Second Quarter Highlights
- Net sales for the quarter increased to $773 million.
- Improved market penetration of the Cooper brand in North America.
- International Operations reported record sales for the second quarter of $283 million.
- Increased investments in 'low cost country' manufacturing.
- Continued liquidity and balance sheet strength.
FINDLAY, Ohio, Aug. 4 /PRNewswire-FirstCall/ -- Cooper Tire & Rubber
Company (NYSE: CTB) today reported a net loss of $22 million, or 38 cents per
share, for the quarter ended June 30, 2008. Net sales for the period were a
record $773 million, an increase of $43 million over the prior year. The
increased revenues were driven by pricing and improved mix partially offset by
decreased tire unit volumes in North America. As with many manufacturing
companies, Cooper faced intense challenges during the quarter that adversely
affected operating results. These included record high raw material costs,
increased utility costs, and weak market demand in North America. Raw
material shortages also led to Cooper's decision to temporarily curtail
production during the quarter in North America.
(Logo: http://www.newscom.com/cgi-bin/prnh/20010404/COOPERLOGO )
The Company's quarterly earnings were negatively impacted by an accounting
limitation on the amount of losses it could tax benefit on an interim
reporting basis. This negatively impacted the earnings per share by 21 cents
per share on a diluted basis.
Through the first six months of 2008, Cooper has generated a record $1.5
billion in net sales. The recorded net losses were $21 million during the
same period, compared to net income of $38 million in 2007.
North American Tire Operations
North American Tire generated sales of $548 million, up 3 percent from
2007's record second quarter. Operating losses were $22 million, an amount
significantly below the same period in 2007. The sales record was the result
of increased pricing and improved mix, offset by 13 percent lower volumes.
These lower volumes were primarily in the broadline area. The Cooper brand
continued to improve position in North America and increased its share of
market penetration as compared to the Rubber Manufacturers Association
reported shipments. Market penetration of light truck products also increased
during the quarter.
Operating profit for North American Tire declined year over year as a
result of several key operating factors. Raw material increases during the
quarter negatively affected results by $51 million. This was partially offset
by price increases of $32 million. Improved customer and product mix were
offset by decreased volumes during the quarter. The curtailment of production
triggered $13 million of costs during the quarter, primarily related to
unabsorbed overhead. Products liability expense for the quarter was $3
million higher. Other negative cost factors in North America related to
increased utility costs and the cost of maintenance projects executed during
the shutdowns.
Factors in global commodity markets are driving record-high raw material
prices, specifically, in natural and synthetic rubber as well as other
petroleum-based materials. These high prices coupled with the use of last-in,
first-out ('LIFO') cost flow assumptions for inventory accounting in North
America, have contributed to decreased earnings. The LIFO accounting method
charges the most recent costs against sales and in periods of rising raw
material costs, results in lower profits compared to other inventory
accounting methods. When costs moderate, the North American operations will
experience lower charges to cost of goods sold than would be reported under
other inventory costing methods.
The North American segment was successful in rebuilding inventories during
the quarter in anticipation of both the peak selling season that occurs during
the second half of the year and the strategic increase of inventories
necessary to continue its industry leading fill rates.
International Tire Operations
The Company's International Tire Operations reported record sales of $283
million in the quarter, an increase of 21 percent compared with the second
quarter of 2007. New products released during the quarter were well received
by consumers and represent the initial phases of successfully executing a
strategy to improve product mix. The segment delivered operating profit of $6
million despite increasing raw material costs, and start up costs related to
developing a larger presence in Asia. The segment continued to successfully
ramp up the Cooper Kenda Tire manufacturing facility in China. The Cooper
Chengshan tire facility also continued to implement projects and improved
throughput during the quarter.
Management Commentary and Outlook
The current macroeconomic conditions in North America have created intense
challenges for the Company. Consumers have reduced the number of miles driven
in reaction to economic pressures and are delaying tire purchases. Raw
material costs have continued to climb globally and show no signs of declining
in the near term.
Roy Armes, Chief Executive Officer, added, 'We are still committed to the
long term goals we established in our Strategic Plan.
