Get Cash Back and $0 Commissions
+ The Power of TradeStation
Business Wire 29-Apr-2019 7:00 AM
Cooper Tire & Rubber Company (NYSE:CTB) today reported first quarter 2019 net income of $7 million, or diluted earnings per share of $0.14, compared with $8 million, or $0.16 per share, last year.
First Quarter Highlights
"Operating profit in the first quarter was higher than we expected due to stronger than anticipated performance in North America and Asia," said Cooper President & Chief Executive Officer Brad Hughes. "Our Americas segment delivered an operating profit of $39 million, up $8 million from year ago, despite the $10 million impact of new TBR tariffs in the period this year. For the third consecutive quarter, we achieved unit volume growth in the U.S. In Asia, our business performed better than expected in what continues to be a challenging economic environment. In fact, third-party sales were up year over year in the region, but this was more than offset by lower intercompany shipments from China to North America.
"Moving forward, we will continue to make progress on our strategic priorities during 2019, and believe underlying macro-conditions will support growth in tire demand, particularly in the U.S. As a result, we continue to 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."
Consolidated Results
Q1 2019 | Q1 2018 | ||||||||||||||||
Cooper Tire | (NYSE:M) | (NYSE:M) | Change | ||||||||||||||
Net Sales | $ | 619 |
$ |
601 | 2.9 | % | |||||||||||
Operating Profit | $ | 26 |
$ |
26 | (0.1 |
%) |
|||||||||||
Operating Margin | 4.3 |
% |
4.4 |
% |
(0.1 |
) ppts. |
|||||||||||
First quarter net sales were $619 million, an increase of 2.9 percent, compared with $601 million in the first quarter of 2018. Net sales included $24 million of favorable price and mix, which was partially offset by $4 million of lower unit volume and $2 million of unfavorable foreign currency impact.
Operating profit was $26 million, unchanged compared with the first quarter of 2018. The quarter included $14 million favorable price and mix, which was partially offset by $3 million of unfavorable raw material costs, $3 million of higher other costs and unfavorable volume of $2 million. Operating profit benefited from manufacturing improvements, including better utilization, of $5 million and reduced product liability costs of $4 million. Negatively affecting the quarter were $10 million of tariffs enacted in the first quarter of 2019 on TBR tires imported into the U.S. from China and $5 million of restructuring costs related to Cooper Tire Europe's decision to cease light vehicle tire production at its Melksham, England facility.
Cooper's first quarter raw material index increased 2.4 percent compared to the first quarter of 2018. The raw material index decreased sequentially from 165.1 in the fourth quarter of 2018 to 160.4 in the first quarter of 2019.
The effective tax rate for the first quarter was 46.9 percent compared to 27.8 percent for the same period the prior year. The tax rate for the first quarter of 2019 includes the impact of final regulations related to U.S. income tax reform, while the first quarter 2018 rate included discrete items related to the accrual of additional uncertain tax positions pertaining to previous years. The effective tax rate is based on forecasted annual earnings and tax rates for the various jurisdictions in which the company operates.
At the end of the first quarter, Cooper had $212 million in cash and cash equivalents compared with $213 million at the end of the first quarter of 2018. Capital expenditures in the first quarter were $60 million, which was equal to the same period a year ago.
The company generated a return on invested capital, excluding the impact of the goodwill impairment charge in the fourth quarter of 2018, of 9.8 percent for the trailing four quarters.
Americas Tire Operations
|
Q1 2019 | Q1 2018 | |||||||||||||||
Americas Tire Operations |
(NYSE:M) | (NYSE:M) | Change | ||||||||||||||
Net Sales | $ | 515 | $ | 485 |
6.1 |
% |
|||||||||||
Operating Profit | $ | 39 | $ | 31 |
24.2 |
% |
|||||||||||
Operating Margin | 7.5 |
% |
6.4 |
% |
1.1 |
ppts. |
|||||||||||
First quarter net sales in the Americas segment increased 6.1 percent as a result of $31 million of favorable price and mix, which was partially offset by $1 million of unfavorable foreign currency impact. For the quarter, segment unit volume was flat compared to the first quarter of 2018 with a unit volume increase in North America that was offset by a decline in Latin America.
