Cooper-Standard Holdings Inc.

Good morning, ladies and gentlemen, and welcome to the Cooper Standard Third Quarter 2020 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. At that time, if you have a question, you will need to press the star followed by the one key. As a reminder, this conference call is being recorded, and the webcast will be available on the Cooper Standard website for replay later today. I would now like to turn the call over to Roger Hendrickson, Director of Investor Relations.

Thanks, Liz, and good morning, everyone. Thank you for spending some time with us today. The members of our leadership team who will be speaking with you on this call this morning are Jeff Edwards, Chairman and Chief Executive Officer, and John Bannis, Executive Vice President and Chief Financial Officer. Before we begin, I need to remind you that this presentation contains forward-looking statements. While they're 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. This presentation also contains non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures are included in the appendix to the presentation. With those formalities out of the way, I'd like to turn the call over to Jeff Edwards.

Thanks, Roger, and good morning, everyone. We certainly appreciate this opportunity to review our third quarter results and provide an update on the current status of our operations. We are pleased with the quick recovery of automotive production in the third quarter. following a very challenging first half. Our facilities around the world are adapting well to recently implemented safety protocols, and they're certainly working hard to keep up with solid customer demand. As volumes have ramped up, we have remained focused on delivering value for our customers and continuing execution of our margin enhancement plan. Our team has done a terrific job, and our results for the quarter reflect it. On slide five, we provide some highlights from the quarter's performance. Our operations performance was strong during the third quarter. We continue to deliver world-class results for product quality, customer service, and employee safety. At the end of the quarter, 96% of our customer scorecards for product quality were green, and 98% were green for launch. Most importantly, the safety performance of our plants continues to be outstanding. Through the first nine months of the year, our total safety incident rate was just 0.36 per 100,000 hours worked, and 32 of our plants still have a perfect record of zero reported incidents. Our plant managers and their teams are doing a world-class job. From a financial perspective, our plan to improve margins and return on invested capital are gaining traction. During the third quarter, we were able to deliver $10 million in cost savings through lean initiatives and improving operating efficiencies. Through the first nine months of the year, manufacturing cost savings totaled $47 million. The aggressive actions we implemented to reduce administrative and overhead costs in 2019 and early this year resulted in a $12 million reduction in SGA and E expense for the quarter versus the third quarter last year. And our global supply chain optimization initiative is delivering as expected. improving results with 14 million dollars in savings during the third quarter combined these initiatives were a significant factor in achieving a 210 basis point improvement in our third quarter adjusted ebitda margin moving to slide six on this slide we summarize the status of our operations by region beginning with asia pacific I want to give a strong shout-out to the team for achieving a perfect zero incident safety performance in the third quarter. Additionally, 10 of 14 manufacturing facilities had zero reported incidents year-to-date. This is a clear indication of what is possible with our total safety culture, and a full-time focus on safety is a top priority for the entire team. Light vehicle production in Asia continues to rebound following the slow start to the year. During the third quarter, our sales outpaced market growth and current customer orders are tracking ahead of our original plan levels. Strong volume combined with continuing success in our cost reduction initiatives helped us drive a strong turnaround in the third quarter and adjusted EBITDA margin for the region. IHS is forecasting an increase in light vehicle production in Q4 versus Q3, and we will look to leverage this strong production with ongoing lean initiatives and overall improvements in operating efficiencies. In Europe, we have seven plants that have maintained perfect safety performance through the first nine months of the year. Safety performance overall for the region remains very strong, with total incident rate at better than world-class levels. Light vehicle production in the region has ramped up significantly following shutdowns that impacted Q2, but remained below last year's level in Q3. Excluding the impact of the business we divested at the beginning of the quarter, our sales outpaced regional light vehicle production in the third quarter. Current customer orders are tracking ahead of our original plan levels, and our total manufacturing efficiencies are ahead of plan year-to-date. The most recent forecast from IHS anticipates a sequential increase in light vehicle production in Q4 versus Q3, but a slight decline year-over-year. Finally, in the Americas, 15 plants in the region have maintained a perfect safety record through the first three quarters of the year, and an overall total incident rate that is better than world class. Third quarter light vehicle production in North America was up slightly year over year. Power sales declined slightly as a result of delayed launches and model year changeovers on certain key platforms. With the continuing success of our cost reduction initiatives, we were able to increase adjusted EBITDA margin in the North American region despite the lower sales volume. Production levels in Brazil remain weak in Q3 as the COVID-19 pandemic continues to weigh on the overall market there. The most recent IHS outlook for North America anticipates a sequential decline of approximately 200,000 units of production in Q4. This is roughly in line with production levels in Q4 of 2019. Our current customer orders remain a bit below our original plan levels. The consolidated company prevention and mitigation of COVID-19 remains a top priority. The added health and safety measures in our facilities appear to have been largely successful, and we're working to offset the related impacts on costs and productivity. Certain government assistance programs, which vary from country to country, have helped in this regard. Moving to slide seven. Our teams have maintained constant focus on the execution of our long-term strategic initiatives throughout the year. Key areas of focus include optimizing our global footprint and reducing fixed overhead costs. We are pleased with the progress we've made so far, and we are beginning to see the positive impact in our results. Since 2019, we have closed or exited 22 facilities. We are currently in the process of closing or consolidating three more before the end of the year. We believe we are on track to deliver in excess of $50 million of annualized fixed cost savings in SGA&E and COGS as compared to 2019. While we have made good progress, we continue to identify additional opportunities to further streamline our operations and improve our overall cost structure. We will provide additional details as these plans are finalized. Turning to slide eight, the execution of our innovation and diversification strategy remains a top priority. In fact, we've intensified our focus on this strategy by bringing two new directors onto our board with strong experience and knowledge in material science and related industries. To further leverage their expertise, we have formed a board subcommittee that is charged with the oversight of our innovation and diversification efforts. We are excited to have these new directors join us at this important stage in growing our business into other industries. Customer demand in our industrial and specialty group remains very strong, with the lone exception being our aviation business. To leverage the strong demand, we are investing in additional capital equipment to modernize and expand our production capabilities and increase our overall capacity. we remain very optimistic about the growth potential of this business over the longer term. In our applied material science business, we have signed two new additional development agreements. Consistent with the approach we discussed at the beginning of the year, we are intentionally adding fewer new clients and increasing the emphasis on moving existing technology development towards commercialization. The new agreements are with new customers, but they are within the same markets we have focused on in the past. This is also intentional. While our material science, based on our Fortrex chemistry platform, could be applied over a wide range of industries, We believe a concentrated focus will enable us to leverage our knowledge base to speed the development process and ultimately help us capture a broader share of these select markets. We are pleased that the installation of new prototype equipment at our Global Technology Center is nearing completion. When fully operational, we expect this equipment will help accelerate our technology development process and enable us to move rapidly towards commercialization of new materials and technology. Now let me turn the call over to John.