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Cooper Tire & Rubber (CTB)

Participants
Jerry Bialek Vice President & Treasurer
Brad Hughes Chief Executive Officer
Chris Eperjesy Chief Financial Officer
Rod Lache Wolfe Research
Chris Van Horn B. Riley FBR
Anthony Deem Longbow Research
Kyle Patterson Northcoast Research
Bret Jordan Jefferies
Ryan Brinkman JPMorgan
Call transcript
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Operator

Good morning and welcome to Cooper Tire & Rubber Company's Fourth Quarter and Full-Year 2018 Earnings Call and Webcast. [Operator Instructions] As a reminder this call is being recorded. I would now like to turn the conference over to Jerry Bialek. Please go ahead.

Jerry Bialek

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

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

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

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

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

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

Brad Hughes

Jerry, you, and Thank good morning, everyone.

a to public CFO, of to introduce start decades Executive is new leadership brings Eperjesy Finance like of I and Cooper. joined I finance December. our who would global set companies Cooper Chris accomplished Before across an the call private who Chris in diverse three

a detail. to forward. team on to pleased begin taking questions. quarter will Then that XXXX of we him today review brief I will we results. about talk With move financial I'll overview the greater We of with our I conclude fourth call can return as he outlook will our year and you your him our to are our full by performance Chris, financial so in and know all to that, turn very After have and XXXX get over will

to Now, XXXX move our results. let's

We are results. the our better pleased bit we were than released outlook that we delivered third a provided when have to results quarter

less on profit costs hold year as by two operating Our on excluding fourth compared profit well sequentially our operating goodwill our again improved volumes from to on an our last what material excluding of margin U.S. as in margin, improved nearly benefit increases. consecutive the the our basis throughout charge achieved a profit began quarter Operating third revenue impairment basis, up in X%, to ending year-over-year product exceeded improved XXXX but margin a year-over-year Raw as volume improved model with and quarter. throughout slightly adjusted profit than Unit delivering liability the the in Also year-over-year same initiatives expectations. were to the period that adjustment reserve take we the quarter a operating strategic year. projection. quarters year,

an discussed exit our private volume non-strategic have had our previously, on distributor we business As comparisons. from U.S. impact brand XXXX

industry. strong to Asia. this We would quarter our in however, OE but USTMA growth beginning the industry, in the economic auto underperformed the tire with Excluding still we region, about weakness outperformed XXXX the in and performance in unit the would third that volume impact, market have created have compared volume A conditions total started in XXXX. year word

Asia. told you expected As to volume result, in headwind moderate see we XXXX that OE unit we a our quarter a fourth in

Car conditions. According by XXXX. compared quarter Association, from well doing China's pleased ensure some as and passenger China in that XXXX softness, I'm this comparatively our team see planned, we're fourth sales to the Passenger were did we in down performed XX% While retail challenging business of to the work to vehicle our the

sales were year-over-year. on trend could full X% business. the our For it down an If continue nearly year, have this impact into were XXXX, to

it to increase efforts our business, considering the the to feel is of diversify prospects does is base. continue respond that Chinese we about we potentially beginning customer Regardless, government with industry, Asia to appear which to our However, automotive and as welcome. market course broader we good liquidity long-term would actions stimulate for still

a balance Day were last of You variables showing recall key at moved that thought through as may also the XXXX. provided we where slide May, Investor market our we headed certain we

off. those projections, back look tires, for demand, and far dynamics. to pricing relative about As four we too costs, talked raw weren't on We we capacity things: Demand material

the demand in see we respect continued XXXX and half to was market, stable, capacity improvement turned of to versus a was environment moved and second into as balance year global to With and expected that be we in terms that we to good In basis. U.S. on supply the of we largely believe out the demand noted there that the true. demand,

of to increases Going tires demand largely has had thought capacity. Investor it installed to more throughput global expect modest as Also due balance Day, in would forward, of tires we of costs. in complex for material this currently larger, sequential and growth we at see the continue our we the raw on impact time reducing

rose tire the cost material faster progressed, somewhat industry dealt year that with expected. raw than the As

seem material we As costs entered to XXXX, stabilized. have raw

last year. Operating implemented down that was profit September margin and intact. year-over-year. and remained million other In sales. operating X.X% of X.X% $XXX results sales in profit net was backdrop, tire price financial full increases our X.X% that we terms With of the pricing, Unit October many year of XXXX included from last of and the year have manufacturers billion, net decreased volume for $X.XX

operating were Diluted goodwill or million, share impairment Excluding per of net X.X% the sales. would $XXX charge, been earnings have $X.XX. profit

charge. for on year, the goodwill per $X.XX goodwill the in would the capital impact earnings XX% excluding achieved XXXX. invested impairment, the a of Excluding share been have fourth quarter Cooper return

