UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
For the transition period from to
Commission file number 001-36127
COOPER-STANDARD HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
20-1945088
(I.R.S. Employer
Identification No.)
40300 Traditions Drive
Northville, Michigan 48168
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (248) 596-5900
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
CPS
_
Name of Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
Title of Each Class
Common Stock, par value $0.001 per share
Preferred Stock Purchase Rights
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐ Accelerated filer
☐ Smaller reporting company
Emerging growth company
☒
☒
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers
during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of voting and non-voting common stock held by non-affiliates as of June 30, 2022 was $67,446,941.
The number of the registrant’s shares of common stock, $0.001 par value per share, outstanding as of February 8, 2023 was 17,108,029 shares.
Documents Incorporated by Reference
Certain portions, as expressly described in this report, of the Registrant’s Proxy Statement for the 2023 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report
on Form 10-K.
TABLE OF CONTENTS
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART III
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Signatures
Exhibits and Financial Statement Schedules
PART IV
Page
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101
PART I
Item 1. Business
Cooper-Standard Holdings Inc. (together with its consolidated subsidiaries, the “Company,” “Cooper Standard,” “we,” “our” or “us”) is a leading
manufacturer of sealing, fuel and brake delivery, and fluid transfer systems. Our products are primarily for use in passenger vehicles and light trucks that are
manufactured by global automotive original equipment manufacturers (“OEMs”) and replacement markets. We conduct substantially all of our activities through
our subsidiaries.
Cooper Standard is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “CPS.” The Company has approximately 23,000
employees, including 3,000 contingent workers, with 132 facilities in 21 countries. We are the largest global producer of sealing systems, the second largest
global producer of the types of fuel and brake delivery products that we manufacture and the third largest global producer of the types of fluid transfer systems
that we manufacture. We design and manufacture our products in each major region of the world through a disciplined and sustained approach to engineering and
operational excellence. We operate in 78 manufacturing locations and 54 design, engineering, administrative and logistics locations.
Our organizational structure consists of a global automotive business (“Automotive”) and the Advanced Technology Group (“ATG”). Our business is
organized in the following reportable segments: North America, Europe, Asia Pacific and South America. ATG and all other business activities are reported in
Corporate, eliminations and other. This operating structure allows us to offer our full portfolio of products and support our global and regional customers with
complete engineering and manufacturing expertise in all major regions of the world. On an ongoing basis, we undertake restructuring, expansion and cost
reduction initiatives to improve competitiveness.
Approximately 82% of our sales in 2022 were to OEMs, including Ford Motor Company (“Ford”), General Motors Company (“GM”), Stellantis,
Volkswagen Group, Daimler, Renault-Nissan, BMW, Toyota, Volvo, Jaguar/Land Rover, Honda and various other OEMs based in China. The remaining 18% of
our 2022 sales were primarily to Tier I and Tier II automotive suppliers, non-automotive customers, and replacement market distributors. The Company’s
products can be found on over 440 nameplates globally.
Corporate History and Business Developments
Cooper-Standard Holdings Inc. was established in 2004 as a Delaware corporation and began operating on December 23, 2004 when it acquired the
automotive segment of Cooper Tire & Rubber Company. Cooper-Standard Holdings Inc. operates the business primarily through its principal operating
subsidiary, Cooper-Standard Automotive Inc. (“CSA U.S.”). Since the 2004 acquisition, the Company has expanded and diversified its customer base through a
combination of organic growth and strategic acquisitions.
In 2018, we established ATG, which incorporated our Industrial and Specialty Group, to accelerate and maximize the value stream of Cooper Standard’s
materials science and manufacturing expertise in industrial and specialty markets. We furthered the expansion of our Industrial and Specialty Group through the
acquisition of Lauren Manufacturing and Lauren Plastics in 2018, and signed multiple joint development agreements for our Fortrex™ chemistry platform
throughout 2018 to 2021. We have also licensed Fortrex™ technology into the footwear industry, with the first mass production programs expected to launch in
2023.
In 2019, we finalized the divestiture of our anti-vibration systems business (“AVS”) product line within our North America, Europe and Asia Pacific
segments. In 2020, we completed the divestiture of our European rubber fluid transfer and specialty sealing businesses, as well as our Indian operations.
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Business Strategy
At the beginning of 2022, the Company introduced a new Purpose Statement - Creating Sustainable Solutions Together - which represents the importance
of sustainability for the long-term health of the business as a whole and the sustained value that we work each day to deliver to our stakeholders (customers,
investors, employees, suppliers and communities). Our key strategic imperatives are defined as:
Financial Strength:
Execute our strategic initiatives, achieving and maintaining sustainable profit margins and cash flows.
Growth – Building For The
Future:
Leverage our materials science and manufacturing expertise. Pursue opportunities for both organic and
inorganic growth. Continue to build an exceptional workforce.
World-Class Functional Expertise
and Execution:
Attain world-class results across all functions allowing the Company to be the first choice of our
stakeholders.
Sustainability:
Deliver value to all our stakeholders through Environmental, Social, and Governance (ESG) initiatives to
ensure the long-term sustainability of the Company.
Cooper Standard’s global alignment around these imperatives continues to drive further value in many areas of the business, including:
Operational and Strategic Initiatives
As part of Cooper Standard’s world-class operations, the Company relies upon its CSOS (Cooper Standard Operating System) to fully position the
Company for growth and ensure global consistency in engineering design, program management, manufacturing process, purchasing and IT systems.
Standardization across all regions is especially critical in support of customers’ global platforms that require the same design, quality and delivery standards
everywhere across the world. As a result of these initiatives, the Company has leveraged CSOS to drive an average savings from improved operating efficiency
of approximately $60 million each of the past five years.
In addition, as part of our continued focus on sustainability and corporate responsibility, in 2021, Cooper Standard formed a Global Sustainability
Council to provide executive level oversight for the Company’s sustainability strategy and ensure alignment and integration with business goals and stakeholder
priorities. The council maintains a holistic look at the Company’s ESG (environmental, social and governance) initiatives, tracks rapidly-evolving best practices
and further develops long-term goals to drive world-class ESG performance.
Cooper Standard continues to progress its diversification strategy through its Advanced Technology Group, which is charged with accelerating and
maximizing expertise in the Company’s core process types for applications in the industrial and specialty markets. This business also drives growth and
diversification through the Company’s applied materials science offerings, which include the Fortrex™ chemistry platform that provides performance advantages
over many other materials, as well as a significantly reduced carbon footprint.
The Company’s CS Open Innovation is an initiative that aims to position Cooper Standard as the partner of choice for start-ups, universities and other
suppliers through a proactive outreach program. The initiative is focused in the areas of materials science, manufacturing and process technology, digital/artificial
intelligence and advanced product technology.
Leveraging Technology and Materials Science for Innovative Solutions
We utilize our technical and materials science expertise to provide customers with innovative and sustainable product solutions. Our engineers use the
results of advanced computational simulations and incorporate a broad understanding of materials science to design products which meet or exceed our
customers’ stringent requirements. We believe our reputation for successful innovation in product design and materials is the reason our customers consult us
early in the development and design process of their next generation vehicles or products.
Cooper Standard utilizes its i Innovation Process (Imagine, Initiate and Innovate) and CS Open Innovation as mechanisms to capture novel ideas while
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promoting a culture of innovation. Ideas are carefully evaluated by our global product
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line teams and Global Technology Council, and those that are selected are put on an accelerated development cycle. We are developing innovative technologies
based on materials expertise, process know-how, and application vision, which may drive future product direction. An example is Fortrex™, the Company’s
synthetic elastomer chemistry platform, offering reduced weight while delivering superior material performance and aesthetics. We have also developed several
other significant technologies, especially related to advanced materials, processing and weight reduction. These include: FlushSeal™, an advanced integrated
solution for frame under glass static sealing systems offering better appearance, improved aerodynamics, quieter ride and reduced weight; MagAlloy™, a
processing technology for brake lines that increases long term durability through superior corrosion resistance; and Easy-Lock™, a small package coolant and
fuel vapor quick connect. Given the trajectory and anticipated future growth of electric vehicles, Cooper Standard has developed innovations to provide
lightweight plastic tubing with our PlastiCool 2000 multilayer tubing, smooth and CVT mid-temperature multilayer tubing, and our next generation Ergo-
Lock™ and Ergo-Lock™ + VDA quick connectors for glycol thermal management needs.
®
Among our newer technologies is Cooper Standard’s artificial intelligence (A.I.)-enhanced development cycle for polymer compounds that has shortened
material development times while realizing rapid discovery of new compounds that offer superior performance properties, which yield superior products. We
have also developed proprietary technology for A.I.-enhanced processes control improvements. This technology enables full automation of polymer extrusion
and other complex continuous processes, reducing process variation (a top driver of scrap), increasing product quality, improving operational metrics and
reducing our carbon footprint.
Our innovations are receiving industry recognition. Cooper Standard earned an Environment + Energy Leader Award in 2022 for our Fortrex™ chemistry
platform, in addition to being named a General Motors Overdrive Award winner in the category of ‘Sustainability’ in 2021, and a 2018 Automotive News PACE
Award winner and a 2018 and 2019 Society of Plastics Engineers Innovation Award finalist. Also, Cooper Standard’s artificial intelligence-enhanced
development cycle for polymer compound development was named a finalist for the 2019 Automotive News PACE Awards.
Cooper Standard’s fluid handling products were selected as the Society of Plastics Engineers 2022 Automotive Innovation Award winner for the
Material category for our innovative battery electric vehicle thermoplastic thermal management solution utilizing PlastiCool 2000 multilayer tube and Ergo-
Lock connectors.
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Leverage Acquisitions and Alliances to Enhance Capabilities and Accelerate Growth
We may, from time to time, consider and selectively pursue complementary acquisitions and joint ventures to enhance our customer base, geographic
penetration, scale and technology. Consolidation is an industry trend, which has been encouraged by the OEMs’ desire for global automotive suppliers. We
believe we have a strong platform for growth through acquisitions based on our past integration successes, experienced management team, global presence and
operational excellence.
Industry
The automotive industry is one of the world’s largest and most competitive markets. Consumer demand for new vehicles largely determines sales and
production volumes of global OEMs. The business and commercial environment in each region also plays a role in vehicle demand as it relates to fleet vehicle
sales and industrial use vehicles such as light and heavy trucks.
OEMs compete for market share in a variety of ways including pricing and incentives, the development of new, more attractive models, branding and
advertising, and the ability to customize vehicle features and options to meet specific consumer needs or demands. They rely heavily on thousands of specialized
suppliers to provide the many distinct components and systems that comprise the modern vehicle. They also rely on these automotive suppliers to develop
technological innovations that will help them meet consumer demands as well as regulatory requirements.
The supplier industry is a highly competitive industry and is generally characterized by high barriers to entry, significant start-up costs and long-standing
customer relationships. The criteria by which OEMs judge automotive suppliers include quality, price, service, performance, design and engineering capabilities,
innovation, timely delivery, financial stability and global footprint. Over the last decade, suppliers that have been able to achieve manufacturing scale globally,
reduce structural costs, diversify their customer base and provide innovative, value-added technologies have been the most successful.
The technology of today’s vehicles is evolving rapidly. This evolution is being driven by many factors including consumer preferences and social
behaviors, a competitive drive for differentiation, regulatory requirements, environmental impact and safety. Cooper Standard supports these trends by providing
innovations that reduce weight, increase life-cycle and durability, reduce interior noise, enhance exterior appearance, simplify the manufacturing and assembly
process, and help reduce a vehicle’s environmental impact. These are innovations that can be applicable and valuable to virtually any vehicle (including internal
combustion, hybrid or battery electric powertrains) or vehicle manufacturer and, in many cases, can also be transferred to non-automotive applications in
adjacent markets. Cooper Standard remains closely aligned with our customers and is prepared to meet their evolving needs as they shift their fleets and offer
more electric vehicle (“EV”) options. We are focused on growing
5
our business in the EV segment by leveraging our technology and innovation to provide value-add solutions for increasingly specialized technical requirements.
Markets Served
Our automotive business is focused on the passenger car and light truck market, up to and including Class 3 full-size, full-frame trucks, better known as
the global light vehicle market. This is our largest market and accounts for approximately 92% of our global sales.
Customers
We are a leading supplier to the following OEMs and are increasing our presence with major OEMs throughout the world. The following charts show the
percentage of sales to our top customers for the years ended December 31, 2022, 2021 and 2020:
(1) 2020 percentages include FCA and Groupe PSA
Our other customers include OEMs such as Renault-Nissan, BMW, Toyota, Volvo, Jaguar/Land Rover, Honda and various other OEMs based in China.
Our business with any given customer is typically split among several contracts for different parts on a number of platforms.
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Products
We currently have three distinct product lines: sealing systems; fuel and brake delivery systems; and fluid transfer systems. These products are produced
and supplied globally to a broad range of customers in multiple markets. On July 1, 2020, we completed the divestiture of the European rubber fluid transfer and
specialty sealing businesses, as well as our Indian operations.
In addition to these product lines, we also sell our core products into other adjacent markets. The percentage of sales by product line and other markets
for the years ended December 31, 2022, 2021 and 2020 are as follows:
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Product Lines
SEALING SYSTEMS
FUEL & BRAKE
DELIVERY SYSTEMS
FLUID TRANSFER
SYSTEMS
Protect vehicle interiors from weather, dust and noise intrusion for improved driving experience;
provide aesthetic and functional class-A exterior surface treatment
Products:
–
– Obstacle detection sensor system
– FlushSeal™ systems
®
Fortrex
Market Position
Global leader
– Dynamic seals
– Static seals
– Encapsulated glass
– Tex-A-Fib (Textured Surface with Cloth
Appearance)
– Variable extrusion
– Specialty sealing products
– Stainless steel trim
– Frameless Systems
Sense, deliver and control fluid and fluid vapors for fuel and brake systems
Top 2 globally
Products:
– Chassis and tank fuel lines and bundles (fuel
lines, vapor lines and bundles)
– Metallic brake lines and bundles
– Quick connects
– Low oligomer multi-layer convoluted tube
– Direct injection & port fuel rails (fuel rails
and fuel charging assemblies)
– MagAlloy™ break tube coating
– ArmorTube™ brake tube coating
– Series 300 and S300LT (low temperature)
quick connects
– Brake jounce lines
– Gen III Posi-Lock quick connects
®
Sense, deliver, connect and control fluid delivery for optimal thermal management, powertrain &
HVAC operation
Products:
– Heater/coolant hoses
– Quick connects (SAE and VDA)
– Diesel particulate filter (DPF) lines
– Degas tanks and deaerators
– Charged air cooling (air intake and discharge) – Easy-Lock™ quick connect
– Transmission Oil Cooling Hoses
– Multilayer tubing for glycol thermal
– Turbo charger hoses
– Charged air cooler ducts/assemblies
– Secondary air hoses
– Brake and clutch hoses
– Ergo-Lock™ VDA quick connect
– Ergo-Lock™ + VDA quick connect
management
Top 3 globally
–
PlastiCool 5000 high temperature MLT
®
– PlastiCool 2000 multi-layer tubing for glycol
®
thermal management
Competition
We believe that the principal competitive factors in our industry are quality, price, service, launch performance, design and engineering capabilities,
innovation, timely delivery, financial stability and global footprint. We believe that our capabilities in these core competencies are integral to our position as a
market leader in each of our product lines. Our sealing systems products compete with Toyoda Gosei, Henniges, Standard Profil, HSR&A, SaarGummi and
JianXin, among others. Our fuel and brake delivery products compete with TI Automotive, Sanoh, Martinrea, Maruyasu and SeAH, among others. Our fluid
transfer products compete with Conti-Tech, Hutchinson, Teklas, Tristone, Akwel and Fränkische, among others.
Joint Ventures and Strategic Alliances
Joint ventures represent an important part of our business, both operationally and strategically. We have utilized joint ventures to enter and expand in
geographic markets such as China, India and Thailand, to acquire new customers and to develop new technologies. When entering new geographic markets,
teaming with a local partner can reduce capital investment by leveraging pre-existing infrastructure. In addition, local partners in these markets can provide
knowledge and insight into local practices and access to local suppliers of raw materials and components.
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The following table shows our significant unconsolidated joint ventures as of December 31, 2022:
Country
Thailand
India
United States
China
China
Name
Nishikawa Tachaplalert Cooper Ltd.
Polyrub Cooper Standard FTS Private Limited
Nishikawa Cooper LLC
Yantai Leading Solutions Auto Parts Co., Ltd.
Shenya Sealing (Guangzhou) Company Limited
Product Line
Sealing systems
Fluid transfer systems
Sealing systems
Fuel and brake delivery systems
Sealing and fluid transfer systems
Ownership Percentage
20%
35%
40%
50%
51%
Research and Development
We have a dedicated team of technical and engineering resources for each product line, some of which are located at our customers’ facilities. We utilize
simulation, digital tools, best practices, standardization and track key process indicators to drive efficiency in execution with an emphasis on manufacturability
and quality. Our development teams work closely with our customers to design and deliver innovative solutions, unique for their applications. Amounts spent on
engineering, research and development, and program management were as follows:
Year
2022
2021
2020
Amount
Percentage of Sales
(Dollar amounts in millions)
80.5
90.0
101.6
$
$
$
3.2 %
3.9 %
4.3 %
Intellectual Property
We believe that one of our key competitive advantages is our ability to translate customer needs and our ideas into innovation through the development of
intellectual property. We hold a significant number of patents and trademarks worldwide.
Our patents are grouped into two major categories: (1) specific product invention claims and (2) specific manufacturing processes that are used for
producing products. The vast majority of our patents fall within the product invention category. We consider these patents to be of value and seek to protect our
rights throughout the world against infringement. While in the aggregate these patents are important to our business, we do not believe that the loss or expiration
of any one patent would materially affect our Company. We continue to seek patent protection for our new products and we develop significant technologies that
we treat as trade secrets and choose not to disclose to the public through the patent process. These technologies nonetheless provide significant competitive
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advantages and contribute to our global leadership position in various markets. We believe that our trademarks, including FlushSeal™, Gen III Posi-Lock , Easy-
Lock , MagAlloy , Ergo-Lock , Ergo-Lock +, PlastiCool and Fortrex™, help differentiate us and lead customers to seek our partnership.
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We also have technology sharing and licensing agreements with various third parties, including Nishikawa Rubber Company, one of our joint venture
partners in sealing products. We have mutual agreements with Nishikawa Rubber Company for sales, marketing and engineering services on certain sealing
products. Under those agreements, each party pays for services provided by the other and royalties on certain products for which the other party provides design
or development services. We also have licensing and joint development agreements for commercial applications of our Fortrex™ chemistry platform in non-
automotive industries. A joint development agreement has also been put in place for the collaborative creation of novel dynamic fluid control products and
systems.
Innovation, Materials, and Product Lifecycle
The international response to risks and opportunities of climate change is transforming our global economy. Our most significant opportunity to
contribute to this low-carbon and circular economy is through reducing the environmental impact of our products and manufacturing processes. We purposefully
apply sustainable principles in the design and production of our products, reducing the environmental impact from sourcing through end-of-life. These efforts
also enable our customers to reduce their environmental impacts.
When obtaining or innovating materials for our products, we seek to sustainably source raw materials, increase the use of recycled content or recyclable
material where feasible, decrease our use of hazardous chemicals where possible, and properly
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disclose restricted materials to customers and regulators. We believe our culture of innovation is a key differentiator, allowing us to compete and succeed within
our dynamic global markets.
Supplies and Raw Materials
Cooper Standard is committed to building strong relationships with our supply partners. We recognize the importance of engaging with suppliers to
create value for our customers.
The principal raw materials for our business include synthetic and natural rubber, carbon black, process oils, and plastic resins. Principal procured
components are primarily made from plastic, carbon steel, aluminum and stainless steel. We manage the procurement of our direct and indirect materials to
assure supply continuity and to obtain the most favorable total cost. Procurement arrangements include short-term and long-term supply agreements that may
contain formula-based pricing based on commodity indices. These arrangements provide quantities needed to satisfy normal manufacturing demands. We believe
we have adequate sources for the supply of raw materials and components for our products with suppliers located around the world. We continue to manage, with
our supplier partners, short-term disruptions in production and logistics throughout our supply chain caused by the COVID-19 pandemic.
Raw material prices are susceptible to fluctuations which may place operational and profitability burdens on the entire supply chain. Costs related to raw
materials, such as steel, aluminum, and oil and oil-derived commodities, continue to be volatile, which led to extended and magnified increases in these costs in
2022. Current global events continue to add further price pressure and uncertainty to raw material costs for 2023. In addition, we continue to see significant
inflationary pressure on wages, energy, transportation and other general costs. It is generally difficult to pass through such increases to our customers. As such,
we have implemented strategies with both our suppliers and our customers to help manage these fluctuations. These actions include material index agreements
that allow price changes as underlying material costs fluctuate and ongoing dialogue to address non-material inflationary impacts. We have also made process
improvements to ensure the efficient use of materials through scrap reduction, as well as standardization of material specifications to maximize leverage over
higher volume purchases.
Seasonality
Within the automotive industry, sales to OEMs are lowest during the months prior to model changeovers or during assembly plant shutdowns.
Automotive production is traditionally reduced during July, August and year-end holidays, and our quarterly results may reflect these trends. However, economic
conditions and consumer demand may change the traditional seasonality of the industry. In 2021, for example, while demand remained strong, production was
more volatile due to supply chain disruptions, which resulted in late-notice shutdowns of certain customer facilities for an intermediate period of time. In 2022,
disruptions stemming from the Russia-Ukraine crisis and lockdowns in key Chinese manufacturing and trading hubs such as Shenzhen and Shanghai further
exacerbated supply chain disruptions and vehicle production levels.
Backlog
Our OEM sales are generally based upon purchase orders issued by the OEMs, with updated releases for volume adjustments. As such, we typically do
not have a firm and definitive backlog of orders at any point in time. Once selected to supply products for a particular platform, we typically supply those
products for the platform life, which is normally five to eight years, although there is no guarantee that this will occur. In addition, when we are the incumbent
supplier to a given platform, we believe we have a competitive advantage in winning the redesign or replacement platform, although there is no guarantee that
this will occur.
Human Capital and Safety
As of December 31, 2022, we had approximately 23,000 employees, including 3,000 contingent workers. We maintain good relations with both our
union and non-union employees and, in the past ten years, have not experienced any major work stoppages.
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Our people have always been the driving force of value at Cooper Standard. The emergence of new ways of working during the COVID-19 pandemic, a
growing international movement for civil rights, and our unwavering dedication to keeping our employees healthy and safe has only made them more critical to
our success. We accomplish this by developing the capabilities of our employees through continuous learning and performance management processes.
Additionally, building an internal talent pipeline supports the achievement of this priority. In 2022, our internal fill rate was approximately 80%. This metric,
which is based on salaried director level positions and above, helps us to understand where employees are advancing in their career and the effectiveness of our
internal development programs. For 2022, our voluntary employee turnover rate was approximately 19%. While this metric has increased compared to prior
years and despite the current competitive environment for talent, we believe that our culture and continued effort to provide our employees with growth
opportunities contributes to retaining our strong talent.
In addition, we aim to diversify our workforce because we recognize the value of engaging different opinions and backgrounds in a global company. We
are committed to recruiting, developing and retaining a high-performing and diverse workforce. A global measurement for our diversity is women in the
company and women in leadership. In 2022, women made up approximately 38% of our workforce. Of our leadership positions, defined as vice president
positions and above, women held approximately 22% of such roles.
Safety continues to be a top priority and primary focus of management. An emphasis on reducing workplace incidents helps Cooper Standard to maintain
a safe workforce and continue to deliver world class results for product quality. In 2022, our total incident rate (“TIR”) was 0.33, which represents an
Occupational Safety and Health Administration measurement of on-the-job injuries in relation to total hours worked. Based on our review of industry peer
sustainability reports, we have a lower TIR relative to our peer group. Additionally, throughout the COVID-19 pandemic, we have remained focused on
protecting the health and safety of our employees while meeting the needs of our customers. After the onset of COVID-19, we adopted enhanced safety measures
and practices across our facilities to protect employee health and safety and ensure a reliable supply of products to our customers. We monitor and track the
impact of the pandemic on our employees and within our operations and proactively modify or adopt new practices to promote their health and safety.
Community Involvement
Supported by the Cooper Standard Foundation, our employees are highly engaged in their local communities. The Foundation’s mission is to strengthen
the communities where Cooper Standard employees work and live through the passionate support of children’s charities, education, health and wellness, and
community revitalization. The Cooper Standard Foundation is a 501(c)(3) organization with oversight by its Board of Directors, Board of Trustees and
Philanthropic Committee. For more information on the Company’s community involvement, please visit our Corporate Responsibility Report located on the
Cooper Standard website.
Environmental, Social and Governance
In 2022, the Company was named to Newsweek’s list of America’s Most Responsible Companies for the fourth consecutive year and was recognized as
one of the 2022 World’s Most Ethical Companies by Ethisphere for the third consecutive year. These awards are a further testament to Cooper Standard’s
commitment to ESG (environmental, social and governance) topics, including our core value of integrity.
Cooper Standard considers itself a steward of the environment, and we monitor the environmental impact of our business and products. We prioritize our
environmental management as a means of driving and sustaining excellence. We are subject to a broad range of federal, state, and local environmental and
occupational safety and health laws and regulations in the United States and other countries, including regulations governing: emissions to air, discharges to
water, noise and odor emissions; the generation, handling, storage, transportation, treatment, reclamation and disposal of chemicals and waste materials; the
cleanup of contaminated properties; and human health and safety. We have made, and will continue to make, expenditures to comply with environmental
requirements. While our 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 our financial condition, such costs could be material to our financial statements in the future. Further details
regarding our commitments and contingencies are provided in Note 21. “Contingent Liabilities” to the consolidated financial statements included in Item 8.
“Financial Statements and Supplementary Data” of this Annual Report on Form 10-K (the “Report”).
Market Data
Some market data and other statistical information used throughout this Annual Report on Form 10-K is based on data from independent firms such as
S&P Global and PwC. Other data is based on good faith estimates, which are derived from our review of internal analyses, as well as third party sources.
Although we believe these third party sources are reliable, we have not
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independently verified the information and cannot guarantee its accuracy and completeness. To the extent that we have been unable to obtain information from
third party sources, we have expressed our belief on the basis of our own internal analyses of our products and capabilities in comparison to our competitors.
Available Information
We make available free of charge on our website (www.cooperstandard.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended, (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and
Exchange Commission (“SEC”). Our reports filed with the SEC also may be found on the SEC’s website at www.sec.gov. Neither the information on our website
nor the information on the SEC’s website is incorporated by reference into this Report unless expressly noted.
Forward-Looking Statements
This Annual Report on Form 10-K 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 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 Annual
Report on Form 10-K 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 Annual Report on Form 10-K 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.
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Item 1A. Risk Factors
We have listed below (not necessarily in order of importance or probability of occurrence) the most significant risk factors that could cause our actual
results to vary materially from recent or anticipated results and could materially and adversely affect our business, results of operations, financial condition and
cash flows.
Operational Risks
Our financial condition and results of operations have been, and may continue to be, adversely affected by a public health issue, such as the COVID-19
pandemic.
We face risks related to public health issues, including epidemics and pandemics such as the global outbreak of COVID-19 and its related variants. The
COVID-19 pandemic and preventative measures taken to contain or mitigate the COVID-19 pandemic have caused, and may continue to cause, business
slowdowns or shutdowns and significant disruption in the financial markets both in the United States and globally. A resurgence of COVID-19 or a new public
health crisis and efforts to contain it (including, but not limited to, vaccination, social distancing policies, restrictions on travel and reduced operations and
extended closures of many businesses and institutions), may cause shutdowns of our and our customers’ facilities, increased operating and production costs,
disruptions and financial distress in the supply chain, disruptions in our production cycle, lost or absent members of the workforce, a decline in demand due to an
economic downturn, and inability to access capital due to disruptions in the global financial markets, materially impacting our financial condition and results of
operations.
The full impact of the COVID-19 pandemic or another health crisis on our financial condition and results of operations will depend on various factors,
such as the ultimate duration and scope of the health crisis, its impact on our customers, suppliers and logistics partners, how quickly normal operations can
resume and the duration and magnitude of the economic downturn caused by the health crisis in our key markets. In particular, the emergence of new variants of
COVID-19 could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time. Further,
government-sponsored liquidity or stimulus programs in response to the COVID-19 pandemic may not be available to our customers, suppliers or us and, if
available, may nevertheless be insufficient to address the impacts of COVID-19. Therefore, it remains difficult to predict the extent or nature of these impacts at
this time. The COVID-19 pandemic or another health crisis may also exacerbate the other risks disclosed in this Item 1A. Risk Factors.
Our business, financial condition and results of operations may be adversely impacted by the effects of inflation.
Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our overall cost structure. Other
inflationary pressures could affect wages, the cost and availability of components and raw materials and other inputs and our ability to meet customer demand.
Inflation may further exacerbate other risk factors, including supply chain disruptions, risks related to international operations and the recruitment and retention
of qualified employees. If we are unsuccessful in negotiating pricing adjustments with our customers to raise the prices of our products sufficiently to keep up
with the rate of inflation, our profit margins and cash flows may be adversely affected.
Increases in the costs, or reduced availability, of raw materials and manufactured components may adversely affect our profitability.
Raw material costs can be volatile. The principal raw materials to produce our products include synthetic and natural rubber, carbon black, process oils,
and plastic resins. Principal procured components are primarily made from plastic, carbon steel, aluminum and stainless steel. Material costs represented
approximately 51% of our total cost of products sold in 2022. The costs and availability of raw materials and manufactured components can fluctuate due to
factors beyond our control, including as a result of existing and potential changes to U.S. policies related to global trade and tariffs. Further, climate change may
have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters, which may adversely
affect the availability or pricing for certain raw materials including natural rubber. A significant increase in the price of raw materials, or a restriction in their
availability, could materially increase our operating costs and adversely affect our profitability because it is generally difficult to pass through these increased
costs to our customers. While we entered into index pricing agreements with some of our customers which provide for a price adjustment based on quoted
market prices to attempt to address some of these risks (notably with respect to steel and rubber), there can be no assurance that commodity price fluctuations
will not adversely affect our results of operations and cash flows. In addition, while the use of index pricing adjustments may provide us with some protection
from adverse fluctuations in commodity prices, by utilizing these instruments, we potentially forego the benefits that might result from favorable fluctuations in
price. The recent disruptions to the global supply chain also have had an adverse impact on the cost and availability of raw materials, components, energy and
other inputs used in our business, or in the businesses of our customers and suppliers, and has adversely affected and may continue to adversely affect our results
of operations, financial condition and business.
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Disruptions in the supply chain could have an adverse effect on our business, financial condition, results of operations and cash flows.
We obtain components and other products and services from numerous suppliers and other vendors throughout the world. We are responsible for
managing our supply chain, including suppliers that may be the sole sources of products that we require, that our customers direct us to use or that have unique
capabilities that would make it difficult and/or expensive to re-source. In certain instances, entire industries may experience short-term capacity constraints. The
global economy has experienced an increased risk of shortages and other disruptions to global supply chains due to strong demand, the potential effects of trade
laws and tariffs, capacity constraints, financial instability, public health crises, such as pandemics and epidemics, or other circumstances. In particular, significant
disruptions in supply have occurred, are occurring, and are expected to continue in the automotive industry due to these industry-wide parts shortages and global
supply chain constraints which have adversely affected our operations and financial performance. The current uncertain economic or industry conditions could
result in financial distress within our supply base, thereby further increasing the risk of supply disruption. As the uncertainty in the market conditions remain, any
economic downturn or other unfavorable conditions in one or more of the regions in which we operate could cause further supply disruptions and thereby
adversely affect our financial condition, operating results and cash flows.
Material supply shortages experienced by our customers either directly or as a result of a supply shortage at another supplier, such as the semiconductor
shortage faced by the automotive industry, have caused customers to halt, delay or limit the purchase of our products, which have adversely affected and may
continue to adversely affect our business, results of operations and financial condition.
Work stoppages or other disruptions to our operations could negatively affect our operations and financial performance.
We may experience work stoppages caused by labor disputes under existing collective bargaining agreements or in connection with the negotiation of
new agreements given that we have a number of agreements that expire in any given year. Further, there is no certainty that we will be successful in negotiating
new collective bargaining agreements that extend beyond the current expiration dates or that new agreements will be on terms as favorable to us as past labor
agreements. In addition, it is possible that our workforce will become more unionized in the future. Unionization activities could increase our costs, which could
negatively affect our results of operations.
Our operations may also be disrupted by other labor issues, including absenteeism, public health issues, and pandemic-related government restrictions;
major equipment failure with prolonged downtime or a complete loss of critical equipment where either no other comparable equipment exists or the remaining
equipment does not have enough capacity to pick up the demand; or natural disaster-related plant closures or disruptions. In particular, natural disasters and
adverse weather conditions can be caused or exacerbated by climate change.
Regardless of the cause, any significant disruption to our production could negatively affect our operations, customer relationships and financial
performance. Similar disruptions at one or more of our suppliers or our customers’ suppliers could adversely affect our operations if an alternative source of
supply were not readily available. Additionally, similar disruptions at our customers’ facilities could result in reduced demand for our products causing us to
delay or cancel production and could have an adverse effect on our business.
A disruption in, or the inability to successfully implement upgrades to, our information technology systems, including disruptions relating to cybersecurity as
well as data privacy concerns, could adversely affect our business and financial performance.
