Q2 2020 Cooper Tire & Rubber Co Earnings Call
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Later, we will conduct a question and answer session and instructions will follow with that.
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I would now like to turn the conference over to Jerry by luck. Please go ahead.
Good morning, everyone and thank you for joining the call today.
Theory, biologic Cooper's Vice President International financing Treasurer, I'm here today, with Chief Executive Officer, Brad Hughes, and Christopher Jaffe, Our Chief Financial Officer.
During our conversation today you meet your forward looking statements related to future financial results some business operations.
The company.
Actual results may differ materially from current management for Catherine conjecture.
Such differences, maybe a result in fact, a couple of 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 the company's reports on file with the FCC.
During this call will provide an overview of the company's second quarter 2020 financial and operating results.
Well as the business update.
Our earnings release includes a link to a set of slides that summarizes information included in the news release and then the 10-Q that will be filed with the FCC later today.
Please note that we will reference certain non-GAAP financial measures on this call. The link slides include information about these measures and a reconciliation to the most directly comparable GAAP financial measures.
Following our prepared remarks, well open the call participants for question and answer session.
Now I'll turn the call over to Brad.
Thank you Gerry and good morning, everyone.
I'll begin the call. This morning by taking Cooper employees around the globe for stepping up to the challenges of the global pandemic and helping us to November 2nd quarter results that materially exceeded our expectations.
Welcome to virus and its impact hope and safety of our people it's been our first priority.
Our teams have done a great job following our very rigorous health and safety standards, while also seizing opportunities to improve and grow our business in this environment.
In fact.
Corona light were significantly impacted our results in the second quarter group were made notable progress on multiple key measures.
We generated significant cash flow impart basically taking decisive actions during the early stages of a pandemic, including reducing working capital and capital expenditures and limiting discretionary spending.
We grew market share with the U.S. performed better than the U.S.T. abate and the total industry and in Asia, We were able to increase third party unit sales.
In addition, Cooper was able to continue building momentum for another quarter by executing our strategic initiatives, which are driving the positive transformation of our business.
Even in the midst of this challenging environment.
This strengthens our confidence in our strategic plan as well as the power of the Cooper brand.
And the value that our products deliver to consumers who are increasingly looking to buy high quality tires at an affordable price.
That's the essence of the Cooper value proposition.
We went into core to buyers with a strong balance sheet and momentum from our strategic plan.
Assuming the economy could continue to rebound, we believe we will emerge from the situation and it even stronger position.
In short we are optimistic about our future.
Today, all of our manufacturing facilities around the world I read operation and continuing to ramp up in line with increasing the there.
From a production standpoint April was significantly impacted as the majority of our plants were shut down.
But as we bought back on wind in May we can have health and safety protocols production continued to increase through the month of June.
We took several temporary actions are we on to preserve our cash position, including plant shutdowns salary reduction employee furloughs and other actions.
However, we have reversed many of these actions as a result were covered much quicker than originally expected.
No. We recently implemented a modest permanent reduction in our force at our corporate headquarters and within certain manufacturing plants, so position, our business and capabilities for the future.
Before I turn it over to Chris I want to touch on some recent important and exciting news.
In line with strengthening our capabilities, we have made a series of important leadership appointments, including pulled away. So as our new chief Human resources officer, as well that take I think that's argue vice president of global manufacturing.
Just a few days ago, we officially announced the Cooper has earned another Oh, we tire for Mercedes Benz.
We're just gabor Srs Ellie well beyond the new Mercedes Benz yellow, which at the automakers next generation full size. That's you beat.
Finally, we shared the news of our Serbia plant expansion.
<unk> increased the size of our cost of watch facility to more than 882000 square feet.
I had about a third more an annual production capacity and been able to fulfill the produce do larger diameter tire demand into Europe and other global markets.
Supersede $8 million in Serbia and government incentives for this project.
Now I will turn the call over to Chris who will provide more detail on our financial performance.
Chris.
Thank you Brad I would also like to begin my remarks by recognizing the resiliency and adaptability of our teams across the globe. During these unprecedented times and the Recognizer supplier partners and of course, our customers and consumers for the trust and Cooper.
With that let's take a look at our second quarter results.
