DJ Cooper Standard Reports Second Quarter Results; Semiconductor-related Customer Shutdowns and Commodity Inflation Weigh on Sales and Profit
Cooper-Standard Holdings Inc. Cooper Standard Reports Second Quarter Results; Semiconductor-related Customer Shutdowns and Commodity Inflation Weigh on Sales and Profit 04-Aug-2021 / 23:45 CET/CEST -----------------------------------------------------------------------------------------------------------------------
Cooper-Standard Holdings Inc. (NYSE: CPS) today reported results for the second quarter 2021.
Second Quarter 2021 Summary . Sales totaled $533.2 million, reflecting a negative impact of approximately $200 million from semiconductor-related
customer shutdowns . Net loss amounted to $63.6 million or $(3.73) per diluted share . Adjusted EBITDA totaled $(14.7) million, including the negative impact of semiconductor-related customer shutdowns . Net new business awards totaled $91.8 million, including $28.0 million in new business awards on electric vehicle
platforms
'Our operating teams continue to perform well, delivering world-class products, technology and service to our customers around the world,' said Jeffrey Edwards, chairman and CEO, Cooper Standard. 'However, volatile customer production schedules and rising material costs significantly impacted our operating efficiency and results during the quarter. We are taking aggressive actions, including commercial negotiations with customers and suppliers, to mitigate these incremental costs. Based on current customer schedules, we expect to leverage higher production volumes to drive improved financial results in the second half of the year.'
Consolidated Results
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(dollar amounts in millions except per share amounts)
$ $ $ $
Sales
533.2 340.5 995.4
1,202.2
$ $ $ $
Net loss
(63.6) (134.2) (97.5)
(244.8)
$ $ $ $
Adjusted net loss
(51.1) (111.8) (65.6)
(148.3)
$ $ $ $
Loss per diluted share
(3.73) (7.93) (5.74)
(14.49)
$ $ $ $
Adjusted loss per diluted share
(3.00) (6.61) (3.86) (8.77)
$ $ $ $
Adjusted EBITDA
(14.7) (93.8) 23.8 (85.5)
The year-over-year change in second quarter sales was primarily attributable to the non-recurrence of COVID-related customer shutdowns and favorable foreign exchange, partially offset by semiconductor-related customer shutdowns and the divestiture of certain businesses in India and Europe in July 2020. Organic sales growth, which excludes the impacts of foreign exchange and divestitures, was 54.9 percent year-over-year.
Net loss for the second quarter 2021 included restructuring charges of $11.6 million and other special items. Net loss for the second quarter 2020 included asset impairment charges of $12.6 million, restructuring charges of $9.8 million and other special items. Adjusted net loss, which excludes these items and their related tax impact, was $51.1 million in the second quarter 2021 compared to $111.8 million in the second quarter of 2020. The year-over-year improvement was primarily due to the non-recurrence of COVID-related customer shutdowns, improved manufacturing efficiency, and lower selling, administrative and engineering (SGA&E) expense, partially offset by semiconductor-related customer shutdowns, higher commodity and material costs, higher interest expense, wage inflation and lower tax benefit.
In the first six months of the year, the year-over-year change in sales was primarily attributable to the non-recurrence of COVID-related customer shutdowns and favorable foreign exchange, partially offset by semiconductor-related customer shutdowns and the divestiture of certain businesses in India and Europe in July 2020. For the first half of the year, organic sales growth, which excludes the impacts of foreign exchange and divestitures, was 22.8 percent versus the same period in 2020.
Net loss for the first six months of 2021 included restructuring charges of $32.7 million and other special items. Net loss for the first six months of 2020 included asset impairment charges of $87.3 million, restructuring charges of $17.1 million and other special items. Adjusted net loss, which excludes these items and their related tax impact, was $65.6 million in the first six months of 2021 compared to $148.3 million in the first six months of 2020. The year-over-year improvement was primarily due to the non-recurrence of COVID-related customer shutdowns, improved manufacturing efficiency and lower SGA&E expense, partially offset by semiconductor-related customer shutdowns, higher commodity and material costs, higher interest expense, wage inflation and lower tax benefit.
