NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
1. Overview
Basis of Presentation
Cooper-Standard Holdings Inc. (together with its consolidated subsidiaries, the “Company” or “Cooper Standard”), through its wholly-owned subsidiary, Cooper-Standard Automotive Inc. (“CSA U.S.”), is a leading manufacturer of sealing, fuel and brake delivery, and fluid transfer systems. The Company’s products are primarily for use in passenger vehicles and light trucks that are manufactured by global automotive original equipment manufacturers (“OEMs”) and replacement markets. The Company conducts substantially all of its activities through its subsidiaries.
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”), as filed with the SEC. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. These financial statements include all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of the Company. The operating results for the interim period ended June 30, 2022 are not necessarily indicative of results for the full year. In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
2. Deconsolidation and Divestiture
2022 Joint Venture Deconsolidation
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 three months ended March 31, 2022, the Company recorded a loss of $2,257, included in other income (expense), net in the condensed 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. On July 1, 2020, the Company completed the divestiture to Mutares SE & Co. KGaA (“Mutares”). During the three and six months ended June 30, 2021, the Company recorded subsequent adjustments resulting in a net gain of $891 and $696, respectively.
3. Revenue
Revenue is recognized for manufactured parts at a point in time, generally when products are shipped or delivered. The Company usually enters into agreements with customers to produce products at the beginning of a vehicle’s life. Blanket purchase orders received from customers and related documents generally establish the annual terms, including pricing, related to a vehicle model. Customers typically pay for parts based on customary business practices with payment terms generally between 30 and 90 days.
Revenue by customer group for the three months ended June 30, 2022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
| Passenger and Light Duty | $ | 323,532 | | | $ | 120,693 | | | $ | 85,338 | | | $ | 26,256 | | | $ | — | | | $ | 555,819 | |
| Commercial | 4,049 | | | 5,546 | | | 441 | | | 5 | | | 1,665 | | | 11,706 | |
| Other | 4,106 | | | 48 | | | — | | | — | | | 34,238 | | | 38,392 | |
| Revenue | $ | 331,687 | | | $ | 126,287 | | | $ | 85,779 | | | $ | 26,261 | | | $ | 35,903 | | | $ | 605,917 | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Revenue by customer group for the six months ended June 30, 2022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
| Passenger and Light Duty | $ | 638,119 | | | $ | 246,061 | | | $ | 188,742 | | | $ | 47,769 | | | $ | — | | | $ | 1,120,691 | |
| Commercial | 7,723 | | | 11,469 | | | 788 | | | 11 | | | 3,322 | | | 23,313 | |
| Other | 7,739 | | | 171 | | | 2 | | | — | | | 66,985 | | | 74,897 | |
| Revenue | $ | 653,581 | | | $ | 257,701 | | | $ | 189,532 | | | $ | 47,780 | | | $ | 70,307 | | | $ | 1,218,901 | |
Revenue by customer group for the three months ended June 30, 2021 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
| Passenger and Light Duty | $ | 240,111 | | | $ | 126,972 | | | $ | 102,950 | | | $ | 14,145 | | | $ | — | | | $ | 484,178 | |
| Commercial | 3,405 | | | 5,471 | | | 965 | | | 8 | | | 1,445 | | | 11,294 | |
| Other | 4,009 | | | 178 | | | — | | | — | | | 33,526 | | | 37,713 | |
| Revenue | $ | 247,525 | | | $ | 132,621 | | | $ | 103,915 | | | $ | 14,153 | | | $ | 34,971 | | | $ | 533,185 | |
Revenue by customer group for the six months ended June 30, 2021 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
| Passenger and Light Duty | $ | 571,724 | | | $ | 286,753 | | | $ | 215,991 | | | $ | 29,624 | | | $ | — | | | $ | 1,104,092 | |
| Commercial | 7,686 | | | 11,352 | | | 2,147 | | | 15 | | | 2,696 | | | 23,896 | |
| Other | 7,151 | | | 292 | | | 2 | | | — | | | 66,719 | | | 74,164 | |
| Revenue | $ | 586,561 | | | $ | 298,397 | | | $ | 218,140 | | | $ | 29,639 | | | $ | 69,415 | | | $ | 1,202,152 | |
The passenger and light duty group consists of sales to automotive OEMs and automotive suppliers, while the commercial group represents sales to OEMs of on- and off-highway commercial equipment and vehicles. The other customer group includes sales related to specialty and adjacent markets.
Substantially all of the Company’s revenues were generated from sealing, fuel and brake delivery and fluid transfer systems for use in passenger vehicles and light trucks manufactured by global OEMs.