Cooper's first quarter total light vehicle tire shipments in the U.S. increased 1.1 percent. The U.S. Tire Manufacturers Association (USTMA) reported that its member shipments of light vehicle tires in the U.S. were up 2.2 percent. Total industry shipments (including an estimate for non-USTMA members) increased 5.6 percent for the period.
First quarter operating profit was $39 million, or 7.5 percent of net sales, compared with $31 million, or 6.4 percent of net sales, in 2018. Operating profit included $15 million of favorable price and mix, which was offset by $4 million of unfavorable raw material costs. The quarter also included $6 million of manufacturing improvements, including better utilization, and $4 million of lower product liability costs. These were partially offset by $10 million of additional tariffs enacted on TBR tires imported into the U.S. from China, $2 million of unfavorable SG&A costs, and other costs that increased by $1 million compared to the same period a year ago.
International Tire Operations
Q1 2019 | Q1 2018 | ||||||||||||||||
International Tire Operations | (NYSE:M) | (NYSE:M) | Change | ||||||||||||||
Net Sales | $ | 144 | $ | 161 |
(10.8 |
%) |
|||||||||||
Operating (Loss)/Profit | $ | (1 |
) |
$ | 7 | (118.0 |
%) |
||||||||||
Operating Margin | (0.9 |
%) |
4.6 |
% |
(5.5 |
) ppts. |
|||||||||||
First quarter net sales in the International segment decreased 10.8 percent as a result of $14 million of lower unit volume, $2 million of unfavorable foreign currency impact and $1 million of unfavorable price and mix. Segment unit volume decreased 9.1 percent, primarily due to lower intercompany sales.
The segment's first quarter operating loss was $1 million compared with operating profit of $7 million in the first quarter of 2018. The decrease included charges of $5 million related to the Melksham, England restructuring. Additionally, the segment experienced $2 million of lower unit volume, $2 million of unfavorable price and mix, and $1 million of higher manufacturing costs, which were partially offset by $2 million of lower raw material costs.
Outlook
"We are pleased that our first quarter results have helped position us well for the remainder of the year," said Hughes. "We expect to continue to improve results, building on our strategic initiatives as we continue to make tangible progress on the milestones communicated at our May 2018 Investor Day. Importantly, we remain focused on building our team's capabilities to advance our strategic initiatives and win in the marketplace."
For 2019, management continues to expect:
For 2019, management now expects:
The 2019 expectations include tariffs already in place, but do not include rate changes or additional tariffs that continue to be considered, but have not yet been imposed.
First Quarter 2019 Conference Call Today at 10 a.m. Eastern
Management will discuss the financial and operating results for the first quarter, as well as the company's business outlook, on a conference call for analysts and investors today at 10 a.m. EDT. The call may be accessed on the investor relations page of the company's website at http://coopertire.com/Investors.aspx or at https://services.choruscall.com/links/ctb190429.html. Following the conference call, the webcast will be archived and available for 90 days at these websites.
A summary slide presentation of information related to the quarter is posted on the company's website at http://investors.coopertire.com/Quarterly-Results.
Forward-Looking Statements
This release contains what the company believes are "forward-looking statements," as that term is defined under the Private Securities Litigation Reform Act of 1995, regarding projections, expectations or matters that the company anticipates may happen with respect to the future performance of the industries in which the company operates, the economies of the U.S. and other countries, or the performance of the company itself, which involve uncertainty and risk. Such forward-looking statements are generally, though not always, preceded by words such as "anticipates," "expects," "will," "should," "believes," "projects," "intends," "plans," "estimates," and similar terms that connote a view to the future and are not merely recitations of historical fact. Such statements are made solely on the basis of the company's current views and perceptions of future events, and there can be no assurance that such statements will prove to be true.
It is possible that actual results may differ materially from projections or expectations due to a variety of factors, including but not limited to:
It is not possible to foresee or identify all such factors. Any forward-looking statements in this release are based on certain assumptions and analyses made by the company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Prospective investors are cautioned that any such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected.
The company makes no commitment to update any forward-looking statement included herein or to disclose any facts, events or circumstances that may affect the accuracy of any forward-looking statement. Further information covering issues that could materially affect financial performance is contained in the company's filings with the U.S. Securities and Exchange Commission ("SEC").
Non-GAAP Financial Measures
This press release includes non-GAAP financial measures as defined under SEC rules. Non-GAAP financial measures should be considered in addition to, not as a substitute for, operating profit, net income, earnings per share or other financial measures prepared in accordance with generally accepted accounting principles ("GAAP"). The company's methods of determining these non-GAAP financial measures may differ from the methods used by other companies for these or similar non-GAAP financial measures. Accordingly, these non-GAAP financial measures may not be comparable to measures used by other companies. As required by SEC rules, detailed reconciliations between the company's GAAP and non-GAAP financial results are provided on the attached schedule. The company believes return on invested capital ("ROIC") provides additional insight for analysts and investors in evaluating the company's financial and operating performance. The company defines ROIC as the trailing four quarters' after tax operating profit, exclusive of certain items affecting comparability of results from period to period and utilizing the company's adjusted effective tax rate, divided by the total invested capital, which is the average of ending debt and equity for the last five quarters. The company believes ROIC is a useful measure of how effectively the company uses capital to generate profits.
About Cooper Tire & Rubber Company
Cooper Tire & Rubber Company (NYSE:CTB) is the parent company of a global family of companies that specializes in the design, manufacture, marketing and sale of passenger car, light truck, medium truck, motorcycle and racing tires. Cooper's headquarters is in Findlay, Ohio, with manufacturing, sales, distribution, technical and design operations within its family of companies located in more than one dozen countries around the world. For more information on Cooper, visit www.coopertire.com, www.facebook.com/coopertire or www.twitter.com/coopertire.
Cooper Tire & Rubber Company | |||||||||||
Consolidated Statements of Operations | |||||||||||
(Unaudited) | |||||||||||
(Dollar amounts in thousands except per share amounts) | |||||||||||
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Net sales | $ | 619,163 | $ | 601,496 | |||||||
Cost of products sold | 530,904 | 517,011 | |||||||||
Gross profit | 88,259 | 84,485 | |||||||||
Selling, general and administrative expense | 56,855 | 58,031 | |||||||||
Restructuring expense | 4,973 | — | |||||||||
Operating profit | 26,431 | 26,454 | |||||||||
Interest expense | (8,314 | ) | (7,691 | ) | |||||||
Interest income | 3,380 | 2,315 | |||||||||
Other pension and postretirement benefit expense | (9,362 | ) | (6,986 | ) | |||||||
Other non-operating income (expense) | 1,380 | (1,658 | ) | ||||||||
Income before income taxes | 13,515 | 12,434 | |||||||||
Provision for income taxes | 6,337 | 3,451 | |||||||||
Net income | 7,178 | 8,983 | |||||||||
Net income attributable to noncontrolling shareholders' interests | 199 | 698 | |||||||||
Net income attributable to Cooper Tire & Rubber Company | $ | 6,979 | $ | 8,285 | |||||||
Earnings per share: |
|||||||||||
Basic | $ | 0.14 | $ | 0.16 | |||||||
Diluted | $ | 0.14 | $ | 0.16 | |||||||
Weighted average shares outstanding (000s): | |||||||||||
Basic | 50,100 | 50,838 | |||||||||
Diluted | 50,378 | 51,179 | |||||||||
Segment information: | |||||||||||
Net Sales | |||||||||||
Americas Tire | $ | 514,936 | $ | 485,392 | |||||||
International Tire | 143,785 | 161,244 | |||||||||
Eliminations | (39,558 | ) | (45,140 | ) | |||||||
Operating profit (loss): | |||||||||||
Americas Tire | $ | 38,789 | $ | 31,236 | |||||||
International Tire | (1,339 | ) | 7,434 | ||||||||
