Cooper Tire & Rubber Company (NYSE:CTB) Q2 2019 Earnings Conference Call July 29, 2019 10:00 AM ET
Jerry Bialek - Vice President & Treasurer
Brad Hughes - Chief Executive Officer
Chris Eperjesy - Chief Financial Officer
- Jerry Bialek - 副总裁兼财务主管
- Brad Hughes - 首席执行官
- Chris Eperjesy - 首席财务官
Rod Lache - Wolfe Research
James Picariello - KeyBanc Capital Markets
Chris Van Horn - B. Riley FBR
Bret Jordan - Jefferies
John Healy - Northcoast Research
Rajat Gupta - JP Morgan Chase & Co.
- Rod Lache - 沃尔夫研究
- James Picariello - KeyBanc Capital Markets
- Chris Van Horn - B. Riley FBR
- 布雷特乔丹 - 杰弗里斯
- John Healy - Northcoast Research
- 拉贾特古普塔 - 摩根大通公司
Good morning, and welcome to the Cooper Tire & Rubber Company Second Quarter Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to Jerry Bialek. Please go ahead.
Good morning, everyone and thank you for joining the call today. This is Jerry Bialek, Cooper's Vice President and Treasurer. I'm here today with our Chief Executive Officer, Brad Hughes; and Chris Eperjesy, our Chief Financial Officer.
During our conversation today you may hear forward-looking statements related to future financial results and business operations of Cooper Tire & Rubber Company. Actual results may differ materially from current management forecasts and projections. Such differences may be a result of factors over which the company has limited or no control. Information on these risk factors and additional information on forward-looking statements are included in the earnings release we issued earlier this morning and in the company's reports on file with the SEC.
During this call, we will provide an overview of the company's second quarter 2019 financial and operating results, as well as the company's 2019 business outlook. Our earnings release includes a link to a set of slides that summarizes information included in the news release and in the 10-Q that will be filed with the SEC later today.
Please note that we'll reference certain non-GAAP financial measures on this call. The linked slides include information about these measures and a reconciliation to the most directly comparable GAAP financial measures. Following our prepared remarks, we will open the call to participants for a question-and-answer session.
Now, I'll turn the call over to Brad.
大家早上好，感谢您今天加入我们的电话会议。这是Cooper的副总裁兼财务主管Jerry Bialek。今天我和我们的首席执行官布拉德休斯在这里;和我们的首席财务官Chris Eperjesy。
在我们今天的谈话中，您可能会听到有关Cooper Tire＆Rubber Company未来财务业绩和业务运营的前瞻性陈述。实际结果可能与当前管理层的预测和预测存在重大差异。这种差异可能是公司限制或无法控制的因素造成的。有关这些风险因素的信息以及有关前瞻性陈述的其他信息包含在我们今天早些时候发布的收益发布中以及公司向美国证券交易委员会提交的报告中。
Thank you, Jerry, and good morning, everyone. I will begin today with a brief overview of our second quarter results. After that, I will turn the call over to Chris for a few of our -- for a review of our financial performance in greater detail. Then I'll return to talk about our outlook. And as always we will conclude by taking your questions.
Now let's talk about the quarter. Net sales decreased 2.8% to $679 million. Unit volume decreased 4.9% compared to the second quarter of 2018. Operating profit was $32 million or 4.7% of net sales, a sequential improvement compared with the first quarter.
The Americas segment operating profit was up 16% year-over-year, despite the impact of new TBR tariffs. Our international segment was challenged by conditions within the China new vehicle market and a weak replacement tire market in Europe. The process of phasing out light vehicle tire production at our Melksham facility is nearing completion and will result in a Cooper tire Europe that is more cost competitive.
We are now sourcing more tires, TBR tires from our Vietnam off take agreement with Sailun and progress on construction of our new joint venture TBR tire production facility in Vietnam is on schedule. Both actions diversify our TBR sourcing footprint outside of China. And our business relationship with Mercedes-Benz is going well.
Let me comment on the unit volume, specifically the U.S result, which underperformed the USTMA and the industry. While we are not satisfied with the result, we remain confident that the strategic growth initiatives we are executing will make a more visible impact in 2020 as we've been saying. Also, we do not believe the second quarter performance is indicative of underlying demand for our products.
While industry sellout data is not complete, with the information we do have, we believe Cooper sellout was in line with the overall U.S market for the first half of 2019. However, as you know, customers make inventory adjustments from time to time, which can impact sell-in results as we believe happened in the second quarter.
With that, I will turn it over to Chris.
谢谢杰瑞，大家早上好。我将从今天开始简要概述第二季度的业绩。在那之后，我将把我们的一些电话转给克里斯 - 更详细地审查我们的财务业绩。然后我将回到谈论我们的前景。一如既往，我们将以您的问题结束。
我们现在从越南采购更多轮胎，TBR轮胎与赛伦达成协议，我们在越南建立新的合资TBR轮胎生产设施的进展如期进行。这两项行动使我们在中国以外的TBR采购业务多样化。我们与梅赛德斯 - 奔驰的业务关系进展顺利。
Thank you, Brad. Moving to the consolidated second quarter results, sales were $679 million, down from $698 million in 2018. This 2.8% decrease was driven by $34 million of lower unit volume and $6 million of unfavorable foreign currency impact, which were partially offset by $21 million of favorable price and mix.
Operating profit was $32 million compared to $33 million in the second quarter of 2018, resulting in an operating margin of 4.7% of sales. This was achieved despite $13 million in costs related to new tariffs on products imported into United States from China as well as $2 million of restructuring costs related to Cooper Tire Europe's decision to cease light vehicle tire production in Melksham England.
Let me provide an update with respect to tariffs. Last quarter we indicated that for the full-year 2019, we expected the cost of the new TBR tariffs implemented on February 15 to be around $50 million. Our expectation was that there will be price increases on TBR tires in the U.S market to help offset these costs. While we and others implemented price increases, we have yet to see the broad industry pricing that we expected.
Cooper will remain market phasing with our TBR pricing and we continue to believe that strong demand for TBR tires relative to supply will eventually result in industry pricing. However, we do not expect that pricing actions will occur as quickly as previously assumed. We're making good progress on our TBR sourcing footprint diversification. We're beginning to receive tires and are ramping up the number of tires we received from our commercial off take agreement with Sailun Vietnam.
At the same time, the construction of the new joint venture TBR plant with Sailun is on track with tire production expected to commence in the first half of next year and we continue to evaluate opportunities to further diversify our TBR sourcing footprint. In early May, the U.S administration announced a further increase in section 301 tariffs from 10% to 25% on certain Chinese imports.
Given that Cooper is on the LIFO accounting method in the U.S., we experienced a negative tariff impact immediately. This incremental rate increase was not included in our previous outlook. This tariff applies to both our passenger car in TBR tires imported from China as well as some raw materials. As we have updated our estimates for recent rate and sourcing changes and other variables, our expectation for the full-year impact of gross expenses for all newly implemented tariffs on fiscal 2019 is $50 million.
As Brad indicated earlier, the Melksham transition is nearing completion a little ahead of schedule, which resulted in approximately $2 million restructuring charges in the second quarter. This amount was in line with our projections and we continue to expect full-year 2019 restructuring charges to be in the range of $8 million to $11 million.
As we approach conclusion of this transition, we experienced slightly more volume in manufacturing disruption than expected. Yet when completed, this action will more fully leverage the remaining plants in our manufacturing network, benefiting Cooper in Europe and globally.
营业利润为3200万美元，而2018年第二季度为3300万美元，营业利润率为销售额的4.7％。尽管与从中国进口到美国的产品的新关税相关的成本为1300万美元，以及与Cooper Tire Europe决定停止在英格兰Melksham的轻型车辆轮胎生产相关的200万美元的重组成本，实现了这一目标。
Now let's take a look at our second quarter operating profit walk. Total company operating profit compared with 2018 was impacted by the following factors: $13 million of new tariffs enacted in 2019 on products imported into United States from China; $2 million of restructuring costs related to ceasing light vehicle tire production in Melksham; $17 million of favorable price and mix; $15 million of favorable raw materials excluding the new tariffs; the quarter also included unfavorable volume of $6 million; higher SG&A of $4 million, primarily related to incentive in stock-based compensation; increased product liability cost of $1 million and $7 million of higher other costs, primarily due to higher distribution costs including the non-recurrence of the Albany warehouse tornado insurance recovery in 2018. Diluted earnings per share was $0.18 compared to $0.30 per share in the second quarter of 2018.
Now turning to our Americas tire operations. Segment sales for the second quarter were $582 million, down 0.4% from $584 million in 2018 as a result of $22 million of lower unit volume, partially offset by $20 million of favorable price and mix. Segment unit volume was down 3.8% compared to the same period a year-ago. Our U.S light vehicle unit volume decreased 4%, while the USTMA decreased by 1.5% and total industry increased by 0.7%.
Second quarter operating profit in Americas increased to $47 million or 8% of net sales compared with $40 million or 6.9% of sales in 2018. Operating profit included $13 million of new tariffs enacted in 2019 on products imported into the U.S from China, $22 million of favorable price and mix, $12 million of favorable raw material costs excluding new tariffs, $3 million of manufacturing improvements, $6 million of unfavorable SG&A costs, $5 million of lower volume, $1 million of higher product liability costs and other costs that increased by $5 million primarily due to higher distribution costs including the non-recurrence of the Albany warehouse tornado insurance recovery in 2018.
Now turning to our international tire operations. Net sales for the second quarter were $139 million, down 17.5% from the second quarter of 2018. This result was driven by $25 million of lower unit volume and $6 million of unfavorable foreign currency impact, which were partially offset by $2 million of favorable price and mix. Segment unit volume decreased 15.1% with unit volume decreases in both Asia and Europe driven in large part by challenging new vehicle market in China and weakness in the European replacement tire business.
The second quarter operating loss in our international operations was $1 million compared to operating profit of $6 million in 2018. The decrease included charges of $2 million related to Melksham England restructuring, $3 million of lower unit volume, $2 million of unfavorable price and mix, $3 million of higher manufacturing costs and $1 million of higher other costs, which were partially offset by $3 million of lower raw material costs and $1 million of lower SG&A costs.
现在让我们来看看我们的第二季度营业利润走势。与2018年相比，公司营业利润总额受以下因素影响：2019年对从中国进口到美国的产品征收1300万美元的新关税;与停止在Melksham生产轻型汽车轮胎相关的200万美元重组成本; 1700万美元的优惠价格和组合;除新关税外的1500万美元优惠原材料;本季度还包括不利的600万美元;较高的SG＆A为400万美元，主要与股票薪酬的激励有关;产品责任成本增加100万美元，其他成本增加700万美元，主要原因是分销成本增加，包括2018年奥尔巴尼仓库龙卷风保险不再发生。每股摊薄收益为0.18美元，而第二季度为每股0.30美元。 2018年的一季度。
Raw material index decreased 1.2% from the second quarter of 2018. Raw material index increased sequentially from 160.4 in the first quarter of 2019 to 161.8 in the second quarter of 2019. This was in line with our expectation to be up slightly on a sequential basis, but down slightly year-over-year. For the third quarter, we expect our raw material index to be down on a sequential and year-over-year basis.
Turning now to corporate items. Other pension and postretirement benefit expenses increased $2.3 million versus the prior year. Similar to the first quarter, this increase is primarily the result of lower estimated return on planned assets compared to 2018. As we have made strides in improving the funding status of our pension plans, the portfolio is taking less risk in order to protect the funded status, which result in a net increased quarterly expense.
