# Cooper-Standard Holdings Inc.: Form 10-Q for the period ended Sep 30, 2021

- Company: [Cooper-Standard Holdings Inc.](/companies/cps.md) (CIK 1320461)
- Form: 10-Q
- Filed: 2021-11-04
- Accepted by EDGAR: Nov 4, 2021, 16:08 ET
- Period: 2021-09-30
- Accession: 0001320461-21-000128
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1320461/000132046121000128/cps-20210930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1320461/000132046121000128/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-07-01 to 2021-09-30 | $0 | us-gaap:Revenues |
| Revenue | 9 months, 2021-01-01 to 2021-09-30 | $0 | us-gaap:Revenues |
| Cost of revenue | 3 months, 2021-07-01 to 2021-09-30 | $534.8m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2021-01-01 to 2021-09-30 | $1.67bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2021-07-01 to 2021-09-30 | −$8.1m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2021-01-01 to 2021-09-30 | $59.2m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2021-07-01 to 2021-09-30 | $60.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2021-01-01 to 2021-09-30 | $168.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2021-07-01 to 2021-09-30 | −$72.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2021-01-01 to 2021-09-30 | −$150.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2021-07-01 to 2021-09-30 | $32.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2021-01-01 to 2021-09-30 | $15.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-07-01 to 2021-09-30 | −$123.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2021-01-01 to 2021-09-30 | −$220.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-07-01 to 2021-09-30 | −$7.20 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2021-01-01 to 2021-09-30 | −$12.96 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2021-07-01 to 2021-09-30 | −$7.20 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2021-01-01 to 2021-09-30 | −$12.96 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2021-07-01 to 2021-09-30 | 17,097,766 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2021-01-01 to 2021-09-30 | 17,027,226 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2021-01-01 to 2021-09-30 | −$111.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2021-01-01 to 2021-09-30 | $76.0m | us-gaap:PaymentsToAcquireProductiveAssets |
| Cash and equivalents | at 2021-09-30 | $253.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-09-30 | $1.07bn | us-gaap:AssetsCurrent |
| Total assets | at 2021-09-30 | $2.32bn | us-gaap:Assets |
| Current liabilities | at 2021-09-30 | $607.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2021-09-30 | $1.91bn | us-gaap:Liabilities |
| Current portion of debt | at 2021-09-30 | $40.1m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2021-09-30 | $393.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 46,903 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, 2020 filed with the U.S. Securities and Exchange Commission (“2020 Annual Report”), including Item 1A. “Risk Factors.” The following should be read in conjunction with our 2020 Annual Report and the other information included herein. Our discussion of trends and conditions supplements and updates such discussion included in our 2020 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 2020 made directly to major OEMs. We operate our business along the following reportable segments: North America, Europe, Asia Pacific and South America. All other business activities are reported in Corporate, eliminations and other.

### Recent Trends and Conditions

#### General Economic Conditions and Outlook

The global automotive industry is susceptible to uncertain economic conditions that could adversely impact new vehicle demand and production. Business conditions may vary significantly from period to period or region to region. The global COVID-19 pandemic created an unusually high degree of economic disruption and uncertainty during 2020, which has continued into 2021. Although optimism for a global economic recovery has continued through the first nine months of 2021, a considerable amount of uncertainty remains, including with respect to variant strains of the virus, access to and acceptance of effective vaccines and related governmental policies and restrictions. The rate of recovery has varied across regions, and, in some cases, rapid growth and spikes in consumer and industrial demand have outpaced production and supply chain capacity. These supply/demand imbalances, primarily semiconductor supply issues, and related inflationary pressures have added another layer of uncertainty for the automotive industry and the broader economy around the world. Despite these uncertainties, economists at the International Monetary Fund (IMF) remain positive in their outlook. They are now expecting the global economy to grow by approximately 5.9% in 2021.

In North America, the United States government has injected historic levels of fiscal stimulus into its economy to sustain businesses, create jobs and drive consumer confidence and spending. In addition, rapid distribution and administration of COVID-19 vaccines have enabled large segments of the economy to return to near normal levels of activity, spurring growth. Unemployment levels improved during the third quarter of 2021, falling below 5.0% in September. At the same time, businesses are continuing to report shortages of labor and reduced output in many markets. Additionally, inflation has continued to ramp higher and is expected to continue throughout 2021. This is having a negative impact on consumer confidence and corporate earnings, which could reduce future economic activity and growth. Despite these adverse impacts, IMF economists currently expect economic growth of approximately 6.0% for the North America region in 2021.

In Europe, the economy bounced back robustly in the second quarter of 2021, as the lifting of pandemic-related restrictions in the region and expansionary fiscal and monetary policies bolstered household spending and investment activity. Available indicators suggest the recovery carried over into the third quarter, albeit at a softer pace. Consumer confidence improved in the third quarter and remains above pre-pandemic levels. However, unemployment in the region is currently estimated at 8.0%, still significantly higher than pre-pandemic levels. Based on improving health conditions and increasing consumer confidence, the IMF is projecting economic growth in the region of approximately 5.0% for 2021.

