1.0 million of losses on sale of receivables.
Income Tax ExpenseIncome taxes for the year ended December 31, 2016 included an expense of $54.3 million on earnings before taxes of $194.8 million. This compares to an expense of $41.2 million on earnings before taxes of $153.0 million for the year ended December 31, 2015. Tax expense in 2016 and 2015 differed from the statutory rate due to the mix of income between the United States and foreign sources, tax incentives recognized in Poland resulting from increased current and future profitability, incremental valuation allowance recorded on tax losses generated in certain foreign jurisdictions, other tax credits and incentives, and other nonrecurring discrete items.
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014.
Sales. Sales for the year ended December 31, 2015 increased $98.8 million, or 3.0% compared to the year ended December 31, 2014. Sales were favorably impacted by improved volume and product mix in North America, Europe and Asia Pacific, as well as our Shenya acquisition, partially offset by unfavorable foreign exchange of $298.2 million, lower volumes in South America and customer price reductions.
Cost of Products Sold. Cost of products sold is primarily comprised of material, labor, manufacturing overhead, depreciation and amortization and other direct operating expenses. Cost of products sold for the year ended December 31, 2015, increased $21.1 million or 0.8% compared to the year ended December 31, 2014. Materials comprise the largest component of our cost of products sold and represented approximately 50% and 49% of total cost of products sold for the years ended December 31, 2015 and 2014, respectively. Cost of sales was impacted by higher production volumes in North America, Europe and Asia Pacific, as well as our Shenya acquisition. These items were partially offset by lower volumes in South America and continuous improvement savings.
Gross Profit. Gross profit for the year ended December 31, 2015 increased $77.7 million compared to the year ended December 31, 2014. As a percentage of sales, gross profit was 17.6% and 15.7% of sales for the years ended December 31, 2015 and 2014, respectively. The increase in gross profit was driven primarily by continuous improvement and material costs savings and improved volume and product mix in North America, Europe and Asia Pacific. These items were partially offset by unfavorable foreign exchange, customer price reductions and lower volumes in South America.
Selling, Administration and Engineering. Selling, administration and engineering expense for the year ended December 31, 2015 was $329.9 million or 9.9% of sales compared to $301.7 million or 9.3% of sales for the year ended December 31, 2014. Selling, administration and engineering expense for the year ended December 31, 2015 was impacted

26



primarily by incentive compensation due to favorable operating results, higher infrastructure costs and the Shenya acquisition, partially offset by favorable foreign exchange.
Impairment Charges. In 2015, due to the deterioration of financial results, the undiscounted cash flows at one of our European facilities and two of our South American facilities did not exceed their book value, resulting in non-cash asset impairment charges of $13.6 million being recorded in the fourth quarter of 2015. Additionally, due to the deterioration of the economic conditions in the region, customer relationships in South America were fully impaired, resulting in a non-cash impairment charge of $8.0 million. In 2014, due to the deterioration of financial results, the undiscounted cash flows at two of our European facilities and two of our North American facilities did not exceed their book value, resulting in an asset impairment charge of $24.2 million being recorded in the fourth quarter of 2014. Additionally, certain assets and patents in the North America segment were written down to their estimated fair market values, resulting in an impairment charge of $2.1 million.
Restructuring. Restructuring charges for the year ended December 31, 2015 increased $36.4 million compared to the year ended December 31, 2014. The increase was primarily the result of expenses incurred related to our European restructuring initiative.
Other Operating Profit. Other operating profit for the year ended December 31, 2015 was $8.0 million resulting from the gain on the sale of our hard coat plastic exterior trim business. Other operating profit for the year ended December 31, 2014 was $16.9 million, of which $16.0 million related to the gain on the sale of our thermal and emissions business.
Interest Expense, net. Net interest expense of $38.3 million for the year ended December 31, 2015 resulted primarily from interest and debt issuance amortization recorded on the Term Loan Facility. Net interest expense of $45.6 million for the year ended December 31, 2014 resulted primarily from interest and debt issuance amortization recorded on the Term Loan Facility, Senior Notes and Senior PIK Toggle Notes.
Loss on Refinancing and Extinguishment of Debt. Loss on refinancing and extinguishment of debt for the year ended December 31, 2014 was $30.5 million which resulted primarily from loss on extinguishment of previously outstanding senior notes.
Other Income (Expense), net. Other income for the year ended December 31, 2015 was $9.8 million, consisting of the gain from remeasurement of our previously held equity interest in Shenya of $14.2 million, which was partially offset by $3.4 million of foreign currency losses and $1.0 million of loss on sale of receivables. Other expense for the year ended December 31, 2014 was $6.2 million, consisting of $7.1 million of foreign currency losses and $1.9 million of loss on sale of receivables, which were partially offset by a $1.9 million gain on the sale of an equity method investment and $0.9 million of other miscellaneous income.
Income Tax ExpenseIncome taxes for the year ended December 31, 2015 included an expense of $41.2 million on earnings before taxes of $153.0 million. This compares to an expense of $42.8 million on $88.3 million of earnings before taxes for the year ended December 31, 2014. Tax expense in 2015 and 2014 differed from the statutory rate due to the incremental valuation allowance recorded on tax losses and credits generated in certain foreign jurisdictions, tax incentives recognized in Poland resulting from increased current and future profitability and a new Special Economic Zone permit, the mix of income between the United States and foreign sources, tax credits and incentives, and other nonrecurring discrete items.