We rely upon information technology networks, systems and processes, including the information technology networks of third parties such as suppliers
and joint venture partners, to manage and support our business. We have implemented a number of procedures and practices designed to protect against breaches
or failures of our systems. Despite the security measures that we have implemented, including those measures to prevent cyber-attacks, our systems could be
breached or damaged by computer viruses or unauthorized physical or electronic access. Like other public companies, our computer systems and those of our
third-party vendors, partners and service providers are regularly subject to, and will continue to be the target of, computer viruses, malware or other malicious
codes (including ransomware), unauthorized access, cyber-attacks or other computer-related penetrations which may cause disruptions to our operations. While
we have experienced threats to our data and systems, to date, we are not aware that we have experienced a material cyber-security breach. Over time, however,
the sophistication of these threats continues to increase. The preventative actions we take to reduce the risk of cyber incidents and protect our information may be
insufficient. A breach of our information technology systems, or those of the third parties on whom we rely, could result in theft of our intellectual property,
disruption to business or unauthorized access to customer or personal information. Such a
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breach could adversely impact our operations and/or our reputation and may cause us to incur significant time and expense to cure or remediate the breach.
Further, we continually update and expand our information technology systems to enable us to more efficiently run our business. If these systems are not
implemented successfully, our operations and business could be disrupted and our ability to report accurate and timely financial results could be adversely
affected.
Our inability to effectively manage the timing, quality and costs of new program launches could adversely affect our financial performance.
In connection with the award of new business, we may obligate ourselves to deliver new products that are subject to our customers’ timing, performance
and quality standards. Given the number and complexity of new program launches, we may experience difficulties managing product quality, timeliness and
associated costs. In addition, new program launches require a significant ramp up of costs. Our sales related to these new programs generally are dependent upon
the timing and success of our customers’ introduction of new vehicles. Our inability to effectively manage the timing, quality and costs of these new program
launches could adversely affect our financial condition, operating results and cash flows.
Our success depends in part on our development of improved products, and our efforts may fail to meet the needs of customers on a timely or cost-effective
basis.
Our continued success depends on our ability to maintain advanced technological capabilities and knowledge necessary to adapt to changing market
demands, as well as to develop and commercialize innovative products. We may be unable to develop new products successfully or to keep pace with
technological developments by our competitors and the industry in general. In addition, we may develop specific technologies and capabilities in anticipation of
customers’ demands for new innovations and technologies. If such demand does not materialize, we may be unable to recover the costs incurred in the
development of such technologies and capabilities. If we are unable to recover these costs or if any such programs do not progress as expected, our business,
results of operations and financial condition could be adversely affected.
We may incur material losses and costs as a result of product liability and warranty and recall claims that may be brought against us.
We may be exposed to product liability and warranty claims in the event that our products actually or allegedly fail to perform as expected or the use of
our products results, or is alleged to result, in bodily injury and/or property damage. Accordingly, we could experience material warranty or product liability
expenses in the future and incur significant costs to defend against these claims. In addition, if any of our products are, or are alleged to be, defective, we may be
required to participate in a recall of that product if the defect or the alleged defect relates to automotive safety. Product recalls could cause us to incur material
costs and could harm our reputation or cause us to lose customers, particularly if any such recall causes customers to question the safety or reliability of our
products. Also, while we possess considerable historical warranty and recall data with respect to the products we currently produce, we do not have such data
relating to new products, assembly programs or technologies, including any new fuel and emissions technology and systems being brought into production, to
allow us to accurately estimate future warranty or recall costs.
In addition, the increased focus on systems integration platforms utilizing fuel and emissions technology with more sophisticated components from
multiple sources could result in an increased risk of component warranty costs over which we have little or no control and for which we may be subject to an
increasing share of liability to the extent any of the other component suppliers are in financial distress or are otherwise incapable of fulfilling their warranty or
product recall obligations. Our costs associated with providing product warranties and responding to product recall claims could be material. Product liability,
warranty and recall costs may adversely affect our business, results of operations and financial condition.
Our commitment to drive value through culture, innovation and results is dependent on our ability to identify, attract, develop and retain a skilled, engaged
and diverse workforce.
Our people are the driving force behind our success at Cooper Standard. Our ability to pursue breakthrough technology innovations, implement cutting-
edge manufacturing and business processes, and achieve our operating and strategic goals is dependent on the engagement, skills, experience and knowledge of
our employees. Any failure or delay in attracting, retaining and developing such a workforce, including the loss of key technological and leadership personnel,
could adversely impact our business, financial condition and operating results.
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Strategic Risks
We are highly dependent on the automotive industry. A prolonged or material contraction in automotive sales and production volumes could adversely affect
our business, results of operations and financial condition.
Automotive sales and production are cyclical and depend on, among other things, general economic conditions and consumer spending, vehicle demand
and preferences (which can be affected by a number of factors, including fuel costs, employment levels and the availability of consumer financing). These factors
could make it difficult for us, our suppliers and our customers to forecast accurately and plan future business activities. As the volume of automotive production
and the mix of vehicles produced fluctuate, the demand for our products also fluctuates. Prolonged or material contraction in automotive sales and production
volumes, or significant changes in the mix of vehicles produced, could cause our customers to reduce orders of our products, which could adversely affect our
business, results of operations and financial condition and our ability to provide accurate forecasts and guidance.
We may not realize sales represented by awarded business, which could adversely affect our business, financial condition, results of operations and cash
flows.
The realization of future sales from awarded business is subject to risks and uncertainties inherent in the cyclicality of vehicle production. In addition, our
customers generally have the right to resource awarded business without penalty. Therefore, the ultimate amount of our sales is not guaranteed. If actual
production orders from our customers are not consistent with the projections we use in calculating the amount of awarded business, we could realize substantially
less sales and profit over the life of these awards than currently projected.
Pricing pressures may adversely affect our business.
Vehicle manufacturers often seek price reductions in both the initial bidding process and during the term of the contract. Price reductions historically
have adversely impacted our sales and profit margins and may do so in the future. If we are not able to offset price reductions through improved operating
efficiencies and reduced expenditures, those price reductions may have a negative impact on our financial condition.
Our business could be adversely affected if we lose any of our largest customers or significant platforms.
While we provide parts to virtually every major global OEM for use on a wide range of different platforms, sales to our three largest customers, Ford,
GM, and Stellantis, on a worldwide basis represented approximately 58% of our sales for the year ended December 31, 2022. Our ability to reduce the risks
inherent in certain concentrations of business will depend, in part, on our ability to continue to diversify our sales on a customer, product, platform and
geographic basis. Although business with each customer is typically split among numerous contracts, the loss of a major customer, significant reduction in
purchases of our products by such customer, or any discontinuance or resourcing of a significant platform could adversely affect our business, results of
operations and financial condition.
We operate in a highly competitive industry and efforts by our competitors to gain market share could adversely affect our financial performance.
The automotive parts industry is highly competitive. We face numerous competitors in each of our product lines. In general, there are three or more
significant competitors and numerous smaller competitors for most of the products we offer. We also face competition for certain of our products from suppliers
producing in lower-cost regions such as Asia and Eastern Europe. Our competitors’ efforts to grow market share could exert downward pressure on the pricing of
our products and our margins.
The benefits of our continuous improvement program and other cost savings plans may not be fully realized.
Our operations strategy includes continuous improvement programs and implementation of lean manufacturing tools across all facilities to achieve cost
savings and increased performance. Further, we have and may continue to initiate restructuring actions designed to improve future profitability and
competitiveness. The cost savings that we anticipate from these initiatives may not be achieved on schedule or at the level we anticipate. If we are unable to
realize these anticipated savings, our operating results and financial condition may be adversely affected.
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We may continue to incur significant costs related to manufacturing facility closings or consolidation which could have an adverse effect on our financial
condition.
If we must close or consolidate manufacturing locations, the exit costs associated with such closures or consolidation, including employee termination
costs, may be significant. Such costs could negatively affect our cash flows, results of operations and financial condition.
We are subject to other risks associated with our international operations.
We have significant manufacturing operations outside the United States, including joint ventures and other alliances. Our operations are located in 21
countries, and we export to several other countries. In 2022, approximately 77% of our sales were attributable to products manufactured outside the United
States. Risks inherent in our international operations include:
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currency exchange rate fluctuations, currency controls and restrictions, and the ability to hedge currencies;
changes in local economic conditions;
repatriation restrictions or requirements, including tax increases on remittances and other payments by our foreign subsidiaries;
global sovereign fiscal uncertainty and hyperinflation in certain foreign countries;
changes in laws and regulations, including laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs, or
taxes or the imposition of embargoes on imports from countries where we manufacture products;
operating in foreign jurisdictions where the ability to enforce rights over intellectual property is limited as a statutory or practical matter;
exposure to possible expropriation or other government actions;
disease, pandemics or other severe public health events; and
exposure to local political or social unrest including resultant acts of war, terrorism, or similar events, including the war in Ukraine and the related
sanctions imposed on Russia.
The occurrence of any of these risks may adversely affect the results of operations and financial condition of our international operations and our
business as a whole.
Expanding our sales and manufacturing operations in the Asia Pacific region, particularly in China, is an integral part of our strategy, and, as a result, our
exposure to the risks described above is substantial.
In addition, we are subject to the Foreign Corrupt Practices Act (the “FCPA”) and other laws which prohibit improper payments to foreign governments
and their officials by U.S. and other business entities. Certain of the countries in which we operate present heightened corruption risks, which therefore increases
the risks of our exposure under the FCPA and other applicable anti-bribery and corruption laws and regulations.
A portion of our operations are conducted by joint ventures which have unique risks.
Certain of our operations are carried out by joint ventures. In joint ventures, we share the management of the company with one or more partners who
may not have the same goals, resources or priorities as we do. The operations of our joint ventures are subject to agreements with our partners, which typically
include additional organizational formalities as well as requirements to share information and decision making and may also limit our ability to sell our interest.
Additional risks include one or more partners failing to satisfy contractual obligations, a change in ownership of any of our partners and our limited ability to
control our partners’ compliance with applicable laws, including the FCPA. Any such occurrences could adversely affect our financial condition, operating
results, cash flow or reputation.
Any acquisitions or divestitures we make may be unsuccessful, may take longer than anticipated or may negatively impact our business, financial condition,
results of operations and cash flows.
We may pursue acquisitions or divestitures in the future as part of our strategy. Acquisitions and divestitures involve numerous risks, including
identifying attractive target acquisitions, undisclosed risks affecting the target, difficulties integrating acquired businesses, the assumption of unknown liabilities,
potential adverse effects on existing customer or supplier relationships, and the diversion of management’s attention from day-to-day business. We may not have,
or be able to raise on acceptable terms, sufficient financial resources to make acquisitions. Our ability to make investments may also be limited by the terms of
our existing or future financing arrangements. Any acquisitions or divestitures we pursue may not be successful or prove to be beneficial to our operations and
cash flow.
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Our diversification strategy through the Advanced Technology Group poses new competitive threats and commercial risks.
Our diversification strategy through the Advanced Technology Group is to leverage our core products in adjacent markets and license our innovation
technology in non-automotive markets. We may be unsuccessful in leveraging our existing products and technology into new markets and thus in meeting the
needs of these new customers and competing favorably in these new markets.
Financial Risks
The risks of the COVID-19 pandemic and global supply chain disruptions present significant risks to our liquidity.
Our continued access to sources of liquidity depends on multiple factors, including global economic conditions, the effects of the COVID-19 pandemic
and global supply chain disruptions on our customers and their production rates, the costs of raw materials, the state of the overall automotive industry, the
condition of global financial markets, the availability of sufficient amounts of financing, our operating performance and cash flows and our credit ratings. In
particular, the global automotive industry is susceptible to uncertain economic conditions that could adversely impact new vehicle demand and production, and
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. Our business is also directly affected by the automotive vehicle production rates in North America,
Europe, Asia Pacific and South America which have been adversely impacted by a series of events
in recent years.
Our ability to borrow against our senior asset-based revolving credit facility (the “ABL Facility”) is limited to our borrowing base, which consists
primarily of our U.S. and Canadian accounts receivable and inventory. Production shutdowns or disruptions in both the United States and Canada could lead to
significant reductions in these working capital balances and significantly decrease our ability to borrow under our ABL Facility.
In addition, if the Company has borrowing availability under its ABL Facility less than the greater of (i) $15.0 million and (ii) 10% of the Borrowing
Base (as defined in the ABL Facility), it must be in compliance with a springing Fixed Charge Coverage Ratio maintenance covenant of 1.00:1.00. As of
December 31, 2022, the Company would not have been able to satisfy such covenant, and accordingly, the Company has to manage any borrowings under its
ABL Facility to avoid triggering this maintenance covenant, which further constrains its ability to utilize the ABL Facility. The effects of the COVID-19
pandemic and global supply chain disruptions on the Company’s business will adversely impact its ability to satisfy such covenant. As of December 31, 2022,
there were no obligations outstanding under the ABL Facility and the Company’s borrowing base was $180.0 million. Net of the greater of 10% of the borrowing
base or $15.0 million that cannot be borrowed without triggering the Fixed Charge Coverage Ratio maintenance covenant and $6.8 million of outstanding letters
of credit, the Company effectively had $155.2 million available for borrowing under its ABL Facility.
Furthermore, production shutdowns or disruptions will result in working capital swings which could result in increased outflows. As a result of the
impacts of the COVID-19 pandemic and global supply chain disruptions, we may be required to raise additional capital, and our access to and cost of financing
will depend on, among other things, our performance, global economic conditions, conditions in the global financing markets, the availability of sufficient
amounts of financing, our prospects and our credit ratings. Such capital may not be available on favorable terms or at all.
The ongoing situation in Ukraine and Russia and related disruptions could adversely affect our liquidity, business, and results of operations.
In February 2022, Russia launched a large-scale invasion of Ukraine that has resulted in an ongoing military conflict between the two countries. As a
result, the United States, the United Kingdom, the member states of the European Union and other public and private actors have levied severe sanctions on
Russia that severely limit, and in some cases, reverse or cancel, business transactions in or involving certain individuals and/or business connected to or
associated with Russia and/or Belarus. The Russia-Ukraine war and the resulting sanctions have caused, and are currently expected to continue to cause,
significant disruptions to the global financial system, international trade, and the transportation and energy sectors, among others. The impacts of the conflict on
the supply chain and commodity prices are expected to be profound and have resulted and may continue to result in substantial inflation in one or more countries
(or globally). These and other issues resulting from the global economic slowdown and financial market turmoil have adversely affected and may continue to
adversely affect the automotive industry, which may lead to a decline in the general demand for our products and erosion of their procurement or sale prices. We
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do not have operations in Ukraine or Russia, nor do we sell there. Nonetheless, if the global economic slowdown and the Russia-Ukraine war continue, our
liquidity, business, and results of operations may continue to be adversely affected.
We have a substantial amount of indebtedness, which could have a material adverse effect on our financial condition and our ability to obtain financing in
the future and to react to changes in our business.
We have a significant amount of indebtedness. As of December 31, 2022, after giving effect to the Refinancing Transactions, we had total indebtedness
of $1,056 million. Our substantial amount of debt and our debt service obligations could limit our ability to satisfy our obligations, limit our ability to operate our
business and impair our competitive position. For example, it could:
• make it more difficult for us to satisfy our obligations;
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increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations, because a portion of our borrowings
accrues interest at variable rates;
require us to dedicate a substantial portion of our cash flows from operations to payments on our debt, which would reduce the availability of cash to
fund working capital, capital expenditures, research and development efforts, acquisitions or other general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we compete;
place us at a disadvantage compared to competitors that may have less debt; and
limit our ability to obtain additional debt or equity financing for working capital, capital expenditures, research and development efforts, debt service
requirements, acquisitions and general corporate purposes.
Our ability to make scheduled payments on our debt or to refinance these obligations depends on our financial condition, operating performance and our
ability to generate cash in the future. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or
delay investments and capital expenditures, sell material assets, seek additional capital or restructure or refinance our indebtedness, any of which could have a
material adverse effect on our business, results of operations and financial condition. In addition, we may not be able to effect any of these actions, if necessary,
on commercially reasonable terms or at all. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our
financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which
could further restrict our business operations. The terms of existing or future debt instruments, including the credit agreement governing the ABL Facility and the
indentures governing the 13.50% Cash Pay / PIK Toggle Senior Secured First Lien Notes due 2027 (the “First Lien Notes”) and the 5.625% Cash Pay / 10.625%
PIK Toggle Senior Secured Third Lien Notes due 2027 (the “Third Lien Notes”), may limit or prevent us from taking any of these actions. In addition, a
reduction of our credit rating could harm our ability to incur additional indebtedness on commercially reasonable terms or at all. An inability to generate
sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have
an adverse effect, which could be material, on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations in
respect of the 5.625% Senior Notes due 2026 (the “2026 Senior Notes”), the First Lien Notes, the Third Lien Notes, or the ABL Facility.
In addition, we and our subsidiaries may be able to incur other substantial additional indebtedness in the future. Although the credit agreement governing
the ABL Facility and the indentures governing the First Lien Notes and the Third Lien Notes contain certain limitations on our ability to incur additional
indebtedness, such restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could
be substantial. To the extent that we incur additional indebtedness or incur such other obligations that may be permitted under our debt instruments, the risks
associated with our substantial indebtedness described above, including our potential inability to service our debt, will increase.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.
The borrowings under the ABL Facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service
obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including
cash available for servicing our indebtedness, would correspondingly decrease.
SOFR and other interest rates that are indices deemed to be “benchmarks” are the subject of recent and ongoing national, international and other
regulatory guidance and proposals for reform. Some of these reforms are already effective, while others are still to be implemented. These reforms may cause
such benchmarks to perform differently than in the past, to be replaced or disappear entirely, or have other consequences that cannot be predicted. Any such
consequence could have a material adverse
19
effect on our existing facilities or our future debt linked to such a “benchmark” and our ability to service debt that bears interest at floating rates of interest.
Our debt instruments impose significant operating and financial restrictions on us and our subsidiaries.
The credit agreements governing the ABL Facility and the indentures governing the First Lien Notes and the Third Lien Notes impose significant
operating and financial restrictions and limit our ability, among other things, to:
incur, assume or permit to exist additional indebtedness (including guarantees thereof);
pay dividends or certain other distributions on our capital stock or repurchase our capital stock
prepay, redeem or repurchase indebtedness;
incur liens on assets;
•
•
•
•
• make certain investments or other restricted payments;
•
•
•
allow to exist certain restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us;
engage in transactions with affiliates; and
sell certain assets or merge or consolidate with or into other companies.
Moreover, our ABL Facility provides the agent considerable discretion to impose reserves, which could materially reduce the amount of borrowings that
would otherwise be available to us.
As a result of these covenants and restrictions (including borrowing base availability), we are limited in how we conduct our business, and we may be
unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities or acquisitions. The terms of any
future indebtedness we may incur could include more restrictive covenants. We may not be able to maintain compliance with these covenants in the future and, if
we fail to do so, we may not be able to obtain waivers from the lenders and/or amend the covenants in such agreements. Our failure to comply with the restrictive
covenants described above as well as others contained in our future debt instruments from time to time could result in an event of default, which, if not cured or
waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms
or if we are unable to refinance such borrowings at all, our financial condition, results of operations and cash flows could be adversely affected.
If there were an event of default under any of the agreements relating to our outstanding indebtedness whether as a result of a payment default, covenant
breach or otherwise, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. Our assets
or cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon occurrence of an event of default.
Further, if we are unable to repay, refinance or restructure our indebtedness under our secured debt, the holders of such debt could exercise remedies against the
collateral securing that indebtedness with the holders of the First Lien Notes receiving full recovery on applicable collateral before the holders of the Third Lien
Notes. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our
other debt instruments. As a result, any default by us on our indebtedness could have a material adverse effect on our business, financial condition and results of
operation.
Our expected annual effective tax rate and cash tax liability could be volatile and could materially change as a result of changes in many items including
mix of earnings, debt and capital structure and other factors.
Many items could impact our effective tax rate and cash tax liability including changes in our debt and capital structure, mix of earnings and many other
factors. Our overall effective tax rate is based upon the consolidated tax expense as a percentage of consolidated earnings before tax. However, tax expenses and
benefits are not recognized on a consolidated or global basis, but rather on a jurisdictional, legal entity basis. Further, certain jurisdictions in which we operate
generate losses where no current financial statement tax benefit is realized. In addition, certain jurisdictions have statutory rates greater than or less than the
United States statutory rate. As such, changes in the mix and source of earnings between jurisdictions could have a significant impact on our overall effective tax
rate and cash tax liability in future years. Changes in rules related to accounting for income taxes, changes in tax laws and rates or adverse outcomes from tax
audits that occur regularly in any of our jurisdictions could also have a significant impact on our overall effective tax rate and cash tax liability in future periods.
Our working capital requirements may negatively affect our liquidity and capital resources.
Our working capital requirements can vary significantly, depending in part on the level, variability and timing of our customers’ worldwide vehicle
production and the payment terms with our customers and suppliers. If our working capital needs exceed our cash provided by operating activities, we would
look to our cash balances and availability under our borrowing arrangements to satisfy those needs, as well as potential sources of additional capital, which may
not be available on satisfactory terms and in adequate amounts, if at all.
20
Foreign currency exchange rate fluctuations could materially impact our operating results.
Our sales and manufacturing operations outside the United States expose us to currency risks. For our consolidated financial statements, our sales and
earnings denominated in foreign currencies are translated into U.S. dollars. This translation is calculated based on average exchange rates during the reporting
period. Accordingly, our reported international sales and earnings could be adversely impacted in periods of a strengthening U.S. dollar.
Although we generally produce in the same geographic region as our products are sold, we also produce in countries that predominately sell in another
currency. Further, some of our commodities are purchased in or tied to the U.S. dollar; therefore our earnings could be adversely impacted during the periods of a
strengthening U.S. dollar relative to other foreign currencies. While we employ financial instruments to hedge certain portions of our foreign currency exposures,
our efforts to manage these risks may not be successful and may not completely insulate us from the effects of currency fluctuation.
Impairment charges relating to our goodwill, long-lived assets or intangible assets could adversely affect our results.
We regularly monitor our goodwill, long-lived assets and intangible assets for impairment indicators. In conducting our goodwill impairment testing, we
compare the fair value of our reporting units to their related net book value. In conducting our impairment analysis of long-lived and intangible assets, we
compare the undiscounted cash flows expected to be generated from the long-lived or intangible assets to the related net book values if indicators of impairment
are identified. Changes in economic or operating conditions impacting our estimates and assumptions could result in the impairment of our goodwill, long-lived
assets or intangible assets. In the event that we determine that our goodwill, long-lived assets or intangible assets are impaired, we may be required to record a
significant charge to earnings, which could adversely affect our results.
Certain of our pension plans are currently underfunded, and we may have to make cash contributions to the plans, reducing the cash available for our
business.
We sponsor various pension plans worldwide that are underfunded and will require cash contributions. Additionally, if the performance of the assets in
our pension plans does not meet our expectations, or if other actuarial assumptions are modified, our required contributions may be higher than we expect. As of
December 31, 2022, our U.S. pension plans were underfunded by $16.3 million and our non-U.S. pension plans (which typically are pay-as-you-go plans) were
underfunded by $83.8 million. If our cash flow from operations is insufficient to fund our worldwide pension liabilities, it could have an adverse effect on our
financial condition and results of operations.
As further described in Note 13. “Pension” to the consolidated financial statements included under Item 8. “Financial Statements and Supplementary
Data” of this Report, our Board of Directors approved a resolution to merge certain of the U.S. pension plans, and terminate the resulting merged plan effective
December 31, 2022. As part of the termination process, we expect to settle benefit obligations under the terminated plan through a combination of lump sum
payments to eligible plan participants and the purchase of a group annuity contract, under which future benefit obligations and administration will be transferred
to a third-party insurance company. Such settlements will be funded primarily from plan assets, but may also require funding from the Company.
Significant changes in discount rates, the actual return on pension assets and other factors could adversely affect our liquidity, results of operations and
financial condition.
Our earnings may be positively or negatively impacted by the amount of income or expense recorded related to our pension plans. Generally accepted
accounting principles in the United States (“U.S. GAAP”) require that income or expense related to the pension plans be calculated at the annual measurement
date using actuarial calculations, which reflect certain assumptions. Because these assumptions have fluctuated and will continue to fluctuate in response to
changing market conditions, the amount of gains or losses that will be recognized in subsequent periods, the impact on the funded status of the pension plans and
the future minimum required contributions, if any, could adversely affect our liquidity, results of operations and financial condition.
Failure to maintain effective controls and procedures could adversely impact our business, financial condition and results of operations.
Regulatory provisions governing the financial reporting of U.S. public companies require that we establish and maintain disclosure controls and internal
controls over financial reporting across our operations in 21 countries. Any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives; as such, they can be susceptible to human error, circumvention or override, and fraud. Failure to
maintain adequate, effective controls and procedures could result in potential financial misstatements or other forms of noncompliance that could have an adverse
impact on our business, results of operations, financial condition or organizational reputation.
21
We operate as a holding company and depend on our subsidiaries for cash to satisfy the obligations of the holding company.
Cooper-Standard Holdings Inc. is a holding company. Our subsidiaries conduct all of our operations and own substantially all of our assets. Our cash
flow and our ability to meet our obligations depend on the cash flow of our subsidiaries. In addition, the payment of funds in the form of dividends,
intercompany payments, tax sharing payments and otherwise may be subject to restrictions under the laws of the countries of incorporation of our subsidiaries or
their governing documents.
We may not be able to procure insurance at reasonable rates to fully meet our needs.
Integral to our risk management strategy and due to requirements under certain of our contracts, we procure insurance coverage from third-party insurers.
There can be no assurance that any of our existing insurance coverage will be renewable upon the expiration of the coverage period or that future coverage will
be affordable at needed limits. Such circumstances will lead to an increase in both our overall risk exposure and our operational expenses, disrupt the
management of our business, and could have a material adverse effect on our business, financial condition and results of our operations.
Legal and Compliance Risks
We are involved from time to time in legal and regulatory proceedings, claims or investigations which could have an adverse impact on our results of
operations and financial condition.
We are involved in legal and regulatory proceedings, claims or investigations that, from time to time, may be significant. These matters typically arise in
the normal course of business including, without limitation, commercial or contractual disputes, including warranty claims and other disputes with customers and
suppliers; intellectual property matters; personal injury claims; environmental issues; tax matters; employment matters; antitrust matters; anti-corruption matters;
or allegations relating to legal compliance by us or our employees.
For further information regarding our legal matters, see Item 3. “Legal Proceedings.” The industries in which we operate are also periodically reviewed
or investigated by regulators, which could lead to enforcement actions, fines and penalties or the assertion of private litigation claims. It is not possible to predict
with certainty the outcome of claims, investigations and lawsuits, and we could in the future incur judgments, fines or penalties or enter into settlements of
lawsuits and claims that could have an adverse effect on our business, results of operations and financial condition in any particular period.
If we are unable to protect our intellectual property or if a third party challenges our intellectual property rights, our business could be adversely affected.
We own or have rights to proprietary technology that is important to our business. We rely on intellectual property laws, patents, trademarks and trade
secrets to protect such technology. Such protections, however, vary among the countries in which we market and sell our products, and as a result, we may be
unable to prevent third parties from using our intellectual property without authorization. Any infringement or misappropriation of our technology could have an
adverse effect on our business and results of operations. We also face exposure to claims by others for infringement of intellectual property rights and could incur
significant costs or losses related to such claims. In addition, many of our supply agreements require us to indemnify our customers from third-party infringement
claims. These claims, regardless of their merit or resolution, are frequently costly to prosecute, defend or settle and divert the efforts and attention of our
management and employees. If any such claim were to result in an adverse outcome, we could be required to take actions which may include: ceasing the
manufacture, use or sale of the infringing products; paying substantial damages to third parties, including to customers, to compensate them for the discontinued
use of a product or to replace infringing technology with non-infringing technology; or expending significant resources to develop or license non-infringing
products, any of which could adversely affect our operations, business and financial condition.
We may be adversely affected by laws and regulations, including environmental, health and safety laws and regulations.
We are subject to various U.S. federal, state and local, and non-U.S. laws and regulations, including those related to environmental, health and safety,
financial, tax, customs and other matters. We cannot predict the substance or impact of pending or future legislation or regulations, or the application thereof. The
introduction of new laws or regulations or changes in existing laws or regulations, or the interpretations thereof, could increase the costs of doing business for us
or our customers or suppliers or restrict our actions and adversely affect our financial condition, results of operations and cash flows.
In particular, we are subject to a broad range of laws and regulations governing emissions to air; discharges to water; noise and odor emissions; the
generation, handling, storage, transportation, treatment, reclamation and disposal of chemicals and waste materials; the cleanup of contaminated properties; and
health and safety. We may incur substantial costs in complying with these laws and regulations. Many of our current and former facilities have been subject to
certain environmental investigations and remediation activities, and we maintain environmental reserves for certain of these sites. Through various acquisitions,
we
22
have acquired a number of manufacturing facilities, and we cannot assure that we will not incur material costs or liabilities relating to activities that predate our
ownership. Material future expenditures may be necessary if compliance standards change or material unknown conditions that require remediation are
discovered. Environmental laws could also restrict our ability to expand our facilities or could require us to acquire costly equipment or to incur other significant
expenses. In addition, climate change poses regulatory risks that could harm our results of operations or affect the way we conduct our businesses. For example,
new or modified regulations could require us to spend substantial funds to enhance our environmental compliance efforts. If we fail to comply with present and
future environmental laws and regulations, we could be subject to future liabilities, which could adversely affect our financial condition, operating results and
cash flows.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of December 31, 2022, our operations were conducted through 132 wholly-owned, leased and consolidated joint venture facilities in 21 countries
(North America: Canada, Costa Rica, Mexico, United States; Asia Pacific: China, India, Japan, South Korea, Thailand; Europe: Czech Republic, France,
Germany, Italy, Netherlands, Poland, Romania, Serbia, Spain, Sweden, United Kingdom; South America: Brazil), of which 78 are predominantly manufacturing
facilities and 54 have design, engineering, administrative or logistics designations. Our corporate headquarters are located in Northville, Michigan. Our
manufacturing facilities are located in North America, Europe, Asia and South America. We believe that substantially all of our properties are in generally good
condition and there is sufficient capacity to meet current and projected manufacturing, product development and logistics requirements. The following table
summarizes our key property holdings:
Type
Segment
Manufacturing
North America
(b)
Other
Manufacturing
(b)
Other
Manufacturing
(b)
Other
Manufacturing
35
24
19
12
21
18
3
Owned Facilities
Total Facilities*
South America
21
1
6
—
14
2
1
Asia Pacific
Europe
(a)
(a)
(a)
(a)
(a)
Includes multi-activity sites which are predominantly manufacturing.
(b) Includes design, engineering, R&D, administrative and logistics locations.
(*) Excludes 3 unutilized facilities: 1 North America; 1 Europe; 1 South America
Item 3. Legal Proceedings
The litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. See Note 21. “Contingent
Liabilities” to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this Report for discussion of loss
contingencies.
Item 4. Mine Safety Disclosures
Not applicable.
23
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
PART II
Securities
Market Information
Our common stock has been traded on the NYSE since October 17, 2013 under the symbol “CPS.”
Holders of Common Stock
As of February 8, 2023, there were approximately 6 holders of record of our common stock. This stockholder figure does not include a substantially
greater number of holders whose shares are held of record by banks, brokers and other financial institutions.
Dividends
Cooper-Standard Holdings Inc. has never paid or declared a dividend on its common stock. The declaration of any prospective dividends is at the
discretion of the Board of Directors and would be dependent upon sufficient earnings, capital requirements, financial position, general economic conditions, state
law requirements and other relevant factors. Additionally, our credit agreements governing our ABL Facility and our indentures governing our New Notes, 2026
Senior Notes, and 2024 Senior Secured Notes contain covenants that, among other things, restrict our ability to pay certain dividends and distributions subject to
certain qualifications and limitations. See “Liquidity and Capital Resources” under Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” of this Report. We do not anticipate paying any dividends on our common stock in the foreseeable future.
Securities 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 our management 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. We are 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 was effective beginning November 2018.
We did not repurchase any shares during the years ended December 31 2022, 2021, or 2020 under the 2018 Program. As of December 31, 2022, we had
approximately $98.7 million of repurchase authorization remaining.
24
Performance Graph
The following graph compares the cumulative total stockholder return for Cooper-Standard Holdings Inc. to the Standard & Poor’s 500 Index and the
Standard & Poor’s Supercomposite Auto Parts & Equipment Index based on currently available data. The graph assumes an initial investment of $100 on
December 29, 2017 and reflects the cumulative total return on that investment, including the reinvestment of all dividends where applicable, through
December 31, 2022.
Comparison of Cumulative Return
Cooper-Standard Holdings Inc.
S&P 500
S&P Supercomposite Auto Parts &
Equipment Index
* Represents last trading day of the year
Item 6. [Reserved]
Ticker
CPS
SPX
S15AUTP
$
$
$
12/29/2017*
12/31/2018
12/31/2019
12/31/2020
12/31/2021
12/30/2022*
100.00 $
100.00 $
100.00 $
50.71 $
93.95 $
68.31 $
27.07 $
123.37 $
28.30 $
145.64 $
18.29 $
186.72 $
90.75 $
111.55 $
136.22 $
7.40
152.51
92.03
25
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding and assessing the trends
and significant changes in our results of operations and financial condition. Our historical results may not indicate, and should not be relied upon as an
indication of, our future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to
known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. See Item 1.