In the Asia Pacific region, China’s economy lost some momentum in the third quarter of 2021, impacted by supply disruptions, negative developments in the property sector, restraints on polluting industries, and some mobility restrictions. In August, credit growth continued to moderate while the non-manufacturing Purchasing Managers’ Index declined. Consumer confidence in China has been trending down in recent months, including during the third quarter of 2021. However, unemployment in the region’s largest economy remains at approximately 5.0%, similar to pre-pandemic levels. Economists at the IMF currently expect China’s economy to grow by 8.0% in 2021, fueled by pent-up domestic demand, as well as increasing export volumes.

In South America, the Brazilian economy continues to show mixed signals of risk and recovery. Unemployment in the country recently improved to 13.7%, the lowest level in more than a year, while consumer confidence ticked slightly lower in August following five consecutive months of improvement. The manufacturing PMI fell to a four-month low as output growth slowed. Economists at the IMF estimate that the Brazilian economy will grow by approximately 5.0% in 2021, underpinned by improving domestic and external demand, as COVID-19 vaccines continue broad distribution and related restrictions are gradually being lifted. However, frail fiscal accounts, a heavy debt burden and political polarization represent key risks. Given the long history of political instability and economic volatility, we remain cautious for the mid to long-term economic outlook in the region.

#### Raw Materials

Our business is susceptible to inflationary pressures with respect to raw materials which may place operational and profitability burdens on the entire supply chain. Costs related to raw materials, such as steel, aluminum, and oil and oil-derived commodities, continue to be volatile, which has led to extended and magnified increases in these costs in 2021. We expect these increases to have an impact on results for the remainder of the year and into 2022. 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 coinciding with the shutdown of our customer facilities in all regions. Production subsequently resumed in all regions, at steadily increasing rates throughout the year.

In the first quarter of 2021 and continuing throughout the year, OEM production volumes were disrupted by the global shortage of semiconductors. The shortage has resulted in slowdowns and stoppages in the final production of vehicles. Current customer schedules and industry forecasts suggest production volumes will begin to improve in the fourth quarter. Therefore, we are collaborating closely with our customers to minimize production inefficiencies while supporting their needs.

Light vehicle production in certain regions for the three and nine months ended September 30, 2021 and 2020 was as follows:

*(In millions of units)*

|  | Three Months Ended September 30, 2021(1) | 2020(1) | % Change | Nine Months Ended September 30, 2021(1) | 2020(1) | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | 3.0 | 4.0 | (25.2)% | 9.8 | 9.2 | 6.8% |
| Europe | 3.1 | 4.4 | (29.6)% | 12.0 | 11.3 | 5.7% |
| Asia Pacific | 9.4 | 11.0 | (15.1)% | 30.7 | 27.8 | 10.6% |
| Greater China | 5.3 | 6.4 | (16.8)% | 17.0 | 15.8 | 7.8% |
| South America | 0.6 | 0.7 | (10.9)% | 1.9 | 1.5 | 28.6% |

(1) Production data based on IHS Automotive, October 2021.

In all regions, during the nine months ended September 30, 2021, vehicle production increased compared to the comparable prior year period, despite the impact of semiconductor supply issues in the current year. The semiconductor supply issues in 2021 resulted in shutdowns at certain facilities, particularly in North America, for intermediate periods of time, as compared to the widespread and lengthy facility shutdowns in 2020 due to the initial impacts of COVID-19. During the third quarter of 2021, decreased vehicle production in all regions compared to the third quarter of 2020 was the result of higher than normal vehicle production in the prior year period as production facilities re-opened after COVID-19 closures and met pent-up demand. Additionally, volume production in the third quarter of 2021 continued to be suppressed by semiconductor supply issues, which resulted in significant decreases in the quarter-over-quarter comparison across all regions.

#### Notable Events

Subsequent to the end of the third quarter, the Company finalized a long-term commercial agreement with a footwear manufacturer granting them license to use FortrexTM technology in the manufacture of their footwear products. The agreement calls for the payment of licensing fees and ongoing volume-based royalties with an established minimum value.