27



Segment Results of Operations
The following table presents sales and segment profit (loss) for each of the reportable segments for the years ended December 31, 2016, 2015 and 2014:
 
  Year Ended December 31,
 
Change
 
2016
 
2015
 
2014
 
2016
vs.
2015
 
2015
vs.
2014
 
(dollar amounts in thousands)
Sales to external customers
 
 
 
 
 
 
 
 
 
North America
$
1,816,486

 
$
1,778,621

 
$
1,698,826

 
$
37,865

 
$
79,795

Europe
1,031,538

 
1,033,635

 
1,138,428

 
(2,097
)
 
(104,793
)
Asia Pacific
540,684

 
435,127

 
249,172

 
105,557

 
185,955

South America
84,183

 
95,421

 
157,561

 
(11,238
)
 
(62,140
)
Consolidated
$
3,472,891

 
$
3,342,804

 
$
3,243,987

 
$
130,087

 
$
98,817

Segment profit (loss)
 
 
 
 
 
 
 
 
 
North America
$
219,744

 
$
215,487

 
$
136,682

 
$
4,257

 
$
78,805

Europe
(15,989
)
 
(22,435
)
 
(28,062
)
 
6,446

 
5,627

Asia Pacific
9,206

 
4,063

 
3,524

 
5,143

 
539

South America
(18,201
)
 
(44,127
)
 
(23,861
)
 
25,926

 
(20,266
)
Income before income taxes
$
194,760

 
$
152,988

 
$
88,283

 
$
41,772

 
$
64,705

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015.
North America. Sales for the year ended December 31, 2016 increased $37.9 million, or 2.1%, compared to the year ended December 31, 2015, primarily due to improved volume and product mix and our recent acquisition, partially offset by unfavorable foreign exchange of $23.8 million and customer price reductions. Segment profit for the year ended December 31, 2016 increased $4.3 million primarily due to the favorable impact of continuous improvement and material cost savings, and improved volume and product mix, partially offset by customer price reductions, inflation and higher incentive compensation due to favorable operating results. Included in segment profit (loss) for the years ended December 31, 2016 and 2015 were restructuring charges of $1.7 million and $5.2 million, respectively.
Europe. Sales for the year ended December 31, 2016 decreased $2.1 million, or 0.2%, compared to the year ended December 31, 2015, primarily due to customer price reductions and unfavorable foreign exchange of $2.0 million, partially offset by improved volume. Segment loss improved by $6.4 million, primarily due to continuous improvement and material cost savings, and lower restructuring costs, partially offset by the nonrecurrence of a prior year gain related to the remeasurement of a previously held equity interest, customer price reductions, unfavorable foreign exchange, inflation and higher incentive compensation due to improved operating results. Included in segment profit (loss) for the years ended December 31, 2016 and 2015 were restructuring charges of $42.0 million and $47.9 million, respectively.
Asia Pacific. Sales for the year ended December 31, 2016 increased $105.6 million, or 24.3%, compared to the year ended December 31, 2015, primarily due to improved volume and our recent acquisitions and consolidation of a previously unconsolidated joint venture, partially offset by unfavorable foreign exchange of $26.8 million. Segment profit increased by $5.1 million, primarily due to improved volume and product mix, our recent acquisitions and consolidation of a previously unconsolidated joint venture, and the favorable impact of continuous improvement and material cost savings, partially offset by higher engineering and administrative costs to support growth in the region as well as higher incentive compensation due to favorable operating results. Included in segment profit (loss) for the years ended December 31, 2016 and 2015 were restructuring charges of $2.3 million and $0.7 million, respectively.
South America. Sales for the year ended December 31, 2016 decreased $11.2 million, or 11.8%, compared to the year ended December 31, 2015, primarily due to a decrease in volumes and unfavorable foreign exchange of $3.8 million. Segment loss improved by $25.9 million, primarily due to the nonrecurrence of impairment charges, material cost savings, partially offset by a decrease in volume and unfavorable foreign exchange.

