Roger Hendriksen - Director, IR Jeffrey S. Edwards - Chairman and CEO Matthew W. Hardt - EVP and CFO.

Unidentified Analyst - Aileen Smith - Bank of America Merrill Lynch Matt Koranda - Roth Capital Partners Glenn Chin - Buckingham Research John Sykes - Nomura Securities David Tamberrino - Goldman Sachs.

Good morning, ladies and gentlemen. And welcome to the Cooper-Standard's First Quarter 2017 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 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’s statements included in periodic filings with the Securities and Exchange Commission. With that said, I’ll turn the call over to Jeff Edwards..

Okay, thanks Roger and good morning everyone. I would 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 and 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 $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 three 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.

Our continued effort to improve operating efficiency drove $22 million in cost reductions. Safety is a top priority at all of our facilities. Through the continued focus and effort we are driving very positive results. It's the first time -- in the first quarter 66 of our facilities got perfect safety performance with zero recordable incidents.

86% of our facilities had zero loss time incidents. Our total incident rate in the quarter was 48% below the full year 2016 rate. Finally we're very proud to have received a prestigious customer award during the quarter for Excellence in Service, product quality, and effective product launches.

Turning to slide 7, we're pleased to announce the first major production contract for our Fortrex material technology. Last month we were awarded a significant Fortrex based static ceiling 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've begun to quote 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 into 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 and our ability to add value for our customers.

As part of our emphasis on providing innovative technology and world class customer service we've recently opened and expanded Asia headquarters and a state of the art technical center in Shanghai, China. This summer we will be adding another technical center in Guangzhou, China and we will open a new global innovation center in Lavonia, 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 two production contracts, we continue making progress on five active development contracts for the 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 the 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 will provide some additional detail on our financial results for the quarter. I will 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.

The first quarter 2017, 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% and 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 and 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 2018 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 operation 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 will be 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 1.8 times, that's down from two times 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 and 5/8 for 10 years. In spite of the higher interest expense our interest coverage ratio remains at 9.9 times.

And just yesterday we completed a repricing of our term loan, lowering the interest rate to LIBOR plus two and a quarter down from LIBOR plus two and three quarters 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 and earnings potential of our operations through selective restructuring initiatives.

In addition we're 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've considered dividends we believe this would 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 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're 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 Lord from DPort Global [ph]. Please go ahead. .

Good morning everyone.

On the Fortrex contract, is that replacing an existing program?.

Yeah, it is Mike. We have the business today, this will replace the traditional product. So we're really excited about it and obviously it'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 then I think even more important than that we continue to receive a tremendous amount of interest in pool for 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 transit that 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 very important product for our customer and I'm sure once we get in there and prove the technology and 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 that clearly to be in there on this type of prestigious vehicle will pay dividends on others in the future. .

It will be manufactured at existing facilities, what is the process before trucks more simple than those which will be replacing them?.

Yeah, to answer the first part of question, it certainly will be manufactured in one of our existing facilities as we've talked before. This runs on very similar production line, extrusion lines that our EPDM product does and to change over those lines is really minimal cost and effort on our part.

Obviously the technology is new so the ramp up we are being very careful with and we haven't been out selling it to more than that focused five or six that we have 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. .

Well 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.

I mean most of the some of the commodity costs are passed through -- some exposure and you know what is -- how does that kind of flow through and which commodities are we talking about?.

Yeah, Mike specifically we are seeing some headwind on a fair amount of our commodities, carbon black being the biggest commodity where we are seeing headwind there. We're 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're 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 and 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're seeing some positive results coming out of it. Listen 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're 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. .

Terrific, thank you. .

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

Good morning guys, this is Aileen Smith on for John.

The 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 to 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 saw in 1Q and is there any chance you could potentially take your tax rate outlook down through the course of the year?.

Hey Aileen, this is Matt and thanks for the call. 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 our -- the increase in the value of our shares over the past three years of our vesting area 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 bucks a share, that enabled us to take a $5 million tax deduction.

That took our planned rate of the high 20's 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 in two 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 costs 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 in 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 the 26% to 29% ETR that we had. 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, thank you.

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 in 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 mid range there.

And you think about this in three phases, when we originally implemented the Cooper-Standard operating system and tried to identify operational efficiency we were able to take 100 million bucks in cost out in 2015 and 85 last year. We will 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 and early 2018 in Europe which helps us expand margin a little bit more.

As you take a look out beyond 2018, into 2019 and 2020 is all of the incremental orders that we've booked on the innovative product. We're 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 if 50 basis point at minimum incremental EBITDA expansion over the next series of years. .

Okay, great. That's it for me, thank you very much. .

Thanks Aileen. .

Your next question comes from Matt Koranda from ROTH Capital. Please go ahead.

Matt?.

Hey guys, sorry I was on mute there.

Quickly on the new SUVs last one 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?.

I think the, this is Jeff, Matt. Thanks for the question. The replacement order from a content per vehicle perspective at least as we sit here today we're 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'll be easier for us to be a little more clear with that but right now it is easier for us to just tell you it is the same. .

Okay, got it.

And I guess in the future as you start to book incremental Fortrex wins, would it be safe to assume that, that 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?.

Yeah, I think we would hope that it increases the opportunity to take our Fortrex technology from the static like we just were able to win to dynamics as 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 dynamic we will see an increase in content per vehicle. .

Okay, got it.

