# Cooper-Standard Holdings Inc.: Form 10-Q for the period ended Sep 30, 2022

- Company: [Cooper-Standard Holdings Inc.](/companies/cps.md) (CIK 1320461)
- Form: 10-Q
- Filed: 2022-11-02
- Accepted by EDGAR: Nov 2, 2022, 16:08 ET
- Period: 2022-09-30
- Accession: 0001320461-22-000117
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1320461/000132046122000117/cps-20220930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1320461/000132046122000117/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $0 | us-gaap:Revenues |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $0 | us-gaap:Revenues |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $618.6m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $1.80bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2022-07-01 to 2022-09-30 | $38.6m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-01-01 to 2022-09-30 | $75.5m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2022-07-01 to 2022-09-30 | $44.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2022-01-01 to 2022-09-30 | $149.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | −$10.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | −$59.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | −$833.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $1.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$32.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | −$127.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | −$1.90 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | −$7.41 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | −$1.90 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | −$7.41 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 17,218,165 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 17,181,534 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | −$10.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $58.5m | us-gaap:PaymentsToAcquireProductiveAssets |
| Cash and equivalents | at 2022-09-30 | $231.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-09-30 | $1.01bn | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $2.10bn | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $667.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-09-30 | $1.93bn | us-gaap:Liabilities |
| Current portion of debt | at 2022-09-30 | $48.9m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2022-09-30 | $181.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 46,349 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, 2021 filed with the U.S. Securities and Exchange Commission (“2021 Annual Report”), including Item 1A. “Risk Factors.” The following should be read in conjunction with our 2021 Annual Report and the other information included herein. Our discussion of trends and conditions supplements and updates such discussion included in our 2021 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 2021 made directly to major OEMs. We operate our automotive 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. In 2021, global automotive production was negatively impacted by lingering impacts of the COVID-19 pandemic and broad supply chain challenges stemming, in part, from a sharp rebound in overall industrial demand. In 2022, rising inflation, interest rates and continuing supply chain challenges are contributing to global economic uncertainty. In addition, recent pandemic related restrictions imposed in certain large population centers in China, the threat of additional lockdowns, and continuing military actions in Eastern Europe are having broad negative impacts on key sectors of the global economy.

In North America, U.S. consumer confidence has trended downward since the second quarter of 2021. Key drivers of the decline are significant inflation, continuing supply chain disruptions and rising interest rates. Geopolitical tensions and uncertainty surrounding the upcoming mid-term elections in the United States are also important factors. However, low unemployment rates, rising wages, continued government spending and private spending related to pent-up consumer demand continue to support economic growth. Economists at the International Monetary Fund (IMF) are expecting the economies of the United States, Canada and Mexico to grow by 1.6 percent, 3.3 percent and 2.1 percent, respectively, in 2022 with growth expectations moderating to 1.0 percent, 1.3 percent and 1.2 percent, respectively, in 2023.

In Europe, the war in Ukraine, related sanctions imposed on Russia and infrastructure disruptions are having a dramatic impact on energy prices and energy security. This is translating into lower output and higher inflation for most Eurozone countries. Supply chain disruptions have also hurt certain industries including the automobile sector, with the war and sanctions hindering the production of key input materials. With the European Central Bank having ended stimulative asset purchases and aggressively raising policy interest rates to stem inflation, economic growth is expected to moderate in the fourth quarter of 2022. Economists at the IMF are currently expecting the economy in the Eurozone region to grow by approximately 3.1 percent for the full year 2022 but just 0.5 percent in 2023.

In the Asia Pacific region, the combination of more transmissible variants and the strict zero-COVID strategy in China has led to repeated mobility restrictions and localized lockdowns that have weighed on economic activity and private consumption. Moreover, real estate investment in China, once a key driver of economic growth, has slowed significantly. However, higher infrastructure investment and government spending are expected to support growth for the remainder of 2022 and into 2023. Economists at the IMF are expecting the Chinese economy to grow 4.3 percent in 2022, with expected growth moderating to just 2.6 percent in 2023.

