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Section 1: 8-K (8-K)

Document
false0000024491 0000024491 2019-10-28 2019-10-28


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, 2019
 
 
 
Cooper Tire & Rubber Company
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
 
 
Delaware
 
001-04329
 
34-4297750
(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 October 28, 2019, Cooper Tire & Rubber Company (the "Company") issued a press release reporting its financial results for the third 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 October 28, 2019, the Company posted a summary slide presentation regarding third 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 October 28, 2019
99.2 Slide Presentation regarding third 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
October 28, 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
400671366_cooperstacked2017a25.jpg                      NEWS
____________________________________________________________________________________________________________________________________________

Cooper Tire & Rubber Company Reports
Third Quarter 2019 Results

FINDLAY, Ohio, Oct. 28, 2019 – Cooper Tire & Rubber Company (NYSE: CTB) today reported third quarter 2019 net income of $29 million, or diluted earnings per share of $0.58, compared with $54 million, or $1.07 per share, last year.
    
Third Quarter Highlights
Net sales decreased 4.5 percent to $704 million.
Unit volume decreased 7.0 percent compared to the third quarter of 2018.
Operating profit was $53 million, or 7.5 percent of net sales.

“Despite the continued impact of tariffs, we were pleased to deliver sequential operating profit margin improvement in the third quarter driven by positive trends in pricing, mix and raw materials,” said President & Chief Executive Officer Brad Hughes. “As expected, our volume was impacted by customer inventory actions in the U.S., as well as challenging market conditions in our other regions. Cooper continues to make progress on the strategic initiatives outlined at our Investor Day in 2018, including expansion into new channels and efforts to optimize our global manufacturing footprint, including our actions in the U.K. and new joint venture in Vietnam. We expect that the impact from our strategic initiatives will begin to make a more visible contribution to our results in 2020.”

Consolidated Results
Cooper Tire
Q3 2019 ($M)
Q3 2018 ($M)
Change
Net Sales
$
704

$
738

(4.5
%)
Operating Profit
$
53

$
81

(35.0
%)
Operating Margin
7.5
%
11.0
%
(3.5
) ppts.

Third quarter net sales were $704 million compared with $738 million in the third quarter of 2018, a decrease of 4.5 percent. Net sales included $54 million of lower unit volume and $7 million of unfavorable foreign currency impact, which were partially offset by $27 million of favorable price and mix.
Operating profit was $53 million compared with $81 million in the third quarter of 2018. Key drivers included:
$4 million benefit from lower product liability costs related to an adjustment of the company's product liability reserve model in the third quarter of 2019, compared to a $31 million benefit in 2018 resulting from a similar adjustment. The impact of the variance in the model adjustment, partially offset by normal activity, including settlements and changes in the amounts of reserves, resulted in $23 million of higher net product liability expense for the third quarter of 2019.
$15 million of higher costs related to new tariffs on products imported into the United States from China compared to the same period a year ago.
$20 million of favorable price and mix and $24 million of favorable raw material costs (excluding the new tariffs).
$16 million impact of lower volume, $12 million of higher manufacturing costs and $6 million of higher all other costs.

-more-



Cooper Q3 2019—2
Cooper's third quarter raw material index decreased 6.9 percent compared to the third quarter of 2018. The raw material index decreased 2.9 percent sequentially from 161.8 in the second quarter of 2019 to 157.1 in the third quarter of 2019.

The effective tax rate for the third quarter was 21.0 percent compared with 22.6 percent for the same period the prior year. 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 third quarter, Cooper had $137 million in unrestricted cash and cash equivalents compared with $209 million at the end of the third quarter of 2018. Capital expenditures in the third quarter were $50 million compared with $46 million in the same period a year ago. In addition, as of the end of the third quarter, the company had invested $49 million in its new joint venture with Sailun Vietnam, named ACTR Company Limited.
The company generated a return on invested capital, excluding the impact of the goodwill impairment charge in the fourth quarter of 2018, of 7.8 percent for the trailing four quarters.

