Good morning, ladies and gentlemen, and welcome to the Cooper-Standard First-Quarter 2022 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Following the company's prepared comments, we will conduct a question-and-answer session. At that time, if you have a question, as a reminder, this conference call is being recorded and the webcast will be available on the Cooper-Standard website for replay later today. I would now like to turn the call over to Roger Hendrickson, Director of Investor Relations.

Thanks, Kevin, and good morning, everyone. We appreciate you taking the time to join our call today. The members of our leadership team who will be speaking with you on the call this morning are Jeff Edwards, Chairman and Chief Executive Officer, and Jon Banas, Executive Vice President and Chief Financial Officer. Before we begin, I need to remind you that this presentation contains forward-looking statements. While they are made based on current factual information and certain assumptions and plans that management currently believes to be reasonable, these statements do involve risks and uncertainties. For more information on forward-looking statements, we ask that you refer to Slide 3 of this presentation and the company's statements included in periodic filings with the securities and exchange commission. This presentation also contains non-GAAP financial measures, and reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures are included in the appendix to the presentation. With those formalities out of the way, I will turn the call over to Jeff Edwards.

Thanks, Roger. Good morning, everyone. We appreciate the opportunity to review our fourth-quarter results and provide an update on some of the key initiatives that will shape our broader business outlook. To begin on Slide 5, we provide some highlights or key indicators of how our operations performed in the quarter. We continued to execute at world-class levels in delivering quality products and services to our customers and keeping our employees safe. At the end of the quarter, 99% of our customer scorecards for product quality were green and 96% were green for launch. Most importantly, the safety performance of our plants continues to be outstanding. In the first quarter, our total safety incident rate was just 0.39 for 200,000 hours worked, well below what is considered world-class and outperforming our target rate of 0.40. I would like to specifically recognize and thank our teams at the 42 Cooper-Standard plants that maintained a perfect safety record of zero reported incidents for the quarter. We are continually striving for zero incidents at all of our facilities, and the dedicated, focused employees at these 42 locations are leading the way and continue to demonstrate that achieving our ultimate goal of zero incidents is certainly possible. Despite lower than expected production volumes, our manufacturing operations and purchasing teams were able to deliver $19 million in savings through lean initiatives and improving efficiencies in the quarter. Our SGA&E expense was down $6 million year-over-year as we continue to right-size our fixed costs. In past restructuring actions, we delivered $3 million in benefits in the quarter. Unfortunately, we continue to face significant ongoing challenges from volatile customer schedules, reduced production volumes, tight labor availability in certain markets, and hyperinflation during the quarter. In this low production volume environment, the improved operating efficiency only partially offset the widespread inflationary impacts we're seeing in materials, energy, transportation, and labor. This is why we're continuing to take aggressive actions to mitigate or recover the incremental costs imposed on our business. I will provide more color on our progress in a few minutes. Despite all the headwinds and volumes remaining well below our plan, we saw month-to-month improvement as the quarter progressed, and we were cash flow positive in the month of March. Moving to Slide 6. As you know, we're proud of our culture and the strong relationships we've developed with our customers. We're equally proud of the progress we're making towards world-class status with respect to sustainability. We continue to garner recognition from our customers and others outside our organization for our quality, service, and culture. In the recent quarter, we were pleased to again be named a GM Supplier of the Year. This marks the fifth consecutive year that we've received this prestigious customer award. Also in the quarter, we were again included in the list of 2022 Most Ethical Companies. This marks the third straight year we've received this recognition. We believe these types of recognition are indicators of how our continued commitment to our core values is shaping our relationships with all stakeholders. And we believe these relationships are fundamental to our long-term growth and success. You can find more detailed information on our sustainability efforts in our corporate responsibility report, which will be published online later this month. Turning to Slide 7, macro conditions in the global economy and within our industry have presented unprecedented challenges to our company and the rest of the automotive supplier community for the past couple of years. And despite our continued improvements in operating efficiency and record performance in virtually all operating KPIs, we have not been able to offset the impacts of lower production volumes and material costs headwinds. Beginning in the third quarter of 2021, out of necessity, we initiated an aggressive commercial program to recover the incremental costs imposed on our business by these headwinds. Because of the solid relationships we have built with our customers, we've been able to work with them to revise existing contracts and effectively improve pricing to allow us to offset a significant portion of our incremental costs. The commercial discussions have resulted in expanded indexed-based agreements, negotiated price increases, one-time true-ups, delayed price concessions, and reduced quick savings payments. Importantly, we've significantly expanded our indexed-based agreements to include customers representing more than 60% of our revenue base. We now have indexed-based agreements on critical oil-based commodities, as well as metals. Previously, we only had indexed-based agreements for EPDM Rubber with a limited number of customers. This strategic change is already having a positive impact on our results and should significantly reduce the magnitude of the impacts commodity price volatility imposes on our business in the future. Our Commercial team has done a great job to achieve these positive results to date in a very tough environment. And they're continuing to have difficult conversations with customers as inflation persists and costs remain to be fully recovered. As we continue to work together to get through these difficult times, I want to thank our customers for their engagement in this process and for their ongoing commitment to mutually beneficial business relationships. Now let me turn the call over to Jon to discuss the financial details of the quarter.

Hey, thanks, Jeff, and good morning, everyone. In the next few slides, I'll provide some detail on our financial results for the quarter and comment on our cash flows, liquidity, balance sheet, and capital allocation priorities. On slide 9, we show a summary of our results for the first quarter of 2022 with comparisons to the same period last year. First-quarter 2022 sales were $613 million, down 8.4% versus the first quarter of 2021. Excluding the impacts of foreign exchange and the deconsolidation of a joint venture in China, sales were down 5.6% compared to the same period a year ago. Gross profit for the first quarter was $21.5 million, or 3.5% of sales. This compares to gross profit of $68 million, or 10.2% of sales in the first quarter of 2021. Adjusted EBITDA in the quarter was essentially break-even, a positive $100,000 compared to adjusted EBITDA of $38.5 million in the first quarter of 2021. Profitability was again impacted by continuing commodity and material headwinds and lower production volumes, partially offset by manufacturing and purchasing efficiencies, as well as some cost recoveries. It's worth noting that despite Q1 sales being lower than we expected, the adjusted EBITDA result was essentially in line with our original expectations for the quarter. Credit to our focus on execution and our broader cost optimization efforts. On a U.S. GAAP basis, the net loss for the quarter was $61 million, compared to a net loss of $33.9 million in the first quarter of 2021. Excluding restructuring expense and other special items, as well as their associated income tax impact, the adjusted net loss for the first quarter of 2022 was $51.4 million or $3 per diluted share, compared to an adjusted net loss of $14.5 million or $0.85 per diluted share in the first quarter of 2021. Capital expenditures in the first quarter totaled $32 million compared to $38.6 million in the same period a year ago. We continue to have a disciplined focus on capital investments and remain committed to keeping CapEx below 4% of sales for the full year. Moving to Slide 10. The charts on Slide 10 provide some additional insight and quantification of the key factors impacting our results. On the top line, unfavorable volume and mix, net of customer price adjustments reduced sales by $37 million versus the first quarter of 2021. Customer production schedule reductions related to the ongoing supply chain challenges in the industry were the major driver. A deconsolidation of a joint venture in China that we announced last quarter reduced consolidated sales by $9 million for the quarter. Foreign exchange, mainly the euro, reduced sales by $10 million versus the same period last year. For adjusted EBITDA, lean initiatives and manufacturing and purchasing drove a combined $19 million in cost savings for the quarter. Run-rate SGA&E expense was also lower by $6 million. Unfortunately, these positives were more than offset by higher material costs of $43 million, unfavorable volume and mix net of price adjustments totaling $4 million, and inflationary pressures and other items of $17 million. Commodity inflation continued to ramp up in the first quarter, and we expect the rate of increase to slow somewhat over the remainder of the year. In addition, as the recovery agreements that Jeff Edwards mentioned are implemented, we expect to see increasing offsets to the material inflation headwinds. Moving to Slide 11. In terms of cash flows, cash used in operations during the three months ended March 31, 2022, was an outflow of approximately $12 million, driven primarily by the cash net loss incurred and increases in inventories. With CapEx of approximately $32 million, we had a first-quarter free cash outflow of approximately $45 million. Importantly, the free cash outflow was more than offset by the receipt of approximately $50 million in proceeds from the sale of a non-core facility in Europe. As a result, our cash balance increased slightly during the period, and we ended the first quarter with a still solid cash balance of $253 million. Availability on our revolving credit facility, which still remains undrawn, was $143 million, resulting in total liquidity of $396 million as of March 31, 2022. Subsequent to the end of the first quarter, in April, we received $29 million in refunds from the IRS related to net operating loss carry-backs made available by the CARES Act, and we expect an additional $23 million by the end of Q2. The $29 million in hand has further strengthened our liquidity position from where it was as of March 31. Let me emphasize that we believe we are in very good shape from a liquidity perspective. We believe that we have more than sufficient resources to continue our focus on growing our top line, expanding margins, and working with our customers to ensure that we are being fairly compensated for the costs and value of the products we supply. In terms of our balance sheet, the company is focused on extending the maturity of some of the debt in our capital structure this year. We are monitoring the markets and are considering all refinancing options available to us. The assistance process, we have ongoing discussions with our long-term banking partners to understand market dynamics, as well as to help identify the most suitable approach and timing for refinancing. While the nearest of our debt maturities is in November 2023 on our Term Loan B, depending on market conditions, we may also consider a refinancing to include both the term loan as well as our senior secured debt to further extend the average weighted maturity of our debt. That concludes my prepared comments, so let me hand it back over to Jeff.

