Cooper Standard Reports Record Sales, Strong Net Income and Record Adjusted EBITDA

NOVI, Mich., August 3, 2017 -- Cooper-Standard Holdings Inc. (NYSE: CPS) today reported results for the second quarter and first half of 2017.

Second Quarter 2017 Highlights

•Sales increased 3.4 percent to a record $909.1 million 

•Net income increased to $40.5 million or $2.14 per diluted share

•Adjusted EBITDA increased 4.8 percent to a record $113.8 million

•Adjusted net income totaled $49.0 million or $2.60 per diluted share

•Second major production order for FortrexTM awarded

During the second quarter of 2017, the Company generated strong net income of $40.5 million, or $2.14 per diluted share, and adjusted EBITDA of $113.8 million on sales of $909.1 million. These results compare to net income of $40.2 million, or $2.16 per diluted share, and adjusted EBITDA of $108.6 million on sales of $879.3 million in the second quarter of 2016.  The Company’s adjusted EBITDA as a percent of sales for the second quarter of 2017 increased 20 basis points to 12.5 percent compared to 12.3 percent in the second quarter of 2016.

“We continue to drive value through culture, innovation and results,” stated Jeffrey Edwards, chairman and CEO of Cooper Standard. “We are attracting and developing diverse talent, supported by our unique culture, launching breakthrough innovations, delivering results by growing in key markets, as well as improving operational efficiency globally.”

The Company's second quarter net income, excluding restructuring and other special items (“adjusted net income”), totaled $49.0 million, or $2.60 per diluted share, compared to $52.2 million, or $2.81 per diluted share in the second quarter of 2016. The change in adjusted net income was driven primarily by discrete tax adjustments for excess tax benefits on share-based compensation recorded in the second quarter of 2016.

For the first six months of 2017, the Company reported net income of $82.2 million, or $4.34 per diluted share, and adjusted EBITDA of $224.8 million on sales of $1.81 billion. By comparison, 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 in the first six months of 2016. The Company’s adjusted EBITDA margin for the first six months of 2017 increased 20 basis points to 12.4 percent compared to 12.2 percent in the first six months of 2016.

Adjusted net income for the first six months of 2017 was $104.9 million or $5.54 per diluted share.  This compares to adjusted net income of $100.3 million or $5.37 per diluted share in the first six months of 2016.

Adjusted EBITDA, adjusted EBITDA margin, adjusted net income and adjusted earnings per share are non-GAAP measures.  Definitions of these measures and 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

During the second quarter, Cooper Standard launched 54 new customer programs and was awarded $96.4 million in annual net new business.  Among the new business awards, the Company received its second significant production contract for FortrexTM premium static sealing system products. FortrexTM is a new, proprietary material science technology that provides significant weight reduction and performance improvements versus traditional EPDM and TPV-based sealing systems.

In addition to the core automotive applications for FortrexTM, the Company is continuing to pursue a complementary adjacent market strategy for its innovative material science and technologies.  During the second quarter, the Company entered into its first agreement to license FortrexTM technology outside of the automotive industry, which is aligned with the Company's adjacent markets strategy.  Successful execution of the adjacent markets strategy is expected, in the long term, to increase return on invested capital by expanding sales opportunities, accelerating the value stream of FortrexTM and other innovative material science technologies, and further diversifying the revenue and profit base of the Company.

In June, the Company celebrated the opening of a new, state-of-the-art technical testing and prototype center in China.  The new facility enhances the Company's ability to provide leading technical support to its customers in the region by increasing in-house design and product validation capabilities, and reducing the time required for new product design and development.

Consolidated Results

Second quarter 2017 sales increased by $29.8 million or 3.4 percent compared to the second quarter of 2016.  The year-over-year variance was largely attributable to net favorable volume and mix, and the impact of acquisitions and divestitures, partially offset by price reductions and the impact of foreign currency exchange rates.  Excluding the impact of foreign currency exchange rates, acquisitions and divestitures, sales in the second quarter were $893.2 million, an increase of 1.6 percent over the second quarter 2016. 

