Cooper Tire & Rubber Co. (CTB, Financial) is the parent company of a global family of companies specializing in the design, manufacture, marketing and sale of passenger car and light truck tires.
Cooper and its subsidiaries also sell medium truck, motorcycle and racing tires.
Cooper's headquarters is in Findlay, Ohio, with manufacturing, sales, distribution, technical and design operations within its family of companies located in more than one dozen countries around the world.
The company recently reported strong fourth-quarter results. It boasts of unit volume increases in all regions and excellent operating profit.
Fourth-quarter results
Fourth-quarter net sales were $776 million (an increase of 3% from sales of $67 million during the prior-year quarter).
Fourth-quarter operating profit was $103 million ($54 million during the prior-year quarter).
Fourth-quarter SG&A was $69 million ($67 million in the prior-year quarter).
The effective tax rate for the fourth quarter was 38%.
At year end, Cooper had $505 million in cash and cash equivalents ($552 million during the prior-year period).
Capital expenditures in the fourth quarter were $54 million ($33 million in the prior-year quarter).
During the fourth quarter, 641,000 shares were repurchased for $26 million.
Diluted earnings per share were $1.04.
American tire operations
Fourth quarter net sales in the Americas segment increased by 3.2% as a result of higher unit volume of $22 million.
Fourth quarter operating profit was $122 million, or 17.1% of net sales ($66 million, or 9.5% of net sales, during the prior-year quarter).
Operating margin during the fourth quarter was 17.1% (9.5% during the prior-year quarter).
International tire operations
Fourth-quarter net sales in the International segment dropped to $101 million ($191 million during the prior-year quarter).
International operations recorded a fourth-quarter operating loss of $7 million (an operating profit of $2 million during the prior-year quarter).
Operating margin during the fourth quarter was (7.3%), which was 1.1% during the prior year quarter.
Expectations for 2016
| Â | Range |
| Operating margin | To range between 8% and 10%. |
| Full Year effective tax rate | To be between 34% and 36%. |
| Capex | To range between $240 million and $260 million. |
Current focus
- Execution of strategic plan.
- Invest in operations around the globe to improve competitive position.
- Investment in technology.
- Product innovation.
- Broadening global reach.
- Expansion through strategic partnerships.
Strategic plan
- Develop a competitive cost structure and improve profitability.
- Drive top line profitable growth.
- Build organizational capabilities.
On a concluding note
Cooper has a significant position in the U.S., the world's largest tire market and an emerging position in China, the fastest growing tire market in the world.
The company announced on Feb. 23 that it extended and increased the share repurchase program by authorizing the repurchase of up to $200 million of the company’s outstanding common stock through Dec. 31, 2017. This replaces the $74 million remaining on the authorization from February 2015.
Cooper has developed a solid foundation that includes great relationships with dealers, an exciting portfolio of products, a flexible manufacturing footprint and employees who are driven to create value in everything they do. It has paid dividends every quarter for more than 40 years.
The company is taking numerous steps to transform its business. It is currently selling more high value, high margin products and is returning cash through share repurchases and dividends. The company is performing well as of now. This company is a buy.
Disclosure: I do not hold any position in the company.
