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May 1, 2019
Cooper Standard Reports First Quarter Results, Reaffirms Adjusted EBITDA Guidance and Announces Two Significant New Fortrex™ Technology Agreements

NOVI, Mich., May 1, 2019 /PRNewswire/ -- Cooper-Standard Holdings Inc. (NYSE: CPS) today reported results for the first quarter 2019.

Summary

  • Sales totaled $880.0 million
  • Net loss of $3.5 million or $(0.20) per diluted share
  • Adjusted EBITDA of $66.4 million or 7.5 percent of sales
  • Adjusted net income of $11.8 million or $0.67 per diluted share
  • Two significant new Fortrex technology agreements signed subsequent to quarter end
  • Full year 2019 adjusted EBITDA guidance reaffirmed

"Our results were in line with our expectations for the quarter despite continuing global economic headwinds," said Jeffrey Edwards, chairman and CEO, Cooper Standard.  "As market conditions remain challenging, we are aggressively implementing and accelerating additional cost improvement initiatives that will drive improved margins and cash flow going forward.  Combined with the expected positive impact from a record number of planned new launches, we anticipate full year adjusted EBITDA results in line with our original guidance."

Consolidated Results

 


Three Months Ended March 31,


2019


2018


(dollar amounts in millions except per share amounts)

Sales

$

880.0



$

967.4


Net (loss) income

$

(3.5)



$

56.8


Adjusted net income

$

11.8



$

63.8


(Loss) earnings per diluted share

$

(0.20)



$

3.07


Adjusted earnings per diluted share

$

0.67



$

3.45


Adjusted EBITDA

$

66.4



$

122.6


 

The year-over-year change in first quarter sales was primarily attributable to unfavorable volume and mix, foreign exchange and customer price adjustments, partially offset by the net positive impact of acquisitions.

Net loss for the first quarter 2019 included the impact of restructuring charges related to headcount reduction actions, as well as project costs related to the recent sale of the Company's AVS business.  Adjusted net income, which excludes these items, was down in the first quarter 2019 due largely to unfavorable volume and mix, customer price adjustments, higher material costs and general inflation, partially offset by operating efficiencies and other cost saving initiatives.

Adjusted net income, adjusted EBITDA and adjusted earnings per diluted share are non-GAAP measures.  Reconciliations to the most directly comparable financial measures, calculated and presented in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), are provided in the attached supplemental schedules.

Notable Developments

During the first quarter, Cooper Standard launched 43 new customer programs and was awarded $76 million in annual net new business.  New contract awards related to the Company's recent product innovations, including both new and replacement business, totaled $81 million in the quarter. Cooper Standard's expanding portfolio of commercialized innovation products includes: MagAlloy™; ArmorHose™; ArmorHose™ TPV; Gen III Posi-Lock; TP Microdense; Microdense EPDM; flush mount glass sealing technology; and FortrexTM.

Subsequent to the end of the first quarter, Cooper Standard reached two new agreements to license FortrexTM technology to develop and commercialize custom blended materials for applications outside of the automotive industry.  The agreements are with a leading Chinese sportswear OEM with internationally recognized brands and a major North American producer of materials for the building and construction industry. Cooper Standard will also supply FortrexTM materials to these companies for any next generation products arising under these agreements. The license agreements are further demonstration of the versatility of FortrexTM chemistry and the diverse market applications that it can address.

Segment Results of Operations

Sales


Three Months Ended March 31,



Variance Due To:


2019


2018


Change



Volume /
Mix*


Foreign Exchange


Other


(dollar amounts in thousands)

Sales to external customers













North America

$

474,707



$

499,178



$

(24,471)




$

(56,899)



$

(3,440)



$

35,868


Europe

254,599



292,401



(37,802)




(17,456)



(21,169)



823


Asia Pacific

127,495



149,175



(21,680)




(31,965)



(8,101)



18,386


South America

23,237



26,637



(3,400)




430



(3,830)




Consolidated

$

880,038



$

967,391



$

(87,353)




$

(105,890)



$

(36,540)



$

55,077















*Net of customer price reductions

 

  • The impact of foreign currency exchange primarily relates to the Euro, Chinese Renminbi, Brazilian Real, Mexican Peso and the Canadian Dollar.
  • Other includes the net impact of acquisitions.