### Results of Operations

*(dollar amounts in thousands)*

|  | Three Months Ended September 30, 2021 | 2020 | Change | Nine Months Ended September 30, 2021 | 2020 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Sales | $526,690 | $683,200 | $(156,510) | $1,728,842 | $1,678,557 | $50,285 |
| Cost of products sold | 534,817 | 598,714 | (63,897) | 1,669,610 | 1,611,299 | 58,311 |
| Gross (loss) profit | (8,127) | 84,486 | (92,613) | 59,232 | 67,258 | (8,026) |
| Selling, administration & engineering expenses | 60,367 | 60,059 | 308 | 168,506 | 199,001 | (30,495) |
| Gain on sale of business, net | — | (2,314) | 2,314 | (696) | (2,314) | 1,618 |
| Amortization of intangibles | 1,819 | 1,669 | 150 | 5,524 | 9,632 | (4,108) |
| Restructuring charges | 1,573 | 6,186 | (4,613) | 34,251 | 23,236 | 11,015 |
| Impairment charges | 1,006 | 100 | 906 | 1,847 | 87,710 | (85,863) |
| Operating (loss) profit | (72,892) | 18,786 | (91,678) | (150,200) | (250,007) | 99,807 |
| Interest expense, net of interest income | (18,243) | (17,985) | (258) | (54,152) | (40,993) | (13,159) |
| Equity in (losses) earnings of affiliates | (1,114) | 738 | (1,852) | 65 | (842) | 907 |
| Other (expense) income, net | (494) | 2,784 | (3,278) | (4,221) | (5,357) | 1,136 |
| (Loss) income before income taxes | (92,743) | 4,323 | (97,066) | (208,508) | (297,199) | 88,691 |
| Income tax expense (benefit) | 32,121 | (2,386) | 34,507 | 15,598 | (55,485) | 71,083 |
| Net (loss) income | (124,864) | 6,709 | (131,573) | (224,106) | (241,714) | 17,608 |
| Net loss (income) attributable to noncontrolling interests | 1,691 | (2,328) | 4,019 | 3,458 | 1,288 | 2,170 |
| Net (loss) income attributable to Cooper-Standard Holdings Inc. | $(123,173) | $4,381 | $(127,554) | $(220,648) | $(240,426) | $19,778 |

### Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

#### Sales

Sales for the three months ended September 30, 2021 decreased 22.9%, compared to the three months ended September 30, 2020. The decrease in sales was driven by lower vehicle production volume due to the impact of semiconductor supply issues in the current year and the prior year ramp up and strong production of vehicles following lengthy shutdowns from COVID-19, partially offset by foreign exchange.

*(dollar amounts in thousands)*

|  | Three Months Ended September 30, 2021 | 2020 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Divestitures |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total sales | $526,690 | $683,200 | $(156,510) | $(165,348) | $8,838 | $— |

\* Net of customer price reductions

#### Gross (Loss) Profit

*(dollar amounts in thousands)*

|  | Three Months Ended September 30, 2021 | 2020 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Cost Increases / (Decreases) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of products sold | $534,817 | $598,714 | $(63,897) | $(101,777) | $10,315 | $27,565 |
| Gross (loss) profit | (8,127) | 84,486 | (92,613) | (63,571) | (1,477) | (27,565) |
| Gross (loss) profit percentage of sales | (1.5)% | 12.4% |  |  |  |  |

\* 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 47% and 49% of total cost of products sold for the three months ended September 30, 2021 and 2020, respectively. The change in the cost of products sold was impacted by vehicle volume and mix, higher commodity and material costs, higher labor and overhead costs due to inconsistent volume production schedules, foreign exchange and wage inflation.

Gross (loss) profit for the three months ended September 30, 2021 decreased $92.6 million compared to the three months ended September 30, 2020. The change was driven by volume and mix, commodity and wage inflation, the non-recurrence of prior year government incentives and foreign exchange. These items were partially offset by lower variable employee compensation expenses, purchasing lean savings, and restructuring savings.

*Selling, Administration and Engineering Expense.* Selling, administration and engineering expense includes administrative expenses as well as product engineering and design and development costs. Selling, administration and engineering expense for the three months ended September 30, 2021 was 11.5% of sales compared to 8.8% for the three months ended September 30, 2020. The increase was primarily due to lower sales and the $11.2 million credit loss for certain accounts receivable deemed to be unrecoverable. Excluding the bad debt reserve, the decrease in amount was attributable to lower variable employee compensation expenses, and salaried headcount initiative savings, partially offset by general inflation and foreign exchange.

*Gain on Sale of Business, Net.* The gain on sale of business of $2.3 million for the three months ended September 30, 2020 related to the net effect of our 2020 divestitures.

*Amortization of Intangibles.* Intangible amortization for the three months ended September 30, 2021 increased $0.2 million compared to the three months ended September 30, 2020. The increase was attributable primarily to foreign exchange translation on our non-U.S. intangibles.

*Restructuring.* Restructuring charges for the three months ended September 30, 2021 decreased $4.6 million compared to the three months ended September 30, 2020. The decrease was driven by lower restructuring charges in North America and Europe, as certain headcount initiatives and footprint rationalization events neared completion.

*Impairment Charges.* Non-cash impairment charges for the three months ended September 30, 2021 increased $0.9 million compared to the three months ended September 30, 2020. The increase was driven by impairment charges related to idle assets, primarily at certain facilities in our North America and Europe regions.

*Interest Expense, Net.* Net interest expense for the three months ended September 30, 2021 increased $0.3 million compared to the three months ended September 30, 2020, due to lower interest income amounts attributable to lower invested cash balances.

