UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2005

or

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

Commission File Number: 333-123708

COOPER-STANDARD HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware 20-1945088

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

39550 Orchard Hill Place Drive
Novi, Michigan 48375
(Address of principal executive offices)
(Zip Code)

(248) 596-5900
(Registrant’s telephone number, including area code)

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.  [X] Yes    [ ] No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    [ ] Yes    [X] No

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

Number of shares of common stock of registrant outstanding, at November 1, 2005:

3,237,100 shares of common stock, $0.01 par value




PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements.

COMBINED AND CONSOLIDATED STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2005
(UNAUDITED)
(Dollar amounts in thousands)


  Predecessor Successor Predecessor Successor
  Three Months Ended September 30, Nine Months Ended September 30,
  2004 2005 2004 2005
Sales $ 423,866   $ 426,655   $ 1,405,820   $ 1,385,937  
Cost of products sold   362,954     368,324     1,162,647     1,179,960  
Gross profit   60,912     58,331     243,173     205,977  
Selling, administration & engineering expenses   44,382     39,660     134,161     127,247  
Amortization of intangibles   282     7,101     549     21,047  
Restructuring   8,408     554     17,330     954  
Operating profit   7,840     11,016     91,133     56,729  
Interest expense, net of interest income   (21   (16,544   (1,680   (49,418
Equity earnings (losses)   (54   658     562     1,945  
Other income (expense)   13     4,629     (1,150   (1,307
Income (loss) before income taxes   7,778     (241   88,865     7,949  
Provision for income tax expense   2,261     867     25,828     1,866  
Net income (loss) $ 5,517   $ (1,108 $ 63,037   $ 6,083  

The accompanying notes are an integral part of these financial statements. See Note 1 for a description of the Predecessor and Successor presentation.

2




CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)


  Successor
  December 31,
2004
September 30,
2005
    (Unaudited)
Assets            
Current assets:            
Cash and cash equivalents $ 83,658   $ 59,974  
Accounts receivable, net   299,906     343,285  
Inventories, net   117,859     102,797  
Prepaid expenses   19,994     18,423  
Total current assets   521,417     524,479  
Property, plant and equipment, net   509,943     479,301  
Goodwill   402,598     411,430  
Intangibles, net   311,605     293,312  
Other assets   54,765     52,121  
  $ 1,800,328   $ 1,760,643  
Liabilities and Stockholders' Equity            
Current liabilities:            
Debt payable within one year $ 13,145   $ 11,681  
Accounts payable   136,543     158,618  
Payroll liabilities   57,210     55,745  
Accrued liabilities   54,452     71,630  
Deferred purchase price payment   53,423      
Payable to stockholder   8,000      
Total current liabilities   322,773     297,674  
Long-term debt   899,572     893,428  
Pension benefits   48,090     44,876  
Postretirement benefits other than pensions   87,410     91,005  
Deferred tax liabilities   109,885     96,326  
Other long-term liabilities   14,438     18,822  
Stockholders' equity:            
Common stock, $0.01 par value, 3,500,000 shares authorized, 3,192,000 and 3,237,100 shares issued and outstanding at December 31, 2004 and September 30, 2005, respectively   32     32  
Additional paid-in capital   319,168     323,678  
Retained earnings (deficit)   (4,545   1,538  
Cumulative other comprehensive income (loss)   3,505     (6,736
Total stockholders' equity   318,160     318,512  
  $ 1,800,328   $ 1,760,643  

The accompanying notes are an integral part of these financial statements. See Note 1 for a description of the Predecessor and Successor presentation.

3




COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2005
(UNAUDITED)
(Dollar amounts in thousands)