Thanks, Jon. And to wrap up our discussion this morning, I'd like to provide you with some additional color on our ongoing efforts to further improve our cost structure and aggressively drive towards our longer-term return on invested capital goals. Let's please turn to Slide 13. We've talked a lot this morning and on previous quarterly calls about the unprecedented disruptions and headwinds we and our industry have been facing for over two years now. Again, we're very pleased that our customers are now stepping up to help us offset some of those headwinds that are simply beyond our control. We also recognize that we can never lose focus on our own efficiencies, lean initiatives, and operational excellence. And manage the things that we can control. So we will continue our efforts this year to further optimize our operating footprint and cost structure as we push to achieve double-digit margins and a return on invested capital within the next few years. We still have nearly half of our business not generating profit, and this is clearly unsustainable. As we've said many times, and recently shown, we're committed to either fixing or exiting underperforming businesses. The initiatives we are showing on the slide are what we have on tap for this year so far. Some of these actions will have an upfront cost but all will provide short-term cash payback with long-term benefits. Ultimately, we're confident that our leaner cost structure and strong relationships with our customers and suppliers will allow us to get back to the level of profitability and returns that our investors expect and certainly deserve. And if we can't see a path for certain portions of our business to make positive contributions to our profitability, we will take more aggressive action. While there is still a lot of uncertainty in the global economy and in our industry, I'm very optimistic about our future and the opportunities that lie ahead. I expect we will begin to see improving margins in coming quarters as volumes improve and our cost recovery agreements begin to kick in. We anticipate providing a formal guidance update in conjunction with our second-quarter results. I want to thank the Cooper-Standard team for their continued commitment and dedication during these most challenging times. As we say often, our employees are our most valuable resource and the contributions of each are critical to our success in support of our purpose, which is to create sustainable solutions together. And as always, I also want to thank our customers for their continued trust, confidence, and support. This concludes our prepared comments, so let's open up the call for Q&A.

Ladies and gentlemen, if you would like to ask a question, one moment please, as we assemble the queue for questions. Our first question comes from Steve Ferazani with Sidoti.

Morning Jeff, Jon, appreciate all the detail on the call. Congratulations on the expansion of those indexed-based agreements. I'm sure that was challenging and I know it's a major step for you. Is there any way at this point that you can quantify the timing and impact of those agreements? I know we're early and those agreements are fairly recent. I'm just trying to think about it from a modeling perspective with a lot of moving parts, but how you see that impacting and the timing of it?

Yeah, Steve, this is Jeff. Again, as I mentioned in the last call, we're going to come back to you in July as we do each year and talk about the rest of the year. Hopefully, we'll be in a position to do that as things become less volatile. We're hopeful in the second half. I can tell you that, as you know, we started this whole process towards the end of last summer. While there was some recovery dating into the fourth quarter of last year and some of these agreements go back that far, the majority are effective this year. So everything went back to January 1 of this year in terms of what we are requiring our customers to support us doing. The indexing dates when those kick in are different for certain customers. So that's the reason I'm not going to start listing the numerous dates here on this call, but we do realize that that's information that is important. Hopefully, we'll have all the indexing details by the July call, and we're able to provide you the answer to the question that you asked me this morning.

Fair enough. In terms of expectations for production ramp, there seems to be some cautious optimism from some of your major customers. Now that we're in May, are you seeing any of that at this point in terms of the increase in productions and any improvement in terms of the component shortages and how it's affecting your business?

This is Jeff. I think everyone wants what you just said to happen. Unfortunately, it's still not as clean as we would all like for obvious reasons. I mean, we have not only the chip shortages, but we have the war in Europe and the COVID shutdowns in China. So there's a lot of supply chain ramifications that are yet to be completely resolved. I tend to be the optimist in the room, but I think to be fair, we're going to continue to see some volatility through this summer. While I acknowledge that several of our customers have come out with pretty bullish volume statements for the second half, there's always that footnote that says, assuming we have chips, right? So I guess I would use the same statement in answering your question. I know everybody hopes for that. I know everybody wants that. I know that the market certainly needs it, and the end consumer certainly wants the vehicles. But until we see more consistency week-by-week, month-by-month, I think we're in for some turbulence still. I can tell you that we're planning from a business point of view for that. I mean, we're attacking all costs within our control. All inflation, we assume, is going to be here for a long period of time, and that's the way we are behaving. If it turns out to be better than that, then so be it.

Fair enough. If I could get one more in, Jeff. In your closing comments, you did mention the potential to exit unprofitable businesses. When you're thinking about that, is that something that's much more likely once the market turns or how are you considering those efforts now?

I think when you reach a point where you have businesses that aren't strategic to you anymore, you tend to sell those when you can. While the volatility in the clouds hover over the industry we serve, that doesn't mean that there aren't opportunities to do deals. It just means that they're probably more difficult to get done now than they will be when things smooth out a little bit. We'll look at both ways, and hopefully, we're able to come to agreements with our customers and do enough with our fixed costs to fix all those businesses. And we don't have to follow through on what you and I are discussing. But all options are on the table as we sit here today, and we'll keep you updated as we go through the rest of this year.

Fantastic. Thanks, Jeff. Appreciate all of the responses. Good luck.

Thank you.

Our next question comes from Mike Ward with Benchmark.

Good morning, everyone. Just going onto that page 10. Honestly, Jeff, that's one of the more significant developments I've seen in the last couple of years. It looks like there are two parts to it, so the timing of when some of those index-based contracts fold in. If we look at this quarter, you had a $43 million negative hit for material inflation. I would expect that number to go down, all things being equal over the course of this year. We hope as we look at 2Q, 3, 4, that impact from commodity inflation, is that the right way to look at it?

Hey Mike, it's actually Jon. I'll take the first part of that and let Jeff add any color. When we came into 2022, I mentioned on our last call that we expected commodities to run about a $70 million headwind for the full year. So that number was before the current economic situation. That was before a war broke out, before a lot of things continued to degrade. So you can think about that as material headwinds could be upwards of about $100 million now. And that's why it's so important that we're continuing our efforts on the recovery side and balancing those efforts there.

This is Jeff. Let me just finish up the answer to that question. As I mentioned, the indexed-based agreements will certainly help smooth that out as we go forward and provide a contractual means to recover inflation moving forward. You're correct in part of your assumption. The other thing I will say is that I know everybody is feeling the same pressure. The inflation, as Jon just mentioned, continues to go up; it isn't going away. It isn't just the raw material side of what we're dealing with, which certainly the indexed-based agreements help that a great deal. It's all the other costs, and as I mentioned in my prepared remarks, those are becoming extremely significant, and we are in conversations and negotiations with our customers on recovering our fair share of all that. That's why I mentioned that by July, I think when we typically do our first-half review and then update guidance or talk about what we see for the second half, we're hopeful we will be able to provide you guys more color around those agreements. We also hope that we will have the negotiations on the non-raw material inflation to find their footing.

Since there are two parts to it, right? You've got the new agreements, which is a big plus, and then you have recovery. If I look at just the last six months between material and then the other components, that's over $100 million. At some point, you would expect the recovery part of that to also start coming in, whether it's in piece price or whatever comes through. That's what we're looking at right now. So you have the new contracts and the recovery, correct?

You're correct.

