First Quarter Highlights
- Net sales for the quarter increased to $679 million.
- International Operations reported record sales for the first quarter of $232 million, up 27 percent.
- Operating profit of $10 million.
- International Operations operating profit of $7 million.
- Share repurchases of $14 million or 803,300 shares.
FINDLAY, Ohio, May 7 /PRNewswire-FirstCall/ -- Cooper Tire & RubberCompany (NYSE: CTB) today reported net income of $2 million, or 3 cents pershare, for the quarter ended March 31, 2008. Net sales for the period were$679 million, an increase of $10 million over the prior year. The increasedrevenues were driven by volumes in the International segment. As with manyNorth American based manufacturing companies, Cooper faced challenges duringthe quarter that adversely affected operating results. These challengesincluded increased raw material costs, increased products liability costs, anddecreased volumes in North America.
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Net income for the quarter includes $344 thousand of income fromdiscontinued operations net of income taxes compared to $1 million in 2007.
The Company repurchased 803 thousand shares for $14 million. This bringsthe Company's total shares repurchased in the last six months to 3.8 million,or six percent of the company's outstanding shares. Debt repurchases duringthe quarter totaled $14 million.
North American Tire Operations
North American Tire generated sales of $498 million, down 3% from 2007'srecord first quarter, and $8 million in operating profit which wasconsiderably below the first quarter of 2007. The segment's decrease insales, compared to the first quarter of 2007, was the result of lower unitvolumes partially offset by improved mix. The largest volume decreases werein the areas of economy passenger and light truck tires. While this shortfallwas greater than industry declines as reported by the Rubber ManufacturersAssociation, a portion of the decline was a result of the Company's strategicdecisions to eliminate one brand and to exit sales of certain less profitablelines. The Company had also benefited during the first quarter of 2007 fromthe strike of a competitor.
Operating profit for North American Tire declined year over year as aresult of several key operating factors. An improved price to raw materialrelationship of $7 million compared to the first quarter of 2007 was offset bythe decreased volumes, affecting operating profit by $12 million. Plantoperations improved sequentially as the benefits from projects implemented inthe second half of 2007 were delivered. Products liability expense for thequarter was $14 million higher, mostly related to revised estimates onexisting reserves.
The declining dollar's impact and other factors are driving record-highraw material prices, specifically, in natural rubber and oil-derivedmaterials. The LIFO accounting method results in the most recent costs beingcharged against sales. When costs moderate, the North American operationswill experience lower charges to cost of goods sold than would be reportedunder a first-in, first-out accounting method.
The North American segment was successful in rebuilding inventories tomore acceptable levels while maintaining industry leading fill rates for itscustomers.
International Tire Operations
The Company's International Tire Operations reported sales of $232 millionin the quarter, an increase of 27 percent compared with the first quarter of2007. The segment's operating profit improved by 13 percent to $7 millionfrom the prior year. This increase was driven by higher unit volumes andpricing, offset by increased raw material and advertising costs in China asmarket development activities continue.
Management Commentary and Outlook
Recent changes in macroeconomic conditions in North America have created anew set of challenges for our Company. Consumers have reduced the number ofmiles driven in reaction to the economic slowdown, and subsequently aredelaying tire purchases. Raw material costs have continued to climb and showno signs of declining in the near term.
Roy Armes, Chief Executive Officer, added, 'Despite these headwinds, weare well-positioned and fully committed to our long-term strategy to build asustainable and cost competitive supply of tires, profitably grow ourbusiness, and increase our organizational capabilities. We are fortunate to bein a position to deal with this current economic environment with a strongbalance sheet, high liquidity levels and the anticipated sale of ourinvestment in Kumho Tire Company. We have the financial strength to pursuethese goals going into the second quarter, the rest of the year and beyond.
'We will increase our focus on delivering cost improvements during 2008,with the many initiatives we already have in place.
