# Cooper-Standard Holdings Inc.: Form 10-Q for the period ended Jun 30, 2020

- Company: [Cooper-Standard Holdings Inc.](/companies/cps.md) (CIK 1320461)
- Form: 10-Q
- Filed: 2020-08-05
- Accepted by EDGAR: Aug 5, 2020, 16:10 ET
- Period: 2020-06-30
- Accession: 0001320461-20-000060
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1320461/000132046120000060/cps-20200630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1320461/000132046120000060/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-04-01 to 2020-06-30 | $0 | us-gaap:Revenues |
| Revenue | 6 months, 2020-01-01 to 2020-06-30 | $0 | us-gaap:Revenues |
| Cost of revenue | 3 months, 2020-04-01 to 2020-06-30 | $400.8m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2020-01-01 to 2020-06-30 | $1.01bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2020-04-01 to 2020-06-30 | −$60.4m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2020-01-01 to 2020-06-30 | −$17.2m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2020-04-01 to 2020-06-30 | $68.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2020-01-01 to 2020-06-30 | $138.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2020-04-01 to 2020-06-30 | −$154.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2020-01-01 to 2020-06-30 | −$268.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2020-04-01 to 2020-06-30 | −$39.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2020-01-01 to 2020-06-30 | −$53.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-04-01 to 2020-06-30 | −$134.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2020-01-01 to 2020-06-30 | −$244.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-04-01 to 2020-06-30 | −$7.93 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2020-01-01 to 2020-06-30 | −$14.49 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2020-04-01 to 2020-06-30 | −$7.93 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2020-01-01 to 2020-06-30 | −$14.49 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2020-04-01 to 2020-06-30 | 16,914,971 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2020-01-01 to 2020-06-30 | 16,899,344 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2020-01-01 to 2020-06-30 | −$126.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2020-01-01 to 2020-06-30 | $62.9m | us-gaap:PaymentsToAcquireProductiveAssets |
| Share repurchases | 6 months, 2020-01-01 to 2020-06-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2020-06-30 | $388.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-06-30 | $1.11bn | us-gaap:AssetsCurrent |
| Total assets | at 2020-06-30 | $2.49bn | us-gaap:Assets |
| Current liabilities | at 2020-06-30 | $572.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2020-06-30 | $1.88bn | us-gaap:Liabilities |
| Current portion of debt | at 2020-06-30 | $56.4m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2020-06-30 | $590.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 44,630 characters.

*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, 2019 filed with the U.S. Securities and Exchange Commission (“2019 Annual Report”) see Item 1A. “Risk Factors.” The following should be read in conjunction with our 2019 Annual Report and the other information included herein. Our discussion of trends and conditions supplements and updates such discussion included in our 2019 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 2019 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.

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

### 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 COVID-19 pandemic created an unusually high degree of economic disruption during the first half of 2020 and is continuing to drive uncertainty for the economic outlook and the automotive industry around the world. Economists at the International Monetary Fund (IMF) are now expecting the global economy to contract by approximately 5.0% in 2020.

Economic conditions and consumer confidence in North America have been negatively impacted by concerns over the COVID-19 pandemic and government-imposed shutdowns to contain the spread of the disease. The United States government has taken historic measures to provide fiscal stimulus to the economy in an effort to sustain businesses, limit job losses and preempt deeper declines in consumer confidence. Despite these efforts, IMF economists now expect economic contraction of approximately 8.0% for the North America region in 2020.

While most states have begun to re-open their economies, continued rolling outbreaks of COVID-19 cases and uncertainty related to the presidential election in the United States will likely weigh on consumer confidence in North America well into the fourth quarter of 2020 and possibly into 2021.

In the European region, the IMF is projecting economic contraction of approximately 10.2% for 2020. Current and potential future impacts of the COVID-19 pandemic will continue to weigh on the economies of the region. Due to the pandemic, certain European governments mandated closures of broad segments of the economy in the first half of the year. Re-opening of the economies has begun at varying times and rates across the region. Most automotive manufacturers resumed production by mid-May to early June. As part of a broad economic recovery program, the European Union is considering various incentives to stimulate automotive demand in the region. Even as businesses in the region return to work, geopolitical concerns and the implementation of new environmental regulations in the automotive industry will likely continue to impact economic growth.