“Business—Forward-Looking Statements” 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 Item 1A. “Risk
Factors.” Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial
statements and the notes to those statements included in Item 8. “Financial Statements and Supplementary Data” of this Report.
Executive Overview
Our Business
We design, manufacture and sell sealing, fuel and brake delivery, and fluid transfer systems for use in passenger vehicles and light trucks manufactured
by global OEMs. In 2022, approximately 82% of our sales consisted of original equipment sold directly to OEMs for installation on new vehicles. The remaining
18% of our sales were primarily to Tier I and Tier II suppliers and non-automotive manufacturers. Accordingly, sales of our products are directly affected by the
annual vehicle production of OEMs and, in particular, the production levels of the vehicles for which we provide specific parts. Most of our products are custom
designed and engineered for a specific vehicle platform. Our sales and product development personnel frequently work directly with the OEMs’ engineering
departments in the design and development of our various products.
Although each OEM may emphasize different requirements as the primary criteria for judging its suppliers, we believe success as an automotive supplier
generally requires outstanding performance with respect to quality, price, service, performance, design and engineering capabilities, innovation, timely delivery,
financial stability and an extensive global footprint. Also, we believe our continued commitment to invest in global common processes is an important factor in
servicing global customers with the same quality and consistency of product wherever we produce in the world. This is especially important when supplying
products for global platforms.
In addition, to remain competitive and offset continued customer pricing pressure, we must also consistently achieve and sustain cost savings. In an
ongoing effort to reduce our cost structure, we run a global continuous improvement program which includes training for our employees, as well as
implementation of lean tools, structured problem solving, best business practices, standardized processes and change management. We also evaluate
opportunities to consolidate facilities and to relocate certain operations to lower cost countries. We believe we will continue to be successful in our efforts to
improve our design and engineering capability and manufacturing processes while achieving cost savings, including through our continuous improvement
initiatives.
Our OEM sales are generally based upon purchase orders issued by the OEMs, with updated releases for volume adjustments. As such, we typically do
not have a defined backlog of orders at any point in time. Once selected to supply products for a particular platform, we typically supply those products for the
platform life, which is normally five to eight years, although there is no guarantee that this will occur. In addition, when we are the incumbent supplier to a given
platform, we believe we have a competitive advantage in winning the redesign or replacement platform.
In 2022, approximately 57% of our sales were generated in North America. Because of our significant international operations, we are subject to the risks
associated with doing business in other countries, such as currency volatility, high interest and inflation rates, and the general political and economic risk that are
associated with some of these markets.
26
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 2022, global automotive production continued to be negatively impacted by broad
supply chain challenges, labor market disruptions and other lingering impacts of the COVID-19 pandemic. In 2023, while supply chain disruptions show signs of
slightly improving, rising interest rates, persistent inflation and continuing military actions in Eastern Europe are contributing to global economic uncertainty and
are having broad negative impacts on key sectors of the global economy.
In North America, U.S. consumer confidence has been trending positively since June of 2022 but remains well below historical averages. Key drivers of the
improvement in consumer sentiment are modestly lower inflation rates and continued low levels of unemployment, offset by continuing concerns over rising
interest rates. Consumer spending, fueled by improving confidence and further drawdown of excess accumulated pandemic savings, and government spending
related to infrastructure are expected to drive modest economic growth in the coming year. Economists at the International Monetary Fund (IMF) are expecting
the economies of the United States, Canada and Mexico to grow by 1.4 percent, 1.5 percent and 1.7 percent, respectively, in 2023.
In Europe, the war in Ukraine, related sanctions imposed on Russia, higher energy costs and infrastructure disruptions continue to impact the regional
economy. This is translating into lower industrial output, higher inflation and lower average real household income for most Eurozone countries. While the
European Central Bank has ended stimulative asset purchases and is continuing to raise policy interest rates to stem inflation, certain countries within the region
continue to provide increased fiscal support at the household level to offset the impacts of higher energy costs. In this uncertain environment, economists at the
IMF are currently expecting the economy in the Eurozone region to grow by approximately 0.7 percent in 2023.
In the Asia Pacific region, China has recently ended its strict zero-COVID strategy and has lifted all related restrictive policy measures previously
employed to prevent spread of the disease. With mobility restored, pent up consumer demand for both goods and services is expected to boost economic activity
in the first half of the 2023. At the same time, demand from external trading partners in Europe and the United States has been resilient and is likely to spur
growth in exports. While considerable uncertainty remains in key economic sectors such as real estate, the nation’s leaders have pledged to provide additional
monetary and fiscal support as necessary to ensure key economic targets are achieved. Economists at the IMF are expecting the Chinese economy to grow 5.2
percent in 2023.
In South America, the Brazilian economy will likely remain challenged by continued inflation and constraining interest rate policy. Following his election
in October 2022, President Lula Da Silva has sought to address deep-rooted social problems and inequities with further expansive fiscal policy and social
spending. The increased government spending is expected to spur inflation above 5 percent for the year and will likely force the central bank to maintain
benchmark interest rates at high levels to dampen the inflationary pressure. Further, tax increases may be necessary to pay for the spending programs that already
exceed strict budget levels. To the positive, the re-opening of the Chinese economy will drive incremental demand for Brazil’s agricultural exports. Economists at
the IMF are now estimating the Brazilian economy will grow 1.2 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.
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 significant 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 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.
According to the forecasting firm S&P Global (formerly IHS Markit), global light vehicle production was approximately 82.0 million units in 2022. This
reflects an increase of approximately 6.2% globally since 2021.
27
Light vehicle production in certain regions for 2022 and 2021, as well as projections for 2023, are provided in the following table:
(In millions of units)
North America
Europe
Asia Pacific
Greater China
South America
2023
(1)
2022
(1)
2021
(1)
Projected % Change
2022-2023
% Change 2021-2022
15.1
16.5
48.1
26.6
3.0
14.3
15.7
46.9
26.3
2.8
13.0
15.9
43.6
24.8
2.6
5.4 %
5.3 %
2.4 %
1.0 %
6.0 %
9.7 %
(1.3)%
7.7 %
6.1 %
8.5 %
(1)
Production data based on S&P Global, January 2023.
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 2022 was negatively impacted by additional supply chain issues related to the Russia-Ukraine
crisis.
Industry Overview
Competition in the automotive supplier industry is intense and has increased in recent years as OEMs have demonstrated a preference for stronger
relationships with fewer suppliers. Because of a growing emphasis on global vehicle platforms, automotive suppliers with a global manufacturing footprint
capable of fully servicing customers around the world will typically have a competitive advantage over smaller, regional competitors. This dynamic is likely to
result in further consolidation of competing suppliers within our industry over time.
OEMs have shifted some research and development, design and testing responsibility to suppliers, while at the same time shortening new product cycle
times. To remain competitive, suppliers must have state-of-the-art engineering and design capabilities and must be able to continuously improve their
engineering, design and manufacturing processes to effectively service the customer. Suppliers are increasingly expected to collaborate on, or assume the product
design and development of, key automotive components and to provide innovative solutions to meet evolving technologies aimed at improved emissions and fuel
economy.
Increased competitiveness in the industry, as well as customer focus on costs, has resulted in continued pressure on suppliers for price reductions, even in
an inflationary environment, which reduces the overall profitability of the industry. Consolidations and market share shifts among vehicle manufacturers continue
to put additional pressures on the supply chain. These pricing and market pressures will continue to drive our focus on reducing our overall cost structure through
continuous improvement initiatives, capital redeployment, restructuring and other cost management processes. Nonetheless, we continue to negotiate with OEM
customers to recover the costs associated with the significant commodity and other inflation that we have incurred during 2022 and anticipate to incur in 2023.
In addition to the above, other factors will present opportunities for automotive suppliers who are positioned for the changing environment, including
autonomous and connected vehicles, evolving government regulation, and consumer preference for environmentally friendly products and technology, including
hybrid and electric vehicle (“EV”) architectures.
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 extended and magnified
increases in these costs in 2021. Current global events continued to add further price pressure and uncertainty to raw material costs in 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.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in Note 2. “Basis of Presentation and Summary of Significant Accounting Policies” to the
consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this Report. Certain of our accounting policies require
the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. These policies require the
most
28
difficult, subjective or complex judgments that management makes in the preparation of the financial statements and accompanying notes. We consider an
accounting estimate to be critical if (i) it requires us to make assumptions about matters that were uncertain at the time we were making the estimate, and (ii)
changes in the estimate or different estimates that we could have selected could have had a material impact on our financial condition or results of operations.
Such critical accounting estimates are discussed below. For these, materially different amounts could be reported under varied conditions and assumptions. While
other items in our consolidated financial statements require estimation, however, in our judgment, they are not as critical as those discussed below.
Goodwill. Goodwill is tested for impairment by reporting unit as of October 1 of each year or more frequently if events or circumstances indicate that an
impairment may exist. For our goodwill analysis, fair value is based on the cash flows projected in the reporting units’ strategic plans and long-range planning
forecasts, discounted at a risk-adjusted rate of return. Our long-range planning forecasts are based on our assessment of revenue growth rates generally based on
industry specific data, external vehicle build assumptions published by widely used external sources, and customer market share data based on known and
targeted awards over a three-year period. The projected profit margin assumptions included in the plans are based on the current cost structure and adjustments
for anticipated cost reductions or increases. If different assumptions were used in these plans, the related cash flows used in measuring fair value could be
different and impairment of goodwill might be recorded. The annual goodwill impairment analysis for 2022 resulted in no impairment for the North America and
Industrial Specialty Group reporting units. Additionally, a hypothetical 10 percent decrease in the fair value of these reporting units would not impact our
conclusion that goodwill was not impaired. See Note 9. “Goodwill and Intangible Assets” to the consolidated financial statements included in Item 8. “Financial
Statements and Supplementary Data” of this Report for additional information.
Long-Lived Assets. We monitor our long-lived assets for impairment indicators on an ongoing basis. If impairment indicators exist, we analyze the
undiscounted cash flows expected to be generated from the long-lived assets compared to the related net book values. If the net book value exceeds the
undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the
fair value of the long-lived assets. Fair value of machinery and equipment is based upon either estimated salvage value or estimated orderly liquidation value.
Fair value of leased buildings is based on a discounted cash flow approach. Fair value of owned buildings is based on a sales comparison approach or cost
approach. Cash flows are estimated using internal budgets based on recent sales data, independent automotive production volume estimates and customer
commitments, as well as assumptions related to discount rates. Changes in economic or operating conditions impacting these estimates and assumptions could
result in the impairment of long-lived assets. In 2022, 2021 and 2020, we recorded impairment charges related to buildings and machinery and equipment in
North America, Europe, Asia Pacific, and Corporate and other segments. See Note 8. “Property, Plant and Equipment” to the consolidated financial statements
included in Item 8. “Financial Statements and Supplementary Data” of this Report for additional information.
Income Taxes. In determining the provision for income taxes for financial statement purposes, we make estimates and judgments which affect our
evaluation of the carrying value of our deferred tax assets as well as our calculation of certain tax liabilities. We evaluate the carrying value of our deferred tax
assets on a quarterly basis. In completing this evaluation, we consider all available positive and negative evidence. Such evidence includes historical operating
results, the existence of cumulative earnings and losses in the most recent fiscal years, taxable income in prior carryback year(s) if permitted under the tax law,
expectations for future pretax operating income which considers forecasted revenue trends within the automotive industry, the time period over which our
temporary differences will reverse, and the implementation of feasible and prudent tax planning strategies. Deferred tax assets are reduced by a valuation
allowance if, based on the weight of this evidence, it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized in future
periods.
Concluding that a valuation allowance is not required is difficult when there is significant negative evidence which is objective and verifiable, such as
cumulative losses in recent years. We utilize three years’ cumulative pre-tax book results adjusted for significant permanent book to tax differences as a measure
of cumulative results in recent years. In certain jurisdictions, our analysis indicates that we have cumulative three-year historical losses on this basis. This is
considered significant negative evidence which is difficult to overcome. However, the three-year loss position is not solely determinative, and, accordingly,
management considers all other available positive and negative evidence in its analysis. In the U.S. and certain foreign jurisdictions, we concluded that it is more
likely than not that the net deferred tax assets may not be realized in the future. Accordingly, we continue to maintain and adjust as appropriate the valuation
allowance related to those net deferred tax assets. However, since future financial results may differ from previous estimates, periodic adjustments to our
valuation allowances may be necessary.
In addition, the calculation of our tax benefits and liabilities includes uncertainties in the application of complex tax regulations in a multitude of
jurisdictions across our global operations. We recognize tax benefits and liabilities based on our estimate of whether, and the extent to which, additional taxes
will be due. We adjust these liabilities based on changing facts and
29
circumstances; however, due to the complexity of some of these uncertainties and the impact of any tax audits, the ultimate resolutions may be materially
different from our estimated liabilities. See Note 16. “Income Taxes” to the consolidated financial statements included in Item 8. “Financial Statements and
Supplementary Data” of this Report for additional information.
Pensions and Postretirement Benefits Other Than Pensions. Included in our results of operations are significant pension and postretirement benefit costs,
which are measured using actuarial valuations. Inherent in these valuations are key assumptions, including discount rates, mortality rates, expected returns on
plan assets and health care cost trend rates. These assumptions are determined as of the current year measurement date. We consider current market conditions,
including changes in interest rates, in making these assumptions. Changes in pension and postretirement benefit costs may occur in the future due to changes in
these assumptions. Experience gains and losses as well as the effects of changes in actuarial assumptions are recognized in other comprehensive income.
Cumulative actuarial gains and losses in excess of 10% of the projected benefit obligation or the fair value of plan assets for a particular plan are amortized over
the average future service period of the employees in that plan. Our net pension and postretirement benefit costs, which included non-cash net pension
curtailment and settlement gains and losses of $2.7 million, were approximately $8.3 million and $0.1 million, respectively, for the year ended December 31,
2022. Note that the curtailment charge resulted from the approved merger and termination of certain U.S. pension plans. See Note. 13 “Pension” to the
consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this Report for additional information.
To develop the discount rate for each pension plan, the expected cash flows underlying the plan’s benefit obligations were discounted using a
December 31, 2022 pension index to determine a single equivalent rate. To develop our expected return on plan assets, we considered historical long-term asset
return experience, the expected investment portfolio mix of plan assets and an estimate of long-term investment returns. To develop our portfolio of plan assets,
we considered the duration of the plan liabilities and gave more weight to fixed-income positions than to public and private equity investments.
Weighted average assumptions used to determine pension benefit obligations as of December 31, 2022 were as follows:
Discount rate
Rate of compensation increase
Cash balance interest credit rate
U.S.
Non-U.S.
4.55 %
(*)
N/A
2.41 %
Weighted average assumptions used to determine net periodic benefit costs for the year ended December 31, 2022 were as follows:
Discount rate
Expected return on plan assets
Rate of compensation increase
U.S.
Non-U.S.
2.84 %
3.50 %
(*)
N/A
4.45 %
1.58 %
N/A
2.39 %
2.15 %
2.39 %
*
As the U.S. plans are frozen, the rate of compensation increase was not applicable.
The sensitivity of our pension cost and obligations to changes in key assumptions, holding all other assumptions constant, is as follows:
Change in assumption
1% increase in discount rate
1% decrease in discount rate
1% increase in expected return on plan assets
1% decrease in expected return on plan assets
Impact on 2023 net periodic
benefit cost
Impact on PBO as of
December 31, 2022
+$0.5 million
-$0.7 million
-$2.2 million
+$2.2 million
-$22.7 million
+$27.4 million
—
—
Excluding the impact of any potential settlement charges associated with the approved termination of certain U.S. pension plans, aggregate pension net
periodic benefit cost is forecasted to be approximately $10.0 million in 2023.
30
Health care cost trend rates are assumed to reflect market trend, actual experience and future expectations. Health care cost trend rate assumptions used to
determine the postretirement benefit obligation as of December 31, 2022 were as follows:
Health care cost trend rate
Ultimate health care cost trend rate
Year that the rate reaches the ultimate trend rate
U.S.
Non-U.S.
6.17 %
4.50 %
2028
5.00 %
5.00 %
N/A
Aggregate other postretirement net periodic benefit cost is forecasted to be approximately $0.7 million in 2023.
The Company’s policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements and contribute amounts
deductible for United States federal income tax purposes or amounts required by local statute. The Company estimates it will make funding cash contributions to
its U.S. and non-U.S. pension plans of approximately $1.0 million and $4.4 million, respectively in 2023.
The Company does not prefund its postretirement benefit obligations. Rather, payments are made as costs are incurred by covered retirees. We expect net
other postretirement benefit payments to be approximately $2.2 million in 2023.
Historical Periods
Refer to Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year
ended December 31, 2021 for discussion of the Results of Operations, Segment Results of Operations, and Liquidity and Capital Resources for the year ended
December 31, 2021 compared to the year ended December 31, 2020, which is incorporated by reference herein.
31
Results of Operations
Sales
Cost of products sold
Gross profit
Selling, administration & engineering expenses
Gain on sale of business, net
Gain on sale of fixed assets, net
Amortization of intangibles
Impairment charges
Restructuring charges
Operating loss
Interest expense, net of interest income
Equity in losses of affiliates
Pension settlement and curtailment charges
Other expense, net
Loss before income taxes
Income tax expense
Net loss
Net loss attributable to noncontrolling interests
Net loss attributable to Cooper-Standard Holdings Inc.
Year Ended December 31,
2022
2021
(Dollar amounts in thousands)
Change
2022 vs. 2021
$
$
2,525,391 $
2,395,600
129,791
199,455
—
(33,391)
6,715
43,710
18,304
(105,002)
(78,514)
(8,817)
(2,682)
(5,485)
(200,500)
17,291
(217,791)
2,407
(215,384) $
2,330,191
2,242,963
87,228
227,110
(696)
—
7,347
25,609
36,950
(209,092)
(72,511)
(1,728)
(1,279)
(4,842)
(289,452)
39,392
(328,844)
6,009
(322,835)
$
$
195,200
152,637
42,563
(27,655)
696
(33,391)
(632)
18,101
(18,646)
104,090
(6,003)
(7,089)
(1,403)
(643)
88,952
(22,101)
111,053
(3,602)
107,451
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021.
Sales
2022
Year Ended December 31,
2021
Change
(Dollar amounts in thousands)
Volume / Mix*
Variance Due To:
Foreign Exchange
Deconsolidation
Total sales
$
2,525,391 $
2,330,191 $
195,200
$
322,259 $
(96,418) $
(30,641)
* Net of customer price adjustments, including recoveries
32
Sales for the year ended December 31, 2022 increased 8.4%, compared to the year ended December 31, 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 related shut-downs in China and the Ukraine conflict in Europe) and net customer price adjustments including partial 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 4. “Deconsolidations and
Divestitures” to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this Report for additional
information.
Gross Profit
Year Ended December 31,
2022
2021
Change
(Dollar amounts in thousands)
Volume / Mix*
Variance Due To:
Foreign Exchange
Cost (Decreases) /
Increases**
Cost of products sold
Gross profit
Gross profit percentage of sales
$
2,395,600
129,791
$
5.1 %
2,242,963
87,228
$
3.7 %
152,637
42,563
$
155,243 $
167,016
(84,437) $
(11,981)
81,831
(112,472)
* 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. Cost of products sold for the year ended December 31, 2022 increased $152.6 million, or 6.8%, compared to the year ended December 31, 2021.
Materials comprise the largest component of our cost of products sold and represented approximately 51% and 47% of total cost of products sold for the years
ended December 31, 2022 and December 31, 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 year ended December 31, 2022 increased $42.6 million compared to the year ended December 31, 2021. As a percentage of sales,
gross profit was 5.1% and 3.7% for the years ended December 31, 2022 and 2021, respectively. The change was driven by volume and mix net of customer price
reductions including partial 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. Selling, administration and engineering expense for the year ended December 31, 2022 was $199.5 million, or
7.9% of sales, compared to $227.1 million, or 9.7% of sales, for the year ended December 31, 2021. The decrease was primarily due to 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 of $0.7 million for the year ended December 31, 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 year ended December 31, 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 year ended December 31, 2022 was relatively consistent compared to the year ended
December 31, 2021.
Impairment Charges. Non-cash asset impairment charges of $43.7 million and $25.6 million for the years ended December 31, 2022 and 2021,
respectively, related to property, plant and equipment impairment charges.
Restructuring. Restructuring charges for the year ended December 31, 2022 decreased $18.6 million compared to the year ended December 31, 2021.
Our restructuring actions include plant and other facility closures and workforce reductions and are initiated to maintain our competitive footprint or in response
to changes in global and regional automotive markets. The decrease was primarily attributable to Europe due to headcount initiatives and footprint rationalization
actions that were completed in 2021.
33
Interest Expense, net. Net interest expense for the year ended December 31, 2022 increased $6.0 million compared to the year ended December 31, 2021,
primarily due to an increase in interest rates on variable rate debt.
Pension Settlement and Curtailment Charges. Non-cash pension settlement and curtailment charges of $2.7 million and $1.3 million for the years ended
December 31, 2022 and 2021, respectively, related to a curtailment regarding the approved termination of a U.S. pension plan and settlements related to our non-
U.S. pension plans. See Note 13. “Pension” to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this
Report for additional information.
Other Expense, net. Other expense, net for the year ended December 31, 2022 increased $0.6 million compared to the year ended December 31, 2021.
The increase was primarily due to higher foreign currency losses in the year ended December 31, 2022, partially offset by benefit related income.
Income Tax Expense. Income tax expense for the year ended December 31, 2022 was $17.3 million on losses before taxes of $200.5 million. This
compared to an income tax of $39.4 million on losses before taxes of $289.5 million for the year ended December 31, 2021. The tax expense in 2022 and 2021
differed from the statutory rate primarily due to incremental valuation allowances recorded on tax losses generated in the U.S. and certain foreign jurisdictions,
the mix of income between the U.S. and foreign sources, tax credits and incentives, and other nonrecurring discrete items.
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. We use 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 presents sales and segment adjusted EBITDA for each of the reportable segments.
Year Ended December 31, 2022 Compared with Year Ended December 31, 2021
Sales
Sales to external customers
North America
Europe
Asia Pacific
South America
Total Automotive
Corporate, eliminations and other
Consolidated
Year Ended December 31,
2022
2021
Change
(Dollar amounts in thousands)
*
Volume / Mix
Variance Due To:
Foreign
Exchange
Deconsolidation
$
$
1,341,099 $
503,672
443,126
100,420
2,388,317
137,074
2,525,391 $
1,148,257 $
518,245
458,306
61,713
2,186,521
143,670
2,330,191 $
192,842
(14,573)
(15,180)
38,707
201,796
(6,596)
195,200
$
$
195,844 $
47,557
45,114
34,400
322,915
(656)
322,259 $
(3,002) $
(62,130)
(29,653)
4,307
(90,478)
(5,940)
(96,418) $
—
—
(30,641)
—
(30,641)
—
(30,641)
*
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.
34
Segment adjusted EBITDA
Segment adjusted EBITDA
North America
Europe
Asia Pacific
South America
Total Automotive
Corporate, eliminations and other
Consolidated adjusted EBITDA
Year Ended December 31,
2022
2021
Change
(Dollar amounts in thousands)
*
Volume / Mix
Variance Due To:
Foreign
Exchange
Cost Decreases /
(Increases)**
$
$
70,819 $
(37,137)
1,556
97
35,335
2,533
37,868 $
54,616 $
(49,599)
(16,756)
(9,852)
(21,591)
13,557
(8,034) $
16,203
12,462
18,312
9,949
56,926
(11,024)
45,902
$
$
77,672 $
41,972
25,609
10,219
155,472
11,544
167,016 $
(3,395) $
1,394
(6,042)
3,072
(4,971)
371
(4,600) $
(58,074)
(30,904)
(1,255)
(3,342)
(93,575)
(22,939)
(116,514)
*
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 the lessening impact
of semiconductor-related supply issues.
•
•
Foreign currency exchange was impacted by the Chinese Renminbi, Korean Won, Mexican Peso, Canadian Dollar, Euro, Polish Zloty, Czech Koruna
and the Brazilian Real.
The Cost Decreases / (Increases) 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
We intend to fund our ongoing working capital, capital expenditures, debt service and other funding requirements through a combination of cash flows
from operations, cash on hand, borrowings under our senior asset-based revolving credit facility (“ABL Facility”) and receivables factoring. We utilize
intercompany loans and equity contributions to fund our worldwide operations. There may be country-specific regulations which may restrict or result in
increased costs in the repatriation of these funds.
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 light vehicle production and customer demand for our products, 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, capital
expenditures debt service and other funding requirements for the foreseeable future, despite the challenges presented by the COVID-19 pandemic and supply
chain issues facing the industry.
35
Cash Flows
Operating Activities. Net cash used in operating activities was $36.2 million for the year ended December 31, 2022, compared to net cash used in
operating activities of $115.5 million for the year ended December 31, 2021. The change was primarily due to increased cash earnings, working capital
improvements 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 $17.9 million for the year ended December 31, 2022, compared to net cash used in investing
activities of $91.3 million for the year ended December 31, 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 year ended December 31, 2022 along with reduced capital spending in 2022. We expect reduced capital
expenditures will continue in 2023, primarily as part of initiatives to consistently lower overall capital spending. We anticipate that we will spend approximately
$70 million to $80 million on capital expenditures in 2023.
Financing Activities. Net cash used in financing activities totaled $4.3 million for the year ended December 31, 2022, compared to net cash provided by
financing activities of $3.2 million for the year ended December 31, 2021. The net cash flows associated with financing activities were relatively consistent in
2022 as compared to 2021.
Refinancing Transactions
On January 27, 2023 (the “Settlement Date”), the Company, Cooper-Standard Automotive Inc. (the “Issuer”), a wholly-owned subsidiary of the
Company, and certain other of the Company’s direct and indirect subsidiaries completed certain refinancing transactions (the “Refinancing Transactions”)
consisting of: (i) the exchange (the “Exchange Offer”) of $357.4 million aggregate principal amount of the Issuer’s then existing 5.625% Senior Notes due 2026
(the “2026 Senior Notes”) (representing 89.36% of the aggregate principal amount outstanding of the 2026 Senior Notes) for $357.4 million aggregate principle
amount of the Issuer’s newly issued 5.625% Cash Pay / 10.625% PIK Toggle Senior Secured Third Lien Notes due 2027 (the “Third Lien Notes”), (ii) the
issuance by the Issuer (the “Concurrent Notes Offering”) of $580.0 million aggregate principal amount of 13.50% Cash Pay / PIK Toggle Senior Secured First
Lien Notes due 2027 (the “First Lien Notes” and, together with the Third Lien Notes, the “New Notes”) to holders of 2026 Senior Notes or their designees who
participated in the Exchange Offer, including to certain backstop commitment parties who committed to purchase the First Lien Notes not otherwise subscribed
for, (iii) the related consent solicitation (the “Consent Solicitation”) to remove substantially all of the covenants, certain events of default and certain other
provisions contained in the 2026 Senior Notes and the indenture governing the 2026 Senior Notes and to release and discharge the guarantee of the 2026 Senior
Notes by the Company, (iv) the effectiveness of the Third Amendment (as defined below) to the ABL Facility and (v) the use of proceeds from the Concurrent
Notes Offering, together with cash on hand, to prepay all amounts outstanding under the Term Loan Facility (as defined below) at par, plus any accrued and
unpaid interest thereon, to redeem the Issuer’s existing 2024 Senior Secured Notes (as defined below), including the prepayment premium and any accrued and
unpaid interest thereon, and to pay fees and expenses related to the Refinancing Transactions. As a result of the Refinancing Transactions, the Issuer extended the
maturities of its indebtedness and reduced the amount of cash interest it is required to pay on such indebtedness for the next two years.
New Notes
On the Settlement Date, the Issuer issued $580.0 million aggregate principal amount of First Lien Notes pursuant to an indenture, dated as of the
Settlement Date (the “First Lien Notes Indenture”), by and among the Issuer, the guarantors party thereto and U.S. Bank Trust Company, National Association,
as trustee and collateral agent (the “First Lien Collateral Agent”).
The First Lien Notes are senior secured obligations of the Issuer and are guaranteed by CS Intermediate Holdco 1 LLC (“Holdings”), each of the Issuer’s
wholly owned domestic subsidiaries that guarantee certain other indebtedness, subject to certain exceptions (the “Domestic Guarantors”), and certain of the
Issuer’s wholly owned subsidiaries organized in Costa Rica, France, Mexico, the Netherlands and Romania (the “Foreign Guarantors”). The First Lien Notes are
guaranteed by Holdings and the Domestic Guarantors on a senior secured basis and by the Foreign Guarantors on a senior unsecured basis. The guarantees of the
subsidiaries organized in France are limited guarantees.
The First Lien Notes will mature on March 31, 2027. The First Lien Notes bear interest at the rate of 13.50% per annum, payable in cash; provided,
however, that for the first four interest periods after the Settlement Date, the Issuer has the option, in its sole discretion, to pay up to 4.50% of such interest on the
First Lien Notes, in such amount as specified by the Issuer, by increasing the principal amount of the outstanding First Lien Notes or, in limited circumstances as
described in the First Lien Notes Indenture, by issuing additional First Lien Notes. Interest on the First Lien Notes is payable semi-annually in arrears on June 15
and December 15 of each year, commencing on June 15, 2023.
36
The Issuer may, at its option, redeem all or part of the First Lien Notes prior to maturity at the prices set forth in the First Lien Notes Indenture. Upon the
occurrence of certain events constituting a Change of Control (as defined in the First Lien Notes Indenture), the Issuer will be required to make an offer to
repurchase all of the First Lien Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the
repurchase date.
The First Lien Notes Indenture contains certain customary covenants that limit the Issuer’s and its restricted subsidiaries’ ability to, among other things,
incur or guarantee additional indebtedness or issue certain preferred stock; incur liens on assets; pay dividends or make other distributions in respect of, or
repurchase or redeem, its capital stock or make other restricted payments; prepay, redeem or repurchase certain debt; make certain loans and investments; enter
into agreements restricting certain subsidiaries’ ability to pay dividends; enter into transactions with affiliates; and sell certain assets or merge or consolidate with
or into other companies. These covenants are subject to a number of important limitations and exceptions. The First Lien Notes Indenture also provides for
customary events of default, which, if any occur, would permit or require the principal, premium, if any, interest and any other monetary obligations on all of the
then outstanding First Lien Notes to be due and payable immediately.
On the Settlement Date, the Issuer issued $357.4 million aggregate principal amount of Third Lien Notes pursuant to an indenture, dated as of the
Settlement Date (the “Third Lien Notes Indenture”), by and among the Issuer, the guarantors party thereto and U.S. Bank Trust Company, National Association,
as trustee and collateral agent (the “Third Lien Collateral Agent”).
The Third Lien Notes are senior secured obligations of the Issuer and are guaranteed by Holdings, the Domestic Guarantors, and the Foreign Guarantors.
The Third Lien Notes are guaranteed by Holdings and the Domestic Guarantors on a senior secured basis and by the Foreign Guarantors on a senior unsecured
basis. The guarantees of the subsidiaries organized in France are limited guarantees.
The Third Lien Notes will mature on May 15, 2027. The Third Lien Notes bear interest at the rate of 5.625% per annum, payable in cash; provided,
however, that for the first four interest periods after the Settlement Date, the Issuer has the option, in its sole discretion, to instead pay such interest at 10.625%
per annum either by increasing the principal amount of the outstanding Third Lien Notes or, in limited circumstances as described the Third Lien Notes
Indenture, by issuing additional Third Lien Notes. Interest on the Third Lien Notes is payable semi-annually in arrears on June 15 and December 15 of each year,
commencing on June 15, 2023.
The Issuer may, at its option, redeem all or part of the Third Lien Notes prior to maturity at the prices set forth in the Third Lien Notes Indenture. Upon
the occurrence of certain events constituting a Change of Control (as defined in the Third Lien Notes Indenture) occurs, the Issuer will be required to make an
offer to repurchase all of the Third Lien Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding,
the repurchase date.
The Third Lien Notes Indenture contains certain customary covenants that limit the Issuer’s and its restricted subsidiaries’ ability to, among other things,
incur or guarantee additional indebtedness or issue certain preferred stock; incur liens on assets; pay dividends or make other distributions in respect of, or
repurchase or redeem, its capital stock or make other restricted payments; prepay, redeem or repurchase certain debt; make certain loans and investments; enter
into agreements restricting certain subsidiaries’ ability to pay dividends; enter into transactions with affiliates; and sell certain assets or merge or consolidate with
or into other companies. These covenants are subject to a number of important limitations and exceptions. The Third Lien Notes Indenture also provides for
customary events of default, which, if any occur, would permit or require the principal, premium, if any, interest and any other monetary obligations on all of the
then outstanding Third Lien Notes to be due and payable immediately.
In connection with the issuance of the New Notes, the First Lien Collateral Agent, the Third Lien Collateral Agent, the collateral agent under the ABL
Facility, the Issuer, Holdings and the several other parties named therein entered into the First Lien and Third Lien Intercreditor Agreement, providing for the
relative priorities of their respective security interests in the assets securing the First Lien Notes, the Third Lien Notes and the ABL Facility, and certain other
matters relating to the administration of security interests.
