Toggle SGML Header (+)


Section 1: 10-Q (10-Q)

Document
P1Y19751000false--12-31Q320190000024491583600072090000772150.1050.1050.1050.1050.1050.1051130000000030000000087850292878502920.0150.080.0762510687100012027400001150000005000000003777665937666319 0000024491 2019-01-01 2019-09-30 0000024491 2019-10-25 0000024491 2019-07-01 2019-09-30 0000024491 2018-01-01 2018-09-30 0000024491 2018-07-01 2018-09-30 0000024491 2019-09-30 0000024491 2018-12-31 0000024491 2017-12-31 0000024491 2018-09-30 0000024491 srt:MinimumMember ctb:TBRMember ctb:GRTAcquisitionMember 2019-04-05 0000024491 ctb:TBRMember ctb:GRTAcquisitionMember 2019-09-30 0000024491 srt:MaximumMember ctb:TBRMember ctb:GRTAcquisitionMember 2019-04-05 0000024491 ctb:TBRMember 2019-04-05 0000024491 ctb:GRTAcquisitionMember 2018-10-01 2018-12-31 0000024491 us-gaap:CostOfSalesMember us-gaap:LossFromCatastrophesMember 2017-01-01 2017-12-31 0000024491 us-gaap:CostOfSalesMember us-gaap:LossFromCatastrophesMember 2018-07-01 2018-09-30 0000024491 us-gaap:CostOfSalesMember us-gaap:LossFromCatastrophesMember 2018-01-01 2018-12-31 0000024491 us-gaap:UnfavorableRegulatoryActionMember 2019-01-01 2019-09-30 0000024491 us-gaap:UnfavorableRegulatoryActionMember 2019-07-01 2019-09-30 0000024491 ctb:Section301TariffsMember 2018-09-24 2018-09-24 0000024491 us-gaap:UnfavorableRegulatoryActionMember 2019-02-15 2019-02-15 0000024491 ctb:Section301TariffsMember 2019-01-01 2019-09-30 0000024491 us-gaap:CostOfSalesMember us-gaap:LossFromCatastrophesMember 2018-01-01 2018-09-30 0000024491 ctb:Section301TariffsMember 2019-07-01 2019-09-30 0000024491 ctb:Section301TariffsMember 2019-05-10 2019-05-10 0000024491 srt:MinimumMember 2019-01-17 0000024491 srt:MaximumMember 2019-01-17 2019-01-17 0000024491 us-gaap:EmployeeSeveranceMember 2019-09-30 0000024491 2019-01-17 2019-01-17 0000024491 srt:MinimumMember 2019-01-17 2019-01-17 0000024491 us-gaap:FacilityClosingMember 2019-01-01 2019-09-30 0000024491 srt:MaximumMember 2019-01-17 0000024491 us-gaap:FacilityClosingMember 2019-07-01 2019-09-30 0000024491 us-gaap:OtherRestructuringMember 2019-06-30 0000024491 us-gaap:EmployeeSeveranceMember 2019-07-01 2019-09-30 0000024491 us-gaap:EmployeeSeveranceMember 2019-01-01 2019-09-30 0000024491 us-gaap:OtherRestructuringMember 2019-07-01 2019-09-30 0000024491 us-gaap:OtherRestructuringMember 2019-01-01 2019-09-30 0000024491 us-gaap:EmployeeSeveranceMember 2018-12-31 0000024491 us-gaap:EmployeeSeveranceMember 2019-06-30 0000024491 us-gaap:OtherRestructuringMember 2018-12-31 0000024491 us-gaap:OperatingSegmentsMember ctb:LightvehicleMember ctb:InternationalTireMember 2019-01-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:TBRMember ctb:AmericasTireMember 2019-01-01 2019-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:TBRMember 2019-07-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:InternationalTireMember 2019-07-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:AmericasTireMember 2019-01-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:OtherMember ctb:InternationalTireMember 2019-07-01 2019-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:OtherMember 2019-01-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:TBRMember ctb:InternationalTireMember 2019-07-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:OtherMember ctb:AmericasTireMember 2019-01-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:LightvehicleMember ctb:InternationalTireMember 2019-07-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:AmericasTireMember 2019-07-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:InternationalTireMember 2019-01-01 2019-09-30 0000024491 ctb:LightvehicleMember 2019-07-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:TBRMember ctb:AmericasTireMember 2019-07-01 2019-09-30 0000024491 srt:ConsolidationEliminationsMember 2019-07-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:OtherMember ctb:InternationalTireMember 2019-01-01 2019-09-30 0000024491 ctb:TBRMember 2019-07-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:LightvehicleMember ctb:AmericasTireMember 2019-01-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:LightvehicleMember ctb:AmericasTireMember 2019-07-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:OtherMember ctb:AmericasTireMember 2019-07-01 2019-09-30 0000024491 ctb:LightvehicleMember 2019-01-01 2019-09-30 0000024491 ctb:TBRMember 2019-01-01 2019-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:LightvehicleMember 2019-01-01 2019-09-30 0000024491 ctb:OtherMember 2019-01-01 2019-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:LightvehicleMember 2019-07-01 2019-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:OtherMember 2019-07-01 2019-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:TBRMember 2019-01-01 2019-09-30 0000024491 srt:ConsolidationEliminationsMember 2019-01-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:TBRMember ctb:InternationalTireMember 2019-01-01 2019-09-30 0000024491 ctb:OtherMember 2019-07-01 2019-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:LightvehicleMember ctb:InternationalTireMember 2018-07-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:OtherMember ctb:InternationalTireMember 2018-07-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:LightvehicleMember ctb:AmericasTireMember 2018-01-01 2018-09-30 0000024491 ctb:OtherMember 2018-07-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:AmericasTireMember 2018-07-01 2018-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:OtherMember 2018-01-01 2018-09-30 0000024491 ctb:LightvehicleMember 2018-07-01 2018-09-30 0000024491 ctb:TBRMember 2018-07-01 2018-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:LightvehicleMember 2018-07-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:TBRMember ctb:AmericasTireMember 2018-07-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:LightvehicleMember ctb:InternationalTireMember 2018-01-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:TBRMember ctb:InternationalTireMember 2018-07-01 2018-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:TBRMember 2018-01-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:TBRMember ctb:InternationalTireMember 2018-01-01 2018-09-30 0000024491 ctb:LightvehicleMember 2018-01-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:OtherMember ctb:AmericasTireMember 2018-01-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:AmericasTireMember 2018-01-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:OtherMember ctb:AmericasTireMember 2018-07-01 2018-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:OtherMember 2018-07-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:InternationalTireMember 2018-01-01 2018-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:TBRMember 2018-07-01 2018-09-30 0000024491 srt:ConsolidationEliminationsMember 2018-01-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:LightvehicleMember ctb:AmericasTireMember 2018-07-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:OtherMember ctb:InternationalTireMember 2018-01-01 2018-09-30 0000024491 srt:ConsolidationEliminationsMember ctb:LightvehicleMember 2018-01-01 2018-09-30 0000024491 srt:ConsolidationEliminationsMember 2018-07-01 2018-09-30 0000024491 ctb:TBRMember 2018-01-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:InternationalTireMember 2018-07-01 2018-09-30 0000024491 ctb:OtherMember 2018-01-01 2018-09-30 0000024491 us-gaap:OperatingSegmentsMember ctb:TBRMember ctb:AmericasTireMember 2018-01-01 2018-09-30 0000024491 us-gaap:ForeignCountryMember 2019-09-30 0000024491 us-gaap:DomesticCountryMember 2019-09-30 0000024491 us-gaap:LetterOfCreditMember 2018-12-31 0000024491 ctb:TermLoanAFacilityMember us-gaap:LineOfCreditMember 2019-06-27 0000024491 ctb:BankGroupAndAccountsReceivableSecuritizationFacilityMember 2019-09-30 0000024491 