FINDLAY, Ohio—Cooper Tire & Rubber Co. reported strong financial results in quarter one of 2021—a net income of $22 million, compared to a net loss of $12 million after the same quarter a year ago—as the tire maker inches closer to finalizing its deal with Goodyear.
Cooper said its operating profit was $38 million, or 5.8 percent of net sales, which increased 23 percent over the pandemic-ravaged Q1 of 2020.
The financial news comes three days after Cooper shareholders voted overwhelmingly to approve Goodyear's $2.5 billion cash and stock deal to acquire the Findlay-based tire maker. According to Cooper, around 99 percent of its stockholder votes cast April 30 were in favor of the transaction.
Because of the impending deal, Cooper did not host an investor call to discuss the results.
Cooper CEO and President Brad Hughes acknowledged in a news release that the deal could close earlier than expected.
"We expect to complete the merger in the second half of 2021, however the transaction could close earlier, following and subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals," Hughes said. "Cooper looks forward to being part of a stronger combined organization that represents the best of what both our companies have to offer to customers, consumers and shareholders."
On April 30, Goodyear reported its best first quarter in three years with first quarter segment operating income of $226 million. Goodyear had a net income of $12 million and adjusted net income of $102 million.
Late last month, China became the first country to grant antitrust approval to Goodyear's offer to purchase Cooper, announcing the ruling April 23 as part of a package of "undertakings" approved unconditionally by its antitrust agency.
Cooper's financial report included $11 million in costs related to the proposed deal with Goodyear.
That total, Cooper said, included $5 million of advisory, legal and other professional fees, as well as a $6 million increase in mark to market costs of stock-based liabilities subsequent to the merger announcement. These costs, Cooper said, represent the impact of the movement in the company's closing stock price from the last trading day prior to the merger agreement announcement compared to the closing price of the company's stock on the day of the announcement.
According to Cooper, Q1 2021 included an increase in mark to market costs of stock-based liabilities aside from the announcement, and an increase in incentive compensation costs. Incentive compensation costs were reduced in Q1 2020 when the company revised its full-year 2020 outlook as a result of the forecasted impact of the global pandemic.
"Our teams continued to do a great job executing our strategy, which resulted in first quarter 2021 volume that exceeded not only the coronavirus-impacted 2020 level, but also 2019 in both segments," Hughes said.
Cooper reported that its global unit volume increased 16.6 percent over the same period last year, while net sales increased 23.3 percent over 2021 Q1, to $656 million.
In the Americas segment, Cooper's Q1 net sales increased 23 percent as a result of $62 million of higher unit volume and $43 million of favorable price and mix. For the quarter, segment unit volume increased 13.6 percent compared to the same period a year ago.
Cooper said its Q1 total light vehicle tire shipments in the U.S. increased 18.4 percent—higher than the U.S. Tire Manufacturers Association's report that said member shipments of light vehicle tires in the U.S. increased 13.7 percent. Total industry shipments (including an estimate for non-USTMA members) increased 10.9 percent for the period.
"Within the Americas segment, our U.S. volume significantly outperformed the USTMA and the total industry," Hughes said. "Our International segment volume increased nearly 50 percent compared to the first quarter of 2020."
Cooper said industry demand remained strong in Q1.
"Our unit volume performance in the quarter, while strong, continued to be constrained by supply that fell short of demand, caused in part by severe weather in the southern U.S. that impacted our ability to produce and move products," Hughes said. "The Cooper value proposition of providing high quality tires at an affordable price remains compelling for consumers. We will continue to leverage our global production footprint and capabilities to meet this continued strong demand."
Cooper attributed positive Q1 net sales on $88 million of higher unit volume, $30 million of favorable price and mix and $6 million of favorable foreign currency impact.
Cooper also said the quarter included $29 million of higher unit volume and $13 million of favorable price and mix. Q1 included $7 million of lower raw material costs, which Cooper said was a result of lower tariff costs resulting from the company's sourcing strategy.
The quarter included $3 million of decreased manufacturing costs and $2 million of lower product liability expense compared to the 2020 Q1. The tire maker said these were partially offset by $20 million of higher selling, general and administrative expenses and $1 million of higher other costs.
Q1 2020 included $11 million of restructuring charges from the transition at the company's now wholly owned Mexico manufacturing facility.
Cooper said its first quarter raw material index increased 1.9 percent compared to the Q1 2020.
Cooper said it has $460 million in unrestricted cash and cash equivalents at the end of Q1, slightly ahead of $433 million at the end of Q1 2020, which included a $270 million draw on the company's revolving credit facility.
Capital expenditures in the first quarter were $57 million, compared with $55 million in the same period a year ago.