On a consolidated basis sales were $496 million down from $679 million in 2019.
It's 26.9% decrease was driven by $187 million lower unit volume and $7 million of unfavorable foreign currency impact, partially offset by $11 million a favorable price mix.
Operating profit was $5 million, 1.1% of sales compared with operating profit of $32 million were 4.7% of sales in 2019.
Second second quarter operating profit compared to 2019 was impacted by the following factors, which are summarized on page six of the supplemental slide that.
$44 million lower unit volume and $39 million, it's higher manufacturing costs, both attributable to the grown of ours pandemic.
This was partially offset by $30 million, a favorable raw material cost $15 million favorable price and mix $7 million of lower question, a expenses and $4 million lower other costs.
Diluted loss per share was 12 cents compared to an earnings per share of 18 cents and the second quarter of 2019.
Now moving onto our segment performance, starting with the Americas tire operations.
Sales for the second quarter were $426 million down 26.9% from $582 million in 2019, as a result of $183 million with lower unit volume and $2 million of unfavorable foreign currency impact, which were partially offset by $29 million a favorable pricing.
Next segment unit volume was down 31.5% compared to the same period a year ago.
Our U.S. light vehicle unit volumes decreased 24.1%, while the U.S.P.M.A. decreased 31.0% and the total industry decreased by 31.7% for the period.
April was the most challenging month at the quarter as you SDMA volumes were down over 50%.
There was strong sequential improvement during may and June with U.S.T., M&A volumes down 33.4% at 6.2% respectively.
U.S. light vehicle unit volumes improved throughout the quarter and outperformed both U.S. Tammy and the total industry.
Second quarter operating profit in the Americas decreased to $22 million were 5.1% of net sales compared with $47 million or 8.0% of sales in 2019.
Operating profit included $41 million of lower volume and $37 million upon favorable manufacturing costs. This was partially offset by $25 million a favorable raw materials $18 million, a favorable price mix $6 million of lower <unk> expenses and $4 million lower.
Other costs.
Now turning to our international tire operations net sales for the second quarter were $101 million down 27.1% from the second quarter 2019. This result was driven by $23 million lower unit volume $11 million has been favorable price and mix and $4 million upon.
Favorable corn foreign currency impact.
Segment unit volume decreased 16.4%, primarily driven by lowering unit volume in Europe, and Asia Third Party unit sales were up 4.5% versus the prior year.
The second quarter operating profit in our international operations was $1 million compared to an operating loss of $1 million in 2019.
The quarter included $5 million, lower raw materials $4 million lower SGN expenses, which was partially offset by $4 million of unfavorable price mix $2 million lower unit volume $2 million of higher manufacturing costs and $1 million of other of higher other costs.
The second quarter 2019 also included a $2 million restructuring charge related to our decision to see slight vehicle tire production at our mission facility positively impacting the year over year comparison.
Moving to raw materials, our raw material index decreased 15.1% from the second quarter 2019, the raw material index decreased 8.8% sequentially from 150.7 in the first quarter 2020, 237.4 in the second quarter 2020.
This was in line with our expectation to be down on a year over year sequential basis.
As we look forward, we anticipate raw material costs will continue to be significantly down year over year basis slightly down on a sequential basis in the third quarter 2020.
We remain cautious about our ability to forecast precisely in this period of market volatility.
Now to some corporate items other pension and postretirement benefit expenses decreased $3.7 million versus the prior year. This was primarily due to the company has improved funding position at December 30, Onest 2019, as a result, a favorable return of plan assets.
The effective tax rate for the second quarter was 13.5% compared with 38.7% for the same period the prior year.
The tax rate for the second quarter of 2020 was primarily driven by the lower level and mix of earnings among our different tax jurisdictions as well as unbenefited losses in jurisdictions with valuation allowances.
Tax rate for the second quarter 2019 included $2 million of discrete items related to the accrual of additional uncertain tax positions pertaining to previous years.
The effective tax rate is based on forecasted annual earnings and tax rates for the various jurisdictions with the could be in which the company operates.
More detail on our taxes will be available in our form 10-Q that will be filed with the FCC later today.
Turning to cash flows and some balance sheet highlights.