28



Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014.
North America. Sales for the year ended December 31, 2015 increased $79.8 million or 4.7%, compared to the year ended December 31, 2014, primarily due to improved volume and product mix, partially offset by unfavorable foreign exchange of $44.9 million and customer price reductions. Segment profit for the year ended December 31, 2015 increased $78.8 million primarily due to the favorable impact of continuous improvement and material cost savings, improved volume and product mix, partially offset by customer price reductions, unfavorable foreign exchange and higher incentive compensation due to favorable operating results.
Europe. Sales for the year ended December 31, 2015 decreased $104.8 million, or 9.2%, compared to the year ended December 31, 2014, primarily due to unfavorable foreign exchange of $204.8 million and customer price reductions, partially offset by improved volume. Segment loss improved by $5.6 million, primarily due to improved volume and product mix, continuous improvement and material cost savings and the gain from the remeasurement of a previously held equity interest in Shenya as the legal ownership was held by one of our European entities, partially offset by unfavorable foreign exchange, higher restructuring costs, customer price reductions and higher incentive compensation due to improved operating results.
Asia Pacific. Sales for the year ended December 31, 2015 increased $186.0 million, or 74.6%, compared to the year ended December 31, 2014, primarily due to the Shenya acquisition which was completed February 27, 2015, and improved volume, partially offset by unfavorable foreign exchange of $11.7 million. Segment profit increased by $0.5 million, primarily due to improved volume and product mix, the Shenya acquisition and the favorable impact of continuous improvement and material costs savings, partially offset by higher engineering and administrative costs to support growth in the region as well as higher incentive compensation due to favorable operating results.
South America. Sales for the year ended December 31, 2015 decreased $62.1 million or 39.4%, compared to the year ended December 31, 2014, primarily due to unfavorable foreign exchange of $36.8 million and a decrease in sales volumes. Segment loss increased by $20.3 million, primarily due to impairment charges at two facilities and the write off of customer relationships that were impaired, a decrease in volume and unfavorable foreign exchange, partially offset by the favorable impact of continuous improvement savings.
Liquidity and Capital Resources
Short and Long-Term Liquidity Considerations and Risks
We intend to fund our ongoing working capital, capital expenditures, debt service and other funding requirements through a combination of cash flows from operations, cash on hand, borrowings under our ABL Facility, and receivables factoring. The Company utilizes intercompany loans and equity contributions to fund its worldwide operations. There may be country specific regulations which may restrict or result in increased costs in the repatriation of these funds. See Note 7. “Debt” to the consolidated financial statements in Item 8 of this Report for a detailed discussion of terms and conditions related to our debt.
Based on our current and anticipated levels of operations and the condition in our markets and industry, we believe that our cash flows from operations, cash on hand, borrowings under our ABL Facility and receivables factoring will enable us to meet our ongoing working capital, capital expenditures, debt service and other funding requirements for the next twelve months. However, our ability to fund our working capital needs, debt payments and other obligations, and to comply with the financial covenants, including borrowing base limitations under our ABL Facility, depend on our future operating performance and cash flow and many factors outside of our control, including the costs of raw materials, the state of the overall automotive industry and financial and economic conditions and other factors.
Cash Flows
Operating Activities. Net cash provided by operating activities was $363.7 million for the year ended December 31, 2016, which included $64.4 million of cash provided by changes in operating assets and liabilities. Cash provided by operating activities was primarily the result of increased earnings, as well as changes in accounts payable and accrued liabilities of $75.7 million. In addition, pension contributions of $7.8 million were made during the year ended December 31, 2016. Net cash provided by operating activities was $270.4 million for the year ended December 31, 2015, which included $36.6 million of cash provided by changes in operating assets and liabilities. Cash provided by operating activities was primarily the result of increased earnings, as well as changes in accounts and tooling receivables, accounts payable and accrued liabilities of $63.9 million. In addition, pension contributions of $7.9 million were made during the year ended December 31, 2015.
Net cash provided by operating activities was $171.0 million for the year ended December 31, 2014, which included $43.1 million of cash used that related to changes in operating assets and liabilities. The use of cash related to changes in

