Cooper Tire & Rubber Co. reported a net income of $17 million for the quarter ended Sept. 30, 2011, a decrease of $28 million from the same period in 2010.
Net sales were a record $1.05 billion, an increase of $171 million, or 19%, from the prior year. Operating profit was $47 million for the quarter, a decrease of $20 million from the prior year same quarter.
Due to the fact that the company has a valuation allowance against its U.S. deferred tax assets, the tax provision for the quarter was impacted by $8.9 million of additional expense because of the timing of credits and deductions. These items are expected to be largely offset with the anticipated fourth quarter release of the majority of the U.S. valuation allowance, the tiremaker said.
Sales volumes in both the North American and International segments were higher than the prior year same period, which improved profits by $5 million. Improved price and mix of $158 million during the quarter was more than offset by $194 million of higher raw material costs. Cooper said also improving profit were $12 million of reduced selling, general and administrative costs, including lower incentive-related expenses, and $5 million of lower restructuring costs. Higher manufacturing costs decreased results by $6 million as the company curtailed production to balance inventory levels and projected demand, while manufacturing a more premium mix of products.
During the first quarter of 2011, Cooper invested $134 million to increase ownership levels and support future growth at affiliated operations in China and Mexico. Working capital increases during the first nine months of 2011 reflected both higher finished goods unit inventory levels, which increased 28% from Dec. 31, 2010, and the higher costs of raw materials.
“Typically, inventory is built during the first half of the year for sale during the second half of the year. We believe that our inventory levels are generally in line with current demand trends, and will adjust production going forward as necessary to maintain an appropriate availability of tires,” the tiremaker stated.
For the nine months ended Sept. 30, 2011, Cooper reported net sales of $2.88 billion, an increase of $440 million, or 18% from the same period of 2010.