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Cooper Tire & Rubber (CTB)

Participants
Jerry Bialek VP and Treasurer
Bradley Hughes CEO
Ginger Jones CFO
Rod Lache Deutsche Bank
Christopher Van Horn B.Riley
Ryan Brinkmann JPMorgan
Bret Jordan Jefferies
Anthony Beem Longbow
Call transcript
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Operator

Good morning, and welcome to Cooper Tire & Rubber Company's Fourth Quarter and Full-Year 2017 Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Jerry Bialek.

Jerry Bialek

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

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

of XXXX the and fourth During this the outlook. call, company’s financial well as operating we full-year results, company’s as business overview quarter will and an provide

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

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

the I’ll turn call Now, over to Brad.

Bradley Hughes

from on Thank you retired and Treasurer. named being Jerry succeeds to everyone. He Lause, I congratulate good has Cooper. morning quickly Tom who want

of review discuss overview to and our Cooper return this full actions to look allocation. have impact taking begin With XXXX address to will your of new our will that, finally to will After financial of reform Ginger talk we contributions. questions. we brief we’ll fourth a for turn is the about results, forward and outlook, with and the year to addition opportunities In take performance, I'll continued and Jerry our a industry I and the then quarter then financial call tax year today Investor his the capital continue lead role, over to Relations to full and that, we'll environment grow. I

move volatile material Now, were throughout including despite promotions, volumes our challenged higher pricing conditions the low XXXX such in and U.S. relatively and by strong prices. year Unit softer retail industry-wide fuel as raw let's driven the factors costs underlying miles demand, and to results.

significant provide X business performance. from private volume a business exit us million process continued almost behind Our largely our brand a which compared is some some down impact units to distributor brand our To non-strategic now also private XXXX. is perspective, on had

in are these units We the higher margin. process business of with generally is replacing strategic more which

were decline. our U.S. fourth performance volume despite the of are about with the XXXX, We quarter XXXX, volume strong impact that the We of unit decrease year compared global with year Asia X.X% nearly the of previously ended price a stated end activity the pleased a material small pleased the offset cost of increases tire X.X% high of to sales, large environment range. of in resulting the is half volatile we the full-year year the the near promotional margin first raw industry, and our increases mid-term profit in which and which generated to of full the operating deliver and target in in operations net including unit

as sales entering already and to drive introductions as global we where initiatives new outside of original already expanding to well in the into business early unit new a several strong equipment improve such launched the have We cadence of channels volume speeding as inroads OE product our the have U.S. growth. presence, Asia

In our time reorganization, reduce costs, production network, and results, our significant other impact December, with Cuts manifest Cooper, results. the quarter, to and part tax items recorded remeasurement regarding take we Cooper a Jobs positive Later, our adoption on efficiencies discrete improvement automation and reform the the are other primarily a the fourth term, the million, legislation. Tax through change our tax operations. coupled quarter, Similar given tax company's margin company reform Act of through fourth on of recent capacity long required many results. related within some efforts further In believes and in will enhance corporate of of reform a tax deemed and the with early benefit progress. repatriation in deferred as company’s tax in of to profit on the impact companies, the focused fully details significance the but of also especially are and in balancing will discrete U.S. to be the plants, the assets will efforts $XX to Ginger the our including encouraged tax had will We items the liabilities companywide tax go

from X.X% Asia was Our This offset and year the volume $X.XX year-over-year. for decline XXXX. to which net price unit financial compared by lower last improvement metrics U.S. volume more of sales than X.X% in down driven by mix volume the Unit in favorable year. billion, and include decreased

$XXX the earlier, share volume were while margin was in net mid-term nearly million of and sales our I said declined of noted the by unit Diluted high-end target grew as our XX% in near Operating U.S. is, volume earnings XXXX. unit profit X.X% range. operating earlier a $X.XX. I International As segment which was profit per

detail discrete in to the been tax continued Excluding $X.XX which share return XX.X% will activity. the year XXXX. achieved of conditions, shareholders per invested the later fourth capital call. in unique earnings impact challenging Cooper of a the excluding through would Cooper items, on on plan cash for have to capital tax our quarter allocation Despite return discuss impact more the Ginger

what Now, several with drive let's the respect in doing talk undertaken is including especially additional unit to to U.S. entering channels. We've sales about improvements first, drive to initiatives volume growth Cooper