Americas Tire Operations
Americas Tire Operations
Q3 2019 ($M)
Q3 2018 ($M)
Change
Net Sales
$
602

$
629

(4.3%)
Operating Profit
$
68

$
87

(22.2%)
Operating Margin
11.3
%
13.9
%
(2.6
) ppts.

Third quarter net sales in the Americas segment decreased 4.3 percent as a result of $51 million of lower unit volume and $1 million of unfavorable foreign currency impact, partially offset by $25 million of favorable price and mix. For the quarter, segment unit volume was down 8.2 percent compared to the same period a year ago.

Cooper’s third quarter total light vehicle tire shipments in the U.S. decreased 7.7 percent. The U.S. Tire Manufacturers Association (USTMA) reported that its member shipments of light vehicle tires in the U.S. were up 0.7 percent. Total industry shipments (including an estimate for non-USTMA members) increased 3.5 percent for the period. As previously stated, Cooper's U.S. volume was impacted by customer inventory actions.

Third quarter operating profit was $68 million, or 11.3 percent of net sales, compared with $87 million, or 13.9 percent of net sales, for the same period in 2018. Operating profit included $23 million of favorable price and mix, and $22 million of favorable raw material costs (excluding the new tariffs). This was offset by $23 million related to product liability, $15 million of new tariffs, $13 million of volume, $6 million of manufacturing, $5 million of SG&A and $2 million of other costs compared to the same period a year ago.

International Tire Operations
International Tire Operations
Q3 2019 ($M)
Q3 2018 ($M)
Change
Net Sales
$
132

$
162

(18.6%)
Operating (Loss)/Profit
$
(5
)
$
6

(180.6
%)
Operating Margin
(3.7
%)
3.7
%
(7.4
) ppts.

Third quarter net sales in the International segment decreased 18.6 percent as a result of $28 million of lower unit volume and $6 million of unfavorable foreign currency impact, partially offset by $4 million of favorable price and mix. Segment unit volume decreased 16.4 percent driven primarily by lower intercompany shipments.
-more-



Cooper Q3 2019—3
The segment's third quarter operating loss was $5 million compared with operating profit of $6 million in the third quarter of 2018. The quarter included $3 million of unfavorable price and mix and $2 million of favorable raw material costs. In addition, the quarter included $1 million of lower SG&A costs, which were more than offset by $3 million of volume, $6 million of manufacturing, $1 million of restructuring and $1 million of other costs compared to the same period a year ago.
Outlook

“Cooper expects fourth quarter operating profit margin to improve sequentially, with full year operating profit margin slightly above the 5.9 percent we reported for full year 2018, driven by positive trends in pricing, mix and raw materials,” said Hughes. “We expect continued global volume headwinds in the fourth quarter, but we anticipate growth in 2020 driven by our strategic initiatives and improving market conditions.”

Additional management expectations for 2019 include:
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.
Charges related to the Melksham, England restructuring to be in a range of $8 to $10 million.
These 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.
Third Quarter 2019 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 https://services.choruscall.com/links/ctb191028.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 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;

-more-



Cooper Q3 2019—4
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 labor problems, including labor disruptions at the company, its joint ventures, or at one or more of its large customers or suppliers;
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;
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 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;
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;
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 TBR products;
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.


-more-



Cooper Q3 2019—5
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.
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 Income
(Unaudited)
 
 
 
 
 
 
 
 
 
(Dollar amounts in thousands except per share amounts)
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Net sales
 
$
704,134

 
$
737,671

 
$
2,002,428

 
$
2,037,575

Cost of products sold
 
589,768

 
597,724

 
1,700,662

 
1,718,920

Gross profit
 
114,366

 
139,947

 
301,766

 
318,655

Selling, general and administrative expense
 
60,786

 
58,746

 
183,452

 
178,236

Restructuring expense
 
811

 

 
7,442

 

Operating profit
 
52,769

 
81,201

 
110,872

 
140,419

Interest expense
 
(7,476
)
 
(7,930
)
 
(23,599
)
 
(24,038
)
Interest income
 
1,507

 
2,399

 
6,887

 
6,702

Other pension and postretirement benefit expense
 
(9,562
)
 