29



operating assets and liabilities was primarily a result of changes in accounts receivable and tooling receivables and accounts payable of $29.4 million and pension contributions of $12.2 million.
Investing Activities. Net cash used in investing activities was $198.3 million for the year ended December 31, 2016, which consisted primarily of $164.4 million of capital spending and $37.5 million for the acquisition of businesses, partially offset by the cash received from the consolidation of a joint venture. Net cash used in investing activities was $166.4 million for the year ended December 31, 2015, which consisted primarily of $166.3 million of capital spending, $34.4 million for the Shenya acquisition and $4.3 million for investment in joint ventures, offset by proceeds of $33.5 million for the sale of our hard coat plastic exterior trim business and $5.1 million for the sale of fixed assets and other. We anticipate that we will spend approximately $165 million to $175 million on capital expenditures in 2017.
Net cash used in investing activities was $157.4 million for the year ended December 31, 2014, which consisted primarily of $192.1 million of capital spending and $21.2 million for the acquisition of businesses, offset by proceeds of $50.6 million from the sale of our thermal and emissions product line, and the Australian business and the sale of an investment in affiliate, proceeds of $4.4 million for the sale of fixed assets and other, and a $1.0 million return on equity investments.
Financing Activities. Net cash used in financing activities totaled $62.9 million for the year ended December 31, 2016, which consisted primarily of the repayment of the Term Loan Facility of $393.1 million, refinancing costs on the Term Loan Facility of $4.1 million, a decrease in short term debt of $12.2 million, payments on long term debt of $10.7 million, taxes withheld and paid on employees’ share-based awards of $12.6 million, and the repurchase of common stock of $23.8 million, partially offset by $393.1 million of net proceeds from the issuance of our Senior Notes and $2.8 million of proceeds from the exercise of stock warrants. Net cash used in financing activities totaled $11.6 million for the year ended December 31, 2015, which consisted primarily of a decrease in short term debt of $9.0 million, payments on long-term debt of $8.9 million, taxes withheld and paid on employees’ share-based awards of $2.0 million, and the purchase of noncontrolling interests of $1.3 million, partially offset by $9.3 million related to the exercise of stock warrants.
Net cash provided by financing activities totaled $49.4 million for the year ended December 31, 2014, which consisted primarily of $737.5 million related to the proceeds from issuance of long-term debt, $9.0 million related to the exercise of stock warrants, increase in long-term debt of $6.6 million and excess tax benefit on stock options exercised of $4.1 million, partially offset by the repurchase of the Senior Notes and the Senior PIK Toggle Notes of $675.6 million, purchase of noncontrolling interest of $18.5 million, payments on long-term debt of $4.3 million, repurchase of common stock of $5.2 million and taxes withheld and paid on employees’ share based awards of $4.2 million.
Issuance of Senior Notes
On November 2, 2016, the Company’s wholly-owned subsidiary, CSA U.S. (the “Issuer”) completed a private offering of debt securities consisting of the issuance of $400.0 million aggregate principal amount of its 5.625% notes due 2026 (the “Senior Notes”). The proceeds from the sale of the Senior Notes were used to repay the non-extended term loans outstanding under the Term Loan Facility and to pay fees and expenses related to the refinancing. The Senior Notes are guaranteed by us, as well as each of CSA U.S.’s wholly-owned existing or subsequently organized U.S. subsidiaries, subject to certain exceptions, to the extent such subsidiary guarantees the ABL Facility and the 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 will 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, commencing on May 15, 2017.
If a Change of Control (as defined in the indenture) occurs, we will be required to make an offer to repurchase all of the Senior Notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.
ABL Facility
On November 2, 2016, CS Intermediate Holdco 1 LLC (“Parent”), CSA U.S., Cooper-Standard Automotive Canada Limited (the “Canadian Borrower”), Cooper-Standard Automotive International Holdings B.V. (the “Dutch Borrower”, and, together with CSA U.S. (the “U.S. Borrower”) and the Canadian Borrower, the “Borrowers”) and certain subsidiaries of CSA U.S., entered into a third amendment of our ABL Facility. Pursuant to the ABL Facility agreement, as amended, we have an aggregate revolving loan availability of up to $210.0 million, subject to borrowing base availability, including a $100.0 million letter of credit sub-facility and a $25.0 million swing line sub-facility. In addition, our ABL Facility provides for an uncommitted $100.0 million incremental loan facility, for a potential total ABL Facility of $310.0 million. Any borrowings under our ABL Facility will mature, and the commitments of the lenders under our ABL Facility will terminate, on November 2, 2021.

30



The ABL Facility includes affirmative and negative covenants that impose substantial restrictions on our financial and business operations, including our ability to incur and secure debt, make investments, sell assets, pay dividends or make acquisitions. The agreement 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 agreement is less than specified levels. The ABL Facility also contains various events of default that are customary for comparable facilities.
Loan and letter of credit availability under the agreement 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. Loan availability under our ABL Facility is apportioned as follows: $170.0 million to the U.S. Borrower, which includes a $60.0 million sublimit to the Dutch Borrower and $40.0 million to the Canadian Borrower. The obligations under the ABL Facility and the related guarantees are secured by various assets, as detailed in Note 7. “Debt” to the consolidated financial statements in Item 8 of this Report.
Borrowings under the ABL Facility bear interest at a rate equal to, at the Borrowers’ option:
in the case of borrowings by 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 is 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 thereafter 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) starting on or about February 2, 2017.
Debt issuance costs of approximately $0.8 million were incurred on the ABL Facility transaction. As of December 31, 2016, there were no borrowings under the ABL Facility, and subject to borrowing base availability, the Company had $195.3 million in availability, less outstanding letters of credit of $56.5 million. As of December 31, 2016, the Company had $1.7 million in unamortized debt issuance costs.
Term Loan Facility Amendment No. 1
On November 2, 2016, CSA U.S., as borrower, entered into the first amendment of our Term Loan Facility. The Term Loan Facility provides for loans in an aggregate principal amount of $340.0 million. 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 million, plus any voluntary prepayments (including revolving facility and ABL Facility 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.
The Term Loan Facility contains incurrence-based negative covenants customary for high yield senior secured debt securities. These negative covenants are subject to exceptions, qualifications and certain carveouts.
Borrowings under the Term Loan Facility bear interest, at the borrower’s option, at either (1) with respect to eurodollar rate loans, the greater of the applicable eurodollar rate and 0.75%, plus 2.75% 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 1.75% per annum.
All obligations of the borrower under the Term Loan Facility are guaranteed jointly and severally on a senior secured basis by us and the wholly-owned U.S. restricted subsidiaries of CSA U.S.
As of December 31, 2016, the principal amount of $340.0 million was outstanding, and the Company had $4.4 million unamortized debt issuance costs and $2.8 million of unamortized original issue discount.
Repayment of the Term Loan Facility 
On November 2, 2016, we repaid the non-extended term loan outstanding under the Term Loan Facility of $393.1 million. As a result of the repayment, the Company recognized a loss on refinancing of $5.1 million, which was primarily due to