2026 Senior Notes
On November 2, 2016, the Issuer issued $400.0 million aggregate principal amount of 2026 Senior Notes. On the Settlement Date, in connection with the
Refinancing Transactions, the Issuer completed the Exchange Offer and delivered $357.4 million aggregate principal amount of the exchanged 2026 Senior
Notes to the trustee for cancellation. Following the completion of the Exchange Offer, $42.6 million aggregate principal amount of the 2026 Senior Notes remain
outstanding.
Following receipt of the requisite consents in the Consent Solicitation, on January 20, 2023, the Issuer, the guarantors named therein and U.S. Bank Trust
Company, National Association (successor in interest to U.S. Bank National Association), as
37
trustee, entered into a supplemental indenture to the indenture governing the 2026 Senior Notes, which became effective on the Settlement Date. The
supplemental indenture provides for the elimination of substantially all of the covenants, certain events of default and certain other provisions contained in the
2026 Senior Notes and the indenture governing the 2026 Senior Notes and released and discharged the guarantee of the 2026 Senior Notes by the Company.
The 2026 Senior Notes are guaranteed by each of the Issuer’s wholly-owned existing or subsequently organized U.S. subsidiaries, subject to certain
exceptions, to the extent such subsidiary guarantees the ABL Facility. The Issuer may, at its option, redeem all or part of the 2026 Senior Notes at various points
in time prior to maturity, as described in the indenture governing the 2026 Senior Notes. The 2026 Senior Notes will mature on November 15, 2026. Interest on
the 2026 Senior Notes is payable semi-annually in arrears in cash on May 15 and November 15 of each year.
2024 Senior Secured Notes
On May 29, 2020, the Issuer issued $250.0 million aggregate principal amount of its 13.000% Senior Secured Notes due 2024 (the “2024 Senior Secured
Notes”), pursuant to an indenture, dated as of May 29, 2020, by and among the Issuer, the other guarantors party thereto and U.S. Bank National Association, as
trustee. The 2024 Senior Secured Notes would have matured on June 1, 2024. Interest on the 2024 Senior Secured Notes was payable semi-annually in arrears in
cash on June 1 and December 1 of each year. Subsequent to the year ended December 31, 2022, in connection with the Refinancing Transactions, the Issuer
redeemed all of the outstanding 2024 Senior Secured Notes on the Settlement Date at the redemption price of 106.500% of the principal amount thereof, plus
accrued and unpaid interest thereon.
ABL Facility
On November 2, 2016, Holdings, Cooper-Standard Automotive Inc. (the “U.S. Borrower”), Cooper-Standard Automotive Canada Limited (the
“Canadian Borrower”), Cooper-Standard Automotive International Holdings B.V. (the “Dutch Borrower”, and, together with the U.S. Borrower and the Canadian
Borrower, the “Borrowers”) and certain subsidiaries of the U.S. Borrower, entered into a third amendment and restatement of our ABL Facility. In March 2020,
the Borrowers entered into Amendment No. 1 of the Third Amended and Restated Loan Agreement (the “First Amendment”). As a result of the First
Amendment, the ABL Facility maturity was extended to March 2025 and the aggregate revolving loan commitment was reduced to $180.0 million. In May 2020,
the Borrowers entered into Amendment No. 2 to the Third Amended and Restated Loan Agreement (the “Second Amendment”), which Second Amendment
modified certain covenants under the ABL Facility. In December 2022, the Borrowers entered into Amendment No. 3 to the Third Amended and Restated Loan
Agreement (the “Third Amendment”), which became effective on the Settlement Date. The Third Amendment provides for the ABL Facility to be amended to:
permit the U.S. Borrower to issue the New Notes in the Concurrent Notes Offering and Exchange Offer, including the granting of liens, subject to the
restrictions set forth in the ABL Facility;
provide for certain of the U.S. Borrower’s wholly-owned subsidiaries organized in Costa Rica, France, Mexico, the Netherlands, Romania and certain
other jurisdictions specified from time to time to become guarantors under the ABL Facility;
authorize the collateral agent under the ABL Facility to enter into an intercreditor agreement with the collateral trustees for the New Notes; and
remove the Dutch Borrower as a borrower under the ABL Facility.
•
•
•
•
In addition, the ABL Facility provides for an uncommitted $100.0 million incremental loan facility, for a potential total ABL Facility of $280.0 million.
The ABL Facility includes affirmative and negative covenants that impose substantial restrictions on our financial and business operations. The ABL
Facility also contains various events of default that are customary for comparable facilities.
Loan and letter of credit availability under the agreement is subject to a borrowing base, which at any time is limited to the lesser of: (A) the maximum
facility amount (subject to certain adjustments) and (B) (i) up to 85% of eligible accounts receivable; plus (ii) the lesser of 70% of eligible inventory or 85% of
the appraised net orderly liquidation value of eligible inventory; plus (iii) up to the lesser of $30.0 million and 85% of eligible tooling accounts receivable; minus
reserves established by the agent. The obligations under the ABL Facility and the related guarantees are secured by various assets, as detailed in Note 10. “Debt”
to the consolidated financial statements in Item 8. “Financial Statements and Supplementary Data” of this Report.
•
Borrowings under the ABL Facility bear interest at a rate equal to, at the Borrowers’ option:
in the case of borrowings by U.S. Borrower, the forward-looking secured overnight funding rate for the applicable interest period (“Term SOFR”)
(including a credit spread adjustment of 0.11448% or 0.26161%, depending on the applicable interest period) or the base rate plus, in each case, an
applicable margin; or
38
•
in the case of borrowings by the Canadian Borrower, bankers’ acceptance (“BA”) rate, Canadian prime rate or Canadian base rate plus, in each case, an
applicable margin.
The applicable margin may vary between 2.00% and 2.50% with respect to the Term SOFR or Canadian BA rate-based borrowings and between 1.00%
and 1.50% with respect to U.S. base rate, Canadian prime rate and Canadian base rate borrowings. The applicable margin is subject, in each case, to quarterly
pricing adjustments (based on average facility availability).
As of December 31, 2022, the Company had $155.2 million in availability under the ABL Facility. As of December 31, 2022 and 2021, the Company had
$0.5 million and $0.8 million, respectively, in unamortized debt issuance costs related to the ABL Facility.
Term Loan Facility
On November 2, 2016, Cooper-Standard Automotive Inc., as borrower, entered into the first amendment to its senior term loan facility (the “Term Loan
Facility”). The Term Loan Facility provided for loans in an aggregate principal amount of $340.0 million. Subject to certain conditions, the Term Loan Facility,
without the consent of the then existing lenders (but subject to the receipt of commitments), could have been expanded (or a new term loan or revolving facility
added) by an amount that would not cause the consolidated secured net debt ratio to exceed 2.25 to 1.00, plus $400.0 million, plus any voluntary prepayments
(including revolving facility and ABL Facility to the extent commitments are reduced) not funded from proceeds of long-term indebtedness.
On May 2, 2017, CSA U.S. 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 bore 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 would have matured on November 2, 2023.
Subsequent to the year ended December 31, 2022, in connection with the Refinancing Transactions, Cooper-Standard Automotive Inc. repaid the Term
Loan Facility in full on the Settlement Date and the term Loan Facility was terminated.
For additional information regarding our debt, see Note 10. “Debt” to the consolidated financial statements in Item 8. “Financial Statements and
Supplementary Data” of this Report.
Off-Balance Sheet Arrangements
As a part of our working capital management, we sell accounts receivable from certain European customers through a third-party financial institution in
off-balance sheet arrangements. The amount sold varies each month based on the amount of underlying receivables and cash flow needs. As of December 31,
2022 and 2021, we had $52.5 million and $52.7 million, respectively, of receivables outstanding under receivable transfer agreements entered into by various
locations. For the years ended December 31, 2022 and 2021, total accounts receivable factored were $355.3 million and $366.9 million, respectively. Costs
incurred on the sale of receivables were $0.7 million, $0.5 million and $0.8 million for the years ended December 31, 2022, 2021 and 2020, respectively. These
amounts are recorded in other expense, net in the consolidated statements of operations. These are permitted transactions under the credit agreements governing
the ABL Facility and the indentures governing the New Notes, the 2026 Senior Notes and the 2024 Senior Secured Notes.
Other Capital Transactions Impacting Liquidity
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 management 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. We are not obligated to acquire a particular amount of securities, and the 2018 Program may be discontinued at any time at our discretion. The
2018 Program was effective beginning November 2018. As of December 31, 2022, we had approximately $98.7 million of repurchase authorization under the
2018 Program.
We did not make any repurchases under the 2018 Program during the years ended December 31, 2022, 2021 or 2020.
39
Contractual Obligations
Our contractual obligations consist of legal commitments requiring us to make fixed or determinable cash payments, regardless of the contractual
requirements of the vendor to provide future goods or services. Except as otherwise disclosed, this table does not include information on our recurring purchase
of materials for use in production because our raw materials purchase contracts typically do not require fixed or minimum quantities.
The following table summarizes the total amounts due in future periods under all debt agreements at nominal value, undiscounted finance lease
commitments and other contractual obligations, on a pro forma basis after giving effect to the Refinancing Transactions, which were completed on January 27,
2023:
Payment due by period
Estimated debt obligations (a)
Estimated interest on debt obligations (b)
Operating lease obligations
Finance lease obligations
Total
Total
$
$
1,162.1 $
369.9
122.7
30.9
1,685.6 $
1-3 years
(Dollar amounts in millions)
51.9 $
51.6
25.8
3.3
132.6 $
170.0
35.6
7.1
212.7 $
— $
1,110.2 $
148.3
20.3
6.5
1,285.3 $
—
—
41.0
14.0
55.0
Less than
1 year
3-5 years
More than
5 years
(a) Debt obligations include (i) $580.0 million aggregate principal amount of First Lien Notes issued on the Settlement Date, (ii) $357.4 million
aggregate principal amount of Third Lien Notes, (iii) $42.6 million aggregate principal amount of 2026 Senior Notes, which remain outstanding following the
completion of the Refinancing Transactions and (iv) assumptions around interest paid in payment-in-kind as further described below. The above table gives effect
to the full repayment of the Term Loan Facility and the full redemption of the 2024 Senior Secured Notes, each of which occurred on the Settlement Date.
(b) Assumes (i) interest on the Third Lien Notes is fully paid in payment-in-kind for the first four interest payments and (ii) 4.50% of the interest on the
First Lien Notes is fully paid in payment-in-kind for the first four interest payments. Payment of interest on the Third Lien Notes and the First Lien Notes in
payment-in-kind is at the Company’s discretion.
In addition to our contractual obligations and commitments set forth in the table above, we have employment arrangements with certain key executives
that provide for continuity of management. These arrangements include payments of multiples of annual salary, certain incentives and continuation of benefits
upon the occurrence of specified events in a manner believed to be consistent with comparable companies. As of December 31, 2022, the Company had
additional operating leases, primarily for real estate, that have not yet commenced with undiscounted lease payments of approximately $6.5 million.
We also have funding requirements with respect to our pension obligations. We expect to make cash contributions to our U.S. and foreign pension plans
of approximately $1.0 million and $4.4 million, respectively, in 2023. Our minimum funding requirements after 2023 will depend on several factors, including
the investment performance of our retirement plans and prevailing interest rates. Our funding obligations may also be affected by changes in applicable legal
requirements. We also have payments due with respect to our postretirement benefit obligations. We do not prefund our postretirement benefit obligations.
Rather, payments are made as costs are incurred by covered retirees. We expect net other postretirement benefit payments to be approximately $2.2 million in
2023.
We may be required to make significant cash outlays due to our unrecognized tax benefits. However, due to the uncertainty of the timing of future cash
flows associated with our unrecognized tax benefits, we are unable to make reasonably reliable estimates of the period of cash settlement, if any, with the
respective taxing authorities. Accordingly, unrecognized tax benefits of $5.9 million as of December 31, 2022 have been excluded from the contractual
obligations table above. See Note 16. “Income Taxes” to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary
Data” of this Report for additional information.
Excluded from the contractual obligations table above are open purchase orders as of December 31, 2022 for raw materials, supplies and capital
expenditures in the normal course of business, supply contracts with customers, distribution agreements, joint venture agreements and other contracts without
express funding requirements.
40
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 the following:
•
•
•
•
•
•
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,
2026 Senior Notes, and 2024 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.
41
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:
Net loss attributable to Cooper-Standard Holdings Inc.
Income tax expense (benefit)
Interest expense, net of interest income
Depreciation and amortization
EBITDA
(1)
(2)
(3)
Restructuring charges
Deconsolidation of joint venture
Impairment charges
Gain on sale of business, net
Gain on sale of fixed assets, net
Lease termination costs
Indirect tax and customs adjustments
Pension settlement and curtailment charges
Project costs
Divested noncontrolling interest debt extinguishment
(5)
(8)
(6)
(4)
(7)
Adjusted EBITDA
2022
$
$
$
(215,384) $
17,291
78,514
122,476
Year Ended December 31,
2021
(Dollar amounts in thousands)
(322,835) $
39,392
72,511
139,008
(71,924) $
36,950
—
25,609
(696)
—
748
—
1,279
—
—
(8,034) $
2,897 $
18,304
2,257
43,710
—
(33,391)
—
1,409
2,682
—
—
37,868 $
2020
(267,605)
(60,847)
59,167
154,229
(115,056)
39,482
—
103,887
(2,834)
—
771
—
184
5,648
3,595
35,677
Loss attributable to deconsolidation of a joint venture in the Asia Pacific region, which required adjustment to fair value.
1.
2. Non-cash impairment charges in 2022 related to recent operating performance and idle assets in certain locations in North America, Europe and Asia Pacific. Impairment
charges in 2021 related to fixed assets and goodwill. Impairment charges in 2020 included impairment of assets held for sale and other impairment charges related to
fixed assets and right-of-use operating lease assets, net of portion attributable to our noncontrolling interests.
3. During 2021, the Company 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. In 2020, the gain on sale of business primarily related to divestitures.
In 2022, the Company recognized a gain on a sale-leaseback agreement on one of its European facilities.
Lease termination costs no longer recorded as restructuring charges in accordance with ASC 842, Leases.
Impact of prior period indirect tax and customs adjustments.
4.
5.
6.
7. Non-cash net pension settlement and curtailment charges and administrative fees incurred related to certain of our U.S. and non-U.S. pension plans.
8.
Project costs recorded in selling, administration and engineering expense related to acquisitions and divestitures.
Recent Accounting Pronouncements
See Note 3. “New Accounting Pronouncements” to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary
Data” of this Report for additional information.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to fluctuations in interest rates, currency exchange rates and commodity prices. We actively manage our exposure to risk from changes in
foreign currency exchange rates through the use of derivative financial instruments in accordance with management’s guidelines. We do not enter into derivative
instruments for trading or speculative purposes. See Item 8. “Financial Statements and Supplementary Data,” specifically Note 11. “Fair Value Measurements
and Financial Instruments” to the consolidated financial statements.
Foreign Currency Exchange Rate Risk. We use forward foreign exchange contracts to reduce the effect of fluctuations in foreign exchange rates on a
portion of forecasted sales, material purchases and operating expenses. As of December 31, 2022, the notional amount of these contracts was $135.3 million. As
of December 31, 2022, the fair value of the Company’s forward foreign exchange contracts was an asset of $8.6 million. The potential fair value of the forward
foreign exchange contracts from a hypothetical 10% adverse or favorable movement in the foreign currency exchange rates in relation to the U.S. Dollar is as
42
10% strengthening of U.S. Dollar
10% weakening of U.S. Dollar
follows:
December 31, 2022
December 31, 2021
($1.6) million
+ $21.4 million
($11.5) million
+ $12.2 million
These estimates assume a parallel shift in all currency exchange rates and, as a result, may overstate the potential impact to earnings because currency
exchange rates do not typically move all in the same direction.
In addition to transactional exposures, our operating results are impacted by the translation of our foreign operating income into U.S. dollars. In 2022, net
sales outside of the United States accounted for 77% of our consolidated net sales, although certain non-U.S. sales are U.S. dollar denominated. We do not enter
into foreign exchange contracts to mitigate this exposure.
Interest Rates. The Company historically used interest rate swap contracts to create fixed interest payments on variable rate debt instruments in order to
manage exposure to fluctuations in interest rates. We did not enter into any interest rate swap contracts in 2022. As of December 31, 2022 and 2021,
approximately 38.1% and 38.4%, respectively, of our total debt was at variable interest rates. The pre-tax earnings and cash flow impact of a 100 basis points
increase or decrease in the interest rates on our variable rate debt outstanding at December 31, 2022 would be a $3.7 million increase or decrease, respectively, on
an annualized basis.
Commodity Prices. We have commodity price risk with respect to purchases of certain raw materials, including natural gas and carbon black. Raw
material, energy and commodity costs have been extremely volatile over the past several years. We did not enter into any commodity derivative instruments in
2022. We will continue to evaluate, and may use, derivative financial instruments to manage our exposure to raw material, energy and commodity price
fluctuations in the future.
43
Item 8. Financial Statements and Supplementary Data
Annual Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID: 42)
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, Internal Control over Financial Reporting
Consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020
Consolidated statements of comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020
Consolidated balance sheets as of December 31, 2022 and December 31, 2021
Consolidated statements of changes in equity for the years ended December 31, 2022, 2021 and 2020
Consolidated statements of cash flows for the years ended December 31, 2022, 2021 and 2020
Notes to consolidated financial statements
Schedule II—Valuation and Qualifying Accounts
Page
45
47
48
49
50
51
52
53
91
44
To the Stockholders and the Board of Directors of Cooper-Standard Holdings Inc.
Opinion on the Financial Statements
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Cooper-Standard Holdings Inc. (the Company) as of December 31, 2022 and 2021, the
related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended
December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at
December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s
internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 17, 2023 expressed an unqualified
opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved
our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical
audit matter or on the accounts or disclosures to which it relates.
45
Impairment of property, plant and equipment
Description of the Matter
As of December 31, 2022, the Company’s property, plant and equipment balance was $643 million. As discussed in Note 8 to the
consolidated financial statements, during 2022 the Company recorded property, plant and equipment impairment charges at certain
locations within its Europe and North America segments due to recent operating performance. The Company evaluated its
property, plant and equipment in these locations for recoverability and concluded that certain assets were impaired. The Company
recognized a $40.2 million impairment charge, which is the amount by which the carrying value exceeded the estimated fair value
of these assets.
Auditing the Company’s impairment measurement involved a high degree of judgment as estimates underlying the determination
of fair value of the long-lived assets were based on assumptions affected by current market and economic conditions. The
Company determined fair value using estimated orderly liquidation value.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process
to measure impairments of property, plant and equipment. Our audit procedures included among others, testing controls over the
Company’s review of the significant assumptions and methodologies used in the calculation of the fair value of the related assets.
Our testing of the Company’s impairment of property, plant and equipment included, among other procedures, evaluating the
assumptions used to estimate the fair value of the property, plant and equipment. We reviewed the valuation methodology to assess
whether the methodology is widely recognized and appropriate for use in the valuation of the property, plant and equipment, tested
significant assumptions and the data used in the valuation, and recalculated the valuation estimate based on the applicable inputs.
We also involved our valuation specialists to assist in our assessment of the valuation approach and assumptions used to estimate
the fair value.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2005.
Detroit, Michigan
February 17, 2023
46
To the Stockholders and the Board of Directors of Cooper-Standard Holdings Inc.
Opinion on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
We have audited Cooper-Standard Holdings Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO
criteria). In our opinion, Cooper-Standard Holdings Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in
equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the
Index at Item 15(a)2 and our report dated February 17, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness
of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Detroit, Michigan
February 17, 2023
47
COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands except per share amounts)
Sales
Cost of products sold
Gross profit
Selling, administration & engineering expenses
Gain on sale of business, net
Gain on sale of fixed assets, net
Amortization of intangibles
Impairment charges
Restructuring charges
Operating loss
Interest expense, net of interest income
Equity in (losses) earnings of affiliates
Pension settlement and curtailment charges
Other expense, net
Loss before income taxes
Income tax expense (benefit)
Net loss
Net loss attributable to noncontrolling interests
Net loss attributable to Cooper-Standard Holdings Inc.
Loss per share:
Basic
Diluted
Year Ended December 31,
2021
2,330,191 $
2,242,963
87,228
227,110
(696)
—
7,347
25,609
36,950
(209,092)
(72,511)
(1,728)
(1,279)
(4,842)
(289,452)
39,392
(328,844)
6,009
(322,835) $
2022
2,525,391 $
2,395,600
129,791
199,455
—
(33,391)
6,715
43,710
18,304
(105,002)
(78,514)
(8,817)
(2,682)
(5,485)
(200,500)
17,291
(217,791)
2,407
(215,384) $
2020
2,375,439
2,227,892
147,547
263,611
(2,834)
—
11,611
104,363
39,482
(268,686)
(59,167)
396
(184)
(2,580)
(330,221)
(60,847)
(269,374)
1,769
(267,605)
(12.53) $
(12.53) $
(18.94) $
(18.94) $
(15.82)
(15.82)
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
48
COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollar amounts in thousands)
Net loss
Other comprehensive income (loss):
Currency translation adjustment
Benefit plan liabilities adjustment, net of tax
Fair value change of derivatives, net of tax
Other comprehensive (loss) income, net of tax
Comprehensive loss
Comprehensive loss attributable to noncontrolling interests
Comprehensive loss attributable to Cooper-Standard Holdings Inc.
$
2022
Year Ended December 31,
2021
2020
$
(217,791) $
(328,844) $
(269,374)
(18,856)
5,052
9,433
(4,371)
(222,162)
1,991
(220,171) $
(2,290)
40,776
(1,892)
36,594
(292,250)
6,127
(286,123) $
18,429
(5,919)
410
12,920
(256,454)
694
(255,760)
The accompanying notes are an integral part of these consolidated financial statements.
49
COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except share amounts)
December 31,
2022
2021
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Tooling receivable, net
Inventories
Prepaid expenses
Income tax receivable and refundable credits
Other current assets
Total current assets
Property, plant and equipment, net
Operating lease right-of-use assets, net
Goodwill
Intangible assets, net
Deferred tax assets
Other assets
Total assets
Liabilities and Equity
Current liabilities:
Debt payable within one year
Accounts payable
Payroll liabilities
Accrued liabilities
Current operating lease liabilities
Total current liabilities
Long-term debt
Pension benefits
Postretirement benefits other than pensions
Long-term operating lease liabilities
Deferred tax liabilities
Other liabilities
Total liabilities
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding
Equity:
Common stock, $0.001 par value, 190,000,000 shares authorized; 19,173,838 shares issued and 17,108,029
outstanding as of December 31, 2022 and 19,057,788 shares issued and 16,991,979 outstanding as of December 31,
2021
Additional paid-in capital
Retained earnings (deficit)
Accumulated other comprehensive loss
Total Cooper-Standard Holdings Inc. equity
Noncontrolling interests
Total equity
Total liabilities and equity
$
$
$
$
$
186,875 $
358,700
95,965
157,756
31,170
13,668
101,515
945,649
642,860
94,571
142,023
47,641
19,852
70,933
1,963,529 $
54,130 $
338,210
99,029
119,463
20,786
631,618
982,054
98,481
31,014
77,617
7,052
34,501
1,862,337
— $
17
507,498
(189,831)
(209,971)
107,713
(6,521)
101,192
1,963,529 $
248,010
317,469
88,900
158,075
26,313
82,813
73,317
994,897
784,348
111,052
142,282
60,375
27,805
105,734
2,226,493
56,111
348,133
69,353
101,466
22,552
597,615
980,604
129,880
43,498
92,760
8,414
42,362
1,895,133
—
17
504,497
25,553
(205,184)
324,883
6,477
331,360
2,226,493
The accompanying notes are an integral part of these consolidated financial statements.
50
COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollar amounts in thousands except share amounts)
Total Equity
Common
Shares
16,842,757 $
—
54,328
—
—
—
16,897,085
94,894
—
—
—
16,991,979
116,050
—
—
—
Common
Stock
Additional
Paid-In Capital
Retained
Earnings
(Deficit)
Accumulated Other
Comprehensive
Loss
17 $
—
—
—
—
—
17
—
—
—
—
17
—
—
—
—
490,451 $
—
8,268
—
—
—
498,719
5,778
—
—
—
504,497
3,001
—
—
—
619,448 $
(1,573)
—
—
(267,605)
—
350,270
—
(1,882)
(322,835)
—
25,553
—
—
(215,384)
—
(253,741) $
—
—
—
—
11,845
(241,896)
—
—
—
36,712
(205,184)
—
—
—
(4,787)
Cooper-
Standard
Holdings Inc.
Equity
856,175 $
(1,573)
8,268
—
(267,605)
11,845
607,110
5,778
(1,882)
(322,835)
36,712
324,883
3,001
—
(215,384)
(4,787)
Noncontrolling
Interest
Total Equity
19,807 $
—
—
(2,112)
(1,769)
1,075
17,001
—
(4,397)
(6,009)
(118)
6,477
—
(11,007)
(2,407)
416
875,982
(1,573)
8,268
(2,112)
(269,374)
12,920
624,111
5,778
(6,279)
(328,844)
36,594
331,360
3,001
(11,007)
(217,791)
(4,371)
17,108,029 $
17 $
507,498 $
(189,831) $
(209,971) $
107,713 $
(6,521) $
101,192
Balance as of December 31, 2019
Cumulative effect of change in accounting principle
Share-based compensation, net
Deconsolidation of noncontrolling interest
Net loss for 2020
Other comprehensive income
Balance as of December 31, 2020
Share-based compensation, net
Purchase of noncontrolling interest
Net loss for 2021
Other comprehensive income (loss)
Balance as of December 31, 2021
Share-based compensation, net
Deconsolidation of noncontrolling interest
Net loss for 2022
Other comprehensive income (loss)
Balance as of December 31, 2022
The accompanying notes are an integral part of these consolidated financial statements.
51
COOPER-STANDARD HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
Operating Activities:
Net loss
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Year Ended December 31,
2022
2021
2020
$
(217,791)
$
(328,844)
$
(269,374)
Depreciation
Amortization of intangibles
Gain on sale of business, net
Gain on sale of fixed assets, net
Impairment charges
Pension settlement and curtailment charges
Share-based compensation expense
Equity in losses, net of dividends related to earnings
Deferred income taxes
Other
Changes in operating assets and liabilities:
Accounts and tooling receivable
Inventories
Prepaid expenses
Income tax receivable and refundable credits
Accounts payable
Payroll and accrued liabilities
Other
Net cash used in operating activities
Investing activities:
Capital expenditures
Proceeds from sale of business, net of cash divested
Proceeds from sale of fixed assets
Other
Net cash used in investing activities
Financing activities:
Proceeds from issuance of long-term debt, net of discount
Principal payments on long-term debt
Increase (decrease) in short-term debt, net
Debt issuance costs
Purchase of noncontrolling interest
Taxes withheld and paid on employees' share-based payment awards
Contribution from noncontrolling interests and other
Net cash (used in) provided by financing activities
Effects of exchange rate changes on cash, cash equivalents and restricted cash
Changes in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheet:
Cash and cash equivalents
Restricted cash included in other current assets
Restricted cash included in other assets
Total cash, cash equivalents and restricted cash shown in the statement of cash flows
Supplemental Disclosure:
Cash paid for interest
Cash (received) paid for income taxes, net of refunds
115,761
6,715
—
(33,391)
43,710
2,682
3,259
12,450
5,653
(10,887)
(65,712)
(2,221)
(5,658)
68,251
20,591
46,177
(25,739)
(36,150)
(71,150)
—
53,288
(30)
(17,892)
—
(4,178)
4,093
(4,229)
—
(607)
655
(4,266)
(13)
(58,321)
251,128
192,807
186,875
4,650
1,282
192,807
80,163
(56,393)
$
$
$
$
131,661
7,347
(696)
—
25,609
1,279
5,574
4,872
35,756
3,222
52,677
(18,527)
2,951
2,221
(25,501)
(45,392)
30,281
(115,510)
(96,107)
—
4,615
230
(91,262)
—
(5,533)
14,935
—
(6,279)
(799)
885
3,209
11,113
(192,450)
443,578
251,128
248,010
961
2,157
251,128
73,221
6,741
$
$
$
$
142,618
11,611
(2,834)
—
104,363
184
10,435
6,847
(8,722)
5,232
94,125
(15,236)
2,099
(52,374)
(18,370)
40,413
(66,951)
(15,934)
(91,794)
(17,006)
1,195
725
(106,880)
245,000
(6,192)
(22,372)
(7,249)
—
(544)
(928)
207,715
(3,065)
81,836
361,742
443,578
438,438
4,089
1,051
443,578
55,685
1,679
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share and share amounts)
1. Description of Business
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 Company believes it is the largest global producer of sealing systems, the second largest global producer of the types of fuel and brake delivery
products that it manufactures and the third largest global producer of fluid transfer systems. The Company designs and manufactures its products in each major
region of the world through a disciplined and sustained approach to engineering and operational excellence. The Company operates in 78 manufacturing
locations and 54 design, engineering, administrative and logistics locations in 21 countries around the world.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
Certain balances in prior periods have been conformed to the current presentation.
Summary of Significant Accounting Policies
Principles of Consolidation – The consolidated financial statements include the accounts of the Company and the wholly-owned and, as applicable, less
than wholly-owned subsidiaries controlled by the Company. All material intercompany accounts and transactions have been eliminated. Acquired businesses are
included in the consolidated financial statements from the dates of acquisition or when the Company gained control.
The equity method of accounting is followed for investments in which the Company does not have control, but does have the ability to exercise
significant influence over operating and financial policies. Generally, this occurs when ownership is between 20% to 50%.
Foreign Currency – The financial statements of foreign subsidiaries are translated to United States (“U.S.”) dollars at the end-of-period exchange rates
for assets and liabilities and at a weighted average exchange rate for each period for revenues and expenses. Translation adjustments for those subsidiaries whose
local currency is their functional currency are recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity (“AOCI”).
Transaction related gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional
currency are recognized in earnings as incurred, except for those intercompany balances which are designated as long-term.
Cash and Cash Equivalents – The Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents,
for which the book value approximates fair value.
Accounts Receivable – The Company records trade accounts receivable when revenue is recorded in accordance with its revenue recognition policy and
relieves accounts receivable when payments are received from customers. Accounts receivable are written off when it is apparent such amounts are not
collectible. Generally, the Company does not require collateral for its accounts receivable, nor is interest charged on accounts receivable balances.
The Company receives bank notes from certain of its customers, which are classified as other current assets in the consolidated balance sheets, for certain
amounts of accounts receivable, primarily in China. The Company may elect to hold such bank notes until maturity, exchange them with suppliers to settle
liabilities, or sell them to third-party financial institutions in exchange for cash.
Allowance for Credit Losses – An allowance for credit losses is established through charges to the provision for credit losses when it is probable that the
outstanding receivable or reimbursable tooling will not be collected. The Company evaluates the adequacy of the allowance for credit losses on a periodic basis,
including historical trends in collections and write-offs, management’s judgment of the probability of collecting accounts and management’s evaluation of
business risk. This evaluation is inherently subjective, as it requires estimates that are susceptible to revision as more information becomes available. The
allowance for credit losses was $17,193 and $20,313 as of December 31, 2022 and 2021, respectively.
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Inventories – Inventories are valued at lower of cost or net realizable value. Cost is determined using the first-in, first-out method. Finished goods and
work-in-process inventories include material, labor and manufacturing overhead costs. The Company records inventory reserves for inventory in excess of
production and/or forecasted requirements and for obsolete inventory.
Finished goods
Work in process
Raw materials and supplies
December 31,
2022
2021
$
$
39,202 $
40,521
78,033
157,756 $
43,186
37,045
77,844
158,075
Derivative Financial Instruments – Derivative financial instruments are utilized by the Company to reduce exposure to foreign currency exchange
fluctuations. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial
instrument activities. On the date the derivative is established, the Company designates the derivative as either a fair value hedge, a cash flow hedge or a net
investment hedge in accordance with its established policy. The Company does not enter into derivative financial instruments for trading or speculative purposes.
Income Taxes – Deferred tax assets or liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities
and are measured using enacted tax laws and rates. A valuation allowance is provided on deferred tax assets if the Company determines that it is more likely than
not that the asset will not be realized.
Long-lived Assets – Property, plant and equipment are recorded at cost and depreciated using primarily the straight-line method over estimated useful
lives. Leasehold improvements are amortized over the expected life of the asset or term of the lease, whichever is shorter. Intangibles with finite lives, which
include technology and customer relationships, are amortized over estimated useful lives. The Company evaluates the recoverability of long-lived assets when
events and circumstances indicate that the assets may be impaired and the undiscounted net cash flows estimated to be generated by those assets are less than
their carrying value. If the net carrying value exceeds the fair value, an impairment loss exists and is calculated based on either estimated salvage value or
estimated orderly liquidation value.
Pre-production Costs Related to Long Term Supply Arrangements – Costs for molds, dies and other tools owned by the Company to produce products
under long-term supply arrangements are recorded at cost in property, plant and equipment and amortized over the lesser of three years or the term of the related
supply agreement. The amounts capitalized were $4,356 and $4,266 as of December 31, 2022 and 2021, respectively. The Company expenses all pre-production
tooling costs related to customer-owned tools for which reimbursement is not contractually guaranteed by the customer. Reimbursable tooling costs are recorded
in tooling receivable in the accompanying consolidated balance sheets if considered to be receivable in the next twelve months, and in other assets if considered
to be receivable beyond twelve months. Tooling receivable for customer-owned tooling as of December 31, 2022 and 2021 was $95,965 and $88,900,
respectively. Reimbursable tooling costs included in other assets in the accompanying consolidated balance sheets were $17,233 and $18,297 as of December 31,
2022 and 2021, respectively.
