UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
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(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2021March 31, 2022
or
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☐ | 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)
______________________________
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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:
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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.
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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 OctoberApril 29, 2021,2022, there were 16,991,21717,062,869 shares of the registrant’s common stock, $0.001 par value, outstanding.
COOPER-STANDARD HOLDINGS INC.
Form 10-Q
For the period ended September 30, 2021March 31, 2022
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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 September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2021 | | 2020 | | | 2022 | | 2021 |
Sales | Sales | $ | 526,690 | | | $ | 683,200 | | | $ | 1,728,842 | | | $ | 1,678,557 | | Sales | | $ | 612,984 | | | $ | 668,967 | |
Cost of products sold | Cost of products sold | 534,817 | | | 598,714 | | | 1,669,610 | | | 1,611,299 | | Cost of products sold | | 591,442 | | | 600,675 | |
Gross (loss) profit | (8,127) | | | 84,486 | | | 59,232 | | | 67,258 | | |
Gross profit | | Gross profit | | 21,542 | | | 68,292 | |
Selling, administration & engineering expenses | Selling, administration & engineering expenses | 60,367 | | | 60,059 | | | 168,506 | | | 199,001 | | Selling, administration & engineering expenses | | 51,904 | | | 58,054 | |
Gain on sale of business, net | Gain on sale of business, net | — | | | (2,314) | | | (696) | | | (2,314) | | Gain on sale of business, net | | — | | | (891) | |
| Amortization of intangibles | Amortization of intangibles | 1,819 | | | 1,669 | | | 5,524 | | | 9,632 | | Amortization of intangibles | | 1,746 | | | 1,772 | |
Restructuring charges | Restructuring charges | 1,573 | | | 6,186 | | | 34,251 | | | 23,236 | | Restructuring charges | | 7,831 | | | 21,047 | |
| Impairment charges | Impairment charges | 1,006 | | | 100 | | | 1,847 | | | 87,710 | | Impairment charges | | 455 | | | — | |
Operating (loss) profit | (72,892) | | | 18,786 | | | (150,200) | | | (250,007) | | |
Operating loss | | Operating loss | | (40,394) | | | (11,690) | |
Interest expense, net of interest income | Interest expense, net of interest income | (18,243) | | | (17,985) | | | (54,152) | | | (40,993) | | Interest expense, net of interest income | | (18,177) | | | (17,784) | |
Equity in (losses) earnings of affiliates | Equity in (losses) earnings of affiliates | (1,114) | | | 738 | | | 65 | | | (842) | | Equity in (losses) earnings of affiliates | | (1,356) | | | 786 | |
| Other (expense) income, net | (494) | | | 2,784 | | | (4,221) | | | (5,357) | | |
(Loss) income before income taxes | (92,743) | | | 4,323 | | | (208,508) | | | (297,199) | | |
Income tax expense (benefit) | 32,121 | | | (2,386) | | | 15,598 | | | (55,485) | | |
Net (loss) income | (124,864) | | | 6,709 | | | (224,106) | | | (241,714) | | |
Net loss (income) attributable to noncontrolling interests | 1,691 | | | (2,328) | | | 3,458 | | | 1,288 | | |
Net (loss) income attributable to Cooper-Standard Holdings Inc. | $ | (123,173) | | | $ | 4,381 | | | $ | (220,648) | | | $ | (240,426) | | |
Other expense, net | | Other expense, net | | (1,211) | | | (5,089) | |
Loss before income taxes | | Loss before income taxes | | (61,138) | | | (33,777) | |
Income tax expense | | Income tax expense | | 652 | | | 936 | |
Net loss | | Net loss | | (61,790) | | | (34,713) | |
Net loss attributable to noncontrolling interests | | Net loss attributable to noncontrolling interests | | 430 | | | 849 | |
Net loss attributable to Cooper-Standard Holdings Inc. | | Net loss attributable to Cooper-Standard Holdings Inc. | | $ | (61,360) | | | $ | (33,864) | |
| (Loss) earnings per share: | | |
Loss per share: | | Loss per share: | | |
Basic | Basic | $ | (7.20) | | | $ | 0.26 | | | $ | (12.96) | | | $ | (14.22) | | Basic | | $ | (3.58) | | | $ | (2.00) | |
Diluted | Diluted | $ | (7.20) | | | $ | 0.26 | | | $ | (12.96) | | | $ | (14.22) | | Diluted | | $ | (3.58) | | | $ | (2.00) | |
The accompanying notes are an integral part of these financial statements.
COOPER-STANDARD HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOMELOSS
(Unaudited)
(Dollar amounts in thousands)
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Net (loss) income | $ | (124,864) | | | $ | 6,709 | | | $ | (224,106) | | | $ | (241,714) | |
Other comprehensive (loss) income: | | | | | | | |
Currency translation adjustment | (6,215) | | | 17,488 | | | (4,074) | | | (4,612) | |
Benefit plan liabilities adjustment, net of tax | 4,978 | | | (853) | | | 8,328 | | | 1,113 | |
Fair value change of derivatives, net of tax | (2,132) | | | 2,072 | | | (1,952) | | | (1,766) | |
Other comprehensive (loss) income, net of tax | (3,369) | | | 18,707 | | | 2,302 | | | (5,265) | |
Comprehensive (loss) income | (128,233) | | | 25,416 | | | (221,804) | | | (246,979) | |
Comprehensive loss (income) attributable to noncontrolling interests | 1,916 | | | (2,970) | | | 3,744 | | | 1,063 | |
Comprehensive (loss) income attributable to Cooper-Standard Holdings Inc. | $ | (126,317) | | | $ | 22,446 | | | $ | (218,060) | | | $ | (245,916) | |
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| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Net loss | | | | | $ | (61,790) | | | $ | (34,713) | |
Other comprehensive income (loss): | | | | | | | |
Currency translation adjustment | | | | | 8,365 | | | (6,572) | |
Benefit plan liabilities adjustment, net of tax | | | | | 984 | | | 2,739 | |
Fair value change of derivatives, net of tax | | | | | 2,431 | | | (571) | |
Other comprehensive income (loss), net of tax | | | | | 11,780 | | | (4,404) | |
Comprehensive loss | | | | | (50,010) | | | (39,117) | |
Comprehensive loss attributable to noncontrolling interests | | | | | 441 | | | 1,101 | |
Comprehensive loss attributable to Cooper-Standard Holdings Inc. | | | | | $ | (49,569) | | | $ | (38,016) | |
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)
| | | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (unaudited) | | | | (unaudited) | | |
Assets | Assets | | Assets | |
Current assets: | Current assets: | | Current assets: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 253,281 | | | $ | 438,438 | | Cash and cash equivalents | $ | 252,911 | | | $ | 248,010 | |
Accounts receivable, net | Accounts receivable, net | 308,907 | | | 379,564 | | Accounts receivable, net | 337,582 | | | 317,469 | |
Tooling receivable, net | Tooling receivable, net | 97,500 | | | 82,150 | | Tooling receivable, net | 90,724 | | | 88,900 | |
Inventories | Inventories | 198,180 | | | 143,742 | | Inventories | 196,921 | | | 158,075 | |
Prepaid expenses | Prepaid expenses | 30,052 | | | 29,748 | | Prepaid expenses | 26,773 | | | 26,313 | |
Income tax receivable and refundable credits | Income tax receivable and refundable credits | 83,089 | | | 85,977 | | Income tax receivable and refundable credits | 80,773 | | | 82,813 | |
Other current assets | Other current assets | 100,629 | | | 100,110 | | Other current assets | 108,166 | | | 73,317 | |
| Total current assets | Total current assets | 1,071,638 | | | 1,259,729 | | Total current assets | 1,093,850 | | | 994,897 | |
Property, plant and equipment, net | Property, plant and equipment, net | 808,666 | | | 892,309 | | Property, plant and equipment, net | 745,343 | | | 784,348 | |
Operating lease right-of-use assets, net | Operating lease right-of-use assets, net | 102,698 | | | 109,795 | | Operating lease right-of-use assets, net | 106,561 | | | 111,052 | |
Goodwill | Goodwill | 142,668 | | | 142,250 | | Goodwill | 142,337 | | | 142,282 | |
Intangible assets, net | Intangible assets, net | 61,980 | | | 67,679 | | Intangible assets, net | 53,469 | | | 60,375 | |
| Other assets | Other assets | 130,941 | | | 140,182 | | Other assets | 141,576 | | | 133,539 | |
Total assets | Total assets | $ | 2,318,591 | | | $ | 2,611,944 | | Total assets | $ | 2,283,136 | | | $ | 2,226,493 | |
| Liabilities and Equity | Liabilities and Equity | | Liabilities and Equity | |
Current liabilities: | Current liabilities: | | Current liabilities: | |
Debt payable within one year | Debt payable within one year | $ | 40,102 | | | $ | 40,731 | | Debt payable within one year | $ | 53,605 | | | $ | 56,111 | |
Accounts payable | Accounts payable | 336,440 | | | 385,284 | | Accounts payable | 394,683 | | | 348,133 | |
Payroll liabilities | Payroll liabilities | 87,280 | | | 112,727 | | Payroll liabilities | 82,989 | | | 69,353 | |
Proceeds from deferred sale of fixed assets | | Proceeds from deferred sale of fixed assets | 49,911 | | | — | |
Accrued liabilities | Accrued liabilities | 122,400 | | | 110,827 | | Accrued liabilities | 122,603 | | | 101,466 | |
Current operating lease liabilities | Current operating lease liabilities | 21,407 | | | 21,711 | | Current operating lease liabilities | 21,470 | | | 22,552 | |
| Total current liabilities | Total current liabilities | 607,629 | | | 671,280 | | Total current liabilities | 725,261 | | | 597,615 | |
Long-term debt | Long-term debt | 981,010 | | | 982,760 | | Long-term debt | 979,922 | | | 980,604 | |
Pension benefits | Pension benefits | 141,562 | | | 152,230 | | Pension benefits | 126,915 | | | 129,880 | |
Postretirement benefits other than pensions | Postretirement benefits other than pensions | 49,936 | | | 49,613 | | Postretirement benefits other than pensions | 43,413 | | | 43,498 | |
| Long-term operating lease liabilities | Long-term operating lease liabilities | 84,891 | | | 90,517 | | Long-term operating lease liabilities | 89,149 | | | 92,760 | |
Other liabilities | Other liabilities | 47,111 | | | 41,433 | | Other liabilities | 47,696 | | | 50,776 | |
Total liabilities | Total liabilities | 1,912,139 | | | 1,987,833 | | Total liabilities | 2,012,356 | | | 1,895,133 | |
| Equity: | Equity: | | Equity: | |
Common stock, $0.001 par value, 190,000,000 shares authorized; 19,056,439 shares issued and 16,990,630 shares outstanding as of September 30, 2021, and 18,962,894 shares issued and 16,897,085 outstanding as of December 31, 2020 | 17 | | | 17 | | |
Common stock, $0.001 par value, 190,000,000 shares authorized; 19,127,504 shares issued and 17,061,695 shares outstanding as of March 31, 2022, and 19,057,788 shares issued and 16,991,979 outstanding as of December 31, 2021 | | Common stock, $0.001 par value, 190,000,000 shares authorized; 19,127,504 shares issued and 17,061,695 shares outstanding as of March 31, 2022, and 19,057,788 shares issued and 16,991,979 outstanding as of December 31, 2021 | 17 | | | 17 | |
Additional paid-in capital | Additional paid-in capital | 502,864 | | | 498,719 | | Additional paid-in capital | 504,934 | | | 504,497 | |
Retained earnings | 129,622 | | | 350,270 | | |
Retained (loss) earnings | | Retained (loss) earnings | (35,807) | | | 25,553 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (239,308) | | | (241,896) | | Accumulated other comprehensive loss | (193,393) | | | (205,184) | |
Total Cooper-Standard Holdings Inc. equity | Total Cooper-Standard Holdings Inc. equity | 393,195 | | | 607,110 | | Total Cooper-Standard Holdings Inc. equity | 275,751 | | | 324,883 | |
Noncontrolling interests | Noncontrolling interests | 13,257 | | | 17,001 | | Noncontrolling interests | (4,971) | | | 6,477 | |
Total equity | Total equity | 406,452 | | | 624,111 | | Total equity | 270,780 | | | 331,360 | |
Total liabilities and equity | Total liabilities and equity | $ | 2,318,591 | | | $ | 2,611,944 | | Total liabilities and equity | $ | 2,283,136 | | | $ | 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)
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| 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 | |
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Share-based compensation, net | 45,467 | | | — | | | 952 | | | — | | | — | | | 952 | | | — | | | 952 | |
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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 | |
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Share-based compensation, net | 45,962 | | | — | | | 1,677 | | | — | | | — | | | 1,677 | | | — | | | 1,677 | |
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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 | |
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Share-based compensation, net | 2,116 | | | — | | | 1,516 | | | — | | | — | | | 1,516 | | | — | | | 1,516 | |
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Net loss | — | | | — | | | — | | | (123,173) | | | — | | | (123,173) | | | (1,691) | | | (124,864) | |
Other comprehensive loss | — | | | — | | | — | | | — | | | (3,144) | | | (3,144) | | | (225) | | | (3,369) | |
Balance as of September 30, 2021 | 16,990,630 | | | $ | 17 | | | $ | 502,864 | | | $ | 129,622 | | | $ | (239,308) | | | $ | 393,195 | | | $ | 13,257 | | | $ | 406,452 | |
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| 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 | |
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Share-based compensation, net | 69,716 | | | — | | | 437 | | | — | | | — | | | 437 | | | — | | | 437 | |
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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 | |
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| | 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) | |
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Share-based compensation, net | | 41,785 | | | — | | | 1,874 | | | — | | | — | | | 1,874 | | | — | | | 1,874 | |
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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 | |
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Share-based compensation, net | | 9,548 | | | — | | | 2,303 | | | — | | | — | | | 2,303 | | | — | | | 2,303 | |
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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 | |
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Share-based compensation, net | | 2,363 | | | — | | | 1,840 | | | — | | | — | | | 1,840 | | | — | | | 1,840 | |
Deconsolidation of noncontrolling interest | | — | | | — | | | — | | | — | | | — | | | — | | | (2,112) | | | (2,112) | |
Net income | | — | | | — | | | — | | | 4,381 | | | — | | | 4,381 | | | 2,328 | | | 6,709 | |
Other comprehensive income | | — | | | — | | | — | | | — | | | 18,065 | | | 18,065 | | | 642 | | | 18,707 | |
Balance as of September 30, 2020 | | 16,896,453 | | | $ | 17 | | | $ | 496,468 | | | $ | 377,449 | | | $ | (259,231) | | | $ | 614,703 | | | $ | 16,632 | | | $ | 631,335 | |
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| | 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 | |
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Share-based compensation, net | | 45,467 | | | — | | | 952 | | | — | | | — | | | 952 | | | — | | | 952 | |
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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 | |
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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)
| | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
Operating Activities: | Operating Activities: | | | | Operating Activities: | | | |
Net loss | Net loss | $ | (224,106) | | | $ | (241,714) | | Net loss | $ | (61,790) | | | $ | (34,713) | |
Adjustments to reconcile net loss to net cash used in operating activities: | Adjustments to reconcile net loss to net cash used in operating activities: | | Adjustments to reconcile net loss to net cash used in operating activities: | |
Depreciation | Depreciation | 99,497 | | | 107,095 | | Depreciation | 30,387 | | | 31,756 | |
Amortization of intangibles | Amortization of intangibles | 5,524 | | | 9,632 | | Amortization of intangibles | 1,746 | | | 1,772 | |
Gain on sale of business, net | Gain on sale of business, net | (696) | | | (2,314) | | Gain on sale of business, net | — | | | (891) | |
| Impairment charges | Impairment charges | 1,847 | | | 87,710 | | Impairment charges | 455 | | | — | |
Share-based compensation expense | Share-based compensation expense | 4,781 | | | 6,977 | | Share-based compensation expense | 584 | | | 2,178 | |
Equity in earnings of affiliates, net of dividends related to earnings | 2,146 | | | 6,087 | | |
Equity in losses (earnings) of affiliates, net of dividends related to earnings | | Equity in losses (earnings) of affiliates, net of dividends related to earnings | 1,356 | | | (786) | |
| Deferred income taxes | Deferred income taxes | 9,785 | | | (32,308) | | Deferred income taxes | (511) | | | (1,434) | |
Other | Other | 2,219 | | | 4,354 | | Other | 509 | | | 130 | |
Changes in operating assets and liabilities | Changes in operating assets and liabilities | (12,485) | | | 27,949 | | Changes in operating assets and liabilities | 15,051 | | | (5,096) | |
Net cash used in operating activities | Net cash used in operating activities | (111,488) | | | (26,532) | | Net cash used in operating activities | (12,213) | | | (7,084) | |
Investing activities: | Investing activities: | | Investing activities: | |
Capital expenditures | Capital expenditures | (75,965) | | | (73,407) | | Capital expenditures | (32,314) | | | (38,617) | |
| Proceeds from sale of business, net of cash divested | — | | | (17,006) | | |
Proceeds from deferred sale of fixed assets | | Proceeds from deferred sale of fixed assets | 50,008 | | | — | |
Proceeds from sale of fixed assets and other | Proceeds from sale of fixed assets and other | 3,130 | | | 963 | | Proceeds from sale of fixed assets and other | 2,377 | | | 2,363 | |
Net cash used in investing activities | (72,835) | | | (89,450) | | |
Net cash provided by (used in) investing activities | | Net cash provided by (used in) investing activities | 20,071 | | | (36,254) | |
Financing activities: | Financing activities: | | Financing activities: | |
Proceeds from issuance of long-term debt, net of discount
| — | | | 245,000 | | |
| Principal payments on long-term debt | Principal payments on long-term debt | (4,227) | | | (4,792) | | Principal payments on long-term debt | (1,429) | | | (1,797) | |
Decrease in short-term debt, net | (597) | | | (6,897) | | |
(Decrease) increase in short-term debt, net | | (Decrease) increase in short-term debt, net | (1,667) | | | 3,429 | |
| Debt issuance costs | — | | | (6,722) | | |
| | Taxes withheld and paid on employees' share-based payment awards | Taxes withheld and paid on employees' share-based payment awards | (777) | | | (533) | | Taxes withheld and paid on employees' share-based payment awards | (523) | | | (729) | |
Other | Other | 884 | | | (925) | | Other | 646 | | | 385 | |
Net cash (used in) provided by financing activities | Net cash (used in) provided by financing activities | (4,717) | | | 225,131 | | Net cash (used in) provided by financing activities | (2,973) | | | 1,288 | |
Effects of exchange rate changes on cash, cash equivalents and restricted cash | Effects of exchange rate changes on cash, cash equivalents and restricted cash | 7,853 | | | (5,718) | | Effects of exchange rate changes on cash, cash equivalents and restricted cash | 5,123 | | | 5,358 | |
Changes in cash, cash equivalents and restricted cash | Changes in cash, cash equivalents and restricted cash | (181,187) | | | 103,431 | | Changes in cash, cash equivalents and restricted cash | 10,008 | | | (36,692) | |
| Cash, cash equivalents and restricted cash at beginning of period | Cash, cash equivalents and restricted cash at beginning of period | 443,578 | | | 361,742 | | Cash, cash equivalents and restricted cash at beginning of period | 251,128 | | | 443,578 | |
Cash, cash equivalents and restricted cash at end of period | Cash, cash equivalents and restricted cash at end of period | $ | 262,391 | | | $ | 465,173 | | Cash, cash equivalents and restricted cash at end of period | $ | 261,136 | | | $ | 406,886 | |
| Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet: | Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet: | Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet: |
| | Balance as of | | Balance as of |
| | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
Cash and cash equivalents | Cash and cash equivalents | $ | 253,281 | | | $ | 438,438 | | Cash and cash equivalents | $ | 252,911 | | | $ | 248,010 | |
Restricted cash included in other current assets | Restricted cash included in other current assets | 6,467 | | | 4,089 | | Restricted cash included in other current assets | 6,953 | | | 961 | |
Restricted cash included in other assets | Restricted cash included in other assets | 2,643 | | | 1,051 | | Restricted cash included in other assets | 1,272 | | | 2,157 | |
Total cash, cash equivalents and restricted cash | Total cash, cash equivalents and restricted cash | $ | 262,391 | | | $ | 443,578 | | Total cash, cash equivalents and restricted cash | $ | 261,136 | | | $ | 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, 20202021 (the “2020“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 September 30, 2021March 31, 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. AcquisitionDeconsolidation and DivestituresDivestiture
20202022 Joint Venture Deconsolidation
In the thirdfirst quarter of 2020, management approved and completed a plan to sell the Company’s entire controlling equity interest of2022, a joint venture in the Asia Pacific region. Upon finalizingregion that was previously consolidated with a noncontrolling interest amended the sale,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 gain on deconsolidation of the business of $1,334. In the third quarter of 2021, the Company recorded an allowance for credit loss of $11,218$2,257 , included in selling, administration and engineering expenses. The credit loss resulted from the bankruptcy proceedings of the divested joint venture and represented accounts receivable balances with the divested joint venture. These accounts receivable amounts primarily represented sales to the joint venture prior to deconsolidationother expense, net in the third quartercondensed consolidated statements of 2020.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. The entities and the associated assets and liabilities met the criteria for presentation as held for sale as of March 31, 2020, and depreciation of long-lived assets ceased. The divestiture did not meet the criteria for presentation as a discontinued operation.