Capital expenditures in the second quarter were $17 million compared with $45 million in the same period a year ago.
Return on invested capital was 5.1% for the trailing four quarters.
At the end of the second quarter Cooper had $541 million, an unrestricted cash and cash equivalents compared with $112 million at the end of the second quarter 2019, and compared to $433 million at the end of the first quarter of this year.
You will recall that the company drew down $270 million on a revolving credit facilities during the first quarter.
There were no new net borrowings during the second quarter improvement in cash during the quarter was primarily driven by our actions to reduce working capital capital expenditures and discretionary discretionary spending as Brad noted.
Other than discretionary debt pay down we do not currently believe we have a substantial cash usage in the third quarter in fact, due to our improving financial position and outlook as of July 31st we've paid down $200 million of the $270 million, we borrowed on our revolving credit facilities.
Let me provide an update as it pertains to capital allocation first given the improve results and outlook. We now expect full year 2020 capital expenditures to be at the high end of our previously stated range between 140 and $160 million.
Second as it pertains to share repurchases, we continue to pursue these more opportunistically and third we continue to support our quarterly dividend.
We entered the year with a strong balance sheet and took the prudent steps to ensure the sustainability of the business. This allows us the ability to continue to support our strategic growth initiatives I'll now turn the call back over to Brad for updated outlook Brad.
It's Chris looking ahead, while Corona virus may present, a level of risk going forward, we expect our business to improve in the second half of this year and further into the future. We're confident in our ability to return to our mid term operating margin target range of 10% to 14%.
Well this it's been a challenging time and we've taken some difficult but necessary actions to mitigate the impact of Corona virus on our business. We also believed that this is an exciting time for Cooper and that there is one way for further success, especially if the economy continues to rebound.
Our value proposition resonates with consumers.
Consumer awareness of our brand is growing and our strategic initiatives are clearly taking hold.
With that let's move your questions operator will you take the first question. Please.
Thank you we will now begin the question and answer session.
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At this time, we'll pause momentarily to assemble our roster.
And our first question will come from Rod Lache with Wolfe Research. Please go ahead.
Hi, Thanks for taking my question.
Good morning.
Just just ask about a couple of things as we look out to the second half maybe just what your perspective is on on industry trends right now how.
What is the extent to what volumes are recovering how should we be thinking about these manufacturing costs, which obviously, we're a pretty big headwind in Q2 and.
Sounds like maybe you can just confirmed that the but it sounds like raw materials.
Pricing continue at least at this pace maybe better.
Given the sequential improvement.
Into the Q3.
So with regard to try to volume to start with.
And again I'll for the moment focus on on the U.S. on but.
Well, we saw what the industry saw on during the second quarter was an improvement each month. So April was on the low with that improved in may that further through June and so that exit momentum was positive still down but positive for the industry and.
What we were seeing at least with our customer base is that the.
They sell out.
Volume was actually a bit ahead of the sell when volume that we saw in the second quarter in and that also portends well for the momentum going into the third quarter. Obviously, there's a lot of unknown on which will go to the virus and how that could impact the we opening up the economy and whether or not at slow.
At some point in time, but I think it's appropriate to say that exiting the second quarter that caught that momentum was still on the recovery trend.
In the U.S. market in particular, and you know we feel really good about our momentum both in the quarter Das we exited the quarter going into the third quarter.
With regard to price in raw materials. The price environment has has remained pretty stable on the action that most folks in the industry took during the first quarter take increased price as seems to have held in place and that that looks to be the case today as well.
Raw materials as he said, we you know we expect to see a small.
Hi sequential reduction in our raw material index for the third quarter relative to the second quarter that would represent you know a similar or maybe slightly larger by improvement for the third quarter year over year on so oh manufacturing sorry with manufacturing again.
You know, what we've been ramping up our facilities on.
So definitely month to month April was essentially a shutdown one name we began to ramp back up June that ramp up continued and and frankly that ramp up continues today, yes. As we continue to win I thought I'd to try and meet that demand that we're seeing for our products.
You meet maybe just to clarify on a little bit.
So how close to normal levels of volume and and and manufacturing are you at this point, we're already kind of midway through Q3, because on the other hand, if you just look at the the rate of.
