CTB - Earnings call transcript Q1 2019 | Cooper Tire & Rubber Co

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Operator

Good morning, and welcome to the Cooper Tire & Rubber First Quarter 2019 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would like to now turn the conference over to Jerry Bialek. ahead. go Please

Jerry Bialek

Hughes; and This everyone, Treasurer. for the Officer, joining here Financial our Good Officer. Jerry thank Bialek, today. Brad Executive Chief is with and Chris Cooper's call Eperjesy, today Chief morning our you and Vice I'm President

which on SEC. the in today be and hear current results Actual included issued additional may our forward-looking Such company control. result over we results has materially limited the related from financial morning are these forecasts information the no forward-looking may or to company's and statements differences in Company. conversation During business Information release & this and operations Rubber statements the reports of factors future earnings management projections. risk on and a of factors you earlier with may Cooper Tire on file differ

will this quarter operating financial and first call, overview XXXX During outlook. company's well company's we of the XXXX the business as provide results, an as

Our financial this included measures. in GAAP slides link earnings note reference financial information XX-Q release today. in and with most SEC that news information that measures on comparable linked later certain directly to of a the slides these reconciliation we'll the release measures and Please a be the call. summarizes filed set The that includes will include non-GAAP a about to the

question-and-answer session. prepared our will call to we remarks, Following a for open participants the

call over turn the Now, Brad. I'll to

Brad Hughes

over our for Then to begin review our with along quarter I for performance about first I'll financial will XXXX. the our outlook you, that, initiatives, good Thank detail. I to progress a talk greater brief a results. Jerry, and Chris of on with overview return our everyone. call strategic today of in morning, After will turn

by taking conclude your questions. We will

about let's Now the first quarter. talk

expected due pleased was the performance profit to Operating we we are first higher Asia. America back in and quarter the performance than that better in outlook North have was in than to delivered We provided February. stronger

we are More net May seeing even importantly, is working. we continued sales strategy decline. few with nearly a Global volume evidence A grew by X% that shared last the unit modest positive examples.

For the and for States. new Mercedes-Benz that up the now XX%, profit of third Cooper was in this sales excited volume United our were original Net unit the Americas despite Cooper luxury over new the growth are in the We're quarter, on equipment first operating TBR consecutive achieved X% tires fitment offered as up tariffs. GLE, automaker. impact

as for and according fast-growing underway, launched that our Europe light retailers, other of Cooper are excited further These production outside to the Sailun we positive the build making and will Our phasing cost production e-commerce out facility a our footprint about to will Melksham This tire tire Tire are joint in beyond. with The and XXXX initiatives are momentum plan is with under-penetrated TBR us a process driving going out retail Cooper of well result strategy new others partnerships more in for we competitive. of expansion Vietnam. vehicle build our progress we And business venture sourcing and is is facility and grow at China. on new in channels. well TBR remainder position diversify our

Chris. I'll Now, over turn to it

Chris Eperjesy

Thank you Brad.

This related imported $XX profit to $XXX $X unchanged in offset XXXX, X.X% million increase partially mix, Moving was XXXX, the by favorable up was Melksham, of production million to quarter to year-over-year. resulting is was tires X.X% first cease This restructuring Europe's increase tire costs primarily additional million, well Cooper of margin vehicle on in as tariffs from quarter Tires of first as were England. operating unit volume driven costs Sales results. achieved light active this in sales. with $XXX to the million TBR $XX related first XXXX. Operating compared X.X% -- quarter decrease decision of and X.X% consolidated of by in million of pricing despite of

Let me elaborate.

tires The duties U.S. into implemented were these from TBR for Regarding the XX%. on is imposed February rate imported over China tariffs, on just Cooper XX.

million Cooper the first in is actions. during immediately. on that method resulted U.S., LIFO we in our a impact offsetting This any pricing negative without quarter Given accounting experienced the tariff cost $XX in

tariffs full the to year, the million. the be For $XX expect of cost around TBR we new

fact, will several price offset increase began before, in brand TBR that said there TBR our Cooper which will quarter. to Cooper on we've tires costs, tires, already second to price Cooper results in in on the these announced. believes been both and impact increases increases market be help As they've and U.S. a the implemented Roadmaster

TBR U.S. focus expanding meet We both China. of not cost we our our will the expected market, is in to in offset and important increases TBR not business lines. are XXXX. Roadmaster said reiterate to committed the It's to be to demand majority are price market is Cooper to on and of the Also from supply continue for product have tires maintaining coming phasing Cooper progress pricing that continued there full TBR expect the brand the through domestic our that as and there be in but of supply year, the we with growth our enough price is incremental increases and will tariffs we before, available as

in the Our marketplace. be to continue efforts recognized

mobile industry. Partner in we one Valuable fleet fact, the of were Services, customers by Most our In the Year of key named leader Fleet Dickinson services is recently the which

We a TBR in sourcing with build to Sailun the and with Sailun commercial our Vietnam are plant footprint a TBR joint with progress agreement Vietnam. new venture global also off-take in on making

is plan resulted in slightly As Brad than of going lower projection. our This charges. transition approximately in amount restructuring the indicated Melksham first the quarter $X and to original million according was

million from range a to $X to restructuring million have to we full year million $XX previously million. So, of charges $XX lowered stated $XX of range the expected XXXX a

material favorable our Total offset at the was look profit operating XXXX walk. of mix, partially a million of unfavorable utilization of of cost; million factors: $X volume price -- benefited positive million by including better and profit $X and take operating quarter from first of $X material costs; compared reduced product million. company $XX Operating higher $X other raw improvements, profit cost with Let's and million $X following by manufacturing million. impacted unfavorable liability of

$X.XX first quarter from related XXXX restructuring earnings $XX first was in to the tax share negatively impacted mentioned, Diluted transition. the I per of of compared costs China shortly. quarter discuss tariffs in will XXXX. million by quarter previously EPS TBR in the of per Melksham enacted was detail tires of share on the imported pension negatively and As the U.S. into were $X affecting and both to which million more $X.XX matters,

in Now unit were turning $XXX favorable volume year, quarter $XXX the America. X.X% to Latin million the the to our first with up flat offset in Americas Tire Segment America compared This increase was unit sales decline in million, mix. by driven by from Operations. a was primarily increase essentially prior XXXX. for Segment North and price volume

X.X%. by X.X% and vehicle X.X%, light by while total by USTMA increased U.S. increased the industry increased unit the Our volume

enacted of of TBR SG&A of unfavorable was by million operating from better million sales mix, tires quarter raw $X million of with and million liability improvements million profit $XX or utilization included XXXX. costs favorable $X $X partially quarter were X.X% or which of compared offset on X.X% unfavorable million million including increased and $XX $X included of offset $XX of in price costs. tariffs additional in also Operating First increased improvements, manufacturing $X of to and costs. material into lower These the by U.S. imported other $XX the that by costs, sales million product Americas profit million. The partially China,

Now first lower and million, result turning lower for to to unit due Net tire primarily X.X%, $XXX intercompany China volume driven volume. quarter This America by XXXX. volume were shipments Europe. from quarter from international to unit down was in decreased first our of lower North the unit Segment primarily XX.X% sales the operations.

slightly up Asia. in year-over-year Third-party were sales actually

operating million quarter to Melksham our The of restructuring. to profit in decrease in XXXX. operations The compared international million, related was $X included the million $X of first loss $X operating charges

the experienced volume, $X $X of were and lower material raw manufacturing unit of costs, million $X $X million lower mix, of which of million costs. unfavorable price higher Additionally, partially million segment offset by

of raw material be year-over-year. from quarter sequentially Our from increased in XXXX. the down nearly in quarter XXX.X of quarter sequentially, of up but XXXX first to X.X% quarter index material in index expectation was line our first This first XXXX. the decreased X% fourth to X% nearly XXX.X the with Raw

a on index For be but quarter, down slightly expect raw slightly the second material year-over-year. to we sequential basis, our up

and compared pension XXXX. the expenses Other estimated million increase primarily the of result year. prior to Turning $X.X to corporate items. now some This on return benefit increased lower assets planned postretirement is versus

We have of made the improving funding our pension plans. strides in status

related As rate to tax for last the driven U.S. and rate tax of negative in $X.X a of to status, the risk was order quarter taking quarter. XX.X% for such higher The the effective Jobs which first Cuts primarily Tax results is a the The million Act, XX.X% result, by funded in in quarter which portfolio resulted protect impact quarterly to increased less the cost. finalization the was regulations compared the XXXX in year.

and that jurisdictions with will rates tax rate we now will full which later on is year today. in estimate on and in the between pensions SEC first Form and be our annual range forecasted be will effective earnings higher our operates. rate, for Given based XX% be in effective the the company available the filed XX%. XXXX tax quarter XX-Q of the More tax rate the The various detail tax taxes

the capital to sheet the $XXX balance XXXX. a goodwill $XX XX% quarter ago. million March were Turning four Return of Capital fourth excluding quarters. the on to expenditures at the invested impairment highlights. and first year compared same in XX, million impact cash of flows in million, and $XXX XXXX, at for trailing equal with was cash were Cash charge XXXX March the quarter some period equivalents XX,

shareholders. Moving to return remains priority Returning our to important capital shareholders the of for capital us. an to

demonstrated now to call supporting attractive in near As first in opportunities quarterly dividend, to balance I'll Brad. our term the invest we over to more pursue are opportunistically back in as the business. committed we we'll the turn our quarter, share repurchases but

Brad Hughes

Thanks, Chris.

We remainder our have first are the results quarter of helped us well position the pleased year. that for

communicated strategic as we continue tangible Investor on on We expect results to improve initiatives we XXXX building progress the to our May milestones at our make Day.

the Importantly, strategic and team our at be tires focused are excellence Tupelo building win Again, are advance initiatives in vehicles. production excited The entire team's Mercedes-Benz our OE supplying to manufacturing to producing thrilled to for Mississippi required capabilities on the these Tupelo we and remain Mercedes-Benz be is marketplace. be our to we to dedicated at facility. awarded

Speaking which a want about I congratulate tire thank is award and recognizes health plants. top time from in Tupelo, commitment earned has safety, also and everyone the to earning our I continued and occupational Award working Safety and to The for manufacturers for safety. at Tupelo team advance our recognition their Improvement a focus is priority for team there the to the USTMA. facility this This sixth Health the

have regional as consumers in been tires. to presence becomes our our buy are our grow more As national aftermarket presence that and retail To and well increase we brand buy are great offer platforms. the are progress availability, buy as by we where by OE availability, tires. at making retail includes progress Cooper that and executing want encouraged channels merchandisers, large efforts tires. we innovation the needs expansion respected dealerships, general To to change encouraged and we are where consumers This tires in even more through to win on a continue increase that traditional making our consumers recognized the quality auto and where independent been available Mercedes-Benz e-commerce have chains such -- and wants to retailers, expansion many our and value, auto strategy grow want be on executing as Cooper build retailers with to we strategy channels the as our

We also remain manufacturing footprint. on our focused strategically optimizing

globe of our exceeding remains These and we and XXXX confident with existing around footprint commencing with I Sailun teams XXXX. production expect an TBR to about addition TBR XXXX we venture contributions producing capital full million Sailun, investments. of sourcing and impact than the tires. continue Melksham, unit U.S. us related other previously net the facility of the Sailun strategy has continue Vietnam and until results. which of operating new seeing the half with and expectation throughout margin joint build tire begun with for the global agreement actions to the of pro Therefore, our for year the develop tires are footprint Cooper profit venture TBR range we XXXX to volume we to XXXX. million. is on JV does as to our In rata TBR we modest plant to from are include our to to share TBR us provide tire with in early will support consolidated of later Melksham earlier, between ongoing execute operating This tariffs some $XXX our Also a supply This we includes the new track joint manufacturing respect sourcing, the Vietnam. our competitive expand of maintain improving strategic the as no capital are first plan And our offtake not $XXX and to year for full to TBR diversify manufacturing Construction in or have our strategy. margin restructuring. mentioned a profit Overall, outside Vietnam potential growth market the Cooper's part compared China to include year give results announced global expenditures a have

the related We which be quarter in range rate and already include not under also incurred XX% tariffs do additional charges $X million consideration, and include not tariffs place, the rate yet that in now $XX Again, between phase tax changes this an expect $X of to XX%. down million but range million year to expectations already of in includes a to a these Melksham or imposed. but effective in are first

of our and Cooper achieve solid the that confident our remains returns our model. improving strategic has is delivering are the strength value. conditions right our goals of well confident positioned plan in record the believe investments and we Overall, drive path We shareholder that help remain on business to industry a with for we future. Cooper

We yet questions. years confident that, as in have take With the to will first move more to question please? done you that we do than succeed your continue Cooper the work for have are long-term. Operator, XXX will let's to

Operator

go first [Operator from question Instructions] The Wolfe Please comes ahead. Rod with Lache Research.

Rod Lache

online positives U.S. market up terms a and what's the Walmart, about like One you morning, that seems are when just initiative. was for underway of at a with the ATD, I of you? X% was had But Monro everybody. volume questions. X%. U.S. look they were you Good mentioned you've two up today got It and can talk volumes number bit the little I happening in there

performance? more us are I what's the you in So was bit and underlying if not numbers wondering give can positives yet if a little color those on this happening

Brad Hughes

good so pleased Yes. to the Well, first there's industry be in general of the a in with continue that that all, Rod, backdrop. we demand we see I think

we Secondly, our private right about to of the that business U.S. finally that beginning and have non-strategic around exit three quarters talking presence. are expanding the out we the some as we've are fruits retail of efforts in consecutive we've exiting now growth our of been of we've talking now. And been had the brand see about

early partnerships. I new we think, these are of several innings in of you've relationships the and stated, as

that on we've include we'll private doesn't of new same into see happen from this -- now got next we the to the wholesale. non-strategic day, every as quarters expect initiatives and would next And over the we every -- course but the that level it the contributions will platform of doesn't brand so move or year, several forward building month begin the that

Rod Lache

the a maybe obviously of to the the or Can non-strategic still exit just positives you drags that the of around some magnitude give us framework just see parameters the affecting magnitude you extent brands? from some and you from are that

Brad Hughes

year into as be think these think develop the There and very grow, may that new begin small we I And implications us. quarter-to-quarter. later Well, next these see as partnerships move this we will we and is behind things largely year. to see I non-strategic

of and bit you lineups more us. we And as the well see larger Some expand outlook and and a you assuming time being from positive successfully, these as to you new go The contributions channels. is that and well have Cooper really then the we it these there becoming grow more take good received we're is in thing will the is positively going pilots but from know of The have take for do brand where this known. that before a it as you then you will start little channels.

Rod Lache

Okay. things. is the from million the year-over-year it had price non-recurrence what us, the tell pretty operating because $X you the of performance was manufacturing negative And just that's something leverage a positive more the was? of Could that in increase what then of a magnitude TBR the in also last minimal just U.S.? two year was given housekeeping volume you seems probably And that like

Brad Hughes

Yes.

me Let if Rod mind. address order in there you them don't reverse

our large positive some manufacturing that do meaningful So quarter continue to we higher to in of a a expect plans perspective portion from We leveraging portion that that that the related to better utilization. saw the and by was part We levels on of having a a first inventory feel reduce with had degree the we where because are significant you us. may of about inventories. we that year balance good as that's our our through to go effort last the and in recall we behind year

producing reflective level headwind is and more additional that have that a be reducing we'll of at of won't so demand And inventories.

continue to the through to we the a year manufacturing would degree. from that some balance expect So perspective, of

amount in instance. quarter did some in begin the contributions pricing fact beginning the don't TBR Regarding to the in of this have-not cases It large and implemented increase quarter. in part we'll pricing, the of for around place that the start the announced second increase at communicate we price from and into see the specifics particular second went

We do. also

I be go as we that around U.S. and demand TBR the actions the additional tires through in supply to of think mentioned will important there note, year, pricing expect Chris as it's given the dynamic

to second round will in in as we benefits but we'll expect there that quarter, of and the be course more that begin of through one the go year. the we So the see

Rod Lache

you. thank Great,

Operator

Riley Chris B. from comes FBR. go Horn with question next The Van ahead. Please

Chris Van Horn

morning. Good the call. for taking Thanks

Brad Hughes

Chris. morning, Good

Chris Van Horn

On was detail and you growth, like? additional bit -- takes give could modest any little some guidance look I hoping maybe us and puts product maybe around around volume you that the I the a growth commentary maybe kind mentioned channels, modest volume what of mix. What's additional around or know regionally? could

Brad Hughes

we with what's it, quarter through a for number look challenging, of was which the we're that talking slightly a the pretty quarter. when you if at market obviously third-party that's Latin look is some look to negative did and where of balance about bit when at from Europe it market remain when But a the pretty industry the positive a market. to But So with as at more forward continues the look in maybe that sales through compared this up outside had we look that job last basis. of challenges a were and regard team, Asia with America America seen markets, regard well. to so policies first signs and tough government vehicle year, the we've that implement cautious has to on our China which a closely you they're you you managing quarter the look great it challenge. year, And a pretty been start planning global we as really basis. that has there was the another of you demand. you first at happening follow let's vehicle And at on in some a North think, demand happen of to and I recently market strong of global about quarter with what positively regard There announcements affect might first

the three that at degree balance into challenges look first of North we the America, of all those the America. year. in of to North the quarter And outside you some believe leaves then both markets continuing when you So cases represent some with in and

And a us relying to growth be that share so to on global would for of deliver going North modest that. be projecting that to America fair suggest we're

Chris Van Horn

us OEM Okay. And an -- there And Thanks then strategy either on anything update for there. color in on has pipeline the OEM North shifted? the abroad? maybe or America perspective the just from

Brad Hughes

in platform those think relationship right U.S. the that to already pipeline started that some road. GLE. We on and and to Mercedes-Benz with an going know, our OE there in three in to replacement of market we for go that to in been evidence given in the dealerships China that from April includes impact important see United minimal early team we continue on again, on there as, done a or a that that's market, that forward So to the in the through overall announced the -- again, look which of to begin in good the very Mercedes success us with just a on the volume look us. around be that we're And way down Asia that roll-out and we've flowing now navigate job really is able do balancing grow market, that our has three you we believe with built environment but still has strategy beginning a the more X the will is the cases to-date as around perspective that we've our the through year. over there portfolio We're to challenge States. In we're allowed as platform coming to with relationship fitments we

on going OE a you four, what two on there. our relationship platform partner today to Cooper better to to partners think Asia the available. on make that And Europe think forward are going right we're globally let's and a with well and are we us news in start it strategy, to see we and a working sharing we a to we look say, with now Volkswagen with would great globally to company over that based products. have recall a brand like their in becomes limited overall we represent folks We with at And as as off number may both look we we're

Chris Van Horn

Thanks for time. Great. Okay. the

Brad Hughes

Thank you.

Operator

The comes go Ryan JPMorgan. Brinkman next question from Please with ahead.

Ryan Brinkman

Thanks taking for Great. my question.

not can volume about know, You a they in bit price the U.S.? prior. goes I'm helped year expectations first relative your just environment talk and on on? challenges more of dynamic price out margin curious seems one how in your versus and sounded or price the It the and be competitors you improving like volume your willingness the for outlook the or as to day, the other a quarter how whether played to competitive signaled that

Brad Hughes

through we in and just remaining to certainly to appears first we anything around And in to pricing earlier, believe while respond a you the the monitoring will place ready changes pricing and if market. perspective a the Well, smaller good be demand tires going U.S. pretty business is Americas And that's that's market to North in I to see that reiterate would put was we remain suggest positive. market change. segment. dramatically forward. and in we the market-facing relative as particularly are positive as From to last pricing demand changing saw, There looking a in TBR price mix some strong. be pricing mentioned in we haven't the had producer backdrop, U.S. seen that environment with place in our really that as performance any and quarter. do the of the that would And And year the that to there the feel about others firmly pretty we American

to place will that more what TBR addition the in the already, road the down move U.S. specifically in market there be we've In put change we as in think we

Ryan Brinkman

that of current rise material environment? of And the ability what thoughts context necessary Thanks. are in raw costs price if demand price the and terms you what Okay. input along pass outlook, recent the are on assuming? oil then to higher your of in And commodity's

Brad Hughes

So increase, that we've we sequentially with regard Chris a – to down year as ago. projection the a we raw would slightly move noted, be a minor of into second as have materials, from quarter

that those within that not oil a a although does to historical bit place. prices bounce continue of relatively on So a lot a incorporate low tight recent little relatively range change if around in in that's

industry that demand And the that so at We look the think looks in though benign there present do to it continue relatively as we it'll rise. a backdrop if America does to longer-term that, over even material raw outlook, do we the raw think a – be the situation should North materials in specifically increases position price.

that for the in raw costs or think appropriate is action. we demand So if see backdrop material that remains, and do increases index, do we

Ryan Brinkman

follow-up services just opening Okay. thought away their Distributors, there utilizing earlier That's then some Tire would on an to very earlier helpful. from And that American a having others reference create walked for you. was

and is on? cadence the of roll in of of that latest the thinking terms benefits when the opportunity what Just size the there

Brad Hughes

a it'd on there, be us the again, what where focus available is to with underway. retail initiatives our big So, for we're have now some in expansion buy doing people importantly and we the right tires U.S. want of consumers

was year, in one more that of we our traditional offered was what that happening which we on component going. but channel that in feel programs way place those of in conquest last distributor is that build And the at positive relationships to across was ATD, put continued build. our distribution wholesale one that's ATD all wholesale also and those We about the of

new to flow up up to tires move wholesalers this and as of order begin customers, So the we year. in and begin course of end demand retailers and some see signing that we'll we they believe retailers, you smaller independent through through that

Ryan Brinkman

Great. Thank you.

Operator

with next ahead. comes Bret Jordan from Jefferies. The question Please go

Bret Jordan

morning, good Hey, guys.

Brad Hughes

Hi, Bret.

Bret Jordan

Did If the compare we look guys the you of private branded ex-out how and volumes, we within were at those X.X%? would legacy of X.X% what USTMA against your ex-private sort volumes share brand the label gain label? growth growth

Brad Hughes

see across we private say that, how our to – you when I'm wholesale. look – from much brand obviously, brand we're Let's the portfolio see going didn't

that's take So the Cooper pocket you about where in would up it equation, within extremely now and for the And I branded end we very feel of at out that. of performing Bret. leave particular looking brand that I'll was highlight well that good you think And that business, business. I probably

Bret Jordan

the volume I at we Okay. the maybe I channels, if guess ex-out and strategy growth new channel? legacy look new we again retail with And the incremental growth that of ATD. new of guess versus How much then sort channels from the Monro's and came the

Brad Hughes

as as started, while there as move as area will forward. where to improve That's much an we opportunity move that is Not we has for there ample forward. be it

Bret Jordan

Okay. Thank you. Great.

Brad Hughes

Thank you.

Operator

The comes go question Anthony Please from from ahead. Longbow. Deem next

Anthony Deem

Hi. Good morning.

Brad Hughes

Good Anthony. morning,

Anthony Deem

million Chris, relative the upside the quarter, that in of outside off, Starting of $X mentioned? if other there upside $XX to to drivers income were expectations specific million segment restructuring you your

Brad Hughes

a we think the noted we areas America fair overall my a thought came were amount North Yes, I were from yes. than because the said in international opening business the There in. outside better and I And mean business from performed comments you the saw charges as improvement bit that and what in we that other of that's Asia. restructuring

in as think I a done Asia So, our market. really challenging good job team a has of I've performing mentioned

regard manufacturing North what expected. we strong perspective versus And And price our of America business did raw facilities. positive mix than a in so pretty did space. performance And our better. we performance saw then from the had utilization space then in the saw to with better material they And the the pretty we

of both So, with we aspects. pleased those were

Anthony Deem

price better mix on of America Asia, overall or volumes holding is North that prices? so more was And manufacturing line

Brad Hughes

going to on and news Yes, see from a the tradeoffs that even Americas overall we that from line and it directionally and when price million can but project. is did mention range to the the of on that bit And over still keep lumpy way mean for I to a well product in with have was volume which some holding I it right you're the a mix $X liability in be quarter-to-quarter. while, our should as there. and been has probably good difficult equation about moving additional business maintain performance making little grow

Anthony Deem

last Yes. while that million you benefit the holding we third view quarter reverse it guidance, in are from we're year? your at, $XX still should And that

Brad Hughes

think Yes. performance we million. Yes, you should indicated what ongoing $XX million excluding that $X had be than I the that about that would have better seen

Anthony Deem

questions tariffs. share few Any the in there of that expectation million, volume any -- versus year? change $XX market a prior any the on expectation or outlook is And

Brad Hughes

ahead the shortfall there we've relative to perform to in demand opportunities brand as and With combined market year American for market. do of with think that supply U.S. us industry. the to was Well, in provides a the last introduction we the we be indicated, think of in going North with that us Cooper the U.S.

Anthony Deem

of of is inventory high a you'll on And now year? some road? like the TBR realization because in material deny offer they the this, positions but more the increase raw wondering And price is you down will price greater right have issue to it in potential be round the later it tighten seems a could double-digit and price is in comment that this Or second a confirm TBR on think or later it's increases low if ballpark. I'm it in might

Brad Hughes

not this to environment pricing think that ahead. going We the over situation and -- most of around there demand pulled of the unfold Well, do our while year. the course supply confirming I'm is and how the purchases that's the to or shipments some probably expectation versus the related of were denying

the will not there here again look be will second later half of that there year in the the expect so may tariff we're from year is market their supply have be the we will market way that's able since -- are anything go million production subside. and we we into of of the into and perspective. a cost as going worked there we we the going as this But through. go from that as to that's $XX markets suggest continue and sources to likely be at get that the demand that And built be sure we'd don't And to begin -- business, on topic here year shift to absorb into going this tariff, that then level tariff to going that to be will then with where into to our meet have our around is go pricing isn't to inventories this to that to And equation. estimated

year, we might headwind bigger may at we thought we've this got forward, a be something bit while that as look opportunity have previously. forward we think a than we so look And of little

Anthony Deem

impact are if year, And million the what last in it was I was a into outlook that was the this quarter assume negative number. guidance? more. Great. I fit two incorporated stating lesser you $XX could

Brad Hughes

estimates say guidance that and provided right changes we've guidance that did we're there's includes making. that -- we're guidance the to that not had now. got guidance we have we're that We with I we huge built margin regard that obviously profit again, into -- previously, providing in would projections the operating the

Anthony Deem

Can question Okay, in American questions. an is driver it. You and are as some you Americas going the give I'm and of utilization an North in great. update interested last this I taking plants? in utilization that appreciate us cost for planning thank And quarter capacity but, on mentioned your upside what how it's you overall? you on particularly my advanced And initiatives, then,

Brad Hughes

Yes. Thank you.

that but manufacturing remains right only that our the the continue reiterate down demand And last thing repeating year, improved large inventory through I'll believe we utilization long with not the do Americas a balance be as be that segment. to continue the will first to as through draw on our We're is And quarter we'll of make But and to place course overall And the again, in forward, as of evaluate do -- not of based there that year. inventories. will share last year the do there required we three capabilities We we have focused the there the everything it, expect America. we to capacity, see So consumers right year, sure this due utilization going just on is that that in it's those. the certainly shared, all that we part anything to cost, and of again that when move we're do. on particularly better which we in to accomplished now, customers was business compared will if service we monitoring be North footprint, supporting appropriate.

of And have so, that footprint make America. three with continue progressing the North the regard we we're in that against we appropriately to to those sure

Anthony Deem

Brad. Thanks,

Operator

Healy question with ahead. from John go next Research. The Northcoast Please comes

John Healy

those the the, you've I tires you you start efforts you. $XX.X take Or or need would do just few cost. headwind Vietnam? right advantage And wanted actually than offset that completely? point outside I Thank at on $XX producing the million so think what it now, additional increases price of of apologize to truck do sounds price like of as that increases in be the China, late. XQ. that It in of I But secondly, Asia, manufacturing those forward, were more in item Are incurring? a can XQ headwind in that and you a then some realignments of dialed enough to actions actions ask call the minutes million to tariff offset put to to offset you

Brad Hughes

Okay.

So any regard the tariff, no pricing quarter. all, first with of offset that to we that in of first had the

there to tariff And in but offset announced be net price tariff will no price amount effect do to that. will also that So the go we year that was in believe need second the But gross more there that million of begin the amount. and we as increases the the is that $XX reported pricing. increases because We've for we to quarter. be move through will offset additional the

when for this was fully cost year year, that inside million. the John we pricing tariff think don't will $XX made we of that comment the that look this you other offset, of The

books think -- any look the in at we you You pricing. got already $XX that million without and

schedule, then a venture to other so XXXX. that Sailun have tires focused perspective is be to producing no the calendar would to we're we're facility. sourcing in the the say later And first are lag construction from one there the regard in we on with we'll of with that Vietnam, get where least on for we'll And the longer-term that of going that we year I certainly XXXX believe opportunities, facility. than regard joint clearly that not half at with

in full will there the beginning And important -- offtake to we're venture. to get for amount And joint it's just continue year. production provide also it that we it's a when agreement Vietnam. bring and of we than So monitor have note that updates in tires material this as over that we'll but certainly But as underneath Sailun also with to smaller appropriate. an it's what a to facility be part agreement

John Healy

those Or commentary Great and margins the forward those then restructuring? about are put that restructuring? clarification just one do The European for you've question. XXXX, include European excluding

Brad Hughes

pricing can balance the for am impact we're provided effect both tariffs, tariffs the or glad less that margin The projected I of of that. just asked guidance clarify higher than still is light the restructuring year. which those the we included of John, of production are any includes have to question Melksham, vehicle you tire so, And for net so we so projected either the that that be the we have both -- margin costs didn't at projecting in all includes those. the of that exclude guidance, which the year it have cessation last of

John Healy

Great, you, guys. thank

Brad Hughes

Thank you.

Operator

back any question-and-answer This Brad turn to conference session. concludes would our like I closing for to remarks. Hughes the over

Brad Hughes

do. today, very all around the I to for thank briefly Just And today. want want that they team globe you for I Cooper to all us thank joining our

much. So thank very you

Operator

has The Thank for today's now attending conference concluded. presentation. you

disconnect. now You may

Cooper Tire & Rubber (CTB) 29 Apr 192019 Q1 Earnings call transcript