(CTB) Cooper Tire & Rubber Company Reports Mixed Second Quarter

Cooper Tire & Rubber Company (CTB) delivered a net income of 18 cents per share from continuing operations in the second quarter of 2011, down significantly from 30 cents per share reported in the year-ago quarter. Reported net income was also substantially lower than the Zacks Consensus Estimate of 46 cents per share. Lower-than-expected results were largely affected by higher raw material costs and lower volumes across each of the company’s operating segments.

Total sales in the quarter grew 14.7% year over year to $922.2 million. Operating profit fell by $10 million to $24 million, despite increased efficiencies and a decrease in selling, general and administrative (SG&A) expenses (down 11% to $48 million).

The North American Tire Operations generated sales of $667 million, up 16% year over year due to strong price and product mix, partly offset by lower unit sales. The light vehicle tire shipments for the segment fell 11.9% in the U.S., much higher than the 6.8% decrease in total industry shipment. Unit sales for the North American segment decreased 8.2 % compared with the prior-year quarter.

Weak industry conditions coupled with higher raw material costs and reduced tire purchases by consumers negatively impacted the segment. Operating profit plunged to $4 million from $20 million in the comparable quarter of 2010.

The International Tire Operations reported sales of $396 million in the quarter, up 27% year over year due to a better price-product mix, offset partially by lower volumes. Sales volumes in the Asian operations dropped 8% (including inter-company shipments), while the same in the European operations grew 6.2% from the year-ago level.

The decrease of volume in the Asian market is attributable to weak demand in the domestic Chinese truck and bus tire market and increased focus on profit rather than volume in certain export markets. The volume increase in the European market was aided by improved demand. Operating profit, however, climbed 5.9% to $23 million from $21 million in the previous year.

Cooper Tire’s cash and cash equivalents plummeted to $137.7 million as of June 30, 2011 from $379.1 million as of June 30, 2010. Almost $134 million of cash was used to acquire additional ownership and support future growth in the Mexican and Chinese operations.

Inventories also increased significantly to $642.5 million as of June 30, 2011 from $387.4 million as of June 30, 2010. Long-term debt fell to $324.4 million at the end of the second quarter in 2011 from $326.9 million at the end of the year-ago quarter.

Headquartered in Findlay, Ohio, Cooper Tire, which has a Zacks #5 Rank (Strong Sell rating), manufactures and markets tires and related products. The company has more than 60 manufacturing, sales, distribution, technical and design facilities located across the world. The company has 8 manufacturing facilities: five in North America (including one in Mexico), two in China and one in Europe. Cooper is the ninth largest tire company in the world.

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