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Section 1: 8-K (FORM 8-K)

 

 

  

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported):   October 28, 2016

 

Cooper Tire & Rubber Company
(Exact name of registrant as specified in its charter)

 

Delaware   001-04329   344297750
(State or other jurisdiction   (Commission   (I.R.S. Employer
of incorporation)   File Number)   Identification No.)

 

701 Lima Avenue, Findlay, Ohio   45840
 (Address of principal executive offices)    (Zip Code)

 

Registrant’s telephone number, including area code:   419-423-1321

 

Not Applicable
Former name or former address, if changed since last report

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

  

 

  

Item 2.02 Results of Operations and Financial Condition.

 

On October 31, 2016, Cooper Tire & Rubber Company (the "Company") issued a press release reporting its financial results for the third quarter 2016. A copy of the Company's press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.. On October 31, 2016, the Company also posted a summary slide presentation regarding third quarter 2016 (the “Slide Presentation”) on its corporate website. A copy of the Slide Presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K..

 

Item 5.05 Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

 

On October 28, 2016, the Board of Directors of the Company approved and adopted an updated Code of Conduct (the “Code”), which applies to all directors, officers and employees of the Company, including the Company’s principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. The Code supersedes the Company’s existing Code of Business Ethics & Standards of Conduct (the “Existing Code”).

 

The Existing Code was revised and updated to, among other things: (i) incorporate a summary of the Company’s fundamental principles; (ii) enhance Company personnel’s understanding of the Company’s standards of ethical business conduct in key compliance areas; (iii) promote awareness of ethical issues that may be encountered in carrying out an employee’s or director’s responsibilities; and (iv) reinforce certain Code sections covering, among other topics, non-retaliation. The Code also includes revised provisions related to: (i) honest and ethical conduct and the handling of conflicts of interest; (ii) full, fair, accurate and timely public disclosures; (iii) compliance with applicable governmental laws, rules and regulations; and (iv) the prompt internal reporting of violations of the Code to an appropriate person identified in the Code.

 

The foregoing summary of the Code does not purport to be a complete description of all changes, and is qualified in its entirety by reference to the full text of the Code. A copy of the Code is available on the Company’s Internet site (http://www.investors.coopertire.com) under “Governance - Governance Documents.” The information contained on or accessible through the Company’s Internet site shall not be deemed to be a part of this Current Report on Form 8-K.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

99.1 Press release dated October 31, 2016

 

99.2 Slide Presentation regarding third quarter 2016

 

  

 

  

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    Cooper Tire & Rubber Company
         
October 31, 2016   By:   /s/Jack Jay McCracken
         
        Name: Jack Jay McCracken
        Title: Assistant General Counsel and Assistant Secretary

  

  

 

  

Exhibit Index

 

Exhibit No.   Description
99.1   Press release dated  October 31, 2016
     
99.2   Slide Presentation regarding third quarter 2016

 

  

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

NEWS

 

Cooper Tire & Rubber Company Reports Third Quarter 2016 Results 

Company posts record operating profit for first nine months of 2016; Q3 operating profit of $78 million,

or 10.4 percent of net sales, is inclusive of $11.5 million non-cash pension settlement charge

 

FINDLAY, Ohio, Oct. 31, 2016 – Cooper Tire & Rubber Company (NYSE: CTB) today reported third quarter 2016 net income of $49 million, or diluted earnings per share of $0.90, compared with $53 million, or $0.93 per share, last year. The quarter included a non-cash pension settlement charge of $11.5 million related to lump-sum distribution of benefits offered to certain former employees. Excluding the non-cash pension settlement charge, diluted earnings per share for the third quarter would have been $1.04.

 

Third Quarter Highlights:

·Unit volume was approximately flat with a year ago.
·Net sales decreased 4.0 percent to $751 million.
·Including the $11.5 million non-cash pension settlement charge, operating profit decreased 4.8 percent year-over-year to $78 million, or 10.4 percent of net sales, while diluted earnings per share were $0.90 compared with $0.93 per share a year ago.
·Excluding the $11.5 million non-cash pension settlement charge, operating profit would have been $90 million or 11.9 percent of net sales, and diluted earnings would have been $1.04 per share.
·The company repurchased $28.4 million of stock during the quarter.

 

“Cooper generated another strong quarter of operating profit, achieving a record for the first nine months of this year. Excluding the $11.5 million pension settlement charge, our third quarter operating profit would have been 11.9 percent of net sales, a result that continues to be above our medium-term goals. Despite a decline in net sales, our Americas segment generated operating profit margin of more than 15 percent, including the impact of the preliminary tariffs on truck and bus radial (TBR) tires imported from China into the United States. The International segment, which continued to improve its performance, delivered an operating profit for the second consecutive quarter. Cooper continues to execute on our strategy to deliver shareholder value, including returning cash to shareholders through our quarterly dividend and share repurchases, which totaled more than $28 million during the third quarter,” said President & Chief Executive Officer Brad Hughes.

