Document
false0001320461 0001320461 2020-02-25 2020-02-25
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 

FORM 8-K 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) – February 25, 2020
 
 
COOPER-STANDARD HOLDINGS INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
001-36127
 
20-1945088
(State or other jurisdiction
 of incorporation)
 
(Commission
File Number)
 
(IRS 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 (248596-5900 
 
Check the appropriate box below in the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.001 per share
 
CPS
 
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  






Item 2.02 Results of Operations and Financial Condition.
On February 25, 2020, Cooper-Standard Holdings Inc. (the “Company”) issued a press release regarding its results of operations and financial condition for the fourth quarter and full year ended December 31, 2019, and will host a conference call to discuss those preliminary results on February 25, 2020 at 9 a.m. ET. The press release is attached hereto as Exhibit 99.
The information furnished pursuant to this Item 2.02, including Exhibit 99, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01    Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are furnished pursuant to Item 9.01 of Form 8-K:
Exhibit 99        Press release dated February 25, 2020
Exhibit 104        The cover page of this Current Report on Form 8-K, formatted in Inline XBRL.
 
                        
     
            

























SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Cooper-Standard Holdings Inc.
 
 
 
 
 
 
/s/ Joanna M. Totsky
Name:
 
Joanna M. Totsky
Title:
 
Senior Vice President, Chief Legal Officer
and Secretary
Date: February 25, 2020





Exhibit
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Cooper Standard Reports Fourth Quarter and Full Year 2019 Results

NOVI, Mich., February 24, 2020 -- Cooper-Standard Holdings Inc. (NYSE: CPS) today reported results for the fourth quarter and full year 2019.
Summary
Full year net income totaled $67.5 million or $3.92 per fully diluted share
Full year adjusted net loss totaled $3.3 million or $(0.19) per fully diluted share
Full year adjusted EBITDA totaled $201.6 million
Fourth quarter cash from operating activities of $68 million, free cash flow of $34 million; Year-end cash balance increased to $360 million
Net new business awards totaled $191 million in the quarter and $451 million for the full year
Contract awards related to the Company’s innovation products totaled $104 million in the quarter and $380 million for the full year
“Weak light vehicle production and commercial pressures in Asia continued to negatively impact our financial results in the fourth quarter,” said Jeffrey Edwards, chairman and CEO, Cooper Standard. “In addition, the UAW work stoppage in the United States and lower than planned volumes on certain important vehicle programs in North America further reduced sales and profits. Despite these challenges, we were able to generate positive free cash flow in the quarter.
“As we look ahead in 2020, our focus will be on providing continued world-class service and quality products to our customers, driving further improvement in our cost structure and optimizing cash flow to further enhance our strong balance sheet,” Edwards added. “We believe the successful execution of our operating plans and longer term strategic initiatives will enable us to drive improved returns on invested capital going forward.”

Consolidated Results*

 
Quarter Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
 
(dollar amounts in millions except per share amounts)
Sales
$
726.2

 
$
870.7

 
$
3,108.4

 
$
3,624.0

Net income (loss)
$
(67.4
)
 
$
(24.2
)
 
$
67.5

 
$
103.6

Adjusted net income (loss)
$
(22.3
)
 
$
26.4

 
$
(3.3
)
 
$
158.0

Earnings (loss) per diluted share
$
(4.00
)
 
$
(1.36
)
 
$
3.92

 
$
5.66

Adjusted earnings (loss) per diluted share
$
(1.32
)
 
$
1.47

 
$
(0.19
)
 
$
8.64

Adjusted EBITDA
$
25.7

 
$
75.7

 
$
201.6

 
$
372.7

*The financial results discussed throughout this release are presented on a preliminary basis. The Company’s annual report on Form 10-K for the year ended December 31, 2019 will include audited financial results.

The year-over-year change in fourth quarter and full year sales was primarily attributable to the sale of the Company's Anti-Vibration Systems (AVS) business, unfavorable volume and mix, including the impact of the United Auto Workers (UAW) work stoppage in the U.S., customer price adjustments and foreign exchange, partially offset by incremental sales from acquisitions.
Net loss for the fourth quarter 2019 included restructuring charges related to plant closures and headcount reductions, impairment charges related to fixed assets, as well as pension settlement charges related to the purchase of a bulk annuity policy designed to de-risk pension obligations in the U.S. Adjusted net loss for the

