Driving Value Through Culture, Innovation and Results. JP MORGAN AUTOMOTIVE CONFERENCE August 9, 2018

Transcription

1 Driving Value Through Culture, Innovation and Results JP MORGAN AUTOMOTIVE CONFERENCE August 9, 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 Primary Product Lines 2017 Revenue by product / % of Total Revenue Sealing Sealing $1.9B / 53% #1 Globally Globally #1 Fuel & Brake Delivery Fuel & Brake Delivery $0.8B / 21% #2Globally Globally 1 #2 Fluid Transfer Fluid Transfer $0.5B / 14% #3 Globally Globally #3 Anti-Vibration Anti-Vibration $0.3B / 9% North American Leader Market position data by Booz & Co. (2013) and Boston Consulting Group (2018) 1 Two companies tied at this level 4

5 Fragmented Markets Represent Significant Growth Potential Key Competitors Sealing Sealing $1.9B / 53% #1 Globally Global Market Size: $9.2 billion CPS Current Share: 20% Market CPS Henniges Hutchinson Saar Gummi Standard Profil Toyoda Gosei Fuel & Brake Delivery Fuel Brake Delivery $0.8B / 21% #2 #2 Globally 1 Global Market Size: $5.8 billion CPS Current Share: 13% Market CPS Martinrea Maruyasu Sanoh TI Automotive Fluid Transfer Fluid Transfer $0.5B / 14% #3 Globally Global Market Size: $4.2 billion CPS Current Share: 14% Market CPS ContiTech Hutchinson MGI Coutier/Avon Teklas Tristone Anti-Vibration Anti-Vibration $0.3B / 9% North American Leader Global Market Size: $10.2 billion CPS Current Share: 3% Market CPS Bridgestone ContiTech Hutchinson Tokai Rubber Vibracoustic Global Market Size based on IHS light vehicle production data and average content per vehicle 1 Two companies tied at this level 5

6 Strong Content in the Right Segments Global Light Vehicle Production - Million Units* Car Crossover Truck Projected Growth % CAGR +3.8% CAGR +0.9% CAGR Light trucks, SUVs and crossovers to comprise 58% of the global market by % of 2017 Global Revenue From LT/SUV/CUV 82% of 2017 North America Revenue from LT/SUV/CUV Cooper Standard CPV on crossovers is 27% higher than on cars globally, 67% higher in North America Cooper Standard CPV on light trucks is 149% higher than on cars globally, 312% higher in North America * Source: IHS December

7 Significant Ramp Up of China Business ~$600m Projected Sales, USD millions* ~$1.2B China Key Highlights Revenue expected to grow faster than market Customer Mix* Customer mix shifting toward local OEMs Improved capacity utilization and overhead absorption 12% 28% SGA&E expected to decline from 10% to ~6% of sales ROIC expected to increase from 9% to >20% Global OEMs Local OEMs Global OEMs Local OEMs *Estimates based on current management projections, IHS production estimates 7

8 Investing in Growth and Diversification Strategic Automotive Acquisition Announced* Strengthens #2 market position in FBD Diversifies FBD product portfolio Increases addressable market by ~$1.0 billion Automotive Parts Division Customer and geographic diversification Adds technical talent and capabilities in Korea JV structure establishes relationship with $25 billion Korean industrial company *Closing subject to customary regulatory approvals 8

9 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 9

10 Providing Customer Solutions Through Innovation Driving Sustainable Competitive Advantage for Cooper Standard Fortrex Sealing Reduces weight, improves performance, and offers appearance options ArmorHose Family Eliminates requirement for protective sleeves on hoses MagAlloy Coating Improves corrosion performance and product life utilizing proprietary technology Gen III Posi-Lock Simplifies systems; reduces mass and complexity 10

11 Driving Process Improvement Through Innovation Enhancing pilot product capability at Global Technical Center Reduces disruption in manufacturing operations; Accelerates process innovation Evaluating wide range of processes for manufacturing improvement Sealing, Fluid Transfer, Fortrex TM Developing advanced machine learning Automated data collection, advanced analytics Process innovation supported by significant IT investments Standardized ERP, HRIS, edvp, ClauS, CSOS, PLM 11

12 Advanced Technology Group Non-automotive Business Overview Strategic Objectives 1. Expand non-automotive business to 25-30% of total Company 2. Further enhance ROIC Industrial and Specialty Group (ISG) Leverage core competencies and traditional technologies in near adjacent, non-automotive and specialty markets Applied Material Science Business Accelerate and maximize the value stream of material science innovations in diverse industries and markets 12