In South America, the Brazilian economy continues to expand amid fiscal support and the lessening impact of the COVID-19 pandemic. Increasing exports of goods and services have provided strong support and the unemployment rate remains low. Certain fiscal interventions such as recently enacted tax cuts and fuel subsidies have provided stimulative support to the Brazilian economy in the second half of 2022 but may expire following the runoff presidential elections in late October. This would likely result in slower economic growth rates going forward. Economists at the IMF are now estimating the Brazilian economy will grow 2.9 percent for the full year 2022, with growth moderating to just 0.7 percent in 2023. We remain cautious for the economic outlook in this market 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-derived commodities, continue to be volatile, which led to significant increases in these costs in 2021. Current global events continue to add further price pressure and uncertainty to raw material costs for 2022. In addition, we continue to see significant inflationary pressure on wages, energy, transportation and other general costs. As such, we will continue to work on an ongoing basis with our customers and suppliers to mitigate both inflationary pressures and our material-related cost exposures through a combination of expanded index-based agreements and other commercial enhancements.

#### Production Levels

Our business is directly affected by the automotive vehicle production rates in North America, Europe, Asia Pacific and South America which have been adversely affected by a series of events in recent years. Beginning in the first quarter of 2020, we experienced production shutdowns related to the COVID-19 pandemic. Beginning in the first quarter of 2021, OEM production volumes were disrupted by the global shortage of semiconductors, but have improved sequentially quarter over quarter. In 2022, disruptions stemming from the Russia-Ukraine crisis and lockdowns in key Chinese manufacturing and trading hubs such as Shenzhen and Shanghai have further exacerbated supply chain disruptions and vehicle production levels. We continue to collaborate 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, 2022 and 2021 was as follows:

*(In millions of units)*

|  | Three Months Ended September 30, 2022(1) | 2021(1) | % Change | Nine Months Ended September 30, 2022(1) | 2021(1) | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | 3.7 | 3.0 | 24.2% | 10.8 | 9.8 | 10.6% |
| Europe | 3.6 | 3.0 | 20.3% | 11.5 | 11.9 | (3.3)% |
| Asia Pacific | 12.5 | 9.6 | 29.9% | 34.1 | 31.0 | 9.9% |
| Greater China | 7.2 | 5.5 | 31.2% | 19.0 | 17.1 | 10.9% |
| South America | 0.8 | 0.6 | 33.4% | 2.1 | 1.9 | 10.0% |

(1) Production data based on S&P Global (formerly IHS Markit), October 2022.

In all regions, production volumes were impacted by the global shortage of semiconductors which began in the first quarter of 2021 and deteriorated thereafter throughout the year. Production stoppages related to semiconductor and other supply chain shortages continued into 2022, but have improved sequentially quarter over quarter. In Europe, vehicle production in the nine months ended September 30, 2022 was negatively impacted by additional supply chain issues related to the Russia-Ukraine crisis.

