UPDATE: Cooper Tire Release Gives Details on Financial Targets, Strategies Laid Out at Investor Day

At its Investor Day in New York today, Cooper Tire & Rubber Company CTB outlined its strategies for continued strong shareholder value creation. Management detailed plans to support sustained annual operating profit of 8% to 10% while also targeting more than 10% operating profit and $5 to $6 billion in annual net sales as a long-term goal. Cooper continues to move forward on the path to determine the future ownership of Cooper Chengshan (Shandong) Tire Company Ltd. (CCT), its joint venture in Rongcheng, China, per the process set forth in the agreement with its joint venture partner, as announced on January 31, 2014. The future ownership of CCT may impact specific plans and timing related to achieving the financial targets. “Cooper has strengthened the foundation of our business over the past several years by improving efficiencies and enhancing our technical capabilities to launch world-class products in the fastest growing and highest value segments of the tire business,” said Cooper Chairman, Chief Executive Officer and President Roy Armes. “We have transformed our manufacturing cost base, resulting in a balanced and competitive manufacturing footprint, and we've achieved strong operating and shareholder results. Through solid execution of our strategic plan, Cooper is poised for continued profitable growth, having developed a geographic manufacturing footprint well positioned to sell into our key markets with great performing, cost competitive tires and with additional capacity to support future expansion. In fact, with our current assets, we have the potential to expand by 17 million to 18 million units at one-third the cost of equivalent greenfield plant expansion. Going forward, we are focused on continuing to improve our globally competitive manufacturing cost structure while delivering great products and driving demand for our house brands across our regions in the most attractive product segments. In addition, we plan to continue to increase original equipment (OE) penetration when it aligns with our strategic plan. Cooper remains committed to China as a growth region and to the global truck and bus radial (TBR) tire market regardless of the ultimate outcome of CCT ownership. Overall, our goals are aggressive, but attainable, and we're excited to start writing the next chapter in our company's 100-year history,” Armes concluded. Operational Excellence Expected to Enable Manufacturing Efficiencies Worldwide and Drive Further Operating Margin Improvement Cooper has dramatically expanded its global manufacturing footprint through acquisitions in China, Mexico and Serbia to enable a cost-competitive, near-sourcing strategy with more than 40% of the company's current manufacturing capacity in traditionally low-cost countries. The company has also significantly improved operating margin, achieving operating margins of 9.4% in 2012, 7% in 2013, and 10.2% in the first quarter of 2014, which compares with negative 7.5% operating margin at the end of 2008. This was achieved in part through Cooper's focus on operational excellence, which led to a 16% reduction in manufacturing costs from 2008 to 2012. Cooper anticipates another 14% in manufacturing cost reductions by 2017 through projects that position Cooper plants worldwide to be even more globally competitive while retaining a focus on safely producing high quality products. These efforts include increased automation in production facilities and product family consolidation, which, by 2020, is expected to decrease the number of global product families by 60%. This will drive a reduction in complexity and manufacturing costs, enhance sourcing flexibility, and speed-up product development, while continuing to allow for product differentiation within global regions. Global Technical Capabilities Drive New Products and New Products Drive the Business By investing in innovation and technology worldwide, Cooper has successfully developed market-leading products and plans to accelerate new product development into the future. The company's global technical footprint, with research and development (R&D) centers in North America, the U.K. and China, helps Cooper maximize its return on R&D investment through ready-to-use advanced technologies that are applicable across product ranges and by creating product families that can be regionally customized. Cooper has earned important third-party recognition for its products. In the U.S., new products—those introduced within the past two years—now make up approximately 30% of annual sales. Cooper's product introduction schedule for 2014 calls for a record number of new tires to be launched during the year, including an innovative premium passenger car tire, the CS5 Touring. North America Strategy Focuses on Continued Mix Shift, Strategic OE Positioning, Additional TBR Share and Expansion in Latin America In its North American Segment, Cooper has built a strong manufacturing