During the third quarter of 2016, the Company generated net income of $36.4 million, or $1.94 per diluted share, and adjusted EBITDA of $100.8 million on sales of $855.7 million. These results compare to net income of $32.7 million or $1.78 per diluted share and adjusted EBITDA of $93.3 million on sales of $827.5 million in the third quarter of 2015.
Third quarter net income, excluding restructuring and other special items (“adjusted net income”), totaled $46.5 million or $2.48 per diluted share. Adjusted net income in the prior year period was $41.1 million or $2.23 per diluted share.
“We continue to drive value through culture, innovation and results,” stated Jeffrey Edwards, chairman and CEO of Cooper Standard. “We are pleased to extend our track record to eight consecutive quarters in which we have delivered year-over-year improvement in adjusted EBITDA and adjusted EBITDA margin.”
For the first nine months of 2016, the Company reported net income of $107.9 million, or $5.77 per diluted share, and adjusted EBITDA of $312.9 million on sales of $2.6 billion. By comparison, the Company reported net income of $90.2 million, or $4.92 per diluted share, and adjusted EBITDA of $271.1 millionon sales of $2.5 billion in the first nine months of 2015. Adjusted net income for the first nine months of 2016 was $146.9 million or $7.85 per diluted share compared to $111.8 million or $6.10 per diluted share in the first nine months of 2015. The Company’s adjusted EBITDA margin for the first nine months of 2016 was 12.0 percent compared to 10.9 percent in the first nine months of 2015.
Consolidated Results
Third quarter 2016 sales increased by $28.1 million or 3.4 percent compared to the third 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 net impact of acquisitions and divestitures. Excluding the impact of foreign currency exchange rates, acquisitions and divestitures, sales in the third quarter were $862.8 million, an increase of 4.3 percent over the third quarter 2015.
Third quarter adjusted EBITDA increased by $7.4 million or 7.9 percent compared to the third quarter of 2015. Adjusted EBITDA margin as a percent of sales was 11.8 percent in the quarter, up 50 basis points compared to the third quarter of 2015. The year-over-year variance is primarily attributable to improvements in operating efficiency, favorable volume and mix, and global supply chain optimization. These favorable items were partially offset by price adjustments, higher compensation-related costs and investments to support growth.
During the third quarter, Cooper Standard launched 18 new customer programs and was awarded an additional $78 million in annual net new business, driven largely by sales of innovative new products and technology. The majority of the new business awards was on global platforms.
North America
The Company’s North America segment reported sales of $450.8 million in the third quarter, a decrease of 1.2 percent when compared to $456.4 million in sales reported in the third quarter 2015. The year-over-year change was largely attributable to the divestiture of the Company’s hard coat plastic exterior trim business, price adjustments and foreign currency exchange rates, partially offset by improved volume and mix and the acquisition of AMI Industries’ fuel and brake business. Excluding the impact of foreign currency exchange rates, acquisitions and divestitures, North America segment sales were $461.9 million, which represents organic growth of $5.5 million or 1.2 percent compared to the third quarter of 2015.
North America segment profit was $55.0 million, or 12.2 percent of sales, in the third quarter. This compared to segment profit of $58.3 million or 12.8 percent of sales in the third quarter 2015. The year-over-year change was driven primarily by price adjustments and higher compensation-related costs, partially offset by gains in operating efficiencies, improved volume and mix, and lower materials costs.
Europe
The Company’s Europe segment reported sales of $242.8 million in the third quarter, compared to $247.3 million in the third quarter 2015. The year-over-year change was attributable to slightly lower volume, mix and price adjustments.
The Europe segment reported a loss of $5.6 million in the third quarter. Excluding planned restructuring expense of $9.7 million, segment profit was $4.1 million. The segment continued to realize year-over-year improvements in operating efficiency and supply chain optimization during the quarter.
Asia Pacific
The Company’s Asia Pacific segment reported sales of $137.2 million in the third quarter, an increase of 34.4 percent when compared to sales of $102.1 million in the third quarter 2015. The year-over-year variance is largely attributable to improved volume and mix and the consolidation of the Company’s sealing joint venture in Guangzhou, China, partially offset by unfavorable foreign currency exchange rates. Excluding the impact of foreign currency exchange rates, Asia Pacific sales increased by $41.4 million or 40.5 percent in the third quarter of 2016 as compared to the third quarter 2015.
Asia Pacific segment profit was $3.0 million in the third quarter, compared to a loss of $0.7 million in the third quarter 2015. The year-over-year improvement was driven primarily by favorable volume and mix as well as improved operating efficiencies and supply chain economics.
South America
The Company’s South America segment reported sales of $24.9 million in the third quarter, compared to $21.8 million in the third quarter of 2015. The increase was largely attributable to price adjustments and foreign currency exchange rates, partially offset by lower production volume.
The South America segment reported a loss of $3.3 million in the third quarter, compared to a segment loss of $7.5 million in the third quarter of 2015. The improvement was due largely to price adjustments, supply chain economics and more favorable foreign currency exchange rates, partially offset by lower production volume.
Liquidity and Cash Flow
At September 30, 2016, Cooper Standard had cash and cash equivalents totaling $360.4 million. Net cash provided by operating activities in the third quarter 2016 was $66.8 million, compared to $53.4 million in the third quarter of 2015. Third quarter 2016 free cash flow (defined as net cash provided by operating activities minus CAPEX) improved by $11.8 million compared to the third quarter of 2015. For the first nine months of the year, free cash flow increased by $84.9 million versus the first nine 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 $483.3 million at September 30, 2016.
Total debt at September 30, 2016 was $779.8 million. Net debt (defined as total debt minus cash and cash equivalents) was $419.4 million. Cooper Standard’s net leverage ratio at September 30, 2016 was 1.0 times trailing 12 months adjusted EBITDA.
Adjusted EBITDA, adjusted net income, adjusted earnings per share 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 nine months of the year and continued positive outlook for its operations and markets in the remainder of the year, the Company is maintaining its 2016 full-year guidance as follows:
|
Previous Guidance (July 28, 2016) |
Current 2016 Guidance |
|
|
Revenue |
$3.40 – $3.43 Billion |
Unchanged |
|
Adjusted EBITDA Margin |
12.0% – 12.5% |
Unchanged |
|
Capital Expenditures |
$155 – $165 million |
Unchanged |
|
Cash Restructuring |
$45 – $55 million |
Unchanged |
|
Cash Taxes |
$50 – $60 million |
Unchanged |
|
Key Assumptions |
||
|
NA Production |
18.0 million units |
Unchanged |
|
European Production |
21.5 million units |
Unchanged |
|
Avg. Full Year FX rates |
||
|
Euro |
1 EUR = $1.12 USD |
Unchanged |
|
Canadian Dollar |
1 CAD = $0.77 USD |
Unchanged |
|
Mexican Peso |
$1.00 USD = 18.1 MXN |
Unchanged |
Conference Call Details
Cooper Standard management will host a conference call and webcast on November 1, 2016 at 9 a.m. ET to discuss its third 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 95008469 or ask to be connected to the Cooper Standard teleconference. 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.