### Results of Operations

*(dollar amounts in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | Change | Nine Months Ended September 30, 2022 | 2021 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Sales | $657,153 | $526,690 | $130,463 | $1,876,054 | $1,728,842 | $147,212 |
| Cost of products sold | 618,594 | 534,817 | 83,777 | 1,800,577 | 1,669,610 | 130,967 |
| Gross profit (loss) | 38,559 | (8,127) | 46,686 | 75,477 | 59,232 | 16,245 |
| Selling, administration & engineering expenses | 44,847 | 60,367 | (15,520) | 149,033 | 168,506 | (19,473) |
| Gain on sale of business, net | — | — | — | — | (696) | 696 |
| Gain on sale of fixed assets, net | — | — | — | (33,391) | — | (33,391) |
| Amortization of intangibles | 1,693 | 1,819 | (126) | 5,176 | 5,524 | (348) |
| Restructuring charges | 1,701 | 1,573 | 128 | 13,014 | 34,251 | (21,237) |
| Impairment charges | 379 | 1,006 | (627) | 837 | 1,847 | (1,010) |
| Operating loss | (10,061) | (72,892) | 62,831 | (59,192) | (150,200) | 91,008 |
| Interest expense, net of interest income | (20,747) | (18,243) | (2,504) | (57,378) | (54,152) | (3,226) |
| Equity in (losses) earnings of affiliates | (3,391) | (1,114) | (2,277) | (8,193) | 65 | (8,258) |
| Other income (expense), net | 146 | (494) | 640 | (2,574) | (4,221) | 1,647 |
| Loss before income taxes | (34,053) | (92,743) | 58,690 | (127,337) | (208,508) | 81,171 |
| Income tax (benefit) expense | (833) | 32,121 | (32,954) | 1,824 | 15,598 | (13,774) |
| Net loss | (33,220) | (124,864) | 91,644 | (129,161) | (224,106) | 94,945 |
| Net loss attributable to noncontrolling interests | 534 | 1,691 | (1,157) | 1,868 | 3,458 | (1,590) |
| Net loss attributable to Cooper-Standard Holdings Inc. | $(32,686) | $(123,173) | $90,487 | $(127,293) | $(220,648) | $93,355 |

### Three Months Ended September 30, 2022 Compared with Three Months Ended September 30, 2021

#### Sales

*(dollar amounts in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Deconsolidation |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total sales | $657,153 | $526,690 | $130,463 | $168,724 | $(32,114) | $(6,147) |

\* Net of customer price adjustments, including recoveries

Sales for the three months ended September 30, 2022 increased 24.8%, compared to the three months ended September 30, 2021. The increase in sales was driven by volume and mix (higher net vehicle production volume due to the impact of lessening semiconductor supply issues in the current year) and net customer price adjustments including recovery of cost increases. This was partially offset by the negative impact of foreign exchange, and the deconsolidation of a joint venture in the Asia Pacific region. See Note 2. “Deconsolidation and Divestiture” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for additional information.

#### Gross Profit

*(dollar amounts in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Cost Increases/(Decreases)\*\* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of products sold | $618,594 | $534,817 | $83,777 | $100,132 | $(30,584) | $14,229 |
| Gross profit | 38,559 | (8,127) | 46,686 | 68,592 | (1,530) | (20,376) |
| Gross profit percentage of sales | 5.9% | (1.5)% |  |  |  |  |

\* Net of customer price adjustments, including recoveries

\*\* Net of deconsolidation

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 52% and 47% of total cost of products sold for the three months ended September 30, 2022 and 2021, respectively. The change in cost of products sold was impacted by higher volume and mix, commodity inflation, higher labor and overhead costs due to inconsistent volume production schedules, higher compensation related costs, and higher energy and transportation costs. These costs were partially offset by foreign exchange, manufacturing efficiencies, purchasing lean savings, restructuring savings and the deconsolidation of a joint venture in the Asia Pacific region.

Gross profit for the three months ended September 30, 2022 increased $46.7 million, compared to the three months ended September 30, 2021. The change was driven by volume and mix, net customer price adjustments including recovery of cost increases, manufacturing efficiencies, purchasing lean savings and restructuring savings, partially offset by commodity and wage inflation, higher compensation related costs, higher energy and transportation costs 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. Selling, administration and engineering expense for the three months ended September 30, 2022 was 6.8% of sales compared to 11.5% for the three months ended September 30, 2021. The decrease was primarily due to the non-recurrence of a prior year credit loss, salaried headcount initiative savings and foreign exchange partially offset by higher compensation related costs.

*Amortization of Intangibles.* Intangible amortization for the three months ended September 30, 2022 was comparable to the three months ended September 30, 2021.

*Restructuring.* Restructuring charges for the three months ended September 30, 2022 was comparable to the three months ended September 30, 2021.

*Impairment Charges.* Non-cash impairment charges for the three months ended September 30, 2022 decreased $0.6 million compared to the three months ended September 30, 2021, primarily due to impairments in Europe in the prior year period.

*Interest Expense, Net.* Net interest expense for the three months ended September 30, 2022 increased $2.5 million compared to the three months ended September 30, 2021, primarily due to an increase in interest rates on variable rate debt.

*Other Income, Net.* Other income, net, for the three months ended September 30, 2022 increased $0.6 million compared to the three months ended September 30, 2021, primarily due to the favorable impact of foreign exchange.

*Income Tax Expense.* Income tax benefit for the three months ended September 30, 2022 was $0.8 million on losses before income taxes of $34.1 million compared to an income tax expense of $32.1 million on losses before income taxes of $92.7 million for the three months ended September 30, 2021. The effective tax rate for the three months ended September 30, 2022 differed from the effective tax rate for the three months ended September 30, 2021 primarily due to the geographic mix of pre-tax losses, the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign jurisdictions due to valuation allowances, and other permanent items during the three-month period ended September 30, 2022. Additionally, a discrete expense of $31.7 million for the initial recognition of valuation allowance against net deferred tax assets in the U.S. was recorded in the three months ended September 30, 2021.

### Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021

#### Sales

Sales for the nine months ended September 30, 2022 increased 8.5%, compared to the nine months ended September 30, 2021. The increase in sales was driven by volume and mix (higher net vehicle production volume due to the impact of lessening semiconductor supply issues in the current year partially offset by the impact of COVID-19 in China and the Ukraine conflict in Europe) and net customer price adjustments including recovery of cost increases. This was partially offset by foreign exchange, and the deconsolidation of a joint venture in the Asia Pacific region. See Note 2. “Deconsolidation and Divestiture” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for additional information.

*(dollar amounts in thousands)*

|  | Nine Months Ended September 30, 2022 | 2021 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Deconsolidation |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total sales | $1,876,054 | $1,728,842 | $147,212 | $233,148 | $(64,776) | $(21,160) |

\* Net of customer price adjustments, including recoveries

#### Gross Profit

*(dollar amounts in thousands)*

|  | Nine Months Ended September 30, 2022 | 2021 | Change | Variance Due To: Volume / Mix\* | Foreign Exchange | Cost Increases / (Decreases)\*\* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of products sold | $1,800,577 | $1,669,610 | $130,967 | $113,720 | $(58,619) | $75,866 |
| Gross profit | 75,477 | 59,232 | 16,245 | 119,428 | (6,157) | (97,026) |
| Gross profit percentage of sales | 4.0% | 3.4% |  |  |  |  |

\* Net of customer price adjustments, including recoveries

\*\* Net of deconsolidation

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 51% and 47% of total cost of products sold for the nine months ended September 30, 2022 and 2021, respectively. The change in the cost of products sold was impacted by higher volume and mix, commodity inflation, increased labor and overhead costs due to inconsistent volume production schedules, higher compensation related costs and higher energy and transportation costs. These costs were partially offset by foreign exchange, manufacturing efficiencies, purchasing lean savings, restructuring savings and the deconsolidation of a joint venture in the Asia Pacific region.

Gross profit for the nine months ended September 30, 2022 increased 27.4%, compared to the nine months ended September 30, 2021. The change was driven by volume and mix net of customer price reductions including recovery of cost increases, manufacturing efficiencies, purchasing lean savings and restructuring savings. These items were partially offset by commodity and wage inflation, higher compensation related costs and the negative impact of 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 nine months ended September 30, 2022 was 7.9% of sales compared to 9.7% for the nine months ended September 30, 2021. The decrease was primarily due the non-recurrence of a prior year credit loss, salaried headcount initiative savings, customer recovery of engineering expense, and foreign exchange, partially offset by higher compensation related costs.

*Gain on Sale of Business, Net.* The gain on sale of business, net of $0.7 million for the nine months ended September 30, 2021 related to the net effect of our 2020 divestitures.

