Cooper-Standard Holdings Inc. (CPS) Q1 2018 Earnings Report, Transcript and Summary

Good morning ladies and gentlemen, and welcome to the Cooper-Standard First Quarter 2018 Earnings Conference Call. [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.

Thank you Angela and good morning everyone. We appreciate you taking the time to join our call. 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 Banas, Executive Vice President and Chief Financial Officer. Before we begin, I need to remind you that this presentation contains forward-looking statements. While these 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 being said, I'll turn the call over to Jeff Edwards.

Okay. Thanks Roger and good morning everyone. I’d like to begin on slide five with some highlights, data points and key accomplishments in the first quarter. First of all, sales reached an all time record of $967 million in the quarter, that’s up more than 7% over the same period last year. Our newly launched business and continuing demand for SUV and light truck gave us solid volume and mix improvement on the top line, even though the total global light vehicle production was down. Foreign exchange rates were also a positive factor, especially in Europe and Asia. Adjusted EBITDA for the quarter was $123 million. This was a first quarter record and an increase of more than 10% over last year. The key driver of the increase was $25 million in cost reductions from improved operating efficiencies. Our global team continues to make terrific progress towards world class in both our manufacturing facilities and in our administrative functions. These continuing improvements help to offset the headwinds from material cost increases in customer price adjustments, driving the strong quarter results. The safety of our employees remains the top priority for everyone at Cooper Standard. We are very proud of our 65 locations that finished the quarter without a single safety incident. Our total incident rate was once again improved versus last year and better than our world-class benchmark. Our total safety culture has been embraced throughout the company and the commitment to keep each other safe will continue to drive even further improvements. We had a very strong quarter in terms of new program launches as well, a total of 50 of those. This represented an increase of more than 85% compared to the first quarter last year. While this is significant volume, our flawless launch system enables our team to smoothly manage these launches, certainly providing the outstanding service and quality our customers deserve and have certainly come to expect from Cooper Standard. Successful launches are a key consideration of our customers when they are awarding contracts for future business and its certainly part of the reason we continue to receive many new contract awards. In the first quarter our annual net new business awards totaled $140 million. Product technology and innovation are also key factors in winning new contracts. Our latest technological advances that continue to be very well received. In fact during the quarter we received contract awards for our innovation products totaling $70 million in annualized sales, including both new and replacement business. Turning to slide six, with these most recent innovation and sales awards, our total since we first began to commercialize our innovations in 2016 now exceeds $0.5 billion, and these awarded contracts – as these awarded contracts come into production, our higher value add, higher margin products will soon begin to have more significant financial impact within our core automotive business. We anticipate annualized sales of our innovation products in the automotive industry will exceed $1 billion within the next five years. Our innovations are opening doors with new customers and expanding opportunities with the existing ones. During the first quarter our Fortrex technology was approved, certified by a key automotive customer in Germany. We believe this lends further credibility to the technology and will likely lead to other European and Asian customers approving it, placing orders for it in the near future. Additionally, outside of the automotive industry we’ve initiated an accelerated program to add Fortrex technology to our industrial and specialty group product lineup and we refer to that as the ISG group. This program is in early stages that could begin to generate revenue by the third quarter of this year. Initially we will look to convert existing products and customers to Fortrex technology with the expectation that increased awareness for the benefits of Fortrex will resolve in incremental demand going forward. Moving on to slide seven, increasing customer orders and demand certainly provide evidence that our innovations are valued in appreciated. Industry recognition such as the Automotive News PACE Award is further evidence that the automotive industry overall is taking notice of our breakthrough technology. We are very pleased to have received a PACE Award last month for our innovative Fortrex technology in automotive sealing applications. Known as the automotive industry benchmark for innovation, PACE Award honors superior innovation, technological advancement and business performance among automotive suppliers. It’s a prestigious honor for our innovation team and the entire company. We thank Automotive News and the Automotive Parts Manufactures Association for running this rigorous judging process that highlights the best of the best innovations that have been developed and commercialized by automotive suppliers. Moving to slide eight, we are also very pleased to have been recently selected as the General Motors supplier of the year and also a finalist for the Fiat Chrysler Suppler of the Year Award. GM gives their prestigious Supplier of the Year Awards to a select group of suppliers each year who go above and beyond GM standards in providing value through innovation, quality and service. This year approximately 130 suppliers received the honor out of a total of more than 20,000; so it’s certainly a significant achievement. We’d like to congratulate our Fluid Transfer Systems team as their continuing hard world and dedication is what earned this high level of customer appreciate. In addition to these notable global awards, we continue to win numerous honors awards and customer recognition at the regional level or in our individual production locations. In fact, in total we’ve received over 40 customer awards in the past 12 months. Receiving these types of customer and industry recognition puts us in elite company and we believe they help confirm the progress we are making towards becoming a world class company. So congratulations to all the employees that contributed and we are very honored that our customers are excited to be doing business with Cooper Standard. So Jon, let me turn the call over to you.