*Other (Expense) Income, Net.* Other (expense) income for the three months ended September 30, 2021 increased $3.3 million compared to the three months ended September 30, 2020, primarily due to higher foreign currency losses.

*Income Tax Expense (Benefit).* Income tax expense for the three months ended September 30, 2021 was $32.1 million on losses before income taxes of $92.7 million compared to an income tax benefit of $2.4 million on earnings before income taxes of $4.3 million for the three months ended September 30, 2020. The effective tax rate for the three months ended September 30, 2021 differed primarily from the effective tax rate for the three months ended September 30, 2020 due to the negative impacts of the COVID-19 pandemic and other supply chain issues driving the initial recognition of valuation allowances in the U.S., resulting in tax expense of $31.7 million, which includes a reversal of tax benefits recorded for losses in the first six months of 2021. Geographic mix of pre-tax losses and the inability to record a tax benefit for pre-tax losses in certain foreign jurisdictions and U.S. states drives a difference between reporting periods. Additionally, the periods vary due to benefits recorded in the three month period ended September 30, 2020 as a result of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) net operating loss (“NOL”) carry back provision that allows NOLs generated to be carried back up to five years at the tax rates in effect during those periods, rather than carried forward at current federal tax rates of 21%.

### Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

#### Sales

Sales for the nine months ended September 30, 2021 increased 3.0%, compared to the nine months ended September 30, 2020. The increase was driven by vehicle production volume increases due to non-recurrence of lengthy shutdowns in the prior year period from COVID-19, offset in part by the impact of semiconductor supply issues in the current year. Foreign exchange also contributed to the increase in sales, which was partially offset by the prior year divestiture of our European rubber fluid transfer and specialty sealing businesses and Indian operations.

*(dollar amounts in thousands)*

|  | Nine Months Ended September 30, 2021 | 2020 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Divestitures |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total sales | $1,728,842 | $1,678,557 | $50,285 | $61,872 | $52,921 | $(64,508) |

\* Net of customer price reductions

#### Gross Profit

*(dollar amounts in thousands)*

|  | Nine Months Ended September 30, 2021 | 2020 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Cost Increases / (Decreases)\*\* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of products sold | $1,669,610 | $1,611,299 | $58,311 | $54,312 | $52,770 | $(48,771) |
| Gross profit | 59,232 | 67,258 | (8,026) | 7,560 | 151 | (15,737) |
| Gross profit percentage of sales | 3.4% | 4.0% |  |  |  |  |

\* Net of customer price reductions

\*\* Includes the net impact of divestitures

Cost of products sold is primarily comprised of material, labor, manufacturing overhead, freight, depreciation, warranty costs and other direct operating expenses. The Company’s material cost of products sold was approximately 47% and 45% of total cost of products sold for the nine months ended September 30, 2021 and 2020, respectively. The change in the cost of products sold was impacted by vehicle volume and mix, the prior year divestiture of our European rubber fluid transfer and specialty sealing businesses and Indian operations, continuous improvement and lean manufacturing, higher commodity and material costs, foreign exchange and wage inflation.

Gross profit for the nine months ended September 30, 2021 decreased 11.9% compared to the nine months ended September 30, 2020. The change was driven by commodity and wage inflation and the non-recurrence of prior year COVID-19 government incentives. These items were partially offset by volume and mix, net favorable operational performance, lower variable employee compensation expenses, purchasing lean savings, restructuring savings, and the prior year divestiture of our European rubber fluid transfer and specialty sealing businesses and Indian operations.

*Selling, Administration and Engineering Expense.* Selling, administration and engineering expense includes administrative expenses as well as product engineering and design and development costs. Sales, administration and engineering expense for the nine months ended September 30, 2021 was 9.7% of sales compared to 11.9% for the nine months ended September 30, 2020. The decrease was primarily due to salaried headcount initiative savings, lower variable employee compensation expenses, lower professional fees, and divestitures, partially offset by the $11.2 million credit loss for certain accounts receivable deemed to be unrecoverable and foreign exchange.

*Gain on Sale of Business, Net.* The gain on sale of business of $0.7 million for the nine months ended September 30, 2021 related to deconsolidation adjustments for the sale of our European fluid transfer and specialty sealing businesses and Indian operations. The gain on sale of business of $2.3 million for the nine months ended September 30, 2020 related to the net effect of our 2020 divestitures.

*Amortization of Intangibles.* Intangible amortization for the nine months ended September 30, 2021 decreased $4.1 million compared to the nine months ended September 30, 2020. The decrease was driven by a customer relationship intangible asset in the North America region that was fully amortized during the second quarter of 2020.

*Restructuring.* Restructuring charges for the nine months ended September 30, 2021 increased $11.0 million compared to the nine months ended September 30, 2020. The increase was driven by higher restructuring charges in Europe, primarily related to headcount initiatives and footprint rationalization.