(6,932
)
 
(28,212
)
 
(20,885
)
Other non-operating expense
 
(509
)
 
2,922

 
(593
)
 
(129
)
Income before income taxes
 
36,729

 
71,660

 
65,355

 
102,069

Provision for income taxes
 
7,721

 
16,227

 
19,908

 
21,944

Net income
 
29,008

 
55,433

 
45,447

 
80,125

Net (loss) income attributable to noncontrolling shareholders' interests
 
(336
)
 
1,720

 
301

 
3,120

Net income attributable to Cooper Tire & Rubber Company
 
$
29,344

 
$
53,713

 
$
45,146

 
$
77,005

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.58

 
$
1.07

 
$
0.90

 
$
1.53

Diluted
 
$
0.58

 
$
1.07

 
$
0.90

 
$
1.52

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding (000s):
 
 
 
 
 
 
 
 
Basic
 
50,179

 
50,065

 
50,148

 
50,443

Diluted
 
50,358

 
50,279

 
50,366

 
50,678

 
 
 
 
 
 
 
 
 
Segment information:
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
 
Americas Tire
 
$
601,957

 
$
628,704

 
$
1,699,201

 
$
1,698,507

International Tire
 
132,270

 
162,401

 
414,569

 
491,484

Eliminations
 
(30,093
)
 
(53,434
)
 
(111,342
)
 
(152,416
)
 
 
 
 
 
 
 
 
 
Operating profit (loss):
 
 
 
 
 
 
 
 
Americas Tire
 
$
67,941

 
$
87,353

 
$
153,544

 
$
159,068

International Tire
 
(4,831
)
 
5,994

 
(7,466
)
 
19,080

Unallocated corporate charges
 
(11,051
)
 
(12,518
)
 
(34,781
)
 
(38,188
)
Eliminations
 
710

 
372

 
(425
)
 
459




Cooper Tire & Rubber Company
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
 
 
 
(Dollar amounts in thousands)
 
 
 
 
 
 
September 30,
 
 
2019
 
2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
137,093

 
$
208,616

Notes receivable
 
8,647

 
7,819

Accounts receivable
 
617,753

 
616,200

Inventories
 
566,880

 
531,362

Other current assets
 
48,501

 
53,897

Total current assets
 
1,378,874

 
1,417,894

 
 
 
 
 
Property, plant and equipment, net
 
1,011,792

 
964,404

Operating lease right-of-use assets, net
 
86,285

 

Goodwill
 
18,851

 
52,725

Intangibles, net
 
113,510

 
122,875

Deferred income tax assets
 
24,256

 
47,043

Investment in joint venture
 
48,936

 

Other assets
 
14,112

 
7,946

Total assets
 
$
2,696,616

 
$
2,612,887

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Current liabilities:
 
 
 
 
Notes payable
 
$
16,188

 
$
14,831

Accounts payable
 
253,821

 
252,551

Accrued liabilities
 
305,477

 
269,862

Income taxes payable
 
15,787

 
17,407

Current portion of long-term debt and finance leases
 
173,578

 
1,376

Total current liabilities
 
764,851

 
556,027

 
 
 
 
 
Long-term debt and finance leases
 
120,657

 
294,841

Noncurrent operating leases
 
60,335

 

Postretirement benefits other than pensions
 
234,773

 
255,980

Pension benefits
 
106,577

 
146,198

Other long-term liabilities
 
140,960

 
131,332

Total parent stockholders' equity
 
1,209,110

 
1,167,544

Noncontrolling shareholders' interests in consolidated subsidiaries
 
59,353

 
60,965

Total liabilities and equity
 
$
2,696,616

 
$
2,612,887




Cooper Tire & Rubber Company
Consolidated Statements of Cash Flows
(Unaudited)
 
(Dollar amounts in thousands)
 
 
 
 
 
 
Nine Months Ended September 30,
 
 
2019
 
2018
Operating activities:
 
 
Net income
 
$
45,447

 
$
80,125

Adjustments to reconcile net income to net cash (used in) provided by operations:
 