Okay, thanks Jeff and good morning everyone. In the next few slides I’ll provide some additional details on our first quarter financial results and also comment briefly on our liquidity, capital structure and balance sheet profile. On slide 10 we have a summary of our results for the first quarter of 2018 in comparison to the prior year. First quarter 2018 sales were a record $967.4 million, up 7.2% over the first quarter of last year. The strong improvement was driven by favorable foreign exchange of $53 million, primarily in Europe and Asia and solid gains and volume and mix in all regions. These were partially offset by the impact of customer price reduction, which amounted to approximately 2.7% in the quarter and included some one-time concessions. For the full year we expect customer price reductions to average around 2% of sales. Gross profit for the quarter was $170.9 million, a slight increase as compared to the first quarter of last year. For gross margin as a percentage of sales, the impact of vehicle production mix and customer price reductions more than offset the $25 million in operating efficiencies that Jeff mentioned earlier. Adjusted EBITDA for the first quarter was $122.6 million or 12.7% of sales compared to $111 million or 12.3% of sales in the first quarter of 2017. This improvement was a result of increased operational efficiencies and other lean initiatives, as well as lower SGA&E expense. Selling, general, administrative and engineering was 8.3% of sales in the first quarter versus 9.7% of sales last year. Lower compensation related costs and other lean initiatives were the key drivers for this improvement. As we said previously, we continue to invest in systems and process improvements that are enabling us to work smarter and more efficiency in administrative and support function just as we do in our manufacturing operations. Going forward we expect these investments will drive further cost savings in SGA&E. We continue to see commodity cost inflation on certain raw materials in the quarter, but we are able to substantially mitigate the impact through supply chain optimization efforts. As we look ahead we expect commodity pricing pressures to continue through the year. We will continue to implement strategies that will leverage our global scale to help offset the higher costs. Our effective tax rate for the quarter was 17% compared to 22% for the first quarter of 2017. The lower rate is driven primarily by the new U.S. tax law including the reduced U.S. statutory rate of 21%. We continue to analyze and interpret the impacts of tax reforms on our business and for now are maintaining our current EPR [ph] guidance for the year. Net income for the quarter was $56.8 million. On an adjusted basis, net income was $63.8 million or $3.45 per diluted share, up 14% and 17% respectively compared to the first quarter of 2017. Related to the CapEx our spending was higher in the first quarter due to the timing of customer launches and certain capital projects to support future growth. This was in-line with our plans and expectations and we expect the rate of spending to balance out later in the year. Our full year expectations for CapEx remained in the guidance range we have provided. On the next slide, slide 11, we break out our sales growth by region and show organic growth rate for sales growth excluding the impacts of foreign exchange and acquisitions and divestitures. Our year-over-year sales growth was 7.2% for the quarter. On an organic basis our sales grew 2.1%, which was well in excess of the overall global market declines. In fact compared to light vehicle production rates, we outpace the market in three of our four regions. We believe our continued focus on innovation, global footprint enhancement and leading technologies provide us the sustainable competitive advantages that are likely to drive continued market share gains. Moving to slide 12. Our balance sheet and credit profile remains strong. We ended the first quarter of 2018 with $420 million of cash on hand. Our total debt at the end of the quarter was $758 million and net debt was $338 million. This compares to net debt of $355 million at the same time last year. Our gross debt for trailing 12 months adjusted EBITDA is 1.6x, an improvement from 1.8x at the end of the first quarter of 2017. On a net basis our leverage ratio is currently just 0.7x and our interest coverage ratio improved to over 11x. During the quarter we entered into a third amendment to our term loan facility, lowering the interest rate by 25 basis points to the euro dollar rate plus 200 basis points. The lower rate will reduce cash interest expense by nearly $1 million annually for the remaining term of the loan. With cash on hand and an undrawn revolver, we maintained solid liquidity of $620 million as of March 2018. Finally a few thoughts on cash flow for the quarter. Free cash flow was an outflow of $78.4 million compared to an outflow of $54.6 million in the first quarter of 2017. As you know a cash out flow in the first quarter of the year is excepted and typical for us given the seasonal pattern for working capital in the industry. The year-over-year change in free cash flow is primarily driven by the timing of certain customer payments and lower utilization of our accounts receivable factoring program in Europe, as well as the higher CapEx mentioned earlier. We expect continued strength in cash generation in the future and when combined with our strong balance sheet and credit profile, we expect that our liquidity will support our strategic plans and priorities. With this in mind, our approach to capital allocation remains consistent with profitable growth whether organic or through strategic acquisitions being the top priority. Now Jeff, let me turn the call back over to you.

