Driving Value Through Culture, Innovation and Results. INVESTOR PRESENTATION November 2017

Transcription

1 Driving Value Through Culture, Innovation and Results INVESTOR PRESENTATION November 2017

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; 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 2016 Revenue by product / % of Total Revenue Sealing Systems Systems Sealing $1.8B / 52% #1 Globally Globally #1 Fuel & Brake Delivery Fuel & Brake Delivery Systems Systems $0.7B / 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 $1.8B / 52% #1 Globally Global Market Size: $8.3 billion CPS Current Share: 24% 1 Market CPS Henniges Hutchinson Standard Profil Saar Gummi Toyoda Gosei Fuel & Brake Delivery Fuel Brake Delivery Systems Systems $0.7B / 21% #2 Globally Global Market Size: $6.3 billion CPS Current Share: 9% 2 Market CPS TI Automotive Martinrea Usui Sanoh Fluid Transfer Fluid Transfer Systems Systems $0.5B / 14% #3 Globally Global Market Size: $6.8 billion CPS Current Share: 7% Market CPS Avon Hutchinson Tristone Teklas ContiTech Anti-Vibration Anti-Vibration Systems Systems $0.3B / 9% North American Leader Global Market Size: $10.0 billion CPS Current Share: 3% Market CPS ContiTech Hutchinson/Paulstra TBVC Tokai/Sumitomo Riko Market position data by Booz & Co. (2013) and Boston Consulting Group (2016) Global Market Size based on IHS light vehicle production data and average content per vehicle (1) includes non-consolidated JV (2) excludes Fuel Rails, included in product line revenue of $0.7B 6

7 2 ACCELERATING GROWTH Accelerating Growth and Innovation Three Key Drivers ( MEGATRENDS ) Will Impact the Industry for the Next Ten Years Global Platforms Emissions / Fuel Economy Legislation Globally Autonomous and Connected Vehicles Produced in two or more regions Common global architectures: fewer platforms, more variants Well positioned suppliers gain market share Regional suppliers left behind Requires weight reduction Adherence to green materials & processes Introduces alternative powertrains Public slow to adopt Creates need for quieter interiors Will affect vehicle ownership model and durability requirements Technology is ready, policy is not 7

8 2 ACCELERATING GROWTH Strong Content in the Right Segments 62% of 2016 Global Revenue From LT/SUV/CUV Global Light Vehicle Production - Million Units* Projected Growth % CAGR +4.8% CAGR Crossovers and light trucks to comprise 57% of the global market by 2021 Cooper Standard CPV on crossovers is 26% higher than on cars Car Crossover Truck +0.3% CAGR Cooper Standard CPV on light trucks is 120% higher than on cars * Source: IHS 8

9 2 ACCELERATING GROWTH Mix Advantage in North America 77% of 2016 North America Revenue From LT/SUV/CUV North America Light Vehicle Production - Million Units* Projected Growth % CAGR Crossovers and light trucks will comprise 66% of the N. Am. market by % CAGR Cooper Standard CPV on crossovers is 42% higher than on cars Car Crossover Truck -1.5% CAGR Cooper Standard CPV on light trucks is 260% higher than on cars * Source: IHS 9

10 2 ACCELERATING GROWTH Aggressive Market Penetration to Drive Higher Content Greater China Light Vehicle Mix - Million Units* Projected Growth % CAGR +6.3% CAGR Cooper Standard average CPV in China expected to double by % CAGR Car Crossover Truck * Source: IHS 10

11 2 ACCELERATING GROWTH Powertrain Trends Providing Opportunity Internal Combustion and Hybrid Vehicles Continue Market Share Dominance Global Light Vehicle Production by Powertrain* 3% 3% 14% +40% CAGR +39% CAGR 97% 83% -1% CAGR Internal Combustion Hybrid All Electric * Source: IHS 11

12 2 ACCELERATING GROWTH Products Essential Across all Powertrains Internal Combustion Hybrid All Electric Sealing Systems Fuel & Brake Delivery Systems Fluid Transfer Systems X2 Anti-Vibration Systems 12

13 2 ACCELERATING GROWTH 2017 Planned New Product/Plant Launches Planned launches up nearly 8% vs Q1 Q2 Q3 Q4 Total North America Europe Asia Pacific South America Total Majority of new launches are on global platforms Includes both new and replacement business Newly launched business, continued improvements in operating efficiency and restructuring savings expected to drive higher margins in 2H Q margins to benefit most from ramp up of new launches, operating efficiencies 13

14 3 ADVANTAGED GLOBAL FOOTPRINT Positioned to Win More Business on Global Platforms NORTH AMERICA SOUTH AMERICA EUROPE ASIA PACIFIC 52%* 2%* 30%* 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 2016 Total Revenue 14

15 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 1,024 GM Cruze 1,942 GM Silverado 1,165 Ford Explorer 160 GM Malibu 852 Ford Edge 898 Ford Focus 2,028 Daimler C-Class 1,121 Ford Fiesta 1,320 FCA (1) Average annual planned production for in thousands. Source: IHS 15

