Cooper-Standard Holdings Inc. — FY2022 Form 10-K
Period clarification: The request metadata says “2021 Q4,” but this filing is the annual report for the fiscal year ended December 31, 2022, filed February 17, 2023. The filing provides annual comparisons, not a standalone Q4 summary. Dollar amounts below are in millions unless stated otherwise.
Business context
Cooper-Standard manufactures sealing, fuel and brake delivery, and fluid transfer systems, primarily for passenger vehicles and light trucks. It reported four automotive segments: North America, Europe, Asia Pacific, and South America. Approximately 82% of 2022 sales were to OEMs; Ford, GM, and Stellantis together represented approximately 58% of sales. The company had about 23,000 employees and 132 facilities in 21 countries.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Sales | $2,525.4 | $2,330.2 |
| Gross profit / margin | $129.8 / 5.1% | $87.2 / 3.7% |
| Operating loss | $(105.0) | $(209.1) |
| Net loss attributable to Cooper-Standard | $(215.4); $(12.53) per share | $(322.8); $(18.94) per share |
| Adjusted EBITDA (non-GAAP) | $37.9 | $(8.0) |
| Cash used in operating activities | $(36.2) | $(115.5) |
| Capital expenditures | $71.2 | $96.1 |
| Cash and cash equivalents at year-end | $186.9 | $248.0 |
| Total debt at year-end | $1,036.2 | $1,036.7 |
Gross margin improved, but the company remained loss-making and cash-flow negative. 2022 operating cash flow included $54.3 million of IRS tax refunds related to net operating loss carrybacks. Year-end current assets were $945.6 million versus current liabilities of $631.6 million. The company also reported $155.2 million of effective ABL borrowing availability, with no ABL borrowings outstanding; availability is subject to borrowing-base limits and a springing covenant.
Material changes versus FY2021
- Sales rose 8.4%, primarily from higher vehicle production and mix as semiconductor constraints eased, plus customer price adjustments; foreign exchange and an Asia Pacific joint-venture deconsolidation partly offset growth.
- Gross profit increased $42.6 million. Volume/mix, manufacturing efficiencies, purchasing savings, and restructuring savings helped, while commodity, wage, energy, transportation, and other inflation remained a substantial drag.
- SG&A and engineering expense decreased to $199.5 million from $227.1 million. Impairment charges increased to $43.7 million from $25.6 million; restructuring charges declined to $18.3 million from $37.0 million.
- Operating cash use narrowed by $79.4 million, but remained negative. Cash and cash equivalents fell by $61.1 million year over year.
- Segment adjusted EBITDA improved to $37.9 million from a loss of $8.0 million. North America generated $70.8 million; Europe remained loss-making at $(37.1) million.
Outlook, financing, risks, and unusual items
- Management forecast 2023 capital expenditures of approximately $70–$80 million and expected reduced capital spending to continue. It said available cash, operating cash flows, ABL borrowing availability, and receivables factoring were expected to fund foreseeable requirements, while identifying significant external uncertainties.
- Management cited inflation, customer pricing pressure, supply-chain and labor disruptions, the Russia-Ukraine war, China-related disruptions, interest rates, and uncertain vehicle production as continuing pressures. S&P Global’s January 2023 forecast cited in the filing projected global light-vehicle production growth in 2023, including approximately 5.4% in North America and 5.3% in Europe.
- On January 27, 2023, after year-end, the company completed a refinancing: it issued $580 million of 13.50% first-lien notes due 2027 and exchanged $357.4 million of 2026 senior notes for 5.625% cash / 10.625% PIK third-lien notes due 2027. It used proceeds and cash on hand to repay the term loan and redeem the 2024 secured notes. The refinancing extended maturities and reduced required cash interest for the next two years, but introduced high-cost debt and potential payment-in-kind interest. $42.6 million of 2026 notes remained outstanding.
- ABL availability is constrained: if availability falls below the greater of $15 million or 10% of the borrowing base, a 1.00:1.00 fixed-charge coverage covenant applies. The company disclosed it would not have satisfied that covenant as of year-end if triggered, and therefore must manage borrowing to avoid triggering it.
- Unusual items included a $33.4 million gain on a European facility sale-leaseback, $43.7 million of non-cash asset impairments, and $18.3 million of restructuring charges. The auditor identified PPE impairment measurement as a critical audit matter; its opinion on the financial statements was unqualified, and it reported effective internal control over financial reporting.
- Other exposures include customer concentration, variable-rate interest costs, underfunded pensions, foreign-exchange movements, environmental and other claims, and reliance on OEM production and awarded programs. Environmental reserves were $10.8 million. The company disclosed an IRS tax dispute with potential tax and interest impact below $15 million if unsuccessful; management said it believes its position is supportable.
Important facts for investors to verify
- Review the refinancing documents and subsequent filings for actual cash versus PIK interest elections, debt balances, covenant terms, and refinancing costs.
- Monitor cash generation, ABL borrowing-base availability, and whether availability approaches the springing-covenant threshold.
- Assess whether customer recoveries and productivity savings can offset persistent material, wage, energy, and logistics inflation, particularly in Europe.
- Confirm 2023 vehicle production, customer volumes, and the timing and extent of any recovery in operating cash flow.
- Track outcomes of the U.S. pension-plan termination, impairment assumptions, and the IRS tax dispute.