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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Cooper Tire and Rubber Co | NYSE:CTB | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 60.17 | 0 | 01:00:00 |
Cooper Tire & Rubber Company (NYSE: CTB) today reported second quarter 2019 net income of $9 million, or diluted earnings per share of $0.18, compared with $15 million, or $0.30 per share, last year.
Second Quarter Highlights
“Our second quarter operating profit margin improved sequentially from the first quarter, and the Americas segment delivered improved operating profit despite new and incremental tariffs this year,” said Cooper President & Chief Executive Officer Brad Hughes. “Our International segment was challenged by the ongoing decline within the new vehicle market in China and a weak replacement tire market in Europe. While we are not satisfied with the lower unit volume in the second quarter, our strategic initiatives are taking hold, and we are confident that they will contribute more meaningfully to unit volume growth in 2020.”
Consolidated Results
Cooper Tire
Q2 2019
($M)
Q2 2018
($M)
Change
Net Sales
$
679
$
698
(2.8
%)
Operating Profit
$
32
$
33
(3.3
%)
Operating Margin
4.7
%
4.7
%
—
ppts.
Second quarter net sales were $679 million compared with $698 million in the second quarter of 2018, a decrease of 2.8 percent. Net sales included $34 million of lower unit volume and $6 million of unfavorable foreign currency impact, which were partially offset by $21 million of favorable price and mix.
Operating profit was $32 million compared with $33 million in the second quarter of 2018. Negatively affecting the quarter was $13 million in costs related to new tariffs on products imported into the United States from China compared to the same period a year ago, as well as $2 million of restructuring costs related to Cooper Tire Europe's decision to cease light vehicle tire production at its Melksham, England facility. In addition, the quarter included $17 million of favorable price and mix, and $15 million of favorable raw material costs (excluding the new tariffs). The quarter also included unfavorable volume of $6 million, higher SG&A of $4 million, and increased product liability costs of $1 million. Other costs increased $7 million, primarily due to higher distribution costs, including the non-recurrence of the Albany tornado insurance recovery in 2018.
Cooper's second quarter raw material index decreased 1.2 percent compared to the second quarter of 2018. The raw material index increased sequentially from 160.4 in the first quarter of 2019 to 161.8 in the second quarter of 2019.
The effective tax rate for the second quarter was 38.7 percent compared with 12.6 percent for the same period the prior year. The tax rate for the second quarter of 2019 includes $2 million of discrete items related to the accrual of additional uncertain tax positions pertaining to previous years. The second quarter of 2018 included $1 million of net discrete tax items that favorably impacted the tax rate. The effective tax rate is based on forecasted annual earnings and tax rates for the various jurisdictions in which the company operates.
At the end of the second quarter, Cooper had $112 million in unrestricted cash and cash equivalents compared with $180 million at the end of the second quarter of 2018. Capital expenditures in the second quarter were $45 million compared with $38 million in the same period a year ago. Also, as of the end of the second quarter, the company had invested $49 million in its new joint venture with Sailun Vietnam.
On June 27, 2019, Cooper executed an amendment to its existing bank credit facility which extended the maturity date to June 27, 2024, and increased the borrowing capacity to $700 million. The amended agreement is comprised of a $500 million revolving credit facility and a new $200 million delayed draw term loan. The proceeds from the new term loan will be used primarily to retire existing 8 percent senior notes that mature in December of this year.
The company generated a return on invested capital, excluding the impact of the goodwill impairment charge in the fourth quarter of 2018, of 9.3 percent for the trailing four quarters.
Americas Tire Operations
Americas Tire Operations
Q2 2019
($M)
Q2 2018
($M)
Change
Net Sales
$
582
$
584
(0.4
%)
Operating Profit
$
47
$
40
15.6
%
Operating Margin
8.0
%
6.9
%
1.1
ppts.
Second quarter net sales in the Americas segment decreased 0.4 percent as a result of $22 million of lower unit volume, partially offset by $20 million of favorable price and mix. For the quarter, segment unit volume was down 3.8 percent compared to the same period a year ago.
Cooper’s second quarter total light vehicle tire shipments in the U.S. decreased 4.0 percent. The U.S. Tire Manufacturers Association (USTMA) reported that its member shipments of light vehicle tires in the U.S. were down 1.5 percent. Total industry shipments (including an estimate for non-USTMA members) increased 0.7 percent for the period.
