Cooper-Standard Holdings Inc. — Form 10-Q Summary
Period clarification: The request metadata says “2020 Q3,” but the filing is for the quarter ended September 30, 2021, with comparisons to 2020. Financial amounts below are in millions of dollars unless noted.
Business context and reporting period
Cooper-Standard manufactures sealing, fuel and brake delivery, and fluid transfer systems, primarily for automotive OEMs. This unaudited filing covers the three and nine months ended September 30, 2021, across North America, Europe, Asia Pacific, and South America.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Sales | $526.7 | $683.2 | $1,728.8 | $1,678.6 |
| Gross profit (loss) | $(8.1) | $84.5 | $59.2 | $67.3 |
| Gross margin | (1.5)% | 12.4% | 3.4% | 4.0% |
| Operating profit (loss) | $(72.9) | $18.8 | $(150.2) | $(250.0) |
| Net income (loss) attributable to Cooper-Standard | $(123.2) | $4.4 | $(220.6) | $(240.4) |
| Adjusted EBITDA | $(33.9) | $64.1 | $(10.0) | $(21.3) |
| Operating cash flow | Not separately reported | Not separately reported | $(111.5) | $(26.5) |
Q3 basic and diluted loss per share was $7.20, versus earnings per share of $0.26 a year earlier. Nine-month loss per share was $12.96, compared with $14.22.
- At September 30, cash and cash equivalents were $253.3, down from $438.4 at December 31, 2020. Cash, cash equivalents and restricted cash totaled $262.4.
- Total debt was $1,021.1, including $40.1 payable within one year; long-term debt was $981.0. The company reported no ABL loans outstanding and approximately $126.9 of effective borrowing availability after stated reserves and letters of credit.
- Current assets were $1,071.6 and current liabilities $607.6. The company reported total equity of $406.5.
- Nine-month capital expenditures were $76.0. Cash used in investing was $72.8; cash used in financing was $4.7.
Material changes versus the prior comparable period
- Q3 sales fell 22.9%, principally from semiconductor-related customer schedule reductions and comparison with the 2020 production rebound after COVID-19 shutdowns. Nine-month sales rose 3.0%, reflecting recovery from prior-year shutdowns, partly offset by semiconductor disruption and divestitures.
- Q3 gross profit deteriorated by $92.6 to a loss of $8.1. The filing cites lower volume and mix, commodity and wage inflation, foreign exchange, and the non-recurrence of prior-year government incentives; savings and lower variable compensation partly offset these pressures.
- Q3 adjusted EBITDA swung to a loss of $33.9 from positive $64.1. Nine-month adjusted EBITDA improved to a loss of $10.0 from a loss of $21.3.
- Nine-month net loss improved by $19.8, but remained $220.6. The prior-year period included $87.7 of impairment charges, largely associated with businesses held for sale.
- Cash used in operations increased to $111.5 from $26.5, primarily due to working-capital outflows and reduced cash earnings. Interest expense rose $13.2 for the nine-month period, mainly because 2021 included a full period of interest on the 13% Senior Secured Notes issued in May 2020.
Outlook, commentary, risks and unusual items
- Management said current projections, cash on hand, ABL availability, operating cash flows and receivables factoring are expected to meet funding needs for the next 12 months. This assessment depends on future performance and external conditions.
- The company anticipated approximately $100 million of capital expenditures for 2021 and expected lower spending to continue. Management said customer schedules and industry forecasts suggested vehicle production would begin improving in Q4; no specific earnings or revenue guidance was provided.
- COVID-19 uncertainty, semiconductor shortages, production volatility, raw-material and wage inflation, supply-chain disruption, customer pricing pressure, foreign exchange and high indebtedness were identified as significant risks. Management expected material-cost inflation to affect results through the remainder of 2021 and into 2022.
- A $11.2 million credit loss was recorded in Q3 selling, administration and engineering expense for receivables from a former Asia-Pacific joint venture undergoing bankruptcy proceedings.
- U.S. valuation allowances contributed to income tax expense of $32.1 in Q3 despite a pretax loss of $92.7; the filing attributes this in part to COVID-19 and supply-chain effects and inability to recognize tax benefits in some jurisdictions.
- After quarter-end, LS Mtron exercised its option requiring the company to purchase its remaining 19.9% interest in the South Korean automotive parts business. The transaction price remained subject to adjustment. Also after quarter-end, Cooper-Standard finalized a Fortrex technology licensing agreement with a footwear manufacturer, including licensing fees and volume-based royalties with a minimum value.
- Environmental reserves were approximately $10.5 at September 30. The company did not believe a material loss beyond recognized amounts was reasonably possible for other disclosed claims, while noting outcomes remain unpredictable.
Most important facts for investors to verify
- Confirm the filing period: the supplied filing is Q3 2021, not Q3 2020.
- Track whether semiconductor-related production constraints ease and whether volume recovery and pricing actions offset material, wage and other cost inflation.
- Monitor cash burn, working capital, cash balances, ABL borrowing availability, debt service and compliance with debt covenants.
- Assess the final purchase price and funding implications of the LS Mtron minority-interest put, and the realized economics of the Fortrex license agreement.
- Review the assumptions behind tax valuation allowances and the recoverability of deferred tax assets, as well as the status of environmental and other contingencies.