Okay, thanks Jon. To wrap up our discussion this morning, let me just take a minute to review our outlook and guidance for 2018; let’s move to slide 14. So following our strong results in the quarter, we feel very good about our prospects and the opportunities for the full year. The guidance ranges we provided at the time of our last call are still reflective of our outlook. We expect the pricing pressures from our customers and cost pressures from commodities to continue. However, we have cost reduction initiatives underway that we believe will continue to offset those pressures and still enable us to expand margins to between 12.7% and 13.3% for the full year. Our core automotive business is stronger than ever and has the potential to get even stronger over the next several years. In addition, we remain very excited about the non-automotive business opportunities that have the potential to create significant incremental value for the company. We want to end by thanking our global Cooper Standard team for their continued engagement in executing our strategies and utilizing the many world class systems that have been put in place to support our customers and to grow our business. We also want to thank our customers for their continuing support and trust. This concludes our prepared comments. So we’ll now open the line for Q&A.

[Operator Instructions]. Our first question is from Matt Koranda with Roth Capital.

Good morning guys.

Hey Matt.

Hey Matt.

Just wanted to see, just a housekeeping item, is it possible for you guys to provide the allocation of restructuring expenses by regions this quarter and then what region should we allocated the debt extinguishment cost to?

The debt extinguishment is the easiest. That will be our North American charge, because that’s where our headquarters sits. The charge was about $1000, so that one is the easy piece. Roger, do you have the restructuring handy for this segment.

I don’t have it right at hand, but we can get it and do a quick follow-up.

That’s an easy one, we can follow-up with you.

Follow-up offline on that one, okay thank you. And then I guess, what I would look at it in terms of the outlook is the reiterated guidance I guess would imply slightly lower revenue for the remainder of the year, but coming at sort of roughly a higher margin. But could you kind of talk about raw material and input pricing increases, are you seeing any headwinds that are more incremental since the last call or are you talking about sort of the same level of headwind [inaudible].

Hey Matt, this is Jeff. I’ll talk about the revenue and then Jon can give you some pretty detailed color around the raw material pressures. On the revenue front is as we say every year, we tend to prefer to wait until we get to July. If we are going to update anything associated with guidance on the top line, it give us the advantage point of really looking at releases out through almost the remainder of the calendar year. So that’s a pretty good way for us to accurately depict mid-year what we think about the top line. Clearly even after you discount the FX in the quarter there was still growth there and obviously we continue to see what I would say is even more favorable volume and mix associated with trucks and SUVs and I don’t see that changing. So there is a possibility that we may have to adjust something up in July in revenue, but let’s see how that goes. Regarding raw material, that continues to be a big challenge and nothing is going to change there. The other thing I would say about raw material cost Matt is, I guess this is 33 or 34 years of this for me. I don’t really take look at this raw material headwind that we are getting and suggest that it’s not something that most companies are prepared to deal with and you got to manage your cost side, you have to become more efficient across the business, including administrative functions which we have been preparing for all along. You have to have great relationships with your customers, because they have to help you with some of this heavy lifting and then you have to be smart enough from a purchasing point of view to leverage your scale across the world. So I’m not sitting here whining about raw material costs. I think that we’ll figure out how to deal with it going forward like we always do. So having said that, Jon can give you the color around it so you get a sense of what we are talking about.