Cooper where the products to places expand are to and dealerships. e-commerce We including are available entering consumers new car channels

market. OE the into inroads making Second, global

business original part enables when especially business stay capability strategically relatively be is technology high as and but a are the with and on inroads we to the making We performing addition America Asia, our Volkswagen in been early announcement of North we business. T-Roc, OE important have will consumers produce the it our mini grow equipment in in replace important underscoring also that same to our small dealer for In to another vehicles. often will in have to the global in car tires. SUV driving It Europe original our and successful come Cooper future. premium OE come to brand, their OE noted OE recently to Tires tires channel growth

faster Cooper product a the in a the and very well to of to process and the we product as we more industry consumers is product lines frequently. into introductions, launches action working speeding industry product refreshing to been past. leader products of are the portfolio than We integrating offerings an the with greater launch be love at their continuously more replacement has pace. our input tire stages with new terms done multiple cadence fresh up much new of market directly have in Third coming have degree products been in tire the active feedback at a speed taking our of existing in our as which new

effective reduce As to production are agile. that working automation through including and improvement noted and drive to companywide underway Cooper more our recent make profit efficient, opportunity efforts enhance margin reorganization earlier, plants continued within corporate in our in addition are efficiencies balancing to to network our capacity the costs we volume designed of and

of of the our functional part about at As future. of this positions the people, in we for our with wide areas most changes to to salaried align reorganization we This corporate have was today U.S. headquarters. a priorities investments eliminated business and range work X% capabilities across and done

in a six XXX As levels to Joint market you to was days capacity works reduced from the days was recently demand, operation. significant and over Mexico to headcount and due know headcount at reduced align region, decreased our market we’ve positions. by Cooper Venture Production seven continuing with decline production

demand and and capacity our We to efficiently. our respond manufacturing operate network to changes will balance continue to optimize

We dynamics. announced address chain our in in network square committed is and three more be will with the foot will effectively. and fall new recently physical of warehouse be manufacturing in open year. we our tire centrally U.S. U.S. network customers an the among this also market tires distribution expansion U.S. of are that Copper’s to dedicated the Cooper This capabilities located X million warehouse both will supply are in plants. a our product leasing to Byhalia, at the will be changing vehicle Mississippi We light serving our investing to within largest

times. warehouses well Both as regard San in to a will In TBR improving addition, that consolidate XXX,XXX supply tires. the this as to more fill facility distribute U.S. distribution customer allow we square rates customers growth. and outpace TBR regional spring, efficiently and be lead volume centers With opening to to are business, continue California, unit directly us to dedicated we Bernardino, foot industry our will shortening products

and a team agreement Cooper’s was globe of their meet of TBR have demand. a are new XXXX for offtake in customer the shipments come the manufacturing hard TBR for Cooper the with fact, we members XXXX I efforts all source a In of than announced this production want gives industry. global This tires growing multi-year grew the to work third in Vietnam the year help thank excited to TBR for Sailun where to Cooper yet row more throughout third to With tires. growth, the around XXXX.

the financial results the call on allocation. Now, will turn to I environment, Ginger an and business for update capital over

Ginger Jones

Thank start addressing you, by Brad. material I'd costs. like raw to

modest our call, noted fourth quarter we in third in our As raw quarter. sequential increase material the index a anticipated during

from quarter just increased increased on third as X.X% quarter X%. slide from fourth XXX.X shown of Our fourth increase quarter a the supplemental index X sequential actual the year-over-year the the a XXX.X of by basis, XXXX. deck. the index This is in slide On of in under to

