Cooper-Standard Holdings Inc. — Form 10-Q Summary
Reporting period: Three months ended March 31, 2023. The request metadata says 2022 Q1, but the supplied filing is for 2023 Q1; comparisons below are against Q1 2022. Cooper-Standard manufactures automotive sealing and fluid-handling systems, primarily for vehicle OEMs.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Sales | $682.5 million | $613.0 million |
| Gross profit / margin | $41.8 million / 6.1% | $21.5 million / 3.5% |
| Operating loss | $14.4 million | $40.4 million |
| Net loss attributable to Cooper-Standard | $130.4 million; $7.57 per share | $61.4 million; $3.58 per share |
| Adjusted EBITDA | $12.5 million | $0.1 million |
| Net cash from (used in) operations | $30.4 million | ($12.2 million) |
| Capital expenditures | $29.3 million | $32.3 million |
Sales rose 11.3%, chiefly from increased vehicle production and volume/mix, partly offset by foreign exchange. Gross profit improved on volume/mix, customer cost recoveries, and manufacturing and purchasing savings; commodity, wage and energy inflation weighed on results. North America, Asia Pacific and South America reported positive segment adjusted EBITDA; Europe remained loss-making at $12.4 million. Adjusted EBITDA is a non-GAAP measure.
At March 31, cash and cash equivalents were $105.8 million, down from $186.9 million at year-end; cash, cash equivalents and restricted cash totaled $115.6 million. Total debt was $1.050 billion, including $52.8 million due within one year, versus $1.036 billion at December 31. Current liabilities exceeded current assets by approximately $207.5 million, and total equity was negative $26.8 million. The company reported $149.0 million of effective unused ABL availability, with no ABL borrowings, and stated it expected available funding sources to cover foreseeable requirements, subject to operating and market risks.
Material changes and unusual items
- January refinancing issued $580 million of 13.50% cash-pay/PIK-toggle first-lien notes due 2027 and exchanged $357.4 million of existing 2026 notes for 5.625% cash-pay/10.625% PIK-toggle third-lien notes due 2027. The company repaid its term loan and redeemed its 2024 secured notes. It said the transaction extended maturities and reduced required cash interest for the next two years.
- The refinancing generated an $81.9 million reported loss, contributing substantially to the larger GAAP net loss. Net interest expense also increased $12.0 million year over year, primarily due to higher interest rates on new debt. Total refinancing fees were $90.7 million.
- Operating cash flow improved by $42.6 million year over year, attributed primarily to working-capital improvements and better operating performance. Financing activities used $75.7 million, largely reflecting the refinancing; Q1 2022 investing cash flow had included $50.0 million of sale-leaseback proceeds.
- Shareholders’ equity moved from $107.7 million at year-end to a deficit, primarily reflecting the quarterly loss. The company accrued no tax benefit on its large pretax loss, citing valuation allowances and other factors.
Outlook, risks and contingencies
The filing provides no specific sales or earnings guidance. Management forecast 2023 capital expenditures of approximately $70–$80 million and said it would continue efforts to preserve cash and reduce capital spending. It described supply conditions as improving but highlighted uncertainty from inflation, interest rates, energy costs, geopolitical events, and vehicle-production trends. Customer recoveries may not fully offset cost inflation.
Key risks include substantial indebtedness and debt-service costs; dependence on future operating performance, ABL borrowing-base availability and receivables factoring; automotive production and supply-chain volatility; foreign exchange and commodity exposure; and execution of pricing and cost-saving initiatives. The ABL has a fixed-charge coverage covenant that applies when availability falls below specified levels. The company reported compliance with applicable debt covenants at quarter-end.
The company is contesting an IRS proposed adjustment concerning 2015–2018 tax years and believes its position is more likely than not to prevail; potential tax and interest impact if unsuccessful was estimated at less than $15 million. Environmental reserves were approximately $10.1 million. Management said it did not believe material additional loss from ordinary-course legal matters was reasonably possible, while noting outcomes are unpredictable. The U.S. pension-plan termination process is expected to take 12–18 months.
Important facts for investors to verify
- Whether production, pricing recoveries and cost savings can sustain gross-margin and adjusted EBITDA improvement despite inflation and foreign-exchange effects.
- Cash generation, cash balances and ABL availability relative to working-capital needs, capital spending and debt service.
- Cash versus PIK interest elections on the new notes, effective interest burden, and the resulting debt balance and maturities.
- Progress on 2023 capital spending and restructuring, and whether Europe’s operating losses improve.
- Developments in the IRS tax dispute, environmental matters and pension-plan termination and funding.