Cooper Standard Reports Record 2015 Results

Cooper-Standard Holdings Inc. (NYSE: CPS) today reported record results for the fourth quarter and full year 2015.

Fourth Quarter 2015 Highlights

• Net income totaled $21.7 million, up $34.5 million vs. fourth quarter 2014
• Adjusted net income totaled $56.2 million or $3.01 per fully diluted share
• Adjusted EBITDA totaled $91.3 million, up 26.5 percent year-over-year
• Free cash flow generated was $123.8 million, up $79.3 million vs. fourth quarter 2014

Full Year 2015 Highlights

• Net income totaled $111.9 million, up 161.5 percent vs. 2014
• Adjusted net income totaled $168.7 million or $9.16 per fully diluted share
• Adjusted EBITDA totaled $362.4 million, up 16.3 percent year-over-year
• Free cash flow generated was $104.1 million, up $125.2 million vs. 2014

During the fourth quarter 2015, the Company generated net income of $21.7 million, or $1.16 per diluted share, and adjusted EBITDA of $91.3 million on sales of $854.4 million. These results compare to a net loss of $12.8 million or $(0.79) per diluted share and adjusted EBITDA of $72.2 million on sales of $767.9 million in the fourth quarter of 2014. The Company’s adjusted EBITDA margin for the fourth quarter 2015 was 10.7 percent compared to 9.4 percent in the fourth quarter 2014.

“This marks the fifth consecutive quarter in which we were able to deliver significant year-over-year margin improvement,” stated Jeffrey Edwards, chairman and CEO of Cooper Standard. “We are very proud of our global team and their engagement around our world-class operating initiatives to serve our customers and drive record results in 2015. Although the bar has been raised significantly, we expect to further improve margins and cash flow in 2016.”

Fourth quarter 2015 net income excluding restructuring and other special items (“adjusted net income”), totaled $56.2 million, or $3.01 per diluted share. Adjusted net income in the prior year period was $15.3 million, or $0.88 per diluted share.

For the full year 2015, the Company reported net income of $111.9 million, or $6.08 per diluted share, and adjusted EBITDA of $362.4 million on sales of $3.34 billion. By comparison, the Company reported net income of $42.8 million, or $2.39 per diluted share, and adjusted EBITDA of $311.5 million on sales of $3.24 billion in 2014. The Company’s adjusted EBITDA margin for 2015 was 10.8 percent compared to 9.6 percent in 2014. Excluding the negative impact of foreign currency exchange rates of $34.8 million, adjusted EBITDA in 2015 was $397.2 million.

Adjusted net income for 2015 was $168.7 million or $9.16 per diluted share. This compares to adjusted net income of $86.0 million or $4.81 per diluted share in 2014.

Adjusted net income and adjusted EBITDA 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 (“GAAP”), are provided in the attached supplemental schedules.

Operational Overview

Consolidated

Fourth quarter 2015 sales increased by $86.5 million or 11.3 percent compared to the fourth quarter of 2014. The year-over-year increase is largely attributable to favorable volume and mix, and additional revenue from the acquisition of Huayu-Cooper Standard Sealing Systems Co. (“Shenya”), partially offset by a $61.1 million impact from unfavorable foreign currency exchange rates. Excluding the impact from foreign currency exchange rates, sales in the fourth quarter of 2015 were $915.5 million, an increase of 19.2 percent over the fourth quarter of 2014.

Fourth quarter adjusted EBITDA increased by $19.1 million or 26.5 percent compared to the fourth quarter of 2014. The year-over-year variance is primarily attributable to improvements in operating efficiency, favorable volume and mix, improved supply chain performance and the incremental adjusted EBITDA provided by the acquisition of Shenya. These favorable items were partially offset by a $5.0 million impact from unfavorable foreign currency exchange rates. Excluding the impact from foreign currency exchange rates, adjusted EBITDA for the fourth quarter of 2015 was $96.3 million.

North America

Cooper Standard’s North America segment reported sales of $451.4 million in the fourth quarter of 2015, an increase of 12.7 percent when compared to $400.5 million in sales recorded in the fourth quarter of 2014. The increase was attributable to improved volume and mix, partially offset by the unfavorable impact of foreign currency exchange rates and customer price adjustments. Excluding the impact of exchange rates, North America segment sales were $462.1 million, an increase of $61.6 million or 15.4 percent higher than the fourth quarter of 2014.