As to anticipate this each material we sequential we remained look in of predict. hard as but raw we cautious in increases XXXX, modest quarter costs forward is

share. favorable company's Full XXXX our the operating were or $X.XX year. $X.XX full to sales profit volumes billion, partially prior Net impact, mix. a earnings by The and by XXXX Diluted lower Now, per moving with sales. year. decrease $XXX for X.X% were results, offset were was sales and net of the year X.X% unfavorable price unit from foreign million beginning currency impacted

expense $X.XX share tax million. reform net million results Excluding been profit $XXX or in included compares quarter per pension fourth and earnings million with the $XX of of million U.S. of XX.X% $X.XX. settlement diluted of non-cash to discreet per earnings other operating XXXX have events, of share The would income of $XX impact sales, the tax XXXX. and related This charges

million million million than Diluted quarter $XX million operating share $XXX an was and Fourth of per decline from liability due to following Moving to offset XXXX. decrease $X general of was volume or to administrative $X Selling, are of of year-over-year to levels, unfavorable of sales, corporate lower down by increased index. in $X.XX manufacturing $XX more sales volumes. with the raw consolidated to of fourth material $XXX mix, with of profit in manage compared which from was compared of unit outcome professional results, and down production inventory costs million lower price and reorganization. primarily to by quarter the product and sales were company's days profit was production $XXX promotional compared was $X million than higher primarily higher of the XX.X% costs. million lower million and $XX XXXX. page required market of This costs, restructuring other the net the expected increased factors impact impacted the $XX X.X% supplemental million the costs activity due the counteract incentive with in driven This fourth in million softer $X.XX volume volume, X summarized earnings costs decreased fees XXXX as of Primarily quarter costs in in deck. of demand the compensation of on and unit lower and by or heavy $X with retail. consumer in Operating price X.X% million, was U.S. XXXX. unfavorable related related loss unit slide U.S.

other would quarter $X.XX. tax share per Excluding the tax fourth discrete of and quarter items, fourth earnings have been reform impact

$XX decline the unfavorable decrease with of mix, $XXX or cost of million unfavorable net sales of fourth costs, volume, unit with $X favorable the $XX related profit price of our XX.X% America. major incentive million, Now partially Americas changes compensation. lower with million volume million $X performance million million mix material to of decreased operating on of rate million. million higher exchange costs. to quarter for America in quarter operation. drivers $XXX with impact favorable net liability from $XX of starting of in of manufacturing million, to operating XXXX. $XX lower by in Americas XXXX, volume These raw Unit Tire Latin Americas segment net in declines million declined sales X.X% profit and were in compared million offset product sales was million of down reductions or were $XXX to were and $XX The partially $X $XX of negative fourth million million volume unit the and the $X X.X% primarily Segment X.X% price North offset quarter $X of by higher both Fourth costs, lower SG&A costs other

the on slide You of supplemental Americas can the for our see segment wallet deck. full X slide profit

unit favorable unit by lower in were our net operating mix. and results other pricing turning net Tire cost favorable XXXX. $XXX million higher quarter increased costs impacted and increase. $X These GRT of contributing our Asia million also contributed in XXXX. to up improvements The from from Operations $X to compared joint $XX of of to improvements million million million mix International offset increase venture International $XX than for $X result the $X Increased volumes the and manufacturing $X in replacement quarter price the to by in sales the to Now Europe, volumes of and in both additional quarter $X $X positively segment, of the of of Fourth million impact in profit the were of OE million operations more offset volume China. and raw including sales the were million million unit XX.X% partially material million unfavorable Improve XXXX. currency foreign fourth markets fourth

operating to profit see team can improved supplemental expected we Operations XXXX. great in segment. accretive in to International walk become move our said previously to the work earnings GRT in some of the note the actually by China GRT we full about another You this which in to accretive Shift operating the to beginning slide deck. for profit X we on before on, XXXX Due to year-over-year contributed was results GRT profit slide

Jobs items, corporate of tax the U.S. some and the the Tax on U.S. to the legislation Act comprehensive to the now and December particular tax government a earnings $XX undistributed foreign complex XX, Turning code. changes passage broad be payable the Cuts tax but with of transition was enacted will repatriation recognized to million In subsidiaries. new expense XXXX. deemed the on which tax repatriation system years, made The all eight tax of as resulted quarter in deemed in fourth of over

provision. the an XX%. XX% tax In impact U.S. liabilities of liabilities reduction addition assets The to to adjustment remeasurement rate the from company's the in non-cash and the tax SEC’s quarter U.S. of the to company's a deemed amounts deferred in guidance tax of the the tax provisional the SAB tax prescribed $XX the as charge on liabilities fourth XXX. assets recorded Both and and by to were million under the measurement repatriation deferred XX% tax rate base and resulted of lower of of corporate assets resulted impact deferred tax our