A summary of the Company’s products is as follows:
| | | | | | | | |
| Product Line | | Description |
| Sealing Systems | | Protect vehicle interiors from weather, dust and noise intrusion for improved driving experience; provide aesthetic and functional class-A exterior surface treatment |
| Fuel & Brake Delivery Systems | | Sense, deliver and control fluids to fuel and brake systems |
| Fluid Transfer Systems | | Sense, deliver and control fluids and vapors for optimal powertrain & HVAC operation |
Revenue by product line for the three months ended June 30, 2022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
| Sealing systems | $ | 127,345 | | | $ | 101,951 | | | $ | 49,874 | | | $ | 19,235 | | | $ | — | | | $ | 298,405 | |
| Fuel and brake delivery systems | 107,614 | | | 21,638 | | | 20,481 | | | 4,814 | | | — | | | 154,547 | |
| Fluid transfer systems | 96,728 | | | 2,698 | | | 15,424 | | | 2,212 | | | — | | | 117,062 | |
| Other | — | | | — | | | — | | | — | | | 35,903 | | | 35,903 | |
| Revenue | $ | 331,687 | | | $ | 126,287 | | | $ | 85,779 | | | $ | 26,261 | | | $ | 35,903 | | | $ | 605,917 | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Revenue by product line for the six months ended June 30, 2022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
| Sealing systems | $ | 254,897 | | | $ | 207,085 | | | $ | 112,910 | | | $ | 35,345 | | | $ | — | | | $ | 610,237 | |
| Fuel and brake delivery systems | 210,335 | | | 44,676 | | | 44,228 | | | 8,375 | | | — | | | 307,614 | |
| Fluid transfer systems | 188,349 | | | 5,940 | | | 32,394 | | | 4,060 | | | — | | | 230,743 | |
| Other | — | | | — | | | — | | | — | | | 70,307 | | | 70,307 | |
| Revenue | $ | 653,581 | | | $ | 257,701 | | | $ | 189,532 | | | $ | 47,780 | | | $ | 70,307 | | | $ | 1,218,901 | |
Revenue by product line for the three months ended June 30, 2021 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
| Sealing systems | $ | 90,174 | | | $ | 104,878 | | | $ | 62,328 | | | $ | 11,533 | | | $ | — | | | $ | 268,913 | |
| Fuel and brake delivery systems | 82,389 | | | 23,991 | | | 25,166 | | | 2,148 | | | — | | | 133,694 | |
| Fluid transfer systems | 74,962 | | | 3,752 | | | 16,421 | | | 472 | | | — | | | 95,607 | |
| Other | — | | | — | | | — | | | — | | | 34,971 | | | 34,971 | |
| Revenue | $ | 247,525 | | | $ | 132,621 | | | $ | 103,915 | | | $ | 14,153 | | | $ | 34,971 | | | $ | 533,185 | |
Revenue by product line for the six months ended June 30, 2021 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Asia Pacific | | South America | | Corporate, Eliminations and Other | | Consolidated |
| Sealing systems | $ | 211,349 | | | $ | 234,239 | | | $ | 132,001 | | | $ | 22,807 | | | $ | — | | | $ | 600,396 | |
| Fuel and brake delivery systems | 195,045 | | | 54,781 | | | 53,535 | | | 5,013 | | | — | | | 308,374 | |
| Fluid transfer systems | 180,167 | | | 9,377 | | | 32,604 | | | 1,819 | | | — | | | 223,967 | |
| Other | — | | | — | | | — | | | — | | | 69,415 | | | 69,415 | |
| Revenue | $ | 586,561 | | | $ | 298,397 | | | $ | 218,140 | | | $ | 29,639 | | | $ | 69,415 | | | $ | 1,202,152 | |
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, which are infrequent, 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 the 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 six months ended June 30, 2022.
The Company’s contract liabilities consist of advance payments received and due from customers. Net contract assets (liabilities) consisted of the following:
| | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 | | Change |
| Contract assets | | $ | 3,454 | | | $ | — | | | $ | 3,454 | |
| Contract liabilities | | (14) | | | (143) | | | 129 | |
| Net contract assets (liabilities) | | $ | 3,440 | | | $ | (143) | | | $ | 3,583 | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Other
The Company, at times, enters into agreements that provide for lump sum payments to customers. These payment agreements are recorded as a reduction of revenue during the period the commitment is made. Amounts related to commitments of future payments to customers on the condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 were current liabilities of $12,236 and $12,045, respectively, and long-term liabilities of $6,485 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.
4. 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 three and six months ended June 30, 2022 and 2021 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| North America | $ | 353 | | | $ | 843 | | | $ | (86) | | | $ | 3,206 | |
| Europe | 1,704 | | | 9,774 | | | 10,135 | | | 26,171 | |
| Asia Pacific | 1,152 | | | 614 | | | 999 | | | 983 | |
| South America | 69 | | | 400 | | | 105 | | | 1,987 | |
| Total Automotive | 3,278 | | | 11,631 | | | 11,153 | | | 32,347 | |
| Corporate and other | 204 | | | — | | | 160 | | | 331 | |
| Total | $ | 3,482 | | | $ | 11,631 | | | $ | 11,313 | | | $ | 32,678 | |
Restructuring activity for the six months ended June 30, 2022 was as follows:
| | | | | | | | | | | | | | | | | | | |
| Employee Separation Costs | | Other Exit Costs | | | | Total |
| Balance as of December 31, 2021 | $ | 20,957 | | | $ | 5,627 | | | | | $ | 26,584 | |
| Expense | 7,150 | | | 4,163 | | | | | 11,313 | |
| Cash payments | (11,039) | | | (1,409) | | | | | (12,448) | |
| | | | | | | |
| Foreign exchange translation and other | (1,298) | | | 67 | | | | | (1,231) | |
| Balance as of June 30, 2022 | $ | 15,770 | | | $ | 8,448 | | | | | $ | 24,218 | |
Other exit costs for the six months ended June 30, 2022 included an immaterial gain on sale of fixed assets related to a closed facility in the Asia Pacific region.
5. Inventories
Inventories consist of the following:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Finished goods | $ | 50,188 | | | $ | 43,186 | |
| Work in process | 44,301 | | | 37,045 | |
| Raw materials and supplies | 89,079 | | | 77,844 | |
| $ | 183,568 | | | $ | 158,075 | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
6. Leases
The Company primarily has operating and finance leases for certain manufacturing facilities, corporate offices and certain equipment. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities and long-term operating lease liabilities on the Company’s condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, net, debt payable within one year, and long-term debt on the Company’s condensed consolidated balance sheets.