 

Adjusted EBITDA


Three Months Ended March 31,



Variance Due To:


2019


2018


Change



Volume /
Mix*


Foreign
Exchange


Cost
(Increases)
/ Decreases


Other


(dollar amounts in thousands)





Segment adjusted EBITDA















North America

$

57,564


$

86,776


$

(29,212)



$

(29,496)


$

(2,631)


$

(1,768)


$

4,683


Europe

9,441


22,968


(13,527)



(10,299)


(1,930)


(964)


(334)


Asia Pacific

767


13,490


(12,723)



(17,908)


1,255


2,878


1,052


South America

(1,386)


(597)


(789)



532


(324)


(997)



Consolidated adjusted EBITDA

$

66,386


$

122,637


$

(56,251)



$

(57,171)


$

(3,630)


$

(851)


$

5,401


* Net of customer price reductions

  • The impact of foreign currency exchange is primarily driven by the Canadian Dollar, Mexican Peso, Chinese Renminbi and Euro.
  • The Cost (Increases) / Decreases category above includes:
    • The increase in material cost pressure and general inflation;
    • Launch related activity for engineering, prototypes and tooling;
    • Net operational efficiencies of $25.0 million primarily driven by our North America and Europe segments;
  • Other includes the net impact of acquisitions.

Liquidity and Cash Flow

At March 31, 2019, Cooper Standard had cash and cash equivalents totaling $262.2 million.  Net cash used in operating activities in the first quarter 2019 was $1.8 million and free cash flow for the quarter (defined as net cash used in/provided by operating activities minus capital expenditures) was an outflow of $61.5 million.  This compares favorably to the free cash outflow of $78.4 million in the first quarter of 2018.

In addition to cash and cash equivalents, the Company had $109.3 million available under its amended senior asset-based revolving credit facility ("ABL"), inclusive of outstanding letters of credit, for total liquidity of $371.5 million at March 31, 2019.

Total debt at March 31, 2019 was $907.2 million. Net debt (defined as total debt minus cash and cash equivalents) was $645 millionCooper Standard's net leverage ratio (defined as net debt divided by trailing 12 months adjusted EBITDA) at March 31, 2019 was 2.0 times.

Subsequent to the end of the quarter, on April 1, 2019, the Company completed the sale of its AVS business.  The total sale price of the transaction was $265.5 million, subject to certain adjustments. The estimated net cash proceeds after taxes and transaction-related expenses and fees are expected to be approximately $220 to $225 million.

In June 2018, the Company's board of directors approved a common stock repurchase program authorizing the Company to repurchase, in aggregate, up to $150.0 million of its outstanding common stock. During the first quarter of 2019, the Company used $5.9 million of cash on hand to repurchase 85,000 shares.  As of March 31, 2019, approximately $128.7 million of repurchase authorization remained available under the 2018 program.

Outlook

Based on the results achieved in the first quarter and the industry and economic outlook for the rest of the year, the Company has revised its revenue guidance and reaffirmed its adjusted EBITDA guidance for the full year 2019 as summarized below:


Previous Guidance
(2/14/2019)

Current Guidance

Sales

$3.40 - $3.60 billion

$3.20 - $3.40 billion

Adjusted EBITDA1

$300 - $340 million

Unchanged

Capital Expenditures

$180 - $190 million

Unchanged

Cash Restructuring

$15 - $25 million

Unchanged

Effective Tax Rate

16% - 18%

Unchanged

1 Adjusted EBITDA is a non-GAAP financial measure. We have not provided a reconciliation of projected adjusted EBITDA to projected net income because full-year net income will include special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end.  Due to this uncertainty, we cannot reconcile projected adjusted EBITDA to U.S. GAAP net income without unreasonable effort.

Conference Call Details

Cooper Standard management will host a conference call and webcast on May 2, 2019 at 9 a.m. ET to discuss its first quarter 2019 results, provide a general business update and respond to investor questions.  A link to the live webcast of the call (listen only) and presentation materials will be available on Cooper Standard's Investor Relations website at www.ir.cooperstandard.com/events.cfm.

To participate by phone, callers in the United States and Canada should dial toll-free (877) 374-4041.  International callers should dial (253) 237-1156.  Provide the conference ID 3077994 or ask to be connected to the Cooper Standard conference call. Representatives of the investment community will have the opportunity to ask questions after the presentation. Callers should dial in at least five minutes prior to the start of the call.

Individuals unable to participate during the live call may visit the investors' portion of the Cooper Standard website (www.ir.cooperstandard.com) for a replay of the webcast.

About Cooper Standard

Cooper Standard, headquartered in Novi, Mich., is a leading global supplier of systems and components for the automotive industry. Products include sealing, fuel and brake delivery, and fluid transfer systems. Cooper Standard employs approximately 30,000 people globally and operates in 21 countries around the world. For more information, please visit www.cooperstandard.com.

