Cooper Standard
May 2, 2017
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Cooper Standard Reports Record First Quarter Results

NOVI, Mich., May 2, 2017 /PRNewswire/ -- Cooper-Standard Holdings Inc. (NYSE: CPS) today reported record results for the first quarter 2017.

First Quarter 2017 Highlights

  • Sales increased 4.6 percent to a record $902.1 million
  • Net income increased 33.1 percent to a strong $41.7 million or $2.20 per diluted share
  • Adjusted EBITDA increased 7.2 percent to a record $111.0 million
  • Adjusted net income increased 16.0 percent to $55.9 million or $2.95 per diluted share
  • First major production order for Fortrex™ awarded

During the first quarter of 2017, the Company generated strong net income of $41.7 million, or $2.20 per diluted share, and adjusted EBITDA of $111.0 million on sales of $902.1 million. These results compare to net income of $31.3 million, or $1.67 per diluted share, and adjusted EBITDA of $103.5 million on sales of $862.5 million in the first quarter of 2016.  Prior period amounts have been recast due to the adoption of a new accounting standard (ASU 2016-09).

"Our team delivered excellent results for the first quarter and put us on track to deliver another record year in 2017," stated Jeffrey Edwards, chairman and CEO of Cooper Standard. "In addition, our continued focus on innovation and delivering game-changing technology is contributing to new customer orders and booked business."

The Company's first quarter net income, excluding restructuring and other special items ("adjusted net income"), totaled $55.9 million, or $2.95 per diluted share.  Adjusted net income in the prior year period was $48.2 million, or $2.57 per diluted share.  The Company's adjusted EBITDA margin for the first three months of 2017 increased 30 basis points to 12.3 percent compared to 12.0 percent in the first three months of 2016.

Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted earnings per share are non-GAAP measures.  Definitions of these measures and 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.

Consolidated Results

First quarter 2017 sales increased by $39.6 million or 4.6 percent compared to the first quarter of 2016.  The year-over-year variance was largely attributable to favorable volume and mix and the net impact of acquisitions and divestitures, partially offset by price reductions and the impact of foreign currency exchange rates.  Excluding the impact of foreign currency exchange rates, acquisitions and divestitures, sales in the first quarter were $894.1 million, an increase of 3.7 percent over the first quarter 2016. 

First quarter adjusted EBITDA increased by $7.4 million or 7.2 percent compared to the first quarter of 2016.  Adjusted EBITDA margin as a percent of sales was 12.3 percent in the quarter, up 30 basis points compared to the first quarter of 2016. The year-over-year variance was primarily attributable to improvements in operating efficiency and favorable volume and mix, partially offset by price reductions, higher raw material costs and investments to support growth.

During the first quarter, Cooper Standard launched 29 new customer programs and was awarded $140.9 million in annual net new business.  In addition, the Company received a significant production contract for its Fortrex™ static sealing system products on a major SUV platform. Fortrex™ is a new, proprietary material science technology that provides significant weight reduction and performance improvements versus traditional EPDM and TPV based sealing systems.

North America

The Company's North America segment reported sales of $484.2 million in the first quarter, an increase of 7.7 percent when compared to $449.7 million in sales reported in the first quarter 2016.  The year-over-year change was largely attributable to favorable volume and mix and the acquisition of AMI Industries' fuel and brake business.  Excluding the impact of acquisitions, divestitures and foreign currency exchange rates, North America segment sales were $471.4 million, which represents organic growth of $21.7 million or 4.8 percent compared to the first quarter of 2016.

North America segment profit was $62.3 million, or 12.9 percent of sales, in the first quarter.  This compared to segment profit of $54.2 million or 12.1 percent of sales in the first quarter 2016.  The year- over-year increase was driven primarily by gains in operating efficiencies and improved volume and mix, partially offset by price reductions and the impact of wage and general inflation.

Europe

The Company's Europe segment reported sales of $261.5 million in the first quarter, compared to $269.3 million in the first quarter 2016.  The year-over-year change was attributable to unfavorable foreign exchange, price reductions and the continued run-off of contract sales related to the Company's thermal and emissions business which was sold in a prior period.  These negative factors were partially offset by improved volume and mix.

The Europe segment reported a loss of $8.6 million in the first quarter compared to segment loss of $2.6 million in the first quarter of 2016.  The segment results include $13.6 million of restructuring and asset impairment expense in the first quarter of 2017 and $8.8 million of restructuring expense in the first quarter of 2016.  Excluding these items, segment profit was $5.0 million in the first quarter compared to segment profit of $6.2 million in the first quarter of 2016.  Year-over-year improvements in operating efficiency and volume and mix were offset by the impact of customer price reductions and unfavorable foreign exchange.

Asia Pacific

The Company's Asia Pacific segment reported sales of $132.6 million in the first quarter, an increase of 4.3 percent when compared to sales of $127.1 million in the first quarter 2016.  The year-over-year variance was largely attributable to the consolidation of the Company's sealing joint venture in Guangzhou, China, partially offset by unfavorable foreign exchange and customer price reductions.