The components of lease expense were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Operating lease expense | $ | 7,238 | | | $ | 8,087 | | | $ | 14,624 | | | $ | 15,431 | |
| Short-term lease expense | 1,234 | | | 1,965 | | | 2,145 | | | 3,605 | |
| Variable lease expense | 178 | | | 181 | | | 466 | | | 429 | |
| Finance lease expense: | | | | | | | |
| Amortization of right-of-use assets | 485 | | | 521 | | | 977 | | | 1,067 | |
| Interest on lease liabilities | 330 | | | 372 | | | 662 | | | 738 | |
| Total lease expense | $ | 9,465 | | | $ | 11,126 | | | $ | 18,874 | | | $ | 21,270 | |
| | | | | | | |
Other information related to leases was as follows:
| | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | |
| | 2022 | | 2021 | | |
| Supplemental Cash Flows Information | | | | | | |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | | |
| Operating cash flows for operating leases | | $ | 15,037 | | | $ | 16,953 | | | |
| Operating cash flows for finance leases | | 668 | | | 734 | | | |
| Financing cash flows for finance leases | | 1,038 | | | 1,195 | | | |
| Non-cash right-of-use assets obtained in exchange for lease obligations: | | | | | | |
| Operating leases | | 9,958 | | | 7,355 | | | |
| Finance leases | | 113 | | | 572 | | | |
| | | | | | |
| Weighted Average Remaining Lease Term (in years) | | | | | | |
| Operating leases | | 7.4 | | 7.7 | | |
| Finance leases | | 9.3 | | 10.1 | | |
| | | | | | |
| Weighted Average Discount Rate | | | | | | |
| Operating leases | | 6.0 | % | | 5.5 | % | | |
| Finance leases | | 5.9 | % | | 5.8 | % | | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Future minimum lease payments under non-cancellable leases as of June 30, 2022 were as follows:
| | | | | | | | | | | | | | | | | | |
| Year | | | | | | Operating Leases | | Finance
Leases |
| Remainder of 2022 | | | | | | $ | 13,593 | | | $ | 1,542 | |
| 2023 | | | | | | 24,820 | | | 3,118 | |
| 2024 | | | | | | 18,858 | | | 3,348 | |
| 2025 | | | | | | 15,322 | | | 3,396 | |
| 2026 | | | | | | 11,214 | | | 3,137 | |
| Thereafter | | | | | | 49,149 | | | 17,025 | |
| Total future minimum lease payments | | | | | | 132,956 | | | 31,566 | |
| Less imputed interest | | | | | | (26,839) | | | (7,663) | |
| Total | | | | | | $ | 106,117 | | | $ | 23,903 | |
| | | | | | | | |
|
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Amounts recognized on the condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 were as follows:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Operating Leases | | | |
| | | |
| Operating lease right-of-use assets, net | $ | 102,407 | | | $ | 111,052 | |
| Current operating lease liabilities | 21,177 | | | 22,552 | |
| | | |
| Long-term operating lease liabilities | 84,940 | | | 92,760 | |
| | | |
| Finance Leases | | | |
| Debt payable within one year | 2,134 | | | 2,153 | |
| Long-term debt | 21,769 | | | 23,590 | |
As of June 30, 2022 and December 31, 2021, assets recorded under finance leases, net of accumulated depreciation were $23,513 and $25,690, respectively. As of June 30, 2022, the Company had one real estate lease that had not yet commenced with undiscounted lease payments of approximately $423.
7. Property, Plant and Equipment
Property, plant and equipment consists of the following:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Land and improvements | $ | 42,608 | | | $ | 44,495 | |
| Buildings and improvements | 263,685 | | | 285,240 | |
| Machinery and equipment | 1,231,726 | | | 1,269,330 | |
| Construction in progress | 71,884 | | | 80,868 | |
| 1,609,903 | | | 1,679,933 | |
| Accumulated depreciation | (907,396) | | | (895,585) | |
| Property, plant and equipment, net | $ | 702,507 | | | $ | 784,348 | |
During the three and six months ended June 30, 2022, the Company recorded impairment charges of $3 and $458, respectively, primarily due to idle assets in Europe. The fair value was determined using salvage value. During the three and six months ended June 30, 2021, the Company recorded impairment charges of $841 each period due to idle assets, primarily in a certain Europe location. The fair value was determined using salvage value.
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 June 30, 2022.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
In the first quarter of 2022, the Company closed on a sale-leaseback transaction related to one of its European facilities. The sale-leaseback was effective and control transferred to the Company on April 1, 2022. During the three months ended June 30, 2022, the Company 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 June 30, 2022.
8. Goodwill and Intangible Assets
Goodwill
Changes in the carrying amount of goodwill by reporting unit for the six months ended June 30, 2022 were as follows:
| | | | | | | | | | | | | | | | | | | |
| North America | | | | Industrial Specialty Group | | Total |
| Balance as of December 31, 2021 | $ | 128,246 | | | | | $ | 14,036 | | | $ | 142,282 | |
| | | | | | | |
| | | | | | | |
| Foreign exchange translation | (69) | | | | | — | | | (69) | |
| Balance as of June 30, 2022 | $ | 128,177 | | | | | $ | 14,036 | | | $ | 142,213 | |
Goodwill is tested for impairment by reporting unit annually or more frequently if events or circumstances indicate that an impairment may exist. There were no indicators of potential impairment during the six months ended June 30, 2022.
Intangible Assets
Intangible assets and accumulated amortization balances as of June 30, 2022 and December 31, 2021 were as follows:
| | | | | | | | | | | | | | | | | |
| Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount |
| Customer relationships | $ | 152,827 | | | $ | (127,439) | | | $ | 25,388 | |
| Other | 38,699 | | | (13,072) | | | 25,627 | |
| Balance as of June 30, 2022 | $ | 191,526 | | | $ | (140,511) | | | $ | 51,015 | |
| | | | | |
| Customer relationships | $ | 154,767 | | | $ | (126,626) | | | $ | 28,141 | |
| Other | 44,955 | | | (12,721) | | | 32,234 | |
| Balance as of December 31, 2021 | $ | 199,722 | | | $ | (139,347) | | | $ | 60,375 | |
The deconsolidation of a joint venture during the three months ended March 31, 2022 included the removal of intangible assets (primarily land use rights) with net carrying value of $5,258, which is reflected in the table above as of June 30, 2022.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
9. Debt
A summary of outstanding debt as of June 30, 2022 and December 31, 2021 is as follows:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Senior Notes | $ | 396,901 | | | $ | 396,544 | |
| Senior Secured Notes | 242,981 | | | 241,683 | |
| Term Loan | 319,999 | | | 321,212 | |
| | | |
| Finance leases | 23,903 | | | 25,743 | |
| Other borrowings | 46,459 | | | 51,533 | |
| Total debt | 1,030,243 | | | 1,036,715 | |
| Less current portion | (51,016) | | | (56,111) | |
| Total long-term debt | $ | 979,227 | | | $ | 980,604 | |
5.625% Senior Notes due 2026
In November 2016, the Company issued $400,000 aggregate principal amount of its 5.625% Senior Notes due 2026 (the “Senior Notes”). The Senior Notes mature on November 15, 2026. Interest on the Senior Notes is payable semi-annually in arrears in cash on May 15 and November 15 of each year.