Unallocated corporate charges | (10,453 | ) | (11,966 | ) | |||||||
Eliminations | (566 | ) | (250 | ) | |||||||
Cooper Tire & Rubber Company | |||||||||
Condensed Consolidated Balance Sheets | |||||||||
(Unaudited) | |||||||||
(Dollar amounts in thousands) | |||||||||
March 31, | |||||||||
2019 | 2018 | ||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 212,331 | $ | 213,091 | |||||
Notes receivable | 12,514 | 66,073 | |||||||
Accounts receivable | 540,813 | 499,130 | |||||||
Inventories | 563,736 | 611,524 | |||||||
Other current assets | 54,829 | 63,921 | |||||||
Total current assets | 1,384,223 | 1,453,739 | |||||||
Property, plant and equipment, net | 1,010,715 | 978,494 | |||||||
Operating lease right-of-use assets, net | 97,646 | — | |||||||
Goodwill | 18,851 | 56,056 | |||||||
Intangibles, net | 117,433 | 126,143 | |||||||
Deferred income tax assets | 26,923 | 57,057 | |||||||
Other assets | 21,377 | 7,493 | |||||||
Total assets | $ | 2,677,168 | $ | 2,678,982 | |||||
Liabilities and Equity | |||||||||
Current liabilities: | |||||||||
Notes payable | $ | 20,074 | $ | 41,043 | |||||
Accounts payable | 268,780 | 268,556 | |||||||
Accrued liabilities | 248,029 | 244,371 | |||||||
Income taxes payable | 4,993 | 5,098 | |||||||
Current portion of long-term debt and finance leases | 173,974 | 1,446 | |||||||
Total current liabilities | 715,850 | 560,514 | |||||||
Long-term debt and finance leases | 121,305 | 295,221 | |||||||
Noncurrent operating leases | 72,730 | — | |||||||
Postretirement benefits other than pensions | 235,974 | 256,188 | |||||||
Pension benefits | 144,908 | 218,280 | |||||||
Other long-term liabilities | 138,183 | 144,753 | |||||||
Total parent stockholders' equity | 1,186,640 | 1,140,723 | |||||||
Noncontrolling shareholders' interests in consolidated subsidiaries | 61,578 | 63,303 | |||||||
Total liabilities and equity | $ | 2,677,168 | $ | 2,678,982 | |||||
Cooper Tire & Rubber Company | |||||||||||
Consolidated Statements of Cash Flows | |||||||||||
(Unaudited) | |||||||||||
(Dollar amounts in thousands) | |||||||||||
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Operating activities: | |||||||||||
Net income | $ | 7,178 | $ | 8,983 | |||||||
Adjustments to reconcile net income to net cash from operations: | |||||||||||
Depreciation and amortization | 37,298 | 36,424 | |||||||||
Stock-based compensation | 869 | 1,280 | |||||||||
Change in LIFO inventory reserve | (168 | ) | (9,900 | ) | |||||||
Amortization of unrecognized postretirement benefits | 9,131 | 9,210 | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts and notes receivable | 2,278 | (14,955 | ) | ||||||||
Inventories | (81,354 | ) | (81,156 | ) | |||||||
Other current assets | (2,170 | ) | (5,532 | ) | |||||||
Accounts payable | 2,740 | 13,063 | |||||||||
Accrued liabilities | (63,228 | ) | (34,778 | ) | |||||||
Other items | (8,986 | ) | 58 | ||||||||
Net cash used in operating activities | (96,412 | ) | (77,303 | ) | |||||||
Investing activities: | |||||||||||
Additions to property, plant and equipment and capitalized software | (59,867 | ) | (59,722 | ) | |||||||
Proceeds from the sale of assets | 38 | 133 | |||||||||
Net cash used in investing activities | (59,829 | ) | (59,589 | ) | |||||||
Financing activities: | |||||||||||
Net payments on short-term debt | 6,608 | (5,356 | ) | ||||||||
Repayments of long-term debt and finance lease obligations | (797 | ) | (809 | ) | |||||||
Payment of financing fees | — | (1,230 | ) | ||||||||
Repurchase of common stock | — | (15,565 | ) | ||||||||
Payments of employee taxes withheld from share-based awards | (1,158 | ) | (1,891 | ) | |||||||
