Cooper Standard reports record quarterly results

Cooper-Standard Holdings Inc. (NYSE: CPS) today reported record results for the first quarter 2016.

First Quarter 2016 Highlights

• Sales increased 7.8 percent, significantly outpacing industry production
• Excluding the impact of foreign exchange, sales increased 11.3 percent
• Net income totaled $30.6 million or $1.64 per diluted share
• Adjusted EBITDA increased 28.3 percent to a record $103.6 million
• Adjusted net income totaled $47.4 million or $2.54 per diluted share
• Free cash flow improved by $33.7 million vs. first quarter of 2015

During the first quarter of 2016, the Company generated net income of $30.6 million, or $1.64 per diluted share, and adjusted EBITDA of $103.6 million on record sales of $862.5 million. These results compare to net income of $21.0 million or $1.15 per diluted share and adjusted EBITDA of $80.8 million on sales of $800.1 million in the first quarter of 2015.

First quarter 2016 net income, excluding restructuring and other special items (“adjusted net income”), totaled $47.4 million or $2.54 per diluted share. Adjusted net income in the prior year period was $29.7 million or $1.63 per diluted share.

“Our record results in the quarter are attributable to our strategy, culture and engaged employees, as well as our continued focus on innovation and operational excellence,” stated Jeffrey Edwards, chairman and CEO of Cooper Standard. “We are pursuing very focused initiatives in each of our operating regions to drive additional growth, profitability and cash flow. Following this quarter’s strong start, we expect to continue building further strategic and financial momentum for our Company throughout the year.”

Consolidated Results

First quarter 2016 sales increased by $62.4 million or 7.8 percent compared to the first quarter of 2015. The year-over-year variance is largely attributable to favorable volume and mix as well as incremental revenue from the acquisition of Huayu-Cooper Standard Sealing Systems Co. (“Shenya”), partially offset by a $27.7 million impact from unfavorable foreign currency exchange rates and the sale of the Company’s hard coat plastic exterior trim business in December 2015. Excluding the impact from foreign currency exchange rates, sales in the first quarter of 2016 were $890.2 million, an increase of 11.3 percent over the first quarter of 2015.

First quarter adjusted EBITDA increased by $22.8 million or 28.3 percent compared to the first quarter of 2015. The year-over-year variance is primarily attributable to improvements in operating efficiency, favorable volume and mix, and improved supply chain economics and optimization. These favorable items were partially offset by wage increases, price adjustments and the impact of unfavorable foreign currency exchange rates.

During the first quarter, Cooper Standard launched 70 new customer programs, 48 of which were on global platforms, and was awarded $167.0 million in annual net new business, mostly on global platforms.

Also during the quarter, the Company completed a secondary public offering of 2.3 million shares of common stock that had been owned by its three largest shareholders and announced a $125.0 million share repurchase program. In conjunction with the secondary offering, the Company repurchased 350,000 shares of its common stock at a price of $68.00 per share. Underwriting fees and other expenses incurred with the secondary offering and share repurchase were allocated to the Company’s operating segments as a one-time expense in the quarter.

North America

Cooper Standard’s North America segment reported sales of $449.7 million in the first quarter of 2016, an increase of 7.7 percent when compared to $417.4 million in sales reported in the first quarter of 2015. The increase was attributable to improved volume and mix, partially offset by the unfavorable impact of the divestiture of the Company’s hard coat plastic exterior trim business, foreign currency exchange rates and price adjustments. Excluding the impact of divestitures and foreign exchange rates, North America segment sales were $474.1 million, which represents organic growth of $56.7 million or 13.6 percent compared to the first quarter of 2015.

Segment profit for the North America segment was $54.3 million, or 12.1 percent of sales, in the first quarter of 2016. This compared to segment profit of $43.0 million, or 10.3 percent of sales in the first quarter of 2015. The 180 basis point improvement was driven primarily by improved volume and mix, gains in operating efficiencies and lower materials costs, partially offset by the impact of price adjustments, wage increases and unfavorable foreign currency exchange rates.

Europe

Cooper Standard’s Europe segment reported sales of $269.3 million in the first quarter of 2016 compared to $266.8 million in the first quarter of 2015. The increase was attributable to improved volume and mix, partially offset by price adjustments and the impact of unfavorable foreign currency exchange rates. Excluding the impact of foreign currency exchange rates, Europe segment sales were $274.4 million for the quarter, up 2.8 percent versus the prior year period.

The Europe segment reported a segment loss of $(2.6) million in the first quarter of 2016, compared to $(4.4) million in the first quarter of 2015. The segment results included $8.8 million of restructuring expense in the first quarter 2016. The first quarter 2015 included $18.4 million of restructuring expense and a non-operating gain of $11.6 million related to the acquisition of Shenya. The year-over-year improvement was attributable to lower restructuring expense and increased operating efficiencies, partially offset by the prior year non-operating gain, foreign currency exchange rates, and price adjustments.

Asia Pacific

Cooper Standard’s Asia Pacific segment reported sales of $127.1 million in the first quarter of 2016, an increase of 48.3 percent compared to $85.7 million in the first quarter of 2015. The year-over-year variance is largely attributable to the consolidation of sales from the Shenya acquisition and improved volume and mix, partially offset by unfavorable foreign currency exchange rates. Excluding growth from acquisitions and the impact of foreign currency exchange rates, sales in the Asia Pacific segment increased $13.4 million in the quarter, representing a 15.6 percent organic growth rate.

The Asia Pacific segment reported segment profit of $2.5 million in the first quarter of 2016 compared to $2.4 million in the first quarter 2015. Year-over-year improvements in volume and mix, and operating efficiency were primarily offset by the impact of unfavorable foreign currency exchange rates, higher depreciation costs, and higher interest expense.

South America

Cooper Standard’s South America segment reported sales of $16.4 million in the first quarter of 2016 compared to $30.2 million in the first quarter of 2015. The decrease was attributable to lower overall vehicle production in Brazil and unfavorable foreign currency exchange rates.

The South America segment reported a segment loss of $(7.8) million in the first quarter of 2016 compared to $(5.1) million in the first quarter of 2015. The year-over-year decline was largely due to further declines in Brazilian light vehicle production levels.

Liquidity and Cash Flow

At March 31, 2016, Cooper Standard had cash and cash equivalents totaling $313.1 million. First quarter 2016 net cash provided by operating activities was $27.9 million, compared to net cash used in operating activities of ($9.5) million during the first quarter of 2015. First quarter 2016 free cash flow (defined as operating cash flow minus CAPEX) improved by $33.7 million versus the first quarter of 2015. In addition to cash and cash equivalents, the Company had $137.4 million available under its senior amended asset-based revolving credit facility (“ABL”) for total liquidity of $450.5 million at March 31, 2016.

Total debt at March 31, 2016 was $778.4 million. Net debt (defined as total debt minus cash and cash equivalents) was $465.4 million. Cooper Standard’s net leverage ratio at March 31, 2016 was 1.2 times trailing 12 months adjusted EBITDA.

Adjusted EBITDA, adjusted net income and free cash flow 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.

Outlook

The Company has reaffirmed its 2016 full year outlook as follows: