Good morning ladies and gentlemen and welcome to the Cooper-Standard fourth quarter 2015 earnings conference call. During the presentation, all participants will be in listen-only mode. Following company's 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 Heidi and good morning everyone. Thanks for taking the time to join in our call this morning. We appreciate your continued interest in Cooper-Standard. 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 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 the slide three of this presentation and the company's statements included in other periodic filings with the Securities and Exchange Commission. With that, I will turn the call over to Jeff Edwards.

Okay. Thanks Roger and good morning everyone. We are very pleased to report that we had a record fourth quarter in 2015 with an 11% increase in revenue compared to the same period a year ago. Total sales of $854 million in the quarter included a net increase of $58 million related to our strategic M&A activities. Excluding this, our organic growth rate was still nearly 4% and when you exclude the impact of exchange, the increase was more than 19%. Adjusted EBITDA increased nearly 27% also marking the highest level for any fourth quarter in our history. Our best business practice tool along with our continuous improvement initiatives helped drive $30 million in operating cost improvements during the quarter, which contributed to the increased EBITDA margin. We also had an excellent quarter in terms of free cash flow, which increased by $79 million compared to the same period last year. Once again, the implementation of the best business practices across the entire company helped drive this improvement. Matt will have a little bit more details in a few minutes. Moving on to slide six, it breaks down the revenue by region. North America and Asia were the clear leaders in the quarter with revenue gains of 12.7% and 89.2%. Revenue growth in North America was driven by higher overall light vehicle production and the full ramp-up of several key platforms following launches in late 2014 and early 2015. In Asia, the increase was driven in part by our acquisition of Shenya. But if you exclude the acquisitions, divestitures and the impact of FX, our underlying organic growth rate was still a very strong 25.1%, while light vehicle production Asia was up approximately 7%. In Europe, although sales were down by 3.9% compared to last year, on an FX neutral…

Thanks Jeff and good morning everyone. In the next few slides, I will provide some additional color on the financial results for the quarter and for the full year. If you turn the page 11, you will see our results for both the fourth quarter and the total year. In the fourth quarter, we generated total sales of $854.4 million compared to $767.9 million in Q4 2014. Our gross profit was $153.8 million or 18% of sales. This is a 270 basis point improvement in gross margin year-over-year. Adjusted EBITDA was $91.3 million and 10.7% of sales, compared to $72.2 million and 9.4% of sales in the same period a year ago. This represents a 130 basis point improvement and on an FX neutral basis our adjusted EBITDA was $96.3 million or over 33% higher than in the fourth quarter of 2014. For the full year, adjusted EBITDA was $362.4 million and 10.8% of sales, compared to $311.5 million and 9.6% of sales in 2014. This represents an increase of 16.3% and up 120 basis points. Net income for the quarter was $21.7 million or $1.16 per fully diluted share and this included restructuring, a non-cash charge for asset impairment and a one-time gain on the sale of our hard coat plastic exterior trim business. Excluding these items, our adjusted net income for the quarter was $56.2 million or $3.01 per diluted share, compared to $15.3 million or $0.88 per diluted share in Q4 2014. For the full year 2015, our reported net income was $111.9 million. The adjusted net income was $168.7 million or $9.16 per diluted share, up 90% from 2014. CapEx for the quarter was $36.6 million or 4.3% of sales. This is down from 4.9% of sales in Q4 2014 and for the full year CapEx…

Okay. Thanks Matt. In a few minutes that we have left, I will cover some of the highlights for the full year 2015 and then provide you some thoughts on our outlook for 2016. So moving to slide 16, it highlights some of the major operating measures and achievements of 2015. In fact, 2015 was the first full year of the execution phase of our profitable growth strategy and we are just at the beginning of transforming the business to fully achieve world class operating targets. We had 120 new program launches and our CLAUS launch system gave us a level of control and consistency to achieve green launches in terms of cost as well as on-time delivery. This enabled us to reduce our launch costs and meet our customers' expectations for each of these launches. Our topline continued to grow in excess of the rate of increase in global light vehicle production. If you exclude the significant headwinds from foreign currency exchange rates, our sales increased by 12% for the year. Excluding FX and the incremental sales from Shenya, our organic growth rate was 7%. Through the implementation of the Cooper-Standard operating system and its related tools, we improved our operating efficiency in our manufacturing facilities around the world. We reduced scrap, improved quality and customer focus, increased overall capacity utilization. Together these amounted to more than $100 million in operating cost savings and enabled us to increase adjusted EBITDA by 16% and adjusted EBITDA margins by 120 basis points over 2014. With improved operating margins and with our laser focus on capital management, we increased free cash flow by $125 million over 2014. We are very pleased with the results in 2015 and we certainly want to thank our customers and supplier partners for their continued support. We…

[Operator Instructions]. Your first question comes from Bret Jordan from Jefferies. Please go ahead.

