CPS - Earnings call transcript Q4 2017 | Cooper-Standard Holdings Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Cooper-Standard Fourth Quarter and Full Year 2017 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded and the Webcast will be available for replay later today. I would now like to turn the call over to Roger Hendriksen, Director of Investor Relations.

Roger Hendriksen

Thanks, Marcella, and good morning, everyone. the participate taking this our you morning. appreciate time in to call We

your our and President our Officer. interest continued also are Executive you continued We appreciate Vice this call in Officer; will speaking our morning and The on Banas, the who Edwards, following news. Financial company Executive members and team of Chairman Chief leadership Jeff be with Chief of your and Jon

statements. we this forward-looking Before I presentation remind need that you begin, to contains

made current these believes uncertainties. on and involve assumptions are information they currently While and management and based to certain factual risks plans statements that reasonable, be do

the For more With that, and turn to and refer this Exchange the information you I'll presentation Jeff to call forward-looking with on the company's ask in Edwards. Securities that three included of we Commission. Slide statements over statements, filings periodic

Jeffrey Edwards

morning, and and certainly Okay. thank good for your Cooper-Standard joining you Thanks, everyone. our call. interest in We Roger, appreciate

million, quarter together Slide to also X. on strong $XXX came the This record year. over an very our Moving more combination way. for all-time was positive sales, and initiatives result, cost-reduction Adjusted the than market higher a our last as all XX% was that's in of EBITDA mix up

total as global production XX ramp We was, across with rate. on full rate platforms. Our over quarter year launches in track. our our of facilities In launches terms XX% compared focus of a full all company's the to them again, quarterly XXXX XX This positive anticipate XXXX, safety to time. of safety incident further achieving up is quarter best performance and total world-class new in in had performance improvement fourth our the impact We of another firmly strong on history. they very once we achieved the in program of

in new were win annual the In contracts for launches, the continue business million we quarter, these each $XXX awarded business awards of with important addition current significant new key fourth to we in In regions. net new for to future. our

that Fortrex quarter. our X announce we to pleased purchased for now we are the production fourth we have who contract products. fourth received Fortrex customers Finally, With this have contract, during

latest this to still important, it ultimately the believe result technology it highly this we as small a allow is for part, will contract validate awards. contract in Although is customer and further

$XX So in annual totaling sales, all, we replacement our both products million new including contract for innovation received awards business. and in

to Turning Slide X.

we are really As statistics at of that a out. look numbers there stand year, the and full couple

and of going opportunities adjusted point result, we record now but whereas business this and a course, forward. program our in is launches Of net EBITDA new $XXX are $XXX is important to increasing million awards pleased million it with measure of the past, XXX growth

global flawless teams value providing in and customer products, and outstanding focusing This business Our job the innovative awards. on of do combination support increases by net what is launches. engineering continue of to an design is driving new

employees, safety had top best safety we also with dedicated our continue making all of terms ever workplace. By severity engagement of in day, year reduce We and the and in of workplace our priority full the number to the incidents. of every our

we centers We full often especially with the are XX proud prouder we community. of but page total we XXXX. be commitment versus that I make, with partnering are. year really couldn't of incident communities on and parts the And car that plants are safety who represent records. For rate to the this perfect X by reduced XX% metrics Therefore, our year, our is technical the completed our say that what we the

XXXX. service and provided charities XX XX,XXX over and their in hours employees around Our with world volunteer families partnered the

an in-depth community Our conjunction April with report our proxy. our and our of of in and highlights in be issued view The provides culture second responsibility corporate annual sustainability report engagement. will efforts,

Slide to X. Moving

Another on key innovation. focus culture our of aspect the is continuing Cooper-Standard

the X new new team long opportunities products new The company of and of has for IX impressive. our added and and outstanding create creating done technology our job our an years, value our to stakeholders. and past developments customers list Over that is bring

As sales than we have in annualized million more impact of look $XXX soon a high business. XXXX, innovations commercialize our anticipate significant innovative since ahead, in the and X our our will value-add financial $X to products million begin products billion $XXX began of in within booked more automotive we we core annualized business years. to Having within XXXX,

Fortrex we targets, will Just to represent in perspective, by hit our if XXXX. planned of business our XX% sales sealing put this

