Cooper Tire & Rubber Company Reports 2002 Fourth Quarter and Year End Results
Fourth Quarter Highlights
* Net income increased 50 percent
* Earnings per share of 32 cents increased 45 percent
* Debt reduced by $133 million - debt to capital ratio below 50 percent
* Tire unit sales increased 10 percent
* Automotive Group operating profit reaches $25 million
FINDLAY, Ohio, Feb. 6 -- Cooper Tire & Rubber
Company today reported a 50 percent increase in net income for the
fourth quarter of 2002 compared to the same period a year ago. The Company
reported quarterly net income of $23 million on revenue of $842 million
compared to net income of $16 million on revenue of $777 million in the fourth
quarter of 2001. Basic and diluted earnings per share for the fourth quarter
of 2002 were 32 cents or 45 percent higher than the earnings per share of 22
cents reported in the fourth quarter of last year.
For the year ended December 31, 2002, the Company recorded net income of
$112 million or $1.51 diluted earnings per share on net sales of $3.3 billion.
By comparison, net income in 2001 was $18 million and earnings per share were
25 cents. The stated full year results for 2001 include the impact of the
expenses related to the settlement of class action suits that had been filed
against the Company in 2000. Without these expenses, 2001 net income would
have been $63 million and earnings per share would have been 87 cents.
Cash flow from operations for the year totaled $341 million, an increase
of 27 percent over 2001. During the year the Company reduced total debt by
$203 million, including $133 million in the fourth quarter, while returning
$31 million to shareholders in the form of dividends.
Reflecting on these results, Cooper chairman, president and chief
executive officer Thomas A. Dattilo commented, "We achieved some very solid
numbers for the quarter and the year, but our results go beyond the numbers.
We set certain goals at the beginning of the year and we achieved them. We
met our targets for unit growth in tire sales. We reduced tire inventory just
as we said we would. We met or exceeded our targets for restructuring and
lean savings. And, importantly, we were able to generate a significant amount
of cash and met our debt reduction targets. Each of these is a solid
accomplishment. Combined, they are outstanding."
Tire Group Operations
Net sales for Cooper's tire operations in the fourth quarter were
$458 million, an increase of nearly 9 percent compared to the $421 million
achieved in the fourth quarter of 2001. This increase is largely attributable
to a 10 percent increase in unit volumes. Operating profit was $30 million in
the fourth quarter compared to $40 million last year. This decline resulted
from a continuation of difficult operating conditions the Company has
experienced throughout the year including less favorable product and customer
mix, increasing raw material costs, and operating inefficiencies related to
ongoing inventory reduction efforts, all which combined to offset the positive
impact of higher volume.
For the full year, the Tire Group had net sales of $1.8 billion compared
to $1.7 billion last year, an increase of nearly 4 percent. Tire unit sales
were up nearly 5 percent overall with units shipped to the regional retailer
channel up more than 30 percent and Cooper brand units in North America
improving by nearly 6 percent. Tire Group operating profit for the year was
$137 million, compared to $73 million in 2001, an increase of 88 percent.
However, operating profit in 2001 included the negative impact of $72 million
in class action settlement charges. Excluding those charges, 2002 operating
profit declined by $8 million, or 5 percent. The change in operating profit
was due to the positive impact of higher tire sales being offset by less
favorable product and customer mix, operating at less than full capacity in
continuation of inventory reduction initiatives and higher product liability
costs.
The Company's international tire operations and commercial tire products
operations both achieved significant improvement in profitability during the
year and made positive contributions to the Tire Group total results.
Automotive Group Operations
In the fourth quarter of 2002, net sales for Cooper-Standard Automotive
were $389 million, an increase of nearly 8 percent over the fourth quarter of
2001. Continuing strong light vehicle production in North America and the
impact of new business launches in both North America and Europe were the
primary drivers of the revenue growth. The Company's strategic positioning as
a supplier to certain light truck and SUV platforms that sold well during the
quarter was also a positive factor. Automotive Group operating profit for the
quarter was $25 million compared to $5 million in the same period last year as
a result of operating improvements and cost savings from restructuring, lean
initiatives and increased production volume. The restructuring activities in
the Automotive Group, largely completed in 2001, generated savings of $8
million in the quarter and $30 million for the year. Savings from lean
manufacturing initiatives were $15 million in the fourth quarter.
For the full year, Cooper-Standard Automotive net sales were $1.6 billion
in 2002 compared to $1.5 billion in 2001. The increase of more than 7 percent
was achieved as operations in both North America and Europe outpaced the
growth in vehicle production. Sales in North America for the year were up
more than 7 percent while light vehicle production was up about 5 percent.
Cooper-Standard's international sales improved nearly 8 percent during the
year while light vehicle production in Europe actually declined by an
estimated 2 percent.
During the quarter Cooper-Standard Automotive was awarded contracts for
$18 million in annualized net new business. This brings the total net new
business awarded in 2002 to $95 million, which will phase in over the next 3
to 5 years.
Outlook
"Challenging operating conditions in our industries will likely persist in
the first half of 2003," Dattilo said. "Tire demand appears to be soft,
especially in comparison to the strong first quarter of 2002. Some pre-buying
in advance of the January price increases probably pulled some tire sales
forward. Raw material prices will also be higher in the first half. But we
are optimistic about the second half of the year as we expect economic
conditions to improve and tire demand to return to near normal levels. We are
also increasingly confident in the sustainability of light vehicle production
levels."