liabilities. expected The a million assessed Additionally against deferred in non-cash allowance The company assets was to the the related deferred expected operations the loss assets fourth Asia company in non-cash the after a $XX on largest related the $X its company pension tax the valuation quarter tax tax its required based allowance is the valuation deferred the in quarter realization its valuation reported million underlying realization reversed fourth of allowance of Also assets. of which U.K. to the of carryforwards. primarily

year. XX.X% items, Excluding compared been have with tax quarter tax XX.X% of rate these discrete the last the effective for would

For was favorable the book/tax of jurisdiction. in unusual decrease by was effective from extent the with other last XX.X% a year. in and The a Permanent compared full increase changes the significant XX.X% U.S. year tax the by and lesser rate to primarily mix tax excluding differences caused in tax rate items, effective XXXX earnings

related a to to upon percent tax impact. year the in current to to Act expect understanding of analysis company's a of estimated which We full our affect XXXX to could our The preliminary is changes guidance range be XX% provisions. estimated rate several is Tax Tax Act. access based XX% act the changes complex the with tax Any or unique

the providing the the our and our continue detail tax our taxes available tax benefit we earnings Brad reform in and cash on greater in long be impact change our and adoption net below periodic be the to potential profit. flexibility compensation will will on approximately And capital a in flow Form rate in with the believe to excluding will run. earlier, million. benefit support initiatives As Cooper improve positive reclassification update costs profit the X, for will strategic result said expects the to January Along priorities. reduction of allocation will classified XXXX of costs More and accelerate be accounting is our net filed company XXXX effective XXXX-XX benefits XX-K SEC later of outside today. $XX finally, benefits service with the standards the to In operating XXX-XX that periodic costs retirement positive operating

Full-year compared XX, December capital expenditures up cash of driven increased the generated in XX, repurchase fourth Cooper XXXX to by with XXXX. and $XXX XXXX authorizing earnings the cash million $XXX million. of XXXX. compared Capital quarter decreased company's our December to decrease extended company’s were compared year equivalents Cash at the In sheet repurchase activities million to at stock were $XXX and $XXX was primarily balance by for million $XXX in program February with XX, through and million were the cash now of XXXX. expenditures $XXX December flows the million XXXX. operating outstanding million Turning of XXXX, $XXX December the million in $XX XX, was full million board directors The in at by share $XXX XXXX.

for shares average of at fourth $XX.XX $XX.X of quarter, per share. price XXX,XXX a repurchased the were an million approximately During total

company December of price $XXX average $XX.XX an began of the XXXX remains through million repurchases Since at in million million As the of of XX.X XXXX, authorization. share. XX, repurchased August December shares XXXX, per a $XXX XX, share total has

As dividend existing capital, are more improvement growth a flows support now reminder, and which and capital our projects, and margin organic investments to capital to allocation we business, working sufficient call we believe over cash ongoing capital shareholders. potential maintenance priorities debt payments, cash and payments support Brad. our commitments as such and leverage to cash, supporting next, define our the as to I’ll back returning support the turn to acquisitions than

Bradley Hughes

Ginger. Thanks

as expect compared ahead, unit and initiatives include as favor have industry growth with results tire to XXXX improve a to Management full-year Looking we begin volume positive underlying XXXX. that for growth expectations hold macro our impact. conditions take

With call, the is target reclassification of by mid-term XX%. profit periodic the benefits to as X% margin on earlier operating Ginger described our now

to year at quarter, the is the throughout strategic to capital And between million rate in range will Cooper continue the Jobs be global profit faster of effective channels, million. our the into challenging U.S. expect initiatives including the priorities, expenditures new by execute especially Act impacts We which U.S. a with in end OE in first of reductions to operating tax the margin on making products below entering Cuts markets, focused in on finally, $XXX the $XXX earnings the additional the decrease An expect range range range full-year this to further XX% volume low pace XXXX inroads we near between other and expected to following driving growth, to tire and and U.S. respect and with due market. a predominance sales improvement and a introducing our unit driven Tax compared Mexico and with XX% the from

the delivering business We results our and model. providing of We our solid strong for strategic have of believe plans, investments overall more planned capital Cooper to on strength confident allocation and the in record of on forward the an is the that improving, look year. middle a detail updated we this Event for guidance well-positioned Cooper conditions with industry future. Overall, remain Investor at

to work do. have We

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

Operator

[Operator will first Instructions] of question And Deutsche come Rod from Lache Bank. our

