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Section 1: 8-K (8-K)

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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):
 
July 29, 2019
 
Cooper Tire & Rubber Company 
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
 
001-04329
 
344297750
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
 (I.R.S Employer Identification No.)
 
 
 
 
 
701 Lima Avenue, Findlay, Ohio
 
419-423-1321
 
45840
(Address of principal executive offices)
 
(Registrant's telephone number)
 
(Zip Code)
 
 
 
 
 
 
 
Not Applicable
 
 
 
 
(Former name or former address, if changed since last report)
 
 
 
 
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
 
 
 
Common Stock, $1 par value per share
 
CTB
 
New York Stock Exchange
(Title of Each Class)
 
(Trading Symbol)
 
(Name of Each Exchange on which Registered)
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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨





Item 2.02 Results of Operations and Financial Condition.
On July 29, 2019, Cooper Tire & Rubber Company (the "Company") issued a press release reporting its financial results for the second quarter 2019. A copy of the Company's press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

Item 8.01 Other Events.
On July 29, 2019, the Company posted a summary slide presentation regarding second quarter 2019 (the “Slide Presentation”) on its corporate website. A copy of the Slide Presentation is attached hereto as Exhibit 99.2 and is incorporated by reference into this Item 8.01.

Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release dated July 29, 2019
99.2 Slide Presentation regarding second quarter 2019







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.
 
 
 
 
 
Dated:
 
 
Cooper Tire & Rubber Company
July 29, 2019
 
 
By: /s/ Jack Jay McCracken                                
 
 
 
Name: Jack Jay McCracken
 
 
 
Title: Vice President, Assistant General Counsel & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

                            
                    

                                
                                


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
398931325_cooperstacked2017a22.jpg                      NEWS
____________________________________________________________________________________________________________________________________________

Cooper Tire & Rubber Company Reports Second
Quarter 2019 Results

FINDLAY, Ohio, July 29, 2019 – Cooper Tire & Rubber Company (NYSE: CTB) today reported second quarter 2019 net income of $9 million, or diluted earnings per share of $0.18, compared with $15 million, or $0.30 per share, last year.
    
Second Quarter Highlights
Net sales decreased 2.8 percent to $679 million.
Unit volume decreased 4.9 percent compared to the second quarter of 2018.
Operating profit was $32 million, or 4.7 percent of net sales.
The company amended its bank credit facility to extend the term, increase capacity, and provide for refinancing of its upcoming bond maturity.

“Our second quarter operating profit margin improved sequentially from the first quarter, and the Americas segment delivered improved operating profit despite new and incremental tariffs this year,” said Cooper President & Chief Executive Officer Brad Hughes.  “Our International segment was challenged by the ongoing decline within the new vehicle market in China and a weak replacement tire market in Europe.  While we are not satisfied with the lower unit volume in the second quarter, our strategic initiatives are taking hold, and we are confident that they will contribute more meaningfully to unit volume growth in 2020.”

Consolidated Results
Cooper Tire
Q2 2019 ($M)
Q2 2018 ($M)
Change
Net Sales
$
679
 
$
698
 
(2.8
%)
Operating Profit
$
32
 
$
33
 
(3.3
%)
Operating Margin
4.7
%
4.7
%
 

Second quarter net sales were $679 million compared with $698 million in the second quarter of 2018, a decrease of 2.8 percent. Net sales included $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 with $33 million in the second quarter of 2018. Negatively affecting the quarter was $13 million in costs related to new tariffs on products imported into the United States from China compared to the same period a year ago, as well as $2 million of restructuring costs related to Cooper Tire Europe's decision to cease light vehicle tire production at its Melksham, England facility. In addition, the quarter included $17 million of favorable price and mix, and $15 million of favorable raw material costs (excluding the new tariffs). The quarter also included unfavorable volume of $6 million, higher SG&A of $4 million, and increased product liability costs of $1 million. Other costs increased $7 million, primarily due to higher distribution costs, including the non-recurrence of the Albany tornado insurance recovery in 2018.
Cooper's second quarter raw material index decreased 1.2 percent compared to the second quarter of 2018. The raw material index increased sequentially from 160.4 in the first quarter of 2019 to 161.8 in the second quarter of 2019.

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Cooper Q2 2019—2
The effective tax rate for the second quarter was 38.7 percent compared with 12.6 percent for the same period the prior 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 $1 million of net discrete tax items that favorably impacted the tax rate. The effective tax rate is based on forecasted annual earnings and tax rates for the various jurisdictions in which the company operates.
At the end of the second quarter, Cooper had $112 million in unrestricted cash and cash equivalents compared with $180 million at the end of the second quarter of 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 end of the second quarter, the company had invested $49 million in its new joint venture with Sailun Vietnam.
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 delayed draw term loan. The proceeds from the new term loan will be used primarily to retire existing 8 percent senior notes that mature in December of this year.
The company generated a return on invested capital, excluding the impact of the goodwill impairment charge in the fourth quarter of 2018, of 9.3 percent for the trailing four quarters.

Americas Tire Operations
Americas Tire Operations
Q2 2019 ($M)
Q2 2018 ($M)
Change
Net Sales
$
582
 
$
584
 
(0.4%)
Operating Profit
$
47
 
$
40
 
15.6%
Operating Margin
8.0
%
6.9
%
1.1 ppts.

Second quarter net sales in the Americas segment decreased 0.4 percent as a result of $22 million of lower unit volume, partially offset by $20 million of favorable price and mix. For the quarter, segment unit volume was down 3.8 percent compared to the same period a year ago.

Cooper’s second quarter total light vehicle tire shipments in the U.S. decreased 4.0 percent. The U.S. Tire Manufacturers Association (USTMA) reported that its member shipments of light vehicle tires in the U.S. were down 1.5 percent. Total industry shipments (including an estimate for non-USTMA members) increased 0.7 percent for the period.

Second quarter operating profit was $47 million, or 8.0 percent of net sales, compared with $40 million, or 6.9 percent of net sales, for the same period in 2018. Negatively affecting the quarter was $13 million in costs related to new tariffs on products imported into the U.S. from China compared to the same period a year ago. In addition, operating profit included $22 million of favorable price and mix, and $12 million of favorable raw material costs (excluding the new tariffs). The quarter also included $3 million of manufacturing improvements, $6 million of unfavorable SG&A costs, $5 million of lower unit volume, $1 million of higher product liability costs, and $5 million of higher other costs compared to the same period a year ago. Other costs increased primarily as a result of higher distribution costs, including the non-recurrence of the Albany tornado insurance recovery in 2018.







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Cooper Q2 2019—3
International Tire Operations
International Tire Operations
Q2 2019 ($M)
Q2 2018 ($M)
Change
Net Sales
$
139
 
$
168
 
(17.5%)
Operating (Loss)/Profit
$
(1
)
$
6
 
(122.9
%)
Operating Margin
(0.9
%)
3.4
%
(4.3
) ppts.

Second quarter net sales in the International segment decreased 17.5 percent as a result of $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 percent, with unit volume declines in Asia and Europe driven in large part by a challenging new vehicle market in China and weakness in the European replacement tire business.
The segment's second quarter operating loss was $1 million compared with operating profit of $6 million in the second quarter of 2018. The decrease included charges of $2 million related to the Melksham, England restructuring. Additionally, the segment experienced $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. These were partially offset by $3 million of lower raw material costs, and $1 million of lower SG&A costs.
Outlook

“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 the year,” said Hughes. “The Americas segment, excluding TBR tariffs, is still generally in line with previous expectations. On a consolidated basis, we anticipate growth 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;
Improving operating profit margin throughout the year, with full year operating profit margin in line with 2018 reported margin of 5.9 percent;
Capital expenditures to range between $180 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;
An effective tax rate, excluding significant discrete items, to range between 23 and 26 percent; and
Charges related to the Melksham, England restructuring to be in a range of $8 to $11 million.

2019 expectations include tariffs already in place, but do not include rate changes or additional tariffs that continue to be considered, but have not yet been imposed.
Second Quarter 2019 Conference Call Today at 10 a.m. Eastern
Management will discuss the financial and operating results for the second 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 https://services.choruscall.com/links/ctb190729.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.
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Cooper Q2 2019—4
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 the company anticipates may happen with respect to the future performance of the industries in which it operates, the economies of the U.S. 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 trade agreements, or the imposition of new or increased tariffs or trade restrictions, imposed on tires, materials or manufacturing equipment which the company uses, including changes related to tariffs on tires, raw materials and tire manufacturing equipment imported into the U.S. from China or other countries;
changes in economic and business conditions in the world, including changes related to the United Kingdom’s decision to withdraw from the European Union;
the inability to obtain and maintain price increases to offset higher production, tariffs or material costs;
the impact of the recently enacted tax reform legislation;
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 or supplier relationships or distribution channels, including the write-off of outstanding accounts receivable or loss of particular business for competitive, credit, liquidity, bankruptcy, restructuring or other reasons;
the failure to develop technologies, processes or products needed to support consumer demand or changes in consumer behavior, including changes in sales channels;
the costs and timing of restructuring actions and impairments or other charges resulting from such actions, including the possible outcome of the recently announced decision to cease light vehicle tire production in the U.K., or from adverse industry, market or other developments;
consolidation or other cooperation by and 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 or to realize the anticipated savings or benefits from strategic actions;
risks relating to investments and acquisitions, including the failure to successfully integrate them into operations or their related financings may impact liquidity and capital resources;
the ultimate outcome of litigation brought against the company, including product liability claims, 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 cybersecurity, could adversely affect the company’s business operations and financial performance;
government regulatory and legislative initiatives including environmental, healthcare, privacy and tax 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 or the benchmarks used for establishing the 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 ERP systems;
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Cooper Q2 2019—5
the risks associated with doing business outside of the U.S.;
technology advancements;
the inability to recover the costs to refresh existing products or develop and test new products or processes;
the impact of labor problems, including labor disruptions at the company, its joint ventures, or at one or more of its large customers or suppliers;
failure to attract or retain key personnel;
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 or expected return on plan assets assumptions, or changes to related accounting regulations;
changes in the company’s relationship with its joint venture partners or suppliers, including any changes with respect to its former PCT joint venture’s production of TBR products;
the ability to find and develop alternative sources for products supplied by PCT;
a variety of factors, including market conditions, may affect the actual amount expended on stock repurchases; the company’s ability to consummate stock repurchases; changes in the company’s results of operations or financial conditions or strategic priorities may lead to a modification, suspension or cancellation of stock repurchases, which may occur at any time;
the inability to adequately protect the company’s intellectual property rights; and
the inability to use deferred tax assets.

It is not possible to foresee or identify all such factors. Any forward-looking statements in this release are 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 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 believes return on invested capital (“ROIC”) provides additional insight for analysts and investors in evaluating the company’s financial and operating performance.  The company defines ROIC as the trailing four quarters’ after tax operating profit, exclusive of certain items affecting comparability of results from period to period and utilizing the company’s adjusted effective tax rate, 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.




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Cooper Q2 2019—6
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, light truck, 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
[email protected]                    [email protected]


###





Cooper Tire & Rubber Company
Consolidated Statements of Operations
(Unaudited)
 
 
 
 
 
 
 
 
 
(Dollar amounts in thousands except per share amounts)
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Net sales
 
$
679,130

 
$
698,408

 
$
1,298,293

 
$
1,299,904

Cost of products sold
 
579,989

 
604,185

 
1,110,894

 
1,121,196

Gross profit
 
99,141

 
94,223

 
187,399

 
178,708

Selling, general and administrative expense
 
65,811

 
61,460

 
122,665

 
119,490

Restructuring expense
 
1,659

 

 
6,632

 

Operating profit
 
31,671

 
32,763

 
58,102

 
59,218

Interest expense
 
(7,810
)
 
(8,417
)
 
(16,123
)
 
(16,108
)
Interest income
 
1,999

 
1,988

 
5,379

 
4,303

Other pension and postretirement benefit expense
 
(9,288
)
 
(6,967
)
 
(18,650
)
 
(13,953
)
Other non-operating expense
 
(1,463
)
 
(1,391
)
 
(84
)
 
(3,050
)
Income before income taxes
 
15,109

 
17,976

 
28,624

 
30,410

Provision for income taxes
 
5,851

 
2,267

 
12,186

 
5,718

Net income
 
9,258

 
15,709

 
16,438

 
24,692

Net income attributable to noncontrolling shareholders' interests
 
437

 
701

 
637

 
1,400

Net income attributable to Cooper Tire & Rubber Company
 
$
8,821

 
$
15,008

 
$
15,801

 
$
23,292

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.18

 
$
0.30

 
$
0.32

 
$
0.46

Diluted
 
$
0.18

 
$
0.30

 
$
0.31

 
$
0.46

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding (000s):
 
 
 
 
 
 
 
 
Basic
 
50,165

 
50,436

 
50,133

 
50,636

Diluted
 
50,362

 
50,590

 
50,370

 
50,883

 
 
 
 
 
 
 
 
 
Segment information:
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
Americas Tire
 
$
582,307

 
$
584,412

 
$
1,097,243

 
$
1,069,804

International Tire
 
138,514

 
167,839

 
282,299

 
329,083

Eliminations
 
(41,691
)
 
(53,843
)
 
(81,249
)
 
(98,983
)
 
 
 
 
 
 
 
 
 
Operating profit (loss):
 
 
 
 
 
 
 
 
Americas Tire
 
$
46,814

 
$
40,480

 
$
85,603

 
$
71,715

International Tire
 
(1,296
)
 
5,652

 
(2,635
)
 
13,086

Unallocated corporate charges
 
(13,278
)
 
(13,705
)
 
(23,730
)
 
(25,670
)
Eliminations
 
(569
)
 
336

 
(1,136
)
 
87




Cooper Tire & Rubber Company
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
 
 
 
(Dollar amounts in thousands)
 
 
 
 
 
 
June 30,
 
 
2019
 
2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
111,681

 
$
180,493

Notes receivable
 
4,175

 
24,022

Accounts receivable
 
616,974

 
582,524

Inventories
 
589,410

 
580,095

Other current assets
 
48,863

 
59,600

Total current assets
 
1,371,103

 
1,426,734

 
 
 
 
 
Property, plant and equipment, net
 
1,017,356

 
964,158

Operating lease right-of-use assets, net
 
93,183

 

Goodwill
 
18,851

 
53,960

Intangibles, net
 
115,937

 
125,979

Deferred income tax assets
 
27,246

 
54,006

Investment in joint venture
 
49,001

 

Other assets
 
11,396

 
7,942

Total assets
 
$
2,704,073

 
$
2,632,779

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Current liabilities:
 
 
 
 
Notes payable
 
$
19,656

 
$
47,378

Accounts payable
 
267,851

 
240,506

Accrued liabilities
 
280,933

 
262,233

Income taxes payable
 
8,881

 
2,295

Current portion of long-term debt and finance leases
 
173,766

 
1,398

Total current liabilities
 
751,087

 
553,810

 
 
 
 
 
Long-term debt and finance leases
 
120,624

 
295,017

Noncurrent operating leases
 
67,214

 

Postretirement benefits other than pensions
 
234,782

 
255,527

Pension benefits
 
132,024

 
198,421

Other long-term liabilities
 
144,316

 
152,736

Total parent stockholders' equity
 
1,192,349

 
1,118,347

Noncontrolling shareholders' interests in consolidated subsidiaries
 
61,677

 
58,921

Total liabilities and equity
 
$
2,704,073

 
$
2,632,779




Cooper Tire & Rubber Company
Consolidated Statements of Cash Flows
(Unaudited)
 
(Dollar amounts in thousands)
 
 
 
 
 
 
Six Months Ended June 30,
 
 
2019
 
2018
Operating activities:
 
 
Net income
 
$
16,438

 
$
24,692

Adjustments to reconcile net income to net cash from operations:
 
 
 
 
Depreciation and amortization
 
74,347

 
73,587

Stock-based compensation
 
2,319

 
2,627

Change in LIFO inventory reserve
 
9,797

 
2,411

Amortization of unrecognized postretirement benefits
 
18,240

 
18,396

Changes in operating assets and liabilities:
 
 
 
 
Accounts and notes receivable
 
(68,786
)
 
(68,485
)
Inventories
 
(119,118
)
 
(74,104
)
Other current assets
 
(958
)
 
(12,572
)
Accounts payable
 
2,599

 
(12,622
)
Accrued liabilities
 
(30,482
)
 
(13,970
)
Other items
 
(3,560
)
 
(18,599
)
Net cash used in operating activities
 
(99,164
)
 
(78,639
)
Investing activities:
 
 
 
 
Additions to property, plant and equipment and capitalized software
 
(105,354
)
 
(97,759
)
Investment in joint venture
 
(49,001
)
 

Proceeds from the sale of assets
 
49

 
160

Net cash used in investing activities
 
(154,306
)
 
(97,599
)
Financing activities:
 
 
 
 
Net payments on short-term debt
 
4,721

 
10,718

Repayments of long-term debt and finance lease obligations
 
(989
)
 
(1,013
)
Payment of financing fees
 
(2,207
)
 
(1,230
)
Repurchase of common stock
 

 
(29,355
)
Payments of employee taxes withheld from share-based awards
 
(1,158
)
 
(1,894
)
Payment of dividends to Cooper Tire & Rubber Company stockholders
 
(10,529
)
 
(10,623
)
Issuance of common shares related to stock-based compensation
 
177

 

Excess tax benefits on stock-based compensation
 

 
270

Net cash used in financing activities
 
(9,985
)
 
(33,127
)
Effects of exchange rate changes on cash
 
601

 
1,344

Net change in cash, cash equivalents and restricted cash
 
(262,854
)
 
(208,021
)
Cash, cash equivalents and restricted cash at beginning of period
 
378,246

 
392,306

Cash, cash equivalents and restricted cash at end of period
 
$
115,392

 
$
184,285

 
 
 
 
 
Unrestricted Cash and cash equivalents
 
$
111,681

 
$
180,493

Restricted cash included in Other current assets
 
2,211

 
1,702

Restricted cash included in Other assets
 
1,500

 
2,090

Total cash, cash equivalents and restricted cash
 
$
115,392

 
$
184,285





Cooper Tire & Rubber Company
 
 
Reconciliation of Non-GAAP Financial Measures
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollar amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RETURN ON INVESTED CAPITAL (ROIC)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trailing Four Quarters Ended June 30, 2019
 
 
Calculation of ROIC
 
 
 
 
 
Calculation of Net Interest Tax Effect
 
 
Adjusted (Non-GAAP) operating profit
 
 
 
$
197,956

 
Provision for income taxes (c)
 
 
 
$
39,965

 
 
Adjusted (Non-GAAP) effective tax rate
 
27.4
%
 
 
 
Adjusted (Non-GAAP) income before income taxes (d)
 
 
 
$
146,100

 
 
Income tax expense on operating profit
 
54,150

 
 
 
Adjusted (Non-GAAP) effective income tax rate (c)/(d)
 
 
 
27.4
%
 
 
Adjusted operating profit after taxes (a)
 
 
 
143,806

 
 
 
 
 
 
 
 
Total invested capital (b)
 
 
 
$
1,547,207

 
 
 
 
 
 
 
 
ROIC, including noncontrolling equity (a)/(b)
 
 
 
9.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Calculation of Invested Capital (five quarter average)
Equity
 
Long-term debt and finance leases
 
Current portion of long-term debt and finance leases
 
Notes payable
 
Total invested capital
 
 
 
 
June 30, 2019
 
$
1,254,026

 
$
120,624

 
$
173,766

 
$
19,656

 
$
1,568,072

 
 
 
 
March 31, 2019
 
1,248,218

 
121,305

 
173,974

 
20,074

 
1,563,571

 
 
 
 
December 31, 2018
 
1,232,443

 
121,284

 
174,760

 
15,288

 
1,543,775

 
 
 
 
September 30, 2018
 
1,228,509

 
294,841

 
1,376

 
14,831

 
1,539,557

 
 
 
 
June 30, 2018
 
1,177,268

 
295,017

 
1,398

 
47,378

 
1,521,061

 
 
 
 
Five quarter average
 
$
1,228,093

 
$
190,614

 
$
105,055

 
$
23,445

 
$
1,547,207

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Calculation of Trailing Four Quarter Income and Expense Inputs
 
 
 
 
 
 
 
 
 
 
 
 
Quarter-ended:
 
Operating profit as reported
 
Goodwill impairment charge*
 
Adjusted operating profit
 
Provision for income taxes as reported
 
Income before income taxes as reported
 
Goodwill impairment charge*
 
Adjusted income before income taxes
June 30, 2019
 
$
31,671

 
$

 
$
31,671

 
$
5,851

 
$
15,109

 
$

 
$
15,109

March 31, 2019
 
26,431

 

 
26,431

 
6,337

 
13,515

 

 
13,515

December 31, 2018
 
24,826

 
33,827

 
58,653

 
11,550

 
11,989

 
33,827

 
45,816

September 30, 2018
 
81,201

 

 
81,201

 
16,227

 
71,660

 

 
71,660

Trailing four quarters
 
$
164,129

 
$
33,827

 
$
197,956

 
$
39,965

 
$
112,273

 
$
33,827

 
$
146,100

*The Company recorded a non-cash goodwill impairment charge of $33,827 in the fourth quarter of 2018 related to the company's Chinese joint venture.

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Section 3: EX-99.2 (EXHIBIT 99.2)

a20190630slides
Company Update Second Quarter 2019 July 29, 2019


 
Safe Harbor Statement This 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 June 30, 2019 Financial Performance Highlights (millions USD, except EPS) Change from Prior Net Sales by Segment Q2 2019 Q2 2018 Year Americas Tire $ 582 $ 584 (0.4%) International Tire 139 168 (17.5%) Eliminations (42) (54) (22.6%) Total Company $ 679 $ 698 (2.8%) Operating Profit (Loss) by Segment OP % OP % Americas Tire $ 47 8.0 $ 40 6.9 $ 7 International Tire (1) (0.9) 6 3.4 (7) Unallocated Corporate Charges (13) (14) 1 Eliminations (1) — (1) Total Company $ 32 4.7 $ 33 4.7 $ (1) Earnings per share, diluted $ 0.18 $ 0.30 $ (0.12) Cash and cash equivalents $ 112 $ 180 $ (68) Amounts are unaudited and may not add due to rounding. 4


 
Six Months Ended June 30, 2019 Financial Performance Highlights (millions USD, except EPS) Six Months Six Months Change Ended June 30, Ended June 30, from Prior Net Sales by Segment 2019 2018 Year Americas Tire $ 1,097 $ 1,070 2.6 % International Tire 282 329 (14.2)% Eliminations (81) (99) (17.9)% Total Company $ 1,298 $ 1,300 (0.1)% Operating Profit (Loss) by Segment OP % OP % Americas Tire $ 86 7.8 $ 72 6.7 $ 14 International Tire (3) (0.9) 13 4.0 (16) Unallocated Corporate Charges (24) (26) 2 Eliminations (1) — (1) Total Company $ 58 4.5 $ 59 4.6 $ (1) Earnings per share, diluted $ 0.31 $ 0.46 $ (0.15) Cash and cash equivalents $ 112 $ 180 $ (68) Amounts are unaudited and may not add due to rounding. 5


 
Operating Profit Walk Total Company Q2 2018 to Q2 2019 ($millions) $(1) $75 15 17 $50 (13) (6) 33 (4) 32 (2) (1) $25 (7) $32 Net Price/Mix vs. Raw Materials $0 it x g * e * y r it f i n s A * it e f o M i ff m & g il h o r / d s ri lu G in b t r P e u ff a o S r a O P ic l ri T u i g r c a V t L g in P x T w c t in t e e ru c t ra , w N t u ra e ls e s d e p a e o p ri N R r O e e P O 8 t h 9 1 a t 1 0 M 0 2 2 w a R Amounts are unaudited and may not add due to rounding. * Truck and Bus Radial (TBR) tires imported into the U.S. from China became subject to 42.16% of AD/CVD tariffs implemented on February 15, 2019. All tires, as well as raw materials and tire-manufacturing equipment, imported into the U.S. from China became subject to 10% tariffs pursuant to Section 301 of the Trade Act of 1974 in September 2018. This rate was increased to 25% on May 10, 2019. ** Restructuring charges related to Cooper Tire Europe's decision to cease light vehicle tire production at its UK facility. 6


 
CTB Raw Material Price Index North America 300 250 200 150 100 Q2 2019 Average = 161.8 50 0 9 0 1 2 3 4 5 6 7 8 9 0 1 1 1 1 1 1 1 1 1 1 Q Q Q Q Q Q Q Q Q Q Q 1 1 1 1 1 1 1 1 1 1 1 Q3 2019 is an estimate 7


 
Operating Profit Walk Americas Tire Operations Q2 2018 to Q2 2019 ($millions) $7 $100 12 3 $75 22 (13) 47 $50 (6) 40 (5) (1) (5) $25 ($34) Net Price/Mix vs. Raw Materials $0 t * r t fi ix g g s A e ty e fi o in in f & m li h o r /M d s r if u i t r P e f u r G l b O P c lu if t a S o ia g ri c r c T V L g in P x a fa w t in t e T u e c t ra , w n N u ra e ls e a d e a o p ri N M r p O e e P O 8 t h 9 1 a t 1 0 M 0 2 2 w a R Amounts are unaudited and may not add due to rounding. * Truck and Bus Radial (TBR) tires imported into the U.S. from China became subject to 42.16% of AD/CVD tariffs implemented on February 15, 2019. All tires, as well as raw materials and tire-manufacturing equipment, imported into the U.S. from China became subject to 10% tariffs pursuant to Section 301 of the Trade Act of 1974 in September 2018. This rate was increased to 25% on May 10, 2019. 8


 
Operating Profit Walk International Tire Operations ($millions) Q2 2018 to Q2 2019 $(7) $10 1 3 6 $5 (3) (2) (3) $0 $1 (2) Net Price/Mix vs. Raw (1) (1) Materials -$5 t * r fi ix ls A e g g e s o a & m in h s r /M ri u r in t o P e e G l u r O L c t S o t tu g g ri a V c c n in P M fa u ti t u tr a ra w n s r e a a e e p R M R p O O 8 9 1 1 0 0 2 2 Amounts are unaudited and may not add due to rounding. * Restructuring charges related to Cooper Tire Europe's decision to cease light vehicle tire production at its UK facility. 9


 
Non-GAAP Measures Non-GAAP financial measures should be considered in addition to, not as a substitute for, 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 June 30, 2019 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. 10


 
Non-GAAP Measures 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’ after tax operating profit, exclusive of certain items affecting comparability of results from period to period and utilizing the company’s adjusted effective tax rate, 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 July 1, 2018 – June 30, 2019 (millions USD) Adjusted (Non-GAAP) operating profit $ 198 Adjusted (Non-GAAP) effective tax rate 27.4% Income tax expense on operating profit 54 Adjusted operating profit after taxes $ 144 Total invested capital $ 1,547 Return on invested capital 9.3% 11 Amounts may not add due to rounding.


 
Non-GAAP Measures Trailing Four Quarter Effective Tax Rate (millions USD) Provision for income taxes $ 40 Adjusted (Non-GAAP) income before income taxes 146 Adjusted (Non-GAAP) effective income tax rate 27.4% Calculation of Total Invested Capital (five quarter average) (millions USD) Current Portion of Short-term Total Long-term Long-term Notes Invested Equity Debt Debt Payable Capital June 30, 2019 $ 1,254 $ 121 $ 174 $ 20 $ 1,568 March 31, 2019 1,248 121 174 20 1,564 December 31, 2018 1,232 121 175 15 1,544 September 30, 2018 1,229 295 1 15 1,540 June 30, 2018 1,177 295 1 47 1,521 Five Quarter Average $ 1,228 $ 191 $ 105 $ 23 $ 1,547 12 Amounts may not add due to rounding.


 
Non-GAAP Measures Calculation of Trailing Four Quarter Income and Expense Inputs Operating Goodwill Adjusted Provision for Income before Goodwill Adjusted income profit as impairment operating income taxes income taxes impairment before income Quarter-ended: reported charge* profit as reported as reported charge* taxes June 30, 2019 $ 31,671 $ — $ 31,671 $ 5,851 $ 15,109 $ — $ 15,109 March 31, 2019 26,431 — 26,431 6,337 13,515 — 13,515 December 31, 2018 24,826 33,827 58,653 11,550 11,989 33,827 45,816 September 30, 2018 81,201 — 81,201 16,227 71,660 — 71,660 Trailing four quarters $ 164,129 $ 33,827 $ 197,956 $ 39,965 $ 112,273 $ 33,827 $ 146,100 *The Company recorded a non-cash goodwill impairment charge of $33,827 in the fourth quarter of 2018 related to the company's Chinese joint venture. 13 Amounts may not add due to rounding.


 
Risks 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 trade agreements, or the imposition of new or increased tariffs or trade restrictions, imposed on tires or materials or manufacturing equipment which the company uses, including changes related to tariffs on tires, raw materials and tire-manufacturing equipment imported into the U.S. from China or other countries; • changes in economic and business conditions in the world, including changes related to the United Kingdom’s decision to withdraw from the European Union; • the inability to obtain and maintain price increases to offset higher production, tariffs or material costs; • the impact of the recently enacted tax reform legislation; • 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 or supplier relationships or distribution channels, including the write-off of outstanding accounts receivable or loss of particular business for competitive, credit, liquidity, bankruptcy, restructuring or other reasons; • the failure to develop technologies, processes or products needed to support consumer demand or changes in consumer behavior, including changes in sales channels; • the costs and timing of restructuring actions and impairments or other charges resulting from such actions, including the possible outcome of the recently announced decision to cease light vehicle tire production in the U.K., or from adverse industry, market or other developments; • consolidation or other cooperation by and 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 or to realize the anticipated savings or benefits from strategic actions; • risks relating to investments and acquisitions, including the failure to successfully integrate them into operations or their related financings may impact liquidity and capital resources; • the ultimate outcome of litigation brought against the company, including product liability claims, 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 cybersecurity, could adversely affect the company’s business operations and financial performance; • government regulatory and legislative initiatives including environmental, healthcare, privacy and tax 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 or the benchmarks used for establishing the 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 ERP systems; • the risks associated with doing business outside of the U.S.; • technology advancements; • the inability to recover the costs to refresh existing products or develop and test new products or processes; • the impact of labor problems, including labor disruptions at the company, its joint ventures, or at one or more of its large customers or suppliers; • failure to attract or retain key personnel; • 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 or expected return on plan assets assumptions, or changes to related accounting regulations; • changes in the company’s relationship with its joint venture partners or suppliers, including any changes with respect to its former PCT joint venture’s production of TBR products; • the ability to find and develop alternative sources for products supplied by PCT; • a variety of factors, including market conditions, may affect the actual amount expended on stock repurchases; the company’s ability to consummate stock repurchases; changes in the company’s results of operations or financial conditions or strategic priorities may lead to a modification, suspension or cancellation of stock repurchases, which may occur at any time; • the inability to adequately protect the company’s intellectual property rights; and • the inability to use deferred tax assets. 14


 
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