Payment of dividends to Cooper Tire & Rubber Company stockholders | (5,262 | ) | (5,334 | ) | |||||||
Excess tax benefits on stock-based compensation | — | 270 | |||||||||
Net cash used in financing activities | (609 | ) | (29,915 | ) | |||||||
Effects of exchange rate changes on cash | (1,058 | ) | 1,399 | ||||||||
Net change in cash, cash equivalents and restricted cash | (157,908 | ) | (165,408 | ) | |||||||
Cash, cash equivalents and restricted cash at beginning of year | 378,246 | 392,306 | |||||||||
Cash, cash equivalents and restricted cash at end of year | $ | 220,338 | $ | 226,898 | |||||||
Cooper Tire & Rubber Company | |||||||||||||||||||||||||||
Reconciliation of Non-GAAP Financial Measures | |||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
(Dollar amounts in thousands) | |||||||||||||||||||||||||||
RETURN ON INVESTED CAPITAL (ROIC) | |||||||||||||||||||||||||||
Trailing Four Quarters Ended March 31, 2019 | |||||||||||||||||||||||||||
Calculation of ROIC |
Calculation of Net Interest Tax Effect |
||||||||||||||||||||||||||
Adjusted (Non-GAAP) operating profit |
$ | 199,048 |
Provision for income taxes (c) |
$ | 36,381 | ||||||||||||||||||||||
Adjusted (Non-GAAP) effective tax rate |
24.4 | % |
Adjusted (Non-GAAP) income before income taxes (d) |
$ | 148,967 | ||||||||||||||||||||||
Income tax expense on operating profit |
48,612 |
Adjusted (Non-GAAP) effective income tax rate (c)/(d) |
24.4 | % | |||||||||||||||||||||||
Adjusted operating profit after taxes (a) |
150,436 | ||||||||||||||||||||||||||
Total invested capital (b) |
$ | 1,541,940 | |||||||||||||||||||||||||
ROIC, including noncontrolling equity (a)/(b) |
9.8 | % | |||||||||||||||||||||||||
Calculation of Invested Capital(five quarter average) |
Equity |
Long-termdebt andfinanceleases |
Currentportion oflong-termdebt andfinanceleases |
Notespayable |
Totalinvestedcapital |
||||||||||||||||||||||
March 31, 2019 | $ | 1,248,218 | $ | 121,305 | $ | 173,974 | $ | 20,074 | $ | 1,563,571 | |||||||||||||||||
December 31, 2018 | 1,232,443 | 121,284 | 174,760 | 15,288 | 1,543,775 | ||||||||||||||||||||||
September 30, 2018 | 1,228,509 | 294,841 | 1,376 | 14,831 | 1,539,557 | ||||||||||||||||||||||
June 30, 2018 | 1,177,268 | 295,017 | 1,398 | 47,378 | 1,521,061 | ||||||||||||||||||||||
March 31, 2018 |
1,204,026 |
295,221 |
1,446 |
|
|
41,043 |
1,541,736 |
||||||||||||||||||||
Five quarter average | $ | 1,218,093 | $ | 225,534 | $ | 70,591 | $ | 27,723 | $ | 1,541,940 | |||||||||||||||||
Calculation of Trailing Four QuarterIncome and Expense Inputs |
|||||||||||||||||||||||||||
Provision | Income | Adjusted | |||||||||||||||||||||||||
for | before | income | |||||||||||||||||||||||||
Operating | Goodwill | Adjusted | income | income | Goodwill | before | |||||||||||||||||||||
profit as | impairment | operating | taxes as | taxes | impairment | income | |||||||||||||||||||||
Quarter-ended: | reported | charge* | profit | reported | as reported | charge* | taxes | ||||||||||||||||||||
March 31, 2019 | $ | 26,431 | $ | — | $ | 26,431 | $ | 6,337 | $ | 13,515 | $ | — | $ | 13,515 | |||||||||||||
December 31, 2018 | 24,826 | 33,827 | 58,653 | 11,550 | 11,989 | 33,827 | 45,816 | ||||||||||||||||||||
September 30, 2018 | 81,201 | — | 81,201 | 16,227 | 71,660 | — | 71,660 | ||||||||||||||||||||
June 30, 2018 | 32,763 | — | 32,763 | 2,267 | 17,976 | — | 17,976 | ||||||||||||||||||||
Trailing four quarters | $ | 165,221 | $ | 33,827 | $ | 199,048 | $ | 36,381 | $ | 115,140 | $ | 33,827 | $ | 148,967 | |||||||||||||
*The Company recorded a non-cash goodwill impairment charge of $33,827 in the fourth quarter of 2018 related to the Company's Chinese joint venture. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190429005290/en/