Adjusted net loss, adjusted EBITDA, adjusted loss per diluted share and free cash flow are non-GAAP measures. Reconciliations to the most directly comparable financial measures, calculated and presented in accordance with accounting principles generally accepted in the United States ('U.S. GAAP'), are provided in the attached supplemental schedules.
New Business Awards
The Company continues to leverage its world-class engineering and manufacturing capabilities, its innovation programs and its reputation for quality and service to win new business awards with its customers. During the second quarter of 2021, the Company received net new business awards representing an incremental $91.8 million in anticipated future annualized sales. Importantly, these net new business awards included $28.0 million in new awards on electric vehicle platforms. For the first six months of 2021, the Company's net new business awards totaled $131.3 million, with $58.8 million in new awards on electric vehicle platforms.
New business awards related to the Company's innovation products were strong in the second quarter, with new contract awards, including both new and converted replacement business, totaling $93.8 million in anticipated future annualized sales. These awards are related to the Company's commercialized innovation products such as MagAlloy, Gen III Posi-Lock, Easy-Lock, PC2000, EPDM Microdense and TP Microdense. Additionally, the Company has introduced new technologies through our i^3 Innovation Process that are supporting future pursuits with Fortrex, FlushSeal, TUROS and next-generation connection technologies.
Continuing Execution of ROIC and Margin Enhancement Initiatives
The Company remains focused on improving returns on invested capital and adjusted EBITDA margins to above 10 percent. A defined, company-wide initiative to accomplish these goals was initiated in late 2019 and the execution on the defined workstreams is ongoing. Full execution of the "Driving Value Plan" is expected to take approximately three years from inception. We believe we are on track to achieve the stated goals of the initiative by the end of 2022 with the first full year of sustained double-digit ROIC and adjusted EBITDA margins expected to be in 2023.
Segment Results of Operations
Sales
Three Months Ended June 30, Variance Due To:
2021 2020 Change Volume / Foreign
Mix* Exchange Divestitures
(dollar amounts in thousands)
Sales to external customers
$ $ $ $ $ $
North America
-
247,525 126,337 121,188 118,962 2,226
Europe
132,621 78,805 53,816 57,827 11,384 (15,395)
Asia Pacific
103,915 105,726 (1,811) (8,707) 9,064 (2,168)
South America 254 -
14,153 3,881 10,272 10,018
Total Automotive
498,214 314,749 183,465 178,100 22,928 (17,563)
Corporate, - eliminations and other 34,971 25,718 9,253 8,179 1,074
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DJ Cooper Standard Reports Second Quarter Results; -2-
$ $ $ $ $ $
Consolidated sales
533,185 340,467 192,718 186,279 24,002 (17,563)
^* Net of customer price reductions . Volume and mix, net of customer price reductions, was driven by vehicle production volume increases in all regions,
except Asia Pacific, due to non-recurrence of lengthy shutdowns in the prior year from COVID-19, offset in part by
the impact of semiconductor supply issues in the current year. . The impact of foreign currency exchange primarily related to the Euro, Chinese Renminbi, and Canadian Dollar.
^Adjusted EBITDA
Three Months Ended June 30, Variance Due To:
Volume/ Cost
2021 2020 Change Mix* Foreign (Increases) Divestitures
Exchange / Decreases
(dollar amounts in thousands)
Segment adjusted EBITDA
$ $ $ $ $ $ $
North America 756
(42,874) 43,630 47,507 1,487 (4,865) (499)
Europe
(14,391) (41,403) 27,012 16,775 (348) 8,407 2,178
Asia Pacific (2,302) (2,172) (130) (4,423) 881 (776) 4,188
South (726) - America (4,351) 3,625 3,152 3,246 (2,773)
Total (7) Automotive (16,663) (90,800) 74,137 63,011 5,266 5,867
Corporate, eliminations 1,937 (2,952) 4,889 1,965 120 2,804 - and other
$ $ $ $ $ $ $ Consolidated adjusted EBITDA (14,726) (93,752) 79,026 64,976 5,386 2,797 5,867
^* Net of customer price reductions . Volume and mix, net of customer price reductions, was driven by vehicle production volume increases due to
non-recurrence of lengthy shutdowns in the prior year from COVID-19, offset in part by the impact of semiconductor
supply issues in the current year. . The impact of foreign currency exchange was driven by the Brazilian Real, Mexican Peso, Canadian Dollar, Euro,
Polish Zloty, Czech Koruna, and Chinese Renminbi. . The Cost (Increases) / Decreases category above includes:
- Reduction in compensation-related expenses due to salaried headcount initiatives, lower variable employee
compensation expenses, purchasing savings through lean initiatives, and restructuring savings;
- Commodity cost, wage inflation increases and the non-recurrence of prior year government incentives; and
- Manufacturing efficiencies of $12 million, primarily driven by our Europe and North America segments.