We ability advantage our and continue for competitive clear our innovations a to a sustainable breakthrough bring market shareholders. see our and driver to and culture to value of as innovation

Moving X. to Slide

Beyond continue our make to leverage culture to innovation adjacent core our markets business, of we our with progress business. automotive

of Fortrex begin using considering this Our They produce will this wire the additional cover first in also technology Fortrex business for number license of product quarter are lines. to within products cable year. third with a and

are our particular in expand to we partner. that So license with agreement discussions existing

new He of some initially us with our will our technology we've the technology. concluding may DeBest advance Technology you parts, hired join help and world-class focusing team this our team licensees negotiations on our focus will for have potential President will for week, Jeff Fortrex of growth as seen innovative announcement priorities group. March. business. in opportunities for be addition, a identify also to last build Advanced a define to the In His current nonautomotive our in

to continue our there segments industries that market numerous benefit as science. from are believe will We as businesses, well material that

it Technology the on become Advanced our only obvious really and our impact scratch in and will surface have company valuation. ROIC the can have Business begun what defining We to

to Now let Jon. call the over turn me

Jonathan Banas

compensation-related higher increased we did savings profile. improvement quarter customer customer a some our sheet On over and by balance We us fourth up and price comparisons year. Thanks, reform, in expense, to Asia the for Fourth and supply most America EBITDA of cost quarter The North sales structure tax I restructuring the America sales, or American continued lower financial sales in impact and of quarter the XX.X% up sales XXXX. were through briefly North detail of fourth X.X%, was materials substantially fourth as $XXX.X quarter was everyone. sales also year, X.X% On costs. and slides, improved these adjustments. Pacific we On sales Jeff, year $XXX.X the million improvement XX, comment partially million from results volume material gains and few adjustments. in last of the full next South and mitigate able efforts. Europe mix good raw result fourth prior chain and and offset to inflation foreign to the Slide been impacted commodity In on favorable show driven sales year, impact offset exchange, a full basis, year-over-year Europe morning, of of $XXX.X quarter with up of XX.X%. our XX.X%, Adjusted year. mix, well regional capital see year over on by year quarterly results, regional volume solid has compared strong The the XXXX was compared will Europe, certain XX% the record a will to additional our U.S. but were on last and by on the price provide the as million, and X.X% were by of basis, a quarter acquisitions fourth throughout last for summary a up contributions or the increased optimization

million to price commodity I'll to the share, a GAAP basis expect number a of and global respectively XX% or adjusted Net the U.S. scale items. minute, as XXXX, quarter the are net pressures income XXXX. will for quarter which special We that was in reform, implementing detail costs. $X.XX This and impact basis, tax diluted per fourth continue offset was million. XX% of other income quarter for a the of up help strategies On higher versus leverage $XX.X well an as $XX.X on our into included U.S.

the advance XXXX. of This state-of-the-art our perspective, versus CapEx equates up X.X% Fortrex of share, tube close new build-out year. launching in and China, $XXX.X $XX.XX up last or for number impact us X.X% income brought innovation, X% per our other Adjusted million, was items, to investment From for per year. the our over diluted For Reform net sales year of new launches target the the the sales for continued up our EBITDA, of plant, year. $X.XX X.X% the was of at adjusted billion share. X.X% for Full versus Adjusted and of $XXX million, $XXX the income special million, full Tax year, Spartanburg a U.S. to continued an of was full expansion net in year-over-year. plant of year business, $X.XX and were prior increase

Moving improving margins XXXX, XX. XX.X% than year margin XX for higher results basis strong we year-over-year. with our EBITDA the With and record line points the our At was to guidance for of adjusted Slide our in provided we a sales, solid in track extended XXXX.

through few and our efficiency been optimization operating these margin past Over costs years, improving have chain key reducing of supply expansion. drivers

margin solely these rely increasing in of proactive are we of value-added adjacent to steps restructuring realize and expansion the still costs, Further ahead. European drive savings for can't materials business our from to our there sales in room While on further we lower areas, expected costdowns. high overhead is products improvement program, market science years realization

