Despite a net loss in the fourth quarter, Cooper Tire & Rubber Co. posted net income of $77 million last year.
The company reported net income of $77 million on net sales of $2.81 billion for fiscal 2018 ended Dec. 31, 2018. That compares to income of $95 million on sales of $2.85 billion for fiscal 2017.
The company's income-to-sales ratio for the year was 2.7%.
Operating income was down 46.5%, from $309.2 million to $165.2 million, or 5.9% of net sales. Excluding a $34 million goodwill impairment charge, operating profit would habe been $199 million.
For its fourth quarter ended Dec. 31, 2018, Cooper posted a net loss of $419,000 on net sales of nearly $770.5 million. That compares to a loss of $42.1 million on sales of $757 million the previous year.
Compared to 4Q 2017, operating profit for 4Q 2018 was down close to 56%, from $56.2 million to $24.8 million.
Consolidated unit volume in the quarter decreased 1.8%, compared to 2.4% year over year.
"Our fourth quarter operating margin, excluding the goodwill impairment charge, exceeded what we achieved in the third quarter, excluding the benefit from an adjustment of our product liability reserve model in that quarter," said CEO Brad Hughes. "As stated at the beginning of 2018, we expected operating margin improvement throughout the year, and we delivered on this expectation as our strategic initiatives took hold.
"As projected, in the fourth quarter we drove unit volume growth in the U.S., which was offset by volume declines in our other regions, reflecting economic and political factors. Raw material costs improved sequentially, but were up on a year-over-year basis by nearly 8%.
"Additionally, we successfully implemented our plan to right-size inventory levels, reducing the number of inventory units in the Americas by over 10% in 2018," he said. "While this plan impacted our 2018 results through higher manufacturing costs, we believe this positions Cooper with the right level of inventory as we enter 2019.
"Moving forward, we expect to make continued progress on our strategic priorities in 2019, and believe underlying macro-conditions will support growth in tire demand, particularly in the U.S. As a result, we expect modest global unit volume growth for Cooper in 2019 and full-year operating profit margin to improve compared with 2018. We are confident that our strategic plan remains the right path to achieve our goals and help drive shareholder value.”
Throughout 2018, the company focused on cash flow improvement by aligning production to demand, managing inventory levels, and taking other working capital actions. Cooper said these actions resulted in improved cash flows, which enabled the company to to improve the funding status of its U.S. pension plans.
Fourth-quarter net sales in the Americas Tire Operations segment increased 3% percent as a result of $21 million of favorable price and mix, which was partially offset by $2 million of unfavorable foreign currency impact. Net sales totaled more than $645.8 million, up from $6
For the quarter, segment unit volume was flat overall compared to the fourth quarter of 2017. However, there was an overall unit volume increase in North America.
Breaking down Cooper's unit shipments for the 4Q even further, total shipments in the U.S. were up 0.4%. By comparison, the U.S. Tire Manufacturers Association (USATMA) reported its member shipments of light vehicle tires in the U.S. were up 1.2% during the same period. Including an estimate for non-USTMA members, overall consumer shipments increased 3.6%.
Cooper expects "modest" unit volume growth in 2019 compared to 2018.
Management expects its first-quarter 2019 operating profit margin to be lower than the first quarter of 2018 as a result of "typical seasonality" and some unique items that will impact the first part of the year, including:
- $10 to $15 million in restructuring charges related to ceasing light vehicle tire production in England;
- recently enacted tariffs on tires and raw materials imported into the U.S. from China; and
- economic conditions in China "that continue to be challenging."
"We are optimistic about 2019 as our business model is strong and our strategic initiatives continue to gain momentum," said Hughes. "We anticipate operating profit margin to improve throughout the year, with the full year expected to be better than 2018."
