Cooper Tire & Rubber Company Outlines Strategic Plan at Investor Day; Provides Mid-Term Financial Targets

NEW YORK--()--At its Investor Day in New York today, Cooper Tire & Rubber Company (NYSE: CTB) outlined strategies for continued shareholder value creation. Management detailed plans to support five-year mid-term targets for operating profit of 10 percent to 14 percent as well as annual unit volume growth in the low- to mid-single digits and return on invested capital of 14 percent to 16 percent.

“Three themes—the increased influence of consumers, underlying trends in the auto industry and consolidation in distribution—are driving changes in the tire business and Cooper is well positioned to benefit from them”

“Three themes—the increased influence of consumers, underlying trends in the auto industry and consolidation in distribution—are driving changes in the tire business and Cooper is well positioned to benefit from them,” said Brad Hughes, President & Chief Executive Officer. “Our brand strength and attractive value proposition represent a solid foundation to build on with consumers, which is important as we move into additional growth channels. Cooper’s emerging OE business will drive enhanced product technology and keep us current with emerging trends such as electric and autonomous vehicles that we believe will be positive for the replacement tire market going forward. Finally, recent consolidation in distribution within the industry has created disruption and is pressuring long-standing relationships. Disruption creates opportunities, and Cooper is taking immediate action to benefit.”

Driving Growth by Focusing on Consumers, Additional Channels

Cooper is implementing strategic initiatives to leverage its strong position with consumers, who have increased knowledge and power in the tire business. The company is enhancing its focus on fast- growing premium product lines, accelerating the cadence of new product introductions, such as its upcoming AT3™ tire line, and enhancing consumer involvement in product development and testing.

At the same time, Cooper is also focused on maximizing its core positions in the independent dealer and national and regional retail channels by enhancing distributor programs and strengthening partnerships. In addition, Cooper is focused on increasing its presence in the fastest-growing sales channels, including mass merchandisers, auto dealers and e-commerce.

Original Equipment (OE) Relationships Deliver Technology Advantages in Evolving Auto Industry

In Asia, Cooper is focused on continuing to build its OE business. In China, the company has fitments on 47 platforms including five of the top-10 selling SUVs in 2017. In the global OE market, Cooper has established a partnership with Volkswagen and is finalizing collaboration with a premium European auto maker. The company’s OE business gives Cooper early product development insight into changing tire requirements driven by the latest vehicle designs, technologies and trends, as well as strengthens the Cooper brand among consumers and retailers.

Consolidation in Tire Distribution Offers Opportunities

Recent consolidation in tire distribution is disrupting the industry landscape. Management believes that such disruption presents opportunity for Cooper. The company is in a position to benefit as changes in distribution entities pressure long-standing relationships between distributors and tire manufacturers. Cooper’s core strengths, including brand equity, quality products, and strategic relationships with national and regional distributors, will allow the company to harness certain opportunities and Cooper is actively pursuing a joint action plan with key distributors and a conquest plan to increase its associate dealer program exposure and participation.

Financial Plans Include Mid-Term Growth in Volume and Operating Profit

As previously reported, Cooper’s results for 2017 and the first quarter of this year were affected by market headwinds related to raw materials, increased competitor promotional activity and generally weak consumer sell-out. Management expects that the market environment will stabilize in the future and that the key strategic initiatives intended to enhance Cooper’s performance will translate into tangible financial benefits in the mid-term. Cooper has announced five-year financial targets of annual unit volume growth in the low- to mid-single digits and operating profit margin in the range of 10 to 14 percent, as well as return on invested capital (ROIC) of 14 to 16 percent.

Investor Day Webcast Archive

The audio webcast of Cooper’s Investor Day event and corresponding presentation slides are available at http://coopertire.com/Investors.aspx or at https://livestream.com/ICENYSE2/coopertireinvestorday2018 and will be archived at these sites for 90 days.

Forward Looking Statements

This release contains what the company believes are “forward-looking statements,” as that term is defined under the Private Securities Litigation Reform Act of 1995, regarding projections, expectations or matters that the company anticipates may happen with respect to the future performance of the industries in which the company operates, the economies of the U.S. and other countries, or the performance of the company itself, which involve uncertainty and risk. Such “forward-looking statements” are generally, though not always, preceded by words such as “anticipates,” “expects,” “will,” “should,” “believes,” “projects,” “intends,” “plans,” “estimates,” and similar terms that connote a view to the future and are not merely recitations of historical fact. Such statements are made solely on the basis of the company’s current views and perceptions of future events, and there can be no assurance that such statements will prove to be true.

