Cooper Tire & Rubber Company Reports First Quarter 2005 Results
First Quarter Highlights
* Net sales increased 7 percent to a new first quarter record
* Sales from North American Tire Operations increased 8 percent
* Unit sales of high performance tires increased 32 percent
* Additional net gain on automotive sale of $6 million
* Recapitalization continued with 6.4 million shares repurchased
FINDLAY, Ohio, April 20 -- Cooper Tire & Rubber Company today reported a 7 percent year-over-year increase in net sales, achieving a new first quarter record of $514 million in the quarter ended March 31, 2005 compared to $480 million in the same period of 2004.
Net income for the quarter was $5 million or 7 cents per share including an additional $6 million gain on the sale of Cooper-Standard Automotive following final post-closing adjustments. The quarter's results were also impacted by costs associated with the work stoppage at the Company's Texarkana, Ark. tire manufacturing facility which began on March 12, 2005 and ended on April 11, 2005. These costs amounted to approximately $7 million pre-tax or 7 cents per share during the quarter. Including the impact of the strike, the Company's continuing operations generated a net loss of $1 million or 1 cent per share during the first quarter of 2005 compared to net income of $2 million or 3 cents per share in the first quarter of 2004.
During the quarter the Company repurchased 6.4 million shares of common stock for $122 million.
North American Tire Operations
The Company's North American tire operations reported sales of $464 million in the quarter, up 8 percent compared to $428 million in the first quarter of 2004. This increase was driven by improved pricing and product mix and was partially offset by lower overall unit volumes. Cooper's shipments of premium performance and light truck tires significantly outpaced the industry during the first quarter, increasing by more than 32 percent and 8 percent respectively. In addition, shipments of Cooper brand products outpaced the industry with an increase of more than 5 percent. Overall unit shipments were down, however, as a result of lower shipments in the economy and broadline tire categories.
First quarter operating profit for the North American Tire operations was $7 million, compared to $13 million in the same period last year. The decline was largely the result of the impact of the strike in Texarkana, higher raw material costs, and lower unit volumes. The prices of virtually all raw materials used in tire production were higher in the quarter. In total, the higher raw material costs reduced North American operating profit by $26 million compared to the prior year.
International Tire Operations
The Company's International operations reported sales of $65 million in the quarter, essentially even with the first quarter of 2004, and recorded an operating loss of $1 million compared to an operating profit of $3 million last year. The decline in operating profit was driven by higher raw material costs, administrative costs associated with the start-up of Asian operations, timing of advertising expenses in Europe and slightly weaker product and customer mix.
In early April, the Company's joint venture with Kenda Rubber Industrial Co., LTD was successful in obtaining the final governmental approvals and business license to build the tire plant in China as previously announced and to commence business operations. Construction on the plant is scheduled to begin within the next few weeks.
Commenting on the quarter's results, Cooper's chairman, president and chief executive officer Thomas A. Dattilo said, "We are pleased with the growth in sales of our premium products which helped us to start the year with another quarterly sales record. Excluding the impact of the strike in Texarkana, our results were slightly better than we had previously forecast because of the improved pricing, mix and operations."
Outlook
"We are seeing improvements in our operations and we expect to get better throughout the year. Our expansion projects will continue through the end of the year. These projects will enable us to produce and sell more of the specialty high performance and large light truck tires in the second half of the year and should help us improve our operating efficiency overall. However, we will continue to face challenging market conditions, higher raw material costs and the negative impact from the shutdown in Texarkana in the second quarter and the rest of the year. Because of the strike, our inventory is somewhat lower and less balanced than we would like as we head toward the peak selling season. Supply on some lines will be tight and will likely cause us to lose some sales. The total impact of the strike including direct costs and lost sales could be as much as 20 cents per share in the second quarter. With all of these things considered we expect second quarter earnings per share in the range of 1 to 5 cents," Dattilo concluded.
Cooper's management team will discuss the financial and operating results for the quarter in a conference call today at 9:00 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 .
Company Description
Cooper Tire & Rubber Company is a global company specializing in the design, manufacture and sales of passenger car, light truck, medium truck, motorcycle and racing tires, as well as tread rubber and related equipment for the retread industry. With headquarters in Findlay, Ohio, Cooper Tire has 39 manufacturing, sales, distribution, technical and design facilities around the world. For more information, visit Cooper Tire's web site at: www.coopertireandrubber.com .
Cooper Tire & Rubber Company
Consolidated Statements of Income
(Dollar amounts in thousands except per share amounts)
Quarter Ended
March 31
2004 2005
Net sales $480,010 $514,057
Cost of products sold 427,534 465,375
Gross profit 52,476 48,682
Selling, general and administrative 42,972 42,801
Restructuring charges - -
Operating profit 9,504 5,881
Interest expense 6,547 14,215
Other income - net (216) (6,843)
Income (loss) before taxes 3,173 (1,491)
Provision (credit) for taxes 990 (447)
Income (loss) from continuing operations 2,183 (1,044)
Income from discontinued operations,
net of income taxes 22,116 -
Gain on sale of discontinued
operations, net of income taxes - 6,260
Net Income $24,299 $5,216
Basic earnings per share
Income (loss) from continuing
operations $0.03 ($0.01)
Income from discontinued operations $0.30 $0.00
Gain on sale of discontinued
operations $0.00 $0.09
Net Income $0.33 $0.07
Diluted earnings per share
Income (loss) from continuing operations $0.03 ($0.01)
Income from discontinued operations $0.29 $0.00
Gain on sale of discontinued
operations $0.00 $0.09
Net Income $0.32 $0.07
Weighted average shares outstanding
Basic 74,049 69,871
Diluted 75,042 70,656
Depreciation $26,600 $25,647
Amortization of intangibles $791 $732
Capital expenditures $24,828 $35,197
Segment information
Net sales
North American Tire $427,947 $463,870
International Tire 65,289 65,489
Eliminations (13,226) (15,302)
Segment profit
North American Tire 13,083 7,467
International Tire 3,035 (836)
Unallocated corporate
charges and eliminations (6,614) (750)
*****************************
CONSOLIDATED BALANCE SHEETS
March 31
2004 2005
Assets
Current assets:
Cash and cash equivalents $70,182 $563,218
Short-term investments - 91,864
Accounts receivable 343,110 387,733
Accounts receivable from sale of
automotive operations - 54,329
Inventories 216,338 276,401
Prepaid expenses, deferred income
taxes and other 37,752 38,423
Assets of discontinued operations and
held for sale 1,423,723 4,450
Total current assets 2,091,105 1,416,418
Property, plant and equipment 701,340 742,718
Goodwill 45,225 48,172
Restricted cash 2,038 13,380
Intangibles and other assets 154,411 338,544
$2,994,119 $2,559,232
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $5,188 $110
Trade payables and accrued liabilities 282,453 300,786
Income taxes 1,812 914
Current portion of debt - -
Liabilities related to the sale of
automotive operations - 6,697
Liabilities of discontinued operations 397,629 231
Total current liabilities 687,082 308,738
Long-term debt 869,533 770,422
Postretirement benefits other than
pensions 154,310 172,798
Other long-term liabilities 208,609 191,095
Long-term liabilities related to the
sale of automotive operations - 23,116
Deferred income taxes 25,383 41,757
Stockholders' equity 1,049,202 1,051,306
$2,994,119 $2,559,232
* Amounts do not add due to rounding
These interim statements are subject to year-end adjustments