CS News

NOVI, Mich., July 30, 2015 /PRNewswire/ -- Cooper-Standard Holdings Inc. (NYSE: CPS), the parent company of Cooper Standard Automotive, today reported 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 for the second quarter of 2015.  These results compare to net income of $13.2 million or $0.72 per diluted share and adjusted EBITDA of $91.8 million on sales of $857.6 million in the second quarter of 2014. 

"Our second quarter results represent another solid step toward achieving our 2015 objectives.  In terms of adjusted EBITDA margin, it was our best quarter in more than three years," stated Jeffrey Edwards, chairman and CEO of Cooper Standard. "We are particularly pleased with the continued strong performance in our North American operations, the margin improvements we are making within our European operations and our profitable growth in Asia. In addition, our increased focus on cash generation is driving positive change that is enhancing our ability to improve shareholder value going forward."

Net income of $36.5 million for the second quarter of 2015 included after tax amounts of a $2.6 million gain related to the acquisition of Huayu-Cooper Standard Sealing Systems Co. (Shenya) (see Note 1) and $7.0 million in restructuring expense.  Net income of $13.2 million in the second quarter of 2014 included after tax amounts of $18.8 million of loss on extinguishment of debt and $3.7 million in restructuring expense.  Excluding these items, adjusted net income for the second quarter of 2015 was $40.9 million or $2.22 per diluted share, up 14.4 percent when compared to adjusted net income of $35.7 million or $1.94 per diluted share in the second quarter of 2014.

For the first six months of 2015, 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.  By comparison, the Company reported net income of $32.9 million, or $1.82 per diluted share, and adjusted EBITDA of $172.3 million on sales of $1.70 billion in the first six months of 2014.  The Company's adjusted EBITDA margin for the first half of 2015 was 10.7 percent compared to 10.2 percent in the first half of 2014. Excluding the impact of foreign currency exchange rates, adjusted EBITDA in the first half of 2015 was $196.0 million or 10.8 percent of sales.

Operational Overview

Consolidated

Second quarter 2015 sales increased by $3.2 million or 0.4 percent compared to the second quarter of 2014.  The year-over-year variance is largely attributable to favorable volume and mix and additional revenue from the Shenya acquisition, partially offset by an $85.3 million impact from unfavorable foreign currency exchange rates.  Excluding the impact from foreign currency exchange rates, sales in the second quarter 2015 were $946.1 million, an increase of 10.3 percent over the second quarter of 2014. 

Second quarter adjusted EBITDA increased by $5.2 million or 5.7 percent compared to the second quarter of 2014.  The year-over-year variance is primarily attributable to improvements in operating efficiency, favorable volume and mix, and lower raw material costs.  These favorable items were partially offset by wage increases, unfavorable price adjustments and a $10.0 million negative impact from unfavorable foreign currency exchange rates.  Excluding the impact from foreign currency exchange rates, adjusted EBITDA was $107.0 million.

North America

Cooper Standard'sNorth America segment reported sales of $453.5 million in the second quarter of 2015 compared to $452.2 million in the second quarter of 2014.  The increase was attributable to improved volume and mix offset primarily by the impact of foreign currency exchange rates and unfavorable price adjustments.  Excluding the impact of exchange rates, North America segment sales were $463.7 million, an increase of $11.5 million or 2.5 percent higher than the second quarter of 2014.

North America segment profit was $55.6 million, or 12.3 percent of sales, in the second quarter of 2015.  This compared to segment profit of $36.5 million, in the second quarter of 2014, which included $13.5 million in allocated loss on extinguishment of debt.  Excluding the allocated loss on extinguishment of debt, segment profit was $49.9 million or 11.0 percent of sales in the second quarter of 2014.  The 130 basis point improvement was driven primarily by improved volume and mix, gains in operating efficiencies and lower material costs partially offset by the impact of price adjustments, wage increases and unfavorable foreign currency exchange rates.

Europe

Cooper Standard'sEurope segment reported sales of $270.3 million in the second quarter of 2015 compared to $305.7 million in the second 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 $335.0 million for the quarter, up 9.6 percent versus the prior year period.

