Cooper Tire Reports Q2 Results
22 July 1998
Cooper Tire Reports Second Quarter Results: Company Affirms Favorable Long-term Outlook
FINDLAY, Ohio--July 21, 1998--
SECOND QUARTER HIGHLIGHTS
-- Avon acquisition contributes to operating profits
-- Improved operating efficiencies exceed earlier expectations
-- Excellent early response to new premium radial tire
-- New private label business underway
-- Cooper house brand benefits from Arnold Palmer association
COOPER TIRE & RUBBER COMPANY today reported a 3% earnings increase on virtually flat sales for its second quarter ended June 30, 1998. The company said it would have been a strong quarter for both sales and earnings had it not been affected by reduced sales to a major customer. Despite this, there were several positive developments in the quarter including: initial shipments to new private label tire customers; strong sales for its engineered products; improvement from the first quarter at Cooper-Avon Tyres Limited; and gains in operating efficiencies across virtually all key metrics. Based on these developments and the strategic imperatives outlined in the Cooper 21 program, management said it maintains a high level of confidence in the company's long-term outlook.
For the three months ended June 30th, 1998, net sales for the company reached $461.7 million compared with $464 million a year ago. Earnings increased to $32.3 million, or 41 cents per share, versus $31.5 million, or 40 cents per share last year.
For the first six months of 1998, net sales rose to $899.3 million compared with $843.5 million in the year earlier period. Earnings for the first half totaled $58.9 million, or 75 cents per share, compared with $56.7 million, or 71 cents per share, in the 1997 period.
Cooper chairman and CEO Patrick W. Rooney said, "notwithstanding reduced sales to a major customer, we made significant progress in our tire operations during the second quarter. In our private label business, we continued development of three major new accounts, and began shipping a line of tires to the first of these three customers in May. We also saw good increases in our house brand tires, with the Cooper brand performing particularly well. We believe the increased strength of our Cooper brand is attributable in part to our marketing relationship with company spokesman Arnold Palmer. As the quarter ended, we introduced our new top-of-the-line touring radial, the Cooper Lifeliner STE. This tire, which has received extremely positive initial dealer reception, represents a first for Cooper because it carries a six-year limited warranty along with a special roadside assistance warranty.
"Our engineered products operation had a good quarter," Mr. Rooney said. "While we felt some impact from the General Motors strike, increased demand from the other major automotive manufacturers helped mitigate the effect as did routine plant shutdowns in late June and early July. We have begun a major expansion at our Mexican engineered products plant (the details of which are available in a separate release), and have completed a new technical center in Auburn, Indiana.
"In terms of operating efficiency, we are going after costs in every area of our business. Based on the results to date, we now expect to achieve in excess of $30 million in annual cost savings, well ahead of our own expectations for what was achievable this year.
"At Cooper-Avon Tyres Limited, we were encouraged by the improved performance which resulted in a contribution to operating profits. While the U.K.-based operation continues to be affected by the relative strength of the pound, the operation moved to seven-day production on several tire lines and showed improvements in both production capabilities and operating efficiencies. Based on this progress, we expect to show continued operating profit contribution in the future.
"We also enhanced our financial position, as our working capital increased by 21%, our current ratio improved to 3.1, long-term debt as a percent of total capital declined from 22.4% to 19%, and our shareholders' equity rose from $9.88 to $11.13 per share. Our strong global employee team deserves the credit for the accomplishments of the quarter.
"While we face several challenges in the near-term we are very positive about the wide range of initiatives underway to enhance revenue growth and operating margins," Mr. Rooney concluded.
Founded in 1914, Cooper Tire & Rubber Company is a leading manufacturer of tires and engineered rubber products that is widely recognized for its strong customer service commitment. In tires, the company exclusively targets the larger, higher gross margin, replacement market, with a mix equally divided between proprietary house brand and private label customers. Cooper markets its tires in more than 100 countries around the world. In engineered rubber products - the company serves virtually every light vehicle manufacturer in the U.S. and Canada, as well as an expanding number of European-based original equipment manufacturers. For more information on Cooper Tire & Rubber Company, visit the company's web site at www.coopertire.com.
This release may contain forward-looking statements relating to future financial results. Actual results may differ materially as a result of factors over which the company has no control. These risk factors and additional information are included in the company's reports on file with the Securities and Exchange Commission.
(Statement of income and balance sheet follows...)
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Quarter Ended Six Months Ended
(Amounts in thousands; June 30 June 30
per share amounts --------------------- --------------------
in dollars) 1998 1997 1998 1997
--------- ---------- ---------- ----------
Revenues:
Net sales $ 461,740 $ 463,993 $ 899,298 $ 843,525
Other income 671 204 1,249 458
--------- ---------- ---------- ----------
462,411 464,197 900,547 843,983
Costs and expenses:
Cost of products sold 378,467 379,608 741,937 695,521
Selling, general,
administrative 28,452 29,272 56,964 51,084
Interest 3,764 4,961 7,613 6,652
--------- ---------- ---------- ----------
410,683 413,841 806,514 753,257
--------- ---------- ---------- ----------
Income before income taxes 51,728 50,356 94,033 90,726
Provision for income taxes 19,392 18,850 35,172 34,070
--------- ---------- ---------- ----------
Net income $ 32,336 $ 31,506 $ 58,861 56,656
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
Basic and diluted
earnings per share $ .41 $ .40 $ .75 $ .71
Weighted average
shares outstanding 78,850 78,792 78,849 79,587
Depreciation $ 25,207 $ 23,234 $ 49,466 $ 44,532
Capital expenditures $ 30,825 $ 23,707 $ 58,207 $ 49,927
CONSOLIDATED BALANCE SHEETS
June 30
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1998 1997
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Assets
Current assets:
Cash and cash equivalents $ 37,434 $ 20,030
Accounts receivable 318,042 351,066
Inventories 209,254 205,453
Prepaid expenses and deferred
income taxes 20,426 17,175
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Total current assets 585,156 593,724
Property, plant and equipment - net 868,961 849,792
Intangibles and other assets 82,428 72,170
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$1,536,545 $1,515,686
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Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 11,080 $ 78,472
Trade payables and accrued
liabilities 179,770 180,637
Income taxes 367 3,950
Current portion of debt 272 4,997
---------- -----------
Total current liabilities 191,489 268,056
Long-term debt 205,282 223,857
Postretirement benefits other than
pensions 148,726 142,053
Other long-term liabilities 38,418 40,331
Deferred income taxes 75,643 63,542
Stockholders' equity 876,987 777,847
---------- -----------
$1,536,545 $1,515,686
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These interim statements are unaudited and subject to year-end
adjustments.