  Predecessor
2004
Successor
2005
Operating activities:            
Net income $ 63,037   $ 6,083  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation   56,672     59,878  
Amortization   951     21,047  
Non-cash restructuring charges   5,903     122  
Amortization of debt issuance costs       2,769  
Changes in operating assets and liabilities:            
Accounts receivable   (42,686   (47,612
Inventories   (8,206   16,970  
Prepaid expenses   (2,555   1,381  
Accounts payable   15,899     25,944  
Accrued liabilities   1,693     18,951  
Other non-current items   (953   (23,770
Net cash provided by operating activities   89,755     81,763  
Investing activities:            
Property, plant, and equipment   (44,573   (32,657
Settlement of working capital adjustment related to Acquisition       (54,270
Payment to stockholder related to Acquisition       (8,000
Cost of other acquisitions, net of cash acquired       (11,490
Proceeds from the sale of assets and other   6,264     847  
Net cash used in investing activities   (38,309   (105,570
Financing activities:            
Increase (decrease) in short-term debt   439     (341
Principal payments on Acquisition-related debt       (6,103
Principal payments on other borrowings   (2,126   (2,187
Net changes in advances from Cooper Tire   (76,151    
Proceeds from issuance of stock       4,510  
Other       (509
Net cash used in financing activities   (77,838   (4,630
Effects of exchange rate changes on cash   (17,667   4,753  
Changes in cash and cash equivalents   (44,059   (23,684
Cash and cash equivalents at beginning of period   102,599     83,658  
Cash and cash equivalents at end of period $ 58,540   $ 59,974  

The accompanying notes are an integral part of these financial statements. See Note 1 for a description of the Predecessor and Successor presentation.

4




NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)

1.    Overview

Description of business

Cooper-Standard Holdings Inc. (the ‘‘Company’’), through its wholly-owned subsidiary Cooper-Standard Automotive Inc., is a leading global manufacturer of body sealing, fluid handling, and noise, vibration and harshness control (‘‘NVH’’) components, systems, subsystems and modules, primarily for use in passenger vehicles and light trucks for global original equipment manufacturers (‘‘OEMs’’) and replacement markets. The Company conducts substantially all of its activities through its subsidiaries.

Change in ownership

The Company acquired the Automotive segment of Cooper Tire & Rubber Company (‘‘Cooper Tire’’) on December 23, 2004 for a cash purchase price of $1,165 million, subject to adjustment based on the amount of cash and cash equivalents less debt obligations and the difference between targeted working capital and working capital at the closing date (hereafter, the ‘‘Acquisition’’). Additionally, the Company incurred approximately $24 million of direct acquisition costs, principally for investment banking, legal and other professional services, for a total purchase price of $1,250 million. The consolidated balance sheet at December 31, 2004 includes a deferred purchase price payment of $53 million related to the estimated settlement of a post-closing working capital adjustment. Final settlement of the working capital adjustment resulted in a payment of $54 million in April 2005.

At closing, the Company funded the Acquisition through $318 million of equity contributions, $200 million of senior notes (the ‘‘Senior Notes’’), $350 million of senior subordinated notes (the ‘‘Senior Subordinated Notes’’) and revolving credit and term loan facilities (the ‘‘Senior Secured Credit Facilities’’) of $350 million. The Company incurred approximately $28 million of issuance costs associated with these borrowings, which are included in other assets on the consolidated balance sheet. The Company amortizes such costs over the terms of the related borrowings.

Basis of presentation

The accompanying unaudited combined and consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (‘‘SEC’’) for interim financial information and should be read in conjunction with the combined and consolidated financial statements and notes thereto included in the Company’s Registration Statement on Form S-4 as of December 31, 2004, 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 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. Operating results for the three and nine months ended September 30, 2005 are not necessarily indicative of results that may be expected for the year ending December 31, 2005. As a result of the Acquisition on December 23, 2004, the consolidated financial statements of the Company reflect the Acquisition under the purchase method of accounting, in accordance with Financial Accounting Standards Board (‘‘FASB’’) Statement of Financial Accounting Standards No. 141, ‘‘Business Combinations’’ (‘‘SFAS 141’’).

The following provides a description of the basis of presentation during all periods presented:

Predecessor:    Represents the combined financial position, results of operations and cash flows of the Automotive segment of Cooper Tire for all periods prior to the Acquisition on December 23, 2004. This presentation reflects the historical basis of accounting without any application of purchase accounting for the Acquisition.

Successor:    Represents the Company’s consolidated financial position and consolidated results of operations and cash flows for periods following the Acquisition. The financial position as of

5




NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)

September 30, 2005, results of operations for the three and nine months ended September 30, 2005 and cash flows for the nine months then ended reflect the preliminary application of purchase accounting relating to the Acquisition and the adjustments required to reflect the assets and liabilities not acquired in the Acquisition and the adjustments for domestic pension liabilities previously held by Cooper Tire.

