FINDLAY, Ohio, Nov. 8 /PRNewswire-FirstCall/ -- Cooper Tire &
Rubber Company (NYSE:CTB) today reported consolidated net sales of
$716 million for the three-month period ended September 30, 2006,
up more than 28 percent compared to the same period a year ago. The
increase was driven largely by the operations of Cooper Chengshan
(Shandong) Passenger Tire Co., Ltd., and Cooper Chengshan
(Shandong) Tire Company, Ltd. in China, of which the Company
acquired controlling interests effective February 4, 2006. Improved
sales volume in Europe and improved product pricing and mix in both
North America and Europe also contributed to the increase in
revenue. (Logo:
http://www.newscom.com/cgi-bin/prnh/20010404/COOPERLOGO ) While
revenue increased, operating results for the quarter were
negatively impacted by several significant factors. These include:
$10 million in unabsorbed overhead due to reduced production levels
associated with the Company's continued efforts to reduce inventory
in North America; $5 million in severance costs relating to the
former CEO; and $2 million in restructuring expense associated with
the closure of the Company's manufacturing facility in Athens, GA.,
and the reorganization of the management structure of Cooper Tire
Europe. Including these items and the impact of increasing raw
material costs, the Company incurred an operating loss of $7
million during the quarter. This was down compared to operating
income of $14 million in the third quarter of 2005 but a sequential
improvement when compared to the operating loss of $26 million
incurred in the second quarter of 2006. The Company recorded an
income tax expense of $7 million for the quarter. This expense
includes a tax benefit of $8 million on a loss before taxes from
continuing operations of $17 million. The tax expense for the
quarter also includes $4 million in net favorable adjustments
resulting primarily from changes in the Company's estimates of tax
credits and deductible items, and a $19 million valuation allowance
to reduce deferred tax assets to amounts more likely to be
realized. Including this tax adjustment, the restructuring charges
and severance expense for the former CEO, the Company recorded a
net loss of $25 million, or 41 cents per share in the quarter. For
the nine month period ended September 30, 2006, the Company
recorded sales of $1.9 billion, up 22 percent compared to the same
period a year ago, and generated an operating loss of $38 million
and a net loss of $51 million. North American Tire Operations
Cooper's North American Tire operations reported sales of $552
million in the third quarter of 2006, up 8 percent compared to
sales in the third quarter of 2005. This increase is attributable
to improved pricing and mix as well as a small improvement in tire
unit sales. The increase in tire sales was partially offset by the
Oliver Rubber Division's discontinuation of sales of custom mixed
rubber products to an automotive customer. The Company's North
American Tire operations continued to gain share during the
quarter. The Rubber Manufacturers Association (RMA) reported
preliminary light vehicle replacement tire shipments were down
about 2 percent in the third quarter. Cooper's total light vehicle
tire shipments were up slightly compared to the same period last
year. Performance, ultra-high performance and SUV tires were the
product categories that showed the greatest increases. Operating
results for North American Tire operations declined year over year
as a result of several key operating factors. In addition to the
$10 million in unabsorbed overhead from temporary plant shutdowns
to reduce inventory, higher raw material costs further reduced
operating profit by $34 million. Products liability expense was $5
million higher and increased scrap resulting from a recall of
certain products produced in the segment's Albany, GA plant during
the quarter reduced operating profit by $4 million. These were
partially offset by improved pricing. In total, North American Tire
operations incurred an operating loss of $3 million in the third
quarter, down compared to the operating profit of $16 million
generated in the third quarter of 2005 but up sequentially from the
operating loss of $30 million incurred in the second quarter of
2006. In the first nine months of 2006, the segment incurred an
operating loss of $39 million compared to operating profit of $24
million in the same period a year ago. The North American Tire
segment was successful in reducing inventory by 1.3 million tires
during the quarter, generating $53 million in cash. International
Tire Operations The Company's International Tire operations
reported sales of $193 million in the quarter, an increase of 152
percent compared to the third quarter of 2005. The acquisition of
the Cooper Chengshan operations contributed $108 million in sales
during the period. Sales for Cooper Europe reached $80 million, up
more than 14 percent compared to the same period last year. The
increase in European sales was the result of approximately 3
percent higher unit volume, the impact of price increases to offset
higher raw material costs, and favorable currency exchange rates.