Goodwill – The Company tests goodwill for impairment on an annual basis in the fourth quarter, or more frequently if an event occurs or circumstances
indicate the carrying amount may be impaired. Goodwill impairment testing is performed at the reporting unit level. The impairment test involves first
qualitatively assessing goodwill for impairment. If the qualitative assessment is not met, a quantitative assessment is performed by comparing the estimated fair
value of each reporting unit to its carrying value. If the carrying value exceeds the fair value, an impairment charge is recorded based on that difference.
In the fourth quarter of 2022 and 2021, the Company completed a quantitative goodwill impairment assessment, and after evaluating the results, events
and circumstances, the Company concluded that sufficient evidence existed to assert quantitatively that the estimated fair value of the North America and
Industrial Specialty Group reporting units remained in excess of their carrying values. See Note 9. “Goodwill and Intangible Assets”.
Business Combinations – The purchase price of an acquired business is allocated to its identifiable assets and liabilities based on estimated fair values.
The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. Determining the fair values of assets
acquired and liabilities assumed requires management’s judgment, the utilization of independent appraisal firms and often involves the use of significant
estimates and assumptions with respect to the timing and amount of future cash flows, market rate assumptions, actuarial assumptions, and appropriate discount
rates, among other items.
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Revenue Recognition and Sales Commitments – In accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when the
performance obligations are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of
account in ASC 606. The Company has one major performance obligation category: manufactured parts.
A contract’s transaction price is allocated to each distinct performance obligation and recognized when the performance obligation is satisfied. The
Company’s contracts may include multiple performance obligations. For such contracts, the Company generally allocates the contract’s transaction price to each
performance obligation based on the purchase order or other arranged pricing.
Revenue is recognized for manufactured parts at a point in time, generally when products are shipped or delivered. The point at which revenue is
recognized often depends on the shipping terms.
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. Although purchase orders do not
usually specify quantities, fulfillment of customers’ purchasing requirements can be the Company’s obligation for the entire production life of the vehicle. These
agreements generally may be terminated by the customer at any time, but such cancellations have historically been minimal. Customers typically pay for parts
based on customary business practices with payment terms generally between 30 and 90 days. The Company has no significant financing arrangements with
customers.
The Company applies the optional exemption to forgo disclosing information about its remaining performance obligations because its contracts usually
have an original expected duration of one year or less. It also applies an accounting policy to treat shipping and handling costs that are incurred after revenue is
recognizable as a fulfillment activity by expensing such costs as incurred, instead of as a separate performance obligation. Amounts billed to customers related to
shipping and handling are included in sales in the Company’s consolidated statements of operations. Shipping and handling costs are included in cost of products
sold in the Company’s consolidated statements of operations.
Research and Development – Engineering, research and development, and program management costs are charged to selling, administration and
engineering expenses as incurred and totaled $80,528, $89,956 and $101,607 for the years ended December 31, 2022, 2021 and 2020, respectively.
Share-based Compensation – The Company measures share-based compensation expense at fair value and generally recognizes such expenses on a
straight-line basis over the vesting period of the share-based employee awards. See Note 20. “Share-Based Compensation” for additional information.
Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that
affect amounts reflected in the consolidated financial statements, as well as disclosure of contingent assets and liabilities. Considerable judgment is often
involved in making such estimates, and the use of different assumptions could result in different conclusions. Management believes its assumptions and estimates
are reasonable and appropriate. However, actual results could differ from those estimates.
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
3. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
The Company adopted the following Accounting Standards Updates (“ASU”) in 2022, which did not have a material impact on its consolidated financial
statements:
Standard
ASU 2021-10, Government Assistance (Topic
832): Disclosures by Business Entities about
Government Assistance
Recently Issued Accounting Pronouncements
Description
Requires new annual disclosures about transactions with a government that are
accounted for by applying a grant or contribution accounting model.
Effective Date
January 1, 2022
The Company considered the recently issued accounting pronouncement summarized as follows, which is not expected to have a material impact on its
consolidated finance statements or disclosures:
Standard
ASU 2022-04, Liabilities - Supplier Finance
Programs (Subtopic 405-50): Disclosure of
Supplier Finance Program Obligations
4. Deconsolidations and Divestitures
2022 Joint Venture Deconsolidation
Description
Requires enhanced disclosures about a buyer’s use of supplier finance programs.
Supplier finance programs may also be referred to as reverse factoring, payables
finance, or structured payables arrangements.
Effective Date
January 1, 2023
In the first quarter of 2022, a joint venture in the Asia Pacific region that was previously consolidated with a noncontrolling interest amended the governing
document underlying the joint venture. The amendment to the agreement did not change the Company’s 51% ownership. However, as a result of the amendment
and effective as of January 1, 2022, the joint venture was deconsolidated and accounted for as an investment under the equity method. The Company remeasured
the retained investment using the income approach method and performed a discounted cash flow analysis of the projected free cash flows of the joint venture.
As a result of the deconsolidation, during the twelve months ended December 31, 2022, the Company recorded a loss of $2,257, included in other expense, net in
the consolidated statements of operations.
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, the Company recorded non-cash impairment charges of $86,470 during the six months ended
June 30, 2020 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, which was settled in December 2021.
Upon finalizing the sale in the third quarter of 2020 and including subsequent adjustments in the fourth quarter of 2020, the Company recorded a net gain
on deconsolidation of the businesses of $353 during the year ended December 31, 2020.
2020 Joint Venture Deconsolidation
In the third quarter of 2020, management approved and completed a plan to sell the Company’s entire controlling equity interest of a joint venture in the
Asia Pacific region. Upon finalizing the sale, the Company recorded a gain on deconsolidation of the business of $1,334. In the third quarter of 2021, the
Company recorded an allowance for credit loss of $11,218 in selling, administration and engineering expenses. The credit loss resulted from the bankruptcy
proceedings of the divested joint venture
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
and represented accounts receivable balances with the divested joint venture. These accounts receivable amounts primarily represented sales to the joint venture
prior to deconsolidation in the third quarter of 2020.
2019 Divestiture
During the first quarter of 2019 and in prior periods, the Company also operated an AVS product line. On April 1, 2019, the Company completed its sale
of the AVS product line to Continental AG. The total sale price of the transaction was $265,000, subject to certain adjustments. Cash proceeds received in 2019
were $243,362 after adjusting for certain liabilities assumed by the purchaser. The Company recognized a gain on the divestiture of $191,571 during the year
ended December 31, 2019. In 2020, the Company finalized adjustments to the gain recorded in 2019 by recording an additional gain on divestiture of $1,147,
primarily due to working capital adjustments.
5. Revenue
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.
Revenue by customer group for the year ended December 31, 2022 was as follows:
North America
Europe
Asia Pacific
South America
Corporate,
Eliminations and
Other
Consolidated
Passenger and Light Duty
Commercial
Other
Revenue
$
$
1,309,786 $
15,518
15,795
1,341,099 $
481,510 $
21,862
300
503,672 $
441,841 $
1,283
2
443,126 $
100,400 $
20
—
100,420 $
— $
6,620
130,454
137,074 $
2,333,537
45,303
146,551
2,525,391
Revenue by customer group for the year ended December 31, 2021 was as follows:
North America
Europe
Asia Pacific
South America
Corporate,
Eliminations and
Other
Consolidated
Passenger and Light Duty
Commercial
Other
Revenue
$
$
1,119,736 $
14,092
14,429
1,148,257 $
496,169 $
21,417
659
518,245 $
455,445 $
2,855
6
458,306 $
61,683 $
30
—
61,713 $
— $
5,165
138,505
143,670 $
2,133,033
43,559
153,599
2,330,191
Revenue by customer group for the year ended December 31, 2020 was as follows:
North America
Europe
Asia Pacific
South America
Corporate,
Eliminations and
Other
Consolidated
Passenger and Light Duty
Commercial
Other
Revenue
$
$
1,110,294 $
11,291
19,783
1,141,368 $
554,349 $
18,134
14,256
586,739 $
463,586 $
4,338
118
468,042 $
60,676 $
22
56
60,754 $
— $
3,731
114,805
118,536 $
2,188,905
37,516
149,018
2,375,439
Substantially all the Company’s revenues are generated from sealing, fuel and brake delivery and fluid transfer systems for use in passenger vehicles and
light trucks manufactured by global OEMs.
Product Line
Sealing Systems
A summary of the Company’s products is as follows:
Description
Protect vehicle interiors from weather, dust and noise intrusion for improved driving experience; provide
aesthetic and functional class-A exterior surface treatment
Sense, deliver and control fluids to fuel and brake systems
Sense, deliver and control fluids and vapors for optimal powertrain & HVAC
operation
Fuel & Brake Delivery Systems
Fluid Transfer Systems
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Revenue by product line for the year ended December 31, 2022 was as follows:
North America
Europe
Asia Pacific
South America
Corporate,
Eliminations and
Other
Consolidated
Sealing systems
Fuel and brake delivery systems
Fluid transfer systems
Other
Revenue
$
$
516,391 $
432,606
392,102
—
1,341,099 $
405,605 $
85,400
12,667
—
503,672 $
281,848 $
96,744
64,534
—
443,126 $
77,309 $
15,796
7,315
—
100,420 $
— $
—
—
137,074
137,074 $
1,281,153
630,546
476,618
137,074
2,525,391
Revenue by product line for the year ended December 31, 2021 was as follows:
North America
Europe
Asia Pacific
South America
Corporate,
Eliminations and
Other
Consolidated
Sealing systems
Fuel and brake delivery systems
Fluid transfer systems
Other
Revenue
$
$
425,388 $
364,309
358,560
—
1,148,257 $
406,677 $
94,751
16,817
—
518,245 $
287,117 $
107,137
64,052
—
458,306 $
46,748 $
9,789
5,176
—
61,713 $
— $
—
—
143,670
143,670 $
1,165,930
575,986
444,605
143,670
2,330,191
Revenue by product line for the year ended December 31, 2020 was as follows:
North America
Europe
Asia Pacific
South America
Corporate,
Eliminations and
Other
Consolidated
Sealing systems
Fuel and brake delivery systems
Fluid transfer systems
Other
Revenue
$
$
433,291 $
371,397
336,680
—
1,141,368 $
438,012 $
95,516
41,102
12,109
586,739 $
298,028 $
110,403
59,611
—
468,042 $
39,354 $
16,968
4,432
—
60,754 $
— $
—
—
118,536
118,536 $
1,208,685
594,284
441,825
130,645
2,375,439
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 year ended December 31,
2022.
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
The Company’s contract liabilities consist of advance payments received and due from customers. Net contract (liabilities) assets consisted of the
following:
Contract assets
Contract liabilities
Net contract (liabilities) assets
Other
December 31, 2022
December 31, 2021
Change
$
$
530 $
(15)
515 $
— $
(143)
(143) $
530
128
658
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 consolidated balance sheets as of
December 31, 2022 and December 31, 2021 were current liabilities of $9,325 and $12,045, respectively, and long-term liabilities of $5,899 and $7,214,
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.
6. 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”), along with other related exit costs and asset impairments related to restructuring activities (collectively, “other exit
costs”). 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 years ended December 31, 2022, 2021 and 2020 was as follows:
North America
Europe
Asia Pacific
South America
Total Automotive
Corporate and other
Total
2022
Year Ended December 31,
2021
2020
$
$
$
(96) $
12,969
4,695
615
18,183 $
121
18,304 $
5,710 $
27,986
2,013
580
36,289 $
661
36,950 $
16,499
14,573
4,773
2,129
37,974
1,508
39,482
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Restructuring activity for all restructuring initiatives for the years ended December 31, 2022 and 2021 was as follows:
Balance as of December 31, 2020
Expense
Cash payments
Non-cash fixed asset impairments included in expense
Foreign exchange translation and other
Balance as of December 31, 2021
Expense
Cash payments
Non-cash fixed asset impairments included in expense
Foreign exchange translation and other
Balance as of December 31, 2022
Employee Separation
Costs
Other Exit Costs
Total
$
$
$
15,029 $
32,000
(24,820)
—
(1,252)
20,957 $
12,648
(19,186)
—
(1,234)
13,185 $
8,406 $
4,950
(7,952)
(214)
437
5,627 $
5,656
(4,560)
(362)
22
6,383 $
23,435
36,950
(32,772)
(214)
(815)
26,584
18,304
(23,746)
(362)
(1,212)
19,568
Restructuring expense for the year ended December 31, 2022 primarily includes expenses incurred related to employee separation costs associated with
workforce reduction initiatives to optimize the Company’s cost structure. Other exit costs for the year ended December 31, 2022 include an immaterial gain on
sale of fixed assets and non-cash fixed asset impairment charges related to closed facilities in the Asia Pacific region.
Restructuring expense for the year ended December 31, 2021 includes expenses incurred due to the termination of contracts by a customer in the South
America region and offsetting expense due to cost recoveries from this customer to reimburse the severance costs for the Company’s employees and also
obsolete inventories. Other exit costs for the year ended December 31, 2021 include non-cash fixed asset impairment charges related to closed facilities.
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, net, current operating lease liabilities and long-term operating lease liabilities on the Company’s 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
consolidated balance sheets.
Lease right-of-use assets are recognized at commencement date based upon the present value of the remaining future lease payments over the lease term.
The Company’s lease terms include options to renew or terminate the lease when it is reasonably certain that the Company will exercise the option. As most of
the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based upon information available at the lease
commencement date to determine the present value of the remaining future lease payments.
The Company has lease agreements with lease and non-lease components. For real estate leases, these components are accounted for separately, while for
equipment leases, the lease and non-lease components are accounted for as a single lease component.
Variable lease expense includes payments based upon changes in a rate or index, such as consumer price indexes, as well as usage of the leased asset.
Short-term lease expense includes leases with terms, at lease commencement, of 12 months or less and no purchase option reasonably certain to be exercised.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
The components of lease expense were as follows:
Operating lease expense
Short-term lease expense
Variable lease expense
Finance lease expense:
Amortization of right-of-use assets
Interest on lease liabilities
Total lease expense
2022
Year Ended December 31,
2021
2020
$
$
28,273 $
4,948
1,136
2,017
1,316
37,690 $
31,912 $
6,736
907
2,102
1,444
43,101 $
32,053
5,069
942
2,564
1,551
42,179
The Company recorded impairment charges of $647 due to the deterioration of financial results at a certain location in North America during the year
ended December 31, 2020. The fair value was determined using estimated market rate for the leased right-of-use asset. Additionally, the Company recorded
sublease income of $669, $256 and $374 for the years ended December 31, 2022, 2021 and 2020 respectively.
Other information related to leases was as follows:
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
Operating cash flows for finance leases
Financing cash flows for finance leases
Non-cash right-of-use assets obtained in exchange for lease obligations:
Operating leases
Finance leases
Weighted Average Remaining Lease Term (in years)
Operating leases
Finance leases
Weighted Average Discount Rate
Operating leases
Finance leases
2022
Year Ended December 31,
2021
2020
$
$
28,603
1,316
1,958
14,326
595
$
33,402
1,440
2,133
25,010
644
30,830
1,563
2,081
50,663
549
7.1
8.7
6.1 %
5.9 %
7.5
9.7
5.9 %
5.8 %
8.0
10.5
5.4 %
5.7 %
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Future lease payments under non-cancellable leases as of December 31, 2022 were as follows:
Year
2023
2024
2025
2026
2027
Thereafter
Total future lease payments
Less imputed interest
Total
Operating Leases
Finance Leases
$
$
$
25,830 $
19,847
15,795
11,428
8,828
41,021
122,749 $
(24,346)
98,403 $
3,283
3,509
3,570
3,283
3,207
14,016
30,868
(7,103)
23,765
Amounts recognized on the consolidated balance sheets as of December 31, 2022 and December 31, 2021 were as follows:
December 31, 2022
December 31, 2021
Operating Leases
Operating lease right-of-use assets, net
Current operating lease liabilities
Long-term operating lease liabilities
Finance Leases
Property, plant and equipment, net
Debt payable within one year
Long-term debt
$
94,571 $
20,786
77,617
22,942
2,228
21,537
111,052
22,552
92,760
25,690
2,153
23,590
As of December 31, 2022, the Company had additional leases, primarily for real estate, that have not yet commenced with undiscounted lease payments
of approximately $6,472. These leases will commence in 2023 with lease terms up to five years.
8. Property, Plant and Equipment
Property, plant and equipment consists of the following:
Land and improvements
Buildings and improvements
Machinery and equipment
Construction in progress
Accumulated depreciation
Property, plant and equipment, net
December 31,
2022
2021
$
$
$
42,939 $
262,694
1,144,310
76,048
1,525,991 $
(883,131)
642,860 $
44,495
285,240
1,269,330
80,868
1,679,933
(895,585)
784,348
Estimated
Useful Lives
10 to 25 years
10 to 40 years
5 to 10 years
For the year ended December 31, 2022, the Company closed on a sale-leaseback transaction related to one of its European facilities and recorded a gain on
the sale transaction of $33,391. The transaction included the removal of property, plant and equipment with a gross carrying value of $16,890 and accumulated
depreciation of $4,013, which is reflected in the balance sheet as of December 31, 2022.
The Company recorded impairment charges of $40,248 related to machinery and equipment, due to recent operating performance in certain locations in
North America and Europe for the year ended December 31, 2022. 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. The Company also recorded impairment charges of $3,462 due to idle assets, in
certain North America, Europe and
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Asia Pacific locations, for the year ended December 31, 2022. The fair value was determined using estimated salvage value, which was deemed the highest and
best use of the assets.
The deconsolidation of a joint venture during the three months ended March 31, 2022 included the removal of property, plant and equipment with gross
carrying value of $29,590 and accumulated depreciation of $11,625, which is reflected in the balance sheet as of December 31, 2022.
For the year ended December 31, 2021, the Company recorded impairment charges of $20,118 related to machinery and equipment and $1,775 related to
a leased building, due to operating performance in certain locations in North America, Europe, and Asia Pacific. The fair value of owned buildings was
determined using a value-in-exchange approach while 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. The Company also recorded impairment charges of $3,326 related to equipment no longer being
utilized, primarily in certain North America and Europe locations for the year ended December 31, 2021. The fair value of equipment was determined using
estimated salvage value.
For the year ended December 31, 2020, the Company recorded impairment charges for property, plant and equipment of $13,084 due to the deterioration
of financial results at certain locations in North America, Europe, and Asia Pacific.The Company also recorded impairment charges of $4,162 related to idle
assets in certain Europe, Asia Pacific, and Corporate and other locations.
A summary of these asset impairment charges is as follows:
2022
Year Ended December 31,
2021
2020
North America
Europe
Asia Pacific
Total Automotive
Corporate and other
Total
9. Goodwill and Intangible Assets
Goodwill
$
$
11,140 $
30,173
2,359
43,672
38
43,710 $
8,479 $
9,179
7,071
24,729
490
25,219 $
Changes in the carrying amount of goodwill by reporting unit for the years ended December 31, 2022 and 2021 were as follows:
Balance as of December 31, 2020
Foreign exchange translation
Balance as of December 31, 2021
Foreign exchange translation
Balance as of December 31, 2022
North America
Industrial Specialty Group
Total
$
$
$
128,214 $
32
128,246 $
(259)
127,987 $
14,036 $
—
14,036 $
—
14,036 $
947
11,938
4,080
16,965
281
17,246
142,250
32
142,282
(259)
142,023
The Company performed its annual impairment analysis of goodwill during the fourth quarter of 2022. The fair value of each reporting unit is determined
and compared to the carrying value. If the carrying value exceeds the fair value, an impairment charge is recorded based on that difference. The annual
impairment analysis resulted in no impairment for 2022.
The Company's annual goodwill impairment analysis for 2021 resulted in an impairment for the Europe reporting unit of $390 for goodwill recorded
during 2021 as a result of purchasing a supplier in its Europe reporting unit for an immaterial purchase consideration. The annual impairment analysis for 2021
resulted in no impairment for the North America and Industrial Specialty Group reporting units.
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Intangible Assets
Definite-lived intangible assets and accumulated amortization balances as of December 31, 2022 and 2021 were as follows:
Gross Carrying
Amount
Accumulated
Amortization
Customer relationships
Other
Balance as of December 31, 2022
Customer relationships
Other
Balance as of December 31, 2021
$
$
$
$
152,578 $
38,479
191,057 $
154,767 $
44,955
199,722 $
Estimated amortization expense for the next five years is shown in the table below:
(129,317) $
(14,099)
(143,416) $
Net Carrying Amount
23,261
24,380
47,641
(126,626) $
(12,721)
(139,347) $
28,141
32,234
60,375
Year
2023
2024
2025
2026
2027
Expense
$
6,965
6,898
6,444
4,703
4,703
10. Debt
A summary of outstanding debt as of December 31, 2022 and 2021 was as follows:
Senior Notes
Senior Secured Notes
Term Loan Facility
Finance Leases
Other borrowings
Total debt
Less current portion
Total long-term debt
December 31,
2022
2021
397,259 $
244,471
318,787
23,765
51,902
1,036,184
(54,130)
982,054 $
396,544
241,683
321,212
25,743
51,533
1,036,715
(56,111)
980,604
$
$
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
The principal maturities of debt, at nominal value, as of December 31, 2022 are as follows:
Year
2023
2024
2025
2026
2027
Thereafter
Total
Debt and Finance Lease
Obligations*
$
$
374,819
253,540
3,573
403,283
3,207
14,016
1,052,438
* Inclusive of imputed interest on finance leases
As further described below, the Company refinanced certain of its debt instruments on January 27, 2023. The amounts in the table above do not reflect
the impacts of that refinancing. As of December 31, 2022, the maturity date of the Term Loan Facility (as defined below) was November 2, 2023. Accordingly,
the principal maturities of debt in 2023 noted in the table above include the Term Loan Facility. However, in accordance with ASC 470, Debt, the amount
outstanding on the Term Loan Facility is reflected in long-term debt in the consolidated balance sheet as of December 31, 2022 because the Company refinanced
the Term Loan Facility with other long-term debt on January 27, 2023.
The weighted average interest rate of our debt payable within one year was 4.1% as of December 31, 2022 and 3.9% as of December 31, 2021.
Refinancing Transaction
On January 27, 2023 (the “Settlement Date”), the Company, Cooper-Standard Automotive Inc. (the “Issuer”), a wholly-owned subsidiary of the
Company, and certain other of the Company’s direct and indirect subsidiaries completed certain refinancing transactions (the “Refinancing Transactions”)
consisting of: (i) the exchange (the “Exchange Offer”) of $357,446 aggregate principle amount of the Issuer’s then existing 5.625% Senior Notes due 2026 (the
“2026 Senior Notes”) (representing 89.36% of the aggregate principal amount outstanding of the 2026 Senior Notes) for $357,446 aggregate principle amount of
the Issuer’s newly issued 5.625% Cash Pay / 10.625% PIK Toggle Senior Secured Third Lien Notes due 2027 (the “Third Lien Notes”), (ii) the issuance by the
Issuer (the “Concurrent Notes Offering”) of $580,000 aggregate principal amount of 13.50% Cash Pay / PIK Toggle Senior Secured First Lien Notes due 2027
(the “First Lien Notes” and, together with the Third Lien Notes, the “New Notes”) to holders of 2026 Senior Notes or their designees who participated in the
Exchange Offer, including to certain backstop commitment parties who committed to purchase the First Lien Notes not otherwise subscribed for, (iii) the related
consent solicitation (the “Consent Solicitation”) to remove substantially all of the covenants, certain events of default and certain other provisions contained in
the 2026 Senior Notes and the indenture governing the 2026 Senior Notes and to release and discharge the guarantee of the 2026 Senior Notes by the Company,
(iv) the effectiveness of the Third Amendment (as defined below) to the senior asset-based revolving credit facility (“ABL Facility”) and (v) the use of proceeds
from the Concurrent Notes Offering, together with cash on hand, to prepay all amounts outstanding under the Term Loan Facility at par, plus any accrued and
unpaid interest thereon, to redeem the Issuer’s existing 2024 Senior Secured Notes (as defined below), including the prepayment premium and any accrued and
unpaid interest thereon, and to pay fees and expenses related to the Refinancing Transactions. As a result of the Refinancing Transactions, the Issuer extended the
maturities of its indebtedness and reduced the amount of cash interest it is required to pay on such indebtedness for the next two years.
New Notes
On the Settlement Date, the Issuer issued $580,000 aggregate principal amount of First Lien Notes pursuant to an indenture, dated as of the Settlement
Date (the “First Lien Notes Indenture”), by and among the Issuer, the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee
and collateral agent (the “First Lien Collateral Agent”).
The First Lien Notes are senior secured obligations of the Issuer and are guaranteed by CS Intermediate Holdco 1 LLC (“Holdings”), each of the Issuer’s
wholly owned domestic subsidiaries that guarantee certain other indebtedness, subject to certain exceptions (the “Domestic Guarantors”), and certain of the
Issuer’s wholly owned subsidiaries organized in Costa Rica, France, Mexico, the Netherlands and Romania (the “Foreign Guarantors”). The First Lien Notes are
guaranteed by Holdings and the Domestic Guarantors on a senior secured basis and by the Foreign Guarantors on a senior unsecured basis. The guarantees of the
subsidiaries organized in France are limited guarantees.
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
The First Lien Notes will mature on March 31, 2027. The First Lien Notes bear interest at the rate of 13.50% per annum, payable in cash; provided,
however, that for the first four interest periods after the Settlement Date, the Issuer has the option, in its sole discretion, to pay up to 4.50% of such interest on the
First Lien Notes, in such amount as specified by the Issuer, by increasing the principal amount of the outstanding First Lien Notes or, in limited circumstances as
described in the First Lien Notes Indenture, by issuing additional First Lien Notes. Interest on the First Lien Notes is payable semi-annually in arrears on June 15
and December 15 of each year, commencing on June 15, 2023.
The Issuer may, at its option, redeem all or part of the First Lien Notes prior to maturity at the prices set forth in the First Lien Notes Indenture. Upon the
occurrence of certain events constituting a Change of Control (as defined in the First Lien Notes Indenture), the Issuer will be required to make an offer to
repurchase all of the First Lien Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the
repurchase date.
The First Lien Notes Indenture contains certain customary covenants that limit the Issuer’s and its restricted subsidiaries’ ability to, among other things,
incur or guarantee additional indebtedness or issue certain preferred stock; incur liens on assets; pay dividends or make other distributions in respect of, or
repurchase or redeem, its capital stock or make another restricted payments; prepay, redeem or repurchase certain debt; make certain loans and investments; enter
into agreements restricting certain subsidiaries’ ability to pay dividends; enter into transactions with affiliates; and sell certain assets or merge or consolidate with
or into other companies. These covenants are subject to a number of important limitations and exceptions. The First Lien Notes Indenture also provides for
customary events of default, which, if any occur, would permit or require the principal, premium, if any, interest and any other monetary obligations on all of the
then outstanding First Lien Notes to be due and payable immediately.
On the Settlement Date, the Issuer issued $357,446 aggregate principal amount of Third Lien Notes pursuant to an indenture, dated as of the Settlement
Date (the “Third Lien Notes Indenture”), by and among the Issuer, the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee
and collateral agent (the “Third Lien Collateral Agent”).
The Third Lien Notes are senior secured obligations of the Issuer and are guaranteed by Holdings, each of the Domestic Guarantors, and each of the
Foreign Guarantors. The Third Lien Notes are guaranteed by Holdings and the Domestic Guarantors on a senior secured basis and by the Foreign Guarantors on
a senior unsecured basis. The guarantees of the subsidiaries organized in France are limited guarantees.
The Third Lien Notes will mature on May 15, 2027. The Third Lien Notes bear interest at the rate of 5.625% per annum, payable in cash; provided,
however, that for the first four interest periods after the Settlement Date, the Issuer has the option, in its sole discretion, to instead pay such interest at 10.625%
per annum either by increasing the principal amount of the outstanding Third Lien Notes or, in limited circumstances as described the Third Lien Notes
Indenture, by issuing additional Third Lien Notes. Interest on the Third Lien Notes is payable semi-annually in arrears on June 15 and December 15 of each year,
commencing on June 15, 2023.
The Issuer may, at its option, redeem all or part of the Third Lien Notes prior to maturity at the prices set forth in the Third Lien Notes Indenture. Upon
the occurrence of certain events constituting a Change of Control (as defined in the Third Lien Notes Indenture), the Issuer will be required to make an offer to
repurchase all of the Third Lien Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the
repurchase date.
The Third Lien Notes Indenture contains certain customary covenants that limit the Issuer’s and its restricted subsidiaries’ ability to, among other things,
incur or guarantee additional indebtedness or issue certain preferred stock; incur liens on assets; pay dividends or make other distributions in respect of, or
repurchase or redeem, its capital stock or make other restricted payments; prepay, redeem or repurchase certain debt; make certain loans and investments; enter
into agreements restricting certain subsidiaries’ ability to pay dividends; enter into transactions with affiliates; and sell certain assets or merge or consolidate with
or into other companies. These covenants are subject to a number of important limitations and exceptions. The Third Lien Notes Indenture also provides for
customary events of default, which, if any occur, would permit or require the principal, premium, if any, interest and any other monetary obligations on all of the
then outstanding Third Lien Notes to be due and payable immediately.
In connection with the issuance of the New Notes, the First Lien Collateral Agent, the Third Lien Collateral Agent, the collateral agent under the ABL
Facility, the Issuer, Holdings and the several other parties named therein entered into the First Lien and Third Lien Intercreditor Agreement, providing for the
relative priorities of their respective security interests in the assets securing the First Lien Notes, the Third Lien Notes and the ABL Facility, and certain other
matters relating to the administration of security interests.
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
2026 Senior Notes
On November 2, 2016, the Issuer issued $400.0 million aggregate principal amount of 2026 Senior Notes. On the Settlement Date, in connection with the
Refinancing Transactions, the Issuer completed the Exchange Offer and delivered $357,446 aggregate principal amount of the exchanged 2026 Senior Notes to
the trustee for cancellation. Following the completion of the Exchange Offer, $42,554 aggregate principal amount of the 2026 Senior Notes remain outstanding.
Following receipt of the requisite consents in the Consent Solicitation, on January 20, 2023, the Issuer, the guarantors named therein and U.S. Bank Trust
Company, National Association (successor in interest to U.S. Bank National Association), as trustee, entered into a supplemental indenture to the indenture
governing the 2026 Senior Notes, which became effective on the Settlement Date. The supplemental indenture provides for the elimination of substantially all of
the covenants, certain events of default and certain other provisions contained in the 2026 Senior Notes and the indenture governing the 2026 Senior Notes and
released and discharged the guarantee of the 2026 Senior Notes by the Company.
The 2026 Senior Notes are guaranteed by each of the Issuer’s wholly-owned existing or subsequently organized U.S. subsidiaries, subject to certain
exceptions, to the extent such subsidiary guarantees the ABL Facility. The Issuer may, at its option, redeem all or part of the 2026 Senior Notes at various points
in time prior to maturity, as described in the indenture governing the 2026 Senior Notes. The 2026 Senior Notes will mature on November 15, 2026. Interest on
the 2026 Senior Notes is payable semi-annually in arrears in cash on May 15 and November 15 of each year.
The Company paid approximately $7,055 of debt issuance costs in connection with the issuance of the 2026 Senior Notes. The debt issuance costs are
being amortized into interest expense over the term of the 2026 Senior Notes. As of December 31, 2022 and 2021, the Company had $2,741 and $3,456,
respectively, of unamortized debt issuance costs related to the 2026 Senior Notes, which is classified as a discount in the consolidated balance sheet.
2024 Senior Secured Notes
On May 29, 2020, the Issuer issued $250,000 aggregate principal amount of its 13.000% Senior Secured Notes due 2024 (the “2024 Senior Secured
Notes”), pursuant to an indenture, dated as of May 29, 2020, by and among the Issuer, the other guarantors party thereto and U.S. Bank National Association, as
trustee. The 2024 Senior Secured Notes would have matured on June 1, 2024. Interest on the 2024 Senior Secured Notes was payable semi-annually in arrears in
cash on June 1 and December 1 of each year. Subsequent to the year ended December 31, 2022, in connection with the Refinancing Transactions, the Issuer
redeemed all of the outstanding 2024 Senior Secured Notes on the Settlement Date at the redemption price of 106.500% of the principal amount thereof, plus
accrued and unpaid interest thereon.
The Company paid approximately $6,431 of debt issuance costs in connection with the issuance of the 2024 Senior Secured Notes. Additionally, the
2024 Senior Secured Notes were issued at a discount of $5,000. As of December 31, 2022 and 2021, the Company had $3,021 and $4,594, respectively, of
unamortized debt issuance costs and $2,508 and $3,723, respectively, of unamortized original issue discount related to the 2024 Senior Secured Notes, which are
presented as direct deductions from the principal balance in the consolidated balance sheets. Both the debt issuance costs and the original issue discount were
amortized into interest expense over the term of the 2024 Senior Secured Notes.
