Driving Value Through Culture, Innovation and Results. INVESTOR PRESENTATION March 2018

Transcription

1 Driving Value Through Culture, Innovation and Results INVESTOR PRESENTATION March 2018

2 Forward-Looking Statements This presentation includes forward-looking statements within the meaning of U.S. federal securities laws, and we intend that such forward-looking statements be subject to the safe harbor created thereby. Our use of words estimate, expect, anticipate, project, plan, intend, believe, forecast, or future or conditional verbs, such as will, should, could, would, or may, and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, we cannot assure you that these expectations, beliefs, and projections will be achieved. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. Among other items, such factors may include: prolonged or material contractions in automotive sales and production volumes; our inability to realize sales represented by awarded business; escalating pricing pressures; loss of large customers or significant platforms; our ability to successfully compete in the automotive parts industry; availability and increasing volatility in costs of manufactured components and raw materials; disruption in our supply base; entering new markets; possible variability of our working capital requirements; risks associated with our international operations; foreign currency exchange rate fluctuations; our ability to control the operations of our joint ventures for our sole benefit; our substantial amount of indebtedness; our ability to obtain adequate financing sources in the future; operating and financial restrictions imposed on us under our debt instruments; the underfunding of our pension plans; significant changes in discount rates and the actual return on pension assets; effectiveness of continuous improvement programs and other cost savings plans; manufacturing facility closings or consolidation; our ability to execute new program launches; our ability to meet customers' needs for new and improved products; the possibility that our acquisitions and divestitures may not be successful; product liability, warranty and recall claims brought against us; laws and regulations, including environmental, health and safety laws and regulations; legal proceedings, claims or investigations against us; work stoppages or other labor disruptions; the ability of our intellectual property to withstand legal challenges; cyber-attacks or other disruptions in our information technology systems; the possible volatility of our annual effective tax rate; the possibility of future impairment charges to our goodwill and long-lived assets; and our dependence on our subsidiaries for cash to satisfy our obligations. You should not place undue reliance on these forward-looking statements. We undertake no obligation to publicly update or otherwise revise any forward-looking statement, whether as a result of new information, future events or otherwise, except where we are expressly required to do so by law. This presentation also contains estimates and other information that is based on industry publications, surveys, and forecasts. This information involves a number of assumptions and limitations, and we have not independently verified the accuracy or completeness of the information. 2

3 COMPANY OVERVIEW 3

4 Cooper Standard - Value Drivers 1 Leading Market Positions in All Product Lines 2 Significant Organic Growth Opportunities via Increasing Content per Vehicle ( CPV ) and New Business Wins on High Volume Global Platforms 3 Advantaged Global Manufacturing Footprint Provides Access to High-volume Global Platforms 4 Value-added Technology Innovated by CPS Driving Increased Sales, Margins, and Strong Customer Relationships 5 Adjacent markets strategy to accelerate value stream of innovations and diversify revenue and profit base 6 Strong Financial Profile With Focus on Cash Flow Generation and Margin Improvement 4

5 1 MARKET LEADER Core Product Lines 2017 Revenue by product / % of Total Revenue Sealing Systems Systems Sealing $1.9B / 53% #1 Globally Globally #1 Fuel & Brake Delivery Fuel & Brake Delivery Systems Systems $0.8B / 21% #2 Globally Globally #2 Fluid Transfer Fluid Transfer Systems Systems $0.5B / 14% #3 Globally Globally #3 Anti-Vibration Anti-Vibration Systems Systems $0.3B / 9% North American Leader Market position data by Booz & Co. (2013) and Boston Consulting Group (2016) 5