us-gaap:LetterOfCreditMember us-gaap:LineOfCreditMember 2019-06-27 0000024491 us-gaap:LetterOfCreditMember us-gaap:LineOfCreditMember 2018-02-15 0000024491 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2019-06-27 0000024491 us-gaap:LetterOfCreditMember 2019-09-30 0000024491 ctb:AccountsReceivableSecuritizationFacilityMember ctb:AmendedAccountsReceivableFacilityMember 2018-02-15 0000024491 us-gaap:RevolvingCreditFacilityMember 2019-06-27 0000024491 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2018-02-15 0000024491 ctb:AsianCreditLinesMember 2019-09-30 0000024491 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2019-09-30 0000024491 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2018-12-31 0000024491 srt:ParentCompanyMember ctb:UnsecuredNotesDueInMarchTwoThousandTwentySevenMember 2019-09-30 0000024491 srt:ParentCompanyMember ctb:UnsecuredNotesDueInDecemberTwoThousandNineteenMember 2019-09-30 0000024491 ctb:UnsecuredNotesDueInMarchTwoThousandTwentySevenMember 2018-12-31 0000024491 ctb:UnsecuredNotesDueInDecemberTwoThousandNineteenMember 2018-12-31 0000024491 ctb:CapitalizedLeasesAndOtherMember 2019-09-30 0000024491 ctb:CapitalizedLeasesAndOtherMember 2018-12-31 0000024491 ctb:UnsecuredNotesDueInDecemberTwoThousandNineteenMember 2019-09-30 0000024491 ctb:UnsecuredNotesDueInMarchTwoThousandTwentySevenMember 2019-09-30 0000024491 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember ctb:NonEmployeeDirectorsStockPlanMember 2019-09-30 0000024491 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateSwapMember 2019-09-30 0000024491 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember 2019-09-30 0000024491 us-gaap:FairValueMeasurementsRecurringMember ctb:NonEmployeeDirectorsStockPlanMember 2019-09-30 0000024491 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember ctb:NonEmployeeDirectorsStockPlanMember 2019-09-30 0000024491 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember ctb:NonEmployeeDirectorsStockPlanMember 2019-09-30 0000024491 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember 2019-09-30 0000024491 us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember 2019-09-30 0000024491 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateSwapMember 2019-09-30 0000024491 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateSwapMember 2019-09-30 0000024491 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember 2019-09-30 0000024491 us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateSwapMember 2019-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000024491 us-gaap:NondesignatedMember 2019-09-30 0000024491 us-gaap:AccruedLiabilitiesMember 2018-12-31 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember 2019-09-30 0000024491 us-gaap:NondesignatedMember 2018-12-31 0000024491 us-gaap:OtherNoncurrentLiabilitiesMember 2018-12-31 0000024491 us-gaap:OtherNoncurrentLiabilitiesMember 2019-09-30 0000024491 us-gaap:AccruedLiabilitiesMember 2019-09-30 0000024491 us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember 2018-12-31 0000024491 us-gaap:FairValueMeasurementsRecurringMember ctb:NonEmployeeDirectorsStockPlanMember 2018-12-31 0000024491 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember 2018-12-31 0000024491 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember ctb:NonEmployeeDirectorsStockPlanMember 2018-12-31 0000024491 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember 2018-12-31 0000024491 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember 2018-12-31 0000024491 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember ctb:NonEmployeeDirectorsStockPlanMember 2018-12-31 0000024491 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember ctb:NonEmployeeDirectorsStockPlanMember 2018-12-31 0000024491 us-gaap:FairValueInputsLevel1Member 2019-09-30 0000024491 us-gaap:ForeignExchangeContractMember 2018-12-31 0000024491 us-gaap:CashFlowHedgingMember 2019-01-01 2019-09-30 0000024491 us-gaap:FairValueInputsLevel1Member 2018-12-31 0000024491 us-gaap:InterestRateSwapMember 2019-07-11 0000024491 2018-01-01 2018-12-31 0000024491 us-gaap:ForeignExchangeContractMember 2019-09-30 0000024491 srt:MaximumMember us-gaap:ForeignExchangeContractMember 2019-01-01 2019-09-30 0000024491 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember us-gaap:OtherNonoperatingIncomeExpenseMember 2019-07-01 2019-09-30 0000024491 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember us-gaap:OtherNonoperatingIncomeExpenseMember 2019-01-01 2019-09-30 0000024491 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember us-gaap:OtherNonoperatingIncomeExpenseMember 2018-07-01 2018-09-30 0000024491 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember us-gaap:OtherNonoperatingIncomeExpenseMember 2018-01-01 2018-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:OtherNonoperatingIncomeExpenseMember 2018-07-01 2018-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:OtherNonoperatingIncomeExpenseMember 2019-01-01 2019-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:OtherNonoperatingIncomeExpenseMember 2018-01-01 2018-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember 2019-01-01 2019-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember 2018-01-01 2018-09-30 0000024491 us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-01-01 2018-09-30 0000024491 us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-07-01 2018-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember 2018-07-01 2018-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:SalesMember 2019-07-01 2019-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember 2019-07-01 2019-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:InterestExpenseMember 2019-01-01 2019-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:InterestExpenseMember 2018-07-01 2018-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:SalesMember 2018-01-01 2018-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:SalesMember 2019-01-01 2019-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:SalesMember 2018-07-01 2018-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:OtherNonoperatingIncomeExpenseMember 2019-07-01 2019-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:InterestExpenseMember 2018-01-01 2018-09-30 0000024491 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:InterestExpenseMember 2019-07-01 2019-09-30 0000024491 ctb:TermLoanAFacilityMember us-gaap:LineOfCreditMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-07-11 2019-07-11 0000024491 country:US us-gaap:PensionPlansDefinedBenefitMember 2018-07-01 2018-09-30 0000024491 country:US us-gaap:PensionPlansDefinedBenefitMember 2019-07-01 2019-09-30 0000024491 country:US us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-09-30 0000024491 country:US us-gaap:PensionPlansDefinedBenefitMember 2018-01-01 2018-09-30 0000024491 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-07-01 2019-09-30 0000024491 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-01-01 2019-09-30 0000024491 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-07-01 2018-09-30 0000024491 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-01-01 2018-09-30 0000024491 us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-09-30 0000024491 us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2018-07-01 2018-09-30 0000024491 us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2018-01-01 2018-09-30 0000024491 us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2019-07-01 2019-09-30 0000024491 us-gaap:CostOfSalesMember 2019-07-01 2019-09-30 0000024491 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-07-01 2019-09-30 0000024491 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-01-01 2019-09-30 0000024491 us-gaap:CostOfSalesMember 2019-01-01 2019-09-30 0000024491 srt:MaximumMember 2019-01-01 2019-09-30 0000024491 