Chris, talk recent I me two announcements. to about it let Before over turn

XX, our will the more the tire up JV contributing the with Vietnam U.S. and truck plant facility soon existing Sailun, XX% new some with until Construction capacity December commencing expected new and production the venture announced strategy tires is build in agreement Cooper another to step two and giving the offtake diversify radial factors tires joint forward produce environment agreement million and market production world. TBR our GRT to JV around fourth on form This have to the the tire in producing. an serve the help the to that which the Cooper's of approvals, growing begin a expand capacity Subject in closing business half First, TBR equipment government us our in the XXXX. we own is for and impairment annually. from venture. an to to globally, to were original agreement important with provide Sailun and goodwill us Vietnam of a This of first TBR is we with recall bus tariff two most Also, manufacturing JV please quarter. will than replacement of to

address higher our tariff priorities. we and opportunities pleased recent maximizing very Sailun help We TBR news, With in relationship global offtake with are the great the agreement accelerating have to us are on to even market. JV build the operation

there to move Tire of with Approximately approximately forward a the Production XX, period needs meet will light over estimated the phased within will production Europe an decision help vehicle facility. XXX that confirmed with customer its site This of to roles announced expansion. XX proposal this and its production, we England was we with assessment potential motor vehicle and for and January in network. eliminated. to light of sites out Melksham, the in materials Cooper be sourcing are in functions is footprint sales center. of the region. and Europe at global also cost, tires from completed Tire tire have industry. efficient technical our in that Cooper marketing, roles technology for Tire capacity, on of cease Tire our motorcycle other Asia Europe production obtain continue announced This global geared Recall Second, previously enhance tire the the and at Cooper Europe action part the to headquarters, that our months terms capabilities tire component capital Melksham Europe needs our support action business, Cooper's assessment sports including will to remain the XXX and Cooper will competitiveness line

With the business the component. in midst environment, an update of will turn to allocation. capital Chris on financial call of a that, Americas results review are and I We for our the over

Chris Eperjesy

forward by call months the join as be part of improve the had about into Brad. role, meet team and of role. I'm opportunities the fascinated I'm in interacting business first the opportunity to you, grow my the excited and my and Two to I've our CFO. has earnings and Thank look with margins. delighted industry to to further to Cooper Cooper several profit you

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

operating fourth sales results the $XX earnings $XX operating been million XXXX profit the share impairment of of excluding XX.X% have $X.XX. or was million quarter, or recorded of share $XXX net earlier, discrete tax compares per noted the profit would and X.X% and XXXX. Brad net of of This items goodwill diluted As of million in impact $X.XX per The in million. earnings sales included with charge $XXX

XXXX. would have $X.XX earnings per been impact, this Excluding in share

by were consolidated volume. was to from million XXXX. with X.X% sales $XX in or primarily This million $XX Moving increase favorable or million profit driven results, X.X% price quarter and unit fourth mix million, compared lower sales in $XXX X.X% offset was of sales XXXX. Operating of up by $XXX

million was X sales. million of which Fourth are testing goodwill of have profit XXXX. Excluding impairment quarter of factors operating non-cash $XX the or the deck. net supplemental slide impacted the XXXX by fourth the resulting compared impairment $XX on quarter operating profit following impairment from goodwill X.X% in of would charge Page summarized charge, been goodwill with

tire impairment created Sailun GRT production and The growth venture mentioned, in in radial truck the As a requirements this China plant production Vietnam. venture to decrease joint would capacity resulting expected new with we planned for by bus Brad in charge. facility build agreement announced Cooper's joint

$XX diversifies million lower the While offset of of impairment a there to are $X costs which of volume, million addition of also price unfavorable Operating lower this our protect $X to charge, footprint was primarily $X.XX higher million, profit favorable manufacturing $XX sourcing profit including lower per higher and included SG&A also million, by unit manufacturing our included Diluted costs. Operating cost expense against loss fourth loss raw of million. $X.XX with tariffs. product in $X risk compared and we million is of of liability costs an about excited mix, quarter XXXX. $X million, $X share other of material

charge, quarter of impact XXXX fourth Excluding of the in Earnings items the been fourth quarter and of have would reform in $X.XX. impact $X.XX. impairment including earnings was the quarter the tax per fourth per share of XXXX other share discrete tax goodwill the

profits or in XX.X% SG&A net and million offset currency on moving million, quarter Americas the $X America price in sales mix with $XX The the of prior of was drivers unfavorable $XX America. tire XXXX. Americas million cost. decline cost raw unit million by fourth million favorable XXXX. manufacturing year our These partially with offset unit to material compared in increased major million compared foreign This price a sales operations. starting the compensation Latin essentially costs. for and $X Fourth of to favorable decreased costs with $X $XX Other lower quarter million of unfavorable from X% of increase million. costs. of the by by up volume sales product of favorable including $XXX performance flat in unfavorable to increase by of Segment Now, result $X also the liability $XXX $XX were North incentive $X was increased cost were offset mix, or were of impact. $X of XX.X% million operating a in partially included by Segment million the million quarter million volume offset of and The segment