In the Asia Pacific region, the IMF expects China’s economic growth rate to slow to just 1.0% in 2020, following two months of aggressive COVID-19 containment measures during the first quarter. While the containment measures have been lifted and many industries are once again approaching normalized production levels, significant challenges remain for the Chinese economy. Consumer confidence is likely to remain suppressed for a period of time, dampening both investment and consumption. In addition, potential new policies by the United States and other developed countries that would encourage the repatriation of production of certain strategically sensitive products in the wake of the COVID-19 pandemic could reduce export demand and further pressure employment levels within China.

In South America, the IMF estimates that the Brazilian economy will contract by approximately 9.1% in 2020 as compared to 2019. Unemployment is projected to exceed 15.0%. In response to the COVID-19 pandemic, the Brazilian government has approved an aggressive fiscal spending package to stimulate economic activity. While seen as urgently necessary, this spending will add to the country’s already high national debt level and could lead to lower consumer confidence and foreign investment in the region going forward. We remain cautious for the mid to long-term outlook given the long history of political instability and economic volatility 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. In addition, we continue to expect commodity cost volatility to have an impact on future earnings and operating cash flows. 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. Beginning in the first quarter of 2020, as a 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 region. Facility shutdowns then occurred in March 2020 for a majority of our facilities in North America, Europe and South America.

Production resumed in Asia Pacific by the end of the first quarter of 2020, albeit at a lower capacity and has steadily increased in production capacity throughout the second quarter. For our North America and Europe facilities, production resumed in May 2020 at a lower capacity and has increased through the remainder of the second quarter. Finally, for our South America facilities, production resumed in the second quarter, but has remained at a lower capacity. We are collaborating closely with our customers as production volume continues to increase, while also adhering to enhanced safety standards and measures to protect our employees.

Light vehicle production in certain regions for the three and six months ended June 30, 2020 and 2019 was as follows:

*(In millions of units)*

|  | Three Months Ended June 30, 2020(1) | 2019(1) | % Change | Six Months Ended June 30, 2020(1) | 2019(1) | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | 1.3 | 4.2 | (69.1)% | 5.1 | 8.5 | (39.9)% |
| Europe | 2.1 | 5.6 | (62.3)% | 6.8 | 11.3 | (39.7)% |
| Asia Pacific | 8.4 | 10.9 | (22.8)% | 16.7 | 22.6 | (26.3)% |
| Greater China | 6.0 | 5.5 | 9.1% | 9.3 | 11.5 | (19.6)% |
| South America | 0.2 | 0.9 | (82.0)% | 0.8 | 1.7 | (51.0)% |

(1) Production data based on IHS Automotive, July 2020.

Total vehicle production has decreased substantially across the globe. The COVID-19 pandemic has emerged as the biggest risk factor facing the automotive industry. Plant shutdowns have greatly slowed production and have been accompanied by decreased demand for vehicles, as new vehicle sales are highly dependent on strong consumer confidence and low unemployment. While the outlook for the second half of the year remains uncertain, there are signs that the global economy is beginning to rebound from the impacts of the pandemic. Lower unemployment rates, improving consumer confidence and lower than normal light vehicle inventory levels could all have a positive impact on light vehicle production going forward.

