Cooper-Standard Holdings Inc. — Form 10-Q Summary
Period clarification: The filing is for the three months ended March 31, 2021, not 2020 Q1 as indicated in the request. Unless noted otherwise, financial amounts below are in millions of dollars; figures are rounded.
Business context and reporting period
Cooper-Standard manufactures sealing, fuel and brake delivery, and fluid transfer systems, primarily for global automotive OEMs. The unaudited quarterly results cover Q1 2021 and are not necessarily indicative of full-year results.
Key financial results and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Sales | $669.0 | $654.9 |
| Gross profit / gross margin | $68.3 / 10.2% | $43.1 / 6.6% |
| Operating loss | $(11.7) | $(114.3) |
| Net loss attributable to Cooper-Standard | $(33.9) | $(110.6) |
| Loss per diluted share | $(2.00) | $(6.55) |
| Adjusted EBITDA, non-GAAP | $38.5 | $8.3 |
| Cash used in operating activities | $7.1 | $2.0 |
| Capital expenditures | $38.6 | $50.6 |
At March 31, 2021, cash and cash equivalents were $398.8 million ($406.9 million including restricted cash). Total debt was $1,024.9 million, including $43.4 million payable within one year; long-term debt was $981.5 million. The company had no ABL borrowings and reported $141.4 million effectively available under the facility after borrowing-base and letter-of-credit limitations. Total current assets were $1,246.0 million and current liabilities were $661.1 million. The filing states the company was in compliance with its debt covenants.
Material changes versus the prior comparable period
- Sales rose 2.1%. Higher China production volumes and favorable foreign exchange were partly offset by North American and European customer shutdowns related mainly to semiconductor shortages, and by the 2020 divestitures.
- Gross profit increased $25.1 million, with margin up 3.6 percentage points. Management cited operational improvements, restructuring savings, material cost reductions and divestiture effects, partly offset by wage inflation, employee incentives and foreign exchange.
- Adjusted EBITDA increased $30.3 million. North America and Asia Pacific reported positive segment adjusted EBITDA of $41.2 million and $3.6 million, respectively; Europe and South America remained negative at $1.5 million and $2.6 million.
- Net loss improved substantially year over year, primarily against Q1 2020, which included a $74.1 million impairment charge for businesses subsequently divested. Q1 2021 included $21.0 million of restructuring charges, versus $7.3 million in Q1 2020.
- Net interest expense rose to $17.8 million from $10.2 million, which management attributed primarily to higher debt balances. Income tax expense was $0.9 million, compared with a $14.1 million benefit in Q1 2020; the 2021 tax provision reflected geographic mix and jurisdictions where tax benefits on losses could not be recorded.
Outlook, management commentary and risks
- Management expects 2021 capital expenditures of approximately $100 million to $125 million. It said cash on hand, operating cash flows, ABL availability and receivables factoring are expected to fund requirements over the next 12 months, while emphasizing ongoing liquidity monitoring.
- The filing provides no specific company sales or earnings guidance. Management cited an improving but uncertain economic recovery and expected some semiconductor and chemical supply constraints to ease in the second half of 2021. The IMF growth estimates discussed in the filing are external economic forecasts, not company guidance.
- Key operating risks include COVID-19 effects, automotive production levels, semiconductor and other supply disruptions, volatile raw-material costs, customer pricing pressure, foreign exchange, and the company’s substantial indebtedness and financing constraints.
- Environmental reserves were approximately $12.0 million at quarter-end. The company did not believe material losses beyond amounts recognized for legal matters were reasonably possible, but noted that outcomes are inherently uncertain and environmental costs could be material in the future.
- Other notable items: Q1 2021 included a $0.9 million gain related primarily to divestiture adjustments. The European and Indian businesses had been sold in July 2020. The company reported $80.5 million of receivables outstanding under off-balance-sheet factoring arrangements at March 31, 2021.
Important facts for investors to verify
- Confirm the reporting period: this is a Q1 2021 filing despite the request’s Q1 2020 label.
- Track whether restructuring and cost-saving initiatives translate into sustained operating profitability and cash generation.
- Monitor semiconductor, chemical and raw-material availability and their effects on customer production, margins and working capital.
- Assess debt service, refinancing needs, ABL borrowing-base availability and the company’s ability to remain covenant-compliant.
- Compare actual capital spending with the stated $100 million to $125 million 2021 expectation and monitor liquidity against management’s outlook.
- Interpret adjusted EBITDA as a non-GAAP measure alongside GAAP earnings and operating cash flow; it excludes items such as restructuring charges.