The strike earlier this year in Texarkana, Ark., hurt Cooper Tire & Rubber Co.'s bottom line, contributing to losses in both the second quarter and first half of the year plus steep declines in its North American tire unit's profitability.
Findlay-based Cooper reported a net loss of $6.88 million in the second quarter, down from earnings of $34 million for the same period in 2004. For the first six months, Cooper posted a loss of $1.67 million, also down from earnings of $58.3 million last year.
After the report Aug. 2, the price of Cooper's shares dropped to $18.20 from $20.77 on Aug. 1. By Aug. 8 the stock price had fallen to $17.38.
The work stoppage in Texarkana, which began in March and continued into April, was resolved by the ratification of a five-year contract on April 10. But the stoppage reduced net income by about $9 million in the second quarter and about $14 million in the half, the tire maker said.
``Once the strike was settled, we got the plant up and running quickly, maybe even more quickly than we had anticipated,'' said Thomas Dattilo, chairman and CEO of Cooper, in a conference call with analysts. Still, he admitted, the strike cost Cooper ``significantly'' both operationally and financially.
Net sales inched up less than 1 percent to $510.9 million from $509.2 million last year. Sales for the half grew 3.6 percent to $1.02 billion from $989.2 million in 2004.
In North America, Cooper's tire operations posted net sales in the quarter of $459.8 million, a slight improvement over last year's sales of $456.3 million. For the half the unit's sales increased 4.5 percent to $923.7 million from $884.3 million.
The tire maker said improvements in price and mix boosted the unit's sales, but they were almost completely offset by lower unit sales, which were the result of weaker-than-expected market demand for the industry overall and especially the light truck replacement market. Cooper's reduction of broadline sales to less profitable distribution channels as well as the Texarkana stoppage also contributed to lower unit sales, the company said.
The company's tire unit volumes in North America were down 8 percent in the quarter and down 5 percent so far this year.
Operating profit in North America plummeted 89.7 percent to $2.26 million from $21.9 million last year. The Texarkana strike was responsible for about $13 million of that-$9 million in lost sales and $4 million for the closure, shift to other plants and restart. Higher raw materials costs impacted operating profit by about $31 million, and lower unit sales impacted operating profit by about $4 million. Segment profit in North America for the half also dropped 72.2 percent to $9.73 million from $35 million.
``We have worked hard to overcome some very difficult operating conditions during the quarter and the first half of the year,'' Mr. Dattilo said in a statement. ``We made some good progress once the strike was behind us, and that progress was clearly evident in June, but it was not enough to offset the broad impact on sales and disruption of our manufacturing operations in the first two months of the quarter.''
But he said he expects to see some improvement in the second half of the year despite some ``lingering impact'' from the Texarkana stoppage. Cooper expects to report earnings in the third quarter of 10 to 14 cents per share.
In the call with analysts, Mr. Dattilo said the Rubber Manufacturers Association estimates replacement tire sales will grow 2-3 percent for the year while the market is below 2 percent so far, leading him to believe the second half of the year will be much more robust.
``While the industry overall and certainly our own shipments have been below where we expected them to be in the first half, we expect solid growth in tire demand in the next two quarters,'' he said.