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Cooper Tire & Rubber Company Reports First Quarter 2016 Results

FINDLAY, Ohio, Apr 29, 2016 (BUSINESS WIRE) -- Cooper Tire & Rubber Company CTB, -1.20% today reported first quarter 2016 net income of $59 million, or diluted earnings per share of $1.05, compared with $41 million, or $0.69 per share, last year.

First Quarter Highlights:

  • Unit volume increased 1.9 percent year-over-year
  • Net sales decreased 2.0 percent to $650 million
  • Operating profit increased by 29.5 percent year-over-year to $91 million, or 14 percent of net sales
  • Diluted earnings per share of $1.05 compared with $0.69 per share a year ago
  • Repurchased $24.8 million of stock at an average price of $35.98 per share

“Cooper is off to a strong start in 2016,” said Chairman, Chief Executive Officer and President Roy Armes. “Our first quarter operating margin performance was excellent, and continued the positive results we delivered in 2015. The Americas segment posted another outstanding quarter, with operating margin of over 18 percent. Unit volumes grew nearly 2 percent year-over-year, with strong growth in the International segment, which was partially offset by a slight decrease in the Americas segment. We continue to execute against our strategic plan, investing in operations around the globe to improve our competitive position and accelerating the development of new products. In North America, new products—those launched in the last two years—represent approximately 30 percent of sales. Of course, our overarching goal is to deliver shareholder value, and we continued to return cash to shareholders through our ongoing quarterly dividend and nearly $25 million in share repurchases in the first quarter,” Armes said.

Consolidated Results:

Consolidated First Quarter Results:

  • First quarter net sales were $650 million, a decrease of 2.0 percent compared with $663 million in the first quarter of 2015. First quarter results include $12 million of higher unit volume, with increases in the International segment partially offset by decreases in the Americas segment. The unit volume increase was more than offset by $17 million of unfavorable price and mix, primarily due to net price reductions related to lower raw material costs, as well as $8 million of negative currency impact.
  • First quarter 2016 operating profit was $91 million compared with $70 million for the same period last year. Operating profit increased as a result of $23 million of favorable raw material costs, net of price and mix, $6 million of lower product liability costs, $2 million of favorable SG&A and $1 million of higher unit volume. These benefits were partially offset by $6 million of higher manufacturing costs, $3 million of negative currency impact, and $2 million of other costs.
  • First quarter SG&A expense was $59 million, which compares with $62 million in the first quarter of 2015. SG&A expense for the quarter decreased to 9.1 percent of net sales, from 9.3 percent of net sales in the first quarter of 2015. The decrease in SG&A was primarily the result of lower mark-to-market costs of stock-based liabilities along with lower professional fees.
  • The higher manufacturing costs were concentrated in the Americas segment and were related to the greater complexity of manufacturing more high value, high margin tires along with nonrecurring costs in our Mexico tire plant resulting from manufacturing process changes that were implemented in the first quarter.
  • The effective tax rate for the first quarter was 32.3 percent, compared with 34.8 percent last year. The reduction in the tax rate was primarily due to discrete tax items during the quarter. The tax rate is based on forecasted annual earnings and tax rates for the various jurisdictions in which the company operates.
  • At quarter end, Cooper had $434 million in cash and cash equivalents, compared with $449 million at March 31, 2015. Capital expenditures in the first quarter were $36 million compared with $48 million in the same period last year.
  • In February 2016, the company announced an extended and increased $200 million share repurchase program. During the first quarter, 689,944 shares were repurchased for $24.8 million at an average price of $35.98 per share. Purchases continued in the second quarter under this authorization with an additional 205,928 shares purchased at an average cost of $36.43 for $7.5 million through April 27, 2016. Since share repurchases began in August 2014, the company has repurchased a total of 10 million shares at an average price of $34.12 per share.

A summary presentation of information related to the quarter is posted on the company's website at http://investors.coopertire.com/Quarterly-Results.

Americas Tire Operations:

First quarter net sales in the Americas segment declined 3.2 percent as a result of $11 million of unfavorable price and mix, $6 million of negative foreign currency impact, and $3 million of lower unit volume. Segment unit shipments decreased 0.5 percent compared with the same period last year. Cooper's total light vehicle tire shipments in the United States decreased 1.4 percent during the quarter due primarily to a decline in private label shipments. The Rubber Manufacturers Association (RMA) reported that its member shipments were up 0.6 percent, and total industry shipments (including an estimate for non-RMA members) increased 6.2 percent for the period.

First quarter operating profit was $106 million, or 18.3 percent of net sales, compared with $90 million, or 15.0 percent of net sales, in the first quarter of 2015. The higher operating profit primarily reflected $27 million of favorable raw material costs, net of price and mix, and $6 million of lower product liability costs, which were partially offset by $5 million of unfavorable manufacturing costs, $5 million of unfavorable SG&A costs, $5 million of negative currency impact and other costs, as well as $2 million due to lower unit volume.

International Tire Operations:

Operating Profit (Loss) ($2) ($3) 36.6%
Operating Margin (1.7%) (2.6%) 0.9 ppts

First quarter net sales in the International segment declined 3.6 percent as a result of $6 million of unfavorable price and mix and $3 million of negative foreign currency impact, which was partially offset by $5 million from higher unit volume. International segment unit volume was up 4.6 percent driven by increased sales in the domestic China market for original equipment and replacement tires.

The first quarter operating loss was $2 million compared with an operating loss of $3 million in the first quarter of 2015. The improvement was driven by $2 million of favorable SG&A costs and $1 million of increased...


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