Second quarter adjusted EBITDA increased by $5.2 million or 4.8 percent compared to the second quarter of 2016. The year-over-year variance was primarily attributable to operating efficiencies, the impact of acquisitions and divestitures, and supply chain optimization initiatives, partially offset by unfavorable vehicle production mix, price reductions and higher net compensation-related costs.

Segment Results

North America

The Company's North America segment reported sales of $481.6 million in the second quarter, an increase of 4.5 percent when compared to $460.7 million in sales reported in the second quarter 2016.  The year-over-year change was largely attributable to favorable volume and mix and the acquisition of AMI Industries' fuel and brake business.  Excluding the impact of acquisitions and foreign currency exchange rates, North America segment sales were $466.7 million, which represents organic growth of $6.0 million or 1.3 percent compared to the second quarter of 2016.

North America segment profit was $64.5 million, or 13.4 percent of sales, in the second quarter.  This compared to segment profit of $60.6 million or 13.2 percent of sales in the second quarter 2016.  The year-over-year increase was driven primarily by gains in operating efficiencies and the acquisition of AMI Industries, partially offset by price reductions, unfavorable vehicle production mix and higher net compensation-related costs.

Europe

The Company's Europe segment reported sales of $260.4 million in the second quarter, compared to $282.3 million in the second quarter 2016.  The year-over-year change was primarily attributable to unfavorable volume and mix, foreign exchange and price reductions.

The Europe segment reported a loss of $3.1 million in the second quarter compared to segment profit of $0.7 million in the second quarter of 2016.  The year-over-year change was primarily attributable to unfavorable volume and mix, price reductions and the impact of wage and general inflation, partially offset by restructuring savings and improvements in operating efficiency.

Asia Pacific

The Company's Asia Pacific segment reported sales of $140.8 million in the second quarter, an increase of 21.2 percent when compared to sales of $116.2 million in the second quarter 2016.  The year-over-year variance was largely attributable to improved volume and mix, and the consolidation of the Company's sealing joint venture in Guangzhou, China.  These items were partially offset by unfavorable foreign exchange and customer price reductions. Excluding the impact of acquisitions and foreign currency exchange rates, Asia Pacific segment sales were $130.2 million, which represents organic growth of $14.0 million or 12.0 percent compared to the second quarter of 2016.

Asia Pacific segment profit was $4.5 million in the second quarter, compared to $0.5 million in the second quarter 2016.  The year-over-year improvement was driven primarily by increased operating efficiencies, favorable volume and mix, and the consolidation of the Guangzhou joint venture, partially offset by customer price reductions and investments to support growth.

South America

The Company's South America segment reported sales of $26.2 million in the second quarter, an increase of 30.7 percent when compared to sales of $20.1 million in the second quarter of 2016.  The increase was largely attributable to improved volume and mix and favorable foreign exchange.

The South America segment reported a loss of $3.8 million in the second quarter, compared to a segment loss of $5.6 million in the second quarter of 2016.  The improvement was due largely to increased operating efficiencies and improved volume and mix.

Liquidity and Cash Flow

At June 30, 2017, Cooper Standard had cash and cash equivalents totaling $400.2 million.  Net cash provided by operating activities in the second quarter 2017 was $60.6 million and free cash flow for the quarter (defined as net cash provided by operating activities minus capital expenditures) was $20.7 million.

During the quarter, the Company repurchased 92,409 shares of its outstanding common stock at a cost of $9.3 million.

In addition to cash and cash equivalents, the Company had $179.9 million available under its amended senior asset-based revolving credit facility (“ABL”) for total liquidity of $580.1 million at June 30, 2017.

Total debt at June 30, 2017 was $752.8 million. Net debt (defined as total debt minus cash and cash equivalents) was $352.6 million.  Cooper Standard’s net leverage ratio at June 30, 2017 was 0.8 times trailing 12 months adjusted EBITDA.

During the quarter, Cooper Standard entered into a second amendment to its Term Loan Facility to reduce the interest rate.  The lower rate will reduce cash interest expense by approximately $1.5 million annually through the remaining term of the loan.