Cooper-Standard Holdings Inc (CPS) 0 Q0 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Cooper Standard first quarter 2017 conference call -- 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.

Thanks, Heidi, and good morning, everyone.

We appreciate your taking the time to join our call today.

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 Slide 3 of this presentation and the company statements included in periodic filings with the Securities and Exchange Commission.

With that said, I turn the call over to Jeff Edwards.

Thanks, Roger.

And good morning, everyone.

I'd like to start -- to begin by highlighting the first quarter of 2017 results, which marks the 10th consecutive reporting period in which we delivered year-over-year improvement in adjusted EBITDA and adjusted EBITDA margin.

The chart on Slide 5 highlights some of the key financial measures.

Our sales in the quarter reached a record high of $902 million, which was a year-over-year increase of 5.6% while adjusting for foreign exchange.

The adjusted EBITDA for the quarter was a record $111 million, up more than 7% versus the same period last year.

Additionally, adjusted net income increased by 16% versus the same quarter last year.

So on behalf of our 30,000 employees around the world, we're pleased to once again deliver record results and continue delivering value for our customers and our shareholders.

On Slide 6, we highlight some of the major operating measures and accomplishments in the quarter.

We were awarded contracts for $141 million in net new business during the first 3 months of the year.

We had significant awards in each of our key regions with Asia Pacific being the strongest.

We successfully launched 29 new programs in the quarter, most of which were on global platforms.

And our continued effort to improve operating efficiency drove $22 million in cost reductions.

Safety is the top priority in all of our facilities.

Through the continued focus and effort, we're driving very positive results.

It's the first -- in the first quarter, 66 of our facilities had perfect safety performance, with 0 recordable incidents.

86% of our facilities had 0 lost time incidents.

Our total incident rate in the quarter was 48%, below the full year 2016 rate.

Finally, we are very proud to have received 8 prestigious customer awards during the quarter for excellence and service, product quality and effective product launches.

Turning to Slide 7. We are pleased to announce the first major production contract for our Fortrex material technology.

Last month, we were awarded a significant Fortrex based static sealing package on a major SUV platform.

The total package represents approximately $140 in content per vehicle, or $40 million in annual revenue.

We expect to ramp up to full rate on this program in the next few years.

So with the Fortrex technology now fully validated, we begun to [clode] our Fortrex family of products broadly with many of our customers.

We continue to see strong interest in this technology and we expect this interest will turn in additional production orders later this year.

In addition, the material scientists on our innovation team are developing new ways to adapt Fortrex technology and expand its application across product lines by using artificial intelligence modeling.

We believe this has the potential to greatly accelerate new product development, further extending our competitive advantage in our ability to add value for our customers.

As part of our emphasis on providing innovative technology and world-class customer service, we recently opened and expanded Asia headquarters and the state-of-the-art technical center in Shanghai, China.

This summer we'll be adding another technical center in Ching-Fu, China and we'll open a new global innovation center in Livonia, Michigan.

Moving to Slide 8. Given the sourcing of our breakthrough technologies by our customers, new orders for our recent product innovations totaled $61 million in the quarter.

We also have $70 million of pending open quotes and approximately $415 million in targeted new quotes that we hope to convert into sales in the near future.

In addition to the 2 production contracts, we continue making progress on 5 active development contracts for our Fortrex line of products.

Our innovation team has 49 active projects in the development pipeline that have the potential to add value in the future.

We are also continuing to develop and refine our adjacent market strategy to accelerate the value stream related to Fortrex material science.

So in summary, we're pleased with the start to the year with excellent operating results and great progress in the execution of our strategies.

As a leadership team, we want to thank our employees for their continued engagement and thank you, our customers, for your continued support and trust.

Now let me turn the call over to Matt.

Thanks, Jeff and good morning, everyone.

In the next few slides, I'll provide some additional detail on our financial results for the quarter.

I'll also comment briefly on our plans and priorities regarding capital allocation going forward.

On Slide 10, we show a summary of our results for the first quarter of 2017 compared to the same period last year.

For first quarter '17, our sales of $902 million were up 4.6% over the first quarter of 2016.

It was our single highest sales quarter in spite of some headwinds we faced from foreign exchange and the actions some of our customers took in North America to balance inventory levels earlier in the quarter.

Gross profit for the quarter was 18.9%.

This is the highest for any first quarter in history.

This was up 40 basis points over last year, which was our previous record high.