Second quarter operating profit was $47 million, or 8.0 percent of net sales, compared with $40 million, or 6.9 percent of net sales, for the same period in 2018. Negatively affecting the quarter was $13 million in costs related to new tariffs on products imported into the U.S. from China compared to the same period a year ago. In addition, operating profit included $22 million of favorable price and mix, and $12 million of favorable raw material costs (excluding the new tariffs). The quarter also included $3 million of manufacturing improvements, $6 million of unfavorable SG&A costs, $5 million of lower unit volume, $1 million of higher product liability costs, and $5 million of higher other costs compared to the same period a year ago. Other costs increased primarily as a result of higher distribution costs, including the non-recurrence of the Albany tornado insurance recovery in 2018.
International Tire Operations
International Tire Operations
Q2 2019
($M)
Q2 2018
($M)
Change
Net Sales
$
139
$
168
(17.5
%)
Operating (Loss)/Profit
$
(1
)
$
6
(122.9
%)
Operating Margin
(0.9
%)
3.4
%
(4.3
) ppts.
Second quarter net sales in the International segment decreased 17.5 percent as a result of $25 million of lower unit volume and $6 million of unfavorable foreign currency impact, which were partially offset by $2 million of favorable price and mix. Segment unit volume decreased 15.1 percent, with unit volume declines in Asia and Europe driven in large part by a challenging new vehicle market in China and weakness in the European replacement tire business.
The segment's second quarter operating loss was $1 million compared with operating profit of $6 million in the second quarter of 2018. The decrease included charges of $2 million related to the Melksham, England restructuring. Additionally, the segment experienced $3 million of lower unit volume, $2 million of unfavorable price and mix, $3 million of higher manufacturing costs, and $1 million of higher other costs. These were partially offset by $3 million of lower raw material costs, and $1 million of lower SG&A costs.
Outlook
“Increased U.S. tariff costs and delayed timing of anticipated commercial truck tire price increases, as well as weakness in the China new vehicle and Europe replacement tire markets, are expected to impact the remainder of the year,” said Hughes. “The Americas segment, excluding TBR tariffs, is still generally in line with previous expectations. On a consolidated basis, we anticipate growth throughout the year in operating profit margin.”
Cooper is adjusting expectations for the full year as follows:
2019 expectations include tariffs already in place, but do not include rate changes or additional tariffs that continue to be considered, but have not yet been imposed.
Second Quarter 2019 Conference Call Today at 10 a.m. Eastern
Management will discuss the financial and operating results for the second quarter, as well as the company’s business outlook, on a conference call for analysts and investors today at 10 a.m. EDT. The call may be accessed on the investor relations page of the company’s website at http://coopertire.com/Investors.aspx or at https://services.choruscall.com/links/ctb190729.html. Following the conference call, the webcast will be archived and available for 90 days at these websites.
A summary slide presentation of information related to the quarter is posted on the company's website at http://investors.coopertire.com/Quarterly-Results.
Forward-Looking Statements
This release 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, expectations or matters the company anticipates may happen with respect to the future performance of the industries in which it operates, the economies of the U.S. and other countries, or the performance of the company itself, which involve uncertainty and risk. Such forward-looking statements are generally, though not always, preceded by words such as “anticipates,” “expects,” “will,” “should,” “believes,” “projects,” “intends,” “plans,” “estimates,” and similar terms that connote a view to the future and are not merely recitations of historical fact. Such statements are made solely on the basis of the company’s current views and perceptions of future events, and there can be no assurance that such statements will prove to be true.
It is possible that actual results may differ materially from projections or expectations due to a variety of factors, including, but not limited to:
It is not possible to foresee or identify all such factors. Any forward-looking statements in this release 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 filings with the U.S. Securities and Exchange Commission (“SEC”).
Non-GAAP Financial Measures
This press release includes non-GAAP financial measures as defined under SEC rules. Non-GAAP financial measures should be considered in addition to, not as a substitute for, operating profit, net income, earnings per share or other financial measures prepared in accordance with generally accepted accounting principles (“GAAP”). The company’s methods of determining these non-GAAP financial measures may differ from the methods used by other companies for these or similar non-GAAP financial measures. Accordingly, these non-GAAP financial measures may not be comparable to measures used by other companies. As required by SEC rules, detailed reconciliations between the company’s GAAP and non-GAAP financial results are provided on the attached schedule. The company believes return on invested capital (“ROIC”) provides additional insight for analysts and investors in evaluating the company’s financial and operating performance. The company defines ROIC as the trailing four quarters’ after tax operating profit, exclusive of certain items affecting comparability of results from period to period and utilizing the company’s adjusted effective tax rate, divided by the total invested capital, which is the average of ending debt and equity for the last five quarters. The company believes ROIC is a useful measure of how effectively the company uses capital to generate profits.
