CPS - Earnings call transcript Q2 2019 | Cooper-Standard Holdings Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen. And welcome to the Cooper-Standard Second Quarter 2019 Earnings Conference Call.

During the presentation, all participants will be in listen-only mode.

Following company prepared comments, we will conduct a question-and-answer session. [Operator Instructions] As a reminder this conference call is being recorded and the webcast will be available on the Cooper-Standard website for replay later today.

to Investor call Relations. like Hendriksen, to now of Director would turn over the Roger I

Roger Hendriksen

The leadership Thanks, appreciate with Jeff time morning. Edwards, you and you spending of Howard, good this Chief some with morning, on the Chairman us morning be and who will team everyone. call We members speaking our are, this Officer. Executive

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

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

more ask this to For information company's filings you on to Exchange and Securities we forward-looking statements of that Commission. X the in periodic statements, with slide the included refer presentation and

the This measures presentation non-GAAP comparable most included to are also to GAAP directly their contains measures non-GAAP the of the Reconciliations financial appendix in presentation. financial measures.

I out to that the Jeff of with Edwards. over So turn way, the call will

Jeffrey Edwards

good Thanks, morning, everyone. and Okay. Roger,

short release, As for outlined press our the in results our of quarter. expectations fell financial

continue to all negatively markets. production vehicle our of mix weak and by unfavorable volumes in We impacted be

in on and vehicle with market have weakness America. North we a the customer not again of had planned. Europe than new expected Asia, And could once but anticipated ramp here in delayed was our We important weaker production China we key launch

rest second But of year year. and last The delayed our about we're production compared for it. volume had not a complaining this significant quarter results to compared impact on explaining the the quarterly plan this, to assured,

and some possible. Slide record measures, as much highlights On organization X, achieving which unanticipated To these anticipated achievements. that mitigating the is reorganized structure, performance. we’ve our focused we under recently these as we're on provided of By impacts market improved of team, global many point, of an

improved through very efficiency. costs been successful at cutting operating We've

pace were the lean of full of with initiatives, year. in in cost million the we savings taken fact, of target million and restructuring In achieve first purchasing $XX our and to costs the $XXX plants, X on months total we've out for year, our combined savings through

year-to-date quality the scorecards be safety quality and Similarly, Through product at our proud year. first XX perfect is safety continues last our We're that rate customer so green. are year reportable XX% especially months our have incident locations of XX% with the pace incidents. world-class of down a versus record Our for our far this total outstanding. performance zero to X continues year, a

executed with far. total XXX launches a the bringing During our XX consistent the the XXX company program full successfully of This to is more plans second so year. year the we launches, for than quarter, record for launches

tremendous excellent this performance, program and XX% are relaunches Despite on for our to deliver to teams launch track continue deliver we year. and product the challenge,

our driving for customers continue that We a to Cooper-Standard. market advantage the deliver are value for innovations in competitive to

Our value customers our with recognizing are orders. innovations the of their new

So track on innovation sales, commercial And first our XXX% of below year, related is customer this or This givebacks staying price new to have the both $XXX has at the team to for compared XXXX. including our with accomplished when booked while half awards new year. replacement target they far up in annualized keep products business. this and totaling million sales to X%

plant Awards being our and Year year. of receive to recognized customers industry. level, continuous Supplier Motors Ford at the the honored the in since operations beginning addition received the in customer to for XX finally, quality world-class improvement the and and We recently regional of are all award, And Excellence were the by and service General the awards our World

we our of managing near doing control are term. the aspects team So business that our in the an summary, of can job of employees in dedicated outstanding

market changing our within process are over in adapt we global term. dynamics vehicle and light of business, lower making significant decisions this, structural ensuring the the to Beyond production we longer

following these of provide initiatives, on more associated initiatives, results. with outlook our and will the detail the strategy review Jon? second Jon's our I quarter financial

Jonathan Banas

Thanks, provide detail and results second liquidity, financial and everyone. also our I'll few comment on some good the for capital the Jeff, slides, on sheet next morning, and our structure. balance profile, quarter In