ABL Facility
On November 2, 2016, Holdings, Cooper-Standard Automotive Inc. (the “U.S. Borrower”), Cooper-Standard Automotive Canada Limited (the
“Canadian Borrower”), Cooper-Standard Automotive International Holdings B.V. (the “Dutch Borrower”, and, together with the U.S. Borrower and the Canadian
Borrower, the “Borrowers”) and certain subsidiaries of the U.S. Borrower, entered into a third amendment and restatement of the ABL Facility. In March 2020,
the Borrowers entered into Amendment No. 1 to the Third Amended and Restated Loan Agreement (“the First Amendment”). As a result of the First
Amendment, the ABL Facility maturity was extended to March 2025 and the aggregate revolving loan commitment was reduced to $180.0 million. In May 2020,
the Borrowers entered into Amendment No. 2 to the Third Amended and Restated Loan Agreement (the “Second Amendment”), which Second Amendment
modified certain covenants under the ABL Facility. In December 2022, the Borrowers entered into Amendment No. 3 to the Third Amended and Restated Loan
Agreement (the “Third Amendment”), which became effective on the Settlement Date. The Third Amendment provides for the ABL Facility to be amended to:
•
permit the U.S. Borrower to issue the New Notes in the Concurrent Notes Offering and Exchange Offer, including the granting of liens, subject to the
restrictions set forth in the ABL Facility;
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
•
•
•
provide for certain of the U.S. Borrower’s wholly-owned subsidiaries organized in Costa Rica, France, Mexico, the Netherlands, Romania and certain
other jurisdictions specified from time to time to become guarantors under the ABL Facility;
authorize the collateral agent under the ABL Facility to enter into an intercreditor agreement with the collateral trustees for the New Notes; and
remove the Dutch Borrower as a borrower under the ABL Facility.
The aggregate revolving loan availability includes a $100.0 million letter of credit sub-facility and a $25.0 million swing line sub-facility. The ABL
Facility also provides for an uncommitted $100.0 million incremental loan facility, for a potential total ABL Facility of $280.0 million (if requested by the
Borrowers and the lenders agree to fund such increase). No consent of any lender (other than those participating in the increase) is required to effect any such
increase. The Company’s borrowing base as of December 31, 2022 was $180,000. Net 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 $6,807 of outstanding letters of credit, the Company effectively had
$155,193 available for borrowing under its ABL Facility.
As of December 31, 2022, there were no borrowings under the ABL Facility.
Maturity. Any borrowings under our ABL Facility will mature, and the commitments of the lenders under our ABL Facility will terminate, on March 24,
2025.
Borrowing Base. As of the Settlement Date, the loan and letter of credit availability under the ABL Facility is subject to a borrowing base, which at any
time is limited to the lesser of: (A) the maximum facility amount (subject to certain adjustments) and (B) (i) up to 85% of eligible accounts receivable; plus
(ii) the lesser of 70% of eligible inventory or 85% of the appraised net orderly liquidation value of eligible inventory; plus (iii) up to the lesser of $30.0 million
and 85% of eligible tooling accounts receivable; minus reserves established by the Agent. The accounts receivable portion of the borrowing base is subject to
certain formulaic limitations (including concentration limits). The inventory portion of the borrowing base is limited to eligible inventory, as determined by the
Agent. The borrowing base is also subject to certain reserves, which are established by the Agent (which may include changes to the advance rates indicated
above). Loan availability under the ABL Facility is apportioned as follows: $160,000 to the U.S. Borrower and $20,000 to the Canadian Borrower.
Guarantees; Security. The obligations of the U.S. Borrower and the Canadian Borrower under the ABL Facility, as well as certain cash management
arrangements and interest rate, foreign currency or commodity swaps entered into by the such Borrowers and their subsidiaries, and certain credit lines entered
into by non-U.S. subsidiaries, in each case with the lenders and their affiliates (collectively, “Additional ABL Secured Obligations”) are guaranteed on a senior
secured basis by Holdings and its U.S. subsidiaries (with certain exceptions) and certain wholly-owned subsidiaries organized in Costa Rica, France, Mexico, the
Netherlands, Romania and certain other jurisdictions specified from time to time, and the obligations of the Canadian Borrower under the ABL Facility and
Additional ABL Secured Obligations of the Canadian Borrower and its Canadian subsidiaries are, in addition, guaranteed on a senior secured basis by the
Canadian subsidiaries of the Canadian Borrower. The obligations under the ABL Facility and related guarantees are secured by (1) a first priority lien on all of
each Borrower’s and each U.S. and Canadian guarantor’s existing and future personal property consisting of certain accounts receivable, inventory, documents,
instruments, chattel paper, deposit accounts and securities accounts and certain related assets and proceeds of the foregoing, with various enumerated exceptions,
including that: (i) the collateral owned by Canadian Borrower or any of its Canadian subsidiaries that are Guarantors only secure the obligations of Canadian
Borrower and such subsidiaries arising under the ABL Facility and Additional ABL Secured Obligations (ii) no liens have been granted on any assets or
properties of any non-U.S. subsidiaries of the Company (other than the Canadian Borrower and Canadian Guarantors, as otherwise specified above) in
connection with the ABL Facility, (2) a second priority lien on all the capital stock in restricted subsidiaries directly held by the U.S. Borrower and each of the
U.S. guarantors, and equipment of the U.S. Borrower and the U.S.-domiciled guarantors and all other material personal property of the U.S. Borrower and the
U.S.-domiciled guarantors and (3) a 65% pledge of the equity interest in the first-tier foreign subsidiaries of the U.S. Guarantors.
Interest. Borrowings under the ABL Facility bear interest at a rate equal to, at the Borrowers’ option:
•
•
in the case of borrowings by the U.S. Borrower, the forward-looking secured overnight funding rate for the applicable interest period (“Term SOFR”)
(including a credit spread adjustment of 0.11448% or 0.26161%, depending on the applicable interest period) or the base rate plus, in each case, an
applicable margin; or
in the case of borrowings by the Canadian Borrower, bankers’ acceptance (“BA”) rate, Canadian prime rate or Canadian base rate plus, in each case, an
applicable margin.
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
The applicable margin may vary between 2.00% and 2.50% with respect to the Term SOFR or Canadian BA rate-based borrowings and between 1.00%
and 1.50% with respect to U.S. base rate, Canadian prime rate and Canadian base rate borrowings. The applicable margin is subject, in each case, to quarterly
pricing adjustments (based on average facility availability).
Fees. The Borrowers are required to pay a fee in respect of committed but unutilized commitments. The ABL Facility also requires the payment of
customary agency and administrative fees.
Voluntary Prepayments. The Borrowers are able to voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans, in
each case, in whole or in part, at any time without premium or penalty (other than customary breakage and related reemployment costs with respect to
repayments of SOFR-based borrowings).
Covenants; Events of Default. The ABL Facility includes affirmative and negative covenants that will impose substantial restrictions on the Company’s
financial and business operations, including its ability to incur and secure debt, make investments, sell assets, pay dividends or make acquisitions. The ABL
Facility also includes a requirement to maintain a monthly fixed charge coverage ratio of no less than 1.0 to 1.0 when availability under the ABL Facility is less
than specified levels. The ABL Facility also contains various events of default that are customary for comparable facilities.
Debt Issuance Costs. As of December 31, 2022 and 2021, the Company had $535 and $782, respectively, of unamortized debt issuance costs related to
the ABL Facility.
Term Loan Facility
On November 2, 2016, Cooper-Standard Automotive Inc., as borrower, entered into Amendment No. 1 to its senior term loan facility (the “Term Loan
Facility”), which provided for loans in an aggregate principal amount of $340.0 million. Subject to certain conditions, the Term Loan Facility, without the
consent of the then-existing lenders (but subject to the receipt of commitments), could have been expanded (or a new term loan or revolving facility added) by an
amount that would not cause the consolidated secured net debt ratio to exceed 2.25 to 1.00 plus $400.0 million plus any voluntary prepayments (including
revolving facility and ABL Facility to the extent commitments are reduced) not funded from proceeds of long-term indebtedness.
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 bore 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 2.00% 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 0.50%, 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.
Maturity. The Term Loan Facility would have matured on November 2, 2023.
Voluntary Prepayments. Subsequent to the year ended December 31, 2022, in connection with the Refinancing Transactions, Cooper-Standard
Automotive Inc. repaid the Term Loan Facility in full on the Settlement Date and the Term Loan Facility was terminated.
Debt Issuance Costs. As of December 31, 2022 and 2021, the Company had $494 and $1,087, respectively, of unamortized debt issuance costs and $319
and $701, respectively, of unamortized original issue discount related to the Term Loan Facility. Both the debt issuance costs and the original issue discount were
amortized into interest expense over the term of the Term Loan Facility.
Debt Covenants
The Company was in compliance with all applicable covenants of the ABL Facility, the Term Loan Facility, the 2026 Senior Notes, and 2024 Senior
Secured Notes, as of December 31, 2022.
Other
Other borrowings as of December 31, 2022 and 2021 reflect borrowings under local bank lines classified in debt payable within one year on the
consolidated balance sheet.
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(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:
Level 2:
Level 3:
Observable inputs such as quoted prices in active markets;
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
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 and interest rate 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 liabilities measured or disclosed at fair value on a
recurring basis as of December 31, 2022 and 2021, was as follows:
Forward foreign exchange contracts - other current assets
Forward foreign exchange contracts - accrued liabilities
Items Measured at Fair Value on a Nonrecurring Basis
December 31, 2022
December 31, 2021
$
$
8,643 $
— $
647
(1,535)
Input
Level 2
Level 2
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 2. “Basis of Presentation and Summary of Significant Accounting Policies”, Note 4. “Deconsolidations and Divestitures”,
Note 8. “Property, Plant and Equipment”, and Note 9. “Goodwill and Intangible Assets”.
Items Not Carried at Fair Value
Fair values of the Company’s Senior Notes, Senior Secured Notes, and Term Loan Facility were as follows:
Aggregate fair value
Aggregate carrying value
(1)
December 31, 2022
December 31, 2021
$
$
744,010 $
969,600 $
899,909
973,000
(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. As further described in Note 10. “Debt”, the
Company refinanced certain of its debt instruments on January 27, 2023. The amounts in the table above do not reflect the impacts of that refinancing.
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
70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
cash flow hedge, the change in fair value of the derivative is recorded in accumulated other comprehensive income (loss) (“AOCI”) in the consolidated balance
sheet, to the extent that the hedges are effective, and reclassified into earnings when the underlying hedged transaction is realized. The realized gains and losses
are recorded on the same line as the hedged transaction in the 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 other than the Euro, the Canadian Dollar, the Mexican Peso, and the Brazilian Real. As of December 31, 2022 and 2021, the notional
amount of these contracts was $135,285 and $136,103, respectively, and consisted of hedges of transactions up to December 2023.
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
Year Ended December 31,
2022
2021
Forward foreign exchange contracts
$
11,808 $
(545)
Pretax amounts related to the Company’s cash flow hedges that were reclassified from AOCI were as follows:
Classification
Gain Reclassified from AOCI to Income
Year Ended December 31,
2022
2021
Forward foreign exchange contracts
Cost of products sold
$
2,287 $
1,432
12. Accounts Receivable Factoring
As a part of its working capital management, the Company sells certain receivables through a third-party financial institution (the “Factor”) in a pan-
European program. 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 the indentures governing the New Notes, 2026 Senior Notes, and 2024
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.
Costs incurred on the sale of receivables are recorded in other expense, net in the consolidated statements of operations. Liabilities related to the factoring
program are recorded in accrued liabilities in the consolidated balance sheet. 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 excluded from accounts receivable in the consolidated balance sheet.
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Amounts outstanding under receivable transfer agreements entered into by various locations as of the period end were as follows:
Off-balance sheet arrangements
Accounts receivable factored and related costs throughout the period were as follows:
Accounts receivable factored
Costs
December 31, 2022
December 31, 2021
52,491 $
52,743
Off-Balance Sheet Arrangements
Year Ended December 31,
2022
2021
355,295 $
366,878
Off-Balance Sheet Arrangements
Year Ended December 31,
2021
2022
2020
710 $
528 $
776
$
$
$
As of December 31, 2022 and 2021, cash collections on behalf of the Factor that had yet to be remitted were $3,772 and $673, respectively, and are
reflected in other current assets as restricted cash in the consolidated balance sheet.
13. Pension
The Company maintains defined benefit pension plans covering employees located in the United States as well as certain international locations. The
majority of these plans are frozen, and all are closed to new employees. Benefits generally are based on compensation, length of service and age for salaried
employees and on length of service for hourly employees. The Company’s policy is to fund pension plans such that sufficient assets will be available to meet
future benefit requirements and contribute amounts deductible for United States federal income tax purposes or amounts required by local statute.
On October 11, 2022, the Company’s Board of Directors (the “Board”) approved a resolution to merge certain of the Company’s U.S. defined benefit
pension plans and terminate the resulting merged plan (“U.S. Pension Plan”) effective December 31, 2022. The termination of the U.S. Pension Plan is expected
to take twelve to eighteen months to complete. As part of the termination process, the Company expects to settle benefit obligations under the U.S. Pension Plan
through a combination of lump sum payments to eligible plan participants and the purchase of a group annuity contract, under which future benefit obligations
and administration will be transferred to a third-party insurance company. Such settlements will be funded primarily from plan assets. Ultimate settlement of
benefit obligations is dependent upon the participants’ elections. The U.S. Pension Plan was underfunded by $5,759 as of December 31, 2022 and overfunded by
$29,804 as of December 31, 2021 under U.S. generally accepted accounting principles. Additionally, the Company recognized a curtailment loss of $3,092
during the year ended December 31, 2022 associated with the planned termination of the U.S. Pension Plan, primarily due to prior service cost resulting from a
2022 plan amendment impacting the benefits of certain participants in the U.S. Pension Plan.
The Company also sponsors voluntary defined contribution plans for certain salaried and hourly U.S. employees of the Company. The Company matches
contributions of participants, up to various limits in all plans. The Company also sponsors retirement plans that include Company non-elective contributions.
Non-elective and matching contributions under these plans totaled $12,015, $12,809 and $13,537 for the years ended December 31, 2022, 2021 and 2020,
respectively.
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Information related to the Company’s defined benefit pension plans was as follows:
Change in projected benefit obligations:
Projected benefit obligations at beginning of period
Service cost
Interest cost
Net actuarial gain
Benefits paid
Foreign exchange translation
Settlements
Plan amendments
Other
Projected benefit obligations at end of period
Change in plan assets:
Fair value of plan assets at beginning of period
Actual return on plan assets
Employer contributions
Benefits paid
Foreign exchange translation
Settlements
Other
Fair value of plan assets at end of period
Funded status of the plans
Amounts recognized in the consolidated balance sheet:
Other assets
Accrued liabilities
Pension benefits (long term)
Year Ended December 31,
2022
2021
U.S.
Non-U.S.
U.S.
Non-U.S.
257,108 $
771
7,062
(41,026)
(14,283)
—
—
3,056
—
212,688 $
273,448 $
(63,769)
1,038
(14,283)
—
—
—
196,434 $
164,957 $
2,755
2,782
(34,354)
(5,535)
(10,012)
(1,760)
—
(2,180)
116,653 $
48,047 $
(9,774)
4,970
(5,535)
(3,138)
(1,759)
—
32,811 $
271,397 $
891
6,516
(8,589)
(13,107)
—
—
—
—
257,108 $
267,343 $
18,175
1,037
(13,107)
—
—
—
273,448 $
195,407
3,345
2,558
(12,976)
(5,324)
(9,610)
(8,210)
—
(233)
164,957
54,548
1,280
5,526
(5,324)
225
(8,210)
2
48,047
(16,254) $
(83,842) $
16,340 $
(116,910)
$
$
$
$
$
December 31, 2022
December 31, 2021
U.S.
Non-U.S.
U.S.
Non-U.S.
$
— $
(1,005)
(15,249)
3,239 $
(3,849)
(83,232)
29,804 $
(1,018)
(12,446)
4,245
(3,721)
(117,434)
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Pre-tax amounts included in accumulated other comprehensive loss that have not yet been recognized in net periodic benefit (income) cost as of
December 31, 2022 and 2021 were as follows:
Prior service costs
Actuarial losses
December 31, 2022
December 31, 2021
U.S.
Non-U.S.
U.S.
Non-U.S.
$
— $
(74,744)
(31) $
(6,910)
(56) $
(43,574)
(185)
(33,742)
The Company uses the corridor approach when amortizing actuarial gains or losses. Under the corridor approach, net unrecognized actuarial losses in
excess of 10% of the greater of i) the projected benefit obligation or ii) the fair value of plan assets for a particular plan are amortized over the average future
service period of the employees in that plan.
The accumulated benefit obligation for all domestic and international defined benefit pension plans was $212,688 and $112,963 as of December 31, 2022
and $257,108 and $158,074 as of December 31, 2021, respectively. As of December 31, 2022, the fair value of plan assets for one of the Company’s defined
benefit plans exceeded the projected benefit obligations of $18,109 by $3,239.
The components of net periodic benefit (income) cost for the Company’s defined benefit plans were as follows:
Year Ended December 31,
2021
2022
2020
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost and actuarial
loss
Settlement (gain) loss
Curtailment loss
Other
Net periodic benefit (income) cost
$
771 $
7,062
(9,293)
886
—
3,092
—
2,518 $
$
2,755 $
2,782
(949)
1,574
(410)
—
—
5,752 $
891 $
6,516
(14,257)
1,670
—
—
—
(5,180) $
3,345 $
2,558
(1,320)
2,635
1,279
—
118
8,615 $
853 $
8,132
(13,683)
1,940
—
—
—
(2,758) $
3,992
3,200
(2,415)
3,478
184
—
(11)
8,428
Pension Settlements
In addition to the settlements shown in the table above, the Company recognized $744 of Non-U.S. pension net settlement and curtailment charges due to
the divestiture of certain businesses in Europe and India during the year ended December 31, 2020 that are recorded as a reduction to gain on sale of business, net
in the consolidated statements of operations. The Company also recognized $836 of Non-U.S. pension settlement charges during the year ended December 31,
2020 that are recorded as restructuring in the consolidated statements of operations.
Plan Assumptions
Weighted average assumptions used to determine benefit obligations as of December 31, 2022 and 2021 were as follows:
Discount rate
Rate of compensation increase
Cash balance interest credit rate
2022
2021
U.S.
Non-U.S.
U.S.
Non-U.S.
4.55 %
N/A
2.41 %
4.45 %
1.58 %
N/A
2.84 %
N/A
4.50 %
1.83 %
1.44 %
N/A
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Weighted average assumptions used to determine net periodic benefit costs for the years ended December 31, 2022, 2021 and 2020 were as follows:
Discount rate
Expected return on plan assets
Rate of compensation increase
2022
2021
2020
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
2.84 %
3.50 %
N/A
2.39 %
2.15 %
2.39 %
2.48 %
5.50 %
N/A
1.63 %
2.48 %
1.99 %
3.28 %
5.75 %
N/A
2.33 %
3.73 %
3.99 %
To develop the expected return on plan assets assumption, the Company considered the historical returns and the future expected returns for each asset
class, as well as the target asset allocation of the pension portfolio. As the U.S. plans are frozen, the rate of compensation increase was not applicable in
determining net periodic benefit cost.
Plan Assets
The goals and investment objectives of the asset strategy are to ensure that there is an adequate level of assets to meet benefit obligations to participants
and retirees over the life of the participants and maintain liquidity in the plan assets sufficient to cover monthly benefit obligations. Risk is managed by investing
in a broad range of investment vehicles, e.g., equity mutual funds, bond mutual funds, real estate mutual funds, hedge funds, etc. There are no equity securities of
the Company in the equity asset category.
Investments in equity securities and debt securities are valued at fair value using a market approach and observable inputs, such as quoted market prices
in active markets (Level 1). Investments in balanced funds are valued at fair value using a market approach and inputs that are primarily directly or indirectly
observable (Level 2). Investments in equity securities and balanced funds in which the Company holds participation units in a fund, the net asset value of which
is based on the underlying assets and liabilities of the respective fund, are considered an unobservable input (Level 3). Investments in real estate funds are
primarily valued at net asset value depending on the investment.
The fair value of the Company’s pension plan assets by category using the three-level hierarchy (see Note 11. “Fair Value Measurements and Financial
Instruments”) as of December 31, 2022 and 2021 was as follows:
2022
Equity funds
Equity funds measured at net asset value
Bond funds
Bond funds measured at net asset value
Real estate measured at net asset value
Cash and cash equivalents
Total
2021
Equity funds
Equity funds measured at net asset value
Bond funds
Bond funds measured at net asset value
Real estate measured at net asset value
Cash and cash equivalents
Total
Level 1
Level 2
Assets
measured at
NAV
(1)
5,661 $
—
—
—
—
2,007
7,668 $
7,418 $
—
25,098
—
—
—
32,516 $
— $
5,638
—
173,092
10,331
—
189,061 $
Level 1
Level 2
Assets
measured at
NAV
(1)
1,231 $
—
—
—
—
9,751
10,982 $
11,586 $
—
36,133
—
—
—
47,719 $
— $
41,032
—
210,492
11,270
—
262,794 $
$
$
$
$
Total
13,079
5,638
25,098
173,092
10,331
2,007
229,245
Total
12,817
41,032
36,133
210,492
11,270
9,751
321,495
(1)
Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value
hierarchy. These assets are included in this table to present total pension plan assets at fair value.
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
There were no transfers of Level 3 assets and no Level 3 assets in the ending balance for the years ended December 31, 2021 and December 31, 2020.
Expected Future Benefit Payments
The Company estimates its benefit payments for domestic and foreign pension plans during the next ten years to be as follows:
Years Ending December 31,
2023
2024
2025
2026
2027
2028 - 2032
U.S.
Non-U.S.
Total
$
81,213 $
133,186
1,001
982
960
4,404
5,901 $
6,277
7,047
7,800
8,488
45,844
87,114
139,463
8,048
8,782
9,448
50,248
As previously noted, as part of the planned termination of the U.S. Pension Plan, the Company expects to settle benefit obligations under the U.S.
Pension Plan through a combination of lump sum payments to eligible participants and the purchase of a group annuity contract. These expected payments and
group annuity purchase are reflected in the table above during the years 2023 and 2024.
Contributions
The Company estimates it will make minimum funding cash contributions of approximately $1,000 to its U.S. pension plans and minimum funding cash
contributions of approximately $4,400 to its non-U.S. pension plans in 2023.
14. Postretirement Benefits Other Than Pensions
The Company provides certain retiree health care and life insurance benefits covering certain U.S. salaried and hourly employees and employees in
Canada. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. The Company’s
policy is to fund the cost of these postretirement benefits as these benefits become payable.
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Information related to the Company’s postretirement benefit plans was as follows:
Change in benefit obligation:
Benefit obligations at beginning of year
Service cost
Interest cost
Net actuarial gain
Benefits paid
Other
Foreign currency exchange rate effect
Benefit obligation at end of year
Funded status of the plan
Net amount recognized as of December 31
Amounts recognized in the consolidated balance sheet:
Accrued liabilities
Postretirement benefits other than pension (long term)
Year Ended December 31,
2022
2021
U.S.
Non-U.S.
U.S.
Non-U.S.
$
$
$
$
21,211 $
89
561
(4,924)
(1,125)
—
—
15,812 $
22,476 $
216
628
(5,663)
(722)
14
(1,476)
15,473 $
23,419 $
105
531
(1,717)
(1,127)
—
—
21,211 $
27,032
357
701
(5,065)
(716)
—
167
22,476
(15,812) $
(15,473) $
(21,211) $
(22,476)
(15,812) $
(15,473) $
(21,211) $
(22,476)
December 31, 2022
December 31, 2021
U.S.
Non-U.S.
U.S.
Non-U.S.
$
(1,452) $
(14,360)
(709) $
(14,764)
(1,576) $
(19,635)
(766)
(21,710)
Pre-tax amounts included in accumulated other comprehensive loss that have not yet been recognized in net periodic benefit (income) cost as of
December 31, 2022 and 2021 were as follows:
Prior service cost
Actuarial gains (losses)
December 31, 2022
December 31, 2021
U.S.
Non-U.S.
U.S.
Non-U.S.
$
$
— $
14,686 $
(14) $
2,328 $
— $
11,339 $
—
(3,760)
The components of net periodic benefit (income) costs for the Company’s other postretirement benefit plans were as follows:
2022
Year Ended December 31,
2021
2020
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
Service cost
Interest cost
Amortization of prior service credit and recognized actuarial
(gain) loss
Net periodic benefit (income) cost
$
$
89 $
561
216 $
628
105 $
531
357 $
701
103 $
680
(1,577)
(927) $
157
1,001 $
(1,396)
(760) $
752
1,810 $
(1,930)
(1,147) $
404
726
448
1,578
Plan Assumptions
Weighted average assumptions used to determine benefit obligations as of December 31, 2022 and 2021 were as follows:
Discount rate
2022
2021
U.S.
Non-U.S.
U.S.
Non-U.S.
5.45 %
5.20 %
2.75 %
3.05 %
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Weighted average assumptions used to determine net periodic benefit costs for the years ended December 31, 2022, 2021 and 2020 were as follows:
Discount rate
2.75 %
3.05 %
2.35 %
2.65 %
3.15 %
3.05 %
2022
2021
2020
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
The assumed health care cost trend rates used to measure the postretirement benefit obligation as of December 31, 2022 were as follows:
U.S.
Non-U.S.
Health care cost trend rate
Ultimate health care cost trend rate
Year that the rate reaches the ultimate trend rate
Expected Future Postretirement Benefit Payments
6.17 %
4.50 %
2028
The Company estimates its benefit payments for its postretirement benefit plans during the next ten years to be as follows:
Non-U.S.
U.S.
Years Ending December 31,
2023
2024
2025
2026
2027
2028 - 2032
$
1,491 $
1,491
1,489
1,471
1,428
6,426
727 $
760
772
792
807
4,497
Total
5.00 %
5.00 %
N/A
2,218
2,251
2,261
2,263
2,235
10,923
Other
Other postretirement benefits recorded in the Company’s consolidated balance sheets include $1,890 and $2,153 as of December 31, 2022 and 2021,
respectively, for termination indemnity plans in Europe.
15. Other Expense, net
The components of other expense, net were as follows:
(1)
Deconsolidation of joint venture
Foreign currency losses
Components of net periodic benefit income (cost) other than service cost
Factoring costs
Miscellaneous income
Other expense, net
$
$
2022
Year Ended December 31,
2021
2020
(2,257) $
(1,131)
(1,831)
(710)
444
(5,485) $
— $
(6,887)
1,610
(528)
963
(4,842) $
—
(1,429)
(576)
(776)
201
(2,580)
(1)
Loss attributable to deconsolidation of a joint venture in the Asia Pacific region, which required adjustment to fair value.
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
16. Income Taxes
Components of the Company’s (loss) income before income taxes and adjustment for noncontrolling interests were as follows:
Domestic
Foreign
2022
Year Ended December 31,
2021
2020
$
$
(154,779) $
(45,721)
(200,500) $
(142,883) $
(146,569)
(289,452) $
(235,574)
(94,647)
(330,221)
The Company’s income tax expense (benefit) consists of the following:
2022
Year Ended December 31,
2021
2020
Current
Federal
State
Foreign
Deferred
Federal
State
Foreign
$
$
(2,280) $
154
13,764
74
106
5,473
17,291 $
5,158 $
68
(1,590)
12,217
(484)
24,023
39,392 $
A reconciliation of the U.S. statutory federal rate to the income tax provision was as follows:
2022
Year Ended December 31,
2021
2020
Tax at U.S. statutory rate
State and local taxes
Tax credits and incentives
Changes in tax law, other
U.S. tax reform/Global Intangible Low-Taxed Income
("GILTI")/foreign derived intangible income
Effect of foreign tax rates
Nonrecurring permanent items
CARES Act
Foreign branch
Stock compensation (ASU 2016-09)
Non deductible expenses
Tax reserves/audit settlements
Valuation allowance
Other, net
Income tax expense (benefit)
Effective income tax rate
$
$
(42,105)
(2,700)
(8,413)
(17)
1,382
(1,614)
(2,189)
—
279
1,258
7,192
3,854
65,559
(5,195)
17,291
$
$
(60,785)
(3,276)
(7,634)
(361)
—
(13,525)
(3,710)
—
1,641
1,257
6,618
(5,043)
124,228
(18)
39,392
$
$
(8.6)%
(13.6)%
18.4 %
For the year ended December 31, 2022, the Company received $54,273 in cash payments from the United States Internal Revenue Service (“IRS”) for tax
refunds related to net operating loss carrybacks.
On August 16, 2022, the U.S. enacted the Inflation Reduction Action of 2022, which, among other things, implements a 15% minimum tax on financial
statement income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. Based on its current
analysis of the provisions, the Company does not believe this
79
(65,565)
(196)
13,636
(15,060)
1,297
5,041
(60,847)
(69,346)
(4,933)
(5,750)
352
(1,046)
(15,432)
(3,069)
(27,844)
(1,215)
1,640
9,335
1,071
51,609
3,781
(60,847)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
legislation will have a material impact on its consolidated financial statements, but the Company is continuing to evaluate the implications.
Nonrecurring permanent item in 2022 relates to a withholding tax refund related to prior periods. In 2021, the nonrecurring permanent item relates to an
intercompany legal entity sale, and in 2020, nonrecurring permanent items were the result of the divestiture of the Company’s European rubber, fluid transfer,
and specialty sealing businesses.
Deferred tax assets and liabilities reflect the estimated tax effect of accumulated temporary differences between the basis of assets and liabilities for tax
and financial reporting purposes, as well as net operating losses, tax credit and other carryforwards. Significant components of the Company’s deferred tax assets
and liabilities as of December 31, 2022 and 2021 were as follows:
2022
2021
Deferred tax assets:
Pension, postretirement and other benefits
Capitalized expenditures
Net operating loss and tax credit carryforwards
Operating lease liabilities
Interest expense carryforwards
All other items
Total deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Operating lease right-of-use
All other items
Total deferred tax liabilities
Valuation allowances
Net deferred tax assets
$
$
40,060 $
31,746
279,755
24,059
28,610
37,392
441,622
(9,896)
(23,106)
(11,028)
(44,030)
(384,792)
12,800 $
40,026
12,521
275,222
27,934
14,341
47,444
417,488
(21,745)
(26,863)
(14,506)
(63,114)
(334,983)
19,391
As of December 31, 2022, the Company’s U.S. and foreign subsidiaries, primarily in France, Brazil, Italy and Germany, had operating loss carryforwards
aggregating $646,000, with indefinite expiration periods. Other foreign subsidiaries in China, Mexico, Netherlands, Spain, Czech Republic and Korea had
operating loss carryforwards aggregating $298,000, with expiration dates beginning in 2023. The Company has research tax credit carryforwards and foreign tax
credit carryforwards totaling $44,000 in the U.S. with expiration dates beginning in 2029. The Company and its domestic subsidiaries have anticipated tax
benefits of state net operating losses and credit carryforwards of $12,000 with expiration dates beginning in 2023.
As of December 31, 2022, the Company has consolidated deferred tax assets of $441,622 with valuation allowances of $384,792 related to tax losses,
credit carryforwards, and other deferred tax assets in the U.S. and certain foreign jurisdictions. The Company’s valuation allowance increased in 2022 primarily
from current year losses generated in the U.S. and certain foreign jurisdictions as well as new valuation allowances established during 2022 in Poland. Current
and future provision for income taxes is significantly impacted by the initial recognition of and changes in valuation allowances in certain countries. The
Company intends to maintain these allowances until it is more likely than not that the deferred tax assets will be realized. In the future, provision for income
taxes will include no tax benefit with respect to losses incurred and no tax expense with respect to income generated in these countries until the respective
valuation allowance is eliminated.
As of December 31, 2022, no material deferred income taxes have been recorded on the undistributed earnings of foreign subsidiaries, since a majority of
these earnings will not be taxable upon repatriation to the United States. These earnings will be primarily treated as previously taxed income from either the one
time transition tax or GILTI, or they will be offset with a 100% dividends received deduction. The Company has not recorded a deferred tax liability for foreign
withholding taxes or state income taxes that may be incurred upon repatriation in the future as such undistributed foreign earnings are considered permanently
reinvested or could be remitted with no tax implications.
As of December 31, 2022, the Company had $5,930 ($6,100 including interest and penalties) of total unrecognized tax benefits, of which $3,753
represents the amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate.
80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:
2022
2021
Balance at beginning of period
Tax positions related to the current period
Gross additions
Tax positions related to prior years
Gross additions
Gross reductions
Settlements
Balance at end of period
$
$
3,571 $
336
2,692
(669)
—
5,930 $
11,272
337
10
(5,143)
(2,905)
3,571
The Company, or one of its subsidiaries, files income tax returns in the United States and other foreign jurisdictions. During the examination of our 2015
and 2016 U.S. federal income tax filings, the IRS asserted that income earned by a Netherlands subsidiary from its Mexican branch operations should be
categorized as foreign based company sales income under Section 954(d) of the Internal Revenue Code and should be recognized currently as taxable income on
our 2015 and 2016 U.S. federal income tax filings. As a result of this assertion, the IRS issued a Notice of Proposed Adjustment (“NOPA”). The Company
believes the proposed adjustment is without merit and we have begun the process of contesting the matter. Currently, our protest for the 2015 and 2016 tax years
has been submitted to the IRS’s administrative appeals office. We believe, after consultation with tax and legal counsel, that it is more likely than not that we will
ultimately be successful in defending our position. As such, we have not recorded any impact of the IRS’s proposed adjustment in our consolidated financial
statements as of and for the year ended December 31, 2022. In the event the Company is not successful in defending its position, the potential income tax
expense impact, including interest, related to tax years 2015 through 2022 is less than $15 million. We intend to vigorously contest the conclusions reached in the
NOPA through the IRS’s administrative appeals process, and, if necessary, through litigation.