srt:MinimumMember 2019-01-01 2019-09-30 0000024491 us-gaap:ParentMember 2019-07-01 2019-09-30 0000024491 2019-01-01 2019-03-31 0000024491 us-gaap:NoncontrollingInterestMember 2019-01-01 2019-03-31 0000024491 us-gaap:ParentMember 2019-04-01 2019-06-30 0000024491 us-gaap:NoncontrollingInterestMember 2019-07-01 2019-09-30 0000024491 us-gaap:ParentMember 2019-09-30 0000024491 us-gaap:NoncontrollingInterestMember 2019-04-01 2019-06-30 0000024491 us-gaap:ParentMember 2019-01-01 2019-03-31 0000024491 2019-04-01 2019-06-30 0000024491 us-gaap:ParentMember 2019-06-30 0000024491 2019-06-30 0000024491 us-gaap:NoncontrollingInterestMember 2019-03-31 0000024491 us-gaap:NoncontrollingInterestMember 2018-12-31 0000024491 us-gaap:NoncontrollingInterestMember 2019-06-30 0000024491 us-gaap:ParentMember 2019-03-31 0000024491 2019-03-31 0000024491 us-gaap:ParentMember 2018-12-31 0000024491 us-gaap:NoncontrollingInterestMember 2019-09-30 0000024491 us-gaap:ParentMember 2018-07-01 2018-09-30 0000024491 2018-04-01 2018-06-30 0000024491 2018-01-01 2018-03-31 0000024491 2018-03-31 0000024491 us-gaap:ParentMember 2018-09-30 0000024491 us-gaap:NoncontrollingInterestMember 2018-01-01 2018-03-31 0000024491 us-gaap:ParentMember 2018-01-01 2018-03-31 0000024491 us-gaap:ParentMember 2018-04-01 2018-06-30 0000024491 us-gaap:NoncontrollingInterestMember 2018-07-01 2018-09-30 0000024491 us-gaap:NoncontrollingInterestMember 2018-09-30 0000024491 us-gaap:NoncontrollingInterestMember 2017-12-31 0000024491 us-gaap:NoncontrollingInterestMember 2018-04-01 2018-06-30 0000024491 us-gaap:ParentMember 2018-03-31 0000024491 us-gaap:NoncontrollingInterestMember 2018-03-31 0000024491 us-gaap:NoncontrollingInterestMember 2018-06-30 0000024491 us-gaap:ParentMember 2017-12-31 0000024491 us-gaap:ParentMember 2018-06-30 0000024491 2018-06-30 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-07-01 2019-09-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2019-07-01 2019-09-30 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-04-01 2019-06-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-31 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2019-07-01 2019-09-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2019-04-01 2019-06-30 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2019-04-01 2019-06-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2019-04-01 2019-06-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2019-01-01 2019-03-31 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2019-03-31 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-06-30 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-06-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-09-30 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2019-07-01 2019-09-30 0000024491 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-01-01 2019-03-31 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2019-06-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-01-01 2019-03-31 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-03-31 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-09-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-07-01 2019-09-30 0000024491 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-04-01 2019-06-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2019-01-01 2019-03-31 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-31 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2019-01-01 2019-03-31 0000024491 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-30 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2019-09-30 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-12-31 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-03-31 0000024491 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2018-07-01 2018-09-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2018-07-01 2018-09-30 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-07-01 2018-09-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-01-01 2018-03-31 0000024491 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-06-30 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-01-01 2018-03-31 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-03-31 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2018-01-01 2018-03-31 0000024491 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-30 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-04-01 2018-06-30 0000024491 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2018-04-01 2018-06-30 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-12-31 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-04-01 2018-06-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2018-04-01 2018-06-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2018-04-01 2018-06-30 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2017-12-31 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2018-06-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-03-31 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2018-03-31 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-07-01 2018-09-30 0000024491 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2018-07-01 2018-09-30 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-06-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2018-01-01 2018-03-31 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2018-01-01 2018-03-31 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-31 0000024491 us-gaap:AccumulatedTranslationAdjustmentMember 2018-09-30 0000024491 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-09-30 0000024491 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-09-30 0000024491 us-gaap:IntersegmentEliminationMember ctb:AmericasTireMember 2019-01-01 2019-09-30 0000024491 us-gaap:IntersegmentEliminationMember 2018-07-01 2018-09-30 0000024491 us-gaap:IntersegmentEliminationMember ctb:InternationalTireMember 2019-07-01 2019-09-30 0000024491 us-gaap:IntersegmentEliminationMember 2019-07-01 2019-09-30 0000024491 us-gaap:IntersegmentEliminationMember 2018-01-01 2018-09-30 0000024491 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-09-30 0000024491 ctb:InternationalTireMember 2019-01-01 2019-09-30 0000024491 ctb:InternationalTireMember 2019-07-01 2019-09-30 0000024491 us-gaap:IntersegmentEliminationMember ctb:AmericasTireMember 2018-07-01 2018-09-30 0000024491 ctb:InternationalTireMember 2018-01-01 2018-09-30 0000024491 us-gaap:CorporateNonSegmentMember 2018-07-01 2018-09-30 0000024491 us-gaap:IntersegmentEliminationMember 2019-01-01 2019-09-30 0000024491 ctb:AmericasTireMember 2019-01-01 2019-09-30 0000024491 ctb:InternationalTireMember 2018-07-01 2018-09-30 0000024491 us-gaap:CorporateNonSegmentMember 2019-01-01 2019-09-30 0000024491 us-gaap:CorporateNonSegmentMember 2019-07-01 2019-09-30 0000024491 ctb:AmericasTireMember 2018-01-01 2018-09-30 0000024491 us-gaap:IntersegmentEliminationMember ctb:InternationalTireMember 2019-01-01 2019-09-30 0000024491 us-gaap:IntersegmentEliminationMember ctb:AmericasTireMember 2018-01-01 2018-09-30 0000024491 ctb:AmericasTireMember 2018-07-01 2018-09-30 0000024491 us-gaap:IntersegmentEliminationMember ctb:InternationalTireMember 2018-01-01 2018-09-30 0000024491 ctb:AmericasTireMember 2019-07-01 2019-09-30 0000024491 us-gaap:IntersegmentEliminationMember ctb:AmericasTireMember 2019-07-01 2019-09-30 0000024491 us-gaap:IntersegmentEliminationMember ctb:InternationalTireMember 2018-07-01 2018-09-30 xbrli:shares xbrli:pure ctb:Employee iso4217:USD iso4217:USD xbrli:shares ctb:Store ctb:Segment ctb:Tire
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
_______________________________________________ 
FORM 10-Q
_______________________________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-4329
 COOPER TIRE & RUBBER COMPANY
(Exact name of registrant as specified in its charter)
Delaware
 