Rod Lache

One you'd volume. think competitors activity promotional I that were fourth some during volumes as from we U.S. quarter, that And Brad the had the but is your some some they they’ve a in mentioned promotional of couple questions. U.S. I you ramped and down. heard recovered up actions well take

much kind So look characterize happening of was loss when competitive could environment? Cooper pricing the to that you Tire that specifically? for at just And we of the of much how what's is volumes How deliberate?

Bradley Hughes

the quarters we the some with and some, Rod, would although see would previous activity fourth what than promotional line fact earlier a and in pricing that in market was seen agree we've quarter saw continued that level in XXXX. continued some say it than in years, on I more I what at during higher that it's probably we to in and

in along, market year last this we difficult up that, year. we the said intend kind we've which opportunity all this our importance programs pricing facing to with have fresh we of and the our better As get actually the to promotional programs that the given of annual and and that call have activity were on and start year our to you we we without - a continue also to and some may ensure off that we catch that start start with to annual sure it's are that given Having now really a indicated recall we to recapture that right promotional said the make competitive.

moment remain activity market we we in continued we have noted and know did the did a well. there while our just facing, continue, in are to was ago we that pricing you brand a promotional as fourth exposure we that continued the the private us through quarter largely fourth reduce the behind business - wholesale it's quarter, call now, and So to

were off with to page and quarter with market we new in the were XXXX made company, channels, program is wanted factors channels positions, starting useful do the to to in we comment a be that regard had So, not in to exiting unique I inventory you last from that on we the know an and in that make only we right XXXX we and think we so the in facing, not as that as with is there overhang sure inventories to we're did both own about the guess, we're our the the were turning fourth manage coming some to annual go Cooper, those happy but that we forward. last XXXX believe I'd to as start we and be going this area, Rod, year.

Rod Lache

and see I I guess, drag the margin trying to XXXX your that outlook, I inventory for saying imagine that the a the think was But, what X.X%. you year. bit big the of towards I'm about when of just I'd about picture, the reconcile end you're was full-year a

that X% XX%, excludes low For end XXXX, to but the you're looking costs. the pension of for

the correct? would a in XXXX you imagined the that I'd Americas kind the picture. down a so correct year-over-year Is be inventory margins X%, being think, on pricing is been more of versus that down an the but if despite just coming if so, And have coming And new kind tight that I are reflection for apples me basis, to I'm of XXXX? of challenging it in wrong, So, year-over-year. apples would that environment

Bradley Hughes

you’re is, corrected to X% that to XX%, to what forward the increase pension that if going we did guidance X% it to you into from - Firstly, XX%. adjustment, rolled we the

yes, old X% would you probably if back as opposed XX%, went to So to to it accounting, X% be approximately XX%. the to

we terms in couple a over in standpoint. pick-up pick-up a last the said the continues sell-out an of positive and the particular it in this coming to the going on expectations - times sell-in, in of environment see and a back where like Having of you sustained year look sales. One from at as particularly we year, it with both things really yet, that course with were on itself year towards industry is sell-out We’re never tire to and saw last into that, looked macro sell-out. demand look

As industry we little on come would the the know, you into year, a report this from bit you in a was we it have soft USTMA the as see bit noted same, little volumes. January of tire

see recently sell-out improving itself have to year We early we're seen particular that that. this the part sustains signs or not in may that be but waiting in whether of

signs in that the going will that's And number slightly nearer the it, here So, market occur. to the costs be to is we're further up competitive industry note a looking early first the of it right material with from year, XXXX. able to in - nature offset And with that in but half term, those we're of sustainable. top an year the that, and that we that we've be positive especially again now, also do will waiting for one they coming in we're not increases part see of look be projected of on then, on fact that's longer-term you if perspective on for the the are industry,

Ginger Jones

that reversal quarter in significant of we two to significant year to benefits that this would that the benefit Rod, liability product mind you’re to early was adjusting in the out. we is benefit Terra. then first during had if the just called nonrecurring, XXXX add the reserves the third XXXX TBR had thinking about keep year had we and Ginger and And in quarter, a our the we I from In the

the keep those about you both XXXX to I as puts XXXX. and think takes from So, would mind in

Rod Lache

or you are year-over-year? pricing bit, mix Could expectation kind for a just you be raw what flat, pricing you pricing down be down, is expecting your materials tell are to us pricing, to kind pricing but flat kind up assuming high little of of of level

Bradley Hughes

be that now how Well, pricing fourth depend on think believe we is that think but in side. improves a do as see that was stable right occur tire the of the activity in some two up much macro I some favorable point And fair to industry, we relatively on I raw come the things. move to we're it pricing - it's now that at that expect overall, One we you of materials know price. time, more Right begin if in a we'll expecting time stable conditions they relative to stabilizing we'll though recovery there see amount for quarter, a a with XXXX. regard do to which we will into the even seems see sell-out to as with that Part expect move, materials. now, I pricing the environment recovery over raw environment

Operator

Van The of B.Riley. next from Christopher question Horn comes

Christopher Van Horn

what because joint direction I get just like little here want as Vietnam earlier of we well as GRT, I in you, detail we U.S. venture in TBR, wanted on seems both and to just the see what's in with with marketplace? seeing it bit if that some the going on China accretive sense and to you're kind thought. in get a of market the of being the more a than additional

Bradley Hughes

offtake - we're is announced with Chris, on Vietnam - for about we're quick the one excited just agreement business TBR our correction we've what an now. Sailun there, Yes, what seeing in

row and So, is the get for that our footprint and we're to three that volume. out going to TBR the support in North very see is we've A expand sourcing the to to lot started a in America last year U.S. and got footprint TBR need that continued in on to strong market third sources the build specifically our in what of support market. for year growth growth the We we our saw business sourcing U.S. happy to there. growth

investment the had that have now able of we earlier which there, relative predicted. the the in were up And China a become We strength on in and that we is by is see bit also XXXX, have great some as well. do joint we over in had on as the ramp the accretive China in demand at venture GRT, in right business to result work growth we than team that to which a

Christopher Van Horn

it at the a profitability of going how each incrementally you think there? quarter, us about profitability obviously international looking it’s XXXX, to then, into over side, on sense level up the give And could

Bradley Hughes

Yes, to that I our in to profitability and growing growth. are in we growing China segment, international believe think support and that capability improved production we continue we’ll capacity still see our

the continued see in we you’ll And volume as - in and expect continue that we improved segment invest XXXX. grow that that that XXXX have profitability capability, to International but improvement with to the we'll relative so, growth implication do on in to

Christopher Van Horn

some on one the then, given be able the Chinese today? the me had OEM to in comment final you would quarter, past during on you've And color that from and volumes you've that

Bradley Hughes

attributable that is We of China. much growth continue we in growth that very highlighted to International the that to We and OE up year compared that strong in the were we market. see prior in the XX% with had OE China

Operator

And from Brinkmann question Ryan next the of comes JPMorgan.

Ryan Brinkman

the investors CapEx $XXX talk you high to can should swing of other prices, could changes pieces, free $XXX which light on mentioned thinking flow in million, it’ll in the in about that know helpful up of million you material you and material some pretty just about end? How factors working of be capital cash if on cetera? Maybe you also comment XXXX, is step moving be a raw the at et range like

Bradley Hughes

- we're are I earnings one, spending contributor mean, capital you're highlighting to I it, a think obviously not is. major

spending beginning of conservative guide the the capital We - are year. guidance at with on typically our

look sense end, tax look provide that reached continue the to a think position to reinvest would example that Cooper for the more reinvest at our end and we've that supported even market in but as to business, I the with period make U.S. we're we ever prior have some compared in that we in rate the in want ensure support that if guidance the to historically investments we can the and the and that back environment. so, you now that position especially high range we’re change can in we our may we they time and do range if don't high - business it of conditions this And a performance within continue

make But good on fairly historically you opportunity tell the to want we're got spending. traditionally capital guidance an that back returning they sure present we if for to So, company projects if themselves. look invest I that we've to in the continue would in you provided conservative we on

one capital. be with earnings. around even in on is our we're that I that capital second that one going factor third a an then highlight become more on to way the XXXX think working and working the that's to that also which efficient is opportunity So, managing the beyond And is lever you

