Good morning, ladies and gentlemen. And welcome to the Cooper-Standard Fourth Quarter and Full Year 2016 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 for replay later today. I would now like to turn the call over to Roger Hendriksen, Director of Investor Relations.

Thanks Jack and good morning, everyone. We appreciate your participation in our call today and your continued interest in Cooper-Standard. The members of our leadership team who will be speaking with you on this call are Jeff Edwards, Chairman and Chief Executive Officer; and Matt Hardt, Executive Vice President and Chief Financial Officer. Before we begin, I need to remind you that this presentation contains forward-looking statements. While they are made based on current factual information and certain assumptions and plans that management currently believes to be reasonable, these statements do involve risks and uncertainties. For more information on forward-looking statements, we ask that you refer to slide three of this presentation and the company’s statements included in periodic filings with the Securities and Exchange Commission. With that said, I’ll turn the call over to Jeff Edwards.

Thanks Roger and good morning, everyone. The fourth quarter of 2016 marks the ninth consecutive reporting period in which we’ve delivered year-over-year improvement in adjusted EBITDA and adjusted EBITDA margin. It also caps off the best full year performance in our company’s history. We’re very proud of our accomplishments in 2016 and we’d like to thank our team of more than 30,000 employees around the world for their engagement in our strategic initiatives, which are driving excellent results. The charts on slide five, I would like some of the key annual financial measures. In 2016, we reached a record high of $3.47 billion in sales that was a year-over-year increase of 5.6% when adjusted for foreign exchange. Adjusted EBITDA for the year was a record $417 million that's up 15% over last year. And we generated $199 million in free cash flow the highest level in our company’s history. Turing to slide six, here we highlight some of major operating measures and accomplishments in 2016 that makes the record financial results possible. We’re pleased to have added $398 million of annual new business awards, which was driven by a combination of break through innovations and excellence in customer service, especially as it relates to our ability to support global platforms. We successfully launched 161 new programs in the year, while at the same time achieving $85 million in operating cost reductions. Improving product quality by 79% and improving employee safety by 33% versus 2015 levels. Finally, we are very proud to have been recognized for two prestigious awards for innovation. Turning to slide seven, none of these achievements would be possible without the dedication and commitment to excellence of our global manufacturing teams. As part of our effort to achieve world class operations we've installed stringent measures for plant performance…

Thanks, Jeff and good morning, everyone. In the next few slides, I’ll provide some additional detail on our financial results for the quarter and the year and I’ll also briefly comment on our plans and priorities for capital allocation going forward. On slide 12, we show a summary of our results for the fourth quarter 2016, compared to the same period for 2015. Fourth quarter 2016 sales of $875 million were up 2.5% over fourth quarter 2015, it was a fourth quarter record in spite of some of the headwinds we faced from customer actions in North America to balance inventory levels. Gross profit for the quarter was 19.2% and that was up 120 basis points. Our adjusted EBITDA of $103.8 million was also a fourth quarter record at 11.9% of sales; this reflects an improvement of 120 basis points over last year and was in line with our expectations. Net income for the quarter was up 43% compared to the fourth quarter of last year and our adjusted net income and EPS was lower in the fourth quarter of 2015 and that was due to a couple of one-time tax benefit items recorded in the same time last year. On page 13, we show a summary of our results for the full year compared to 2015. Full year 2016 sales of $3.47 billion was a new record and an increase of 3.9% over last year and as Jeff mentioned the increase was 5.6% year-over-year, when you exclude the negative impact of foreign exchange. This was slightly higher than our mid-year revised guidance, driven by the acquisition of the North American operations of AMI and the consolidation of a previously owned joined venture that was related to our 2015 Shenya acquisition. Organic growth that’s excluding foreign exchange price and M&A…

Okay, thanks Matt. To wrap up our discussion this morning, I just want to take a minute to review our outlook and guidance for the full year 2017. So, let’s move to slide 19. We believe 2017 is shaping up to be another very strong year, we acknowledge the potential for some slight headwinds in North America like vehicle production this year, and we expect this to be more than offset by continued improvement in product mix, with the shift towards trucks, SUVs and crossovers and certainly our growth plans in Asia. As we continue with our operating improvement initiatives and ramp up our best business practice tool across the business, we expect to once again deliver significant cost savings and higher margins. With this and our continued focus on key priorities and our strategic initiatives we’re confident that we will be able to achieve our guidance targets and deliver another record year in 2017. So this concludes our prepared remarks for this morning. Now, let’s open up the lines and address any questions that you may have.