*Gain on Sale of Fixed Assets, Net.* The gain on sale of fixed assets for the nine months ended September 30, 2022 was attributable to the gain on the sale-leaseback of a European facility of $33.4 million.

*Amortization of Intangibles.* Intangible amortization for the nine months ended September 30, 2022 was comparable to the nine months ended September 30, 2021.

*Restructuring.* Restructuring charges for the nine months ended September 30, 2022 decreased $21.2 million compared to the nine months ended September 30, 2021. The decrease was primarily driven by lower restructuring charges in Europe.

*Impairment Charges.* Impairment charges for the nine months ended September 30, 2022 decreased $1.0 million, as compared to the nine months ended September 30, 2021. The decrease was driven by lower impairment charges in Europe in the current year period.

*Interest Expense, Net.* Net interest expense for the nine months ended September 30, 2022 increased $3.2 million compared to the nine months ended September 30, 2022, primarily due to an increase in interest rates on variable rate debt.

*Other Expense, Net.* Other expense for the nine months ended September 30, 2022 decreased $1.6 million compared to the nine months ended September 30, 2021, primarily due to favorable foreign currency, offset by a loss on deconsolidation.

*Income Tax Expense (Benefit).* Income tax expense for the nine months ended September 30, 2022 was $1.8 million on losses before income taxes of $127.3 million compared to income tax expense of $15.6 million on losses before income taxes of $208.5 million for the nine months ended September 30, 2021. The effective tax rate for the nine months ended September 30, 2022 differed primarily from the effective tax rate for the nine months ended September 30, 2021 due to the geographic mix of pre-tax losses, the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign jurisdictions due to valuation allowances, discrete tax impacts of the gain on sale transaction in Europe, other tax reserve changes, and other permanent items during the nine months ended September 30, 2022. Additionally, a discrete expense of $13.3 million for the initial recognition of valuation allowance against net deferred tax assets in the U.S. was recorded in the nine months ended September 30, 2021.

### 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, 2022 Compared with Three Months Ended September 30, 2021

#### Sales

*(dollar amounts in thousands)*

| Sales to external customers | Three Months Ended September 30, 2022 | 2021 | Change | Variance Due To: Volume/ Mix\* | Foreign Exchange | Deconsolidation |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $351,011 | $270,592 | $80,419 | $80,840 | $(421) | $— |
| Europe | 113,670 | 98,682 | 14,988 | 34,726 | (19,738) | — |
| Asia Pacific | 129,493 | 109,526 | 19,967 | 35,932 | (9,818) | (6,147) |
| South America | 27,073 | 15,981 | 11,092 | 11,129 | (37) | — |
| Total Automotive | 621,247 | 494,781 | 126,466 | 162,627 | (30,014) | (6,147) |
| Corporate, eliminations and other | 35,906 | 31,909 | 3,997 | 6,097 | (2,100) | — |
| Consolidated | $657,153 | $526,690 | $130,463 | $168,724 | $(32,114) | $(6,147) |

\* Net of customer price adjustments, including recoveries

- Volume and mix, net of customer price adjustments including recoveries, was driven by vehicle production volume increases due to the lessening impact of semiconductor-related supply issues.
- The impact of foreign currency exchange was primarily related to the Euro, Chinese Renminbi and Korean Won.

