Q3 2019 Earnings Call
Gentlemen, and welcome to the Cooper standard third quarter 2019, <unk> 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 cheap.
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 Hendriksen.
Director of Investor Relations.
Okay. Thanks, let tape and good morning, everyone. We appreciate your spending some time with us this morning.
The members of our leadership team, who will be speaking with you on the call. This morning are Jeff Edwards, Chairman and Chief Executive Officer, and Jon Benet Executive Vice President and Chief Financial Officer.
Before we begin I need to remind you that this presentation contains forward looking statements.
Well they are made based on current factual information and certain assumptions and plans that management currently believed to be reasonable. These statements do involve risks and uncertainties.
For more information on forward looking statement, we ask that you referred to slide three of this presentation and the company statement included in periodic filings with the Securities and Exchange Commission.
This presentation OCO 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.
But those formalities I'll turn the call over to Jeff Edwards.
Thanks, Roger and good morning, everyone.
I'd like to begin this morning by putting some context around or third quarter and the main factors leading to our disappointing results.
Obviously conditions in the worlds top auto markets remain challenging.
Production of light vehicles has declined across the board.
In production of some of our top platforms has been down disproportionately versus last years levels.
First is the broader market declines.
And versus our plans.
The impact of these market conditions has more than offset our continuing improvements in operating efficiency.
In increasing volume related to new launches.
Weakness in the China market has put significant pressure on many of our customers.
In response, they've been coming back to us and other suppliers with increasing demands for price reductions.
Negotiations have been tough.
Maybe as challenging as I've seen since I first started doing business in China over 20 years ago.
During the third quarter, we experience a number of on favorable outcomes in our customer negotiations.
Leading to several onetime price concessions or give backs.
In one extreme case, we opted to discontinue the customer relationship.
Rather than except the one sided demands.
Third quarter volume and mix was also unfavorable in North America.
Impacted by lower than planned production on certain new program launches.
As well as the UAE W work stoppage.
A general motors.
Combined the one off price concessions.
The discontinued customer relationship.
And the you ADW strike had a $26 million negative impact on our results in the quarter.
Finally, raw material costs remained higher.
And last year, despite the lower production levels and relative stability in oil prices.
For the first nine months.
Gerald Economics has been a 20 million dollar headwind for us.
So in the face of the challenging market conditions are manufacturing teams come to work everyday to focus on safety quality efficiency.
We're working with a sense of urgency to lower costs and offset these market headwinds while continue to focus on the needs of our customers.
Through our innovation continuous improvement in best business practice.
We continue to improve our manufacturing efficiency overall.
In fact during the first nine months of the year improved operating efficiency resulted in $64 million manufacturing cost reductions.
This has been accomplished despite lower volume.
Increasing complexity and a record number of new program launches.
During the quarter, we successfully executed 71 launches, bringing the total for the year to 176.
With 92% Green results on customer scorecard.
Another positive is that our quality service and innovation continue to drive customer demand.
For our products.
We're continuing to filled the pipeline for future sales was significant business awards.
For the first three quarters net new business awards totaled $261 million in estimated annual sales.
Contracts awarded for innovation products, including new and replacement.
Totaled $276 million in projected annual sales.
We expect these new awards will help position us for future profitable growth.
Now, let me turn it over to John to discuss the financial results in more detail for the quarter John .
Thanks, Jeff and good morning, everyone.
The next few slides I'll provide some more detail on or financial results for the third quarter.
It also comment on our liquidity balance sheet profile and capital structure.
On slide seven we show a summary of our results for the third quarter with comparisons to the prior year.
Third quarter, 2019 sales were $729 million down 15.4% versus the third quarter 2018.
The year over year change was driven by the sale of or ABS business.
Unfavorable volume and mix in all regions.
Foreign exchange and customer price reductions.
These were partially offset by increased sales from recent acquisitions.
Gross profit for the third quarter was $69.7 million compared to 119.7 million in the same period a year ago.
Adjusted EBITDA was 43.5 million were 6% of sales compared to 69.6 million in the third quarter 2018.
The most significant drivers of the decline in adjusted EBITDA were weaker volume and mix.
Customer price reductions.
In other commercial items.
The volume and mix impact was largest in North America due largely to cancellation of certain programs that have been previously announced.
The work stoppage at our second largest customer.