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

volume by driven quarter currency tire result the Now, unit offset sales year-over-year. fourth partially the for turning price Net the of down mix. in to unit for million, was impact, X.X% and from that with In were down reasons our and international unit explained. XX.X% Asia unfavorable were fourth operations. foreign lower slightly Europe, by Europe Brad third-party volume decreased sales This XXXX. was and quarter up Segment $XXX volume favorable

was we sourcing compared near million as by from However, lower decrease in of profit continued operating million million. of goodwill by the operating more Fourth operations to strategy. driven than shipments The quarter $X charge this international Serbia primarily offset execute an was the $XX in $XX U.S. our to loss was XXXX. to impairment our

$X lower million favorable Additionally, was quarter increased unit the million more material costs. by $X million segment manufacturing million raw lower included which price and $X The SG&A than of million unfavorable volume. mix, experienced of $X of $X and also of offset costs of

profit of full international deck. slide walk the supplemental see the slide You our for operations X on can

in the would same year noted about compared quarter our in quarter raw be index a third As we during XX% quarter the material with October, higher anticipated ago. fourth call the

Our fourth the index increased the third XXXX actual in of slightly quarter XXX.X as less quarter decreased of slide in deck. fourth XXXX The X.X% XXXX raw than index XXX.X shown on of material from from the quarter sequentially of anticipated. to slide supplemental X the

raw stabilized. be XXXX first raw our nearly appeared but have to Therefore, year-over-year. expect As Brad X% we quarter material mentioned, to down sequentially, index X% nearly up material costs

with the effective last to was The now rate quarter some Turning compared XX.X% items. corporate year. tax for XXX%

includes tax including quarter of rate have tax accrual would related XXXX – by XXXX tax items impair million of U.S. income offset reform expense to income rate impact as XXXX fourth net additional The reform quarter $X discrete the impairment benefit of XX.X%. blended effective U.S. of fourth items tax a fourth goodwill quarter been rate a uncertain statutory the result the The tax XX.X%. charge of rate lower tax the approximately positions. other of the the discrete and U.S. tax effective for Excluding tax was

was For compared rate XX.X% the in year. to the prior full year, the XX.X% tax same period effective the

reflects that The will charge U.S. our impact available detail SEC XXXX taxes impairment tax with of blended the income our tax Excluding will was a goodwill of as rate rate Form the adjusted tax in effective the result statutory effective decrease the the today. be later on filed in the tax benefit of XX.X%. U.S. rate More lower reform. XX-K be

some $XXX balance at cash at XX, and highlights. sheet and flows cash were equivalents to Turning million XX, Cash $XXX December million XXXX with XXXX. compared December

XXXX, throughout actions working flow As discussed managing have other focused production on cash capital actions. levels, inventory and aligning improvement including we demand, to

focus over improvements able strong our in working achieve a We we're As the XXXX. to team, compared this capital million to by result of capital of work significant $XX working improved and XXXX.

million right this in capital of with we working Capital by will the of focus in the level the inventory continue part to XXXX positions able Cooper reduce Americas and As were to compared in to XXXX. improvement, $XXX XX% in with units year. the compared period same capital quarter the with was on charge XXXX. four for Return the XXXX of $XX trailing million expenditures Full last goodwill quarters. in year in million quarter were invested $XXX the capital excluding million impact the on meaningfully over expenditures the we're We fourth number this believe XX%. enter of fourth inventory impairment $XX

Moving to of capital return to shareholders.

million price X of at $XX.XX shares $XX share. for over million repurchased we per XXXX, During stock an company of the approximately average

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

over XXXX. regular our shareholders Cooper dividends in remains million an to capital quarterly $XX Additionally, distributed priority Returning us. during important for

more committed quarterly to dividend, term in attractive We repurchases opportunities will our as to are in business. near we but supporting share pursue invest balance our the opportunistically

in could interest due flexibility notes, We as which well for rate are our financial million currently provide XXXX, an additional of which senior $XXX evaluating savings. the refinancing opportunity are as December

borrowing considering our increase -- take we very rates of with the offering, than to As advantage bonds These of reinvestment include potential pension obligations the maturing Brad. sources, the previously the borrowing good manufacturing financing consider call announced relative debt, the we will some and footprint Sailun into joint attractive business. opportunities and liquidity more assess to other fund and investments. turn to of the back I'll the for other over Vietnam amount venture now back

Brad Hughes

Chris. Thanks,

entering pace of progress to products strong good are volume of the their our the such priorities with inroads will our global earlier, execute faster Cooper for additional world already mentioned we our presence at strategic into want employees OE initiatives Investor in strategic sales States. driving I as I initiatives in As all a contributions. focused especially OE and continue XXXX channels, other around identified new Day and on making to business these United to the thank making introducing on the Asia, on outside growth, respect at

and emphasize to to Cooper continue consumers. We build to strong value the brand proposition our

