Cooper Tire & Rubber Company has reported a first-quarter 2020 net loss of $12 million, or diluted loss per share of $0.23, compared with net income of $7 million, or $0.14 diluted earnings per share, for the same period last year.
First-quarter net sales were $532 million compared with $619 million in the first quarter of 2019, a decrease of 14.1%. First-quarter net sales were negatively impacted by $98 million of lower unit volume and $4 million of unfavorable foreign currency impact, partially offset by $15 million of favorable price and mix.
First quarter net sales in the Americas segment decreased 11.2% as a result of $61 million of lower unit volume and $1 million of unfavorable foreign currency impact, which were partially offset by $4 million of favorable price and mix, Cooper says. For the quarter, segment unit volume was down 11.9 percent compared to the same period a year ago.
Cooper’s first-quarter total light vehicle tire shipments in the U.S. decreased by 11.9%. The U.S. Tire Manufacturers Association (USTMA) reported that its member shipments of light vehicle tires in the U.S. decreased 12.3%. Total industry shipments (including an estimate for non-USTMA members) decreased 10.4% for the period.
Cooper’s first-quarter operating profit was $10 million, or 2.3% of net sales, compared with $39 million, or 7.5% of net sales, for the same period in 2019. Operating profit included $14 million of lower unit volume, $19 million of unfavorable manufacturing and $11 million of higher restructuring costs. This was partially offset by $10 million of favorable raw material costs and $5 million of price and mix, Cooper says.
At the end of the first quarter, Cooper had $433 million in unrestricted cash and cash equivalents compared with $212 million at the end of the first quarter of 2019. To maximize financial flexibility, the company drew
down $270 million on its revolving credit facilities during the quarter. In addition, Cooper has taken temporary actions to improve liquidity, including:
- Reduced working capital, capital expenditures and discretionary spending.
- Reduced salaries for executive leadership and the majority of salaried employees, and reduced cash retainers for members of its board of directors.
- Suspended discretionary pension contributions and company contributions to employee 401(k) plans.
- Furloughed a number of hourly and salaried employees.
“Cooper’s priorities during this unprecedented time have continued to be the health and safety of our employees, responsibilities to our broader communities, and commitments to our customers as well as all other key stakeholders. I am exceedingly proud of how Cooper employees around the globe, driven by our purpose, mission and values, have risen to the challenges,” said Cooper president and CEO Brad Hughes.
“In response to the coronavirus, we temporarily shut down our manufacturing plants for various periods of time while we continued to operate our distribution centers around the world. At the same time, we took several actions to improve liquidity. As we have communicated over recent weeks, our China, U.S. and Serbia manufacturing plants are back in operation. These facilities will continue to ramp up as conditions improve. Meanwhile, our U.K. and Mexico facilities remain temporarily closed.”
Operating loss was $6 million compared with operating profit of $26 million in the first quarter of 2019, Cooper says. Key drivers included $30 million of higher manufacturing costs, $18 million of lower unit volume, $6 million of higher restructuring costs and $2 million of higher other costs, which were partially offset by $12 million of favorable raw material costs, $6 million of favorable price and mix, and $6 million lower SG&A expenses.
Due to the rapidly evolving environment and continued uncertainties resulting from the coronavirus pandemic, Cooper withdraws its previously announced full year 2020 outlook, which was issued in February.
“We cannot at this time predict the extent or duration of the pandemic and its impacts on our financial and operating results for the full year. Given that the coronavirus will likely have a significant impact on the second quarter, we believe it will be the most challenging quarter of our year for operating profit. We have dramatically scaled back our capital expenditure plans, and now expect full year 2020 capital expenditures to be between $140 and $160 million, but this is dependent on the duration and severity of the pandemic. With this and other actions, we do not currently believe we will have a substantial cash usage in the second quarter. Overall, we are confident in our ability to weather the storm,” said Hughes.
“Overall, we believe Cooper is in a good position to benefit when the economy recovers. Over the past two years, we have transformed our company into a consumer-driven organization with Cooper products now more available where consumers want to buy tires. We believe that our value proposition – high-quality tires at an affordable price – will be even more compelling for consumers in the future economy, and our heritage of manufacturing tires in the U.S. for U.S. drivers will become even more important coming out of this period of uncertainty. Our research suggests consumer confidence in the Cooper brand is growing, and we believe that we stand to be a consumer tire partner of choice.”