Thank you. [Operator Instructions] Your first question comes from the line of Matt Koranda with Roth Capital. Your line is open.

Good morning, guys. Thanks for taking the question.

Hey, Matt.

Just wanted to start off with the margin improvement opportunities especially as it pertain to the outlook for '17 I know you guys called out $85 million in cost reductions from operating efficiencies this past year, I think you did about $100 million in '15. So are these opportunities sort of tapering off a little bit more in '17 relative to what we did in '16 or do you see additional opportunity kind of as you roll the best business practices across your FTS and FNB [ph] plants? And then sort of how does that offset some of the commodity input pricing increases that you’re seeing this year?

Okay thanks Matt this is Jeff. Certainly as I mentioned in the prepared remarks here this morning, we believe that we still have tremendous opportunities across our plants and as you clearly pointed out, we just really started rolling out this past year across our other businesses, we started with sealing couple of years ago and now with fuel and brake and in FTS and AVS ramping up with our best business practice we know we have that type of opportunity. So I think the good news is we have a lot of transparency, we have a lot of terrific data and we have the success that everyone has seen so far. So we're very confident in the opportunities that exist in the $85 million that we are talking about for 2017 as well. Look I think it’s clear that low hanging fruit is the expression I’m not suggesting we're picking it up off the ground, but we certainly don’t have our extension ladders out either. So we still have a lot of opportunity. And that as it relates to commodity pricing, we are in a situation where we recognize and I think we've acknowledged here that there are some headwinds, Matt can get into the details, but he want to talk about it in generals terms, probably $10 million or so is what we see from a headwind point of view. Each year we go at this as if it’s our job to offset that and our cost reduction initiatives have proven to be very effective and we expect that to continue. If we have headwinds that become a little stronger obviously then there is an opportunity to go back and engage with the customers and like we always say they treat us very fairly, if the commodity prices are going up, we don’t go broke if they’re going down, we don’t get rich. So we have that type of a relationship with our customers that really allows us to have a level of confidence that we'll be able to offset anything that we have out there in 2017 that’s how we think about it.

Okay, that’s helpful. And just wanted to clarify I think you had mentioned $85 million is the target for this year as well. So that’s $85 million in addition to the $85 million that you did this last year?

Yes, sir.

Okay, got it. And then maybe let’s just move on to some of the quotes that you had in the - I think it was slide eight, it looks like in the innovations to market slide here, you mentioned $454 million in additional targeted quotes, I think that’s up pretty substantially, last time I saw that I think it was somewhere like the $260 million range. So just wondered, if you could speak a little bit about sort of some of the quotes you are targeting, are there some large ones out there that were added to that number and just a little color around that number?

Yes, I think you’re correct. This is up substantially over what had we showed it before. It’s just really simply an issue of Matt when the products are coming through or I should say when the vehicles, the new vehicles are coming through the customers product pipelines. So as those vehicles come to market, now that we're come up for bid, now that our innovation is ready for sale, you would naturally see this number continuing to go up. As you know we booked our first order last quarter and we are targeting as you clearly point out some fairly large platforms here that are coming up for bid in 2017. So that’s what’s driving this number, so it’s as simple as Fortrex is ready for sale, ArmorHose ready for sale and many of our other innovation products that we talked to you about in the past. So it’s just a timing thing.

Got it, okay. One more if I may, in the capital deployment slide, you guys mentioned M&A opportunities and put that relatively high in the stack. So just wanted to kind of get the latest from you guys in terms of what you’re seeing on that front, are you satisfied, what kind of where valuation multiple sit at this point in the cycle? And how are you sort of approaching those opportunities as we head into ‘17?

Yes, I think regarding M&A - this is Jeff again, Matt I think that how we think about it, we try to be very transparent with you all and in terms of the competitive landscape that we're faced with across Asia and North America and Europe and the - in our view, the numbers in our space are too high. And so we believe that we have opportunities to work with our customers and to try to help consolidate within the space and make everybody stronger. That's still our objective. We look at the multiples like you would expect us to, I mean we're going to go out and over pay for anything. But as opportunities come up we'll do it. Keep in mind that we've done, I think it's 9 or 10 transactions in the past three year. So, we know how to do that whether they’re larger ones going forward there is probably a pretty good possibility that that would be the case. We're in good shape from a balance sheet point of view to do that. And the other thing, I think we're bullish on is the fact that we have our operating system in place around the world. It really allows us to take a look at M&A and really evaluate the tuck under the synergy opportunities and feel that we have a level of confidence that we can sort of do those acquisitions, plug them into our company sort of take the top off of whatever it is we're acquiring, plug those plants in and go at it. So, that's really - that puts us in a really good place, I think a position of strength. So the synergy opportunities that we're going to identify here, I think are going to be pretty good, they're going to be pretty high, and our level of confidence to do them quickly is also gaining the momentum because of the maturity of our operating systems across the business. So, that's how I would answer that.

Excellent, I’ll jump back in queue. Thanks for the time.

Okay.

Our next question comes from John Murphy with Bank of America Merrill Lynch. Please go ahead.

Good morning, guys. I just had a follow-up on the sort of the year-over-year walk in ‘16 and then into ‘17, I mean if you look at the 12% EBITDA margin you did in ‘16 it implied to sort of the midpoint of the range for sales we get somewhere at $420 million and then you add the $85 million of operating efficiency you are targeting so that would get you to $505 million. Yet if you take sort of the midpoint of the operating or I am sorry the EBITDA margin guidance, you would get to $437.5 million. So, I am just curious, sort of the gap between that I mean is there a lot more inflation in the $10 million you’re talking about that would come in other items, other than raw material cost or would there be sort of more incremental price downs that might be coming. I am just trying to understand the incremental headwind there or if you're maybe you are just being too conservative in your outlook?

Sure, John good question, I mean as we typically have talked through the operating savings, they come at sort of gross level, there is a couple of things that are - that mitigate that savings, one is inflationary pressures that Jeff talked about on commodities. There is employee inflation, wage inflation that you typically see across the globe, as well as we run somewhere in the 1.8% to 2% price down with our customer base globally. So, when you net all that in there, there are headwind pressures that mitigate some of the operating savings. So, we've typically talked about a 25% to a 35% fall through rate, offsetting price and other inflationary pressures, just on the gross margin line. And then we continue to invest from an SG&A and E perspective to ensure that we are putting the right team on the field, specifically in Asia, as we continue to grow that to $1 billion and then the $2 billion over the next five years to ten years.

Okay. And maybe as a follow-up and I need to push on this, but I mean it looks like in ‘16, I mean in ‘16 you did, you put up 120 basis points of EBITDA margin improvements, sounds like headwinds maybe somewhat similar maybe a little bit worse and our efficiency maybe somewhat similar, it just seems like you might be able to do a lot better when you're talking about. I mean certainly there is nothing really incrementally, what I am trying to get at is there is nothing really incrementally changing the operating environment that would lead you to be more concerned about what's going on out there, it’s your typical inflation rose and customer price downs and then expansion that might create a little bit of sort of a launch cost or start-up cost.

Yes, John this is Jeff. I think the short answer is we don’t have any additional concerns beyond what we've told just so hopefully we’ll…

Got you, okay. And then if we think about the, one of the big issues, facing the whole [indiscernible] industry I am just curious your views on NAFTA and trade agreements broadly and how you're thinking about it, how mobility you are as far as capital mobility if you will as far as capacity. I am just thinking about your footprint not just maybe in North America, but globally and how it could shift or might need to shift overtime.

Yes John, this is Jeff. I’ll take the footprint part then Matt can you give some of the math. So think about it this way are, in North America we have 38 plants, 8 of those are in Mexico and of those eight, five of them are leased. So we have tremendous flexibility with our footprint number one. Number two, as you know, we sort of follow our customers lead there. And so as they adjusted if there is any reason to adjust then we have the flexibility to do that. We are trying to predict the outcome here probably any more than you are as it relates to the legislations being discussed and we don’t have any insight beyond what you would have. So we think about it in terms of that we have a very flexible footprint, our product, our manufacturing products can adjust fairly quickly, we have moved plants, we have closed plants, we started up plants, we have consolidated plants over the last several years. So we are pretty good at that if we need to be we’ll do it again.

