Cooper Tire & Rubber Company Reports First Quarter 2009 Results
FINDLAY, Ohio, May 6, 2009: Cooper Tire & Rubber Company today reported a net loss of $21 million, or 36 cents per share, for the quarter ended March 31, 2009. Net sales for the period were $571 million, down $108 million from the prior year same quarter. The decreased revenues were driven by volume declines offset by improved pricing and mix.
Results were pressured by decreased volumes and production curtailments as the Company manages inventory to align with demand. Operating profit was favorably impacted by lower raw material costs and improved underlying manufacturing operations, in addition to the improved sales price and mix. Cooper's results during the quarter included pretax restructuring charges of $14 million related to the on-going closure of its facility in Albany, Ga. Additionally the Company recorded $7 million of charges related to the tentative settlement of a previously disclosed retiree medical lawsuit.
Operating profit excluding restructuring charges and the tentative settlement for the first quarter was $5 million compared to $10 million from continuing operations for the same quarter in 2008. The Company had cash of $233 million as of March 31, 2009, and did not draw on available parent company credit lines. This compares to a cash balance of $248 million at December 31, 2008.
North American Tire Operations
North American Tire operations generated sales of $439 million during the first quarter, down from 2008 net sales of $498 million during the same quarter. Sales continued to be affected by soft demand in North America as weakness in the replacement tire market persists. The Cooper brand continued to outpace the industry in the U.S. market when compared to the Rubber Manufacturer Association's reported shipments for the industry. The most significant volume decreases were in the economy and light truck product segments. The private brand distributor channel was also significantly weaker. The segment had success in expanding its market presence in Mexico and Canada.
Operating losses for the first quarter were $4 million, compared to operating profit of $8 million from the same period in 2008. This decline was the net result of several key factors. Raw material cost improvements during the quarter positively affected results by $8 million compared to the prior-year quarter. Price increases and mix improvements contributed $21 million. Lower products liability costs of $7 million also improved profits. Manufacturing operations improved by $7 million as a result of the Company's continued focus on improvement in this area. Volume decreases negatively affected profits by $21 million. The curtailment of production resulted in unabsorbed fixed overhead during the period of $18 million. Restructuring charges amount to $14 million during the quarter.
The Company previously announced it will close its facility in Albany, Ga. The total restructuring charges were most recently estimated to be $120 to $145 million, of which 60 to 70 percent would be non-cash. The shutdown has been continuing on plan and is expected to be completed within the originally announced time frame. To date, including write-downs of assets in the fourth quarter of 2008, the Company has incurred $90 million of related restructuring costs.
In addition to the shutdown of the Albany facility, the Company has undertaken a series of actions to reduce costs and manage liquidity. These include a freeze in the accrual of benefits for salaried employees' pension plans, changes to executive compensation and a variety of cost savings projects that will help the Company deliver even greater value to customers.
International Tire Operations
The Company's International Tire Operations reported sales of $166 million in the quarter, a decrease of $66 million from the first quarter of 2008. The decrease in sales volume was primarily attributable to decreases in exports from the Company's Asian operations as global demand for tires weakened. Volume decreases and pricing adjustments negatively affected operating profit net of improved mix by $9 million. This reduction in demand also drove the Company to manage production levels to align inventory with market conditions. The net impact of production curtailments and higher utility costs was a decline in profit of $8 million. Favorable currency impacts of $5 million and lower raw material cost of $2 million helped to offset the higher costs. The segment's operating profit decreased from $7 million in the first quarter of 2008 to a loss of $3 million in the first quarter of 2009.
Management Commentary and Outlook
Roy Armes, Chief Executive Officer, commented, "The tire industry and our business continued to be affected by weak demand for replacement tires during the first quarter of 2009. Raw material spot prices have decreased in recent months, but overcapacity is still a negative pressure on results for the tire industry. We are actively taking steps to address this environment. While our operations continued to improve and we were very pleased with the performance, we recognize there is still much work to be done.
"We continue to focus on improving our global cost structure, profitably increasing our top line, and enhancing our organizational capabilities as targeted in our strategic plan. We are beginning to see some of the benefits from our actions. Unfortunately, much of what we have done is still masked by current market conditions. In light of these market conditions, we have also continued with liquidity and cash management priorities while managing inventory levels to successfully meet customer demands. We were successful at preserving our cash during the quarter by managing our costs, inventory and capital expenditures. We will continue to be prudent in managing our resources as we move forward.
"There have been several recent signs of stabilization in tire demand, but the near-term outlook is still pressured by the macroeconomic environment. Raw materials prices are difficult to forecast, but we do not see a return to the extreme price highs of last year. Commodity prices are likely to stabilize during 2009 and then begin to increase as demand for raw materials increases. I am proud of the way our employees have focused on what is critical, and they are doing an excellent job of executing during a difficult time. The actions we take will continue to reposition Cooper as a stronger company."
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 COOPER.