The combined statement of income includes expenses recorded by the Predecessor or directly charged to the Predecessor by Cooper Tire for periods prior to the Acquisition. In addition, the combined statement of income includes an allocation of certain general and administrative corporate expenses from Cooper Tire. These services primarily consisted of compensation and benefits administration, payroll processing, legal services, purchasing, auditing, income tax planning and compliance, treasury services and general corporate management. These allocations totaled $3,719 and $11,157 in the three and nine months ended September 30, 2004, respectively. The allocations were determined based on specific services being provided or were allocated based on net sales, headcount, assets or a combination of these factors and are reported in cost of products sold and selling, administration and engineering expenses in the combined statements of income. In addition, Cooper Tire charged the Predecessor market rate interest expense on net intercompany advances of $0 and $1,907 in the three and nine months ended September 30, 2004, respectively.

The domestic operations of the Predecessor were included in the United States consolidated tax returns of Cooper Tire with current taxes refundable and payable reported in advances from Cooper Tire through the date of the Acquisition. The Predecessor’s provisions for income taxes were computed on a basis consistent with separate returns.

Stock-based compensation

The Company accounts for employee stock option plans in accordance with Accounting Principles Board Opinion (‘‘APB’’) No. 25, ‘‘Accounting for Stock Issued to Employees.’’ The following table illustrates the effect on net income as if the fair value recognition provisions of SFAS No. 123, ‘‘Accounting for Stock-Based Compensation,’’ had been applied. Amounts related to the Predecessor period represent stock options granted by Cooper Tire to employees of the Predecessor. Amounts related to the Successor period relate to stock options granted by the Company.


  Predecessor Successor Predecessor Successor
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2004 2005 2004 2005
Net income (loss), as reported $ 5,517   $ (1,108 $ 63,037   $ 6,083  
Add: Stock-based compensation, as reported                
Deduct: Stock-based compensation under SFAS 123 fair value method, net of tax   (180   (133   (538   (399
Pro forma net income (loss) $ 5,337   $ (1,241 $ 62,499   $ 5,684  

6




NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)

The fair value for options awarded was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:


  Predecessor Successor Predecessor Successor
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2004 2005 2004 2005
Risk-free interest rate   2.2   3.7   2.2   3.7
Dividend yield   2.1   0.0   2.1   0.0
Expected volatility   34.0   0.0   34.0   0.0
Expected life (in years)   4.7     6.0     4.7     6.0  

Reclassifications

Certain prior period amounts have been reclassified to conform to the current year presentation. As a result of changing to a net presentation of cash held in our global cash management vehicle, which we use to pool cash funds from foreign subsidiaries, cash and debt payable within one year both decreased by $79,230 at December 31, 2004 as compared to the previous classification. Additionally, we reclassified our presentation of the statement of cash flows related to non-cash restructuring charges and proceeds from the sale of certain assets. This reclassification increased net cash provided by operating activities by $4,854 for the nine months ended September 30, 2004 as compared to the previous classification with a corresponding decrease to net cash used in investing activities.

Recent accounting pronouncements

In December 2004, the FASB issued FASB Staff Position (‘‘FSP’’) 109-2, ‘‘Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004’’, which provides accounting and disclosure guidance for the foreign earnings repatriation provision within the American Jobs Creation Act of 2004. The Act provides a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer. FSP 109-2 provides for a period of time beyond the financial reporting period of enactment for a company to evaluate the effect of the Act on its plan for reinvestment or repatriation of foreign earnings. The Company does not expect the effects of adoption to be significant.

In December 2004, the FASB issued FAS 123R, ‘‘Share-Based Payment’’, that requires companies to expense the value of employee stock options and similar awards. The effective date for application by the Company is interim and annual periods beginning after December 15, 2005. FAS 123R applies to all outstanding and unvested share-based payment awards at a company’s adoption date and allows alternative transition methods. The Company will use the prospective transition method for its options outstanding at January 1, 2006. Accordingly, the adoption of FAS 123R will not have a material impact on the Company’s consolidated financial statements. However, the Company must apply the expense recognition provisions under FAS 123R for any stock options granted subsequent to December 31, 2005.

