Cooper reports record third quarter sales
Cooper Tire & Rubber Co. reported net income of $30 million for the quarter ended Sept. 30, 2007. That is an improvement of $55 million from the prior year. Net sales increased 11% to a new third quarter record of $768 million.
Income from continuing operations increased $41 million from a loss of $24 million for the same period last year. Income from discontinued operations also contributed $12 million for the quarter.
Improved pricing in North America, and increased tire unit sales for the International segment, contributed to the dramatically improved results, the company says. The improvement was also supported by the ongoing cost and profit improvement initiative implemented throughout the year. As a result, operating profit improved to $33 million in the third quarter of 2007, compared with an operating loss of $5 million in the third quarter of 2006.
For the nine month period ended Sept. 30, 2007, the company’s net income improved to $69 million on $2.2 billion of sales. This is a $119 million improvement in net income over the same period a year ago.
North American Tire Operations
The company's North American tire operations reported sales of $576 million in the quarter, up 10% compared with $526 million in the third quarter of 2006. This increase was driven by improved pricing, as well as increased unit volumes in sport utility vehicle and broadline tires. North American operations increased market share during the quarter versus third quarter 2006.
Cooper’s unit shipments of light vehicle replacement tires in the U.S. were up approximately 2% in the quarter over the same period last year, exceeding the decrease of less than 1% for the industry as reported by the Rubber Manufacturers Association.
North American Tire generated $26.9 million in operating profit from continuing operations in the quarter, or an increase of $27.9 million compared with the third quarter of 2006. This improvement was the result of favorable pricing changes and the company’s cost savings and profit improvement initiatives, Cooper reported.
The absence of production curtailments experienced in 2006 contributed a total of $10 million toward the improvement.
Changes in last-in, first-out inventory valuations also contributed $14 million to the third quarter results. These were partially offset by unfavorable plant operations as the company continues to align its production to meet future market needs and high demand. Raw material costs also negatively affected the quarter’s results by $6 million as compared with last year.
Discontinued operations relate to the segregation of operations of its Oliver Rubber Co. subsidiary, which was sold in October 2007, tax benefits relating to release of a tax valuation allowance, and charges to reflect changes in estimated obligations retained following the sale of the company’s former automotive group.
Due to the impending sale of Oliver Rubber Co., the company revised its judgment regarding the realization of certain deferred tax assets associated with tax attribute carryforwards in recognizing the tax benefits. Amounts included in the third quarter were income from the Oliver operations of $700,000, loss of $2.3 million from former automotive operations, and $14 million due to the change in the tax valuation allowance.
For the nine-month period ended Sept. 30, 2007, North American operations generated $74 million of operating profit on $1.6 billion of net sales. This is an improvement of $103 million over operating profit during the same period a year ago.
International Tire Operations
The company's International Tire Operations reported sales of $236 million in the quarter, an increase of 22% compared with the third quarter of 2006.
Cooper Europe continued to improve its operating profit while the segment’s sales in Asia increased by 32%, driven by a 28% increase in unit sales and favorable pricing improvements over the same period last year.
Operating profit for the International segment was $7.2 million in the third quarter of 2007, compared with $3.1 million in the third quarter of 2006.
The segment increased operating profit on stronger sales and improved pricing, partially offset by higher raw material costs. Production continued to ramp up at the Cooper-Kenda joint venture plant in China.
Operating profit for the segment improved to $25 million for the first nine months of the year. This is a $10.8 million increase over the same period last year.
Commenting on the results, Cooper President and CEO Roy Armes said, “During the third quarter we continued to deliver improved results to the top and bottom lines. People throughout the organization have been focused on executing the strategies that we previously identified and are excited about what the future holds for the company. We aren’t satisfied with where we are, but we are pleased with what we’ve accomplished over the last year.
"North America had another quarter of dramatically improved operating profit, and our international segment has continued its impressive growth. This global growth has been accompanied by an improved balance sheet as our margins improve and we continue to focus on inventory management. As we launch into the fourth quarter, we expect to continue with our improvements, I have confidence that the employees at Cooper will execute to our expectations.
"The story at Cooper during the first nine months of 2007 has been continued improvement and positive momentum,” Armes continued. “There are always concerns or risks regarding raw material costs, which are at high levels and trending upward, as well as economic and industry effects. We believe that we will be able to continue operational improvements in the fourth quarter and inventory levels will remain at low levels throughout the rest of the year.
“Overall, we expect to build on the momentum we have established during 2007. We are pleased with our results thus far, but are determined to continue reviewing and improving on all aspects of our company so that we can provide the greatest returns possible for all of our stakeholders,” Armes concluded.