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Cooper Tire & Rubber Company (CTB)
Q3 2009 Earnings Call
November 2, 2009; 11:00 am ET
Roy Armes - Chairman, Chief Executive Officer & President
Phil Weaver - Chief Financial Officer
Curtis Schneekloth - Director of Investor Relation
Himanshu Patel - JP Morgan
Rod Lache - Deutsche Bank
Tony Cristello - BB&T Capital Markets
Saul Ludwig - KeyBanc
Kirk Ludtke - CRT Capital Group
Previous Statements by CTB
» Cooper Tire & Rubber Q2 2009 Earnings Call Transcript
» Cooper Tire & Rubber Q1 2009 Call Transcript
» Cooper Tire & Rubber Co. Q4 2008 Earnings Call Transcript
Mr. Schneekloth, you may begin your conference.
Good morning everyone and thank you for joining our call today. My name is Curtis Schneekloth and I serve as the company’s Director of Investor Relations. To start with, I’d like to remind you that during the conversation you may hear forward-looking statements related to future financial results and business operations for Cooper Tire & Rubber Company. Actual results can differ materially from current management forecast and projections.
This is a result of factors over, which the can has 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 and filed with the Securities and Exchange Commission. With me today are Roy Armes, Chairman, Chief Executive Officer and President; and Phil Weaver, who serves as Chief Financial Officer.
Today’s call will begin with Roy, providing an overview of our results. He will then turn it over to Phil 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. Following our prepared comments we will open the call to participants for a question-and-answer session.
Now let me turn the call over to Roy Armes.
Thanks, Curtis and good morning to everyone. The third quarter was truly exciting for Cooper as we benefited from changes that we’ve been successfully implementing in an environment where there’s been a positive relationship between a price and raw materials.
We continue to make progress as outlined in our strategic plan by establishing a sustainable and cost competitive supply of tires, profitably growing our top line and enhancing our organizational capabilities. We’re also successful in managing our cash, ending the third quarter with $410 million up $162 million from December 31, 2008 and this period we also reduced our debt by $77 million.
While exciting, this progress is a part of our journey and not the goal. We realize we must continue to successfully execute changes to position the company for success, while remaining realistic about the difficulties that can be posed by the global economic environment and factors outside of our control, but during the third quarter, we had net income of $0.77 per share or $47 million.
This includes restructuring charges, primarily related to the closure of the Albany, Georgia, facility of $13 million and this is a significant improvement over the prior year third quarter loss of $55 million or $0.94 per share. The demand for tires appears to have begun stabilizing, but is not rebounded dramatically and indicators of this include stabilization in miles driven the U.S., our largest market and market recovery in China.
Our strategic plan continues to guide us forward and although we had to adapt our expectations to ever changing market conditions, we’re committed to delivering results with the actions that we’ve put in place. Production at our facility in Albany, Georgia ceased in September, well ahead of the original projections. In currently, we’re relocating equipment for installation in other plants and we continue to estimate the restructuring charges in total will be around $120 million to $145 million of which 60% to 70% would be non-cash.
To date, we have incurred $113 million of restructuring cost, the majority of which were non-cash. The annual savings of the closure will be in the range of $75 million to $80 million, primarily due to the better fixed cost structure and the operating leverage at our other remaining facilities, in essence, better optimizing the three remaining facilities versus sub optimizing the four U.S. plants.
With that said, let me present an overview of the operation. On a consolidated basis, sales for the third quarter increased over the prior year third quarter by 1% to $803 million. Volume increases were offset by negative pricing and mix during the quarter and raw material costs were favorable during the third quarter, but have begun to increase.
We also continue to realize the benefits of reducing costs in our manufacturing operation. There were a few positive indicators during the quarter related to the top line and they were both industry and company specific. These included improved miles driven data, strong shipments in China and reduced inventory levels throughout the industry.
We’re able to begin closing the gap that existed with industry performance in the United States and as we discussed in prior calls, this is the result of multiple efforts that have been underway and are beginning to deliver results. These reflect a positive sign of what we can do by adjusting our go-to-market efforts.
Operating profit for the third quarter was $71 million, compared to operating losses of $47 million for the same period last year. The largest drivers of this change were the impact of lower raw material costs and favorable results from our operations. These were offset by negative price, and mix impacts, and higher selling, general and administrative costs. Increased restructuring costs during the quarter also impacted the results.