Cooper Standard(CPS) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This part details the company's financial performance, position, and cash flows, along with management's analysis and disclosures on market risk and internal controls Item 1. Financial Statements (unaudited) The unaudited condensed consolidated financial statements for the period ended June 30, 2025, show improved profitability despite slightly lower sales, a continued total equity deficit, and negative cash flow from operations Condensed Consolidated Statements of Operations This section presents the company's unaudited condensed consolidated statements of operations, highlighting a significant improvement in net income for the first six months of 2025 - The company's profitability significantly improved in the first six months of 2025, swinging from a net loss of $107.9 million in 2024 to a net income of $0.15 million, driven by higher gross profit and lower restructuring charges despite a slight decline in sales[11] Consolidated Statements of Operations Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales | $705,973 | $708,362 | $1,373,042 | $1,384,787 | | Gross Profit | $93,051 | $82,940 | $170,229 | $144,583 | | Operating Income | $37,279 | $11,146 | $59,543 | $14,629 | | Net (Loss) Income | $(1,473) | $(76,183) | $129 | $(107,491) | | Diluted EPS | $(0.08) | $(4.34) | $0.01 | $(6.16) | Condensed Consolidated Balance Sheets This section provides the company's unaudited condensed consolidated balance sheets, showing a total equity deficit and a decrease in cash and cash equivalents as of June 30, 2025 - As of June 30, 2025, the company's total liabilities of $1.93 billion exceeded its total assets of $1.82 billion, resulting in a total equity deficit of $105.4 million, while cash and cash equivalents decreased from $170.0 million at year-end 2024 to $121.6 million[16] Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $121,620 | $170,035 | | Total current assets | $885,390 | $805,256 | | Total assets | $1,819,711 | $1,733,065 | | Total current liabilities | $633,894 | $576,783 | | Long-term debt | $1,059,454 | $1,057,839 | | Total liabilities | $1,925,093 | $1,866,435 | | Total equity | $(105,382) | $(133,370) | Condensed Consolidated Statements of Cash Flows This section details the company's unaudited condensed consolidated statements of cash flows, indicating increased cash usage from operating activities and reduced capital expenditures for the first half of 2025 - For the six months ended June 30, 2025, the company used $30.4 million in cash from operating activities, an increase from the $26.2 million used in the same period of 2024, while capital expenditures decreased to $25.3 million from $28.1 million year-over-year[21] Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(30,431) | $(26,212) | | Net cash used in investing activities | $(22,757) | $(27,835) | | Net cash used in financing activities | $(4,357) | $(3,493) | | Change in cash, cash equivalents and restricted cash | $(51,126) | $(62,120) | | Cash at end of period | $127,571 | $100,941 | Notes to Condensed Consolidated Financial Statements This section provides explanatory notes to the financial statements, covering restructuring plans, debt status, and ongoing tax disputes - In May 2024, the company approved a restructuring plan to eliminate approximately 400 positions, expected to generate annualized savings of $40 million to $45 million, with restructuring charges for the first six months of 2025 at $5.0 million, down from $18.9 million in the prior-year period[40][41][43] - The company's total debt remained stable at approximately $1.1 billion, and as of June 30, 2025, it had no borrowings under its ABL Facility and $151.2 million available for borrowing[48][56][57] - The company is contesting an IRS Notice of Proposed Adjustment for 2015-2018 tax filings, believing its position will be successful, with a potential tax expense, including interest, of less than $10 million[84] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the slight sales decline in H1 2025 to foreign exchange and mixed vehicle production, while gross profit and operating income improved significantly due to savings and restructuring actions Executive Overview and Recent Trends This section provides an executive overview and discusses recent trends, including anticipated flat global light vehicle production for 2025 and strategies to mitigate inflationary pressures - The company anticipates global light vehicle production for the full year 2025 to remain flat compared to 2024, with expected declines in North America and Europe being offset by growth in China[102] Light Vehicle Production by Region (in millions of units) | Region | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | North America | 7.7 | 8.1 | (4.1)% | | Europe | 8.8 | 9.1 | (3.3)% | | Asia Pacific | 25.8 | 23.9 | 7.8% | | South America | 1.4 | 1.3 | 8.3% | - The company is actively pursuing pricing adjustments from customers and implementing lean initiatives to mitigate ongoing inflationary pressures on raw materials, labor, and overhead[109][110] Results of Operations This section analyzes the company's results of operations, highlighting improved gross profit and operating income in H1 2025 due to savings and reduced charges, despite volume/mix challenges - Gross profit for H1 2025 