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cps-20220630

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, 2022


☐			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 29, 2022, there were 17,106,178 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, 2022



		Page

	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive 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	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	38

	PART II. OTHER INFORMATION


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 6.	Exhibits	40
SIGNATURES		41

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,
	2022		2021		2022		2021
Sales	$	605,917	$	533,185	$	1,218,901	$	1,202,152
Cost of products sold	590,541		534,118		1,181,983		1,134,793
Gross profit (loss)	15,376		(933)		36,918		67,359
Selling, administration & engineering expenses	52,282		50,085		104,186		108,139
Loss (gain) on sale of business, net	—		195		—		(696)

Gain on sale of fixed assets, net	(33,391)		—		(33,391)		—
Amortization of intangibles	1,737		1,933		3,483		3,705
Restructuring charges	3,482		11,631		11,313		32,678

Impairment charges	3		841		458		841
Operating loss	(8,737)		(65,618)		(49,131)		(77,308)
Interest expense, net of interest income	(18,454)		(18,125)		(36,631)		(35,909)
Equity in (losses) earnings of affiliates	(3,446)		393		(4,802)		1,179

Other (expense) income, net	(1,509)		1,362		(2,720)		(3,727)
Loss before income taxes	(32,146)		(81,988)		(93,284)		(115,765)
Income tax expense (benefit)	2,005		(17,459)		2,657		(16,523)
Net loss	(34,151)		(64,529)		(95,941)		(99,242)
Net loss attributable to noncontrolling interests	904		918		1,334		1,767
Net loss attributable to Cooper-Standard Holdings Inc.	$	(33,247)	$	(63,611)	$	(94,607)	$	(97,475)

Loss per share:
Basic	$	(1.93)	$	(3.73)	$	(5.51)	$	(5.74)
Diluted	$	(1.93)	$	(3.73)	$	(5.51)	$	(5.74)

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

COOPER-STANDARD HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(Dollar amounts in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net loss	$	(34,151)	$	(64,529)	$	(95,941)	$	(99,242)
Other comprehensive income (loss):
Currency translation adjustment	(17,084)		8,713		(8,719)		2,141
Benefit plan liabilities adjustment, net of tax	2,063		611		3,047		3,350
Fair value change of derivatives, net of tax	(1,023)		751		1,408		180
Other comprehensive (loss) income, net of tax	(16,044)		10,075		(4,264)		5,671
Comprehensive loss	(50,195)		(54,454)		(100,205)		(93,571)
Comprehensive loss attributable to noncontrolling interests	627		727		1,068		1,828
Comprehensive loss attributable to Cooper-Standard Holdings Inc.	$	(49,568)	$	(53,727)	$	(99,137)	$	(91,743)

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, 2022		December 31, 2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	250,458	$	248,010
Accounts receivable, net	350,001		317,469
Tooling receivable, net	87,414		88,900
Inventories	183,568		158,075
Prepaid expenses	30,360		26,313
Income tax receivable and refundable credits	26,838		82,813
Other current assets	70,467		73,317

Total current assets	999,106		994,897
Property, plant and equipment, net	702,507		784,348
Operating lease right-of-use assets, net	102,407		111,052
Goodwill	142,213		142,282
Intangible assets, net	51,015		60,375

Other assets	143,134		133,539
Total assets	$	2,140,382	$	2,226,493

Liabilities and Equity
Current liabilities:
Debt payable within one year	$	51,016	$	56,111
Accounts payable	357,327		348,133
Payroll liabilities	94,646		69,353

Accrued liabilities	121,416		101,466
Current operating lease liabilities	21,177		22,552

Total current liabilities	645,582		597,615
Long-term debt	979,227		980,604
Pension benefits	120,438		129,880
Postretirement benefits other than pensions	42,525		43,498

Long-term operating lease liabilities	84,940		92,760
Other liabilities	45,957		50,776
Total liabilities	1,918,669		1,895,133

Equity:
Common stock, $0.001 par value, 190,000,000 shares authorized; 19,166,930 shares issued and 17,101,121 shares outstanding as of June 30, 2022, and 19,057,788 shares issued and 16,991,979 outstanding as of December 31, 2021	17		17
Additional paid-in capital	506,062		504,497
Retained (loss) earnings	(69,054)		25,553
Accumulated other comprehensive loss	(209,714)		(205,184)
Total Cooper-Standard Holdings Inc. equity	227,311		324,883
Noncontrolling interests	(5,598)		6,477
Total equity	221,713		331,360
Total liabilities and equity	$	2,140,382	$	2,226,493

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 (Loss)		Accumulated Other Comprehensive Loss		Cooper-Standard Holdings Inc. Equity		Noncontrolling Interests		Total Equity
Balance as of December 31, 2021	16,991,979	$	17	$	504,497	$	25,553	$	(205,184)	$	324,883	$	6,477	$	331,360


Share-based compensation, net	69,716	—		437		—		—		437		—		437



Deconsolidation of noncontrolling interest	—	—		—		—		—		—		(11,007)		(11,007)
Net loss	—	—		—		(61,360)		—		(61,360)		(430)		(61,790)
Other comprehensive income (loss)	—	—		—		—		11,791		11,791		(11)		11,780
Balance as of March 31, 2022	17,061,695	$	17	$	504,934	$	(35,807)	$	(193,393)	$	275,751	$	(4,971)	$	270,780


Share-based compensation, net	39,426	—		1,128		—		—		1,128		—		1,128




Net loss	—	—		—		(33,247)		—		(33,247)		(904)		(34,151)
Other comprehensive income (loss)	—	—		—		—		(16,321)		(16,321)		277		(16,044)
Balance as of June 30, 2022	17,101,121	$	17	$	506,062	$	(69,054)	$	(209,714)	$	227,311	$	(5,598)	$	221,713


	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, 2020	16,897,085	$	17	$	498,719	$	350,270	$	(241,896)	$	607,110	$	17,001	$	624,111


Share-based compensation, net	45,467	—		952		—		—		952		—		952

Net loss	—	—		—		(33,864)		—		(33,864)		(849)		(34,713)
Other comprehensive loss	—	—		—		—		(4,152)		(4,152)		(252)		(4,404)
Balance as of March 31, 2021	16,942,552	$	17	$	499,671	$	316,406	$	(246,048)	$	570,046	$	15,900	$	585,946


Share-based compensation, net	45,962	—		1,677		—		—		1,677		—		1,677



Net loss	—	—		—		(63,611)		—		(63,611)		(918)		(64,529)
Other comprehensive income	—	—		—		—		9,884		9,884		191		10,075
Balance as of June 30, 2021	16,988,514	$	17	$	501,348	$	252,795	$	(236,164)	$	517,996	$	15,173	$	533,169

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,
	2022		2021
Operating Activities:
Net loss	$	(95,941)	$	(99,242)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	60,062		65,267
Amortization of intangibles	3,483		3,705
Gain on sale of business, net	—		(696)


Gain on sale of fixed assets, net	(33,391)		—
Impairment charges	458		841
Share-based compensation expense	1,625		3,002
Equity in losses of affiliates, net of dividends related to earnings	7,804		1,032

Deferred income taxes	(5,096)		(21,709)
Other	1,178		1,192
Changes in operating assets and liabilities	59,583		(14,126)
Net cash used in operating activities	(235)		(60,734)
Investing activities:
Capital expenditures	(44,278)		(55,599)




Proceeds from sale of fixed assets	52,633		3,000
Other	32		35
Net cash provided by (used in) investing activities	8,387		(52,564)
Financing activities:

Principal payments on long-term debt	(2,536)		(2,895)
(Decrease) increase in short-term debt, net	(1,666)		14,811






Taxes withheld and paid on employees' share-based payment awards	(526)		(744)
Other	651		532
Net cash (used in) provided by financing activities	(4,077)		11,704
Effects of exchange rate changes on cash, cash equivalents and restricted cash	7,103		4,179
Changes in cash, cash equivalents and restricted cash	11,178		(97,415)

Cash, cash equivalents and restricted cash at beginning of period	251,128		443,578
Cash, cash equivalents and restricted cash at end of period	$	262,306	$	346,163

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:
	Balance as of
	June 30, 2022		December 31, 2021
Cash and cash equivalents	$	250,458	$	248,010
Restricted cash included in other current assets	9,893		961
Restricted cash included in other assets	1,955		2,157
Total cash, cash equivalents and restricted cash	$	262,306	$	251,128

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.

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, 2021 (the “2021 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, 2022 are not necessarily indicative of results for the full year. In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

2. Deconsolidation and Divestiture

2022 Joint Venture Deconsolidation

In the first quarter of 2022, a joint venture in the Asia Pacific region that was previously consolidated with a noncontrolling interest amended the governing document underlying the joint venture. The amendment to the agreement did not change the Company’s 51% ownership. However, as a result of the amendment and effective as of January 1, 2022, the joint venture was deconsolidated and accounted for as an investment under the equity method. The Company remeasured the retained investment using the income approach method and performed a discounted cash flow analysis of the projected free cash flows of the joint venture. As a result of the deconsolidation, during the three months ended March 31, 2022, the Company recorded a loss of $2,257, included in other income (expense), net in the condensed consolidated statements of operations.

2020 Divestiture

In the fourth quarter of 2019, management approved a plan to sell its European rubber fluid transfer and specialty sealing businesses, as well as its Indian operations. On July 1, 2020, the Company completed the divestiture to Mutares SE & Co. KGaA (“Mutares”). During the three and six months ended June 30, 2021, the Company recorded subsequent adjustments resulting in a net gain of $891 and $696, respectively.

3. Revenue

Revenue is recognized for manufactured parts at a point in time, generally when products are shipped or delivered. The Company usually enters into agreements with customers to produce products at the beginning of a vehicle’s life. Blanket purchase orders received from customers and related documents generally establish the annual terms, including pricing, related to a vehicle model. Customers typically pay for parts based on customary business practices with payment terms generally between 30 and 90 days.

Revenue by customer group for the three months ended June 30, 2022 was as follows:


	North America		Europe		Asia Pacific		South America		Corporate, Eliminations and Other		Consolidated
Passenger and Light Duty	$	323,532	$	120,693	$	85,338	$	26,256	$	—	$	555,819
Commercial	4,049		5,546		441		5		1,665		11,706
Other	4,106		48		—		—		34,238		38,392
Revenue	$	331,687	$	126,287	$	85,779	$	26,261	$	35,903	$	605,917

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(Unaudited)

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

Revenue by customer group for the six months ended June 30, 2022 was as follows:


	North America		Europe		Asia Pacific		South America		Corporate, Eliminations and Other		Consolidated
Passenger and Light Duty	$	638,119	$	246,061	$	188,742	$	47,769	$	—	$	1,120,691
Commercial	7,723		11,469		788		11		3,322		23,313
Other	7,739		171		2		—		66,985		74,897
Revenue	$	653,581	$	257,701	$	189,532	$	47,780	$	70,307	$	1,218,901

Revenue by customer group for the three months ended June 30, 2021 was as follows:


	North America		Europe		Asia Pacific		South America		Corporate, Eliminations and Other		Consolidated
Passenger and Light Duty	$	240,111	$	126,972	$	102,950	$	14,145	$	—	$	484,178
Commercial	3,405		5,471		965		8		1,445		11,294
Other	4,009		178		—		—		33,526		37,713
Revenue	$	247,525	$	132,621	$	103,915	$	14,153	$	34,971	$	533,185

Revenue by customer group for the six months ended June 30, 2021 was as follows:


	North America		Europe		Asia Pacific		South America		Corporate, Eliminations and Other		Consolidated
Passenger and Light Duty	$	571,724	$	286,753	$	215,991	$	29,624	$	—	$	1,104,092
Commercial	7,686		11,352		2,147		15		2,696		23,896
Other	7,151		292		2		—		66,719		74,164
Revenue	$	586,561	$	298,397	$	218,140	$	29,639	$	69,415	$	1,202,152

The passenger and light duty group consists of sales to automotive OEMs and automotive suppliers, while the commercial group represents sales to OEMs of on- and off-highway commercial equipment and vehicles. The other customer group includes sales related to specialty and adjacent markets.

Substantially all of the Company’s revenues were generated from sealing, fuel and brake delivery and fluid transfer systems for use in passenger vehicles and light trucks manufactured by global OEMs.

A summary of the Company’s products is as follows:


Product Line						Description
Sealing Systems						Protect vehicle interiors from weather, dust and noise intrusion for improved driving experience; provide aesthetic and functional class-A exterior surface treatment
Fuel & Brake Delivery Systems						Sense, deliver and control fluids to fuel and brake systems
Fluid Transfer Systems						Sense, deliver and control fluids and vapors for optimal powertrain & HVAC operation

Revenue by product line for the three months ended June 30, 2022 was as follows:


	North America		Europe		Asia Pacific		South America		Corporate, Eliminations and Other		Consolidated
Sealing systems	$	127,345	$	101,951	$	49,874	$	19,235	$	—	$	298,405
Fuel and brake delivery systems	107,614		21,638		20,481		4,814		—		154,547
Fluid transfer systems	96,728		2,698		15,424		2,212		—		117,062
Other	—		—		—		—		35,903		35,903
Revenue	$	331,687	$	126,287	$	85,779	$	26,261	$	35,903	$	605,917

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(Unaudited)

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

Revenue by product line for the six months ended June 30, 2022 was as follows:


	North America		Europe		Asia Pacific		South America		Corporate, Eliminations and Other		Consolidated
Sealing systems	$	254,897	$	207,085	$	112,910	$	35,345	$	—	$	610,237
Fuel and brake delivery systems	210,335		44,676		44,228		8,375		—		307,614
Fluid transfer systems	188,349		5,940		32,394		4,060		—		230,743
Other	—		—		—		—		70,307		70,307
Revenue	$	653,581	$	257,701	$	189,532	$	47,780	$	70,307	$	1,218,901

Revenue by product line for the three months ended June 30, 2021 was as follows:


	North America		Europe		Asia Pacific		South America		Corporate, Eliminations and Other		Consolidated
Sealing systems	$	90,174	$	104,878	$	62,328	$	11,533	$	—	$	268,913
Fuel and brake delivery systems	82,389		23,991		25,166		2,148		—		133,694
Fluid transfer systems	74,962		3,752		16,421		472		—		95,607
Other	—		—		—		—		34,971		34,971
Revenue	$	247,525	$	132,621	$	103,915	$	14,153	$	34,971	$	533,185

Revenue by product line for the six months ended June 30, 2021 was as follows:


	North America		Europe		Asia Pacific		South America		Corporate, Eliminations and Other		Consolidated
Sealing systems	$	211,349	$	234,239	$	132,001	$	22,807	$	—	$	600,396
Fuel and brake delivery systems	195,045		54,781		53,535		5,013		—		308,374
Fluid transfer systems	180,167		9,377		32,604