34-4297750
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification no.)
701 Lima Avenue, Findlay, Ohio 45840
(Address of principal executive offices)
(Zip code)
(419) 423-1321
(Registrant’s telephone number, including area code)
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)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer
Accelerated filer
Non-accelerated filer
 (Do not check if a smaller reporting company)
Smaller reporting company
 
 
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 7(a)(2)(B) of the Securities Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No 
Number of shares of common stock of registrant outstanding as of Oct 25, 2019: 50,183,978



Part I.
FINANCIAL INFORMATION
Item 1.
FINANCIAL STATEMENTS
 
 
 
 
 
 
 
 
 
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,
 
 
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) income
 
(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

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.




 
 
 
 
 
 
 
 
 
COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE 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 income
 
$
29,008

 
$
55,433

 
$
45,447

 
$
80,125

Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
Cumulative currency translation adjustments
 
(17,692
)
 
(5,500
)
 
(15,718
)
 
(16,481
)
Financial instruments:
 
 
 
 
 
 
 
 
Change in the fair value of derivatives
 
(2,052
)
 
(1,747
)
 
(4,393
)
 
863

Income tax (provision) benefit on derivative instruments
 
530

 
429

 
1,213

 
(318
)
Financial instruments, net of tax
 
(1,522
)
 
(1,318
)
 
(3,180
)
 
545

Postretirement benefit plans:
 
 
 
 
 
 
 
 
Amortization of actuarial loss
 
9,177

 
9,275

 
27,625

 
27,941

Amortization of prior service credit
 
(102
)
 
(135
)
 
(306
)
 
(406
)
Income tax provision on postretirement benefit plans
 
(2,041
)
 
(2,021
)
 
(6,123
)
 
(6,062
)
Foreign currency translation effect
 
2,201

 
559

 
2,170

 
1,365

Postretirement benefit plans, net of tax
 
9,235

 
7,678

 
23,366

 
22,838

Other comprehensive (loss) income
 
(9,979
)
 
860

 
4,468

 
6,902

Comprehensive income
 
19,029

 
56,293

 
49,915

 
87,027

Less: Comprehensive (loss) income attributable to noncontrolling shareholders' interests
 
(2,324
)
 
2,043

 
(1,047
)
 
2,305

Comprehensive income attributable to Cooper Tire & Rubber Company
 
$
21,353

 
$
54,250

 
$
50,962

 
$
84,722

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

-3-


 
 
 
 
 
COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except per share amounts)
 
 
 
 
 
 
 
September 30, 2019 (Unaudited)
 
December 31, 2018
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
137,093

 
$
356,254

Notes receivable
 
8,647

 
5,737

Accounts receivable, less allowances of $7,209 at 2019 and $5,836 at 2018
 
617,753

 
546,905

Inventories:
 
 
 
 
Finished goods
 
420,243

 
338,133

Work in process
 
29,989

 
27,265

Raw materials and supplies
 
116,648

 
114,582

Total inventories
 
566,880

 
479,980

Other current assets
 
48,501

 
67,856

Total current assets
 
1,378,874

 
1,456,732

Property, plant and equipment:
 
 
 
 
Land and land improvements
 
52,736

 
52,668

Buildings
 
331,872

 
314,555

Machinery and equipment
 
2,003,925

 
1,981,857

Molds, cores and rings
 
256,317

 
238,911

Total property, plant and equipment
 
2,644,850

 
2,587,991

Less: Accumulated depreciation
 
1,633,058

 
1,586,070

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

 
1,001,921

Operating lease right-of-use assets, net of accumulated amortization of $19,751 at 2019 and $0 at 2018
 
86,285

 

Goodwill
 
18,851

 
18,851

Intangibles, net of accumulated amortization of $120,274 at 2019 and $106,871 at 2018
 
113,510

 
120,321

Deferred income tax assets
 
24,256

 
28,146

Investment in joint venture
 
48,936

 

Other assets
 
14,112

 
8,234

Total assets
 
$
2,696,616

 
$
2,634,205

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


-4-


 
 
 
 
 
COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except per share amounts)
 
 
 
 
 
(Continued)
 
September 30, 2019 (Unaudited)
 
December 31, 2018
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Notes payable
 
$
16,188

 
$
15,288

Accounts payable
 
253,821

 
286,671

Accrued liabilities
 
305,477

 
282,650

Income taxes payable
 
15,787

 
975

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

 
174,760

Total current liabilities
 
764,851

 
760,344

Long-term debt and finance leases
 
120,657

 
121,284

Noncurrent operating leases
 
60,335

 

Postretirement benefits other than pensions
 
234,773

 
236,454

Pension benefits
 
106,577

 
147,950

Other long-term liabilities
 
140,960

 
135,730

Equity:
 
 
 
 
Preferred stock, $1 par value; 5,000,000 shares authorized; none issued
 


 


Common stock, $1 par value; 300,000,000 shares authorized; 87,850,292 shares issued at 2019 and 2018
 
87,850

 
87,850

Capital in excess of par value
 
21,474

 
21,124

Retained earnings
 
2,478,677

 
2,449,714

Accumulated other comprehensive loss
 
(455,773
)
 
(461,589
)
Parent stockholders' equity before treasury stock
 
2,132,228

 
2,097,099

Less: Common shares in treasury at cost (37,666,319 at 2019 and 37,776,659 at 2018)
 
(923,118
)
 
(925,056
)
Total parent stockholders' equity
 
1,209,110

 
1,172,043

Noncontrolling shareholders' interests in consolidated subsidiaries
 
59,353

 
60,400

Total equity
 
1,268,463

 
1,232,443

Total liabilities and equity
 
$
2,696,616

 
$
2,634,205

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


-5-


 
 
 
 
 
COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollar amounts in thousands except per share amounts)
 
 
 
 
 
 
 
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

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


-6-


COOPER TIRE & RUBBER COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)