It appears that your leading customer in North America is starting to improve and become more efficient with essential programs. When I examine the production data from March and April, sometimes the information we receive doesn't align with your experiences. Does this data correspond with your experiences in North America with your main customer?

Two answers to that. The volatility has improved. The volume per release is still short.

It's still short, but not as bad as it was.

That's correct.

Any update on the commercialization of the shoes with Fortrex?

Yes. We mentioned in the last call that they have been able to maintain the schedule for the first quarter of FY23, so we expect the launch to occur and we will be able to talk more in detail about what that is and who it's with. This is a positive. In terms of expanding it beyond that particular order, there are a lot of conversations going on right now to take the Fortrex product beyond that particular product line. So I would say it's extremely positive, and they've been able to make up time that was lost during the middle of the pandemic when everybody was on lockdown.

I think last quarter you mentioned something that you developed something in the manufacturing process with Fortrex that was a meaningful improvement. Is there any update on that or is it holding? Are you able to pass that along the piece price, and how is that affecting the business?

It will certainly make the Fortrex product, we think, more affordable, and we believe that that will have a positive impact, especially with the shoe manufacturers, because the product will be more competitive and it will still have all the properties that we have. So to answer your question, we continue to make terrific progress. We expect that by the end of June, we will have cleared our manufacturing tryout hurdles and it will be for sale later this summer. That's what we expect.

And just so I can sneak in one more, Jon, you talked about the tax refunds in April, and it looks like more are coming in the second quarter. Additionally, I think the second quarter is seasonally a better quarter from a working capital standpoint. Can we assume a normal seasonal pattern? You mentioned the inventory build in Q1. Can we look to a more seasonal type pattern with working capital as well? So you can have a pretty significant improvement in liquidity again in the second quarter; is that right?

Mike, I wouldn't call anything seasonal in this day and age, just given the China lockdowns. The industry is dealing with continued chip shortages and issues that are centered around Europe. So I don't want to give you a one direction or another. We're just managing through and trying to control what we can.

Thanks, Jon.

This is Jeff. I think we should say that the entire month of April from a production perspective is basically gone. It'll have an impact as they ramp back up. The good news is as we enter May, facilities are starting to come back online. Certainly not getting anywhere close to full production that we expect. As the month of May goes on, we'll be closer. When we hit June, we expect things to get back to a normal state of operation. Again, that's all COVID lockdown related. They had a great first quarter, but with everything that's happened now, that's all out the window.

Thank you, guys. Thanks very much.

Our next question comes from Kirk Ludtke with Imperial Capital.

Hello guys.

Hey Kirk.

Thank you for taking the question and the presentation. Just to follow up on Slide 10, the $43 million, is that net of recoveries?

No. Kirk, that's the gross commodity or material inflation that we faced.

Okay. So the $43 million that you initially projected at $70 million is now $100 million?

It could be as high as $100 million is what we're facing right now, yes.

Okay. Got it. And the customer negotiations, I'm curious. Are there other types of customer support that you're pursuing other than?

Curtis, this is Jeff. As I mentioned in the prepared remarks, not only the raw material recovery, but the non-raw material inflation via transportation, energy, labor, stops, starts and all those things that are non-raw materials. Part of what's on the table. We clearly have continued to talk about tooling as well. Historically, most suppliers act as our customers' bank in terms of tooling for new programs. There has been conversation there and good progress about them paying for that sooner than they would have historically. That's also helped our liquidity. So you're correct in stating that it's more than just raw material.

Great. Thank you. And then with respect to the production schedules, I know it's a fluid situation, but could you maybe just talk about directionally at least how you see production rolling out from first quarter to second quarter by region, up, down?

This is Jeff. So as we just presented the first quarter, you have that. As we just discussed a minute ago, China for COVID lockdown purposes and Shanghai specifically has been an obvious change between first and second quarter. There was virtually no production in April in those Shanghai factories for us, which is the majority of our business, and certainly, our customers' plans were down as well. I would say that when we look at Europe, we're probably at 85% of what we thought we would be. We attribute that to the war in Ukraine. And then with North America, it's well-documented, the chip shortages and other supply chain shortages. I don't see that being a whole lot different here in the second quarter than it was in the first quarter. I think the encouraging news is that our largest customers here in North America have been pretty clear about the third and fourth quarter being better from a volume point of view than it has been. I'm hopeful that that's the case, but there seems to be a footnote related to chip availability with each of those statements, so we have to recognize that those are the facts. China, as I mentioned, is starting to come back as we head into May. Plants are starting to get approval to open back up at a lower percentage, much less than 50% of volume. We expect that to improve as we go through the month of May. Hopefully, by June, they will be back to a normal state of operation. That's all COVID lockdown related, and they had a great first quarter, but with everything that's happened now, that's all out the window.