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fourth quarter 2019 excludes these and other non-cash or non-operating items and their related tax impact. The year-over-year change in adjusted net income (loss) for the fourth quarter was due largely to unfavorable volume and mix, including the impact of the UAW work stoppage in the U.S., customer price adjustments, general inflation, the sale of the Company’s AVS business and unfavorable foreign exchange, partially offset by improved operating efficiencies and other cost saving initiatives.
Net income for the full year 2019 included a gain on the sale of the Company’s AVS business, restructuring charges, pension settlement charges related to the bulk annuity purchase, non-cash impairment charges, certain project costs related to acquisitions and divestitures, and other non-cash or non-operating items and their related tax impact. Adjusted net loss for the full year 2019 excludes these items. The year-over-year change in full-year 2019 adjusted net income (loss) was due largely to unfavorable volume and mix, including the impact of the UAW work stoppage in the U.S., customer price adjustments, general inflation, higher raw material costs, the sale of the Company’s AVS business and unfavorable foreign exchange, partially offset by improved operating efficiencies, lower SGA&E expense and other cost saving initiatives.
The year-over-year change in fourth quarter and full year adjusted EBITDA is largely attributable to unfavorable volume and mix, customer price adjustments, the one-time impacts of the UAW work stoppage in the U.S. and a discontinued customer relationship in China, general inflation, higher raw material costs and unfavorable foreign exchange, partially offset by improved operating efficiencies and other cost saving initiatives.
Adjusted net income (loss), adjusted EBITDA, adjusted earnings (loss) per diluted share and free cash flow are non-GAAP measures. Reconciliations to the most directly comparable financial measures, calculated and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), are provided in the attached supplemental schedules.

Notable Developments
During the fourth quarter, Cooper Standard successfully conducted 73 new launches of customer programs, an increase of 30 percent over the same period a year ago. For the full year, new launches totaled 271, an increase of 38 percent over 2018. Also during the fourth quarter, the Company received net new business awards totaling $191 million in anticipated future annualized sales. This brings the year-to-date total net new business awards to $451 million. Contract awards related to the Company’s recent product innovations, including new, replacement and conversion business, totaled $104 million for the fourth quarter and $380 million for the full year 2019.
Net new business reflects anticipated sales from formally awarded programs, less lost business, discontinued programs and replacement programs, based on customer forecast volumes.  Contract awards related to innovation products reflect anticipated sales from formally awarded new and replacement programs specifically with respect to products containing the company’s commercialized innovation products, such as MagAlloy™, ArmorHose™, ArmorHose™ TPV, LightHose, Gen III Posi-Lock, TP Microdense, Microdense EPDM, FlushSeal™ glass sealing technology and Fortrex™, based on customer forecast volumes.  The calculation of “net new business” and “new contract awards related to innovation products” does not reflect customer price reductions on existing programs and may be impacted by various assumptions embedded in the respective calculation, including actual vehicle production levels on new programs, foreign exchange rates and the timing of major program launches.
Also during the fourth quarter, the Company undertook an initiative to de-risk pension obligations in the U.S. by purchasing a bulk annuity policy designed to match the liabilities of the plan. The annuity purchase was funded using plan assets. The related non-cash settlement charge of $15.2 million was recorded in pension settlement charges. As a result of the settlement, the Company’s overall projected benefit obligation as of December 31, 2019 was reduced by $58.2 million.


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Cost Reduction and Strategic Restructuring Initiatives

The Company remains focused on reducing ongoing costs through improved operating efficiency and the further rightsizing of its operating footprint and overhead expenses. In 2019, the Company announced and largely completed the closure of 10 facilities, conducted a significant voluntary separation program and completed the transition to a global organization structure that streamlined the size and function of the Global Leadership Team and other senior leadership offices. In total, the anticipated annualized savings from these initiatives are expected to generate a cash return on the related restructuring expenses in less than two years.

In continuation of the Company’s cost optimization efforts, two additional manufacturing facilities are scheduled for closure in 2020. The restructuring expense related to these additional facility closures is expected to be approximately $15 million. The structural cost savings resulting from these initiatives are expected to drive a cash payback in approximately two years on an annualized basis. In addition to the facility closures, the Company is continuing a strategic review process to consider alternatives for certain unprofitable operations. The Company expects to provide further details and updates on this process as decisions are made and finalized.

Quarterly Segment Results

Sales
 
Three Months Ended December 31,
 
 
Variance Due To:
 
2019
 
2018
 
Change
 
 
Volume / Mix*
 
Foreign Exchange
 
Acquis./Divest.
 
(Dollar amounts in thousands)
Sales to external customers
 
 
 
 
 
 
 
 
 
 
 
 
North America
$
368,407

 
$
476,378

 
$
(107,971
)
 
 
$
(49,868
)
 
$
276

 
$
(58,379
)
Europe
199,963

 
230,245

 
(30,282
)
 
 
(6,036
)
 
(6,227
)
 
(18,019
)
Asia Pacific
136,867

 
141,760

 
(4,893
)
 
 
6,512

 
(2,759
)
 
(8,646
)
South America
20,952

 
22,277

 
(1,325
)
 
 
400

 
(1,725
)
 

Consolidated
$
726,189

 
$
870,660

 
$
(144,471
)
 
 
$
(48,992
)
 
$
(10,435
)
 
$
(85,044
)
* Net of customer price reductions
The impact of the UAW work stoppage at GM plants in the United States is included in the volume/mix variance.
The impact of foreign currency exchange was primarily related to the Euro, Chinese Renminbi and the Brazilian Real.
Adjusted EBITDA
 
Three Months Ended December 31,
 
 
Variance Due To:
 
2019
 
2018
 
Change
 
 
Volume / Mix*
 
Foreign Exchange
 
Cost (Increases) / Decreases
 
Acquis./Divest.
 
