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, 20162019 filed with the U.S. Securities and Exchange Commission (“20162019 Annual Report”) see, including Item 1A. “Risk Factors.” The following should be read in conjunction with our 20162019 Annual Report and the other information included herein. Our discussion of trends and conditions supplements and updates such discussion included in our 20162019 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.
The global automotive industry is susceptible to uncertain economic conditions that could adversely impact new vehicle demand.demand and production. Business conditions may vary significantly from period to period or region to region. The global COVID-19 pandemic created an unusually high degree of economic disruption and uncertainty during the first nine months of 2020. Although most automotive manufacturing operations continued production during the third quarter, many industries remain significantly impacted by policies, regulations, risks and concerns surrounding the novel coronavirus, which is continuing to drive significant uncertainty for the broader economic outlook and for the automotive industry around the world. Economists at the International Monetary Fund (IMF) believe global economic activity is likely to remain subdued until perceived health risks abate. They are now expecting the global economy to contract by approximately 4.4% in 2020.
Our business is directly affected by the automotive vehicle production rates in North America, Europe, Asia Pacific and South America. New vehicle demand is driven by macroeconomic and other factors, suchBeginning in the first quarter of 2020, as interest rates, manufacturer and dealer sales incentives, fuel prices, consumer confidence, employment levels, income growth trends and government and tax incentives. The industry could face uncertaintiesa result of COVID-19, we experienced the shutdown of effectively all of our facilities in Asia Pacific coinciding with the shutdown of our customer facilities in that may adversely impact consumer demandregion. Facility shutdowns then occurred in March 2020 for vehicles as well as the future production environment.
Light vehicle production in certain regions for the three and nine months ended September 30, 20172020 and 2016 was:2019 was as follows:
In addition to the above, other factors will present opportunities for automotive suppliers who are positioned for the changing environment, including autonomous and connected vehicles, evolving government regulation, and consumer preference for environmentally friendly products and technology, including hybrid and electric vehicle architectures.
Results of Operations
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2020 | | 2019 | | Change | | 2020 | | 2019 | | Change |
| (dollar amounts in thousands) |
Sales | $ | 683,200 | | | $ | 739,518 | | | $ | (56,318) | | | $ | 1,678,557 | | | $ | 2,382,211 | | | $ | (703,654) | |
Cost of products sold | 598,714 | | | 659,313 | | | (60,599) | | | 1,611,299 | | | 2,088,631 | | | (477,332) | |
Gross profit | 84,486 | | | 80,205 | | | 4,281 | | | 67,258 | | | 293,580 | | | (226,322) | |
Selling, administration & engineering expenses | 60,059 | | | 63,020 | | | (2,961) | | | 199,001 | | | 224,164 | | | (25,163) | |
Gain on sale of business, net | (2,314) | | | 1,730 | | | (4,044) | | | (2,314) | | | (188,180) | | | 185,866 | |
Amortization of intangibles | 1,669 | | | 4,250 | | | (2,581) | | | 9,632 | | | 13,173 | | | (3,541) | |
Restructuring charges | 6,186 | | | 5,572 | | | 614 | | | 23,236 | | | 29,214 | | | (5,978) | |
Impairment of assets held for sale | — | | | — | | | — | | | 86,470 | | | — | | | 86,470 | |
Other impairment charges | 100 | | | 1,958 | | | (1,858) | | | 1,240 | | | 4,146 | | | (2,906) | |
Operating profit (loss) | 18,786 | | | 3,675 | | | 15,111 | | | (250,007) | | | 211,063 | | | (461,070) | |
Interest expense, net of interest income | (17,985) | | | (10,351) | | | (7,634) | | | (40,993) | | | (33,858) | | | (7,135) | |
Equity in earnings (losses) of affiliates | 738 | | | 1,515 | | | (777) | | | (842) | | | 5,764 | | | (6,606) | |
Other income (expense), net | 2,784 | | | (514) | | | 3,298 | | | (5,357) | | | (3,091) | | | (2,266) | |
Income (loss) before income taxes | 4,323 | | | (5,675) | | | 9,998 | | | (297,199) | | | 179,878 | | | (477,077) | |
Income tax (benefit) expense | (2,386) | | | 745 | | | (3,131) | | | (55,485) | | | 47,001 | | | (102,486) | |
Net income (loss) | 6,709 | | | (6,420) | | | 13,129 | | | (241,714) | | | 132,877 | | | (374,591) | |
Net (income) loss attributable to noncontrolling interests | (2,328) | | | 1,543 | | | (3,871) | | | 1,288 | | | 2,036 | | | (748) | |
Net income (loss) attributable to Cooper-Standard Holdings Inc. | $ | 4,381 | | | $ | (4,877) | | | $ | 9,258 | | | $ | (240,426) | | | $ | 134,913 | | | $ | (375,339) | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
| (dollar amounts in thousands) |
Sales | $ | 869,016 |
| | $ | 855,656 |
| | $ | 13,360 |
| | $ | 2,680,212 |
| | $ | 2,597,457 |
| | $ | 82,755 |
|
Cost of products sold | 718,187 |
| | 690,984 |
| | 27,203 |
| | 2,187,058 |
| | 2,101,000 |
| | 86,058 |
|
Gross profit | 150,829 |
| | 164,672 |
| | (13,843 | ) | | 493,154 |
| | 496,457 |
| | (3,303 | ) |
Selling, administration & engineering expenses | 94,145 |
| | 92,368 |
| | 1,777 |
| | 267,883 |
| | 268,498 |
| | (615 | ) |
Amortization of intangibles | 3,432 |
| | 3,457 |
| | (25 | ) | | 10,563 |
| | 9,974 |
| | 589 |
|
Impairment charges | — |
| | — |
| | — |
| | 4,270 |
| | — |
| | 4,270 |
|
Restructuring charges | 9,909 |
| | 10,430 |
| | (521 | ) | | 28,220 |
| | 33,468 |
| | (5,248 | ) |
Other operating loss | — |
| | — |
| | — |
| | — |
| | 155 |
| | (155 | ) |
Operating profit | 43,343 |
| | 58,417 |
| | (15,074 | ) | | 182,218 |
| | 184,362 |
| | (2,144 | ) |
Interest expense, net of interest income | (10,256 | ) | | (10,114 | ) | | (142 | ) | | (31,788 | ) | | (29,861 | ) | | (1,927 | ) |
Equity in earnings of affiliates | 660 |
| | 1,386 |
| | (726 | ) | | 3,735 |
| | 5,823 |
| | (2,088 | ) |
Loss on refinancing and extinguishment of debt | — |
| | — |
| | — |
| | (1,020 | ) | | — |
| | (1,020 | ) |
Other expense, net | (451 | ) | | (518 | ) | | 67 |
