Sale of unit, sales records push up profits

2/17/2005

FINDLAY - Cooper Tire & Rubber Co. yesterday said its profit last year jumped a whopping 173 percent over 2003, aided mainly by the $1.22 billion sale of its Cooper-Standard Automotive subsidiary and sales records in every quarter last year.

But it failed to meet analysts' profit expectations and pronounced a poorer outlook in the first quarter of this year, sending investors scrambling and the company's stock plunged $2 a share to close at $19.50.

For the year, the tire maker had a profit of $201.4 million, or $2.68 a share, up from $73.8 million, or $1 a share in 2003. The Fortune 500 firm's sales last year were $2.1 billion, up 12 percent from $1.9 billion a year earlier.

The fourth quarter was especially good for Findlay company as it completed its sale of Cooper-Standard, an auto parts subsidiary, and reaped a net profit of $112 million on the sale. For the final quarter, Cooper Tire reported a profit of $133.2 million, or $1.79 a share, up 372 percent from $28.2 million, or 38 cents a share, for the period a year earlier. Sales for the period were $541 million, up from $515 million a year earlier.

Company Chairman and Chief Executive Thomas A. Dattilo said in a statement that the sale of the parts unit allows the firm to focus on making tires. "We set the stage for a new period of growth and opportunity in the tire business," he said.

But investors and analysts weren't as enthusiastic.

Excluding discontinued operations and the subsidiary sale, earnings for the fourth quarter were $3 million, or 4 cents a share, compared to $8 million, or 10 cents a share, in the year-earlier period. Analysts had expected the per-share figure to be about 12 cents; the firm had said it would be 8 to 12 cents.

Himanshu Patel, an analyst at J.P. Morgan, said in a report yesterday that Cooper Tire appeared to be hurt by a number of operational issues, including selling fewer tires for the fourth quarter. The company also had production problems, product liability costs, and higher than expected raw materials costs.

The tire giant said it expects a first-quarter 2005 profit of 1 cent to 3 cents a share and to repurchase up to $200 million in stock, and up to $200 million in bonds. The stock buyback is below analysts expectations, Mr. Patel said, and the next quarter results are likely to disappoint the market.

Mr. Dattilo braced analysts and investors for such a result. In his statement, he said, "In the short term, challenging industry conditions, higher raw material costs, some continuing capacity constraints and tough comparisons to last year will make the first half difficult."

Shareholders wasted no time reacting. The firm's stock was down $2.80 a share at one point yesterday on the New York Stock Exchange, in trading nearly nine times usual volume.

Contact Jon Chavez at

jchavez@theblade.com

or 419-724-6128.