(Dollar amounts in thousands)
Segment adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
37,496

 
79,918

 
(42,422
)
 
 
(28,727
)
 
(2,474
)
 
(8,201
)
 
(3,020
)
Europe
429

 
4,911

 
(4,482
)
 
 
(2,237
)
 
(1,161
)
 
2,562

 
(3,646
)
Asia Pacific
(13,691
)
 
(6,492
)
 
(7,199
)
 
 
(6,320
)
 
(803
)
 
888

 
(964
)
South America
1,448

 
(2,594
)
 
4,042

 
 
407

 
182

 
3,453

 

Consolidated adjusted EBITDA
25,682

 
75,743

 
(50,061
)
 
 
(36,877
)
 
(4,256
)
 
(1,298
)
 
(7,630
)
* Net of customer price reductions
The impact of the UAW work stoppage at GM plants in the United States is included in the volume/mix variance.

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The Cost (Increases) / Decreases category above includes:
The increase in material costs, wages and general inflation; tax settlements in Brazil; one-time impact of commercial settlements in Asia Pacific; and
Net operational efficiencies of $16.4 million primarily driven by our North America and Europe segments.
Full Year Segment Results
Sales
 
Year Ended December 31,
 
 
Variance Due To:
 
2019
 
2018
 
Change
 
 
Volume / Mix*
 
Foreign Exchange
 
Acquis./Divest.
 
(Dollar amounts in thousands)
Sales to external customers
 
 
 
 
 
 
 
 
 
 
 
 
North America
$
1,641,724

 
$
1,924,717

 
$
(282,993
)
 
 
$
(175,275
)
 
$
(5,433
)
 
$
(102,285
)
Europe
868,188

 
1,030,102

 
(161,914
)
 
 
(57,722
)
 
(50,797
)
 
(53,395
)
Asia Pacific
503,953

 
571,160

 
(67,207
)
 
 
(81,777
)
 
(22,623
)
 
37,193

South America
94,535

 
98,063

 
(3,528
)
 
 
4,393

 
(7,921
)
 

Consolidated
$
3,108,400

 
$
3,624,042

 
$
(515,642
)
 
 
$
(310,381
)
 
$
(86,774
)
 
$
(118,487
)
* Net of customer price reductions
The impact of the UAW work stoppage at GM plants in the United States is included in the volume/mix variance.
The impact of foreign currency exchange was primarily related to the Euro, Chinese Renminbi and the Brazilian Real.

Adjusted EBITDA
 
Year Ended December 31,
 
 
Variance Due To:
 
2019
 
2018
 
Change
 
 
Volume / Mix*
 
Foreign Exchange
 
Cost (Increases) / Decreases
 
Acquis./Divest.
 
(Dollar amounts in thousands)
Segment adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
212,530

 
320,955

 
(108,425
)
 
 
(103,375
)
 
(5,389
)
 
4,704

 
(4,365
)
Europe
22,702

 
45,105

 
(22,403
)
 
 
(27,764
)
 
(3,508
)
 
13,534

 
(4,665
)
Asia Pacific
(29,496
)
 
13,849

 
(43,345
)
 
 
(52,034
)
 
(1,080
)
 
9,914

 
(145
)
South America
(4,128
)
 
(7,251
)
 
3,123

 
 
2,263

 
(673
)
 
1,533

 

Consolidated adjusted EBITDA
201,608

 
372,658

 
(171,050
)
 
 
(180,910
)
 
(10,650
)
 
29,685

 
(9,175
)
* Net of customer price reductions
The impact of the UAW work stoppage at GM plants in the United States is included in the volume/mix variance.
The unfavorable impact of foreign currency exchange was primarily driven by the Canadian Dollar, the Euro, the Chinese Renminbi, the Polish Zloty, the Czech Koruna and the Brazilian Real.
The Cost (Increases) / Decreases category above includes:
The increase in commodity, general inflation, and tariffs;
Tax settlements in South America and the one-time impact of commercial settlements in Asia Pacific;
Net operational efficiencies of $80.9 million primarily driven by our North America, Europe, and Asia Pacific segments; and
The decrease in selling, administrative and engineering expense due to efficiencies related to cost improvement initiatives.