Europe segment profit was $2.8 million in the second quarter of 2015, compared to a loss of $12.9 million in the second quarter 2014.  Segment profit included restructuring expense of $6.1 million and a $2.6 million gain related to the acquisition of Shenya.  Segment profit in the second quarter of 2014 included $3.5 million of restructuring expense and $10.9 million in allocated loss on extinguishment of debt.  Excluding these items, Europe segment profit was $6.3 million in the second quarter of 2015 compared to $1.5 million in the second quarter of 2014.  The improvement was attributable to operating efficiencies, lower material costs, higher sales volume and favorable product mix.  These positive factors were partially offset by unfavorable foreign currency exchange rates and price adjustments.

Asia Pacific

Cooper Standard'sAsia Pacific segment reported sales of $111.9 million in the second quarter of 2015, an increase of 92.1 percent compared to $58.2 million in the second quarter of 2014.  The year-over-year variance is largely attributable to the consolidation of the revenue from the Shenya acquisition and improved volume and mix.  Excluding growth from acquisitions, sales in the Asia Pacific segment increased $11.1 million in the quarter, representing a solid 19.7 percent organic growth rate.

Asia Pacific segment profit was $2.0 million in the second quarter of 2015, compared to a loss of $0.6 million in the second quarter 2014.  The year-over-year change was primarily the result of $3.6 million in allocated loss on extinguishment of debt included in the second quarter of 2014, improved volume and mix and lower raw material costs offset by higher depreciation, amortization and SGA&E expense.

South America

Cooper Standard'sSouth America segment reported sales of $25.1 million in the second quarter of 2015 compared to $41.4 million in the second quarter of 2014.  The decrease was attributable to unfavorable foreign currency exchange rates and lower overall vehicle production in Brazil. 

Primarily as a result of lower sales, the South America segment incurred a segment loss of $7.5 million in the second quarter of 2015 compared to a loss of $4.3 million in the second quarter of 2014.

Liquidity and Capital Resources

At June 30, 2015, Cooper Standard had cash and cash equivalents totaling $204.8 million, compared to $194.4 million at the end of the first quarter 2015 and $267.3 million at December 31, 2014.  The sequential quarterly increase was driven by improved cash from operations and an intensified focus on capital spending and working capital.  The cash balance decline in the first six months of the year is due primarily to seasonal changes in working capital and $34.4 million in cash payments made in connection with the acquisition of Shenya.  In addition to its cash and cash equivalents, the Company had $146.9 million available under its senior amended asset-based revolving credit facility ("ABL") for total liquidity of $351.7 million at June 30, 2015.

Total debt at June 30, 2015 was $803.7 million compared to $785.9 million at December 31, 2014.    Cooper Standard's total debt-to-book capitalization ratio was 57.6 percent at June 30, 2015 compared to 58.9 percent at December 31, 2014.  Cooper Standard's net debt-to-book capitalization ratio was 42.9 percent at June 30, 2015.

Outlook

The Company has reaffirmed or revised its 2015 full year outlook as follows:

Conference Call Details

Cooper Standard management will host a conference call and webcast on July 31 at 9 a.m. ET to discuss its second quarter 2015 results, provide a general business update and respond to investor questions.

An interactive webcast will also be available by clicking here.

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  87673327 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.

A replay of the conference call and webcast will be available on the investor relations page of the Cooper Standard website at www.ir.cooperstandard.com/events.cfm.

About Cooper Standard

Cooper Standard, headquartered in Novi, Mich., is a leading global supplier of systems and components for the automotive industry. Products include sealing, fuel and brake delivery, fluid transfer and anti-vibration systems. Cooper Standard employs more than 27,000 people globally and operates in 20 countries around the world. For more information, please visit www.cooperstandard.com.