16 3 ADVANTAGED GLOBAL FOOTPRINT Supporting Global Customers 2016 Revenue $3.47B RENAULT FCA 12% VW 6% PSA 7% GM 20% Ford 30% Other 9% Daimler 6% Renault Nissan 3% Tata 3% BMW 2% Geely 2% 16

17 3 ADVANTAGED GLOBAL FOOTPRINT Enhancing Revenue Diversification by Region 2004A 2016A Asia Pacific 4% South America 3% South America 2% Asia Pacific 16% Europe 23% North America 70% Europe 30% North America 52% 17

18 3 ADVANTAGED GLOBAL FOOTPRINT We Expect to Profitably Grow our China Business 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 18

19 3 ADVANTAGED GLOBAL FOOTPRINT 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%

20 3 ADVANTAGED GLOBAL FOOTPRINT Improving Capacity Utilization from 70% to >90% Eight Plants in China with More than $100m Revenue by 2021 vs Two Plants in 2017 $100m

21 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 21

22 4 INNOVATION / VALUE-ADD TECHNOLOGY Delivering Breakthrough Innovations to the Market USD Millions Projected Automotive Innovation Revenue 2 $1,200 Q Annual Booked Business $32m Innovation Products 1 $1,000 $800 $600 $400 Since Q Annual Booked Business $417m Innovation Products 1 $200 $ 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 Leveraging Innovation in the Non-Automotive Rubber Market $76b Market Opportunity* $59b Industrial Equipment / Wire & Cable / Consumer / Medical $10b Defense & Other $7b Building / Construction *Finished goods value; Source: The Freedonia Group and Company estimates 23

24 5 ADJACENT MARKETS STRATEGY Advancing Adjacent Markets Strategy Licensing of Fortrex Outside of the Automotive Industry Building / Construction (1.75B lbs.*) Signed first license agreement in Q Wire & Cable (1.5B lbs.*) Footwear (1.5B lbs.*) NDAs / engagement with an additional 16 potential partners Potential partners engaged in all key selected markets / segments Term-sheet negotiations/proposals underway with 8 potential partners * Source: The Freedonia Group, Company Estimates 24

25 5 ADJACENT MARKETS STRATEGY Adjacent Markets - 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 25

26 FINANCIAL OVERVIEW 26

27 6 STRONG FINANCIAL PROFILE Financial Results (USD millions, except per share amounts) Third Quarter First Nine Months Sales $869.0 $855.7 $2,680.2 $2,597.5 Gross Profit $150.8 $164.7 $493.2 $496.5 % Margin 17.4% 19.2% 18.4% 19.1% Adjusted EBITDA 1 $96.0 $100.8 $320.8 $312.9 % Margin 11.1% 11.8% 12.0% 12.0% Net Income $24.6 $36.4 $106.8 $107.9 EPS (Fully diluted) $1.32 $1.94 $5.67 $5.77 Adjusted Net Income 1 $39.5 $46.5 $144.4 $146.9 Adjusted EPS (Fully diluted) 1 $2.11 $2.48 $7.66 $7.85 CAPEX $39.3 $35.4 $137.4 $116.8 % of Sales 4.5% 4.1% 5.1% 4.5% 1 See Appendix for definitions and reconciliation to U.S. GAAP. 27

28 6 STRONG FINANCIAL PROFILE Track Record of Increasing Margins and ROIC Adjusted EBITDA 1 Margin Return on Invested Capital % ~ 12.5% 12.8% ~ 13.0% 10.8% 9.3% 9.6% 9.8% 6.8% 5.9% E E 1 See appendix for information regarding non-gaap items 2 Defined as TTM net operating profit after tax/average invested capital. Source: Bloomberg, Company estimates 28

29 6 STRONG FINANCIAL PROFILE Strong Balance Sheet and Credit Profile Gross Debt and Net Debt (USD millions) Liquidity Profile (USD millions) Net Debt $780 $755 $360 $373 Cash Cash Revolver $483 $123 $562 $189 $419 $382 $360 $373 Q Q Q Q Leverage Ratio (Gross Debt / TTM Adj. EBITDA 1 ) Interest Coverage Ratio (TTM Adj. EBITDA 1 / Interest) 1.9x 1.8x 10.1x 9.8x Q Q Q Q See Appendix for definitions and reconciliation to U.S. GAAP. Numbers are subject to rounding 29

30 Return to Stakeholders Profitable Growth 6 STRONG FINANCIAL PROFILE Priorities for Capital Allocation Organic growth Win and launch new business On track for 171 program launches in FY 2017 Innovation Continued investments in new material science Initiatives to enhance margins European restructuring ~$13m remaining spend; to be completed early 2018 Strategic M&A Plug-ins with immediate synergies Continuous evaluation of value-add opportunities Share Repurchase Active repurchase program in place $70m remaining of $125 million authorized Pay Down Debt Balance sheet flexibility Maintain/improve current credit ratings 30