Our adjusted EBITDA of $111 million was also a record high for any quarter.

And at 12.3% of sales, this reflects an improvement of 30 basis points over last year and was in line with our expectations.

Our net income for the quarter was up 33% compared to the first quarter of last year, and our GAAP EPS was $2.20 per share.

Our adjusted net income of $55.9 million was an increase from approximately 16% versus last year in our adjusted EPS of $2.95 compared to $2.57 a year ago.

Moving to Slide 11.

In this bridge, you can see that our continued focus on improving operating efficiency along with benefits of improved volume and mix remain the key drivers of our increased adjusted EBITDA.

Now these were only partially offset by normal inflationary pressures on wages, contractual customer price reductions and raw material cost increases during the quarter.

We continue to see commodity cost inflation in certain raw materials, but have been able to mitigate this impact thus far through continued supply chain optimization efforts.

We expect our operating improvement actions coupled with volume and mix favorability to continue to outpace the pricing and inflationary pressures through 2017.

Then, as we move into 2018, you can expect to see more cost savings related to our European restructuring program, which remains on track for completion early next year.

Then beyond '18, we expect to see further top line and margin expansion related to the sales of our innovations that Jeff mentioned earlier coupled with continued growth in China.

Moving to Slide 12.

We believe we have a strong track record of margin expansion over the past 10 quarters and we believe continuing improvements in operational efficiency, the completion of our restructuring and the acceleration of our innovative products will give us plenty of room to continue this trend moving forward.

Moving to Slide 13, we ended the first quarter with $407 million of cash.

This was down from year-end due to typical seasonal cash flow patterns, but up significantly over the same period a year ago.

Our free cash flow was down versus last year, mainly due to the timing of working capital, some increased payments related to incentive compensation and restructuring and partially offset by increased earnings and reduced cash paid for taxes.

Our total debt in the quarter was at $762 million and with our debt declining -- as our net debt declining to $355 million.

With cash on hand and our undrawn revolver, we were maintaining a solid level of liquidity at $587 million going into the second quarter.

Through continued improvement in our EBITDA and cash generation, we continue to strengthen our credit profile.

Our gross debt to adjusted EBITDA is at 1.8x.

That's down from 2x at the end of the first quarter 2016.

Our interest expense has increased slightly over last year as a result of the refinancing we completed last fall.

And in the refinancing, we converted a portion of our term loan to a fixed rate bond and locked in at a rate of 5 5/8% for 10 years.

In spite of the higher interest expense, our interest coverage ratio remains at 9.9x.

And just yesterday, we completed a repricing of our term loan, lowering the interest rate to LIBOR plus 2 1/4, down from LIBOR plus 2 3/4 and this lower rate will reduce our annual interest expense by approximately $1.5 million going forward.

Moving to Slide 14.

Our priorities for capital allocation remain consistent.

Our top priorities are focused on continued profitable growth of the company, including the launch of new business, continued funding of our innovation programs and improving the growth in earnings potential of our operations through selective restructuring initiatives.

In addition, we are continually evaluating opportunities for inorganic growth and market consolidation within our core product lines.

Following the allocation of cash to profitable growth opportunities, we anticipate returning any excess cash to our stakeholders by buying back shares and paying down debt where it makes sense.

While we have considered dividends, we believe this will be more appropriate once we've met our longer-term growth objectives.

Now let me turn the call back to Jeff.

Okay.

Thanks, Matt.

And to wrap up our discussion this morning, we want to take just a minute to review our outlook and guidance for the full year 2017.

Following the strong start, we believe we are on track to deliver another record year in 2017.

We acknowledge the potential for some slight market headwinds in North America and China, light vehicle production this year.

Additionally, our sales in Europe will be down slightly in large part to foreign exchange and the run-off of contract production from the thermal and emission business that we sold back in 2014.

However, we expect this to be more than offset by continued improvement in product mix with the shift towards trucks, SUVs and crossovers and our growth plans in Asia.

Our outlook for sales as well as continued margin expansion remain in line with our projections at the first of the year.

As a result, we are reiterating our full year guidance.

So this concludes our prepared remarks.

Now let's open the line for additional questions.

(Operator Instructions) Our first question comes from Mike Ward from Seaport Global.

On the Fortrex contract.

Is that replacing an existing program?

Yes, it is, Mike.

It's -- we have the business today.

This will replace the traditional product.

But we're really excited about it, obviously.

There's been a lot of hard work and effort by our team here in North America with this particular customer and to have a contract with $140 of content and $40 million of annual sales, that's really good.

And I think even more important to now, we continue to receive a tremendous amount of interest and pull from many of our other customers on this technology.

So really, really good news to begin 2017.

Now, most SUVs in North America, I presume, share platforms with other vehicles, whether -- pickup trucks.

Is there a chance that they can extend beyond the 300,000 units that you have now?

Well, I think most importantly for us once, as you know -- knowing the industry well, once you're in there on a particular -- of course, this is a very important product for our customer and I'm sure once we get in there and improve the technology in this setting, it will result in more for us, we believe.

So I don't know that there is a connection with this particular one on any other models that sit next to it, but clearly to be in there on this type of prestigious vehicle will pay dividends on others in the future.

And it will be manufactured at existing facilities?

And -- is the process for Fortrex more simple than it is for what you're replacing now?

Yes, it'll -- to answer the first part of your question, it certainly will be manufactured in one of our existing facilities.

As we talked before, this runs on very similar production line -- extrusion lines at our EPDM product does in the changeover those lines is really minimal cost and effort on our part.

Obviously, the technology is new so the ramp up we're being very careful with and we haven't been out selling it to more than the net focused 5 or 6 that we've been talking to you about.

But now that we're this far down the road, we are opening it up for the rest of our customers.

That's great news.

Matt, you alluded to some of the material and commodity type headwinds.

Can you talk a little bit about what your exposure is and how it works?

And most of the commodity costs are passed through correct reopening the (inaudible) some exposure and how does this kind of flow through and which commodities are we talking about?

Yes, Mike, specifically we are seeing some headwind on a fair amount of our commodities.

Carbon black being the biggest commodity where we're seeing headwind there.

We are seeing headwind on EPDM, we're also seeing headwind on some process oils.

We talked about in our last call as well, seeing some headwind on metals.

Regarding some of the oil-based products, there is an amount that we are indexed, that we can pass through to our customers.

But we are seeing a fair amount of incremental inflation on those products throughout each of the regions in 2017.

To offset that, we've got lean efforts and supply chain optimization efforts that we're working on with our suppliers to mitigate what that impact is in net-net, we should be able to fully offset and still result in lower material cost on balance year-over-year.

What is the supply chain optimization?

What are you doing with that?

Essentially, that's working on lean products to try to design out and decrease the content and decrease price with the suppliers.

It's tougher in an inflationary environment, right?

Because a lot of the suppliers haven't had an opportunity to take prices up over the last series of years.

So it's really putting our purchasing team to task.

But we are seeing some positive results coming out of it.

So at the end of the day, like we try to work and collaborate with our customers, we need to work through and collaborate with our supply base as well to ensure that we are delivering the most cost-efficient product to our customers.

And we've developed some really nice partnerships with the supply base over the past few years.

Your next question comes from John Murphy with Bank of America Merrill Lynch.

This is Aileen Smith on for John.

First question, can you talk about your tax rate and what happened in the quarter to drive such a low rate?

And I realize that you guys are still reiterating your outlook for full year tax rate of 26% to 29%.

But in order to hit that range, you're going have to have a tax rate close to 30% in the back half of the year.

What do you expect to drive that level higher than what you thought in 1Q?

And is there any chance, you could potentially take your tax rate outlook down through the course of the year?

Aileen, this is Matt.

Our GAAP rate in the first quarter was at 22% and that's compared to 32% in the first quarter of 2016.

Essentially our ETR, the lower rate was driven by a significant tax benefit that we got for the excess deductions based on stock-based compensation.

So when you think about it given the increase in the value of our shares over the past 3 years, of our vesting period for our issues and grants, the actual tax rate for the compensation expense was significantly higher than what was booked at the time of the grants.

So the excess tax benefits on the compensation are treated as discrete in the quarter, really in which the trigger event occurs.

So ultimately, we had a couple hundred thousand options exercised in our issues that were granted at an average price of about $115 a share.

That enabled us to take a $5 million tax deduction.

That took our planned rate of the high '20s down to about 22% on a GAAP basis.

Additionally, from an adjusted net income perspective, when you take a look at the impairment that we took and 2 of the facilities that we had in Europe as well as the incremental restructuring cost, there's really no tax benefit that comes with them because they were cost incurred in a jurisdiction that didn't have income.

So essentially, you take that $15 million out of your pretax base and it takes your ETR down from 22% to 17.5%.