13 Investing in Growth and Diversification Strategic Non-automotive and Specialty Acquisition Strengthens position in non-automotive segments Significant opportunities for cross-selling Platform for expanding Fortrex applications Expands competitive advantage in material science Adds technical talent and key leadership Establishes dedicated ISG manufacturing footprint 13

14 Immediate Expansion of Industrial and Specialty Group (ISG) Existing ISG business + + = ~$250 million non-automotive industrial business 14

15 Global ISG Market Sizing - $3.3B* Addressable Market ($3.3B) Addressable Market by Region ($3.3B) CPS (with Lauren) $250M Annualized 7.6% $676 21% $1,252 38% $1,140 35% $216 6% Global Market CPS (with Lauren) North America ROW China EU *Source: Company estimates 15

16 North American Non-automotive Sealing Markets Key Competitors Renewable Energy Building and Construction Est. Market Size: ~$135 million CPS Current Share: ~19% Market CPS Amesbury Trelleborg Tremco Recreational Vehicle and Transportation Est. Market Size: ~$215 million CPS Current Share: ~14% Market CPS Boyd Corporation Mantaline Northwest Rubber Saar Gummi Custom Rubber Extrusions Distribution and Specialty Est. Market Size: ~$155 million CPS Current Share: ~16% Market CPS Dacon Jager Unitek Mantaline Trim Lok Enclosures Containers and Enclosures Est. Market Size: ~$120 million CPS Current Share: ~7% Market CPS Griffith Rubber Ilpea Jasper Rubber Kirkhill $625M Total Non-automotive Sealing Market in North America CPS Share at Approximately 14% 16

17 Expanding Opportunities for Applied Material Science Licensing of Fortrex TM Technology Continued progress with current licensee Initial production beginning this quarter Product applications being added Active license pursuits in multiple industries Building and construction Wire / cable Footwear Consumer Transportation Breakthrough on Fortrex foam performance Advancing aggressive IP strategy 17

18 Priorities for Capital Allocation Profitable Growth Organic growth Initiatives to enhance margins Strategic M&A Return to Stakeholders Share Repurchase Pay Down Debt 18

19 Driving Value Through Culture, Innovation and Results

20 APPENDIX 20

21 Non-GAAP Financial Measures EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, net debt, organic growth 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, net debt, organic growth 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 divided by the weighted average number of basic and diluted shares, respectively, outstanding during the period. Net debt is defined as total debt minus cash and cash equivalents. Organic growth is defined as year-over-year sales growth net of the impacts of foreign exchange, acquisitions and divestitures. 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, net debt, organic growth 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, net debt, organic growth 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, net debt, organic growth 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. 21

22 Adjusted EBITDA Margin, Full-year Trend (Unaudited, dollar amounts in thousands) Twelve Months Ended December 31, Net income attributable to Cooper-Standard Holdings Inc. $ 42,779 $ 111,880 $ 138,988 $ 135,303 Income tax expense 42,810 41,218 54,321 74,527 Interest expense, net of interest income 45,604 38,331 41,389 42,112 Depreciation and amortization 112, , , ,088 EBITDA $ 243,773 $ 305,856 $ 357,358 $ 390,030 Restructuring charges 17,188 53,844 46,031 35,137 Impairment charges (1) 26,273 21,611 1,273 14,763 Settlement charges (2) 3, ,427 Foreign tax amnesty program (3) 4,623 Loss on refinancing and extinguishment of debt (4) 30,488 5,104 1,020 Secondary Offering Fees (5) 6,500 Gain on remeasurement of previously held equity interest (6) (14,199) Gain on divestiture (7) (14,568) (8,033) Amortization of inventory write-up (8) 1,419 Share-based compensation (9) 2,770 Acquisition costs 740 1,637 Other 1, Adjusted EBITDA $ 311,537 $ 362,365 $ 416,702 $ 452,000 Sales $ 3,243,987 $ 3,342,804 $ 3,472,891 $ 3,618,126 Net Income margin (Net income/sales) 1.3% 3.3% 4.0% 3.7% Adjusted EBITDA margin (Adjusted EBITDA/Sales) 9.6% 10.8% 12.0% 12.5% (1) Non-cash impairment charges related to fixed assets and intangible 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 repurchase of certain debt in 2014, the refinancing of our Term Loan Facility in 2016 and amendment of the Term Loan Facility in (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 thermal 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. 22