About Cooper Tire & Rubber Company
Cooper Tire & Rubber Company (NYSE: CTB) is the parent company of a global family of companies that specializes in the design, manufacture, marketing and sale of passenger car, light truck, medium truck, motorcycle and racing tires. Cooper's headquarters is in Findlay, Ohio, with manufacturing, sales, distribution, technical and design operations within its family of companies located in more than one dozen countries around the world. For more information on Cooper, visit www.coopertire.com, www.facebook.com/coopertire or www.twitter.com/coopertire.
Cooper Tire & Rubber Company
Consolidated Statements of Operations
(Unaudited)
(Dollar amounts in thousands except per share amounts)
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Net sales
$
679,130
$
698,408
$
1,298,293
$
1,299,904
Cost of products sold
579,989
604,185
1,110,894
1,121,196
Gross profit
99,141
94,223
187,399
178,708
Selling, general and administrative expense
65,811
61,460
122,665
119,490
Restructuring expense
1,659
—
6,632
—
Operating profit
31,671
32,763
58,102
59,218
Interest expense
(7,810
)
(8,417
)
(16,123
)
(16,108
)
Interest income
1,999
1,988
5,379
4,303
Other pension and postretirement benefit expense
(9,288
)
(6,967
)
(18,650
)
(13,953
)
Other non-operating expense
(1,463
)
(1,391
)
(84
)
(3,050
)
Income before income taxes
15,109
17,976
28,624
30,410
Provision for income taxes
5,851
2,267
12,186
5,718
Net income
9,258
15,709
16,438
24,692
Net income attributable to noncontrolling shareholders' interests
437
701
637
1,400
Net income attributable to Cooper Tire & Rubber Company
$
8,821
$
15,008
$
15,801
$
23,292
Earnings per share:
Basic
$
0.18
$
0.30
$
0.32
$
0.46
Diluted
$
0.18
$
0.30
$
0.31
$
0.46
Weighted average shares outstanding (000s):
Basic
50,165
50,436
50,133
50,636
Diluted
50,362
50,590
50,370
50,883
Segment information:
Net Sales
Americas Tire
$
582,307
$
584,412
$
1,097,243
$
1,069,804
International Tire
138,514
167,839
282,299
329,083
Eliminations
(41,691
)
(53,843
)
(81,249
)
(98,983
)
Operating profit (loss):
Americas Tire
$
46,814
$
40,480
$
85,603
$
71,715
International Tire
(1,296
)
5,652
(2,635
)
13,086
Unallocated corporate charges
(13,278
)
(13,705
)
(23,730
)
(25,670
)
Eliminations
(569
)
336
(1,136
)
87
Cooper Tire & Rubber Company
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollar amounts in thousands)
June 30,
2019
2018
Assets
Current assets:
Cash and cash equivalents
$
111,681
$
180,493
Notes receivable
4,175
24,022
Accounts receivable
616,974
582,524
Inventories
589,410
580,095
Other current assets
48,863
59,600
Total current assets
1,371,103
1,426,734
Property, plant and equipment, net
1,017,356
964,158
Operating lease right-of-use assets, net
93,183
—
Goodwill
18,851
53,960
Intangibles, net
115,937
125,979
Deferred income tax assets
27,246
54,006
Investment in joint venture
49,001
—
Other assets
11,396
7,942
Total assets
$
2,704,073
$
2,632,779
Liabilities and Equity
Current liabilities:
Notes payable
$
19,656
$
47,378
Accounts payable
267,851
240,506
Accrued liabilities
280,933
262,233
Income taxes payable
8,881
2,295
Current portion of long-term debt and finance leases
173,766
1,398
Total current liabilities
751,087
553,810
Long-term debt and finance leases
120,624
295,017
Noncurrent operating leases
67,214
—
Postretirement benefits other than pensions
234,782
255,527
Pension benefits
132,024
198,421
Other long-term liabilities
144,316
152,736
Total parent stockholders' equity
1,192,349
1,118,347
Noncontrolling shareholders' interests in consolidated subsidiaries
61,677
58,921
Total liabilities and equity
$
2,704,073
$
2,632,779
Cooper Tire & Rubber Company
Consolidated Statements of Cash Flows
(Unaudited)
(Dollar amounts in thousands)
Six Months Ended June 30,
2019
2018
Operating activities:
Net income
$
16,438
$
24,692
Adjustments to reconcile net income to net cash from operations:
Depreciation and amortization
74,347
73,587
Stock-based compensation
2,319
2,627
Change in LIFO inventory reserve
9,797
2,411