And then John, specifically relating policy I mean between would Brady [ph] running and Trump are contemplating, we are just trying to keep up left where we think this may lie and trying to calculate to what we think the potential impact would be. Lot of folks talk about just boarder adjustment and they think about Mexico, but it’s in aggregate import, it’s in aggregate - we’re in aggregate, it’s an import issue not just with Mexico but globally. For us we are going to be - we are a net importer to the States. So to the extent that there is protection as we are a net importer and our big deal is that we are trying to grow globally, right. As we take a look at our growth over the next period of time, we will grow in Europe and grow in Asia, which should mitigate some of the impact there.

And then related to Mexico, John, just to give you the numbers there. So we have $640 million in sales that you’ll see in the K that we have in Mexico revenue.

Just to give you some sense of the distribution with the rest of our North American number.

But to be clear, I mean most of the stuff that you are making in Mexico is getting shipped into vehicles that are produced in Mexico or are you actually by yourself shipping cross border.

It’s a mix; it’s a mix of both.

And the motivation for footprint locations is more co-location than necessarily cross savings I am sure cross savings become obviously a part of the decision as far as labor and other logistics cost, but I mean if the bigger motivation though is co-location with the customer.

Yes, absolutely, absolutely. And we think about 4 million units or roughly that number being produced there, certainly our footprint is in Mexico to support that. But as Matt said, we obviously produce given the fact that our product shifts fairly well, we produce product there and ship it back and we’re a net importer as he just told you. And $640 million of our North American revenue is down there.

So John from a flexibility perspective of those 30 plus plants that we have got in North America, those 18 of them in the U.S. and we have got plenty of capacity, if the OEMs came back to us and say that we want to shift manufacturing to the states we could do that, if they want us to keep in Mexico, we can do that. I mean at the end of the day, we’re not going to leave this charge, our view is based on how tax reform shakes out and where OEMs want us to be, we’ll take a stand that says we’re going to do the best for our shareholders and drive profitability the best way we can.

Okay, that’s incredibly helpful. Thank you very much guys.

Our next question comes from David Kelley with Jefferies. Please go ahead.

Good morning guys, thanks for taking my questions. Another strong growth quarter here in Asia Pacific. Just wondering if you could provide some color on how you see your volume mix opportunity in the region in 2017 and maybe how we used to think about the profit margin walk there as growth ultimately ramps longer term?

Yes sure, David this is Jeff. So, when we talk about the Asia, for the most part I assume your question was related to China. So as we look at our business there, I mean, we've said publicly a number of times as we exit the decade here and enter the next one we expect to have $1 billion of business in our pocket, so that sort of the trajectory we see. We've grown over the last several years just under a 30% compounded annual growth rate. So things are going extremely well. We have our footprint position in that region as well. So the capacity if you will is basically in place to do that to do what I just said. As it relates to the mix in China it's a very good question. I think again what we're starting to see there and we've predicted this as well that we will begin to see a similar shift in that region not only with more demand in the luxury type of vehicles, but also crossovers, SUVs and even to some extent pickup trucks. So I think all of that for as very good news.

Okay, great thanks. And a quick follow-up on mix and kind of headed back to the North American market, just any additional color on that mix shift towards light trucks and things like we continue to push forward there. Maybe what that means for your content opportunity and potential offset to what feels like slowing regional production any color there would be great.

Sure so I mean as you take a look in HIS, which we follow you'll see a contraction in the market in the aggregate in 2017 in North America. The North American market looking to be down maybe 1.4% or something along those lines. We anticipate ourselves growing in the North America based on the programs that we’ve won and to your point the continued growth in trucks and SUVs there is two things. One uses more of our product on the bigger trucks; and secondly our CPV on each of those goes up, which allows us to grow in excess of what the market is.

Just to give you an example our F-150 content we've said quite often, you can figure that around $450-$456 of content. If you're looking at a smaller passenger car it's probably half of that.