Note 1.
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.
There is a year-round demand for passenger car and truck replacement tires, but passenger car replacement tire sales are generally strongest during the third and fourth quarters of the year. Winter tires are sold principally during the months of June through November. Operating results for the nine month period ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2019.
The Company consolidates into its financial statements the accounts of the Company, all wholly-owned subsidiaries, and any partially-owned subsidiary that the Company has the ability to control. Control generally equates to ownership percentage, whereby investments that are more than 50 percent owned are consolidated, investments in affiliates of 50 percent or less but greater than 20 percent are accounted for using the equity method, and investments in affiliates of 20 percent or less are accounted for using the cost method. The Company does not consolidate any entity for which it has a variable interest based solely on power to direct the activities and significant participation in the entity’s expected results that would not otherwise be consolidated based on control through voting interests. Further, the Company’s joint ventures are businesses established and maintained in connection with the Company’s operating strategy. All intercompany transactions and balances have been eliminated.
On April 5, 2019, Cooper Tire & Rubber Company Vietnam Holding, LLC ("Cooper Vietnam"), a wholly owned subsidiary of the Company, and Sailun (Vietnam) Co., Ltd. ("Sailun Vietnam") established a joint venture in Vietnam, ACTR Company Limited ("ACTR"), which will produce and sell truck and bus radial ("TBR") tires. The Company’s investment in the joint venture represents a 35 percent ownership interest and is accounted for under the equity method. Total investment in the facility and equipment in the joint venture is expected to be in the range of $220,000 to $240,000, funded through capital contributions and debt, with Cooper being responsible for its pro rata share. As of September 30, 2019, the Company has invested $49,001 into the joint venture. Construction of the facility began in 2019, with commercial tire production expected to commence in the first half of 2020.
The capacity created by the planned Vietnam joint venture will decrease expected production requirements for Cooper's China-based Qingdao Ge Rui Da Rubber Co., Ltd. ("GRT") joint venture. The Company included the expected impact of the new Vietnam joint venture on projected future cash flows in performing its annual goodwill impairment assessment on GRT in the fourth quarter of 2018. Based on the assessment performed, the goodwill balance was deemed to be fully impaired and resulted in a non-cash fourth quarter 2018 impairment charge of $33,827.

-7-


Earnings per common shareNet income per share is computed on the basis of the weighted average number of common shares outstanding each year. Diluted earnings per share includes the dilutive effect of stock options and other stock units. The following table sets forth the computation of basic and diluted earnings per share:
(Number of shares and dollar amounts in thousands except per share amounts)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Numerator
 
 
 
 
 
 
 
 
Numerator for basic and diluted earnings per share - income from continuing operations available to common stockholders
 
$
29,344

 
$
53,713

 
$
45,146

 
$
77,005

Denominator
 
 
 
 
 
 
 
 
Denominator for basic earnings per share - weighted average shares outstanding
 
50,179

 
50,065

 
50,148

 
50,443

Effect of dilutive securities - stock options and other stock units
 
179

 
214

 
218

 
235

Denominator for diluted earnings per share - adjusted weighted average shares outstanding
 
50,358

 
50,279

 
50,366

 
50,678

Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.58

 
$
1.07

 
$
0.90

 
$
1.53

Diluted
 
$
0.58

 
$
1.07

 
$
0.90

 
$
1.52


Options to purchase shares of the Company’s common stock not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares were 77,215 at September 30, 2019. All options were included in the computation of diluted earnings per share at September 30, 2018.
Warranties – Warranties are provided on the sale of certain of the Company’s products and an accrual for estimated future claims is recorded at the time revenue is recognized. Tire replacement under most of the warranties the Company offers is on a prorated basis. The Company provides for the estimated cost of product warranties based primarily on historical return rates, estimates of the eligible tire population and the value of tires to be replaced. The following table summarizes the activity in the Company’s product warranty liabilities, which are recorded in Accrued liabilities and Other long-term liabilities on the Company’s Condensed Consolidated Balance Sheets:
 
 
Nine Months Ended September 30,
 
 
2019
 
2018
Reserve at beginning of year
 
$
12,431

 
$
12,093

Additions
 
8,070

 
9,523

Payments
 
(8,586
)
 
(9,492
)
Reserve at period end
 
$
11,915

 
$
12,124



Truck and Bus Tire Tariffs – Antidumping and countervailing duty investigations into certain TBR tires imported from the People’s Republic of China ("PRC") into the United States ("U.S.") were initiated on January 29, 2016. The preliminary determinations announced in both investigations were affirmative and resulted in the imposition of significant additional duties from each. On February 22, 2017, the U.S. International Trade Commission ("ITC") made a final determination that the U.S. market had not suffered material injury because of imports of TBR tires from the PRC. As a result of this decision, preliminary antidumping and countervailing duties from Chinese TBR tires imported subsequent to the preliminary determination were not collected and any amounts previously paid were refunded by U.S. Customs and Border Protection. On April 14, 2017, the United Steelworkers Union filed a civil action challenging the ITC's decision not to impose duties on TBR tires from China imported into the U.S. and that case is still pending. On November 1, 2018, the Court of International Trade (“CIT”) remanded the case back to the ITC for reconsideration.  On January 30, 2019, the ITC reversed its earlier decision and made an affirmative determination of material injury. On February 15, 2019, the determination was published in the Federal Register and countervailing duties of 42.16 percent were imposed on the Company's TBR tire imports into the U.S. from China. The ITC’s re-determination, along with comments from the parties regarding the re-determination, were filed with the CIT. The CIT will make a final determination. Since the publication of the determination in the Federal Register, the Company incurred duties of $8,818 and $26,754 for the three and nine month periods ended September 30, 2019. These amounts were recorded as a component of Cost of products sold in the Condensed Consolidated Statements of Income.


-8-


Section 301 Tariffs - Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, passenger, light truck and truck and bus tires, raw materials and tire-manufacturing equipment from the PRC imported into the U.S. became subject to additional 10 percent duties effective September 24, 2018. These tariffs increased to 25 percent effective May 10, 2019. The Company has incurred duties of $6,495 and $15,892 for the three and nine month periods ended September 30, 2019 related to these Section 301 tariffs. These amounts were recorded as a component of Cost of products sold in the Condensed Consolidated Statements of Income.
North American Distribution Center – On January 22, 2017, a tornado hit the Company’s leased Albany, Georgia distribution center, causing damage to the Company's assets and disrupting certain operations. Insurance, less applicable deductibles, covered the repair or replacement of the Company's assets that suffered loss or damage, and the Company worked closely with its insurance carriers and claims adjusters to ascertain the full amount of insurance proceeds due to the Company as a result of the damages and the loss the Company suffered. The Company's insurance policies also provided coverage for interruption to its business, including lost profits, and reimbursement for other expenses and costs that were incurred relating to the damages and losses suffered. For the year ended December 31, 2017, the Company incurred direct expenses of $12,583, less proceeds of $7,000 recovered from insurance. For the year ended December 31, 2018, the Company recorded insurance recoveries of $7,300, less direct costs of $1,569. In the third quarter of 2018, the Company recorded insurance recoveries of $504, while incurring direct costs of $17. For the nine months ended September 30, 2018, the Company recorded insurance recoveries of $7,300, while incurring direct costs of $1,569. These amounts were recorded as a component of Cost of products sold in the Condensed Consolidated Statements of Income for the respective periods. The Company's insurance claim related to the tornado was closed in the year ended December 31, 2018, with no further direct expenses or insurance recoveries anticipated.
Recent Accounting Pronouncements
Each change to U.S. GAAP is established by the Financial Accounting Standards Board (“FASB”) in the form of an accounting standards update (“ASU”) to the FASB’s Accounting Standards Codification (“ASC”).
The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s condensed consolidated financial statements.
Accounting Pronouncements – Recently adopted