Upon meeting the criteria for held for sale classification and during the six months ended June 30, 2020, the Company recorded non-cash impairment charges of $86,470 to reduce the carrying value of the held for sale entities to fair value less costs to sell. Fair value, which is categorized within Level 3 of the fair value hierarchy, was determined using a market approach, estimated based on expected proceeds. The fair value less costs to sell were assessed each reporting period that the asset group remained classified as held for sale.
On July 1, 2020, the Company completed the divestiture of its European rubber fluid transfer and specialty sealing businesses, as well as its Indian operations, to Mutares SE & Co. KGaA (“Mutares”). The transaction included payment denominated in Euro of €9,000, which consisted of €6,500 in cash paid and €2,500 in deferred payment obligations, payable in December 2021.
Upon finalizing the sale duringDuring the three months ended September 30, 2020, the Company recorded a loss on deconsolidation of the business of $167. During the nine months ended September 30,March 31, 2021, the Company recorded subsequent adjustments resulting in a net gain of $696.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
2019 Divestiture
During the second quarter of 2019, the Company completed its sale of the AVS product line to Continental AG. In the third quarter of 2020, the Company finalized adjustments to the gain recorded in 2019 by recording an additional gain on divestiture of $1,147, primarily due to working capital adjustments.
Subsequent Event
In the fourth quarter of 2018, the Company acquired 80.1% of LS Mtron Ltd.’s South Korean automotive parts business. The acquisition agreement included an option for LS Mtron Ltd. to sell its remaining 19.9% noncontrolling interest to the Company, beginning three years from the acquisition date. Subsequent to the third quarter of 2021, LS Mtron Ltd. exercised its option, requiring the Company to purchase the remaining 19.9% interest. The transaction price is subject to adjustments that are expected to be finalized at closing in the fourth quarter of 2021.$891.
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 September 30, 2021March 31, 2022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
Passenger and Light Duty | $ | 262,821 | | | $ | 93,766 | | | $ | 109,187 | | | $ | 15,973 | | | $ | — | | | $ | 481,747 | |
Commercial | 3,341 | | | 4,773 | | | 337 | | | 8 | | | 1,333 | | | 9,792 | |
Other | 4,430 | | | 143 | | | 2 | | | — | | | 30,576 | | | 35,151 | |
Revenue | $ | 270,592 | | | $ | 98,682 | | | $ | 109,526 | | | $ | 15,981 | | | $ | 31,909 | | | $ | 526,690 | |
Revenue by customer group for the nine months ended September 30, 2021 was as follows:
| | | North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated | | North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
Passenger and Light Duty | Passenger and Light Duty | $ | 834,545 | | | $ | 380,519 | | | $ | 325,178 | | | $ | 45,597 | | | $ | — | | | $ | 1,585,839 | | Passenger and Light Duty | $ | 314,587 | | | $ | 125,368 | | | $ | 103,404 | | | $ | 21,513 | | | $ | — | | | $ | 564,872 | |
Commercial | Commercial | 11,027 | | | 16,125 | | | 2,484 | | | 23 | | | 4,029 | | | 33,688 | | Commercial | 3,674 | | | 5,923 | | | 347 | | | 6 | | | 1,657 | | | 11,607 | |
Other | Other | 11,581 | | | 435 | | | 4 | | | — | | | 97,295 | | | 109,315 | | Other | 3,633 | | | 123 | | | 2 | | | — | | | 32,747 | | | 36,505 | |
Revenue | Revenue | $ | 857,153 | | | $ | 397,079 | | | $ | 327,666 | | | $ | 45,620 | | | $ | 101,324 | | | $ | 1,728,842 | | Revenue | $ | 321,894 | | | $ | 131,414 | | | $ | 103,753 | | | $ | 21,519 | | | $ | 34,404 | | | $ | 612,984 | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Revenue by customer group for the three months ended September 30, 2020March 31, 2021 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
Passenger and Light Duty | $ | 350,016 | | | $ | 141,754 | | | $ | 129,822 | | | $ | 17,558 | | | $ | — | | | $ | 639,150 | |
Commercial | 3,179 | | | 4,066 | | | 1,190 | | | 6 | | | 911 | | | 9,352 | |
Other | 5,812 | | | 209 | | | 51 | | | 16 | | | 28,610 | | | 34,698 | |
Revenue | $ | 359,007 | | | $ | 146,029 | | | $ | 131,063 | | | $ | 17,580 | | | $ | 29,521 | | | $ | 683,200 | |
Revenue by customer group for the nine months ended September 30, 2020 was as follows:
| | | North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated | | North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
Passenger and Light Duty | Passenger and Light Duty | $ | 796,937 | | | $ | 383,288 | | | $ | 312,871 | | | $ | 41,878 | | | $ | — | | | $ | 1,534,974 | | Passenger and Light Duty | $ | 331,613 | | | $ | 159,781 | | | $ | 113,041 | | | $ | 15,479 | | | $ | — | | | $ | 619,914 | |
Commercial | Commercial | 8,328 | | | 12,846 | | | 3,149 | | | 16 | | | 2,868 | | | 27,207 | | Commercial | 4,281 | | | 5,881 | | | 1,182 | | | 7 | | | 1,251 | | | 12,602 | |
Other | Other | 14,880 | | | 13,942 | | | 113 | | | 38 | | | 87,403 | | | 116,376 | | Other | 3,142 | | | 114 | | | 2 | | | — | | | 33,193 | | | 36,451 | |
Revenue | Revenue | $ | 820,145 | | | $ | 410,076 | | | $ | 316,133 | | | $ | 41,932 | | | $ | 90,271 | | | $ | 1,678,557 | | Revenue | $ | 339,036 | | | $ | 165,776 | | | $ | 114,225 | | | $ | 15,486 | | | $ | 34,444 | | | $ | 668,967 | |
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 September 30, 2021March 31, 2022 was as follows:
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| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
Sealing systems | $ | 102,636 | | | $ | 75,824 | | | $ | 69,872 | | | $ | 12,114 | | | $ | — | | | $ | 260,446 | |
Fuel and brake delivery systems | 80,549 | | | 18,989 | | | 23,446 | | | 2,286 | | | — | | | 125,270 | |
Fluid transfer systems | 87,407 | | | 3,869 | | | 16,208 | | | 1,581 | | | — | | | 109,065 | |
Other | — | | | — | | | — | | | — | | | 31,909 | | | 31,909 | |
Consolidated | $ | 270,592 | | | $ | 98,682 | | | $ | 109,526 | | | $ | 15,981 | | | $ | 31,909 | | | $ | 526,690 | |
Revenue by product line for the nine months ended September 30, 2021 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
Sealing systems | $ | 313,985 | | | $ | 310,063 | | | $ | 201,873 | | | $ | 34,921 | | | $ | — | | | $ | 860,842 | |
Fuel and brake delivery systems | 275,594 | | | 73,770 | | | 76,981 | | | 7,299 | | | — | | | 433,644 | |
Fluid transfer systems | 267,574 | | | 13,246 | | | 48,812 | | | 3,400 | | | — | | | 333,032 | |
Other | — | | | — | | | — | | | — | | | 101,324 | | | 101,324 | |
Consolidated | $ | 857,153 | | | $ | 397,079 | | | $ | 327,666 | | | $ | 45,620 | | | $ | 101,324 | | | $ | 1,728,842 | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
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| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
Sealing systems | $ | 127,552 | | | $ | 105,134 | | | $ | 63,036 | | | $ | 16,110 | | | $ | — | | | $ | 311,832 | |
Fuel and brake delivery systems | 102,721 | | | 23,038 | | | 23,747 | | | 3,561 | | | — | | | 153,067 | |
Fluid transfer systems | 91,621 | | | 3,242 | | | 16,970 | | | 1,848 | | | — | | | 113,681 | |
Other | — | | | — | | | — | | | — | | | 34,404 | | | 34,404 | |
Revenue | $ | 321,894 | | | $ | 131,414 | | | $ | 103,753 | | | $ | 21,519 | | | $ | 34,404 | | | $ | 612,984 | |
Revenue by product line for the three months ended September 30, 2020March 31, 2021 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
Sealing systems | $ | 138,823 | | | $ | 116,640 | | | $ | 82,754 | | | $ | 11,045 | | | $ | — | | | $ | 349,262 | |
Fuel and brake delivery systems | 118,997 | | | 25,218 | | | 29,877 | | | 5,134 | | | — | | | 179,226 | |
Fluid transfer systems | 101,187 | | | 4,171 | | | 18,432 | | | 1,401 | | | — | | | 125,191 | |
Other | — | | | — | | | — | | | — | | | 29,521 | | | 29,521 | |
Consolidated | $ | 359,007 | | | $ | 146,029 | | | $ | 131,063 | | | $ | 17,580 | | | $ | 29,521 | | | $ | 683,200 | |
Revenue by product line for the nine months ended September 30, 2020 was as follows:
| | | North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated | | North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
Sealing systems | Sealing systems | $ | 312,331 | | | $ | 297,216 | | | $ | 201,295 | | | $ | 27,385 | | | $ | — | | | $ | 838,227 | | Sealing systems | $ | 121,175 | | | $ | 129,361 | | | $ | 69,673 | | | $ | 11,274 | | | $ | — | | | $ | 331,483 | |
Fuel and brake delivery systems | Fuel and brake delivery systems | 266,203 | | | 65,078 | | | 75,061 | | | 11,707 | | | — | | | 418,049 | | Fuel and brake delivery systems | 112,656 | | | 30,790 | | | 28,369 | | | 2,865 | | | — | | | 174,680 | |
Fluid transfer systems | Fluid transfer systems | 241,611 | | | 35,673 | | | 39,777 | | | 2,840 | | | — | | | 319,901 | | Fluid transfer systems | 105,205 | | | 5,625 | | | 16,183 | | | 1,347 | | | — | | | 128,360 | |
Other | Other | — | | | 12,109 | | | — | | | — | | | 90,271 | | | 102,380 | | Other | — | | | — | | | — | | | — | | | 34,444 | | | 34,444 | |
Consolidated | $ | 820,145 | | | $ | 410,076 | | | $ | 316,133 | | | $ | 41,932 | | | $ | 90,271 | | | $ | 1,678,557 | | |
Revenue | | Revenue | $ | 339,036 | | | $ | 165,776 | | | $ | 114,225 | | | $ | 15,486 | | | $ | 34,444 | | | $ | 668,967 | |
Contract Estimates
The amount of revenue recognized is usually based on the purchase order price and adjusted for variable consideration, including pricing concessions. The Company accrues for pricing concessions by reducing revenue as products are shipped or delivered. The accruals are based on historical experience, anticipated performance and management’s best judgment. The Company also generally has ongoing adjustments to customer pricing arrangements based on the content and cost of its products. Such pricing accruals are adjusted as they are settled with customers. Customer returns, which are infrequent, are usually related to quality or shipment issues and are recorded as a reduction of revenue. The Company generally does not recognize significant return obligations due to their infrequent nature.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Contract Balances
The Company’s contract assets consist of unbilled amounts associated with variable pricing arrangements in its Asia Pacific region. Once pricing is finalized, contract assets are transferred to accounts receivable. As a result, the timing of revenue recognition and billings, as well as changes in foreign exchange rates, will impact contract assets on an ongoing basis. Contract assets were not materially impacted by any other factors during the ninethree months ended September 30, 2021.March 31, 2022.
The Company’s contract liabilities consist of advance payments received and due from customers. Net contract assets (liabilities) consisted of the following:
| | | September 30, 2021 | | December 31, 2020 | | Change | | March 31, 2022 | | December 31, 2021 | | Change |
Contract assets | Contract assets | | $ | 1,118 | | | $ | 777 | | | $ | 341 | | Contract assets | | $ | 8,564 | | | $ | — | | | $ | 8,564 | |
Contract liabilities | Contract liabilities | | (171) | | | (27) | | | (144) | | Contract liabilities | | (15) | | | (143) | | | 128 | |
Net contract assets | | $ | 947 | | | $ | 750 | | | $ | 197 | | |
Net contract assets (liabilities) | | Net contract assets (liabilities) | | $ | 8,549 | | | $ | (143) | | | $ | 8,692 | |
Other
The Company, at times, enters into agreements that provide for lump sum payments to customers. These payment agreements are recorded as a reduction of revenue during the period the commitment is made. Amounts related to commitments of future payments to customers on the condensed consolidated balance sheets as of September 30, 2021March 31, 2022 and December 31, 20202021 were current liabilities of $14,628$9,944 and $16,932,$12,045, respectively, and long-term liabilities of $7,020$6,705 and $6,828,$7,214, respectively.
The Company provides assurance-type warranties to its customers. Such warranties provide customers with assurance that the related product will function as intended and complies with any agreed-upon specifications, and are recognized in costs of products sold.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
4. Restructuring
On an ongoing basis, the Company evaluates its business and objectives to ensure that it is properly configured and sized based on changing market conditions. Accordingly, the Company has implemented several restructuring initiatives, including closure or consolidation of facilities throughout the world and the reorganization of its operating structure.
The Company’s restructuring charges consist of severance, retention and outplacement services, and severance-related postemployment benefits (collectively, “employee separation costs”), other related exit costs and asset impairments related to restructuring activities. Employee separation costs are recorded based on existing union and employee contracts, statutory requirements, completed negotiations and Company policy.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Restructuring expense by segment for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 was as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2021 | | 2020 | | | 2022 | | 2021 |
North America | North America | $ | 307 | | | $ | 3,721 | | | $ | 3,513 | | | $ | 10,468 | | North America | | $ | (439) | | | $ | 2,363 | |
Europe | Europe | 1,113 | | | 1,720 | | | 27,284 | | | 7,019 | | Europe | | 8,431 | | | 16,397 | |
Asia Pacific | Asia Pacific | 282 | | | 552 | | | 1,265 | | | 3,264 | | Asia Pacific | | (153) | | | 369 | |
South America | South America | (129) | | | 316 | | | 1,858 | | | 2,367 | | South America | | 36 | | | 1,587 | |
Total Automotive | Total Automotive | 1,573 | | | 6,309 | | | 33,920 | | | 23,118 | | Total Automotive | | 7,875 | | | 20,716 | |
Corporate and other | Corporate and other | — | | | (123) | | | 331 | | | 118 | | Corporate and other | | (44) | | | 331 | |
Total | Total | $ | 1,573 | | | $ | 6,186 | | | $ | 34,251 | | | $ | 23,236 | | Total | | $ | 7,831 | | | $ | 21,047 | |
Restructuring activity for the ninethree months ended September 30, 2021March 31, 2022 was as follows:
| | | Employee Separation Costs | | Other Exit Costs | | | Total | | Employee Separation Costs | | Other Exit Costs | | | Total |
Balance as of December 31, 2020 | $ | 15,029 | | | $ | 8,406 | | | | $ | 23,435 | | |
Balance as of December 31, 2021 | | Balance as of December 31, 2021 | $ | 20,957 | | | $ | 5,627 | | | | $ | 26,584 | |
Expense | Expense | 28,455 | | | 5,796 | | | | 34,251 | | Expense | 4,148 | | | 3,683 | | | | 7,831 | |
Cash payments | Cash payments | (19,329) | | | (8,031) | | | | (27,360) | | Cash payments | (6,493) | | | (801) | | | | (7,294) | |
Non-cash fixed asset impairments included in expense | — | | | (214) | | | | (214) | | |
| Foreign exchange translation and other | Foreign exchange translation and other | (994) | | | 475 | | | | (519) | | Foreign exchange translation and other | (411) | | | 530 | | | | 119 | |
Balance as of September 30, 2021 | $ | 23,161 | | | $ | 6,432 | | | | $ | 29,593 | | |
Balance as of March 31, 2022 | | Balance as of March 31, 2022 | $ | 18,201 | | | $ | 9,039 | | | | $ | 27,240 | |
Other exit costs for the three months ended March 31, 2022 included an immaterial gain on sale of fixed assets related to a closed facility in the Asia Pacific region.