Pricing and and and raw material declines I mean that alone if it's even if it just held at the Q2 level. That's like a 600 basis point margin tailwind, obviously you have some headwind.
Coming from volume and and manufacturing to indicate that the 10% to 14%, it's kind of a midterm target rather than a near term target.
Yeah, So with regard to manufacturing specifically, we still have some wanting to go in terms of the ramp up but you know marks we getting close to.
In normal, but there's still some room there on that we have to further workable.
Yes, maybe you know finish off the third quarter here on.
And then and then with regard to margins I guess, the only comment I'd make right now is on.
Yeah, we feel good about what happened in the second quarter. Because I'd also you know we talk about price mix and that in combination that was that a strong contributor to the.
What happened in the quarter from a profit perspective last quarter on and we're now seeing a substantial difference as we move into the third quarter on as you out.
Right. So maybe just [laughter] I'll I'll just ask this.
This way and then I'll I'll get off the.
The call but.
Did you mean to imply that they tend to 14% margin is more of a mid term expectation because it seems like there are a number of tailwinds. They couldn't try to kind of kick in to get your they're relatively near term.
Yeah, I, here's what I would say about as quick as we said in the any remarks. The opening remarks here you know we're.
Yes, we competence that the second half is gonna be a better happen first half based on everything we can see right now on there was with all the coffee, adding that you need to do today with regard to the virus.
As it.
You know as it is it plays out and the end effects, the economic rebound or or may be does it but if we look forward on it we're not trying to put it timeline on when we get to that 10 to 14, a lot of it's gonna have to do to get to the other side of the virus <unk> impact on that on the economic rebound.
But once we get through that on we're confident that we're going to be able to get back to that came to 14% target on that we outlined in may of 2018. So.
<unk> better than first half.
We're not trying to put a timeline on that 10 to 14 on because there's just too many things that are uncertain right now with regard to the sustainability of what we're seeing happening right now.
But there are some good things happening.
Yep, great well take thanks for that.
Okay. Thanks Rod.
And our next question will come from James Pirrello with Keybanc. Please go ahead.
Hey, good morning, guys.
40 James.
Just to dig in on the on the international So quickly I mean.
First the first quarter of a return to profitability in over a year it sounds as though.
Yeah, you're ramping up capacity investments that you're Serbia plants. So just wondering with the utilization improvement potential is for your international business going forward.
And would you expect to generate a profitability through the rest of the year.
Yes. So we were pleased with the performance of that business in the second quarter. If you look at the markets around the world everybody that at a different stage.
Reacting to and recovering from.
The pandemic and and Asia was the first really and I say Asia really China was the first to emerge and again, there's you know bumps in the road in all of these markets as well, but but China was the first to emerge and in our business state as well that you know that that.
Economy, and vehicle industry, and tighter industry seem to be recovering and and stabilizing in that recovery reasonably well on obviously still some risk bearing and.
Challenges.
On every competitor get market, but overall that that market seems to be.
Able lighting in the any recovery mode right now Europe's a bit behind and you know you've got a lot of different.
Markets over their individual countries that are different places in terms of their their response and rebound from.
The pandemic and so you know there there are still entering from our view on the recovery stage in it and it's not it's clear how quickly that's going to happen so that the timing of of that market.
And our international business, we're covering into second half is gonna be largely dependent on what's happening.
With the economic rebound on does does a China and Asia continue to stay stable in the rebound stage and just Europe. We've seen some some good signs in Europe did that continue that'll have a lot could you with with the timing of when we returned to profitability at a sustainable basis in Europe, but the signs or put.
Good right now like utilization on should be improving here.
Now when and ultimately as we begin to bring out more capacity in Serbia, we feel confident that we're going to be able to to fill that additional capacity on with even more profitable tires. So I think overall the international situation.
Little uncertainty still as we look out over the last half of this year on but but the trends are positive in that market.
Did I answer everything there James I'm sorry.
Yes, no. That's that's helpful. Just on the Serbia a plant discussion so the investments that you're announcing in making this year does that fully accommodate the the 1 million units that are getting shifted from melksham few Serbia or is there any additional throughput that you're targeting within the investments that you've that you can mean communicated.