Slide XX. to Moving

As into you're late Cut aware, all which Jobs December. was Act, Congress law signed Tax in the and passed

earnings tax recorded over required will As for charge This beginning in of to quarter. million earnings. foreign resulted corporate years in other XXXX. the the tax accumulated our per be of of charges overall our XXXX a restate recognize December impact The diluted result, XX% also we of We're and of reduced million XXXX. share deemed rate fourth end of payable $X This to deferred $XX.X these a law the balances in was charge X repatriation to $X.XX as provisions.

analyzing likely the of provisions. process and we're Regarding the beyond, tax the in in of all impact XXXX still reform

expect impact the low mid-XXs, net our cash on tax our favorable a to to impact as However, it a overall, lowering taxes. effective U.S. favorable we as the well rate, to

also from approximately XXXX impact. $XX tax no Canada to expect in the million to repatriate additional with We back U.S.

allocation overall significantly terms as has our policy, reform. tax result nothing In of of changed capital a

invest to demand position an to if will in support increases, our customers excellent However, growth. that be we

improve in as We will businesses look customer the product and expand our world, launches to base capabilities, well our further and our develop for strategic as acquisitions invest footprint. to our around continue

Moving Slide XX. to

approximately of sheet during using million to and to more of $XX million on strengthen. This cash stock than shares balance year. XXXX ended repurchase the Our hand. $XXX with credit our We profile XXX,XXX was continue after common

time same was year-end million the at million. This with last to net $XXX our debt to year. million total $XXX declining Our $XXX debt compares at

million very customers. $XXX the EBITDA of gross and consolidation in adjusted positive capital Free the was XXXX. Our lower a typical cash X.Xx part, ratio fourth accounts on is net negotiations On from $XXX just at our of of With and solid of $XXX of basis, price maintain end at results, undrawn down patterns debt last at up leverage to strong European finalization and for QX. from is with an hand revolver, a million. operating X.Xx. quarter we factoring following currently flow the working This our was overall X.Xx, certain cash level million, liquidity by driven seasonal our programs large receivable

was year, million. cash For $XXX flow free full the

balance When future. allocation We sheet as the remains this approach support to expect capital expect cash our priorities. our continued earlier, in combined plans consistent. strong With and and with credit in strategic I profile, strength mind, in will mentioned we our it generation

Jeff. Now let turn back over to me the call

Jeffrey Edwards

our guidance And a this just up Okay, to review discussion for morning, want XXXX. take to thanks, Jon. our to wrap just I minute

So XX. to let's Slide move

what for stakeholders an fully record the automotive in impact pricing from line which North and company, some can. our top is especially sustain pressure can XXXX. spite we will believe some anticipate In of America, whether that somewhat. results So XXXX we headwinds industry, we was our customers, We but in the increased outstanding our surpass within that we to those understand year matters

prepare to costs from to to XX Europe ramp-up slightly pressures will for investments all as around Spartanburg now savings we of efficiencies fixed us operating of enabling be proactive expect our IT commodity regions. be launch margins able and program. we Fortrex ahead China, next of higher continue we expand in anticipated dynamic year major more over and improvements are offset inflation. CapEx of this, restructuring increases our in steps a expect in absorption as complete sales through smarter to and better expansion points plant continued production and costs asset However, year, basis efficiently. first to and the taking work for by We're all to overhead and in utilization the as XXXX, price as the China in of as cost infrastructure in With also we in reduce in well

have our it excited impact adjacent While results we our in remain likely significant in will not financial very opportunities about our businesses. XXXX, markets on

build new under Group direction continue this and to acceleration our organization and we team our anticipate in of activity As President, the results we of area. an

better believe stakeholder our value position before. to continue increased a to than We drive is company in ever

continuing want our to their thank and and sustained looking concludes in for efforts comments. year are forward support certainly and executing And to our plans we We their I in prepared XXXX, customers our This want our thank workforce to for engaged another trust. strong strategies.

phone Q&A. So now open we'll the lines for

Operator

[Operator Instructions].

line question comes from Capital the of first Roth Matt Koranda from Our Partners.

