Cooper Tire And Rubber's CEOs Discuss 1Q 2012 Results - Earnings Call Transcript

Cooper Tire and Rubber, Inc. (CTB)

1Q 2012 Earnings Call

May 2, 2012

Executives

Curtis Schneekloth – Director, IR

Roy Armes – Chairman, President and CEO

Bradley Hughes – VP and CFO

Analysts

Brett Hoselton – KeyBanc Capital Markets

Saul Ludwig – NorthCoast Research

Ravi Shanker – Morgan Stanley

Pat Nolan - Deutsche Bank Securities

Presentation

Operator

Good morning, my name is LaTonya, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cooper Tire First Quarter 2012 Results Conference Call. All lines have been placed on mute to prevent any background noise. (Operator instructions)

I will now hand the floor to Curtis Schneekloth, Director of Investor Relations. Thank you. Please, go ahead.

Curtis Schneekloth

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 financial results and business operations of Cooper Tire & Rubber Company. Actual results may differ materially from current management forecast and projections.

Such differences may be a result of factors over which the company has limited or no control. Information on these risk factors and additional information on forward looking statements are included in the press release and 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 quarterly operations and results. The press release contains a link to a set of slides that are a summary of information included in the press release and 10-Q. These slides are intended to help investors and analysts quickly obtain information. They will not be used as the focus of today's call.

Following our prepared comments, we will open the call to participants for a question-and-answer session. We've also established a new email address that you can send questions to, it is investorrelations@cooppertire.com.

Today's call will begin with Roy providing the overview of our results. He will then turn it to Brad for 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 Armes

Yes, thanks Curtis, and good morning.

During the first quarter, we continue progress toward our strategic goals despite a challenging business environment. We now have achieved 11 consecutive quarters of profitability, which was a tribute to the resiliency of our business model and to our entire organization who are dedicated and committed to the success of our company.

Before I provide an overview of the specific results for the quarter, I want to recognize that shortly after our last earnings call, the labor situation in Findlay, was resolved and we're very pleased to have our employees back to work. And to the credit of the management team and the workers at the Findlay facility, we had a smooth ramp up with limited issues. Brad will provide some more information of the impacts of that situation later in his comments.

Also, in the first quarter we closed a deal to purchase the tire manufacturing assets in Krusevac, Serbia. We're excited about the potential that this plant has to expand our international business, and also to strengthen our global manufacturing net worth.

During the first quarter we had net income attributable to Cooper Tire and Rubber Company of $22 million or $0.34 a share including the impact to the work stoppage. This compares to net income of $16 million or $0.25 a share in the first quarter of 2011. The consolidated net sales were $984 million for the first quarter up 9% versus the first quarter of 2011. This increase was primarily driven by higher prices, and volumes were down slightly for the total company.

Where unit volumes were down 3% for the North American segment and up 8% for the international segment. Our shipment volumes declined 6.1% in the United States for light vehicle tires which is in line with the industry shipments which were down 5.8% for the quarter. And for the industry and Cooper, Broadline and Value Tire shipments continue to be weak.

We were able to offset this by outperforming the industry in most other segments including light truck and UHP. We believe that pinup demand continues to exist for Broadline and Value Tires however, it's extremely difficult to predict when and how that demand will manifest.

Now within the international segment Asian volumes increased while European volumes decreased. The increase in volume in Asia was a combination of moderate growth in the domestic TBR market as well as continued successful efforts to expand distribution and supply of light vehicle tires in the Chinese market.

The decrease in European demand reflects continued weak industry conditions in several key European markets. Operating profit for the first quarter was $48 million or 4.8% of net sales compared with $32 million or 3.6% for the same period last year. The North American segment operating profit was $23 million or 3.3% of net sales, and international segment operating profit was $33 million or 8.1% of net sales.

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