Cooper Tire & Rubber Company (NYSE: CTB) today reported full year 2020 net income of $143 million, or diluted earnings per share of $2.83, compared with net income of $96 million, or $1.91 diluted earnings per share, for the prior year.
Full Year 2020 Highlights:
Fourth Quarter Highlights
“In 2020, Cooper continued to build upon the positive momentum that began in 2019, driven by execution of our strategic initiatives, which have successfully transformed Cooper into a consumer-driven company,” said President & Chief Executive Officer Brad Hughes. “Despite impacts from coronavirus, we delivered strong operating profit performance for the year and demonstrated that the value proposition of providing high quality tires at an affordable price is compelling for consumers, especially in the current environment. We are proud of the achievements of our teams around the globe.”
Fourth quarter net sales were $728 million compared with $750 million in the fourth quarter of 2019, a decrease of 2.9 percent. Fourth quarter net sales were negatively impacted by $74 million of lower unit volume, partially offset by $48 million of favorable price and mix and $4 million of favorable foreign currency impact. Operating profit was $60 million, compared with operating profit of $64 million in the fourth quarter of 2019. The quarter included $22 million of unfavorable raw material costs, which were offset by $22 million of favorable price and mix. The quarter also included $7 million of lower manufacturing costs and $3 million of lower product liability expense. These were more than offset by $12 million of lower unit volume and $2 million of higher selling, general and administrative (SG&A) expenses.
Cooper's fourth quarter raw material index decreased 3.3 percent compared to the fourth quarter of 2019. The raw material index increased 6.6 percent sequentially from 135.8 in the third quarter of 2020 to 144.8 in the fourth quarter of 2020.
The effective tax rate for the fourth quarter was 18.1 percent compared with (19.3) percent for the same period the prior year, and included $2 million of net discrete items that favorably impacted the rate. The tax rate for the fourth quarter of 2019 included a $19 million discrete tax benefit resulting from planning actions involving the company's European tax structure. The effective tax rate is based on forecasted annual earnings and tax rates for the various jurisdictions in which the company operates.
At the end of the fourth quarter, Cooper had $626 million in unrestricted cash and cash equivalents compared with $391 million at the end of the fourth quarter of 2019. The significant improvement in cash was primarily driven by strong operating results, as well as actions to defer and reduce working capital, capital expenditures and discretionary spending.
Capital expenditures in the fourth quarter were $55 million, compared with $47 million, in the same period a year ago. Full year capital expenditures were $151 million, compared with $203 million in the prior year. In addition, during 2020, the company paid $62 million for the buyout of the minority partner in its Mexico manufacturing facility.
Return on invested capital was 10.0 percent for the trailing four quarters.
Fourth quarter net sales in the Americas segment decreased 3.9 percent as a result of $82 million of lower unit volume and $2 million of unfavorable foreign currency impact, which were partially offset by $58 million of favorable price and mix. For the quarter, segment unit volume was down 12.5 percent compared to the same period a year ago.
Cooper’s fourth quarter total light vehicle tire shipments in the U.S. decreased 10.9 percent. The U.S. Tire Manufacturers Association (USTMA) reported that its member shipments of light vehicle tires in the U.S. decreased 6.9 percent. Total industry shipments (including an estimate for non-USTMA members) increased 0.5 percent for the period.
Fourth quarter operating profit was $72 million, or 11.4 percent of net sales, compared with $84 million, or 12.9 percent of net sales, for the same period in 2019. Operating profit included $26 million of unfavorable raw material costs, which were offset by $26 million of favorable price and mix. The quarter also included $3 million of lower net product liability expense and $2 million of lower manufacturing costs. These were more than offset by $14 million of lower unit volume, $2 million of higher SG&A expenses and $1 million of higher other costs.
Fourth quarter net sales in the International segment increased 14.0 percent as a result of $18 million of higher unit volume and $7 million of favorable foreign currency impact, which were partially offset by $8 million of unfavorable price and mix. For the quarter, segment unit volume was up 15.3 percent compared to the same period a year ago.
The segment's fourth quarter operating profit was $3 million compared with an operating loss of $6 million in the fourth quarter of 2019. The quarter included $5 million of favorable raw material costs, which were partially offset by $4 million of unfavorable price and mix. The quarter also included $4 million of lower manufacturing costs, $2 million of higher unit volume and $2 million of lower other costs.