Yes Matt, if you recall past discussions on the total year outlook, we think there is going to be about $14 million to $15 million of incremental commodity inflation overall. Certainly metals will be a continued headwind given the volatility and steel and aluminum prices there. But more significantly, overall for us it will be the chemicals and oil bucket where Carbon Black and EPDM and certain resins are driving inflationary pressures for us. So based on our earlier expectations when we set our plan, we thought we’d be at about $26 million to $27 million and we are running about $14 million or so higher than that.

Got it, okay. So $14 million to $15 million of incremental, above and beyond the $26 million, $27 million that you guys mentioned in the prior call.

Yes correct.

Okay, that’s helpful. I guess that threads in with my next question which is on the cost savings bucket. I mean $25 million in operational efficiencies in the quarter was I guess a little bit more than I would have expected in terms of you guys hitting your typical run rate of $85 million for the full year. I guess is that $25 million sort of sustainable through the remaining quarters or are we just looking at some lumpiness in terms of any other savings quarter-to-quarter.

Yeah Matt, this is Jeff. Certainly not lumpy. We expect to continue to take cost out of the similar rate for the year. Again, back to the momentum that has been built the last couple of years really around the world, our teams are just doing a great job of transferring best practices and taking the cost of our day-to-day operations down and I think I was pretty open in the last call about doing the same thing you know on the administrative side. We’ve invested in IT infrastructure over the last few years and that’s allowing us to get very aggressive on the overall cost. I think you saw some of that reflected in our SG&A for the quarter. So we’re very pleased with it. Our teams are very engaged and just doing a fantastic job.

Okay, just to do the math really quickly with you guys here, so that if I drag that $25 million out we’re looking at you know roughly a run rate of $100 million, which would be an incremental 15, which potentially offsets I guess some of the increased commodity inflation that you guys are seeing. Is that a fair assumption?

Yeah, that’s what I was trying to tell you in the beginning is that the headwinds are there, but our performance is helping to mark it down. So I would expect that will continue and it wouldn’t surprise me if we sat here next quarter and talked about more economic headwinds, but we’re expecting that and we’re preparing on those things that we can control to manage them even better going forward, so that’s why we’re bullish on the year.

Okay, that’s helpful. Alright, last one for me and then I’ll jump back in queue. But on the adjacent markets I know it was kind of mentioned in the prepared remarks, but you didn’t have the typical slide in terms of the advance technology products and adjacent markets there. So I was curious if you guys could give us an update just in terms of – sort of terms of your negotiations that are underway. I think there were eight as of Q4, but where does that stand now and you know I guess what are the key gating items that we need to get through before there is a little bit more substantial announcements to make there?

Yeah, I think there were two things on the Fortrex front. So first of all, I mentioned that we finally have Germany signed up, so we’re excited about that, and then secondly with Jeff DeBest joining the team, we’re very pleased with the momentum that he and I were building within the adjacent market business. So they are having very high level meetings with respective customers across each of those areas that we’ve talked to you in the past. So whether it’s the building or the roofing or shoes or wiring cable, we continue to make progress there Matt. We aren’t to a position where we can define that for you yet, but I can tell you the interest continues to grow and this just isn’t a North American statement. We will be in Korea as a matter of fact here over the next week having very high level meetings there with a prospective partner, so it’s building momentum. I think when you guys are here on the 17th you can get a chance to tour the tech center and talk with Jeff and Lyle and Chris Couch and all of our terrific folks there in the tech center who will give you more color around it, but the momentum is building is how I would summarize it.

Alright, got it. Thanks guys.

Okay, Matt, to circle back on your restructuring question, we have $7.1 million of charges in the quarter, $1.1 million in North America, $5.5 million in Europe, $500,000 or so in Asia and a nominal amount in South America. You’ll see some more details on that when we file our Q later.

Our next question is from John Murphy from Bank of America.

Good morning John.

Good morning. This is Aileen Smith on for John.

Oh! Sorry Aileen.

No worries. Thanks for the commentary on the raw material cost dynamic. Can you remind us what percent of the raw material cost burden [Audio Gap] you bear on average and what percent you may be able to pass on to your customers?

Yeah, what we said in the past Aileen is that we don’t – when the raw material prices go up, the good news is we don’t go broke. When they go down, we don’t get rich. So we’ve been able to in the 50%-ish range and it varies between those business here in the North America and Fernando’s [ph] in Europe, they are all a little bit different, but you can use that numbers as still pretty good in terms of how we think about it. That’s the reason I made the comment before about our ability to work with customers, our ability to work with the suppliers and our ability to drive cost out of the business, all of those things are – well, this isn’t just a discussion about what’s going wrong. You have to run the business and drive these things to the best of your ability and so far we’ve been able to do that very well.

