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cps-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

___________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission File Number: 001-36127

______________________________

COOPER-STANDARD HOLDINGS INC.

(Exact name of registrant as specified in its charter)

______________________________


Delaware						20-1945088
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

40300 Traditions Drive

Northville, Michigan 48168

(Address of principal executive offices)

(Zip Code)

(248) 596-5900

(Registrant’s telephone number, including area code)

______________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

CPS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 30, 2020, there were 16,896,453 shares of the registrant’s common stock, $0.001 par value, outstanding.

COOPER-STANDARD HOLDINGS INC.

Form 10-Q

For the period ended June 30, 2020



		Page

	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Changes in Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42

	PART II. OTHER INFORMATION

Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 6.	Exhibits	47
SIGNATURES			48

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

COOPER-STANDARD HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollar amounts in thousands except per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Sales	$	340,467	$	764,698	$	995,357	$	1,642,693
Cost of products sold	400,838		666,828		1,012,585		1,429,318
Gross profit (loss)	(60,371)		97,870		(17,228)		213,375
Selling, administration & engineering expenses	68,271		74,170		138,942		161,144
Gain on sale of business	—		(189,910)		—		(189,910)

Amortization of intangibles	3,513		5,148		7,963		8,923
Restructuring charges	9,774		5,927		17,050		23,642
Impairment of assets held for sale	12,391		—		86,470		—
Other impairment charges	163		2,188		1,140		2,188
Operating (loss) profit	(154,483)		200,347		(268,793)		207,388
Interest expense, net of interest income	(12,771)		(11,575)		(23,008)		(23,507)
Equity in (losses) earnings of affiliates	(3,011)		1,891		(1,580)		4,249

Other expense, net	(4,701)		(1,781)		(8,141)		(2,577)
(Loss) income before income taxes	(174,966)		188,882		(301,522)		185,553
Income tax (benefit) expense	(38,982)		44,222		(53,099)		46,256
Net (loss) income	(135,984)		144,660		(248,423)		139,297
Net loss attributable to noncontrolling interests	1,765		545		3,616		493
Net (loss) income attributable to Cooper-Standard Holdings Inc.	$	(134,219)	$	145,205	$	(244,807)	$	139,790

(Loss) earnings per share:
Basic	$	(7.93)	$	8.39	$	(14.49)	$	8.02
Diluted	$	(7.93)	$	8.36	$	(14.49)	$	7.99

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

COOPER-STANDARD HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Dollar amounts in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net (loss) income	$	(135,984)	$	144,660	$	(248,423)	$	139,297
Other comprehensive income (loss):
Currency translation adjustment	6,789		(5,828)		(22,100)		(3,858)
Benefit plan liabilities adjustment, net of tax	(716)		(2,947)		1,966		(1,560)
Fair value change of derivatives, net of tax	6,238		828		(3,838)		2,081
Other comprehensive income (loss), net of tax	12,311		(7,947)		(23,972)		(3,337)
Comprehensive (loss) income	(123,673)		136,713		(272,395)		135,960
Comprehensive loss attributable to noncontrolling interests	1,675		1,172		4,033		749
Comprehensive (loss) income attributable to Cooper-Standard Holdings Inc.	$	(121,998)	$	137,885	$	(268,362)	$	136,709

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

COOPER-STANDARD HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands except share amounts)


	June 30, 2020		December 31, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	388,035	$	359,536
Accounts receivable, net	270,925		423,155
Tooling receivable, net	117,849		148,175
Inventories	144,909		143,439
Prepaid expenses	36,449		34,452
Income tax receivable and refundable credits	61,371		32,763
Other current assets	64,802		60,750
Assets held for sale	30,337		—
Total current assets	1,114,677		1,202,270
Property, plant and equipment, net	884,576		988,277
Operating lease right-of-use assets, net	110,091		83,376
Goodwill	142,000		142,187
Intangible assets, net	70,872		84,369

Other assets	166,381		135,103
Total assets	$	2,488,597	$	2,635,582

Liabilities and Equity
Current liabilities:
Debt payable within one year	$	56,358	$	61,449
Accounts payable	243,903		426,055
Payroll liabilities	108,276		88,486
Accrued liabilities	101,938		119,841
Current operating lease liabilities	20,913		24,094
Liabilities held for sale	41,093		—
Total current liabilities	572,481		719,925
Long-term debt	982,897		746,179
Pension benefits	135,509		140,010
Postretirement benefits other than pensions	44,098		48,313

Long-term operating lease liabilities	88,995		60,234
Other liabilities	58,426		44,939
Total liabilities	1,882,406		1,759,600
7% Cumulative participating convertible preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding	—		—
Equity:
Common stock, $0.001 par value, 190,000,000 shares authorized; 18,959,899 shares issued and 16,894,090 shares outstanding as of June 30, 2020, and 18,908,566 shares issued and 16,842,757 outstanding as of December 31, 2019	17		17
Additional paid-in capital	494,628		490,451
Retained earnings	373,068		619,448
Accumulated other comprehensive loss	(277,296)		(253,741)
Total Cooper-Standard Holdings Inc. equity	590,417		856,175
Noncontrolling interests	15,774		19,807
Total equity	606,191		875,982
Total liabilities and equity	$	2,488,597	$	2,635,582

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

COOPER-STANDARD HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(Dollar amounts in thousands except share amounts)


	Total Equity
	Common Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Cooper-Standard Holdings Inc. Equity		Noncontrolling Interests		Total Equity
Balance as of December 31, 2019	16,842,757	$	17	$	490,451	$	619,448	$	(253,741)	$	856,175	$	19,807	$	875,982
Cumulative effect of change in accounting principle	—	—		—		(1,573)		—		(1,573)		—		(1,573)

Share-based compensation, net	41,785	—		1,874		—		—		1,874		—		1,874




Net loss	—	—		—		(110,588)		—		(110,588)		(1,851)		(112,439)
Other comprehensive loss	—	—		—		—		(35,776)		(35,776)		(507)		(36,283)
Balance as of March 31, 2020	16,884,542	$	17	$	492,325	$	507,287	$	(289,517)	$	710,112	$	17,449	$	727,561


Share-based compensation, net	9,548	—		2,303		—		—		2,303		—		2,303




Net loss	—	—		—		(134,219)		—		(134,219)		(1,765)		(135,984)
Other comprehensive income	—	—		—		—		12,221		12,221		90		12,311
Balance as of June 30, 2020	16,894,090	$	17	$	494,628	$	373,068	$	(277,296)	$	590,417	$	15,774	$	606,191


	Total Equity
	Common Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Cooper-Standard Holdings Inc. Equity		Noncontrolling Interests		Total Equity
Balance as of December 31, 2018	17,554,737	$	17	$	501,511	$	569,215	$	(245,937)	$	824,806	$	26,669	$	851,475
Cumulative effect of change in accounting principle	—	—		—		(2,607)		—		(2,607)		—		(2,607)
Repurchase of common stock	(118,774)	—		(2,057)		(3,880)		—		(5,937)		—		(5,937)
Share-based compensation, net	85,937	—		4		(214)		—		(210)		—		(210)
Contribution from noncontrolling interests	—	—		—		—		—		—		2,112		2,112
Net (loss) income	—	—		—		(5,415)		—		(5,415)		52		(5,363)
Other comprehensive income	—	—		—		—		4,239		4,239		371		4,610
Balance as of March 31, 2019	17,521,900	$	17	$	499,458	$	557,099	$	(241,698)	$	814,876	$	29,204	$	844,080

Repurchase of common stock	(626,305)	—		(20,486)		(9,514)		—		(30,000)		—		(30,000)
Share-based compensation, net	5,738	—		3,522		1		—		3,523		—		3,523
Purchase of noncontrolling interest	—	—		1,298		—		—		1,298		(6,057)		(4,759)
Dividends declared to noncontrolling interests	—	—		—		—		—		—		(233)		(233)

Net income (loss)	—	—		—		145,205		—		145,205		(545)		144,660
Other comprehensive loss	—	—		—		—		(7,320)		(7,320)		(627)		(7,947)
Balance as of June 30, 2019	16,901,333	$	17	$	483,792	$	692,791	$	(249,018)	$	927,582	$	21,742	$	949,324

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

COOPER-STANDARD HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollar amounts in thousands)


	Six Months Ended June 30,
	2020		2019
Operating Activities:
Net (loss) income	$	(248,423)	$	139,297
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation	72,260		65,550
Amortization of intangibles	7,963		8,923
Gain on sale of business	—		(189,910)

Impairment of assets held for sale	86,470		—
Other impairment charges	1,140		2,188
Share-based compensation expense	4,935		6,482
Equity in earnings of affiliates, net of dividends related to earnings	6,825		668

Deferred income taxes	(29,052)		18,803
Other	2,053		2,030
Changes in operating assets and liabilities	(30,405)		(62,997)
Net cash used in operating activities	(126,234)		(8,966)
Investing activities:
Capital expenditures	(62,874)		(95,496)

Acquisition of businesses, net of cash acquired	—		(452)


Proceeds from sale of business	—		243,362
Proceeds from sale of fixed assets and other	817		2,099
Net cash (used in) provided by investing activities	(62,057)		149,513
Financing activities:
Proceeds from issuance of long-term debt, net of discount	245,000		—
Principal payments on long-term debt	(3,081)		(2,067)
Decrease in short-term debt, net	(3,042)		(47,351)


Debt issuance costs	(4,904)		—
Purchase of noncontrolling interests	—		(4,797)
Repurchase of common stock	—		(36,550)

Taxes withheld and paid on employees' share-based payment awards	(516)		(2,733)
Other	(807)		2,277
Net cash provided by (used in) financing activities	232,650		(91,221)
Effects of exchange rate changes on cash, cash equivalents and restricted cash	(4,036)		(2,882)
Changes in cash, cash equivalents and restricted cash	40,323		46,444
Cash, cash equivalents and restricted cash reclassified to assets held for sale	(11,278)		—
Cash, cash equivalents and restricted cash at beginning of period	361,742		267,399
Cash, cash equivalents and restricted cash at end of period	$	390,787	$	313,843

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:
	Balance as of
	June 30, 2020		December 31, 2019
Cash and cash equivalents	$	388,035	$	359,536
Restricted cash included in other current assets	16		12
Restricted cash included in other assets	2,736		2,194
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	390,787	$	361,742

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands except per share and share amounts)

1. Overview

Basis of Presentation

Cooper-Standard Holdings Inc. (together with its consolidated subsidiaries, the “Company” or “Cooper Standard”), through its wholly-owned subsidiary, Cooper-Standard Automotive Inc. (“CSA U.S.”), is a leading manufacturer of sealing, fuel and brake delivery, and fluid transfer systems. The Company’s products are primarily for use in passenger vehicles and light trucks that are manufactured by global automotive original equipment manufacturers (“OEMs”) and replacement markets. The Company conducts substantially all of its activities through its subsidiaries.

During the first quarter of 2019 and in prior periods, the Company also operated an anti-vibration systems (“AVS”) product line. On April 1, 2019, the Company completed the divestiture of its AVS product line.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”), as filed with the SEC. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. These financial statements include all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of the Company. The operating results for the interim period ended June 30, 2020 are not necessarily indicative of results for the full year. In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

Immaterial Correction of Errors

During the year ended December 31, 2019, the Company identified errors primarily related to periods prior to fiscal year 2019. The Company concluded these errors were not material individually or in the aggregate to any of the previously reported periods and, therefore, amendments of previously filed reports were not required. Corrections were made to the applicable prior periods reflected in the financial information herein.

The following table presents the impact of these corrections on the Company’s condensed consolidated statements of operations:


	Three Months Ended June 30, 2019										Six Months Ended June 30, 2019
	As previously reported		Adjustment		As corrected		As previously reported		Adjustment		As corrected
Sales	$	764,806	$	(108)	$	764,698	$	1,644,844	$	(2,151)	$	1,642,693



Income tax expense	44,239		(17)		44,222		46,570		(314)		46,256

Net loss attributable to noncontrolling interests	545		—		545		702		(209)		493
Net income attributable to Cooper-Standard Holdings Inc.	145,296		(91)		145,205		141,836		(2,046)		139,790

Earnings per share:
Basic	$	8.39	$	—	$