Cooper sales up 4% in third quarter
Cooper Tire & Rubber Co. today reported results for the third quarter of 2012. Net sales were a record for any quarter of $1.1 billion, an increase of $47 million, or 4%, compared with the same period a year ago. Operating profit was a record for any quarter of $130 million, $82 million higher than third quarter 2011 and 11.8% of net sales.
Net income attributable was a third quarter record of $74 million and compares with $17 million for the same period last year.
"Our third quarter financial results include several record performances for Cooper Tire,” says Chief Executive Officer Roy Armes. "Total global volume grew by 5%. Once again, our U.S. volumes grew while the overall industry declined.
"We believe our ability to outpace the industry is attributable to strong execution of our strategic plan, especially our focus on new product introductions that are positioning Cooper as the consumer choice for performance and value. In addition, our initiatives to improve efficiency helped lower costs, and we benefitted along with the industry from lower raw material costs. We are pleased with our teams and their ability to drive results around the world, which should continue to deliver value to our shareholders.”
Third quarter profits were positively impacted by lower raw material costs of $144 million, volume increases totaling $9 million and $7 million in manufacturing efficiencies.
These profit contributors were partially offset by $36 million in unfavorable price and mix, $28 million in higher selling, general and administrative costs as the company continued to invest in expanding distribution networks and promoting Cooper brands, $7 million in higher product liability costs and $7 million in “other” costs, which included higher pension expense. Higher incentive compensation costs, resulting from higher profits, affected selling, general and administrative costs and other costs.
The company ended the third quarter with $272 million of cash and cash equivalents, an increase of $181 million compared with the prior-year third quarter balance of $91 million. Improved profits and lower working capital contributed to the higher cash balance.
North America Tire Operations
North America Tire Operations achieved net sales of $816 million during the third quarter, up 7% from third quarter 2011 net sales of $760 million. Increased sales resulted from higher unit volumes and higher price and mix. Unit sales for the North American segment increased 4% compared with the prior-year third quarter.
Cooper's total light vehicle tire shipments in the United States increased 6% during the quarter compared with total industry shipments that were down 3% as reported by the Rubber Manufacturers Association (RMA).
The segment's operating profit was $105 million for the third quarter, or 12.8% of net sales. This represents an increase of $87 million compared with third quarter 2011. The improved profit includes a $102 million decrease in raw material costs, manufacturing efficiencies of $9 million and higher unit volumes of $6 million. These improvements were partially offset by $14 million of higher selling, general and administrative costs. Product liability costs increased $7 million and “other” costs were $7 million higher attributable to pension related expense and incentive compensation. Price and mix was $1 million unfavorable. Higher incentive compensation costs, resulting from higher profits, affected selling, general and administrative costs and other costs.
International Tire Operations
The company's International Tire Operations reported third quarter sales of $411 million, a decrease of $11 million, or 3%, compared with the same period a year ago. Higher unit volumes of $45 million and favorable currency translation of $4 million were more than offset by pricing and mix of $60 million.
Sales volumes in Asia increased 10%, while European sales volumes decreased 5%. Higher sales in Asia were driven by improved truck and bus radial and premium passenger car tire sales. European sales volumes decreased as a result of weak market conditions that were partially offset by incremental volumes from the company’s new operation in Serbia.
The International segment achieved third quarter operating profit of $36 million, or 8.6% of net sales, compared with $30 million, or 7.2% of net sales, for the same period a year ago. Profits improved by $64 million attributable to lower raw material costs and $3 million from higher unit volumes.
Partially offsetting these improvements were unfavorable price and mix of $53 million and $7 million of higher selling, general and administrative costs, reflecting strategic investments to expand the company’s distribution network in China and to promote Cooper brands. Manufacturing efficiencies decreased $2 million.
Raw material prices decreased by 13% sequentially from the second quarter to the third quarter. Management anticipates fourth quarter raw material prices will be approximately the same as the third quarter, and that the long-term outlook for raw material prices will be to generally trend higher. Capital expenditures for 2012 are expected to be between $180 million and $210 million, including the investment in an Enterprise Resource Planning (ERP) system and investments related to the continuing ramp-up of Serbian operations.
"We are confident that our ability to execute our strategic plan will drive results and build on the positive momentum we’ve established over the last several quarters,” Armes said. "We expect to compete at or above the industry in our markets and believe that we are on the right path toward continued profitable growth for our company.
“Still, we are approaching the future with caution regarding several factors that we cannot control, such as the challenging global economic environment and factors specific to the tire industry, which contribute to uncertainty about the near-term future.”