| | (3,275 | ) | | (8,589 | ) | | 5,314 |
|
Income before income taxes | 33,296 |
| | 49,171 |
| | (15,875 | ) | | 149,870 |
| | 151,735 |
| | (1,865 | ) |
Income tax expense | 7,838 |
| | 12,525 |
| | (4,687 | ) | | 40,258 |
| | 43,312 |
| | (3,054 | ) |
Net income | 25,458 |
| | 36,646 |
| | (11,188 | ) | | 109,612 |
| | 108,423 |
| | 1,189 |
|
Net income attributable to noncontrolling interests | (818 | ) | | (284 | ) | | (534 | ) | | (2,810 | ) | | (549 | ) | | (2,261 | ) |
Net income attributable to Cooper-Standard Holdings Inc. | $ | 24,640 |
| | $ | 36,362 |
| | $ | (11,722 | ) | | $ | 106,802 |
| | $ | 107,874 |
| | $ | (1,072 | ) |
Three Months Ended September 30, 20172020 Compared with Three Months Ended September 30, 20162019
Sales.Sales
Sales for the three months ended September 30, 2017 increased $13.4 million, or 1.6%2020 decreased 7.6%, compared to the three months ended September 30, 2016, primarily2019. The decline was driven by the acquisitiondecrease in vehicle production volume and the divestiture of AMI Industries’ fuelour European rubber fluid transfer and brake business, consolidationspecialty sealing businesses and Indian operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Variance Due To: |
| 2020 | | 2019 | | Change | | | Volume / Mix* | | Foreign Exchange | | Divestitures |
| (dollar amounts in thousands) |
Total sales | $ | 683,200 | | | $ | 739,518 | | | $ | (56,318) | | | | $ | (8,958) | | | $ | 2,234 | | | $ | (49,594) | |
* Net of a previously unconsolidated joint venture and favorable foreign exchange, partially offset by customer price reductions.reductions
Gross Profit
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Variance Due To: |
| 2020 | | 2019 | | Change | | | Volume / Mix* | | Foreign Exchange | | Cost Increases / (Decreases)** |
| (dollar amounts in thousands) |
Cost of products sold | $ | 598,714 | | | $ | 659,313 | | | $ | (60,599) | | | | $ | (806) | | | $ | 3,246 | | | $ | (63,039) | |
Gross profit | 84,486 | | | 80,205 | | | 4,281 | | | | (8,152) | | | (1,012) | | | 13,445 | |
Gross profit percentage of sales | 12.4 | % | | 10.8 | % | | | | | | | | | |
* Net of Products Sold.customer price reductions
** Includes the net impact of divestitures
Cost of products sold is primarily comprised of material, labor, manufacturing overhead, freight, depreciation, and amortizationwarranty costs and other direct operating expenses. Cost of products sold for the three months ended September 30, 2017 increased $27.2 million, or 3.9%, compared to the three months ended September 30, 2016. CostThe Company’s material cost of products sold was impacted by commodity price pressures, transactional foreign exchange pressure, general inflationapproximately 49% and acquisitions. These items were partially offset by continuous improvement and material cost savings. Materials comprise the largest component of our cost of products sold and represented approximately 50% of the total cost of products sold for the three months ended September 30, 20172020 and 2016,2019, respectively. The change in the cost of products sold was driven by vehicle volume and mix, the divestiture of our European rubber fluid transfer and specialty sealing businesses and Indian operations, continuous improvement and lean manufacturing, material cost reductions, commodity price fluctuations, foreign exchange and wage inflation.
Gross Profit.Gross profit for the three months ended September 30, 2017 decreased $13.82020 increased $4.3 million or 8.4%,5.3% compared to the three months ended September 30, 2016. As a percentage of sales, gross profit was 17.4% and 19.2% for the three months ended September 30, 2017 and 2016, respectively.2019. The decrease in gross profitincrease was driven primarily by customer price reductions, commodity price pressures,net favorable operational performance, restructuring savings and unfavorable vehicle production mix.material cost reductions. These items were partially offset by continuous improvement,wage inflation, employee incentives and material cost savings.foreign exchange.
Selling, Administration and Engineering.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 three months ended September 30, 20172020 was $94.1 million, or 10.8%8.8% of sales compared to $92.4 million, or 10.8% of sales,8.5% for the three months ended September 30, 2016.2019. The increase in rate was driven by the decline in total sales. Selling, administration and engineering expenseexpenses were lower by $3.0 million. The decrease in amount was primarily due to savings generated from salaried headcount initiatives including net divestitures and lower travel expenses, partially offset by general inflation and higher variable employee compensation expenses.
Gain on Sale of Business, Net. The gain on sale of business of $2.3 million for the three months ended September 30, 2017 increased as a result of non-cash settlement charges relating2020 related to the wind-upnet effect of our U.K. pension plan2020 divestitures, which included the European fluid transfer and specialty sealing business, Indian operations, the deconsolidation of $5.7a joint venture in our Asia Pacific region, and the finalized adjustments related to the sale of our AVS product line. The gain on sale of business for the three months ended September 30, 2019 included a $1.7 million and investmentsadjustment, decreasing the amount of the gain recognized on the sale of the AVS business in the second quarter of 2019, primarily due to support growth and innovation, partially offsetworking capital adjustments.
Amortization of Intangibles. Intangible amortization for the three months ended September 30, 2020 decreased $2.6 million compared to the three months ended September 30, 2019. The decrease was primarily driven by lower compensation related costs.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 three months ended September 30, 2017 decreased $0.52020 increased $0.6 million compared to the three months ended September 30, 2016.2019. The decreaseincrease was primarily driven by lower restructuring expenses related to our
European initiatives of $3.4 million, partially offset by higher restructuring charges attributed toin North America, and Asia Pacific of $2.9 million.primarily related to plant closures.
