- Sales totaled $764.8 million
- Net income of $145.3 million or $8.36 per diluted share
- Adjusted EBITDA of $58.1 million or 7.6 percent of sales
- Adjusted net income of $5.4 million or $0.31 per diluted share
- Contract awards related to innovation products for annualized sales of $171 million
- Significant new Fortrex™ technology agreement signed subsequent to quarter end
“Our results for the quarter were once again negatively impacted by continuing weak production volume and mix in China and Europe, as well as the slower than expected ramp up of an important new vehicle platform in North America,” said Jeffrey Edwards, chairman and CEO, Cooper Standard. “Looking ahead, we expect these challenging market dynamics to continue at least through the end of the year, and we have revised our full-year outlook accordingly.
“We are working to mitigate these headwinds as much as possible by accelerating planned restructuring and further streamlining the business under our global management structure,” Edwards added. “We expect these actions will help us to improve our overall efficiency in the near-term and better position the Company for long-term profitable growth. We remain on track with our new program launches, cost reduction initiatives and the strategic diversification of our business.”
Consolidated Results
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| (dollar amounts in millions except per share amounts) | |||||||||||||||
| Sales | $ | 764.8 | $ | 928.3 | $ | 1,644.8 | $ | 1,895.7 | |||||||
| Net income | $ | 145.3 | $ | 41.9 | $ | 141.8 | $ | 98.7 | |||||||
| Adjusted net income | $ | 5.4 | $ | 50.3 | $ | 17.2 | $ | 114.1 | |||||||
| Earnings per diluted share | $ | 8.36 | $ | 2.28 | $ | 8.11 | $ | 5.36 | |||||||
| Adjusted earnings per diluted share | $ | 0.31 | $ | 2.74 | $ | 0.99 | $ | 6.19 | |||||||
| Adjusted EBITDA | $ | 58.1 | $ | 107.9 | $ | 124.5 | $ | 230.5 | |||||||
The year-over-year change in second quarter sales was primarily attributable to the sale of the Company’s Anti-Vibration Systems (AVS) business, unfavorable volume and mix, and foreign exchange.
Net income for the second quarter 2019 included a $189.9 million gain on the sale of the AVS business, certain project costs related to acquisitions and divestitures, and restructuring charges related to headcount reduction actions. Adjusted net income, which excludes these items and their related tax impact, declined in the second quarter 2019 compared to the prior year due largely to unfavorable volume and mix, general inflation, customer price adjustments and higher material costs, 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
The Company continues at a record pace for new program launches and contract awards related to recent product innovations. During the second quarter, the Company successfully launched 84 new customer programs, an increase of 75 percent compared to the second quarter of 2018. Also during the quarter, the Company received new contract awards related to product innovations, including both new and replacement business, totaling $171 million in annualized sales. These awards included the first production order for FlushSeal™ glass sealing technology on an all-new electric vehicle platform. In the first six months of the year, contract awards related to product innovations totaled $252 million in annualized sales. Net new business awards received during the second quarter and in the first six months of the year totaled $53 million and $129 million in annualized sales, respectively. Cooper Standard’s expanding portfolio of commercialized innovation products includes: MagAlloy™; ArmorHose™; ArmorHose™ TPV; LightHose; Gen III Posi-Lock; TP Microdense; Microdense EPDM; FlushSeal™ glass sealing technology; and Fortrex™.
Subsequent to the end of the second quarter, Cooper Standard signed a new Fortrex™ technology agreement with a multinational industrial products manufacturer based in Asia. Under the agreement, the customer is expected to initially focus on developing three to four new product applications using Fortrex™ technology. The new agreement, which is the third the Company has signed this year, is further demonstration of the versatility of the Fortrex™ chemistry platform and the diverse market applications that it can address.
Segment Results of Operations
Sales
| Three Months Ended June 30, | Variance Due To: | |||||||||||||||||||||||
| 2019 | 2018 | Change | Volume / Mix* | Foreign Exchange | Acquisitions/
Divestiture, net |
|||||||||||||||||||
| (dollar amounts in thousands) | ||||||||||||||||||||||||
| Sales to external customers | ||||||||||||||||||||||||
| North America | $ | 404,863 | $ | 477,608 | $ | (72,745) | $ | (39,189) | $ | (1,629) | $ | (31,927) | ||||||||||||
| Europe | 216,217 | 279,124 | (62,907) | (28,740) | (13,686) | (20,481) | ||||||||||||||||||
| Asia Pacific | 118,603 | 147,994 | (29,391) | (36,146) | (8,061) | 14,816 | ||||||||||||||||||
| South America | 25,123 | 23,536 | 1,587 | 3,817 | (2,230) | — | ||||||||||||||||||
| Consolidated | $ | 764,806 | $ | 928,262 | $ | (163,456) | $ | (100,258) | $ | (25,606) | $ | (37,592) | ||||||||||||
| * Net of customer price reductions | ||||||||||||||||||||||||
- The impact of foreign currency exchange primarily relates to the Euro, Chinese Renminbi, Brazilian Real and the Canadian Dollar.
