Cooper Reports 16% Increase in Net Sales But Operating Loss in North America

Cooper said its acquisition of Cooper Chengshan (Shandong) Passenger Tire Co. Ltd. and Cooper Chengshan (Shandong) Tire Co., Ltd. increased sales by $48 million in the quarter, and higher prices, improved product mix, and higher unit sales volumes in North America and Europe added $39 million.

“While the increase in sales volume generated additional operating profit of $5 million, the company’s continuing operations experienced offsetting cost increases from higher raw material costs, reduced mold and production levels in the company’s Texarkana, Ark., plant and the transition to seven-day continuous operations in the Findlay, Ohio, plant,” Cooper stated in a release. “These cost increases outweighed the combined effects of improved price, improved product and customer mix and the increased sales volume.”

Cooper also said it “tentatively resolved a certain product liability claim” that reduced operating profit by $4 million, net income by $3 million and earnings per share by 5 cents. Overall, the company generated a net loss of 8 cents per share in the quarter, compared to net earnings of 7 cents per share in the first quarter of 2005.

Cooper’s North American tire operations reported sales of $496 million in the quarter, which were up 7% compared to $463 million in the first quarter of 2005. Unit sales of SUV, performance and light truck tires increased by 15%, 17% and 2% respectively, according to the company.

However, operating results for North American tire operations declined year over year as a result of $29 million in higher raw material costs and $5 million in higher utility costs. These costs were “partially offset by $20 million in improved pricing,” Cooper said.

In total, North American tire operations recorded an operating loss of $2 million, compared to operating profit of $6 million in the first quarter of 2005. Including the adjustments to product liability reserves, the segment result was an operating loss of $6 million.

“We had good momentum in terms of sales for the quarter as we outpaced the industry, increased marketshare and improved our overall product mix in North America,” said Thomas A. Dattilo, Cooper’s chairman, president and chief executive officer. “We had strong, record-setting sales in Europe, with improved product offering, availability and expanded distribution. We were pleased with the addition of Cooper Chengshan in China and the solid contribution it is already making to our company. We were also pleased with the dividend on our investment in Kumho.

“However, the North American replacement tire market remains very competitive and raw material prices continue to impact our results,” Dattilo said. “The price increases we have instituted in the past several months have fallen short of covering rising material costs."

More price increases will be necessary if natural rubber and oil prices remain elevated, according to Dattilo.

McCarthy Tire Service recently opened a new in-house commercial wheel refinishing facility. According to the company, the facility has the ability to refinish over 1,000 wheels per day and technicians will utilize equipment for inspection, surface preparation, pre-treatment, and automated coating techniques at the facility.

“We're thrilled to unveil this wheel refinishing facility,” John McCarthy Jr., president of McCarthy Tire Service said. “This investment reflects our dedication to providing our customers with unparalleled efficiency and a one-stop shop for all their commercial tire and wheel needs. By streamlining the refinishing process, we can help fleets minimize downtime and maximize productivity.”