#### Segment adjusted EBITDA

*(dollar amounts in thousands)*

| Segment adjusted EBITDA | Three Months Ended September 30, 2022 | 2021 | Change | Variance Due To: Volume/ Mix\* | Foreign Exchange | Cost (Increases)/ Decreases\*\* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $19,401 | $8,817 | $10,584 | $29,273 | $(1,355) | $(17,334) |
| Europe | (10,905) | (25,112) | 14,207 | 16,942 | 1,205 | (3,940) |
| Asia Pacific | 7,523 | (14,274) | 21,797 | 10,612 | (10) | 11,195 |
| South America | 766 | (3,422) | 4,188 | 2,750 | 1,060 | 378 |
| Total Automotive | 16,785 | (33,991) | 50,776 | 59,577 | 900 | (9,701) |
| Corporate, eliminations and other | 3,720 | 132 | 3,588 | 9,015 | 28 | (5,455) |
| Consolidated adjusted EBITDA | $20,505 | $(33,859) | $54,364 | $68,592 | $928 | $(15,156) |

\* Net of customer price adjustments, including recoveries

\*\* Net of deconsolidation

- Volume and mix, net of customer price adjustments including recoveries, was driven by vehicle production volume increases due to a lessening impact on customer production schedules for semiconductor-related supply issues in the current year period.
- The impact of foreign currency exchange was primarily related to the Euro and Brazilian Real, partially offset by the Mexican Peso.
- The Cost (Increases) / Decreases category above includes:
- Commodity cost and inflationary economics;
- Manufacturing efficiencies and purchasing savings through lean initiatives;
- Increased compensation-related expenses; and
- Decreased costs related to ongoing salaried headcount initiatives and restructuring savings.

### Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021

#### Sales

*(dollar amounts in thousands)*

| Sales to external customers | Nine Months Ended September 30, 2022 | 2021 | Change | Variance Due To: Volume/ Mix\* | Foreign Exchange | Deconsolidation |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $1,004,592 | $857,153 | $147,439 | $149,236 | $(1,797) | $— |
| Europe | 371,371 | 397,079 | (25,708) | 20,605 | (46,313) | — |
| Asia Pacific | 319,025 | 327,666 | (8,641) | 27,397 | (14,878) | (21,160) |
| South America | 74,853 | 45,620 | 29,233 | 26,357 | 2,876 | — |
| Total Automotive | 1,769,841 | 1,627,518 | 142,323 | 223,595 | (60,112) | (21,160) |
| Corporate, eliminations and other | 106,213 | 101,324 | 4,889 | 9,553 | (4,664) | — |
| Consolidated | $1,876,054 | $1,728,842 | $147,212 | $233,148 | $(64,776) | $(21,160) |

\* Net of customer price adjustments, including recoveries

- Volume and mix, net of customer price adjustments including recoveries, was driven by vehicle production volume increases due to a lessening impact on customer production schedules for semiconductor related supply issues in the current year period partially offset by the impact of COVID-19 shutdowns in China and the Ukraine conflict in Europe.
- The impact of foreign currency exchange was primarily related to the Euro, Chinese Renminbi and Korean Won.

#### Segment adjusted EBITDA

*(dollar amounts in thousands)*

| Segment adjusted EBITDA | Nine Months Ended September 30, 2022 | 2021 | Change | Variance Due To: Volume/ Mix\* | Foreign Exchange | Cost (Increases)/ Decreases\*\* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $52,338 | $50,806 | $1,532 | $56,443 | $(1,857) | $(53,054) |
| Europe | (40,878) | (40,992) | 114 | 25,202 | 3,545 | (28,633) |
| Asia Pacific | (1,018) | (13,024) | 12,006 | 14,631 | (2,599) | (26) |
| South America | (941) | (6,756) | 5,815 | 7,279 | 2,181 | (3,645) |
| Total Automotive | 9,501 | (9,966) | 19,467 | 103,555 | 1,270 | (85,358) |
| Corporate, eliminations and other | 775 | (79) | 854 | 15,873 | 375 | (15,394) |
| Consolidated adjusted EBITDA | $10,276 | $(10,045) | $20,321 | $119,428 | $1,645 | $(100,752) |

\* Net of customer price adjustments, including recoveries

\*\* Net of deconsolidation

- Volume and mix, net of customer price adjustments including recoveries, was driven by vehicle production volume increases due to a lessening impact on vehicle manufacturers of the semiconductor related supply issues partially offset by the impact of COVID-19 shutdowns in China and the Ukraine conflict in Europe.
- The impact of foreign currency exchange was primarily related to the Euro and Brazilian Real partially offset by the Mexican Peso, Chinese Renminbi and Korean Won.
- The Cost (Increases) / Decreases category above includes:
- Commodity cost and inflationary economics;
- Manufacturing efficiencies and purchasing savings through lean initiatives;
- Increased compensation-related expenses; and
- Decreased costs related to ongoing salaried headcount initiatives and restructuring savings.

### Liquidity and Capital Resources

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

The sources to fund our ongoing working capital, capital expenditures, debt service and other funding requirements are 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. 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. 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 requirements and capital expenditures for the next twelve months, despite the challenges presented by the COVID-19 pandemic and supply chain issues facing the industry. Our ability to meet our debt service requirements for the next twelve months is contingent upon our ability to refinance our Term Loan Facility.

Our Term Loan Facility matures on November 2, 2023. The Company has retained Goldman Sachs & Co. LLC as its financial advisor to analyze, evaluate and help arrange a refinancing of the Term Loan Facility and possibly certain other debt instruments. To the extent the Company is not able to refinance its Term Loan Facility prior to the issuance of the financial statements for the year ended December 31, 2022, our independent auditors may issue an audit opinion including an explanatory paragraph that indicates there is substantial doubt about our ability to continue as a going concern. The inclusion of such an explanatory paragraph in the report of our independent auditors would breach a covenant under our Term Loan Facility which, unless cured, would constitute an event of default thereunder. Such an event of default would cause a cross-default or cross-acceleration of other indebtedness. In such a case, the Company would not expect that it would have sufficient liquidity to repay all of its outstanding indebtedness at such time. The Company continues its discussions with certain investors with respect to potential refinancing alternatives. While discussions are ongoing, the Company has not reached an agreement with respect to such a transaction for refinancing its capital structure and there can be no assurances that such an agreement will be reached in the future.

### Cash Flows

*Operating Activities.* Net cash used in operations was $10.4 million for the nine months ended September 30, 2022, compared to net cash used in operations of $111.5 million for the nine months ended September 30, 2021. The net change was primarily due to improved operating results and the receipt of $54.3 million in cash payments from the United States Internal Revenue Service for tax refunds related to net operating loss carrybacks.

*Investing Activities.* Net cash used in investing activities was $5.4 million for the nine months ended September 30, 2022, compared to net cash used in investing activities of $72.8 million for the nine months ended September 30, 2021. The change was primarily related to proceeds of $50.0 million related to the sale-leaseback of a certain European facility which were received in the nine months ended September 30, 2022 along with reduced capital spending in 2022. We expect to continue initiatives to reduce overall capital spending and anticipate that we will spend approximately $80 - $90 million on capital expenditures in 2022.

*Financing Activities.* Net cash used in financing activities totaled $6.1 million for the nine months ended September 30, 2022, compared to net cash provided by financing activities of $4.7 million for the nine months ended September 30, 2021. The outflow in 2022 was relatively consistent with the outflow in 2021.

### 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, changes in tax laws (including the Inflation Reduction Act) 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, 2022, we had approximately $98.7 million of repurchase authorization remaining under the 2018 Program. We did not make any repurchases under the 2018 Program during the nine months ended September 30, 2022 or 2021.

### 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, 2022 | 2021 | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Net loss attributable to Cooper-Standard Holdings Inc. | $(32,686) | $(123,173) | $(127,293) | $(220,648) |
| Income tax (benefit) expense | (833) | 32,121 | 1,824 | 15,598 |
| Interest expense, net of interest income | 20,747 | 18,243 | 57,378 | 54,152 |
| Depreciation and amortization | 30,628 | 36,049 | 94,173 | 105,021 |
| EBITDA | $17,856 | $(36,760) | $26,082 | $(45,877) |
| Restructuring charges | 1,701 | 1,573 | 13,014 | 34,251 |
| Deconsolidation of joint venture (1) | — | — | 2,257 | — |
| Impairment charges (2) | 379 | 1,006 | 837 | 1,847 |
| Loss (gain) on sale of business, net (3) | — | — | — | (696) |
| Gain on sale of fixed assets, net (4) | — | — | (33,391) | — |
| Lease termination costs (5) | — | 322 | — | 430 |
| Indirect tax and customs adjustments (6) | 569 | — | 1,477 | — |
| Adjusted EBITDA | $20,505 | $(33,859) | $10,276 | $(10,045) |

