Good morning, ladies and gentlemen. And welcome to the Cooper-Standard Second Quarter 2019 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. [Operator Instructions] 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.

Thanks, Howard, and good morning, everyone. We appreciate you 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.Before we begin, I need to remind you that this presentation contains forward-looking statements. While these statements 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 3 of this presentation and to the company's statements included in periodic filings with the Securities and Exchange Commission.This presentation also contains non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures are included in the appendix to the presentation.So with that out of the way, I will turn the call over to Jeff Edwards.

Okay. Thanks, Roger, and good morning, everyone. As outlined in our press release, our financial results fell short of expectations for the quarter. We continue to be negatively impacted by weak vehicle production volumes and unfavorable mix in all of our markets.We expected market weakness in Europe and Asia, but China once again was weaker than we had planned. And we could not have anticipated the delayed ramp of production on our important new vehicle launch with a key customer here in North America.The delayed production volume had a significant impact on the quarterly results compared to the second quarter of last year and compared to our plan for this year. But rest assured, we're explaining this, not complaining about it.To that point, our global team, which we recently reorganized under an improved organization structure, is focused on mitigating as much of these anticipated and unanticipated market impacts as possible. By many measures, we're achieving record performance. On Slide 5, we’ve provided some of the highlights of these achievements.We've been very successful at cutting costs through improved operating efficiency. In fact, through the first 6 months of the year, we've taken out $52 million of costs in our plants, and combined with restructuring savings and lean purchasing initiatives, we were on pace to achieve our target of $130 million in total cost savings for the full year.Our product quality continues to be outstanding. Through the first 6 months of the year, our customer scorecards for quality are 94% green. Similarly, our safety performance continues at a world-class pace and our total incident rate year-to-date is down 21% versus last year. We're especially proud of our 34 locations that have a perfect safety record so far this year with zero reportable incidents.During the second quarter, we successfully executed a company record…

Thanks, Jeff, and good morning, everyone. In the next few slides, I'll provide some detail on our financial results for the second quarter and also comment on our liquidity, balance sheet profile, and capital structure.On Slide 7, we show a summary of our results for the second quarter with comparisons to the prior year. Second quarter 2019 sales were $764.8 million, down 17.6% versus the second quarter of 2018.The year-over-year change was driven by the unfavorable volume and mix in all regions, as Jeff just described; the sale of our AVS business; unfavorable foreign exchange; and customer price reductions. These were partially offset by increased sales from recent acquisitions.Gross profit for the second quarter was $98 million, compared to $151.4 million in the same period a year ago. Adjusted EBITDA was $58.1 million or 7.6% of sales, compared to $107.9 million in the second quarter of 2018. The most significant driver of the decline in adjusted EBITDA was weaker volume and mix, including the impact of delayed ramp up of production in key launches.Also contributing to the decline were general inflation, customer price reductions, raw materials and the net impact of acquisitions and divestitures. These were only partially offset by the success of our continuing cost reduction initiatives.The sale of our AVS business resulted in a gain of $189.9 million recorded in the quarter. The effective tax rate on the gain was 22% or about $42 million, accounting for the majority of our total tax expense of $44.2 million in the quarter.However, the cash tax rate on the gain on sale was only 7.9% due to tax laws and tax credit carryforwards in the U.S. and Europe. With a U.S. GAAP effective tax rate of 23.4% for the quarter and 24.8% year-to-date, we now anticipate an ETR in the range…

Okay. Thanks, Jon. With the next few slides, I want to provide some perspective on our longer-term strategy and, more importantly, the actions we're taking to improve our financial results going forward.So moving to Slide 12. A core component of our long-term profitable growth strategy is the continued focus on innovation. Our success in this area is an increasing competitive advantage for us. As I discussed earlier, it's driving significant new sales awards.Our Fortrex material has dominated the innovation conversation for some time. It is just one of the many innovations we offer. We continue to advance a full pipeline of innovative products and technology.Our new FlushSeal technology was just introduced to the market during the second quarter, and we've already sold it for production on an exciting new premium electric vehicle. It is gaining attention with all of our customers, and we are in the midst of a global roadshow, featuring this product on-site at customer locations. With the premium, sleek appearance and improved aero acoustics this technology provides, we believe this first contract award is just the first of many.Moving to Slide 13. Looking ahead, we have a number of additional innovations that we expect to introduce to the market before the end of the year. LightHose 3, ArmorHose 3 and Armor 2 have all garnered significant attention from our customers due to the high performance and weight savings they provide. In some cases, they can drive cost savings for our customer, while still providing an enhanced margin for us. Importantly, we are leveraging our expertise in material science to deliver innovation across all of our product lines.Moving to Slide 14. We continue to make solid progress in our strategy to diversify our business. The current state of the global manufacturing industry is a perfect example why this…

Thank you. [Operator Instructions] Our first question or comment comes from the line of Mike Ward from Seaport Global. Your line is open.

Thank you. Good morning, everyone. Jeff, I want to make sure I got this right. Did you say you do not -- your assumptions for your guidance do not expect the lost volume from the new program ramp that you made up in the second half?

Yes. We took a conservative view there for the second half, Mike, and it's conservatively behind the original plan, so we just felt that it was prudent to take that bit of a conservative approach for the second half. That's correct.

Okay. That's despite the fact that the company, your customer, is adding another line and hiring employees, so you're just being ultra conservative?

Yes. Again, I haven't -- and then you know us, we don't really like to talk to or for our customers in these situations, so I won't indicate which one was for that aspect. But based on the information we have available, we just felt that was for this period.I mean, again, we're talking about 6 months here to make up a considerable number of vehicles, and we just thought, for our business, it was prudent to take this approach. For next year, I'm sure things are going to be on track and everything is going to be going extremely well.

