Cooper Tire & Rubber Co. has reported first quarter 2021 net income of $22 million, or diluted earnings per share of $0.43, compared with a net loss of $12 million, or diluted loss per share of $0.23, for the same period last year.
“We are pleased to have delivered strong first quarter operating results. Our teams continued to do a great job executing our strategy, which resulted in first quarter 2021 volume that exceeded not only the coronavirus-impacted 2020 level, but also 2019 in both segments,” said president and CEO Brad Hughes. “Within the Americas segment, our U.S. volume significantly outperformed the USTMA and the total industry. Our International segment volume increased nearly 50 percent compared to the first quarter of 2020.
“Demand remained strong for the industry and Cooper in the first quarter. Our unit volume performance in the quarter, while strong, continued to be constrained by supply that fell short of demand, caused in part by severe weather in the southern U.S. that impacted our ability to produce and move products. The Cooper value proposition of providing high quality tires at an affordable price remains compelling for consumers. We will continue to leverage our global production footprint and capabilities to meet this continued strong demand.
“As previously announced, Cooper stockholders overwhelmingly voted in favor of the proposed Goodyear-Cooper business combination. We expect to complete the merger in the second half of 2021, however the transaction could close earlier, following and subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals. Cooper looks forward to being part of a stronger combined organization that represents the best of what both our companies have to offer to customers, consumers, and shareholders.”
First quarter net sales were $656 million compared with $532 million in the first quarter of 2020, an increase of 23.3 percent. First quarter net sales were positively impacted by $88 million of higher unit volume, $30 million of favorable price and mix, and $6 million of favorable foreign currency impact.
Operating profit was $38 million compared with an operating loss of $6 million in the first quarter of 2020. The quarter included $29 million of higher unit volume and $13 million of favorable price and mix. In addition, the first quarter included $7 million of lower raw material costs, which is more than explained by lower tariff costs resulting from the company’s sourcing strategy. The quarter also included $3 million of decreased manufacturing costs and $2 million of lower product liability expense compared to the first quarter of 2020. These were partially offset by $20 million of higher selling, general and administrative expenses and $1 million of higher other costs. The first quarter of 2020 included $11 million of restructuring charges related to the transition at the company’s now wholly owned Mexico manufacturing facility.
The increase in selling, general and administrative expenses in the first quarter of 2021 included $11 million of costs associated with the proposed merger. This included $5 million of advisory, legal and other professional fees, as well as an increase of $6 million in mark to market costs of stock-based liabilities subsequent to the merger announcement. The mark to market cost represents the impact of the movement in the company’s closing stock price from the last trading day prior to the merger agreement announcement compared to the closing price of the company’s stock on the day of the announcement. The first quarter of 2021 also included an increase in mark to market costs of stock-based liabilities aside from the announcement, and an increase in incentive compensation costs. Incentive compensation costs were reduced in the first quarter of 2020 when the company revised its full-year 2020 outlook as a result of the forecasted impact of the global pandemic.
Cooper’s first quarter raw material index increased 1.9 percent compared to the first quarter of 2020. The raw material index increased 6.1 percent sequentially from 144.8 in the fourth quarter of 2020 to 153.6 in the first quarter of 2021.
The effective tax rate for the first quarter was 27.9 percent. The first quarter 2021 effective tax rate was impacted by $5 million of merger-related costs, which are not tax deductible. 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 first quarter, Cooper had $460 million in unrestricted cash and cash equivalents. This compares with $433 million at the end of the first quarter of 2020, which included a $270 million draw on the company’s revolving credit facility.