6 1 MARKET LEADER Large, Fragmented Markets Represent Significant Growth Potential Key Competitors Sealing Sealing Systems Systems $1.9B / 53% #1 Globally Global Market Size: $8.0 billion CPS Current Share: 24% Market CPS Henniges Hutchinson Standard Profil Saar Gummi Toyoda Gosei Fuel & Brake Delivery Fuel Brake Delivery Systems Systems $0.8B / 21% #2 Globally Global Market Size: $5.8 billion CPS Current Share: 13% Market CPS TI Automotive Martinrea Usui Sanoh Fluid Transfer Fluid Transfer Systems Systems $0.5B / 14% #3 Globally Global Market Size: $4.2 billion CPS Current Share: 12% Market CPS Avon Hutchinson Tristone Teklas ContiTech Anti-Vibration Anti-Vibration Systems Systems $0.3B / 9% North American Leader Global Market Size: $10.2 billion CPS Current Share: 3% Market CPS ContiTech Hutchinson/Paulstra TBVC Tokai/Sumitomo Riko Global Market Size based on IHS light vehicle production data and average content per vehicle 6

7 2 ACCELERATING GROWTH Products Essential Across all Powertrains and Mobility Options Currently a supplier on 7 of the top 10 EV platforms Internal Combustion Hybrid All Electric Autonomous Sealing Systems Fuel & Brake Delivery Systems Fluid Transfer Systems X2 Anti-Vibration Systems 7

8 2 ACCELERATING GROWTH Strong Content in the Right Segments 65% of 2017 Global Revenue From LT/SUV/CUV Global Light Vehicle Production - Million Units* Projected Growth % CAGR Crossovers and light trucks to comprise 58% of the global market by % CAGR Cooper Standard CPV on crossovers is 27% higher than on cars Car Crossover Truck +0.9% CAGR Cooper Standard CPV on light trucks is 149% higher than on cars * Source: IHS 8

9 2 ACCELERATING GROWTH Advantaged Mix in North America 82% of 2017 North America Revenue From LT/SUV/CUV North America Light Vehicle Production - Million Units* Projected Growth % CAGR SUVs/CUVs and light trucks will comprise 68% of the N. Am. market by % CAGR Cooper Standard CPV on crossovers is 67% higher than on cars Car Crossover Truck -0.9% CAGR Cooper Standard CPV on light trucks is 312% higher than on cars * Source: IHS 9

10 2 ACCELERATING GROWTH Strong Mix in China Market Greater China Light Vehicle Mix - Million Units* Projected Growth % CAGR +5.9% CAGR SUVs/CUVs and light trucks will comprise 61% of the China market by % CAGR Cooper Standard average CPV in China expected to double by Car Crossover Truck * Source: IHS 10

11 2 ACCELERATING GROWTH Significant Ramp Up of China Business is Imminent Projected Sales; USD Millions ~ $1,200* China Key Highlights Revenue expected to grow faster than market Improved capacity utilization and overhead absorption SGA&E declining from 10% to 6% of sales ROIC increasing from 9% to 25% *Estimates based on current management projections, IHS production estimates 11

12 2 ACCELERATING GROWTH Expanding Our Product Portfolio in China Planned Revenue Split by Product 16% +78.5% FTS CAGR 13% 27% +50.1% FBD CAGR 11% 26% 4% 14% 6% 19% 25% +15.4% Sealing CAGR 82% 75% 64% 61% 57%

13 2 ACCELERATING GROWTH Improving Capacity Utilization from <70% to >90% Eight Plants in China with More than $100m Revenue by 2021 vs Two Plants in 2017 $100m

14 2 ACCELERATING GROWTH 2018 Planned New Product/Plant Launches Q1 Q2 Q3 Q4 Total North America Europe Asia Pacific South America Planned launches up nearly 22% vs Majority of new launches are on global platforms Includes both new and replacement business Total

15 3 ADVANTAGED GLOBAL FOOTPRINT Positioned to Win More Business on Global Platforms NORTH AMERICA SOUTH AMERICA EUROPE ASIA PACIFIC 52%* 3%* 29%* 16%* 34 Manufacturing 8 R&D 4 Sales/Admin 12 Other 30 US, 11 CA, 9 MEX 3 Manufacturing 1 Sales/Admin 4 Brazil 24 Manufacturing 8 R&D 6 Sales/Admin 6 Other 17 Eastern, 17 Western 29 Manufacturing 5 R&D 4 Admin/Sales 1 Other 15 China, 11 India, 6 Korea, 2 Japan, 1 Thailand * % of 2017 Total Revenue 15

16 3 ADVANTAGED GLOBAL FOOTPRINT Products Well Represented on Key Global Vehicles Vehicle Global Platform Projected Units (1) Sealing Fuel and Brake Fluid Transfer Anti- Vibration Ford F-150 1,057 GM Cruze 1,567 GM Silverado 1,251 Ford Explorer 92 Ford Focus 1,917 GM Malibu 675 Ford Fiesta 1,162 Ford Edge 748 Daimler C-Class 1,162 PSA 308 1,419 (1) Average annual planned production for in thousands. Source: IHS 16

17 3 ADVANTAGED GLOBAL FOOTPRINT Supporting Global Customers 2017 Revenue $3.62B RENAULT GM 21% Ford 31% FCA 11% Other 10% VW 5% PSA 6% Daimler 6% Renault Nissan 3% Tata 3% BMW 2% Geely 2% 17

18 3 ADVANTAGED GLOBAL FOOTPRINT Enhancing Revenue Diversification by Region Asia Pacific 4% South America 3% South America 3% Asia Pacific 16% Europe 23% North America 70% Europe 29% North America 52% 18

19 4 INNOVATION / VALUE-ADD TECHNOLOGY Our Innovations Are Creating Industry Breakthroughs Producing green solutions and automotive components that are: LIGHTER WEIGHT MORE DURABLE REDUCED NVH IMPROVED AESTHETICS Improving Fuel Economy Reducing Carbon Footprint Improving Serviceability 19

20 4 INNOVATION / VALUE-ADD TECHNOLOGY Providing Customer Solutions through Innovation Driving Sustainable Competitive Advantage for Cooper Standard Fortrex Sealing Reduces weight, improves performance, and offers appearance options ArmorHose, ArmorHose II, and ArmorHose III Eliminates requirement for protective sleeves on hoses MagAlloy Coating Improves corrosion performance and product life utilizing proprietary technology Gen III Posi-Lock Quick Connector Simplifies systems; reduces mass and complexity 20

21 4 INNOVATION / VALUE-ADD TECHNOLOGY Using Advanced Analytics to Support Innovation Collaboration with MIT for Analytic Chemistry Using Artificial Intelligence to Accelerate Material Development A.I. finds answer in 5 steps, starting at same point as humans Better material properties Historical trials by humans; compound improving but not good enough A.I. training A.I. answers 21

22 4 INNOVATION / VALUE-ADD TECHNOLOGY Delivering Breakthrough Innovations to the Market USD Millions Projected Automotive Innovation Revenue 2 Q Annual Booked Business $45m Innovation Products 1 $1,200 $1,000 $800 Full Year 2017 Annual Booked Business $220m Innovation Products 1 $600 $400 $200 Since Q Annual Booked Business $464m Innovation Products 1 $ Sealing Fuel and Brake Fluid Transfer AVS 1 Commercialized innovation products include: MagAlloy, ArmorHose, ArmorHose TPV, Gen III Posi-Lock, TP Microdense, Fortrex and Dynafib Includes new and replacement business. 2 Estimates based on current management projections, IHS production estimates 22

23 5 ADJACENT MARKETS STRATEGY Adjacent Markets Business Overview Strategic Objectives 1. Expand non-automotive business to 25-30% of total Company 2. Further enhance ROIC Industrial & Specialty Group Leverage core competencies and traditional technologies in near adjacent, non-automotive markets Advanced Technology Business Accelerate and maximize the value stream of material science innovations in nonautomotive markets 23