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Liquidity and Cash Flow
As of December 31, 2019, Cooper Standard had cash and cash equivalents totaling $359.5 million, compared to $265.0 million as of December 31, 2018. Net cash provided by operating activities in the fourth quarter 2019 was $67.8 million compared to $71.4 million in the fourth quarter of 2018. Free cash flow (defined as net cash provided by operating activities minus capital expenditures) improved to $34.4 million in the fourth quarter of 2019 compared to $13.4 million in the fourth quarter of 2018. For the full year 2019, net cash provided by operating activities was $97.7 million compared to $149.4 million in 2018. Free cash flow for the full year 2019 was an outflow of $66.8 million compared to an outflow of $68.7 million in 2018.
In addition to cash and cash equivalents, the Company had $173.0 million available under its senior amended asset-based revolving credit facility (“ABL facility”) for total liquidity of $532.5 million at December 31, 2019.
Total debt at December 31, 2019 was $807.6 million compared to $831.1 million at December 31, 2018. Net debt (defined as total debt minus cash and cash equivalents) at December 31, 2019 was $448.1 million, improved from $566.1 million at December 31, 2018. Cooper Standard’s net leverage ratio (defined as net debt divided by adjusted EBITDA) at December 31, 2019 was 2.2 times trailing 12 months adjusted EBITDA.
Outlook
Based on our outlook for the global automotive industry, macroeconomic conditions, current customer production schedules and our own operating plans, including the estimated first quarter impact of the coronavirus outbreak in China, the Company has issued 2020 full year guidance as follows:
 
Current Guidance1
Sales
$2.85 - $3.05 billion
Adjusted EBITDA2
$150 - $185 million
Capital Expenditures
$140 - $150 million
Cash Restructuring
$30 - $40 million
Cash Taxes
$10 - $15 million
Free Cash Flow
Positive
1 Guidance is representative of management's estimates and expectations as of the date it is published. Current guidance as presented in this press release considers February 2020 IHS production forecasts for relevant light vehicle platforms and models, customers' planned production schedules and other internal assumptions.
2 Adjusted EBITDA is a non-GAAP financial measure. The Company has not provided a reconciliation of projected adjusted EBITDA to projected net income because full-year net income will include special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end. Due to this uncertainty, the Company cannot reconcile projected adjusted EBITDA to U.S. GAAP net income without unreasonable effort.

Conference Call Details
Cooper Standard management will host a conference call and webcast on February 25, 2020 at 9 a.m. ET to discuss its fourth quarter and full year 2019 results, provide a general business update and respond to investor questions.
To participate in the live question-and-answer session, callers in the United States and Canada should dial toll-free 877-374-4041 (international callers dial 253-237-1156) and provide the conference ID 5998676 or ask to be connected to the Cooper Standard conference call. Callers should dial in at least five minutes prior to the start of the call. Analysts and investors are invited to ask questions after the presentations are made.
The interactive webcast and slide presentation can be accessed live or in replay on the investor relations page of the Cooper Standard website at www.ir.cooperstandard.com/events.cfm.

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About Cooper Standard
Cooper Standard, headquartered in Novi, Mich., is a leading global supplier of systems and components for the automotive industry. Products include rubber and plastic sealing, fuel and brake delivery, and fluid transfer systems. Cooper Standard employs approximately 28,000 people globally and operates in 21 countries around the world. For more information, please visit www.cooperstandard.com.
Forward-Looking Statements
This press release 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. Our use of words “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “believe,” “outlook,” “guidance,” “forecast,” 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 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. Among other items, such factors may include: prolonged or material contractions in automotive sales and production volumes; our inability to realize sales represented by awarded business; escalating pricing pressures; loss of large customers or significant platforms; our ability to successfully compete in the automotive parts industry; availability and increasing volatility in costs of manufactured components and raw materials; disruption in our supply base; competitive threats and commercial risks associated with our diversification strategy through the Advanced Technology Group; possible variability of our working capital requirements; risks associated with our international operations, including changes in laws, regulations and policies governing the terms of foreign trade, such as increased trade restrictions and tariffs; foreign currency exchange rate fluctuations; our ability to control the operations of our joint ventures for our sole benefit; our substantial amount of indebtedness; our ability to obtain adequate financing sources in the future; operating and financial restrictions imposed on us under our debt instruments; the underfunding of our pension plans; significant changes in discount rates and the actual return on pension assets; effectiveness of continuous improvement programs and other cost savings plans; manufacturing facility closings or consolidation; our ability to execute new program launches; our ability to meet customers’ needs for new and improved products; the possibility that our acquisitions and divestitures may not be successful; product liability, warranty and recall claims brought against us; laws and regulations, including environmental, health and safety laws and regulations; legal proceedings, claims or investigations against us; work stoppages or other labor disruptions; the ability of our intellectual property to withstand legal challenges; cyber-attacks, data privacy concerns, other disruptions in or the inability to implement upgrades to, our information technology systems; the possible volatility of our annual effective tax rate; the possibility of a failure to maintain effective controls and procedures; the possibility of future impairment charges to our goodwill and long-lived assets; our dependence on our subsidiaries for cash to satisfy our obligations; and other risks and uncertainties, including those detailed from time to time in the Company’s periodic reports filed with the Securities and Exchange Commission.
You should not place undue reliance on these forward-looking statements. Our forward-looking statements speak only as of the date of this press release and we undertake no obligation to publicly update or otherwise revise any forward-looking statement, whether as a result of new information, future events or otherwise, except where we are expressly required to do so by law.
This press release also contains estimates and other information that is based on industry publications, surveys and forecasts. This information involves a number of assumptions and limitations, and we have not independently verified the accuracy or completeness of the information.


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CPS_F

Contact for Analysts:
Contact for Media:
Roger Hendriksen
Chris Andrews
Cooper Standard
Cooper Standard
(248) 596-6465
(248) 596-6217
roger.hendriksen@cooperstandard.com
candrews@cooperstandard.com



Financial statements and related notes follow:


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COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands except share and per share amounts)
(Unaudited)
 
 
 
 
 
 
 
 
 
Quarter Ended December 31,
 
Year Ended December 31,
 
2019
 
2018 (a)
 
2019
 
2018 (b)
Sales
$
726,189

 
$
870,660

 
$
3,108,400

 
$
3,624,042

Cost of products sold
660,647

 
760,331

 
2,749,278

 
3,075,737

Gross profit
65,542

 
110,329

 
359,122

 
548,305

Selling, administration & engineering expenses
78,332

 
75,892

 
302,496

 
314,805

Gain on sale of business
(3,391
)
 

 
(191,571
)
 

Amortization of intangibles
4,793

 
4,248

 
17,966

 
14,844

Gain on sale of land

 
337

 

 
(10,377
)
Goodwill impairment charges

 
45,281

 

 
45,281

Other impairment charges
18,993

 
43,706

 
23,139

 
43,706

Restructuring charges
21,888

 
9,881

 
51,102

 
29,722

Operating profit (loss)
(55,073
)
 
(69,016
)
 
155,990

 
110,324

Interest expense, net of interest income
(10,255
)
 
(11,248
)
 
(44,113
)
 
(41,004
)
Equity in earnings of affiliates
740

 
2,370

 
6,504

 
6,718

Loss on refinancing and extinguishment of debt

 

 

 
(770
)
Pension settlement charges
(15,819
)
 
(775
)
 
(15,819
)
 
(775
)
Other expense, net
(1,169
)
 
(865
)
 
(4,260
)
 
(4,838
)
Income (loss) before income taxes
(81,576
)
 
(79,534
)
 
98,302

 
69,655

Income tax expense (benefit)
(10,912
)
 
(49,048
)
 
36,089

 
(29,400
)
Net income (loss)
(70,664
)
 
(30,486
)
 
62,213

 
99,055

Net loss attributable to noncontrolling interests
3,280

 
6,279

 
5,316

 
4,546

Net income (loss) attributable to Cooper-Standard Holdings Inc.
$
(67,384
)
 
$
(24,207
)
 
$
67,529

 
$
103,601

 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
Basic
16,859,946

 
17,761,701

 
17,146,124

 
17,894,718

Diluted
16,859,946

 
17,761,701

 
17,208,768

 
18,290,202

 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
(4.00
)
 
$
(1.36
)
 
$
3.94

 
$
5.79

Diluted
$
(4.00
)
 
$
(1.36
)
 
$
3.92

 
$
5.66

(a) Includes adjustment to previously reported amounts to decrease sales by $1,327, decrease income tax benefit by $466, increase net loss by $1,793, increase net loss attributable to noncontrolling interests by $645, and increase net loss attributable to Cooper-Standard Holdings Inc. by $1,148. Basic and diluted EPS were also each reduced by $0.06.
(b) Includes adjustment to previously reported amounts to decrease sales by $5,251, decrease income tax benefit by $283, decrease net income by $5,534, increase net loss attributable to noncontrolling interests by $1,369, and decrease net income attributable to Cooper-Standard Holdings Inc. by $4,165. Basic and diluted EPS were also each reduced by $0.23.