And just as a follow-up to that, for the adjacent businesses that your currently working on, expanding or quoting for, will those contracts be set up similarly to the existing automotive business where you are able to pass on some of the commodity cost inflation to your customers?

I think those grillers will be smaller, so I would expect that terms and conditions where we have an advantage from the technology point of view will be more favorable than they are now on the other side. That’s what it looks like to me early on.

Okay, and then second question on the customer price reductions that you stated in the press release. Have these gotten remarkably worse over the past year with volume growth in some major regions that’s starting to moderate or are they the standard price downs that you typically experience and is the pressure more acute in any one region or another?

Well as I mentioned in the last call, we do have some pressure built into the plan. We’ve averaged you know between 1.5% and 1.7% for the last several years. In 2018 we bumped that up to 2%. That was really due to more of the contractual arrangements that we agreed to you know years in advance to winning business, so it’s sort of math there. I wouldn’t say there is a particular dynamic that we’re faced with across any region that I would consider unusual. For us this is sort of you know how it works in the industry and I don’t see anything that you would term based on your question on usual.

That’s helpful and last question, one of the developments that we’ve been seeing among your customer base over the past year is that automakers are taking a hard look at their business portfolios and are rationalizing or in some cases shuttering non-economic segments in regions. In terms of you internal business planning and product investment, how disruptive are announcements like these with ford and passenger cars being the latest example and do recent developments like this only service more motivation to diversify end markets?

Two points there, I mentioned in a number of calls that we sort of were a little bit ahead of this trend I would say as it relates to our focus on winning business in trucks SUVs and CUVs and in fact here in North America where you refer to the announcements, you know our percentage is about 72% I think in trucks, SUVs, in crossover. The percentage of revenue, total revenue is about 70%. In fact on certain passenger cars that aren’t being impacted our revenue is some of the strongest that we have in the company, so we’re in pretty good shape as it relates to that. What was the second half of your question?

Just in terms of, do these recent developments serve as more motivation for you to diversify your end market towards more ancillary businesses like all the rougher products that you’re talking about?

I don’t think it serves any more or less in motivation or our strategies. Our strategy innovation is front and center and we all along felt that the ability to take as an example the Fortrex innovation across a $76 billion rubber industry and figure out how we can sell it there, it made sense for us. So I don’t think that the OEM strategy necessarily drove that. The other thing that I would say in the ISG business where we have $160 million or so in revenue, that’s non-automotive. We will continue to add to that portfolio in a big way both organic and inorganically and that provides us an opportunity to again with Fortrex there. I would say if we didn’t have Fortrex we probably wouldn’t be as focused on growing that business as fast as we’re talking about. So again, innovation drove that more than anything else.

Great, that’s very helpful. Thanks for the question.

Okay.

Our next question is from Michael Ward with Ward Transportation Research.

Good morning everyone.

Hey Mike.

Hey Mike.

Just to follow-up on an earlier question about the win in Germany, was that an auto related win?

Yes, it was.

Okay, and that’s your third auto win with Fortrex?

That is number four Mike.

Number four, okay. One in the U.S., one in Japan or the Japan based one in Germany you said and then what’s the other one.

Yeah, it depends how you look at those customers, but I call it one in Germany, a couple here and one across the pond in Asia is sort of how I would think about it.

Okay, and just since you know China so well, where are you guys winning in China? Is it all in the SUV market as that continues to expand or is it all towards the low end?

Primarily our strategy there Mike has been same as those business here in North America. We focus on the high content per vehicle opportunities that happens to be SUV’s and crossovers. Obviously SAIC is our largest customer there and that business for them continues to be probably better balanced than most, we have some passenger car as well. I think in total the number we gave for total company revenue, SUV’s, trucks, crossovers, I think it is a little bit above 60% as we sit here today and North America is above 70%, so that gives you some sense and Europe is basically all – you would consider that all cars for the moment. So between China and the North American market, that’s a big portion of the revenue there. The other thing we’re doing in China that’s very good or we’re very proud of our local teams there, they are also starting to win business from the domestic automakers and again in the area that we consider our space, the SUVs and crossovers and we’re very selective about what we’re going after there and we’re having success. And again, based a lot on technology and our ability to launch and our ability to produce higher quality product in the region versus what they have been historically buying from the local supply base. So there’s a couple of things going on there that are really helping us. The final comment I would make as you know, we are well on our way to achieving $1 billion in revenue in China. We are very pleased with the mix. We also are very pleased that we’re starting to make in-roads with the locals as well as the foreign JV’s.

