NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
1. Overview
Basis of Presentation
Cooper-Standard Holdings Inc. (together with its consolidated subsidiaries, the “Company” or “Cooper Standard”), through its wholly-owned subsidiary, Cooper-Standard Automotive Inc. (“CSA U.S.”), is a leading manufacturer of sealing, fuel and brake delivery, and fluid transfer systems. The Company’s products are primarily for use in passenger vehicles and light trucks that are manufactured by global automotive original equipment manufacturers (“OEMs”) and replacement markets. The Company conducts substantially all of its activities through its subsidiaries.
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”), as filed with the SEC. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. These financial statements include all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of the Company. The operating results for the interim period ended March 31, 2021 are not necessarily indicative of results for the full year. In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
2. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
The Company adopted the following Accounting Standard Updates (“ASU”) during the three months ended March 31, 2021, which did not have a material impact on its condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
Standard
|
Description
|
Effective Date
|
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
|
Modifies ASC Topic 740 by removing certain exceptions and amending existing guidance in order to simplify the accounting for income taxes.
|
January 1, 2021
|
ASU 2021-01, Reference Rate Reform (Topic 848): Scope
|
Clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition and tailors the existing guidance to derivative instruments affected by the discounting transition.
|
January 1, 2021
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
3. Divestiture
2020 Divestiture
In the fourth quarter of 2019, management approved a plan to sell its European rubber fluid transfer and specialty sealing businesses, as well as its Indian operations. The entities and the associated assets and liabilities met the criteria for presentation as held for sale as of March 31, 2020, and depreciation of long-lived assets ceased. The divestiture did not meet the criteria for presentation as a discontinued operation.
Upon meeting the criteria for held for sale classification and during the three months ended March 31, 2020, the Company recorded non-cash impairment charges of $74,079 to reduce the carrying value of the held for sale entities to fair value less costs to sell. Fair value, which is categorized within Level 3 of the fair value hierarchy, was determined using a market approach, estimated based on expected proceeds. The fair value less costs to sell were assessed each reporting period that the asset group remained classified as held for sale.
On July 1, 2020, the Company completed the divestiture of its European rubber fluid transfer and specialty sealing businesses, as well as its Indian operations, to Mutares SE & Co. KGaA (“Mutares”). The transaction included payment denominated in Euro of €9,000, which consisted of €6,500 in cash paid and €2,500 in deferred payment obligations, payable in December 2021.
During the three months ended March 31, 2021, the Company recorded subsequent adjustments resulting in a gain of $891.
4. Revenue
Revenue is recognized for manufactured parts at a point in time, generally when products are shipped or delivered. The Company usually enters into agreements with customers to produce products at the beginning of a vehicle’s life. Blanket purchase orders received from customers and related documents generally establish the annual terms, including pricing, related to a vehicle model. Customers typically pay for parts based on customary business practices with payment terms generally between 30 and 90 days.
Revenue by customer group for the three months ended March 31, 2021 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
Europe
|
|
Asia Pacific
|
|
South America
|
|
Corporate, Eliminations and Other
|
|
Consolidated
|
Passenger and Light Duty
|
$
|
331,613
|
|
|
$
|
159,781
|
|
|
$
|
113,041
|
|
|
$
|
15,479
|
|
|
$
|
—
|
|
|
$
|
619,914
|
|
Commercial
|
4,281
|
|
|
5,881
|
|
|
1,182
|
|
|
7
|
|
|
1,251
|
|
|
12,602
|
|
Other
|
3,142
|
|
|
114
|
|
|
2
|
|
|
—
|
|
|
33,193
|
|
|
36,451
|
|
Revenue
|
$
|
339,036
|
|
|
$
|
165,776
|
|
|
$
|
114,225
|
|
|
$
|
15,486
|
|
|
$
|
34,444
|
|
|
$
|
668,967
|
|
Revenue by customer group for the three months ended March 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
Europe
|
|
Asia Pacific
|
|
South America
|
|
Corporate, Eliminations and Other
|
|
Consolidated
|
Passenger and Light Duty
|
$
|
325,982
|
|
|
$
|
170,781
|
|
|
$
|
78,742
|
|
|
$
|
20,439
|
|
|
$
|
—
|
|
|
$
|
595,944
|
|
Commercial
|
3,178
|
|
|
5,557
|
|
|
546
|
|
|
10
|
|
|
1,134
|
|
|
10,425
|
|
Other
|
5,641
|
|
|
8,904
|
|
|
56
|
|
|
22
|
|
|
33,898
|
|
|
48,521
|
|
Revenue
|
$
|
334,801
|
|
|
$
|
185,242
|
|
|
$
|
79,344
|
|
|
$
|
20,471
|
|
|
$
|
35,032
|
|
|
$
|
654,890
|
|
The passenger and light duty group consists of sales to automotive OEMs and automotive suppliers, while the commercial group represents sales to OEMs of on- and off-highway commercial equipment and vehicles. The other customer group includes sales related to specialty and adjacent markets.