Well, the what we've announced in Serbia couple of points. There. One is the amount of the 55 million that's been announced a lot of about a little over half of that's already been invested in 2019. So there is about half maybe a little bit less than half of that pick all just to help you with the capital spending side of it.
And then with regard to date with a Belgium facility and the cessation of light vehicle tire production there that's going into our full footprint a lot of did going into serve yet this will only get count for that and and possibly a little bit more because as we look to.
Our manufacturing footprint it really is.
Order to support global markets in the most efficient way and while we always strive to be near sourced.
Today to sell units from plants that are close to those markets was selling into you know we will flex the global footprint just support global demand and yeah, we did that what melksham and and the Serbia will absorb a good chunk. It and then there's a little bit more than <unk>.
Got it and free cash flow came in much better than expected for the quarter.
But what were the puts and takes there and how should we be thinking about.
For the for the second half working capital and in the third quarter verse universe. The fourth does the is the third quarter trend as the use of cash and then we see that typical seasonal bump in Fourq you.
Color there would be helpful.
Yeah, I think well first of all the team continues to do a great job like you know we started this year and a half or so maybe two years ago in terms of really putting in a an.
And increased focus on making sure that were being efficient without working capital. That's a big contributor what was going on in cash flow on so all the work that they had been doing I was a big part of this we did take some incremental actions I is as all company skated to try and make sure that.
We're going to make it through a period of great uncertainty in terms of the economy in the industry and Cooper's performance, but the teams done a great job outperforming on we've been able to back away from some of the things that we had to initiate as those incremental actions to try and preserve cash and so a lot of it really turned into working cap.
We do have some when did the sale of errors, we'd been ramping our plants up demand has been recovery very quickly and as a result, you know we we've been horrible inventory build big do we see in the second quarter in preparation for the larger selling season in the third and fourth quarter was.
It's difficult to achieve so we're basically at this point.
On selling a lot of what we're making and so that's a good good thing for cash on for the third quarter. We'd indicated we don't and this is what we set for the second quarter and we'll see how it plays out what we said, we don't expect a significant cash utilization on and so.
Yeah, not it's not a big difference from on what we said around the second quarter and they've yeah. I think we would expect the fourth quarter to habits typical.
I'm.
Cash generation it maybe a little bit less this year and then it has done in past years, because you know we pulled forward some of that free cash flow on from the way that the working capital and inventory specifically finished tire inventory, yes. The managed through the first half of your and what we expect going.
Into the third so.
Great.
Free cash flow generation, great management of that by the company in the team our third quarter. We don't expect much usage in fourth quarter on will likely be but you know I a cash generation as it is traditionally maybe a little bit muted because and pulled some of that quote.
Got it thanks, congrats on a under great momentum here.
Thanks James.
Our next question will come from Ryan Brinkman with JP Morgan. Please go ahead all right. Thanks for taking my question No are you able to share what trends you've seen since the close of the quarter in terms of volume, particularly with regard to U.S. comes from replacement tire shipments in July and no do you have an estimate for industry volumes in Threeq.
Yes, good year on Friday guided down.
20% in Threeq you I'm just curious if if you might have a different view for the industry or expect that Cooper can perform differently than the market, whether due to your different geographic or segment mix product cadence or some other factor.
Hi, Good morning, Ryan first of all secondly on.
Yeah, I would say yes.
Well, we get into the third quarter and there's still a lot a lot of bye.
Certainty around us that could pop up pretty quickly if things were were to turn with regard to the way that.
The pandemic situation is playing out in how come you know state local governments respond to that Nick that affect that into the economy, having said that on I would say that what we saw in July was a continuation of.
Of the of the rebound that we saw towards the end of the second quarter on and I would say that that was.
For the industry and it was certainly for Cooper on so as we as as we move into the third quarter or from a Cooper perspective.
I think it that John what we've seen so far is a continuation of the momentum that we then I gaming and talking about since the fourth quarter of last year and so I without.
As we can continue to perform the way we've been performing and we can continue to wrap up our manufacturing capacity and productivity on I would think that we're in a position to outperformed the market in the near term here.
In the U.S.