2.    Goodwill and Intangibles

In connection with the Acquisition, the Company recorded goodwill totaling $402,598 at December 31, 2004. The Company increased goodwill by $8,832 during the nine months ended September 30, 2005 as a result of the settlement of the post-closing working capital adjustment and other purchase price allocation adjustments to recorded assets and liabilities. Due to the close proximity of the Acquisition to the reporting period and the pending completion of the purchase price allocation, goodwill has not been allocated to the applicable reporting units as of September 30, 2005. Such allocation will occur upon completion of the purchase price allocation in 2005.

7




NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)

The following table presents intangible assets and accumulated amortization balances of the Successor as of September 30, 2005:


  Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortization
Period
Customer contracts $ 141,000   $ (13,842 $ 127,158   7 to 8 years
Customer relationships   153,000     (5,900   147,100   20 years
Developed technology   18,200     (1,769   16,431   6 to 10 years
Other   2,754     (131   2,623    
  $ 314,954   $ (21,642 $ 293,312    

Amortization expense totaled $7,101 and $282 for the three months ended September 30, 2005 and 2004, respectively, and $21,047 and $549 for the nine months ended September 30, 2005 and 2004, respectively. Estimated amortization expense will total approximately $28,000 for the year ending December 31, 2005.

3.    Restructuring

Successor Actions

In connection with the Acquisition, the Company implemented a restructuring strategy whereby certain manufacturing facilities will be closed and certain businesses will be exited within and outside the U.S. The Company recorded reserves in purchase accounting totaling $3,524 through September 30, 2005 for employee severance and other exit costs. Related costs associated with relocating ongoing operations are recorded to restructuring expense as incurred and totaled approximately $600 through September 30, 2005. A total of approximately 425 employees will be terminated as part of these initiatives, though adjustments may occur as the Company finalizes its plans. Cash payments related to these restructuring activities will extend into 2007. The Company will finalize its restructuring strategy in the fourth quarter of 2005 and record any necessary adjustments to the recorded amounts.

In addition, the Company initiated a restructuring initiative in Australia during the first quarter of 2005. This initiative was completed in the third quarter of 2005 at a total cost of approximately $300, including the termination of 26 employees.

The following table summarizes the activity for the Successor’s initiatives through September 30, 2005:


  Employee
Severance
Costs
Other
Exit
Costs
Asset
Impairments
Total
Balance at January 1, 2005 $   $   $   $  
Expense incurred   316     516     122     954  
Purchase price allocation   2,262     1,262         3,524  
Cash payments   (820   (515       (1,335
Utilization of reserve           (122   (122
Balance at September 30, 2005 $ 1,758   $ 1,263   $   $ 3,021  

Predecessor Actions

The Predecessor had an accrual of $700 at January 1, 2004 for employee severance costs related to the closure of a plastics manufacturing facility in Cleveland, OH. This closure was completed in 2004 at a total cost of approximately $4,000 and affected approximately 190 hourly and salaried employees. During the nine months ended September 30, 2004, the Predecessor recorded $700 in employee

8




NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)

severance costs and $700 of other exit costs related to this closure. The Predecessor also had an accrual of $2,600 at January 1, 2004 for employee severance costs related to the closure of two manufacturing facilities in the United Kingdom. This initiative was completed in 2004 at a total cost of $18,900 and affected approximately 515 hourly and salaried employees. During the nine months ended September 30, 2004, $5,775 of severance costs were recorded representing amounts to be paid to employees upon their termination. These costs were recorded over the remaining work life of the employees. The Predecessor also recorded asset impairments of $5,900 and other exit costs of $4,200 related to this initiative during the nine months ended September 30, 2004.

In addition to the Cleveland and United Kingdom closures included in the above table, the Predecessor incurred costs of $2,755 during the nine months ended September 30, 2004, related to workforce reductions and other costs associated with closed facilities, primarily in Europe and North America.