 
 
 
Depreciation and amortization
 
111,518

 
110,210

Stock-based compensation
 
3,473

 
3,867

Change in LIFO inventory reserve
 
2,438

 
1,134

Amortization of unrecognized postretirement benefits
 
27,314

 
27,535

Changes in operating assets and liabilities:
 
 
 
 
Accounts and notes receivable
 
(80,571
)
 
(88,942
)
Inventories
 
(96,043
)
 
(24,957
)
Other current assets
 
(352
)
 
(9,190
)
Accounts payable
 
(2,492
)
 
6,500

Accrued liabilities
 
(5,350
)
 
(6,832
)
Other items
 
(19,795
)
 
(65,928
)
Net cash (used in) provided by operating activities
 
(14,413
)
 
33,522

Investing activities:
 
 
 
 
Additions to property, plant and equipment and capitalized software
 
(155,808
)
 
(143,974
)
Investment in joint venture
 
(49,001
)
 

Proceeds from the sale of assets
 
6

 
160

Net cash used in investing activities
 
(204,803
)
 
(143,814
)
Financing activities:
 
 
 
 
Issuances of short-term debt
 
1,488

 
2,467

Repayments of short-term debt
 
(588
)
 
(24,619
)
Repayments of long-term debt and finance lease obligations
 
(1,196
)
 
(1,203
)
Payment of financing fees
 
(2,207
)
 
(1,230
)
Repurchase of common stock
 

 
(30,183
)
Payments of employee taxes withheld from share-based awards
 
(1,376
)
 
(2,107
)
Payment of dividends to Cooper Tire & Rubber Company stockholders
 
(15,799
)
 
(15,880
)
Issuance of common shares related to stock-based compensation
 
114

 

Excess tax benefits on stock-based compensation
 

 
275

Net cash used in financing activities
 
(19,564
)
 
(72,480
)
Effects of exchange rate changes on cash
 
1,958

 
2,812

Net change in cash, cash equivalents and restricted cash
 
(236,822
)
 
(179,960
)
Cash, cash equivalents and restricted cash at beginning of period
 
378,246

 
392,306

Cash, cash equivalents and restricted cash at end of period
 
$
141,424

 
$
212,346

 
 
 
 
 
Cash and cash equivalents
 
$
137,093

 
$
208,616

Restricted cash included in Other current assets
 
2,850

 
1,311

Restricted cash included in Other assets
 
1,481

 
2,419

Total cash, cash equivalents and restricted cash
 
$
141,424

 
$
212,346





Cooper Tire & Rubber Company
 
 
Reconciliation of Non-GAAP Financial Measures
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollar amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RETURN ON INVESTED CAPITAL (ROIC)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trailing Four Quarters Ended September 30, 2019
 
 
Calculation of ROIC
 
 
 
 
 
Calculation of Net Interest Tax Effect
 
 
Adjusted (Non-GAAP) operating profit
 
 
 
$
169,524

 
Provision for income taxes (c)
 
 
 
$
31,459

 
 
Adjusted (Non-GAAP) effective tax rate
 
28.3
%
 
 
 
Adjusted (Non-GAAP) income before income taxes (d)
 
 
 
$
111,169

 
 
Income tax expense on operating profit
 
47,973

 
 
 
Adjusted (Non-GAAP) effective income tax rate (c)/(d)
 
 
 
28.3
%
 
 
Adjusted operating profit after taxes (a)
 
 
 
121,551

 
 
 
 
 
 
 
 
Total invested capital (b)
 
 
 
$
1,558,772

 
 
 
 
 
 
 
 
ROIC, including noncontrolling equity (a)/(b)
 
 
 
7.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
 
 
September 30, 2019
 
$
1,268,463

 
$
120,657

 
$
173,578

 
$
16,188

 
$
1,578,886

 
 
 
 
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

 
 
 
 