SEC Disclosure Regulation Simplifications
During the fourth quarter of 2018, the U.S. Securities and Exchange Commission (“SEC”) published Final Rule Release No. 33-10532, "Disclosure Update and Simplification." This standard, effective for quarterly and annual reports submitted after November 5, 2018, streamlines disclosure requirements by removing certain redundant topics. For the Company, the most notable simplification implemented in 2019 was the expansion of the shareholders' equity reconciliation to display quarter-to-quarter details beginning in the first quarter of 2019. The changes to the SEC rules impacted the presentation of the Company's filings, but did not materially impact the Company's condensed consolidated financial statements.

Leases
In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires balance sheet recognition of lease liabilities and right-of-use assets for most leases having terms of twelve months or longer. The Company adopted the standard on the required effective date of January 1, 2019 using the transition option, “Comparatives Under 840 Option,” established by ASU 2018-11, Leases (Topic 842), Targeted Improvements (ASU 2018-11). The FASB issued multiple amendments to the standard which provided clarification, additional guidance, practical expedients and other improvements to ASU 2016-02. The new guidance requires recognition of lease assets and liabilities for operating leases with terms of more than 12 months, in addition to those currently recorded, on the Company's Condensed Consolidated Balance Sheets. See Note 9 for additional details.
Derivatives and Hedging
In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities,” which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The Company adopted this standard effective January 1, 2019. The adoption of this standard did not materially impact the Company's condensed consolidated financial statements.

Additionally, in October 2018, the FASB issued ASU 2018-16, "Derivatives and Hedging (Topic 815)." The Federal Reserve and Alternative Reference Rates Committee expressed the importance of including the Overnight Index Swap ("OIS") rate based on Secured Overnight Financing Rate ("SOFR") as a benchmark rate for hedge accounting purposes in facilitating broader use of the underlying SOFR rate in the marketplace to facilitate the market's move away from the London Interbank

-9-


Offered Rate ("LIBOR"). This update, effective on January 1, 2019, provides the option to use the OIS rate based on SOFR as a benchmark for hedge accounting. The Company does not currently hold any SOFR-based instruments, but will continue to evaluate its use as the markets transition away from LIBOR.
Accounting Pronouncements – To be adopted

Credit Losses
In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments," which changes accounting requirements for the recognition of credit losses from an incurred or probable impairment methodology to a current expected credit losses (CECL) methodology. The FASB issued subsequent amendments to the initial guidance in November 2018, April 2019 and May 2019 with ASU 2018-19, ASU 2019-04 and ASU 2019-05, respectively. Trade receivables (including the allowance for doubtful accounts) is the only financial instrument in scope for ASU 2016-13 currently held by the Company. Implementation is anticipated to include an update to the Company's allowance for doubtful accounts methodology and related disclosures, but with minimal impact on the condensed consolidated financial statements. This standard is effective for interim and annual reporting periods beginning after December 15, 2019 with a modified retrospective approach. Early adoption is permitted but not part of the Company's implementation plan.

Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820)," which removes, modifies and adds various disclosure requirements around the topic in order to clarify and improve the cost-benefit nature of disclosures. For example, disclosures around transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs determining level 3 fair value measurements will be added. This standard is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact the new standard will have on its condensed consolidated financial statements.

Defined Benefit Plans
In August 2018, the FASB issued ASU 2018-14, "Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20)," which removes, modifies and adds various disclosure requirements around the topic in order to clarify and improve the cost-benefit nature of disclosures. For example, disclosures around the effect of a one-percentage-point change in assumed health care costs will be removed and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period will be added. This standard is effective for fiscal years ending after December 15, 2020, and early adoption is permitted. These amendments must be applied on a retrospective basis for all periods presented. The Company is currently evaluating the impact the new standard will have on its condensed consolidated financial statements.

Internal-Use Software
In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)," which aligns the requirements for capitalizing implementation costs incurred in a service contract hosting arrangement with those of developing or obtaining internal-use software. This standard is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact the new standard will have on its condensed consolidated financial statements.
Related Parties
In October 2018, the FASB issued ASU 2018-17 "Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for VIEs." When determining if fees paid to decision makers and service providers are variable interests, entities must now also consider indirect interests of those decision makers and service providers held through related parties under common control. This standard is effective January 1, 2020, with early adoption permitted. The Company is currently evaluating the impact the new standard will have on its condensed consolidated financial statements.
Note 2.
Restructuring
On January 17, 2019, Cooper Tire Europe, a wholly owned subsidiary of the Company, committed to the planned cessation of passenger car and light truck tire production ("light vehicle tire production") at its Melksham, U.K. facility, which is included in the International Segment. This initiative is expected to result in charges to 2019 pre-tax earnings of approximately $8 to $10 million, of which 15 to 25 percent are expected to be non-cash charges. Approximately 300 roles were eliminated at the site. Cooper Tire Europe will obtain light vehicle tires to meet customer needs from other production sites within the Company’s global production network. Approximately 400 roles will remain in Melksham to support the functions that continue there, including motorsports and motorcycle tire production, a materials business, Cooper Tire Europe headquarters,

-10-


sales and marketing, and the Europe Technical Center. Phasing out of light vehicle tire production was substantially completed in the third quarter of 2019.
For the three and nine month periods ended September 30, 2019, the Company recorded restructuring expense of $811 and $7,442, made up of employee severance, asset write-downs and other costs. In the third quarter, the Company released certain of its severance accruals due to employees separating from the Company prior to meeting the requirements for payment. At September 30, 2019, the Company's accrued restructuring balance is $381, related largely to employee severance costs.
 
