Cooper-Standard Holdings Inc Q3 2018 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Aileen Elizabeth Smith - BofA Merrill Lynch, Research Division - Analyst : This is Aileen Smith on for John. First question on the divestiture of the AVS business. You noted in the slide deck, it's a little over $300 million in revenue and apologies if I missed this. Can you provide any detail on the margin profile of that business? Is it above or below corporate average margin?

Question: Aileen Elizabeth Smith - BofA Merrill Lynch, Research Division - Analyst : Okay, great. That's helpful. And if I'm calculating the implications of your revised full year 2018 outlook for 4Q, I get a 4Q revenue year-over-year decline in the range of 2% to 7%, which is a notable deceleration from the pace you've been running at year-to-date. Can you provide any color around some of the puts and takes within that outlook and what it might take to get to the higher end or the lower end of that range? Is it just an assumption for a continued deterioration across major markets?

Question: Aileen Elizabeth Smith - BofA Merrill Lynch, Research Division - Analyst : Okay. And on the raw material side of things. Is the shift over to Fortrex and ArmorHose and other material science innovations in any way exacerbating your raw material cost pressure? Is the sourcing for some of those raw materials in those products different from your traditional products? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Aileen Elizabeth Smith - BofA Merrill Lynch, Research Division - Analyst : Great, that's very helpful. And last question, I realize it's early to provide any official outlook for 2019 but obviously there's a lot of skepticism around IHS production forecast right now, and it still appears your 2018 volume assumptions are based off of IHS. As you think about 2019 and what has happened with schedules from IHS and other sources so far this year, are you approaching 2019 and thinking about capital allocation and forecast in the same way to be based off of IHS? Or are you potentially approaching it a bit more conservatively?

Question: John Sykes - Nomura Securities Co. Ltd., Research Division - Analyst : I guess, just tacking on to the last question, what are you going to do with the sale proceeds? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: John Sykes - Nomura Securities Co. Ltd., Research Division - Analyst : So like you said, is that like 5 years from now where -- because that would be a significant, in my mind, benefit. So you don't have to -- I'm assuming when you say nonautomotive, you're kind of looking at like more of a noncyclical type business, right?

Question: John Sykes - Nomura Securities Co. Ltd., Research Division - Analyst : Okay. I know you can't say much about 2019, but let me just throw a kind of hypothetical out there and just really want to see how you guys are going to react. If nothing improves, right, if the tariffs continue, so raw material costs remain kind of escalated, China and Europe continue kind of a slower to weaker trend. Let's just say North America down but probably not down significantly or dramatically like prior years, what's the game plan? Can you -- you're going to pull back on CapEx, manage the business a little bit more for free cash flow? Obviously, your leverage is low. So leverage isn't an issue here. I'm just trying to get a more of a sense operationally, what you guys are thinking.

Question: John Sykes - Nomura Securities Co. Ltd., Research Division - Analyst : Yes, no. Again, you guys haven't done anything crazy in terms of leveraging up the business. So I think you're in good shape if things got worse which, who knows, right? But no, I appreciate that.