North America segment profit was $58.5 million, or 13.0 percent of sales, in the fourth quarter of 2015. This compared to segment profit of $16.2 million, or 4.1 percent of sales in the fourth quarter of 2014. The segment results in the fourth quarter 2014 included an impairment charge of $18.1 million. Excluding this charge, North America segment profit in the fourth quarter 2014 would have been $34.3 million. The year-over-year improvement was driven primarily by gains in operating efficiencies, improved volume and mix, and lower material costs, partially offset by the impact of higher incentive accruals, inflationary pressure and customer price adjustments.

Europe

Cooper Standard’s Europe segment reported sales of $249.2 million in the fourth quarter of 2015 compared to $259.3 million in the fourth quarter of 2014. The decrease was attributable to unfavorable foreign currency exchange rates, partially offset by improvements in volume and product mix. Excluding the impact of foreign currency exchange rates, Europe segment sales were $284.8 million for the quarter, up 9.8 percent versus the prior year.

The Europe segment reported a segment loss of $16.1 million in the fourth quarter of 2015, compared to segment loss of $17.5 million in the fourth quarter of 2014. The segment results for the fourth quarter 2015 included restructuring expense of $16.2 million and an impairment charge of $2.3 million. Segment loss in the fourth quarter of 2014 included restructuring expense of $5.6 million and an impairment charge of $6.1 million. Excluding these items, Europe segment profit was $2.4 million in the fourth quarter of 2015 compared to a segment loss of $5.8 million in the fourth quarter of 2014. This improvement was attributable to increased operating efficiency, lower material costs, higher sales volume and favorable product mix, partially offset by unfavorable foreign currency exchange rates.

Asia Pacific

Cooper Standard’s Asia Pacific segment reported sales of $135.5 million in the fourth quarter of 2015, an increase of 89.4 percent compared to $71.6 million in the fourth quarter of 2014. The year-over-year increase is largely attributable to the consolidation of revenue from the Shenya acquisition, and improved volume and mix. Excluding growth from acquisitions and the impact of unfavorable foreign currency exchange rates, sales in the Asia Pacific segment increased $18.0 million in the quarter, representing a 25.1 percent year-over-year organic growth rate.

The Asia Pacific segment reported segment profit of $0.3 million in the fourth quarter of 2015, compared to segment profit of $2.3 million in the fourth quarter 2014. The year-over-year change was primarily the result of higher SGA&E expenses as the Company establishes its footprint and infrastructure for growth based on its expanded booked business pipeline, as well as higher depreciation and amortization expense and negative impact of foreign currency exchange rates. These factors were partially offset by incremental consolidated income from the Shenya acquisition and improved volume and mix.

South America

Cooper Standard’s South America segment reported sales of $18.3 million in the fourth quarter of 2015 compared to $36.4 million in the fourth quarter of 2014. The decrease was attributable to lower overall vehicle production in Brazil and unfavorable foreign currency exchange rates.

The South America segment incurred a segment loss of $24.0 million in the fourth quarter of 2015 compared to a loss of $5.9 million in the fourth quarter of 2014. The segment loss in the fourth quarter of 2015 included an asset impairment charge of $19.3 million. Excluding the impairment charge, the segment loss in the fourth quarter 2015 was $4.7 million compared to a segment loss of $5.9 million in the fourth quarter 2014.

Cash Flow and Liquidity

At December 31, 2015, Cooper Standard had cash and cash equivalents totaling $378.2 million, compared to $232.0 million at the end of the third quarter 2015 and $267.3 million at December 31, 2014. The sequential quarterly and full year increases were driven by improved cash from operations and a continued focus on reducing capital spending and working capital. Free cash flow (defined as cash provided by operating activities minus capital expenditures) improved to $123.8 million in the fourth quarter of 2015 compared to $44.5 million in the fourth quarter of 2014. For the full year 2015, free cash flow increased to $104.1 million compared to ($21.0) million in 2014. 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 $515.6 million at December 31, 2015.

Total debt at December 31, 2015 was $777.9 million compared to $778.7 million at December 31, 2014. Net debt (defined as total debt minus cash and cash equivalents) at December 31, 2015 was $399.7 million compared to $511.4 million at December 31, 2014. Cooper Standard’s net debt-to-book capitalization ratio was 28.7 percent at December 31, 2015 while its net leverage ratio was lowered to 1.1 times trailing 12 months adjusted EBITDA.

Outlook

The Company has issued 2016 full year guidance as follows:

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