24 5 ADJACENT MARKETS STRATEGY Industrial & Specialty Group Leveraging core technologies in immediate adjacencies $2.2 billion addressable market Electric vehicles Commercial vehicles Agriculture Construction Power sports Marine Aftermarket ~$160 million current annual revenue New dedicated facility to meet specialized demands and accelerate growth Provides enhanced margin opportunity Fragmented markets with potential for consolidation 24

25 5 ADJACENT MARKETS STRATEGY Advanced Technology Group Actively Pursuing License Agreements for Fortrex TM Technology New group president joined Company as of March 5, 2018 Sales under first license agreement expected to begin in Q Term-sheet negotiations/proposals underway with 8 additional potential partners Exploring additional markets via material compounders * Source: The Freedonia Group, Company Estimates 25

26 FINANCIAL OVERVIEW 26

27 6 STRONG FINANCIAL PROFILE Financial Results (USD millions, except per share amounts) Fourth Quarter Twelve Months Ended Sales $ $ $ 3,618.1 $ 3,472.9 Gross Profit $ $ $ $ % Margin 19.0% 19.2% 18.6% 19.1% Adjusted EBITDA 1 $ $ $ $ % Margin 14.0% 11.9% 12.5% 12.0% Net Income $ 28.5 $ 31.1 $ $ EPS (Fully diluted) $ 1.53 $ 1.65 $ 7.21 $ 7.42 Adjusted Net Income 1 $ 63.6 $ 48.1 $ $ Adjusted EPS (Fully diluted) 1 $ 3.42 $ 2.56 $ $ CAPEX $ 49.3 $ 47.6 $ $ % of Sales 5.3% 5.4% 5.2% 4.7% 1 See Appendix for definitions and reconciliation to U.S. GAAP. 27

28 6 STRONG FINANCIAL PROFILE Consistent Margin Expansion Adjusted EBITDA Margin 1 1 See appendix for definitions and reconciliation to U.S. GAAP 28

29 6 STRONG FINANCIAL PROFILE Strong Balance Sheet and Credit Profile Gross Debt and Net Debt (USD millions) Liquidity Profile (USD millions) $763 Net Debt $758 Cash Cash Revolver $619 $139 $714 $198 $480 $516 $480 $516 $283 $ Leverage Ratio (Gross Debt / TTM Adj. EBITDA 1 ) Interest Coverage Ratio (TTM Adj. EBITDA 1 / Interest) 1.8x 1.7x 10.1x 10.7x See Appendix for definitions and reconciliation to U.S. GAAP. Numbers are subject to rounding 29

30 6 STRONG FINANCIAL PROFILE Impact of New U.S. Tax Legislation 2017 Actual Results 2018 Outlook $32.5 million charge for one-time transition tax (payable over 8 years) $1.0 million charge for restatement of deferred tax assets Impact of $(1.80) per diluted share in Q4 Effective tax rate (ETR) favorably impacted by: Reduced US tax rate to 21% Asset expensing ETR negatively impacted by: Executive comp. deduction limits Domestic production deduction repeal Foreign related provisions Net Positive Impact to Full-year ETR ~$50 million to be repatriated from Canada 30

31 6 STRONG FINANCIAL PROFILE Priorities for Capital Allocation Profitable Growth Organic growth Initiatives to enhance margins Strategic M&A Return to Stakeholders Share Repurchase Pay Down Debt 31