### Results of Operations

*(dollar amounts in thousands)*

|  | Three Months Ended June 30, 2020 | 2019 | Change | Six Months Ended June 30, 2020 | 2019 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Sales | $340,467 | $764,698 | $(424,231) | $995,357 | $1,642,693 | $(647,336) |
| Cost of products sold | 400,838 | 666,828 | (265,990) | 1,012,585 | 1,429,318 | (416,733) |
| Gross profit (loss) | (60,371) | 97,870 | (158,241) | (17,228) | 213,375 | (230,603) |
| Selling, administration & engineering expenses | 68,271 | 74,170 | (5,899) | 138,942 | 161,144 | (22,202) |
| Gain on sale of business | — | (189,910) | 189,910 | — | (189,910) | 189,910 |
| Amortization of intangibles | 3,513 | 5,148 | (1,635) | 7,963 | 8,923 | (960) |
| Restructuring charges | 9,774 | 5,927 | 3,847 | 17,050 | 23,642 | (6,592) |
| Impairment of assets held for sale | 12,391 | — | 12,391 | 86,470 | — | 86,470 |
| Other impairment charges | 163 | 2,188 | (2,025) | 1,140 | 2,188 | (1,048) |
| Operating (loss) profit | (154,483) | 200,347 | (354,830) | (268,793) | 207,388 | (476,181) |
| Interest expense, net of interest income | (12,771) | (11,575) | (1,196) | (23,008) | (23,507) | 499 |
| Equity in (losses) earnings of affiliates | (3,011) | 1,891 | (4,902) | (1,580) | 4,249 | (5,829) |
| Other expense, net | (4,701) | (1,781) | (2,920) | (8,141) | (2,577) | (5,564) |
| (Loss) income before income taxes | (174,966) | 188,882 | (363,848) | (301,522) | 185,553 | (487,075) |
| Income tax (benefit) expense | (38,982) | 44,222 | (83,204) | (53,099) | 46,256 | (99,355) |
| Net (loss) income | (135,984) | 144,660 | (280,644) | (248,423) | 139,297 | (387,720) |
| Net loss attributable to noncontrolling interests | 1,765 | 545 | 1,220 | 3,616 | 493 | 3,123 |
| Net (loss) income attributable to Cooper-Standard Holdings Inc. | $(134,219) | $145,205 | $(279,424) | $(244,807) | $139,790 | $(384,597) |

### Three Months Ended June 30, 2020 Compared with Three Months Ended June 30, 2019

#### Sales

Sales for the three months ended June 30, 2020 decreased 55.5%, compared to the three months ended June 30, 2019. The decline was almost entirely driven by the decrease in vehicle production volume due to government imposed global shutdowns related to the COVID-19 pandemic.

*(dollar amounts in thousands)*

|  | Three Months Ended June 30, 2020 | 2019 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Divestiture |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total sales | $340,467 | $764,698 | $(424,231) | $(416,550) | $(6,697) | $(984) |

\* Net of customer price reductions

#### Gross Profit

*(dollar amounts in thousands)*

|  | Three Months Ended June 30, 2020 | 2019 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Cost Increases / (Decreases) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of products sold | $400,838 | $666,828 | $(265,990) | $(242,555) | $(7,739) | $(15,696) |
| Gross profit (loss) | (60,371) | 97,870 | (158,241) | (173,995) | 1,042 | 14,712 |
| Gross profit percentage of sales | (17.7)% | 12.8% |  |  |  |  |

\* Net of customer price reductions

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 39% and 50% of total cost of products sold for the three months ended June 30, 2020 and 2019, respectively. The change in the cost of products sold was driven by government imposed global shutdowns related to the COVID-19 pandemic, commodity price fluctuations, foreign exchange, and wage inflation.

Gross profit (loss) for the three months ended June 30, 2020 decreased $158.2 million or 161.7% compared to the three months ended June 30, 2019. The decrease was driven by the decline in vehicle production volume due to government imposed global shutdowns related to the COVID-19 pandemic, customer price reductions, and wage inflation. These items were partially offset by net favorable operational performance, restructuring savings, material cost reductions and foreign exchange.

*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 three months ended June 30, 2020 was 20.1% of sales compared to 9.7% for the three months ended June 30, 2019. The increase in rate was driven by the significant decline in total sales. Selling, administration and engineering expenses were lower by $5.9 million. The decrease in amount was primarily due to savings generated from salaried employee initiatives resulting in lower compensation-related expenses and lower travel expenses, partially offset by general inflation.

*Gain on Sale of Business.* Gain on sale of business of $189.9 million for the three months ended June 30, 2019 related to the sale of our AVS product line within our North America, Europe and Asia Pacific segments. We completed the sale to Continental AG on April 1, 2019.

*Restructuring.* Restructuring charges for the three months ended June 30, 2020 increased $3.8 million compared to the three months ended June 30, 2019. The increase was driven by higher restructuring charges in North America, Asia Pacific and South America, primarily related to plant closures and other footprint rationalization initiatives.