Ryan Brinkman

And then very XXXX clearly year. I think unusual a in

have know that the even that the have in contributed year. imagined we'd You volume replacement factors in miles to what XXXX? expected have track you like that share shipments consumer stronger higher U.S. would the you cetera impact of did higher to know not give the some et tire you confidence slightly even Can start driven at metrics ordinarily of the can

Bradley Hughes

things a And mind right, I was you're term. usual come think that I guess few to than think there's Ryan. good a I

initially start thought on industry that course begin we we replacement tire that should On there and seen, on was and prior a of industry. - U.S. it positive these will right that beyond been to periods we to the when I now top that's signs back keeping the look the in growth. where have on when actually at not saying like older try replacement at long vehicle a come it we another time the over we new or them we've or was would and we for And favorably to their been eventually the tires coming trends vehicles enough year this in we tire coming, new the replacement buying of can continuing We've they're kept year what that slowdown did looking I regard people here it macro it to almost and causing I lessons when see and saw suggested especially saw a timing environment two we’re to at start market tire was replacement with nine longer vehicles cycle. However get of the learned from that the to point think depending market look ownership will that in trigger last that element impact year, last see years. it's factors saying that terms And as think we learn grow. on that on are I've potential there was just that into of kept a usually that, suggested and

for the the the which again difficult so And think on factor what. industry some positive with there of a new it's the an factors of about coming potential continuation bit slowdown in just additional we talking we've impact that will be a been say and vehicle to exactly from is that

Ryan Brinkman

question beyond new rate last my XX% the just rate to tax Is potential effective track decent And there the in over is XXXX to statutory that for a some on time? XX% the it s is to XXXX. proxy closer or

Ginger Jones

rate the then there to a a we're still of tax Act of and are companies, a it's like reasonable addition think to I estimate U.S. that some we in around that rate Ryan need Well, lot of jurisdictions statutory blend U.S. rate all there is tax our I forget state getting arms in. we're the but Tax the parts for the in don't caution that

is of more and XX% update understand we that some tax best complex I So for components XXXX. to the act across our the as we'll think now XX% of estimate

Operator

question next of the Jordan from comes Jefferies. Bret And

Bret Jordan

difference some profile the our I those On is e-commerce in as and our U.S., margin of channels of your of e-commerce dealership maybe and the discussion maybe on existing? channels versus discussion the some the - in business new new like guess channels of the there any

Bradley Hughes

reduced six as various than other you that on, business that the channels years I exposure we noting away than that has of look the our business beyond at think business that the a worth making time over channel or And to sell the we've think and and difficult brand over that it's brand added gone wholesale that margin comments into, I been just onto the important. you be it it's of reducing Well, margin majority if be about the we as private that and the overall terms generally customer has in the replacing some business put that is begin expect fact to this is time. by new better the the likely to it's we in over to put business business some lower would label that books years of up on varies wholesale of that generic And to specific five better last space. private

Bret Jordan

brands and or to distribution now? core So similar it’s private than slightly than less it’s better product branded your maybe

Bradley Hughes

have general make see I that. true is Maybe, your we the channels mean - to to second to new you have statement the see of a first across like part how those we'll balance to statement part and we'll definitely and know

Bret Jordan

you far production day Mexico, the your matter? or of taking pretty out production for then of talked balancing are balanced we about And you that given as now are capacity as a much process out done outlook with

Bradley Hughes

look cost on a near-term right that draw year I - at XXXX, overhead, action I bit probably that of if amount XXXX the on should - because to attention we of to did absorbing manufacturing a that’s the you think implementing focused at plants in that weren’t continue our it, to our now We’ll - relative in last we're we the out. running look we full have fair weren’t little

been now But what big item And board so, build do we we the to we to we've continuing in doing need optimize of this year. scheduling for look that the the are Mexico. can tires is right on how at on the

Bret Jordan

just then, a your housekeeping guidance. And on

the said of end could low low to or it below range X% XX% I near is the range, X% the to X%? the to think within end XX% is near be potentially you expected the - that

Bradley Hughes

Trying range the to we year were the low suggesting remember towards full the But, exact in end words range. for used. the of that we the

Bret Jordan

Thank great. was word end didn’t All right, know the the the range near lower the that That's in if exact you. range. I down was of though.

