4. Fresh-Start Accounting

As discussed in Note 3. "Reorganization Under Chapter 11 of the Bankruptcy Code," the Debtors emerged from Chapter 11 bankruptcy proceedings on May 27, 2010. As a result, the Successor adopted fresh-start accounting as (i) the reorganization value of the Predecessor's assets immediately prior to the confirmation of the Plan of Reorganization was less than the total of all post-petition liabilities and allowed claims and (ii) the holders of the Predecessor's existing voting shares immediately prior to the confirmation of the Plan of Reorganization received less than 50% of the voting shares of the emerging entity. GAAP requires the adoption of fresh-start accounting as of the Plan of Reorganization's confirmation date, or as of a later date when all material conditions precedent to the Plan of Reorganization becoming effective are resolved, which occurred on May 27, 2010. The Company elected to adopt fresh-start accounting as of May 31, 2010 to coincide with the timing of its normal May accounting period close. There were no transactions that occurred from May 28, 2010 through May 31, 2010, that would materially impact the Company's consolidated financial position, results of operations or cash flows for the 2010 Successor or 2010 Predecessor periods.

Reorganization Value

The Bankruptcy Court confirmed the Plan of Reorganization, which included an enterprise value (or distributable value) of $1,025,000, assuming $50,000 of excess cash, as set forth in the Disclosure Statement. For purposes of the Plan of Reorganization and the Disclosure Statement, the Company and certain unsecured creditors agreed upon this value. This reorganization value was determined to be a fair and reasonable value and is within the range of values considered by the Bankruptcy Court as part of the confirmation process. The reorganization value reflects a number of factors and assumptions, including the Company's statements of operations and balance sheets, the Company's financial projections, the amount of cash to fund operations, current market conditions and a return to more normalized light vehicle production and sales volumes. The range of values considered by the Bankruptcy Court of $975,000 to $1,075,000 was determined using comparable public company trading multiples, precedent transactions analysis and discounted cash flow valuation methodologies.

The comparable public company analysis identified a group of comparable companies giving consideration to lines of business, size, geographic footprint and customer base. The analysis compared the public market implied enterprise value for each comparable public company to its projected earnings before interest, taxes, depreciation and amortization ("EBITDA"). The calculated range of multiples for the comparable companies was used to estimate a range which was applied to the Company's projected EBITDA to determine a range of enterprise values for the reorganized company or the reorganization value.

Precedent transactions analysis estimates the value of a company by examining public merger and acquisition transactions. An analysis of a company's transaction value as a multiple of various operating statistics provided industry-wide valuation multiples for companies in similar lines of business to the Debtors. Transaction multiples are calculated based on the purchase price (including any debt assumed) paid to acquire companies that are comparable to the Debtors. Prices paid as a multiple of revenue, earnings before interest and taxes and EBITDA were considered, which were then applied to the Debtors' key operating statistics to estimate the enterprise value, or value to a potential strategic buyer.

The discounted cash flow analysis was based on the Company's projected financial information, which includes a variety of estimates and assumptions. While the Company considers such estimates and assumptions reasonable, they are inherently subject to uncertainties and to a wide variety of significant business, economic and competitive risks, many of which are beyond the Company's control and may not materialize. Changes in these estimates and assumptions may have had a significant effect on the determination of the Company's reorganization value. The discounted cash flow analysis was based on recent automotive industry and specific platform production volume projections developed by both third-party and internal forecasts, as well as commercial, wage and benefit, inflation and discount rate assumptions. Other significant assumptions include terminal value growth rate, terminal value margin rate, future capital expenditures and changes in working capital requirements.

Reorganization Adjustments

The consolidated financial information gives effect to the following reorganization adjustments, the Plan of Reorganization and the implementation of the transactions contemplated by the Plan of Reorganization. These adjustments give effect to the terms of the Plan of Reorganization and certain underlying assumptions, which include, but are not limited to, the below.

•

The issuance of the Senior Notes, which resulted in cash proceeds of $450,000.