The effective tax rate was 30.8% for the quarter -- 38.7% for the quarter compared to 12.6% last year. The tax rate for the second quarter of 2019 includes $2 million of discrete items related to the accrual of additional uncertain tax positions pertaining to previous years. The second quarter of 2018 included a -- included $1 million of net discrete tax items favorably impacting the tax rate.
In conjunction with restructuring decision related to the Melksham facility, the company is examining its entity structure in the region in order to ensure effectiveness from a tax planning perspective. We estimate the full-year of 2019 effective tax rate, excluding significant discrete items will be in a range between 23% and 26%. The effective tax rate is based on forecasted annual earnings and tax rates for the various jurisdictions, which the company operates. More detail on our taxes will be available in our form 10-Q that will be filed with the SEC later today.
Turning to cash flows and some balance sheet highlights. Unrestricted cash and cash equivalents were $112 million at June 30, 2019 compared with $180 million at June 30, 2018. Capital expenditures in the second quarter were $45 million compared with $38 million in the same period a year-ago. Also, as of the second quarter, the company has invested $49 million in its new joint venture with Sailun Vietnam. Return on invested capital excluding the impact of the goodwill impairment charge in the fourth quarter of 2018 was 9.3% for the trailing four quarters.
On June 27, 2019 Cooper executed an amendment to its existing bank credit facility, which extended the maturity date to June 27, 2024 and increased the borrowing capacity to $700 million. The amended agreement is comprised of a $500 million revolving credit facility and a new $200 million to late draw term loan. The proceeds from the new loan will be used primarily to retire the existing 8% senior notes that mature in December of this year.
The amendment provides Cooper with additional financial flexibility to fund some very good opportunities for reinvestment back into the business. At the same time, given the attractive borrowing rates, we will be able to save approximately $7 million of annual interest savings beginning in 2020.
本季度的有效税率为30.8％ - 本季度为38.7％，而去年为12.6％。 2019年第二季度的税率包括200万美元的离散项目，这些项目与前几年增加的不确定税收头寸相关。 2018年第二季度包括 - 包括100万美元的净离散税项目，有利于影响税率。
Before I turn it over to Brad, I want to reiterate that returning capital to our shareholders remains an important priority for us. As demonstrated in the second quarter, we're committed to supporting our quarterly dividend, but we'll pursue share repurchases more opportunistically in the near-term as we balance attractive opportunities to invest in our business.
I'll now turn the call back over to Brad.
Thanks, Chris. Clearly the industry is facing some near-term challenges as we've described. Yet even with these headwinds we were able to improve total company operating profit margin from 4.3% in the first quarter to4.7% in the second quarter. And in the Americas segment, we improved profitability by 16% year-over-year even after absorbing the impact of the new tariffs.
We continue to make progress on executing our strategic initiatives, including our retail expansion efforts and expect that these initiatives will drive more meaningful improvements in our business starting in 2020. We have work to do, but remain confident about the future and where we are headed. Increased U.S tariff costs and delayed timing of anticipated commercial truck tire price increases as well as weakness in the China new vehicle and Europe replacement tire markets are expected to impact the remainder of this year. The Americas segment, excluding TBR tariffs is still generally in line with previous expectations. On a consolidated basis, we anticipate improvement throughout the year in operating profit margin.
Cooper is adjusting expectations for the full-year as follows: given first half volume performance and the lack of clarity regarding the China new vehicle market, Cooper no longer expects full-year unit volume growth compared to 2018. Operating profit margin will improve throughout the year with full-year operating profit margin in line with 2018 reported margin of 5.9%. Capital expenditures will range between $180 million and $200 million. This does not include capital contributions related to Cooper's pro rata share of its joint venture with Sailun Vietnam or other potential manufacturing footprint investments. Our effective tax rate excluding significant discrete items will range between 23% and 26% and finally charges related to the Melksham England restructuring will be in a range of $8 million to $11 million.
In summary, while the short-term outlook has been affected by the conditions we described, we continue to believe that Cooper is doing the right things to build our business and drive improvement, which will support sequential operating profit margin improvement this year and positive momentum going into 2020.
With that, let's move to your questions. Operator, will you take the first question, please?
Absolutely. [Operator Instructions] Today's first question comes from Rod Lache of Wolfe Research. Please go ahead.
绝对。 [操作员说明]今天的第一个问题来自Wolfe Research的Rod Lache。 请继续。
Good morning, everybody.
Good morning, Rod.
Had a couple questions. One is just kind of high level. If you divide your performance into the variable contribution items, so if you think about volume price mix raw materials and tariffs on a year-over-year basis, it was actually up $13 million year-over-year. And that was offset by the SG&A restructuring distribution and other which was a negative 14. I was hoping you can maybe talk a little bit more about how those structural costs -- those other items flow as you look into the back half of this year because you will be comping against, I think it was $5 million of higher distribution costs for distribution facility you had last year and on the West Coast. And there was a $34 million goodwill impairment in the fourth quarter which shouldn’t recur.