As our you partnership brand more this our as more recognized, many new is great A strategy example Cooper with important. is will to stores as XX know approximately auto a now retail which available retail with becomes across even an Monro, U.S. footprint. exciting a locations growth-oriented leading tire be retail relationship, this and expansion X,XXX of Monro the of has new becomes states. they number retailer Cooper expand in service With continue Tire Monro of

great products continued to and We tire consumer an a make audience commitment and together are to to Monro our the services and share available that are of ever the outstanding Cooper consumers. in industry excited wider that service strong two growth to organizations coming

strategic up pleased teaming be to very Monro We further with to initiatives. are our

are and initiatives as underway. strategic model was XXXX business strong about optimistic are our well our We

This not expect XXXX, a XXXX year profit As tax pro result, announced or full to include operating and $XXX Sailun, capital to margin manufacturing to unit modest include rate related range and and strategic footprint the previously throughout Vietnam with million. range does year expenditures share venture joint between growth improving compared potential an with operating we capital the the XX% full finally, global year investments. $XXX Cooper's effective between XX%, of XXXX, rata million other margin profit in volume any a contributions exceeding to

typical the include light charges However, there with These this which related the part Melksham, tire decision items will result the are year. the first million restructuring We action will will in charges to to of that occur in $XX along some first unique estimate impact expect that in seasonality of production vehicle we quarter. cease in majority the million to $XX England.

China. enacted as including Section raw duties tires XXX U.S. to tariffs -- and to from China addition economic market. and tires materials U.S. XX.XX% be reflecting challenging, on conditions in the In recently well tire TBR replacement from on Also the the tariffs as the weakness continue that in imported the XX% OE

first to XXXX. result, we operating first lower our XXXX quarter margin quarter expect the a be than As profit

profit to under include Again, tariffs continue do improve better expect are the but to place, be margin consideration, tariffs throughout We in rate XXXX expectations operating any these additional full XXXX. not changes that not year yet imposed. or include already to than but and year

Let elaborate a little TBR more me regarding tariffs.

XXth, to On ITC the and or tires impose its to from the the that Trade imported Court or duties decision. ITC ruling bus International there appealed Trade that into reversed it. on radial by February Commission earlier International a the ordered recall U.S. China. ITC the ruling United The U.S. XXXX, antidumping January in of United and may not was truck States reconsider Steelworkers You countervailing

China implemented which with rate into result, duties a were other on TBR XXth. XX.XX%, most imported is producers. from tires on for consistent is generally TBR the February Cooper U.S. The As Chinese

the that was made week impacted. will a not just Given this decision pricing clear how and ago, it's be market

is believes majority of China. TBR for meet not the enough supply domestic is supply said U.S. to demand and before, coming As the we've there tires Cooper the in excess that from

may help offset be will We actions tariffs; a lag. of pricing the be the there time to cost however, expect there

LIFO impact Given will on that accounting Cooper the tariff negative we is see immediately.

we result, in impact disproportionate a As expect first would a of the XXXX. part

our that reinforce is committed to me Let business. TBR Cooper

alternative and agreement TBR offtake we venture existing have Vietnam provide to joint announced recently our are business Our steps capacity to taken world. serve Sailun, around help with the

as joint to well maximize units working agreement as venture new accelerate the timeline the our for are from We offtake to in the Vietnam.

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

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

Operator

We comes question-and-answer will from the Instructions] first Wolfe ahead. Research. session with Lache Our Rod question Please now begin go [Operator

Rod Lache

get morning, you was market I the taking If the of expectations your going U.S. just talked X.X% depending look forward. you source inventory market X% quarter, the on about down. for all of in that better also sense everybody. to X% about at and hoping Good to were first some up share was up I a

– that signed new thinking like up some not that I ATD Walmart you accounts needle move in are on are market guess are So, you share? of nutshell, and to sufficient a just the you've these

Brad Hughes

from regard there, that fourth our have to that above have only out and we excluding that we increases. good label were to private again, regard on this, where closer headed and feel but going performance volume. USTMA also we're the to I would we but the U.S. quarter impacted not highlight where with about non-strategic is market we Rod, continuing hope course moved we this reduce time we're business in as through our we're been industry the – volume the of year, an last to – the last the with the exit year, the to The

XXXX, allow last we we That's in into had the focus that expansion. transitioned continue over volume to come are adding continue time. to program and to we we on we conquest at us where were will going again to build year dealers, looking retail on that And online As place starting which feel other you've channels year, underrepresented. that's our the but like make we're and and this We've highlighted think where is out category, Costco Sam's also we we're in Walmart, portfolio. to highlighted merchandiser we're retail we general that customer continuing and progress going build to do Club, that channel