On a results we prior show X, our the summary second with the year. comparisons Slide of quarter for to

second down quarter XX.X% were XXXX sales of XXXX. Second $XXX.X quarter million, versus the

of in our The regions, year-over-year the by described; the recent mix change acquisitions. These just unfavorable price sales volume by and exchange; partially were Jeff and reductions. foreign all from customer AVS was unfavorable driven business; offset increased as sale

million, quarter decline XXXX. EBITDA was of EBITDA was second impact compared the the X.X% year profit in of of most or million same Gross launches. in $XX quarter to including of period for million and a $XXX.X $XX.X was compared million up of $XXX.X significant the to Adjusted second volume ago. weaker driver adjusted ramp in key production The mix, the the in delayed sales,

net initiatives. were raw the These and the of decline continuing the by reduction and only price offset reductions, customer inflation, Also divestitures. general of our materials cost impact partially acquisitions were contributing success to

resulted the total in sale the tax the gain on effective $XXX.X about $XX.X a The for million, rate accounting XX% $XX was business of majority of quarter. tax The AVS in gain quarter. million our of expense the or our in million of recorded

tax full anticipate XX.X% U.S. the the on in of on the year-to-date, carryforwards due X.X% XX.X% sale to rate Europe. now we of tax effective and only ETR for the GAAP in to U.S. the quarter However, credit and tax and With tax laws an for XX% gain cash range was year. rate the a XX%

XXXX. was for $XX.X the in of income net of million basis, million income $XXX.X quarter second GAAP the net versus quarter a On

was gain net and adjusted million income share. the on quarter sale, special taxes, second $X.X items, for $X.XX diluted related Excluding per or other the

quarter a the and the for in than was or second our period X.X% consistent year from From year. a in full XX% $XX.X million with CapEx to $XX.X the by for in spending million CapEx our sales, ago. perspective, the quarter more of our plan with down was same line This expectations reduce

Moving and The of the in Slide Slide on X. to X EBITDA. change our drivers adjusted year-over-year significant charts quantify the sales

reduced mix was customer of of a combined. sales $XXX $XX and the reductions million divestitures year-over-year, price and net of volume negative acquisitions million impact $XX net another and sales, For The million was FX negative. impact by

our For lean efforts ongoing $XX million unfavorable mix, operational than quarter. adjusted manufacturing price and These more of offset were volume and savings EBITDA, reductions. the net in cost of for efficiency in by $XX drove savings million

the discontinuation mix or to and on ramp out had and volume the run delays on program programs. car America production impact customer launch North important passenger of new of due the biggest an certain

had wages, commodity cost unfavorable the in accounted and negative expenses million higher and a and other impact General net million and costs. other we $X also $X to acquisitions million inflation, mix, for volume $XX utilities, as rents from addition such incremental divestitures. and In of in

X. Slide to Moving

second credit a we million With ended We revolving balance million availability credit on of with hand the quarter sheet and XX, cash strong profile. of June have as on solid hand. liquidity facility, our We $XXX maintain continue to $XXX cash on and XXXX. of

the the $XXX at million, at year. Our down end from million the total June was quarter first this of of end $XXX debt

year. to the at and $XXX million the is $XXX was of compares net at the from debt of debt million million. $XXX first end the quarter of end This Net down last quarter second

X.X of was June debt at at the of X.X XX EBITDA to the end months June Our to trailing times compared net times, adjusted end XXXX.

price XX, sales Slide April sheet cash with closed We total more the of XXXX, a our thoughts a AVS and on on to sale balance million. few Turning X, flow. the of on business $XXX.X

in the during by proceeds adjustment certain million the the assumed $XXX.X quarter. second Following for we received liabilities buyer,

that to be adjustments, will $XXX estimate million. of fees proceeds the yet be taxes million We paid the cash in following $XXX range net post-closing and to

of we range, and final end of view discussion amount purposes may this slide, For upper but the vary. the that

pay $XXX closing proceeds the well local of revolving the of after million U.S. as our completely used credit China. transaction, facility some down balance debt Shortly balances as the in we to

also the second shares to of repurchase in We $XX used million quarter. cash

proceeds the the on of remain sheet, manage improved us our rest balance business. flexibility The to giving

we to conditions a this believe automotive the prudent be allocation in Given the of prevailing markets, proceeds. global

of due lower period it the relates cash flow, to first down to flow to cash earnings. year year compared same in half the the As last largely free was as