Forward Looking Statements

This press release includes "forward-looking statements" within the meaning of U.S. federal securities laws, and we intend that such forward-looking statements be subject to the safe harbor created thereby.  Our use of words "estimate," "expect," "anticipate," "project," "plan," "intend," "believe," "outlook," "guidance," "forecast," or future or conditional verbs, such as "will," "should," "could," "would," or "may," and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, we cannot assure you that these expectations, beliefs and projections will be achieved. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. Among other items, such factors may include: prolonged or material contractions in automotive sales and production volumes; our inability to realize sales represented by awarded business; escalating pricing pressures; loss of large customers or significant platforms; our ability to successfully compete in the automotive parts industry; availability and increasing volatility in costs of manufactured components and raw materials; disruption in our supply base; competitive threats and commercial risks associated with us entering new markets; possible variability of our working capital requirements; risks associated with our international operations, including changes in laws, regulations, and policies governing the terms of foreign trade such as increased trade restrictions and tariffs; foreign currency exchange rate fluctuations; our ability to control the operations of our joint ventures for our sole benefit; our substantial amount of indebtedness; our ability to obtain adequate financing sources in the future; operating and financial restrictions imposed on us under our debt instruments; the underfunding of our pension plans; significant changes in discount rates and the actual return on pension assets; effectiveness of continuous improvement programs and other cost savings plans; manufacturing facility closings or consolidation; our ability to execute new program launches; our ability to meet customers' needs for new and improved products; the possibility that our acquisitions and divestitures may not be successful; product liability, warranty and recall claims brought against us; laws and regulations, including environmental, health and safety laws and regulations; legal proceedings, claims or investigations against us; work stoppages or other labor disruptions; the ability of our intellectual property to withstand legal challenges; cyber-attacks, other disruptions in or the inability to implement upgrades to, our information technology systems; the possible volatility of our annual effective tax rate; changes in our assumptions as a result of IRS issuing guidance on the Tax Cuts and Jobs Act; the possibility of future impairment charges to our goodwill and long-lived assets; our dependence on our subsidiaries for cash to satisfy our obligations; and other risks and uncertainties, including those detailed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission.

You should not place undue reliance on these forward-looking statements.  Our forward-looking statements speak only as of the date of this press release and we undertake no obligation to publicly update or otherwise revise any forward-looking statement, whether as a result of new information, future events or otherwise, except where we are expressly required to do so by law.

This press release also contains estimates and other information that is based on industry publications, surveys and forecasts.  This information involves a number of assumptions and limitations, and we have not independently verified the accuracy or completeness of the information.

CPS_F

 

Contact for Analysts:

Contact for Media:

Roger Hendriksen

Sharon Wenzl

Cooper Standard

Cooper Standard

(248) 596-6465

(248) 596-6211

roger.hendriksen@cooperstandard.com 

sswenzl@cooperstandard.com 

 

Financial statements and related notes follow:

 

COOPER-STANDARD HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollar amounts in thousands except per share amounts)






Three Months Ended March 31,


2019


2018

Sales

$

880,038



$

967,391


Cost of products sold

762,490



796,511


Gross profit

117,548



170,880


Selling, administration & engineering expenses

86,974



80,440


Amortization of intangibles

3,775



3,406


Restructuring charges

17,715



7,125


Operating profit

9,084



79,909


Interest expense, net of interest income

(11,932)



(9,800)


Equity in earnings of affiliates

2,358



1,687


Loss on refinancing and extinguishment of debt



(770)


Other expense, net

(796)



(1,719)


(Loss) income before income taxes

(1,286)



69,307


Income tax expense

2,331



11,891


Net (loss) income

(3,617)



57,416


Net loss (income) attributable to noncontrolling interests

157



(624)


Net (loss) income attributable to Cooper-Standard Holdings Inc.