So, it's an in we're on on expansion conquest channels. adding year we're entries where new across the the ago, new board and a other building from program customers

as And we're XXXX, so we about I get volume. optimistic pretty into our think feeling

Rod Lache

the clarification. Thanks about Great. impact Okay. new on and XXXX? contract the talk you up whether looking there any to could material And numbers labor is the for also

Brad Hughes

I'd to have One clearly, are in No, down the years, course are plant next look the Texarkana. fairly Rod. in two forward that implications we at an that and with of things, few and say we neutral we the think that important us as the glad financial is, have of over move it agreement we behind as place

Rod Lache

that lastly, some the that raw it's Okay. the materials. you the course industry good, over that Great. coming just towards looks shortfall the price Do the mix just from behind about And momentum XXXX, industry of thinking your the recovered there’s the still but think pretty like recovering you pricing hasn't environment? been pricing year? to think move continues Do versus

Brad Hughes

Rod. is of into here, break on One I'm TBR think it front. a to couple discussions going the I

we see to I there is that think there be that would we itself everything setting up going pricing. is that anticipate

We expecting across perspective both there. to challenged supply tires going be a are already where demand U.S. likely a that TBR the we’re markets OE replacement the the to was in relative position from market and for the

I'm expect You a into would add are are into imported being including that from of and that be the factors and that some now lot that segment, in there vehicle the be again tires of coming the China. action the U.S. definitely U.S. now. where the expectation cost to light right anticipation. tariffs In pricing We that market, our focused some here on is going would

I a we will to times that going the bit. see if a couple If think a on ready in about the We’ve as some be to gross pricing so this may depend we reason see market, rise pounce costs, top a increase in continue pricing. think I invoice. conferences we of little it's line, price don't, raw stable that industry at to if on material do talked those pricing in the the we

another to of However, I of there are market lot there if that see off some still average what is cases was where doing the of it in to dollars backing from there factor way all to the cases, are is lot a off. to attention of in was competitors movement and think many largely a other a and of that XXXX going paying an that's offset are need terms be market attempted selling in improve The price backed we here the with of which we're rollback the as to gross carryover a dollars promotional any price. backing the to that still in the pay promotional are then that price, attention where industry off to some but in

Rod Lache

Thank great. Okay, you.

Brad Hughes

you. Thank

Operator

B. Our next question Horn FBR. from comes Chris Van Riley with

Brad Hughes

Hi, Chris.

Chris Van Horn

any more would Good morning. volume? then takes XXXX seems could if might you year puts little new you're Is Thanks more of you And line, going what see, seeing call. guide operating for Could a a elaborate to half. see bit little It back into maybe full regionally? great? reductions improving, the product the mix more you're be what profit same elaborate taking bit, your launches, bit seeing? the modest on on some you're you the like will could that on Maybe, more little get detail you a you and unit cost there in

Brad Hughes

another for on here market, it we're right a month of thank that here outlook volume the looking China in global January on saw we allowing modest at now because but Van, elaborate includes the are calling recently. in which Good. what for Yeah, you to sales decline OE view me we vehicle on global basis,

We to that to of And so the we at economically again a way perspective in think regard that Latin around as both the through America, that our we first moving the opportunity that got continues But as soft, that China. cautious the anybody clearly included market a market. and that well navigate especially lot looking we're down the for for half from OE some outlook of in side was that be there will market. there Cooper there if volumes replacement growth were is with on things and do we've likely year politically.

in we're product with that a And going products a nice selling for was Melksham the right product formerly produced really situation our market mix and done that Europe of over other because into so the the the job production in parts are of transition there. that there on cautious mix really need that's we're the having footprint, team of the at has now the while moving of we to that of on we’re in to over market. Europe we're that improving make our bit outlook focused

value-add mix continuation growth more of of XxX of XXXX, And a in on we and the it's in in near-term high where of are terms volume strength focused and so less a it's opportunity products.

benign has outlook TBR. where been volume you vehicle around that going would at have is do think to that suggest relatively both U.S. our three market, we we've number you on in the a those our that and of XXXX, to initiatives we what this in which off are look do year that start light in So contribute to built expectation we're got growth the of for and of markets confidence terms in

that is geographic and one product we think So transition me the move the be clearly are we of line profit into to Both to things. look. bottom will Mix positive, mix going as XXXX. as

did to from team good giving The was would faced including more thought in inventory, point opportunity inventory we the of our of to tire other position think big great a to regard working we to demand a Chris and less a addressing. a at with and job we a finished supply it perspective, run a same And manufacturing perspective. an is factor of the both time we demand that Part from headwind XXXX costs. enter aligned business an the bit had the now efficiently which capital XXXX we I

cost better should XXXX with plant as a compared our from So well. perspective performance a XXXX in have