And slower than expected ramp up of key replacement programs.
Given significant market pressures in production declines in China, we recorded $15 million in one off quick savings price concessions during the quarter, including the true up certain pricing commitments made in past periods.
These reductions are not reflective a run rate pricing for future periods.
In fact for the quarter and year to date, we're right around 1% globally for customer price reductions.
We also incurred $8 million write offs due to the cancellation of certain customer programs in China, the Jeff referred to earlier.
Again, not in our normal run rate.
Further contributing to the decline were general economics commodity inflation, and the net impact of acquisitions and divestitures.
Which were partially offset by favorable SG a any expense.
On the U.S. GAAP basis net loss for the quarter was $13.9 million versus net income of 32.2 million in the third quarter of 2018.
Excluding restructuring expense another special items.
Adjusted net loss for the third quarter was 5.2 million or minus 31 cents per diluted share.
From a capex perspective, our spending in the third quarter was 35.6 million or 4.9% of sales.
Down from $53.4 million in the same period a year ago.
This was in line with their expectations for the quarter inconsistent with our continuing drive to reduce capex by more than 15% for the full year.
Moving to slide eight.
The charts on slide eight quantify the significant drivers of the year over year changes in our sales and adjusted EBITDA.
For sales volume and mix net of typical customer price reductions.
Reduced sales by $45 million year over year.
The one off items of the commercial impacts in China, and the way W. strike accounted for $23 million of the revenue decline.
The combined impact of acquisitions and divestitures was negative $51 million.
Well foreign currency fluctuations reduced sales by 14 million.
For adjusted EBITDA are ongoing efforts and lean manufacturing and operational efficiencies drove $13 million in cost savings for the quarter.
These savings were more than offset by $27 million unfavorable volume mix and typical price reductions.
As well as the $26 million, a one off items from customer settlements in China, and the you ADW work stoppage.
We also had $4 million in higher commodity costs, and a negative net impact of $3 million from acquisitions and divestitures.
Positive improvements in our SG a any expense.
Lower compensation related costs, and lean purchasing savings helped offset general inflation another negative headwinds.
Coming back to the run rate, we would have met or exceeded our previous expectations for the quarter had not been for the combined impact of the one off items discussed.
Jeff will discuss your updated guidance in a few minutes for the year, but looking ahead to Q4, we have not assumed any catch up during weekends or holidays for either production loss during the gym strike or the delayed ramp up of output for the largest TV program launch.
And given all the moving parts in the industry right now, including global production estimates for the year being down over 3% since our last earnings call.
Too early to look ahead to our run rate for 2020.
We'll be able to provide more detail when we issue formal guidance during the fourth quarter earnings call come mid February .
Moving to slide nine.
At the end of September our balance sheet and credit profile remains solid.
We ended the third quarter with $323 million of cash on hand.
Up from $311 million at the end of June of this year.
And $41 million higher than a year ago.
With cash on hand in availability under revolving credit facility, we had total liquidity of $507 million as of September Thirtyth 2019.
We feel this provides adequate liquidity for the funding needs of the company given the current industry environment.
Our total debt at the end of September was $803 million, while net debt was 480 million.
That equates to a net leverage ratio of two times trailing 12 months EBITDA.
To wrap up I wanted to provide an update on our efforts around legacy pension liabilities.
Subsequent to the ended the third quarter, we were able to take advantage of favorable market conditions.
And proactively de risk a significant portion of our U.S. pension plan.
Using pension plan assets, we purchased a bulk annuity policy and reduced our projected benefit obligation by $57 million or nearly 20%.
There were no cash contributions related to the transaction.
No impact to the overall funded ratio of the U.S. plan, which remains at nearly 97% funded.
This is a great result that will significantly reduce the long term risk of our pension plan liabilities going forward.
The accounting impact to the de risking will be recorded in our fourth quarter results.
With that let me turn the call back over to Jeff.
Okay. Thanks, John with the next few slides I'll give you some highlights related to our innovation and diversification initiatives and provide some additional detail on the actions, we're taking to reduce costs and align our organization with the current challenging market conditions.
So if you turn to slide 11.
We are pleased with the many new products and materials that have been developed through innovation initiatives over the past several years.
They've been a key reason why we continue to win more than our fair share of new contracts.
In addition, our innovation team has been working beyond products in materials to develop advanced process technology as well.