32 APPENDIX 32

33 Non-GAAP Financial Measures EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow are measures not recognized under U.S. GAAP and which exclude certain non-cash and special items that may obscure trends and operating performance not indicative of the Company's core financial activities. Management considers EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow to be 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. In addition, similar measures are utilized in the calculation of the financial covenants and ratios contained in the Company s financing arrangements and management uses these measures for developing internal budgets and forecasting purposes. EBITDA is defined as net income adjusted to reflect income tax expense, interest expense net of interest income, depreciation and amortization, and adjusted EBITDA is defined as EBITDA further adjusted to reflect certain items that management does not consider to be reflective of the Company's core operating performance. Adjusted EBITDA margin is defined as adjusted EBITDA divided by sales. Adjusted net income is defined as net income adjusted to reflect certain items that management does not consider to be reflective of the Company's core operating performance. Adjusted basic and diluted earnings per share is defined as adjusted net income and adjusted diluted net income, respectively, divided by the weighted average number of basic and diluted shares, respectively, outstanding during the period. Free cash flow is defined as net cash provided by operating activities minus capital expenditures and is useful to both management and investors in evaluating the Company s ability to service and repay its debt. When analyzing the Company s operating performance, investors should use EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow as supplements to, and not as alternatives for, net income, operating income, or any other performance measure derived in accordance with U.S. GAAP, and not as an alternative to cash flow from operating activities as a measure of the Company s liquidity. EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow 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, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow differently and therefore the Company's results may not be comparable to other similarly titled measures of other companies. In addition, in evaluating adjusted EBITDA and adjusted net income, it should be noted that in the future the Company may incur expenses similar to or in excess of the adjustments in the below presentation. This presentation of adjusted EBITDA and adjusted net income should not be construed as an inference that the Company's future results will be unaffected by special items. Reconciliations of EBITDA, adjusted EBITDA, adjusted net income, adjusted earnings per share and free cash flow follow. 33

34 EBITDA and Adjusted EBITDA Reconciliation (Unaudited, dollar amounts in thousands) Three Months Ended December 31, Twelve Months Ended December 31, Net income attributable to Cooper-Standard Holdings Inc. $ 28,501 $ 31,114 $ 135,303 $ 138,988 Income tax expense 34,269 11,009 74,527 54,321 Interest expense, net of interest income 10,324 11,528 42,112 41,389 Depreciation and amortization 38,675 30, , ,660 EBITDA $ 111,769 $ 84,612 $ 390,030 $ 357,358 Restructuring charges 6,917 12,563 35,137 46,031 Impairment charges (1) 10,493 1,273 14,763 1,273 Settlement charges (2) , Foreign tax amnesty program (3) 1,502 4,623 Loss on refinancing and extinguishment of debt (4) 5,104 1,020 5,104 Secondary offering underwriting fees and other expenses (5) 6,500 Other 155 Adjusted EBITDA $ 131,206 $ 103,833 $ 452,000 $ 416,702 (1) Impairment charges related to fixed assets. (2) Non-cash settlement charges incurred related to certain of our non-u.s. pension plans. (3) Relates to indirect taxes recorded in cost of products sold. (4) Loss on refinancing and extinguishment of debt relating to the May 2017 amendment of the Term Loan Facility and the refinancing of our Term Loan Facility in (5) Fees and other expenses associated with the March 2016 secondary offering. 34

