Cooper Standard Reports First Quarter Results, Reaffirms Adjusted EBITDA Guidance and Announces Two Significant New Fortrex(TM) 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(TM) 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(TM); ArmorHose(TM); ArmorHose(TM) TPV; Gen III Posi-Lock; TP Microdense; Microdense EPDM; flush mount glass sealing technology; and Fortrex(TM).
Subsequent to the end of the first quarter, Cooper Standard reached two new agreements to license Fortrex(TM) 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 Fortrex(TM) materials to these companies for any next generation products arising under these agreements. The license agreements are further demonstration of the versatility of Fortrex(TM) 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 / Foreign Exchange Other
Mix*
(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 / Foreign Cost Other
Mix* Exchange (Increases)
/ Decreases
(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 million. Cooper 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
Current Guidance
(2/14/2019)
Sales
$3.40 - $3.60 billion
$3.20 - $3.40 billion
---
Adjusted EBITDA(1)
$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)
SOURCE Cooper-Standard Holdings Inc.