Three Months Ended September 30, 2019
 
Nine Months Ended September 30, 2019
Employee severance (reversals) costs
$
(411
)
 
$
5,308

Asset write-downs & other costs
1,222

 
2,134

Total restructuring expense
$
811

 
$
7,442

 
 
 
 
Beginning balance of accrued restructuring - severance
$
4,484

 
$

Release of severance accrual
(411
)
 
5,308

Payment of severance costs
(4,133
)
 
(5,368
)
 
 
 
 
Beginning balance of accrued restructuring - other
125

 

Additional other accrual
380

 
683

Payment of other costs
(64
)
 
(242
)
Ending balance of total accrued restructuring
$
381

 
$
381


In addition to the costs classified as restructuring expense, the Company incurred additional costs of $363 and $677 for the three and nine month periods ended September 30, 2019, respectively, as a result of Cooper Tire Europe's decision to cease light vehicle tire production at the Melksham facility. These additional costs relate to professional fees associated with the Company's evaluation of its legal entity structure moving forward, as well as other matters, and are included within selling, general and administrative expense for the three and nine months periods ended September 30, 2019. These costs, as well as estimates for similar types of costs in future periods, are included in the $8 to $10 million overall estimate of costs related to the Melksham decision.
Note 3.
Revenue from Contracts with Customers
Accounting policy
On January 1, 2018, the Company adopted the new U.S. GAAP revenue standard using the modified retrospective transition method applied to contracts which were not completed as of January 1, 2018. The new revenue standard requires revenue to be recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods and services.
In accordance with the new revenue standard, revenue is measured based on the consideration specified in a contract with a customer and excludes any sales incentives or rebates. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. This occurs with shipment or delivery, depending on the underlying terms with the customer. The transaction price will include estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. At the time of sale, the Company estimates provisions for different forms of variable consideration (discounts and rebates) based on historical experience, current conditions and contractual obligations, as applicable. Payment terms with customers vary by region and customer, but are generally 30-90 days. The Company does not have significant financing components or significant payment terms. Incidental items that are immaterial in the context of the contract are expensed as incurred.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
Shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as a fulfillment cost and not as a separate performance obligation. Therefore, such items are accrued upon recognition of revenue.
Nature of goods and services

-11-


The following is a description of principal activities, separated by reportable segments, from which the Company generates its revenue. See Note 14 - Business Segments for additional details on the Company's reportable segments.
The Company’s reportable segments have the following revenue characteristics:
Americas Tire Operations - The Americas Tire Operations segment manufactures and markets passenger car and light truck tires. The segment also markets and distributes wheels and racing, motorcycle and TBR tires.
International Tire Operations - The International Tire Operations segment manufactures and markets passenger car, light truck, motorcycle, racing and TBR tires and tire retread material for global markets.
Disaggregation of revenue
In the following tables, revenue is disaggregated by major market channel for the three and nine months ended September 30, 2019 and 2018, respectively:
 
Three Months Ended September 30, 2019
 
Americas
 
International
 
Eliminations
 
Total
Light Vehicle (1)
$
537,711

 
$
103,275

 
$
(16,651
)
 
$
624,335

Truck and bus radial
51,187

 
17,973

 
(13,442
)
 
55,718

Other (2)
13,059

 
11,022

 

 
24,081

Net sales
$
601,957

 
$
132,270

 
$
(30,093
)
 
$
704,134

 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2019
 
Americas
 
International
 
Eliminations
 
Total
Light Vehicle (1)
$
1,508,374

 
$
308,860

 
$
(57,594
)
 
$
1,759,640

Truck and bus radial
151,045

 
65,561

 
(53,748
)
 
162,858

Other (2)
39,782

 
40,148

 

 
79,930

Net sales
$
1,699,201

 
$
414,569

 
$
(111,342
)
 
$
2,002,428


 
Three Months Ended September 30, 2018
 
Americas
 
International
 
Eliminations
 
Total
Light Vehicle (1)
$
556,253

 
$
126,161

 
$
(34,252
)
 
$
648,162

Truck and bus radial
56,459

 
22,833

 
(19,182
)
 
60,110

Other (2)
15,992

 
13,407

 

 
29,399

Net sales
$
628,704

 
$
162,401

 
$
(53,434
)
 
$
737,671

 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
Americas
 
International
 
Eliminations
 
Total
Light Vehicle (1)
$
1,516,921

 
$
370,374

 
$
(90,624
)
 
$
1,796,671

Truck and bus radial
$
141,492

 
$
75,949

 
$
(61,792
)
 
155,649

Other (2)
$
40,094

 
$
45,161

 
$

 
85,255

Net sales
$
1,698,507

 
$
491,484

 
$
(152,416
)
 
$
2,037,575


(1) 
Light vehicle includes passenger car and light truck tires
(2) 
Other includes motorcycle and racing tires, wheels, tire retread material, and other items
Contract balances
Contract liabilities relate to customer payments received in advance of shipment. As the Company does not generally have rights to consideration for work completed but not billed at the reporting date, the Company does not have any contract assets. Accounts receivable are not considered contract assets under the new revenue standard as contract assets are conditioned upon

-12-


the Company's future satisfaction of a performance obligation. Accounts receivable, in contrast, are unconditional rights to consideration.
Significant changes in the contract liabilities balance during the nine months ended September 30, 2019 are as follows:
 
Contract Liabilities
Contract liabilities at beginning of year
$
947

Increases to deferred revenue for cash received in advance from customers
13,288

Decreases due to recognition of deferred revenue
(10,516
)
Contract liabilities at September 30, 2019
$
3,719



Transaction price allocated to remaining performance obligations
For the three and nine months ended September 30, 2019 and 2018, respectively, revenue recognized from performance obligations related to prior periods was not material.
Revenue expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, contracts where revenue is recognized as invoiced and contracts with variable consideration related to undelivered performance obligations, is not material.
The Company applies the practical expedient in ASC 606 "Revenue from Contracts with Customers" and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
Note 4.
Inventories
Inventory costs are determined using the last-in, first-out ("LIFO") method for substantially all U.S. inventories. The current cost of the U.S. inventories under the FIFO method was $462,163 and $380,990 at September 30, 2019 and December 31, 2018, respectively. These FIFO values have been reduced by approximately $87,506 and $85,068 at September 30, 2019 and December 31, 2018, respectively, to arrive at the LIFO value reported on the Condensed Consolidated Balance Sheets. The remaining inventories have been valued under the FIFO method. All LIFO inventories are valued at the lower of cost or market. All other inventories are stated at the lower of cost or net realizable value.