5. Inventories
Inventories consist of the following:
| | | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
Finished goods | Finished goods | $ | 58,200 | | | $ | 39,136 | | Finished goods | $ | 54,555 | | | $ | 43,186 | |
Work in process | Work in process | 46,437 | | | 35,477 | | Work in process | 48,422 | | | 37,045 | |
Raw materials and supplies | Raw materials and supplies | 93,543 | | | 69,129 | | Raw materials and supplies | 93,944 | | | 77,844 | |
| | $ | 198,180 | | | $ | 143,742 | | | $ | 196,921 | | | $ | 158,075 | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
6. Leases
The Company primarily has operating and finance leases for certain manufacturing facilities, corporate offices and certain equipment. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities and long-term operating lease liabilities on the Company’s condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, net, debt payable within one year, and long-term debt on the Company’s condensed consolidated balance sheets.
The components of lease expense were as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2021 | | 2020 | | | 2022 | | 2021 |
Operating lease expense | Operating lease expense | $ | 7,827 | | | $ | 8,065 | | | $ | 23,258 | | | $ | 24,484 | | Operating lease expense | | $ | 7,386 | | | $ | 7,344 | |
Short-term lease expense | Short-term lease expense | 1,719 | | | 1,040 | | | 5,324 | | | 3,115 | | Short-term lease expense | | 911 | | | 1,640 | |
Variable lease expense | Variable lease expense | 191 | | | 273 | | | 620 | | | 678 | | Variable lease expense | | 288 | | | 248 | |
Finance lease expense: | Finance lease expense: | | Finance lease expense: | | |
Amortization of right-of-use assets | Amortization of right-of-use assets | 519 | | | 598 | | | 1,586 | | | 1,950 | | Amortization of right-of-use assets | | 492 | | | 546 | |
Interest on lease liabilities | Interest on lease liabilities | 356 | | | 384 | | | 1,094 | | | 1,169 | | Interest on lease liabilities | | 332 | | | 366 | |
Total lease expense | Total lease expense | $ | 10,612 | | | $ | 10,360 | | | $ | 31,882 | | | $ | 31,396 | | Total lease expense | | $ | 9,409 | | | $ | 10,144 | |
|
Other information related to leases was as follows:
| | | | Nine Months Ended September 30, | | | | Three Months Ended March 31, | |
| | | 2021 | | 2020 | | | | 2022 | | 2021 | |
Supplemental Cash Flows Information | Supplemental Cash Flows Information | | | | Supplemental Cash Flows Information | | | |
Cash paid for amounts included in the measurement of lease liabilities: | Cash paid for amounts included in the measurement of lease liabilities: | | | | Cash paid for amounts included in the measurement of lease liabilities: | | | |
Operating cash flows for operating leases | Operating cash flows for operating leases | | $ | 25,641 | | | $ | 23,038 | | | Operating cash flows for operating leases | | $ | 7,530 | | | $ | 7,346 | | |
Operating cash flows for finance leases | Operating cash flows for finance leases | | 1,093 | | | 1,188 | | | Operating cash flows for finance leases | | 337 | | | 362 | | |
Financing cash flows for finance leases | Financing cash flows for finance leases | | 1,677 | | | 1,578 | | | Financing cash flows for finance leases | | 579 | | | 652 | | |
Non-cash right-of-use assets obtained in exchange for lease obligations: | Non-cash right-of-use assets obtained in exchange for lease obligations: | | | | Non-cash right-of-use assets obtained in exchange for lease obligations: | | | |
Operating leases | Operating leases | | 14,968 | | | 47,176 | | | Operating leases | | 6,319 | | | 2,932 | | |
Finance leases | | 606 | | | 549 | | | |
| | Weighted Average Remaining Lease Term (in years) | Weighted Average Remaining Lease Term (in years) | | | | Weighted Average Remaining Lease Term (in years) | | | |
Operating leases | Operating leases | | 7.6 | | 8.1 | | Operating leases | | 7.5 | | 7.6 | |
Finance leases | Finance leases | | 9.9 | | 10.7 | | Finance leases | | 9.5 | | 10.4 | |
| Weighted Average Discount Rate | Weighted Average Discount Rate | | | | Weighted Average Discount Rate | | | |
Operating leases | Operating leases | | 5.7 | % | | 5.4 | % | | Operating leases | | 5.9 | % | | 5.4 | % | |
Finance leases | Finance leases | | 5.8 | % | | 5.7 | % | | Finance leases | | 5.8 | % | | 5.7 | % | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Future minimum lease payments under non-cancellable leases as of September 30, 2021March 31, 2022 were as follows:
| Year | Year | | | Operating Leases | | Finance Leases | Year | | | Operating Leases | | Finance Leases |
Remainder of 2021 | | | $ | 7,456 | | | $ | 814 | | |
2022 | | | 24,693 | | | 3,307 | | |
Remainder of 2022 | | Remainder of 2022 | | | $ | 20,564 | | | $ | 2,299 | |
2023 | 2023 | | | 20,512 | | | 3,218 | | 2023 | | | 24,096 | | | 3,149 | |
2024 | 2024 | | | 15,777 | | | 3,456 | | 2024 | | | 18,032 | | | 3,393 | |
2025 | 2025 | | | 12,588 | | | 3,503 | | 2025 | | | 15,254 | | | 3,458 | |
2026 | | 2026 | | | 11,302 | | | 3,186 | |
Thereafter | Thereafter | | | 51,554 | | | 20,622 | | Thereafter | | | 49,389 | | | 17,242 | |
Total future minimum lease payments | Total future minimum lease payments | | | 132,580 | | | 34,920 | | Total future minimum lease payments | | | 138,637 | | | 32,727 | |
Less imputed interest | Less imputed interest | | | (26,282) | | | (8,584) | | Less imputed interest | | | (28,018) | | | (7,909) | |
Total | Total | | | $ | 106,298 | | | $ | 26,336 | | Total | | | $ | 110,619 | | | $ | 24,818 | |
| | |
Amounts recognized on the condensed consolidated balance sheets as of September 30, 2021March 31, 2022 and December 31, 20202021 were as follows:
| | | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
Operating Leases | Operating Leases | | | | Operating Leases | | | |
| Operating lease right-of-use assets, net | Operating lease right-of-use assets, net | $ | 102,698 | | | $ | 109,795 | | Operating lease right-of-use assets, net | $ | 106,561 | | | $ | 111,052 | |
Current operating lease liabilities | Current operating lease liabilities | 21,407 | | | 21,711 | | Current operating lease liabilities | 21,470 | | | 22,552 | |
| Long-term operating lease liabilities | Long-term operating lease liabilities | 84,891 | | | 90,517 | | Long-term operating lease liabilities | 89,149 | | | 92,760 | |
| Finance Leases | Finance Leases | | Finance Leases | |
Debt payable within one year | Debt payable within one year | 2,183 | | | 2,300 | | Debt payable within one year | 2,110 | | | 2,153 | |
Long-term debt | Long-term debt | 24,153 | | | 26,152 | | Long-term debt | 22,708 | | | 23,590 | |
As of September 30, 2021March 31, 2022 and December 31, 2020,2021, assets recorded under finance leases, net of accumulated depreciation were $28,282$24,754 and $30,847,$25,690, respectively. As of September 30, 2021,March 31, 2022, the Company had additional leases, primarily forone real estate lease that havehad not yet commenced with undiscounted lease payments of approximately $9,443. These leases will commence in 2021 with$2,551. This lease terms up to tenis part of the sale-leaseback agreement on one of the Company’s European facilities. The lease commencement date was April 1, 2022, and the lease term is three years.
7. Property, Plant and Equipment
Property, plant and equipment consists of the following:
| | | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
Land and improvements | Land and improvements | $ | 44,911 | | | $ | 61,226 | | Land and improvements | $ | 44,119 | | | $ | 44,495 | |
Buildings and improvements | Buildings and improvements | 285,904 | | | 298,431 | | Buildings and improvements | 272,888 | | | 285,240 | |
Machinery and equipment | Machinery and equipment | 1,308,453 | | | 1,277,624 | | Machinery and equipment | 1,259,431 | | | 1,269,330 | |
Construction in progress | Construction in progress | 76,467 | | | 96,706 | | Construction in progress | 74,095 | | | 80,868 | |
| | 1,715,735 | | | 1,733,987 | | | 1,650,533 | | | 1,679,933 | |
Accumulated depreciation | Accumulated depreciation | (907,069) | | | (841,678) | | Accumulated depreciation | (905,190) | | | (895,585) | |
Property, plant and equipment, net | Property, plant and equipment, net | $ | 808,666 | | | $ | 892,309 | | Property, plant and equipment, net | $ | 745,343 | | | $ | 784,348 | |
During the three and nine months ended September 30, 2021,March 31, 2022, the Company recorded impairment charges of $1,006 and $1,847, respectively,$455 due to idle assets primarily in certain North American and European locations.Europe. The fair value was determined using salvage value.
The Company recorded impairment chargesdeconsolidation of $100 and $1,240a joint venture during the three and nine months ended September 30, 2020, respectively.March 31, 2022 included the removal of property, plant and equipment with gross carrying value of $29,590 and accumulated depreciation of $11,625.
In the first quarter of 2022, the Company signed a sale-leaseback agreement on one of its European facilities. The Company closed the transaction and received cash proceeds in the amount of $50,008 during the three months ended March 31, 2022. The sale-leaseback became effective on April 1, 2022. A corresponding accrued liability was recorded when proceeds
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
were received, which will be reduced when control transfers to the Company and a gain is recorded on April 1, 2022. The Company expects to record a gain on the sale transaction of approximately $32,500.
8. Goodwill and Intangible Assets
Goodwill
Changes in the carrying amount of goodwill by reporting unit for the ninethree months ended September 30, 2021March 31, 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Industrial Specialty Group | | Total |
Balance as of December 31, 2020 | $ | 128,214 | | | $ | — | | | $ | 14,036 | | | $ | 142,250 | |
| | | | | | | |
Acquisition (1) | — | | | 408 | | | — | | | 408 | |
Foreign exchange translation | 19 | | | (9) | | | — | | | 10 | |
Balance as of September 30, 2021 | $ | 128,233 | | | $ | 399 | | | $ | 14,036 | | | $ | 142,668 | |
(1) During the second quarter of 2021, the Company purchased a supplier in its Europe reporting unit for an immaterial purchase consideration, resulting in tax deductible goodwill. | | | | | | | | | | | | | | | | | | | |
| North America | | | | Industrial Specialty Group | | Total |
Balance as of December 31, 2021 | $ | 128,246 | | | | | $ | 14,036 | | | $ | 142,282 | |
| | | | | | | |
| | | | | | | |
Foreign exchange translation | 55 | | | | | — | | | 55 | |
Balance as of March 31, 2022 | $ | 128,301 | | | | | $ | 14,036 | | | $ | 142,337 | |
Goodwill is tested for impairment by reporting unit annually or more frequently if events or circumstances indicate that an impairment may exist.
During There were no indicators of potential impairment during the third quarter of 2021, the Company’s North America reporting unit continued to be negatively impacted by semiconductor-related customer schedule reductions and increasing material costs. After evaluating and weighing all relevant events and circumstances and considering the substantial excess fair value of the North America reporting unit, the Company concluded that it was more likely than not that the fair value of this reporting unit exceeded the carrying value. Consequently, the Company determined that it was not necessary to perform an interim impairment test for the North America reporting unit.three months ended March 31, 2022.
Intangible Assets
Intangible assets and accumulated amortization balances as of September 30, 2021March 31, 2022 and December 31, 20202021 were as follows:
| | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Customer relationships | Customer relationships | $ | 154,651 | | | $ | (125,397) | | | $ | 29,254 | | Customer relationships | $ | 153,376 | | | $ | (126,632) | | | $ | 26,744 | |
Other | Other | 44,695 | | | (11,969) | | | 32,726 | | Other | 39,441 | | | (12,716) | | | 26,725 | |
Balance as of September 30, 2021 | $ | 199,346 | | | $ | (137,366) | | | $ | 61,980 | | |
Balance as of March 31, 2022 | | Balance as of March 31, 2022 | $ | 192,817 | | | $ | (139,348) | | | $ | 53,469 | |
| Customer relationships | Customer relationships | $ | 155,409 | | | $ | (122,657) | | | $ | 32,752 | | Customer relationships | $ | 154,767 | | | $ | (126,626) | | | $ | 28,141 | |
Other | Other | 44,826 | | | (9,899) | | | 34,927 | | Other | 44,955 | | | (12,721) | | | 32,234 | |
Balance as of December 31, 2020 | $ | 200,235 | | | $ | (132,556) | | | $ | 67,679 | | |
Balance as of December 31, 2021 | | Balance as of December 31, 2021 | $ | 199,722 | | | $ | (139,347) | | | $ | 60,375 | |
The deconsolidation of a joint venture during the three months ended March 31, 2022 included the removal of intangible assets (primarily land use rights) with net carrying value of $5,258.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
9. Debt
A summary of outstanding debt as of September 30, 2021March 31, 2022 and December 31, 20202021 is as follows:
| | | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
Senior Notes | Senior Notes | $ | 396,365 | | | $ | 395,829 | | Senior Notes | $ | 396,723 | | | $ | 396,544 | |
Senior Secured Notes | Senior Secured Notes | 241,098 | | | 239,567 | | Senior Secured Notes | 242,310 | | | 241,683 | |
Term Loan | Term Loan | 321,818 | | | 323,636 | | Term Loan | 320,605 | | | 321,212 | |
ABL Facility | ABL Facility | — | | | — | | ABL Facility | — | | | — | |
Finance leases | Finance leases | 26,336 | | | 28,452 | | Finance leases | 24,818 | | | 25,743�� | |
Other borrowings | Other borrowings | 35,495 | | | 36,007 | | Other borrowings | 49,071 | | | 51,533 | |
Total debt | Total debt | 1,021,112 | | | 1,023,491 | | Total debt | 1,033,527 | | | 1,036,715 | |
Less current portion | Less current portion | (40,102) | | | (40,731) | | Less current portion | (53,605) | | | (56,111) | |
Total long-term debt | Total long-term debt | $ | 981,010 | | | $ | 982,760 | | Total long-term debt | $ | 979,922 | | | $ | 980,604 | |
5.625% Senior Notes due 2026
In November 2016, the Company issued $400,000 aggregate principal amount of its 5.625% Senior Notes due 2026 (the “Senior Notes”). The Senior Notes mature on November 15, 2026. Interest on the Senior Notes is payable semi-annually in arrears in cash on May 15 and November 15 of each year.
Debt issuance costs related to the Senior Notes are amortized into interest expense over the term of the Senior Notes. As of September 30, 2021March 31, 2022 and December 31, 2020,2021, the Company had $3,635$3,277 and $4,171$3,456 of unamortized debt issuance costs, respectively, related to the Senior Notes, which are presented as direct deductions from the principal balance in the condensed consolidated balance sheets.
13.0% Senior Secured Notes due 2024
In May 2020, the Company issued $250,000 aggregate principal amount of its 13.0% Senior Secured Notes due 2024 (the “Senior Secured Notes”). The Senior Secured Notes mature on June 1, 2024. Interest on the Senior Secured Notes is payable semi-annually in arrears in cash on June 1 and December 1 of each year.
The Company paid approximately $6,431 of debt issuance costs in connection with the transaction. Additionally, the Senior Secured Notes were issued at a discount of $5,000. As of September 30, 2021March 31, 2022 and December 31, 2020,2021, the Company had $4,931$4,236 and $5,828$4,594 of unamortized debt issuance costs, respectively, and $3,971$3,454 and $4,605$3,723 of unamortized original issue discount, respectively, related to the Senior Secured Notes, which are presented as direct deductions from the principal balance in the condensed consolidated balance sheets. Both the debt issuance costs and the original issue discount are amortized into interest expense over the term of the Senior Secured Notes.
Term Loan Facility
In November 2016, the Company entered into Amendment No. 1 to its senior term loan facility (“Term Loan Facility”), which provides for loans in an aggregate principal amount of $340,000. On May 2, 2017, the Company entered into Amendment No. 2 to the Term Loan Facility to modify the interest rate. Subsequently, on March 6, 2018, the Company entered into Amendment No. 3 to the Term Loan Facility to further modify the interest rate. In accordance with this amendment, borrowings under the Term Loan Facility bear interest, at the Company’s option, at either (1) with respect to Eurodollar rate loans, the greater of the applicable Eurodollar rate and 0.75% plus 2.0% per annum, or (2) with respect to base rate loans, the base rate, (which is the highest of the then current federal funds rate plus 0.5%, the prime rate most recently announced by the administrative agent under the term loan, and the one-month Eurodollar rate plus 1.0%) plus 1.0% per annum. The Term Loan Facility matures on November 2, 2023, unless earlier terminated.
As of September 30, 2021March 31, 2022 and December 31, 2020,2021, the Company had $1,235$939 and $1,680$1,087 of unamortized debt issuance costs, respectively, and $796$606 and $1,084$701 of unamortized original issue discount, respectively, related to the Term Loan Facility, which are presented as direct deductions from the principal balance in the condensed consolidated balance sheets. Both the debt issuance costs and the original issue discount are amortized into interest expense over the term of the Term Loan Facility.
