Cooper-Standard Holdings Inc. — Form 10-Q Summary
Period: Quarter ended March 31, 2019. The request metadata says 2018 Q1, but the filing itself is for 2019 Q1. Dollar figures below are in millions unless otherwise noted; the filing presents most figures in thousands.
Business context and results
Cooper-Standard manufactures sealing, fuel and brake delivery, and fluid transfer systems, primarily for global automotive OEMs. During the quarter it also operated an anti-vibration systems (AVS) business, sold on April 1, 2019.
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Sales | $880.0 | $967.4 |
| Gross profit / margin | $117.5 / 13.4% | $170.9 / 17.7% |
| Operating profit | $9.1 | $79.9 |
| Net income (loss) attributable to Cooper-Standard | $(3.5) | $56.8 |
| Diluted earnings (loss) per share | $(0.20) | $3.07 |
| Adjusted EBITDA, non-GAAP | $66.4 | $122.6 |
| Operating cash flow | $(1.8) | $(10.6) |
| Capital expenditures | $59.6 | $67.9 |
Financial position and liquidity
- March 31 cash and cash equivalents were $262.2, versus $265.0 at December 31, 2018. Cash, cash equivalents and restricted cash at quarter-end totaled $264.4.
- Total debt was $907.2, up from $831.1 at year-end; $169.1 was classified as payable within one year. The increase included higher short-term borrowings. The company reported compliance with debt covenants at quarter-end.
- Current assets were $1,352.4 and current liabilities were $940.1. Total assets were $2,814.8 and total liabilities were $1,960.7.
- Net cash used in investing was $60.0; financing provided $57.4, primarily reflecting a $65.8 increase in short-term debt. Cash, cash equivalents and restricted cash decreased $3.0 during the quarter.
- Receivables factoring was an off-balance-sheet arrangement: $94.8 outstanding at quarter-end. The company factored $173.7 of receivables during the quarter.
Changes and drivers versus prior year
- Sales declined 9.0%. The filing attributes a $105.9 decrease to volume/mix, net of customer price reductions, and a $36.5 decrease to foreign exchange, partly offset by $55.1 from other factors, including acquisitions.
- Gross profit fell $53.3 and margin contracted 4.3 percentage points. Management cited production mix, commodity and foreign-exchange pressures, and wage inflation; operational performance and acquisitions partly offset these factors.
- Adjusted EBITDA decreased $56.3. Segment adjusted EBITDA fell in North America ($29.2), Europe ($13.5), and Asia Pacific ($12.7); South America’s loss widened by $0.8.
- Restructuring charges rose to $17.7 from $7.1. Selling, administration and engineering expense increased to $87.0 from $80.4, reflecting acquired-business costs, inflation and AVS divestiture expenses, partly offset by salaried-employee savings. Net interest expense increased $2.1, primarily due to higher debt.
- Regional light-vehicle production declined year over year: North America 2.5%, Europe 4.9%, Asia Pacific 7.5%, and South America 4.7%, according to the filing’s cited industry data.
Outlook, unusual items and risks
- The AVS divestiture to Continental AG closed April 1, 2019, for a stated sale price of $265.5 million, subject to adjustments. Estimated net cash proceeds after taxes and transaction costs were $220–$225 million. The sale was not presented as a discontinued operation.
- Management expected 2019 capital expenditures of approximately $180–$190 million and stated that available cash, operating cash flow, ABL borrowings and receivables factoring should meet funding needs for the next 12 months. No full-year earnings guidance is provided in the supplied filing text.
- Management anticipated ongoing commodity-cost volatility and adverse material-cost effects from existing and potential tariffs. It also highlighted uncertain vehicle production and demand, trade tensions, Brexit, foreign-exchange movements, and regional economic risks.
- The 2019 effective tax rate was negative 181%; the company recorded tax expense despite a pretax loss, principally because it could not recognize tax benefits for losses in certain foreign jurisdictions.
- Environmental remediation reserves were approximately $5.1 million. The company did not believe material losses beyond amounts already recognized were reasonably possible as of March 31, 2019, but cautioned that legal and environmental outcomes are uncertain.
- Lease accounting adoption on January 1, 2019 added $102.3 million of operating lease right-of-use assets and corresponding lease liabilities at adoption; the company said adoption did not affect income or cash flows.
- The company repurchased 85,000 shares under its program for $5.9 million during the quarter; approximately $128.7 million of authorization remained at March 31.
Most important facts for investors to verify
- Confirm the intended reporting period: the supplied filing is Q1 2019, not Q1 2018.
- Track whether sales, gross margin and segment profitability stabilize as vehicle production, mix, currencies and material costs change.
- Verify actual AVS sale proceeds and how proceeds are used, including any effect on debt, liquidity and borrowing-base availability; the ABL borrowing base was reduced by $27.4 million after the sale.
- Monitor debt maturities, short-term borrowing needs, covenant headroom and reliance on receivables factoring, alongside the planned $180–$190 million of 2019 capital spending.
- Assess restructuring execution and costs, tax-valuation allowances, and the potential impact of tariffs, raw-material inflation, customer pricing and automotive production volatility.