Cash and Liquidity
At June 30, 2021, Cooper Standard had cash and cash equivalents totaling $335.5 million and total liquidity, including availability under its amended senior asset-based revolving credit facility, of $452.6 million. Based on our current expectations for light vehicle production and customer demand for our products, we expect our current strong cash balance, anticipated incremental free cash flow in the second half of 2021 and access to flexible credit facilities will provide sufficient resources to support ongoing operations and the execution of planned strategic initiatives.
Outlook
Entering the third quarter, light vehicle manufacturers and their suppliers continue to experience significant production delays and disruption due to the ongoing global semiconductor shortage and other supply chain constraints. Higher commodity costs, rising wages, general inflation and labor availability are creating additional headwinds. At the same time, consumer demand for new light vehicles remains strong and U.S. dealer inventories are at the lowest levels in over 20 years.
Current customer schedules and industry forecasts suggest production volumes will begin to improve in the latter portion of the third quarter and continue to increase through the fourth quarter.
Based on our outlook for the global automotive industry, macroeconomic conditions, current customer production schedules and our own operating plans, the Company has updated its 2021 full year guidance as follows:
Current 2021 Guidance^1
$
Sales
2.45 - $2.60 billion
$
Adjusted EBITDA^2
75 - $105 million
$
Capital Expenditures
100 - $115 million
$
Cash Restructuring
40 - $45 million
$
Cash Taxes
10 - $15 million
^1 Guidance is representative of management's estimates and expectations as of the date it is published. Current guidance as presented in this press release considers July 2021 IHS Markit production forecasts for relevant light vehicle platforms and models, customers' planned production schedules and other internal assumptions.
^2 Adjusted EBITDA is a non-GAAP financial measure. The Company has not provided a reconciliation of projected adjusted EBITDA to projected net income because full-year net income will include special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end. Due to this uncertainty, the Company cannot reconcile projected adjusted EBITDA to U.S. GAAP net income without unreasonable effort.
^Conference Call Details
Cooper Standard management will host a conference call and webcast on August 5, 2021 at 9:00 a.m. ET to discuss its second quarter 2021 results, provide a general business update and respond to investor questions. A link to the live webcast of the call (listen only) and presentation materials will be available on Cooper Standard's Investor Relations website at www.ir.cooperstandard.com/events.cfm.
To participate by phone, callers in the United States and Canada should dial toll-free (877) 374-4041. International callers should dial (253) 237-1156. Provide the conference ID 7365064 or ask to be connected to the Cooper Standard conference call. Representatives of the investment community will have the opportunity to ask questions after the presentation. Callers should dial in at least five minutes prior to the start of the call.
Individuals unable to participate during the live call may visit the investors' portion of the Cooper Standard website (www.ir.cooperstandard.com) for a replay of the webcast.
^About Cooper Standard
Cooper Standard, headquartered in Northville, Mich., is a leading global supplier of systems and components in diverse transportation and industrial markets. Products include sealing, fuel and brake delivery and fluid transfer systems. Cooper Standard employs approximately 25,000 people globally and operates in 21 countries around the world. For more information, please visit www.cooperstandard.com.
^Forward Looking Statements
This press release 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,' 'outlook,' 'guidance,' '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: the impact, and expected continued impact, of the COVID-19 outbreak on our financial condition and results of operations; significant risks to our liquidity presented by the COVID-19 pandemic risk; 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; competitive threats and commercial risks associated with our diversification strategy through our Advanced Technology Group; possible variability of our working capital requirements; risks associated with our international operations, including changes in laws, regulations, and policies governing the terms of foreign trade such as increased trade restrictions and tariffs; foreign currency exchange rate fluctuations; our ability to
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