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COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
(Unaudited)
 
 
 
 
 
December 31,
 
2019
 
2018 (a)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
359,536

 
$
264,980

Accounts receivable, net
423,155

 
418,607

Tooling receivable
148,175

 
141,106

Inventories
143,439

 
175,572

Prepaid expenses
34,452

 
36,878

Other current assets
93,513

 
108,683

Assets held for sale


103,898

Total current assets
1,202,270

 
1,249,724

Property, plant and equipment, net
988,277

 
984,241

Operating lease right-of-use assets, net
83,376

 

Goodwill
142,187

 
143,681

Intangible assets, net
84,369

 
99,602

Deferred tax assets
56,662

 
71,049

Other assets
78,441

 
75,848

Total assets
$
2,635,582

 
$
2,624,145

Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Debt payable within one year
$
61,449

 
$
101,323

Accounts payable
426,055

 
452,320

Payroll liabilities
88,486

 
92,604

Accrued liabilities
119,841

 
102,976

Current operating lease liabilities
24,094

 

Liabilities held for sale


71,195

Total current liabilities
719,925

 
820,418

Long-term debt
746,179

 
729,805

Pension benefits
140,010

 
138,771

Postretirement benefits other than pensions
48,313

 
40,901

Long-term operating lease liabilities
60,234

 

Deferred tax liabilities
10,785

 
5,566

Other liabilities
34,154

 
37,209

Total liabilities
1,759,600

 
1,772,670

7% Cumulative participating convertible preferred stock

 

Equity:
 
 
 
Common stock
17

 
17

Additional paid-in capital
490,451

 
501,511

Retained earnings
619,448

 
569,215

Accumulated other comprehensive loss
(253,741
)
 
(245,937
)
Total Cooper-Standard Holdings Inc. equity
856,175

 
824,806

Noncontrolling interests
19,807

 
26,669

Total equity
875,982

 
851,475

Total liabilities and equity
$
2,635,582

 
$
2,624,145

(a) Includes adjustment to previously reported amounts to increase deferred tax assets by $1,042, increase accrued liabilities by $4,069, decrease deferred tax liabilities by $2,667, increase other liabilities by $7,667, decrease retained earnings by $6,810, decrease accumulated other comprehensive loss by $151, and decrease noncontrolling interests by $1,368.

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COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
 
 
 
 
 
 
 
Year Ended December 31,
 
2019
 
2018
 
2017
Operating Activities:
 
 
 
 
 
Net income
$
62,213

 
$
99,055

 
$
141,241

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation
133,987

 
131,854

 
124,032

Amortization of intangibles
17,966

 
14,844

 
14,056

Gain on sale of business
(191,571
)
 

 

Gain on sale of land

 
(10,377
)
 

Impairment charges
23,139

 
88,987

 
14,763

Pension settlement charges
15,819

 
775

 
6,427

Share-based compensation expense
11,865

 
8,520

 
24,963

Equity in earnings, net of dividends related to earnings
(1,587
)
 
(1,856
)
 
(137
)
Loss on refinancing and extinguishment of debt

 
770

 
1,020

Deferred income taxes
15,874

 
(38,931
)
 
7,975

Other
5,230

 
2,652

 
1,286

Changes in operating assets and liabilities:
 
 
 
 
 
Accounts and tooling receivable
(26,534
)
 
17,916

 
(26,428
)
Inventories
29,430

 
1,410

 
(13,929
)
Prepaid expenses
(150
)
 
(4,647
)
 
5,981

Accounts payable
(14,643
)
 
(32,502
)
 
11,415

Payroll and accrued liabilities
(1,258
)
 
(61,800
)
 
8,378

Other
17,917

 
(67,282
)
 
(7,937
)
Net cash provided by operating activities
97,697

 
149,388

 
313,106

Investing activities:
 
 
 
 
 
Capital expenditures
(164,466
)
 
(218,071
)
 
(186,795
)
Acquisition of businesses, net of cash acquired
(452
)
 
(171,653
)
 
(478
)
Proceeds from sale of business
243,362

 

 

Proceeds from sale of fixed assets and other
5,586

 
6,733

 
(13,349
)
Net cash provided by (used for) investing activities
84,030

 
(382,991
)
 
(200,622
)
Financing activities:
 
 
 
 
 
Principal payments on long-term debt
(4,494
)
 
(3,437
)
 
(19,866
)
Purchase of noncontrolling interest
(4,797
)
 
(2,450
)
 

Repurchase of common stock
(36,550
)
 
(59,955
)
 
(55,123
)
Proceeds from exercise of warrants

 

 
2,373

(Decrease) increase in short term debt, net
(40,406
)
 
65,198

 
10,683

Taxes withheld and paid on employees' share-based payment awards
(2,787
)
 
(11,618
)
 
(13,297
)
Contribution from noncontrolling interests and other
5,042

 
(2,178
)
 
(297
)
Net cash used for financing activities
(83,992
)
 
(14,440
)
 
(75,527
)
Effects of exchange rate changes on cash, cash equivalents and restricted cash
(3,392
)
 
(3,019
)
 
(1,475
)
Changes in cash, cash equivalents and restricted cash
94,343

 
(251,062
)
 
35,482

Cash, cash equivalents and restricted cash at beginning of period
267,399

 
518,461

 
482,979

Cash, cash equivalents and restricted cash at end of period
$
361,742

 
$
267,399

 
$
518,461

 
 
 
 
 
 
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheet:
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
359,536