We will deliver which flow full second expect the in And improvement we for generate flow half. solid cash to expect year, the full cash neutral, to free a positive year free to continue over be essentially XXXX.

growth. cash of strategy our positioned on the to while To condition current balance through summarize, while sheet improving we pursuing increasing remain and with our long-term well focused our flow and the are of pleased market, We challenges in credit our believe financial strengthening free company, overall profitable the the we profile. manage of

to me let back turn Now Jeff. call the

Jeffrey Edwards

Thanks, Jon. Okay.

our taking some provide perspective forward. the With I strategy results financial few the more we're our to improve and, actions importantly, slides, want next on longer-term going to

growth long-term continued Slide So moving XX. profitable innovation. strategy our to component is A the focus core on of

success this Our competitive area us. an in advantage is for increasing

new earlier, I driving discussed As awards. sales it's significant

has many offer. the is innovations material we Fortrex conversation of innovation dominated some Our one for time. just the It

We products pipeline continue to advance and technology. innovative full a of

the this locations. production premium FlushSeal are exciting new introduced quarter, of attention at the customers, with to featuring an we it Our in on just global and technology during of was market already electric customer on-site midst all It new for vehicle. roadshow, sold a our we've gaining is the and second product

provides, technology the believe the and first appearance just we is of contract aero this this acoustics first With sleek many. award premium, improved

XX. Moving to Slide

X garnered to of the X, Looking expect ArmorHose that all we us. enhanced additional introduce end significant customers and ahead, before drive providing the some to a for we our to from due can have cases, they X Armor and have for year. performance an innovations provide. of LightHose customer, the number the savings still our margin while they attention savings high In market cost weight

our leveraging lines. science all material product expertise our deliver across are we of Importantly, innovation to in

to XX. Moving Slide

example state our automotive have make agreement diversify our the is solid The perfect why of industry signed important Technology in global another to industry. long to applications We're beyond to continue the so We manufacturing business. strategy very a progress for the pleased current strategy is in Fortrex run. this develop to

of well. is multi-national in potential industrial initially The a for be in The more provides as focusing will business or applications breadth latest X company Asia, on large, overall their future based potentially agreement product with the X applications. high-volume who

and end three goals you far, on for still Our a by the objectives remains total the sign of to Having year. that to with Fortrex track year. agreements advanced we science one the four the the to three at new out six for laid materials first expect more signed we of so business of

demonstrate wide chemistry potential for applications agreements These the Fortrex technology. in platform of the continue range and the to versatility the

of the excited about potential this be of optimistic long-term and to continue We business. side our

Turning XX. Slide to

demand customer and environment in the and the Europe. must As trends in to around and value Asia for outlook normal consider light production deliver near-term company new the we our world, the we vehicle position in

Our least is below vehicle or at current levels, remain XXXX, and markets production possibly view through light of that current longer. will at these

As of initiate the X in anticipated to a demand. North the our taking align production America. of and in result, are steps significant to plants year, We lower including capacity vehicle the Asia with expect the now end we closure X by X

becoming In support and at us from we light the by economy our if In market related synergies of acquisitions. America, underperforming North SUVs profitable In crossovers. Europe, will we them. this plant will We the to remains underlying the believe the least believe businesses world, help around the preference cannot capital, to plant for we trucks, all we and recent regions can consumer strong, fundamentally exit more fix a become continuing growing achieve cover with closures cost smaller.

ramp We again operations America American North teens. high North the believe year a new program the rate our Our at can up year. margin once as run for this launches EBITDA exit in planned

believe us We to savings. help a global significant cost and drive we pure structure, accelerating synergies are and transition organization our will this

globe. between We a organization structure, further across during the align and be commercial expect in engineering, better uniform the the will our Details fourth to global flatten and way teams scale provided quarter. manufacturing, leverage priorities supply chain

collaboration supply important $X than in more of reduce chain among better equipment scale Related major This all that on complexity will joint a to dramatically leverage spend. is global this, our direct commodity initiative global an begun with we've and project functions. and annual billion

We to the the this in time materials drive XXXX significant in of expect reductions cost period. XXXX to

in we cash of capital our our improved a or to on lower spending reinvestment flow, Continuing to reduce ratio focus plan X XXXX.