Earlier this year their work in applying artificial intelligence in the compound development process was recognized as a pace award finalist.
Today Im pleased to announce that we've made significant progress in applying artificial intelligence to develop automatic process controls for our extrusion lines.
For those of you that have visited our Livonia Tech center in the past two years, you've probably heard us talking about the concept.
But now the concept as reality.
The AI based process control systems gather live data for many points on the extrusion line and analyze it in real time.
When variations in the Extrusions occur the system immediately recognize it then makes automatic adjustments to correct.
In addition, the system learns what factors caused the variation in can initiate actions.
It will help us present recurrence.
The initial results from testing in our Tech center very positive.
The system has been able to reduce 50% to 90% of extrusion variation.
Which is a top driver of scrap and our plants.
So if the results can be replicated on a large scale the opportunity to reduce the cost of scrap.
In energy usage across all of our operations is significant.
We're in the process now, bringing the system online in two pilot locations.
We will look to fully validate.
The test findings.
We're simultaneously working to develop an affordable infrastructure.
We expect will allow us to eventually deploy the system on all 345 extrusion lines in our plants around the world.
Turning to slide 12.
Our advanced Technology group is also making excited exciting progress as they define and refine and integrated strategy to maximize our opportunities beyond the automotive industry.
Through the voice of our new customers, we're learning that a business model focused exclusively on technology licensing would capture a small subset of the total potential market opportunity for Fortrex technology.
Licensing in addition to sale of custom materials expands our opportunities.
And in some cases sales have converted materials that incorporate our advanced technologies, maybe the best way to capture maximum value.
We are advancing our strategy to incorporate all three options.
Leveraging existing production facilities from the I SG operations, where that makes sense.
A key focus for the Eightd team is to prepare to deliver on our first major material orders, which we expect will begin in the next 12 to 18 months.
This new business model present different challenges such as delivering materials in railcar quantities.
Something we don't typically do in our automotive business.
We're working very hard to ensure that our first material science product launch is flawless.
In terms of new business development.
We now expect assigned to new license or technical agreements before year end.
This would be in line with our original goals.
We're also evaluating certain new opportunities were proposals that have been presented to us from existing customers.
So I think it would be accurate to say that the interest in our materials science business remains high and our progress overall is in line with if not ahead of our earlier expectations.
Turning to slide 13.
Since the beginning of the year, we've been in the process of evolving and streamlining our organization structure.
The initiative began with globalizing, our business support functions and services such as manufacturing.
Engineering human resources and finance.
Most recently we announced.
Of our purchasing group a transition to global structure.
You've seen the early results of these efforts in our ESG any expenses that had been trending lower.
So today, we're announcing the final step in that process.
Effective January Onest 2020.
We will further streamline the organization by creating a single global automotive business and by Globalizing, Our advanced Technology group.
Each will be flatter and more capable of quickly adapting to the dynamics of a transforming global business model.
The creation of these two businesses replaces our former regional leadership structure.
The automotive business will be headed by Bill Pumphrey, who was formerly senior Vice President and President North America.
The business will align with the needs of customers.
Providing consistent performance in the latest innovations to assist customers in meeting the demands of the rapidly changing mobility landscape.
The advanced Technology group remain under leadership of Jeff The Best Executive Vice President and President.
Jeff and his team will continue to focus on diversifying Cooper standard by expanding the sale of both converted products in applied materials science offerings, including the Fork trucks chemistry platform into global industrial markets.
As a part of the organization transition.
Sung Min Li Senior Vice President and President Asia Pacific.
The part the company at the end of 2019.
Fernando Demon, well senior Vice President and President Europe , South America, and India will remain with the company through the first half of 2020 to assist with the restructuring activities.
Upon conclusion of this assignment Fernando will also depart the company.
In addition to song and Fernando for more executives will depart the company by year end and one more by mid 2020.
These actions are consistent with a more lean and efficient organization in the continued rightsizing of our SGN a cost basis.
It also confirms the depth of talent and leadership that has been developed the past several years throughout our company.
Moving to slide 14.
On this slide we're providing you with details and updates on the various cost savings and value creation initiatives that we outlined for you last quarter.
We're working with laser focus to advance in complete these initiatives and we have good progress to report.
We said, we would accelerate the transition to a global organization structure.