Matthew Koranda

could discuss other color a the Are referenced North And the just of you regions? any pricing that -- on We more over you into spill America. bit that in seeing products. use pricing pressure at maybe on base all, products you can you're seeing some also the how, you then to your that just offset on could of innovation touch if the environment

Jeffrey Edwards

sure, is North here America. pressure Matt. we're Right calling increased it Jeff. -- Yes, in now some This

this talking here. still, I the X.X% anything is We're about percent-ish X.X% is up. talked lot I think best to different We've it we I a which in regions the about probably us past in other characterize than mean, X.X in for don't that's in see the talked the always call the not have past. range, way about it. with you. to

pressure, differentiating we market, if selling, be we bit certainly we too pressure out in those and more in our about little to were us core number going innovation normal. that I is in a business we're core there we're going that over probably talking Again, business a two, more would especially I that the And -- prices forward. that I me replace one. within particular there just portfolio suppose part out the with replace think mean, forward, our helps. be substantial. less, we would if position product keep the very automotive weren't innovation as trying the pleased what not the to pricing strategy the pricing it's considered a So sell our Number the mind, we on

that So there importantly benefits are but we environment, both in more have. today's in replacing the portfolio

Matthew Koranda

you are could quantify that's was expecting helpful. related call if could that you us? black? materials help most headwind Or Okay, for other And raw I is XXXX? And there us of the items to wondering in that then you're carbon out guys from

Jonathan Banas

inflation of chemical and XXXX, million Matt, of this the side. we're commodity of the or that $XX is side in expecting $XX is million about on so. Yes, overall is on million Jon. metal $XX that

of had most things. XXXX year-over-year side of preponderance of about in coming we the the cost commodity That's of well. impact in and is terms from us carbon supposition That million $XX correct your that that's in black as So inflation black. carbon

Matthew Koranda

maybe into outlook? program break as in if in that down there then And launches? expected. Asia how not if during with little QX? just a it. Asia performing performance shifting I growth issues down could you Got moment. in lighter have drill any terms expectations, then else line seemed Were the our expected the your in a Or but just gears, And of would into terms with we programs than of XXXX quarter? in just spills seemed Everything Asia growth Or for could

Jonathan Banas

Sure, Jon It's again. Matt.

segment in an keep number. the type mind is So for the profit all-in aspect quarter,

D&A, charges, like. allocation any includes the it corporate restructuring-related or impairments cost includes of So includes interest it asset it and

take specific for quarter, a our impairments. Pacific in to about in the Korea Asia $X So million business to we of charge asset had

So overall. headwind that to significant was the segment number profit a

small went plate But product issues, ongoing a of and QX product famously. operational from of our there of aspect operational were in the the only business. of great business up launches ramped we had an will, was they bit as little handling more really was India great. things they actually an The things, load the , if team of in a terms launches, That terms In quarter It headwind. in our you 'XX. our spill additional on

Matthew Koranda

it. Got for last one Maybe me Fortrex. on

validate as get product particular program? should You gives ahead that they what mentioned its a existing look a to they Fortrex validate customer orders I'm time expect the more need and new follow-on program small And remarks toehold it's you guess, with is you prepared we a in an how expect I that that on to a like when more once much -- do for to you I would guess, how at come? trying and

Jeffrey Edwards

is Yes Jeff. Matt, this

teams this. determined for you it to years orders in that wanted And their XX% back goes and once changes us running we've conservative Fortrex into have where to X.X a components execute order it, different we Because then months couple XXXX. in the they in customer the for about on of win been significant these forward win solution ways presented term years I to a put have two my is of win themselves X will So that a address that of into comment few actually after to of we into The the sealing about years production. after were couple issues. to X get of our are orders based our that by a vehicles longer we after and vehicles over want already other Fortrex customers running those to it, going able we you think changes convert future Fortrex, particular period That about where programs or within Fortrex talked X then launching that business short they have winning to would expect a it. X and a to in issues was address. term estimate the happened of

will those present things customer we of approved more themselves think future all base. I our across the in material of as our get

years, as pooling I more it's approvals. little be will a bit So in system, short term, in those the characterize talked of the as slower I But gain that this lot you're first whole would as think that portfolio. really the is they the in of about the seen that a always couple once us is you than But projection XX% in I how none we've far it. sealing

So it go even can I think faster.