Okay. Is the FlushSeal product different than the Fortrex-based window seal like in the Explorer?

Yes, it is, Mike. There's actually potential for incorporating the Fortrex technology within the FlushSeal product, but FlushSeal is really the way that the glass is aligned with the sheet metal, with the structure of the vehicle itself to give a much smoother and sleeker appearance and a quieter feel. We call it aeroacoustics. So yes, it's a new program, but we can actually incorporate the material science of Fortrex.

Okay. And the vehicles launched in 2Q?

No. That one hasn't launched, it's been sold – awarded for production.

Okay. The award was given, okay. How does content compare with traditional sealing products?

As we do with all our innovations, we try to get additional content, and hopefully improve value for the customers and value for our shareholders as well.

Okay. And then just one last thing. You mentioned that you had 8 plants targeted to close by the end of this year, and I guess 5 in Asia. I think that's what you said. When you look at those closures, are these plants shut, complete, gone? Or are they mothballed, that if volume comes back, that they can be turned back on in a relatively short period of time?

Yes. For the Asia footprint, Mike, this is Jeff, it's the mothball approach as we've talked in the past. I think, for us, it's more prudent to move our lines and consolidate lines into the number of plants that we actually need for the foreseeable future. As the volume comes back there, then we have the flexibility to open those back up, yes.

And when does your new business in China start to accelerate?

Well, we're launching a significant amount of new business in China as we speak. The issue there has more to do with the volume and mix for us than it does number of new programs.Just to give you some color around that, the data would suggest that, from a customer point of view in China, if you just look at year-over-year volume and mix reductions for all customers in China, that number is a little bit over 13% year-over-year down.If you look at the Cooper-Standard volume and mix associated with that customer group, ours is down about 30%, so a significant number of vehicles that we happen to be sourced on are significantly down from the previous year's volumes. So that really is our issue.The good news is, I guess, if you try to find some good news in that, is we have a tremendous amount of good information going forward, so it allows us to really take out costs and to address the fixed cost that were -- that I just spoke about going forward. So, we will get the costs out and the footprint will reflect that particular environment until that particular environment improves.

Perfect. Thank you.

Thank you. [Operator Instructions] Our next question or comment comes from the line of Mike Daigle [ph] from EME Asset Management.

Good morning. Thanks for taking the call. You bought back $30 million in stock in the quarter and you've got room left on the -- your purchase authorization. Do you expect to continue the cadence of the buyback between now and the end of the year? And secondly, will you do that, do you think, in an accelerated format or open market repurchases?

Mike, this is Jon. The $30 million program was an accelerated share repurchase program as you pointed out. So we had initial delivery of 80% of those shares, and technically the program is still open as our banking partner covers the shares. To date, so far, we bought them back at about an average of $43 per share.As I mentioned in my prepared remarks, though, we are going to sit back, I think, a little bit here for the rest of the year as we work through the industry dynamics, and we don't have any further plans at this point to spend any of the further $98 million authorization that we still have open.

That's probably prudent. Okay. Good luck.

Thank you.

Thank you. Our next question or comment comes from the line of Prateek Gupta from Goldman Sachs.

Can you hear me?

Yes, we hear you now Prateek. Go ahead.

Okay, great. Thanks for taking my questions. So my question was specifically around the guidance that you have provided. And if I'm kind of doing high level calculations around implications from 1H versus 2H, revenue is obviously softer, but margin profile looks much stronger.So, can you just help us bridge the gap in terms of where exactly this improvement in margin is coming from despite what looks like lower revenue?

Yes, Prateek. This is Jon again. Jeff alluded to this in his prepared remarks as the second half profitability looks to improve for us. The significant driver there year-over-year, sequentially, is going to be the significant launch cadence that we've got scheduled this year. We've got 272 launches, and 83 of those launch in Q3 and another 68 launch in Q4.So as the launches we've had year-to-date are at full run rate exiting the year and those other ones come online, we expect to have increased absorption and improved profitability in the back half of the year.

Okay. And one follow-up question around these launches would be, in terms of visibility, obviously, you know you’ve mentioned 2Q, some of the launches kind of surprised to the negative in terms of volume. So, what is the visibility level in terms of these launches actually getting down and actually getting the volumes that you are modeling in your guidance?

Yes. This is Jeff. So I think we're very confident in what we have just said, related to the guidance. The vehicle that we referred to is a challenge during the quarter. As I mentioned, we're being somewhat conservative in the back half related to the making of those units that were lost in the second quarter. That's our decision that we've taken. So that gives us a high level of confidence that what we do have in there is going to happen.

Okay. If I may, finally, any commentary around which regions these new launches are kind of spread across? Is it similar to your revenue mix right now or is it more concentrated in a particular region?

Yes, Prateek. It's Jon again. I can give you some further breakdown. Of the full year 272 programs, 163 of those are actually global platforms and 109 are regional when you look at the actual platforms themselves. But in Q3 and Q4, the North America region will launch another 45 programs. Europe will launch another 38, Asia will launch 58, and South America will launch another 10. So you can see it's a very global program and aggressive launch schedule that we have for all of our regions.

Got it. Thank you for the color and best of luck.

Thank you.

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

Okay. Thanks, everybody, for your questions. We appreciate your participation this morning, and we would invite you to reach out to us if you have further follow-up calls in the coming days and weeks. We thank you for your participation today and look forward to speaking to you again soon. This concludes our call. Thanks.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Every one, have a wonderful day.