We're now in position to complete this process by the end of the year is I just described.
We expect the people related restructuring associated with this transition.
We will drive the payback in less than one year.
We said we plan to close eight facilities that number has now increased to 10.
We expect to complete the closures of these facilities by the end of 2020.
And we anticipate savings that will drive a payback in less than two years.
We also told you that we would fix or exit unprofitable operations, including the possibility of improving profitability by becoming smaller in Europe .
Well I won't provide you with the details I can tell you that a strategic process has been initiated and we'll provide you further details and updates as appropriate.
With the transition to a global organization structure now nearly complete.
We believe the increased functional efficiency will drive positive results.
We see major opportunities in purchasing.
And supply chain through standardization in economies of scale as we discussed last quarter.
We also expect to realize further reductions in SJ SG, a and E. expense.
Finally, we're continuing our focus on improving free cash flow.
My further reducing capital investments.
And optimizing working capital metrics.
Moving to slide 15.
The initiatives, we've laid out for you are already beginning to reduce costs, but the benefits have been far outweighed by the impact of the GM strike certain onetime price concessions and continued weak production volumes in China.
And lower than expected volumes on important platforms in North America.
Based on our year to date results and these continuing headwinds.
We have revised our full year outlook as shown in the table on slide 15.
These are challenging times.
And despite the headwinds and uncertainty.
Facing our industry and our company.
We're confident that our long term strategy remains sound.
We're also confident that the actions, we're taking to reduce cost and streamline our business will soon begin to drive improved results.
And finally, we would like to thank our global team for their continuing hard work and their commitment to our company values.
So those members of our team who will soon be departing the company.
We want to thank them for their many contributions over the years.
We would also like to thank our customers for their continued trust and confidence in Cooper standard.
This concludes our prepared comments. So we will now open it up for Q and <unk>.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please press star followed by the one on your telephone.
If your question has been answered and you would like to withdraw your registration.
We do so by pressing the pound G.
If you're using speakerphone, please pick up the handset before entering your request.
One moment, please as we assemble the queue for questions.
Our first question comes from the line of.
Justin Clare for off capital partner.
Hi, everyone. Thanks for taking my questions.
So first off your revised 2019 guidance suggests you could see a sequential decline in revenue and margin in Q4.
Wanted to see if you could just talk about how you see sales and margins trending for your key geographic regions and whether you see a potential for improvement as you move into 2020.
Hey, just and good morning, John .
I'll take a tick the first pass at this one when you when you think about.
The industry volume environment I'll break it down by region for you to it to address your question since the last time, we we gave guidance and with the Q3 results.
Volumes are down 3% actually 3.4% globally.
And when you when you dig one liberal deeper there are down.
5% in China.
So 4.5% overall in the Asia Pacific region, a 2% in North America, and another 2% in Europe .
So when you when you couple that.
Industry decline in our or take rates and product mix.
And you layer on the delayed ramp up of the largest UBI program. That's important for us here in North America.
Revenue declines in between Q3 in Q4, since our last guidance about $25 million to $30 million.
Sorry, that's the profit impact the revenue impact is about $60 million.
In those two periods.
It's a big part of the decline overall, and then pricing of course hits that topline so the the.
The reduction in the overall sales guidance that we gave out includes the the further headwinds we had an comes from price reductions.
Hi, Justin this is Jeff I'll, I'll offset a little bit of color. There. So if we again, we're not talking about 2020 guidance. We said, we'll do that and in February but I think it is important to point out.
As we as we look at the third and fourth quarter and you think about the work stoppage that.
Consistent with our second largest customer you think about the challenge.
Associated with the ramp up in the in the third and fourth quarter here of the yes, you view, that's so important Dawson and everyone else in the industry.
Clearly those things as we move forward in 2020 aren't going to exist.
So I see it as as a headwind or.
I'm, sorry headwind in the third and fourth but tailwind as we head into into 2020. So despite.
Awesome, some challenges that John talked about in terms of the I just for gas being down 3%.
There are some things specifically related to our volume and mix going forward.
That I think will be positive and we'll talk in more detail about that when we get into the February guidance discussion.
Okay, great. Thanks for the detail there.
And then just.
For your Asia business, it sounds like your exposure to specific customers and to a specific vehicle platforms is causing some underperformance versus the market overall I wonder if you could just speak to whether you see potential for customer and vehicle mission.