The following table summarizes the activity for the Predecessor’s initiatives:


  Employee
Severance
Costs
Other
Exit
Costs
Asset
Impairments
Total
Balance at January 1, 2004 $ 3,300   $   $   $ 3,300  
Expense incurred   6,475     4,955     5,900     17,330  
Cash payments   (6,725   (4,955       (11,680
Utilization of reserve           (5,900   (5,900
Balance at September 30, 2004 $ 3,050   $   $   $ 3,050  

4.    Inventories

Inventories are comprised of the following:


  December 31,
2004
September 30,
2005
Finished goods $ 45,572   $ 31,212  
Work in process   21,423     22,790  
Raw materials and supplies   50,864     48,795  
  $ 117,859   $ 102,797  

Inventory at December 31, 2004 includes a $9,806 fair value write-up related to the Acquisition. Such inventory was liquidated as of March 31, 2005 and recorded as an increase to cost of products sold.

9




NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)

5.    Debt

Outstanding debt consisted of the following at December 31, 2004 and September 30, 2005:


  December 31,
2004
September 30,
2005
Senior Notes $ 200,000   $ 200,000  
Senior Subordinated Notes   350,000     350,000  
Term Loan A   51,320     49,065  
Term Loan B   115,000     114,138  
Term Loan C   185,000     183,612  
Revolving Credit Facility        
Capital leases and other borrowings   11,397     8,294  
Total debt   912,717     905,109  
Less: debt payable within one year   (13,145   (11,681
Total long-term debt $ 899,572   $ 893,428  

As of September 30, 2005, the Company had $15,717 of standby letters of credit outstanding under the Revolving Credit facility leaving $109,283 of availability.

6.    Pension and Postretirement Benefits other than Pensions

The following tables disclose the amount of net periodic benefit costs for the three and nine month periods ended September 30, 2004 and 2005 for the Company’s defined benefit plans and other postretirement benefit plans:


  Pension Benefits
  Predecessor Successor
  Three Months Ended September 30,
  2004 2005
  U.S. Non-U.S. U.S. Non-U.S.
Service cost $ 2,246   $ 602   $ 2,171   $ 822  
Interest cost   2,946     952     2,842     922  
Expected return on plan assets   (3,393   (978   (3,171   (844
Amortization of prior service cost and recognized actuarial loss   777     464          
Net periodic benefit cost $ 2,576   $ 1,040   $ 1,842   $ 900  

  Pension Benefits
  Predecessor Successor
  Nine Months Ended September 30,
  2004 2005
  U.S. Non-U.S. U.S. Non-U.S.
Service cost $ 6,737   $ 1,789   $ 6,514   $ 2,459  
Interest cost   8,836     2,835     8,526     2,769  
Expected return on plan assets   (10,178   (2,911   (9,512   (2,511
Amortization of prior service cost and recognized actuarial loss   2,331     1,387          
Net periodic benefit cost $ 7,726   $ 3,100   $ 5,528   $ 2,717  

10




NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)


  Other Postretirement Benefits Other Postretirement Benefits
  Predecessor Successor Predecessor Successor
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2004 2005 2004 2005
Service cost $ 723   $ 772   $ 2,165   $ 2,309  
Interest cost   1,576     1,399     4,723     4,191  
Amortization of prior service cost and recognized actuarial loss   425         1,276      
Net periodic benefit cost $ 2,724   $ 2,171   $ 8,164   $ 6,500  

7.    Income Taxes

Under Accounting Principles Board Opinion No. 28, Interim Financial Reporting, the Company is required to compute its effective tax rate each quarter based upon its estimated annual effective tax rate. The effective tax rates for the nine months ended September 30, 2004, was 29% as compared to 24% for the nine months ended September 30, 2005. Income tax expense for the three months ended September 30, 2005 reflects adjustments necessary to recognize year to date income tax expense at the Company’s expected annual effective tax rate, which increased during the three months ended September 30, 2005 due primarily to changes in the forecasted distribution of income between U.S. and foreign sources. The income tax rate for 2005 varies from the United States statutory income tax rate due primarily to lower than United States statutory effective income tax rates in certain foreign jurisdictions, the effect of losses in certain foreign jurisdictions for which valuation allowances are recorded, and the benefit of tax credits, primarily in the U.S. During 2005, the Company has recognized a tax benefit for operating losses generated in the United States as the Company believes it is more likely than not that such benefit will be realized.