increased by $25.6 million year-over-year, driven by manufacturing and purchasing savings, restructuring benefits, and favorable foreign exchange, which more than offset unfavorable volume/mix and inflation[128] - Operating income for H1 2025 rose to $59.5 million from $14.6 million in H1 2024, benefiting from a $14.0 million decrease in restructuring charges and the absence of the prior year's $46.8 million pension settlement charge[111][130][131] - Other income for H1 2025 included $10.3 million from royalty settlements, contributing significantly to the year-over-year improvement[132] Segment Results of Operations This section provides a breakdown of financial results by segment, showing increased Adjusted EBITDA for both Sealing Systems and Fluid Handling Systems in H1 2025 Segment Adjusted EBITDA - Six Months Ended June 30 (in thousands) | Segment | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Sealing Systems | $72,657 | $56,406 | $16,251 | | Fluid Handling Systems | $47,979 | $27,264 | $20,715 | - The Sealing Systems segment's adjusted EBITDA for H1 2025 increased by $16.3 million, primarily due to $24.7 million in manufacturing and purchasing savings, which offset unfavorable volume/mix and foreign exchange[148] - The Fluid Handling Systems segment's adjusted EBITDA for H1 2025 grew by $20.7 million, largely driven by a $13.5 million favorable foreign exchange impact from the Mexican Peso and $15.8 million in manufacturing and purchasing savings[149] Liquidity and Capital Resources This section discusses the company's liquidity and capital resources, outlining primary funding sources, cash flow from operations, anticipated capital expenditures, and remaining share repurchase authorization - Primary sources of liquidity are cash from operations, cash on hand, the ABL Facility, and receivables factoring, which management believes are sufficient to meet funding requirements for the foreseeable future[150][152] - Net cash used in operations was $30.4 million for H1 2025, a slight increase from $26.2 million in H1 2024, mainly due to working capital changes and higher cash interest payments[153] - The company anticipates capital expenditures for the full year 2025 to be between $45 million and $55 million[154] - As of June 30, 2025, the company had approximately $98.7 million of authorization remaining under its share repurchase program, with no shares repurchased under the program during the first half of 2025 or 2024[156] Non-GAAP Financial Measures This section provides a reconciliation of non-GAAP financial measures, specifically detailing the calculation of Adjusted EBITDA from net (loss) income Reconciliation of Net (Loss) Income to Adjusted EBITDA (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income attributable to Cooper-Standard | $(1,401) | $(76,243) | $151 | $(107,903) | | EBITDA | $59,913 | $(13,655) | $116,615 | $14,560 | | Restructuring charges | $2,852 | $17,781 | $4,963 | $18,914 | | Pension settlement charge | — | $46,787 | — | $46,787 | | Adjusted EBITDA | $62,765 | $50,913 | $121,480 | $80,261 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its quantitative and qualitative disclosures about market risk from those disclosed in its 2024 Annual Report - There have been no material changes to the company's market risk disclosures since the 2024 Annual Report[170] Item 4. Controls and Procedures Based on an evaluation by management, including the CEO and CFO, the company's disclosure controls and procedures were deemed effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the reporting period[171] - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to affect, the company's internal control over financial reporting[172] PART II. OTHER INFORMATION This part covers other information, including risk factors, equity security sales, other disclosures, and a list of exhibits filed with the report Item 1A. Risk Factors The company states that there have been no material changes to its risk factors since the filing of its 2024 Annual Report and its Q1 2025 10-Q - No material changes to risk factors have been identified since the filing of the 2024 Annual Report[175] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has a common stock repurchase program with approximately $98.7 million of authorization remaining as of June 30, 2025, with limited shares repurchased for tax withholding purposes - As of June 30, 2025, the company had approximately $98.7 million of repurchase authorization remaining under its common stock share repurchase program[176] Share Repurchases - Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | — | $— | | May 2025 | 330 | $24.30 | | June 2025 | — | $— | | Total | 330 | | - Shares repurchased during the quarter were to satisfy employee tax withholding requirements and were not part of the publicly announced repurchase plan[177] Item 5. Other Information During the second quarter of 2025, none of the company's directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[178] Item 6. Exhibits This section lists the exhibits filed with the report, including the amended 2021 Omnibus Incentive Plan, CEO and CFO certifications, and Inline XBRL data files - Key exhibits filed with the report include CEO and CFO certifications pursuant to the Sarbanes-Oxley Act of 2002 and the company's Amended and Restated 2021 Omnibus Incentive Plan[179]