Other Expense, Net. Other expenseImpairment Charges. Non-cash impairment charges for the three months ended September 30, 20172020 decreased $0.1$1.9 million compared to the three months ended September 30, 2016,2019, primarily related to tooling machinery and equipment charges due to other miscellaneous income, partially offset by increased foreign currency losses.the termination of certain customer programs in the Asia Pacific region in the third quarter of 2019.
Income TaxInterest Expense,. Income tax Net. Net interest expense for the three months ended September 30, 20172020 increased $7.6 million compared to the three months ended September 30, 2019, primarily due to higher outstanding debt balances including our recently issued Senior Secured Notes.
Other Income (Expense), Net. Other income for the three months ended September 30, 2020 increased $3.3 million compared to the three months ended September 30, 2019, primarily due to higher foreign currency gains.
Income Tax (Benefit) Expense. Income tax benefit for the three months ended September 30, 2020 was $7.8$2.4 million on earnings before income taxes of $33.3$4.3 million. This compares to an income tax expense of $12.5$0.7 million on earningslosses before income taxes of $49.2$5.7 million for the same period of 2016.three months ended September 30, 2019. The effective tax rate for the three months ended September 30, 20172020 compared to the three months ended September 30, 2016 was lower primarily due to nonrecurring discrete items, including the impact of participating in a foreign tax amnesty program, recorded in the three months ended September 30, 2017. The income tax rate for the three months ended September 30, 2017 varied from statutory rates2019 differed primarily due to the impactgeographic mix of income taxes on foreign earnings taxed at rates lower than the U.S. statutory rate,
pre-tax losses, the inability to record a tax benefit for pre-tax losses in certain foreign jurisdictions, as well as benefits recorded 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 extent not offset by other categoriestax rates in effect during those periods, rather than carried forward at current federal tax rates of 21%. We have included a $19.8 million benefit in the estimated annual effective tax rate for this CARES Act provision which was used to calculate the income tax credits, income tax incentives, excess tax benefits related to share-based compensation and other permanent items.benefit recorded in the three months ended September 30, 2020.
Nine Months Ended September 30, 20172020 Compared with Nine Months Ended September 30, 20162019
Sales.Sales
Sales for the nine months ended September 30, 2017 increased $82.8 million, or 3.2%2020 decreased 29.5%, compared to the nine months ended September 30, 2016, primarily2019. The decline was mainly driven by the decrease in vehicle production volume due to improved volumegovernment imposed global shutdowns related to the COVID-19 pandemic, net divestitures, foreign exchange and mix in all regions, the acquisition of AMI Industries’ fuel and brake business and consolidation of a previously unconsolidated joint venture, partially offset by customer price reductions and unfavorable foreign exchange.reductions.
Cost | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | | Variance Due To: |
| 2020 | | 2019 | | Change | | | Volume / Mix* | | Foreign Exchange | | Divestitures |
| (dollar amounts in thousands) |
Total sales | $ | 1,678,557 | | | $ | 2,382,211 | | | $ | (703,654) | | | | $ | (557,327) | | | $ | (18,003) | | | $ | (128,324) | |
* Net of Products Sold.customer price reductions
Gross Profit
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | | Variance Due To: |
| 2020 | | 2019 | | Change | | | Volume / Mix* | | Foreign Exchange | | Cost Increases / (Decreases)** |
| (dollar amounts in thousands) |
Cost of products sold | $ | 1,611,299 | | | $ | 2,088,631 | | | $ | (477,332) | | | | $ | (311,037) | | | $ | (15,548) | | | $ | (150,747) | |
Gross profit | 67,258 | | | 293,580 | | | (226,322) | | | | (246,290) | | | (2,455) | | | 22,423 | |
Gross profit percentage of sales | 4.0 | % | | 12.3 | % | | | | | | | | | |
* Net of customer price reductions
** Includes the net impact of divestitures
Cost of products sold for the nine months ended September 30, 2017 increased $86.1 million, or 4.1%, compared to the nine months ended September 30, 2016. Costis primarily comprised of products sold increased primarily due to inflation, commodity price pressures, higher production volumesmaterial, labor, manufacturing overhead, freight, depreciation, warranty costs and acquisitions. These items were partially offset by continuous improvement andother direct operating expenses. The Company’s material cost savings. Materials comprise the largest component of our cost of products sold was approximately 45% and represented approximately 51% and 50% of the total cost of products sold for the nine months ended September 30, 20172020 and 2016,2019, respectively. The change in the cost of products sold was driven by government imposed global shutdowns related to the COVID-19 pandemic, the sale of our AVS product line, the divestiture of our European rubber fluid transfer and specialty sealing businesses and Indian operations, continuous improvement and lean manufacturing, material cost reductions, commodity price fluctuations, foreign exchange, and wage inflation.
Gross Profit.Gross profit for the nine months ended September 30, 20172020 decreased $3.3 million, or 0.7%,77.1% compared to the nine months ended September 30, 2016.2019. The decrease in gross profit was driven primarily by inflation, commodity price pressures and unfavorablethe decline in vehicle production mix. As a percentage of sales, gross profit was 18.4%volume due to government imposed global shutdowns related to the COVID-19 pandemic, customer price reductions, employee incentives and 19.1% for the nine months ended September 30, 2017wage inflation. These items were partially offset by net favorable operational performance, restructuring savings, foreign exchange and 2016, respectively.material cost reductions.
Selling, Administration and Engineering.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, 20172020 was $267.9 million or 10.0%11.9% of sales compared to $268.5 million, or 10.3% of sales,9.4% for the nine months ended September 30, 2016. Selling, administration2019. This increase in rate was primarily due to the significant decline in total sales. The decrease in amount was primarily due to savings generated from salaried headcount initiatives, net divestitures and engineering expense for the nine months ended September 30, 2017 was favorable as a result of lower compensation related costs,travel expenses, partially offset by non-cash settlement charges relating to the wind-upgeneral inflation and higher variable employee compensation expenses.
Gain on Sale of our U.K. pension planBusiness, Net. The gain on sale of $5.7 million, and investments to support growth and innovation.