Debt issuance costs related to the Senior Notes are amortized into interest expense over the term of the Senior Notes. As of June 30, 2022 and December 31, 2021, the Company had $3,099 and $3,456 of unamortized debt issuance costs, respectively, related to the Senior Notes, which are presented as direct deductions from the principal balance in the condensed consolidated balance sheets.
13.0% Senior Secured Notes due 2024
In May 2020, the Company issued $250,000 aggregate principal amount of its 13.0% Senior Secured Notes due 2024 (the “Senior Secured Notes”). The Senior Secured Notes mature on June 1, 2024. Interest on the Senior Secured Notes is payable semi-annually in arrears in cash on June 1 and December 1 of each year. The Company may redeem all or part of the Senior Secured Notes prior to maturity at the prices (inclusive of any applicable premium) set forth in the indenture.
The Company paid approximately $6,431 of debt issuance costs in connection with the transaction. Additionally, the Senior Secured Notes were issued at a discount of $5,000. As of June 30, 2022 and December 31, 2021, the Company had $3,856 and $4,594 of unamortized debt issuance costs, respectively, and $3,163 and $3,723 of unamortized original issue discount, respectively, related to the Senior Secured Notes, which are presented as direct deductions from the principal balance in the condensed consolidated balance sheets. Both the debt issuance costs and the original issue discount are amortized into interest expense over the term of the Senior Secured Notes.
Term Loan Facility
In November 2016, the Company entered into Amendment No. 1 to its senior term loan facility (“Term Loan Facility”), which provides for loans in an aggregate principal amount of $340,000. On May 2, 2017, the Company entered into Amendment No. 2 to the Term Loan Facility to modify the interest rate. Subsequently, on March 6, 2018, the Company entered into Amendment No. 3 to the Term Loan Facility to further modify the interest rate. In accordance with this amendment, borrowings under the Term Loan Facility bear interest, at the Company’s option, at either (1) with respect to Eurodollar rate loans, the greater of the applicable Eurodollar rate and 0.75% plus 2.0% per annum, or (2) with respect to base rate loans, the base rate, (which is the highest of the then current federal funds rate plus 0.5%, the prime rate most recently announced by the administrative agent under the term loan, and the one-month Eurodollar rate plus 1.0%) plus 1.0% per annum. The Term Loan Facility matures on November 2, 2023, unless earlier terminated.
As of June 30, 2022 and December 31, 2021, the Company had $791 and $1,087 of unamortized debt issuance costs, respectively, and $509 and $701 of unamortized original issue discount, respectively, related to the Term Loan Facility, which are presented as direct deductions from the principal balance in the condensed consolidated balance sheets. Both the debt issuance costs and the original issue discount are amortized into interest expense over the term of the Term Loan Facility.
ABL Facility
In November 2016, the Company entered into a Third Amended and Restated Loan Agreement of its ABL Facility, which provided an aggregate revolving loan availability of up to $210,000, subject to borrowing base availability. In March 2020, the Company entered into the First Amendment of the Third Amended and Restated Loan Agreement (“the Amendment”). As a result of the Amendment, the senior asset-based revolving credit facility (“ABL Facility”) maturity was extended to March
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
2025 and the aggregate revolving loan availability was reduced to $180,000. The aggregate revolving loan availability includes a $100,000 letter of credit sub-facility and a $25,000 swing line sub-facility. The ABL Facility also provides for an uncommitted $100,000 incremental loan facility, for a potential total ABL Facility of $280,000, if requested by the borrowers under the ABL Facility and the lenders agree to fund such increase. No consent of any lender is required to effect any such increase, except for those participating in the increase.
As of June 30, 2022, there were no loans outstanding under the ABL Facility. The Company’s borrowing base was $180,000. Net of the greater of 10% of the borrowing base or $15,000 that cannot be borrowed without triggering the fixed charge coverage ratio maintenance covenant and $5,753 of outstanding letters of credit, the Company effectively had $156,247 available for borrowing under its ABL facility.
Any borrowings under the ABL Facility will mature, and the commitments of the lenders under the ABL Facility will terminate, on the earlier of March 24, 2025 or the date 91 days prior to the maturity date of the Term Loan Facility (or another fixed asset facility replacing the Term Loan Facility).
As of June 30, 2022 and December 31, 2021, the Company had $659 and $782, respectively, of unamortized debt issuance costs related to the ABL Facility, which are presented in other assets in the condensed consolidated balance sheets.
Debt Covenants
The Company was in compliance with all covenants of the Senior Notes, Senior Secured Notes, Term Loan Facility and ABL Facility as of June 30, 2022.
Other
Other borrowings as of June 30, 2022 and December 31, 2021 reflect borrowings under local bank lines classified in debt payable within one year on the condensed consolidated balance sheet.
10. Fair Value Measurements and Financial Instruments
Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy is utilized, which prioritizes the inputs used in measuring fair value as follows:
| | | | | |
| Level 1: | Observable inputs such as quoted prices in active markets; |
| Level 2: | Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
| Level 3: | Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Items Measured at Fair Value on a Recurring Basis
Estimates of the fair value of foreign currency derivative instruments are determined using exchange traded prices and rates. The Company also considers the risk of non-performance in the estimation of fair value and includes an adjustment for non-performance risk in the measure of fair value of derivative instruments. In certain instances where market data is not available, the Company uses management judgment to develop assumptions that are used to determine fair value. Fair value measurements and the fair value hierarchy level for the Company’s assets and liabilities measured or disclosed at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 were as follows:
| | | | | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 | | Input |
| Forward foreign exchange contracts - other current assets | $ | 1,380 | | | $ | 647 | | | Level 2 |
| Forward foreign exchange contracts - accrued liabilities | (923) | | | (1,535) | | | Level 2 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Items Measured at Fair Value on a Nonrecurring Basis
In addition to items that are measured at fair value on a recurring basis, the Company measures certain assets and liabilities at fair value on a nonrecurring basis, which are not included in the table above. As these nonrecurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy. For further information on assets and liabilities measured at fair value on a nonrecurring basis see Note 2. “Deconsolidation and Divestiture” and Note 7. “Property, Plant and Equipment.”