 
$
264,980

 
$
515,952

Restricted cash included in other current assets
12

 
18

 
88

Restricted cash included in other assets
2,194

 
2,401

 
2,421

Total cash, cash equivalents and restricted cash shown in the statement of cash flows
$
361,742

 
$
267,399

 
$
518,461



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Non-GAAP Measures

EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow are measures not recognized under U.S. GAAP and which exclude certain non-cash and special items that may obscure trends and operating performance not indicative of the Company’s core financial activities. Management considers EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow to be key indicators of the Company’s operating performance and believes that these and similar measures are widely used by investors, securities analysts and other interested parties in evaluating the Company’s performance. In addition, similar measures are utilized in the calculation of the financial covenants and ratios contained in the Company’s financing arrangements and management uses these measures for developing internal budgets and forecasting purposes. EBITDA is defined as net income adjusted to reflect income tax expense, interest expense net of interest income, depreciation and amortization, and adjusted EBITDA is defined as EBITDA further adjusted to reflect certain items that management does not consider to be reflective of the Company’s core operating performance. Adjusted EBITDA margin is adjusted EBITDA presented as percentage of sales. Adjusted net income is defined as net income adjusted to reflect certain items that management does not consider to be reflective of the Company’s core operating performance. Adjusted earnings per share is defined as adjusted net income divided by the weighted average number of basic and diluted shares. Free cash flow is defined as net cash provided by operating activities minus capital expenditures and is useful to both management and investors in evaluating the Company’s ability to service and repay its debt.

When analyzing the Company’s operating performance, investors should use EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow as supplements to, and not as alternatives for, net income, operating income, or any other performance measure derived in accordance with U.S. GAAP, and not as an alternative to cash flow from operating activities as a measure of the Company’s liquidity. EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company’s results of operations as reported under U.S. GAAP. Other companies may report EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow differently and therefore the Company’s results may not be comparable to other similarly titled measures of other companies. In addition, in evaluating adjusted EBITDA and adjusted net income, it should be noted that in the future the Company may incur expenses similar to or in excess of the adjustments in the below presentation. This presentation of adjusted EBITDA and adjusted net income should not be construed as an inference that the Company’s future results will be unaffected by special items. Reconciliations of EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income and free cash flow follow.












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Reconciliation of Non-GAAP Measures
EBITDA and Adjusted EBITDA
The following table provides reconciliation of EBITDA and adjusted EBITDA from net income (unaudited):
 
Quarter Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
 
(dollar amounts in thousands)
Net income (loss) attributable to Cooper-Standard Holdings Inc.
$
(67,384
)
 
$
(24,207
)
 
$
67,529

 
$
103,601

Income tax expense (benefit)
(10,912
)
 
(49,048
)
 
36,089

 
(29,400
)
Interest expense, net of interest income
10,255

 
11,248

 
44,113

 
41,004

Depreciation and amortization
39,985

 
37,427

 
151,953

 
146,698

EBITDA
$
(28,056
)
 
$
(24,580
)
 
$
299,684

 
$
261,903

Gain on sale of business (1)
(3,391
)
 

 
(191,571
)
 

Restructuring charges (2)
21,888

 
9,881

 
51,102

 
29,722

Other impairment charges (3)
18,993

 
43,706

 
23,139

 
43,706

Pension settlement charges (4)
15,997

 
775

 
15,997

 
775

Project costs (5)
87

 
4,881

 
2,090

 
4,881

Lease termination costs (6)
164

 

 
1,167

 

Goodwill impairment charges (7)

 
39,818

 

 
39,818

Gain on sale of land (8)

 
337

 

 
(10,377
)
Amortization of inventory write-up (9)

 
925

 

 
1,460

Loss on refinancing and extinguishment of debt (10)

 

 

 
770

Adjusted EBITDA
$
25,682

 
$
75,743

 
$
201,608

 
$
372,658

 
 
 
 
 
 
 
 
Sales
$
726,189

 
$
870,660

 
$
3,108,400

 
$
3,624,042

Net income margin
(9.3
)%
 
(2.8
)%
 
2.2
%
 
2.9
%
Adjusted EBITDA margin
3.5
 %
 
8.7
 %
 
6.5
%
 
10.3
%


(1)
Gain on sale of AVS product line.
(2)
Includes non-cash impairment charges related to restructuring.
(3)
Other non-cash impairment charges in 2019 related to fixed assets. Impairment charges in 2018 related to intangible assets of $791 and fixed assets of $42,915.
(4)
Non-cash pension settlement charges and administrative fees incurred related to certain of our U.S. and non-U.S. pension plans.
(5)
Project costs recorded in selling, administration and engineering expense related to acquisitions and divestiture.
(6)
Lease termination costs no longer recorded as Restructuring charges in accordance with ASC 842.
(7)
Non-cash goodwill impairment charges in 2018 related to impairments at our Europe and Asia Pacific reporting units, net of approximately $5,463 attributable to our noncontrolling interests.
(8)
In 2018, the gain on sale consists of gain on sale of land in Europe that was contemplated in conjunction with our restructuring plan.
(9)
Amortization of write-up of inventory to fair value for the 2018 acquisitions.
(10)
Loss on refinancing and extinguishment of debt relating to the March 2018 amendment of the Term Loan Facility.