Impairment charges. Impairment chargesbusiness of $4.3$2.3 million for the nine months ended September 30, 2017 resulted from our decision2020 related to divest twothe net effect of our inactive2020 divestitures, which included certain European sites basedbusinesses and our Indian operations, the deconsolidation of a joint venture in our Asia Pacific region, and the finalized adjustments related to the sale of our AVS product line. The gain on current real estate market conditions.sale of business of $188.2 million for the nine months ended September 30, 2019 related to the sale of our AVS product line within our North America, Europe and Asia Pacific segments.
Amortization of Intangibles. Intangible amortization for the nine months ended September 30, 2020 decreased $3.5 million compared to the nine months ended September 30, 2019. The decrease was primarily 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, 20172020 decreased $5.2$6.0 million compared to the nine months ended September 30, 2016.2019. The decrease was primarily driven bya result of lower expensesrestructuring charges in Europe, Asia Pacific and Corporate and other.
Impairment Charges. Non-cash impairment charges for the nine months ended September 30, 2020 increased $83.6 million compared to the nine months ended September 30, 2019. The increase primarily related to our European initiativesreducing the carrying value of $7.8 million, partially offset by higher restructuring charges attributedthe divested assets to North America and Asia Pacific of $2.6 million.fair value less costs to sell. Fair value was determined using a market approach, estimated based on expected proceeds.
Interest Expense, Net.Net interest expense for the nine months ended September 30, 20172020 increased $1.9$7.1 million compared to the nine months ended September 30, 2016, which resulted2019, primarily fromdue to higher interest rates related to the newoutstanding debt balances including our recently issued Senior Secured Notes.
Loss on Refinancing and Extinguishment of Debt. Loss on refinancing and extinguishment of debt of $1.0 million for the nine months ended September 30, 2017 resulted from the partial write off of new and unamortized debt issuance costs and unamortized original issue discount related to the amendment of the Term Loan Facility.
Other Expense, Net. Other expense for the nine months ended September 30, 2017 decreased $5.32020 increased $2.3 million compared to the nine months ended September 30, 2016. The decrease was2019, primarily due to the nonrecurrence of underwriting fees related to the secondary offering of $5.9 million recorded in the nine months ended September 30, 2016 and other miscellaneous income,higher foreign currency losses, partially offset by increased foreign currency losses.lower benefit related costs.
Income Tax Expense. (Benefit) Expense. Income tax expensebenefit for the nine months ended September 30, 20172020 was $40.3$55.5 million on earningslosses before income taxes of $149.9$297.2 million. This compares to income tax expense of $43.3$47.0 million on earnings before income taxes of $151.7$179.9 million for the same period of 2016.nine months ended September 30, 2019. The effective tax rate for the nine months ended September 30, 20172020 compared to the nine months ended September 30, 2016 was lower primarily due to nonrecurring discrete items, including the impact of participating in a foreign tax amnesty program, recorded in the nine months ended September 30, 2017. The income tax rate for the nine months ended September 30, 2017 varied from statutory rates2019 differed primarily due to the impactgeographic mix of income taxespre-tax losses driven by the impairment charge on foreign earnings taxed at rates lower than the U.S. statutory rate,divested entities, the inability to record a tax benefit for pre-tax losses in certain foreign jurisdictions, as well as benefits recorded as a result of the CARES Act net operating loss carry back provision. We have included a $19.8 million benefit in the estimated annual effective tax rate for this CARES Act provision which was used to calculate the extent not offset by other categories of income tax credits, incomebenefit recorded in the nine months ended September 30, 2020. Additionally, a discrete expense of $13.4 million for the initial recognition of valuation allowances against net deferred tax incentives, excess tax benefits related to share-based compensation and other permanent items.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 table presentstables present sales and segment profit (loss)adjusted EBITDA for each of the reportable segments for the three and nine months ended September 30, 2017 and 2016:segments.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
| (dollar amounts in thousands) |
Sales to external customers | | | | | | | | | | | |
North America | $ | 437,406 |
| | $ | 450,795 |
| | $ | (13,389 | ) | | $ | 1,403,270 |
| | $ | 1,361,183 |
| | $ | 42,087 |
|
Europe | 254,399 |
| | 242,773 |
| | 11,626 |
| | 776,346 |
| | 794,411 |
| | (18,065 | ) |
Asia Pacific | 148,493 |
| | 137,174 |
| | 11,319 |
| | 421,926 |
| | 380,483 |
| | 41,443 |
|
South America | 28,718 |
| | 24,914 |
| | 3,804 |
| | 78,670 |
| | 61,380 |
| | 17,290 |
|
Consolidated | $ | 869,016 |
| | $ | 855,656 |
| | $ | 13,360 |
| | $ | 2,680,212 |
| | $ | 2,597,457 |
| | $ | 82,755 |
|
| | | | | | | | | | | |
Segment profit (loss) | | | | | | | | | | | |
North America | $ | 44,214 |
| | $ | 55,031 |
| | $ | (10,817 | ) | | $ | 170,971 |
| | $ | 169,857 |
| | $ | 1,114 |
|
Europe | (9,024 | ) | | (5,632 | ) | | (3,392 | ) | | (20,633 | ) | | (7,510 | ) | | (13,123 | ) |
Asia Pacific | 3,050 |
| | 3,037 |
| | 13 |
| | 11,036 |
| | 6,073 |
| | 4,963 |
|
South America | (4,944 | ) | | (3,265 | ) | | (1,679 | ) | | (11,504 | ) | | (16,685 | ) | | 5,181 |
|
Consolidated income before income taxes | $ | 33,296 |
| | $ | 49,171 |
| | $ | (15,875 | ) | | $ | 149,870 |
| | $ | 151,735 |
| | $ | (1,865 | ) |
Three Months Ended September 30, 20172020 Compared with Three Months Ended September 30, 20162019
North America.Sales for the three months ended September 30, 2017 decreased $13.4 million, or 3.0%, compared to the three months ended September 30, 2016, primarily due to decreased volume
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Variance Due To: |
| 2020 | | 2019 | | Change | | | Volume/ Mix* | | Foreign Exchange | | Divestitures |
| (dollar amounts in thousands) |
Sales to external customers | | | | | | | | | | | | |
North America | $ | 359,007 | | | $ | 372,104 | | | $ | (13,097) | | | | $ | (11,812) | | | $ | (1,285) | | | $ | — | |
Europe | 146,029 | | | 187,438 | | | (41,409) | | | | (13,526) | | | 7,448 | | | (35,331) | |
Asia Pacific | 131,063 | | | 123,139 | | | 7,924 | | | | 20,377 | | | 1,810 | | | (14,263) | |
South America | 17,580 | | | 25,220 | | | (7,640) | | | | (1,448) | | | (6,192) | | | — | |
Total Automotive | 653,679 | | | 707,901 | | | (54,222) | | | | (6,409) | | | 1,781 | | | (49,594) | |
Corporate, eliminations and other | 29,521 | | | 31,617 | | | (2,096) | | | | (2,549) | | | 453 | | | — | |
Consolidated | $ | 683,200 | | | $ | 739,518 | | | $ | (56,318) | | | | $ | (8,958) | | | $ | 2,234 | | | $ | (49,594) | |
* Net of customer price reductions
•Volume and unfavorable mix, andnet of customer price reductions, partially offsetis driven by the acquisitionregional mix of AMI Industries’ fuelvehicles in Europe, North America and brake business. China.