(1) Loss attributable to deconsolidation of a joint venture in the Asia Pacific region, which required adjustment to fair value.

(2) Non-cash impairment charges in 2022 and 2021 related to idle assets in Europe.

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

(4) In the first quarter of 2022, the Company signed a sale-leaseback agreement on one of its European facilities, and a gain was recognized in the second quarter of 2022.

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

(6) Impact of prior period indirect tax and customs adjustments.

### 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, 2022.

### Forward-Looking Statements

This quarterly report on Form 10-Q includes “forward-looking statements” within the meaning of U.S. federal securities laws, and we intend that such forward-looking statements be subject to the safe harbor created thereby. Our use of words “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “believe,” “outlook”, “guidance”, “forecast,” or future or conditional verbs, such as “will,” “should,” “could,” “would,” or “may,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, we cannot assure you that these expectations, beliefs and projections will be achieved. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. Among other items, such factors may include: Volatility or decline of the Company’s stock price, or absence of stock price appreciation; impacts, including commodity cost increases and disruptions related to the war in Ukraine and the current COVID-related lockdowns in China; our ability to offset the adverse impact of higher commodity and other costs through negotiations with our customers; the impact, and expected continued impact, of the COVID-19 outbreak on our financial condition and results of operations; significant risks to our liquidity presented by the COVID-19 pandemic risk; prolonged or material contractions in automotive sales and production volumes; our inability to realize sales represented by awarded business; escalating pricing pressures; loss of large customers or significant platforms; our ability to successfully compete in the automotive parts industry; availability and increasing volatility in costs of manufactured components and raw materials; disruption in our supply base; competitive threats and commercial risks associated with our diversification strategy through our Advanced Technology Group; possible variability of our working capital requirements; risks associated with our international operations, including changes in laws, regulations, and policies governing the terms of foreign trade such as increased trade restrictions and tariffs; foreign currency exchange rate fluctuations; our ability to control the operations of our joint ventures for our sole benefit; our substantial amount of indebtedness and variable rates of interest; our ability to obtain adequate financing sources in the future; operating and financial restrictions imposed on us under our debt instruments; the underfunding of our pension plans; significant changes in discount rates and the actual return on pension assets; effectiveness of continuous improvement programs and other cost savings plans; manufacturing facility closings or consolidation; our ability to execute new program launches; our ability to meet customers’ needs for new and improved products; the possibility that our acquisitions and divestitures may not be successful; product liability, warranty and recall claims brought against us; laws and regulations, including environmental, health and safety laws and regulations; legal and regulatory proceedings, claims or investigations against us; work stoppages or other labor disruptions; the ability of our intellectual property to withstand legal challenges; cyber-attacks, data privacy concerns, other disruptions in, or the inability to implement upgrades to, our information technology systems; the possible volatility of our annual effective tax rate; the possibility of a failure to maintain effective controls and procedures; the possibility of future impairment charges to our goodwill and long-lived assets; our ability to identify, attract, develop and retain a skilled, engaged and diverse workforce; our ability to procure insurance at reasonable rates; and our dependence on our subsidiaries for cash to satisfy our obligations.

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

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

## 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 2021 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, 2022 that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.

Filed Nov 2, 2022.
Source: SEC EDGAR, the filing index for accession 0001320461-22-000117. Last ingested by Listed: Nov 5, 2026, 16:52 ET. No prices; not investment advice.