Amortization of unrecognized postretirement benefits
18,240
18,396
Changes in operating assets and liabilities:
Accounts and notes receivable
(68,786
)
(68,485
)
Inventories
(119,118
)
(74,104
)
Other current assets
(958
)
(12,572
)
Accounts payable
2,599
(12,622
)
Accrued liabilities
(30,482
)
(13,970
)
Other items
(3,560
)
(18,599
)
Net cash used in operating activities
(99,164
)
(78,639
)
Investing activities:
Additions to property, plant and equipment and capitalized software
(105,354
)
(97,759
)
Investment in joint venture
(49,001
)
—
Proceeds from the sale of assets
49
160
Net cash used in investing activities
(154,306
)
(97,599
)
Financing activities:
Net payments on short-term debt
4,721
10,718
Repayments of long-term debt and finance lease obligations
(989
)
(1,013
)
Payment of financing fees
(2,207
)
(1,230
)
Repurchase of common stock
—
(29,355
)
Payments of employee taxes withheld from share-based awards
(1,158
)
(1,894
)
Payment of dividends to Cooper Tire & Rubber Company stockholders
(10,529
)
(10,623
)
Issuance of common shares related to stock-based compensation
177
—
Excess tax benefits on stock-based compensation
—
270
Net cash used in financing activities
(9,985
)
(33,127
)
Effects of exchange rate changes on cash
601
1,344
Net change in cash, cash equivalents and restricted cash
(262,854
)
(208,021
)
Cash, cash equivalents and restricted cash at beginning of period
378,246
392,306
Cash, cash equivalents and restricted cash at end of period
$
115,392
$
184,285
Unrestricted Cash and cash equivalents
$
111,681
$
180,493
Restricted cash included in Other current assets
2,211
1,702
Restricted cash included in Other assets
1,500
2,090
Total cash, cash equivalents and restricted cash
$
115,392
$
184,285
Cooper Tire & Rubber Company
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Dollar amounts in thousands)
RETURN ON INVESTED CAPITAL (ROIC)
Trailing Four Quarters Ended June 30, 2019
Calculation of ROIC
Calculation of Net Interest Tax Effect
Adjusted (Non-GAAP) operating profit
$
197,956
Provision for income taxes (c)
$
39,965
Adjusted (Non-GAAP) effective tax rate
27.4
%
Adjusted (Non-GAAP) income before income taxes (d)
$
146,100
Income tax expense on operating profit
54,150
Adjusted (Non-GAAP) effective income tax rate (c)/(d)
27.4
%
Adjusted operating profit after taxes (a)
143,806
Total invested capital (b)
$
1,547,207
ROIC, including noncontrolling equity (a)/(b)
9.3
%
Calculation of Invested Capital (five quarter average)
Equity
Long-term
debt and
finance
leases
Current
portion of
long-term
debt and
finance
leases
Notes
payable
Total
invested
capital
June 30, 2019
$
1,254,026
$
120,624
$
173,766
$
19,656
$
1,568,072
March 31, 2019
1,248,218
121,305
173,974
20,074
1,563,571
December 31, 2018
1,232,443
121,284
174,760
15,288
1,543,775
September 30, 2018
1,228,509
294,841
1,376
14,831
1,539,557
June 30, 2018
1,177,268
295,017
1,398
47,378
1,521,061
Five quarter average
$
1,228,093
$
190,614
$
105,055
$
23,445
$
1,547,207
Calculation of Trailing Four Quarter Income and Expense Inputs
Quarter-ended:
Operating
profit as
reported
Goodwill
impairment
charge*
Adjusted
operating
profit
Provision
for income
taxes as
reported
Income
before
income taxes
as reported
Goodwill
impairment
charge*
Adjusted
income
before
income
taxes
June 30, 2019
$
31,671
$
—
$
31,671
$
5,851
$
15,109
$
—
$
15,109
March 31, 2019
26,431
—
26,431
6,337
13,515
—
13,515
December 31, 2018
24,826
33,827
58,653
11,550
11,989
33,827
45,816
September 30, 2018
81,201
—
81,201
16,227
71,660
—
71,660
Trailing four quarters
$
164,129
$
33,827
$
197,956
$
39,965
$
112,273
$
33,827
$
146,100
*The Company recorded a non-cash goodwill impairment charge of $33,827 in the fourth quarter of 2018 related to the company's Chinese joint venture.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190729005103/en/
Investor Contact: Jerry Bialek 419.424.4165 investorrelations@coopertire.com
Media Contact: Anne Roman 419.429.7189 alroman@coopertire.com
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