*Impairment Charges.* Non-cash impairment charges for the three months ended June 30, 2020 increased $10.4 million compared to the three months ended June 30, 2019, primarily related to reducing the carrying value of the held for sale facilities to 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 three months ended June 30, 2020 increased $1.2 million compared to the three months ended June 30, 2019, primarily due to higher outstanding debt balances.

*Other Expense, Net.* Other expense for the three months ended June 30, 2020 increased $2.9 million compared to the three months ended June 30, 2019, primarily due to higher foreign currency losses.

*Income Tax (Benefit) Expense.* Income tax benefit for the three months ended June 30, 2020 was $39.0 million on a loss before income taxes of $175.0 million. This compares to an income tax expense of $44.2 million on earnings before income taxes of $188.9 million for the three months ended June 30, 2019. The effective tax rate for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 differed primarily due to the geographic mix of pre-tax losses driven by the impairment charge on held for sale 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 Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) net operating loss (“NOL”) carry back provision that allows NOLs generated in tax years 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%.

### Six Months Ended June 30, 2020 Compared with Six Months Ended June 30, 2019

#### Sales

Sales for the six months ended June 30, 2020 decreased 39.4%, compared to the six months ended June 30, 2019. The decline was mainly driven by the decrease in vehicle production volume due to government imposed global shutdowns related to the COVID-19 pandemic, customer price reductions and foreign exchange.

*(dollar amounts in thousands)*

|  | Six Months Ended June 30, 2020 | 2019 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Acquisitions / Divestiture, Net |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total sales | $995,357 | $1,642,693 | $(647,336) | $(548,369) | $(20,237) | $(78,730) |

\* Net of customer price reductions

#### Gross Profit

*(dollar amounts in thousands)*

|  | Six Months Ended June 30, 2020 | 2019 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Cost Increases / (Decreases)\*\* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of products sold | $1,012,585 | $1,429,318 | $(416,733) | $(310,231) | $(18,794) | $(87,708) |
| Gross profit (loss) | (17,228) | 213,375 | (230,603) | (238,138) | (1,443) | 8,978 |
| Gross profit percentage of sales | (1.7)% | 13.0% |  |  |  |  |

\* Net of customer price reductions

\*\* Includes the net impact of acquisitions and divestiture

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 44% of total cost of products sold for the six months ended June 30, 2020 and 51% of total cost of products sold for six months ended June 30, 2019. 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, continuous improvement and lean manufacturing, material cost reductions, commodity price fluctuations, foreign exchanges, and wage inflation.

Gross profit (loss) for the six months ended June 30, 2020 decreased 108.1% compared to the six months ended June 30, 2019. The decrease was driven by the decline in vehicle production volume due to government imposed global shutdowns related to the COVID-19 pandemic, customer price reductions, commodity price inflation, foreign exchange pressures, and wage inflation. These items were partially offset by net favorable operational performance, restructuring savings, and material cost reductions.

*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 six months ended June 30, 2020 was 14.0% of sales compared to 9.8% for the six months ended June 30, 2019. 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 employee initiatives resulting in lower compensation-related expenses, the sale of our AVS product line and lower travel expenses, partially offset by general inflation.

*Gain on Sale of Business.* Gain on sale of business of $189.9 million for the six months ended June 30, 2019 related to the sale of our AVS product line within our North America, Europe and Asia Pacific segments. We completed the sale to Continental AG on April 1, 2019.

*Restructuring.* Restructuring charges for the six months ended June 30, 2020 decreased $6.6 million compared to the six months ended June 30, 2019. The decrease was a result of lower restructuring charges in Europe, Asia Pacific and Corporate and other, as the first quarter of 2019 included certain salaried employee initiatives and footprint rationalization initiatives.

*Impairment Charges.* Non-cash impairment charges for the six months ended June 30, 2020 increased $85.4 million compared to the six months ended June 30, 2019. The increase primarily related to reducing the carrying value of the held for sale facilities to 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 six months ended June 30, 2020 decreased $0.5 million compared to the six months ended June 30, 2019, due to interest expense related to the ABL Facility in the first quarter of 2019.