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Adjusted Net Income and Adjusted Earnings Per Share
The following table provides reconciliation of net income to adjusted net income and the respective earnings per share amounts (unaudited):
 
Quarter Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
 
(dollar amounts in thousands, except per share amounts)
Net income (loss) attributable to Cooper-Standard Holdings Inc.
$
(67,384
)
 
$
(24,207
)
 
$
67,529

 
$
103,601

Gain on sale of business (1)
(3,391
)
 

 
(191,571
)
 

Restructuring charges (2)
21,888

 
9,881

 
51,102

 
29,722

Other impairment charges (3)
18,993

 
43,706

 
23,139

 
43,706

Pension settlement charges (4)
15,997

 
775

 
15,997

 
775

Project costs (5)
87

 
4,881

 
2,090

 
4,881

Lease termination costs (6)
164

 

 
1,167

 

Goodwill impairment charges (7)

 
39,818

 

 
39,818

Gain on sale of land (8)

 
337

 

 
(10,377
)
Amortization of inventory write-up (9)

 
925

 

 
1,460

Loss on refinancing and extinguishment of debt (10)

 

 

 
770

Tax impact of adjusting items(11)
(8,620
)
 
(6,879
)
 
27,271

 
(7,889
)
Reversal of deferred tax valuation allowance (12)

 
(43,606
)
 

 
(43,606
)
Impact of U.S. tax reform(13)

 
748

 

 
(4,900
)
Adjusted net income (loss)
$
(22,266
)
 
$
26,379

 
$
(3,276
)
 
$
157,961

 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
Basic
16,859,946

 
17,761,701

 
17,146,124

 
17,894,718

Diluted (14)
16,859,946

 
17,761,701

 
17,208,768

 
18,290,202

 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
(4.00
)
 
$
(1.36
)
 
$
3.94

 
$
5.79

Diluted
$
(4.00
)
 
$
(1.36
)
 
$
3.92

 
$
5.66

 
 
 
 
 
 
 
 
Adjusted earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
(1.32
)
 
$
1.49

 
$
(0.19
)
 
$
8.83

Diluted
$
(1.32
)
 
$
1.47

 
$
(0.19
)
 
$
8.64

(1)
Gain on sale of AVS product line.
(2)
Includes non-cash impairment charges related to restructuring.
(3)
Other non-cash impairment charges in 2019 related to fixed assets. Impairment charges in 2018 related to intangible assets of $791 and fixed assets of $42,915.
(4)
Non-cash pension settlement charges and administrative fees incurred related to certain of our U.S. and non-U.S. pension plans.
(5)
Project costs recorded in selling, administration and engineering expense related to acquisitions and divestiture.
(6)
Lease termination costs no longer recorded as Restructuring charges in accordance with ASC 842.
(7)
Non-cash goodwill impairment charges in 2018 related to impairments at our Europe and Asia Pacific reporting units, net of approximately $5,463 attributable to our noncontrolling interests.
(8)
In 2018, the gain on sale consists of gain on sale of land in Europe that was contemplated in conjunction with our restructuring plan.
(9)
Amortization of write-up of inventory to fair value for the 2018 acquisitions.
(10)
Loss on refinancing and extinguishment of debt relating to the March 2018 amendment of the Term Loan Facility.
(11)
Represents the elimination of the income tax impact of the above adjustments, by calculating the income tax impact of these adjusting items using the appropriate tax rate for the jurisdiction where the charges were incurred.
(12)
Relates to the reversal of the Company’s valuation allowance on net deferred tax assets in France and on capital losses in the U.S.
(13)
Tax impact of the transition tax on undistributed foreign earnings and the tax effect of adjusting deferred taxes for the Tax Cuts and Jobs Act enacted into law on December 22, 2017.
(14)
For the purpose of calculating adjusted diluted earnings (loss) per share for the year ended December 31, 2019 and quarter ended December 31, 2018, the weighted average shares outstanding were 17,146,124 and 18,003,882, respectively.


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Free Cash Flow

The following table provides a reconciliation of net cash provided by operating activities to free cash flow (unaudited):
 
Quarter Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
 
(dollar amounts in thousands)
Net cash provided by operating activities
$
67,790

 
$
71,384

 
$
97,697

 
$
149,388

Capital expenditures
(33,381
)
 
(57,983
)
 
(164,466
)
 
(218,071
)
Free cash flow
$
34,409

 
$
13,401

 
$
(66,769
)
 
$
(68,683
)


14