So with a GAAP rate of 22%, we anticipate on balance to still be in that range for the balance of the year, albeit probably at the low end of that 26% to 29% ETR that we had.

Now I know you and John typically take a look at the net income adjusted rate.

You need to adjust our GAAP rate down based on not having any tax favorability that comes from the restructuring add back and any impairment add backs.

Okay.

Great.

And then can we talk about your margins for a bit?

As you look into 2018 and beyond, how much room do you think there is left to expand margins through your continued restructuring and your cost rationalization programs?

And what is your expectation for margins with the launch of your material science products like Fortrex and ArmorHose?

Should we be thinking about your current margins as being at a sustainable level?

Or do you expect to drive further margin expansion in the out years?

That's a good question and what we've talked about with investors historically has been to contemplate about a 50 basis point expansion on average per year consistently over the next series of years.

So 2016, we had a 12% EBITDA rate; this year we guided to 12.3% to 12.8%.

And we think we're right in the midrange there.

And you think about this in 3 phases.

When we originally implement the Cooper Standard operating system and tried to identify operational efficiency, we were able to take $100 million in cost out in '15 and $85 million last year, we'll take similar to that out this year.

As that curve starts to flatten, on cost out in our existing facilities, Phase 2 kicks in really as the margin expansion that you start to see from the restructuring actions that we're just concluding end of 2017 in early '18 in Europe, which helps us expand margin a little bit more.

As you take a look out beyond 2018 into '19 and '20, is all of the incremental orders that we've booked on the innovative product, we are seeing margin expansion there because it comes with a price premium at similar cost to the existing product.

So when you add those together, it gives us a level of confidence that we should be able to see a 50 basis point at minimum incremental EBITDA expansion over the next series of years.

Your next question comes from Matt Koranda from Roth Capital.

Quickly on the new SUVs platform that you guys booked.

Did that result in more content per vehicle?

Could you just talk about the Delta and what you had on the prior platform versus what you're going to ramp to with the Fortrex materials?

Yes, this is Jeff, Matt.

The replacement order from a content per vehicle perspective, at least as we sit here today, we are going to call that virtually equal to the one that it replaces.

I think that's the easiest way for us to describe it.

As we get through the development process, as you know, over the next couple of years, it will be easier for us to be a little more clear with that, but right now it's easier for us to just to tell you it's the same.

Okay.

Got it.

I guess, in the future as you start to book incremental Fortrex wins, would it be safe to assume that the content per vehicle opportunity is increasing with that product?

Or is it mainly just kind of replacing the incumbent content that you had on vehicles prior?

Yes, I think we would hope that it increases.

The opportunity to take our Fortrex technology from the static seal, like we just were able to win, to dynamics is our next step.

So we don't have as much of that business, so we would certainly like to believe that once our customers understand the benefit on both the static and the dynamics, we will see an increase in content per vehicle.

Okay.

Got it.

Just moving on the guidance.

Could you guys just talk about kind of from a revenue perspective, how you see the year unfolding on sort of a quarterly revenue cadence perspective?

And if you can do it by region, that would be great.

Because even if I assume a pretty healthy drop in Q3 in North America, I still sort of seem to come to a middle to the high end of your revenue range for the year.

But wanted to kind of get a sense for the puts and takes by region.

So Matt, where we stand right now is we're still in the middle of that range, which is why we had guided there.

I mean, Jeff had alluded to on the call, given the April sales, there does seem to be a little bit of softness in North American [SAAR], and we've tried to -- we'll try to take that into account.

However, our view is that that's offset by continued strengthening in the SUV and crossover space.

So North America, even if the $17.6 million production rate drops down a couple few hundred thousand, we think we can weather that storm and still hit the midrange of our top line guidance.

China had a very good first quarter and we anticipate that number still oscillating in that 27.9 million to 28 million unit production range.

But when you take a look at the split between automobiles, crossovers, SUVs and trucks, we continue to see positive mix there.

So our strength in China continues to grow and in Asia Pacific we contemplate that number being upwards of closer to $600 million in 2017.

Europe continues to show favorability.

We had a original estimate as we had on the guidance of $21.8 million.

We continue to see the recovery there assuming that it's again 2 to 3 years behind the North American recovery and we expect that to be at or around 22 million units.

And we continue to grow there.

We are running into a little bit of headwind year-on-year as we bleed down the thermal and emissions business in Europe.

And that goes against our typical gains and share in market growth as well as the euro being at a $1.05, $1.06 rate.