Chris Van Horn

you that maybe other number That's just a is launch ramp follow-up could it? and is of really helpful. timing or they into the elaborate product just lineup? curious, do the terms that my Monro -- you of of congratulations And your And on right on color. all of customers Thanks some with in throughout to is year? do Great. it -- And the for And it if similar tires away, of relationship. next year then is kind

Brad Hughes

that are I'd It's agreement and relatively bit make gone the than we're partnership we've move good us we -- build to further be people with it's would this that brand. feet know expecting things Chris to our it going very we're and the is can let opportunity to to say products believe going it. of going forward highlight be both and for portfolio get this Well, think as there, both excited us. a to I'd how the from we this actually to that a because underneath with it's going regard we Monro, both start we're that about this with Cooper of get to

Chris Van Horn

the Okay. Got it. for time. Thanks again

Brad Hughes

Thank you.

Operator

Anthony Our Longbow with comes Research. question ahead. next from Deem go Please

Anthony Deem

morning. Good Hi.

Brad Hughes

Anthony. Hi,

Anthony Deem

me. for questions few So,

index I to to the I getting we of percentage what similar shared, $XX And $X just the is a raws. million benefit specifically, that price in so in about I'm when quarter, Chris, headwind think use to sort saw First data, getting fourth there. assume I'm a year-over-year a year-over-year quarter, impact if positive million mix you I about

year-over-year. price that would guidance, overall if just positive. about I'm income lower a good how the other $X first quarter many essentially that's we're So good Is of generally framework million thinking mix mean framework? is a the drivers wondering of are which

Brad Hughes

the in capture as a are I now we place raw and quarter. were the first ago, in we ones affect in think our to ones tariffs effect that highlighted the one quarter right that first have there in in material didn't are in the place and the we and thing, year tariffs going costs that place

portion So tires. being for and quarter TBR significant the into of the on XXX both Duty place the at tariffs went just least and tires then on a on on tariffs Antidumping/Countervailing material that

of XXX material incremental a Those And that. different raw into play the came to you're so, that's time talk the and are came effects and over in looking important -- that with period index that tariffs it. on about we the numbers way at in

not ago. but a of quarter So year, in course over the the year were the in of place first they

Anthony Deem

So higher year-over-year. costs that's driving material raw

shared or I think was the that So lines? number was something it Is X% along ex-tariffs. those flat

Brad Hughes

see and back fundamentally to regard wanted question to of with framework with Well, will don't to line your go started you anything with. I I framework highlight… I the original just out the

Anthony Deem

Okay.

Brad Hughes

you'd in ...the raw other that see materials. impact

Anthony Deem

I that exact you share your margin And affected on I tariff apologize missed has Did operating fine. That's XXXX if impacts the income this. in guidance?

Brad Hughes

premature, we factored as is, No, probably would pricing and do expectation emphasize that. a there it we be frankly we because, have that did of didn't. -- to It's portion what offset we in obviously, will to an that try be

project net bit is that difficult of at freshness the the impact little a news this So given to point. just

Anthony Deem

then, Fair rightsizing enough. And your inventory. on

drop in So balance fourth inventory. quarter pretty XXXX sheet the significant for

to fourth there on historically. first terms going that blame absorption the similar is to a can impact negative overhead You That's the of you've seasonality. what quarter? specifically, quarter, seen some wondering I'm in But for be

Brad Hughes

in relative quarter, had that XXXX, of did of move even Again, we our to we're be plants full, during the And XXXX. into that I actually a we to right a what the the from fourth think, terms in going as already, manufacturing turn more little contribution. start, bit on we running

coming we we're out pretty of in good shape Anthony. So think the gate,

Anthony Deem

Got you. And me. then, question just for last

key expectations you for earnings. Just just you curious much. for what help that's I'm us modeling product if for variable your Thank are? very expense, the can liability XXXX a

Brad Hughes

about be annual third the would go-forward of expense Anthony, our quarter, to $X the reserves million that about the Yes. adjustment announced on in reduction. we, when $XX our million, annual we impact indicated

on time, the $X you'll basis, product it expense but million to ongoing annual it not liability about you on adjust be where one-time having if running. adjustment, at down reserve had an compared been over should So have -- to product that for look reserve

Anthony Deem

for ex that just are then, like $XX And that at clarification, a we fair? for so XXXX? looking benefit, million Is run rate

Brad Hughes

can and filed you math, that available honest in XX-K, done guided with get the We to with be close to we've able haven't we the soon-to-be that should to I what get Because you. pretty what's combination of back. be number.

Anthony Deem

I'll you up. Thank follow much. very

Brad Hughes

Thank you.

