Although Cooper Tire & Rubber Company posted a record $773 million in sales for the second quarter, the company's overall stock dropped 38 cents per share during the same period. According to company executives, the increased revenues were driven by pricing and improved mix partially offset by decreased tire unit volumes in North America. "We are still committed to the long term goals we established in our strategic plan," says Roy Armes, the company's chief executive officer. "These include establishing a sustainable and cost competitive supply of tires, profitably growing our business and enhancing our organizational capabilities. Developments in the macro economic environment have caused us to be guarded in our expectations of profitability for 2008, and to reduce our capital expenditure plans for the year, however our balance sheet remains strong." As with many manufacturing companies, Cooper faced intense challenges during the quarter that adversely affected operating results. These included record high raw material costs, increased utility costs, and weak market demand in North America. Raw material shortages also led to Cooper's decision to temporarily curtail production during the quarter in North America. The company's quarterly earnings were negatively impacted by an accounting limitation on the amount of losses it could tax benefit on an interim reporting basis. This negatively impacted the earnings per share by 21 cents per share on a diluted basis. Through the first six months of 2008, Cooper has generated a record $1.5 billion in net sales. The recorded net losses were $21 million during the same period, compared to net income of $38 million in 2007. North American Tire generated sales of $548 million, up 3 percent from 2007's record second quarter. Operating losses were $22 million, an amount significantly below the same period in 2007. The sales record was the result of increased pricing and improved mix, offset by 13 percent lower volumes. These lower volumes were primarily in the broadline area. The Cooper brand continued to improve position in North America and increased its share of market penetration as compared to the Rubber Manufacturers Association reported shipments. Market penetration of light truck products also increased during the quarter. Operating profit for North American Tire declined year over year as a result of several key operating factors. Raw material increases during the quarter negatively affected results by $51 million. This was partially offset by price increases of $32 million. Improved customer and product mix were offset by decreased volumes during the quarter. The curtailment of production triggered $13 million of costs during the quarter, primarily related to unabsorbed overhead. Products liability expense for the quarter was $3 million higher. Other negative cost factors in North America related to increased utility costs and the cost of maintenance projects executed during the shutdowns. Factors in global commodity markets are driving record-high raw material prices, specifically, in natural and synthetic rubber as well as other petroleum-based materials. These high prices coupled with the use of last-in, first-out (LIFO) cost flow assumptions for inventory accounting in North America, have contributed to decreased earnings. The LIFO accounting method charges the most recent costs against sales and in periods of rising raw material costs, results in lower profits compared to other inventory accounting methods. When costs moderate, the North American operations will experience lower charges to cost of goods sold than would be reported under other inventory costing methods. The North American segment was successful in rebuilding inventories during the quarter in anticipation of both the peak selling season that occurs during the second half of the year and the strategic increase of inventories necessary to continue its industry leading fill rates. The company's International Tire Operations reported record sales of $283 million in the quarter, an increase of 21 percent compared with the second quarter of 2007. New products released during the quarter were well received by consumers and represent the initial phases of successfully executing a strategy to improve product mix. The segment delivered operating profit of $6 million despite increasing raw material costs, and start up costs related to developing a larger presence in Asia. The segment continued to successfully ramp up the Cooper Kenda Tire manufacturing facility in China. The Cooper Chengshan tire facility also continued to implement projects and improved throughput during the quarter. The current macroeconomic conditions in North America have created intense challenges for the company. Consumers have reduced the number of miles driven in reaction to economic pressures and are delaying tire purchases. Raw material costs have continued to climb globally and show no signs of declining in the near term. For more information about Cooper Tire & Rubber, visit the company's Web site.
| 