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
Items Not Carried at Fair Value
Fair values of the Company’s Senior Notes, Senior Secured Notes and Term Loan Facility were as follows:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Aggregate fair value | $ | 717,271 | | | $ | 899,909 | |
Aggregate carrying value (1) | 971,300 | | | 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.
Derivative Instruments and Hedging Activities
The Company is exposed to fluctuations in foreign currency exchange rates, interest rates and commodity prices. The Company enters into derivative instruments primarily to hedge portions of its forecasted foreign currency denominated cash flows and designates these derivative instruments as cash flow hedges in order to qualify for hedge accounting.
The Company formally documents its hedge relationships, including the identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the cash flow hedges. The Company also formally assesses whether a cash flow hedge is highly effective in offsetting changes in the cash flows of the hedged item. Derivatives are recorded at fair value in other current assets, other assets, accrued liabilities and other long-term liabilities. For a cash flow hedge, the change in fair value of the derivative is recorded in accumulated other comprehensive income (loss) (“AOCI”) in the condensed 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 condensed consolidated statements of operations.
The Company is exposed to credit risk in the event of nonperformance by its counterparties on its derivative financial instruments. The Company mitigates this credit risk exposure by entering into agreements directly with major financial institutions with high credit standards that are expected to fully satisfy their obligations under the contracts.
Cash Flow Hedges
Forward Foreign Exchange Contracts - The Company uses forward contracts to mitigate the potential volatility to earnings and cash flows arising from changes in currency exchange rates that impact the Company’s foreign currency transactions. The principal currencies hedged by the Company include various European currencies, the Canadian Dollar, and the Mexican Peso. As of June 30, 2022 and December 31, 2021, the notional amount of these contracts was $59,626 and $136,103, respectively, and consisted of hedges of transactions up to December 2022.
Pretax amounts related to the Company’s cash flow hedges that were recognized in other comprehensive income (loss) (“OCI”) were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Gain (Loss) Recognized in OCI |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Forward foreign exchange contracts | $ | (515) | | | $ | 1,190 | | | $ | 1,896 | | | $ | 642 | |
| | | | | | | |
| | | | | | | |
Pretax amounts related to the Company’s cash flow hedges that were reclassified from AOCI and recognized in cost of products sold were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Gain (Loss) Reclassified from AOCI to Income |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Forward foreign exchange contracts | $ | 519 | | | $ | 349 | | | $ | 562 | | | $ | 537 | |
| | | | | | | |
| | | | | | | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
11. Accounts Receivable Factoring
As a part of its working capital management, the Company sells certain receivables through a single 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 Term Loan Facility and the indentures governing the Senior Notes and Senior Secured Notes. The European factoring facility, which was renewed in March 2020, allows the Company to factor up to €120 million of its Euro-denominated accounts receivable, accelerating access to cash and reducing credit risk. The factoring facility expires in December 2023.
Costs incurred on the sale of receivables are recorded in other expense, net in the condensed consolidated statements of operations. The sale of receivables under this contract is considered an off-balance sheet arrangement to the Company and is accounted for as a true sale and is excluded from accounts receivable in the condensed consolidated balance sheet. Amounts outstanding under receivable transfer agreements entered into by various locations as of the period end were as follows:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Off-balance sheet arrangements | $ | 59,017 | | | $ | 52,743 | |
Accounts receivable factored and related costs throughout the period were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Off-Balance Sheet Arrangements | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | | | | |
| 2022 | | 2021 | | 2022 | | 2021 | | | | | | | | |
| Accounts receivable factored | $ | 90,332 | | | $ | 100,046 | | | $ | 172,882 | | | $ | 217,317 | | | | | | | | | |
| Costs | 114 | | | 150 | | | 239 | | | 304 | | | | | | | | | |
As of June 30, 2022 and December 31, 2021, cash collections on behalf of the Factor that have yet to be remitted were $5,282 and $673, respectively, and are reflected in other current assets as restricted cash in the condensed consolidated balance sheet.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
12. Pension and Postretirement Benefits Other Than Pensions
The components of net periodic benefit (income) cost for the Company’s defined benefit plans and other postretirement benefit plans were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits |
| Three Months Ended June 30, |
| 2022 | | 2021 |
| U.S. | | Non-U.S. | | U.S. | | Non-U.S. |
| Service cost | $ | 193 | | | $ | 692 | | | $ | 223 | | | $ | 913 | |
| Interest cost | 1,766 | | | 716 | | | 1,629 | | | 660 | |
| Expected return on plan assets | (2,323) | | | (252) | | | (3,564) | | | (344) | |
| Amortization of prior service cost and actuarial loss | 222 | | | 396 | | | 418 | | | 933 | |
| Other | — | | | — | | | — | | | 125 | |
| Net periodic benefit (income) cost | $ | (142) | | | $ | 1,552 | | | $ | (1,294) | | | $ | 2,287 | |
| Pension Benefits |
| Six Months Ended June 30, |
| 2022 | | 2021 |
| U.S. | | Non-U.S. | | U.S. | | Non-U.S. |
| Service cost | $ | 386 | | | $ | 1,413 | | | $ | 446 | | | $ | 1,827 | |
| Interest cost | 3,532 | | | 1,449 | | | 3,258 | | | 1,308 | |
| Expected return on plan assets | (4,646) | | | (506) | | | (7,128) | | | (678) | |
| Amortization of prior service cost and actuarial loss | 444 | | | 811 | | | 836 | | | 1,865 | |
| Other | — | | | — | | | — | | | 125 | |
| | | | | | | |
| Net periodic benefit (income) cost | $ | (284) | | | $ | 3,167 | | | $ | (2,588) | | | $ | 4,447 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Other Postretirement Benefits |