It is possible that actual results may differ materially from projections or expectations due to a variety of factors, including, but not limited to:

  • volatility in raw material and energy prices, including those of rubber, steel, petroleum-based products and natural gas or the unavailability of such raw materials or energy sources;
  • the failure of the company’s suppliers to timely deliver products or services in accordance with contract specifications;
  • changes to tariffs or trade agreements, or the imposition of new tariffs or trade restrictions, including changes related to tariffs on tires imported into the U.S. from China, as well as tariffs imposed on raw materials which the company uses;
  • changes in economic and business conditions in the world, including changes related to the United Kingdom’s decision to withdraw from the European Union;
  • the impact of the recently enacted tax reform legislation;
  • increased competitive activity including actions by larger competitors or lower-cost producers;
  • the failure to achieve expected sales levels;
  • changes in the company’s customer or supplier relationships, including loss of particular business for competitive, credit, liquidity, bankruptcy, restructuring or other reasons;
  • consolidation or other cooperation by and among the company’s competitors or customers;
  • the ultimate outcome of litigation brought against the company, including product liability claims, which could result in commitment of significant resources and time to defend and possible material damages against the company or other unfavorable outcomes;
  • a disruption in, or failure of, the company’s information technology systems, including those related to cybersecurity, could adversely affect the company’s business operations and financial performance;
  • changes in pension expense and/or funding resulting from the company’s pension strategy, investment performance of the company’s pension plan assets and changes in discount rate or expected return on plan assets assumptions, or changes to related accounting regulations;
  • government regulatory and legislative initiatives including environmental, healthcare, privacy and tax matters;
  • volatility in the capital and financial markets or changes to the credit markets and/or access to those markets;
  • a variety of factors, including market conditions, may affect the actual amount expended on stock repurchases; the company’s ability to consummate stock repurchases; changes in the company’s results of operations or financial conditions or strategic priorities may lead to a modification, suspension or cancellation of stock repurchases, which may occur at any time;
  • changes in interest or foreign exchange rates;
  • an adverse change in the company’s credit ratings, which could increase borrowing costs and/or hamper access to the credit markets;
  • failure to implement information technologies or related systems, including failure by the company to successfully implement ERP systems;
  • the risks associated with doing business outside of the U.S.;
  • the failure to develop technologies, processes or products needed to support consumer demand or changes in consumer behavior;
  • technology advancements;
  • the inability to recover the costs to develop and test new products or processes;
  • the impact of labor problems, including labor disruptions at the company, its joint ventures, or at one or more of its large customers or suppliers;
  • failure to attract or retain key personnel;
  • inaccurate assumptions used in developing the company’s strategic plan or operating plans or the inability or failure to successfully implement such plans or to realize the anticipated savings or benefits from strategic actions;
  • the costs and timing of restructuring actions and impairments or other charges resulting from such actions or from adverse industry, market or other developments;
  • risks relating to acquisitions including the failure to successfully integrate them into operations or their related financings may impact liquidity and capital resources;
  • changes in the company’s relationship with its joint-venture partners or suppliers, including any changes with respect to its former PCT joint venture’s production of Cooper-branded products;
  • the ability to find alternative sources for products supplied by PCT;
  • the inability to obtain and maintain price increases to offset higher production or material costs;
  • inability to adequately protect the company’s intellectual property rights; and
  • inability to use deferred tax assets.

It is not possible to foresee or identify all such factors. Any forward-looking statements in this release are based on certain assumptions and analyses made by the company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Prospective investors are cautioned that any such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected.

The company makes no commitment to update any forward-looking statement included herein or to disclose any facts, events or circumstances that may affect the accuracy of any forward-looking statement. Further information covering issues that could materially affect financial performance is contained in the company’s filings with the U.S. Securities and Exchange Commission (“SEC”).

Non-GAAP Financial Measures

This press release includes non-GAAP financial measures as defined under SEC rules. Non-GAAP financial measures should be considered in addition to, not as a substitute for, other financial measures prepared in accordance with generally accepted accounting principles (“GAAP”). The company’s methods of determining these non-GAAP financial measures may differ from the methods used by other companies for these or similar non-GAAP financial measures. Accordingly, these non-GAAP financial measures may not be comparable to measures used by other companies. As required by SEC rules, detailed reconciliations between the company’s GAAP and non-GAAP financial results are provided on the attached schedule. The company believes return on invested capital (“ROIC”) provides additional insight for analysts and investors in evaluating the company’s financial and operating performance. The company defines ROIC as the trailing four quarters’ after tax operating profit, utilizing the company's adjusted effective tax rate excluding discrete tax items affecting comparability of results from period to period, divided by the total invested capital, which is the average of ending debt and equity for the last five quarters. The company believes ROIC is a useful measure of how effectively the company uses capital to generate profits.

About Cooper Tire & Rubber Company

Cooper Tire & Rubber Company (NYSE: CTB) is the parent company of a global family of companies that specializes in the design, manufacture, marketing and sale of passenger car, light truck, medium truck, motorcycle and racing tires. Cooper’s headquarters is in Findlay, Ohio, with manufacturing, sales, distribution, technical and design operations within its family of companies located in more than one dozen countries around the world. For more information on Cooper, visit www.coopertire.com, www.facebook.com/coopertire or www.twitter.com/coopertire.

Contacts

Cooper Tire & Rubber Company
Investor Contact:
Jerry Bialek, 419-424-4165
investorrelations@coopertire.com
or
Media Contact:
Anne Roman, 419-429-7189
alroman@coopertire.com

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