Adjusted EBITDA
| Three Months Ended June 30, | Variance Due To: | |||||||||||||||||||||||||||
| 2019 | 2018 | Change | Volume /
Mix* |
Foreign Exchange | Cost (Increases) / Decreases | Acquisitions/
Divestiture, |
||||||||||||||||||||||
| (dollar amounts in thousands) | ||||||||||||||||||||||||||||
| Segment adjusted EBITDA | ||||||||||||||||||||||||||||
| North America | $ | 54,867 | $ | 82,672 | $ | (27,805) | $ | (25,927) | $ | (583) | $ | 2,286 | $ | (3,581) | ||||||||||||||
| Europe | 6,082 | 16,292 | (10,210) | (11,611) | (1,185) | 2,498 | 88 | |||||||||||||||||||||
| Asia Pacific | (1,586) | 11,304 | (12,890) | (17,096) | (1,452) | 5,821 | (163) | |||||||||||||||||||||
| South America | (1,284) | (2,361) | 1,077 | 1,298 | 206 | (427) | — | |||||||||||||||||||||
| Consolidated adjusted EBITDA | $ | 58,079 | $ | 107,907 | $ | (49,828) | $ | (53,336) | $ | (3,014) | $ | 10,178 | $ | (3,656) | ||||||||||||||
| * Net of customer price reductions | ||||||||||||||||||||||||||||
- The impact of foreign currency exchange is primarily driven by the Chinese Renminbi, Euro, Canadian Dollar, Mexican Peso, Polish Zloty and Czech Koruna.
- The Cost (Increases) / Decreases category above includes:
- The increase in commodity cost pressure, general inflation and tariffs;
- Launch related activity for engineering, prototypes and tooling; and
- Net operational efficiencies of $26.5 million primarily driven by our North America, Europe and Asia Pacific segments.
Liquidity and Cash Flow
At June 30, 2019, Cooper Standard had cash and cash equivalents totaling $310.8 million. Net cash used in operating activities in the second quarter 2019 was $7.1 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 $43.0 million.
In addition to cash and cash equivalents, the Company had $158.8 million available under its amended senior asset-based revolving credit facility (“ABL”), inclusive of outstanding letters of credit, for total liquidity of $469.6 million at June 30, 2019.
Total debt at June 30, 2019 was $792.2 million. Net debt (defined as total debt minus cash and cash equivalents) was $481.4 million. Cooper Standard’s net leverage ratio (defined as net debt divided by trailing 12 months adjusted EBITDA) at June 30, 2019was 1.8 times.
On April 1, 2019, the Company completed the sale of its AVS business. The total sale price of the transaction was $265.5 million and the Company received $243.4 million in cash proceeds after adjusting for certain liabilities assumed by the purchaser. The estimated net cash proceeds after taxes and transaction-related expenses and fees are expected to be approximately $215 to $220 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. In May 2019, the Company entered into an accelerated share repurchase (“ASR”) agreement in the amount of $30.0 million. The ASR is expected to be completed no later than the third quarter of 2019. As of June 30, 2019, approximately $98.7 million remained available under the 2018 board of directors repurchase authorization.
Outlook
Based on the results achieved in the first two quarters and the industry and economic outlook for the rest of the year, the Company has revised its guidance for the full year 2019 as summarized below:
| Previous Guidance (5/1/2019) |
Current Guidance1 | |
| Sales | $3.2 – $3.4 billion | $3.0 – $3.2 billion |
| Adjusted EBITDA2 | $300 – $340 million | $270 – $300 million |
| Capital Expenditures | $180 – $190 million | $175 – $185 million |
| Cash Restructuring | $15 – $25 million | $25 – $35 million |
| Effective Tax Rate | 16% – 18% | 21% – 25% |
| 1 | Guidance is representative of management’s estimates and expectations as of the date it is published. Current guidance as presented in this press release is reflective of June 2019 IHS production forecasts for relevant light vehicle platforms and models, customer production schedules and other internal assumptions. |
| 2 | Adjusted EBITDA is a non-GAAP financial measure. The Company has 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, the Company 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 August 2, 2019 at 9 a.m. ET to discuss its second 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 8455478 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.
SOURCE: Cooper Standard
