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. These include
establishing a sustainable and cost competitive supply of tires, profitably
growing our business, and enhancing our organizational capabilities.
Developments in the macro economic environment have caused us to be guarded in
our expectations of profitability for 2008, and to reduce our capital
expenditure plans for the year, however our balance sheet remains strong.
'Our International Operations have been successful in developing and
launching new products that the market demands. The launch of our Asian
Technical Center during the quarter will further our ability to tailor
products to the rapidly developing Asian markets. In Europe we have been
successful in focusing on the markets where we have a strong presence and are
continuing to be successful.
'Our focus on improving our cost competitive position has intensified even
further, with our execution of automation projects and the deployment of
resources to implement a LEAN Six Sigma culture. This includes the training of
50 fulltime black belts during the year who will be working on projects that
reduce waste within our facilities. We are also excited about the recently
announced investment in Mexico as it is an excellent source of high quality
cost competitive tires to support sales in Mexico, the United States, and
Canada. While we recognize that we are facing strong headwinds as an
industry, the actions we are taking will prepare us to capitalize on future
opportunities.'
Cooper's management team will discuss the financial and operating results
for the quarter in a conference call today at 11 a.m. Eastern time.
Interested parties may access the audio portion of that conference call on the
investor relations page of the Company's web site at www.coopertire.com.
About Cooper Tire & Rubber Company
Cooper Tire & Rubber Company is a global company that specializes in the
design, manufacture, marketing and sales of passenger car, light truck, medium
truck tires and subsidiaries that specialize in motorcycle and racing tires.
With headquarters in Findlay, Ohio, Cooper Tire has manufacturing, sales,
distribution, technical and design facilities within its family of companies
located in 10 countries around the world. For more information, visit Cooper
Tire's web site at: www.coopertire.com.
Forward-Looking Statements
This report contains what the Company believes are 'forward-looking
statements,' as that term is defined under the Private Securities Litigation
Reform Act of 1995, regarding projections, expectations or matters that the
Company anticipates may happen with respect to the future performance of the
industries in which the Company operates, the economies of the United States
and other countries, or the performance of the Company itself, which involve
uncertainty and risk.
Such 'forward-looking statements' are generally, though not always,
preceded by words such as 'anticipates,' 'expects,' 'believes,' 'projects,'
'intends,' 'plans,' 'estimates,' and similar terms that connote a view to the
future and are not merely recitations of historical fact. Such statements are
made solely on the basis of the Company's current views and perceptions of
future events, and there can be no assurance that such statements will prove
to be true.
It is possible that actual results may differ materially from those
projections or expectations due to a variety of factors, including but not
limited to:
-- changes in economic and business conditions in the world, especially
the continuation of the global tensions and risks of further terrorist
incidents that currently exist;
-- increased competitive activity, including the inability to obtain and
maintain price increases to offset higher production or material costs;
-- the failure to achieve expected sales levels;
-- consolidation among the Company's competitors and customers;
-- technology advancements;
-- fluctuations in raw material and energy prices, including those of
steel, crude petroleum and natural gas and the unavailability of such
raw materials or energy sources;
-- changes in interest and foreign exchange rates;
-- increases in pension expense resulting from investment performance of
the Company's pension plan assets and changes in discount rate, salary
increase rate, and expected return on plan assets assumptions;
-- government regulatory initiatives, including the proposed and final
regulations under the TREAD Act;
-- changes in the Company's customer relationships, including loss of
particular business for competitive or other reasons;
-- the impact of labor problems, including a strike brought against the
Company or against one or more of its large customers;
-- litigation brought against the Company;
-- an adverse change in the Company's credit ratings, which could increase
its borrowing costs and/or hamper its access to the credit markets;
-- the inability of the Company to execute its cost reduction/Asian
strategies;
-- the failure of the Company's suppliers to timely deliver products in
accordance with contract specifications;
-- the impact of reductions in the insurance program covering the
principal risks to the Company, and other unanticipated events and
conditions;
-- the failure of the Company to achieve the full cost reduction and
profit improvement targets; and
-- the inability or failure to implement the Company's strategic plan.
It is not possible to foresee or identify all such factors. Any
forward-looking statements in this report are based on certain assumptions and
analyses made by the Company in light of its experience and perception of
historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances.
Prospective investors are cautioned that any such statements are not a
guarantee of future performance and actual results or developments may differ
materially from those projected.