Operator

Longbow. Beem question from And of our next comes Anthony

Anthony Beem

questions me. from So, few

also able guidance? this you is for X% how XXXX, you you Americas can expected assumption in positive us X% a X%, growth are growth a know or greater? appreciate give volume to X% the guiding that trend to region unit us range help within You're to And to

Bradley Hughes

with we At And key global how of for unit Cooper how the until grow talking we're guiding at we year, need volume, markets on we’re are of of a - markets about it and point, this individual the a themselves more bit on basis, frankly start better our get better by in the little this there. XXXX sense started confident those Americas this market a that so, I sense a are including in key specifically us the we globally, breaking more the think we're until see point some to get global get market sticking can the we that U.S. down we global and approach of markets.

Anthony Beem

magnitude press quarter release. of And the X%. Can curious first of quarter first that target from last commentary so tariff then so mid-term to that you I'm to was on below in the relative the margin the that shortfall material, the the benefit year very the end low add

basis I'm XXX mean might calculating. I have was points tariff the So been

of we quarter for should can you expect big a if provide that? shortfall how the So, first

Bradley Hughes

- point tariff of the year there during that non-recurrence on range Again in quarter had guidance we below of describing benefit providing we the no earlier that that end ago. is provided that the first one low the as you're be commentary impacts will at the we're the doubt about this of being the the of

Anthony Beem

And two XXXX? range for XXXX was should from reclassification that fourth into earnings pension the all maybe more well we as for then that it benefit the quarter The any just or is strictly take in account me. there

Bradley Hughes

perspective. all that's Anthony

that on we'll see there XXXX. was of the fourth So no impact XXXX quarter in and to begin

Anthony Beem

for one me last taking just question. thanks for my and Then

agreement here to mitigate new agreement two mean excess Vietnam offtake of us could capacity. countries from with has be for Sailun, DRT location few diversify a risk exports that thoughts or Chinese you for U.S. I your sourcing rights additional TVR given can in the if a the give tariffs the resurface maybe that strategic So Vietnam rationale maybe

Thank there color is you. additional any helpful? So

Bradley Hughes

that that, think, just would about Maybe have actually worth then the comment, to been incurred Vietnam we going real to lower forward that and GRT what XXXX. get relative in I’ll quick quickly question on is the talk one $XX it's expense I pension, we the recognizing million Sailun a

capacity in So, the regard comments to can what there. not only that's as volume growth. maybe as couple year the move specifically, up to XXXX. than from quarter With when We're the full are that, we at full GRT, it a change you our was worth support noting that we continuing fourth fast that's TBR, lower on to of ramp

facility there we're so. yet. there's a but ramping to capacity, still capacity So, do at that continue We're we'll to towards higher larger definitely, we have working and available and that talked we're not about that still up

question of that's in earlier. the part So, that asked you one comment

having sourcing to than a build our ago. footprint out is, we our to TBR we many another diversified pop and against bit diversified point risk And continued tariffs diversify one some that had be be we’ll there source the off better business of want years for in up time that a few for to world, that's The including other what potential that that say footprint. more a in at the risks, we that's part may have

those sell in factor fantastic give So, tires and that and markets. U.S., major think facility is only us a could is it but to it we definitely another that other potentially the opportunities not

happy very was logic behind that it. Anthony. it, about So, the we're And

Operator

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

Bradley Hughes

want I morning. with time be to taking the the thank call you on to this for us Again

to we've you talked out today, And If you if off. look Jerry about questions further through you've to we'll reach thank what And begin comment. on that please any with for again additional sign got everybody.

Operator

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

now may disconnect. You