Good morning guys.

Hi Bret.

Good morning Bret.

A quick question on the margin impact from some of the lower margin business divestitures. If your EBITDA margin expectation is 11.3% to 11.8%, how much is just immediately picked up by getting out of the Rockford facility and some of the other business shifts you talked about?

Yes, Bret, this is Matt. These businesses were running at far less than 10% EBITDA. So by exiting these businesses does negatively impact us by a close to $100 million in topline. But the impact to EBITDA was much less than what our run rate is.

Okay. Great. And then I guess as we look at the shift from high cost production to lower cost markets, what inning are we at? Has that begun? Or is that something that is really going to drive incremental operating efficiency down the road?

I think as we talked, Bret, we have got the facility in Serbia up and running, which is what we are talking about here. We expect 2016 to continue to ramp that business. Obviously that's a challenge for us as we continue to manage that and it's a greenfield site. So we have new employees. We have new plant. We are training folks everyday. It's going quite well but we are very aware of the risk from a customer point of view. So we are taking it at the right pace, I will say. We have said all along that by the time we ramp that up fully by the end of 2017, that will save us about $25 million a year. So that's the number. So if you just think about the labor rate, it's basically $30 to $5 is the difference.

Okay.

So we will save money in 2016. We will save money in 2017. But that $25 million a year number won't be fully hitting our bottomline until we reach the 2018 period.

Okay. And I guess to some extent, just trying to put it in perspective, is that the first of many or is that 80% of what you see being able to shift? The question being, what inning are we at? Is Serbia going to be the majority of what we do in the next five years? Or is this just scratching the surface?

No. I think it's fair to say that when we put Serbia in place, we felt that that would support us well into the, really, next decade. Keep in mind we already have Poland to go along with Serbia. We have facilities in the Czech as well. So this is just a continuation of the move from West to East. But we have plenty of room to expand there. The labor force is significant. So I don't anticipate needing to do anything else as it relates to expansion that is going to fill that one up.

Okay. Great. Thank you.

Your next question comes from the line of John Rolfe with Argand Capital. Go ahead, please.

Hi. Good morning guys. A few questions for you. First, you mentioned that the 2016 growth is 3.1% to 4.7%. Just to confirm, so that 3% to 4.7%, is that a constant currency apples-to-apples adjustment for the divestitures as well as Shenya? Or is that not fully apples-to-apples or organic currency type growth?

John, thanks for the call. Specifically related to 2016, when you take a look at the midrange, we will show about 2% on topline growth. When you take out the dispositions of Rockford and the run out of T&E, that adds roughly 1.9% or 2% of incremental growth. FX, we do think is going to negatively hit us. Based on the rates that we are assuming, that's going to add another, call it 1.2% or so percent. So that gives us up to the midrange or the high end of the range that Jeff mentioned.

Okay. Got it. In terms of the working capital improvements, clearly in the fourth quarter you guys made huge strides there and generated a whole lot of cash our of your working capital. How should we be thinking about targets going forward? How do guys, I guess from a modeling perspective and how do you guys think about what additional can be achieved there going forward?

Sure. When you take a look at where we ended, we reduce working capital in the fourth quarter by about $106 million, driven by AR collections primarily driven by a lot of tooling collections from the OEMs. We took inventory down about 20 days and payables up to about 47 days. So when you think about that from working capital, we still think we have got more room to go there. We have still got in 2016 another day of inventory. We have still got a few days of payables that we are executing on with the procure-to-pay strategy. So there is incremental opportunity there and working capital. However, when we continue to think through growth in Europe and specifically in Asia, we have got a lot of strategies that we are working on to decrease receivables, but there is a counter move there, based on extended terms that you end up seeing in those regions. We think there is incremental opportunity net net on working capital between now and 2016, which is going to help generate incremental cash flow.

And John, I think it's important to note, this is Jeff, I think it is important to note here that as we have rolled out the business systems that we continue to refer to as the Cooper-Standard operating system, we continue to talk about the best business practice tool. This is how we are running the company. So when you go across all of our plants in all of our businesses, we are able to clearly see with data where the best performing ones are and then we are able to quickly transfer those lessons learned and best practices around the business. These guys come together speaking around the table as a conference call around the world every month. They are reviewing all of the operating metrics that have been assigned to the plants, including some of the working capital that Matt just talked to you about. So this is how the business is running. It will continue to improve each and every year as we as we go forward. I mentioned before that we have actually two of our businesses this year, fluid transfer system as well as fuel and brake business will just be getting online really with the tool that we have focused primarily on the sealing business over the course of the last year. So I fully expect that we will continue to march our way towards world-class over the course the next one to two years, but we certainly didn't achieve that in 2015. That's just the continuous improvement that you see as a result of a lot of good work, but there is still a lot of work to do

Okay. Great. And last question, on a reported basis, you had a pretty attractive tax rate in 2015. I know there is kind of a lot of moving pieces going forward in terms of mix of business regionally as well as whether you are able to get Europe back to some reasonable level of profitability. But how do you guys think about tax rate a couple of years out with what might be a reasonable regional mix of business? How should we be thinking about tax rate when you look out a couple of years?