The statute of limitations for U.S. state and local jurisdictions is closed for taxable years ending prior to 2015. The Company’s major foreign jurisdictions
are Brazil, Canada, China, France, Germany, Italy, Mexico, and Poland. The Company is no longer subject to income tax examinations in major foreign
jurisdictions for years prior to 2017.
During the next twelve months, it is reasonably possible that, as a result of audit settlements and the completion of current examinations, the Company
may decrease the amount of its gross unrecognized tax benefits by approximately $3,141, all of which, if recognized, would impact the effective tax rate.
The Company classifies all income tax related interest and penalties as income tax expense. The Company has liabilities of $170 and $710 recorded as of
December 31, 2022 and 2021, respectively, for tax related interest and penalties on its consolidated balance sheet.
81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
17. Net (Loss) Income Per Share Attributable to Cooper-Standard Holdings Inc.
Basic net (loss) income per share attributable to Cooper-Standard Holdings Inc. was computed by dividing net (loss) income attributable to Cooper-
Standard Holdings Inc. by the weighted average number of shares of common stock outstanding during the period. Diluted net (loss) income per share
attributable to Cooper-Standard Holdings Inc. was computed using the treasury stock method by dividing diluted net (loss) income 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) income per share attributable to Cooper-Standard Holdings Inc. was as follows:
Net loss available to Cooper-Standard Holdings Inc. common stockholders
Basic weighted average shares of common stock outstanding
Dilutive effect of common stock equivalents
Diluted weighted average shares of common stock outstanding
Basic net loss per share attributable to Cooper-Standard Holdings Inc.
Diluted net loss per share attributable to Cooper-Standard Holdings Inc.
Year Ended December 31,
2021
(322,835) $
2022
(215,384) $
2020
(267,605)
17,190,958
—
17,190,958
17,045,353
—
17,045,353
16,913,850
—
16,913,850
(12.53) $
(18.94) $
(15.82)
(12.53) $
(18.94) $
(15.82)
$
$
$
Approximately 24,000, 166,000, and 71,000 securities were excluded from the calculation of diluted (loss) earnings per share for the years ended
December 31, 2022, 2021, and 2020 because the inclusion of such securities in the calculation would have been anti-dilutive.
18. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) by component, net of related tax, were as follows:
Balance as of December 31, 2020
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income (loss)
Balance as of December 31, 2021
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income (loss)
Balance as of December 31, 2022
Cumulative
currency
translation
adjustment
Benefit plan
liabilities
Fair value change
of derivatives
Total
$
(136,579)
$
(106,079)
$
762
$
(241,896)
(2,316)
(1)
144
(138,751)
(18,978)
(1)
35,506
(2)
(4)
5,270
(65,303)
4,419
(2)
(843)
(3)
(5)
(1,049)
(1,130)
11,029
(3)
$
(294)
(158,023)
$
(6)
633
(60,251)
$
(5)
(1,596)
8,303
$
32,347
4,365
(205,184)
(3,530)
(1,257)
(209,971)
(1)
(2)
(3)
(4)
(5)
(6)
Includes $(15,619) and $(5,077) of other comprehensive loss for the years ended December 31, 2022 and 2021, respectively, that are related to intra-
entity foreign currency balances that are of a long-term investment nature.
Net of tax expense (benefit) of $250 and $(248) for the years ended December 31, 2022 and 2021, respectively.
Net of tax expense of $779 and $298 for the years ended December 31, 2022 and 2021, respectively.
Includes the effect of the amortization of actuarial losses of $3,484, net settlement losses of $1,291, net curtailment losses of $305, and the amortization
of prior service costs of $205, net of tax of $15.
Net of tax expense of $691 and $383 for the years ended December 31, 2022 and 2021, respectively.
Includes the effect of the amortization of actuarial losses of $862, net settlement gains of $(416), and the amortization of prior service costs of $190, net
of tax of $3.
82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
19. Equity
Shareholder Rights Plan
On November 7, 2022, the Company’s Board of Directors adopted a Section 382 rights plan and declared a dividend of one right (a “Right”) for each
outstanding share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), to stockholders of record at the close of business on
November 17, 2022 (“Shareholder Rights Plan”). Each Right entitles its holder, under certain circumstances described below, to purchase from the Company one
one-thousandth of a share of Series A Junior Participating Preferred Stock of the Company, par value $0.001 per share (the “Series A Preferred Stock”), at an
exercise price of $50.00 per Right, subject to adjustment.
If the Rights become exercisable, each Right would allow its holder to purchase from the Company one one-hundredth of a share of the Series A
Preferred Stock for a purchase price of $50.00. Each fractional share of Series A Preferred Stock would give the stockholder approximately the same dividend,
voting and liquidation rights as does one share of Common Stock. Prior to exercise, however, a Right does not give its holder any dividend, voting or liquidation
rights. The exercisability of the Rights are described in further detail in the rights agreement.
Preferred Stock
The Company is authorized to issue up to 10,000,000 shares of preferred stock, par value $0.001 per share, of which 2,000,000 shares were designated
as 7% Cumulative Participating Convertible Preferred Stock (the “7% Preferred Stock”). On November 7, 2022, the Company filed a Certificate of Elimination
to its Third Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware
eliminating from the Certificate of Incorporation all matters set forth in the Certificate of Designation with respect to the Company’s 7% Preferred Stock. No
shares of the 7% Preferred Stock were outstanding and none will be issued subject to the Certificate of Designation for the 7% Preferred Stock. All shares that
were designated as 7% Preferred Stock have been returned to the status of authorized but unissued shares of preferred stock of the Company, without designation
as to series.
On November 7, 2022, in connection with the adoption of the Shareholder Rights Plan, the Company filed a Certificate of Designation of Series A
Junior Participating Preferred Stock of Cooper-Standard Holdings Inc. (the “Certificate of Designation”) to its Certificate of Incorporation with the Secretary of
State of the State of Delaware, designating 2,000,000 shares of preferred stock as Series A Preferred Stock. As of December 31, 2022, no shares of Series A
Preferred Stock were issued or outstanding.
Common Stock
The Company is authorized to issue up to 190,000,000 shares of Common Stock, par value $0.001 per share. As of December 31, 2022, 19,173,838
shares of its Common Stock were issued, and 17,108,029 shares were outstanding.
Holders of shares of Common Stock are entitled to one vote for each share on each matter on which holders of Common Stock are entitled to vote.
Holders of Common Stock are entitled to ratably receive dividends and other distributions when, as and if declared by the Board out of assets or funds legally
available therefore. The ABL Facility, the New Notes, the 2026 Senior Notes, and the 2024 Senior Secured Notes each contain covenants that restrict the
Company’s ability to pay dividends or make distributions on the Common Stock, subject to certain exceptions.
In the event of the liquidation, dissolution or winding up of the Company, holders of Common Stock are entitled to share ratably in the Company assets,
if any, remaining after the payment of all the Company’s debts and liabilities.
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 was effective beginning November 2018. As of December 31, 2022, the Company had
approximately $98,720 of repurchase authorization under the 2018 Program.
The Company did not make any repurchases under the 2018 Program during the years ended December 31, 2022, 2021, or 2020.
83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
20. 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. There are 1,453,092 shares of common stock authorized for awards granted under the
current plan. Under previous plans, a total of 5,873,103 shares were authorized for awards. The plans provide for the grant of stock options, stock appreciation
rights, shares of common stock, restricted stock, restricted stock units (“RSUs”), performance-vested restricted stock units (“PUs”), incentive awards and certain
other types of awards to key employees and directors of the Company and its affiliates.
The Company measures share-based compensation expense at fair value and recognizes such expense on a straight-line basis over the vesting period of
the share-based employee awards. The compensation expense related to stock options, restricted stock and performance units granted to key employees and
directors of the Company, which is quantified below, does not represent payments actually made to these employees. Rather, the amounts represent the non-cash
compensation expense recognized by the Company in connection with these awards for financial reporting purposes. The actual value of these awards to the
recipients will depend on the trading price of the Company’s stock when the awards vest. In accordance with the Company’s long-term incentive plans, share-
based compensation awards that settle in shares of Company stock may be delivered on a gross settlement basis or a net settlement basis, as determined by the
recipient.
Share-based compensation expense (income) was as follows:
PUs
RSUs
Stock options
Total
Stock Options
Year Ended December 31,
2021
2020
2022
$
$
248 $
1,738
1,273
3,259 $
(916) $
4,201
2,289
5,574 $
916
6,994
2,525
10,435
Stock option awards are granted at the fair market value of the Company’s stock price at the date of the grant and have a 10 year term. The stock option
grants vest over three years from the date of grant.
Stock option transactions and related information for the year ended December 31, 2022 was as follows:
Options
Weighted Average
Exercise Price
Weighted Average
Remaining Contractual
Life (Years)
Aggregate
Intrinsic Value
Outstanding as of January 1, 2022
Forfeited
Expired
Outstanding as of December 31, 2022
Exercisable as of December 31, 2022
800,019 $
(913) $
(13,262) $
785,844 $
648,982 $
59.57
22.90
71.06
59.41
65.32
4.1 $
3.6 $
—
—
There were no stock options granted during the year ended December 31, 2022. The weighted-average grant date fair value of stock options granted
during the years ended December 31, 2021 and 2020 was $16.46 and $8.85, respectively. The total intrinsic value of stock options exercised during the year
ended December 31, 2021 was $142. There were no stock options exercised during the years ended December 31, 2022 or 2020.
As of December 31, 2022, unrecognized compensation expense for stock options amounted to $846. Such cost is expected to be recognized over a
weighted average period of approximately 1.2 years.
84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
The fair value of the options was estimated at the date of the grant using the Black-Scholes option pricing model. Expected volatility was based on the
historical volatility of the Company’s common stock. The expected option life was calculated using the simplified method. The risk-free rate is based on the U.S.
Treasury zero-coupon issues with a term equal to the expected option life on the date the stock options were granted. The fair value of each option was estimated
using the following assumptions:
Expected volatility
Dividend yield
Expected option life - years
Risk-free rate
Restricted Stock and Restricted Stock Units
2021
48.65% - 50.50%
0.00 %
6.0
0.6% - 0.9%
2020
33.74 %
0.00 %
6.0
1.50 %
The fair value of the restricted stock and restricted stock units is determined based on the closing price of the common stock on the date of grant. The
restricted stock and restricted stock units vest over one or three years.
Restricted stock and restricted stock units transactions and related information for the year ended December 31, 2022 was as follows:
Non-vested as of January 1, 2022
Granted
Vested
Forfeited
Non-vested as of December 31, 2022
Restricted Stock and
Restricted Units
Weighted Average
Grant Date Fair Value
242,014 $
313,161 $
(155,400) $
(10,739) $
389,036 $
48.38
9.46
58.90
46.10
11.98
The weighted-average grant date fair value of restricted stock and restricted stock units granted during the years ended December 31, 2022, 2021 and
2020 was $9.46, $32.38 and $17.62, respectively. The total fair value of restricted stock and restricted stock units vested during the years ended December 31,
2022, 2021 and 2020 was $9,153, $9,299 and $7,786, respectively.
As of December 31, 2022, unrecognized compensation expense for restricted stock and restricted stock units amounted to $2,371. Such cost is expected
to be recognized over a weighted-average period of approximately 1.7 years.
Performance-Vested Restricted Stock Units
The actual number of performance units that will vest depends on the Company’s achievement of target performance goals related to the Company’s
ROIC and total shareholder return over a performance period, which may range from 0% to 200% of the target award amount. The PUs cliff vest at the end of
their three-year performance period or vest ratably over three years after their initial two-year performance period. PUs that are expected to be settled in shares of
the Company’s common stock are accounted for as equity awards, and the fair value is determined based on the closing price of the common stock on the date of
grant and a contemporaneous valuation by an independent valuation specialist with respect to the total shareholder return performance units. PUs that are
expected to be settled in cash are accounted for as liability awards.
85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
A summary of activity for performance-vested restricted stock units transactions and related information for the year ended December 31, 2022 was as
follows:
Non-vested as of January 1, 2022
Granted
Vested at 0% payout
Forfeited
Non-vested as of December 31, 2022
Stock Settled Performance
Units
Cash Settled Performance
Units
Weighted Average Grant Date
Fair Value
81,010
200,031
(81,010)
(4,374)
195,657
188,886 $
— $
(107,310) $
2,240 $
83,816 $
51.19
9.41
56.17
(22.38)
18.50
The weighted-average grant date fair value of performance units granted during the years ended December 31, 2022, 2021 and 2020 was $9.41, $39.70
and $10.10, respectively. The total fair value of PUs vested during the years ended December 31, 2022, 2021 and 2020 was $10,578, $4,864, and $5,243,
respectively. Actual payout of units vested was 0% and no cash was paid to settle PUs during the years ended December 31, 2022, 2021, and 2020.
As of December 31, 2022, unrecognized compensation expense for the PUs granted in 2022 was $1,118. Such cost is expected to be recognized over a
weighted-average period of approximately 2 years.
The fair value of certain performance units is estimated using a Monte Carlo simulation. Expected volatility was calculated based on historical stock
price volatility over the previous year. The risk-free rate was based on the U.S. Treasury yield curve, generally represented by U.S. Treasury securities, with a
term equal to the expected life of the performance units. The dividend yield was assumed to be zero based on Company’s historical patterns and future
expectation. The fair value of the performance units were estimated using the following assumptions:
Expected volatility
Dividend yield
Risk-free rate
21. Contingent Liabilities
Litigation and Claims
2022
2021
88.24 %
0.00 %
1.71 %
99.40 %
0.00 %
0.14 %
Various legal actions, proceedings, and claims (generally, “matters”) are pending or may be instituted or asserted against the Company. The Company
accrues for matters when losses are deemed probable and reasonably estimable. Any resulting adjustments, which could be material, are recorded in the period
the adjustments are identified. As of December 31, 2022, the Company does not believe that there is a reasonable possibility that any material loss exceeding the
amounts already accrued for matters, if any, has been incurred. However, the ultimate resolutions of these matters are inherently unpredictable and could require
payment substantially in excess of the amounts that have been accrued or disclosed.
Environmental
The Company is subject to a broad range of federal, state and local environmental and occupational safety and health laws and regulations in the United
States and other countries, including those governing: emissions to air, discharges to water, noise and odor emissions; the generation, handling, storage,
transportation, treatment, reclamation and disposal of chemicals and waste materials; the cleanup of contaminated properties; and human health and safety. The
Company may incur substantial costs associated with hazardous substance contamination or exposure, including cleanup costs, fines, and civil or criminal
sanctions, third party property or natural resource damage, personal injury claims or costs to upgrade or replace existing equipment as a result of violations of or
liabilities under environmental laws or the failure to maintain or comply with environmental permits required at their locations. In addition, many of the
Company’s current and former facilities are located on properties with long histories of industrial or commercial operations, and some of these properties have
been subject to certain environmental investigations and remediation activities. The Company maintains environmental reserves for certain of these sites. As of
December 31, 2022 and 2021, the Company had $10,817 and $9,965, respectively, reserved in accrued liabilities and other liabilities on the consolidated balance
sheet on an undiscounted basis, which it believes are adequate. Because some environmental laws (such as the Comprehensive Environmental Response,
Compensation and Liability Act and analogous state laws) can impose liability retroactively and regardless of fault on potentially responsible parties for the
entire cost of cleanup at
86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
currently or formerly owned or operated facilities, as well as sites at which such parties disposed or arranged for disposal of hazardous waste, the Company could
become liable for investigating or remediating contamination at their current or former properties or other properties (including offsite waste disposal locations).
The Company may not always be in complete compliance with all applicable requirements of environmental laws or regulation, and the Company may receive
notices of violation or become subject to enforcement actions or incur material costs or liabilities in connection with such requirements. In addition, new
environmental requirements or changes to interpretations of existing requirements, or in their enforcement, could have a material adverse effect on the
Company’s business, results of operations, and financial condition. The Company has made and will continue to make expenditures to comply with
environmental requirements. 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.
Brazil Indirect Tax Claim
In 2019, the Superior Judicial Court of Brazil rendered a favorable decision on a case challenging whether a certain state value-added tax should be
included in the calculation of federal gross receipts taxes. The decision will allow the Company the right to recover, through offset of federal tax liabilities,
amounts collected by the government. As a result of the favorable decision, the Company recorded pre-tax recoveries of $8,000 in the South America segment
and in cost of products sold for the year ended December 31, 2019. As of December 31, 2022, the Company had $4,608 of pre-tax recoveries remaining. Timing
on realization of these remaining recoveries is dependent upon generation of federal tax liabilities eligible for offset.
22. Business Segments
The Company’s automotive 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.
The accounting policies of the Company’s segments are consistent with those described in Note 2. “Basis of Presentation and Summary of Significant
Accounting Policies.”
Certain financial information on the Company’s reportable segments was as follows:
Sales to external customers
North America
Europe
Asia Pacific
South America
Total Automotive
Corporate, eliminations and other
Consolidated
2022
Year Ended December 31,
2021
2020
1,341,099 $
503,672
443,126
100,420
2,388,317
137,074
2,525,391 $
1,148,257 $
518,245
458,306
61,713
2,186,521
143,670
2,330,191 $
1,141,368
586,739
468,042
60,754
2,256,903
118,536
2,375,439
$
$
87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Intersegment sales
North America
Europe
Asia Pacific
South America
Total Automotive
Corporate, eliminations and other
Consolidated
Adjusted EBITDA
North America
Europe
Asia Pacific
South America
Total Automotive
Corporate, eliminations and other
Consolidated
Net interest expense
North America
Europe
Asia Pacific
South America
Total Automotive
Corporate, eliminations and other
Consolidated
Depreciation and amortization expense
North America
Europe
Asia Pacific
South America
Total Automotive
Corporate, eliminations and other
Consolidated
2022
Year Ended December 31,
2021
2020
$
$
$
$
$
$
$
$
11,979 $
7,272
3,847
54
23,152
(23,152)
— $
70,819 $
(37,137)
1,556
97
35,335
2,533
37,868 $
365 $
560
1,602
1,659
4,186
74,328
78,514 $
51,592 $
26,694
27,509
2,701
108,496
13,980
122,476 $
9,775 $
9,502
1,863
15
21,155
(21,155)
— $
54,616 $
(49,599)
(16,756)
(9,852)
(21,591)
13,557
(8,034) $
470 $
1,274
1,445
362
3,551
68,960
72,511 $
54,779 $
32,655
32,426
2,531
122,391
16,617
139,008 $
12
9
2
24
(24
90
(39
12
(13
50
(14
35
1
2
4
55
59
60
36
31
2
131
23
154
88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Capital expenditures
North America
Europe
Asia Pacific
South America
Total Automotive
Corporate, eliminations and other
Consolidated
Adjusted EBITDA
Impairment charges
Restructuring charges
Pension settlement and curtailment charges
Lease termination costs
Gain on sale of business, net
Gain on sale of fixed assets, net
Deconsolidation of joint venture
Project costs
Indirect tax and customs adjustments
Divested noncontrolling interest debt extinguishment
EBITDA
Income tax (expense) benefit
Interest expense, net of interest income
Depreciation and amortization
Net loss attributable to Cooper-Standard Holdings Inc.
Segment assets
North America
Europe
Asia Pacific
South America
Total Automotive
Corporate, eliminations and other
Consolidated
2022
Year Ended December 31,
2021
2020
$
$
39,276 $
7,965
15,374
6,107
68,722
2,428
71,150 $
36,370 $
27,384
20,473
3,959
88,186
7,921
96,107 $
30
25
21
2
80
11
91
2022
Year Ended December 31,
2021
2020
$
$
$
37,868 $
(43,710)
(18,304)
(2,682)
—
—
33,391
(2,257)
—
(1,409)
—
2,897 $
(17,291)
(78,514)
(122,476)
(215,384) $
(8,034) $
(25,609)
(36,950)
(1,279)
(748)
696
—
—
—
—
—
(71,924) $
(39,392)
(72,511)
(139,008)
(322,835) $
December 31,
2022
2021
$
$
851,623 $
338,225
447,257
73,403
1,710,508
253,021
1,963,529 $
35,677
(103,887)
(39,482)
(184)
(771)
2,834
—
—
(5,648)
—
(3,595)
(115,056)
60,847
(59,167)
(154,229)
(267,605)
885,517
372,097
510,524
61,479
1,829,617
396,876
2,226,493
89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands except per share and share amounts)
Geographic Information
Geographic information for revenues, based on country of origin, and property, plant and equipment, net, is as follows:
Revenues
Mexico
United States
China
Poland
Canada
Germany
France
Other
Consolidated
Property, plant and equipment, net
China
United States
Mexico
Poland
Germany
Canada
France
Other
Consolidated
Customer Concentration
2022
Year Ended December 31,
2021
2020
$
$
696,755 $
589,801
354,741
166,114
144,890
116,153
90,711
366,226
2,525,391 $
592,777 $
539,528
371,811
168,357
116,854
116,509
94,334
330,021
2,330,191 $
578,790
518,497
364,207
191,530
125,729
114,221
97,289
385,176
2,375,439
December 31,
2022
2021
$
$
140,182 $
134,978
132,956
45,100
30,606
26,416
18,834
113,788
642,860 $
182,298
161,780
139,630
67,521
47,885
29,482
21,921
133,831
784,348
Sales to customers of the Company which contributed 10% or more of its total consolidated sales and the related percentage of consolidated Company
sales for 2022, 2021 and 2020 are as follows:
Customer
Ford
General Motors
Stellantis
(1)
(1) 2020 percentage includes FCA and Groupe PSA
2022 Percentage of Net
Sales
2021 Percentage of Net
Sales
2020 Percentage of Net
Sales
25 %
19 %
14 %
24 %
17 %
14 %
24 %
19 %
14 %
90
SCHEDULE II
Valuation and Qualifying Accounts
(dollars in millions)
Description
Allowance for credit losses
Year ended December 31, 2022
Year ended December 31, 2021
Year ended December 31, 2020
Balance at
beginning of
period
Charged to
Expenses
Charged
(credited) to
other accounts
(1)
Deductions
(2)
Balance at end of
period
$
$
$
20.3
7.1
10.7
(4)
(3)
(0.2)
16.4
0.7
(2.1)
(0.3)
0.5
(0.8) $
(2.9) $
(4.8) $
17.2
20.3
7.1
(1)
(2)
Primarily foreign currency translation.
Includes impact of divestitures.
(3)
(4)
Includes $11.2 resulting from the bankruptcy proceedings of a divested joint venture.
Includes $1.6 adjustment due to adoption of ASU 2016-13 as of January 1, 2020.
Description
Tax valuation allowance
Year ended December 31, 2022
Year ended December 31, 2021
Year ended December 31, 2020
Balance at
beginning of
period
$
$
$
335.0
234.4
194.8
Additions
Charged to
Income
Charged to
(5)
Equity
Deductions
Balance at end of
period
65.6
124.2
51.6
(6)
(7)
(8)
(15.8)
(23.6)
7.3
—
—
(19.3)
(9)
$
$
$
384.8
335.0
234.4
(5)
(6)
(7)
Includes foreign currency translation.
Primarily relates to 2022 losses with no benefit in the U.S. and certain foreign jurisdictions in addition to new valuation allowance in Poland.
Primarily related to 2021 losses with no benefit in the U.S. and certain foreign jurisdictions in addition to new valuation allowance in the U.S., France
and Canada.
(8)
Primarily related to 2020 losses with no benefit in certain foreign jurisdictions and U.S. states and new valuation allowances in foreign jurisdictions and
U.S. states.
(9)
Deductions a result of the divestiture of our European rubber, fluid transfer, and specialty sealing businesses as well as our Indian operations.
91
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company has evaluated, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive
Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2022. 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. However, 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 December 31, 2022.
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Exchange Act Rule 13a-15(f). Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer
and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on the evaluation
under the framework in Internal Control—Integrated Framework, management concluded that the Company’s internal control over financial reporting was
effective as of December 31, 2022.
The attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting is set forth in
Item 8. “Financial Statements and Supplementary Data” of this Report under the caption “Report of Independent Registered Public Accounting Firm on Internal
Control over Financial Reporting” and incorporated herein by reference.
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting that occurred during the fourth quarter ended December 31, 2022 that has
materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
92
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
PART III
The information required by Item 10 regarding the Company’s directors is incorporated by reference from the information under the headings “Proposals
- Proposal 1: Election of Directors” in the Company’s definitive Proxy Statement for its 2023 Annual Meeting of Stockholders (the “2023 Proxy Statement”).
The information required by Item 10 regarding the Company’s executive officers is incorporated by reference from the information under the headings
“Corporate Governance, Board and Committee Matters - Executive Officers” in the 2023 Proxy Statement.
Audit Committee
The information required by Item 10 regarding the Audit Committee, including the identification of the Audit Committee members and the “audit
committee financial expert,” is incorporated by reference from the information in the 2023 Proxy Statement under the heading “Corporate Governance, Board
and Committee Matters - Board Committees and Their Functions - Audit Committee.”
Compliance with Section 16(a) of The Exchange Act
The information required by Item 10 regarding compliance with Section 16(a) of the Exchange Act, if any, is incorporated by reference from the
information in the 2023 Proxy Statement under the heading “Corporate Governance, Board and Committee Matters - Delinquent Section 16(a) Reports.”
Code of Conduct
The information required by Item 10 regarding our code of ethics is incorporated by reference from the information in the 2023 Proxy Statement. The
Company’s Code of Conduct applies to all of the Company’s officers, directors and employees and is available on the Company’s website at
www.cooperstandard.com. To access the Code of Conduct, first click on “Investors” and then click on “Corporate Governance.”
Item 11. Executive Compensation
The information required by Item 11 is incorporated by reference to our 2023 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 is incorporated by reference to our 2023 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 is incorporated by reference to our 2023 Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required by Item 14 is incorporated by reference to our 2023 Proxy Statement.
93
Item 15. Exhibits and Financial Statement Schedules
(a) Documents Filed as Part of this Annual Report on Form 10-K:
PART IV
1. Financial Statements
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, Internal Control over Financial Reporting
Consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020
Consolidated statements of comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020
Consolidated balance sheets as of December 31, 2022 and December 31, 2021
Consolidated statements of changes in equity for the years ended December 31, 2022, 2021 and 2020
Consolidated statements of cash flows for the years ended December 31, 2022, 2021 and 2020
Notes to consolidated financial statements
2. Financial Statement Schedules
Schedule II—Valuation and Qualifying Accounts
All other financial statement schedules are not required under the related instructions or are inapplicable and therefore have been omitted.
3. Exhibits listed on the “Index to Exhibits”
10-K
Report
page(s)
45
47
48
49
50
51
52
53
91
94
Unless otherwise provided, the SEC File Number under which each document incorporated by reference herein was filed is 001-36127.
Exhibit No.
Description of Exhibit
Index to Exhibits
2.1*
3.1*
3.2*
3.3*
3.4*
3.5*
4.1*
4.2*
Debtors’ Second Amended Joint Chapter 11 Plan of Reorganization, dated March 26, 2010 (incorporated by reference to Exhibit 2.1 to
Cooper-Standard Holdings Inc.’s Current Report on Form 8-K filed May 24, 2010 (File No. 333-123708)).
Third Amended and Restated Certificate of Incorporation of Cooper-Standard Holdings Inc., dated May 27, 2010 (incorporated by
reference to Exhibit 3.1 to Cooper-Standard Holdings Inc.’s Registration Statement on Form S-1 (File No. 333-168316)).
Amended and Restated Bylaws of Cooper-Standard Holdings Inc. (incorporated by reference to Exhibit 3.2 to Cooper-Standard Holdings
Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016).
Cooper-Standard Holdings Inc. Certificate of Designations 7% Cumulative Participating Convertible Preferred Stock (incorporated by
reference to Exhibit 3.3 to Cooper-Standard Holdings Inc.’s Registration Statement on Form S-1 (File No. 333-168316)).
Certificate of Designation of Series A Junior Participating Preferred Stock of Cooper-Standard Holdings Inc. filed with the Secretary of
State of the State of Delaware on November 7, 2022 (incorporated by reference to Exhibit 3.1 to Cooper-Standard Holdings Inc.’s
Registration of Securities on Form 8-A filed November 7, 2022 (File No. 000-54305)).
Certificate of Elimination of 7% Cumulative Participating Convertible Preferred Stock of Cooper-Standard Holdings Inc., filed with the
Secretary of State of the State of Delaware on November 7, 2022 (incorporated by reference to Exhibit 3.1 to Cooper-Standard Holdings
Inc.’s Current Report on Form 8-K filed November 7, 2022.
Registration Rights Agreement, dated as of May 27, 2010, by and among Cooper-Standard Holdings Inc., the Backstop Purchasers and the
other holders party thereto (incorporated by reference to Exhibit 4.3 to Cooper-Standard Holdings Inc.’s Current Report on Form 8-K filed
June 3, 2010 (File No. 333-123708)).
Indenture, dated as of November 2, 2016, by and among Cooper-Standard Automotive Inc., the guarantors party thereto and U.S. Bank
National Association (incorporated by reference to Exhibit 4.1 to Cooper-Standard Holdings Inc.’s Current Report on Form 8-K filed
November 7, 2016).
4.3**
Description of Securities.
4.4*
4.5*
Indenture, dated as of May 29, 2020, by and among Cooper-Standard Automotive Inc., the Guarantors party thereto and U.S. Bank
National Association, as Trustee and Collateral Agent (incorporated by reference to Exhibit 4.1 to Cooper-Standard Holdings Inc.'s
Current Report on Form 8-K filed June 1, 2020 (File No. 001-36127)).
Section 382 Rights Agreement, dated as of November 7, 2022, by and between Cooper-Standard Holdings Inc. and Broadridge Corporate
Issuer Solutions, Inc., which includes the Form of Certificate of Designation as Exhibit A, Form of Rights Certificate as Exhibit B, and the
Form of Summary of Rights as Exhibit C (incorporated by reference to Exhibit 4.1 to Cooper-Standard Holdings Inc.’s Registration of
Securities on Form 8-A filed November 7, 2022 (File No. 000-54305)).
95
Exhibit No.
10.1*
Third Amended and Restated Loan Agreement, dated as of November 2, 2016, among Cooper-Standard Automotive Inc., Cooper-
Standard Automotive Canada Limited, Cooper-Standard Automotive International Holdings B.V., and certain subsidiaries of Cooper-
Standard Automotive Inc., as guarantors, CS Intermediate HoldCo 1 LLC, as Holdings, the lenders party thereto and Bank of America,
N.A. as agent for such lenders (incorporated by reference to Exhibit 10.1 to Cooper-Standard Holdings Inc.’s Current Report on Form 8-K
filed November 7, 2016).
Description of Exhibit
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
Credit Agreement, dated as of April 4, 2014, among CS Intermediate HoldCo 2 LLC, CS Intermediate HoldCo 1 LLC, Deutsche Bank AG
New York Branch, as administrative agent and collateral agent, and the other lenders party thereto (incorporated by reference to Exhibit
10.1 to Cooper-Standard Holdings Inc.’s Current Report on Form 8-K filed April 8, 2014).
Amendment No. 1, dated as of November 2, 2016, to the Term Loan Credit Agreement, among Cooper-Standard Automotive Inc., as the
borrower, certain subsidiaries of Cooper-Standard Automotive Inc., as guarantors, CS Intermediate HoldCo 1 LLC, as Holdings, Deutsche
Bank AG New York Branch, as Administrative Agent and Collateral Agent and other lenders party thereto (incorporated by reference to
Exhibit 10.2 to Cooper-Standard Holdings Inc.’s Current Report on Form 8-K filed November 7, 2016).
Amendment No. 2, dated as of May 2, 2017 to the Term Loan Credit Agreement, among Cooper-Standard Automotive Inc., as the
borrower, certain subsidiaries of Cooper-Standard Automotive Inc., as guarantors, CS Intermediate Holdco 1 LL, as Holdings, Deutsche
Bank AG New York Branch, as Administrative Agent and Collateral Agent and the other lenders party thereto (incorporated by reference
to Exhibit 10.2 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2017).
Amendment No. 3, dated as of March 6, 2018 to the Term Loan Credit Agreement, among Cooper-Standard Automotive Inc., as the
borrower, certain subsidiaries of Cooper-Standard Automotive Inc., as guarantors, CS Intermediate Holdco 1 LL, as Holdings, Deutsche
Bank AG New York Branch, as Administrative Agent and Collateral Agent and the other lenders party thereto (incorporated by reference
to Exhibit 10.1 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2018).
Amendment No. 1, dated as of March 24, 2020, to the Third Amended and Restated Loan Agreement and Limited Waiver by and among
CS Intermediate Holdco 1 LLC, Cooper-Standard Automotive Inc., Cooper-Standard Automotive Canada Limited, Cooper-Standard
Automotive International Holdings B.V., certain subsidiaries of Cooper-Standard Automotive Inc., the lenders party thereto and Bank of
America, N.A. as agent for such lenders (incorporated by reference to Exhibit 10.4 to Cooper-Standard Holdings Inc.’s Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2020).
Amendment No. 2, dated as of May 18, 2020, to the Third Amended and Restated Loan Agreement by and among Cooper-Standard
Automotive Inc., as loan party agent, and Bank of America, N.A. as agent for such lenders (incorporated by reference to Exhibit 10.1 to
Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2020).
