Cooper Standard reports record quarterly results; raises guidance

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

Second Quarter 2016 Highlights

• Sales increased to a record $879.3 million
• Net income totaled $40.9 million or $2.20 per diluted share
• Adjusted EBITDA increased 11.9 percent to a record $108.5 million
• Adjusted net income totaled $52.9 million or $2.85 per diluted share
• Free cash flow increased by $39.4 million in the quarter and $73.1 million in the first half
• Full year guidance for adjusted EBITDA margin increased to 12.0 – 12.5 percent

During the second quarter of 2016, the Company generated net income of $40.9 million, or $2.20 per diluted share, and adjusted EBITDA of$108.5 million on record sales of $879.3 million. These results compare to net income of $36.5 million or $1.98 per diluted share and adjusted EBITDA of $97.0 million on sales of $860.8 million in the second quarter of 2015.

Second quarter net income, excluding restructuring and other special items (“adjusted net income”), totaled $52.9 million or $2.85 per diluted share.  Adjusted net income in the prior year period was $41.0 million or $2.23 per diluted share.

“We are pleased to report record results for the quarter,” stated Jeffrey Edwards, chairman and CEO of Cooper Standard. “Driven by our culture and strategy, this marks the seventh consecutive reporting period in which we have delivered year-over-year improvement in adjusted EBITDA and adjusted EBITDA margin.”

For the first six months of 2016, the Company reported net income of $71.5 million, or $3.83 per diluted share, and adjusted EBITDA of$212.1 million on sales of $1.74 billion.  By comparison, the Company reported net income of $57.5 million, or $3.14 per diluted share, and adjusted EBITDA of $177.7 million on sales of $1.66 billion in the first six months of 2015.  Adjusted net income for the first six months of 2016 was $100.3 million or $5.37 per diluted share compared to $70.7 million or $3.86 per diluted share in the first six months of 2015.  The Company’s adjusted EBITDA margin for the first six months of 2016 was 12.2 percent compared to 10.7 percent in the first six months of 2015.

Consolidated Results

Second quarter 2016 sales increased by $18.5 million or 2.1 percent compared to the second quarter of 2015.  The year-over-year variance is largely attributable to favorable volume and mix, partially offset by price adjustments, the impact of foreign currency exchange rates and the sale of the Company’s hard coat plastic exterior trim business in December 2015.  Excluding the impact of foreign currency exchange rates and divestitures, sales in the second quarter were $905.4 million, an increase of 5.2 percent over the second quarter 2015.

Second quarter adjusted EBITDA increased by $11.6 million or 11.9 percent compared to the second quarter of 2015.  Adjusted EBITDA margin as a percent of sales was 12.3 percent in the quarter, up 100 basis points compared to the second 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 price adjustments, higher compensation-related costs and investments to support growth.

During the second quarter, Cooper Standard launched 60 new customer programs and was awarded an additional $47 million in annual net new business, driven largely by sales of innovative new products and technology.  The new programs and new business were mostly on global platforms.

North America

The Company’s North America segment reported sales of $460.7 million in the second quarter, an increase of 1.6 percent when compared to$453.5 million in sales reported in the second quarter 2015.  The increase was attributable to improved volume and mix, partially offset by the divestiture of the Company’s hard coat plastic exterior trim business, foreign currency exchange rates and price adjustments.  Excluding the impact of foreign currency exchange rates and divestitures, North America segment sales were $482.8 million, which represents organic growth of $29.3 million or 6.5 percent compared to the second quarter of 2015.

North America segment profit was $60.5 million, or 13.1 percent of sales, in the second quarter.  This compared to segment profit of $55.6 million, or 12.3 percent of sales in the second quarter 2015.  The improvement was driven primarily by improved volume and mix, gains in operating efficiencies and lower materials costs, partially offset by higher compensation-related costs.

Europe

The Company’s Europe segment reported sales of $282.3 million in the second quarter, compared to $270.3 million in the second quarter 2015.  The increase was attributable to improved volume and product mix.  Excluding the impact of foreign currency exchange rates and divestitures, Europe segment sales were $278.6 million for the quarter, up 3.1 percent versus the prior year period.

Europe segment profit was $0.7 million in the second quarter.  Excluding planned restructuring expense of $11.7 million, segment profit was$12.4 million. The segment realized year-over-year improvements in operating efficiency, volume and mix during the quarter.

Asia Pacific

The Company’s Asia Pacific segment reported sales of $116.2 million in the second quarter, compared to $111.9 million in the second quarter of 2015.  The year-over-year variance is largely attributable to improved volume and mix, partially offset by unfavorable foreign currency exchange rates. Excluding the impact of foreign currency exchange rates, Asia Pacific sales increased by $10.5 million or 9.4 percent in the second quarter of 2016 as compared to the second quarter 2015.

Asia Pacific segment profit was $0.5 million in the second quarter, compared to $2.0 million in the second quarter 2015.  The year-over-year change was driven primarily by higher interest expense and other costs to support booked future growth in the region.

South America

The Company’s South America segment reported sales of $20.1 million in the second quarter, compared to $25.1 million in the second 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 loss of $5.6 million in the second quarter, compared to a segment loss of $7.5 million in the second quarter of 2015.  The improvement was due to operating efficiencies and lower material costs, partially offset by lower production volume and unfavorable foreign exchange.

Liquidity and Cash Flow

At June 30, 2016, Cooper Standard had cash and cash equivalents totaling $339.5 million.  Net cash provided by operating activities in the second quarter 2016 was $87.3 million, compared to $66.1 million in the second quarter of 2015.  Second quarter 2016 free cash flow (defined as operating cash flow minus CAPEX) improved by $39.4 million compared to the second quarter of 2015.  For the first six months of the year, free cash flow increased by $73.1 million versus the first six months of 2015.

In addition to cash and cash equivalents, the Company had $122.9 million available under its senior amended asset-based revolving credit facility (“ABL”) for total liquidity of $462.5 million at June 30, 2016.

Total debt at June 30, 2016 was $773.9 million. Net debt (defined as total debt minus cash and cash equivalents) was $434.4 million.  Cooper Standard’s net leverage ratio at June 30, 2016 was 1.1 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

Based on the record results achieved in the first and second quarters of the year and continued positive outlook for its operations and markets in the remainder of the year, the Company has updated its 2016 full-year guidance as follows:

Conference Call Details

Cooper Standard management will host a conference call and webcast on July 29 at 9 a.m. ET to discuss its second quarter 2016 results, provide a general business update and respond to investor questions.

To participate in the live question-and-answer session, 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 95008448 or ask to be connected to the Cooper Standardteleconference. Callers should dial in at least five minutes prior to the start of the call. Financial and automotive analysts are invited to ask questions after the presentations are made.

The interactive webcast and slide presentation can be accessed live or in replay on the investor relations page of the Cooper Standard website at www.ir.cooperstandard.com/events.cfm.