•

The issuance of 17.5 million shares of our common stock, including 8.6 million shares offered to holders of the Predecessor's prepetition senior subordinated notes in connection with the rights offering conducted pursuant to the Plan of Reorganization (the "Rights Offering"), 2.6 million shares to certain of the Debtors' creditors that agreed to backstop the Rights Offering (the "Backstop Parties") pursuant to an equity commitment agreement (the "Equity Commitment Agreement") and 6.3 million shares to certain holders of the Predecessor's prepetition senior notes and prepetition senior subordinated notes. The Company also issued shares of 7% preferred stock convertible into 4.3 million shares of common stock pursuant to the Equity Commitment Agreement. The Company received cash proceeds of $355,000 in connection with the Rights Offering and Equity Commitment Agreement and also received the full and complete satisfaction, settlement and release of allowed prepetition senior note claims and allowed prepetition senior subordinated note claims for such shares. In addition, the Company also issued warrants to purchase 2.4 million shares of common stock.

•

The repayment of $175,000 of liabilities under the Debtors' Debtor-in-Possession Credit Agreement (the "DIP Credit Agreement"). On the Effective Date, each holder of an allowed DIP claim received, in full and complete satisfaction, settlement and release of and in exchange for such allowed claim against the Debtors, an amount in cash equal to the allowed amount of such claim.

•

The repayment of the $639,600, including interest, outstanding under the Predecessor's prepetition credit agreement in cash.

•

The repayment of the $105,200, including interest, outstanding of the Predecessor's prepetition senior notes in cash.

•

The effects of the above reorganization adjustments resulted in a decrease in interest expense, including the amortization of debt issuance costs, resulting from a lower level of debt.

Adoption of Fresh-Start Accounting

Fresh-start accounting results in a new basis of accounting and reflects the allocation of the Company's fair value to its underlying assets and liabilities. The Company's estimates of fair value included in the Successor's financial statements represent the Company's best estimates based on independent appraisals and valuations. The Company's estimates of fair value are inherently subject to significant uncertainties and contingencies beyond the control of the Company. Accordingly, there can be no assurance that the estimates, assumptions, valuations and appraisals will be realized, and actual results could vary materially.

The Company's reorganization value was allocated to its assets in conformity with ASC 805, "Business Combinations." The excess reorganization value over the fair value of tangible and identifiable intangible assets was recorded as goodwill. Liabilities existing as of the Effective Date, other than deferred taxes, were recorded at the present value of amounts expected to be paid using appropriate risk adjusted interest rates. Deferred taxes were determined in conformity with applicable income tax accounting standards. Predecessor accumulated depreciation, accumulated amortization, retained deficit, common stock and accumulated other comprehensive loss were eliminated.

The following Fresh-Start Consolidated Balance Sheet illustrates the financial effects on the Company of the implementation of the Plan of Reorganization and the adoption of fresh-start accounting. This Fresh-Start Consolidated Balance Sheet reflects the effects of the consummation of the transactions contemplated in the Plan of Reorganization, including settlement of various liabilities, issuance of certain securities, incurrence of new indebtedness, repayment of old indebtedness and other cash payments.


	Predecessor May 31, 2010		Reorganization Adjustments (1)			Fresh-start Adjustments (9)		Successor May 31, 2010
Assets
Current assets:
Cash and cash equivalents	$	200,311	$	(21,642)	(2)	$	-	$	178,669
Restricted cash		482,234		(482,234)	(2)		-		-
Accounts receivable, net		409,041		-			-		409,041
Inventories, net		116,248		-			8,136		124,384
Prepaid expenses		26,931		(1,243)	(3)		-		25,688
Other		36,858		(68)	(2)		-		36,790

Total current assets		1,271,623		(505,187)			8,136		774,572
Property, plant and equipment, net		527,306		-			40,665		567,971
Goodwill		87,728		-			48,938		136,666	(8)
Intangibles, net		10,294		-			144,711		155,005
Other assets		125,120		4,895	(3)		(26,721)		103,294

	$	2,022,071	$	(500,292)		$	215,729	$	1,737,508

Liabilities and Equity (Deficit)
Current liabilities:
Debt payable within one year	$	15,335	$	-		$	-	$	15,335
Debtor-in-possession financing		74,813		(74,813)	(2)		-		-
Accounts payable		171,886		6,763	(4)		-		178,649
Payroll liabilities		94,427		374	(4)		(1,154)		93,647
Accrued liabilities		92,426		4,232	(4)		(9,462)		87,196