Transaction Support Agreement, dated as of November 15, 2022, among CSA, Parent, Holdings, the other Credit Parties and the
Consenting Noteholders (incorporated by reference to Exhibit 10.1 to Cooper-Standard Holdings Inc.’s Current Report on Form 8-K filed
November 15, 2022).
Backstop Agreement, dated as of December 19, 2022, among Cooper-Standard Automotive Inc., J.P. Morgan Investment Management Inc.
and Millstreet Capital Management LLC (incorporated by reference to Exhibit 10.1 to Cooper-Standard Holdings Inc.’s Current Report on
Form 8-K filed December 20, 2022).
96
Exhibit No.
10.10*
Third Amendment, dated as of December 19, 2022, to the Third Amended and Restated Loan Agreement, among CS Intermediate Holdco
1 LLC, Cooper-Standard Automotive Inc., Cooper-Standard Automotive Canada Limited, Cooper-Standard Automotive International
Holdings B.V., certain subsidiaries of Cooper-Standard Automotive Inc., the lenders party thereto and Bank of America, N.A. as agent for
such lenders (incorporated by reference to Exhibit 10.2 to Cooper-Standard Holdings Inc.’s Current Report on Form 8-K filed December
20, 2022).
Description of Exhibit
10.11*
10.12*†
10.13*†
10.14*†
10.15*†
10.16*†
10.17*†
10.18*†
10.19*†
10.20*†
10.21*†
Amendment No. 1 to the Transaction Support Agreement, dated as of December 15, 2022, among Cooper-Standard Holdings
Inc., Cooper-Standard Automotive Inc., CS Intermediate Holdco 1 LLC, certain other direct or indirect subsidiaries of Cooper-Standard
Holdings Inc., J.P. Morgan Investment Management Inc. and Millstreet Capital Management LLC (incorporated by reference to Exhibit
10.3 to Cooper-Standard Holdings Inc.’s Current Report on Form 8-K filed December 20, 2022).
Cooper-Standard Automotive Inc. Deferred Compensation Plan, effective January 1, 2005 with Amendments through December 31, 2008
(incorporated by reference to Exhibit 10.33 to Cooper-Standard Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2008).
Cooper-Standard Automotive Inc. Supplemental Executive Retirement Plan, effective January 1, 2011 (incorporated by reference to
Exhibit 10.10 to Cooper-Standard Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010).
2011 Cooper-Standard Holdings Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.22 to Cooper-Standard Holdings
Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010).
Amended and Restated 2011 Cooper-Standard Holdings Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.12 to
Cooper-Standard Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013).
Amended and Restated Cooper-Standard Holdings Inc. 2011 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to
Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2017).
Letter Agreement between Jeffrey S. Edwards, Cooper-Standard Holdings Inc., Cooper-Standard Automotive Inc. dated October 1, 2012
(incorporated by reference to Exhibit 10.2 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2012).
Form of Cooper-Standard Holdings Inc. 2011 Omnibus Incentive Plan Nonqualified Stock Option Agreement (incorporated by reference
to Exhibit 10.38 to Cooper-Standard Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014).
Form of 2015 Cooper-Standard Holdings Inc. 2011 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (incorporated by
reference to Exhibit 10.40 to Cooper-Standard Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31,
2014).
Offer Letter between Jonathan P. Banas and Cooper-Standard Automotive Inc. dated August 17, 2015 (incorporated by reference to
Exhibit 10.1 to Cooper-Standard Holdings Inc.’s Current Report on Form 8-K filed on August 28, 2015).
Form of Cooper-Standard Holdings Inc. 2011 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (Non-Employee Directors)
(incorporated by reference to Exhibit 10.1 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2015).
97
Exhibit No.
10.22*†
10.23*†
10.24*†
10.25*†
10.26*†
10.27*†
10.28*†
10.29*†
10.30*†
10.31*†
10.32*†
10.33*†
10.34*†
Description of Exhibit
Form of Cooper-Standard Holdings Inc. Amended and Restated Indemnification Agreement for officers and directors (incorporated by
reference to Exhibit 10.36 to Cooper-Standard Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31,
2018).
Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.36 to Cooper-Standard Holdings
Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019).
Form of Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (incorporated by reference
to Exhibit 10.4 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2017).
Form of Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Nonqualified Stock Option Award Agreement (incorporated by
reference to Exhibit 10.5 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2017).
Form of Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (Non-Employee Directors)
(incorporated by reference to Exhibit 10.42 to Cooper-Standard Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2019).
Form of 2018 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Nonqualified Stock Option Agreement. (incorporated by
reference to Exhibit 10.2 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2018).
Form of 2019 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 10.1 to Cooper-Standard Holdings Inc. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019).
Form of 2019 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Performance Unit Award Agreement (cash-settled award)
(incorporated by reference to Exhibit 10.2 to Cooper-Standard Holdings Inc. Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2019).
Form of 2019 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Performance Unit Award Agreement (stock-settled award)
(incorporated by reference to Exhibit 10.3 to Cooper-Standard Holdings Inc. Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2019).
Form of 2019 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (cash or stock-settled
award) (incorporated by reference to Exhibit 10.4 to Cooper-Standard Holdings Inc. Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2019).
Form of 2019 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (cash-settled award)
(incorporated by reference to Exhibit 10.5 to Cooper-Standard Holdings Inc. Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2019).
Form of 2020 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 10.1 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2020).
Form of 2020 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Performance Unit Award Agreement (cash-settled award)
(incorporated by reference to Exhibit 10.2 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2020).
98
Exhibit No.
10.35*†
10.36*†
10.37*†
10.38*†
10.39*†
10.40*†
10.41*†
10.42*†
10.43*†
10.44*†
10.45*†
10.46*†
Description of Exhibit
Form of 2020 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (cash-settled award)
(incorporated by reference to Exhibit 10.3 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2020).
Form of 2021 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 10.1 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2021).
Form of 2021 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Performance Unit Award Agreement (cash-settled award)
(incorporated by reference to Exhibit 10.2 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2021).
Form of 2021 Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (cash or stock-settled
award) (incorporated by reference to Exhibit 10.3 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2021).
Separation Agreement between Jeffrey DeBest, Cooper-Standard Holdings Inc. and Cooper-Standard Automotive Inc. effective as of
March 1, 2021 (incorporated by reference to Exhibit 10.4 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2021).
Cooper-Standard Holdings Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 4.4 to Cooper-Standard Holdings
Inc.’s Post-Effective Amendment No. 1 to Form S-8 filed on Form S-8POS on May 20, 2021).
Cooper-Standard Automotive Inc. Executive Severance Pay Plan, Amended and Restated as of June 9, 2021 (incorporated by reference to
Exhibit 10.2 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021).
Cooper-Standard Automotive Inc. Annual Incentive Plan Amended and Restated effective as of January 1, 2021(incorporated by reference
to Exhibit 10.3 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021).
Form of 2021 Cooper-Standard Holdings Inc. 2021 Omnibus Incentive Plan Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 10.1 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
2021).
Form of 2021 Cooper-Standard Holdings Inc. 2021 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (cash or stock-settled
award) (incorporated by reference to Exhibit 10.2 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2021).
Form of 2022 Cooper-Standard Holdings Inc. 2021 Omnibus Incentive Plan Performance Award Agreement (ROIC) (incorporated by
reference to Exhibit 10.1 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2022).
Form of 2022 Cooper-Standard Holdings Inc. 2021 Omnibus Incentive Plan Performance Award Agreement (TSR) (incorporated by
reference to Exhibit 10.2 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2022).
99
Exhibit No.
10.47*†
10.48*†
21.1**
23.1**
31.1**
31.2**
Form of 2022 Cooper-Standard Holdings Inc. 2021 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (cash or stock-settled
award) (incorporated by reference to Exhibit 10.3 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2022).
Description of Exhibit
Form of 2022 Cooper-Standard Holdings Inc. 2021 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (cash or stock-settled
award) (interim awards) (incorporated by reference to Exhibit 10.1 to Cooper-Standard Holdings Inc.’s Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 2022).
List of Subsidiaries of Cooper-Standard Holdings Inc.
Consent of Independent Registered Public Accounting Firm.
Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) (Section 302 of the Sarbanes-Oxley Act
of 2002).
Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) (Section 302 of the Sarbanes-Oxley Act of
2002).
32***
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH****
Inline XBRL Taxonomy Extension Schema Document
101.CAL****
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF****
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB****
Inline XBRL Taxonomy Label Linkbase Document
101.PRE****
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104****
Cover Page Interactive Data File, formatted in Inline XBRL
* Incorporated by reference as an exhibit to this Report.
** Filed with this Report.
*** Furnished with this Report
**** Submitted electronically with this Report in accordance with the provisions of Regulation S-T.
† Management contract or compensatory plan or arrangement.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to
the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties
made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the
actual state of affairs as of the date they were made or at any other time.
100
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
COOPER-STANDARD HOLDINGS INC.
SIGNATURES
Date: February 17, 2023
/s/ Jeffrey S. Edwards
Jeffrey S. Edwards
Chairman and Chief Executive Officer
(Principal Executive Officer)
101
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below on February 17, 2023 by the following persons on behalf
of the Registrant in the capacities indicated.
Signature
Title
/s/ Jeffrey S. Edwards
Chairman and Chief Executive Officer (Principal Executive Officer)
Jeffrey S. Edwards
/s/ Jonathan P. Banas
Chief Financial Officer (Principal Financial Officer)
Jonathan P. Banas
/s/ Amy B. Kulikowski
Chief Accounting Officer (Principal Accounting Officer)
Amy B. Kulikowski
/s/ David J. Mastrocola
Lead Director
David J. Mastrocola
/s/ John G. Boss
John G. Boss
Director
/s/ Richard J. Freeland
Director
Richard J. Freeland
/s/ Adriana E. Macouzet-Flores
Director
Adriana E. Macouzet-Flores
/s/ Christine M. Moore
Director
Christine M. Moore
/s/ Robert J. Remenar
Director
Robert J. Remenar
/s/ Sonya F. Sepahban
Sonya F. Sepahban
/s/ Thomas W. Sidlik
Thomas W. Sidlik
Director
Director
/s/ Stephen A. Van Oss
Director
Stephen A. Van Oss
102
Authorized Capital Stock
We have the authority to issue a total of 200,000,000 shares of capital stock, consisting of 190,000,000 shares of common stock, par value $0.001 per share and
10,000,000 shares of preferred stock, par value $0.001 per share, of which, 2,000,000 shares are currently designated as Series A Junior Participating Preferred
Stock.
DESCRIPTION OF SECURITIES
Exhibit 4.3
Common Stock
The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of holders of shares of any
series of our preferred stock which we may designate and issue in the future.
Voting rights
Holders of shares of common stock are entitled to one vote for each share on each matter properly submitted to our stockholders on which holders of common
stock are entitled to vote. The holders of common stock do not have cumulative voting rights.
Dividend rights
Subject to limitations under the Delaware General Corporation Law and to the rights of holders of any outstanding series of preferred stock, the holders of shares
of common stock are entitled to receive ratably dividends and other distributions when, as and if declared by our board of directors out of assets or funds legally
available therefor.
Liquidation rights
In the event of the liquidation, dissolution or winding-up of the Company, holders of common stock are entitled to share ratably in proportion to their
shareholding in our assets, if any, remaining after the payment of all our debts and liabilities, subject to any liquidation preference of any outstanding series of
preferred stock.
Other rights
Holders of common stock are not entitled to preemptive rights, and no redemption or sinking fund provisions are applicable to our common stock. Shares of our
common stock are not convertible. All outstanding shares of common stock are fully paid and non-assessable.
Preferred Stock
Preferred stock may be issued from time to time in one or more series. The Board of Directors (the “Board”) is hereby expressly authorized to provide for the
issuance of shares of preferred stock in one or more series and to establish from time to time the number of shares to be included in each such series and to fix
the voting powers, if any, designations, powers, preferences and relative, participating, optional and other special rights, if any, of each such series and the
qualifications, limitations and restrictions thereof.
Series A Junior Participating Preferred Stock
On November 7, 2022, the Board adopted a Section 382 rights plan and declared a dividend of one right (a “Right”) for each outstanding share of our common
stock to stockholders of record at the close of business on November 17, 2022. The Board adopted the Section 382 rights plan in an effort to protect stockholder
value by attempting to protect against a possible limitation on our ability to use our net operating losses, any loss or deduction attributable to a “net unrealized
built-in loss” and other tax attributes (collectively, “Tax Benefits”). Each Right entitles its holder, under certain circumstances described below, to purchase from
us one one-thousandth of a share of Series A
Junior Participating Preferred Stock, at an exercise price of $50.00 per Right, subject to adjustment. The description and terms of the Rights are set forth in a
Section 382 Rights Agreement, dated as of November 7, 2022, by and between the Company and Broadridge Corporate Issuer Solutions, Inc., as Rights Agent
(the “Rights Agreement”).
Under the Rights Agreement, the Rights will initially trade with our common stock and will generally become exercisable only if a person (or any persons acting
as a group) acquires 4.9% or more of our outstanding common stock. If the rights become exercisable, all holders of rights (other than any triggering person) will
be entitled to acquire shares of our common stock at a 50% discount. Under the Rights Agreement, any person who currently owns 4.9% or more of our common
stock may continue to own its shares of common stock but may not acquire any additional shares without triggering the Rights Agreement. Under the Rights
Agreement, the Board has the discretion to exempt any transaction and to exempt any person (or group of persons) from the provisions of the Rights Agreement.
The Rights
The Board authorized the issuance of one Right per each outstanding share of common stock on November 17, 2022. If the Rights become exercisable, each
Right would allow its holder to purchase from us one one-hundredth of a share of the Series A Preferred Stock for a purchase price of $50.00. Each fractional
share of Series A Preferred Stock would give the stockholder approximately the same dividend, voting and liquidation rights as does one common share. Prior to
exercise, however, a Right does not give its holder any dividend, voting or liquidation rights.
Exercisability
The Rights will not be exercisable until the earlier of:
•
•
10 days after our public announcement that a person or group has become an acquiring person; and
10 business days (or a later date determined by the Board) after a person or group begins a tender or exchange offer that, if completed, would result in
that person or group becoming an acquiring person.
The date on which the Rights become exercisable is referred to as the “distribution date.” Until the distribution date, the certificates for the shares of common
stock will also evidence the Rights and will contain a notation to that effect. Any transfer of shares of common stock prior to the distribution date will constitute
a transfer of the associated Rights. After the distribution date, the Rights will separate from the shares of common stock and be evidenced by right certificates,
which we will mail to all holders of Rights that have not become void.
Flip-in Event
After the distribution date, if a person or group already is or becomes an acquiring person, all holders of Rights, except the acquiring person, may exercise their
Rights upon payment of the purchase price to purchase shares of common stock (or other securities or assets as determined by the Board) with a market value of
two times the purchase price.
Flip-over Event
After the distribution date, if a flip-in event has already occurred and we are acquired in a merger or similar transaction, all holders of Rights except the acquiring
person may exercise their Rights, upon payment of the purchase price, to purchase shares of the acquiring corporation with a market value of two times the
purchase price of the Rights.
Expiration
The Rights will expire, unless earlier terminated, on the earliest to occur of: (i) the close of business on November 6, 2025; (ii) the time at which the Rights are
redeemed; (iii) the time at which all exercisable Rights are exchanged; (iv) the close of business on November 6, 2023, if the approval of our stockholders of the
Rights Agreement has not been obtained by that date; (v) the repeal of Section 382 of the Code if the Board determines that the Rights Agreement is no longer
necessary or desirable for the preservation of the Tax Benefits; or (vii) the time at which the Board determines that the Tax Benefits are fully utilized or no longer
available under Section 382 of the Code or that an ownership change under Section 382 of the Code would not adversely impact in any material respect the time
period in which we could use the Tax Benefits, or materially impair the amount of the Tax Benefits that could be used by us in any particular time period, for
applicable tax purposes.
Redemption
The Board may redeem all (but not less than all) of the Rights for a redemption price of $0.001 per Right at any time before the later of the distribution date and
the date of our first public announcement or disclosure that a person or group has become an acquiring person. Once the Rights are redeemed, the Right to
exercise the Rights will terminate, and the only right of the holders of Rights will be to receive the redemption price. The Board may adjust the redemption price
if we declare a stock split or issues a stock dividend on the common stock.
Exchange
After the later of the distribution date and the date of our first public announcement that a person or group has become an acquiring person, but before any person
beneficially owns 50% or more of the Company’s outstanding shares of common stock, the Board may exchange each Right (other than Rights that have become
void) for one share of common stock or an equivalent security.
Anti-Dilution Provisions
The Board may adjust the purchase price of the shares of Series A Preferred Stock, the number of shares of Series A Preferred Stock issuable and the number of
outstanding Rights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of
the Series A Preferred Shares or the shares of common shares. No adjustments to the purchase price of less than 1% will be made.
Amendments
Before the time that the Rights cease to be redeemable, the Board may amend or supplement the Rights Agreement without the consent of the holders of the
Rights, except that no amendment may decrease the redemption price below $0.001 per Right. At any time thereafter, the Board may amend or supplement the
Rights Agreement only to cure an ambiguity, to alter time period provisions, to correct inconsistent provisions or to make any additional changes to the Rights
Agreement, but only to the extent that those changes do not impair or adversely affect any Rights holder and do not result in the Rights again becoming
redeemable. The limitations on the ability of the Board to amend the Rights Agreement does not affect the power or ability of the Board to take any other action
that is consistent with its fiduciary duties, including, without limitation, accelerating or extending the expiration date of the Rights, making any amendment to the
Rights Agreement that is permitted by the Rights Agreement or adopting a new rights agreement with such terms as the Board determines in its sole discretion to
be appropriate.
No Rights as Stockholder
Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company beyond those as an existing stockholder, including,
without limitation, the right to vote or to receive dividends.
Exchange Listing
Our common stock is traded on the New York Stock Exchange under the symbol “CPS.”
Transfer Agent
Our transfer agent is Broadridge Corporate Issuer Solutions Inc..
Section 203 of the Delaware General Corporation Law Does Not Apply
We are not governed by Section 203 of the DGCL. Section 203 of the DGCL provides that an “interested stockholder” (a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the outstanding voting stock of a corporation) may not engage in business combinations (such as
mergers, consolidations, asset sales and other transactions in which an interested stockholder receives or could receive a financial benefit on other than a pro rata
basis with other stockholders) with the corporation for a period of three years after the date on which the person became an interested stockholder unless: (i) prior
to such time, the corporation’s board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the corporation’s outstanding voting stock at the time the transaction commenced; or (iii) at or after the time a person became
an interested stockholder, the business combination is approved by the corporation’s board of directors and authorized at a meeting of stockholders by the
affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and Bylaws and Delaware Law
Certain provisions that are included in our certificate of incorporation and bylaws, which are summarized in the following paragraphs, and applicable provisions
of the DGCL, may have the effect of discouraging transactions that involve an actual or threatened change of control of the Company or changing our board of
directors and management. In addition, provisions of our certificate of incorporation and bylaws may be deemed to have anti-takeover effects and may delay,
defer or prevent a tender offer or takeover attempt that a stockholder might consider in such stockholder’s best interest, including those attempts that might result
in a premium over the market price of the shares held by our stockholders.
Blank check preferred
Our board of directors is authorized to create and issue from time to time, without stockholder approval, up to an aggregate of 10,000,000 shares of preferred
stock in one or more series and to establish the number of shares to be included in each series and to fix the voting powers, if any, designations, powers,
preferences and relative, participating, optional and other special rights, if any, of each series and the qualifications, limitations and restrictions thereof. We may
issue our preferred stock in ways that may delay, deter or prevent a change in control of the Company without further action by our stockholders and may affect
the voting and other rights of the holders of our common stock. The issuance of our preferred stock with voting and conversion rights also may adversely affect
the voting power of the holders of our common stock, including the loss of voting control to others. Our board of directors may issue, or reserve for issuance, any
series of preferred stock to be used in connection with a “poison pill” or similar “shareholder rights plan” which, if implemented, may delay, deter or prevent a
change in control of the Company.
Directors, not stockholders, fix the size of our board of directors
Our certificate of incorporation provides that the number of directors on our board of directors is initially seven and shall be fixed from time to time by our board
of directors.
Remaining directors, not stockholders, fill board vacancies
Newly created directorships resulting from any increase in our authorized number of directors and vacancies in our board of directors resulting from death,
resignation, retirement, disqualification or removal from office may be filled solely by a majority vote of the directors then in office, even if less than a quorum,
or by a sole remaining director (and not by stockholders).
Calling of special meetings of stockholders
Our certificate of incorporation provides that special meetings of our stockholders: (i) may be called by the chairman of the board, the chief executive officer, or
any member of the board of directors pursuant to a resolution adopted by a majority of our board of directors; and (ii) must be called by the secretary at the
written request (a “special meeting request”) of the holders of record of at least 20% of the voting power of the outstanding stock entitled to vote on the matter or
matters to be brought before the proposed special meeting.
Stockholder action by written consent permitted in only limited circumstances
The DGCL permits stockholder action by written consent unless otherwise provided by a corporation’s certificate of incorporation. Our certificate of
incorporation provides that our stockholders may not act by written consent, unless the action by written consent of the stockholders is approved in advance by a
resolution of our board of directors or except as expressly provided by the terms of any series of preferred stock.
Advance notice requirements for stockholder proposals
Our bylaws establish advance notice procedures with respect to stockholder proposals. Stockholders will only be able to consider proposals at an annual meeting
that are specified in the notice of meeting or brought before the annual meeting by or at the direction of our board of directors or by a stockholder who was a
stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given to our secretary timely written notice, in proper
form, of the stockholder’s intention to bring that business before the meeting. In order to bring business before an annual meeting, a stockholder’s notice must be
received by the secretary of the Company at our principal executive offices not later than 90 calendar days or earlier than 120 calendar days before the first
anniversary of the previous year’s annual meeting of stockholders, subject to certain exceptions contained in our bylaws. If the date of the applicable annual
meeting is more than 30 days before or more than 60 days after such anniversary date, notice by a stockholder to be timely must be so received not earlier than
120 calendar days and not later than the later of 90 calendar days before the date of such annual meeting or the tenth day following the date on which public
announcement of the date of the annual meeting is first made by the Company. The adjournment or postponement of an annual meeting or the public
announcement thereof does not commence a new time period for the giving of a stockholder’s notice as described above.
Under our bylaws, the business transacted at any special meeting is limited to those matters stated (i) in the notice of such special meeting and (ii) if applicable,
in the special meeting request or as otherwise permitted under Sections 2.7 and 3.2 of our bylaws. In the case of a special meeting called due to a special meeting
request, a stockholder proper notice to our secretary must be received not later than 15 days prior to the meeting.
Advance notice requirements for director nominations
Our bylaws establish advance notice procedures with respect to stockholder nomination of candidates for election as directors (other than as may be provided by
the terms of any series of preferred stock with respect to the rights of holders of such series of preferred stock to elect directors). Stockholders will only be able
to consider nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board of directors or by
a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given to our secretary timely
written notice, in proper form, of the stockholder’s intention to bring that business before the meeting. In order to nominate directors to our board of directors at
an annual meeting, a stockholder’s notice must be received by the secretary of the Company at our principal executive offices not later than 90 calendar days or
earlier than 120 calendar days before the first anniversary of the previous year’s annual meeting of stockholders, subject to certain exceptions contained in our
bylaws. If the date of the applicable annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by a stockholder to be
timely must be so received not earlier than 120 calendar days and not later than the later of 90 calendar days before the date of such annual meeting or the tenth
day following the date on which public announcement of the date of the annual meeting is first made by the Company. Notwithstanding the foregoing, if the
number of directors to be elected to our board of directors at an annual meeting is greater than the number of nominees of the Company and there is no public
announcement by us of a decrease in the size of the board of directors at the time notice of the meeting is given to stockholders, a stockholder’s notice shall be
timely (but only with respect to the directorships for which the Company has not provided nominees) if proper notice is received not later than 10 days following
the date that the notice of the meeting was given by us.
In order to nominate directors at a special meeting of stockholders called for the purpose of electing directors, a stockholder’s notice must be received by the
secretary of the Company at our principal executive offices not earlier than 120 calendar days and not later than the later of 90 calendar days before the date of
the special meeting or the tenth day following the date on which public announcement of the date of the special meeting is first made by the Company. In the
case of a special meeting of stockholders called due to a special meeting request for the purpose of electing directors, proper notice must be received not later
than 15 days prior to the meeting.
The adjournment or postponement of an annual meeting or special meeting or the public announcement thereof does not commence a new time period for the
giving of a stockholder’s notice as described above.
Amendments to certificate of incorporation
The DGCL provides generally that the affirmative vote of a majority of the outstanding shares entitled to vote is required to amend a corporation’s certificate of
incorporation, unless the certificate of incorporation requires a greater percentage. Our certificate of incorporation provides that the following provisions may be
amended or repealed by our stockholders only by a vote of at least two-thirds of the voting power of all then outstanding shares of our stock entitled to vote
generally in the election of directors, voting together as a single class:
•
•
•
•
•
•
•
•
the number, election and terms of the directors;
the ability of our board of directors to fill vacancies on the board;
the removal of directors;
the rights of the holders of preferred stock to elect directors;
the power of our board of directors to adopt, amend, alter or repeal the bylaws;
the limitation on stockholder action by written consent;
the limitation and notice requirements for special meetings; and
the amendment provision requiring that the above provisions be amended only with a two-thirds supermajority vote of our stockholders.
Limitations on directors’ and officers’ liability
Our certificate of incorporation contains a provision eliminating the personal liability of our directors to the Company or any of our stockholders for monetary
damages for breach of fiduciary duty to the fullest extent
permitted by the DGCL. Our certificate of incorporation and our bylaws also contain provisions generally providing for indemnification and prepayment of
expenses to our directors and officers to the fullest extent permitted by applicable law.
Subsidiaries of Cooper-Standard Holdings Inc.
(1)
Subsidiary Name
Jurisdiction of Organization
Exhibit 21.1
Cooper-Standard Automotive (Australia) Pty. Ltd.
CSA (Barbados) Investment Co. Ltd.
Cooper-Standard Automotive Brasil Sealing Ltda.
Itatiaia Standard Industrial Ltda.
Cooper-Standard Automotive Canada Limited
Cooper (Wuhu) Automotive Co., Ltd.
Cooper Standard (Shandong) Automotive Parts Co., Ltd.
Cooper Standard Automotive (Kunshan) Co., Ltd.
Cooper Standard Automotive (Suzhou) Co., Ltd.
Cooper Standard Chongqing Automotive Co., Ltd.
Cooper Standard Fluid Systems (Kunshan) Co. Ltd.
Cooper Standard INOAC Automotive (Huai'an) Co Ltd
Cooper Standard Sealing (Guangzou) Co. Ltd. (51%)
Cooper Standard Sealing (Shanghai) Co., Ltd.
Cooper Standard Sealing (Shenyang) Co. Ltd.
Cooper-Standard Dongfeng Automotive Parts Co., Ltd. (70%)
Cooper-Standard FAWSN Automotive Systems (Changchun) Co., Ltd. (55%)
Cooper-Standard Investment Co., Ltd.
Shanghai Jyco Sealing Products Co., Ltd.
Shanghai Shumi Automotive Parts Co., Ltd.
Yantai Leading Solution Auto Parts Co., Ltd (50%)
CS Automotive Costa Rica S.A.
Cooper-Standard Automotive Ceska Republika s.r.o.
Cooper-Standard Automotive France S.A.S.
Cooper-Standard France SAS
Cooper Standard Europe GmbH
Cooper Standard GmbH
Cooper Standard Service GmbH
Cooper Standard Technical Rubber GmbH
Cooper-Standard Automotive (Deutschland) GmbH
Metzeler Kautschuk Unterst✔tzungskasse Gesellschaft mit beschränkter Haftung
Cooper-Standard Services India Private Limited
Polyrub Cooper Standard FTS Private Ltd. (35%)
Cooper-Standard Automotive Italy S.p.A.
Cooper-Standard Automotive Italy Service SRL
Cooper Standard Automotive Japan Inc.
Cooper Standard Automotive Korea Inc.
Cooper Standard Korea Inc.
CooperStandard Automotive and Industrial Inc.
Coopermex, S.A. de C.V.
Cooper-Standard Automotive de Mexico S.A. de C.V.
Cooper-Standard Automotive FHS, S. de R.L. de C.V.
Cooper-Standard Automotive Fluid Systems de Mexico, S. de R.L. de C.V.
Cooper-Standard Automotive Sealing de Mexico, S.A. de C.V.
Cooper-Standard Automotive Services, S. de R.L. de C.V.
Cooper-Standard de México S de RL de CV
Australia
Barbados
Brazil
Brazil
Canada
China
China
China
China
China
China
China
China
China
China
China
China
China
China
China
China
Costa Rica
Czech Republic
France
France
Germany
Germany
Germany
Germany
Germany
Germany
India
India
Italy
Italy
Japan
Korea, Republic of
Korea, Republic of
Korea, Republic of
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Subsidiary Name
Jurisdiction of Organization
Cooper-Standard Technical Services de Mexico, S. de R.L. de C.V.
CS Mexico Holdings, S. de R.L. de C.V.
Manufacturera El Jarudo, S. de R.L. de C.V.
Cooper-Standard Automotive International Holdings B.V.
Cooper-Standard Latin America B.V.
Cooper Standard Polska Sp. z o.o.
S.C. Cooper-Standard Romania SRL
Cooper Standard Srbija DOO Sremska Mitrovica
Cooper-Standard Holdings Singapore Pte. Ltd.
Cooper-Standard Pte. Ltd.
Cooper-Standard Automotive España, S.L.
Cooper Standard Sweden filial of Cooper-Standard Automotive International Holdings B.V.
Nishikawa Tachaplalert Cooper Ltd. (20%)
Cooper-Standard Automotive UK Limited
Cooper-Standard Automotive Fluid Systems Mexico Holding LLC
Cooper-Standard Canada Holdings LLC
Cooper-Standard FHS LLC
CS Intermediate HoldCo 1 LLC
NISCO Holding Company
Nishikawa Cooper LLC (40%)
Liveline Technologies Inc.
Cooper-Standard Foundation Inc.
Cooper-Standard Automotive Inc.
Cooper-Standard Industrial and Specialty Group, LLC
CSA Services Inc.
(3)
(2)
Mexico
Mexico
Mexico
Netherlands
Netherlands
Poland
Romania
Serbia
Singapore
Singapore
Spain
Sweden
Thailand
United Kingdom
United States (Delaware)
United States (Delaware)
United States (Delaware)
United States (Delaware)
United States (Delaware)
United States (Delaware)
United States (Delaware)
United States (Michigan)
United States (Ohio)
United States (Ohio)
United States (Ohio)
(1)
(2)
(3)
Subsidiaries as of January 31, 2023; wholly-owned except as otherwise indicated
This is a branch office of Cooper-Standard Automotive International Holdings B.V.
This is a Michigan non-profit corporation
Exhibit 23.1
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-3 File No. 333-175637) of Cooper-Standard Holdings Inc.,
Consent of Independent Registered Public Accounting Firm
(2) Registration Statement (Form S-8 File No. 333-188516) pertaining to the Cooper-Standard Holdings Inc. 2011 Omnibus Incentive Plan,
(3) Registration Statement (Form S-3 File No. 333-189981) of Cooper-Standard Holdings Inc., and
(4) Registration Statement (Form S-8 File No. 333-218127) pertaining to the Cooper-Standard Holdings Inc. 2017 Omnibus Incentive Plan and the
Cooper-Standard Holdings Inc. 2021 Omnibus Incentive Plan;
of our reports dated February 17, 2023, with respect to the consolidated financial statements and schedule of Cooper-Standard Holdings Inc. and the effectiveness
of internal control over financial reporting of Cooper-Standard Holdings Inc. included in this Annual Report (Form 10-K) of Cooper-Standard Holdings Inc. for
the year ended December 31, 2022.
/s/ Ernst & Young LLP
Detroit, Michigan
February 17, 2023
Exhibit 31.1
I, Jeffrey S. Edwards, certify that:
1.
I have reviewed this annual report on Form 10-K of Cooper-Standard Holdings Inc.;
COOPER-STANDARD HOLDINGS INC.
Certification of the Principal Executive Officer
Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
(Section 302 of the Sarbanes-Oxley Act of 2002)
2
3
4
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably like to materially affect, the registrant’s
internal control over financial reporting; and
5
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Dated: February 17, 2023
/s/ Jeffrey S. Edwards
Jeffrey S. Edwards
Chairman and Chief Executive Officer
(Principal Executive Officer)
COOPER-STANDARD HOLDINGS INC.
Certification of the Principal Financial Officer
Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
(Section 302 of the Sarbanes-Oxley Act of 2002)
Exhibit 31.2
I, Jonathan P. Banas, certify that:
1
2
3
4
I have reviewed this annual report on Form 10-K of Cooper-Standard Holdings Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Dated: February 17, 2023
/s/ Jonathan P. Banas
Jonathan P. Banas
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32
In connection with the filing of this annual report on Form 10-K of Cooper-Standard Holdings Inc. (the "Company") for the period ended
December 31, 2022, with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: February 17, 2023
/s/ Jeffrey S. Edwards
Jeffrey S. Edwards
Chief Executive Officer
(Principal Executive Officer)
/s/ Jonathan P. Banas
Jonathan P. Banas
Chief Financial Officer
(Principal Financial Officer)