*Impairment Charges.* Impairment charges of $1.8 million during the nine months ended September 30, 2021 related to idle assets, primarily at certain facilities in our North America and Europe regions. Impairment charges of $87.7 million during the nine months ended September 30, 2020 primarily related to reducing the carrying value of our held for sale facilities to fair value less costs to sell.

*Interest Expense, Net.* Net interest expense for the nine months ended September 30, 2021 increased $13.2 million compared to the nine months ended September 30, 2020, primarily due to a full nine months of interest expense for our Senior Secured Notes, which were issued in May 2020.

*Other Expense, Net.* Other expense for the nine months ended September 30, 2021 decreased $1.1 million compared to the nine months ended September 30, 2020, primarily due to higher benefit income and miscellaneous income amounts.

*Income Tax Expense (Benefit).* Income tax expense for the nine months ended September 30, 2021 was $15.6 million on losses before income taxes of $208.5 million compared to income tax benefit of $55.5 million on losses before income taxes of $297.2 million for the nine months ended September 30, 2020. The effective tax rate for the nine months ended September 30, 2021 differed primarily from the effective tax rate for the nine months ended September 30, 2020 due to the negative impacts of the COVID-19 pandemic and other supply chain issues driving the initial recognition of valuation allowances in the U.S resulting in net tax expense of $13.3 million, geographic mix of pre-tax losses, the inability to record a tax benefit for pre-tax losses in certain foreign jurisdictions and U.S. states, as well as benefits recorded in the nine-month period ended September 30, 2020 as a result of the CARES Act net operating loss carry back provision. Additionally, a discrete expense of $13.4 million for the initial recognition of valuation allowances against net deferred tax assets in certain foreign jurisdictions was recorded in the nine months ended September 30, 2020.

### Segment Results of Operations

Our business is organized into the following reportable segments: North America, Europe, Asia Pacific and South America. All other business activities are reported in Corporate, eliminations and other. The Company uses Segment adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. We have defined adjusted EBITDA as net income before interest, taxes, depreciation, amortization, restructuring expense, and special items.

The following tables present sales and segment adjusted EBITDA for each of the reportable segments.

### Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

#### Sales

*(dollar amounts in thousands)*

| Sales to external customers | Three Months Ended September 30, 2021 | 2020 | Change | Variance Due To: Volume/ Mix\* | Foreign Exchange | Divestitures |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $270,592 | $359,007 | $(88,415) | $(89,665) | $1,250 | $— |
| Europe | 98,682 | 146,029 | (47,347) | (48,118) | 771 | — |
| Asia Pacific | 109,526 | 131,063 | (21,537) | (27,813) | 6,276 | — |
| South America | 15,981 | 17,580 | (1,599) | (2,042) | 443 | — |
| Total Automotive | 494,781 | 653,679 | (158,898) | (167,638) | 8,740 | — |
| Corporate, eliminations and other | 31,909 | 29,521 | 2,388 | 2,290 | 98 | — |
| Consolidated | $526,690 | $683,200 | $(156,510) | $(165,348) | $8,838 | $— |

\* Net of customer price reductions

- Volume and mix, net of customer price reductions, was driven by vehicle production volume decreases due to semiconductor-related customer schedule reductions.
- The impact of foreign currency exchange primarily related to the Chinese Renminbi, Canadian Dollar, Euro and Brazilian Real.

#### Segment adjusted EBITDA

*(dollar amounts in thousands)*

| Segment adjusted EBITDA | Three Months Ended September 30, 2021 | 2020 | Change | Variance Due To: Volume/ Mix\* | Foreign Exchange | Cost (Increases)/ Decreases | Divestitures |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $8,817 | $58,115 | $(49,298) | $(33,462) | $(3,606) | $(12,230) | $— |
| Europe | (25,112) | (1,466) | (23,646) | (18,621) | (197) | (4,828) | — |
| Asia Pacific | (14,274) | 12,246 | (26,520) | (12,204) | (2,015) | (12,301) | — |
| South America | (3,422) | (2,680) | (742) | (322) | 529 | (949) | — |
| Total Automotive | (33,991) | 66,215 | (100,206) | (64,609) | (5,289) | (30,308) | — |
| Corporate, eliminations and other | 132 | (2,081) | 2,213 | 1,038 | (162) | 1,337 | — |
| Consolidated adjusted EBITDA | $(33,859) | $64,134 | $(97,993) | $(63,571) | $(5,451) | $(28,971) | $— |

\* Net of customer price reductions

- Volume and mix, net of customer price reductions, was driven by vehicle production volume decreases due to semi-conductor-related customer schedule reductions.
- The impact of foreign currency exchange was driven by the Chinese Renminbi, Mexican Peso, Canadian Dollar, Euro, Polish Zloty, Czech Koruna, and Brazilian Real.
- The Cost (Increases) / Decreases category above includes:
- Commodity cost, wage inflation increases and the non-recurrence of prior year government incentives;
- The one-time impact of $11.2 million credit loss for certain accounts receivable related to the bankruptcy proceedings of a former joint venture in Asia; and
- Reduction in compensation-related expenses due to lower variable employee compensation expenses, salaried headcount initiatives, purchasing savings through lean initiatives, and restructuring savings.

### Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

#### Sales

*(dollar amounts in thousands)*

| Sales to external customers | Nine Months Ended September 30, 2021 | 2020 | Change | Variance Due To: Volume/ Mix\* | Foreign Exchange | Divestitures |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $857,153 | $820,145 | $37,008 | $32,794 | $4,214 | $— |
| Europe | 397,079 | 410,076 | (12,997) | 9,988 | 26,232 | (49,217) |
| Asia Pacific | 327,666 | 316,133 | 11,533 | 3,567 | 23,257 | (15,291) |
| South America | 45,620 | 41,932 | 3,688 | 6,599 | (2,911) | — |
| Total Automotive | 1,627,518 | 1,588,286 | 39,232 | 52,948 | 50,792 | (64,508) |
| Corporate, eliminations and other | 101,324 | 90,271 | 11,053 | 8,924 | 2,129 | — |
| Consolidated | $1,728,842 | $1,678,557 | $50,285 | $61,872 | $52,921 | $(64,508) |

\* Net of customer price reductions

- Volume and mix, net of customer price reductions, was driven by vehicle production volume increases due to non-recurrence of lengthy shutdowns in the prior year from COVID-19, offset in part by semiconductor-related customer schedule reductions in the current year.
- The impact of foreign currency exchange primarily related to the Euro, Chinese Renminbi, Canadian Dollar and Brazilian Real.

#### Segment adjusted EBITDA

*(dollar amounts in thousands)*

| Segment adjusted EBITDA | Nine Months Ended September 30, 2021 | 2020 | Change | Variance Due To: Volume/ Mix\* | Foreign Exchange | Cost (Increases)/ Decreases | Divestitures |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $50,806 | $52,260 | $(1,454) | $11,683 | $(6,838) | $(5,800) | $(499) |
| Europe | (40,992) | (47,492) | 6,500 | (932) | (1,405) | 6,487 | 2,350 |
| Asia Pacific | (13,024) | (6,983) | (6,041) | (9,633) | 497 | (3,944) | 7,039 |
| South America | (6,756) | (11,608) | 4,852 | 4,260 | 4,657 | (4,065) | — |
| Total Automotive | (9,966) | (13,823) | 3,857 | 5,378 | (3,089) | (7,322) | 8,890 |
| Corporate, eliminations and other | (79) | (7,516) | 7,437 | 2,182 | 386 | 4,869 | — |
| Consolidated adjusted EBITDA | $(10,045) | $(21,339) | $11,294 | $7,560 | $(2,703) | $(2,453) | $8,890 |

\* Net of customer price reductions

- Volume and mix, net of customer price reductions, was driven by vehicle production volume increases due to non-recurrence of lengthy shutdowns in the prior year period from COVID-19, offset in part by the impact of semiconductor-related customer schedule reductions in the current year.
- The impact of foreign currency exchange was driven by the Canadian Dollar, Mexican Peso, Euro, Polish Zloty, Czech Koruna, Brazilian Real, and Chinese Renminbi.
- The Cost (Increases) / Decreases category above includes:
- The one-time impact of $11.2 million credit loss for certain accounts receivable related to the bankruptcy proceedings of a former joint venture in Asia; and
- Commodity cost, wage inflation increases and the non-recurrence of prior year government incentives; and
- Reduction in compensation-related expenses, due to salaried headcount initiatives, purchasing savings through lean initiatives, lower variable employee compensation expenses and restructuring savings; and
- Net manufacturing efficiencies of $28 million, primarily driven by our North America, Asia Pacific and Europe segments.

### Liquidity and Capital Resources

### Short and Long-Term Liquidity Considerations and Risks

We intend to fund our ongoing working capital, capital expenditures, debt service and other funding requirements through a combination of cash flows from operations, cash on hand, borrowings under our senior asset-based revolving credit facility (“ABL Facility”) and receivables factoring. The Company utilizes intercompany loans and equity contributions to fund its worldwide operations. There may be country-specific regulations which may restrict or result in increased costs in the repatriation of these funds. See Note 9. “Debt” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for additional information.

We continue to actively preserve cash and enhance liquidity, including decreasing our capital expenditures. Based on those actions and current projections of OEM customer production, we believe that our cash flows from operations, cash on hand, borrowings under our ABL Facility and receivables factoring will enable us to meet our ongoing working capital, capital expenditures, debt service and other funding requirements for the next twelve months, despite the challenges presented by the COVID-19 pandemic and supply chain issues facing the industry. We continuously monitor and forecast our liquidity situation, take the necessary actions to preserve our liquidity and evaluate other financial alternatives that may be available to us should the need arise. Our ability to fund our working capital needs, debt payments and other obligations, and to comply with the financial covenants, including borrowing base limitations, under our ABL Facility, depend on our future operating performance and cash flows and many factors outside of our control, including the costs of raw materials, the state of the overall automotive industry and financial and economic conditions, including the continued impact of COVID-19, and other factors.

