Cooper Tire & Rubber Co. reported net income from continuing operations attributable to Cooper Tire of $17 million for the quarter ended Sept. 30, 2011, a decrease of $28 million from the same period in 2010. Net sales were $1.05 billion, an increase of $171 million, or 19%, from the prior year and a record for any quarter.
Operating profit was $47 million for the quarter, a decrease of $20 million from the prior year same quarter.
Due to the fact that the company has a valuation allowance against its U.S. deferred tax assets, the tax provision for the quarter was impacted by $8.9 million of additional expense because of the timing of credits and deductions, Cooper reports. These items are expected to be largely offset with the anticipated fourth quarter release of the majority of the U.S. valuation allowance.
Sales volumes in both the North American and International segments were higher than the prior year same period, which improved profits by $5 million. Improved price and mix of $158 million during the quarter was more than offset by $194 million of higher raw material costs. Also improving profit were $12 million of reduced selling, general and administrative costs, including lower incentive-related expenses, and $5 million of lower restructuring costs, the company reports.
Higher manufacturing costs decreased results by $6 million as the company curtailed production to balance inventory levels and projected demand, while manufacturing a more premium mix of products.
Working capital increases during the first nine months of 2011 reflected both higher finished goods unit inventory levels, which increased 28% from Dec. 31, 2010, and the higher costs of raw materials. “Typically, inventory is built during the first half of the year for sale during the second half of the year. We believe that our inventory levels are generally in line with current demand trends, and will adjust production going forward as necessary to maintain an appropriate availability of tires,” the company says.
For the nine months ended Sept. 30, 2011, Cooper reported net sales of $2.88 billion, an increase of $440 million, or 18%, from the same period of 2010.
North America Tire Operations
North America Tire Operations achieved net sales of $765 million during the third quarter, up 18% from 2010 net sales of $648 million. The increased sales were the result of both higher unit sales and stronger price and mix, Cooper reports. Unit sales for the North American segment increased 1.3% compared with the prior year third quarter. Cooper's total light vehicle shipments in the United States increased by 1.1% compared with total industry shipment increases of 0.2% as reported by the Rubber Manufacturers Association.
Broadline and value tire lines, where the company has a substantial presence, were relatively weaker than other product lines for the industry and Cooper. The company was able to offset this through better performance than the industry in ultra-high performance, light truck and SUV tires, resulting in a volume increase better than the industry.
Commercial tire shipments of the Roadmaster brand, which are excluded from light vehicle sales, were also strong during the quarter, up 52% compared with third quarter 2010. Year-to-date, the company's shipments of light vehicle tires decreased 0.9%, compared with an industry decrease of 0.5%.
The segment's operating profit was $17 million for the third quarter, or 2.3% of net sales. This is a decrease of $38 million compared with the same period in 2010. Favorable pricing and mix of $75 million were more than offset by $123 million of higher raw material costs. Selling, general and administrative costs were $6 million lower than a year ago. Restructuring costs were lower by $4 million and higher volumes improved results by $1 million. Other costs decreased by $3 million. Manufacturing costs, including curtailment costs, increased by $4 million.
For the nine months ended Sept. 30, 2011, the segment reported $2.08 billion of net sales and $43 million of operating profit, compared with $1.75 billion and $88 million for the same period of 2010.
International Tire Operations
The company's International Tire Operations reported $422 million in net sales, an increase of $97 million, or 30%, compared with the third quarter of 2010. The increase reflected positive price and mix and higher volumes. The segment shipped 2.3% more units than the same quarter in 2010, including intra-segment shipments. Asian sales volumes increased by 2.2%, including intercompany shipments, while European sales volumes increased by 12.4%.
The segment's operating profit increased by $9 million, to $30 million, or 7.2% of net sales in the third quarter of 2011, from $21 million, or 6.3%, in the third quarter of 2010. Favorable price and mix of $81 million more than offset higher raw material costs of $71 million. Higher volumes improved results by $4 million. Manufacturing cost changes lowered results by $2 million. Currency charges and other costs were unfavorable by $3 million compared to the prior year.
For the nine months ended Sept. 30, 2011, the segment reported $1.18 billion of net sales and $74 million of operating profit compared with $931 million and $64 million for the same period of 2010.