Mix issues to improve as new vehicles are launched here.
In the coming quarters.
Justin This is Jeff I'll take it in the macro sense and then John can talk to you about the the specific volume and mix that that impacted us versus the overall industry. So as we look at China going going forward.
Clearly China is the largest car market today, and it's going to be the largest car market every year in the future as far out as you want to look so we're very committed to being there it makes sense to be there and we're well positioned.
When that market comes back so thats. The first point. The second point is that there will continue to be a shift in China towards Ashley movies, Cvs and those type of vehicles that are clearly in our sweet spot.
From a content per vehicle. So as is today in North America market dominated by truck Cvs and actually movies, we see China going forward in a very similar fashion at least as it relates to as you'd be in CV.
Segment, so content per vehicle will go up I do think that the challenge we have in China in 2020 in 2021, if we just look at it from a macro point of view will continue to be.
Challenging in terms of growth I think that the market will be a flat best case through 21.
But after that I think clearly all of the new launches that are planned.
And especially the expansion from cars to ask movies and Cvs not will have a very positive impact on Cooper standard.
Okay, Great and then well go ahead, I'm, just going to add a little bit more color on the market dynamic there Justin.
When you when you think about Q3 production environment the industry was down about 5% year over year, but when you think about our customer waiting which is currently at about 82% western.
Oems are the joint ventures thereof.
Only 18% local China domestics.
Our revenues are actually down 26%, because we're so heavily weighted towards those those global.
Global manufacturers. So it has a little bit more pressure to that mix dynamic that Jeff was just referring to.
Okay got it and then one last one for me so just given the industry had headwinds and reduce production volumes.
Can you update us on how you're thinking about capital allocation and specifically your leverage in the amount of debt that you have could you look to allocate more cash to pay down debt at this point in time or how are you thinking about that.
Yeah, Justin as John again.
When you when you look at our maturity profile of some of our debt. It's long tailed our term loan doesn't come due until 2023, our bonds don't come due until 2026 and when we took both of those pieces of debt out back in 2016, there at very attractive interest.
It's for us compared to current market rates that we would have to pay should we have to go back into the capital markets again, so theres not a burning need to de lever.
But instead, we're thinking just here in the short term at least maintain cash and the balance sheet and whether any market fluctuations that we see coming and and once we get into 2020, we'll take a fresh look at that as far as.
Any any opportunity to either pay down debt or refinance debt.
Yes. This is Jeff on the operating side clearly we've stated that moving forward from a capital point of view our expenditures will be much less than you've seen historically, we will be it a reinvestment ratio of one or less.
Starting in 2020, it's because we've invested.
Well over the last several years, both in China and in terms of the innovation.
We've launched in our manufacturing plants. So it allows us at this point in time to really scale back. We believe still have the great growth that we've we've been talking about that our plants are a lot more efficient and were able to spread those assets across our facilities in a much different way as I mentioned, we're in the process.
So of of Mothballing, you're closing 10 factory so inside those plants as equipment that we can continue to use as the business grows around the world.
So capital expenditures definitely will be significantly lower in 20.
In addition to that there's theres opportunities I mentioned before on that working capital side of the business inventory opportunities everyday we take out is worth about $10 million to us. So there will be a laser focus on making sure that the working capital execution going.
Going forward continues to improve and continues to allow us even more flexibility on the balance sheet as we move into next year.
Okay, great. Thanks, guys.
Thank you Justin.
Thank you. Our next question comes from Glenn Chen of Buckingham Research. Your line is open.
Good morning gentleman.
Right.
Jeff can you elaborate a bit on the customer negotiations in China can you give any reinsurance at.
These are indeed.
One off sorry.
How far you are in these discussions with Oems, whether there's more to come with more OEM as or more.
Ams et cetera.
Yes. These are settlements Glenn as we said so clearly.
We've been App. This now the rest of the you know for the entire year.
We were hoping for a little better outcome, obviously than weve than we've seen here, but we consider it.
Closed with.
The customers that were going to go forward with and we obviously made some decisions in terms of.
Preserving relationships and making sure that.
That we were around there too.
Benefit when the industry comes back.
Hence the decisions that we that we took however.
We didn't do that with everybody we decided in one particular case now that that didn't make any sense for for the company to go forward and we exited that relationship as a result so.
The short answer is yes, I do believe that that the negotiations as we've described it in terms of one offs are behind us our going forward it will be than normal.
Tighten negotiations that Weve that we've always referred to I think it's also important as John mentioned in his comments, we had some terrific results in Europe and in North America related to customer our price negotiation, we didnt have a good result in China, but when the markets.
Under the pressure, it's under its I suppose that's.
Understandable at this at this stage, having said all of that we're still on target to.
To achieve this 1% a number that we've that we've been talking about all year as you know we've averaged 1.5% to 1.7% give backs really the last seven years last year, we actually gave back 2%. So despite all of that.
In keeping in mind that that everything John talked about in China related to the one offs, it's behind us So moving forward, we see things normalizing if you will.
In terms of price negotiations will get into the details of what we're going to define 2020.
As a target in February when we talk to you all.
Okay. Thanks for the color Jeff Okay.
And then John I apologize if I missed it in your prepared comments, but.
In your adjusted EBITDA walked carriers as any other positive $21 million can you tell us what.
What is inside that.
Yeah, Yeah, Glenn net $21 million I referenced.
Better SG in a performance, which is nearly half of that when you think about the initiatives, we've been undertaking and the cost reduction actions.
Theres good performance when you look at the US unit cost base.
Theres also some lower compensation related expenses, given the overall nature of the industry and the performance.
Backdrop, and our purchasing lean organization. Their efforts are included in that $21 million of savings so those combined or the $21 million a good news.
There is your normal inflation as I'll call it four.
Wage rates or utilities or rental charges around the world that we incur every year and thats included in other bucket offsetting the good news.
Okay very good that's it for me thanks, gentlemen.
Thanks.
Thank you once again, ladies and gentlemen to ask a question. Please press star one on your touched on telephone.
Next question comes from John Murphy of Bank of America Merrill Lynch. Your line is open.
Good morning, guys. This is Alan Smith on for John .
Ask another question around the customer price reductions in settlements that you've commented on or any of these outsized concessions on some of your new material science products like for tracks armor Whos or was this pressure more on your legacy products. Thanks.
It would be a legacy products and business.
Yeah.
Okay. So is it fair to assume that some of this customer pressure on may ultimately accelerate your business transition to more of the material science products and diversification to the non automotive end markets, we will actually launch for tracks for our largest customer.
In China next year, so we're well on our way to two bringing that technology into the region as you well know we also launched our magalloy.
Product, there with our fuel and brake business this past year. So.
We're pretty excited about the pool that we are receiving not just from the the western automakers, but also the larger more successful.
Local Chinese manufacturers are interested as well so.
It's on all fronts.
Great. That's that's helpful and second question on the 10 facilities that you're targeting a close by 2020 can you detail where these are located is limited to just one geography and are these closures just going after capacity consolidation in a more efficient upfront or do they reflect pulling back on some business. That's an economic like what you did.
Discontinuing the one relationship in China, and that's a little bit of both the so I've said in the past ailing that primarily the five facilities that are Asia based.
Our as a result of the the market decline that we have but we've seen there obviously our revenues down 30%. So we're reacting to that it also.
Reflects efficiencies that were we continue to drive into that into that footprint. So it's a little bit of both but that primarily the market and as I mentioned those are being mothballed more than than anything so as the market comes back I will be able to to still have facilities that were that we have the ability to go.
Back and produce product again as the market comes back so I think thats the right approach given what's happened there when we come over here.
North America.
The plants that are that are impacted our basically gone forever.
And same with what will be doing in Europe gone forever.
Okay.
And then one last follow up to suggest that question asked earlier on the balance sheet. How do you think about funding that restructuring programs. You've outlined are these initiatives that can be funded through.
Cash from operations, despite a more pressured cycle on the macro environment.
Alien this is John .
Yes is part of the answer but we also have.
170 million of availability remaining on our revolving credit facility. So we needed to tap into to that we could use that to pay for the some of the restructuring activities and then there's certainly a.
A lot of cash on the balance sheet at this point in time, so as we go forward and get it further into next year will kind of reassess that strategy and whether.
The current liquidity, we have is adequate to to pay for the restructuring as well as the ongoing.
Capital needs of the company.
Okay, Great Omnichannel questions I had thanks.
Thank you.