Operator

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

Kyle Patterson

Good everyone. morning,

Brad Hughes

John. Hi,

Kyle Patterson

This is question. Kyle Patterson on taking for John Healy. my for Thanks

gave volume the appreciate guys full XXXX outlook. the terms guidance in you I for of year that So the

you in view, sell-in I in So just would how wondering, just industry you've guys terms if inventory sell-out? taking discuss the seen overall? a industry And micro of first you and was what of more levels just could half characterize QX

Brad Hughes

like and I time fourth from from that a data Kyle, year volume We and including I this I seen data looks the is most published what of January for think the than is last it's available the into that with second reasonably U.S. frame our suggests it relatively in there that. And a over this know in continuing again, Okay. decent quarter focused that we the at that with market. broader think industry is in we've January year perspective, holding the look half there with industry strong point at exited January. out the as bit in

the the Cooper, last own -- the come position to inventory nice industry, are pretty of year specifically of into way an is economic was -- both exited be looks part There and driven inventories we they to automotive in the in that the volume what early pretty the that the we are specifically. way weakness of certainly continues along us, coming markets, with know China and are the year the trends year, we of although by the try I think In of industry, again, America flattish broader pretty and channel in think optimism that year. in concerns and looking exited the growth. last around other variability it year aware with overhang. economic the that which to Cooper, our the kind Latin does underway take ended the in good I softness in we're we're any some somewhat there overall some -- without I steps to in terms As that terms is year. government then to up in consistent start generally that some both there in potentially that And -- taking cautiously economic we're circumstances, of industry year our that markets address those some at is year this political starting Europe for of a changes last automotive appear are the with the and be --

Our governed opportunity demanded. produce that tires be the be a our will bit there to is ability by to little going

that so that of and move sure portfolio. to continue focused to making building And appropriate the on strengthen we're we're mix product

Kyle Patterson

color with know was wondering Okay, little relationship? great. relationship the And has a just of Thanks side. that if you more provide was for e-commerce the the XXXX was that been also relationship if to Walmart color. we there in that the on And on movement curious on there then locations? And some could I just see expansion brick-and-mortar relationship expanded just the could in any I evolution

Brad Hughes

Yes.

have are what platform place the about Kyle across second -- So as talked second we fact that half have platform the talked e-commerce of we have for is in for that tires XXXX. their about starting been the and selling for the and now second half we

selling of part products are of with terms for type thrilled most we're the the those that way in of the are being that sold. that's We positioning and that price going products the

So that's been a very good experience.

we we a that a in And retail part was amount is significant other which much it effort it put thing as market around the broader that. of and of The expansion we've about general is were a a clearly highlighted and attention we because part merchandise. that underrepresented effort year, our fair talked last

to build we're and activity channel. haven't do next. we begin We the half activity have this that we as that first and we and in focused specifically customers through some that into going within of on to the made believe that think see go of the year more about there we've year we'll talked course this progress channel, been But on

Kyle Patterson

taking great. good luck. Thanks for my questions and Okay,

Brad Hughes

Kyle. Thanks

Operator

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

Bret Jordan

guys. Hey good morning

Brad Hughes

Hi Bret.

Bret Jordan

we update, from maybe us XXXX? a end Could stand that the the with where transition? an I a positive you standpoint of in was ATD And guess, give unit

Brad Hughes

that. to balance a company to distribution that against out their much here paying a previous certainly On available a their healthier -- opportunity well last move did Not And as of that move States, for what as go wholesale them at ATD is grow benefited they've bankruptcy that in doubt to along and didn't out result place we out team the the through executed this us feel side we lot have and come sign did to proceeding changes into -- publicly did as new continue program actually full would XXXX. the occurred only great sign is but broadly year up into organization I through so, including this the that to the did volume a times conquest keep balance -- new up would me more we but business where And other on on up, up ATD. consolidation XXXX of this XXXX. I up cases, improve a they're Cooper was signed some ATD that new no these customers and customers with -- through many never conquest and it a be we two sheet. year, large program conquest and the a at to through ATD additional that a expect is was never lot context, a signed we last to looked there customers continue with serviced create of for United a we wasn't really have of we only and up as grow even said in to with as our of we very in more put with of a channel from done distributors with customers plan When one to actually call, that put it things half -- I year. loud want program while sign in it reinforce that about And sheet. I through number that. and try it national frankly think again, now in other There and we comfortable It and the with ATD

have So, there are and build are products Cooper more customers to ordering going to experience. that continue an are is out to opportunity that to that. We going there just be on think this

Bret Jordan

-- Okay, remarks great. then more I your -- maybe changing the you are And prepared quipped think that? looking in said in on footprint detail you you passing reviewing at you're component, production Americas'

Brad Hughes

just the review, we Yes, and in what our time completed European going through we had market-by-market. review at and that Asia we're we said the Investor well were Day,

near We have we a want strategy of we tires where into in to market. market or sell near the majority sourcing build that a

make sure build able geographically to that. being to regionally the got plants, have and technology -- to right had the that And go cost that And and is we're there tires looking We're the so the through at and make happen right looking what we've a review to right kind the didn't clearly we any going we that future. right if of being wanted we to sure -- of Asia. would in any about footprint we out Melksham have in premature spending it's CapEx announcement Europe support with remarks The Americas' to of into came changes now. looking footprint as forward efficient can right able of the capability the of our make in footprint from regionally levels to part that

Bret Jordan

great. Thank Okay, you.