The Company makes no commitment to update any forward-looking statement
included herein or to disclose any facts, events or circumstances that may
affect the accuracy of any forward-looking statement.
Further information covering issues that could materially affect financial
performance is contained in the Company's periodic filings with the U. S.
Securities and Exchange Commission ('SEC').
Cooper Tire & Rubber Company
Consolidated Statements of Income
(Dollar amounts in thousands except per share amounts)
Quarter Ended Six Months Ended
June 30 June 30
2007 2008 2007 2008
Net sales $730,135 $772,907 $1,399,735 $1,452,228
Cost of products sold 654,773 743,078 1,253,534 1,366,161
Gross profit 75,362 29,829 146,201 86,067
Selling, general and
administrative 44,168 45,246 84,831 91,930
Restructuring charges 1,692 - 2,739 -
Operating profit (loss) 29,502 (15,417) 58,631 (5,863)
Interest expense (12,157) (12,742) (24,676) (24,220)
Interest income 4,259 3,669 7,788 7,392
Debt extinguishment - - - (583)
Dividend from unconsolidated
subsidiary - - 2,007 1,943
Other income - net 1,647 2,201 6,253 3,518
Income (loss) from continuing
operations before income taxes 23,251 (22,289) 50,003 (17,813)
Income tax benefit (expense) (4,708) 677 (11,556) (371)
Income (loss) from continuing
operations before
noncontrolling shareholders'
interests 18,543 (21,612) 38,447 (18,184)
Noncontrolling shareholders'
interests (2,928) (488) (3,327) (2,574)
Income (loss) from continuing
operations 15,615 (22,100) 35,120 (20,758)
Income (loss) from discontinued
operations, net of income taxes 1,998 (131) 3,244 213
Net income (loss) $17,613 $(22,231) $ 38,364 $(20,545)
Basic earnings (loss) per share
Income (loss) from continuing
operations $0.25 $(0.38) $0.57 $(0.35)
Income from discontinued
operations 0.03 - 0.05 -
Net income (loss) $0.28 $(0.38) $0.62 $(0.35)
Diluted earnings (loss) per share
Income (loss) from continuing
operations $0.25 $(0.38) $0.56 $(0.35)
Income from discontinued
operations 0.03 - 0.05 -
Net income (loss) $0.28 $(0.38) $0.61 $(0.35)
Weighted average shares
outstanding
Basic 61,980 58,897 61,729 59,191
Diluted 62,913 58,897 62,445 59,191
Depreciation $33,182 $35,136 $64,534 $69,155
Amortization $1,404 $1,150 $3,271 $2,508
Capital expenditures $34,828 $33,848 $77,582 $65,512
Segment information
Net sales
North American Tire $533,181 $547,513 $1,048,270 $1,045,185
International Tire 234,495 282,966 417,456 514,746
Eliminations (37,541) (57,572) (65,991) (107,703)
Segment profit (loss)
North American Tire 20,692 (21,906) 47,489 (13,762)
International Tire 11,772 5,944 17,886 12,853
Eliminations 413 987 (411) (282)
Unallocated corporate
charges (3,375) (442) (6,333) (4,672)
******************************
CONSOLIDATED BALANCE SHEETS
June 30
2007 2008
Assets
Current assets:
Cash and cash equivalents $281,121 $252,316
Short-term investments 50,314 -
Accounts receivable 410,557 405,899
Inventories 334,240 443,674
Other current assets 128,018 144,404
Assets of discontinued operations 54,879 -
Total current assets 1,259,129 1,246,293
Net property, plant and equipment 987,225 1,007,154
Goodwill 24,439 24,439
Restricted cash 7,690 2,730
Intangibles and other assets 91,373 86,709
$2,369,856 $2,367,325
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $126,811 $154,816
Payable to non-controlling owner 19,077 1,022
Trade payables and accrued liabilities 400,428 474,454
Income taxes 5 4,060
Liabilities of discontinued operations 11,414 1,317
Current portion of long-term debt - 39,420
Total current liabilities 557,735 675,089
Long-term debt 543,147 419,060
Postretirement benefits other than
pensions 263,748 248,919
Other long-term liabilities 222,073 151,196
Long-term liabilities of discontinued
operations 9,345 9,462
Deferred income taxes - -
Noncontrolling shareholders' interests 78,264 95,859
Stockholders' equity 695,544 767,740
$2,369,856 $2,367,325
These interim statements are subject to year-end adjustments
SOURCE Cooper Tire & Rubber Company