All right great thanks again guys. Appreciate the color.

Thanks, David.

[Operator Instructions] Our next question comes from the line of David Tamberrino with Goldman Sachs. Please go ahead.

Great, thank you and good morning gentlemen.

Good morning David.

Maybe just going back to the operational efficiency $85 million this year $85 million last year in 2016. As we think about going into 2018 should we continue to look at that type of run rate or if we combine it with some of the restructuring efficiencies that you're expecting to get we should see a kind of a step up if you will year-over-year from '17 to '18?

Yes I think that's fair. I mean we obviously have been restructuring Europe and we've talked to you about what that's going to put on the bottom-line. And we've also said that these cost reduction initiatives that we're driving across from a BBP point of view is separate from that. And we haven't talked about guidance for 2019 David, but we're not backing off of that type of a number strategically anyway when we think about that 2018.

Okay, that's helpful. And you've done a nice job showing up free cash flow from this year. I think a lot of that was from better working capital management at the end of the year you might have mentioned this in your prepared remarks. Is there going to be any give back in '17 as a result of - at the end of '16 where free cash flow for the business might be a little bit lower softer as a result of this or how should we be thinking about that working capital as a potential use of cash in '17?

Sure so David typically we see cyclicality in the automotive industry where your fourth quarter is your big cash generating quarter and first quarter is typically usage. You'll see the same this year. But when you take a look at where we stand we still think we've got an incremental opportunities on working capital we're still taking a look at another day or so out of inventory in 2017, taking some more out of payables more days and payables and then taking receivables down. I don't think you're going to see the 40% and 49% consecutive reductions in working capital that you saw in 2015 and 2016, but you're not going to see give backs. As we continue to see growth that's going to tend to want to drive working capital up a little bit. Our view of ‘17 is that we maintain and decrease that with some of the activities that we’ve got going on with again receivable reductions, inventory days reductions and days payable extensions.

Understood. So I think the net takeaway I should maybe have from that as free cash flow is strong, 2016 probably looking at to maintain at a similar level as we are growing EBITDA, but has maybe a little bit of working capital a year or so or less of a benefit from what you are working on and then as obviously as CapEx increases as well little bit?

Yes, I would say, on the working capital side flat to improved. Offsetting growth plus dropping a little through. And then as you see EBITDA expand that falls through net of CapEx and you continue to grow - you continue to grow cash flow from earnings growth.

Okay. And as we think about the use of that obviously you talked about when launched new business innovation restructure and we understand the spends on that. You’ve kind of talked a little bit on a strategic M&A, but when you think about share repurchases you got about $100 million remaining on the authorization. I mean what’s the minimum cash balance that you think you would need for the business and what are some of the triggers or valuation triggers that you are looking at when you are coming to the market to look to repurchase your stock?

Good question. When you take a look at us, we’ve always commented $300 or so plus million cash range that we want to try to keep on the books and that was going through with some of your guys and the other side of the house so when we did the refinancing and so for in October. So, right now versus that minimum amount we’ve got excess cash on the books. As we take a look we are going through that list right now, working through with the leadership team and the Board on capital allocation and over the course of the year we’ll put a lot more of that to better use as we get into first and second quarter.

Okay. And then just lastly from me on North America I think you called out there might be a bit a onetime headwind in the quarter, absent that would margins have still compressed year-over-year?

No, no, there is a couple of things, right. In North America specifically in the quarter we have that $8 million or so gain from the Rockford sale that hit us in the fourth quarter last year favorable that's the non-repeat. And secondly over the course of the fourth quarter we had about $5 million of debt extinguishment cost that were aligned with the restructuring of the balance sheet. Taken on a bond and taken our term down. So a big both of that with hit the North America. So when you take that $8 million of Rockford away close the $4 million of the $5 million of the debt extinguishment away our fourth quarter with sales up 4 million unit then up a few million dollars in margin. So it would have been margin expansion.

Understood. Thank you for the time, appreciate it.

Thank you.

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

Okay. Thanks everybody. We appreciate your questions and your interest in our company. If you have follow-up questions later on, please feel free to reach out to us. And we’ll do our best to respond. Thanks again. This now concludes our call.

This concludes today’s earnings call, you may now disconnect.