We to days optimize to our a also in XX near term, with inventory payables. XX reduce plan the get longer-term receivables to and hand on and to goal further

strategy long-term execute this is entire with objectives. and connection Our in aligned near-term to organization transition global our

half Turning realized the impacts. year, reduce already half are of laid benefits not the first to Most out Slide XX. to and The second initiatives XXXX in offset for the until but sufficiently to the we've will be you costs of beginning not beyond. volume

half first we've expectation shown weak Asia Slide on revised results of full year our volumes Given our continued in XX. the and and as outlook Europe,

we production sales see year. ramp While quarter be half made delays second as midpoints expect second the to positive new the Using the not second will production, expect in up impact we improvement EBITDA you margin to the and sales to full lost assuming ranges, the this volume are in in of can do EBITDA half. we launches

confidence. for our in their very our to global challenging for team a continued also trust and to customers would and thank driving thank We want to We value again commitment environment. their creation change like

lines so Q&A. concludes our comments, prepared the now open This phone for we'll

Operator

Thank of Mike the comes from Global. [Operator Our or Instructions] question Seaport line first from Ward you. comment

Your line open. is

Mike Ward

Thank to you program ramp Jeff, you. Did half? that your the expect for in say up do I sure your do I made new this morning, not make everyone. the lost Good not second the assumptions from want volume right. you guidance you got --

Jeffrey Edwards

view a felt That's the Mike, that for just for the was of conservative second half, Yes. plan, we half. correct. behind bit and so take second approach it conservatively to We prudent the there took conservative a that it's original

Mike Ward

ultra fact the line and employees, is company, despite so just adding you're That's the being Okay. hiring another customer, your that conservative?

Jeffrey Edwards

really you just aspect. like indicate was I won't this on information we that situations, was talk to haven't which don't know we I then for felt and Again, we based in for -- these or to us, customers our that so Yes. one for have period. the available, But

to make number just I again, talking we mean, a this of considerable vehicles, business, months our here prudent approach. and it for we're take about up X thought, to was

going I'm is going everything For sure to going extremely be to next year, are be things and track on well.

Mike Ward

product the like than FlushSeal Is Okay. window seal Fortrex-based Explorer? the the different in

Roger Hendriksen

actually vehicle within with technology much aeroacoustics. Yes, Mike. metal, structure itself product, quieter Fortrex way with feel. the the There's that it really is We call glass of is, the incorporating a and is and to aligned smoother FlushSeal a the the the FlushSeal potential the sheet sleeker for appearance but it give

the new a Fortrex. material we of but actually program, So can yes, science incorporate it's

Mike Ward

the vehicles Okay. And XQ? launched in

Roger Hendriksen

awarded launched, for hasn't it's one That No. been sold – production.

Mike Ward

with award given, traditional How okay. The was content products? sealing compare Okay. does

Roger Hendriksen

As and our additional we do try with and the we for well. as innovations, shareholders all customers for get to content, hopefully improve our value value

Mike Ward

one Okay. And then thing. just last

targeted mentioned You of this Asia. and end X you X the that I guess in year, had by plants to close

those back, relatively what think Or back When if are gone? complete, time? are you these shut, be closures, can you I they look comes period mothballed, volume of at that's said. that that a in they plants on turned short

Jeffrey Edwards

Yes.

Mike, footprint, we've Asia the is past. as For the in the it's this mothball talked Jeff, approach

the future. our lines to prudent more it's we that foreseeable and us, number for move actually consolidate plants need for the think, of I lines into

have volume we there, those back the open back comes flexibility the As yes. to up, then

Mike Ward

does China in when to accelerate? new And your start business

Jeffrey Edwards

China amount has Well, number with than business new we're volume and launching The significant the issue as we more programs. to there a does of do mix speak. new of for it us in

view in and that, in around a all that, China, is of a point bit XX% just year-over-year customer look to Just mix color you China, some the over down. suggest for data volume from you little that at would give year-over-year number customers if reductions

are customer and year's at mix significantly vehicles sourced the look the significant with number previous is XX%, to you of down we be a volumes. about that group, so on happen ours volume that from down associated If Cooper-Standard

is So that our really issue.

if news about were The forward, I -- allows news you address good some and going out a amount of find take try that, forward. I that is, good tremendous to we spoke have cost that guess, so fixed in to really to is just us information costs the going it good

the and particular will out particular that get the environment will we costs environment until footprint improves. So, that reflect

Mike Ward

you. Thank Perfect.