$

(3,460)



$

56,792






Weighted average shares outstanding




Basic

17,535,195



17,991,488


Diluted

17,535,195



18,511,113






(Loss) earnings per share:




Basic

$

(0.20)



$

3.16


Diluted

$

(0.20)



$

3.07


 

COOPER-STANDARD HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands)


March 31, 2019


December 31, 2018


 (unaudited)



Assets




Current assets:




Cash and cash equivalents

$

262,169



$

264,980


Accounts receivable, net

480,828



418,607


Tooling receivable

162,769



141,106


Inventories

186,272



175,572


Prepaid expenses

33,206



36,878


Other current assets

104,200



108,683


Assets held for sale

122,966



103,898


Total current assets

1,352,410



1,249,724


Property, plant and equipment, net

990,665



984,241


Operating lease right-of-use assets

92,508




Goodwill

142,106



143,681


Intangible assets, net

95,611



99,602


Other assets

141,522



145,855


Total assets

$

2,814,822



$

2,623,103






Liabilities and Equity




Current liabilities:




Debt payable within one year

$

169,087



$

101,323


Accounts payable

452,979



452,320


Payroll liabilities

108,236



92,604


Accrued liabilities

107,707



98,907


Current operating lease liabilities

26,216




Liabilities held for sale

75,830



71,195


Total current liabilities

940,055



816,349


Long-term debt

738,077



729,805


Pension benefits

134,863



138,771


Postretirement benefits other than pensions

41,875



40,901


Long-term operating lease liabilities

68,905




Other liabilities

36,945



37,775


Total liabilities

1,960,720



1,763,601


7% Cumulative participating convertible preferred stock




Equity:




Common stock

17



17


Additional paid-in capital

499,458



501,511


Retained earnings

565,864



576,025


Accumulated other comprehensive loss

(241,633)



(246,088)


Total Cooper-Standard Holdings Inc. equity

823,706



831,465


Noncontrolling interests

30,396



28,037


Total equity

854,102



859,502


Total liabilities and equity

$

2,814,822



$

2,623,103


 

COOPER-STANDARD HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollar amounts in thousands)






Three Months Ended March 31,


2019


2018

Operating Activities:




Net (loss) income

$

(3,617)



$

57,416


Adjustments to reconcile net (loss) income to net cash provided by operating activities:




Depreciation

32,830



32,853


Amortization of intangibles

3,775



3,406


Share-based compensation expense

3,186



3,875


Equity in earnings of affiliates, net of dividends related to earnings

2,559



2,821


Loss on refinancing and extinguishment of debt



770


Other

531



1,242


Changes in operating assets and liabilities

(41,112)



(112,939)


Net cash used in operating activities

(1,848)



(10,556)


Investing activities:




Capital expenditures

(59,633)



(67,858)


Acquisition of businesses, net of cash acquired

(452)



(3,223)


Proceeds from sale of fixed assets and other

102



889


Net cash used in investing activities

(59,983)



(70,192)


Financing activities:




Principal payments on long-term debt

(1,012)



(887)


Increase (decrease) in short-term debt, net

65,791



(1,123)


Purchase of noncontrolling interests



(2,450)


Repurchase of common stock

(6,550)




Taxes withheld and paid on employees' share-based payment awards

(2,706)



(9,621)


Contribution from noncontrolling interest and other

1,827



(881)


Net cash provided by (used in) financing activities

57,350



(14,962)


Effects of exchange rate changes on cash, cash equivalents and restricted cash

1,477



(69)


Changes in cash, cash equivalents and restricted cash

(3,004)



(95,779)


Cash, cash equivalents and restricted cash at beginning of period

267,399



518,461


Cash, cash equivalents and restricted cash at end of period

$

264,395



$

422,682






Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:


Balance as of


March 31, 2019


December 31, 2018

Cash and cash equivalents

$

262,169



$

264,980


Restricted cash included in other current assets

20



18


Restricted cash included in other assets

2,206



2,401


Total cash, cash equivalents and restricted cash shown in the statement of cash flows

$

264,395



$

267,399


 

Non-GAAP Measures

EBITDA, adjusted EBITDA, adjusted net income, adjusted earnings per share, net debt and free cash flow are measures not recognized under U.S. GAAP and which exclude certain non-cash and special items that may obscure trends and operating performance not indicative of the Company's core financial activities. Management considers EBITDA, adjusted EBITDA, adjusted net income, adjusted earnings per share, net debt and free cash flow to be key indicators of the Company's operating performance and believes that these and similar measures are widely used by investors, securities analysts and other interested parties in evaluating the Company's performance. In addition, similar measures are utilized in the calculation of the financial covenants and ratios contained in the Company's financing arrangements and management uses these measures for developing internal budgets and forecasting purposes. EBITDA is defined as net income adjusted to reflect income tax expense, interest expense net of interest income, depreciation and amortization, and adjusted EBITDA is defined as EBITDA further adjusted to reflect certain items that management does not consider to be reflective of the Company's core operating performance.  Adjusted net income is defined as net income adjusted to reflect certain items that management does not consider to be reflective of the Company's core operating performance. Adjusted basic and diluted earnings per share is defined as adjusted net income divided by the weighted average number of basic and diluted shares, respectively, outstanding during the period.  Net debt is defined as total debt minus cash and cash equivalents.  Free cash flow is defined as net cash provided by operating activities minus capital expenditures and is useful to both management and investors in evaluating the Company's ability to service and repay its debt.

