Cooper Tire & Rubber Company (CTB)

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Cooper Tire & Rubber Company (CTB)

Q3 2012 Earnings Call

November 02, 2012, 11:00 am ET

Executives

Jerry Long - Assistant Treasurer & Investor Relations

Roy Armes - Chairman, President & CEO

Brad Hughes - VP & CFO

Analysts

Elizabeth Lane - Bank of America Merrill Lynch

Rod Lache - Deutsche Bank

Brett Hoselton - KeyBanc

Bret Jordan - BB&T Capital Markets

Aditya Oberoi - Goldman Sachs

Efraim Levy - S&P Capital IQ

Presentation

Operator

Ladies and gentlemen thank you for standing by and welcome to the Cooper Tire Third Quarter 2012 Results 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)

I will now turn the call over to Jerry Long. Mr. Long, you may begin.

Jerry Long

Thank you, operator. Good morning everyone and thank you for joining our call today. My name is Jerry Long and I serve as the company's Assistant Treasurer, responsible for 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 forecasts 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, CEO and President and Brad Hughes, our 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 that will be filed with the SEC. 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. Questions may also be directed to our email address, which is investorrelations@cooppertire.com.

Today's call will begin with Roy providing an overview of our results. He will then turn it over to Brad for a detailed review of our quarterly results. Roy will then summarize and provide comments on our outlook.

Now, let me turn the call over to Roy Armes.

Roy Armes

Thanks Jerry and good morning to everyone. Needless to say, I am very pleased to report that the third quarter was a period of record performance for Cooper Tire and consolidated net sales were $1.1 billion, that's a 4% increase over the third quarter of last year and a company record. This increase was driven by 5% quarter-over-quarter rise in total company unit volume. Our third quarter results included record operating profit for any quarter of $133 million or 11.8% of total net sales compared with $47 million or 4.5% for the same period last year.

North America segment, operating profit was $105 million or 12.8% of net sales, while the International segment operating profit was $36 million or 8.6% of net sales. Earnings grew to $1.17 per share, up $0.90 per share over the same period last year, demonstrating our continued focus on creating and sustaining shareholder value even in what remains a challenging global economy and sluggish tire industry.

In fact on the topline, Cooper significantly outperformed the U.S. industry volumes in the third quarter and in the light vehicle category, we were up 6% while the industry was down 3% and in the light truck, we were up 20% while the industry was up just 6% and finally we were up 4% in TBR while the industry was down 3.5%. You’ll note that the industry comparison data here is from the RMA’s original release for the quarter, which was later revised showing even weaker industry performance.

Our International segment volumes increased 13% compared to third quarter of 2011, and despite the challenging market conditions in China, we are pleased the domestic volumes for both our TBR and PCR segments continue to grow and outpace the industry. And our team in Europe continues to navigate profitably through a difficult economic environment.

Third quarter volumes in the regions were down compared to the prior year. However, they were partially offset by incremental volumes from our new operation in Serbia which continues to ramp up production in line with our previously stated targets. This investment in Serbia reinforces our competency to acquire and upgrade existing assets to produce world-class tires with significant capital efficiency.

And Brad will review all the specific quarterly results on a consolidated basis and by segment, but I want to spend a few minutes talking about what we believe is setting Cooper’s results apart from the industry. Our people and their ability to effectively execute our company’s strategic plan are at the heart of our performance. We launched our strategic plan in 2008 and our teams have been aggressively and consistently executing towards its three primary objectives; which are, one, creating and sustaining a competitive cost position, and two, driving topline profitable growth, and three, building organizational capabilities that help us achieve the first two objectives.

Now let me start with the first one, creating a competitive cost position. We are working very hard at Cooper to drive process efficiencies and to optimize and leverage our global manufacturing footprint while building better products. And as a result of our global expansion strategy the International segment now represents 37% of combined segment operating profit on a year-to-date basis. While work remains to be done, we believe we are on the right path as we continue to leverage our global footprint to drive efficiencies. And we are well positioned with significant manufacturing capabilities in Asia as well as in Europe.

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