Again, as some of the locals go to larger products or larger programs, bigger vehicles.

Yeah, obviously they are following the trend of the market and everything you see and read the investment will continue – we’re predicting the segment profile in China will look a whole lot more like North America than Europe.

When you look at the market, I think a few years ago you may have been the first one to say China is hitting the $30 million at some point, I don’t know when, but it will. Where do we go from here? Is the base ready?

$35 million, $40 million.

We can get there?

$45 million, $50 million, $1.3 billion, a lot of people. So as the country continues to develop, you know it will continue to grow. It’s not just in the automotive side. I mean I am very excited about Fortrex helping us there in the non-automotive and you think about facilities and you think about shoes and other products that we’re targeting, that’s a market we’re very interested in many, many ways.

Is it easier for a U.S. based company like yours to gain revenue than it was say 10 years ago when you were over there?

I think if you have technology and innovation you can make it happen. I think if you don’t have technology and innovation you better have strong partners.

Interesting! Just one housekeeping item, you mentioned – at least you had 50 launches in the first quarter. What is the cadence like in Q2, Q3 and Q4?

So we have 50 in Q1. It looks like we will do about 66 in Q2 Mike, 50 in Q3 and then 48 in Q4, so it’s pretty evenly spread and 214 launches for the total year, which is a 27% increase over last year.

Wow! Awesome! Thank you guys. I really appreciate it.

Okay. Thanks Mike.

And our next question is from David Tamberrino with Goldman Sachs.

Hi guys, this is Mariel Kennedy on for David Tamberrino.

Good morning.

Yeah, I just had some questions on some of the Fortrex wins. You guys saw pretty tough pressure in North American this quarter, but are you seeing any sort of incremental pricing power on Fortrex or innovation products or do you think that will come later as you are still pushing adoption with them now?

The programs that we’ve already won, we are getting favorable pricing on the raw material side of this thing. So I would tell you, it’s in the same, call it 7% to 10% premium on the raw material portion that we would have expected, so very favorably received. The customers love the lighter weight, they love the improved performance and they are willing to pay for it.

Okay thanks, that’s really helpful. And then just a little bit more on that, on the business that you are seeing with innovation products, are you seeing more on replacement or new wins?

It’s really a combination of both. We elected early on to go ahead and just to get Fortrex in to the market. We originally were only going to put it in if it was conquest, but the way things work in the industry, you [Audio Gap] so we felt it was easier to do that on existing programs. But since, we’ve gone after the conquest business as well, and so we are having success on both fronts. On the MagAlloy for Honda that we’ve announced, I think we’ve had three or four different wins with Honda since the first one we announced a year and a half ago. It’s already launched as a matter of fact. That was a barrier to entry for the company for many years and the MagAlloy technology actually opened the doors for us to do business with Honda on the fuel and brake business. So we are seeing more examples of that than not.

Thanks so much, that’s really helpful. And then jus the last question, on those. With the contract sizes currently being a little bit smaller on these products, do you have any sort of sense when we can expect to see larger contracts or is that pretty far out?

I think what I said this morning, we have given you some context on this. I think out into the 2022 time period we expect about $1 billion. If you think about the revenue that we have today in our core automotive business being call it $3.6 billion, $3.7 billion, by the time we hit 2022-ish about a $1 billion of that will have turned over in the, what you are referring to as the innovative product. And so as you go out further in the cycles, we would expect that the core portfolio continues to turnover. I’ll give you an example. In North American on the Fortrex product as we have won programs and those that we are highly confident of winning, I hear this year and next, our sealing business in North America will almost be 30% Fortrex, so it’s coming.

Okay, thanks so much. That’s all from us.

Okay.

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

Hey, thank you Angela, and thank you all for your participation in our call this morning. We do appreciate your continuing interest in Cooper Standard and we look forward to speaking with you again soon. This concludes today’s call.

Thank you for participating. You may now disconnect.