| Three Months Ended June 30, |
| 2022 | | 2021 |
| U.S. | | Non-U.S. | | U.S. | | Non-U.S. |
| Service cost | $ | 22 | | | $ | 57 | | | $ | 26 | | | $ | 93 | |
| Interest cost | 140 | | | 167 | | | 133 | | | 183 | |
| Amortization of prior service credit and actuarial (gain) loss | (394) | | | 42 | | | (349) | | | 196 | |
| | | | | | | |
| Net periodic benefit (income) cost | $ | (232) | | | $ | 266 | | | $ | (190) | | | $ | 472 | |
| Other Postretirement Benefits |
| Six Months Ended June 30, |
| 2022 | | 2021 |
| U.S. | | Non-U.S. | | U.S. | | Non-U.S. |
| Service cost | $ | 44 | | | $ | 115 | | | $ | 52 | | | $ | 183 | |
| Interest cost | 280 | | | 335 | | | 266 | | | 360 | |
| Amortization of prior service credit and actuarial (gain) loss | (788) | | | 84 | | | (698) | | | 386 | |
| | | | | | | |
| Net periodic benefit (income) cost | $ | (464) | | | $ | 534 | | | $ | (380) | | | $ | 929 | |
The service cost component of net periodic benefit (income) cost is included in cost of products sold and selling, administrative and engineering expenses in the condensed consolidated statements of operations. All other components of net periodic benefit (income) cost are included in other income (expense), net in the condensed consolidated statements of operations for all periods presented.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
13. Other Income (Expense), Net
The components of other income (expense), net were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Deconsolidation of joint venture (1) | $ | — | | | $ | — | | | $ | (2,257) | | | $ | — | |
| Foreign currency (losses) gains | (1,136) | | | 1,114 | | | 344 | | | (4,150) | |
| Components of net periodic (cost) benefit income other than service cost | (480) | | | (20) | | | (995) | | | 100 | |
| Factoring costs | (114) | | | (150) | | | (239) | | | (304) | |
| Miscellaneous income | 221 | | | 418 | | | 427 | | | 627 | |
| Other (expense) income, net | $ | (1,509) | | | $ | 1,362 | | | $ | (2,720) | | | $ | (3,727) | |
(1)Loss attributable to deconsolidation of a joint venture in the Asia Pacific region, which required adjustment to fair value.
14. Income Taxes
The Company determines its effective tax rate each quarter based upon its estimated annual effective tax rate. The Company records the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year where no tax benefit can be recognized are excluded from the estimated annual effective tax rate.
Income tax expense (benefit), loss before income taxes and the corresponding effective tax rate for the three and six months ended June 30, 2022 and 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Income tax expense (benefit) | $ | 2,005 | | | $ | (17,459) | | | $ | 2,657 | | | $ | (16,523) | |
| Loss before income taxes | (32,146) | | | (81,988) | | | (93,284) | | | (115,765) | |
| Effective tax rate | (6) | % | | 21 | % | | (3) | % | | 14 | % |
The effective tax rate for the three and six months ended June 30, 2022 varied from the effective tax rate for the three and six months ended June 30, 2021 primarily due to the geographic mix of pre-tax losses, the inability to record a benefit for pre-tax losses in the U.S. and certain foreign jurisdictions due to valuation allowances, discrete tax impacts of the gain on sale transaction in Europe, and other tax reserve changes during the three and six months ended June 30, 2022.
The income tax rate for the three and six months ended June 30, 2022 and 2021 varied from the U.S. statutory rate primarily due to the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign jurisdictions, tax credits, the impact of income taxes on foreign earnings taxed at rates varying from the U.S. statutory rate, and other permanent items.
During the three months ended June 30, 2022, the Company received $51,396 in cash payments from the United States Internal Revenue Service for tax refunds related to net operating loss carrybacks.
The Company’s current and future provision for income taxes is impacted by changes in valuation allowances in the U.S. and certain foreign jurisdictions. The Company’s future provision for income taxes will include no tax benefit with respect to losses incurred and, except for certain jurisdictions, no tax expense with respect to income generated in these countries until the respective valuation allowances are eliminated. Accordingly, income taxes are impacted by changes in valuation allowances and the mix of earnings among jurisdictions. The Company evaluates the realizability of its deferred tax assets on a quarterly basis. In completing this evaluation, the Company considers all available evidence in order to determine, based on the weight of the evidence, if a valuation allowance for its deferred tax assets is necessary. Such evidence includes historical results, future reversals of existing taxable temporary differences and expectations for future taxable income (exclusive of the reversal of temporary differences and carryforwards), as well as the implementation of feasible and prudent tax planning strategies. If, based on the weight of the evidence, it is more likely than not that all or a portion of the Company’s deferred tax assets will not be realized, a valuation allowance is recorded. If operating results improve or decline on a continual basis in a particular jurisdiction, the Company’s decision regarding the need for a valuation allowance could change, resulting in either the initial recognition or reversal of a valuation allowance in that jurisdiction, which could have a significant impact on income tax
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
expense in the period recognized and subsequent periods. In determining the provision for income taxes for financial statement purposes, the Company makes certain estimates and judgments, which affect its evaluation of the carrying value of its deferred tax assets, as well as its calculation of certain tax liabilities.
15. Net Loss Per Share Attributable to Cooper-Standard Holdings Inc.
Basic net loss per share attributable to Cooper-Standard Holdings Inc. was computed by dividing net loss attributable to Cooper-Standard Holdings Inc. by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share attributable to Cooper-Standard Holdings Inc. was computed using the treasury stock method by dividing diluted net loss available to Cooper-Standard Holdings Inc. by the weighted average number of shares of common stock outstanding, including the dilutive effect of common stock equivalents, using the average share price during the period.
Information used to compute basic and diluted net loss per share attributable to Cooper-Standard Holdings Inc. was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | |
| | | | | | | |
| Net loss available to Cooper-Standard Holdings Inc. common stockholders | $ | (33,247) | | | $ | (63,611) | | | $ | (94,607) | | | $ | (97,475) | |
| | | | | | | |
| Basic weighted average shares of common stock outstanding | 17,189,128 | | | 17,031,113 | | | 17,162,915 | | | 16,991,372 | |
| Dilutive effect of common stock equivalents | — | | | — | | | — | | | — | |
| Diluted weighted average shares of common stock outstanding | 17,189,128 | | | 17,031,113 | | | 17,162,915 | | | 16,991,372 | |
| | | | | | | |
| Basic net loss per share attributable to Cooper-Standard Holdings Inc. | $ | (1.93) | | | $ | (3.73) | | | $ | (5.51) | | | $ | (5.74) | |
| | | | | | | |
| Diluted net loss per share attributable to Cooper-Standard Holdings Inc. | $ | (1.93) | | | $ | (3.73) | | | $ | (5.51) | | | $ | (5.74) | |
Securities excluded from the calculation of diluted loss per share were approximately 26,000 and 164,000 for the three months ended June 30, 2022 and 2021, respectively, and 67,000 and 172,000 for the six months ended June 30, 2022 and 2021, respectively, because the inclusion of such securities in the calculation would have been anti-dilutive.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
16. Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss by component, net of related tax, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2022 | | 2021 | | 2022 | | 2021 | |
| Foreign currency translation adjustment | | | | | | | | |
| Balance at beginning of period | $ | (130,375) | | | $ | (142,899) | | | $ | (138,751) | | | $ | (136,579) | | |
| Other comprehensive (loss) income before reclassifications | (17,361) | | (1) | 8,522 | | (1) | (8,691) | | (1) | 2,202 | | (1) |
| Amounts reclassified from accumulated other comprehensive loss | — | | | — | | | (294) | | | — | | |
| Balance at end of period | $ | (147,736) | | | $ | (134,377) | | | $ | (147,736) | | | $ | (134,377) | | |
| Benefit plan liabilities | | | | | | | | |
| Balance at beginning of period | $ | (64,319) | | | $ | (103,340) | | | $ | (65,303) | | | $ | (106,079) | | |
| Other comprehensive income (loss) before reclassifications | 1,831 | | (2) | (602) | | (2) | 2,538 | | (2) | 1,041 | | (2) |
| Amounts reclassified from accumulated other comprehensive loss | 232 | | (3) | 1,213 | | (4) | 509 | | (5) | 2,309 | | (6) |
| Balance at end of period | $ | (62,256) | | | $ | (102,729) | | | $ | (62,256) | | | $ | (102,729) | | |
| Fair value change of derivatives | | | | | | | | |
| Balance at beginning of period | $ | 1,301 | | | $ | 191 | | | $ | (1,130) | | | $ | 762 | | |
| Other comprehensive (loss) income before reclassifications | (657) | | (7) | 1,008 | | (7) | 1,815 | | (7) | 576 | | (7) |
| Amounts reclassified from accumulated other comprehensive loss | (366) | | (8) | (257) | | (8) | (407) | | (8) | (396) | | (8) |
| Balance at end of period | $ | 278 | | | $ | 942 | | | $ | 278 | | | $ | 942 | | |
| Accumulated other comprehensive loss, ending balance | $ | (209,714) | | | $ | (236,164) | | | $ | (209,714) | | | $ | (236,164) | | |
(1)Includes other comprehensive (loss) income related to intra-entity foreign currency balances that are of a long-term investment nature of $(12,877) and $7,668 for the three months ended June 30, 2022 and 2021, respectively, and $(4,235) and $3,279 for the six months ended June 30, 2022 and 2021, respectively.
(2)Net of tax benefit of $(63) and $(32) for the three months ended June 30, 2022 and 2021, respectively, and $(244) and $(277) for the six months ended June 30, 2022 and 2021, respectively.
(3)Includes the effect of the amortization of actuarial losses of $192, and amortization of prior service cost of $44, net of tax of $4.
(4)Includes the effect of the amortization of actuarial losses of $1,128, amortization of prior service cost of $63, and impact of curtailment of $117, net of tax of $95.
(5)Includes the effect of the amortization of actuarial losses of $424, and amortization of prior service cost of $93, net of tax of $8.
(6)Includes the effect of the amortization of actuarial losses of $2,252, amortization of prior service cost of $128, and impact of curtailment of $117, net of tax of $188.
(7)Net of tax expense of $142 and $182 for the three months ended June 30, 2022 and 2021, respectively, and $81 and $66 for the six months ended June 30, 2022 and 2021, respectively.
(8)Net of tax expense of $153 and $92 for the three months ended June 30, 2022 and 2021, respectively, and $155 and $141 for the six months ended June 30, 2022 and 2021, respectively.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
17. Common Stock
Share Repurchase Program
In June 2018, the Company’s Board of Directors approved a common stock repurchase program (the “2018 Program”) authorizing the Company to repurchase, in the aggregate, up to $150,000 of its outstanding common stock. Under the 2018 Program, repurchases may be made on the open market, through private transactions, accelerated share repurchases, round lot or block transactions on the New York Stock Exchange or otherwise, as determined by management and in accordance with prevailing market conditions and federal securities laws and regulations. The Company expects to fund any future repurchases from cash on hand and future cash flows from operations. The Company is not obligated to acquire a particular amount of securities, and the 2018 Program may be discontinued at any time at the Company’s discretion. The 2018 Program became effective in November 2018. As of June 30, 2022, the Company had approximately $98,720 of repurchase authorization remaining under the 2018 Program. The Company did not make any repurchases under the 2018 Program during the six months ended June 30, 2022 or 2021.
18. Share-Based Compensation
The Company’s long-term incentive plans allow for the grant of various types of share-based awards to key employees and directors of the Company and its affiliates. The Company generally awards grants on an annual basis.
In February 2022, the Company granted Restricted Stock Units (“RSUs”) and Performance Units (“PUs”). The number of PUs that will vest depends on the Company’s achievement of target performance goals related to the Company’s return on invested capital (“ROIC”) and total shareholder return, which may range from 0% to 200% of the target award amount. The PUs tied to total shareholder return cliff vest at the end of a three year performance period. The PUs tied to ROIC cliff vest one year after the end of their individual performance periods. The RSUs vest ratably over three years.