It's causing some top line FX pressure for us in Europe.

Got it.

Just in Asia, if we could drill down into that a little bit more.

I think the Q1 performance, while good growth, would imply a pretty healthy ramp during the year to hit that $600 million run rate that you were talking about, Matt.

Maybe, could you just talk about kind of how the cadence of program launches for the year in that region?

And then sort of how those launches may impact operating margins during the latter parts of this year?

Sure.

When you take a look at program launches for the year, we are going to have about 176 new launches in the year.

As Jeff mentioned, we had 29 launches in the first quarter of 2017.

6 of those were in Asia Pacific.

Our current outlook based on releases and launch schedules, so that we are going to have close to 50 launches in Asia Pacific in the course of 2017.

So that 6 that we had in the first quarter, sales in comparison to the launch is that we'll end up seeing in the second, third and fourth quarter.

Additionally, Matt, what you'll end up seeing here is, the local Chinese OEMs continue to grow and in the second half of the year, we've got 9 programs that are going to be launching specifically with local OEMs, which is a big plus for us as we continue to grow our penetration and share in China both with a global as well as the local OEMs.

Your next question comes from Glenn Chin with Buckingham Research.

Can I ask you, I'm sorry if I missed it, but did you disclose what your organic revenue growth was for total company?

So FX and M&A?

Our organic was 5.1%, Glenn.

When you take exchange, price and the impact of M&A out, it was 5.1%.

So that includes price down?

Yes.

And how much was price down?

Roughly 1.5%, typical to what we have been running.

And then you disclosed what your organic revenue growth was in North America.

Can you share what it was in comparison with Asia and South America?

In the same metric, Matt?

So in Europe, our organic growth was just over 4% and in Asia Pacific, it was just over 1%.

Okay.

South America worth talking about?

Yes, South America organic was up 9%.

Our actual sales growth was up 44.7% in South America but 27.5% of that came from exchange.

So when you adjust for that and some of the price recovery that we are able to see, we actually were up 12%.

Okay.

And all of these numbers again, they include 1.5% price down?

Yes, it's a little bit different for each region.

Asia Pacific had a couple of points in price.

The total company was blended at 1.5%.

South America was positive, Asia had a couple of points, Europe was a little less than that.

Okay.

And then just going back to Fortrex, that's great news, obviously.

And is it logical to think that over time, Fortrex will replace all of your existing sealing business or do you envision a scenario where it will be Fortrex on some higher trend vehicles, for example, an existing TPV or EPDM on lower term levels?

Yes, Glenn, this is Jeff.

It will be blended.

It's not going to replace the entire market.

So we'll continue to have EPDM products, TPV products, Fortrex products.

As we mentioned before, we think certainly for the larger vehicles, large trucks, large SUVs, more luxury vehicles.

That's the home for our Fortrex product, we believe.

Okay.

And what is the hurdle for adoption on every vehicle, Jeff?

Is it just obviously -- is a cost-benefit, I'm assuming?

Well, anytime you have new technology and innovation that's going into the vehicles, there is a fairly long, exhaustive process, as you probably know, with our customers to get it all proved out and it isn't as simple as just getting it proved out with 1. You have to get it proved out with everybody.

So that's the primary hurdle was just the engineering time it takes to validate the product on each vehicle for each customer.

Okay.

And then on cash flow, a bit of an increase in working capital.

Matt, was this the reversal of a [teen] that we saw in the fourth quarter and likewise, can we expect another reversal in subsequent quarters?

Sure.

So Glenn, specifically on the cash flow side.

I think what you saw is a slight increase in working capital.

Essentially the increase in usage year-on-year was driven by that, primarily, on the payable side, when you net everything out and it's just some timing from the fourth quarter.

We had a -- from the cash side we had an incremental usage of comp, as we had a north of 100% bonuses we paid out as well as cash from restructuring was about $7 million higher on a year-over-year basis and they were offset by lower cash taxes of close to $8 million and an EBITDA was up 7%.

As you take a look forward, we still anticipate [80%].

We looking to add another day or two in 2017 to accounts payable.

So that will be net positive on the year.

And we'll continue to work through to take a day out of inventory and to maintain around 50 days on receivables.

(Operator Instructions) Your next question comes from [John Skikes] from Nomura.

A question for you on North America.

I know you're still saying 17.6.

What -- as these current run rate levels persist, will that -- I realize I did have to know what happens in Europe, in China and that type of thing.