Operator

Your next question from from comes John Murphy BOA. line the of

John Murphy

Could [indiscernible] midstream follow of To to How you're as Fortrex Could on program standard the your even line X question it year be or a win there. out can over answer the a change you X that system. up a to changeover? XX-month -- be and this ArmorHose and actually to and X- fast in once quick? eventually opposed

Jeffrey Edwards

last the less the months. that in new one, a here truck six than was Jon, we on Yes, U.S., pickup just it's that won, and

John Murphy

Okay.

had an you Chrysler, Or penetrate into start with like as you're Fortrex -- things that penetration So get should you correct? automaker flipping as in but the that you can Is all-new [indiscernible] or an -- just say. Chrysler ArmorHose, was I that that. with once system,

Jeffrey Edwards

a focused think I That address example a an with a and the new component were wanted material question. good they help on. that Fortrex item it's was improvement And to it's they spec-ed great

sense. and the are terms be of it's And it's really the customers. part Germany going impact ways to applied one. let system now us Our call really then And in going starting me getting, and spec to about will where really a that for think up Fortrex. it, the many just I it largest the of can really in And we're to that signed And part excited, most I'm next. customers we're have close talk our forward close of that's makes with now vocabulary, what of positive it's both

John Murphy

margins is and about for we Europe differences That's deltas is But Traditionally, suppliers. some very for you, operating I'm aren't some margins curious, really that And helpful. there break even those margins structural think mix or basis, timing? XX is then even is And North any America. Five obviously, low, and just business plus in with drive in any a Or costs just is ramp America if Asia. similar regional to years -- South with think segment to restructuring if know ultimately operating growth out in those reason is a you and and get is Europe, that there margins I are perfect couldn't loaded get you directionally, Asia, America, to there minus. why in specific growth, or in but there there? North just reason there these couldn't high and fairly on this wins pure reason

Jeffrey Edwards

Yes, one take -- me those. let it of each take

said the So will double-digit getting the that that first EBITDA year we've in be of tailwind be on our Europe, and us. this will that's behind restructuring

Europe think Jon. forward, be in going double-digit the area, I low will

improve market Europe. see until deliver where I continue dynamics to are you're delivering forward, They'll America. going think there that's with North way we Europe the to us going that we're the not change, probably but for

early move as switching Asia, why is There we the our then to up won't upper to ramp next no teens China business we decade. into the to begin gears and mid-teens reason there.

out high We band guess, long year we in will teens, as well a we even time we of the time. there the South high in as for as achieving up first in because America make XX% ROIC in plants. expectations we money terms those actually have high should will probably fill this China margin bring then as -- EBITDA I as And

back we in market done and have I there that 'XX. think lost in call, $XX seeing I'll making all million footprint into could And cost region. a we great any So are that for, we but way we'll our XXXX, the our that start out already as predicting make the there there I'm or significant and Keep in predictions of throughout and revitalization we're getting of mind, terms margins in to taking what ready job Brazil 'XX XXXX. a be, how strides teams not what

we'll So is the so this hopefully answered there that question. money that terrific your year fact story. make actually really a

John Murphy

the That's going And tax that cash is on to to? Bringing to $XX implications And lower we million the bump the U.S., that incremental cash? investment little go are thought think What's cash this tax $XX and about in rate forward. and for helpful. in coming going shareholders? Canada more process million where that to going very Is go free this aggressive money restructuring, the this What business, to by then nice situation. the Canada? down from from cash if

Jonathan Banas

forward. Yes launches costs continually our put my scripted spend that on out to for. for again. eye money do we John. production, taking change about in we it's those. cash as over further the in here our to strategic have to comments, out investing got continue up use go in spend We've It's Jon Then the would our product a M&A. processes not to the Similar infrastructure there. XXXX. in funds got in continue putting and going what only really no behind We'll but business, -- real we're coming XXX We've to We use -- innovation,

infrastructure innovation a advantage We're in that out our to the So of brings take the side IT as common the table. continuing IT we'll efficiencies build to as well invest that infrastructure. and to

Jeffrey Edwards

to this on And Jeff. continue there is Jon,

this take technology as that able us excited Debest adjacent business, highlighted Jeff a expectation address about of we're that. Obviously, cash the material we've the I we're lot about question. a having just an experienced is forward. going My will but excited that on. group us directly be We're market, that what think to the things, will a invest already, faster leader about standpoint. running and talking be other The in from that for X science join to business there we result the

other on go there in the at, that opportunities market really as for business. science, the our that is glasses think looking group, number opportunities space as we well we're nonautomotive on our business magnifying put do in material a in how adjacent thing I in business, ISG that we of and both M&A faster the

