Cooper Tire & Rubber Co. reported second quarter 2015 net income of $60 million, or diluted earnings per share of $1.03, compared with $38 million, or 59 cents per share, in the second quarter of last year.
Net sales were $752 million compared with $889 million in the second quarter of 2014. The company says the sales decline was fully attributable to the absence of CCT, the company’s former joint venture (JV) in China. Cooper sold its interest in the JV during the fourth quarter of 2014. CCT contributed sales of $172 million, net of intercompany eliminations, in the second quarter of 2014.
Excluding the impact of CCT, second quarter 2015 sales rose 5 percent as a result of higher unit volume of $64 million, with increases in both the Americas and international segments. The unit volume increase was partially offset by unfavorable price and mix of $20 million, related to lower raw material costs, and negative foreign exchange of $8 million.
Second quarter 2015 operating profit was $99 million compared with $77 million for the same period last year, which included $25 million from CCT. Second quarter operating margin was 13.2 percent of net sales versus 8.6 percent of net sales in 2014.
Excluding CCT, operating profit increased more than 90 percent, resulting from favorable raw material costs of $76 million, higher volume of $14 million, and lower product liability and selling, general and administrative costs of $5 million.
These benefits were partially offset by unfavorable price and mix of $27 million, $13 million of higher manufacturing costs, and $7 million of other costs and foreign exchange impact. The higher manufacturing costs were primarily in the Americas segment where Cooper incurred costs related to plant reconfiguration to meet demand for higher value tires, as well as investments in technical capabilities and increased pension expense.
“Our second quarter performance was very strong as the positive trends from the first quarter continued, giving Cooper a strong first half of 2015,” said Roy Armes, Cooper’s chairman, CEO and president. “This was a record second quarter operating profit for the company. The Americas segment posted another quarter of outstanding results, with continued unit volume growth and an operating margin of 16 percent, which is well above our long-term total company target. Unit volumes increased in both the Americas and International segments, with double-digit increases in unit volumes in China, excluding CCT, and Latin America. This demonstrates that our efforts to grow in these rapidly expanding markets are working as we continue to execute our global strategic growth plan.”
At quarter end, Cooper had $408 million in cash and cash equivalents, compared with $327 million at June 30, 2014. Capital expenditures in the second quarter were $41 million compared with $36 million in the same period last year. Capital expenditures are expected to be higher in the remaining quarters of 2015, compared to the prior year periods, as the company invests in equipment and capabilities to support growth.
In February 2015, Cooper announced a new $200 million share repurchase program. During the second quarter, 1,207,283 shares were repurchased under the program for $47.7 million. For the full year, 1,520,688 shares have been repurchased under the program for $60.0 million, or an average price of $39.49 per share.