•The impact of foreign currency exchange primarily relates to the Euro and Brazilian Real.
Segment profit for the three months ended September 30, 2017 decreased by $10.8 million, primarily due to lower volumeadjusted EBITDA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Variance Due To: |
| 2020 | | 2019 | | Change | | | Volume/ Mix* | | Foreign Exchange | | Cost (Increases)/ Decreases | | Divestitures |
| (dollar amounts in thousands) |
Segment adjusted EBITDA | | | | | | | | | | | | | | |
North America | $ | 58,115 | | | $ | 59,819 | | | $ | (1,704) | | | | $ | (7,544) | | | $ | 562 | | | $ | 6,062 | | | $ | (784) | |
Europe | (1,466) | | | 6,269 | | | (7,735) | | | | (5,960) | | | (375) | | | (1,488) | | | 88 | |
Asia Pacific | 12,246 | | | (12,080) | | | 24,326 | | | | 6,321 | | | 1,726 | | | 14,480 | | | 1,799 | |
South America | (2,680) | | | (2,678) | | | (2) | | | | 1,863 | | | (1,781) | | | (84) | | | — | |
Total Automotive | 66,215 | | | 51,330 | | | 14,885 | | | | (5,320) | | | 132 | | | 18,970 | | | 1,103 | |
Corporate, eliminations and other | (2,081) | | | 2,491 | | | (4,572) | | | | (2,832) | | | 205 | | | (3,775) | | | 1,830 | |
Consolidated adjusted EBITDA | $ | 64,134 | | | $ | 53,821 | | | $ | 10,313 | | | | $ | (8,152) | | | $ | 337 | | | $ | 15,195 | | | $ | 2,933 | |
* Net of customer price reductions
•Volume and unfavorable mix, net of customer price reductions, is driven by the regional mix of vehicles in Europe, North America and continued investments to support innovation, partially offsetChina.
•The impact of foreign currency exchange is driven by operational efficienciesthe Chinese Renminbi, Brazilian Real, Euro, Polish Zloty, and net material cost savings.Czech Koruna.
Europe. Sales for the three months ended September 30, 2017 increased $11.6 million, or 4.8%, compared to the three months ended September 30, 2016, primarily
•The Cost (Increases) / Decreases category above includes:
◦Reduction in compensation-related expenses due to favorable foreign exchangesalaried headcount initiatives, purchasing savings through lean initiatives, and improved volumerestructuring savings;
◦Wage and mix. Segment loss for the three months ended September 30, 2017 increased by $3.4variable employee compensation increases;
◦The non-recurrence of prior year one-time impact of commercial settlements in Asia Pacific;
◦Net manufacturing efficiencies of $10 million, primarily due to non-cash settlement charges relating to the wind-up ofdriven by our U.K. pension plan of $5.7 millionNorth America and commodity price pressures, partially offset by lower restructuring expense, improved volume and mix and operational efficiencies, including restructuring savings.Asia Pacific segments.
Asia Pacific. Sales for the three months ended September 30, 2017 increased $11.3 million, or 8.3%, compared to the three months ended September 30, 2016, primarily due to improved volume and mix and the consolidation of a previously unconsolidated joint venture, partially offset by customer price reductions. Segment profit for the three months ended September 30, 2017 was flat compared to the three months ended September 20, 2016. Continuous improvement and material cost savings were offset by customer price reductions, wage inflation, and higher engineering costs to support growth in the region.
South America. Sales for the three months ended September 30, 2017 increased $3.8 million, or 15.3%, compared to the three months ended September 30, 2016, primarily due to improved volume and mix and favorable foreign exchange, partially
offset by customer price reductions. Segment loss for the three months ended September 30, 2017 increased by $1.7 million primarily due to a $3.1 million pre-tax charge for costs associated with a foreign tax amnesty program, of which $0.2 million was paid in cash, and customer price reductions, partially offset by continuous improvement, volume and mix.
Nine Months Ended September 30, 20172020 Compared with Nine Months Ended September 30, 20162019
North America.Sales for the nine months ended September 30, 2017 increased $42.1 million, or 3.1%, compared to the nine months ended September 30, 2016, primarily due to improved volume
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | | Variance Due To: |
| 2020 | | 2019 | | Change | | | Volume/ Mix* | | Foreign Exchange | | Divestitures |
| (dollar amounts in thousands) |
Sales to external customers | | | | | | | | | | | | |
North America | $ | 820,145 | | | $ | 1,198,943 | | | $ | (378,798) | | | | $ | (321,792) | | | $ | (2,175) | | | $ | (54,831) | |
Europe | 410,076 | | | 634,867 | | | (224,791) | | | | (167,710) | | | 685 | | | (57,766) | |
Asia Pacific | 316,133 | | | 367,086 | | | (50,953) | | | | (29,847) | | | (5,379) | | | (15,727) | |
South America | 41,932 | | | 73,581 | | | (31,649) | | | | (20,572) | | | (11,077) | | | — | |
Total Automotive | 1,588,286 | | | 2,274,477 | | | (686,191) | | | | (539,921) | | | (17,946) | | | (128,324) | |
Corporate, eliminations and other | 90,271 | | | 107,734 | | | (17,463) | | | | (17,406) | | | (57) | | | — | |
Consolidated | $ | 1,678,557 | | | $ | 2,382,211 | | | $ | (703,654) | | | | $ | (557,327) | | | $ | (18,003) | | | $ | (128,324) | |
* Net of customer price reductions
•Volume and mix, and the acquisitionnet of AMI Industries’ fuel and brake business, partially offset by customer price reductions. Segment profit for the nine months ended September 30, 2017 increased by $1.1 million, primarily due to continuous improvement, net material cost savings, favorable foreign exchange and acquisitions, partially offset by customer price reductions, is mainly driven by the impact of the decline in vehicle production mix and continued investments to support innovation.