ABL Facility
In November 2016, the Company entered into a Third Amended and Restated Loan Agreement of its ABL Facility, which provided an aggregate revolving loan availability of up to $210,000, subject to borrowing base availability. In March 2020, the Company entered into the First Amendment of the Third Amended and Restated Loan Agreement (“the Amendment”). As a
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
result of the Amendment, the senior asset-based revolving credit facility (“ABL Facility”) maturity was extended to March 2025 and the aggregate revolving loan availability was reduced to $180,000. The aggregate revolving loan availability includes a $100,000 letter of credit sub-facility and a $25,000 swing line sub-facility. The ABL Facility also provides for an uncommitted $100,000 incremental loan facility, for a potential total ABL Facility of $280,000, if requested by the borrowers under the ABL Facility and the lenders agree to fund such increase. No consent of any lender is required to effect any such increase, except for those participating in the increase.
As of September 30, 2021,March 31, 2022, there were no loans outstanding under the ABL Facility. The Company’s borrowing base was $147,106.$164,941. Net of the greater of 10% of the borrowing base or $15,000 that cannot be borrowed without triggering the fixed charge coverage ratio maintenance covenant and $5,224$5,769 of outstanding letters of credit, the Company effectively had $126,882$142,678 available for borrowing under its ABL facility.
Any borrowings under the ABL Facility will mature, and the commitments of the lenders under the ABL Facility will terminate, on the earlier of March 24, 2025 or the date 91 days prior to the maturity date of the Term Loan Facility (or another fixed asset facility replacing the Term Loan Facility).
As a result of the Amendment in March 2020, the Company wrote off $177 in unamortized debt issuance costs, which are presented in interest expense, net of interest income in the condensed consolidated statements of operations. As of September 30, 202131, 2022 and December 31, 2020,2021, the Company had $844$720 and $1,029,$782, respectively, of unamortized debt issuance costs related to the ABL Facility, which are presented in other assets in the condensed consolidated balance sheets.
Debt Covenants
The Company was in compliance with all covenants of the Senior Notes, Senior Secured Notes, Term Loan Facility and ABL Facility as of September 30, 2021.March 31, 2022.
Other
Other borrowings as of September 30, 2021March 31, 2022 and December 31, 20202021 reflect borrowings under local bank lines classified in debt payable within one year on the condensed consolidated balance sheet.
10. Fair Value Measurements and Financial Instruments
Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy is utilized, which prioritizes the inputs used in measuring fair value as follows:
| | | | | |
Level 1: | Observable inputs such as quoted prices in active markets; |
Level 2: | Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
Level 3: | Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Items Measured at Fair Value on a Recurring Basis
Estimates of the fair value of foreign currency derivative instruments are determined using exchange traded prices and rates. The Company also considers the risk of non-performance in the estimation of fair value and includes an adjustment for non-performance risk in the measure of fair value of derivative instruments. In certain instances where market data is not available, the Company uses management judgment to develop assumptions that are used to determine fair value. Fair value measurements and the fair value hierarchy level for the Company’s assets and liabilities measured or disclosed at fair value on a recurring basis as of September 30, 2021March 31, 2022 and December 31, 20202021 were as follows:
| | | September 30, 2021 | | December 31, 2020 | | Input | | March 31, 2022 | | December 31, 2021 | | Input |
Forward foreign exchange contracts - other current assets | Forward foreign exchange contracts - other current assets | $ | 490 | | | $ | 1,826 | | | Level 2 | Forward foreign exchange contracts - other current assets | $ | 2,686 | | | $ | 647 | | | Level 2 |
Forward foreign exchange contracts - accrued liabilities | Forward foreign exchange contracts - accrued liabilities | (1,407) | | | (750) | | | Level 2 | Forward foreign exchange contracts - accrued liabilities | (1,208) | | | (1,535) | | | Level 2 |
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Items Measured at Fair Value on a Nonrecurring Basis
In addition to items that are measured at fair value on a recurring basis, the Company measures certain assets and liabilities at fair value on a nonrecurring basis, which are not included in the table above. As these nonrecurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy. For further information on assets and liabilities measured at fair value on a nonrecurring basis see Note 2. “Acquisition“Deconsolidation and Divestitures”Divestiture” and Note 7. “Property, Plant and Equipment.”
Items Not Carried at Fair Value
Fair values of the Company’s Senior Notes, Senior Secured Notes and Term Loan Facility were as follows:
| | | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
Aggregate fair value | Aggregate fair value | $ | 906,729 | | | $ | 965,052 | | Aggregate fair value | $ | 764,211 | | | $ | 899,909 | |
Aggregate carrying value (1) | Aggregate carrying value (1) | 973,850 | | | 976,400 | | Aggregate carrying value (1) | 972,150 | | | 973,000 | |
(1) Excludes unamortized debt issuance costs and unamortized original issue discount.
Fair values were based on quoted market prices and are classified within Level 1 of the fair value hierarchy.
Derivative Instruments and Hedging Activities
The Company is exposed to fluctuations in foreign currency exchange rates, interest rates and commodity prices. The Company enters into derivative instruments primarily to hedge portions of its forecasted foreign currency denominated cash flows and designates these derivative instruments as cash flow hedges in order to qualify for hedge accounting.
The Company formally documents its hedge relationships, including the identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the cash flow hedges. The Company also formally assesses whether a cash flow hedge is highly effective in offsetting changes in the cash flows of the hedged item. Derivatives are recorded at fair value in other current assets, other assets, accrued liabilities and other long-term liabilities. For a cash flow hedge, the change in fair value of the derivative is recorded in accumulated other comprehensive income (loss) (“AOCI”) in the condensed consolidated balance sheet, to the extent that the hedges are effective, and reclassified into earnings when the underlying hedged transaction is realized. The realized gains and losses are recorded on the same line as the hedged transaction in the condensed consolidated statements of operations.
The Company is exposed to credit risk in the event of nonperformance by its counterparties on its derivative financial instruments. The Company mitigates this credit risk exposure by entering into agreements directly with major financial institutions with high credit standards that are expected to fully satisfy their obligations under the contracts.
Cash Flow Hedges
Forward Foreign Exchange Contracts - The Company uses forward contracts to mitigate the potential volatility to earnings and cash flow arising from changes in currency exchange rates that impact the Company’s foreign currency transactions. The principal currencies hedged by the Company include various European currencies, the Canadian Dollar, and the Mexican Peso. As of September 30, 2021March 31, 2022 and December 31, 2020,2021, the notional amount of these contracts was $155,100$96,913 and $97,503,$136,103, respectively, and consisted of hedges of transactions up to December 2022.
Pretax amounts related to the Company’s cash flow hedges that were recognized in other comprehensive income (loss) (“OCI”) were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Gain (Loss) Recognized in OCI |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Forward foreign exchange contracts | $ | (1,606) | | | $ | 1,051 | | | $ | (964) | | | $ | (8,448) | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | Gain (Loss) Recognized in OCI |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Forward foreign exchange contracts | | | | | $ | 2,411 | | | $ | (548) | |
| | | | | | | |
| | | | | | | |
Pretax amounts related to the Company’s cash flow hedges that were reclassified from AOCI and recognized in cost of products sold were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Gain (Loss) Reclassified from AOCI to Income |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Forward foreign exchange contracts | $ | 508 | | | $ | (1,764) | | | $ | 1,045 | | | $ | (6,315) | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | Gain (Loss) Reclassified from AOCI to Income |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Forward foreign exchange contracts | | | | | $ | 43 | | | $ | 188 | |
| | | | | | | |
| | | | | | | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
11. Accounts Receivable Factoring
As a part of its working capital management, the Company sells certain receivables through a single third-party financial institution (the “Factor”) in a pan-European program. The amount sold varies each month based on the amount of underlying receivables and cash flow needs of the Company. These are permitted transactions under the Company’s credit agreements governing the ABL Facility and Term Loan Facility and the indentures governing the Senior Notes and Senior Secured Notes. The European factoring facility, which was renewed in March 2020, allows the Company to factor up to €120 million of its Euro-denominated accounts receivable, accelerating access to cash and reducing credit risk. The factoring facility expires in December 2023.
Costs incurred on the sale of receivables are recorded in other expense, net in the condensed consolidated statements of operations. The sale of receivables under this contract is considered an off-balance sheet arrangement to the Company and is accounted for as a true sale and is excluded from accounts receivable in the condensed consolidated balance sheet. Amounts outstanding under receivable transfer agreements entered into by various locations as of the period end were as follows:
| | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
Off-balance sheet arrangements | $ | 43,876 | | | $ | 85,108 | |
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Off-balance sheet arrangements | $ | 55,271 | | | $ | 52,743 | |
Accounts receivable factored and related costs throughout the period were as follows:
| | | Off-Balance Sheet Arrangements | | | | Off-Balance Sheet Arrangements | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Three Months Ended March 31, | |
| | 2021 | | 2020 | | 2021 | | 2020 | | | | 2022 | | 2021 | |
Accounts receivable factored | Accounts receivable factored | $ | 68,897 | | | $ | 124,910 | | | $ | 286,214 | | | $ | 352,103 | | | Accounts receivable factored | | $ | 82,550 | | | $ | 117,271 | | |
Costs | Costs | 117 | | | 120 | | | 421 | | | 591 | | | Costs | | 125 | | | 154 | | |
As of September 30, 2021March 31, 2022 and December 31, 2020,2021, cash collections on behalf of the Factor that have yet to be remitted were $6,272$5,666 and $1,786,$673, respectively, and are reflected in other current assets as restricted cash in the condensed consolidated balance sheet.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
12. Pension and Postretirement Benefits Other Than Pensions
The components of net periodic benefit (income) cost for the Company’s defined benefit plans and other postretirement benefit plans were as follows:
| | | | | | | Pension Benefits | | Pension Benefits |
| | Three Months Ended September 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | U.S. | | Non-U.S. | | U.S. | | Non-U.S. | | U.S. | | Non-U.S. | | U.S. | | Non-U.S. |
Service cost | Service cost | $ | 223 | | | $ | 878 | | | $ | 213 | | | $ | 884 | | Service cost | $ | 193 | | | $ | 721 | | | $ | 223 | | | $ | 914 | |
Interest cost | Interest cost | 1,629 | | | 659 | | | 2,033 | | | 736 | | Interest cost | 1,766 | | | 733 | | | 1,629 | | | 648 | |
Expected return on plan assets | Expected return on plan assets | (3,564) | | | (335) | | | (3,421) | | | (580) | | Expected return on plan assets | (2,323) | | | (254) | | | (3,564) | | | (334) | |
Amortization of prior service cost and actuarial loss | Amortization of prior service cost and actuarial loss | 418 | | | 509 | | | 485 | | | 833 | | Amortization of prior service cost and actuarial loss | 222 | | | 415 | | | 418 | | | 932 | |
| Net periodic benefit (income) cost | $ | (1,294) | | | $ | 1,711 | | | $ | (690) | | | $ | 1,873 | | |
| Pension Benefits | |
| Nine Months Ended September 30, | |
| 2021 | | 2020 | |
| U.S. | | Non-U.S. | | U.S. | | Non-U.S. | |
Service cost | $ | 669 | | | $ | 2,705 | | | $ | 639 | | | $ | 2,838 | | |
Interest cost | 4,887 | | | 1,967 | | | 6,099 | | | 2,277 | | |
Expected return on plan assets | (10,692) | | | (1,013) | | | (10,263) | | | (1,716) | | |
Amortization of prior service cost and actuarial loss | 1,254 | | | 2,374 | | | 1,455 | | | 2,417 | | |
Other | — | | | 125 | | | — | | | — | | |
| Net periodic benefit (income) cost | Net periodic benefit (income) cost | $ | (3,882) | | | $ | 6,158 | | | $ | (2,070) | | | $ | 5,816 | | Net periodic benefit (income) cost | $ | (142) | | | $ | 1,615 | | | $ | (1,294) | | | $ | 2,160 | |
| | | | | | | Other Postretirement Benefits | | Other Postretirement Benefits |
| | Three Months Ended September 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | U.S. | | Non-U.S. | | U.S. | | Non-U.S. | | U.S. | | Non-U.S. | | U.S. | | Non-U.S. |
Service cost | Service cost | $ | 26 | | | $ | 91 | | | $ | 26 | | | $ | 97 | | Service cost | $ | 22 | | | $ | 58 | | | $ | 26 | | | $ | 90 | |
Interest cost | Interest cost | 133 | | | 178 | | | 170 | | | 175 | | Interest cost | 140 | | | 168 | | | 133 | | | 177 | |
Amortization of prior service credit and actuarial (gain) loss | Amortization of prior service credit and actuarial (gain) loss | (349) | | | 191 | | | (483) | | | 108 | | Amortization of prior service credit and actuarial (gain) loss | (394) | | | 42 | | | (349) | | | 190 | |
| Net periodic benefit (income) cost | Net periodic benefit (income) cost | $ | (190) | | | $ | 460 | | | $ | (287) | | | $ | 380 | | Net periodic benefit (income) cost | $ | (232) | | | $ | 268 | | | $ | (190) | | | $ | 457 | |
| Other Postretirement Benefits | |
| Nine Months Ended September 30, | |
| 2021 | | 2020 | |
| U.S. | | Non-U.S. | | U.S. | | Non-U.S. | |
Service cost | $ | 78 | | | $ | 274 | | | $ | 78 | | | $ | 286 | | |
Interest cost | 399 | | | 538 | | | 510 | | | 516 | | |
Amortization of prior service credit and actuarial (gain) loss | (1,047) | | | 577 | | | (1,449) | | | 319 | | |
| Net periodic benefit (income) cost | $ | (570) | | | $ | 1,389 | | | $ | (861) | | | $ | 1,121 | | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
The service cost component of net periodic benefit (income) cost is included in cost of products sold and selling, administrative and engineering expenses in the condensed consolidated statements of operations. All other components of net periodic benefit (income) cost are included in other (expense) income,expense, net in the condensed consolidated statements of operations for all periods presented.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
13. Other (Expense) Income,Expense, Net
The components of other (expense) income,expense, net were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Foreign currency (losses) gains | $ | (1,396) | | | $ | 2,626 | | | $ | (5,546) | | | $ | (4,397) | |
Components of net periodic benefit income (cost) other than service cost | 531 | | | (56) | | | 631 | | | (165) | |
Factoring costs | (117) | | | (120) | | | (421) | | | (591) | |
Miscellaneous income (expense) | 488 | | | 334 | | | 1,115 | | | (204) | |
Other (expense) income, net | $ | (494) | | | $ | 2,784 | | | $ | (4,221) | | | $ | (5,357) | |
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Deconsolidation of joint venture (1) | | | | | $ | (2,257) | | | $ | — | |
Foreign currency gains (losses) | | | | | 1,480 | | | (5,264) | |
Components of net periodic benefit (cost) income other than service cost | | | | | (515) | | | 120 | |
Factoring costs | | | | | (125) | | | (154) | |
Miscellaneous income | | | | | 206 | | | 209 | |
Other expense, net | | | | | $ | (1,211) | | | $ | (5,089) | |
(1)Loss attributable to deconsolidation of joint venture investment in Asia Pacific, which required adjustment to fair value.
14. Income Taxes
The Company determines its effective tax rate each quarter based upon its estimated annual effective tax rate. The Company records the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year where no tax benefit can be recognized are excluded from the estimated annual effective tax rate.
Income tax expense, (benefit), (loss) incomeloss before income taxes and the corresponding effective tax rate for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Income tax expense (benefit) | $ | 32,121 | | | $ | (2,386) | | | $ | 15,598 | | | $ | (55,485) | |
(Loss) income before income taxes | (92,743) | | | 4,323 | | | (208,508) | | | (297,199) | |
Effective tax rate | (35) | % | | (55) | % | | (7) | % | | 19 | % |
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Income tax expense | | | | | $ | 652 | | | $ | 936 | |
Loss before income taxes | | | | | (61,138) | | | (33,777) | |
Effective tax rate | | | | | (1) | % | | (3) | % |
The effective tax rate for the three and nine months ended September 30, 2021 varied compared toMarch 31, 2022 is consistent with the effective tax rate for the three and nine months ended September 30, 2020March 31, 2021. Any differences are primarily due to the negative impacts of the COVID-19 pandemic and other supply chain issues driving the initial recognition of valuation allowances in the U.S., resulting in tax expense of $31,740 recorded in the three months and $13,278 recorded in the nine months ended September 30, 2021, the geographic mix of pre-tax losses and the inability to record a benefit for pre-tax losses in the U.S. and certain foreign jurisdictions and U.S. states. The three and nine months ended September 30, 2020 were impacted by discrete items related to the benefit for net operating losses carried back up to five years at tax rates in effect during those periods under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), rather than carried forward at current federal tax rates of 21%. Additionally, an incremental loss was recorded for impairment charges on held for sale entities for which no tax benefit was recognized, and a discrete expense of $13,414 for the initial recognition of valuation allowances against net deferred tax assets in certain foreign jurisdictions was recorded in the nine months ended September 30, 2020.jurisdictions.
The income tax rate for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 varied from the U.S. statutory rate primarily due to the initial recognition of valuation allowances in the U.S., the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign jurisdictions, and U.S. states, tax credits, the impact of income taxes on foreign earnings taxed at rates varying from the U.S. statutory rate, and other permanent items. Additionally,
In April 2022, subsequent to the income tax rate forend of the three and nine months ended September 30, 2020 variedfirst quarter, the Company received $28,549 in cash payments from the U.S. statutory rate as a result of benefits fromUnited States Internal Revenue Service for tax refunds related to net operating loss carry backs undercarrybacks. The Company expects to receive additional refunds of approximately $23,000 during the CARES Act.remainder of the second quarter of 2022.
The Company’s current and future provision for income taxes is impacted by the initial recognition of and changes in valuation allowances in the U.S. and certain countries.foreign jurisdictions. The Company’s future provision for income taxes will include no tax benefit with respect to losses incurred and, except for certain jurisdictions, no tax expense with respect to income generated in these countries until the respective valuation allowances are eliminated. Accordingly, income taxes are impacted by changes in valuation allowances and the mix of earnings among jurisdictions. The Company evaluates the realizability of its deferred tax assets on a quarterly basis. In completing this evaluation, the Company considers all available evidence in order to determine, based on the weight of the evidence, if a valuation allowance for its deferred tax assets is necessary. Such evidence includes historical results, future reversals of existing taxable temporary differences and expectations for future taxable income (exclusive of the reversal of
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
(exclusive of the reversal of temporary differences and carryforwards), as well as the implementation of feasible and prudent tax planning strategies. If, based on the weight of the evidence, it is more likely than not that all or a portion of the Company’s deferred tax assets will not be realized, a valuation allowance is recorded. If operating results improve or decline on a continual basis in a particular jurisdiction, the Company’s decision regarding the need for a valuation allowance could change, resulting in either the initial recognition or reversal of a valuation allowance in that jurisdiction, which could have a significant impact on income tax expense in the period recognized and subsequent periods. In determining the provision for income taxes for financial statement purposes, the Company makes certain estimates and judgments, which affect its evaluation of the carrying value of its deferred tax assets, as well as its calculation of certain tax liabilities.
