FINDLAY, Ohio—Cooper Tire & Rubber Co. reported lower operating and net income for the quarter and year, largely due to costs associated with the failed merger with Apollo Tyres Ltd. and the negative effects of lower sales.
Despite the drops in sales and earnings, Roy Armes, Cooper Chairman, CEO and president, lauded Cooper's employees for their “dedication and commitment” and pointed to the “resilience our business model” for helping deliver a strong balance sheet at year-end.
“These results were achieved despite several unique challenges in 2013, the impact of which will diminish as we move forward in 2014,” Armes said. “I am proud of our organization and confident in our strategic plan, which we believe will produce results that create value for our shareholders over the long term.”
For 2014, Cooper anticipates growth equal to or higher than the industry norm in key markets, allowing it to recover lost unit volumes.
This would allow the company to “effectively leverage our flexible global manufacturing and distribution footprint to deliver on our strategic plan objectives, which focus on driving stockholder value as a top priority,” Armes said.
For fiscal 2013, Cooper's operating income fell 39.4 percent to $240.7 million, while net income was cut nearly in half to $111 million. Sales were off 18.1 percent to $3.44 billion, leaving an operating/sales ratio of 7 percent, down 2 ½ percentage points from the 2012 level.
Operating profit in the fourth quarter plunged 62.2 percent to $47 million, while sales fell 18.8 percent to 861 million. Net earnings dropped 73.1 percent to $19.6 million.
Fourth quarter profits were impacted by $27 million in unusual items related to the negative impacts of labor actions taken at the Cooper Chengshan (Shandong) Tire Company, Ltd. joint venture, Cooper said. This figure included $25 million from lower volumes and $2 million of manufacturing inefficiencies in the international business segment.
The results included $9 million of costs resulting from the now terminated merger agreement with Apollo. In addition, unfavorable price and product mix reduced profits by $68 million, offset in part by $31 million of lower raw material costs.
Manufacturing costs were unfavorable by $10 million, including $11 million of costs from production curtailments in North American plants.
The company ended the fourth quarter with $398 million in cash and cash equivalents, an increase of $46 million compared with the prior-year fourth quarter balance of $352 million, Cooper said.
Cooper's North America Tire Operations reported 31 percent lower operating income of $204.2 million for the year, on 19.7 percent lower sales of $2.49 billion. Operating income in the fourth quarter dropped 66.2 percent to $34.9 million, whiles sales were off 22.6 percent to $628.1 million on lower unit volumes and unfavorable price and mix.
Unit shipments for the North American segment fell 13 percent in the quarter, Cooper said, including a 10 percent drop in light vehicle tire shipments in the U.S. That contrasted with 2 percent growth for the market overall, as reported by the Rubber Manufacturers Association.