Share-based compensation expense was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| PUs | $ | 242 | | | $ | (645) | | | $ | 312 | | | $ | (306) | |
| RSUs | 497 | | | 885 | | | 621 | | | 2,131 | |
| Stock options | 302 | | | 584 | | | 692 | | | 1,177 | |
| Total | $ | 1,041 | | | $ | 824 | | | $ | 1,625 | | | $ | 3,002 | |
19. Commitments and Contingencies
The Company is periodically involved in claims, litigation and various legal matters that arise in the ordinary course of business. The Company accrues for litigation exposure when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified. As of June 30, 2022, the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for claims, litigation and various legal matters, if any, has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, the Company’s financial condition, results of operations or cash flows could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters.
In addition, the Company conducts and monitors environmental investigations and remedial actions at certain locations. As of June 30, 2022 and December 31, 2021, the Company had approximately $12,490 and $9,965, respectively, reserved in accrued liabilities and other liabilities on the condensed consolidated balance sheets on an undiscounted basis. While the Company’s costs to defend and settle known claims arising under environmental laws have not been material in the past and are not currently estimated to have a material adverse effect on the Company’s financial condition, such costs may be material to the Company’s financial statements in the future.
20. Segment Reporting
The Company’s business is organized in the following reportable segments: North America, Europe, Asia Pacific and South America. All other business activities are reported in Corporate, eliminations and other. The Company’s principal products within each of the reportable segments are sealing, fuel and brake delivery, and fluid transfer systems.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
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.
Certain financial information on the Company’s reportable segments was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, |
| | 2022 | | 2021 |
| | External Sales | | Intersegment Sales | | Adjusted EBITDA | | External Sales | | Intersegment Sales | | Adjusted EBITDA |
| North America | | $ | 331,687 | | | $ | 2,747 | | | $ | 15,441 | | | $ | 247,525 | | | $ | 2,140 | | | $ | 756 | |
| Europe | | 126,287 | | | 1,541 | | | (15,316) | | | 132,621 | | | 2,836 | | | (14,391) | |
| Asia Pacific | | 85,779 | | | 908 | | | (7,799) | | | 103,915 | | | 858 | | | (2,302) | |
| South America | | 26,261 | | | — | | | (1,298) | | | 14,153 | | | 3 | | | (726) | |
| Total Automotive | | 570,014 | | | 5,196 | | | (8,972) | | | 498,214 | | | 5,837 | | | (16,663) | |
| Corporate, eliminations and other | | 35,903 | | | (5,196) | | | (1,402) | | | 34,971 | | | (5,837) | | | 1,937 | |
| Consolidated | | $ | 605,917 | | | $ | — | | | $ | (10,374) | | | $ | 533,185 | | | $ | — | | | $ | (14,726) | |
| | |
| | Six Months Ended June 30, |
| | 2022 | | 2021 |
| | External Sales | | Intersegment Sales | | Adjusted EBITDA | | External Sales | | Intersegment Sales | | Adjusted EBITDA |
| North America | | $ | 653,581 | | | $ | 6,277 | | | $ | 32,937 | | | $ | 586,561 | | | $ | 4,773 | | | $ | 41,989 | |
| Europe | | 257,701 | | | 3,910 | | | (29,973) | | | 298,397 | | | 5,815 | | | (15,880) | |
| Asia Pacific | | 189,532 | | | 1,533 | | | (8,541) | | | 218,140 | | | 1,488 | | | 1,250 | |
| South America | | 47,780 | | | 5 | | | (1,707) | | | 29,639 | | | 15 | | | (3,334) | |
| Total Automotive | | 1,148,594 | | | 11,725 | | | (7,284) | | | 1,132,737 | | | 12,091 | | | 24,025 | |
| Corporate, eliminations and other | | 70,307 | | | (11,725) | | | (2,945) | | | 69,415 | | | (12,091) | | | (211) | |
| Consolidated | | $ | 1,218,901 | | | $ | — | | | $ | (10,229) | | | $ | 1,202,152 | | | $ | — | | | $ | 23,814 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Adjusted EBITDA | | $ | (10,374) | | | $ | (14,726) | | | $ | (10,229) | | | $ | 23,814 | |
| Restructuring charges | | (3,482) | | | (11,631) | | | (11,313) | | | (32,678) | |
| Deconsolidation of joint venture | | — | | | — | | | (2,257) | | | — | |
| Impairment charges | | (3) | | | (841) | | | (458) | | | (841) | |
| (Loss) gain on sale of business, net | | — | | | (195) | | | — | | | 696 | |
| Gain on sale of fixed assets, net | | 33,391 | | | — | | | 33,391 | | | — | |
| Lease termination costs | | — | | | (108) | | | — | | | (108) | |
| Indirect tax adjustments | | (908) | | | — | | | (908) | | | — | |
| | | | | | | | |
| | | | | | | | |
| EBITDA | | $ | 18,624 | | | $ | (27,501) | | | $ | 8,226 | | | $ | (9,117) | |
| Income tax expense | | (2,005) | | | 17,459 | | | (2,657) | | | 16,523 | |
| Interest expense, net of interest income | | (18,454) | | | (18,125) | | | (36,631) | | | (35,909) | |
| Depreciation and amortization | | (31,412) | | | (35,444) | | | (63,545) | | | (68,972) | |
| Net loss attributable to Cooper-Standard Holdings Inc. | | $ | (33,247) | | | $ | (63,611) | | | $ | (94,607) | | | $ | (97,475) | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
(Dollar amounts in thousands except per share and share amounts)
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Segment assets: | | | |
| North America | $ | 897,898 | | | $ | 885,517 | |
| Europe | 395,273 | | | 372,097 | |
| Asia Pacific | 445,606 | | | 510,524 | |
| South America | 76,679 | | | 61,479 | |
| Total Automotive | 1,815,456 | | | 1,829,617 | |
| Corporate, eliminations and other | 324,926 | | | 396,876 | |
| Consolidated | $ | 2,140,382 | | | $ | 2,226,493 | |