31



the write off of unamortized original issue discount and debt issuance costs. The Company used proceeds from the Senior Notes, together with cash on hand, to repay the non-extended term loan.
Off-Balance Sheet Arrangements
As a part of our working capital management, we sell certain receivables through third party financial institutions without recourse. The amount sold varies each month based on the amount of underlying receivables and cash flow needs. As of December 31, 2016 and 2015, we had $49.6 million and $63.5 million, respectively, of receivables outstanding under receivable transfer agreements entered into by various locations. For the years ended December 31, 2016 and 2015, total accounts receivables factored were $267.6 million and $279.5 million, respectively. Costs incurred on the sale of receivables were $1.6 million, $2.1 million and $3.3 million for the years ended December 31, 2016, 2015 and 2014, respectively. These amounts are recorded in other (expense) income, net and interest expense, net of interest income in the consolidated statements of net income. These are permitted transactions under our credit agreement governing our ABL Facility, Term Loan Facility and Senior Notes.
As of December 31, 2016, we had no other material off-balance sheet arrangements.
Other Capital Transactions Impacting Liquidity
During 2016, the Board of Directors approved a securities repurchase program whereby the Company used $23.8 million of cash on hand to purchase 350,000 of the shares being offered in connection with the secondary offering of the Company’s common stock. The Company is not obligated to acquire a particular amount of securities, and the securities repurchase program may be discontinued at any time at the Company’s discretion. See Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity” and Note 17. “Equity.”
Contractual Obligations
Our contractual obligations consist of legal commitments requiring us to make fixed or determinable cash payments, regardless of the contractual requirements of the vendor to provide future goods or services. Except as otherwise disclosed, this table does not include information on our recurring purchase of materials for use in production because our raw materials purchase contracts typically do not require fixed or minimum quantities.
The following table summarizes the total amounts due as of December 31, 2016 under all debt agreements, commitments and other contractual obligations.
 
Payment due by period
 
Total
 
Less than
1 year
 
1-3 years
 
3-5 years
 
More than
5 years
 
(dollar amounts in millions)
Debt obligations
$
740.0

 
$
3.4

 
$
6.8

 
$
6.8

 
$
723.0

Interest on debt obligations
343.1

 
37.2

 
77.8

 
80.6

 
147.5

Operating lease obligations
125.3

 
34.1

 
46.8

 
26.5

 
17.9

Other obligations (1)
37.0

 
31.1

 
4.0

 
1.9

 

Total
$
1,245.4

 
$
105.8

 
$
135.4

 
$
115.8

 
$
888.4

 
(1) Represents other borrowings and capital lease obligations.
In addition to our contractual obligations and commitments set forth in the table above, we have employment arrangements with certain key executives that provide for continuity of management. These arrangements include payments of multiples of annual salary, certain incentives and continuation of benefits upon the occurrence of specified events in a manner believed to be consistent with comparable companies.
We also have funding requirements with respect to our pension obligations. We expect to make cash contributions of approximately $5.2 million to our foreign pension plans in 2017. We do not expect to make cash contributions to our U.S. pension plans in 2017. Our minimum funding requirements after 2017 will depend on several factors, including the investment performance of our retirement plans and prevailing interest rates. Our funding obligations may also be affected by changes in applicable legal requirements. We also have payments due with respect to our postretirement benefit obligations. We do not prefund our postretirement benefit obligations. Rather, payments are made as costs are incurred by covered retirees. We expect net other postretirement benefit payments to be approximately $2.6 million in 2017.
We may be required to make significant cash outlays due to our unrecognized tax benefits. However, due to the uncertainty of the timing of future cash flows associated with our unrecognized tax benefits, we are unable to make reasonably