Europe. Sales for the nine months ended September 30, 2017 decreased $18.1 million, or 2.3%, comparedvolume driven by government imposed global shutdowns related to the nine months ended September 30, 2016,COVID-19 pandemic.
•The impact of foreign currency exchange primarily duerelates to the Brazilian Real, Chinese Renminbi, Canadian Dollar and Mexican Peso.
Segment adjusted EBITDA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | | Variance Due To: |
| 2020 | | 2019 | | Change | | | Volume/ Mix* | | Foreign Exchange | | Cost (Increases)/ Decreases | | Divestitures |
| (dollar amounts in thousands) |
Segment adjusted EBITDA | | | | | | | | | | | | | | |
North America | $ | 52,260 | | | $ | 172,853 | | | $ | (120,593) | | | | $ | (140,772) | | | $ | 174 | | | $ | 24,542 | | | $ | (4,537) | |
Europe | (47,492) | | | 21,540 | | | (69,032) | | | | (74,178) | | | 635 | | | 6,978 | | | (2,467) | |
Asia Pacific | (6,983) | | | (14,313) | | | 7,330 | | | | (17,735) | | | 1,139 | | | 22,717 | | | 1,209 | |
South America | (11,608) | | | (4,817) | | | (6,791) | | | | (4,283) | | | (6,465) | | | 3,957 | | | — | |
Total Automotive | (13,823) | | | 175,263 | | | (189,086) | | | | (236,968) | | | (4,517) | | | 58,194 | | | (5,795) | |
Corporate, eliminations and other | (7,516) | | | 663 | | | (8,179) | | | | (9,322) | | | (1,492) | | | 805 | | | 1,830 | |
Consolidated adjusted EBITDA | $ | (21,339) | | | $ | 175,926 | | | $ | (197,265) | | | | $ | (246,290) | | | $ | (6,009) | | | $ | 58,999 | | | $ | (3,965) | |
* Net of customer price reductions
•Volume and unfavorable foreign exchange, partially offset by improvement in volume and mix. Segment loss for the nine months ended September 30, 2017 increased by $13.1 million, primarily due to non-cash settlement charges relating to the wind-upmix, net of our U.K. pension plan of $5.7 million, impairment charges recorded in the first quarter of 2017, customer price reductions commodity price pressure, product mix and foreign exchange, partially offsetprimarily includes the impact of the decline in vehicle production volume as driven by lower restructuring expense and operational efficiencies, including restructuring savings.
Asia Pacific. Sales for the nine months ended September 30, 2017 increased $41.4 million, or 10.9% comparedgovernment imposed global shutdowns related to the nine months ended September 30, 2016, primarilyCOVID-19 pandemic.
•The impact of foreign currency exchange is driven by the Brazilian Real, Euro, Chinese Renminbi, Brazilian Real, Euro, Polish Zloty, and Czech Koruna.
•The Cost (Increases) / Decreases category above includes:
◦Reduction in compensation-related expenses, due to salaried headcount initiatives, purchasing savings through lean initiatives, and restructuring savings;
◦Commodity cost fluctuations, wage increases and variable employee compensation increases;
◦The non-recurrence of prior year one-time impact of commercial settlements in Asia Pacific;
◦Net manufacturing efficiencies of $45 million, weakened by the consolidationimpact of a previously unconsolidated joint venture and improved volume and mix, partially offset by unfavorable foreign exchange and customer price reductions. Segment profit for the nine months ended September 30, 2017 increased by $5.0 millionCOVID-19, primarily driven by continuous improvementour European, North America and material cost savings, partially offset by customer price reductions, higher engineering costs to support growth in the region and wage inflation.Asia Pacific segments.
South America. Sales for the nine months ended September 30, 2017 increased $17.3 million, or 28.2%, compared to the nine months ended September 30, 2016, primarily due to improved volume and mix and favorable foreign exchange. Segment loss for the nine months ended September 30, 2017 improved by $5.2 million primarily due to continuous improvement and net material cost savings and improved volume and mix, partially offset by a $3.1 million pre-tax charge for costs associated with a foreign tax amnesty program, of which $0.2 million was paid in cash.
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 7.10. “Debt” to the unaudited condensed consolidated financial statements included in Part 1,I, Item 1 of this Report for additional information.
We continue to take aggressive action to preserve cash and enhance liquidity, including significantly decreasing our capital expenditures. Based on ourthose actions and current and anticipated levels of operations and the condition in our markets and industry,projections for increasing 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. However,months, despite the challenges presented by the COVID-19 pandemic. 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 flowflows 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 impact of COVID-19, and other factors.
Cash Flows
Operating Activities. Net cash provided byused in operations was $104.6$26.5 million for the nine months ended September 30, 2017,2020, compared to $182.0net cash provided by operations of $29.9 million for the nine months ended September 30, 2016.2019. The changenet outflow was primarily driven by an increase in receivables due to customer payment timing and repurchase of receivables as part of the transition to a pan-European factoring program, increased inventory and higher payments related to incentive compensation,decreased cash earnings, partially offset by increased cash earnings and reduced cash paid for restructuring and taxes.working capital improvements.
Investing Activities. Net cash used in investing activities was $136.7$89.5 million for the nine months ended September 30, 2017,2020, compared to $150.7net cash provided by investing activities of $113.9 million for the nine months ended September 30, 2016.2019. Significant decreases in capital expenditures occurred throughout 2020, in order to preserve liquidity in response to the COVID-19 pandemic. Additionally, lower capital expenditures are expected in the fourth quarter of 2020. Cash used inprovided by investing activities in 2019 consisted
primarily of gross proceeds of $243.4 million from the sale of our AVS product line, partially offset by capital spending of $137.4 million and $116.8spending.