15. Net (Loss) IncomeLoss Per Share Attributable to Cooper-Standard Holdings Inc.
Basic net (loss) incomeloss per share attributable to Cooper-Standard Holdings Inc. was computed by dividing net (loss) incomeloss attributable to Cooper-Standard Holdings Inc. by the weighted average number of shares of common stock outstanding during the period. Diluted net (loss) incomeloss per share attributable to Cooper-Standard Holdings Inc. was computed using the treasury stock method by dividing diluted net (loss) incomeloss available to Cooper-Standard Holdings Inc. by the weighted average number of shares of common stock outstanding, including the dilutive effect of common stock equivalents, using the average share price during the period.
Information used to compute basic and diluted net (loss) incomeloss per share attributable to Cooper-Standard Holdings Inc. was as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2021 | | 2020 | | | 2022 | | 2021 |
| Net (loss) income available to Cooper-Standard Holdings Inc. common stockholders | $ | (123,173) | | | $ | 4,381 | | | $ | (220,648) | | | $ | (240,426) | | |
Net loss available to Cooper-Standard Holdings Inc. common stockholders | | Net loss available to Cooper-Standard Holdings Inc. common stockholders | | $ | (61,360) | | | $ | (33,864) | |
| Basic weighted average shares of common stock outstanding | Basic weighted average shares of common stock outstanding | 17,097,766 | | | 16,927,924 | | | 17,027,226 | | | 16,908,940 | | Basic weighted average shares of common stock outstanding | | 17,136,411 | | | 16,951,190 | |
Dilutive effect of common stock equivalents | Dilutive effect of common stock equivalents | — | | | 87,031 | | | — | | | — | | Dilutive effect of common stock equivalents | | — | | | — | |
Diluted weighted average shares of common stock outstanding | Diluted weighted average shares of common stock outstanding | 17,097,766 | | | 17,014,955 | | | 17,027,226 | | | 16,908,940 | | Diluted weighted average shares of common stock outstanding | | 17,136,411 | | | 16,951,190 | |
| Basic net (loss) income per share attributable to Cooper-Standard Holdings Inc. | $ | (7.20) | | | $ | 0.26 | | | $ | (12.96) | | | $ | (14.22) | | |
Basic net loss per share attributable to Cooper-Standard Holdings Inc. | | Basic net loss per share attributable to Cooper-Standard Holdings Inc. | | $ | (3.58) | | | $ | (2.00) | |
| Diluted net (loss) income per share attributable to Cooper-Standard Holdings Inc. | $ | (7.20) | | | $ | 0.26 | | | $ | (12.96) | | | $ | (14.22) | | |
Diluted net loss per share attributable to Cooper-Standard Holdings Inc. | | Diluted net loss per share attributable to Cooper-Standard Holdings Inc. | | $ | (3.58) | | | $ | (2.00) | |
Securities excluded from the calculation of diluted loss per share were approximately 169,00080,000 and 189,000 for the three months ended September 30,March 31, 2022 and 2021, and approximately 159,000 and 53,000 for the nine months ended September 30, 2021 and 2020, respectively, because the inclusion of such securities in the calculation would have been anti-dilutive. There were no anti-dilutive securities during the three months ended September 30, 2020.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
16. Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss by component, net of related tax, were as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Three Months Ended March 31, | |
| | 2021 | | 2020 | | 2021 | | 2020 | | | | 2022 | | 2021 | |
Foreign currency translation adjustment | Foreign currency translation adjustment | | | | | | | | | Foreign currency translation adjustment | | | | | |
Balance at beginning of period | Balance at beginning of period | $ | (134,377) | | | $ | (175,616) | | | $ | (136,579) | | | $ | (153,933) | | | Balance at beginning of period | | $ | (138,751) | | | $ | (136,579) | | |
Other comprehensive (loss) income before reclassifications | (6,134) | | (1) | 15,200 | | (1) | (3,932) | | (1) | (6,483) | | (1) | |
Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | | 8,670 | | (1) | (6,320) | | (1) |
Amounts reclassified from accumulated other comprehensive loss | Amounts reclassified from accumulated other comprehensive loss | 144 | | | 1,646 | | | 144 | | | 1,646 | | | Amounts reclassified from accumulated other comprehensive loss | | (294) | | | — | | |
Balance at end of period | Balance at end of period | $ | (140,367) | | | $ | (158,770) | | | $ | (140,367) | | | $ | (158,770) | | | Balance at end of period | | $ | (130,375) | | | $ | (142,899) | | |
Benefit plan liabilities | Benefit plan liabilities | | | | | | | | | Benefit plan liabilities | | | | | |
Balance at beginning of period | Balance at beginning of period | $ | (102,729) | | | $ | (98,194) | | | $ | (106,079) | | | $ | (100,160) | | | Balance at beginning of period | | $ | (65,303) | | | $ | (106,079) | | |
Other comprehensive income (loss) before reclassifications | 4,119 | | (2) | (2,422) | | (2) | 5,160 | | (2) | (1,803) | | (2) | |
Other comprehensive income before reclassifications | | Other comprehensive income before reclassifications | | 707 | | (2) | 1,643 | | (2) |
Amounts reclassified from accumulated other comprehensive loss | Amounts reclassified from accumulated other comprehensive loss | 859 | | (3) | 1,569 | | (4) | 3,168 | | (5) | 2,916 | | (6) | Amounts reclassified from accumulated other comprehensive loss | | 277 | | (3) | 1,096 | | (4) |
Balance at end of period | Balance at end of period | $ | (97,751) | | | $ | (99,047) | | | $ | (97,751) | | | $ | (99,047) | | | Balance at end of period | | $ | (64,319) | | | $ | (103,340) | | |
Fair value change of derivatives | Fair value change of derivatives | | | | | | | | | Fair value change of derivatives | | | | | |
Balance at beginning of period | Balance at beginning of period | $ | 942 | | | $ | (3,486) | | | $ | 762 | | | $ | 352 | | | Balance at beginning of period | | $ | (1,130) | | | $ | 762 | | |
Other comprehensive (loss) income before reclassifications | (1,760) | | (7) | 786 | | (7) | (1,184) | | (7) | (6,370) | | (7) | |
Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | | 2,472 | | (5) | (432) | | (5) |
Amounts reclassified from accumulated other comprehensive loss | Amounts reclassified from accumulated other comprehensive loss | (372) | | (8) | 1,286 | | (8) | (768) | | (8) | 4,604 | | (8) | Amounts reclassified from accumulated other comprehensive loss | | (41) | | (6) | (139) | | (6) |
Balance at end of period | Balance at end of period | $ | (1,190) | | | $ | (1,414) | | | $ | (1,190) | | | $ | (1,414) | | | Balance at end of period | | $ | 1,301 | | | $ | 191 | | |
Accumulated other comprehensive loss, ending balance | Accumulated other comprehensive loss, ending balance | $ | (239,308) | | | $ | (259,231) | | | $ | (239,308) | | | $ | (259,231) | | | Accumulated other comprehensive loss, ending balance | | $ | (193,393) | | | $ | (246,048) | | |
(1)Includes other comprehensive income (loss) income related to intra-entity foreign currency balances that are of a long-term investment nature of $(9,265)$8,642 and $7,368$(4,389) for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and $(5,986) and $(11,850) for the nine months ended September 30, 2021 and 2020, respectively.
(2)Net of tax expense (benefit)benefit of $27$181 and $57$245 for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and $(250) and $347 for the nine months ended September 30, 2021 and 2020, respectively. Includes other comprehensive gain of $2,666 for each of the three and nine months ended September 30, 2021 related to benefit plan liability remeasurement due to a non-U.S. curtailment event. Includes other comprehensive loss of $371 for each of the three and nine months ended September 30, 2020 related to benefit plan liability remeasurement due to the divestiture of certain businesses in Europe and India.
(3)Includes the effect of the amortization of actuarial losses of $664,$232 and amortization of prior service cost of $41, and impact of curtailment of $193,$49, net of tax of $39.$4.
(4)Includes the effect of the amortization of actuarial losses of $982,$1,124 and amortization of prior service cost of $25, and net settlement loss of $1,059, offset by net curtailment gain of $315 and$65, net of tax of $182.$93.
(5)Includes the effect of the amortization of actuarial losses of $2,916, amortization of prior service cost of $169, and impact of curtailment of $310, netNet of tax benefit of $227.$61 and $116 for the three months ended March 31, 2022 and 2021, respectively.
(6)Includes the effect of the amortization of actuarial losses of $2,769, amortization of prior service cost of $67, and net settlement loss of $1,059, offset by net curtailment gain of $315 and net of tax of $664.
(7)Net of tax expense (benefit) of $154$2 and $265$49 for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and $220 and $(2,078) for the nine months ended September 30, 2021 and 2020, respectively.
(8)Net of tax expense (benefit) of $136 and $(478) for the three months ended September 30, 2021 and 2020, respectively, and $277 and $(1,711) for the nine months ended September 30, 2021 and 2020, respectively.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
17. Common Stock
Share Repurchase Program
In June 2018, the Company’s Board of Directors approved a common stock repurchase program (the “2018 Program”) authorizing the Company to repurchase, in the aggregate, up to $150,000 of its outstanding common stock. Under the 2018 Program, repurchases may be made on the open market, through private transactions, accelerated share repurchases, round lot or block transactions on the New York Stock Exchange or otherwise, as determined by management and in accordance with prevailing market conditions and federal securities laws and regulations. The Company expects to fund any future repurchases from cash on hand and future cash flows from operations. The Company is not obligated to acquire a particular amount of securities, and the 2018 Program may be discontinued at any time at the Company’s discretion. The 2018 Program became effective in November 2018. As of September 30, 2021,March 31, 2022, the Company had approximately $98,720 of repurchase authorization remaining under the 2018 Program.
The Company did not make any repurchases under the 2018 Program during the ninethree months ended September 30, 2021March 31, 2022 or 2020.2021.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
18. Share-Based Compensation
The Company’s long-term incentive plans allow for the grant of various types of share-based awards to key employees and directors of the Company and its affiliates. The Company generally awards grants on an annual basis.
In February 2021,2022, the Company granted Restricted Stock Units (“RSUs”), and Performance Units (“PUs”) and stock options. The RSUs cliff vest after three years, the PUs vest ratably over three years after the initial two-year performance period, and the stock options vest ratably over three years.. The number of PUs that will vest depends on the Company’s achievement of target performance goals related to the Company’s return on invested capital (“ROIC”) and total shareholder return, which may range from 0% to 200% of the target award amount. The PUs tied to total shareholder return cliff vest at the end of a three year performance period. The PUs tied to ROIC cliff vest one year after the end of their individual performance periods. The RSUs vest ratably over three years.
Share-based compensation expense was as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2021 | | 2020 | | | 2022 | | 2021 |
PUs | PUs | $ | 357 | | | $ | 127 | | | $ | 51 | | | $ | 346 | | PUs | | $ | 70 | | | $ | 339 | |
RSUs | RSUs | 873 | | | 1,305 | | | 3,004 | | | 4,715 | | RSUs | | 124 | | | 1,246 | |
Stock options | Stock options | 549 | | | 610 | | | 1,726 | | | 1,916 | | Stock options | | 390 | | | 593 | |
Total | Total | $ | 1,779 | | | $ | 2,042 | | | $ | 4,781 | | | $ | 6,977 | | Total | | $ | 584 | | | $ | 2,178 | |
19. Commitments and Contingencies
The Company is periodically involved in claims, litigation and various legal matters that arise in the ordinary course of business. The Company accrues for litigation exposure when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified. As of September 30, 2021,March 31, 2022, the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for claims, litigation and various legal matters, if any, has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, the Company’s financial condition, results of operations or cash flows could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters.
In addition, the Company conducts and monitors environmental investigations and remedial actions at certain locations. As of September 30, 2021March 31, 2022 and December 31, 2020,2021, the Company had approximately $10,477$13,168 and $13,302,$9,965, respectively, reserved in accrued liabilities and other liabilities on the condensed consolidated balance sheets on an undiscounted basis. While the Company’s costs to defend and settle known claims arising under environmental laws have not been material in the past and are not currently estimated to have a material adverse effect on the Company’s financial condition, such costs may be material to the Company’s financial statements in the future.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
20. Segment Reporting
The Company’s business is organized in the following reportable segments: North America, Europe, Asia Pacific and South America. All other business activities are reported in Corporate, eliminations and other. The Company’s principal products within each of the reportable segments are sealing, fuel and brake delivery, and fluid transfer systems.
The Company uses Segment adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. The results of each segment include certain allocations for general, administrative and other shared costs. Segment adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
Certain financial information on the Company’s reportable segments was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2021 | | 2020 |
| | External Sales | | Intersegment Sales | | Adjusted EBITDA | | External Sales | | Intersegment Sales | | Adjusted EBITDA |
North America | | $ | 270,592 | | | $ | 2,711 | | | $ | 8,817 | | | $ | 359,007 | | | $ | 2,372 | | | $ | 58,115 | |
Europe | | 98,682 | | | 1,903 | | | (25,112) | | | 146,029 | | | 2,440 | | | (1,466) | |
Asia Pacific | | 109,526 | | | 306 | | | (14,274) | | | 131,063 | | | 1,008 | | | 12,246 | |
South America | | 15,981 | | | — | | | (3,422) | | | 17,580 | | | 4 | | | (2,680) | |
Total Automotive | | 494,781 | | | 4,920 | | | (33,991) | | | 653,679 | | | 5,824 | | | 66,215 | |
Corporate, eliminations and other | | 31,909 | | | (4,920) | | | 132 | | | 29,521 | | | (5,824) | | | (2,081) | |
Consolidated | | $ | 526,690 | | | $ | — | | | $ | (33,859) | | | $ | 683,200 | | | $ | — | | | $ | 64,134 | |
| | |
| | Nine Months Ended September 30, |
| | 2021 | | 2020 |
| | External Sales | | Intersegment Sales | | Adjusted EBITDA | | External Sales | | Intersegment Sales | | Adjusted EBITDA |
North America | | $ | 857,153 | | | $ | 7,484 | | | $ | 50,806 | | | $ | 820,145 | | | $ | 8,968 | | | $ | 52,260 | |
Europe | | 397,079 | | | 7,718 | | | (40,992) | | | 410,076 | | | 6,755 | | | (47,492) | |
Asia Pacific | | 327,666 | | | 1,794 | | | (13,024) | | | 316,133 | | | 1,678 | | | (6,983) | |
South America | | 45,620 | | | 15 | | | (6,756) | | | 41,932 | | | 72 | | | (11,608) | |
Total Automotive | | 1,627,518 | | | 17,011 | | | (9,966) | | | 1,588,286 | | | 17,473 | | | (13,823) | |
Corporate, eliminations and other | | 101,324 | | | (17,011) | | | (79) | | | 90,271 | | | (17,473) | | | (7,516) | |
Consolidated | | $ | 1,728,842 | | | $ | — | | | $ | (10,045) | | | $ | 1,678,557 | | | $ | — | | | $ | (21,339) | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 |
Adjusted EBITDA | | $ | (33,859) | | | $ | 64,134 | | | $ | (10,045) | | | $ | (21,339) | |
Restructuring charges | | (1,573) | | | (6,186) | | | (34,251) | | | (23,236) | |
Impairment charges | | (1,006) | | | (100) | | | (1,847) | | | (87,417) | |
Gain on sale of business, net | | — | | | 2,314 | | | 696 | | | 2,314 | |
Lease termination costs | | (322) | | | (83) | | | (430) | | | (684) | |
| | | | | | | | |
Project costs | | — | | | — | | | — | | | (4,234) | |
Divested noncontrolling interest debt extinguishment | | — | | | (3,595) | | | — | | | (3,595) | |
EBITDA | | $ | (36,760) | | | $ | 56,484 | | | $ | (45,877) | | | $ | (138,191) | |
Income tax (expense) benefit | | (32,121) | | | 2,386 | | | (15,598) | | | 55,485 | |
Interest expense, net of interest income | | (18,243) | | | (17,985) | | | (54,152) | | | (40,993) | |
Depreciation and amortization | | (36,049) | | | (36,504) | | | (105,021) | | | (116,727) | |
Net (loss) income attributable to Cooper-Standard Holdings Inc. | | $ | (123,173) | | | $ | 4,381 | | | $ | (220,648) | | | $ | (240,426) | |
Certain financial information on the Company’s reportable segments was as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
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| | | | | | | | | | | | |
| | |
| | Three Months Ended March 31, |
| | 2022 | | 2021 |
| | External Sales | | Intersegment Sales | | Adjusted EBITDA | | External Sales | | Intersegment Sales | | Adjusted EBITDA |
North America | | $ | 321,894 | | | $ | 3,530 | | | $ | 17,496 | | | $ | 339,036 | | | $ | 2,633 | | | $ | 41,233 | |
Europe | | 131,414 | | | 2,369 | | | (14,657) | | | 165,776 | | | 2,979 | | | (1,489) | |
Asia Pacific | | 103,753 | | | 625 | | | (742) | | | 114,225 | | | 630 | | | 3,552 | |
South America | | 21,519 | | | 5 | | | (409) | | | 15,486 | | | 12 | | | (2,608) | |
Total Automotive | | 578,580 | | | 6,529 | | | 1,688 | | | 634,523 | | | 6,254 | | | 40,688 | |
Corporate, eliminations and other | | 34,404 | | | (6,529) | | | (1,543) | | | 34,444 | | | (6,254) | | | (2,148) | |
Consolidated | | $ | 612,984 | | | $ | — | | | $ | 145 | | | $ | 668,967 | | | $ | — | | | $ | 38,540 | |
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2022 | | 2021 |
Adjusted EBITDA | | | | | | $ | 145 | | | $ | 38,540 | |
Restructuring charges | | | | | | (7,831) | | | (21,047) | |
Deconsolidation of joint venture | | | | | | (2,257) | | | — | |
Impairment charges | | | | | | (455) | | | — | |
Gain on sale of business, net | | | | | | — | | | 891 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
EBITDA | | | | | | $ | (10,398) | | | $ | 18,384 | |
Income tax expense | | | | | | (652) | | | (936) | |
Interest expense, net of interest income | | | | | | (18,177) | | | (17,784) | |
Depreciation and amortization | | | | | | (32,133) | | | (33,528) | |
Net loss attributable to Cooper-Standard Holdings Inc. | | | | | | $ | (61,360) | | | $ | (33,864) | |
| | | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
Segment assets: | Segment assets: | | | | Segment assets: | | | |
North America | North America | $ | 905,347 | | | $ | 907,652 | | North America | $ | 901,103 | | | $ | 885,517 | |
Europe | Europe | 473,071 | | | 465,031 | | Europe | 447,256 | | | 372,097 | |
Asia Pacific | Asia Pacific | 484,490 | | | 587,610 | | Asia Pacific | 473,232 | | | 510,524 | |
South America | South America | 61,815 | | | 64,800 | | South America | 78,479 | | | 61,479 | |
Total Automotive | Total Automotive | 1,924,723 | | | 2,025,093 | | Total Automotive | 1,900,070 | | | 1,829,617 | |
Corporate, eliminations and other | Corporate, eliminations and other | 393,868 | | | 586,851 | | Corporate, eliminations and other | 383,066 | | | 396,876 | |
Consolidated | Consolidated | $ | 2,318,591 | | | $ | 2,611,944 | | Consolidated | $ | 2,283,136 | | | $ | 2,226,493 | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition. Our historical results may not indicate, and should not be relied upon as an indication of, our future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. See “Forward-Looking Statements” below for a discussion of risks associated with reliance on forward-looking statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed below and in our Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 filed with the U.S. Securities and Exchange Commission (“20202021 Annual Report”), including Item 1A. “Risk Factors.” The following should be read in conjunction with our 20202021 Annual Report and the other information included herein. Our discussion of trends and conditions supplements and updates such discussion included in our 20202021 Annual Report. References in this quarterly report on Form 10-Q (the “Report”) to “we,” “our,” or the “Company” refer to Cooper-Standard Holdings Inc., together with its consolidated subsidiaries.