32



reliable estimates of the period of cash settlement, if any, with the respective taxing authorities. Accordingly, unrecognized tax benefits of $7.9 million as of December 31, 2016 have been excluded from the contractual obligations table above. See Note 10. “Income Taxes” to the consolidated financial statements for additional information.
Excluded from the contractual obligations table above are open purchase orders as of December 31, 2016 for raw materials, supplies and capital expenditures in the normal course of business, supply contracts with customers, distribution agreements, joint venture agreements and other contracts without express funding requirements.
Non-GAAP Financial Measures
In evaluating our business, management considers EBITDA and Adjusted EBITDA to be key indicators of our operating performance. Our management also uses EBITDA and Adjusted EBITDA:
because similar measures are utilized in the calculation of the financial covenants and ratios contained in our financing arrangements;
in developing our internal budgets and forecasts;
as a significant factor in evaluating our management for compensation purposes;
in evaluating potential acquisitions;
in comparing our current operating results with corresponding historical periods and with the operational performance of other companies in our industry; and
in presentations to the members of our board of directors to enable our board of directors to have the same measurement basis of operating performance as is used by management in their assessments of performance and in forecasting and budgeting for our company.
In addition, we believe EBITDA and Adjusted EBITDA and similar measures are widely used by investors, securities analysts and other interested parties in evaluating our performance. We define Adjusted EBITDA as net income (loss) plus income tax expense (benefit), interest expense, net of interest income, depreciation and amortization or EBITDA, as adjusted for items that management does not consider to be reflective of our core operating performance. These adjustments include, but are not limited to, restructuring costs, impairment charges, non-cash fair value adjustments, acquisition related costs and non-cash share-based compensation.
We calculate EBITDA and Adjusted EBITDA by adjusting net income (loss) to eliminate the impact of items we do not consider indicative of our ongoing operating performance. EBITDA and Adjusted EBITDA are not financial measurements recognized under U.S. GAAP, and when analyzing our operating performance, investors should use EBITDA and Adjusted EBITDA as a supplement to, and not as alternatives for, net income (loss), operating income, or any other performance measure derived in accordance with U.S. GAAP, nor as an alternative to cash flow from operating activities as a measure of our liquidity. EBITDA and Adjusted EBITDA have limitations as analytical tools, and they should not be considered in isolation or as substitutes for analysis of our results of operations as reported under U.S. GAAP. These limitations include:
they do not reflect our cash expenditures or future requirements for capital expenditure or contractual commitments;
they do not reflect changes in, or cash requirements for, our working capital needs;
they do not reflect interest expense or cash requirements necessary to service interest or principal payments under our ABL Facility, Term Loan Facility and Senior Notes;
they do not reflect certain tax payments that may represent a reduction in cash available to us;
although depreciation and amortization are non-cash charges, the assets being depreciated or amortized may have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements; and
other companies, including companies in our industry, may calculate these measures differently and, as the number of differences in the way companies calculate these measures increases, the degree of their usefulness as a comparative measure correspondingly decreases.
In addition, in evaluating Adjusted EBITDA, it should be noted that in the future, we may incur expenses similar to the adjustments in the below presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by special items.

33



The following table provides a reconciliation of EBITDA and Adjusted EBITDA from net income, which is the most comparable financial measure in accordance with U.S. GAAP:
 
Year Ended December 31,
 
2016
 
2015
 
2014
 
(dollar amounts in thousands)
Net income attributable to Cooper-Standard Holdings Inc.
$
138,988

 
$
111,880

 
$
42,779

Income tax expense
54,321

 
41,218

 
42,810

Interest expense, net of interest income
41,389

 
38,331

 
45,604

Depreciation and amortization
122,660

 
114,427

 
112,580

EBITDA
$
357,358

 
$
305,856

 
$
243,773

Gain on remeasurement of previously held equity interest (1)

 
(14,199
)
 

Restructuring charges (2)
46,031

 
53,844

 
17,188

Impairment charges (3)
1,273

 
21,611

 
26,273

Gain on divestiture (4)

 
(8,033
)
 
(14,568
)
Loss on refinancing and extinguishment of debt (5)
5,104

 

 
30,488

Secondary offering underwriting fees and other expenses (6)
6,500

 

 

Amortization of inventory write-up (7)

 
1,419

 

Settlement charges (8)
281

 

 
3,637

Share-based compensation (9)

 
(71
)
 
2,770

Acquisition costs

 
1,637

 
740

Other
155

 
301

 
1,236

Adjusted EBITDA
$
416,702

 
$
362,365

 
$
311,537


(1)
Gain on remeasurement of previously held equity interest in Shenya.
(2)
Includes non-cash impairment charges related to restructuring and is net of non-controlling interest.
(3)
Impairment charges in 2016 related to fixed assets of $1,273. Impairment charges in 2015 related to fixed assets of $13,630 and intangible assets of $7,981. Impairment charges in 2014 related to fixed assets of $24,573 and intangible assets of $1,700.
(4)
Gain on sale of hard coat plastic exterior trim business in 2015 and thermal and emissions product line in 2014.
(5)
Loss on refinancing and extinguishment of debt relating to the refinancing of our Term Loan Facility in 2016 and the repurchase of certain debt in 2014.
(6)
Fees and other expenses associated with the March 2016 secondary offering.
(7)
Amortization of write-up of inventory to fair value for the Shenya acquisition.
(8)
Settlement charges in 2016 related to the initiative to de-risk the U.K. pension plans. Settlement charges in 2014 related to the U.S. pension plans that were amended to offer a one-time voluntary lump sum window to certain terminated vested participants.
(9)
Non-cash stock amortization expense and non-cash stock option expense for grants issued at emergence from bankruptcy.