 

Consolidated Results:

 

Cooper Tire  Q3 2016 ($M)   Q3 2015 ($M)   Change 
Net Sales  $751   $782    (4.0)%
Operating Profit  $78*  $82    (4.8)%
Operating Margin   10.4%   10.5%   (0.1) ppts.

 

*Includes $11.5 million non-cash pension settlement charge

 

Consolidated Third Quarter Results:

·Third quarter net sales were $751 million, a decrease of 4.0 percent compared with $782 million in the third quarter of 2015. Third quarter results were negatively impacted by $17 million of unfavorable price and mix, primarily due to net price reductions related to lower raw material costs, as well as $13 million of negative foreign currency impact and $1 million from lower unit volume.

 

·Third quarter 2016 operating profit was $78 million compared with $82 million for the same period last year. Operating profit decreased as a result of the non-cash pension settlement charge of $11.5 million, $9 million of higher manufacturing costs and $1 million of negative foreign currency impact. These declines were partially offset by $8 million of favorable SG&A expense, as well as $9 million of favorable raw material costs, net of price and mix. Raw material costs are inclusive of tariffs, including the preliminary TBR duties.

 

-more-

 

 

 

 

Cooper Tire Q3 2016—2

 

·Third quarter SG&A expense was $63 million, which compares with $72 million in the third quarter of 2015. SG&A expense for the quarter decreased to 8.4 percent of net sales, from 9.2 percent of net sales in the third quarter of 2015. The reduction in SG&A was primarily the result of decreased incentive compensation and lower brand and marketing program expense.

 

·Higher manufacturing costs were concentrated in the Americas segment and were primarily related to the greater complexity of manufacturing more higher value, higher margin tires as well as the impact of lower production volumes.

 

·The effective tax rate for the third quarter was 32.0 percent, compared with 31.4 percent last year. The tax rate increase was primarily due to discrete items which were recorded in the third quarter of the prior year related to research and development tax credits and the release of reserves for effectively settled uncertain tax positions. The tax rate is based on forecasted annual earnings and tax rates for the various jurisdictions in which the company operates.

 

·At quarter end, Cooper had $450 million in cash and cash equivalents, compared with $424 million at the end of the same period last year. Capital expenditures in the third quarter were $41 million compared with $40 million in the same period last year.

 

·In February 2016, the company announced an extended and increased $200 million share repurchase program. During the third quarter, 865,163 shares were repurchased for $28.4 million at an average price of $32.78 per share. Purchases have continued in the fourth quarter under this authorization with an additional 196,138 shares purchased at an average cost of $37.50 per share for $7.4 million through Oct. 26, 2016. The remaining repurchase authorization is $128 million and expires on Dec. 31, 2017. Since share repurchases began in August 2014, the company has repurchased a total of 11.7 million shares at an average price of $33.93 per share.

 

Americas Tire Operations:

 

Americas Tire Operations  Q3 2016 ($M)   Q3 2015 ($M)   Change 
Net Sales  $673   $702    (4.2)%
Operating Profit  $102   $102    - 
Operating Margin   15.1%   14.6%    0.5.ppts.

 

Third quarter net sales in the Americas segment declined 4.2 percent as a result of $24 million of unfavorable price and mix, $4 million of negative foreign currency impact and $1 million due to lower unit volume. Segment unit volume decreased 0.1 percent compared with the same period last year, with an increase in unit volume in Latin America that was more than offset by decreased unit volume in North America. Cooper’s total light vehicle tire shipments in the United States decreased 4.2 percent during the quarter due primarily to a decline in private brand distributor shipments. Cooper brand product shipments increased by 1.5 percent. The Rubber Manufacturers Association (RMA) reported that its member shipments in the United States were down 2.7 percent. Total industry shipments (including an estimate for non-RMA members) increased 3.0 percent for the period. Cooper’s commercial truck tire shipments for the United States were up 25.8 percent during the third quarter, outperforming both the industry and the RMA.

 

Third quarter operating profit was $102 million, or 15.1 percent of net sales, compared with $102 million, or 14.6 percent of net sales, in the third quarter of 2015. Operating profit was impacted by $6 million of favorable SG&A costs, $2 million of favorable raw material costs, net of price and mix, and $1 million of favorable other expense. These improvements were offset by $9 million of unfavorable manufacturing costs.

-more-

 

 

 

 

Cooper Tire Q3 2016—3

 

International Tire Operations:

 

International Tire Operations  Q3 2016 ($M)   Q3 2015 ($M)   Change 
Net Sales  $113   $119    (5.1)%
Operating Profit (Loss)  $3   $(5)   161.3%
Operating Margin   2.9%   (4.5)%   7.4ppts.

 

Third quarter net sales in the International segment declined 5.1 percent as a result of $8 million of negative foreign currency impact and $6 million of lower unit volume, partially offset by $8 million of favorable price and mix. Segment unit volume was down 4.7 percent, with decreased unit volume in sales to intercompany segments for sale in the United States and lower unit volume in the European market. This was partially offset by continued growth in the domestic China market led by strong original equipment tire sales.

 

The third quarter operating profit was $3 million compared with an operating loss of $5 million in the third quarter of 2015. The improvement was driven by $8 million of favorable raw material costs, net of price and mix, and $1 million of favorable SG&A expense. These improvements were partially offset by $1 million of negative foreign currency impact.

 

Outlook

Third quarter raw material costs increased 4 percent from the second quarter of 2016, which was in line with the company’s expectations. The company’s internal raw material index increased from 135.5 in the second quarter to 141.2 in the third quarter. Cooper anticipates fourth quarter raw material costs will be up modestly from the third quarter.

 

The company’s planned acquisition of a majority interest in GRT, a joint venture in China to produce TBR tires for global markets, is on track. Cooper expects the transaction to close in the fourth quarter, pending certain permits and approvals by the Chinese government.

 

Management expectations for the full year 2016 include:

·Global unit volume growth in the fourth quarter.
·Total company operating margin, excluding the impact of acquisitions and non-cash pension settlement charges, is expected to be modestly above 2015 levels.
·The International segment, excluding the impact of acquisitions, is expected to perform better than originally anticipated for the full year 2016. Management expects the segment to deliver a modest full-year profit.
·Effective tax rate for full year 2016 is expected to be in a range of 32 percent to 34 percent.
·Capital expenditures, excluding the impact of acquisitions, are expected to range from $180 million to $200 million for the year. The company continues to invest in organic growth and margin improvement initiatives across all regions, and this updated projection more accurately reflects expected timing of capital spending for those investments.

 

“The Cooper business model remains a solid foundation for growth and continued profitability,” Hughes said.  “We continue to successfully shift our mix to higher margin products, including growing the Cooper brand, and we remain focused on improving our cost structure by optimizing our global manufacturing footprint and investing in automation. These initiatives are driving our strong operating margins in the Americas segment. In China, we are rapidly growing our OE business and expanding our TBR business, which will be aided by the pending acquisition of a majority interest in GRT.

 

“Looking ahead, we expect that the benefit of lower raw material costs will moderate, and global markets will continue to be very competitive. We will stay focused on continuing to generate strong profit performance across the business as well as driving unit volume growth, which we expect to be led by growth in Latin America and Asia. I am proud of the Cooper teams around the world for staying committed to the effective execution of our strategic plan, which is essential as we work to achieve the ambitious goals we have for Cooper’s growth and profitability in the future.”

 

-more- 

 

 

 

Cooper Tire Q3 2016—4

 

Third Quarter 2016 Conference Call Today at 10 a.m. Eastern

Management will discuss the financial and operating results for the third quarter, as well as the company’s business outlook, on a conference call for analysts and investors today at 10 a.m. EDT. The call may be accessed on the investor relations page of the company’s website at http://coopertire.com/Investors.aspx or at http://services.choruscall.com/links/ctb161031.html. Following the conference call, the webcast will be archived and available for 90 days at these websites.

 

A summary slide presentation of information related to the quarter is posted on the company's website at http://investors.coopertire.com/Quarterly-Results.

 

Forward-Looking Statements

This release contains what the company believes are “forward-looking statements,” as that term is defined under the Private Securities Litigation Reform Act of 1995, regarding projections, expectations or matters that the company anticipates may happen with respect to the future performance of the industries in which the company operates, the economies of the United States and other countries, or the performance of the company itself, which involve uncertainty and risk.

 

Such “forward-looking statements” are generally, though not always, preceded by words such as “anticipates,” “expects,” “will,” “should,” “believes,” “projects,” “intends,” “plans,” “estimates,” and similar terms that connote a view to the future and are not merely recitations of historical fact. Such statements are made solely on the basis of the company’s current views and perceptions of future events, and there can be no assurance that such statements will prove to be true.

 

It is possible that actual results may differ materially from projections or expectations due to a variety of factors, including but not limited to:

volatility in raw material and energy prices, including those of rubber, steel, petroleum based products and natural gas or the unavailability of such raw materials or energy sources;
the failure of the company’s suppliers to timely deliver products or services in accordance with contract specifications;
changes to tariffs or the imposition of new tariffs or trade restrictions, including changes related to the anti-dumping and countervailing duties for passenger car and light truck tires imported into the United States from China; and duties from the ongoing investigation into truck and bus tires imported into the United States from China;
changes in economic and business conditions in the world, including changes related to the United Kingdom’s referendum on withdrawal from the European Union;
increased competitive activity including actions by larger competitors or lower-cost producers;
the failure to achieve expected sales levels;
changes in the company’s customer relationships, including loss of particular business for competitive or other reasons;
the ultimate outcome of litigation brought against the company, including stockholders lawsuits relating to the terminated Apollo merger as well as product liability claims, in each case which could result in commitment of significant resources and time to defend and possible material damages against the company or other unfavorable outcomes;
a disruption in, or failure of, the company’s information technology systems, including those related to cyber security, could adversely affect the company’s business operations and financial performance;
changes in pension expense and/or funding resulting from the company’s pension strategy, investment performance of the company’s pension plan assets and changes in discount rate, salary increase rate, and expected return on plan assets assumptions, or changes to related accounting regulations;
government regulatory and legislative initiatives including environmental and healthcare matters;
volatility in the capital and financial markets or changes to the credit markets and/or access to those markets;
changes in interest or foreign exchange rates;
an adverse change in the company’s credit ratings, which could increase borrowing costs and/or hamper access to the credit markets;
failure to implement information technologies or related systems, including failure by the company to successfully implement an ERP system;
the risks associated with doing business outside of the United States;

 

-more- 

 

 

 

Cooper Tire Q3 2016—5

the failure to develop technologies, processes or products needed to support consumer demand;
technology advancements;
the inability to recover the costs to develop and test new products or processes;
the impact of labor problems, including labor disruptions at the company, its joint venture, or at one or more of its large customers or suppliers;
failure to attract or retain key personnel;
consolidation among the company’s competitors or customers;
inaccurate assumptions used in developing the company’s strategic plan or operating plans or the inability or failure to successfully implement such plans;
risks relating to acquisitions, such as the proposed acquisition of a majority interest in China based Qingdao Ge Rui Da Rubber Co., Ltd., including the failure to successfully complete acquisitions or integrate them into operations or their related financings may impact liquidity and capital resources;
changes in the company’s relationship with its joint-venture partner or suppliers, including any changes with respect to the production of Cooper-branded products by CCT, the company’s former joint venture in China;
the ability to find alternative sources for products supplied by CCT;
the inability to obtain and maintain price increases to offset higher production or material costs;
inability to adequately protect the company’s intellectual property rights; and
inability to use deferred tax assets.

 

It is not possible to foresee or identify all such factors. Any forward-looking statement in this release is based on certain assumptions and analyses made by the company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Prospective investors are cautioned that any such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected.

 

The company makes no commitment to update any forward-looking statement included herein or to disclose any facts, events or circumstances that may affect the accuracy of any forward-looking statement. Further information covering issues that could materially affect financial performance is contained in the company's periodic filings with the U. S. Securities and Exchange Commission (“SEC”).

 

Non-GAAP Financial Measures

This press release includes non-GAAP financial measures as defined under SEC rules.  Non-GAAP financial measures should be considered in addition to, not as a substitute for, operating profit, net income, earnings per share or other financial measures prepared in accordance with generally accepted accounting principles (“GAAP”). The company’s methods of determining these non-GAAP financial measures may differ from the methods used by other companies for these or similar non-GAAP financial measures. Accordingly, these non-GAAP financial measures may not be comparable to measures used by other companies. As required by SEC rules, detailed reconciliations between the company’s GAAP and non-GAAP financial results are provided on the attached schedule.  The company uses adjusted operating profit, net income and earnings per share to evaluate the performance of the company’s operations exclusive of certain items affecting comparability of results from period to period. The company believes that information about operating profit, net income and earnings per share exclusive of these items is useful to investors, particularly where the impact of the excluded items is significant in relation to reported earnings, because the measure allows for comparability between periods of the operating performance of the company’s business and allows investors to evaluate the impact of the excluded items separately from the impact of the operations of the business.

 

###

 

About Cooper Tire & Rubber Company

Cooper Tire & Rubber Company (NYSE: CTB) is the parent company of a global family of companies that specializes in the design, manufacture, marketing and sale of passenger car and light truck tires. Cooper and its subsidiaries also sell medium truck, motorcycle and racing tires. Cooper's headquarters is in Findlay, Ohio, with manufacturing, sales, distribution, technical and design operations within its family of companies located in more than one dozen countries around the world. For more information on Cooper, visit www.coopertire.com, www.facebook.com/coopertire or www.twitter.com/coopertire.

 

Investor Contact: Media Contact:
Jerry Bialek Anne Roman
419.424.4165 419.429.7189
investorrelations@coopertire.com alroman@coopertire.com

 

 

 

 

Cooper Tire & Rubber Company

Condensed Consolidated Statements of Income

(Unaudited)

 

(Dollar amounts in thousands except per share amounts)  Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2016   2015   2016   2015 
                 
Net sales  $750,913   $782,368   $2,140,982   $2,197,355 
Cost of products sold   597,961    628,414    1,657,932    1,751,754 
Gross profit   152,952    153,954    483,050    445,601 
                     
Selling, general and administrative expense   63,262    71,787    192,339    193,652 
Pension settlement charge   11,462    -    11,462    - 
Operating profit   78,228    82,167    279,249    251,949 
                     
Interest expense   (6,795)   (5,889)   (19,717)   (18,485)
Interest income   1,018    533    2,907    1,609 
Other non-operating income   1,785    1,362    4,672    3,034 
Income before income taxes   74,236    78,173    267,111    238,107 
                     
Provision for income taxes   23,757    24,524    86,509    81,818 
Net income   50,479    53,649    180,602    156,289 
                     
Net income attributable to noncontrolling shareholder interests   1,176    473    1,545    2,769 
                     
Net income attributable to Cooper Tire & Rubber Company  $49,303   $53,176   $179,057   $153,520 
                     
Basic earnings per share:                    
 Net income attributable to Cooper Tire & Rubber Company common stockholders  $0.91   $0.94   $3.26   $2.68 
                     
Diluted earnings per share:                    
 Net income attributable to Cooper Tire & Rubber Company common stockholders  $0.90   $0.93   $3.23   $2.65 
                     
Weighted average shares outstanding (000s):                    
Basic   54,055    56,693    54,869    57,332 
Diluted   54,680    57,232    55,459    57,934 
                     
Segment information:                    
Net sales                    
Americas Tire  $672,641   $702,460   $1,906,699   $1,973,993 
International Tire   112,789    118,903    339,693    350,853 
Eliminations   (34,517)   (38,995)   (105,410)   (127,491)
                     
Operating profit (loss):                    
Americas Tire  $101,522   $102,475   $323,667   $301,039 
International Tire   3,265    (5,329)   4,645    (11,755)
Unallocated corporate charges   (26,442)   (15,416)   (48,191)   (40,084)
Eliminations   (117)   437    (872)   2,749 

 

 

 

 

Cooper Tire & Rubber Company

Condensed Consolidated Balance Sheets

(Unaudited)

 

(Dollar amounts in thousands)  September 30, 
   2016   2015 
         
ASSETS          
Current assets:          
Cash and cash equivalents  $450,348   $424,232 
Notes receivable   5,947    10,917 
Accounts receivable   434,580    423,731 
Inventories   496,095    464,848 
Other current assets   44,797    52,548 
Total current assets   1,431,767    1,376,276 
           
Net property, plant and equipment   812,291    769,305 
Goodwill   18,851    18,851 
Intangibles   132,380    134,047 
Restricted cash   1,014    791 
Deferred income tax assets   133,990    170,807 
Other assets   15,575    16,336 
Total assets  $2,545,868   $2,486,413 
           
LIABILITIES AND EQUITY          
Current liabilities:          
Notes payable  $12,222   $17,646 
Accounts payable   225,662    228,939 
Accrued liabilities   221,258    222,385 
Income taxes payable   10,973    12,036 
Current portion of long-term debt   600    600 
Total current liabilities   470,715    481,606 
           
Long-term debt   295,874    296,389 
Postretirement benefits other than pensions   251,219    263,885 
Pension benefits   284,223    329,938 
Other long-term liabilities   145,048    146,015 
Deferred income tax liabilities   2,049    3,856 
Total parent stockholders' equity   1,060,752    926,433 
Noncontrolling shareholder interest in consolidated subsidiary   35,988    38,291 
Total liabilities and equity  $2,545,868   $2,486,413 

 

 

 

 

Cooper Tire & Rubber Company

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

(Dollar amounts in thousands)  Nine Months Ended 
   September 30, 
   2016   2015 
Operating activities:          
Net income  $180,602   $156,289 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   96,928    90,588 
Stock-based compensation   11,800    11,710 
Change in LIFO inventory reserve   (3,426)   (45,132)
Amortization of unrecognized postretirement benefits   32,266    34,641 
Pension settlement charge   11,462    - 
Changes in operating assets and liabilities:          
Accounts and notes receivable   (67,940)   (66,628)
Inventories   (89,877)   (5,762)
Other current assets   (13,788)   (19,193)
Accounts payable   13,370    (24,849)
Accrued liabilities   19,008    45,489 
Other items   (13,725)   (43,911)
Net cash provided by operating activities   176,680    133,242 
           
Investing activities:          
Additions to property, plant and equipment and capitalized software   (126,921)   (128,601)
Proceeds from the sale of assets   331    1,555 
Net cash used in investing activities   (126,590)   (127,046)
           
Financing activities:          
Net payments on short-term debt   (645)   (39,131)
Repayments of long-term debt   (600)   (3,125)
Payment of financing fees   -    (2,586)
Repurchase of common stock   (82,486)   (82,800)
Payment of dividends to noncontrolling shareholder   (804)   (917)
Payment of dividends to Cooper Tire & Rubber Company stockholders   (17,242)   (17,998)
Issuance of common shares and excess tax benefits on stock options   3,710    19,665 
Net cash used in financing activities   (98,067)   (126,892)
           
Effects of exchange rate changes on cash   (6,832)   (6,724)
           
Net change in cash and cash equivalents   (54,809)   (127,420)
           
Cash and cash equivalents at beginning of year   505,157    551,652 
           
Cash and cash equivalents at end of period  $450,348   $424,232 

 

 

 

 

Cooper Tire & Rubber Company

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

 

(Dollar amounts in thousands except per share amounts)

 

   Three months ended September 30, 2016 
   Net Sales   Cost of
products sold
   Gross profit   Selling, general and
administrative expense
   Pension
settlement
charge
   Operating profit   Operating
profit %
 
Reported (GAAP)  $750,913   $597,961   $152,952   $63,262   $11,462   $78,228    10.4%
Pension settlement charge  $-   $-   $-   $-   $(11,462)  $11,462    - 
Adjusted (Non-GAAP)  $750,913   $597,961   $152,952   $63,262   $-   $89,690    11.9%
                                    
   Three months ended September 30, 2016                 
                     
   Income before income
taxes
   Provision for income
taxes
   Net income   Net income attributable
to noncontrolling
shareholder interests
   Net income attributable
to Cooper Tire &
Rubber Company
                
Reported (GAAP)  $74,236   $23,757   $50,479   $1,176   $49,303                 
Pension settlement charge  $11,462   $3,756   $7,706   $-   $7,706                 
Adjusted (Non-GAAP)  $85,698   $27,513   $58,185   $1,176   $57,009                 
                                          
   Three months ended September 30, 2016                                 
                                     
   Net income attributable
to Cooper Tire &
Rubber Company
   Weighted average
number of shares
outstanding - Diluted
   Diluted earnings
per share
                                
Reported (GAAP)  $49,303    54,680   $0.90                                 
Pension settlement charge  $7,706    -   $-                                 
Adjusted (Non-GAAP)  $57,009    54,680   $1.04                                 

 

 

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Section 3: EX-99.2 (EXHIBIT 99.2)

 

Exhibit 99.2

October 31, 2016

 

 

Safe Harbor Statement T his presentation contains what the company believes are forward - looking statements related to future financial results and business operations for Cooper Tire & Rubber Company. Actual results may differ materially from current management forecasts and projections as a result of factors over which the company may have limited or no control. Information on certain of these risk factors and additional information on forward - looking statements are included in the company’s reports on file with the Securities and Exchange Commission and set forth at the end of this presentation. 2

 

 

Available Information You can find Cooper Tire on the web at coopertire.com. Our company webcasts earnings calls and presentations from certain events that we participate in or host on the investor relations portion of our website (http://coopertire.com/investors.aspx). In addition, we also make available a variety of other information for investors on the site. Our goal is to maintain the investor relations portion of the website as a portal through which investors can easily find or navigate to pertinent information about Cooper Tire, including: • our annual report on Form 10 - K, quarterly reports on Form 10 - Q, current reports on Form 8 - K, and any amendments to those reports, as soon as reasonably practicable after we electronically file that material or furnish it to the Securities and Exchange Commission (“SEC”); • information on our business strategies, financial results and selected key performance indicators; • announcements of our participation at investor conferences and other events; • press releases on quarterly earnings, product and service announcements and legal developments; • corporate governance information; and • other news and announcements that we may post from time to time that investors may find relevant. The content of our website is not intended to be incorporated by reference into this presentation or in any report or document we file with or furnish to the SEC, and any references to our website are intended to be inactive textual references only. 3

 

 

Three Months Ended September 30, 2016 Financial Performance Highlights 4 Amounts are unaudited and may not add due to rounding. (millions USD, except EPS) Net Sales by Segment Q3 2016 Q3 2015 Change from Prior Year Americas Tire $ 673 $ 702 - 4.2% International Tire 113 119 - 5.1% Eliminations (35) (39) 11.5% Total Company $ 751 $ 782 - 4.0% Operating Profit by Segment OP % OP % Americas Tire $ 102 15.1 $ 102 14.6 $ ( 1) International Tire 3 2.9 (5) - 4.5 9 Corporate ( 26) (15) (11) Eliminations (0) 0 (1) Total Company $ 78 10.4 $ 82 10.5 $ (4) Earnings Per Share (diluted) from continuing operations attributable to common stockholders $ 0.90 $ 0.93 $ (0.03) Cash and Cash Equivalents $ 450 $ 424 $ 26

 

 

Nine Months Ended September 30, 2016 Financial Performance Highlights 5 Amounts are unaudited and may not add due to rounding. (millions USD, except EPS) Net Sales by Segment 9 Months Ended September 30, 2016 9 Months Ended September 30, 2015 Change from Prior Year Americas Tire $ 1,907 $ 1,974 - 3.4% International Tire 340 351 - 3.2% Eliminations (105) (127) 17.3% Total Company $ 2,141 $ 2,197 - 2.6% Operating Profit by Segment OP % OP % Americas Tire $ 324 17.0 $ 301 15.3 $ 23 International Tire 5 1.4 (12) - 3.4 16 Corporate (48) (40) (8) Eliminations (1) 3 (4) Total Company $ 279 13.0 $ 252 11.5 $ 27 Earnings Per Share (diluted) from continuing operations attributable to common stockholders $ 3.23 $ 2.65 $ 0.58 Cash and Cash Equivalents $ 450 $ 424 $ 26

 

 

33 8 82 78 24 11 9 1 - 50 100 150 ($millions) ($millions) Operating Profit Walk Total Company Q3 2015 to Q3 2016 9 Net Price/Mix vs. Raw Materials $(4) - 5% 6 Amounts are unaudited and may not add due to rounding. * Raw material costs are inclusive of tariffs, including the preliminary tariffs on truck and bus radial tires imported from China into the United States.

 

 

7 CTB Raw Material Price Index North America 0 50 100 150 200 250 300 Q3 2016 Average = 141.2 Q4 2016 is an estimate

 

 

30 6 1 102 102 28 9 - 150 ($millions) ($millions) Operating Profit Walk Americas Tire Operations Q3 2015 to Q3 2016 8 $0 0% 2 Net Price/Mix vs. Raw Materials Amounts are unaudited and may not add due to rounding. * Raw material costs are inclusive of tariffs, including the preliminary tariffs on truck and bus radial tires imported from China into the United States .

 

 

4 1 (5) 3 1 (25) - 25 ($millions) 4 Operating Profit Walk International Tire Operations Q3 2015 to Q3 2016 Amounts are unaudited and may not add due to rounding. 9 8 Net Price/Mix vs. Raw Materials $8 +161%

 

 

Non - GAAP Measures 10 Non - GAAP financial measures should be considered in addition to, not as a substitute for, operating profit, net income, earnings per share, total debt or other financial measures prepared in accordance with generally accepted accounting principles (“ GAAP”). The Company’s methods of determining these non - GAAP financial measures may differ from the methods used by other companies for these or similar non - GAAP financial measures. Accordingly, these non - GAAP financial measures may not be comparable to measures used by other companies. Pursuant to the requirements of SEC Regulation G, detailed reconciliations between the Company’s GAAP and non - GAAP financial results were posted, by incorporation within this presentation, on the Company’s Investor Relations website at http :// coopertire.com/investors.aspx on the day the Company’s operating and financial results were announced for the quarter ended September 30, 2016 and management presented certain non - GAAP financial measures during a conference call with analysts and investors. Investors are advised to carefully review and consider this information as well as the GAAP financial results that are disclosed in the Company’s earnings releases and annual and quarterly SEC filings.

 

 

Non - GAAP Measures 11 Return on Invested Capital (ROIC) Management is using non - GAAP financial measures in this document because it considers them to be important supplemental measures of the Company’s performance. Management also believes that these non - GAAP financial measures provide additional insight for analysts and investors in evaluating the Company’s financial and operating performance. The Company defines ROIC as the trailing four quarters’ net income before interest, after tax, divided by the total invested capital, which is the average of ending debt and equity for the last five quarters. The Company believes ROIC is a useful measure of how effectively the Company uses capital to generate profits. Calculation of Return on Invested Capital October 1, 2015 – September 30, 2016 Operating profit $ 382 Provision for income taxes (123) Net interest tax effect (7) Net operating profit after tax $ 252 Total invested capital $ 1,351 Return on invested capital 18.6%

 

 

Non - GAAP Measures 12 Calculation of Trailing Four Quarter Income and Expense Inputs Quarter - ended: Operating profit Provision for income taxes Income before income taxes Interest expense Interest income Net Interest Expense December 31, 2015 $ 103 $ (36) $ 96 $ (5) $ 1 $ (5) March 31, 2016 91 (28) 87 (7) 1 (6) June 30, 2016 110 (35) 106 (6) 1 (5) September 30, 2016 78 (24) 74 (7) 1 (6) Total $ 382 $ (123) $ 363 $ (25) $ 4 $ ( 22) Trailing Four Quarter Net Interest Tax Effect Calculation Income before income taxes $ 363 Provision for income taxes (123) Effective income tax rate 33.9 % Net interest expense (22 ) Net interest tax effect $ (7)

 

 

Non - GAAP Measures 13 Calculation of Total Invested Capital Trailing Five Quarters Equity Long - term Debt Current Portion of Long - term Debt Short - term Notes Payable Total Invested Capital September 30, 2015 $ 965 $ 297 $ 1 $ 18 $ 1,280 December 31, 2015 1,018 296 1 12 1,327 March 31, 2016 1,054 296 1 8 1,358 June 30, 2016 1,085 296 1 4 1,386 September 30, 2016 1,097 296 1 12 1,405 Average Balance $ 1,044 $ 296 $ 1 $ 11 $ 1,351