Financing Activities. Net cash provided by financing activities totaled $225.1 million for the nine months ended September 30, 2017 and 2016, respectively. We anticipate that we will spend approximately $165 million2020, compared to $175 million on capital expenditures in 2017.
Financing Activities. Netnet cash used in financing activities totaled $52.1of $78.3 million for the nine months ended September 30, 2017, compared2019. The inflow was primarily due to $41.3proceeds from issuance of the Senior Secured Notes during the nine months ended September 30, 2020. There were no share repurchases during the nine months ended September 30, 2020. Cash used for share repurchases was $36.6 million for the nine months ended September 30, 2016. The increase was primarily due to increased repurchase activity under our share repurchase program, certain paydowns of foreign bank loans in 2017 and decreased warrant exercises.2019.
Share Repurchase Program
In March 2016,June 2018, our Board of Directors approved a securitiesnew common stock repurchase program (the “Program”“2018 Program”) authorizing us to repurchase, in the aggregate, up to $125$150.0 million of our outstanding common stock or warrants to purchase common stock. Under the 2018 Program, repurchases may be made on the open market, or through private transactions, accelerated share repurchases, round lot or block transactions on the New York Stock Exchange or otherwise, as determined by our managementus and in accordance with prevailing market conditions and federal securities laws and regulations.
In March 2016, we purchased $23.8 million of our common stock (350,000 shares at $68.00 per share) from the Selling Stockholders (as described in Note 15. “Common Stock” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report). In 2017, we repurchased $31.5 million of our common stock (306,072 shares at an average purchase price of $102.76 per share, excluding commissions) in the open market, of which $30.7 million was settled in cash during the nine months ended September 30, 2017. 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, 2017,2020, we havehad approximately $69.7$98.7 million of repurchase authorization remaining under the 2018 Program. We currently have no plans to repurchase shares in the foreseeable future.
We did not make any repurchases during the nine months ended September 30, 2020. 2019 Repurchases
In May 2019, we entered into an accelerated share repurchase (“ASR”) agreement with a third-party financial institution to repurchase our common stock pursuant to the 2018 Program. Under the ASR agreement, we made an up-front payment of $30.0 million and received an initial delivery of 626,305 shares of our common stock in the second quarter of 2019. The repurchase was completed in the third quarter of 2019 when we received final delivery of an additional 72,875 shares. A total of 699,180 shares were repurchased at a weighted average purchase price of $42.91 per share.
In addition to the repurchase under the ASR agreement, during the nine months ended September 30, 2019, we repurchased 85,000 shares at an average purchase price of $69.85 per share, excluding commissions, for a total cost of $5.9 million.
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 income (loss), which is the most comparable financial measure in accordance with U.S. GAAP:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
| (dollar amounts in thousands) |
Net income (loss) attributable to Cooper-Standard Holdings Inc. | $ | 4,381 | | | $ | (4,877) | | | $ | (240,426) | | | $ | 134,913 | |
Income tax (benefit) expense | (2,386) | | | 745 | | | (55,485) | | | 47,001 | |
Interest expense, net of interest income | 17,985 | | | 10,351 | | | 40,993 | | | 33,858 | |
Depreciation and amortization | 36,504 | | | 37,495 | | | 116,727 | | | 111,968 | |
EBITDA | $ | 56,484 | | | $ | 43,714 | | | $ | (138,191) | | | $ | 327,740 | |
Impairment of assets held for sale | — | | | — | | | 86,470 | | | — | |
Restructuring charges | 6,186 | | | 5,572 | | | 23,236 | | | 29,214 | |
Project costs (1) | — | | | 335 | | | 4,234 | | | 2,003 | |
Other impairment charges (2) | 100 | | 1,958 | | | 947 | | | 4,146 | |
Lease termination costs (3) | 83 | | | 512 | | | 684 | | | 1,003 | |
Gain on sale of business, net (4) | (2,314) | | | 1,730 | | | (2,314) | | | (188,180) | |
Divested noncontrolling interest debt extinguishment | 3,595 | | | — | | | 3,595 | | | — | |
Adjusted EBITDA | $ | 64,134 | | | $ | 53,821 | | | $ | (21,339) | | | $ | 175,926 | |
(1)Project costs recorded in selling, administration and engineering expense related to divestitures in 2020 and acquisitions and divestiture costs in 2019.
(2)Non-cash impairment charges of $947 related to fixed assets, net of approximately $293 attributable to our noncontrolling interests for the nine months ended September 30, 2020.
(3)Lease termination costs no longer recorded as restructuring charges in accordance with ASC 842.
(4)Gain on sale of business primarily related to divestitures in 2020. In the third quarter of 2019, there were working capital adjustments to the net gain on sale of business, which related to the divestiture of the AVS product line in 2019.
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
| (dollar amounts in thousands) |
Net income attributable to Cooper-Standard Holdings Inc. | $ | 24,640 |
| | $ | 36,362 |
| | $ | 106,802 |
| | $ | 107,874 |
|
Income tax expense | 7,838 |
| | 12,525 |
| | 40,258 |
| | 43,312 |
|
Interest expense, net of interest income | 10,256 |
| | 10,114 |
| | 31,788 |
| | 29,861 |
|
Depreciation and amortization | 34,368 |
| | 31,325 |
| | 99,413 |
| | 91,699 |
|
EBITDA | $ | 77,102 |
| | $ | 90,326 |
| | $ | 278,261 |
| | $ | 272,746 |
|
Restructuring charges | 9,909 |
| | 10,430 |
| | 28,220 |
| | 33,468 |
|
Settlement charges (1) | 5,902 |
| | — |
| | 5,902 |
| | — |
|
Foreign tax amnesty program (2) | 3,121 |
| | — |
| | 3,121 |
| | — |
|
Impairment charges (3) | — |
| | — |
| | 4,270 |
| | — |
|
Loss on refinancing and extinguishment of debt (4) | — |
| | — |
| | 1,020 |
| | — |
|
Secondary offering underwriting fees and other expenses (5) | — |
| | — |
| | — |
| | 6,500 |
|
Other | — |
| | — |
| | — |
| | 155 |
|
Adjusted EBITDA | $ | 96,034 |
| | $ | 100,756 |
| | $ | 320,794 |
| | $ | 312,869 |
|
| |
(1) | Non-cash settlement charges of $5.7 million and administrative fees of $0.2 million relating to the U.K. pension plan. |
| |
(2) | Relates to indirect taxes recorded in cost of products sold. |
| |
(3) | Impairment charges related to fixed assets. |
| |
(4) | Loss on refinancing and extinguishment of debt related to the May 2017 amendment of the Term Loan Facility. |
| |
(5) | Fees and other expenses associated with the March 2016 secondary offering. |
Contingencies and Environmental Matters
The information concerning contingencies, including environmental contingencies and the amount currently held in reserve for environmental matters, contained in Note 18.21. “Commitments and Contingencies” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report, is incorporated herein by references.reference.