Yeah, that's helpful. Your business in China is primarily sealing business. Our volumes are directly related to the two largest automakers in China who happen to have a large manufacturing presence in Shanghai. That's what was impacted the last six weeks here.

Our next question comes from Kevin McVeigh with Credit Suisse.

Hey guys, how's it going? Thanks for taking the question. Just a real quick one from me, clarifying a couple of points you made that will combine some of the color around both the indexing and the inflationary headwinds. I go back to the fourth-quarter presentation, and I think it's Slide 13, the guidance bridge on EBITDA, negative $70 million, materials that economic headwind. Sounds like you think that's going somewhere close to $100 million. But on the flip side, the great progress on indexing, the volume mix price column, which was a positive $130 million in this guidance bridge, could be going higher. Is it right to think about the push and pull to profitability in that sense?

Sure, Kevin, it's Jon here. You're right on the full-year guidance bridge about how the effect of any recoveries would take hold, but keep in mind both the $100 million new estimate of commodity inflation and any recovery are volume dependent. So anything that's flowing through that volume mix number is all subject to the volumes that are actually produced, because that's how we've linked those index-based agreements. But here, you also have to keep in mind that there is a lag effect. What we're seeing come through as far as recoveries here in Q1 or what we saw in Q4 wasn't tied to that particular quarter. It was tied to previous quarters. There's a gradual catch-up effect, but some of it may be retroactive to earlier periods if we can negotiate those lump sum recoveries. From an indexing standpoint, there's that lag effect that you're going to see going forward. So hopefully that helps frame it.

The other part I’d like to add is that we've also indicated, and we're continuing to point you towards that high end of the range that we've traditionally recovered. We've stated it's 40% to 60% historically. And we said in the last call, and we're saying again today that we expect the recovery to be at the high end of that. That's the direction that we can give you today. Regarding the timing of recovery and volume, we feel more confident because of the indexing that we've negotiated, that we can sustain the level of recovery going forward as this volatility continues. Once we're able to clearly show you what those agreements are and when they kick in, I think it will help you model the future better than we've been able to do.

Thanks, Jeff and Jon. I totally appreciate that, and thank you for the candor there. Last one for me is if I'm reading the tea leaves around your comments regarding the capital structure, in particular, first-lien loan and bonds, it sounded like your commentary was slightly different than last quarter. In that last quarter, I believe you were more focused on the term loans specifically, and now this quarter, making a comment about potentially trying to include the 13th solution there as well. Is my read of that change in language accurate, and if so, what's driving that change?

I think it's accurate. This is Jon, Kevin. I think as we continually evaluate the capital structure and the opportunities to improve it, and look at the overall market conditions, we're considering all options and opportunities for us. It wasn't so much that we've ruled it out last quarter in my comments, so much as we're looking at all opportunities.

Understood. Thanks so much for the time.

Thanks, Kevin.

Our next question comes from Brian DiRubbio with Baird.

Good morning. A couple of questions on housekeeping points. Jon, how much cash do you have today that is in the U.S. versus overseas?

Brian, I don't have that handy, but let me just characterize it qualitatively. North America is the most profitable; it plays the role of the Cooper-Standard bank for the rest of the regions. But we have a very efficient structure to move money wherever we need to via inter-company cash pooling arrangements. Our China on Asia-Pacific operations are self-funding through various mechanisms there. But certainly when you're talking about some of the big ticket items, such as IRS refunds, they are going to be U.S.-based. The European sale leaseback is fairly European-based. It's an evolving structure, but for the most part, you're looking at U.S.-based cash, with efficient mechanisms to move it around as necessary.

Okay. It'll be a little helpful if you could just close maybe in the queue that breakdown also of the amount of intercompany notes. I think that would help investors a lot there. Switching gears as it pertains to the potential refinancing, cash is flush right now, but the market is in a little bit of turmoil; market rates are obviously much higher than they were just six weeks ago. How comfortable do you feel about possibly using some of this cash? You have the balance sheet today to pay down debt potentially ahead of a refinancing, given that your interest costs are just going to balloon going forward? Love to get your thoughts there.