Total current liabilities		448,887		(63,444)			(10,616)		374,827
Long-term debt		458,373		-			-		458,373
Pension benefits		134,278		12,473	(4)		21,685		168,436
Postretirement benefits other than pensions		75,198		-			4,948		80,146
Deferred tax liabilities		9,218		(268)	(4)		12,267		21,217
Other long-term liabilities		21,124		1,891	(4)		7,839		30,854
Liabilities subject to compromise		1,213,781		(1,213,781)	(4)		-		-

Total liabilities		2,360,859		(1,263,129)			36,123		1,133,853
Successor preferred stock		-		128,000	(2)(4)		-		128,000
Equity (deficit):
Successor common stock		-		17	(2)(4)(7)		-		17
Successor additional paid-in capital		-		473,275	(2)(4)(7)		-		473,275
Predecessor common stock		35		(35)	(5)		-		-
Predecessor additional paid-in capital		356,560		(356,560)	(5)		-		-
Accumulated deficit		(633,481)		518,130	(6)		115,351		-
Accumulated other comprehensive loss		(62,083)		10	(4)		62,073		-

Total Cooper-Standard Holdings Inc. equity (deficit)		(338,969)		634,837			177,424		473,292
Noncontrolling interests		181		-			2,182		2,363

Total equity (deficit)		(338,788)		634,837			179,606		475,655

Total liabilities and equity (deficit)	$	2,022,071	$	(500,292)		$	215,729	$	1,737,508

(1)

Represents amounts recorded as of the Effective Date for the consummation of the Plan of Reorganization, including the settlement of liabilities subject to compromise, the satisfaction of the DIP Credit Agreement, the incurrence of new indebtedness and related cash payments, the issuances of 7% preferred stock and common stock and the cancellation of the Predecessor's common stock.

(2)	This adjustment reflects net cash payments recorded as of the Effective Date.


Release of restricted cash (a)	$	482,234
Cash received from Rights Offering		355,000
Payment of prepetition bank debt		(639,646)
Payment of prepetition senior notes		(105,227)
Repayment of DIP Credit Agreement		(75,777)
Other		(38,226)

Net cash payments	$	(21,642)

(a)

Includes proceeds from issuance of long term debt held in restricted cash until the Effective Date.

(3)	This adjustment reflects the capitalization of $4,895 of debt issuance costs related to the Senior ABL Facility.

(4)	This adjustment reflects the settlement of liabilities subject to compromise (see "Liabilities Subject to Compromise" below).


Settlement of liabilities subject to compromise	$	(1,213,781)
Liabilities settled by cash (a)		765,931
Issuance of Successor common stock, 7% preferred stock and warrants, net		258,716
Liabilities reinstated		26,891

Gain on settlement of liabilities subject to compromise	$	(162,243)

(a)

Cash received from the sale of the Senior Notes and amounts received from the Rights Offering.

(5)	This adjustment reflects the cancellation of the Predecessor's common stock.

(6)	This adjustment reflects the cumulative impact of the Reorganization Adjustments discussed above.


Gain on settlement of liabilities subject to compromise	$	(162,243)
Cancellation of Predecessor's common stock		(356,595)
Other		708

	$	(518,130)

(7)	A reconciliation of the reorganization value of the Successor's common stock as of the Effective Date is shown below:


Reorganization value	$	1,025,000
Less: Senior Notes		(450,000)
Other debt		(23,708)
7% preferred stock		(128,000)
Plus: Excess cash		50,000

Reorganization value of Successor's common stock and warrants		473,292
Less: Fair value of warrants (a)		20,919

Reorganization value of Successor's common stock	$	452,373


Shares outstanding as of May 31, 2010		17,489,693
Per share value (b)	$	25.87

(a)

For further information on the fair value of the warrants, see Note 19. "Equity and Redeemable Preferred Stock."

(b)

Does not include restricted shares issued to management upon emergence that vest over 3-4 years.

(c)

The per share value of $25.87 was used to record the issuance of the Successor's common stock.

(8)	A reconciliation of the reorganization value of the Successor's assets and goodwill is shown below:


Reorganization value	$	1,025,000
Plus:Liabilities (excluding debt and after giving effect to fresh-start accounting adjustments)		660,145
Fair value of noncontrolling interest		2,363
Excess cash		50,000

Reorganization value of Successor's assets		1,737,508
Less:Successor's assets (excluding goodwill and after giving effect to fresh-start accounting adjustments)		1,600,842

Reorganization value of Successor's assets in excess of fair value - Successor's goodwill	$	136,666

(9)	Represents the adjustment of assets and liabilities to fair value, or other measurement as specified by ASC 805, in conjunction with the adoption of fresh-start accounting. Significant adjustments are summarized below.