footprint throughout the U.S. and Mexico. Since 2009, the company has expanded North America net revenues and has made the segment significantly more profitable. In fact, from 2009 to 2012, net sales grew from $2 billion to $3.1 billion at a compound annual growth rate (CAGR) of 16%, or 54% in total. This was driven primarily by pricing and product mix improvements. In 2013, specific factors, including Cooper's implementation of an ERP system and increased imports of foreign tires that hit the U.S. upon the expiration of the ITC 421 tariff, negatively impacted the North American segment. The impact of these factors has lessened over time, and Cooper's North American Segment increased unit shipments in the first quarter of 2014. Even without the full contribution of Roadmaster TBR products, which were supply-constrained due to the now-resolved labor issues at CCT, the segment achieved operating profit of 12.2% in the first quarter of 2014. Going forward, Cooper's North America strategy will be driven by anticipated enhancements in mix and margin, achieved through a continuation of exciting products entering the market, sales growth in the Cooper brand, converting capacity to grow sales of more premium products, and increasing the company's presence in underpenetrated channels. In addition, while Cooper will remain primarily a replacement tire company, plans include increasing participation in the OE channel when it aligns with the company's strategic plan. Overall, management expects that OE will ultimately account for no more than 10% of its total business in North America. Growth plans in North America will also be bolstered by leveraging Cooper's footprint in Latin America, including expansion of manufacturing in Mexico and growing sales in key markets within the region. International Segment Growth Expected to be Fueled by Continued Expansion in China and Core Market Growth in Europe Cooper's International Segment has grown rapidly. From 2009 through 2012, segment sales grew at a 17% CAGR from $1 billion to $1.6 billion as units increased between 12% and 14% each year. Operating profits over this period expanded from 7.3% in 2009 to 9.1% in 2012. The company's plan for the International Segment is to continue to drive profitable sales and ultimately grow the business to deliver half of Cooper's total global revenues. In China specifically, Cooper expects to drive sales growth by increasing the pace of new product introductions and significantly expanding points of distribution. Cooper plans to grow its already established OE business in China, as it is key to driving consumer replacement tire pull-through in the region. As previously indicated, Cooper is committed to growing its presence in China regardless of the ultimate outcome of CCT ownership, although this may have an impact on the specific plans and timing related to financial targets. In Europe, Cooper will focus on profitable growth in Western Europe by strengthening its product offering and improving brand awareness, as well as by driving growth in core markets such as the U.K. and Germany. In addition, the company anticipates leveraging local sourcing in Europe to improve customer service, continuing to enhance its manufacturing cost competitiveness, and growing in high potential regions such as Eastern Europe. Such markets will be served by Cooper's Serbia manufacturing plant, which provides the advantages of competitive cost production and in-market manufacturing, while also having duty-free status with the European Union and Russia. Financial Plans Include Growth in Sales, Operating Profit and Cash Flow as well as Capital Expenditures for Maintenance, High-Return Improvements and Capacity Expansion From 2008 through 2013, Cooper increased annual operating profit from negative 7.5% to 7%, and looks to sustain annual operating profit of 8% to 10%. The company has started toward this goal by achieving strong first quarter 2014 operating profit of 10.2%. Cooper's long-term goal is to exceed 10% annual operating profit and achieve global revenues of $5 billion to $6 billion. The company expects to continue to improve cash generation, allowing for investment in high-return projects for its business and other uses. According to Chief Financial Officer Brad Hughes, “Cooper is a strong company with a positive future ahead. The ultimate ownership of the CCT joint venture may impact specific plans and timing related to our financial targets, as well as our capital deployment plans for 2014. CCT ownership must be resolved before we can be specific about these matters, yet we are confident that with any ownership outcome, Cooper is well positioned to grow and to continue to drive strong shareholder value creation,” he concluded. Cooper Investor Day Webcast An archive of the May 15, 2014 Cooper Investor Day is accessible to all interested investors and parties at http://www.media-server.com/m/p/re7afy2h or via the Cooper investor relations website at http://coopertire.com/investors.aspx for 30 days.