Substantially all of the Company’s revenues were generated from sealing, fuel and brake delivery and fluid transfer systems for use in passenger vehicles and light trucks manufactured by global OEMs.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
A summary of the Company’s products is as follows:
|
|
|
|
|
|
|
|
|
Product Line
|
|
Description
|
Sealing Systems
|
|
Protect vehicle interiors from weather, dust and noise intrusion for improved driving experience; provide aesthetic and functional class-A exterior surface treatment
|
Fuel & Brake Delivery Systems
|
|
Sense, deliver and control fluids to fuel and brake systems
|
Fluid Transfer Systems
|
|
Sense, deliver and control fluids and vapors for optimal powertrain & HVAC operation
|
Revenue by product line for the three months ended March 31, 2021 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
Europe
|
|
Asia Pacific
|
|
South America
|
|
Corporate, Eliminations and Other
|
|
Consolidated
|
Sealing systems
|
$
|
121,175
|
|
|
$
|
129,361
|
|
|
$
|
69,673
|
|
|
$
|
11,274
|
|
|
$
|
—
|
|
|
$
|
331,483
|
|
Fuel and brake delivery systems
|
112,656
|
|
|
30,790
|
|
|
28,369
|
|
|
2,865
|
|
|
—
|
|
|
174,680
|
|
Fluid transfer systems
|
105,205
|
|
|
5,625
|
|
|
16,183
|
|
|
1,347
|
|
|
—
|
|
|
128,360
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34,444
|
|
|
34,444
|
|
Consolidated
|
$
|
339,036
|
|
|
$
|
165,776
|
|
|
$
|
114,225
|
|
|
$
|
15,486
|
|
|
$
|
34,444
|
|
|
$
|
668,967
|
|
Revenue by product line for the three months ended March 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
Europe
|
|
Asia Pacific
|
|
South America
|
|
Corporate, Eliminations and Other
|
|
Consolidated
|
Sealing systems
|
$
|
124,556
|
|
|
$
|
127,246
|
|
|
$
|
49,024
|
|
|
$
|
13,549
|
|
|
$
|
—
|
|
|
$
|
314,375
|
|
Fuel and brake delivery systems
|
104,934
|
|
|
28,562
|
|
|
19,818
|
|
|
5,747
|
|
|
—
|
|
|
159,061
|
|
Fluid transfer systems
|
105,311
|
|
|
21,945
|
|
|
10,502
|
|
|
1,175
|
|
|
—
|
|
|
138,933
|
|
Other
|
—
|
|
|
7,489
|
|
|
—
|
|
|
—
|
|
|
35,032
|
|
|
42,521
|
|
Consolidated
|
$
|
334,801
|
|
|
$
|
185,242
|
|
|
$
|
79,344
|
|
|
$
|
20,471
|
|
|
$
|
35,032
|
|
|
$
|
654,890
|
|
Contract Estimates
The amount of revenue recognized is usually based on the purchase order price and adjusted for variable consideration, including pricing concessions. The Company accrues for pricing concessions by reducing revenue as products are shipped or delivered. The accruals are based on historical experience, anticipated performance and management’s best judgment. The Company also generally has ongoing adjustments to customer pricing arrangements based on the content and cost of its products. Such pricing accruals are adjusted as they are settled with customers. Customer returns are usually related to quality or shipment issues and are recorded as a reduction of revenue. The Company generally does not recognize significant return obligations due to their infrequent nature.
Contract Balances
The Company’s contract assets consist of unbilled amounts associated with variable pricing arrangements in its Asia Pacific region. Once pricing is finalized, contract assets are transferred to accounts receivable. As a result, the timing of revenue recognition and billings, as well as changes in foreign exchange rates, will impact contract assets on an ongoing basis. Contract assets were not materially impacted by any other factors during the three months ended March 31, 2021.
The Company’s contract liabilities consist of advance payments received and due from customers. Net contract assets (liabilities) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Change
|
Contract assets
|
|
$
|
5,274
|
|
|
$
|
777
|
|
|
$
|
4,497
|
|
Contract liabilities
|
|
(21)
|
|
|
(27)
|
|
|
6
|
|
Net contract assets
|
|
$
|
5,253
|
|
|
$
|
750
|
|
|
$
|
4,503
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Other
The Company, at times, enters into agreements that provide for lump sum payments to customers. These payment agreements are recorded as a reduction of revenue during the period the commitment is made. Amounts related to commitments of future payments to customers on the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020 were current liabilities of $15,882 and $16,932, respectively, and long-term liabilities of $6,427 and $6,828, respectively.
The Company provides assurance-type warranties to its customers. Such warranties provide customers with assurance that the related product will function as intended and complies with any agreed-upon specifications, and are recognized in costs of products sold.
5. Restructuring
On an ongoing basis, the Company evaluates its business and objectives to ensure that it is properly configured and sized based on changing market conditions. Accordingly, the Company has implemented several restructuring initiatives, including closure or consolidation of facilities throughout the world and the reorganization of its operating structure.
The Company’s restructuring charges consist of severance, retention and outplacement services, and severance-related postemployment benefits (collectively, “employee separation costs”), other related exit costs and asset impairments related to restructuring activities. Employee separation costs are recorded based on existing union and employee contracts, statutory requirements, completed negotiations and Company policy.
Restructuring expense by segment for the three months ended March 31, 2021 and 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
North America
|
|
|
|
|
$
|
2,363
|
|
|
$
|
3,703
|
|
Europe
|
|
|
|
|
16,397
|
|
|
2,193
|
|
Asia Pacific
|
|
|
|
|
369
|
|
|
133
|
|
South America
|
|
|
|
|
1,587
|
|
|
1,202
|
|
Total Automotive
|
|
|
|
|
20,716
|
|
|
7,231
|
|
Corporate and other
|
|
|
|
|
331
|
|
|
45
|
|
Total
|
|
|
|
|
$
|
21,047
|
|
|
$
|
7,276
|
|
Restructuring activity for the three months ended March 31, 2021 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Separation Costs
|
|
Other Exit Costs
|
|
|
|
Total
|
Balance as of December 31, 2020
|
$
|
15,029
|
|
|
$
|
8,406
|
|
|
|
|
$
|
23,435
|
|
Expense
|
18,152
|
|
|
2,895
|
|
|
|
|
21,047
|
|
Cash payments
|
(4,416)
|
|
|
(5,646)
|
|
|
|
|
(10,062)
|
|
Non-cash fixed asset impairments included in expense
|
—
|
|
|
(182)
|
|
|
|
|
(182)
|
|
Foreign exchange translation and other
|
(603)
|
|
|
1,928
|
|
|
|
|
1,325
|
|
Balance as of March 31, 2021
|
$
|
28,162
|
|
|
$
|
7,401
|
|
|
|
|
$
|
35,563
|
|
6. Inventories
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
Finished goods
|
$
|
46,675
|
|
|
$
|
39,136
|
|
Work in process
|
41,153
|
|
|
35,477
|
|
Raw materials and supplies
|
83,258
|
|
|
69,129
|
|
|
$
|
171,086
|
|
|
$
|
143,742
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
7. Leases
The Company primarily has operating and finance leases for certain manufacturing facilities, corporate offices and certain equipment. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities and long-term operating lease liabilities on the Company’s condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, net, debt payable within one year, and long-term debt on the Company’s condensed consolidated balance sheets.
The components of lease expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Operating lease expense
|
|
|
|
|
$
|
7,344
|
|
|
$
|
8,605
|
|
Short-term lease expense
|
|
|
|
|
1,640
|
|
|
1,010
|
|
Variable lease expense
|
|
|
|
|
248
|
|
|
250
|
|
Finance lease expense:
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
|
|
|
546
|
|
|
681
|
|
Interest on lease liabilities
|
|
|
|
|
366
|
|
|
385
|
|
Total lease expense
|
|
|
|
|
$
|
10,144
|
|
|
$
|
10,931
|
|
|
|
|
|
|
|
|
|
Other information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2021
|
|
2020
|
|
|
Supplemental Cash Flows Information
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
Operating cash flows for operating leases
|
|
$
|
7,346
|
|
|
$
|
7,933
|
|
|
|
Operating cash flows for finance leases
|
|
362
|
|
|
410
|
|
|
|
Financing cash flows for finance leases
|
|
652
|
|
|
648
|
|
|
|
Non-cash right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
|
|
|
Operating leases
|
|
2,932
|
|
|
37,205
|
|
|
|
Finance leases
|
|
—
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term (in years)
|
|
|
|
|
|
|
Operating leases
|
|
7.6
|
|
8.2
|
|
|
Finance leases
|
|
10.4
|
|
11.1
|
|
|
|
|
|
|
|
|
|
Weighted Average Discount Rate
|
|
|
|
|
|
|
Operating leases
|
|
5.4
|
%
|
|
5.3
|
%
|
|
|
Finance leases
|
|
5.7
|
%
|
|
6.1
|
%
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Future minimum lease payments under non-cancellable leases as of March 31, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
|
|
|
|
Operating Leases
|
|
Finance
Leases
|
Remainder of 2021
|
|
|
|
|
|
$
|
24,400
|
|
|
$
|
2,442
|
|
2022
|
|
|
|
|
|
22,224
|
|
|
3,181
|
|
2023
|
|
|
|
|
|
17,837
|
|
|
3,092
|
|
2024
|
|
|
|
|
|
13,616
|
|
|
3,370
|
|
2025
|
|
|
|
|
|
10,416
|
|
|
3,442
|
|
Thereafter
|
|
|
|
|
|
50,890
|
|
|
21,120
|
|
Total future minimum lease payments
|
|
|
|
|
|
139,383
|
|
|
36,647
|
|
Less imputed interest
|
|
|
|
|
|
(27,604)
|
|
|
(9,624)
|
|
Total
|
|
|
|
|
|
$
|
111,779
|
|
|
$
|
27,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized on the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
Operating Leases
|
|
|
|
|
|
|
|
Operating lease right-of-use assets, net
|
106,670
|
|
|
109,795
|
|
Current operating lease liabilities
|
25,666
|
|
|
21,711
|
|
|
|
|
|
Long-term operating lease liabilities
|
86,113
|
|
|
90,517
|
|
|
|
|
|
Finance Leases
|
|
|
|
Debt payable within one year
|
2,193
|
|
|
2,300
|
|
Long-term debt
|
24,830
|
|
|
26,152
|
|
As of March 31, 2021 and December 31, 2020, assets recorded under finance leases, net of accumulated depreciation were $29,837 and $30,847, respectively. As of March 31, 2021, the Company had additional operating and finance leases, primarily for real estate, that have not yet commenced with undiscounted lease payments of approximately $5,563. These leases will commence in 2021 with lease terms up to five years.
8. Property, Plant and Equipment
Property, plant and equipment consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
Land and improvements
|
$
|
58,334
|
|
|
$
|
61,226
|
|
Buildings and improvements
|
291,272
|
|
|
298,431
|
|
Machinery and equipment
|
1,283,381
|
|
|
1,277,624
|
|
Construction in progress
|
78,362
|
|
|
96,706
|
|
|
1,711,349
|
|
|
1,733,987
|
|
Accumulated depreciation
|
(853,740)
|
|
|
(841,678)
|
|
Property, plant and equipment, net
|
$
|
857,609
|
|
|
$
|
892,309
|
|
Based on the Company’s interim impairment assessment, the Company determined there were no indicators of impairment identified during the three months ended March 31, 2021.
During the three months ended March 31, 2020, the Company recorded an impairment charge related to machinery and equipment of $977 due to the deterioration of financial results in a certain Asia Pacific location. The fair value of machinery and equipment was determined using estimated orderly liquidation value, which was deemed the highest and best use of the assets.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
9. Goodwill and Intangible Assets
Goodwill
Changes in the carrying amount of goodwill by reporting unit for the three months ended March 31, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
Industrial Specialty Group
|
|
Total
|
Balance as of December 31, 2020
|
$
|
128,214
|
|
|
$
|
14,036
|
|
|
$
|
142,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation
|
57
|
|
|
—
|
|
|
57
|
|
Balance as of March 31, 2021
|
$
|
128,271
|
|
|
$
|
14,036
|
|
|
$
|
142,307
|
|
Goodwill is tested for impairment by reporting unit annually or more frequently if events or circumstances indicate that an impairment may exist. There were no indicators of potential impairment during the three months ended March 31, 2021.
Intangible Assets
Intangible assets and accumulated amortization balances as of March 31, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Customer relationships
|
$
|
154,510
|
|
|
$
|
(122,837)
|
|
|
$
|
31,673
|
|
Other
|
44,725
|
|
|
(10,535)
|
|
|
34,190
|
|
Balance as of March 31, 2021
|
$
|
199,235
|
|
|
$
|
(133,372)
|
|
|
$
|
65,863
|
|
|
|
|
|
|
|
Customer relationships
|
$
|
155,409
|
|
|
$
|
(122,657)
|
|
|
$
|
32,752
|
|
Other
|
44,826
|
|
|
(9,899)
|
|
|
34,927
|
|
Balance as of December 31, 2020
|
$
|
200,235
|
|
|
$
|
(132,556)
|
|
|
$
|
67,679
|
|
10. Debt
A summary of outstanding debt as of March 31, 2021 and December 31, 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
Senior Notes
|
$
|
396,008
|
|
|
$
|
395,829
|
|
Senior Secured Notes
|
240,043
|
|
|
239,567
|
|
Term Loan
|
323,030
|
|
|
323,636
|
|
ABL Facility
|
—
|
|
|
—
|
|
Finance leases
|
27,023
|
|
|
28,452
|
|
Other borrowings
|
38,823
|
|
|
36,007
|
|
Total debt
|
1,024,927
|
|
|
1,023,491
|
|
Less current portion
|
(43,441)
|
|
|
(40,731)
|
|
Total long-term debt
|
$
|
981,486
|
|
|
$
|
982,760
|
|
5.625% Senior Notes due 2026
In November 2016, the Company issued $400,000 aggregate principal amount of its 5.625% Senior Notes due 2026 (the “Senior Notes”). The Senior Notes mature on November 15, 2026. Interest on the Senior Notes is payable semi-annually in arrears in cash on May 15 and November 15 of each year.
Debt issuance costs related to the Senior Notes are amortized into interest expense over the term of the Senior Notes. As of March 31, 2021 and December 31, 2020, the Company had $3,992 and $4,171 of unamortized debt issuance costs, respectively, related to the Senior Notes, which are presented as direct deductions from the principal balance in the condensed consolidated balance sheets.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
13.0% Senior Secured Notes due 2024
In May 2020, the Company issued $250,000 aggregate principal amount of its 13.0% Senior Secured Notes due 2024 (the “Senior Secured Notes”). The Senior Secured Notes mature on June 1, 2024. Interest on the Senior Secured Notes is payable semi-annually in arrears in cash on June 1 and December 1 of each year.
The Company paid approximately $6,431 of debt issuance costs in connection with the transaction. Additionally, the Senior Secured Notes were issued at a discount of $5,000. As of March 31, 2021 and December 31, 2020, the Company had $5,547 and $5,828 of unamortized debt issuance costs, respectively, and $4,410 and $4,605 of unamortized original issue discount, respectively, related to the Senior Secured Notes, which are presented as direct deductions from the principal balance in the condensed consolidated balance sheets. Both the debt issuance costs and the original issue discount are amortized into interest expense over the term of the Senior Secured Notes.
Term Loan Facility
In November 2016, the Company entered into Amendment No. 1 to its senior term loan facility (“Term Loan Facility”), which provides for loans in an aggregate principal amount of $340,000. On May 2, 2017, the Company entered into Amendment No. 2 to the Term Loan Facility to modify the interest rate. Subsequently, on March 6, 2018, the Company entered into Amendment No. 3 to the Term Loan Facility to further modify the interest rate. In accordance with this amendment, borrowings under the Term Loan Facility bear interest, at the Company’s option, at either (1) with respect to Eurodollar rate loans, the greater of the applicable Eurodollar rate and 0.75% plus 2.0% per annum, or (2) with respect to base rate loans, the base rate, (which is the highest of the then current federal funds rate plus 0.5%, the prime rate most recently announced by the administrative agent under the term loan, and the one-month Eurodollar rate plus 1.0%) plus 1.0% per annum. The Term Loan Facility matures on November 2, 2023, unless earlier terminated.
As of March 31, 2021 and December 31, 2020, the Company had $1,532 and $1,680 of unamortized debt issuance costs, respectively, and $998 and $1,084 of unamortized original issue discount, respectively, related to the Term Loan Facility, which are presented as direct deductions from the principal balance in the condensed consolidated balance sheets. Both the debt issuance costs and the original issue discount are amortized into interest expense over the term of the Term Loan Facility.
ABL Facility
In November 2016, the Company entered into a Third Amended and Restated Loan Agreement of its ABL Facility, which provided an aggregate revolving loan availability of up to $210,000, subject to borrowing base availability. In March 2020, the Company entered into the First Amendment of the Third Amended and Restated Loan Agreement (“the Amendment”). As a result of the Amendment, the senior asset-based revolving credit facility (“ABL Facility”) maturity was extended to March 2025 and the aggregate revolving loan availability was reduced to $180,000. The aggregate revolving loan availability includes a $100,000 letter of credit sub-facility and a $25,000 swing line sub-facility. The ABL Facility also provides for an uncommitted $100,000 incremental loan facility, for a potential total ABL Facility of $280,000, if requested by the borrowers under the ABL Facility and the lenders agree to fund such increase. No consent of any lender is required to effect any such increase, except for those participating in the increase.
As of March 31, 2021, there were no loans outstanding under the ABL Facility. The Company’s borrowing base was $163,208. Net of the greater of 10% of the borrowing base or $15,000 that cannot be borrowed without triggering the fixed charge coverage ratio maintenance covenant and $5,530 of outstanding letters of credit, the Company effectively had $141,357 available for borrowing under its ABL facility.
Any borrowings under the ABL Facility will mature, and the commitments of the lenders under the ABL Facility will terminate, on the earlier of March 24, 2025 or the date 91 days prior to the maturity date of the Term Loan Facility (or another fixed asset facility replacing the Term Loan Facility).
As a result of the Amendment in March 2020, the Company wrote off $177 in unamortized debt issuance costs, which are presented in interest expense, net of interest income in the condensed consolidated statements of operations. As of March 31, 2021 and December 31, 2020, the Company had $967 and $1,029, respectively, of unamortized debt issuance costs related to the ABL Facility, which are presented in other assets in the condensed consolidated balance sheets.
Debt Covenants
The Company was in compliance with all covenants of the Senior Notes, Senior Secured Notes, Term Loan Facility and ABL Facility as of March 31, 2021.
Other
Other borrowings as of March 31, 2021 and December 31, 2020 reflect borrowings under local bank lines classified in debt payable within one year on the condensed consolidated balance sheet.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
11. Fair Value Measurements and Financial Instruments
Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy is utilized, which prioritizes the inputs used in measuring fair value as follows:
|
|
|
|
|
|
Level 1:
|
Observable inputs such as quoted prices in active markets;
|
Level 2:
|
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
|
Level 3:
|
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
Items Measured at Fair Value on a Recurring Basis
Estimates of the fair value of foreign currency derivative instruments are determined using exchange traded prices and rates. The Company also considers the risk of non-performance in the estimation of fair value and includes an adjustment for non-performance risk in the measure of fair value of derivative instruments. In certain instances where market data is not available, the Company uses management judgment to develop assumptions that are used to determine fair value. Fair value measurements and the fair value hierarchy level for the Company’s assets and liabilities measured or disclosed at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Input
|
Forward foreign exchange contracts - other current assets
|
$
|
1,129
|
|
|
$
|
1,826
|
|
|
Level 2
|
Forward foreign exchange contracts - accrued liabilities
|
(788)
|
|
|
(750)
|
|
|
Level 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items Measured at Fair Value on a Nonrecurring Basis
In addition to items that are measured at fair value on a recurring basis, the Company measures certain assets and liabilities at fair value on a nonrecurring basis, which are not included in the table above. As these nonrecurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy. For further information on assets and liabilities measured at fair value on a nonrecurring basis see Note 3. “Divestiture” and Note 8. “Property, Plant and Equipment.”
Items Not Carried at Fair Value
Fair values of the Company’s Senior Notes, Senior Secured Notes and Term Loan Facility were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
Aggregate fair value
|
$
|
942,438
|
|
|
$
|
965,052
|
|
Aggregate carrying value (1)
|
975,550
|
|
|
976,400
|
|
(1) Excludes unamortized debt issuance costs and unamortized original issue discount.
Fair values were based on quoted market prices and are classified within Level 1 of the fair value hierarchy.
Derivative Instruments and Hedging Activities
The Company is exposed to fluctuations in foreign currency exchange rates, interest rates and commodity prices. The Company enters into derivative instruments primarily to hedge portions of its forecasted foreign currency denominated cash flows and designates these derivative instruments as cash flow hedges in order to qualify for hedge accounting.
The Company formally documents its hedge relationships, including the identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the cash flow hedges. The Company also formally assesses whether a cash flow hedge is highly effective in offsetting changes in the cash flows of the hedged item. Derivatives are recorded at fair value in other current assets, other assets, accrued liabilities and other long-term liabilities. For a cash flow hedge, the effective portion of the change in fair value of the derivative is recorded in accumulated other comprehensive income (loss) (“AOCI”) in the condensed consolidated balance sheet and reclassified into earnings when the
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
underlying hedged transaction is realized. The realized gains and losses are recorded on the same line as the hedged transaction in the condensed consolidated statements of operations.
The Company is exposed to credit risk in the event of nonperformance by its counterparties on its derivative financial instruments. The Company mitigates this credit risk exposure by entering into agreements directly with major financial institutions with high credit standards that are expected to fully satisfy their obligations under the contracts.
Cash Flow Hedges
Forward Foreign Exchange Contracts - The Company uses forward contracts to mitigate the potential volatility to earnings and cash flow arising from changes in currency exchange rates that impact the Company’s foreign currency transactions. The principal currencies hedged by the Company include various European currencies, the Canadian Dollar, and the Mexican Peso. As of March 31, 2021 and December 31, 2020, the notional amount of these contracts was $66,133 and $97,503, respectively, and consisted of hedges of transactions up to December 2021.