Recent Accounting Pronouncements
See Note 2. “Summary of Significant Accounting Policies” to the consolidated financial statements included in Item 8 of this Report.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
We are exposed to fluctuations in interest rates, currency exchange rates and commodity prices. We actively monitor our exposure to risk from changes in foreign currency exchange rates and interest rates through the use of derivative financial instruments in accordance with management’s guidelines. We do not enter into derivative instruments for trading purposes. See Item 8. “Financial Statements and Supplementary Data,” specifically Note 20. “Fair Value Measurements and Financial Instruments” to the consolidated financial statements.

34



Foreign Currency Exchange Rate Risk. We use forward foreign exchange contracts to reduce the effect of fluctuations in foreign exchange rates on a portion of forecasted sales, material purchases and operating expenses. As of December 31, 2016, the notional amount of these contracts was $58.7 million. As of December 31, 2016, the fair value of the Company’s forward foreign exchange contracts was an asset of $0.2 million.
In addition to transactional exposures, our operating results are impacted by the translation of our foreign operating income into U.S. dollars. In 2016, net sales outside of the United States accounted for 75% of our consolidated net sales, although certain non-U.S. sales are U.S. dollar denominated. We do not enter into foreign exchange contracts to mitigate this exposure.
Interest Rates. In August 2014, the Company entered into 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, 2016, the notional amount of these contracts was $300.0 million. As of December 31, 2016, the fair value of the Company’s interest rate swaps was a liability of $3.1 million. In addition, as of December 31, 2016 and 2015, approximately 7% and 58%, respectively, of our total debt was at variable interest rates, after considering the effect of the interest rate swap contracts.
Commodity Prices. We have commodity price risk with respect to purchases of certain raw materials, including natural gas and carbon black. Raw material, energy and commodity costs have been extremely volatile over the past several years. Historically, we have used derivative instruments to reduce our exposure to fluctuations in certain commodity prices. We did not enter into any commodity derivative instruments in 2016. We will continue to evaluate, and may use, derivative financial instruments to manage our exposure to higher raw material, energy and commodity prices in the future.

35



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, 2016, 2015 and 2014
Consolidated statements of comprehensive income (loss) for the years ended December 31, 2016, 2015 and 2014
Consolidated balance sheets as of December 31, 2016 and December 31, 2015
Consolidated statements of changes in equity for the years ended December 31, 2016, 2015 and 2014
Consolidated statements of cash flows for the years ended December 31, 2016, 2015 and 2014
Notes to consolidated financial statements
Schedule II—Valuation and Qualifying Accounts


36



Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Cooper-Standard Holdings Inc.
We have audited the accompanying consolidated balance sheets of Cooper-Standard Holdings Inc. (the “Company”) as of December 31, 2016 and 2015, and 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, 2016. Our audits also included the financial statement schedule listed in the index at Item 15(a) 2. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cooper-Standard Holdings Inc. as of December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Cooper-Standard Holdings Inc.’s internal control over financial reporting as of December 31, 2016, 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 17, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Detroit, Michigan
February 17, 2017


37



Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Cooper-Standard Holdings Inc.
We have audited Cooper-Standard Holdings Inc.’s internal control over financial reporting as of December 31, 2016, 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). Cooper-Standard Holdings Inc.’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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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.
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.
In our opinion, Cooper-Standard Holdings Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Cooper-Standard Holdings Inc. as of December 31, 2016 and 2015, and the related consolidated statements of net income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2016, and our report dated February 17, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Detroit, Michigan
February 17, 2017


38



COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF NET INCOME
(Dollar amounts in thousands except per share amounts)
 
 
Year Ended December 31,
 
2016
 
2015
 
2014
Sales
$
3,472,891

 
$
3,342,804

 
$
3,243,987

Cost of products sold
2,808,049

 
2,755,691

 
2,734,558

Gross profit
664,842

 
587,113

 
509,429

Selling, administration & engineering expenses
359,782

 
329,922

 
301,724

Amortization of intangibles
13,566

 
13,892

 
16,437

Impairment charges
1,273

 
21,611

 
26,273

Restructuring charges
46,031

 
53,844

 
17,414

Other operating loss (profit)
155

 
(8,033
)
 
(16,927
)
Operating profit
244,035

 
175,877

 
164,508

Interest expense, net of interest income
(41,389
)
 
(38,331
)
 
(45,604
)
Loss on refinancing and extinguishment of debt
(5,104
)
 