When analyzing the Company's operating performance, investors should use EBITDA, adjusted EBITDA, adjusted net income, adjusted earnings per share, net debt and free cash flow as supplements to, and not as alternatives for, net income, operating income, or any other performance measure derived in accordance with U.S. GAAP, and not as an alternative to cash flow from operating activities as a measure of the Company's liquidity. EBITDA, adjusted EBITDA, adjusted net income, adjusted earnings per share, net debt and free cash flow have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company's results of operations as reported under U.S. GAAP. Other companies may report EBITDA, adjusted EBITDA, adjusted net income, adjusted earnings per share, net debt and free cash flow differently and therefore the Company's results may not be comparable to other similarly titled measures of other companies. In addition, in evaluating adjusted EBITDA and adjusted net income, it should be noted that in the future the Company may incur expenses similar to or in excess of the adjustments in the below presentation. This presentation of adjusted EBITDA and adjusted net income should not be construed as an inference that the Company's future results will be unaffected by special items.  Reconciliations of EBITDA, adjusted EBITDA, adjusted net income and free cash flow follow.

 

Reconciliation of Non-GAAP Measures

EBITDA and Adjusted EBITDA
(Unaudited)
(Dollar amounts in thousands)


The following table provides reconciliation of EBITDA and adjusted EBITDA from net (loss) income:



Three Months Ended March 31,


2019


2018

Net (loss) income attributable to Cooper-Standard Holdings Inc.

$

(3,460)



$

56,792


Income tax expense

2,331



11,891


Interest expense, net of interest income

11,932



9,800


Depreciation and amortization

36,605



36,259


EBITDA

$

47,408



$

114,742


Restructuring charges

17,715



7,125


Project costs (1)

1,263




Loss on refinancing and extinguishment of debt (2)



770


Adjusted EBITDA

$

66,386



$

122,637






Sales

$

880,038



$

967,391


Net (loss) income margin

(0.4)

%


5.9

%

Adjusted EBITDA margin

7.5

%


12.7

%

 

(1)

Project costs related to acquisitions and planned divestiture.

(2)

Loss on refinancing and extinguishment of debt related to the applicable amendment of the Term Loan Facility entered into during such period.

 

Adjusted Net Income and Adjusted Earnings Per Share
(Unaudited)
(Dollar amounts in thousands, except per share amounts)


The following table provides reconciliation of net (loss) income to adjusted net income and the respective earnings per share amounts:



Three Months Ended March 31,


2019


2018

Net (loss) income attributable to Cooper-Standard Holdings Inc.

$

(3,460)



$

56,792


Restructuring charges

17,715



7,125


Project costs (1)

1,263




Loss on refinancing and extinguishment of debt (2)



770


Tax impact of adjusting items (3)

(3,681)



(901)


Adjusted net income

$

11,837



$

63,786






Weighted average shares outstanding:




Basic

17,535,195



17,991,488


Diluted (4)

17,535,195



18,511,113






(Loss) earnings per share:




Basic

$

(0.20)



$

3.16


Diluted

$

(0.20)



$

3.07






Adjusted earnings per share:




Basic

$

0.68



$

3.55


Diluted (4)

$

0.67



$

3.45


 

(1)

Project costs related to acquisitions and planned divestiture.

(2)

Loss on refinancing and extinguishment of debt related to the applicable amendment of the Term Loan Facility entered into during such period.

(3)

Represents the elimination of the income tax impact of the above adjustments by calculating the income tax impact of these adjusting items using the appropriate tax rate for the jurisdiction where the charges were incurred.

(4)

For the purpose of calculating Q1 2019 adjusted diluted earnings per share, the weighted average shares outstanding were 17,623,821.

 

Free Cash Flow
(Unaudited)
(Dollar amounts in thousands)


The following table defines free cash flow:



Three Months Ended March 31,


2019


2018

Net cash used in operating activities

$

(1,848)



$

(10,556)


Capital expenditures

(59,633)



(67,858)


Free cash flow

$

(61,481)



$

(78,414)


 

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SOURCE Cooper-Standard Holdings Inc.