Forward Looking Statements

There are a number of risks and uncertainties that could cause the Company's actual results to differ materially from the forward-looking statements contained in this announcement. Important factors that could cause the Company's actual results to differ materially from the forward-looking statements made herein include, but are not limited to: prolonged or material contractions in automotive sales and production volumes; the Company's liquidity; the viability of the Company's supply base and the financial conditions of the Company's customers; loss of large customers or significant platforms; foreign currency exchange rate fluctuations; the Company's substantial indebtedness; the Company's ability to obtain financing in the future; ability to generate sufficient cash to service all of the Company's indebtedness; operating and financial restrictions imposed on the Company by the credit agreements governing the Company's Term Loan Facility and Senior ABL facility; underfunding of pension plans; availability and increasing volatility in costs of manufactured components and raw materials; escalating pricing pressures; the Company's ability to meet significant increases in demand; the Company's ability to successfully compete in the automotive parts industry; risks associated with the Company's non-U.S. operations; ability to control the operations of the Company's joint ventures for the Company's sole benefit; effectiveness of continuous improvement programs and other cost savings plans; product liability, warranty and recall claims that may be brought against the Company; work stoppages or other labor conditions; natural disasters; ability to meet the Company's customers' needs for new and improved products on a timely or cost-effective basis; the possibility that the Company's acquisition strategy may not be successful; the ability of the Company's intellectual property portfolio to withstand legal challenges; a disruption in, or the inability to successfully implement upgrades to, the Company's information technology systems; compliance with environmental, health and safety laws and other laws and regulations; the volatility of the Company's annual effective tax rate; significant changes in discount rates and the actual return on pension assets; the possibility of future impairment charges to the Company's goodwill and long-lived assets; the concentration of stock ownership which may allow a few owners to exert significant control over the Company; stock volatility; and dependence on the Company's subsidiaries for cash to satisfy the obligations of the holding Company.

CPS_F

Contact for Analysts:
Roger Hendriksen
Cooper Standard
(248) 596-6465
roger.hendriksen@cooperstandard.com

Contact for Media:
Sharon Wenzl
Cooper Standard
(248) 596-6211
sswenzl@cooperstandard.com

Related notes and financial statements follow:

Note 1:

In the first quarter of 2015, the Company completed the acquisition of an additional 47.5 percent of Shenya for cash consideration of $59.3 million. The Company now owns 95 percent of Shenya. The business acquired in the transaction is operated from Shenya's manufacturing locations in China. Shenya primarily supplies sealing systems and components to the automotive industry. This acquisition is directly aligned with the Company's growth strategy by strengthening important customer relationships in the automotive sealing systems market. This acquisition was accounted for under ASC 805, "Business Combinations," and the results of operations of Shenya are included in the Company's consolidated financial statements from the date of acquisition, February 27, 2015.

Prior to the acquisition, the Company held a 47.5 percent unconsolidated equity interest in Shenya. The fair value of the equity interest prior to the date of acquisition was $41.4 million, resulting in a gain of $14.2 million recorded in other income, net for the six months ended June 30, 2015, of which $2.6 million was recorded in the three months ended June 30, 2015. The gain was recorded in the results of our Europe segment as the previously owned equity interest was legally held by one of our Europe entities.

Non-GAAP Measures

EBITDA and adjusted EBITDA are measures not recognized under Generally Accepted Accounting Principles in the United States (U.S. GAAP) which exclude certain non-cash and non-recurring items. Management considers EBITDA and adjusted EBITDA as key indicators of the Company's operating performance and believes that these and similar measures are widely used by investors, securities analysts and other interested parties in evaluating the Company's performance. Adjusted EBITDA is defined as net income adjusted to exclude income tax expense, interest expense net of interest income, depreciation and amortization, and certain unusual, non-operating, non-cash or non-recurring items that management considers to be outside the scope of the Company's core operating performance.

When analyzing the Company's operating performance, investors should use EBITDA and adjusted EBITDA in addition to, and not as alternatives for, net income (loss), operating income, cash flow from operating activities or any other performance measure derived in accordance with U.S. GAAP. EBITDA and adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company's results of operations as reported under U.S. GAAP. Other companies may report EBITDA and adjusted EBITDA differently and therefore Cooper Standard's results may not be comparable to other similarly titled measures of other companies. This presentation of adjusted EBITDA should not be construed as an inference that Cooper Standard's future results will be unaffected by unusual or non-recurring items.

Reconciliation of Non-GAAP Measures

EBITDA and Adjusted EBITDA

The following table provides reconciliation of EBITDA and adjusted EBITDA to net income:

Net Income and Adjusted Net Income

The following table provides reconciliation of net income to adjusted net income:

(Dollar amounts in thousands except per share amounts)

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SOURCE Cooper-Standard Holdings Inc.