Total unit sales for International Tire operations increased by
more than 130 percent during the quarter compared to the third
quarter of 2005. Operating profit for the International segment was
$3 million compared to essentially break-even operating results in
the third quarter of 2005. Cooper Chengshan added more than $6
million in operating profit. Improved pricing and mix in Europe
added $8 million and higher unit volume added $2 million. These
were partially offset by higher raw material costs, expenses
related to the startup of Asian operations, and higher utility and
other plant costs. For the first nine months of the year, the
Company's International Tire operations recorded sales of $504
million and operating profit of $14 million compared to $239
million in sales and $3 million in operating profit in the same
period a year ago. Management Commentary Commenting on the
quarter's results, Cooper's interim Chief Executive Officer Byron
Pond said, "This was a tough quarter with some of the operating
challenges and continued dramatic raw material cost increases we
faced. It was made even tougher with some of the unusual expenses
we incurred. But excluding those non-recurring items, you can see
signs that we are headed in the right direction. "Our team did a
great job in driving sales higher in a weak market, and we are
pleased with that. But more importantly, we remained focused on our
goals of reducing inventory, reducing complexity, and reducing
costs. We made solid progress toward our goal of reducing inventory
by $100 million. We have clearly identified projects which could
yield $34 million of the $70 million cost cutting goal announced in
September. And we have already implemented projects that will drive
$35 million of our $100 million profit improvement goal. "Even with
all of this activity, we did make some sequential improvement on
the operating line during the quarter. But there is a lot more work
to be done and we have defined plans in place to accomplish much
more." Outlook The Company plans to continue implementation of
projects to reduce inventory, cut costs, and improve operating
profit. Most of these key projects have been approved for
implementation and will be completed throughout 2007. The
implementation of these projects may, in some cases, be temporarily
disruptive to normal operations. However, each project has a short
payback and the Company is confident that the combination of
initiatives planned will improve overall efficiency and
profitability. Spot market prices of several key commodities
declined during the third quarter which, based on the Company's
purchasing patterns and contracts, should lead to sequentially
lower raw material costs in the fourth quarter. The Company
anticipates a sequential decline of approximately 2 percent in its
overall raw materials index in the fourth quarter. However, on a
year-over- year basis, the fourth quarter index is expected to be
nearly 11 percent higher than the fourth quarter of 2005. The
Company expects greater stability in raw material prices in 2007.
"We are confident in the direction we are heading and our outlook
calls for steady but modest improvement in the fourth quarter,"
Pond said. "The current trends in raw materials will help but our
success will ultimately depend on the execution of our plans. The
entire Cooper team is committed to getting this job done and
returning our company to profitability as soon as possible."
Cooper's management team will discuss the financial and operating
results for the quarter in a conference call today at 11:00 a.m.
Eastern time. Interested parties may access the audio portion of
that conference call on the investor relations page of the
Company's web site at http://www.coopertire.com/. Company
Description Cooper Tire & Rubber Company is a global company
that specializes in the design, manufacture, marketing and sales of
passenger car, light truck, medium truck tires and subsidiaries
that specialize in motorcycle and racing tires, as well as tread
rubber and related equipment for the retread industry. With
headquarters in Findlay, Ohio, Cooper Tire has 59 manufacturing,
sales, distribution, technical and design facilities within its
family of companies located around the world. For more information,
visit Cooper Tire's web site at: http://www.coopertire.com/.
Forward-Looking Statements This report 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
United States 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," "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
those projections or expectations due to a variety of factors,
including but not limited to: - changes in economic and business
conditions in the world, especially the continuation of the global
tensions and risks of further terrorist incidents that currently
exist; - increased competitive activity, including the inability to
obtain and maintain price increases to offset higher production or
material costs; - the failure to achieve expected sales levels; -
consolidation among the Company's competitors and customers; -
technology advancements; - fluctuations in raw material and energy
prices, including those of steel, crude petroleum and natural gas
and the unavailability of such raw materials or energy sources; -
changes in interest and foreign exchange rates; - increases in
pension expense resulting from investment performance of the