8.    Comprehensive Income

On an annual basis, disclosure of comprehensive income is incorporated into the statement of stockholders’ equity, which is not presented on a quarterly basis. The components of comprehensive income (loss), net of related tax, are as follows:


  Predecessor Successor Predecessor Successor
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2004 2005 2004 2005
Net income (loss) $ 5,517   $ (1,108 $ 63,037   $ 6,083  
Currency translation adjustment   13,499     2,156     (15,788   (10,241
Minimum pension liability   66         (7    
Change in the fair value of derivatives and unrealized gain on marketable securities   6,241         2,997      
Comprehensive income (loss) $ 25,323   $ 1,048   $ 50,239   $ (4,158

11




NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)

9.    Other Income (Expense)

The components of other income (expense) are as follows:


  Predecessor Successor Predecessor Successor
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2004 2005 2004 2005
Foreign currency gains (losses) $ 301   $ 4,882   $ (511 $ (654
Minority interest   (276   (243   (624   (660
Gains (losses) on fixed assets disposals   (12   (10   (15   7  
Other income (expense) $ 13   $ 4,629   $ (1,150 $ (1,307

Included in foreign currency gains (losses) in the three and nine months ended September 30, 2005 are unrealized gains of $6,267 and $2,125, respectively, related to indebtedness used to finance the Acquisition, including $6,267 and $3,779, respectively, related to Term Loan B, a U.S. dollar-denominated obligation of our Canadian subsidiary.

10.    Related Party Transactions

The Predecessor had transactions in the normal course of business with Cooper Tire, including the purchase of raw materials which totaled $4,995 and $17,208 during the three and nine months ended September 30, 2004, respectively. Such purchases are no longer considered related party transactions for periods subsequent to the Acquisition. Additionally, as part of the Acquisition, the Company executed a Transition Services Agreement with Cooper Tire whereby Cooper Tire agreed to provide a number of transitional services to the Company, including payroll, travel and employee benefits administration, treasury, purchasing, employee training, and information technology. The Company agreed to pay Cooper Tire specified amounts for certain of these services on a specific period or an as-needed basis. Cooper Tire's obligation to provide such services generally terminated by June 30, 2005, though payroll services continued through September 30, 2005. The Company incurred approximately $300 and $900 of expenses related to these services in the three and nine months ended September 30, 2005, respectively.

Sales to NISCO, a 50% owned joint venture, totaled $3,290 and $5,690 in the three months ended September 30, 2004 and 2005, respectively, and $10,250 and $15,321 in the nine months ended September 30, 2004 and 2005, respectively.

In connection with the Acquisition, the Company paid one of its primary stockholders transaction advisory fees totaling $8,000 in January 2005. Such amount is reflected on the consolidated balance sheet as of December 31, 2004 as a payable to stockholder.

12




NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)

11.    Business Segments

The Company evaluates segment performance based on segment profit before tax. The following table details information on the Company's business segments:


  Predecessor Successor Predecessor Successor
  Three Months Ended
September,
Nine Months Ended
September 30,
  2004 2005 2004 2005
Sales to external customers                        
Sealing $ 196,469   $ 205,069   $ 649,757   $ 675,550  
Fluid   146,977     150,402     485,222     477,356  
NVH   80,451     71,049     271,117     232,674  
Eliminations and other   (31   135     (276   357  
Consolidated   423,866     426,655     1,405,820     1,385,937  
Intersegment sales                        
Sealing   6         54     23  
Fluid   1     3     1     3  
NVH   8,509     9,264     26,828     27,792  
Eliminations and other   (8,516   (9,267   (26,883   (27,818
Consolidated                
Segment profit (loss)                        
Sealing   (6,595   (1,074   8,721     (2,439
Fluid   11,180     3,968     52,437     18,003  
NVH   3,403     (3,135   28,555     (7,615
Other   (210       (848    
Income (loss) before income taxes $ 7,778   $ (241 $ 88,865   $ 7,949  

Restructuring costs included in segment profit for Sealing, Fluid and NVH totaled $6,815, $1,592 and $0, respectively, for the three months ended September 30, 2004, $13,946, $3,383 and $0, respectively, for the nine months ended September 30, 2004, $511, $43 and $0, respectively, for the three months ended September 30, 2005, and $635, $319 and $0, respectively, for the nine months ended September 30, 2005.