*Other Expense, Net.* Other expense for the six months ended June 30, 2020 increased $5.6 million compared to the six months ended June 30, 2019, primarily due to higher foreign currency losses.

*Income Tax (Benefit) Expense.* Income tax benefit for the six months ended June 30, 2020 was $53.1 million on a loss before income taxes of $301.5 million. This compares to income tax expense of $46.3 million on earnings before income taxes of $185.6 million for the six months ended June 30, 2019. The effective tax rate for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 differed primarily due to the geographic mix of pre-tax losses driven by the impairment charge on held for sale 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. Additionally, a discrete expense of $12.9 million for the initial recognition of valuation allowances against net deferred tax assets in certain foreign jurisdictions was recorded in the six months ended June 30, 2020.

### Segment Results of Operations

Our business is now 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 June 30, 2020 Compared with Three Months Ended June 30, 2019

#### Sales

*(dollar amounts in thousands)*

| Sales to external customers | Three Months Ended June 30, 2020 | 2019 | Change | Variance Due To: Volume/ Mix\* | Foreign Exchange | Divestiture |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $126,337 | $379,121 | $(252,784) | $(252,689) | $(95) | $— |
| Europe | 78,805 | 205,029 | (126,224) | (124,304) | (947) | (973) |
| Asia Pacific | 105,726 | 118,495 | (12,769) | (8,555) | (4,203) | (11) |
| South America | 3,881 | 25,124 | (21,243) | (19,954) | (1,289) | — |
| Total Automotive | 314,749 | 727,769 | (413,020) | (405,502) | (6,534) | (984) |
| Corporate, eliminations and other | 25,718 | 36,929 | (11,211) | (11,048) | (163) | — |
| Consolidated | $340,467 | $764,698 | $(424,231) | $(416,550) | $(6,697) | $(984) |

\* Net of customer price reductions

- Volume and mix, net of customer price reductions, almost entirely is driven by the decline in vehicle production volume as a result of government imposed global shutdowns related to the COVID-19 pandemic.
- The impact of foreign currency exchange primarily relates to the Chinese Renminbi, Brazilian Real, and Euro.

#### Segment adjusted EBITDA

*(dollar amounts in thousands)*

| Segment adjusted EBITDA | Three Months Ended June 30, 2020 | 2019 | Change | Variance Due To: Volume/ Mix\* | Foreign Exchange | Cost (Increases)/ Decreases | Divestiture |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $(42,874) | $53,883 | $(96,757) | $(106,401) | $(515) | $10,152 | $7 |
| Europe | (41,403) | 5,996 | (47,399) | (50,698) | (602) | 3,700 | 201 |
| Asia Pacific | (2,172) | (1,826) | (346) | (6,708) | 922 | 5,679 | (239) |
| South America | (4,351) | (1,106) | (3,245) | (5,665) | (1,171) | 3,591 | — |
| Total Automotive | (90,800) | 56,947 | (147,747) | (169,472) | (1,366) | 23,122 | (31) |
| Corporate, eliminations and other | (2,952) | 1,024 | (3,976) | (4,523) | (645) | 1,192 | — |
| Consolidated adjusted EBITDA | $(93,752) | $57,971 | $(151,723) | $(173,995) | $(2,011) | $24,314 | $(31) |

\* Net of customer price reductions

- Volume and mix, net of customer price reductions, almost entirely is driven by the decline in vehicle production volume as a result of government imposed global shutdowns related to the COVID-19 pandemic.
- The impact of foreign currency exchange is driven by the Euro, Mexican Peso, Canadian Dollar, Chinese Renminbi, Brazilian Real, Polish Zloty, and Czech Koruna.
- The Cost (Increases) / Decreases category above includes:
- Reduction in compensation-related expenses, purchasing savings through lean initiatives, restructuring savings;
- Wage increases;
- Net manufacturing efficiencies of $21 million, weakened by the impact of COVID-19, primarily driven by our European, North America and Asia Pacific segments.

