Cooper-Standard Holdings Inc. — Form 10-Q Summary
Reporting period: The supplied filing is for the three months ended March 31, 2022, although the request metadata says 2021 Q1. The filing’s financial comparisons are against Q1 2021. Dollar figures below are in millions unless stated otherwise.
Business context and results
Cooper-Standard manufactures sealing, fuel and brake delivery, and fluid transfer systems, primarily for automotive OEMs. Q1 2022 sales were $613.0 million, down 8.4% from $669.0 million. Management attributed the decline to lower vehicle production from semiconductor shortages, foreign exchange, and deconsolidation of an Asia Pacific joint venture.
- Gross profit was $21.5 million, versus $68.3 million; gross margin fell to 3.5% from 10.2%.
- Operating loss was $40.4 million, compared with $11.7 million. Net loss attributable to Cooper-Standard was $61.4 million, or $3.58 per diluted share, versus $33.9 million, or $2.00 per share.
- Adjusted EBITDA, a non-GAAP measure, was $0.1 million, down from $38.5 million. Segment adjusted EBITDA was $17.5 million in North America, negative $14.7 million in Europe, negative $0.7 million in Asia Pacific, and negative $0.4 million in South America.
- Operating cash flow was negative $12.2 million, compared with negative $7.1 million. Capital expenditures were $32.3 million. Investing cash flow was positive $20.1 million, including $50.0 million of sale-leaseback proceeds; financing cash flow was negative $3.0 million.
Financial position and liquidity
- At March 31, cash and cash equivalents were $252.9 million; total cash, cash equivalents and restricted cash were $261.1 million. Total debt was $1,033.5 million, including $53.6 million current debt. Gross debt less cash and cash equivalents was approximately $780.6 million.
- Working capital was approximately $368.6 million, based on current assets of $1,093.9 million and current liabilities of $725.3 million. Inventories rose to $196.9 million from $158.1 million at year-end 2021.
- No loans were outstanding under the ABL Facility; stated borrowing availability was $142.7 million after applicable reserves and letters of credit. The company reported compliance with debt covenants at quarter-end.
- Management said cash on hand, operating cash flows, ABL borrowing capacity, and receivables factoring were expected to meet funding needs for the next 12 months. It anticipated 2022 capital expenditures of $90–$100 million.
Material changes, outlook and risks
- Gross profit declined $46.8 million. Management cited commodity and wage inflation, lower volume/mix, foreign exchange, and higher energy, transport, labor and overhead costs; customer cost recoveries, efficiencies, purchasing savings and restructuring savings partly offset these pressures.
- Global vehicle production and supply chains remained exposed to semiconductor shortages, COVID-related restrictions, and the Russia-Ukraine crisis. Management also highlighted inflation, energy costs, geopolitical uncertainty and weaker production in Europe. It noted China lockdowns could further disrupt supply chains.
- Q1 restructuring charges were $7.8 million, down from $21.0 million a year earlier. The company recorded a $2.3 million loss on deconsolidating an Asia Pacific joint venture, a $0.5 million impairment charge for idle European assets, and no comparable 2021 joint-venture deconsolidation charge.
- A European facility sale-leaseback generated $50.0 million of proceeds in Q1. The transaction became effective April 1, 2022; the company expected to record an approximately $32.5 million gain then.
- After quarter-end, the company received $28.5 million in U.S. tax refunds related to net operating loss carrybacks and expected approximately $23.0 million more during Q2 2022.
- Environmental reserves were $13.2 million at quarter-end, up from $10.0 million at December 31, 2021. The company said known legal matters were not expected to create a reasonably possible material loss beyond amounts recognized, while noting outcomes remain unpredictable.
- The company reported a 1% effective tax rate despite a $61.1 million pretax loss, principally because it could not recognize tax benefits for losses in the U.S. and certain foreign jurisdictions.
Important facts for investors to verify
- Confirm the intended period: the filing is Q1 2022, not Q1 2021.
- Track whether pricing recoveries and cost actions can offset inflation and whether vehicle production disruptions persist.
- Monitor operating cash flow, working-capital needs, capital spending, factoring usage and ABL availability against debt service requirements.
- Verify the timing and accounting for the sale-leaseback gain and the expected additional tax refunds.
- Assess the sustainability of results alongside non-GAAP adjusted EBITDA and its reconciliation to GAAP net loss.