But all other things being equal, would that cause you to take guidance down?

John, this is Jeff.

As we mentioned on the call, for us, you can't talk about the total unless you talk about the mix.

And the mix continues to be very favorable for us in terms of trucks, SUVs, crossovers in this market.

We certainly don't see any signs of that going down.

I mean, there's overtime being added and shifts being added by our customers to produce more of them.

So for us, we believe that, that will offset -- more than offset any of the total number that you referred to or at least is on our radar as we sit here talking to you this morning.

Okay.

I guess, I mean, do you view March and April as sort of an aberration?

I know Ford is saying this summer should be better.

Is that kind of what you're saying, too, with the 17.6 forecast even though it's not the thing that you worry about the most because of the mix and because of the diversity geographically.

But I'm just trying to drill, it's more of an industry thing with respect to that number?

Right.

I think that we're -- we're not in a position to talk for our customers, but I can tell you based on our releases, that lines up with the words that we're speaking to you this morning.

Okay.

Okay.

And then just in China, flipping back, I know [Guilie] is a decent size customer.

Do you feel relatively well positioned with the non-JV related local players?

Because it seems like those guys are stepping up production coming out with a better product.

Sounds like it's going to get a little bit more competitive in that market.

So do you feel comfortable with where you sit with those other players?

We do -- we're having, as Matt mentioned, quite a bit of success with the local Chinese automakers.

And we've build a regional team that has great relationships and getting really, really good results.

I think Matt mentioned, we have 9 launches with the Chinese OEMs as you're referring to here yet this year.

So we are in very good position.

We continue to target that as a goal for us going forward, just to have a better balance between the local OEMs that are winning and those that are lined up with Western automakers.

So obviously, they're both important but we are clearly targeting winning more business there.

Your next question come from Mariel Kennedy of Goldman Sachs.

Actually Dave Tamberrino here from Goldman.

I wanted to ask you a couple of questions.

First on the Fortrex announcement that you had last night, this morning.

How large of a size of your new business wins was it for the quarter and what sort of timing of it are we looking at the 2018 launch, 2019 launch, when we should be thinking about that rolling into the business and top line?

Yes, typically, Dave, when you take a look at it, it's a 2- to 3-year order placement to launch, so you could expect that in the next 2 to 3 years.

End of '19 and into '20 type of a timeframe for this first order.

And then in terms of sizing of new business wins and just flipping through the presentation, is it the majority of the book business, is it half for the quarter?

How should I think about that?

Sure.

When you take a look at our operational highlights and we've got $141 million in that new business, as Jeff mentioned, this was more of a replacement sort of business so that wouldn't fall into the $141 million.

It would be $40-plus million of the $70 million of innovation orders that we booked.

When you take a look at net new business for us and then generally in the industries, as you know, that net new business is incremental conquest stuff, since it was a replacement for business we already have.

We don't add to that bucket.

Understood.

That's why we call out the -- that's what we call out the innovation bucket of the $61 million of total innovation orders booked.

Understood.

And we think about the margin profile this business in the past you've talked about, being able to add value to the customer by reducing wait.

Should we also be seeing a step up in your content per vehicle as a result of that for these types of contracts and replacement wins?

Yes, I think generally speaking, David, that's accurate.

Obviously, as we win the first one with each customer, those that are little bit more fluent.

But going forward, your comment is spot on.

Okay.

Understood.

And just in the Asia-Pacific region, when we think about the margin profile for that business, I mean, should we be expecting a material ramp year-over-year as you continue to launch business over -- is the margin expansion opportunities for there more 2018 and beyond?

No, I think we continue to see a ramp there.

I mean, we report segment profit for that business, but when you add back depreciation and amortization, Asia-Pacific in the first quarter eclipsed a 10% EBITDA rate.

And 10.3% and we've been talking about over the last couple of years that we were in 12% to 13% rate, we took the acquisition of the Shenya business and it took us down below 10%.

This quarter, we'll be north of 10% in our view is as we go out, on a steady pace over the next series of years with incremental capacity utilization and topline growth and utilization of a fixed cost, we'll continue to see that grow into the mid-teens over the next few years.

It appears there are no more question.

I would now like to turn the call back over to Roger Hendriksen.

Okay, thanks everybody.

We appreciate your participation this morning and as other questions come up, please feel free to reach out.

Again, thanks for your participation and for your continued support of Cooper Standard.

This conclude today's conference call.

You may now disconnect.