Operator

from from the Daigle Instructions] Mike Thank question Asset you. [ph] comes of line comment or Our [Operator Management. EME next

Unidentified Analyst

morning. Good for taking the call. Thanks

in authorization. year? you've buyback -- of your back of the that, and cadence think, You the in accelerated and now continue the the you an in room And stock Do secondly, bought the or million the left got market purchase expect you quarter between repurchases? end $XX to will do you on do open format

Jonathan Banas

as million repurchase The out. Jon. $XX share this program an pointed accelerated Mike, is was you program

we So delivery we back average the XX% date, at technically far, $XX shares. per To an bought initial share. open still as our had of covers is of program about so partner those of banking the and them shares,

mentioned going point of to the any sit we have year prepared think, remarks, in million here little we rest work any $XX authorization back, industry spend this I though, further as through to and that still my the As bit of the for the further have I at open. plans we we a are dynamics, don't

Unidentified Analyst

prudent. probably That's

Okay. Good luck.

Jonathan Banas

Thank you.

Operator

Thank you.

from comment Our Gupta question next comes or from line Sachs. Goldman of the Prateek

Prateek Gupta

me? Can hear you

Jonathan Banas

Go Yes, you Prateek. hear ahead. we now

Prateek Gupta

great. Thanks my taking for Okay, questions.

my calculations guidance XH specifically kind versus So if profile but question XH, implications margin I'm was around doing have you revenue And looks stronger. of much high from provided. softer, obviously is level around that the

exactly you can the in help this is just like improvement bridge So, what looks gap from us revenue? coming lower terms where margin in of despite

Jonathan Banas

XX QX the is to we've driver going be launch us. those of another this to profitability for his got XX sequentially, year. scheduled in again. This to significant in is QX. significant The and half this the improve that alluded and Prateek. got second Jeff Yes, XXX remarks as Jon cadence in prepared launch looks launches, year-over-year, launch there We've

the come year had year. the at in have other exiting So full of run increased we the expect absorption online, those profitability back we've and are ones and improved launches to rate the half year-to-date as

Prateek Gupta

would And you’ve in obviously, terms launches volume. of you kind follow-up mentioned know one terms be, visibility, XQ, launches of these of Okay. question in of surprised to the negative the around some

down actually is your in visibility in the of launches the that level getting and what guidance? volumes these So, modeling are getting terms you actually

Jeffrey Edwards

Jeff. is This Yes.

So just referred guidance. quarter. in that a to The is we to during the challenge said, what very related I have we vehicle we're think confident the

that we're the conservative As those units I decision half lost were that second taken. to our the making we've the somewhat being back in of quarter. mentioned, in That's related

of us going that there we what happen. in gives a level do high that confidence have So is to

Prateek Gupta

I which around If any of Okay. kind it spread finally, or to commentary may, across? more Is right it are particular region? revenue your now these concentrated in a regions launches is mix new similar

Jonathan Banas

Yes, America North themselves. can programs. and another Prateek. platforms launch again. America full QX are another are actual the XX, It's will and XX, of the will I Asia further the regional some in will XXX launch launch region Of global you XX. will But Jon launch actually programs, you XX those at QX, XXX South Europe breakdown. another and platforms XXX give year look when

and can program it's launch very all schedule a So see aggressive you of have our global that we for regions.

Prateek Gupta

it. of luck. and best the you Got for color Thank

Jonathan Banas

Thank you.

Operator

back Roger Thank you. no to now would there the Hendriksen. questions like Mr. I the in call are more queue. It appears over to turn

Roger Hendriksen

you call. follow-up to again for everybody, the participation coming speaking and would further for participation questions. us our concludes have look today Thanks, forward you to and thank and appreciate invite Okay. weeks. calls reach you in soon. We out this your you days Thanks. morning, This We your to to your if we

Operator

in thank the today's gentlemen, for conference. and participating Ladies This program. you concludes

a Every may one, wonderful disconnect. now day. You have

Cooper-Standard (CPS) 2 Aug 192019 Q2 Earnings call transcript