Cooper Tire & Rubber Company (NYSE:CTB) today reported net sales of $1.06 billion, an increase of $140 million, or 15 percent, compared with the second quarter of 2011. Operating profit was $95 million for the quarter, an increase of $71 million from the prior year same quarter. Net income attributable to Cooper Tire & Rubber Company was $52 million, or $0.82 per share on a diluted basis, for the quarter ended June 30, 2012, compared with $12 million, or $0.18, for the second quarter of 2011.
Results during the quarter included a pre-tax gain of $7 million related to the curtailment of a pension plan at the Company’s United Kingdom operations.
Profits were improved $67 million from lower raw material costs which was partially offset by unfavorable price and mix of $3 million. Sales volumes in both the North American and International segments were higher which improved profits by $19 million. Also improving profit were improved manufacturing efficiencies of $8 million and lower product liability costs of $1 million. Selling, general and administrative costs increased by $19 million as the Company continued to invest in expanding distribution networks and promoting Cooper brands. Results were also decreased by $9 million of higher other costs including pension expense and expenses related to the start up of the Company’s recently acquired manufacturing operation in Serbia. As a result of the Company’s improved operating profit performance, selling, general and administrative and other costs also included higher incentive compensation-related expenses.
The Company ended the quarter with $241 million of cash and cash equivalents, an increase of $103 million compared with the prior year second quarter balance of $138 million. Improved profits and reduced inventory levels contributed to the higher cash balance.
The Company has posted a summary presentation of information related to the quarter on its website at http://coopertire.com/Investors/Financials/Quarterly-Summary.aspx
North America Tire Operations
North America Tire Operations achieved net sales of $771 million during the second quarter, up 16 percent from 2011 net sales of $663 million. The increased sales were the result of higher unit volumes and stronger price and mix. Unit sales for the North American segment increased 15 percent compared with the prior year second quarter. Cooper’s total light vehicle tire shipments in the United States increased 16 percent during the quarter, compared with total industry shipments which were essentially flat as reported by the Rubber Manufacturers Association.
The segment’s operating profit was $65 million for the second quarter, or 8.4 percent of net sales. This was an increase of $61 million compared with the same period in 2011. Profits improved due to lower raw material costs of $35 million, favorable price and mix of $18 million, higher unit volumes of $12 million, manufacturing efficiencies of $7 million and lower product liability costs of $1 million. These improvements were partially offset by $5 million of higher selling, general and administrative costs and $6 million of other costs which include pension and incentive compensation expense.
International Tire Operations
The Company’s International Tire Operations reported second quarter sales of $419 million, an increase of $23 million, or 6 percent, compared with the second quarter of 2011. Record unit shipments increased 19 percent over the same quarter in 2011, including intercompany shipments. Asian sales volumes increased 16 percent, while European sales volumes increased 1 percent. Higher Asian sales were driven by improved truck and bus radial and premium passenger car tire sales. European sales volumes increased as a result of sales volumes of the new operations in Serbia.
The segment achieved record operating profit of $43 million, or 10.3 percent of net sales, in the second quarter of 2012, compared with $23 million, or 5.9 percent of net sales, in the second quarter of 2011. Profits improved by $46 million from lower raw material costs, $6 million from higher unit volumes and $1 million from improved manufacturing costs. Partially offsetting these improvements were unfavorable price and mix of $32 million and $6 million of higher selling, general and administrative costs reflecting investments to expand the distribution network in China and to promote Cooper brands. Serbia startup costs were $2 million. Profits include a one time gain of $7 million pre-tax related to the curtailment of a pension plan at the Company’s United Kingdom operations.
Management Commentary and Outlook
Roy Armes, Chief Executive Officer, commented, “I am very pleased with our results for the second quarter. During the quarter we continued progress toward our goals in the midst of a challenging business environment, which demonstrates the strengthening of our business model.
“While demand has been sluggish for the industry, our new products continued to do well as we exceeded industry growth in many product lines.
“While second quarter raw material costs increased sequentially from the first quarter, costs declined during the latter part of the second quarter and we expect further reductions as measured by our raw material index in the third quarter.
“We continue to expect capital expenditures for 2012 to total $180 million to $210 million. This includes investments in an ERP system and investments to ramp up production at our Serbian operation.
“There are more opportunities for the Company to increase shareholder value as we move forward. These opportunities include building on the momentum from our new product introductions and driving cost savings to the bottom line as we become more efficient in our operations. We will also create new opportunities to enhance the effectiveness of our operations as we implement our ERP system.
“While we have confidence that the execution of initiatives defined in our strategic plan will move our business forward, the global economic climate is very uncertain which causes us to be cautious about the near term future.”
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 website at www.coopertire.com.
Source Reuters