Thank you. Your next question comes from Josh to cost of Credit Suisse. Your line is open.
Hey, guys. Thanks for taking the question.
First one for me just was wondering if you could comment on.
The latest that you're seeing as far as large north American STB platform.
And the ramp that you're seeing there.
Josh This is Jeff.
I wish I could tell you that its remarkably.
Improved but I can't so we're still faced with a.
Pretty significant shortfall there as we are moving through the fourth quarter much like we had in the third quarter.
Got it.
And then just looking at the revised guidance, if I had my math right it looks like.
Implied Fourq you number on the topline of about 675 million.
And margins of about four in three quarters percent.
Which would imply a sales decline of about 20% versus for Q of last year and about 60% on EBIT da so.
I was wondering if you could just comment on.
The 20% decline in revenue with respect to 60% decline or selling EBITDA.
Yes.
Hey, Josh it's John .
I'll walk you through some of those details when you think about the the year over year revenue decline I walk through some of that detailed before.
We're not expecting like I said any makeup on the GM platforms that were down during September and October .
So we're just looking at what the planned production levels are currently in the in the system and in the releases.
In the same thing on the largest TV platform and say, what we're seeing from the customers. We're not anticipating any makeup to to counteract the year over year drop.
Keep in mind for all of October .
We lost revenue from from the UAE W. strikes, so thats, a big drag on overall revenues as well as profitability and it's not just your normal pull through rates on that lost production, but at the unit fixture inefficiencies.
That are created because of the operational or lack of production there in the plants. So thats a a further drag on overall profitability for.
So I think those are the two big pieces that I would I'd point you to on the Q4 revenue side. So on the the other part of your question there Josh just to clarify and John mentioned this in his in his prepared remarks as well.
So if you think about weekends and holidays during during the fourth quarter.
When a lot of companies decide to.
Make up for lost units, we have not included any of that in our projection for the fourth quarter. So if that happens then that would be goodness.
Got it that's helpful and apologies I missed it very genetic also.
No that was spending to be repeated my apologies.
My last question just on networking capital looks like there's a bit of.
Working capital release in Threeq, you I'm, just trying to get a sense for how you're expecting a networking capital flows in Fourq you.
Yes, so I'll characterize it as we we typically see a.
Positive inflow and working capital in Q4 due to the seasonality of the business.
So that should hold but for any any change in customer.
Production plans near year end typically you see the holiday season shutdown and that allows us to collect on receivables and and reduce inventory levels.
By the end of the year, which creates a natural free cash flow info for us. So when we look ahead. There is there's definitely an implied Q4 positive inflow on free cash flow and the working capital side, but again thats all subject to those customer.
Releases and if there's any change in that that.
Situation, then, we'll we'll see the changes they're throwing through our working capital.
Got it.
That should be for me thanks, guys.
Thanks, Josh.
Thank you. Our next question comes from Mike because our view of GDP investment Advisors. Your line is open.
Hi, Thanks for taking my question.
Kind of along the lines of what Josh chest.
If I feel like math right. It looks like fourth quarter, EBITDA will be lower than third quarter EBITDA.
And I'm just wondering you talked about one off items is the way w. strike could impact the fourth quarter as well as of the third quarter could you give.
Do you have.
Can you estimate how much impact each quarter.
Yes, Mike it's John .
It definitely impacts Q4, more so than 10- Q3 so in in Q3, we lost about.
About $8 million of revenue and about $3 million of total profits.
When you when you look at the normal pull through as well as the manufacturing inefficiencies caused by by the shutdown.
And then in Q4 those numbers more than double when it comes to sales sales are closer to $15 million to $16 million and then profit and reduced.
Inefficiencies are $7 million to $8 million of reduction seeing kind of frame it like that so the bigger impact is again in Q4.
Okay. Thank you.
And the same question about.
The China settlements is that all third quarter is that going to affect fourth quarter as well.
Q3.
Just a Q3.
All in Q3, okay. Thank you very much.
Hey, Mike Thanks.
Thank you I would now like to turn the call back over to Roger Hendriksen.
Okay. Thanks, everybody, we really appreciate your participation in the call. This morning, and we would look forward to and welcome any further questions as the days and weeks come forward.
We appreciate your continuing engagement with us here Cooper standard.
That will conclude the call. Thanks a lot.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
[laughter].
Okay.