31 APPENDIX 31

32 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. 32

33 EBITDA and Adjusted EBITDA Reconciliation (Unaudited, dollar amounts in thousands) Three Months Ended Sept. 30, Nine Months Ended Sept. 30, Net income attributable to Cooper-Standard Holdings Inc. $ 24,640 $ 36,362 $ 106,802 $ 107,874 Income tax expense 7,838 12,525 40,258 43,312 Interest expense, net of interest income 10,256 10,114 31,788 29,861 Depreciation and amortization 34,368 31,325 99,413 91,699 EBITDA $ 77,102 $ 90,326 $ 278,261 $ 272,746 Restructuring charges 9,909 10,430 28,220 33,468 Settlement charges (1) 5,902 5,902 Foreign tax amnesty program (2) 3,121 3,121 Impairment charges (3) 4,270 Loss on refinancing and extinguishment of debt (4) 1,020 Secondary offering underwriting fees and other expenses (5) 6,500 Other 155 Adjusted EBITDA $ 96,034 $ 100,756 $ 320,794 $ 312,869 (1) Non-cash settlement charges of $5.7 million and administrative fees of $0.2 million relating to the U.K. pension plan. (2) Relates to indirect taxes recorded in cost of products sold. (3) Impairment charges related to fixed assets. (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. 33

34 Adjusted EBITDA Margin, Financial Ratios Twelve Months Ended Sept. 30, 2017 (Unaudited, dollar amounts in thousands) Twelve Three Months Ended Months Ended 31-Dec Mar Jun Sep Sep-17 Net income attibutable to Cooper-Standard Holdings Inc. $ 31,114 $ 41,706 $ 40,456 $ 24,640 $ 137,916 Income tax expense 11,009 11,890 20,530 7,838 51,267 Interest expense, net of interest income 11,528 11,239 10,293 10,256 43,316 Depreciation and amortization 30,961 31,857 33,188 34, ,374 EBITDA $ 84,612 $ 96,692 $ 104,467 $ 77,102 $ 362,873 Restructuring charges 12,563 9,988 8,323 9,909 40,783 Impairment charges (1) 1,273 4, ,543 Loss on refinancing and extinguishment of debt (2) 5,104-1,020-6,124 Foreign tax amnesty program (3) ,121 3,121 Settlement charges (4) ,902 6,183 Adjusted EBITDA $ 103,833 $ 110,950 $ 113,810 $ 96,034 $ 424,627 Debt Debt payable within one year $32,448 Long-term debt 722,557 Total Debt 755,005 Less: cash and cash equivalents (372,984) Net Debt $ 382,021 Leverage ratio (Total debt/adjusted EBITDA) 1.8 Net Leverage ratio (Net debt/adjusted EBITDA) 0.9 Interest coverage ratio (Adjusted EBITDA/Interest expense) 9.8 Sales $ 875,434 $ 902,051 $ 909,145 $ 869,016 $ 3,555,646 Adjusted EBITDA Margin (Adj. EBITDA/Sales ) 11.9% 12.3% 12.5% 11.1% 11.9% (1) Impairment charges related to fixed assets. (2) Loss on refinancing and extinguishment of debt relating to the October 2016 bond issue and the May 2017 amendment of the Term Loan Facility. (3) Relates to indirect taxes recorded in cost of products sold. (4) Non-cash settlement charges of $5.7 million and administrative fees of $0.2 million relating to the U.K. pension plan. 34

35 Adjusted Net Income and Adjusted EPS (Unaudited, dollar amounts in thousands except share and per share amounts) Net income attributable to Cooper-Standard Holdings Inc. $ 24,640 $ 36,362 $ 106,802 $ 107,874 Restructuring charges 9,909 10,430 28,220 33,468 Settlement charges (1) 5,902 5,902 Foreign tax amnesty program (2) 3,121 3,121 Impairment charges (3) 4,270 Loss on refinancing and extinguishment of debt (4) 1,020 Secondary offering underwriting fees and other expenses (5) 6,500 Other 155 Tax impact of adjusting items (6) (4,068) (268) (4,943) (1,132) Adjusted net income $ 39,504 $ 46,524 $ 144,392 $ 146,865 Weighted average shares outstanding Basic 17,703,660 17,469,156 17,769,808 17,388,541 Diluted 18,680,518 18,760,663 18,838,287 18,703,578 Earnings per share Basic $ 1.39 $ 2.08 $ 6.01 $ 6.20 Diluted $ 1.32 $ 1.94 $ 5.67 $ 5.77 Adjusted earnings per share Three Months Ended Sept. 30, Nine Months Ended Sept. 30, Basic $ 2.23 $ 2.66 $ 8.13 $ 8.45 Diluted $ 2.11 $ 2.48 $ 7.66 $ 7.85 (1) Non-cash settlement charges of $5.7 million and administrative fees of $0.2 million relating to the U.K. pension plan. (2) Relates to indirect taxes recorded in cost of products sold. (3) Impairment charges related to fixed assets. (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) 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. 35