有几个问题。 一个是高级别的。 如果您将您的业绩划分为可变供款项目，那么如果您考虑到销售价格与原材料和关税同比增长，那么它实际上比去年同期增加了1300万美元。 这被SG＆A重组分配和其他负面因素14所抵消。我希望你可以谈谈这些结构性成本 - 当你看到今年下半年时其他项目是如何流动的 你会反对，我认为你去年和西海岸的配送设施的分销成本高出500万美元。 第四季度有一笔3400万美元的商誉减值，不应再发生。
Yes, that's correct, Rod. And I don't have exactly the math in front of me that you used, but directionally it does seem correct around the variable improvement in some of the structural things that are many of them are not going to recur as we go forward. So a couple of examples there. Within the distribution costs, there are $2.8 million, I believe, of nonrecurring insurance recoveries that we had in last year's on results that we don't have this year. So there's almost $3 million there that’s contributing to that distribution. Something else in there that's on a little less obvious on is that we are actually manufacturing more tires in the United States and Mexico for this region. And it actually moves where we reflect those distribution costs into distribution costs were some of the sea freight when they were being imported previously were not recorded in the same category. Not a huge number, but another contributor to that distribution cost there. And then as you’re correct, we began to in the second half of last year and most importantly I think the bigger piece of that was in the fourth quarter had the new warehouses online, and so began to incur some of those costs and we will not have that differences as we move forward this year. On the SG&A side, I point out that there's a couple of things that are going on in the compensation category. One is with deferred compensation related to stock shares, the price, you look at the move and the price a year-ago versus the move in the price of the shares this year and that was a negative contributor to the SG&A. And frankly a year-ago, we were on adjusting our projection for the full-year payout and incentive comp down and we did not have a similar reduction this year. So there are several things in there to your point that are not recurring as we move into the second half of this year, and we would think that we'd see a better year-over-year performance.
Rod, this is Chris. Just one other thing I would add in terms of items that occurred last year that won't be reoccurring in the second half of the year is, you will recall in the third quarter there was a $31 million benefit related to product liability, the adjustment of our model, so that kind of rounds out all the one-time items.
罗德，这是克里斯。 就去年发生的项目而言，我将在下半年再次发生的另一件事是，你会记得在第三季度有与产品责任相关的3100万美元的利益，调整 我们的模型，所以这样的所有一次性项目。
Right, right. Okay. That's helpful. And just two other things. One is, can you just remind us on what the aggregate volume will be from the Vietnam off take agreement once that ramps? To what extent are you offsetting the million or so units that you're bringing in on commercial tires from China. And any update on what happened to the ramp from ATD, Walmart and some of the other new accounts that seem to be coming in, in the back half of last year? Wouldn't some of those accounts be ramping up inventory?
是的是的。 好的。 这很有帮助。 还有另外两件事。 一个是，你能不能提醒我们一旦达到一定程度，越南的总量将会达到多少？ 你在多大程度上抵消了你从中国带来商用轮胎的百万左右的单位。 去年下半年，有关ATD，沃尔玛以及其他一些似乎即将出现的新账户的匝道发生了什么变化？ 这些帐户中的一部分会不会增加库存？
Yes. So on -- first to the question on Vietnam, we haven't given specific numbers about the number of tires that we’re bringing in. We are ramping up against the commercial off take agreement that we had and that will be -- we will have more units coming from that in the second half of the year, certainly compared with the first half. But more meaningfully as we get into the joint venture next year and begin to produce there then you'll see a larger number of tires coming from Vietnam over the course of next year and we will continue to highlight that because that's a big opportunity against the tariff costs that were impact -- were incurring right now. And then with regard to the business that came online last year, we are seeing some of the benefits of that this year and as we tried to highlight in the comments previously on, we -- as we look at sellout, which ultimately determines what the sell-in will be over a longer period of time, we think that actually we are on increasing at about the same level that the market is in the U.S. Unfortunately on the timing of some inventory adjustments that we’re seeing from some customers right now is offsetting a portion of that. But we believe that over the longer-term and certainly as we get into 2020 as we get through some of those inventory adjustments, we will move around from quarter-to-quarter etcetera and we've got more impactful contributions from some of the new business that we have been putting on the books that you really start to see that contribute to the bottom line with growth.
是。所以 - 首先是关于越南的问题，我们没有给出关于我们带来的轮胎数量的具体数字。我们正在加大反对我们已经拥有的商业承购协议 - 我们将 - 今年下半年将有更多的单位，肯定与上半年相比。但更有意义的是，当我们明年进入合资企业并开始在那里生产时，你会看到更多的轮胎来自越南的明年，我们将继续强调，因为这是一个很大的机会，反对影响的关税成本 - 现在正在招致。然后关于去年上线的业务，我们看到了今年的一些好处，正如我们在之前的评论中试图强调的那样，我们 - 当我们看待卖出时，最终决定了什么在较长一段时间内卖出，我们认为实际上我们正在增加与美国市场大致相同的水平。不幸的是，我们现在从一些客户那里看到一些库存调整的时机抵消了一部分。但我们相信，从长期来看，当我们进入2020年时，我们会通过一些库存调整，我们将从四分之一到四分之一的地方转移，我们从一些新的一些产生了更有影响力的贡献我们一直在看到你真正开始看到的有助于增长的底线的业务。
Okay. Thank you.
And our next question today comes from James Picariello of KeyBanc Capital Markets. Please go ahead.
我们今天的下一个问题来自KeyBanc Capital Markets的James Picariello。 请继续。
Hey, good morning, guys. Can we just kind of focus on the operating margin guidance, the revision there, going from greater than 7.1% to now 5.9%. We’ve got -- if you could help just bridge the items, so we’ve got lower volume, we’ve got raw materials look a little bit better, just curious what the major buckets are in terms of the variance. The gross tariff impact remains at $50 million, so maybe the netting of that has changed. It sounds like pricing is a bit delayed. So, yes, if you could just help walk through this variance in the full-year expectation, that will be helpful. Thank you.