### Six Months Ended June 30, 2020 Compared with Six Months Ended June 30, 2019

#### Sales

*(dollar amounts in thousands)*

| Sales to external customers | Six Months Ended June 30, 2020 | 2019 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Acquisitions / Divestiture, Net |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $461,138 | $826,839 | $(365,701) | $(309,980) | $(890) | $(54,831) |
| Europe | 264,047 | 447,429 | (183,382) | (154,184) | (6,763) | (22,435) |
| Asia Pacific | 185,070 | 243,947 | (58,877) | (50,224) | (7,189) | (1,464) |
| South America | 24,352 | 48,361 | (24,009) | (19,124) | (4,885) | — |
| Total Automotive | 934,607 | 1,566,576 | (631,969) | (533,512) | (19,727) | (78,730) |
| Corporate, eliminations and other | 60,750 | 76,117 | (15,367) | (14,857) | (510) | — |
| Consolidated | $995,357 | $1,642,693 | $(647,336) | $(548,369) | $(20,237) | $(78,730) |

\* Net of customer price reductions

- Volume and mix, net of customer price reductions includes the impact of the decline in vehicle production volume as driven by government imposed global shutdowns related to the COVID-19 pandemic.
- The impact of foreign currency exchange primarily relates to the Chinese Renminbi, Euro and Brazilian Real.

#### Segment adjusted EBITDA

*(dollar amounts in thousands)*

| Segment adjusted EBITDA | Six Months Ended June 30, 2020 | 2019 | Change | Variance Due To: Volume/ Mix\* | Foreign Exchange | Cost (Increases) / Decreases | Acquisitions / Divestiture, Net |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $(5,855) | $113,034 | $(118,889) | $(133,228) | $(388) | $18,480 | $(3,753) |
| Europe | (46,026) | 15,271 | (61,297) | (68,218) | 1,010 | 8,466 | (2,555) |
| Asia Pacific | (19,229) | (2,233) | (16,996) | (24,056) | (587) | 8,237 | (590) |
| South America | (8,928) | (2,139) | (6,789) | (6,146) | (4,684) | 4,041 | — |
| Total Automotive | (80,038) | 123,933 | (203,971) | (231,648) | (4,649) | 39,224 | (6,898) |
| Corporate, eliminations and other | (5,435) | (1,828) | (3,607) | (6,490) | (1,697) | 4,580 | — |
| Consolidated adjusted EBITDA | $(85,473) | $122,105 | $(207,578) | $(238,138) | $(6,346) | $43,804 | $(6,898) |

\* Net of customer price reductions

- Volume and mix, net of customer price reductions, includes the impact of the decline in vehicle production volume as driven by government imposed global shutdowns related to the COVID-19 pandemic.
- The impact of foreign currency exchange is driven by the Euro, Mexican Peso, Canadian Dollar, Chinese Renminbi, Brazilian Real, Euro, Polish Zloty, and Czech Koruna.
- The Cost (Increases) / Decreases category above includes:
- Reduction in compensation-related expenses, purchasing savings through lean initiatives, restructuring savings;
- Commodity cost fluctuations and wage increases;
- Net manufacturing efficiencies of $35 million, weakened by the impact of COVID-19, primarily driven by our European, North America and Asia Pacific segments.

### 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 10. “Debt” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for additional information.

Taking into account the ramp up of production thus far, our current expectations and projections for increasing OEM customer production plans and due to the aggressive actions we have taken to preserve cash and enhance liquidity, including significantly decreasing our capital expenditures, 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. 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 impact of COVID-19, and other factors.

### Cash Flows

*Operating Activities.* Net cash used in operations was $126.2 million for the six months ended June 30, 2020, compared to net cash used in operations of $9.0 million for the six months ended June 30, 2019. The net outflow was primarily due to decreased cash earnings, partially offset by working capital improvements.

*Investing Activities.* Net cash used in investing activities was $62.1 million for the six months ended June 30, 2020, compared to net cash provided by investing activities of $149.5 million for the six months ended June 30, 2019. Significant decreases in capital expenditures occurred in the second quarter of 2020, in order to preserve liquidity in response to the COVID-19 pandemic. Additionally, lower capital expenditures are expected in the second half of 2020. Cash provided 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.