 
(30,488
)
Equity in earnings of affiliates
7,877

 
5,683

 
6,037

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

 
(6,170
)
Income before income taxes
194,760

 
152,988

 
88,283

Income tax expense
54,321

 
41,218

 
42,810

Net income
140,439

 
111,770

 
45,473

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

 
(2,694
)
Net income attributable to Cooper-Standard Holdings Inc.
$
138,988

 
$
111,880

 
$
42,779

 
 
 
 
 
 
Earnings per share
 
 
 
 
 
Basic
$
7.96

 
$
6.50

 
$
2.56

Diluted
$
7.42

 
$
6.08

 
$
2.39

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


39



COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollar amounts in thousands)
 
 
Year Ended December 31,
 
2016
 
2015
 
2014
Net income
$
140,439

 
$
111,770

 
$
45,473

Other comprehensive income (loss):
 
 
 
 
 
Currency translation adjustment
(13,930
)
 
(80,331
)
 
(56,162
)
Benefit plan liabilities, net of tax(1)
(13,488
)
 
2,737

 
(53,455
)
Fair value change of derivatives, net of tax(2)
810

 
(269
)
 
(2,011
)
Other comprehensive loss, net of tax
(26,608
)
 
(77,863
)
 
(111,628
)
Comprehensive income (loss)
113,831

 
33,907

 
(66,155
)
Comprehensive (income) loss attributable to noncontrolling interests
(341
)
 
451

 
(2,615
)
Comprehensive income (loss) attributable to Cooper-Standard Holdings Inc.
$
113,490

 
$
34,358

 
$
(68,770
)
 
(1) 
Other comprehensive income (loss) related to the benefit plan liabilities is net of a tax effect of $2,883, $2,051 and $19,096 for the years ended December 31, 2016, 2015 and 2014, respectively.
(2) 
Other comprehensive income (loss) related to the fair value change of derivatives is net of a tax effect of $685, $299 and $1,253 for the years ended December 31, 2016, 2015 and 2014, respectively.
The accompanying notes are an integral part of these consolidated financial statements.


40



COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except share amounts)
 
December 31,
 
2016
 
2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
480,092

 
$
378,243

Accounts receivable, net
460,503

 
455,187

Tooling receivable
90,974

 
102,877

Inventories
146,449

 
149,645

Prepaid expenses
37,142

 
30,016

Other current assets
81,021

 
73,513

Total current assets
1,296,181

 
1,189,481

Property, plant and equipment, net
832,269

 
765,369

Goodwill
167,441

 
149,219

Intangible assets, net
81,363

 
70,702

Deferred tax assets
46,419

 
49,299

Other assets
68,029

 
80,222

Total assets
$
2,491,702

 
$
2,304,292

Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Debt payable within one year
$
33,439

 
$
45,494

Accounts payable
475,426

 
400,604

Payroll liabilities
144,812

 
127,609

Accrued liabilities
105,665

 
107,713

Total current liabilities
759,342

 
681,420

Long-term debt
729,480

 
732,418

Pension benefits
172,950

 
176,525

Postretirement benefits other than pensions
54,225

 
52,963

Deferred tax liabilities
9,241

 
4,914

Other liabilities
44,673

 
41,253

Total liabilities
1,769,911

 
1,689,493

Redeemable noncontrolling interest

 

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

 

Equity:
 
 
 
Common stock, $0.001 par value, 190,000,000 shares authorized; 19,686,917 shares issued and 17,690,611 outstanding as of December 31, 2016 and 19,105,251 shares issued and 17,458,945 outstanding as of December 31, 2015
17

 
17

Additional paid-in capital
513,934

 
513,764

Retained earnings
425,972

 
306,713

Accumulated other comprehensive loss
(242,563
)
 
(217,065
)
Total Cooper-Standard Holdings Inc. equity
697,360

 
603,429

Noncontrolling interests
24,431

 
11,370

Total equity
721,791

 
614,799

Total liabilities and equity
$
2,491,702

 
$
2,304,292

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

41



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, 2013
$
5,153

16,676,539

$
17

$
489,052

$
156,775

$
(27,694
)
$
618,150

$
(2,578
)
$
615,572

Shares issued under stock option plans

42,014


(1,307
)


(1,307
)

(1,307
)
Repurchase of common stock

(96,622
)

(2,338
)
(2,824
)

(5,162
)

(5,162
)
Warrant exercise

425,886


9,022



9,022


9,022

Share-based compensation, net

(8,489
)

11,458

(1,497
)

9,961


9,961

Excess tax benefit on stock options



4,098



4,098


4,098

Purchase of noncontrolling interest



(17,026
)


(17,026
)
(1,461
)
(18,487
)
Net income (loss) for 2014
(1,110
)



42,779


42,779

3,804

46,583

Other comprehensive loss
(62
)




(111,549
)
(111,549
)
(17
)
(111,566
)
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

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

42