Cooper Tire & Rubber Company (CTB, Financial) is the parent company of a global family of companies that specializes 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. (Source: Company Website)
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. It 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 reported first quarter results with excellent operating margin. Operating margin was good at the Americas segment.
First quarter results
First quarter net sales were $650 million, which marked a decrease of 2% from $663 million in the prior-year quarter.
Operating profit during the quarter was $91 million ($70 million during the prior-year quarter).
SG&A expense during the quarter was $59 million, which was $62 million in the prior-year quarter.
Effective tax rate during the quarter was 32.3%, which was 34.8% in the prior-year quarter.
As at the quarter end, the company had $434 million in cash and cash equivalents, which was $449 million during the prior-year period.
Capex during the quarter was $36 million ($48 million in the prior-year quarter).
During the quarter, the company purchased 689,944 shares for $24.8 million at an average price of $35.98 per share.
Americas tire segment
First quarter net sales in the Americas segment declined by 3.2%.
First quarter operating profit was $106 million, or 18.3% of net sales, which was $90 million, or 15.0% of net sales, in the prior-year quarter.
International tire segment
First quarter net sales in the International segment decreased by 3.6%.
The first quarter operating loss was $2 million (an operating loss of $3 million in the prior-year quarter).
Dividend
The company announced a quarterly dividend of 10.5 cents per share on common stock, payable June 30 to stockholders of record at the close of business June 2. This will mark the 177th consecutive quarterly dividend paid by Cooper Tire & Rubber Company. (Source: Company Website)
Strong attributes of the first quarter
- Excellent operating profit margin.
- Growth in unit volumes (2% year over year).
- Strong growth in the International segment.
- Improving mix of sales.
Expectations for 2016
| Metrics | Range |
| Effective tax rate | To be in the range of 33% to 35% |
| Capex | To range between $210 million and $240 million |
Focus
- The company is investing in operations around the globe to improve its competitive position.
- Deliver shareholder value.
- The company continues to make progress on its planned acquisition of a majority interest in GRT, a joint venture in China to produce truck and bus radial tires for global markets. The transaction is expected to close in the third quarter of this year pending certain permits and approvals by the Chinese government.
- In the U.S., the plant teams are focused on modernizing facilities to support the transition to produce and sell more high value, high margin products.
- Driving topline profitable growth.
On a concluding note
The company is currently investing in operations around the globe to improve its competitive position. It is also concentrating on innovation and technology. The company expects to benefit from lower raw material costs. It is doing well and investors should consider adding this company to their portfolios.
Disclosure: I do not hold any position in the company.
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