Five quarter average
 
$
1,246,332

 
$
155,742

 
$
139,491

 
$
17,207

 
$
1,558,772

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
September 30, 2019
 
$
52,769

 
$

 
$
52,769

 
$
7,721

 
$
36,729

 
$

 
$
36,729

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

Trailing four quarters
 
$
135,697

 
$
33,827

 
$
169,524

 
$
31,459

 
$
77,342

 
$
33,827

 
$
111,169

*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)

a2019093010qpressrelease
Company Update Third Quarter 2019 October 28, 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 September 30, 2019 Financial Performance Highlights (millions USD, except EPS) Change from Prior Net Sales by Segment Q3 2019 Q3 2018 Year Americas Tire $ 602 $ 629 (4.3%) International Tire 132 162 (18.6%) Eliminations (30) (53) (43.7%) Total Company $ 704 $ 738 (4.5%) Operating Profit (Loss) by Segment OP % OP % Americas Tire $ 68 11.3 $ 87 13.9 $ (19) International Tire (5) (3.7) 6 3.7 (11) Unallocated Corporate Charges (11) (13) 2 Eliminations 1 — 1 Total Company $ 53 7.5 $ 81 11.0 $ (28) Earnings per share, diluted $ 0.58 $ 1.07 $ (0.49) Cash and cash equivalents $ 137 $ 209 $ (72) Amounts are unaudited and may not add due to rounding. 4


 
Nine Months Ended September 30, 2019 Financial Performance Highlights (millions USD, except EPS) Nine Months Nine Months Ended Ended Change September 30, September 30, from Prior Net Sales by Segment 2019 2018 Year Americas Tire $ 1,699 $ 1,699 —% International Tire 415 491 (15.6)% Eliminations (111) (152) (26.9)% Total Company $ 2,002 $ 2,038 (1.7)% Operating Profit (Loss) by Segment OP % OP % Americas Tire $ 154 9.0 $ 159 9.4 $ (6) International Tire (7) (1.8) 19 3.9 (27) Unallocated Corporate Charges (35) (38) 3 Eliminations — — (1) Total Company $ 111 5.5 $ 140 6.9 $ (30) Earnings per share, diluted $ 0.90 $ 1.52 $ (0.62) Cash and cash equivalents $ 137 $ 209 $ (72) Amounts are unaudited and may not add due to rounding. 5


 
Operating Profit Walk Total Company Q3 2018 to Q3 2019 ($millions) $(28) $44 Net Price/Mix vs. Raw Materials 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 Q3 2019 Average = 157.1 Q4 2019 is an estimate 7


 
Operating Profit Walk Americas Tire Operations Q3 2018 to Q3 2019 ($millions) $(19) $45 Net Price/Mix vs. Raw Materials 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) Q3 2018 to Q3 2019 $(11) $(1) Net Price/Mix vs. Raw Materials 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 September 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 October 1, 2018 – September 30, 2019 (millions USD) Adjusted (Non-GAAP) operating profit $ 170 Adjusted (Non-GAAP) effective tax rate 28.3% Income tax expense on operating profit 48 Adjusted operating profit after taxes $ 122 Total invested capital $ 1,559 Return on invested capital 7.8% 11 Amounts may not add due to rounding.


 
Non-GAAP Measures Trailing Four Quarter Effective Tax Rate (millions USD) Provision for income taxes $ 31 Adjusted (Non-GAAP) income before income taxes 111 Adjusted (Non-GAAP) effective income tax rate 28.3% 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 September 30, 2019 $ 1,268 $ 121 $ 174 $ 16 $ 1,579 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 Five Quarter Average $ 1,246 $ 156 $ 139 $ 17 $ 1,559 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 as income taxes impairment before income Quarter-ended: reported charge* profit reported as reported charge* taxes September 30, 2019 $ 52,769 $ — $ 52,769 $ 7,721 $ 36,729 $ — $ 36,729 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 Trailing four quarters $ 135,697 $ 33,827 $ 169,524 $ 31,459 $ 77,342 $ 33,827 $ 111,169 *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, 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 labor problems, including labor disruptions at the company, its joint ventures, or at one or more of its large customers or suppliers; • 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; • 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 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; • 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; • 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 TBR products; • 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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