Pretax amounts related to the Company’s cash flow hedges that were recognized in other comprehensive income (loss) (“OCI”) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in OCI
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Forward foreign exchange contracts
|
|
|
|
|
$
|
(548)
|
|
|
$
|
(12,871)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax amounts related to the Company’s cash flow hedges that were reclassified from AOCI and recognized in cost of products sold were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Reclassified from AOCI to Income
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Forward foreign exchange contracts
|
|
|
|
|
$
|
188
|
|
|
$
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12. Accounts Receivable Factoring
As a part of its working capital management, the Company sells certain receivables through a single third-party financial institution in a pan-European program (the “Factor”). The amount sold varies each month based on the amount of underlying receivables and cash flow needs of the Company. These are permitted transactions under the Company’s credit agreements governing the ABL Facility and Term Loan Facility and the indentures governing the Senior Notes and Senior Secured Notes. The European factoring facility, which was renewed in March 2020, allows the Company to factor up to €120 million of its Euro-denominated accounts receivable, accelerating access to cash and reducing credit risk. The factoring facility expires in December 2023.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Costs incurred on the sale of receivables are recorded in other expense, net in the condensed consolidated statements of operations. The sale of receivables under this contract is considered an off-balance sheet arrangement to the Company and is accounted for as a true sale and is excluded from accounts receivable in the condensed consolidated balance sheet. Amounts outstanding under receivable transfer agreements entered into by various locations as of the period end were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
Off-balance sheet arrangements
|
$
|
80,461
|
|
|
$
|
85,108
|
|
Accounts receivable factored and related costs throughout the period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-Balance Sheet Arrangements
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
Accounts receivable factored
|
|
|
|
|
$
|
117,271
|
|
|
$
|
176,508
|
|
|
|
|
|
|
|
|
|
Costs
|
|
|
|
|
154
|
|
|
309
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021 and December 31, 2020, cash collections on behalf of the Factor that have yet to be remitted were $6,174 and $1,786, respectively, and are reflected in other current assets as restricted cash in the condensed consolidated balance sheet.
13. Pension and Postretirement Benefits Other Than Pensions
The components of net periodic benefit (income) cost for the Company’s defined benefit plans and other postretirement benefit plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
|
Non-U.S.
|
Service cost
|
$
|
223
|
|
|
$
|
914
|
|
|
$
|
213
|
|
|
$
|
989
|
|
Interest cost
|
1,629
|
|
|
648
|
|
|
2,033
|
|
|
782
|
|
Expected return on plan assets
|
(3,564)
|
|
|
(334)
|
|
|
(3,421)
|
|
|
(577)
|
|
Amortization of prior service cost and actuarial loss
|
418
|
|
|
932
|
|
|
485
|
|
|
794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit (income) cost
|
$
|
(1,294)
|
|
|
$
|
2,160
|
|
|
$
|
(690)
|
|
|
$
|
1,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement Benefits
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
|
Non-U.S.
|
Service cost
|
$
|
26
|
|
|
$
|
90
|
|
|
$
|
26
|
|
|
$
|
96
|
|
Interest cost
|
133
|
|
|
177
|
|
|
170
|
|
|
173
|
|
Amortization of prior service credit and actuarial (gain) loss
|
(349)
|
|
|
190
|
|
|
(483)
|
|
|
107
|
|
|
|
|
|
|
|
|
|
Net periodic benefit (income) cost
|
$
|
(190)
|
|
|
$
|
457
|
|
|
$
|
(287)
|
|
|
$
|
376
|
|
The service cost component of net periodic benefit (income) cost is included in cost of products sold and selling, administrative and engineering expenses in the condensed consolidated statements of operations. All other components of net periodic benefit (income) cost are included in other expense, net in the condensed consolidated statements of operations for all periods presented.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
14. Other Expense, Net
The components of other expense, net were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Foreign currency losses
|
|
|
|
|
$
|
(5,264)
|
|
|
$
|
(3,232)
|
|
Components of net periodic benefit income (cost) other than service cost
|
|
|
|
|
120
|
|
|
(63)
|
|
Factoring costs
|
|
|
|
|
(154)
|
|
|
(309)
|
|
Miscellaneous income
|
|
|
|
|
209
|
|
|
164
|
|
Other expense, net
|
|
|
|
|
$
|
(5,089)
|
|
|
$
|
(3,440)
|
|
15. Income Taxes
The Company determines its effective tax rate each quarter based upon its estimated annual effective tax rate. The Company records the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year where no tax benefit can be recognized are excluded from the estimated annual effective tax rate.
Income tax expense (benefit), loss before income taxes and the corresponding effective tax rate for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
Income tax expense (benefit)
|
|
|
|
|
$
|
936
|
|
|
$
|
(14,117)
|
|
Loss before income taxes
|
|
|
|
|
(33,777)
|
|
|
(126,556)
|
|
Effective tax rate
|
|
|
|
|
(3)
|
%
|
|
11
|
%
|
The effective tax rate for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 varied from prior periods primarily due to the 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, and due to a benefit in the three months ended March 31, 2020 for net operating losses carried back up to five years at tax rates in effect during those periods under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), rather than carried forward at current federal tax rates of 21%. The incremental loss in the three months ended March 31, 2020 was driven by impairment charges on held for sale entities for which no tax benefit was recognized. Additionally, a discrete expense of $13,309 for the initial recognition of valuation allowances against net deferred tax assets in certain foreign jurisdictions was recorded in the three months ended March 31, 2020.
