Cooper Tire & Rubber Co. reported a net loss of $168,000 on net sales of $832 million for the third quarter ended Sept. 30, 2013. That compares to net income of $74 million on sales of more than $1 billion for the third quarter of 2012.
Operating profit for the third quarter was $28 million, which is $102 million lower than the same period in 2012 and 3.4% of net sales.
For the first nine months of 2013, operating profit was $194 million compared with $273 million for the same period in 2012.
Despite the negative impact of unusual items, Cooper says it will report positive operating profit and net income for the fourth quarter and second half of 2013. Year-end cash and cash equivalents will approach $400 million. Fourth quarter and full-year 2013 results will be released in mid-March 2014.
“With the merger agreement terminated and operations returning to normal at CCT, we are resuming financial reporting and moving our business forward,” says Cooper Chairman, Chief Executive Officer and President Roy Armes.
“As expected, issues surrounding the merger had a significant negative impact on our third quarter results, and we anticipate some carryover of these negative impacts to a lesser degree in the near term,” he said. “Still, our business model remains resilient and we will report positive operating profit and net income for the fourth quarter and second half of 2013. We will also end the year with a strong balance sheet, which is important as we continue to invest in our business and focus on delivering value to stockholders.”
Third quarter operating profit was impacted by a number of unusual items including actions at the CCT joint venture in Rongcheng, China, that took place in response to the merger agreement. On July 13, 2013, workers at CCT began a temporary work stoppage. When they returned to work on Aug. 17, 2013, workers resumed production but excluded Cooper brand products. These actions reduced operating profit during the third quarter by $29 million, including $22 million from lower volume and $7 million from manufacturing inefficiencies. Cooper also incurred $5 million of expenses associated with the merger during the third quarter.
In addition to these unusual items, the company’s third quarter 2013 operating profit included $36 million from lower raw materials costs, which was more than offset by unfavorable pricing and mix of $76 million. Lower unit volumes resulting from shipping inefficiencies related to continued ERP system deployments, as well as increased competition that impacted private label and lower price point tire volumes in North America, decreased profit by $22 million. In total, manufacturing costs were $11 million unfavorable, driven by $13 million of costs associated with production curtailments in North America caused by the lower volumes. All other costs were $5 million lower compared with the third quarter of 2012.
The $168,000 net loss in the third quarter included the impact of an 84% tax rate. This unusually high rate was caused by $8 million of discrete items in the quarter. In comparison, the full year tax rate is expected to be between 36% and 40%.
For more on the company’s results, see the company’s website.
For details on Cooper’s agreement with its Chinese partner see: