Cooper Tire & Rubber Company (CTB)
Q1 2010 Earnings Call
May 5, 2010 11:00 am ET
Curtis Schneekloth - Director of Investor Relation
Roy V. Armes - Chairman, Chief Executive Officer and President
Brad Hughes – Chief Financial Officer
Anthony Cristello - BB&T Capital Markets
Rod Lache - Deutsche Bank Securities
Himanshu Patel – JPMorgan
Robbie [Shanker] – Unidentified Analyst
Saul Ludwig – KeyBanc Capital Markets
Derrick Winger – Jefferies & Co.
Previous Statements by CTB
» Cooper Tire & Rubber Company Q4 2009 Earnings Call Transcript
» Cooper Tire & Rubber Company Q3 2009 Earnings Call Transcript
» Cooper Tire & Rubber Q2 2009 Earnings Call Transcript
Good morning. My name is Debbie and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Cooper Tire first quarter 2010 conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions)
Mr. Curtis Schneekloth, you may begin your conference.
Good morning everyone. Thank you for joining our call today. My name is Curtis Schneekloth and I serve as the Company’s Director of Investor Relations.
To begin with I would like to remind you that during our conversation today you may hear forward-looking statements related to the future finance for results and operations of Cooper Tire & Rubber company. Actual results may differ materially from current management forecast and projections as a result the factors over which the company has no control.
Information on these risk factors and additional information on forward-looking statements are included in the press release in the company’s reports on file with the Securities and Exchange Commission.
With me today are Roy Armes, Chairman, Chief Executive Officer and President and Brad Hughes who serves as Chief Financial Officer.
In association with the press release which was sent out earlier this morning we will provide an overview of the company’s first quarter operations and results. Following the prepared comments we’ll open the call to participants for a question-and-answer session.
The call will begin with Roy providing an overview of the results who will then turn it over to Brad for a discussion on some of the details by segment and comments on other matters. Roy will then summarize and provide comments on our outlook.
Now let me turn the call over to Roy Armes.
Roy V. Armes
Yes thanks Curtis and good morning to everyone. During the first quarter we had net income of $0.19 per share or $12 million. This includes restructuring charges primarily related to the closure of the Albany Georgia facility of about $8 million and this is a significant improvement over the prior year first quarter loss of $21 million or $0.36 a share which included $14 million of restructuring charges.
We’re seeing a return to healthier levels of demand for replacement tires across the globe from the depressed levels that we experienced in early 2009 and this combined with our successful efforts to position the company for growth have resulted in impressive improvements to the top line.
We’ve also pushed forward in our efforts to improve our cost structure and this will be an ongoing effort as we ingrain the lessons of continuous improvement in the company. And we’re excited about the opportunities and look forward to implementing other organizational improvements that will also strengthen the company.
With that said let me present an overview of the operations. On a consolidated basis sales for the first quarter increased over the prior year first quarter by 32% to $754 million. Driving the top line growth were significant volume increases and favorable exchange rates offset by negative pricing and mix compared to the first quarter of 2009.
Our volume performance was again ahead of the industry in the United States and continues the trend started in the second half of 2009. This is a result of multiple actions taken to better align ourselves with the market demands.
And the new products that we’ve launched continue to be positively accepted by the market and we’re also benefiting from some of the positive industry trends that are occurring as well. This includes the preference that consumers are showing for value products in segments where Cooper has been able to deliver the value that they’re looking for.
Operating profit for the first quarter was $33 million compared to operating losses of $16 million for the same period last year. Excluding restructuring charges our total company operating profit improved by $42 million.
The largest drivers of this change were improved volumes and increased utilization and manufacturing capacity. As demand increased we operated at a level very close to full practical capacity. Favorable price and mix impacts of $17 million dollars did not fully offset increased raw material costs of $41 million during the quarter.
We recently announced a price increase in North America of up to 7.5% effective June 1 in response to the continued increases in raw materials. Our higher products liability cost primarily reflect a $22 million increase in reserves for an adverse verdict in a single case which the company intends to aggressively appeal. These charges are included in the North American operating profits or operating results.
Without this reserve increase the North American segment would have posted $35 million in operating profit or 6.7% of net sales. Our international segment again provided strong results with $23 million in operating profit, an increase of $25 million over the first quarter of 2009. The segment has done an incredible job of improving their competitiveness while supporting significant growth in a variety of regions.
I’m very proud of the efforts and accomplishments of the Cooper team during this period and staying focused on the right priorities executing with a sense of urgency and improving industry conditions all resulted in the progress for our company.