嘿，早上好，伙计们。 我们是否可以专注于营业利润率指引，那里的修订从大于7.1％到现在的5.9％。 我们已经 - 如果你可以帮助只是桥接物品，所以我们的体积较小，我们的原材料看起来好一点，只是好奇主要的桶在方差方面。 总关税影响仍为5000万美元，因此净结算可能已发生变化。 听起来价格有点延迟。 所以，是的，如果你能帮助我们在全年的期望中解决这种差异，那将会很有帮助。 谢谢。
Yes, that’s you’ve just identified one of them, James, there which is the TBR tariffs. And again there's a lot of moving pieces in there both in the gross cost and in the pricing side, specifically the timing of one we anticipate there to be pricing. But the combination of those factors including the 301 tariff going from 10% to 25% and now a revised outlook is the one we're going to see pricing in that market, even though we continue to believe that the dynamics of that supply and demand situation will ultimately create a very favorable background for price increases, but we are moving those out. So that the tariffs including the timing for the pricing is an element of that. We are seeing a continued slowdown in the new vehicle market in China. So we've expanded that to affect the full-year, which is a little bit different from we had previously. And then, frankly, the slowness, the weakness in the replacement market in Europe is probably the third major factor that I would refer to with regard to the change in the guidance for the full-year.
Okay. Thank you for that. How about the inventory realignment with a key customer in the U.S. Does that persist as well?
好的。 谢谢你。 如何与美国的关键客户进行库存调整是否仍然存在？
The -- that’s all timing, right. And it can be one quarter, it's not necessarily just one customer on the -- that is a timing element. And I make that comment because different from what we were saying about the private brand wholesale business, which was a structural change that the way that we were going to market and which tires we were selecting to sell and to whom, we -- that is behind us. This sell-in, sell-out as inventories are adjusted from quarter-to-quarter or period to period, is really a timing and we’re trying to become more focused on the sellout and we feel pretty good about where we're tracking through the first half of the year relative to market in the U.S.
- 那是所有的时机，对吧。 它可能是四分之一，它不一定只是一个客户 - 这是一个时间元素。 我发表评论的原因与我们对私人品牌批发业务的说法有所不同，后者是我们上市的方式和我们选择销售的轮胎和我们选择销售的轮胎的结构变化，我们 - 这是 我们后面。 由于库存按季度或周期调整，因此这种卖出，卖出是真正的时机，我们正在努力变得更专注于卖出，我们对于我们追踪的位置感觉相当不错 通过上半年相对于美国市场
Got it. And just a housekeeping one on the tariffs side. So the 301 tariff did step up from 10% to 25%. So what's allowing you guys to keep that gross tariff exposure to $50 million as oppose to something higher.
得到它了。 在关税方面只是一个家务管理员。 因此，301关税确实从10％上升到25％。 因此，允许你们将总关税敞口保持在5000万美元以反对更高的价格。
Also -- there's a -- again, lot of moving pieces there and including the fact that we are continuing to restore certain products to new countries that are not affected by the tariffs. And so that -- the volume, which markets we are selling them into, all contribute to that. But we didn’t lose sight of the sourcing changes well within that.
此外 - 那里还有很多活动件，包括我们正在继续将某些产品恢复到不受关税影响的新国家。 因此，我们将其销售的市场数量都有助于实现这一目标。 但我们并没有忽视其中的采购变化。
And our next question today comes from Chris Van Horn of B. Riley FBR. Please go ahead.
我们今天的下一个问题来自B. Riley FBR的Chris Van Horn。 请继续。
Chris Van Horn
Good morning. Thanks for taking the call.
Chris Van Horn
I just want to dig a little bit further into the comment around unit growth, unit volume growth for 2020. Is part of it just a reversal of maybe what you see in the back half of this year, or is there other moving pieces that we should think about on top of that or more weighted than that?
Well, I think there are a couple things, but most importantly is the retail expansion initiatives that the team has been pursuing in North America, specifically on -- are going to begin to show themselves in greater numbers and have more of an impact on the total overall volume in growth next year. That combined with some changes to the -- if we get to a more consistent sell-out/sell-in type of environment, which we would expect in certain -- with certain customers next year that would also give us a little bit of a tailwind as we move into next year with regard to volume. But the most important thing is that the efforts around retail expansion are going to contribute more next year than they have to date just as we grow into those new relationships.
嗯，我认为有一些事情，但最重要的是团队一直在北美追求的零售扩张计划，特别是 - 将开始展示自己更多的数量，并对其产生更大的影响。 明年增长总量。 结合一些变化 - 如果我们得到一个更加一致的抛售/销售类型的环境，我们可以预期 - 与明年的某些客户也会给我们一点点 我们在明年进入量产时顺风顺风。 但最重要的是，随着我们成长为新的关系，围绕零售扩张的努力明年将比他们迄今为止做出更多贡献。
Chris Van Horn
Okay, got it. And then, you’ve identified $8 million to $11 million of additional spent on the Melksham restructuring. Can you remind us on what you foresee that being as a benefit in the out years in terms of cost savings and controls etcetera?
好，知道了。 然后，你已经确定了在Melksham重组上花费的800万到1100万美元。 您能否提醒我们您预计在成本节约和控制等方面成为多年的利益？
Yes, we haven't given specific numbers on that yet, but clearly it is going to contribute a benefit to the bottom line removing out of our highest cost facility into one of our lowest-cost facilities, Melksham to Serbia, which is going to absorb the most of that volume, that's being moved. But it's also going to put additional volume into the rest of the footprint, which will benefit our overall utilization. So, we haven't quantified that yet and you'll begin to see more of that as we get into next year obviously, but it clearly will contribute to lower costs for total company and most importantly for Europe.
是的，我们还没有给出具体的数据，但很明显，这将有利于我们的最高成本设施，从我们的成本最低的设施，Melksham到塞尔维亚的底线，这将是 吸收大部分体积，即被移动。 但它也将在剩余的足迹中增加额外的数量，这将有利于我们的整体利用率。 所以，我们还没有对此进行量化，你会在明年进入明年时开始看到更多，但这显然有助于降低整个公司的成本，最重要的是欧洲的成本。
Chris Van Horn
Okay, got it. And then last for me, just maybe an update on the OEM launch here in the U.S. Any foreseen unexpected costs or is it going as planned, just any update there?
No, going largely as planned. The relationship is very good with Mercedes. We are adding additional platforms as we move along here and continue to seemingly perform pretty well based on all the feedback that we’ve received.
不，大致按计划进行。 梅赛德斯的关系非常好。 我们在这里继续添加其他平台，并根据我们收到的所有反馈继续表现得相当不错。
Chris Van Horn
Okay, great. Thanks again for the time.
And our next question today comes from Bret Jordan of Jefferies. Please go ahead.
我们今天的下一个问题来自Jefferies的Bret Jordan。 请继续。
Hi. Good morning, guys.
I guess just a question on the timing of the new relationships. I mean, obviously -- I guess, you expanded your volumes with ATD at Walmart and picked up Monro. As far as the fill-in as most of loading up those new relationships done and now it's a matter of selling out, or are there incremental new customers that you’re adding to the list going forward.
我想这是一个关于新关系时间的问题。 我的意思是，很明显 - 我想，你在沃尔玛用ATD扩大了你的音量，并选择了Monro。 至于填补这些新关系的大部分时间，现在这是出售的问题，或者是否有增加的新客户，你将在未来的列表中添加。
Well, I think there's two categories here. There's -- the first category are some of the new opportunities that we started to experience through our conquest program last year when there were some changes in the distribution landscape and we went out and tried to use that as and successfully used that as an opportunity to increase the number of selling points that we had primarily with the independent dealers and retailers that are serviced through some of the large national distributors. That -- the initial selling that resulted from that is largely in place right now. And now it's a matter of growing the number of tires that we're selling through those retail points that we added last year. Again the smaller independent retailers and dealers that are serviced by those large wholesale distributors. Then you've got some of the newer larger retail, national retail general merchandiser accounts where we are adding additional opportunity to sell-in different parts of the U.S and those are still building right now. You go through the pilot phase, which can last different lengths of time depending on which one you're talking about, but seemingly we're progressing with those and those will continue to grow this year and at more importantly we really think next year is when you’re going to start to see some of that new activity show up on the bottom line.
好吧，我认为这里有两个类别。还有 - 第一类是我们去年通过征服计划开始体验的一些新机会，当时分销格局发生了一些变化，我们出去尝试使用它并成功地将其作为一个机会增加我们主要与通过一些大型全国经销商提供服务的独立经销商和零售商的卖点数量。那 - 由此产生的最初销售现在基本上已经存在。而现在，我们通过去年增加的零售点来增加轮胎数量的问题。这些较小的独立零售商和经销商再次由那些大型批发经销商提供服务。然后你就拥有了一些较新的大型零售，全国零售一般商品客户账户，我们正在增加额外的机会在美国的不同地区进行销售，而且现在仍在建设中。你经历了试验阶段，这可能会持续不同的时间长短取决于你正在谈论的那个，但似乎我们正在逐步推进这些并且今年会继续增长，更重要的是我们真的认为明年是当你开始看到一些新活动出现在底线时。
Okay, great. And then a question on -- the commentary about being more opportunistic in the near-term on the share repurchase program, is that more -- is that being more aggressive? I guess -- I think you’ve said in conjunction with a discussion about reinvesting in the business, which would theoretically take away from the buyback. What is your thought on the share repurchase going forward here?
好，太棒了。 然后一个问题 - 关于在近期股票回购计划中更多机会主义的评论，更多的是 - 更具侵略性吗？ 我想 - 我认为你已经谈到了关于再投资业务的讨论，理论上这将从回购中解脱出来。 您对此前的股票回购有何看法？
Yes. So we’ve been saying for on -- a few quarters now that that we think that there are new and good opportunities to reinvest in the business and so that will be something that we're considering to do. We obviously are going to need to continue to look at where the share price is as we look at the -- any opportunity to buy back. But for right now, we do think that there are some new and better opportunities that we've had over the last couple of years with regard to reinvesting in the business.
是。 所以我们一直在说 - 几分之一的时间我们认为有新的和良好的机会再投资于业务，因此这将是我们正在考虑的事情。 我们显然需要继续关注股价在哪里看待 - 任何买回的机会。 但就目前而言，我们确实认为，在过去几年中，我们在再投资业务方面有一些新的和更好的机会。
Okay, great. Thank you.
And our next question today comes from John Healy of Northcoast Research. Please go ahead.
我们今天的下一个问题来自Northcoast Research的John Healy。 请继续。
Thank you. I want to ask a question about the Americas segment. I think you guys called out the $6 million of SG&A cost in terms of the operating income for the segment. It seems like a big number assuming, just given the relative size of SG&A for you guys. I was just hoping you could give us a little bit more color what was going on there?
谢谢。 我想问一个关于美洲部分的问题。 我想你们就这个细分市场的营业收入来说，已经拨出600万美元的SG＆A成本。 这似乎是一个很大的数字假设，只是考虑到你们的SG＆A的相对大小。 我只是希望你能给我们一点颜色，那里发生了什么？
Right. Look, Chris, supplement this a little bit as we -- if I missed something here, but again a couple of big pieces there are: one the -- two pieces of what I will describe is compensation. One is anything that's related to deferred stock compensation as you mark it period-by-period. And so the change in the first quarter to the second quarter in terms of the share price a year-ago compared with the magnitude of the change in the share price from quarter-to-quarter this year is a meaningful contributor to that. In addition to that, we also -- a year-ago adjusted our accrual for the full-year incentive compensation based on our outlook for the year relative to our targets, we are doing that this year at this point. And so that was a reduction in SG&A last year that credit -- albeit call it and we don't have that this year. So those were two big pieces of it. Chris, anything else of noting in there?
对。 看，克里斯，补充一点我们 - 如果我在这里错过了一些东西，但又有几件大件：一件 - 我要描述的两件是补偿。 一个是与递延股票补偿相关的任何事情，因为您逐个标记它。 因此，就一年前的股价而言，第一季度至第二季度的变化与今年一季度的股价变化幅度相比是一个有意义的贡献因素。 除此之外，我们还 - 一年前根据我们相对于目标的年度展望调整了全年激励薪酬的应计，我们今年正在这样做。 因此，去年SG＆A减少了这笔信用 - 尽管如此，我们今年也没有。 所以那些是它的两大部分。 克里斯，其他任何注意到的东西？
No, that was the majority, Brad. It was the stock based comp and the overall incentive compensation and the adjustment of the accrual last year.
Got you. And then I just want to ask maybe just kind of on a broader base picture standpoint. If you look at the Americas segment and we think about ATD and Monro and Walmart, just at a surface level most of us think it shouldn’t be a really good thing for Cooper. And maybe you guys should be growing volumes and the volumes are still on the soft side. Can you help us close that gap and maybe provide a time frame for when do you think that we might be done with kind of some of this overhang of the private label business? Just trying to understand when you think is a reasonable time that Cooper should start to perform in line with the USTMA members or maybe even better than that, given some of the share opportunities?
有你。 然后我只是想问一下更广泛的基本图片观点。 如果你看一下美洲市场，我们会考虑ATD和Monro以及沃尔玛，只是在表面层面，我们大多数人认为对Cooper来说这不应该是一件好事。 也许你们应该增加音量，音量仍然偏软。 您是否可以帮助我们弥补这一差距，并为您提供一个时间框架，以便您认为我们何时可以通过自有品牌业务中的某些突出部分来完成这些工作？ 只是试图理解你认为何时Cooper应该开始与USTMA成员一起开展的合理时间，或者甚至可能比这更好，考虑到一些分享机会？
Well, I think on -- it's hard to call a quarter-to-quarter, John, but I would certainly indicate and confirm as we've been saying that we think as we get into 2020, that you're definitely going to start to see on a different level of performance as this new business begins to contribute more. Before that, it's just -- again, as you move quarter-to-quarter and you look at on sell-in activity, which is what we're measuring as opposed to sell-out activity with the numbers that the USTMA reports and that we compare ourselves to is can move up and down quarter-to-quarter based on some of the buy in and sell-out timing. We think that as we get through the balance of this year that will kind of even itself out. We’ve a lot of customers out there that and we're not alone. I would say the industry is doing a much better job of managing their inventories both for -- which will better align the sell-in to the sell-out. And so as that begins to trickle through, it will be reflective of what the sell-out demand is for our products in terms of the sell-in that we are reporting. And we think through the first half of the year, we were about the same as the industry in the U.S., and we think as we move forward with some of the new initiatives as we get into 2020 that should improve and show itself on the sell-in data that we report against [indiscernible].
好吧，我想 - 很难打电话给约翰季度，但我肯定会指出并确认，因为我们一直在说，我们认为，进入2020年，你肯定会开始随着这项新业务开始做出更多贡献，我们可以看到不同的业绩水平。在此之前，它只是 - 再次，当你按季度移动并且你看看卖入活动，这是我们正在衡量的，而不是卖出活动与USTMA报告的数字和那个我们比较自己可以根据一些买入和卖出时机逐季上下移动。我们认为，当我们度过今年的平衡时，它甚至会消失。我们有很多客户，而且我们并不孤单。我认为该行业在管理库存方面做得更好 - 这将更好地使销售与销售一致。因此，当它开始渗透时，它将反映出我们报告的销售对我们的产品的销售需求是什么。我们认为，通过今年上半年，我们与美国的行业大致相同，我们认为随着我们进入2020年的一些新举措的推进，我们应该改进并展示自己的销售情况。 - 我们针对[音频不清晰]报告的数据。
Great. And then just last question for me. On the Vietnam opportunity, when you look at the TBR is it reasonable that most of those tires that you bring into the U.S can be sourced through Vietnam in 2020, or do you think you'll still be using a dual region approach to bringing those tires into the U.S?
非常好。 然后对我来说只是最后一个问题。 关于越南的机会，当你看到TBR是合理的，你带到美国的大部分轮胎都可以在2020年通过越南采购，或者你认为你仍然会采用双区域方法来带来那些 轮胎进入美国？
Its -- there's definitely going to be a continued transition during 2020. As we exit the year, there's no doubt that we will be in a position where the majority is coming -- assuming everything stays on track and we're well on track right now. So I should say could use the term no doubt, but we're highly confident that that by the time we exit 2020, the majority of those tires will be coming from outside of China. Whether or not we get there for the full-year, I don't know, but it's on -- everything is on track and that will be a big help next year if the current tariff environment remains in place.
它 - 在2020年肯定会有一个持续的过渡。当我们退出这一年时，毫无疑问我们将处于大多数即将到来的位置 - 假设一切都在轨道上，我们正在走上正轨 现在。 所以我应该说可以毫无疑问地使用这个词，但我们非常有信心，到2020年退出时，大部分轮胎将来自中国以外。 无论我们是否到达全年，我都不知道，但它已经开始 - 一切都在按计划进行，如果当前的关税环境仍然存在，明年将会有很大的帮助。
Great. Thank you, guys.
And our next question today comes from Ryan Brinkman of JPMorgan. Please go ahead.
Hi, good morning. This is Rajat Gupta on for Ryan. Just had a question on the manufacturing improvements bucket and the margin bridge, particularly in America, and you continued to see some good improvement there. Last quarter you had highlighted some easy compares you saw from the inventory draw down efforts. How do you feel about the inventory levels currently? And then, how should we think about benefits from manufacturing going forward, especially in the second half in this weak volume growth environment? And I have a follow-up.