"We will have to work hard to offset some of the increasing costs our
industries are facing. Recently implemented tire price increases will help to
offset raw material costs. New products and increasing demand for replacement
tires as well as new automotive business launches will allow us to improve our
capacity utilization and overall operating efficiency. We are confident that
over the course of the year improving economic conditions and improvements in
our own performance will allow us to achieve results even better than in
2002."
Company Description
Cooper Tire & Rubber Company is headquartered in Findlay, Ohio and
specializes in the manufacture and marketing of automotive products. Products
for Cooper's Tire Group include automotive, motorcycle and truck tires, inner
tubes, tread rubber and equipment. In the
Automotive Group, Cooper is an original equipment supplier of sealing, trim,
NVH control systems and fluid handling systems for the automotive industry in
North America, Europe, Australia and South America. Cooper has more than
20,000 employees and 52 manufacturing facilities in 13 countries. For more
information, visit the Company's web site at: http://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 or expectations for future financial
performance, which involve uncertainty and risk. It is possible that the
Company's future financial performance may differ materially from those
projections or expectations due to a variety of factors including, but not
limited to:
* changes in political, economic and business conditions in the world,
* increased competitive activity,
* the failure to achieve expected sales levels,
* consolidation among the Company's competitors and customers,
* technology advancements,
* unexpected costs and charges,
* fluctuations in raw material and energy prices and the unavailability of
raw materials or energy sources,
* increased pension expense resulting from poor investment performance of
the Company's pension plan assets over the past three years and changes
in discount rate assumptions,
* government regulatory initiatives, including the proposed regulations
under the TREAD Act,
* the cyclical nature and overall health of the global automotive
industry,
* the loss of a major customer or loss or delay of a program,
* risks associated with new vehicle launches,
* risks to the economy associated with external events, including those
resulting from terrorist activities, war or political unrest,
domestically or abroad, which may occur in the future,
* litigation brought against the Company,
* unforeseen changes in financing related matters including changes in
interest and foreign exchange rates, 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 to obtain or reductions
in insurance coverage sufficient to cover the principal risks to the
Company, and other unanticipated events and conditions.
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.
Cooper Tire & Rubber Company
Consolidated Statements of Income
(Dollar amounts in thousands except per share amounts)
Quarter Ended Twelve Months Ended
December 31 December 31
2001 2002 2001 2002
Net sales $776,590 $841,628 $3,154,702 $3,329,957
Cost of products sold 674,773 723,271 2,724,692 2,839,757
Gross profit 101,817 118,357 430,010 490,200
Class action costs 557 - 72,194 -
Restructuring charges 2,829 1,683 8,648 4,565
Amortization of goodwill 3,999 - 15,705 -
Selling, general and
administrative 53,498 63,208 227,229 237,239
Operating profit 40,934 53,466 106,234 248,396
Interest expense 21,692 18,298 90,695 75,587
Other - net (6,207) (1,791) (13,619) (4,388)
Income before taxes 25,449 36,959 29,158 177,197
Provision for taxes 9,757 13,464 10,992 65,352
Net Income $15,692 $23,495 $18,166 $111,845
Basic earnings per share $0.22 $0.32 $0.25 $1.53
Diluted earnings per share $0.22 $0.32 $0.25 $1.51
Weighted average shares
outstanding
Basic 72,581 73,554 72,559 73,327
Diluted 72,860 73,772 72,738 74,039
Depreciation $42,823 $48,328 $169,479 $177,926
Amortization of goodwill and
other intangibles $5,272 $1,463 $20,808 $4,959
Capital expenditures $30,214 $49,252 $136,287 $142,732
Segment information
Net Sales
Tire $421,193 $457,588 $1,704,623 $1,769,058
Automotive 361,084 389,082 1,477,409 1,585,953
Eliminations (5,687) (5,042) (27,330) (25,054)
Segment profit
Tire 39,737 29,695 73,192 137,403
Automotive 5,019 24,562 39,001 117,473
Unallocated
corporate
charges and
eliminations (3,822) (791) (5,959) (6,480)
CONSOLIDATED BALANCE SHEETS
December 31
2001 2002
Assets
Current assets:
Cash and cash equivalents $71,835 $44,748
Accounts receivable 497,180 460,879
Inventories 306,478 280,641
Prepaid expenses, deferred income
taxes and other 76,604 73,030
Total current assets 952,097 859,298
Property, plant and equipment 1,206,074 1,197,975
Goodwill - net 427,895 427,895
Intangibles and other assets 178,184 225,811
$2,764,250 $2,710,979
Liabilities and stockholders' equity
Current liabilities:
Notes payable $15,875 $21,956
Trade payables and accrued liabilities 414,305 396,300
Income taxes 564 96
Current portion of debt 217,161 14,994
Total current liabilities 647,905 433,346
Long-term debt 882,134 875,378
Postretirement benefits other than
pensions 197,757 207,315
Other long-term liabilities 106,202 239,452
Deferred income taxes 20,012 13,772
Stockholders' equity 910,240 941,716
$2,764,250 $2,710,979