Asia Pacific segment profit was $3.5 million in the first quarter, compared to $2.5 million in the first quarter 2016.  The year-over-year improvement was driven primarily by improved operating efficiencies and the consolidation of the Guangzhou joint venture, partially offset by customer price reductions and investments to support growth.

South America

The Company's South America segment reported sales of $23.7 million in the first quarter, compared to $16.4 million in the first quarter of 2016.  The increase was largely attributable to favorable foreign exchange and improved volume and mix.

The South America segment reported a loss of $2.8 million in the first quarter, compared to a segment loss of $7.8 million in the first quarter of 2016.  The improvement was due largely to improved operating efficiencies and material cost savings.

Liquidity and Cash Flow

At March 31, 2017, Cooper Standard had cash and cash equivalents totaling $406.9 million.  Net cash provided by operating activities in the first quarter 2017 was $3.6 million, compared to $27.9 million in the first quarter of 2016.  First quarter 2017 free cash flow (defined as net cash provided by operating activities minus capital expenditures) declined by $27.5 million compared to the first quarter of 2016.

The decline was primarily due to typical seasonal working capital increases and higher payments related to incentive compensation and restructuring, partially offset by increased earnings and reduced cash paid for taxes.

In addition to cash and cash equivalents, the Company had $180.1 million ($199.4 million undrawn facility less $19.3 million in outstanding letters of credit) available under its senior amended asset-based revolving credit facility ("ABL") for total liquidity of $587.0 million at March 31, 2017.

Total debt at March 31, 2017 was $761.9 million. Net debt (defined as total debt minus cash and cash equivalents) was $355.0 millionCooper Standard's net leverage ratio at March 31, 2017 was 0.8 times trailing 12 months adjusted EBITDA.

Subsequent to the end of the first quarter, the Company entered into a second amendment to its Term Loan Facility to reduce the interest rate.  The lower rate will reduce cash interest expense by approximately $1.5 million annually through the remaining term of the loan.

Outlook

Based on the positive results of the first quarter, the Company is on track to meet previously issued full year guidance ranges.  The Company reiterates its full year 2017 guidance as follows:


Previous Guidance (2/16/2017)

Current Guidance

Sales

$3.48 - $3.53 billion

Unchanged

Adjusted EBITDA Margin1

12.3% - 12.8%

Unchanged

Capital Expenditures

$165 - $175 million

Unchanged

Cash Restructuring

$45 - $55 million

Unchanged

Effective Tax Rate

26% - 29%

Unchanged

1 Adjusted EBITDA Margin is a non-GAAP financial measure. We do not provide guidance on net income margin. 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.

Conference Call Details

Cooper Standard management will host a conference call and webcast on May 3, 2017 at 9 a.m. ET to discuss its first quarter 2017 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 800-949-4315 (international callers dial 678-825-8315) and provide the conference ID 95008471 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 rubber and plastic sealing, fuel and brake lines, fluid transfer hoses and anti-vibration systems. Cooper Standard employs more than 30,000 people globally and operates in 20 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," "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; possible variability of our working capital requirements; risks associated with our international operations; 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 or other disruptions in our information technology systems; the possible volatility of our annual effective tax rate; the possibility of future impairment charges to our goodwill and long-lived assets; and our dependence on our subsidiaries for cash to satisfy our obligations.

You should not place undue reliance on these forward-looking statements.  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 NET INCOME

(Unaudited)

(Dollar amounts in thousands except per share amounts)






Three Months Ended March 31,


2017


2016 (1)

Sales

$

902,051



$

862,497


Cost of products sold

731,966



702,673


Gross profit

170,085



159,824


Selling, administration & engineering expenses

87,634



83,458


Amortization of intangibles

3,595



3,278


Impairment charges

4,270




Restructuring charges

9,988



10,832


Other operating loss



155


Operating profit

64,598



62,101


Interest expense, net of interest income

(11,239)



(9,752)


Equity in earnings of affiliates

1,675



1,770


Other expense, net

(640)



(7,816)


Income before income taxes

54,394



46,303


Income tax expense

11,890



14,766


Net income

42,504



31,537


Net income attributable to noncontrolling interests

(798)



(214)


Net income attributable to Cooper-Standard Holdings Inc.

$

41,706



$

31,323






Weighted average shares outstanding




Basic

17,742,994



17,442,364


Diluted

18,972,550



18,746,600






Earnings per share:




Basic

$

2.35



$

1.80


Diluted

$

2.20



$

1.67



(1) Certain amounts have been recast due to the adoption of ASU 2016-09.