Good question John. I think we expect our future effective tax rate to be under 30% as our mix of earnings continues to improve. We get a little more profitable in Europe. We continue to grow in Asia.

Okay. Great. Thanks very much and nice quarter, nice year.

Thanks John.

[Operator Instructions]. Your next question comes from Glenn Chin with Buckingham Research. Please go ahead.

Good morning gentlemen. Congrats on another nice quarter.

Thank you, Glenn.

So just first on housekeeping type question on SGA&E. So really more a question for Marr. So Matt, you discussed SGA&E, keeping it low at 10% of sales threshold recently. It's crept up above that threshold? Is this the new run rate we should expect kind of sequentially fair amount?

No, our goal going forward, Glenn, on balance for the year is to maintain it below 10% SGA&E figure. And we are changing that on a go forward basis. As you see sales increase and decrease seasonally throughout the quarters, that will change. Specifically in the fourth quarter, as Jeff has mentioned, we did make a year-to-date true-up in the fourth quarter for incentive compensation based on the results that we had for the year. So you make a 12-month true-up in December for that. We still anticipate that number being below 10% going forward even with an incremental 161 or so programs being launched in 2016. So from a modeling perspective, keep it under 10%.

Okay. Very good. And then just on South America. Jeff, I had discussed it with you in the past and imminent plans for dramatic action down there? You did mention that you are building out in anticipation of three million unit build down there?

Yes. We have challenged our leadership team, Glenn, to think about that market in terms of three million units and make money at three million units. So they are in the processes of working their way through that and we anticipate much a better performance in 2016, because we continue to take cost out of the business and work with our customers to try to get a little bit of help as well. But at the end of the day, it's still going to be a very tough place to make money in 2016, but we are committed to being there, at least as long as our customers are committed to being there, I will say it that way.

Okay. Very good. And this $19.3 million impairment charge you took down there, that's not to say assets down there have been fully impaired?

Not fully, but it was a big P&E charge as well as an intangible charge, Glenn.

Okay. Very good. That's it for me, gentlemen. Thank you and congrats again.

Thank you.

Thanks, Glenn.

[Operator Instructions]. Your next question comes from Scott Segal with MSD Partners. Please go ahead.

Hi guys. Congratulations on another great quarter.

Thank you Scott.

Thanks Scott.

Just two quick questions for you. In 2015, you reduced cost by $100 million which is obviously a great feat and when I look at our adjusted EBITDA, not all of that fell to the adjusted EBITDA line. Is that $100 million, should we think of that on a run rate basis? Or why didn't more of it fall to the bottomline?

Scott, that's a good question. I think there is two buckets here. On balance, we would probably expect 30% or so of that to fall through with offsets being in customer price, normal wage inflation as well as indirect cost inflation. However, when you take a look at 2015, in particular in the remnants of 2014, we have been seen $30 million plus of EBITDA erosion based on foreign exchange. While the sales number is a few hundred million dollars, the EBITDA still has been $30 million. We have got natural hedging with cost in those places where we have got sales erosion, but that's impacting some of that as well. So going from $311 million to $362 million, we are helped out by volume, but we are also helped out as again by the net operating cost. If you take a look at that in 2016, we have talked externally about meaning to drive an incremental $100 million of net operating efficiency throughout the business. We anticipate a bit of pressure coming from foreign exchange, but we still anticipate 30% plus of that falling through.

So if you have 30% of that falling through, how do I put that to the increase in the guidance, because on an annual basis, wouldn't that imply 100 basis points of an increase relative to the 10.8% that we are at today and that gives no credit for the flow through in incremental volumes that you expect to see?

I think what you would end up seeing there is a couple of things. One is, there is an incremental fall through that you would see from the volume. Some of that is going to be eroded with incremental FX. And the gross margin line, you will see that level of expansion, but you will see a bit of expansion as well from the SG&A perspective to erode a bit more of that.

Got it. That makes sense. Okay. Thanks guys. Thanks for great quarter.

Okay.

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

Okay. Thanks everyone for joining the call. Great questions .We look forward to taking more of your questions as the next quarter rolls on. Hope to talk to you very soon. Thank you.

This concludes today's conference call. You may now disconnect.