Company's pension plan assets and changes in discount rate, salary
increase rate, and expected return on plan assets assumptions; -
government regulatory initiatives, including the proposed and final
regulations under the TREAD Act; - changes in the Company's
customer relationships, including loss of particular business for
competitive or other reasons; - the impact of labor problems,
including a strike brought against the Company or against one or
more of its large customers; - litigation brought against the
Company; - an adverse change in the Company's credit ratings, which
could increase its borrowing costs and/or hamper its access to the
credit markets; - the inability of the Company to execute the cost
reduction/Asian strategies outlined for the coming year; - the
failure of the Company's suppliers to timely deliver products in
accordance with contract specifications; - the impact of reductions
in the insurance program covering the principal risks to the
Company, and other unanticipated events and conditions; and - the
failure of the Company to achieve the full cost reduction and
profit improvement targets set forth in a presentation made by
senior management and filed on Form 8-K on September 7, 2006. It is
not possible to foresee or identify all such factors. Any forward-
looking statements in this report 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 periodic filings with the U. S. Securities and Exchange
Commission ("SEC"). (Statements of income and balance sheets follow
... ) Cooper Tire & Rubber Company Consolidated Statements of
Income (Dollar amounts in thousands except per share amounts)
Quarter Ended Nine Months Ended September 30 September 30 2005 2006
2005 2006 Net sales $557,795 $715,795 $1,582,782 $1,937,162 Cost of
products sold 502,369 664,257 1,440,764 1,812,827 Gross profit
55,426 51,538 142,018 124,335 Selling, general and administrative
41,631 56,144 121,929 150,960 Adjustment to class action warranty
(277) (277) Restructuring charges - 2,715 - 10,927 Operating profit
(loss) 14,072 (7,321) 20,366 (37,552) Interest expense 13,545
12,964 41,475 35,361 Interest income (3,857) (2,064) (13,991)
(7,132) Debt extinguishment 1,328 - 10,403 (77) Dividend from
unconsolidated subsidiary - - - (4,286) Other income - net 1,296
(1,704) (238) (1,574) Income (loss) from continuing operations
before income taxes 1,760 (16,517) (17,283) (59,844) Income tax
benefit (expense) (2,846) (6,878) 8,732 11,530 Loss from continuing
operations before minority interests (1,086) (23,395) (8,551)
(48,314) Minority interests 11 (1,483) 14 (4,953) Loss from
continuing operations (1,075) (24,878) (8,537) (53,267) Income
(loss) from discontinued operations, net of income taxes 235 (115)
6,032 2,389 Net loss $(840) $(24,993) $(2,505) $(50,878) Basic
earnings (loss) per share Loss from continuing operations $(0.02)
$(0.41) $(0.13) $(0.87) Income from discontinued operations $0.00
$0.00 $0.09 $0.04 Net loss $(0.01)* $(0.41) $(0.04) $(0.83) Diluted
earnings (loss) per share Loss from continuing operations $(0.02)
$(0.41) $(0.13) $(0.87) Income from discontinued operations $0.00
$0.00 $0.09 $0.04 Net loss $(0.01)* $(0.41) $(0.04) $(0.83)
Weighted average shares outstanding Basic 61,292 61,339 64,440
61,336 Diluted 61,292 61,339 64,440 61,336 Depreciation $26,695
$34,125 $79,046 $98,259 Amortization $1,791 $1,349 $3,969 $4,007
Capital expenditures $38,894 $50,012 $128,012 $126,606 Segment
information Net sales North American Tire $508,756 $551,681
$1,430,484 $1,510,980 International Tire 76,539 192,659 238,869
503,636 Eliminations (27,500) (28,545) (86,571) (77,454) Segment
profit (loss) North American Tire 16,278 (3,285) 24,060 (39,092)
International Tire 67 3,137 2,784 14,262 Eliminations (114) 1,673
(692) (681) Unallocated corporate charges (2,159) (8,846) (5,786)
(12,041) CONSOLIDATED BALANCE SHEETS September 30 2005 2006 Assets
Current assets: Cash and cash equivalents $405,262 $105,137
Short-term investments 41,810 - Accounts receivable 378,304 468,753
Inventories 343,669 424,018 Other current assets 26,409 34,279
Deferred income taxes 28,022 12,971 Total current assets 1,223,476
1,045,158 Property, plant and equipment 775,227 983,744 Goodwill
48,172 60,706 Restricted cash 12,240 13,243 Intangibles and other
assets 349,676 359,930 $2,408,791 $2,462,781 Liabilities and
Stockholders' Equity Current liabilities: Notes payable $189
$110,850 Payable to non-controlling owner - 54,159 Trade payables
and accrued liabilities 323,693 399,113 Income taxes 1,159 1,832
Liabilities of discontinued operations 3,528 4,460 Total current
liabilities 328,569 570,414 Long-term debt 673,619 513,013
Postretirement benefits other than pensions 179,392 190,503 Other
long-term liabilities 197,115 228,447 Long-term liabilities of
discontinued operations 22,248 8,827 Deferred income taxes 42,334
12,971 Minority interests 4,964 60,578 Stockholders' equity 960,550
878,028 $2,408,791 $2,462,781 * Amounts do not add due to rounding
These interim statements are subject to year-end adjustments
Certain amounts from 2005 have been reclassed to conform to 2006
presentation
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http://photoarchive.ap.org/ DATASOURCE: Cooper Tire & Rubber
Company CONTACT: Roger S. Hendriksen of Cooper Tire & Rubber
Company, +1-419-427-4768 Web site:
http://www.coopertireandrubber.com/
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