*Financing Activities.* Net cash provided by financing activities totaled $232.7 million for the six months ended June 30, 2020, compared to net cash used in financing activities of $91.2 million for the six months ended June 30, 2019. The inflow was primarily due to proceeds from issuance of our Senior Secured Notes during the six months ended June 30, 2020. There were no share repurchases during the six months ended June 30, 2020. Cash used for share repurchases was $36.6 million for the six months ended June 30, 2019.

### Share Repurchase Program

In June 2018, our Board of Directors approved a new 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 June 30, 2020, we had approximately $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 six months ended June 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 six months ended June 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:

*(dollar amounts in thousands)*

|  | Three Months Ended June 30, 2020 | 2019 | Six Months Ended June 30, 2020 | 2019 |
| --- | ---: | ---: | ---: | ---: |
| Net (loss) income attributable to Cooper-Standard Holdings Inc. | $(134,219) | $145,205 | $(244,807) | $139,790 |
| Income tax (benefit) expense | (38,982) | 44,222 | (53,099) | 46,256 |
| Interest expense, net of interest income | 12,771 | 11,575 | 23,008 | 23,507 |
| Depreciation and amortization | 42,460 | 37,868 | 80,223 | 74,473 |
| EBITDA | $(117,970) | $238,870 | $(194,675) | $284,026 |
| Impairment of assets held for sale | 12,391 | — | 86,470 | — |
| Restructuring charges | 9,774 | 5,927 | 17,050 | 23,642 |
| Project costs (1) | 1,809 | 405 | 4,234 | 1,668 |
| Other impairment charges (2) | 163 | 2,188 | 847 | 2,188 |
| Lease termination costs (3) | 81 | 491 | 601 | 491 |
| Gain on sale of business (4) | — | (189,910) | — | (189,910) |
| Adjusted EBITDA | $(93,752) | $57,971 | $(85,473) | $122,105 |

(1) Project costs recorded in selling, administration and engineering expense related to assets held for sale in 2020 and acquisitions and divestiture costs in 2019.

(2) Non-cash impairment charges of $847 related to fixed assets, net of approximately $293 attributable to our noncontrolling interests for the six months ended June 30, 2020.

(3) Lease termination costs no longer recorded as restructuring charges in accordance with ASC 842.

(4) Gain on sale of AVS product line.

### Contingencies and Environmental Matters

The information concerning contingencies, including environmental contingencies and the amount currently held in reserve for environmental matters, contained in Note 21. “Commitments and Contingencies” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report, is incorporated herein by reference.

### Recently Issued Accounting Pronouncements

See Note 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 six months ended June 30, 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 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, 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’ 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, 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; 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; 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.

## Market risk

As filed, 389 characters.

Except 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 2019 Annual Report.

## Controls and procedures

As filed, 1,244 characters.

### 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 June 30, 2020 that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 10,951 characters.

The Company is supplementing the risk factors set out under “Part I. Item 1A. Risk Factors” in its 2019 Annual Report, as updated by the risk factors set out under “Part II. Item 1A. Risk Factors” in its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020 (the “First Quarter Form 10-Q”), with the risk factors set forth below. The risk factors below should be read in conjunction with the factors set out in the 2019 Annual Report and the First Quarter Form 10-Q.

***We have a substantial amount of indebtedness, which could have a material adverse effect on our financial condition and our ability to obtain financing in the future and to react to changes in our business.***

For discussion of our debt and financing arrangements, including our Term Loan Facility, ABL Facility, Senior Notes and Senior Secured Notes, see “Liquidity and Capital Resources – Short and Long-Term Liquidity Considerations and Risks” in Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 10. “Debt” to the unaudited condensed consolidated financial statements included under Part I. Item 1. “Financial Statements” of this Report.

Our substantial amount of debt and our debt service obligations could limit our ability to satisfy our obligations, limit our ability to operate our business and impair our competitive position. For example, it could:

- increase our vulnerability to adverse economic and general industry conditions, including interest rate fluctuations, because a portion of our borrowings is at variable rates of interest;
- require us to dedicate a substantial portion of our cash flows from operations to payments on our debt, which would reduce the availability of cash to fund working capital, capital expenditures or other general corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our business and industry;
- place us at a disadvantage compared to competitors that may have proportionately less debt;
- limit our ability to obtain additional debt or equity financing due to applicable financial and restrictive covenants in our debt agreements; and
- increase our cost of borrowing.