 

 

COOPER-STANDARD HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands)


March 31, 2017


December 31, 2016


 (unaudited)



Assets




Current assets:




Cash and cash equivalents

$

406,925



$

480,092


Accounts receivable, net

518,634



460,503


Tooling receivable

101,430



90,974


Inventories

160,587



146,449


Prepaid expenses

34,663



37,142


Other current assets

96,013



81,021


Total current assets

1,318,252



1,296,181


Property, plant and equipment, net

841,371



832,269


Goodwill

167,888



167,441


Intangible assets, net

78,198



81,363


Other assets

101,361



114,448


Total assets

$

2,507,070



$

2,491,702






Liabilities and Equity




Current liabilities:




Debt payable within one year

$

33,470



$

33,439


Accounts payable

483,168



475,426


Payroll liabilities

118,062



144,812


Accrued liabilities

104,353



105,665


Total current liabilities

739,053



759,342


Long-term debt

728,470



729,480


Pension benefits

173,445



172,950


Postretirement benefits other than pensions

54,474



54,225


Other liabilities

42,228



53,914


Total liabilities

1,737,670



1,769,911


7% Cumulative participating convertible preferred stock




Equity:




Common stock

18



17


Additional paid-in capital

513,415



513,934


Retained earnings

462,110



425,972


Accumulated other comprehensive loss

(231,555)



(242,563)


Total Cooper-Standard Holdings Inc. equity

743,988



697,360


Noncontrolling interests

25,412



24,431


Total equity

769,400



721,791


Total liabilities and equity

$

2,507,070



$

2,491,702


 

 

COOPER-STANDARD HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollar amounts in thousands)






Three Months Ended March 31,


2017


2016 (1)

Operating Activities:




Net income

$

42,504



$

31,537


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation

28,262



26,927


Amortization of intangibles

3,595



3,278


Impairment charges

4,270




Share-based compensation expense

6,804



4,434


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

965



1,252


Other

7,661



(362)


Changes in operating assets and liabilities

(90,510)



(39,152)


Net cash provided by operating activities

3,551



27,914


Investing activities:




Capital expenditures

(58,270)



(55,090)


Acquisition of businesses, net of cash acquired



(3,020)


Proceeds from sale of fixed assets and other

33



(127)


Net cash used in investing activities

(58,237)



(58,237)


Financing activities:




Increase in short-term debt, net

142



2,295


Principal payments on long-term debt

(1,836)



(2,436)


Repurchase of common stock



(23,800)


Proceeds from exercise of warrants

580



248


Taxes withheld and paid on employees' share based payment awards

(10,740)



(1,714)


Other

(117)



28


Net cash used in financing activities

(11,971)



(25,379)


Effects of exchange rate changes on cash and cash equivalents

(6,510)



(9,464)


Changes in cash and cash equivalents

(73,167)



(65,166)


Cash and cash equivalents at beginning of period

480,092



378,243


Cash and cash equivalents at end of period

$

406,925



$

313,077



(1) Certain amounts have been recast due to the adoption of ASU 2016-09.

 

Non-GAAP Measures

EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share 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 EBITDA margin, adjusted net income, adjusted earnings per share 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 EBITDA margin is defined as adjusted EBITDA divided by sales.  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 and adjusted diluted net income, respectively, divided by the weighted average number of basic and diluted shares, respectively, outstanding during the period.  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 EBITDA margin, adjusted net income, adjusted earnings per share 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 EBITDA margin, adjusted net income, adjusted earnings per share 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 EBITDA margin, adjusted net income, adjusted earnings per share 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

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

(Unaudited; Dollar amounts in thousands)



Three Months Ended March 31,


2017


2016 (1)

Net income attributable to Cooper-Standard Holdings Inc.

$

41,706



$

31,323


Income tax expense

11,890



14,766


Interest expense, net of interest income

11,239



9,752


Depreciation and amortization

31,857



30,205


EBITDA

$

96,692



$

86,046


Restructuring charges

9,988



10,832


Impairment charges (2)

4,270




Secondary offering underwriting fees and other expenses (3)



6,500


Other



155


Adjusted EBITDA

$

110,950



$

103,533



(1)     Certain amounts have been recast due to the adoption of ASU 2016-09.

(2)     Impairment charges related to fixed assets.

(3)     Fees and other expenses associated with the March 2016 secondary offering.

                                                                                                       

 

Adjusted Net Income and Adjusted Earnings Per Share

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

(Unaudited; Dollar amounts in thousands, except per share amounts)



Three Months Ended March 31,


2017


2016 (1)

Net income attributable to Cooper-Standard Holdings Inc.

$

41,706



$

31,323


Restructuring charges

9,988



10,832


Impairment charges (2)

4,270




Secondary offering underwriting fees and other expenses (3)



6,500


Other



155


Tax impact of adjusting items (4)

(95)



(658)


Adjusted net income

$

55,869



$

48,152






Weighted average shares outstanding




Basic

17,742,994



17,442,364


Diluted

18,972,550



18,746,600






Earnings per share:




Basic

$

2.35



$

1.80


Diluted

$

2.20



$

1.67






Adjusted earnings per share:




Basic

$

3.15



$

2.76


Diluted

$

2.95



$

2.57



(1)     Certain amounts have been recast due to the adoption of ASU 2016-09.

(2)     Impairment charges related to fixed assets.

(3)     Fees and other expenses associated with the March 2016 secondary offering.

(4)     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.

 

 

Free Cash Flow

The following table defines free cash flow:

(Unaudited; Dollar amounts in thousands)



Three Months Ended March 31,


2017


2016

Net cash provided by operating activities

$

3,551



$

27,914


Capital expenditures

(58,270)



(55,090)


Free cash flow

$

(54,719)



$

(27,176)


 

 

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SOURCE Cooper-Standard Holdings Inc.

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