Jonathan Banas

comment. I'd sorry, one more I'm maybe give Jon,

both Asia, keep as respective their in Just Europe in cycles. and both in users growth cash they're mind they that are

any continue Europe. as initiatives back and exit anticipate we the build those and in from growth to do So of wouldn't in they the China, restructuring either significantly bringing cash there regions up turnaround

John Murphy

that makes on right? then would exit. Is some I sort sense. the side very is investment material that. Or I science focused and the opposed manufacturing, there science No, as more science capacity? the ramp-up imagine on appreciate there back to Jeff, this R&D the side? it's Yes. much of and on

Jeffrey Edwards

It is. We're a bringing in leader.

We expect coming to given us sure. activity the volume of resources to have that going at for we're additional there right now some add

into the helping faster. actual to and customers the As our prototyping get market we over NDAs with associated there these of product convert licenses, contracts course, is and engineering costs new and startup

we look So at in we'll returns going just fortunate cash the growth in get. in the expectation put have a you we're to we're to position a mode business, on be how we that that matter and high have that and a that's no that it

Operator

line from the Goldman Tamberrino comes of question Sachs. next from Your David

Mariel Kennedy

Mariel This on for Kennedy is David.

a So adjacent question just on had the I business.

of there. I think ratio had referenced as a XX% frame for would to What be guys this? at you XX% a looking about we sort time target of

Jeffrey Edwards

Yes, Mariel, this is Jeff.

that I is mentioned, as a the make I that, already into talk fair that XXXX the that. to business have number. we're see And quarter I in you that's summer before believe consider product call. line with depend, our would the again, don't in target. that you business head very XXXX, but to it's what on can We about Japan. through an near. we very I this start level summer a as a It model of think enough on about this next announcement activity that we much opportunity, assure I here. is to third significant talking have will would we accept on launch say I day

Mariel Kennedy

you products? would North that on between that business and I to a more just start, I science see guess, what material Okay, business, be then that those. And follow-up most of split America Between of would And in nonauto products helps. traditional assume? sort

Jeffrey Edwards

Yes. about talking the get other Could question, that didn't North in Most that give activity the me you it. -- of again? quite America. is we're I of part that

Mariel Kennedy

Yes.

between the what expect material So would to the sort material leveraged more looking be What science products, would business? split the of for more see? to business products we're the Or split we more science? overall traditional and of it seeing at

Jonathan Banas

does is well. we're currently, group correct. that include North Jon. of about collectively business in our And here and products the adjacent you're terming America, predominately $XXX as sales, What Merril, it's million industrial specialty

continue can that grow fits look M&A we overall you're referring and will to that So for support as growth that That would to. that XX% strategy. best XX% activity that to into

Operator

next the Silver Your Capital. Gary Hu Point from comes line of question from

Gary Hu

know euro if you wondering, pressures Yes, And some have was But I you'd pricing top North is I just using guide. on FX then your out that? separately, your quick line there a what you'll assumption in full year America. I wondering highlighted question was else you're driving guide. as that guys just for that call anything

Jonathan Banas

and start when planning for euro Yes. that at go we The $X.XX Gary, rates look 'XX in our through fall assumption. we time. process, let at me start average the forward was the and we with the about

for plan. ballpark our similar rates a set when in we're forward than So the we

So you numbers. can your model that into

to your referred that's with first in historical impact. European part X.XX%. been our I that On that X.X% side, pricing was that is of Again, That overall, your to think question. the line earlier -- Jeff

Gary Hu

anything driving pressures than other in just else America. the call the as that then North And you line there Was top guide? out would pricing

Jonathan Banas

No.

drivers significant the there. are those think I

Operator

Hendriksen. questions. It appears would back now to I the there return Roger more over to like call no are

Roger Hendriksen

appreciate we Thanks engagement Again and appreciate call. your joining your questions Okay. Cooper-Standard. We your with the continued everybody.

with get call. further like speaking to a have you you. in questions or to If please would management Thank further give team, you soon. look touch our me forward with I

Cooper-Standard (CPS) 16 Feb 182017 Q4 Earnings call transcript