 

 

Non - GAAP Measures 14 Adjusted Operating Profit, Earnings and Earnings per Share Management is using non - GAAP financial measures in this document because it considers them to be important supplemental measures of the Company’s performance. The Company uses adjusted operating profit, net income and earnings per share to evaluate the performance of the Company’s operations exclusive of certain items affecting comparability of results from period to period. The Company believes that information about operating profit, net earnings and earnings per share exclusive of these items is useful to investors, particularly where the impact of the excluded items is significant in relation to reported earnings, because the measure allows for comparability between periods of the operating performance of the Company’s business and allows investors to evaluate the impact of the excluded items separately from the impact of the operations of the business . Three months ended September 30, 2016 Net Sales Cost of products sold Gross profit Selling, general and administrative expense Pension settlement charge Operating profit Operating profit % Reported (GAAP) $ 751 $ 598 $ 153 $ 63 $ 11 $ 78 10.4% Pension settlement charge $ - $ - $ - $ - $ ( 11) $ 11 - Adjusted (Non - GAAP) $ 751 $ 598 $ 153 $ 63 $ - $ 90 11.9%

 

 

Non - GAAP Measures 15 Three months ended September 30, 2016 Income before income taxes Provision for income taxes Net income Net income attributable to noncontrolling shareholder interests Net income attributable to Cooper Tire & Rubber Company Reported (GAAP) $ 74 $ 24 $ 50 $ 1 $ 49 Pension settlement charge $ 11 $ 4 $ 8 $ - $ 8 Adjusted (Non - GAAP) $ 86 $ 28 $ 58 $ 1 $ 57 Three months ended September 30, 2016 Net income attributable to Cooper Tire & Rubber Company Weighted average number of shares outstanding - Diluted Diluted earnings per share Reported (GAAP) $ 49 54,680 $ 0.90 Pension settlement charge $ 8 - $ - Adjusted (Non - GAAP) $ 57 54,680 $ 1.04

 

 

Risks 16 It is possible that actual results may differ materially from projections or expectations due to a variety of factors, includ ing but not limited to: • volatility in raw material and energy prices, including those of rubber, steel, petroleum - based products and natural gas or the unavailability of such raw materials or energy sources; • the failure of the company’s suppliers to timely deliver products or services in accordance with contract specifications; • changes to tariffs or the imposition of new tariffs or trade restrictions, including changes related to the anti - dumping and cou ntervailing duties for passenger car and light truck tires imported into the United States from China; and duties from the ongoing investigation into truck and bus tires imported into the United States from China; • changes in economic and business conditions in the world , including changes related to the United Kingdom’s referendum on withdrawal from the European Union ; • increased competitive activity including actions by larger competitors or lower - cost producers; • the failure to achieve expected sales levels; • changes in the company’s customer relationships, including loss of particular business for competitive or other reasons; • the ultimate outcome of litigation brought against the company , including stockholders lawsuits relating to the terminated Apollo merger as well as product liability claims, in each case which could result in commitment of significant resources and time to defend and possible material damages against the company or other unfavorable outcomes; • a disruption in, or failure of, the company’s information technology systems, including those related to cyber security, could adversely affect the company’s business operations and financial performance; • changes in pension expense and/or funding resulting from the Company’s pension strategy, investment performance of the Compan y’s pension plan assets and changes in discount rate, salary increase rate, and expected return on plan assets assumptions, or changes to related accounting regulations ; • government regulatory and legislative initiatives including environmental and healthcare matters; • volatility in the capital and financial markets or changes to the credit markets and/or access to those markets; • changes in interest or foreign exchange rates; • an adverse change in the company’s credit ratings, which could increase borrowing costs and/or hamper access to the credit markets; • failure to implement information technologies or related systems, including failure by the company to successfully implement an ERP system; • the risks associated with doing business outside of the United States; • the failure to develop technologies, processes or products needed to support consumer demand; • technology advancements; • the inability to recover the costs to develop and test new products or processes; • the impact of labor problems, including labor disruptions at the company , its joint venture, or at one or more of its large customers or suppliers; • failure to attract or retain key personnel; • consolidation among the company’s competitors or customers; • inaccurate assumptions used in developing the company’s strategic plan or operating plans or the inability or failure to successfully implement such plans; • risks relating to acquisitions, such as the proposed acquisition of a majority interest in China based Qingdao Ge Rui Da Rubber Co., Ltd., including the failure to successfully complete acquisitions or integrate them into operations or their related financings may impact liquidity and capital resources; • changes in the company’s relationship with its joint - venture partner or suppliers, including any changes with respect to the production of Cooper - branded products by CCT, the c ompany’s former joint venture in China; • the ability to find alternative sources for products supplied by CCT; • the inability to obtain and maintain price increases to offset higher production or material costs; • inability to adequately protect the company’s intellectual property rights; and • inability to use deferred tax assets.

 

 

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