Cooper Tire & Rubber Company Reports Q3 Results
19 October 1998
Cooper Tire & Rubber Company Reports Third Quarter Results; Repurchases 3 Million Shares Under Stock Buyback Plan
FINDLAY, Ohio--Oct. 19, 1998--THIRD QUARTER HIGHLIGHTS
-- New private label business begins to come on stream
-- Strong house brand sales continue
-- Engineered product sales reflect good demand despite GM strike
-- Stock buyback plan implemented
-- Favorable results from long-term debt reduction
COOPER TIRE & RUBBER COMPANY , today reported a 3.5 percent earnings decline on slightly higher sales for the third quarter of 1998. The company said that, despite a difficult operating environment fueled by the General Motors strike, both tire and engineered products operations achieved significant progress. Cooper also repurchased three million shares of its common stock during the quarter in accordance with a 5 million share buyback program authorized in May of 1997.
For the three months ended September 30, 1998, net sales for the company totalled $480.6 million compared with $480.6 million a year ago. Earnings declined 3.5 percent to $30.0 million, or 39 cents per share based on 77.1 million average shares outstanding, versus $31.1 million, or 40 cents per share based on 78.8 million shares, last year.
For the nine month period of 1998, net sales rose 4 percent to $1.38 billion compared with $1.32 billion in the year earlier period. Earnings rose slightly to $88.9 million, or $1.14 per share based on 78.3 million average shares outstanding, compared with $87.8 million, or $1.11 per share based on 79.3 million shares, in the 1997 period.
Chairman and CEO Patrick W. Rooney said, "Tire sales were down slightly during the quarter, reflecting lower sales to private label customers versus the year earlier period. This reduction was largely offset by gains in house brand sales. Fueled by our association with Arnold Palmer, increased recognition and demand for the Cooper brand has resulted in six consecutive quarters of increased sales for this house brand. Also during the quarter, we began shipping tires to our three new private label accounts. We expect additional contributions in the fourth quarter, but the full impact of this new business will be much more apparent in the first quarter of 1999. Tire prices ranged from flat to down slightly, reflecting in part, the effect of Asian imports; however, favorable raw material costs and product mix mitigated the impact on our margins. Indications are that we will see similar favorable raw material prices in the fourth quarter.
"Engineered products sales remain very healthy," Mr. Rooney continued. "While we felt some impact from the GM strike, demand from the other major automotive manufacturers helped offset the shortfall.
"Margin, as a percent of net sales, decreased slightly during the quarter. This happened in part, because of a particularly strong third quarter in 1997. One year ago our engineered products plants were running at full capacity in anticipation of upcoming labor negotiations. During this year's quarter, the GM strike had an adverse effect, but was offset by favorable operations in other areas.
"Net income for the quarter was positively affected by three developments. First, we elected last year to retire $18 million of 9 percent notes early, and also reduced our commercial paper borrowings. These steps helped lower interest expense by 19 percent and brought our debt-to-total capital ratio down to 19.5 percent, even after the repurchase of 3 million shares of common stock. Second, we benefited from a significant improvement in managing the currency relationship with our Cooper-Avon Tyres Limited subsidiary. Finally, we benefited from a reduction in our effective tax rate during the quarter as well as a reduction in the number of our shares outstanding due to the repurchase of common stock."
Regarding the fourth quarter, Mr. Rooney said, "Historically, the last two quarters of the year tend to closely track each other. Looking ahead to 1999, while we will continue to face a challenging operating environment, we have significant growth opportunities. We have three new private label customers coming on stream, which should keep our tire plants running above rated capacity. We are experiencing strong demand for our engineered products. We are making productivity and efficiency gains at Cooper-Avon Tyres. And we are continuing to look at reducing costs in every area of our business. Additionally, our new Cooper 21' plan, which is designed to position our company for optimal performance as we move into the new century, should further expand our long-term growth opportunities."
Reflecting on Cooper's performance, Mr. Rooney noted that, "Compared to the top ten global tire-producing companies, Cooper has had the highest compounded annual sales growth and the highest net income as a percent of sales since 1990. Cooper's international exposure is far less significant than most of our global competitors. Including European-based Cooper-Avon Tyres, our total sales exposure outside the U.S. is approximately 15 percent. Additionally, because we focus exclusively on replacement tires, we are more protected from wide swings in demand in the original equipment market. In short, we believe Cooper is well positioned for long-term growth and profitability," 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 CO.
CONSOLIDATED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30 September 30
(Amounts in thousands; _________________ _________________
per share amounts in dollars) 1998 1997 1998 1997
______ ______ ______ ______
Revenues:
Net sales $ 480,616 $ 480,572 $1,379,914 $1,324,097
Other income 522 394 1,771 852
__________ __________ __________ __________
481,138 480,966 1,381,685 1,324,949
Costs and expenses:
Cost of products sold 400,670 400,477 1,142,607 1,095,998
Selling, general,
administrative 30,631 26,971 87,595 78,055
Interest 3,745 4,624 11,358 11,276
__________ __________ __________ __________
435,046 432,072 1,241,560 1,185,329
__________ __________ __________ __________
Income before income taxes 46,092 48,894 140,125 139,620
Provision for income taxes 16,063 17,770 51,235 51,840
__________ __________ __________ __________
Net income $ 30,029 $ 31,124 $ 88,890 $ 87,780
__________ __________ __________ __________
__________ __________ __________ __________
Basic and diluted earnings
per share $ .39 $ .40 $ 1.14 $ 1.11
Weighted average shares
outstanding 77,103 78,833 78,267 79,336
Depreciation $ 25,655 $ 23,938 $ 75,120 $ 68,470
Capital expenditures $ 30,549 $ 22,602 $ 88,756 $ 72,529
CONSOLIDATED BALANCE SHEETS
September 30
____________________
1998 1997
______ ______
Assets
______
Current assets:
Cash and cash equivalents $ 22,822 $ 15,091
Accounts receivable 337,682 345,019
Inventories 191,078 190,348
Prepaid expenses and deferred income taxes 21,396 16,838
__________ __________
Total current assets 572,978 567,296
Property, plant and equipment - net 874,905 846,659
Intangibles and other assets 87,321 80,842
__________ __________
$1,535,204 $1,494,797
__________ __________
__________ __________
Liabilities and Stockholders' Equity
____________________________________
Current liabilities:
Notes payable $ 12,201 $ 20,487
Trade payables and accrued liabilities 204,477 188,345
Income taxes 83 8,049
Current portion of debt 279 4,861
__________ __________
Total current liabilities 217,040 221,742
Long-term debt 205,209 223,839
Postretirement benefits other than pensions 150,499 143,602
Other long-term liabilities 38,521 40,985
Deferred income taxes 77,250 63,391
Stockholders' equity 846,685 801,238
__________ __________
$1,535,204 $1,494,797
__________ __________
__________ __________
These interim statements are unaudited and subject to year-end
adjustments.