早上好。 对于Ryan来说，这是Rajat Gupta。 刚刚对制造改进桶和利润率桥梁提出了疑问，特别是在美国，你继续看到一些好的改进。 上个季度，您已经重点介绍了您从库存提取工作中看到的一些简单比较。 您对目前的库存水平有何看法？ 那么，我们应该怎样考虑制造业未来的收益，特别是在这个疲软的销量增长环境的下半年呢？ 我有一个后续行动。
Okay. On the manufacturing question in specific, well one thing to note is that when you look at it on a consolidated basis as we were working our way through the tail end of the cessation of light vehicle tire production in Europe, we did experience a minor complications relative to what we thought we were going to incur. Now we are pretty much done with that. That along with making sure that we're not overbuilding China relative to the OE market cost us to adjust our production schedule there. And in combination, those did have an offsetting impact on what we're able to achieve in the Americas. As we look forward, we still think for the balance of the year when you look at it in total that we will continue to have better utilized facilities in North America, and so when we get into the second half of the year, we do see that continuing.
好的。 关于具体的制造问题，有一点需要注意的是，当你在欧洲轻型汽车轮胎生产停止的尾端工作时，我们在综合的基础上看待它，我们确实经历了一些轻微的并发症 相对于我们认为我们将要发生的事情。 现在我们已经完成了很多工作。 这与确保我们相对于OE市场不会过度建设中国的成本相比，我们需要调整我们的生产计划。 结合起来，这些确实对我们在美洲能够实现的目标产生了抵消影响。 在我们展望未来的时候，我们仍然会考虑今年的余额，当你总体看我们将继续更好地利用北美的设施时，所以当我们进入下半年时，我们确实看到了 那继续。
Got it. And then just on the margin guidance for the full-year, what kind of industry or company-specific volume expectation is that based on? I mean, is there -- could you give us a range or sensitivity as to how that margin might move if volumes come in better or worse than expectations?
得到它了。 然后就全年的保证金指引而言，基于什么样的行业或公司特定的交易量预期？ 我的意思是，是否存在 - 如果交易量好于或低于预期，您是否可以给我们一个范围或敏感度来确定保证金可能会如何变动？
Well, those are global expectations, so we need to think about it globally. And as we indicated, we are now viewing that the China OE market, the new vehicle market and then the European replacement market will remain soft for the balance year -- of the year. The severity of that continuation and how that happens could have some impact on the guidance that we provided. I would suggest that if we stay in the range that we're in right now for an industry -- replacement industry volume in North America that would -- there wouldn't be any change to our guidance relative to what we've just provided. So I would say kind of as is in the Americas and continued weakness in Europe and China with the one caveat there that China if it were to continue to be really, really severe through the balance of the full-year, might have some further impact. And then, just lastly, Chris noted this earlier, last year in that 5.9% for the full-year there were two offsetting -- almost offsetting equally one timers with regard to the product liability, benefit and the goodwill write-off, $31 million and $34 million, respectively. This year, we've got not only the restructuring costs that we've indicated for Melksham of $8 million to $11 million as the range and at the new TBR tariffs that we are incurring of $50 million roughly in the profits that we are talking about, those are two pretty big hurdles to be overcome -- overcoming and still to achieve the same report of operating profit margin guidance, which just highlights that there's progress being made in the underlying business.
那些是全球期望，所以我们需要在全球范围内思考它。正如我们所指出的那样，我们现在看到中国OE市场，新车市场以及欧洲替代市场将在今年的余额中保持疲软。这种延续的严重性以及如何发生可能会对我们提供的指导产生一些影响。我建议如果我们留在我们目前所处的行业 - 北美的替代行业数量 - 我们的指导相对于我们刚刚提供的内容不会有任何变化。所以我会说美洲的情况和欧洲和中国的持续疲软，但有一点需要注意的是，中国如果在全年的平衡期间继续真正地，非常严重的话，可能会产生进一步的影响。然后，就在最后，克里斯早些时候注意到这一点，去年全年有5.9％有两次抵消 - 在产品责任，利益和商誉冲销方面几乎抵消了一次定时器，3100万美元分别为3400万美元。今年，我们不仅已经将我们为Melksham指定的800万美元到1100万美元的重组成本作为范围和新的TBR关税，而我们正在谈论的利润大致相当于5000万美元。 ，这是两个相当大的障碍需要克服 - 克服并仍然实现相同的营业利润率指引报告，这只是强调了基础业务的进展。
Got it. Makes sense. Thank you.
得到它了。 说得通。 谢谢。
And this concludes our question-and-answer session. I would like to turn the conference back over to the management team for any final remarks.
Thank you very much. And before we close, I want to reiterate some key points. First, as I was just describing, the new TBR tariffs in Melksham restructuring costs have negatively affected our near-term results. Excluding these, our operating profit and operating profit margin would have improved year-over-year for both the second quarter and the first half. Regarding our TBR business, we’ve sourcing initiatives well underway to mitigate the current tariff impact as we move into 2020, and we believe market conditions will be favorable in the future for pricing. In China, while there has been near-term weakness in the new vehicle market, we continue to believe that China is a strategically important part of our business given the size of the car park and the growing what should be a growing replacement market. Moving to Europe, we believe near-term softness in the replacement market will ultimately improve and the actions we've taken at Melksham will make us more cost competitive, particularly in Europe. Lastly, as we said in North America, our retail expansion plans are moving forward and we expect to see more from them in 2020. We will continue to implement our strategic initiatives, while evaluating incremental opportunities to improve our business and results going forward. Thank you for being on the call today.
Thank you, sir. This conclude today’s conference. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
谢谢你，先生。 今天的会议结束了。 我们感谢大家参加今天的演讲。 您现在可以断开线路并度过美好的一天。
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