The income tax rate for the three months ended March 31, 2021 and 2020 varied from the U.S. statutory rate primarily due to the inability to record a tax benefit for pre-tax losses in certain foreign jurisdictions and U.S. states, tax credits, the impact of income taxes on foreign earnings taxed at rates varying from the U.S. statutory rate, and other permanent items. Additionally, the income tax rate for the three months ended March 31, 2020 varied from the U.S. statutory rate as a result of benefits from net operating loss carry backs under the CARES Act. Further, the Company’s current and future provision for income taxes is impacted by the initial recognition of and changes in valuation allowances in certain countries. The Company intends to maintain these valuation allowances until it is more likely than not that the deferred tax assets will be realized.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
16. Net Loss Per Share Attributable to Cooper-Standard Holdings Inc.
Basic net loss per share attributable to Cooper-Standard Holdings Inc. was computed by dividing net loss attributable to Cooper-Standard Holdings Inc. by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share attributable to Cooper-Standard Holdings Inc. was computed using the treasury stock method by dividing diluted net loss available to Cooper-Standard Holdings Inc. by the weighted average number of shares of common stock outstanding, including the dilutive effect of common stock equivalents, using the average share price during the period.
Information used to compute basic and diluted net loss per share attributable to Cooper-Standard Holdings Inc. was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to Cooper-Standard Holdings Inc. common stockholders
|
|
|
|
|
$
|
(33,864)
|
|
|
$
|
(110,588)
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares of common stock outstanding
|
|
|
|
|
16,951,190
|
|
|
16,883,717
|
|
Dilutive effect of common stock equivalents
|
|
|
|
|
—
|
|
|
—
|
|
Diluted weighted average shares of common stock outstanding
|
|
|
|
|
16,951,190
|
|
|
16,883,717
|
|
|
|
|
|
|
|
|
|
Basic net loss per share attributable to Cooper-Standard Holdings Inc.
|
|
|
|
|
$
|
(2.00)
|
|
|
$
|
(6.55)
|
|
|
|
|
|
|
|
|
|
Diluted net loss per share attributable to Cooper-Standard Holdings Inc.
|
|
|
|
|
$
|
(2.00)
|
|
|
$
|
(6.55)
|
|
Approximately 189,000 and 13,000 securities were excluded from the calculation of diluted loss per share for the three months ended March 31, 2021 and 2020, respectively, because the inclusion of such securities in the calculation would have been anti-dilutive.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
17. Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss by component, net of related tax, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
|
|
$
|
(136,579)
|
|
|
$
|
(153,933)
|
|
|
Other comprehensive loss before reclassifications
|
|
|
|
|
(6,320)
|
|
(1)
|
(28,382)
|
|
(1)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
|
|
|
$
|
(142,899)
|
|
|
$
|
(182,315)
|
|
|
Benefit plan liabilities
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
|
|
$
|
(106,079)
|
|
|
$
|
(100,160)
|
|
|
Other comprehensive income before reclassifications
|
|
|
|
|
1,643
|
|
(2)
|
2,024
|
|
(2)
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
|
|
1,096
|
|
(3)
|
658
|
|
(4)
|
Balance at end of period
|
|
|
|
|
$
|
(103,340)
|
|
|
$
|
(97,478)
|
|
|
Fair value change of derivatives
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
|
|
$
|
762
|
|
|
$
|
352
|
|
|
Other comprehensive loss before reclassifications
|
|
|
|
|
(432)
|
|
(5)
|
(9,984)
|
|
(5)
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
|
|
(139)
|
|
(6)
|
(92)
|
|
(6)
|
Balance at end of period
|
|
|
|
|
$
|
191
|
|
|
$
|
(9,724)
|
|
|
Accumulated other comprehensive loss, ending balance
|
|
|
|
|
$
|
(246,048)
|
|
|
$
|
(289,517)
|
|
|
(1)Includes other comprehensive loss related to intra-entity foreign currency balances that are of a long-term investment nature of $4,389 and $22,703 for the three months ended March 31, 2021 and 2020, respectively.
(2)Net of tax (benefit) expense of $(245) and $337 for the three months ended March 31, 2021 and 2020, respectively.
(3)Includes the effect of the amortization of actuarial losses of $1,124 and amortization of prior service cost of $65, net of tax of $93.
(4)Includes the effect of the amortization of actuarial losses of $872 and amortization of prior service cost of $21, net of tax of $235.
(5)Net of tax benefit of $116 and $2,887 for the three months ended March 31, 2021 and 2020, respectively.
(6)Net of tax expense of $49 and $23 for the three months ended March 31, 2021 and 2020, respectively.
18. Common Stock
Share Repurchase Program
In June 2018, the Company’s Board of Directors approved a common stock repurchase program (the “2018 Program”) authorizing the Company to repurchase, in the aggregate, up to $150,000 of its outstanding common stock. Under the 2018 Program, repurchases may be made on the open market, through private transactions, accelerated share repurchases, round lot or block transactions on the New York Stock Exchange or otherwise, as determined by management and in accordance with prevailing market conditions and federal securities laws and regulations. The Company expects to fund any future repurchases from cash on hand and future cash flows from operations. The Company is not obligated to acquire a particular amount of securities, and the 2018 Program may be discontinued at any time at the Company’s discretion. The 2018 Program became effective in November 2018. As of March 31, 2021, the Company had approximately $98,720 of repurchase authorization remaining under the 2018 Program.
The Company did not make any repurchases under the 2018 Program during the three months ended March 31, 2021 or during the three months ended March 31, 2020.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
19. Share-Based Compensation
The Company’s long-term incentive plans allow for the grant of various types of share-based awards to key employees and directors of the Company and its affiliates. The Company generally awards grants on an annual basis.
In February 2021, the Company granted Restricted Stock Units (“RSUs”), Performance Units (“PUs”) and stock options. The RSUs cliff vest after three years, the PUs vest ratably over three years after the initial two-year performance period, and the stock options vest ratably over three years. The number of PUs that will vest depends on the Company’s achievement of target performance goals related to the Company’s return on invested capital (“ROIC”) and total shareholder return, which may range from 0% to 200% of the target award amount.
Share-based compensation expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2021
|
|
2020
|
PUs
|
|
|
|
|
$
|
339
|
|
|
$
|
74
|
|
RSUs
|
|
|
|
|
1,246
|
|
|
1,643
|
|
Stock options
|
|
|
|
|
593
|
|
|
657
|
|
Total
|
|
|
|
|
$
|
2,178
|
|
|
$
|
2,374
|
|
20. Commitments and Contingencies
The Company is periodically involved in claims, litigation and various legal matters that arise in the ordinary course of business. The Company accrues for litigation exposure when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified. As of March 31, 2021, the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for claims, litigation and various legal matters, if any, has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, the Company’s financial condition, results of operations or cash flows could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters.
In addition, the Company conducts and monitors environmental investigations and remedial actions at certain locations. As of March 31, 2021 and December 31, 2020, the Company had approximately $12,012 and $13,302, respectively, reserved in accrued liabilities and other liabilities on the condensed consolidated balance sheets on an undiscounted basis. While the Company’s costs to defend and settle known claims arising under environmental laws have not been material in the past and are not currently estimated to have a material adverse effect on the Company’s financial condition, such costs may be material to the Company’s financial statements in the future.
21. Segment Reporting
The Company’s business is organized in the following reportable segments: North America, Europe, Asia Pacific and South America. All other business activities are reported in Corporate, eliminations and other. The Company’s principal products within each of the reportable segments are sealing, fuel and brake delivery, and fluid transfer systems.
The Company uses Segment adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. The results of each segment include certain allocations for general, administrative and other shared costs. Segment adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Certain financial information on the Company’s reportable segments was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2021
|
|
2020
|
|
|
External Sales
|
|
Intersegment Sales
|
|
Adjusted EBITDA
|
|
External Sales
|
|
Intersegment Sales
|
|
Adjusted EBITDA
|
North America
|
|
$
|
339,036
|
|
|
$
|
2,633
|
|
|
$
|
41,233
|
|
|
$
|
334,801
|
|
|
$
|
4,468
|
|
|
$
|
37,019
|
|
Europe
|
|
165,776
|
|
|
2,979
|
|
|
(1,489)
|
|
|
185,242
|
|
|
3,091
|
|
|
(4,623)
|
|
Asia Pacific
|
|
114,225
|
|
|
630
|
|
|
3,552
|
|
|
79,344
|
|
|
457
|
|
|
(17,057)
|
|
South America
|
|
15,486
|
|
|
12
|
|
|
(2,608)
|
|
|
20,471
|
|
|
68
|
|
|
(4,577)
|
|
Total Automotive
|
|
634,523
|
|
|
6,254
|
|
|
40,688
|
|
|
619,858
|
|
|
8,084
|
|
|
10,762
|
|
Corporate, eliminations and other
|
|
34,444
|
|
|
(6,254)
|
|
|
(2,148)
|
|
|
35,032
|
|
|
(8,084)
|
|
|
(2,483)
|
|
Consolidated
|
|
$
|
668,967
|
|
|
$
|
—
|
|
|
$
|
38,540
|
|
|
$
|
654,890
|
|
|
$
|
—
|
|
|
$
|
8,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
Adjusted EBITDA
|
|
|
|
|
|
$
|
38,540
|
|
|
$
|
8,279
|
|
Restructuring charges
|
|
|
|
|
|
(21,047)
|
|
|
(7,276)
|
|
Gain on sale of business
|
|
|
|
|
|
891
|
|
|
—
|
|
Impairment of assets held for sale
|
|
|
|
|
|
—
|
|
|
(74,079)
|
|
Project costs
|
|
|
|
|
|
—
|
|
|
(2,425)
|
|
Other impairment charges
|
|
|
|
|
|
—
|
|
|
(684)
|
|
Lease termination costs
|
|
|
|
|
|
—
|
|
|
(520)
|
|
EBITDA
|
|
|
|
|
|
$
|
18,384
|
|
|
$
|
(76,705)
|
|
Income tax (expense) benefit
|
|
|
|
|
|
(936)
|
|
|
14,117
|
|
Interest expense, net of interest income
|
|
|
|
|
|
(17,784)
|
|
|
(10,237)
|
|
Depreciation and amortization
|
|
|
|
|
|
(33,528)
|
|
|
(37,763)
|
|
Net loss attributable to Cooper-Standard Holdings Inc.
|
|
|
|
|
|
$
|
(33,864)
|
|
|
$
|
(110,588)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
Segment assets:
|
|
|
|
North America
|
$
|
941,996
|
|
|
$
|
907,652
|
|
Europe
|
447,340
|
|
|
465,031
|
|
Asia Pacific
|
543,970
|
|
|
587,610
|
|
South America
|
61,714
|
|
|
64,800
|
|
Total Automotive
|
1,995,020
|
|
|
2,025,093
|
|
Corporate, eliminations and other
|
570,341
|
|
|
586,851
|
|
Consolidated
|
$
|
2,565,361
|
|
|
$
|
2,611,944
|
|