Okay. That's great. Thanks, and then just what is your current outlook for potential tariffs on tires imported from China to the United States are there any milestones we should be looking for time frame that you expect and can you remind us of your own import tires from China, which types of tires would you expect could be impacted versus what you important and do you expect to be enough.
Beneficiary of any potential tariffs.
Yeah. So I mean, why does that timeline on its is also moving around a little bit faced the most recent.
News that we purchase at the more the more important part of that tariff decision, making process, which is the anti dumping tariffs that's likely to happen around the early part of next year, what's a little bit delayed compared with what the original timeline was on but but the preliminaries on we're expecting sometime.
Early next year and then the finals, maybe second quarter of next year on we we.
Continue to optimize our global manufacturing footprint and that includes on adjusting where we make tires for the markets we seldom in.
And if tariffs have a significant impact that's something that we'll continue to move around so the number of tires that we bring in light vehicle tires, specifically that we bring into the U.S. market from China is is pretty well in terms of a percentage of that the total these days.
And.
You know again.
Hi.
We're doing everything we're doing this to optimize.
That equation from but what is a terrific footprint, we believe for the markets that we're selling and so not much of any impact today on what's coming out of China, which is the one market that is affected by tariffs, we don't bring light vehicle tires in from any of the four markets that are being evaluated right now as part of the petition.
Okay.
If you look back to what happened 2910, 11 net timeframe when the initial careless were put on light vehicle tires coming in from China on.
We think that might be a reasonable proxy to look at what might happen because.
The number of tires that are important they're sold in the United States that come from these four markets.
It is 25 plus percent of the tire sold in the U.S. and it would be really difficult for those tires.
And a new manufacturing home really quickly to avoid the terrorists and so what happened in a similar situation when they put the tariffs on light vehicle tires from China again about a decade ago.
Became more about pricing of back where the industry.
Increased prices to offset on.
A portion of the the tariff cost that was applied at that point in time.
We look at this situation.
That seems.
To be the most likely outcome from our perspective.
Very helpful. Thank you.
Yes.
And the next question will be from John Healy with Northcoast Research. Please go ahead.
Thank you good morning, guys.
Wanted to ask a little bit about the performance relative to the yes, Jim and members. When you look at that the catch up in performance in the outperformance this quarter.
How would you kind of bucket that you know I know in in quarters past Theres been noise in the numbers with private label and things like that that have kind of worked against do you guys. It was just trying to understand you know when you look at the data is this an acceleration in terms of Cooper's performance.
If you kind of adjusted for those outlying factors.
And really what do you think is driving it.
Well I really do things on that and we've had this for few quarters that the.
Our on.
Effort to.
Some of the non strategic private label business, what is behind us and and so the work that our teams have been doing to grow in different channels to grow our retail presence, which <unk>, which has grown significantly in the United States I wouldn't build need to be available to consumers that want to buy.
Cooper on are beginning to show when they are within this these numbers that.
Specific things that the team has been working on.
Our coming to fruition and beginning to contribute.
To try to this growth.
Oh I'm relative to the market I should say I mean its.
I would have wanted to be growth right now, which is we're down less than they are but I think that momentum that's there and and the work that the teams have done.
We are going to position us well performance going forward on the.
I think.
When does the things that may be happening as a result of of the cold bid situation is people are becoming more value conscious on that doesn't just pertain to tires were seeing that.
Consumer durable.
Industries and so we do believe that that may be one thing that is a has changed a little bit is putting more focus on a brand a value brands like Cooper I mean, it gets pitch very very well with the guy what the value that we provide to consumers into our customers who are great product and so.
So we think that that is a maybe a little bit it accelerates here.
Beyond that there there's a lot of things that are happy behind it seems that are on.
You know, maybe pluses or minuses indeed in the short term here, but we think that this is real on sustainable change in the trajectory of our performance relative to the U.S.T. and they have the industry.
Great and then just one follow up question on cost I think you mentioned in the prepared remarks that.
If you recently started to maybe reverse some of the.
Furloughing or wait wait wage actions, but you've also had some headcount or alignment both at the corporate it and the factories.
Can you kind of talk about kind of what we might expect in Q3 from an incremental expense standpoint of.
Some of those.