Just moving on to guidance, could you guys just talk about kind of from a revenue perspective how you see the year unfolding on a 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 the 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 April sales there does seem to be a little bit of softness in North American star [ph] and we have tried to -- we are trying to take that into account.

However, our view is that that's offset by continued strengthening in the SUV and crossover space. So in 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 mid range of our top line guidance.

You know, 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 crossover 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 two to three years behind in 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 lead down to thermal and emissions business in Europe.

And that goes against our typical gains in share and market growth as well as the euro being at 105-106 range. This is 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're going to have about 176 new launches in the year. As Jeff mentioned we had 29 launches in the first quarter of 2017, six of those were in Asia Pacific.

Our current outlook based on releases and launch schedule so that we're going to have close to 50 launches in Asia Pacific in the course of 2017. So that six that we had in the first quarter pales in comparison to the launches that we will end up seeing in the second, third, and fourth quarter.

Additionally Matt what you'll end up seeing here is the local Chinese OEM's continue to grow and in the second half of the year we've got nine 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 the global as well as the local OEMs. .

Great, that's great color. Thanks Matt, and I will jump back in queue. .

Your next question comes from the Glenn Chin with Buckingham Research. Please go ahead. .

Good morning gentleman, congrats on another solid quarter. .

Thanks Glenn. .

Can I ask you, I am sorry if I missed it, but did you disclose what your organic revenue growth was for total company, so ex effects 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%. .

Oh, and so that includes price down?.

Yes. .

And how much was price down?.

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

And you disclosed it what your organic revenue growth was in North America, can you share what it was in Europe, Asia, and South America, any metric Matt?.

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

South America we're 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 the 1.5% price down?.

Yeah, 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'll be Fortrex on some higher -- for example and existing TPV or EPDM on lower term levels?.

Yeah Glenn, this is Jeff. It'll be blended. It's not going to replace the entire market so we will continue to have EPDM products, TPV products, Fortrex products. As we mentioned before we think certainly for the larger vehicles, the large trucks, large SUVs more luxury vehicles that's the home for our Fortrex products we believe. .

Okay, and what is the hurdle for adoption on every vehicle, just how easy is the cost benefit I am assuming?.

Well anytime you have new technology and innovation it's going into the vehicles. There's a fairly long exhaustive process as you probably know with our customers to get it all proved out and it is a simple as just getting it proved out with one, you got to get it proved out with everybody.

So that's the primary hurdle or 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, that was just a reversal of exchange that we saw in the fourth quarter and likewise can you expect [indiscernible] 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 is just some timing for the fourth quarter.

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

As you take a look forward we still anticipate AP where we are looking to add another day or two in 2017 to accounts payable. So that will be net positive on the year. It will continue to work through to take a day out of inventory and to maintain around 50 days on receivables. .

Okay, very good. That's it for me, thank you. .

[Operator Instructions]. Your next question comes from John Sykes from Nomura. Please go ahead. .

Yeah, hey, good quarter, a question for you on North America, I know you're still saying 17.6 what -- if these current run rate levels persist will that -- I realize that you'd have to know what happens in Europe and China and that type of thing but all other things being equal would that cause you to take guidance down?.

Hi 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 just 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 that isn’t 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 the 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 are 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 are speaking to you this morning. .

Okay, okay, and then just in China flipping back, I know Gillies [ph] is a decent sized 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 built a regional team that has great relationships and getting really, really good results. I think Matt mentioned we have nine launches with the Chinese OEMs as you're referring to here this year.

So, we're in a very good position and we continue to target that as a goal for us going forward, is to have a better balance between the local OEM's 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. .

Okay, alright. Okay, thanks, I appreciate it. .

Your next question comes from Mario Pannagl with Goldman Sachs. Please go ahead. .

Hey guys, it is actually Dave Tamberrino here from Goldman.

Good morning, how you doing?.

Good morning Dave. .

I wanted to ask a couple of questions first on the Fortrex announcement that you had last night and this morning.

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

Yeah, typically Dave when you take a look at it it's a two to three year order placement to launch. So you could expect that in the next two or three years, end of 2019, end of 2020 type of a time frame 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 bucks 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 or the 70 of innovation orders that we've booked.

When you take a look at net new business for us and then generally in the industry as you know, the net new business is incremental conquest stuff. Since it was a replacement for business we already had, we don't add to that bucket. .

Understood….

That's where we call out the innovation bucket of the 61 million bucks of total innovation orders booked. .

Understood, thank you and we think about the margin profile of this business in the past, you have talked about being able to add value to the customer by reducing weight.

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?.

Yeah, I think generally speaking David that's accurate. Obviously as we win the first one with each customer those are a little bit more fluid but going forward your comment is spot on. .

Okay, understood and then 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 or is the margin expansion opportunities for 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, you know, Asia Pacific in the first quarter eclipsed to 10% EBITDA rate. At 10.3% and we have been talking about over the last couple years that we were in the 12% to 13% rate.

We took the acquisition of the Shenya business and it took us down below 10.

You know this quarter we will be North of 10% and our view is as we go out on a steady pace over the next series of years with incremental capacity utilization and top line growth and utilization of fixed cost we will continue to see that grow into the mid teens over the next few years. .

Understood, that is very helpful. I think it was a good looking quarter. Thank you very much for your time. .

Thanks for the call. .

It appears there are no more questions. 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 concludes today's conference call. You may now disconnect..