Cooper-Standard Holdings Inc. Business Report FY ended Dec. 2017

Financial Overview

(in million USD)

	FY ended Dec. 31, 2017	FY ended Dec. 31, 2016	Rate of change (%)	Factors
Net Sales	3,618.1	3,472.9	4.2	1)
Net Income	138.6	140.4	(1.3)	-
Sales by Geographic Area
-North America	1,882.7	1,816.5	3.6	2)
-Europe	1,043.7	1,031.5	1.2	3)
-Asia Pacific	585.2	540.7	8.2	4)
-South America	106.6	84.2	26.6	5)

Factors
1) Net Sales
-The Company’s sales for the fiscal year ended December 31, 2017 increased by 4.2% over the previous year to USD 3,618.1 million. Sales increased due to improved sales volume and product mix across all of the Company’s operating regions. Additionally, acquisitions and divestitures as well as foreign currency exchange effects both conferred positive impacts to the Company’s net sales. These gains were partially offset by customer price reductions.

2) North America sales
-Sales for the Company’s North America segment increased by 3.6% in the fiscal year ended December 31, 2017 to USD 1,882.7 million. The combination of improved sales volumes and the Company’s acquisition of AMI Industries’ fuel and brake business resulted in the increase in sales. Customer price reductions partially offset these gains.

3) Europe sales
-Sales in the Europe segment in the fiscal year ended December 31, 2017 totaled USD 1,043.7 million, an increase of 1.2% over the previous year. Improved sales volumes, product mix, and positive foreign currency exchange effects of USD 18.9 million contributed to the increase in sales, which were partially offset by customer price reductions.

4) Asia Pacific sales
-The Company’s Asia Pacific segment had sales of USD 585.2 million in the fiscal year ended December 31, 2017, an increase of 8.2% over the previous year. The gains were caused by improved sales volumes and product mix, as well as the consolidation of a previously unconsolidated joint venture. Negative foreign exchange effects and customer price reductions partially offset the increases in sales.

5) South America sales
-The South America segment’s sales increased by 26.6% in the fiscal year ended December 31, 2017 to USD 106.6 million. The increase in sales was caused by a improved sales volumes, improved product mix and favorable foreign currency exchange effects. The sales increases were partially offset by a USD 4.6 million pre-tax charge for costs associated with a foreign tax amnesty program.

Acquisitions

-In 2017, the Company agreed to purchase the China fuel and brake business of AMI Industries. The agreement was finalized in the first quarter of 2018.

Awards

-The Company’s Fortrex lightweight elastomeric material used in sealing was nominated as a finalist for the 2018 Automotive News PACE Awards. Fortrex provides weight savings of up to 30% compared to traditional EPDM materials (ethylene propylene diene monomers) while avoiding compression set issues associated with TPV materials (thermoplastic vulcanizate). Fortrex is non-conductive, has a low carbon footprint and can be modified for a wide variety of applications and solutions. (From a press release on October 19, 2017)

R&D Expenditures

(in million USD)

	FY ended Dec. 31, 2017	FY ended Dec. 31, 2016	FY ended Dec. 31, 2015
Overall	128.0	117.8	108.8

R&D Facilities

-The Company has 20 research and development facilities across the world.

-The Company announced that it has recently opened a new global technology center in Livonia, Michigan, U.S. The 137,750-square-foot facility offers capabilities in material science, tooling, development, production and validation. Offering significant increases in size and capacity compared to the former technical center in Farmington Hills, Michigan, the new facility consolidates the Company's innovation and development teams under one roof with the expertise to take products from material development to production reality. The center supports all of the Company’s product lines and also features an innovation showroom and vehicle display area. (From a press release on October 25, 2017)

-On June 28, 2017, the Company announced the opening of its Asia Pacific Sealing Test and Sealing Prototype Centers in Shanghai, China. The Asia Pacific Sealing Test Center is built on a 1,100-square-meter site in the Qingpu district. It is the Company's largest, most diverse and capable sealing laboratory in the Asia Pacific region. (From a press release on June 28, 2017)

Product Development

Recent technologies related to advanced materials, processing and weight reduction
-In recent years, the Company has realized several technologies related to advanced materials, processing and weight reduction. These technologies include MagAlloy, a processing technology to develop a material for brake lines that provides increased long-term durability through improved corrosion resistance, and ArmorHose, a material which enables more durable coolant hoses and removes the necessity for abrasion sleeves on under-hood hose assemblies.

Capital Expenditure

(in million USD)

	FY ended Dec. 31, 2017	FY ended Dec. 31, 2016	FY ended Dec. 31, 2015
North America	67.3	61.3	64.9
Europe	45.9	57.1	46.8
Asia Pacific	51.2	33.8	43.3
South America	4.9	2.1	2.8
Corporate	17.5	10.1	8.5
Total	186.8	164.4	166.3

-In the fiscal year ending December 31, 2018, the Company expects to invest between USD 195 million and USD 215 million in capital expenditures.

Investments outside U.S.

-On September 21, 2017, the Company celebrated the grand opening of its Sherbrooke, Quebec, Canada facility, which will serve as a dedicated manufacturing and warehousing site for the Company’s Industrial Specialty Group (ISG). The facility acts to consolidate three existing ISG facilities and 250 employees to optimize service, quality and cost efficiencies. The new facility will also enable the Company to provide added expertise in the extrusion of EPDM materials (ethylene propylene diene monomers) for the industrial, commercial and specialty vehicle markets. The Company invested approximately USD 10 million into the 138,000-square-foot manufacturing facility. (From a press release on September 21, 2017)

-The Company signed a contract with the city of Dangjin in Chungcheongnam-do, South Korea, regarding a new investment of approximately USD 30 million. Based on the contract, the Company will build a facility to manufacture rubber moldings for automotive applications on the 53,592-square-meter site. (From a press release on September 14, 2017)

Investments in U.S.

-The Company announced that it is investing USD 1 million in new plant equipment for its facility in Surgoinsville, Tennessee, U.S. The Company manufactures coolant tube and hose assemblies, transmission oil cooling lines, and fuel and brake lines at the facility. (Tennessee Department of Economic and Community Development release on July 13, 2017)