12.    Subsequent Event

On November 2, 2005, the Company announced the planned closure of a manufacturing facility located in the U.S.  The Company will incur costs relating to severance, employee retention, and other exit costs as the result of this closure. Final closure will not occur until late 2006 or early 2007 as production is transferred to other facilities. The Company will record an adjustment to goodwill in the fourth quarter of 2005 to reflect the impact of certain of these exit costs while other costs will be recognized in the Company’s financial results as they are incurred.

13.    Guarantor and Non-Guarantor Subsidiaries

In connection with the Acquisition, Cooper-Standard Automotive Inc. (the ‘‘Issuer’’), a wholly-owned subsidiary, issued the Senior Notes and Senior Subordinated Notes with a total principal amount of $550,000. Cooper-Standard Holdings Inc. (the ‘‘Parent’’) and all wholly-owned domestic subsidiaries of Cooper-Standard Automotive Inc. (the ‘‘Guarantors’’) unconditionally guarantee the notes. The following condensed consolidating and combining financial data provides information regarding the financial position, results of operations and cash flows of the Guarantors. Separate financial statements of the Guarantors are not presented because management has determined that those would not be material to the holders of the notes. The Guarantors account for their investments in the non-guarantor subsidiaries on the equity method. The principal elimination entries are to eliminate the investments in subsidiaries and intercompany balances and transactions (dollars in millions).

13




NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share amounts)

COMBINING STATEMENT OF INCOME
For the Three Months Ended September 30, 2004


  Predecessor
          Combined
  Issuer Guarantors Non-Guarantors Eliminations Totals
Sales $ 147.7   $ 77.1   $ 214.1   $ (15.0 $ 423.9  
Cost of products sold   137.4     62.5     178.1     (15.0   363.0  
Selling, admin, & engineering expenses   28.5     4.2     11.6         44.3  
Amortization of intangibles   0.2         0.1         0.3  
Restructuring   0.6         7.8         8.4  
Operating profit   (19.0   10.4     16.5         7.9  
Interest expense, net of interest income                    
Equity earnings (losses)   (0.1               (0.1
Other income (expense)   3.5         (3.6       (0.1
Income (loss) before income taxes   (15.6   10.4     12.9         7.7  
Provision for income tax expense (benefit)   (4.1   2.6     3.7         2.2  
Income (loss) before equity in income (loss) of subsidiaries   (11.5   7.8     9.2         5.5  
Equity in net income (loss) of subsidiaries   17.0             (17.0    
NET INCOME (LOSS) $ 5.5   $ 7.8   $ 9.2   $ (17.0 $ 5.5  

CONSOLIDATING STATEMENT OF INCOME
For the Three Months Ended September 30, 2005


  Successor
            Consolidated
  Parent Issuer Guarantors Non-Guarantors Eliminations Totals
Sales $   $ 135.8   $ 77.1   $ 230.2   $ (16.5 $ 426.6  
Cost of products sold       123.2     63.2     198.5     (16.5   368.4  
Selling, admin, & engineering expenses       24.2     6.5     8.9         39.6  
Amortization of intangibles       7.0     0.1             7.1  
Restructuring       0.5                 0.5  
Operating profit       (19.1   7.3     22.8         11.0  
Interest expense, net of interest income       (14.0       (2.5       (16.5
Equity earnings (losses)           0.6             0.6  
Other income (expense)       5.8         (1.2       4.6  
Income (loss) before income taxes       (27.3   7.9     19.1         (0.3
Provision for income tax expense (benefit)       (12.8   3.8     9.8         0.8  
Income (loss) before equity in income (loss) of subsidiaries       (14.5   4.1     9.3         (1.1
Equity in net income (loss) of subsidiaries   (1.1   13.4             (12.3    
NET INCOME (LOSS) $ (1.1 $ (1.1 $ 4.1   $ 9.3   $ (12.3 $ (1.1

14




NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

COMBINING STATEMENT OF INCOME
For the Nine Months Ended September 30, 2004


  Predecessor
          Combined
  Issuer Guarantors Non-Guarantors Eliminations Totals
Sales $ 485.3   $ 255.5     712.4   $ (47.4