### Cash Flows

*Operating Activities.* Net cash used in operations was $111.5 million for the nine months ended September 30, 2021, compared to net cash used in operations of $26.5 million for the nine months ended September 30, 2020. The net change was primarily due to working capital outflows and reduced cash earnings.

*Investing Activities.* Net cash used in investing activities was $72.8 million for the nine months ended September 30, 2021, compared to net cash used in investing activities of $89.5 million for the nine months ended September 30, 2020. The larger outflow in the nine months ended September 30, 2020 was primarily due to cash divested. In response to the COVID-19 pandemic and subsequent supply chain issues, significant decreases in capital expenditures occurred throughout 2020 and in the nine months ended September 30, 2021. We expect lower expenditures will continue in 2021, primarily as part of initiatives to consistently reduce overall capital spending. We anticipate that we will spend approximately $100 million on capital expenditures in 2021.

*Financing Activities.* Net cash used in financing activities totaled $4.7 million for the nine months ended September 30, 2021, compared to net cash provided by financing activities of $225.1 million for the nine months ended September 30, 2020. The outflow in 2021 primarily related to principal payments on debt, while the inflow in 2020 was primarily due to proceeds from issuance of our Senior Secured Notes.

### Share Repurchase Program

In June 2018, our Board of Directors approved a common stock repurchase program (the “2018 Program”) authorizing us to repurchase, in the aggregate, up to $150.0 million of our outstanding common stock. Under the 2018 Program, repurchases may be made on the open market, through private transactions, accelerated share repurchases, round lot or block transactions on the New York Stock Exchange or otherwise, as determined by us and in accordance with prevailing market conditions and federal securities laws and regulations. We expect to fund any future repurchases from cash on hand and future cash flows from operations. The specific timing and amount of any future repurchase will vary based on market and business conditions and other factors. We are not obligated to acquire a particular amount of securities, and the 2018 Program may be discontinued at any time at our discretion. As of September 30, 2021, we had approximately $98.7 million of repurchase authorization remaining under the 2018 Program.

We did not make any repurchases under the 2018 Program during the nine months ended September 30, 2021 or 2020.

### Non-GAAP Financial Measures

In evaluating our business, management considers EBITDA and Adjusted EBITDA to be key indicators of our operating performance. Our management also uses EBITDA and Adjusted EBITDA:

- because similar measures are utilized in the calculation of the financial covenants and ratios contained in our financing arrangements;
- in developing our internal budgets and forecasts;
- as a significant factor in evaluating our management for compensation purposes;
- in evaluating potential acquisitions;
- in comparing our current operating results with corresponding historical periods and with the operational performance of other companies in our industry; and
- in presentations to the members of our board of directors to enable our board of directors to have the same measurement basis of operating performance as is used by management in their assessments of performance and in forecasting and budgeting for our company.

In addition, we believe EBITDA and Adjusted EBITDA and similar measures are widely used by investors, securities analysts and other interested parties in evaluating our performance. We define Adjusted EBITDA as net income (loss) plus income tax expense (benefit), interest expense, net of interest income, depreciation and amortization or EBITDA, as adjusted for items that management does not consider to be reflective of our core operating performance. These adjustments include, but are not limited to, restructuring costs, impairment charges, non-cash fair value adjustments and acquisition-related costs.

EBITDA and Adjusted EBITDA are not financial measurements recognized under U.S. GAAP, and when analyzing our operating performance, investors should use EBITDA and Adjusted EBITDA as a supplement to, and not as alternatives for, net income (loss), operating income, or any other performance measure derived in accordance with U.S. GAAP, nor as an alternative to cash flow from operating activities as a measure of our liquidity. EBITDA and Adjusted EBITDA have limitations as analytical tools, and they should not be considered in isolation or as substitutes for analysis of our results of operations as reported under U.S. GAAP. These limitations include:

- they do not reflect our cash expenditures or future requirements for capital expenditure or contractual commitments;
- they do not reflect changes in, or cash requirements for, our working capital needs;
- they do not reflect interest expense or cash requirements necessary to service interest or principal payments under our ABL Facility, Term Loan Facility, Senior Notes and Senior Secured Notes;
- they do not reflect certain tax payments that may represent a reduction in cash available to us;
- although depreciation and amortization are non-cash charges, the assets being depreciated or amortized may have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements; and
- other companies, including companies in our industry, may calculate these measures differently and, as the number of differences in the way companies calculate these measures increases, the degree of their usefulness as a comparative measure correspondingly decreases.

In addition, in evaluating Adjusted EBITDA, it should be noted that in the future, we may incur expenses similar to the adjustments in the below presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by special items.