Executive Overview
Our Business
We design, manufacture and sell sealing, fuel and brake delivery, and fluid transfer systems for use primarily in passenger vehicles and light trucks manufactured by global automotive original equipment manufacturers (“OEMs”). We are primarily a “Tier 1” supplier, with approximately 83% of our sales in 20202021 made directly to major OEMs. We operate our business along the following reportable segments: North America, Europe, Asia Pacific and South America. All other business activities are reported in Corporate, eliminations and other.
Recent Trends and Conditions
General Economic Conditions and Outlook
The global automotive industry is susceptible to uncertain economic conditions that could adversely impact new vehicle demand and production. Business conditions may vary significantly from period to period or region to region. The globalIn 2020, the COVID-19 pandemic created an unusually high degree of economic disruption and uncertainty during 2020,globally which has continued into 2021. Although optimism foradversely impacted automotive production. In 2021, global automotive production was again impaired by lingering impacts of the COVID-19 pandemic and broad supply chain challenges stemming, in part, from a sharp rebound in overall industrial demand. In early 2022, global economic recovery has continued through the first nine months of 2021, a considerable amount of uncertainty remains includingand is increasing as pandemic related restrictions are again being imposed in certain large population centers, and evolving military actions in Eastern Europe are creating a regional humanitarian and economic crisis with respect to variant strainsbroad global implications.
In North America, U.S. consumer confidence has trended downward since the second quarter of 2021. Key drivers of the virus, access to and acceptance of effective vaccines and related governmental policies and restrictions. The rate of recovery has varied across regions, and, in some cases, rapid growth and spikes in consumer and industrial demand have outpaced production anddecline are significant inflation, continuing supply chain capacity. These supply/disruptions and enacted and prospective interest rate hikes. Geopolitical tensions and persistent concerns over new variants of COVID-19 are also important factors. However, U.S. households have benefited from past economic stimulus actions, and personal savings rates remain high. In addition, the unemployment rate in the U.S. is near an all-time low. Finally, the U.S. government has begun to take actions to control inflation. The Federal Reserve Bank announced a 25 basis point increase in the Federal Funds interest rate in March and set expectations for six additional interest rate hikes during the remainder of the year. However, future government spending authorized by recently passed infrastructure legislation and private spending related to pent-up consumer demand imbalances, primarily semiconductor supply issues, and related inflationary pressures have added another layer of uncertainty for the automotive industry and the broader economy around the world. Despite these uncertainties, economistsare expected to support continued economic growth. Economists at the International Monetary Fund (IMF) remain positive in their outlook. They are now expecting the globaleconomies of the United States, Canada and Mexico to grow by 3.7 percent, 3.9 percent and 2.0 percent, respectively, in 2022.
In Europe, the war in Ukraine and related sanctions imposed on Russia are having a dramatic impact on energy prices and energy security. This is translating into lower output and higher inflation for most Eurozone countries. Supply chain disruptions have also hurt certain industries – including the automobile sector, with the war and sanctions hindering the production of key input materials. The easing of COVID-19 restrictions, tighter labor markets, pent-up spending and EU fund disbursements should sustain activity and support some growth in 2022. Economists at the IMF are currently expecting the economy in the Eurozone region to grow by approximately 5.9% in 2021.
In North America, the United States government has injected historic levels of fiscal stimulus into its economy to sustain businesses, create jobs and drive consumer confidence and spending. In addition, rapid distribution and administration of COVID-19 vaccines have enabled large segments of the economy to return to near normal levels of activity, spurring growth. Unemployment levels improved during the third quarter of 2021, falling below 5.0% in September. At the same time, businesses are continuing to report shortages of labor and reduced output in many markets. Additionally, inflation has continued to ramp higher and is expected to continue throughout 2021. This is having a negative impact on consumer confidence and corporate earnings, which could reduce future economic activity and growth. Despite these adverse impacts, IMF economists currently expect economic growth of approximately 6.0%2.8 percent for the North America region in 2021.
In Europe, the economy bounced back robustly in the second quarter of 2021, as the lifting of pandemic-related restrictions in the region and expansionary fiscal and monetary policies bolstered household spending and investment activity. Available indicators suggest the recovery carried over into the third quarter, albeit at a softer pace. Consumer confidence improved in the third quarter and remains above pre-pandemic levels. However, unemployment in the region is currently estimated at 8.0%, still significantly higher than pre-pandemic levels. Based on improving health conditions and increasing consumer confidence, the IMF is projecting economic growth in the region of approximately 5.0% for 2021.year.
In the Asia Pacific region, China’s economy lost some momentumthe combination of more transmissible variants and the strict zero-COVID strategy in China has led to repeated mobility restrictions and localized lockdowns that have weighed on economic activity and private consumption. Recent lockdowns in key Chinese manufacturing and trading hubs such as Shenzhen and Shanghai will likely compound supply disruptions elsewhere in the third quarter of 2021, impacted by supply disruptions, negative developmentsregion and beyond. Moreover, real estate investment growth in the property sector, restraints on polluting industries,China has slowed significantly, and some mobility restrictions. In August, credit growth continued to moderate while the non-manufacturing Purchasing Managers’ Index declined. Consumer
confidencedemand for Chinese exports is expected to be weaker as a result of the war in China has been trending down in recent months, including duringUkraine. Still, the third quarterChinese government recently set a GDP growth target of 2021. However, unemployment in the region’s largest economy remains at approximately 5.0%, similar5.5 percent for 2022, implying that further stimulus measures may be implemented to pre-pandemic levels.sustain economic growth. Economists at the IMF currently expect China’sare expecting the Chinese economy to grow by 8.0% in 2021, fueled by pent-up domestic demand, as well as increasing export volumes.just 4.4 percent for the year.
In South America, the Brazilian economy continuesgovernment has attempted to show mixed signalsrein in inflation by implementing a 975 basis point increase in interest rates. This is expected to weigh on consumer demand as well as industrial production and growth. However, with the October presidential election looming, the government has also implemented a significant social spending program and a reduction in fuel tax rates targeted at aiding the lower and middle-income segments of risk and recovery. Unemployment in the country recently improved to 13.7%,population. Even with the lowest level in more than a year, while consumer confidence ticked slightly lower in August following five consecutive months of improvement. The manufacturing PMI fell to a four-month low as output growth slowed. Economistsincreased social spending, economists at the IMF estimate thatare now estimating the Brazilian economy will grow by approximately 5.0%just 0.8 percent in 2021, underpinned by improving domestic and external demand, as COVID-19 vaccines continue broad distribution and related restrictions are gradually being lifted. However, frail fiscal accounts, a heavy debt burden and political polarization represent key risks. Given2022. We remain cautious for the economic outlook in this market given the long history of political instability and economic volatility we remain cautious for the mid to long-term economic outlook in the region.
Raw Materials
Our business is susceptible to inflationary pressures with respect to raw materials which may place operational and profitability burdens on the entire supply chain. Costs related to raw materials, such as steel, aluminum, and oil and oil-derived commodities, continue to be volatile, which has led to extended and magnifiedsignificant increases in these costs in 2021. We expect these increasesCurrent global events add another layer of uncertainty to have an impact on resultsraw material costs for the remainder of the year2022, and into 2022.we continue to see significant inflationary pressure. As such, on an ongoing basis, we work with our customers and suppliers to mitigate both inflationary pressures and our material-related cost exposures.
Production Levels
Our business is directly affected by the automotive vehicle production rates in North America, Europe, Asia Pacific and South America.America which have been adversely affected by a series of events in recent years. Beginning in the first quarter of 2020, as a result of COVID-19, we experienced the shutdown of effectively all of our facilities coinciding with the shutdown of our customer facilitiesproduction shutdowns related to COVID-19. Beginning in all regions. Production subsequently resumed in all regions, at steadily increasing rates throughout the year.
In the first quarter of 2021, and continuing throughout the year, OEM production volumes were disrupted by the global shortage of semiconductors. The shortage has resulted in slowdownsIn 2022 disruptions stemming from the Russia-Ukraine crisis have further exacerbated supply chain disruptions and stoppages in the finalvehicle production of vehicles. Current customer schedules and industry forecasts suggest production volumes will beginlevels. We continue to improve in the fourth quarter. Therefore, we are collaboratingcollaborate closely with our customers to minimize production inefficiencies while supporting their needs.
Light vehicle production in certain regions for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 was as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
(In millions of units) | (In millions of units) | 2021(1) | | 2020(1) | | % Change | | 2021(1) | | 2020(1) | | % Change | (In millions of units) | | 2022(1) | | 2021(1) | | % Change |
North America | North America | 3.0 | | | 4.0 | | | (25.2)% | | 9.8 | | | 9.2 | | | 6.8% | North America | | 3.6 | | | 3.6 | | | (1.8)% |
Europe | Europe | 3.1 | | | 4.4 | | | (29.6)% | | 12.0 | | | 11.3 | | | 5.7% | Europe | | 3.9 | | | 4.7 | | | (18.3)% |
Asia Pacific | Asia Pacific | 9.4 | | | 11.0 | | | (15.1)% | | 30.7 | | | 27.8 | | | 10.6% | Asia Pacific | | 11.1 | | | 11.1 | | | 0.2% |
Greater China | Greater China | 5.3 | | | 6.4 | | | (16.8)% | | 17.0 | | | 15.8 | | | 7.8% | Greater China | | 6.2 | | | 5.9 | | | 5.9% |
South America | South America | 0.6 | | | 0.7 | | | (10.9)% | | 1.9 | | | 1.5 | | | 28.6% | South America | | 0.6 | | | 0.7 | | | (12.7)% |
(1)Production data based on S&P Global (formerly IHS Automotive, October 2021.Markit), April 2022.
In all regions, duringproduction volumes were impacted by the nine months ended September 30, 2021, vehicle production increased compared to the comparable prior year period, despite the impactglobal shortage of semiconductor supply issuessemiconductors which began in the current year. The semiconductor supply issues in 2021 resulted in shutdowns at certain facilities, particularly in North America, for intermediate periods of time, as compared to the widespread and lengthy facility shutdowns in 2020 due to the initial impacts of COVID-19. During the thirdfirst quarter of 2021 decreased vehicle productionand deteriorated thereafter. Additionally in all regions compared to the third quarter of 2020 was the result of higher than normalEurope, vehicle production in the prior year period as production facilities re-opened after COVID-19 closures and met pent-up demand. Additionally, volume production in the third quarter of 2021 continued to be suppressedthree months ended March 31, 2022 was negatively impacted by semiconductoradditional supply chain issues which resulted in significant decreases in the quarter-over-quarter comparison across all regions.
Notable Events
Subsequentrelated to the end of the third quarter, the Company finalized a long-term commercial agreement with a footwear manufacturer granting them license to use FortrexRussia-Ukraine crisis.
TM technology in the manufacture of their footwear products. The agreement calls for the payment of licensing fees and ongoing volume-based royalties with an established minimum value.
Results of Operations
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change | | | 2022 | | 2021 | | Change |
| | (dollar amounts in thousands) | | | (dollar amounts in thousands) |
Sales | Sales | $ | 526,690 | | | $ | 683,200 | | | $ | (156,510) | | | $ | 1,728,842 | | | $ | 1,678,557 | | | $ | 50,285 | | Sales | | $ | 612,984 | | | $ | 668,967 | | | $ | (55,983) | |
Cost of products sold | Cost of products sold | 534,817 | | | 598,714 | | | (63,897) | | | 1,669,610 | | | 1,611,299 | | | 58,311 | | Cost of products sold | | 591,442 | | | 600,675 | | | (9,233) | |
Gross (loss) profit | (8,127) | | | 84,486 | | | (92,613) | | | 59,232 | | | 67,258 | | | (8,026) | | |
Gross profit | | Gross profit | | 21,542 | | | 68,292 | | | (46,750) | |
Selling, administration & engineering expenses | Selling, administration & engineering expenses | 60,367 | | | 60,059 | | | 308 | | | 168,506 | | | 199,001 | | | (30,495) | | Selling, administration & engineering expenses | | 51,904 | | | 58,054 | | | (6,150) | |
Gain on sale of business, net | Gain on sale of business, net | — | | | (2,314) | | | 2,314 | | | (696) | | | (2,314) | | | 1,618 | | Gain on sale of business, net | | — | | | (891) | | | 891 | |
Amortization of intangibles | Amortization of intangibles | 1,819 | | | 1,669 | | | 150 | | | 5,524 | | | 9,632 | | | (4,108) | | Amortization of intangibles | | 1,746 | | | 1,772 | | | (26) | |
Restructuring charges | Restructuring charges | 1,573 | | | 6,186 | | | (4,613) | | | 34,251 | | | 23,236 | | | 11,015 | | Restructuring charges | | 7,831 | | | 21,047 | | | (13,216) | |
| Impairment charges | Impairment charges | 1,006 | | | 100 | | | 906 | | | 1,847 | | | 87,710 | | | (85,863) | | Impairment charges | | 455 | | | — | | | 455 | |
Operating (loss) profit | (72,892) | | | 18,786 | | | (91,678) | | | (150,200) | | | (250,007) | | | 99,807 | | |
Operating loss | | Operating loss | | (40,394) | | | (11,690) | | | (28,704) | |
Interest expense, net of interest income | Interest expense, net of interest income | (18,243) | | | (17,985) | | | (258) | | | (54,152) | | | (40,993) | | | (13,159) | | Interest expense, net of interest income | | (18,177) | | | (17,784) | | | (393) | |
Equity in (losses) earnings of affiliates | Equity in (losses) earnings of affiliates | (1,114) | | | 738 | | | (1,852) | | | 65 | | | (842) | | | 907 | | Equity in (losses) earnings of affiliates | | (1,356) | | | 786 | | | (2,142) | |
Other (expense) income, net | (494) | | | 2,784 | | | (3,278) | | | (4,221) | | | (5,357) | | | 1,136 | | |
(Loss) income before income taxes | (92,743) | | | 4,323 | | | (97,066) | | | (208,508) | | | (297,199) | | | 88,691 | | |
Income tax expense (benefit) | 32,121 | | | (2,386) | | | 34,507 | | | 15,598 | | | (55,485) | | | 71,083 | | |
Net (loss) income | (124,864) | | | 6,709 | | | (131,573) | | | (224,106) | | | (241,714) | | | 17,608 | | |
Net loss (income) attributable to noncontrolling interests | 1,691 | | | (2,328) | | | 4,019 | | | 3,458 | | | 1,288 | | | 2,170 | | |
Net (loss) income attributable to Cooper-Standard Holdings Inc. | $ | (123,173) | | | $ | 4,381 | | | $ | (127,554) | | | $ | (220,648) | | | $ | (240,426) | | | $ | 19,778 | | |
Other expense, net | | Other expense, net | | (1,211) | | | (5,089) | | | 3,878 | |
Loss before income taxes | | Loss before income taxes | | (61,138) | | | (33,777) | | | (27,361) | |
Income tax expense | | Income tax expense | | 652 | | | 936 | | | (284) | |
Net loss | | Net loss | | (61,790) | | | (34,713) | | | (27,077) | |
Net loss attributable to noncontrolling interests | | Net loss attributable to noncontrolling interests | | 430 | | | 849 | | | (419) | |
Net loss attributable to Cooper-Standard Holdings Inc. | | Net loss attributable to Cooper-Standard Holdings Inc. | | $ | (61,360) | | | $ | (33,864) | | | $ | (27,496) | |
Three Months Ended September 30, 2021March 31, 2022 Compared with Three Months Ended September 30, 2020March 31, 2021
Sales
Sales for the three months ended September 30, 2021March 31, 2022 decreased 22.9%8.4%, compared to the three months ended September 30, 2020.March 31, 2021. The decrease in sales was driven by lower vehicle production volume due to the impact of semiconductor supply issues in the current year, foreign exchange, and the prior year ramp updeconsolidation of a joint venture in the Asia Pacific region. See Note 2. “Deconsolidation and strong productionDivestiture” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of vehicles following lengthy shutdowns from COVID-19, partially offset by foreign exchange.this Report for additional information.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Variance Due To: |
| 2021 | | 2020 | | Change | | | Volume / Mix* | | Foreign Exchange | | Divestitures |
| (dollar amounts in thousands) |
Total sales | $ | 526,690 | | | $ | 683,200 | | | $ | (156,510) | | | | $ | (165,348) | | | $ | 8,838 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | Variance Due To: |
| 2022 | | 2021 | | Change | | | Volume / Mix* | | Foreign Exchange | | Deconsolidation |
| (dollar amounts in thousands) |
Total sales | $ | 612,984 | | | $ | 668,967 | | | $ | (55,983) | | | | $ | (37,454) | | | $ | (10,059) | | | $ | (8,470) | |
* Net of customer price reductionsadjustments
Gross (Loss) Profit
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Variance Due To: |
| 2021 | | 2020 | | Change | | | Volume / Mix* | | Foreign Exchange | | Cost Increases / (Decreases) |
| (dollar amounts in thousands) |
Cost of products sold | $ | 534,817 | | | $ | 598,714 | | | $ | (63,897) | | | | $ | (101,777) | | | $ | 10,315 | | | $ | 27,565 | |
Gross (loss) profit | (8,127) | | | 84,486 | | | (92,613) | | | | (63,571) | | | (1,477) | | | (27,565) | |
Gross (loss) profit percentage of sales | (1.5) | % | | 12.4 | % | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | Variance Due To: |
| 2022 | | 2021 | | Change | | | Volume / Mix* | | Foreign Exchange | | Cost Increases/(Decreases) |
| (dollar amounts in thousands) |
Cost of products sold | $ | 591,442 | | | $ | 600,675 | | | $ | (9,233) | | | | $ | (33,332) | | | $ | (7,416) | | | $ | 31,515 | |
Gross profit | 21,542 | | | 68,292 | | | (46,750) | | | | (4,122) | | | (2,643) | | | (39,985) | |
Gross profit percentage of sales | 3.5 | % | | 10.2 | % | | | | | | | | | |
* Net of customer price reductionsadjustments
Cost of products sold is primarily comprised of material, labor, manufacturing overhead, freight, depreciation, warranty costs and other direct operating expenses. The Company’s material cost of products sold was approximately 47%50% and 49%48% of total cost of products sold for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively. The change in the cost of products sold was impacted by vehicle volume and mix, higher commodity and material costs,wage inflation, higher labor and overhead costs due to inconsistent volume production schedules, and higher energy and transportation costs. These costs were partially offset by volume and mix, foreign exchange, purchasing lean, manufacturing efficiencies, and wage inflation.the deconsolidation of a joint venture in the Asia Pacific region.
