Cooper Tire & Rubber Company Reaches New All-Time Record Sales, Driving Income Up 56 Percent
First Quarter Highlights
* All-time record sales, year-over-year increase of 23 percent
* Net income increased 56 percent
* Earnings per share of 32 cents increased 52 percent
* Earnings per share net of restructuring charges increased 64 percent
* Tire Group sales increased 23 percent, setting a first quarter record
* Automotive Group sales increased 23 percent, setting an all-time quarter record
* Automotive Group operating profit increased 69 percent, setting a first quarter record
FINDLAY, Ohio, April 22 -- Cooper Tire & Rubber Company today reported all-time record high sales of $974 million and a 56 percent increase in net income in the quarter ended March 31, 2004. The record sales represent a 23 percent increase compared to the same period a year earlier. Net income increased by 56 percent to $24 million compared to $15 million in the first quarter of 2003. Basic and diluted earnings per share for the first quarter of 2004 were 32 cents or 52 percent higher than the earnings per share of 21 cents reported in the first quarter of 2003. These results include restructuring charges of 4 cents per share in the first quarter of 2004 and 1 cent per share in the first quarter of 2003. Excluding the restructuring charges, the Company's basic and diluted earnings per share in the first quarter of 2004 would have been 36 cents compared to 22 cents in the first quarter of 2003.
Commenting on these results, Cooper Chairman, President and Chief Executive Officer Thomas A. Dattilo said, "New products, new business, and a lot of hard work continue to drive our sales to new records quarter after quarter. The increasing demand that we are seeing for our products is very exciting and bodes well for the future of both sides of our business."
"Our Tire Group set a first quarter record in sales but continued to face headwinds from raw material costs, just as we had said and expected, and that impacted operating margins. Our Automotive Group had an outstanding quarter and set records in both sales and operating profit. Successful new business launches last year and more efficient operations made that possible."
Tire Group Operations
Sales for Cooper's tire operations were a first quarter record $485 million, an increase of 23 percent compared to the $396 million achieved in the first quarter of 2003. This increase was driven by a 12 percent increase in tire unit volumes and improving customer and product mix. The Company's net sales of high performance and ultra-high performance tires increased by 47 percent during the quarter. Sales of P-Metric SUV tires increased by 52 percent and light truck tire sales increased by 27 percent compared to the prior year period.
Operating profit was slightly less than $16 million in the first quarter compared to slightly more than $16 million in the same period last year. Increasing raw material costs reduced operating profit by $18 million during the quarter and product liability insurance and litigation costs were $9 million higher compared to the first quarter of last year. These two items combined to essentially offset the positive impact of higher sales volume.
The Tire Group continues to operate at about 100 percent of current production capacity and is engaged in capacity expansion projects in all plants in North America as well as in Asia in order to meet future projected demand.
Cost reductions and lean initiatives in the Tire Group exceeded $10 million in the quarter and are on track to reach the plan of $49 million for the year.
Automotive Group Operations
In the first quarter of 2004, sales for Cooper-Standard Automotive reached an all-time record $497 million, an increase of 23 percent over the first quarter of 2003. New business launches in both North America and Europe and higher production volume on key platforms were the primary drivers of the revenue growth, combining to add $79 million to total sales. Changes in foreign currency exchange rates added $31 million.
Automotive Group operating profit for the quarter increased 69 percent to reach $39 million. This compares to $23 million in the same period last year. The significant increase was driven by new business, higher production on key platforms, and cost savings from restructuring and lean initiatives. Savings from lean manufacturing initiatives were $20 million in the first quarter.
During the quarter Cooper-Standard Automotive was awarded contracts for $23 million in annualized net new business which will begin production and phase in over the next 2 to 5 years.
Outlook
"2004 is shaping up to be a very exciting year for Cooper," Dattilo said. "Our sales volumes are going to be strong, we are seeing significant improvement in our plants and we are finding ways to reduce costs to offset the headwinds of raw materials and product liability expense. Raw material costs are likely to remain high throughout the year but the tire price increase we implemented in February and additional price increases planned for June will help offset that impact. We will continue to increase our production capacity to keep up with strong demand. Expansions are under way in our North American tire plants and the implementation of our Asian strategy will see the construction begin on our joint venture tire plant in China.
"The successful quarter we had at Cooper-Standard Automotive puts the spotlight on the value we have created in that business. We continue to explore the possibility of a sale of our automotive operations and we are finding significant interest. But for now we remain focused on running this business and meeting our targets for increasing sales and implementing cost reduction initiatives. We expect the economy to continue to improve throughout the year and North American light vehicle production to reach or slightly exceed 16 million units.
"The result should be that we see increasingly strong results as the year progresses with the Tire Group driving much of the sequential improvement. We expect earnings in the second quarter to be in the range of 38 to 43 cents," Dattilo concluded.
Company Description
Cooper Tire & Rubber Company, headquartered in Findlay, Ohio, specializes in the manufacture and marketing of products for the global automotive industry. Products include automotive, motorcycle and truck tires, inner tubes, tread rubber and equipment, as well as sealing, trim, NVH control systems and fluid handling systems. Cooper has more than 20,000 employees and 52 manufacturing facilities in 13 countries. For more information, visit the Company's web site at: www.coopertireandrubber.com .
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)
Three Months Ended
March 31
2003 2004
Net sales $794,827 $974,466
Cost of products sold 693,510 847,451
Gross profit 101,317 127,015
Selling, general and administrative 62,146 69,991
Restructuring charges 1,067 4,420
Operating profit 38,104 52,604
Interest expense 16,716 16,203
Other - net (2,519) (424)
Income before taxes 23,907 36,825
Provision for taxes 8,726 13,073
Net Income $15,181 $23,752
Basic earnings per share $0.21 $0.32
Diluted earnings per share $0.21 $0.32
Weighted average shares outstanding
Basic 73,560 74,049
Diluted 73,810 75,042
Depreciation $44,104 $46,885
Amortization of intangibles $936 $1,108
Capital expenditures $35,695 $37,434
Segment information
Net Sales
Tire $395,934 $485,110
Automotive 404,201 496,984
Eliminations (5,308) (7,628)
Segment profit
Tire 16,315 15,735
Automotive 23,127 39,132
Unallocated corporate charges and
eliminations (1,338) (2,263)
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CONSOLIDATED BALANCE SHEETS
March 31
2003 2004
Assets
Current assets:
Cash and cash equivalents $33,159 $110,397
Accounts receivable 537,834 687,343
Inventories 319,092 308,799
Prepaid expenses, income taxes
refundable and deferred income taxes 50,006 58,093
Total current assets 940,091 1,164,632
Property, plant and equipment 1,193,491 1,190,982
Goodwill 427,895 429,792
Intangibles 50,728 46,561
Other assets 162,265 162,152
$2,774,470 $2,994,119
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $26,823 $9,943
Trade payables and accrued liabilities 445,852 550,980
Income taxes - 6,477
Current portion of debt 15,007 3,397
Total current liabilities 487,682 570,797
Long-term debt 876,155 876,424
Postretirement benefits other than
pensions 209,978 224,829
Other long-term liabilities 238,246 254,431
Deferred income taxes 10,387 18,435
Stockholders' equity 952,022 1,049,203
$2,774,470 $2,994,119
These interim statements are subject to year-end adjustments.