Our ability to make scheduled payments on our debt or to refinance these obligations depends on our financial condition, operating performance and our ability to generate cash in the future. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, sell material assets, seek additional capital or restructure or refinance our indebtedness, any of which could have a material adverse effect on our business, results of operations and financial condition. In addition, we may not be able to effect any of these actions, if necessary, on commercially reasonable terms or at all. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments, including the credit agreements governing the Term Loan Facility and the ABL Facility and the indentures governing the Senior Notes and the Senior Secured Notes, may limit or prevent us from taking any of these actions. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness on commercially reasonable terms or at all. An inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have an adverse effect, which could be material, on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations in respect of the Term Loan Facility, the ABL Facility, the Senior Notes or the Senior Secured Notes.

Although the credit agreements governing the Term Loan Facility and the ABL Facility contain certain limitations on our ability to incur additional indebtedness, they do not prohibit us from incurring obligations that do not constitute indebtedness as defined therein. To the extent that we incur additional indebtedness or such other obligations, the risk associated with our substantial indebtedness described above, including our potential inability to service our debt, will increase.

***Our debt instruments impose significant operating and financial restrictions on us and our subsidiaries.***

The credit agreements governing the Term Loan Facility and the ABL Facility impose significant operating and financial restrictions and limit our ability, among other things, to:

- incur, assume or permit to exist additional indebtedness (including guarantees thereof);
- pay dividends or certain other distributions on our capital stock or repurchase our capital stock or prepay subordinated indebtedness;
- incur liens on assets;
- make certain investments or other restricted payments;
- allow to exist certain restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us;
- engage in transactions with affiliates;
- alter the business that we conduct; and
- sell certain assets or merge or consolidate with or into other companies.

Moreover, our ABL Facility provides the agent considerable discretion to impose reserves, which could materially reduce the amount of borrowings that would otherwise be available to us.

The indentures governing the Senior Notes and the Senior Secured Notes also impose restrictions and limit our ability, among other things, to:

- incur or guarantee additional indebtedness or issue certain preferred stock;
- create or incur liens;
- make certain restricted payments;
- sell certain assets or merge or consolidate with or into other companies; and
- enter into certain sale-leaseback transactions.

As a result of these covenants and restrictions (including borrowing base availability), we are limited in how we conduct our business, and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities or acquisitions. The terms of any future indebtedness we may incur could include more restrictive covenants. We may not be able to maintain compliance with these covenants in the future and, if we fail to do so, we may not be able to obtain waivers from the lenders and/or amend the covenants in such agreements. Our failure to comply with the restrictive covenants described above as well as others contained in our future debt instruments from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms, our financial condition, results of operations and cash flows could be adversely affected.

If there were an event of default under any of the agreements relating to our outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. Our assets or cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon occurrence of an event of default. Further, if we are unable to repay, refinance or restructure our indebtedness under our secured debt, the holders of such debt could exercise remedies against the collateral securing that indebtedness. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments. As a result, any default by us on our indebtedness could have a material adverse effect on our business, financial condition and results of operation.

***We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.***

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. If our operating results and available cash are insufficient to meet our debt service obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them, and these proceeds may not be adequate to meet any debt service obligations then due. Any future refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants which could further restrict our business operations. Additionally, the credit agreements governing the ABL Facility and the Term Loan Facility and the indentures governing the Senior Notes and the Senior Secured Notes limit the use of the proceeds from any disposition of our assets. As a result, the credit agreements governing the ABL Facility and the Term Loan Facility and the indentures governing the Senior Notes and the Senior Secured Notes may prevent us from using the proceeds from such dispositions to satisfy our debt service obligations.

***Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.***

The borrowings under the ABL Facility and the Term Loan Facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease.

Filed Aug 5, 2020.
Source: SEC EDGAR, the filing index for accession 0001320461-20-000060. Last ingested by Listed: Nov 5, 2026, 16:52 ET. No prices; not investment advice.