Gross (loss) profit for the three months ended September 30, 2021March 31, 2022 decreased $92.6$46.8 million compared to the three months ended September 30, 2020.March 31, 2021. The change was driven by volume and mix, commodity and wage inflation, the non-recurrence of prior year government incentivesvolume and mix, and foreign exchange. These items were partially offset by lower variable employee compensation expenses,customer recovery of cost increases, manufacturing efficiencies, purchasing lean savings, and restructuring savings.
Selling, Administration and Engineering Expense. Selling, administration and engineering expense includes administrative expenses as well as product engineering and design and development costs. Selling, administration and engineering expense for the three months ended September 30, 2021March 31, 2022 was 11.5%8.5% of sales compared to 8.8%8.7% for the three months ended September 30, 2020March 31, 2021. The increasedecrease was primarily due to lower sales and the $11.2 million credit loss for certain accounts receivable deemedcompensation costs due to be unrecoverable. Excluding the bad debt reserve, the decrease in amount was attributable to lower variable employee compensation expenses, and salaried headcount initiative savings, customer recovery of engineering expense, and foreign exchange, partially offset by general inflation and foreign exchange.wage inflation.
Gain on Sale of Business, Net. The gain on sale of business of $2.3$0.9 million for the three months ended September 30, 2020March 31, 2021 related to the net effect of our 2020 divestitures.
Amortization of Intangibles. Intangible amortization for the three months ended September 30, 2021 increased $0.2 million comparedMarch 31, 2022 was comparable to the three months ended September 30, 2020. The increase was attributable primarily to foreign exchange translation on our non-U.S. intangibles.March 31, 2021.
Restructuring. Restructuring charges for the three months ended September 30, 2021March 31, 2022 decreased $4.6$13.2 million compared to the three months ended September 30, 2020.March 31, 2021. The decrease was driven by lower restructuring charges primarily in North America and Europe, as certain headcount initiatives and footprint rationalization events neared completion.Europe.
Impairment Charges. Non-cash impairment charges for the three months ended September 30, 2021 increased $0.9March 31, 2022 of $0.5 million compared to the three months ended September 30, 2020. The increase was driven by impairment charges related to idle assets, primarily atin a certain facilities in our North America and Europe regions.European location.
Interest Expense, Net. Net interest expense for the three months ended September 30, 2021March 31, 2022 increased $0.3$0.4 million compared to the three months ended September 30, 2020,March 31, 2021, due to lower interest income amounts attributable to lower invested cashhigher debt balances.
Other (Expense) Income,Expense, Net. Other (expense) incomeexpense for the three months ended September 30, 2021 increased $3.3March 31, 2022 decreased $3.9 million compared to the three months ended September 30, 2020,March 31, 2021, primarily due to higherlower foreign currency losses.losses, partially offset by the loss on deconsolidation of joint venture.
Income Tax Expense (Benefit).Expense. Income tax expense for the three months ended September 30, 2021March 31, 2022 was $32.1$0.7 million on losses before income taxes of $92.7$61.1 million compared to an income tax benefitexpense of $2.4$0.9 million on earningslosses before income taxes of $4.3$33.8 million for the three months ended September 30, 2020.March 31, 2021. The effective tax rate for the three months ended September 30, 2021March 31, 2022 differed primarily from the effective tax rate for the three months ended September 30, 2020March 31, 2021 due to the negative impacts of the COVID-19 pandemic and other supply chain issues driving the initial recognition of valuation allowances in the U.S., resulting in tax expense of $31.7 million, which includes a reversal of tax benefits recorded for losses in the first six months of 2021. Geographicgeographic mix of pre-tax losses and the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign jurisdictions and U.S. states drives a difference between reporting periods. Additionally, the periods vary due to benefits recorded in thejurisdictions.
three month period ended September 30, 2020 as a result of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) net operating loss (“NOL”) carry back provision that allows NOLs generated to be carried back up to five years at the tax rates in effect during those periods, rather than carried forward at current federal tax rates of 21%.
Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020
Sales
Sales for the nine months ended September 30, 2021 increased 3.0%, compared to the nine months ended September 30, 2020. The increase was driven by vehicle production volume increases due to non-recurrence of lengthy shutdowns in the prior year period from COVID-19, offset in part by the impact of semiconductor supply issues in the current year. Foreign exchange also contributed to the increase in sales, which was partially offset by the prior year divestiture of our European rubber fluid transfer and specialty sealing businesses and Indian operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | | Variance Due To: |
| 2021 | | 2020 | | Change | | | Volume / Mix* | | Foreign Exchange | | Divestitures |
| (dollar amounts in thousands) |
Total sales | $ | 1,728,842 | | | $ | 1,678,557 | | | $ | 50,285 | | | | $ | 61,872 | | | $ | 52,921 | | | $ | (64,508) | |
* Net of customer price reductions
Gross Profit
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | | Variance Due To: |
| 2021 | | 2020 | | Change | | | Volume / Mix* | | Foreign Exchange | | Cost Increases / (Decreases)** |
| (dollar amounts in thousands) |
Cost of products sold | $ | 1,669,610 | | | $ | 1,611,299 | | | $ | 58,311 | | | | $ | 54,312 | | | $ | 52,770 | | | $ | (48,771) | |
Gross profit | 59,232 | | | 67,258 | | | (8,026) | | | | 7,560 | | | 151 | | | (15,737) | |
Gross profit percentage of sales | 3.4 | % | | 4.0 | % | | | | | | | | | |
* Net of customer price reductions
** Includes the net impact of divestitures
Cost of products sold is primarily comprised of material, labor, manufacturing overhead, freight, depreciation, warranty costs and other direct operating expenses. The Company’s material cost of products sold was approximately 47% and 45% of total cost of products sold for the nine months ended September 30, 2021 and 2020, respectively. The change in the cost of products sold was impacted by vehicle volume and mix, the prior year divestiture of our European rubber fluid transfer and specialty sealing businesses and Indian operations, continuous improvement and lean manufacturing, higher commodity and material costs, foreign exchange and wage inflation.
Gross profit for the nine months ended September 30, 2021 decreased 11.9% compared to the nine months ended September 30, 2020. The change was driven by commodity and wage inflation and the non-recurrence of prior year COVID-19 government incentives. These items were partially offset by volume and mix, net favorable operational performance, lower variable employee compensation expenses, purchasing lean savings, restructuring savings, and the prior year divestiture of our European rubber fluid transfer and specialty sealing businesses and Indian operations.
Selling, Administration and Engineering Expense. Selling, administration and engineering expense includes administrative expenses as well as product engineering and design and development costs. Sales, administration and engineering expense for the nine months ended September 30, 2021 was 9.7% of sales compared to 11.9% for the nine months ended September 30, 2020. The decrease was primarily due to salaried headcount initiative savings, lower variable employee compensation expenses, lower professional fees, and divestitures, partially offset by the $11.2 million credit loss for certain accounts receivable deemed to be unrecoverable and foreign exchange.
Gain on Sale of Business, Net. The gain on sale of business of $0.7 million for the nine months ended September 30, 2021 related to deconsolidation adjustments for the sale of our European fluid transfer and specialty sealing businesses and Indian operations. The gain on sale of business of $2.3 million for the nine months ended September 30, 2020 related to the net effect of our 2020 divestitures.
Amortization of Intangibles. Intangible amortization for the nine months ended September 30, 2021 decreased $4.1 million compared to the nine months ended September 30, 2020. The decrease was driven by a customer relationship intangible asset in the North America region that was fully amortized during the second quarter of 2020.
Restructuring. Restructuring charges for the nine months ended September 30, 2021 increased $11.0 million compared to the nine months ended September 30, 2020. The increase was driven by higher restructuring charges in Europe, primarily related to headcount initiatives and footprint rationalization.
Impairment Charges. Impairment charges of $1.8 million during the nine months ended September 30, 2021 related to idle assets, primarily at certain facilities in our North America and Europe regions. Impairment charges of $87.7 million during the nine months ended September 30, 2020 primarily related to reducing the carrying value of our held for sale facilities to fair value less costs to sell.
Interest Expense, Net. Net interest expense for the nine months ended September 30, 2021 increased $13.2 million compared to the nine months ended September 30, 2020, primarily due to a full nine months of interest expense for our Senior Secured Notes, which were issued in May 2020.
Other Expense, Net. Other expense for the nine months ended September 30, 2021 decreased $1.1 million compared to the nine months ended September 30, 2020, primarily due to higher benefit income and miscellaneous income amounts.
Income Tax Expense (Benefit). Income tax expense for the nine months ended September 30, 2021 was $15.6 million on losses before income taxes of $208.5 million compared to income tax benefit of $55.5 million on losses before income taxes of $297.2 million for the nine months ended September 30, 2020. The effective tax rate for the nine months ended September 30, 2021 differed primarily from the effective tax rate for the nine months ended September 30, 2020 due to the negative impacts of the COVID-19 pandemic and other supply chain issues driving the initial recognition of valuation allowances in the U.S resulting in net tax expense of $13.3 million, geographic mix of pre-tax losses, the inability to record a tax benefit for pre-tax losses in certain foreign jurisdictions and U.S. states, as well as benefits recorded in the nine-month period ended September 30, 2020 as a result of the CARES Act net operating loss carry back provision. Additionally, a discrete expense of $13.4 million for the initial recognition of valuation allowances against net deferred tax assets in certain foreign jurisdictions was recorded in the nine months ended September 30, 2020.
Segment Results of Operations
Our business is organized into the following reportable segments: North America, Europe, Asia Pacific and South America. All other business activities are reported in Corporate, eliminations and other. The Company uses Segment adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. We have defined adjusted EBITDA as net income before interest, taxes, depreciation, amortization, restructuring expense, and special items.
The following tables present sales and segment adjusted EBITDA for each of the reportable segments.
Three Months Ended September 30, 2021March 31, 2022 Compared with Three Months Ended September 30, 2020March 31, 2021
Sales
| | | Three Months Ended September 30, | | | Variance Due To: | | Three Months Ended March 31, | | | Variance Due To: |
| | 2021 | | 2020 | | Change | | | Volume/ Mix* | | Foreign Exchange | | Divestitures | | 2022 | | 2021 | | Change | | | Volume/ Mix* | | Foreign Exchange | | Deconsolidation |
| | (dollar amounts in thousands) | | (dollar amounts in thousands) |
Sales to external customers | Sales to external customers | | | | Sales to external customers | | | |
North America | North America | $ | 270,592 | | | $ | 359,007 | | | $ | (88,415) | | | | $ | (89,665) | | | $ | 1,250 | | | $ | — | | North America | $ | 321,894 | | | $ | 339,036 | | | $ | (17,142) | | | | $ | (16,824) | | | $ | (318) | | | $ | — | |
Europe | Europe | 98,682 | | | 146,029 | | | (47,347) | | | | (48,118) | | | 771 | | | — | | Europe | 131,414 | | | 165,776 | | | (34,362) | | | | (24,620) | | | (9,742) | | | — | |
Asia Pacific | Asia Pacific | 109,526 | | | 131,063 | | | (21,537) | | | | (27,813) | | | 6,276 | | | — | | Asia Pacific | 103,753 | | | 114,225 | | | (10,472) | | | | (1,794) | | | (208) | | | (8,470) | |
South America | South America | 15,981 | | | 17,580 | | | (1,599) | | | | (2,042) | | | 443 | | | — | | South America | 21,519 | | | 15,486 | | | 6,033 | | | | 4,909 | | | 1,124 | | | — | |
Total Automotive | Total Automotive | 494,781 | | | 653,679 | | | (158,898) | | | | (167,638) | | | 8,740 | | | — | | Total Automotive | 578,580 | | | 634,523 | | | (55,943) | | | | (38,329) | | | (9,144) | | | (8,470) | |
Corporate, eliminations and other | Corporate, eliminations and other | 31,909 | | | 29,521 | | | 2,388 | | | | 2,290 | | | 98 | | | — | | Corporate, eliminations and other | 34,404 | | | 34,444 | | | (40) | | | | 875 | | | (915) | | | — | |
Consolidated | Consolidated | $ | 526,690 | | | $ | 683,200 | | | $ | (156,510) | | | | $ | (165,348) | | | $ | 8,838 | | | $ | — | | Consolidated | $ | 612,984 | | | $ | 668,967 | | | $ | (55,983) | | | | $ | (37,454) | | | $ | (10,059) | | | $ | (8,470) | |
* Net of customer price reductionsadjustments
•Volume and mix, net of customer price reductions,adjustments, was driven by vehicle production volume decreases due to semiconductor-related customer schedule reductions.
•The impact of foreign currency exchange primarily related to the Chinese Renminbi, Canadian Dollar, Euro and Brazilian Real.
Segment adjusted EBITDA
| | | Three Months Ended September 30, | | | Variance Due To: | | Three Months Ended March 31, | | | Variance Due To: |
| | 2021 | | 2020 | | Change | | | Volume/ Mix* | | Foreign Exchange | | Cost (Increases)/ Decreases | | Divestitures | | 2022 | | 2021 | | Change | | | Volume/ Mix* | | Foreign Exchange | | Cost (Increases)/ Decreases | |
| | (dollar amounts in thousands) | | (dollar amounts in thousands) |
Segment adjusted EBITDA | Segment adjusted EBITDA | | | | Segment adjusted EBITDA | | | | |
North America | North America | $ | 8,817 | | | $ | 58,115 | | | $ | (49,298) | | | | $ | (33,462) | | | $ | (3,606) | | | $ | (12,230) | | | $ | — | | North America | $ | 17,496 | | | $ | 41,233 | | | $ | (23,737) | | | | $ | (7,010) | | | $ | 221 | | | $ | (16,948) | | |
Europe | Europe | (25,112) | | | (1,466) | | | (23,646) | | | | (18,621) | | | (197) | | | (4,828) | | | — | | Europe | (14,657) | | | (1,489) | | | (13,168) | | | | (3,068) | | | 244 | | | (10,344) | | |
Asia Pacific | Asia Pacific | (14,274) | | | 12,246 | | | (26,520) | | | | (12,204) | | | (2,015) | | | (12,301) | | | — | | Asia Pacific | (742) | | | 3,552 | | | (4,294) | | | | 157 | | | 99 | | | (4,550) | | |
South America | South America | (3,422) | | | (2,680) | | | (742) | | | | (322) | | | 529 | | | (949) | | | — | | South America | (409) | | | (2,608) | | | 2,199 | | | | 1,562 | | | 3,418 | | | (2,781) | | |
Total Automotive | Total Automotive | (33,991) | | | 66,215 | | | (100,206) | | | | (64,609) | | | (5,289) | | | (30,308) | | | — | | Total Automotive | 1,688 | | | 40,688 | | | (39,000) | | | | (8,359) | | | 3,982 | | | (34,623) | | |
Corporate, eliminations and other | Corporate, eliminations and other | 132 | | | (2,081) | | | 2,213 | | | | 1,038 | | | (162) | | | 1,337 | | | — | | Corporate, eliminations and other | (1,543) | | | (2,148) | | | 605 | | | | 4,237 | | | 471 | | | (4,103) | | |
Consolidated adjusted EBITDA | Consolidated adjusted EBITDA | $ | (33,859) | | | $ | 64,134 | | | $ | (97,993) | | | | $ | (63,571) | | | $ | (5,451) | | | $ | (28,971) | | | $ | — | | Consolidated adjusted EBITDA | $ | 145 | | | $ | 38,540 | | | $ | (38,395) | | | | $ | (4,122) | | | $ | 4,453 | | | $ | (38,726) | | |
* Net of customer price reductionsadjustments
•Volume and mix, net of customer price reductions,adjustments, was driven by vehicle production volume decreases due to semi-conductor-related customer schedule reductions.
•The impact of foreign currency exchange was driven by the Chinese Renminbi, Mexican Peso, Canadian Dollar, Euro, Polish Zloty, Czech Koruna, and Brazilian Real.
•The Cost (Increases) / Decreases category above includes:
◦Commodity cost wage inflation increases and the non-recurrence of prior year government incentives;inflationary economics;
◦The one-time impact of $11.2 million credit loss for certain accounts receivable related to the bankruptcy proceedings of a former joint venture in Asia; Manufacturing lean efficiencies and
◦Reduction in compensation-related expenses due to lower variable employee compensation expenses, salaried headcount initiatives, purchasing savings through lean initiatives, and restructuring savings.
Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020
Sales
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | | Variance Due To: |
| 2021 | | 2020 | | Change | | | Volume/ Mix* | | Foreign Exchange | | Divestitures |
| (dollar amounts in thousands) |
Sales to external customers | | | | | | | | | | | | |
North America | $ | 857,153 | | | $ | 820,145 | | | $ | 37,008 | | | | $ | 32,794 | | | $ | 4,214 | | | $ | — | |
Europe | 397,079 | | | 410,076 | | | (12,997) | | | | 9,988 | | | 26,232 | | | (49,217) | |
Asia Pacific | 327,666 | | | 316,133 | | | 11,533 | | | | 3,567 | | | 23,257 | | | (15,291) | |
South America | 45,620 | | | 41,932 | | | 3,688 | | | | 6,599 | | | (2,911) | | | — | |
Total Automotive | 1,627,518 | | | 1,588,286 | | | 39,232 | | | | 52,948 | | | 50,792 | | | (64,508) | |
Corporate, eliminations and other | 101,324 | | | 90,271 | | | 11,053 | | | | 8,924 | | | 2,129 | | | — | |
Consolidated | $ | 1,728,842 | | | $ | 1,678,557 | | | $ | 50,285 | | | | $ | 61,872 | | | $ | 52,921 | | | $ | (64,508) | |
* Net of customer price reductions
•Volume and mix, net of customer price reductions, was driven by vehicle production volume increases due to non-recurrence of lengthy shutdowns in the prior year from COVID-19, offset in part by semiconductor-related customer schedule reductions in the current year.
•The impact of foreign currency exchange primarily related to the Euro, Chinese Renminbi, Canadian Dollar and Brazilian Real.
Segment adjusted EBITDA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | | Variance Due To: |
| 2021 | | 2020 | | Change | | | Volume/ Mix* | | Foreign Exchange | | Cost (Increases)/ Decreases | | Divestitures |
| (dollar amounts in thousands) |
Segment adjusted EBITDA | | | | | | | | | | | | | | |
North America | $ | 50,806 | | | $ | 52,260 | | | $ | (1,454) | | | | $ | 11,683 | | | $ | (6,838) | | | $ | (5,800) | | | $ | (499) | |
Europe | (40,992) | | | (47,492) | | | 6,500 | | | | (932) | | | (1,405) | | | 6,487 | | | 2,350 | |
Asia Pacific | (13,024) | | | (6,983) | | | (6,041) | | | | (9,633) | | | 497 | | | (3,944) | | | 7,039 | |
South America | (6,756) | | | (11,608) | | | 4,852 | | | | 4,260 | | | 4,657 | | | (4,065) | | | — | |
Total Automotive | (9,966) | | | (13,823) | | | 3,857 | | | | 5,378 | | | (3,089) | | | (7,322) | | | 8,890 | |
Corporate, eliminations and other | (79) | | | (7,516) | | | 7,437 | | | | 2,182 | | | 386 | | | 4,869 | | | — | |
Consolidated adjusted EBITDA | $ | (10,045) | | | $ | (21,339) | | | $ | 11,294 | | | | $ | 7,560 | | | $ | (2,703) | | | $ | (2,453) | | | $ | 8,890 | |
* Net of customer price reductions
•Volume and mix, net of customer price reductions, was driven by vehicle production volume increases due to non-recurrence of lengthy shutdowns in the prior year period from COVID-19, offset in part by the impact of semiconductor-related customer schedule reductions in the current year.initiatives;
•The impact of foreign currency exchange was driven by the Canadian Dollar, Mexican Peso, Euro, Polish Zloty, Czech Koruna, Brazilian Real, and Chinese Renminbi.
•The Cost (Increases) / Decreases category above includes:
◦The one-time impact of$11.2 million credit loss for certain accounts receivable related to the bankruptcy proceedings of a former joint venture in Asia; and
◦Commodity cost, wage inflation increases and the non-recurrence of prior year government incentives; and
◦Reduction in compensation-related expenses due to salaried headcount initiatives purchasing savings through lean initiatives, lower variable employee compensation expenses and restructuring savings; and
◦Net manufacturing efficiencies of $28 million, primarily driven by our North America, Asia Pacific and Europe segments.savings.
Liquidity and Capital Resources
Short and Long-Term Liquidity Considerations and Risks
We intend to fund our ongoing working capital, capital expenditures, debt service and other funding requirements through a combination of cash flows from operations, cash on hand, borrowings under our senior asset-based revolving credit facility (“ABL Facility”) and receivables factoring. The Company utilizes intercompany loans and equity contributions to fund its worldwide operations. There may be country-specific regulations which may restrict or result in increased costs in the repatriation of these funds. See Note 9. “Debt” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for additional information.
We continue to actively preserve cash and enhance liquidity, including decreasing our capital expenditures. Based on those actions and current projections of OEM customer production, we believe that our cash flows from operations, cash on hand, borrowings under our ABL Facility and receivables factoring will enable us to meet our ongoing working capital, capital expenditures, debt service and other funding requirements for the next twelve months, despite the challenges presented by the COVID-19 pandemic and supply chain issues facing the industry. We continuously monitor and forecast our liquidity situation, take the necessary actions to preserve our liquidity and evaluate other financial alternatives that may be available to us should the need arise. Our ability to fund our working capital needs, debt payments and other obligations, and to comply with the financial covenants, including borrowing base limitations, under our ABL Facility, depend on our future operating performance and cash flows and many factors outside of our control, including the costs of raw materials, the state of the overall automotive industry and financial and economic conditions, including the continued impact of COVID-19, and other factors.
Cash Flows
Operating Activities. Net cash used in operations was $111.5$12.2 million for the ninethree months ended September 30, 2021,March 31, 2022, compared to net cash used in operations of $26.5$7.1 million for the ninethree months ended September 30, 2020.March 31, 2021. The net change was primarily due to working capital outflows and reduced cash earnings.earnings, partially offset by improvement in working capital.
In April 2022, subsequent to the end of the first quarter, we received $28.5 million in cash payments from the United States Internal Revenue Service for tax refunds related to net operating loss carrybacks. We expect to receive additional refunds of approximately $23.0 million during the remainder of the second quarter of 2022.
Investing Activities. Net cash used inprovided by investing activities was $72.8$20.1 million for the ninethree months ended September 30, 2021,March 31, 2022, compared to net cash used in investing activities of $89.5$36.3 million for the ninethree months ended September 30, 2020. The larger outflowMarch 31, 2021. Cash proceeds of $50.0 million related to the sale-leaseback agreement were received in the ninethree months ended September 30, 2020 was primarily due to cash divested. In response to the COVID-19 pandemic and subsequent supply chain issues, significant decreases in capital expenditures occurred throughout 2020 and in the nine months ended September 30, 2021.March 31, 2022. We expect lower expenditures willto continue in 2021, primarily as part of initiatives to consistently reduce overall capital spending. Wespending and anticipate that we will spend approximately $90 - $100 million on capital expenditures in 2021.2022.
Financing Activities. Net cash used in financing activities totaled $4.7$3.0 million for the ninethree months ended September 30, 2021,March 31, 2022, compared to net cash provided by financing activities of $225.1$1.3 million for the ninethree months ended September 30, 2020.March 31, 2021. The outflow in 20212022 primarily related to principal payments on debt, while the inflow in 20202021 was primarily due to proceeds from issuance of our Senior Secured Notes.an increase in short-term debt.
Share Repurchase Program
In June 2018, our Board of Directors approved a common stock repurchase program (the “2018 Program”) authorizing us to repurchase, in the aggregate, up to $150.0 million of our outstanding common stock. Under the 2018 Program, repurchases may be made on the open market, through private transactions, accelerated share repurchases, round lot or block transactions on the New York Stock Exchange or otherwise, as determined by us and in accordance with prevailing market conditions and federal securities laws and regulations. We expect to fund any future repurchases from cash on hand and future
cash flows from operations. The specific timing and amount of any future repurchase will vary based on market and business conditions and other factors. We are not obligated to acquire a particular amount of securities, and the 2018 Program may be discontinued at any time at our discretion. As of September 30, 2021,March 31, 2022, we had approximately $98.7 million of repurchase authorization remaining under the 2018 Program.
We did not make any repurchases under the 2018 Program during the ninethree months ended September 30, 2021March 31, 2022 or 20202021.
Non-GAAP Financial Measures
In evaluating our business, management considers EBITDA and Adjusted EBITDA to be key indicators of our operating performance. Our management also uses EBITDA and Adjusted EBITDA:
•because similar measures are utilized in the calculation of the financial covenants and ratios contained in our financing arrangements;
•in developing our internal budgets and forecasts;
•as a significant factor in evaluating our management for compensation purposes;
•in evaluating potential acquisitions;
•in comparing our current operating results with corresponding historical periods and with the operational performance of other companies in our industry; and
•in presentations to the members of our board of directors to enable our board of directors to have the same measurement basis of operating performance as is used by management in their assessments of performance and in forecasting and budgeting for our company.
In addition, we believe EBITDA and Adjusted EBITDA and similar measures are widely used by investors, securities analysts and other interested parties in evaluating our performance. We define Adjusted EBITDA as net income (loss) plus income tax expense (benefit), interest expense, net of interest income, depreciation and amortization or EBITDA, as adjusted for items that management does not consider to be reflective of our core operating performance. These adjustments include, but are not limited to, restructuring costs, impairment charges, non-cash fair value adjustments and acquisition-related costs.
EBITDA and Adjusted EBITDA are not financial measurements recognized under U.S. GAAP, and when analyzing our operating performance, investors should use EBITDA and Adjusted EBITDA as a supplement to, and not as alternatives for, net income (loss), operating income, or any other performance measure derived in accordance with U.S. GAAP, nor as an alternative to cash flow from operating activities as a measure of our liquidity. EBITDA and Adjusted EBITDA have limitations as analytical tools, and they should not be considered in isolation or as substitutes for analysis of our results of operations as reported under U.S. GAAP. These limitations include:
•they do not reflect our cash expenditures or future requirements for capital expenditure or contractual commitments;
•they do not reflect changes in, or cash requirements for, our working capital needs;
•they do not reflect interest expense or cash requirements necessary to service interest or principal payments under our ABL Facility, Term Loan Facility, Senior Notes and Senior Secured Notes;
•they do not reflect certain tax payments that may represent a reduction in cash available to us;
•although depreciation and amortization are non-cash charges, the assets being depreciated or amortized may have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements; and
•other companies, including companies in our industry, may calculate these measures differently and, as the number of differences in the way companies calculate these measures increases, the degree of their usefulness as a comparative measure correspondingly decreases.
In addition, in evaluating Adjusted EBITDA, it should be noted that in the future, we may incur expenses similar to the adjustments in the below presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by special items.
The following table provides a reconciliation of EBITDA and Adjusted EBITDA from net loss, which is the most comparable financial measure in accordance with U.S. GAAP:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (dollar amounts in thousands) |
Net (loss) income attributable to Cooper-Standard Holdings Inc. | $ | (123,173) | | | $ | 4,381 | | | $ | (220,648) | | | $ | (240,426) | |
Income tax expense (benefit) | 32,121 | | | (2,386) | | | 15,598 | | | (55,485) | |
Interest expense, net of interest income | 18,243 | | | 17,985 | | | 54,152 | | | 40,993 | |
Depreciation and amortization | 36,049 | | | 36,504 | | | 105,021 | | | 116,727 | |
EBITDA | $ | (36,760) | | | $ | 56,484 | | | $ | (45,877) | | | $ | (138,191) | |
Restructuring charges | 1,573 | | | 6,186 | | | 34,251 | | | 23,236 | |
Impairment charges (1) | 1,006 | | | 100 | | | 1,847 | | | 87,417 | |
Gain on sale of business, net (2) | — | | | (2,314) | | | (696) | | | (2,314) | |
Lease termination costs (3) | 322 | | | 83 | | | 430 | | | 684 | |
| | | | | | | |
Project costs (4) | — | | | — | | | — | | | 4,234 | |
Divested noncontrolling interest debt extinguishment | — | | | 3,595 | | | — | | | 3,595 | |
Adjusted EBITDA | $ | (33,859) | | | $ | 64,134 | | | $ | (10,045) | | | $ | (21,339) | |
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
| | | | | (dollar amounts in thousands) |
Net loss attributable to Cooper-Standard Holdings Inc. | | | | | $ | (61,360) | | | $ | (33,864) | |
Income tax expense | | | | | 652 | | | 936 | |
Interest expense, net of interest income | | | | | 18,177 | | | 17,784 | |
Depreciation and amortization | | | | | 32,133 | | | 33,528 | |
EBITDA | | | | | $ | (10,398) | | | $ | 18,384 | |
Restructuring charges | | | | | 7,831 | | | 21,047 | |
Deconsolidation of joint venture (1) | | | | | 2,257 | | | — | |
Impairment charges (2) | | | | | 455 | | | — | |
Gain on sale of business, net (3) | | | | | — | | | (891) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Adjusted EBITDA | | | | | $ | 145 | | | $ | 38,540 | |
(1)Loss attributable to deconsolidation of joint venture investment in Asia Pacific, which required adjustment to fair value.
(2)Non-cash impairment charges in 20212022 related to fixed assets. Non-cash impairment chargesidle assets in 2020 included impairment of assets held for sale and other impairment charges, net of portion attributable to our noncontrolling interests.Europe.
(2)(3)During 2021, we recorded subsequent adjustments to the net gain on sale of business, which related to the 2020 divestiture of our European rubber fluid transfer and specialty sealing businesses.
(3)Lease termination costs no longer recorded as restructuring charges in accordance with ASC 842.
(4)Project costs recorded in selling, administration and engineering expense related to divestitures in 2020.
Contingencies and Environmental Matters
The information concerning contingencies, including environmental contingencies and the amount currently held in reserve for environmental matters, contained in Note 19. “Commitments and Contingencies” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report, is incorporated herein by reference.
Critical Accounting Estimates
There have been no significant changes in our critical accounting estimates during the ninethree months ended September 30, 2021.March 31, 2022.
Forward-Looking Statements
This quarterly report on Form 10-Q 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: Impacts, including commodity cost increases and disruptions related to the war in Ukraine and the current COVID-related lockdowns in China; our ability to offset the adverse impact of higher commodity and other costs through negotiations with our customers; the impact, and expected continued impact, of the COVID-19 outbreak on our financial condition and results of operations; significant risks to our liquidity presented by the COVID-19 pandemic risk; 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 our 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 and variable rates of interest; 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 and regulatory 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 ability to identify, attract, develop and retain a skilled, engaged and diverse workforce; our ability to procure insurance at reasonable rates; and our dependence on our subsidiaries for cash to satisfy our obligations.
You should not place undue reliance on these forward-looking statements. Our forward-looking statements speak only as of the date of this quarterly report on Form 10-Q, 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 quarterly report on Form 10-Q 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the quantitative and qualitative information about the Company’s market risk from those previously disclosed in the Company’s 20202021 Annual Report.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company has evaluated, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Based on that evaluation, the Company’s Chief Executive Officer along with the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this Report.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Purchases of Equity Securities By the Issuer and Affiliated Purchasers
The Company is authorized to purchase, in the aggregate, up to $150 million of our outstanding common stock under our common stock repurchase program, which was effective in November 2018. As of September 30, 2021,March 31, 2022, we had approximately $98.7 million of repurchase authorization remaining under our common stock share repurchase program as discussed in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Share Repurchase Program,” and Note 17. “Common Stock” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report.
A summary of our shares of common stock repurchased during the three months ended September 30, 2021March 31, 2022 is shown below:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased(1) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in millions) |
July 1, 2021 through July 31, 2021 | | 597 | | | $ | 29.00 | | | — | | | $ | 98.7 | |
August 1, 2021 through August 31, 2021 | | 556 | | | 25.78 | | | — | | | 98.7 | |
September 1, 2021 through September 30, 2021 | | 61 | | | 22.27 | | | — | | | 98.7 | |
Total | | 1,214 | | | | | — | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased(1) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in millions) |
January 1, 2022 through January 31, 2022 | | 1,310 | | | $ | 22.41 | | | — | | | $ | 98.7 | |
February 1, 2022 through February 28, 2022 | | 29,777 | | | 16.88 | | | — | | | 98.7 | |
March 1, 2022 through March 31, 2022 | | — | | | — | | | — | | | 98.7 | |
Total | | 31,087 | | | | | — | | | |
(1)Represents shares repurchased by the Company to satisfy employee tax withholding requirements due upon the vesting of restricted stock awards.
Item 6. Exhibits
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Exhibit No. | | Description of Exhibit |
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10.1*† | | |
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10.2*† | | |
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10.3*† | | |
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31.1* | | |
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31.2* | | |
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32** | | |
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101.INS*** | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH*** | | Inline XBRL Taxonomy Extension Schema Document |
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101.CAL*** | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF*** | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB*** | | Inline XBRL Taxonomy Label Linkbase Document |
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101.PRE*** | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104*** | | Cover Page Interactive Data File, formatted in Inline XBRL |
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* | Filed with this Report. |
** | Furnished with this Report. |
*** | Submitted electronically with this Report in accordance with the provisions of Regulation S-T. |
† | Management contract or compensatory plan or arrangement. |
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 thereunto duly authorized.
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| | | | COOPER-STANDARD HOLDINGS INC. |
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November 4, 2021May 6, 2022 | | | | /S/ JONATHAN P. BANAS |
Date | | | | Jonathan P. Banas Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer) |