Operator

Our final ahead. with JPMorgan. question Please Brinkman comes Ryan from go

Ryan Brinkman

Great. Thanks taking for my questions.

Do that U.K. you cost account XQ. the Does for outlook, lower also margin adjusted basis? margin mean It for Firstly, the wind-down XXXX higher the takes into margin margin for full about the expect impairment year guide adjusted charge? XQ, year-over-year we the in progresses? account year-over-year that how the underlying rise year-over-year XXXX margin higher then potential basis an an various think on the as outlook into GAAP items XXXX takes should in on in mentioned including to the you on And

Brad Hughes

Ryan is Yeah. it When on an giving are that basis. adjusted we guidance,

it million So does out the not quarter. only charge $XX in impairment goodwill -- adjust the fourth

what reflective underlying the expecting business, but the margin of have business like. think we operating looks believe adjusted ongoing are I it We're an to So improvement. calling we profit it's

Ryan Brinkman

production on China. new vehicle then under significant And the thanks. is a Perfect, there pressure. question Clearly

pretty production replacement China? do right, the in cyclical to good I sort I tailwinds but should there What is for you in with think structural these aftermarket out some be you netting the headwinds, see is too, increase their units guess though there from in impact atypically there. cetera? happening How of also operation relative recent important and trend shipments et on

Brad Hughes

all that there end will feel that that other our that us it in and parts now. up there of in of to continue emphasis markets always really market that world. very Asia, long-term, were bigger of being is over We business of the the was a more business building going about a is a our around least there way long-term aren't like Yeah. intent positively started with the But for replacement it part mature we to OE early in emphasize we world strategic has plan or for which we been at

it are passed pull-through point the the to we've do other a for we the begins at Certainly to start age at think market become a seen where we're general vehicle believe we're used replacement little we’re there about should plateaued terms to we the of not But consumers. there I'm that at as of bit we've see peak sure is I you in the and We so point vehicle in to over the for think -- the then start a we look at to now out in market see for cars point. the And growth. I in seen significant that those now, when that that it replacement park. that tires park. going growth Cooper, and build where quite

while that is in want dip on big replacement we've replacement them make a of I the making so is for period industry market for this for still focus very China. got bit where sure replacement us network that in there, again I And And little people a you market in a we as been a the the for available of for us OE a tires can particularly what at tires for looks long-term and think attractive look it a terrific market particularly time, the has think to Cooper.

Ryan Brinkman

just lastly, then auto under would just of action? TBR already included parts in imported And And to in not how autos tariff? this you the recent tires on I do see. tariffs any and place under definition layer the Section tires the relative to potential expect existing be XXX Thanks. CVDs

Brad Hughes

or -- not it's Yes. sides of it we those that, to on will Ryan. people a both be I will good those difference it included. question they will from they application from from these not they markets would all included different understanding on tariffs. say, they -- or those were incremental. that XXX heard if We've Clearly is tariffs are unless respect are will views countries on coming be The our excluded of markets the are are that is that, those tires

market the substantive States. And on United the really so, impact it in would be a

time in of here, of industry what fast but do pretty we could us -- long would market conditions our point -- to disruptive at popular what very it's something that's sure any U.S. pretty footprint would taking America, building be disruptive a largely also including make recognizing for that it's were we're it become period we happen. And to have North could long-term those support in the the market For are that in relationships, the in a pretty but to term place for we while that if time. the in like

So we'll see.

Ryan Brinkman

very see, helpful. I Thank you.

Brad Hughes

regard it operator. questions I to with think that's

Operator

for management I remarks. now the to would the session. turn question-and-answer call to over like any This closing back concludes

Brad Hughes

and to consecutive challenging two on OE margin. for and and Again the volume efforts. just They good results businesses, our environment revenue growth in Yes. with quarters both adjusted of quickly. year-over-year a profit want operating Cooper a team remarks globe delivered good around fourth make thank growth TBR closing quarter higher in U.S., the the I to I'm going XXXX including global progress some and their here

channels as program, will full initiatives the strategic starting to TBR, had to and our improvement ago with as year in operating a which build year the At expect dealer new successful profit and that expansion our we partnering forward Looking the margin retail footprint as U.S. conquest same we continue described customers. progress improving new by time we continuing just such includes into our by in we our new we expanding Vietnam. are JV and manufacturing on

So today. Cooper Thank remains challenging, how close it we about optimistic are for while your And you. participation and to that we the thank compete. positioned industry at will you with are we

Operator

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