Yeah. Brian, sorry, we had a mic issue. Like I conferred earlier, all options are on the table, but as we manage through the very near term, liquidity is key for us as we respond to disruptions and shutdowns. But as we look forward, it's interesting to consider using some of the cash to help optimize the capital structure going forward. We will do that if it makes sense at the time. I'll just leave it at that and say we're looking at all options.

Okay. That's fair enough. Jeff, I want to go back to the comments that you made earlier about looking at the business. You have really good business in the U.S. Outside of the U.S., not so much. What's the strategic importance of holding or keeping that business outside the U.S? Does it really make sense for Cooper to be a global company, given that the returns have been so poor outside the U.S. for so long? Just love your thoughts there.

That's the conversation we're having with our customers. As we sit here today, the answer they give us is yes, they want us to be in China, in Europe, in Brazil, and in the other North America spots. I guess we'll find out.

Well, having them want you there and having them pay you for being there are obviously two different factors. I guess we'll see as that develops.

That's correct.

Our next question comes from Josh Taykowski, Credit Suisse.

Hey, guys, thanks for taking the questions. Most of mine have been answered already. But sounds like some good progress on the recovery negotiations. Just one housekeeping question to start from me. The sale you did in Europe this quarter, I know the release said that the ongoing annual rent for the piece that you're leasing back is immaterial for the business. But I was just wondering if you could provide any color on what that annual amount is or what percentage of the footprint you’re leasing back?

I'll just give you the number. It's less than a million dollars a year for the three-year term that we signed up for.

So much more of a sale than a sale leaseback.

Correct. Yes.

Okay. And then just to beat a dead horse, just wanted to ask one question on the conversation about indexing versus recoveries. You had one in the 8-K yesterday about increasing the percentage of recovery of FY21 incurred and FY22 expected incremental. Does this mean the FY21 headwinds you faced, I think it was $64 million in material economics headwinds for the full-year FY21? Will you expect to get the majority of that back in the coming quarters? And if so, what percentage have you gotten back on that already?

Yeah, this is Jeff. We haven't broken it down for you that way. What I'll just say is that the percentage of recovery in that 40% to 60% range that we've at the far end of that range is what we are saying publicly for this conversation is what we're delivering. While the significant increases that Jon talked about this year are all on the table and being negotiated for recovery this year. As those numbers continue to get higher and higher from an inflation standpoint, we're at a much better position to recover those or our fair share of those in FY22 than we have been any year in our history, including FY21. We didn't like 21; we've said it publicly. FY21 is history. FY22, though, we have no choice; you got to pay us and not just for raw material but for all the other non-rawws, and I appreciate everything our customers have done to engage in this very important conversation and all that they've done to help us bridge what we're managing our way through. Every one of our customers in every region continues to tell us that they want us here and they're willing to work with us to resolve these issues. That’s what I believe is happening. Hopefully, we have more clarity around it in the July call. We'll just stick with that answer for now.

Got it. Appreciate the color. Thanks, guys.

Our last question comes from Prateek Gupta with Goldman Sachs.

Hi, good morning. I just have one quick question, please. So in terms of assets, you have announced an improvement one in 1Q FY22. Can you talk a little bit about if you're planning any further asset sales going forward, and if not, what the scope of that could be?

Hey Prateek, it's Jon. When we entered into that sale leaseback transaction, it was more of a non-core property assessment rather than a liquidity play. We were simply being opportunistic to capitalize on market conditions there. As far as any possible additional asset sales, we are ongoingly reviewing the total footprint in conjunction with our cost optimization initiatives. As Jeff said on the call earlier, we're committed to either fixing or exiting unprofitable businesses or operations. So no current plans that would call your attention to, but future asset sales could play a role in that strategy.

Okay. Thank you.

Ladies and gentlemen, this concludes the Q&A portion of today's conference. I would like to turn the call back over to Roger Hendrickson.

Okay. Thanks, everybody for the questions and for your engagement on the call today. If you have other questions that you weren't able to ask, please feel free to give me a call and we'll arrange to spend some time together. Again, thank you for your time today. This concludes our call. Goodbye.

Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.