The following table provides a reconciliation of EBITDA and Adjusted EBITDA from net loss, which is the most comparable financial measure in accordance with U.S. GAAP:

*(dollar amounts in thousands)*

|  | Three Months Ended September 30, 2021 | 2020 | Nine Months Ended September 30, 2021 | 2020 |
| --- | ---: | ---: | ---: | ---: |
| Net (loss) income attributable to Cooper-Standard Holdings Inc. | $(123,173) | $4,381 | $(220,648) | $(240,426) |
| Income tax expense (benefit) | 32,121 | (2,386) | 15,598 | (55,485) |
| Interest expense, net of interest income | 18,243 | 17,985 | 54,152 | 40,993 |
| Depreciation and amortization | 36,049 | 36,504 | 105,021 | 116,727 |
| EBITDA | $(36,760) | $56,484 | $(45,877) | $(138,191) |
| Restructuring charges | 1,573 | 6,186 | 34,251 | 23,236 |
| Impairment charges (1) | 1,006 | 100 | 1,847 | 87,417 |
| Gain on sale of business, net (2) | — | (2,314) | (696) | (2,314) |
| Lease termination costs (3) | 322 | 83 | 430 | 684 |
| Project costs (4) | — | — | — | 4,234 |
| Divested noncontrolling interest debt extinguishment | — | 3,595 | — | 3,595 |
| Adjusted EBITDA | $(33,859) | $64,134 | $(10,045) | $(21,339) |

(1) Non-cash impairment charges in 2021 related to fixed assets. Non-cash impairment charges in 2020 included impairment of assets held for sale and other impairment charges, net of portion attributable to our noncontrolling interests.

(2) During 2021, we recorded subsequent adjustments to the net gain on sale of business, which related to the 2020 divestiture of our European rubber fluid transfer and specialty sealing businesses.

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

(4) Project costs recorded in selling, administration and engineering expense related to divestitures in 2020.

### Contingencies and Environmental Matters

The information concerning contingencies, including environmental contingencies and the amount currently held in reserve for environmental matters, contained in Note 19. “Commitments and Contingencies” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report, is incorporated herein by reference.

### Critical Accounting Estimates

There have been no significant changes in our critical accounting estimates during the nine months ended September 30, 2021.

### 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 COVID-19 outbreak on our financial condition and results of operations; significant risks to our liquidity presented by the COVID-19 pandemic risk; prolonged or material contractions in automotive sales and production volumes; our inability to realize sales represented by awarded business; escalating pricing pressures; loss of large customers or significant platforms; our ability to successfully compete in the automotive parts industry; availability and increasing volatility in costs of manufactured components and raw materials; disruption in our supply base; competitive threats and commercial risks associated with our diversification strategy through our Advanced Technology Group; possible variability of our working capital requirements; risks associated with our international operations, including changes in laws, regulations, and policies governing the terms of foreign trade such as increased trade restrictions and tariffs; foreign currency exchange rate fluctuations; our ability to control the operations of our joint ventures for our sole benefit; our substantial amount of indebtedness and variable rates of interest; our ability to obtain adequate financing sources in the future; operating and financial restrictions imposed on us under our debt instruments; the underfunding of our pension plans; significant changes in discount rates and the actual return on pension assets; effectiveness of continuous improvement programs and other cost savings plans; manufacturing facility closings or consolidation; our ability to execute new program launches; our ability to meet customers’ needs for new and improved products; the possibility that our acquisitions and divestitures may not be successful; product liability, warranty and recall claims brought against us; laws and regulations, including environmental, health and safety laws and regulations; legal and regulatory proceedings, claims or investigations against us; work stoppages or other labor disruptions; the ability of our intellectual property to withstand legal challenges; cyber-attacks, data privacy concerns, other disruptions in, or the inability to implement upgrades to, our information technology systems; the possible volatility of our annual effective tax rate; the possibility of a failure to maintain effective controls and procedures; the possibility of future impairment charges to our goodwill and long-lived assets; our ability to identify, attract, develop and retain a skilled, engaged and diverse workforce; our ability to procure insurance at reasonable rates; and our dependence on our subsidiaries for cash to satisfy our obligations.

You should not place undue reliance on these forward-looking statements. Our forward-looking statements speak only as of the date of this quarterly report on Form 10-Q, and we undertake no obligation to publicly update or otherwise revise any forward-looking statement, whether as a result of new information, future events or otherwise, except where we are expressly required to do so by law.

This quarterly report on Form 10-Q also contains estimates and other information that is based on industry publications, surveys, and forecasts. This information involves a number of assumptions and limitations, and we have not independently verified the accuracy or completeness of the information.

## Market risk

As filed, 184 characters.

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 2020 Annual Report.

## Controls and procedures

As filed, 1,249 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 September 30, 2021 that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.

Filed Nov 4, 2021.
Source: SEC EDGAR, the filing index for accession 0001320461-21-000128. Last ingested by Listed: Nov 5, 2026, 16:52 ET. No prices; not investment advice.