Elimination of Predecessor's goodwill	$	(87,728)
Successor's goodwill		136,666
Elimination of Predecessor's intangible assets		(10,294)
Successor's intangible asset adjustment (a)		155,005
Defined benefit plans adjustment (b)		(30,680)
Inventory adjustment (c)		8,136
Property, plant and equipment adjustment (d)		40,665
Investments in non-consolidated affiliates adjustment (e)		9,021
Noncontrolling interest adjustments (e)		(2,182)
Elimination of Predecessor's accumulated other comprehensive loss and other adjustments		(78,678)

Pretax income on fresh-start accounting adjustments		139,931
Tax related to fresh-start accounting adjustments (f)		(24,580)

Net gain on fresh-start accounting adjustments	$	115,351

(a)	Intangible assets – This adjustment reflects the fair value of intangible assets determined as of the Effective Date. For further information on the valuation of intangible assets, see Note 8. "Goodwill and Intangibles."

(b)

Defined benefit plans – This adjustment primarily reflects differences in assumptions, such as the expected return on plan assets and the weighted average discount rate related to the payment of benefit obligations, between the prior measurement date of December 31, 2009 and the Effective Date. The $(30,680) is reflected in the following: pension benefits $(21,685), postretirement benefits other than pension $(4,948), other assets $(4,701), accrued payroll $(591) and accrued liabilities $1,245 line items on the Fresh-Start Consolidated Balance Sheet.

(c)

Inventory – This amount adjusts inventory to fair value as of the Effective Date, which is estimated for finished goods and work-in-process based upon the expected selling price less cost to complete, selling and disposal cost and a normal selling profit. Raw material inventory was recorded at a carrying value as such value approximates the replacement cost.

(d)

Property, plant and equipment – This amount adjusts property, plant and equipment to fair value as of the Effective Date, giving consideration to the highest value and best use of these assets. Fair value estimates were based on independent appraisals. Key assumptions used in the appraisals were based on a combination of income, market and cost approaches, as appropriate.

(e)

Investments in non-consolidated and noncontrolling interests – These amounts adjust investments in non-consolidated affiliates and noncontrolling interests to their estimated fair values. Estimated fair values were based on internal and external valuations using customary valuation methodologies, including comparable earnings multiples, discounted cash flows and negotiated transaction values. The adjustment to investments in non-consolidated affiliates of $9,021 is included in the other assets line item on the Fresh-Start Consolidated Balance Sheet.

(f)

Tax expense – This amount reflects the tax expense related to the fair value adjustments of inventory, property, plant and equipment, intangibles, tooling and investments and is included in the other assets $(17,313), accrued liabilities $5,000 and deferred tax liabilities $(12,267) line items on the Fresh-Start Consolidated Balance Sheet.

Liabilities Subject to Compromise

Certain prepetition liabilities were subject to compromise under the Plan of Reorganization and were reported at amounts allowed or expected to be allowed by the Bankruptcy Court. Certain of these claims were resolved and satisfied as of the Effective Date. A summary of liabilities subject to compromise reflected in the Predecessor consolidated balance sheet as of May 31, 2010, is shown below:


Predecessor - May 31, 2010
Short-term borrowings	$	85,503
Accounts payable		8,007
Accrued liabilities		23,433
Derivatives		18,081
Debt subject to compromise
Prepetition primary credit facility		520,637
Prepetition senior notes		197,320
Prepetition senior subordinated notes		308,009
Accrued interest		52,791

Liabilities subject to compromise	$	1,213,781

Reorganization Items and Fresh-Start Accounting Adjustments, net

Reorganization items include expenses, gains and losses directly related to the Debtors' reorganization proceedings. Fresh-start accounting adjustments reflect the impact of adoption of fresh-start accounting. A summary of reorganization items and fresh-start accounting adjustments, net for the Predecessor period, is shown below:


Pretax reorganization items:
Professional and other fees	$	48,701
Gain on prepetition settlement		(49,980)
Gain on settlement of liabilities subject to compromise		(162,243)

		(163,522)

Pretax fresh-start accounting adjustments		(139,931)

Reorganization items and fresh-start accounting adjustments, net	$	(303,453)