35 Adjusted EBITDA Margin, Financial Ratios Twelve Months Ended December 31, 2017 (Unaudited, dollar amounts in thousands) Three Months Ended Twelve Months Ended December 31, Q Q Net income attributable to Cooper-Standard Holdings Inc. $ 28,501 $ 31,114 $ 135,303 $ 138,988 $ 111,880 $ 42,779 Income tax expense 34,269 11,009 74,527 54,321 41,218 42,810 Interest expense, net of interest income 10,324 11,528 42,112 41,389 38,331 45,604 Depreciation and amortization 38,675 30, , , , ,580 EBITDA $ 111,769 $ 84,612 $ 390,030 $ 357,358 $ 305,856 $ 243,773 Restructuring 6,917 12,563 35,137 46,031 53,844 17,188 Impairment charges (1) 10,493 1,273 14,763 1,273 21,611 26,273 Settlement charges (2) , ,637 Foreign tax amnesty program (3) 1,502 4,623 Loss on extinguishment of debt (4) 5,104 1,020 5,104 30,488 Secondary Offering Fees (5) 6,500 Gain on remeasurement of previously held equity interest (6) (14,199) Gain on divestiture (7) (8,033) (14,568) Inventory write-up (8) 1,419 Share-based compensation (9) 2,770 Acquisition costs 1, Other ,236 Adjusted EBITDA $ 131,206 $ 103,833 $ 452,000 $ 416,702 $ 362,365 $ 311,537 Debt Debt payable within one year $ 34,921 $ 33,439 Long-term debt 723, ,480 Total debt $ 758,246 $ 762,919 Less:cash and cash equivalents (515,952) (480,092) Net debt $ 242,294 $ 282,827 Leverage ratio (Total debt/adjusted EBITDA) Net leverage ratio (Net debt/adjusted EBITDA) Interest coverage ratio (Adjusted EBITDA/Interest expense) Sales $ 937,914 $ 875,434 $ 3,618,126 $ 3,472,891 $ 3,342,804 $ 3,243,987 Adjusted EBITDA margin (Adjusted EBITDA/Sales) 14.0% 11.9% 12.5% 12.0% 10.8% 9.6% (1) Impairment charges related to fixed assets. (2) Non-cash settlement charges incurred related to certain of our non-u.s. pension plans. (3) Relates to indirect taxes recorded in cost of products sold. (4) Loss on refinancing and extinguishment of debt relating to the May 2017 amendment of the Term Loan Facility. (5) Fees and other expenses associated with the March 2016 secondary offering. (6) Gain on remeasurement of previously held equity interest in Shenya. (7) Gain on sale of hard coat plastic exterior trim business in 2015 and themral and emissions product line in (8) Amortization of write-up of inventory to fair value for the Shenya acquisition. (9) Non-cash stock amortization expense and non-cash stock option expense for grants issued at emergence from bankruptcy. 35

36 Adjusted Net Income and Adjusted EPS (Unaudited, dollar amounts in thousands except share and per share amounts) Three Months Ended December 31, Twelve Months Ended December 31, Net income attributable to Cooper-Standard Holdings Inc. $ 28,501 $ 31,114 $ 135,303 $ 138,988 Restructuring charges 6,917 12,563 35,137 46,031 Impairment charges (1) 10,493 1,273 14,763 1,273 Settlement charges (2) , Foreign tax amnesty program (3) 1,502 4,623 Loss on refinancing and extinguishment of debt (4) 5,104 1,020 5,104 Secondary offering underwriting fees and other expenses (5) 6,500 Other 155 Tax impact of adjusting items (6) (3,912) (2,253) (8,855) (3,385) Impact of U.S. tax reform (7) 33,484 33,484 Worthless security tax deduction (8) (13,947) (13,947) Adjusted net income $ 63,563 $ 48,082 $ 207,955 $ 194,947 Weighted average shares outstanding Basic 17,815,292 17,671,669 17,781,272 17,459,710 Diluted 18,591,378 18,809,223 18,776,653 18,730,378 Earnings per share: Basic $ 1.60 $ 1.76 $ 7.61 $ 7.96 Diluted $ 1.53 $ 1.65 $ 7.21 $ 7.42 Adjusted earnings per share: Basic $ 3.57 $ 2.72 $ $ Diluted $ 3.42 $ 2.56 $ $ (1) Impairment charges related to fixed assets. (2) Non-cash settlement charges incurred related to certain of our non-u.s. pension plans. (3) Relates to indirect taxes recorded in cost of products sold. (4) Loss on refinancing and extinguishment of debt relating to the May 2017 amendment of the Term Loan Facility and the refinancing of our Term Loan Facility in (5) Fees and other expenses associated with the March 2016 secondary offering. (6) Represents the elimination of the income tax impact of the above adjustments, by calculating the income tax impact of these adjusting items using the appropriate tax rate for the jurisdiction where the charges were incurred. (7) Tax impact of the transition tax on undistributed foreign earnings and the tax effect of adjusting deferred taxes for the Tax Cuts and Jobs Act enacted into law on December 22, (8) Discrete tax benefit recorded in Q