Beta cost or kind of deferred costs coming back online and then you know how much you are you going to be savings, but these were this recent realignment.
Yeah I.
The recent reduction in force on you know, while there will be a a small positive on.
Positive small reduction in our SGN cost SGN, a cost related to that I wouldn't call that material and frankly, that's as much about positioning the company to make sure that we've got the rate skill sets going forward to continue to drive our strategy forward on I think also.
On as we were turn it.
To a more normal environment from last year, they spending perspective.
I think theyre beginning to to go back and look at it on a year over year basis as a as opposed to a sequential basis on might be a good way to do it I don't know that will get all the way back to what I would call a normal seasonal SDMA spend for the third quarter, but thats, probably a better weapons.
The second quarter, because we are beginning to on to move back in that direction of Oh, what I would expect our ongoing SGN a trend to look like.
Great. Thank you.
Alright, thank you.
[noise] again, if you have a question. Please press Star then one.
The next question will come from Bret Jordan with Jefferies. Please go ahead.
Hey, good morning, guys.
Hey, Brett.
Hey, other market share gains I mean, obviously starting to pick up from share against U.S. TDMA do you see that being in new channels, whether its national accounts or more online or is that also you know evenly spread across your legacy smaller dealership networks.
Yeah, I would say that they were seeing contributions on from some of the newer channels and from some of the more traditional channels by its.
We as as the team, particularly in North America, which you know the focus your for this part of the discussion.
Has been working on.
Ensuring that we are more pressing where people want to buy yes, yeah, but also trying to make sure that.
And we've got the white partners going forward and those that are going to help us to grow our business. You know we're seeing we're seeing contributions from both sides of the business and so the new business developments definitely contributing no no doubt about that but but some of the traditional channels, whether its retailers that we've had a long history with.
Or its shy the wholesale distribution part of our business.
We're seeing contributions from both.
Okay, Great and then one question I mean, obviously this is this a tough to answer but what's your take as far as the the tariff potential on the new four markets. You commented, it's more of a price impact than.
Actual change of where the tires are gonna come from but I think the lab data was like 900000 dollar cost for jobs saved.
On the first China tariff do you think the ITC is.
Leading towards the tariff where do you think it's going to be more of a tax and the consumer and they pass on it.
Yeah.
Again, I don't I will first of all you know we as we always me we have a fairly general statement that we make that we would like the markets to be free and fair I mean, that's the way we look at trade we continue to look at.
Any activity in this arena from Matt lens on and so we'll see how this plays out when they get your actual decision whether they move forward looking forward, what kind of tariffs they actually put in place, but at the end of the day on we don't know what they're going to do the petitions out there they're moving forward with it we know what.
Timeline generally looks like at this point. So early next year, we should ever read on.
You know if it's going to happen in how material. It is on the big thing is is it.
It's such a big.
When you're talking about over 25% of the tires that are sold in this country today coming from those four markets.
It's just hard to see a quick response in terms of multi get someplace and so as a result, there's going to be a lot of the tires that are coming into this market that are going to have that incremental cost on it.
And I think it that there's the market's going to look to price to book cover that cost impact on and again largely based on the experience that we saw from on a tariff impact that in 910 11, or 10, 11 12, I can't remember what 10 11, 12, I think on Chinese light.
Vehicle tires.
Okay, great. Thank you.
Ladies and gentlemen. This concludes our question answer session. So I'll turn it back to Mr. cues for any closing remarks.
Okay. Thank you very much on you know when our first quarter call I need I remarked that I thought this could be a time when the Cooper team wouldn't really shine and I have to say that they've exceeded even my expectations. When you look at the first six months of this year and think about all that transpired for our team do have been able to do.
To deliver a small operating profit if you exclude the restructuring charges while at the same time continuing to go forward, our strategic initiatives lot of that related to our manufacturing footprint, but clearly also the progress being made on the commercial land and creating more demand for our product and.
All the time, all the while doing that while maintaining a very strong cash position, which is going to position us well as we move in its second half of this year and and going forward I think it's a testament to our plan to the execution of that plan, but mostly to our team.
With that I want to thank everyone for participating today and please stay safe and stay healthy.
Thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Mm.