Cooper announces second consecutive quarterly loss
Cooper Tire & Rubber Co. posted a net loss of $840,000 on net sales of $558 million for the third quarter ended Sept. 30, 2005. That compares to net income of nearly $9.9 million on sales of $551 million for the same period a year ago.
The company's quarterly loss was its second in a row. It posted a net loss of $6.9 million for the second quarter ended June 30, 2005.
Cooper's overall third-quarter operting profit was a little over $14 million; in North America, it was $16.9 million (on sales of $509 million). The company reported a nearly $1.1 million loss from continuing operations.
"Our sales were softer than we anticipated throughout the quarter and lagged the markets in July and August," says Tom Dattilo, Cooper's chairman, CEO and president. "We saw improvement and gained market share in September, but it was not enough to overcome the slow start in the quarter.
"We made good progress in restoring production levels in our plants. Production on an equivalent unit basis was up for the quarter overall and more so in September. Our order fill rates and the availability of critical, high-demand products continued to improve, and these will be key factors as we work hard to regain business, particularly with our independent dealers, going forward."
For the first nine months of the year, Cooper posted a net loss of $2.5 million (a decrease of 103% compared to the same period in 2004) on net sales of $1.58 billion (a 2.7% comparative increase). Operating profit was $20.3 million -- down 63%. The company also posted an $8.5 million loss from continuing operations.
The nine-month results included the net impact of $10 million ($7 million net of tax) in debt extinguishment costs and $24 million ($16 million net of tax) in costs related to the strike at the company's Texarkana, Ark., tire plant that occurred in March and April.
"We are excited about the growth potential in Asia as we complete and begin to leverage our acquisition of a majority interest in Cooper Chengshan Passenger Tire Co. and in Cooper Chengshan Truck Tire Co. in China," says Dattilo. "They have grown significantly over the past two years, and will report nearly $500 million in annualized sales to start.
"We expect growth in the China automotive and tire industry to keep pace with or exceed the overall economic growth in China."
He says Cooper's fourth-quarter outlook for increasing its sales in North America is cautiously optimistic. "However, we still face challenges in our broad-line sales, and uncertainty remains in the tire industry specifically and in the broader economy in North America and key regions around the world.
"Raw material prices and energy costs are still headed higher. In addition, it is very difficult at this point to accurately assess the current and future strength of global tire markets, particularly in North America, where the impact of higher gasoline prices, declining consumer confidence and the lingering impact of hurricanes in Florida, Mississippi, Louisiana and Texas cannot yet be measured.
"We reduced the production schedules in our plants starting in early October due to raw material supply constraints following Hurricane Rita," says Dattilo. "Raw material supplies now appear to be stabilized.
"However, our inventory of certain products remains high. As a result, we will continue to operate our North American plants on reduced production schedules. This will negatively impact our fourth-quarter operating profit and obscure the progress we are achieving in production process changes and manufacturing efficiency.
"So our outlook is that our operating environment will remain challenging in the fourth quarter, but we expect to see improvement as well as increasing productivity and manufacturing efficiency in the first quarter of 2006."
Cooper Tire's stock price closed at $14.41 on the New York Stock Exchange on Monday, Nov. 7. That compares to a 52-week high and low of $22.50 and $13, respectively.