Recently Issued Accounting Pronouncements
See Note 1. “Overview”2. “New Accounting Pronouncements” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report.
Critical Accounting Estimates
There have been no significant changes in our critical accounting estimates during the nine months ended September 30, 2017.2020.
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 and other factors 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: the impact, and expected continued impact, of the recent 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 Advanced Technology Group; possible variability of our working capital requirements; risks associated with our international operations;operations, including changes in laws, regulations, and policies governing the terms of foreign trade such as increased trade restrictions and tariffs; foreign currency exchange rate fluctuations; our ability to control the operations of our joint ventures for our sole benefit; our substantial amount of indebtedness; our ability to obtain adequate financing sources in the future; operating and financial restrictions imposed on us under our debt instruments; the underfunding of our pension plans; significant changes in discount rates and the actual return on pension assets; effectiveness of continuous improvement programs and other cost savings plans; manufacturing facility closings or consolidation; our ability to execute new program launches; our ability to meet customers'customers’ needs for new and improved products; the possibility that our acquisitions and divestitures may not be successful; product liability, warranty and recall claims brought against us; laws and regulations, including environmental, health and safety laws and regulations; legal proceedings, claims or investigations against us; work stoppages or other labor disruptions; the ability of our intellectual property to withstand legal challenges; cyber-attacks, ordata 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; changes in our assumptions as a result of IRS issuing guidance on the Tax Cuts and Jobs Act; the possibility of a failure to maintain effective controls and procedures; the possibility of future impairment charges to our goodwill and long-lived assets; and our dependence on our subsidiaries for cash to satisfy our obligations.
You should not place undue reliance on these forward-looking statements. WeOur 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
ThereExcept for the broad effects of COVID-19 on the global economy and major financial markets, which has and could continue to cause interest rates, currency exchange rates and commodity prices to fluctuate, 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 20162019 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, 20172020 that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, other than as updated in Part II, “Item 1A. Risk Factors,” in our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2020 and June 30, 2020.
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, 2020, we had approximately $98.7 million of repurchase authorization remaining under our ongoing 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 15.18. “Common Stock” to the unaudited condensed consolidated financial statements included in Part 1,I, Item 1 of this Report, we have approximately $69.7 million of repurchase authorization remaining under our ongoing common stock share repurchase program.Report.
A summary of our shares of common stock repurchased during the three months ended September 30, 20172020 is shown below: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, 2020 through July 31, 2020 | | 800 | | | $ | 12.55 | | | — | | | $ | 98.7 | |
August 1, 2020 through August 31, 2020 | | — | | | — | | | — | | | 98.7 | |
September 1, 2020 through September 30, 2020 | | — | | | — | | | — | | | 98.7 | |
Total | | 800 | | | | | — | | | |
(1)Includes shares repurchased by the Company to satisfy employee tax withholding requirements due upon the vesting of restricted stock awards.
|
| | | | | | | | | | | | | | |
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, 2017 through July 31, 2017 | | 71,671 |
| | $ | 103.63 |
| | 71,663 |
| | $ | 84.5 |
|
August 1, 2017 through August 31, 2017 | | 76,038 |
| | $ | 100.56 |
| | 76,000 |
| | $ | 76.8 |
|
September 1, 2017 through September 30, 2017 | | 66,003 |
| | $ | 107.02 |
| | 66,000 |
| | $ | 69.7 |
|
Total | | 213,712 |
| | $ | 103.58 |
| | 213,663 |
| | $ | 69.7 |
|
| |
(1) | Includes 49 shares repurchased by the Company to satisfy employee tax withholding requirements due upon the vesting of restricted stock awards. |
Item 6. Exhibits
| | | | | | | | |
| | |
Exhibit No. | | |
Exhibit
No.
| | Description of Exhibit |
| | |
31.1* | | |
| |
31.2* | | |
| |
32** | | |
| |
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 |
| | |
101.SCH*** | | Inline XBRL Taxonomy Extension Schema Document |
| |
101.CAL*** | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| |
101.DEF*** | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| |
101.LAB*** | | Inline XBRL Taxonomy Label Linkbase Document |
| |
101.PRE*** | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
| | |
104*** | | Cover Page Interactive Data File, formatted in Inline XBRL |
| | | | | |
* | Filed with this Report. |
** | Furnished with this Report. |
*** | Submitted electronically with this Report in accordance with the provisions of Regulation S-T. |
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.
| | | | | | | | | | | | | | |
| | | | COOPER-STANDARD HOLDINGS INC. |
| | |
| | | | |
| | | | COOPER-STANDARD HOLDINGS INC. |
| | |
November 1, 20176, 2020 | | | | /S/ JONATHAN P. BANAS |
Date | | | | Jonathan P. Banas Chief Financial Officer
(Principal Financial Officer)
|
INDEX TO EXHIBITS
|
| | |
Exhibit
No.
| | Description of Exhibit |
| | |
31.1* | | |
| |
31.2* | | |
| |
32** | | |
| |
101.INS*** | | XBRL Instance Document |
| |
101.SCH*** | | XBRL Taxonomy Extension Schema Document |
| |
101.CAL*** | | XBRL Taxonomy Extension Calculation Linkbase Document |
| |
101.DEF*** | | XBRL Taxonomy Extension Definition Linkbase Document |
| |
101.LAB*** | | XBRL Taxonomy Label Linkbase Document |
| |
101.PRE*** | | XBRL Taxonomy Extension Presentation Linkbase Document |
|
| |
* | Filed with this Report. |
** | Furnished with this Report. |
*** | Submitted electronically with this Report in accordance with the provisions of Regulation S-T. |