Note 5.
Income Taxes
For the three month period ended September 30, 2019, the Company recorded a provision for income taxes of $7,721 (effective tax rate of 21.0 percent) compared to $16,227 (effective tax rate of 22.6 percent) for the same period in 2018. For the nine month period ended September 30, 2019, the Company recorded a provision for income taxes of $19,908 (effective tax rate of 30.5 percent) compared to $21,944 (effective tax rate of 21.5 percent) for the same period in 2018. The 2019 and 2018 three and nine month period provisions for income taxes are calculated using a forecasted multi-jurisdictional annual effective tax rate to determine a blended annual effective tax rate. The Company is subjected to the U.S. federal statutory rate of 21 percent. The effective tax rate for the three and nine month periods ended September 30, 2019 were affected by net discrete tax (benefit) expense of $(1,863) and $2,522 recorded during the three and nine month periods, respectively, and by the projected mix of earnings in international jurisdictions with differing tax rates and jurisdictions where valuation allowances are recorded. The discrete tax items in the three month period ended September 30, 2019, consist of state refund filings and other state activity of $(971) as well as U.S. Federal tax benefit based on return to provision adjustments related to tax reform items and certain tax credits of $(892). The discrete tax items in the nine month period ended September 30, 2019 primarily consist of various state reserves for additional uncertain tax positions of $4,939 offset by return to provision adjustments of $(1,347) and expected refunds and deferred tax benefits related to other state filings of $(3,858). For the nine month period ended September 30, 2019, discrete items also include 2017 transition tax and unrecognized tax benefits accrued of $1,661 and $670, respectively, as a result of final U.S. federal tax guidance issued during the first quarter of 2019 pertaining to the one-time mandatory deemed repatriation under the 2017 Tax Act.

-13-


The Company continues to maintain valuation allowances pursuant to ASC 740, “Accounting for Income Taxes,” against portions of its U.S. and non-U.S. deferred tax assets at September 30, 2019 as it cannot assure the future realization of the associated tax benefits prior to their reversal or expiration. In the U.S., the Company has offset a portion of its deferred tax asset relating primarily to a loss carryforward by a valuation allowance of $1,402. In addition, the Company has recorded valuation allowances of $21,687 relating to non-U.S. net operating losses and other deferred tax assets for a total valuation allowance of $23,089. In conjunction with the Company’s ongoing review of its actual results and anticipated future earnings, the Company will continue to reassess the possibility of releasing all or part of the valuation allowances currently in place when the associated deferred tax assets are deemed to be realizable. If the evidence suggests that deferred tax assets for these operations will more likely than not be able to be realized in the future, release of a portion or all of the valuation allowance in place for these entities could occur. Such release could materially impact the Company's effective tax rate in the period in which the release occurs.

The Company maintains an ASC 740-10, “Accounting for Uncertainty in Income Taxes,” liability for unrecognized tax benefits. At September 30, 2019, the Company’s liability, exclusive of penalty and interest, totals approximately $10,957. The Company reversed an immaterial amount of its state unrecognized tax benefits, primarily as a result of exam settlement, and accrued an immaterial amount of interest expense during the nine month period ended September 30, 2019. Based upon the outcome of tax examinations, judicial proceedings, or expiration of statutes of limitations, it is possible that the ultimate resolution of the Company's unrecognized tax benefits may result in a payment that is materially different from the current estimate of the tax liabilities.
The Company operates in multiple jurisdictions throughout the world. The Company has effectively settled U.S. federal tax examinations for tax years before 2016 and state and local examinations for tax years before 2013, with limited exceptions. Furthermore, the Company’s non-U.S. subsidiaries are generally no longer subject to income tax examinations in major foreign taxing jurisdictions for tax years prior to 2014. Certain of the Company's state income tax returns in various jurisdictions are currently under examination and it is possible that these examinations will conclude within the next twelve months. However, it is not possible to estimate net increases or decreases in the Company’s unrecognized tax benefits during the next twelve months.
Note 6.
Debt
On February 15, 2018, the Company amended its revolving credit facility ("Credit Facility") with a consortium of banks that provided up to $400,000 based on available collateral, including an $110,000 letter of credit subfacility, set to expire in February 2023. As of June 27, 2019, the Company amended this Credit Facility with a consortium of several banks that provides up to $700,000 and is set to expire in June 2024. Of this amended borrowing capacity, $200,000 is allocated to a Delayed Draw Term Loan A ("Term Loan A"), which is scheduled to be drawn in December 2019, while the remaining $500,000 is allocated to the Credit Facility to provide working capital and funds for general corporate purposes. The Term Loan A funds will be used primarily to pay for the unsecured notes maturing at that time. The Credit Facility still includes the $110,000 letter of credit sub-facility. The Company may elect, with lender consent, to increase the commitments under the Credit Facility or incur one or more tranches of term loans in an aggregate amount of up to $300,000 (or an unlimited increase if the Proforma Net Secured Leverage Ratio is less than 1.75x). Debt issuance costs related to the Credit Facility amendment totaled $1,507 while those related to the Term Loan A totaled $700, for a combined $2,207 in debt issuance costs. These costs, along with the remaining debt issuance costs from the February 2018 credit facility amendment, will be amortized over the life of the underlying debt instruments and are included in the Other assets classification in the Condensed Consolidated Balance Sheets. The Company may elect to add certain foreign subsidiaries as additional borrowers under the Credit Facility, subject to the satisfaction of certain conditions.
On July 11, 2019, the Company entered into forward-starting interest rate swaps to hedge a portion of the cash flow exposure associated with the Company's forthcoming Term Loan A variable-rate borrowings. See Note 7 Fair Value Measurement for further information.
The Company's accounts receivable securitization facility provides up to $150,000 based on available collateral and expires in February 2021. Pursuant to the terms of the facility, the Company is permitted to sell certain of its domestic trade receivables on a continuous basis to its wholly-owned, bankruptcy-remote subsidiary, Cooper Receivables LLC (“CRLLC”). In turn, CRLLC may sell from time to time an undivided ownership interest in the purchased trade receivables, without recourse, to a PNC Bank administered, asset-backed commercial paper conduit. The accounts receivable securitization facility has no significant financial covenants until available credit is less than specified amounts.
The Company had no borrowings under the revolving credit facility or the accounts receivable securitization facility at September 30, 2019 or December 31, 2018, other than amounts used to secure letters of credit. Amounts used to secure letters of credit totaled $16,840 at September 30, 2019 and $16,800 at December 31, 2018. The Company’s additional borrowing

-14-


capacity, net of borrowings and amounts used to back letters of credit, and based on eligible collateral through use of its credit facility with its bank group and its accounts receivable securitization facility at September 30, 2019, was $803,558.
The Company’s consolidated operations in Asia have renewable unsecured credit lines that provide up to $45,262 of borrowings and do not contain financial covenants. The additional borrowing capacity on the Asian credit lines, based on eligible collateral and the short-term notes payable, totaled $29,074 at September 30, 2019.
The following table summarizes the long-term debt and finance leases of the Company at September 30, 2019 and December 31, 2018. Except for the finance leases and other, the remaining long-term debt is due in an aggregate principal payment on the due date:
 
 
September 30, 2019
 
December 31, 2018
Parent company
 
 
 
 
8% unsecured notes due December 2019
 
$
173,578

 
$
173,578

7.625% unsecured notes due March 2027
 
116,880

 
116,880

Finance leases and other
 
5,063

 
6,245

 
 
295,521

 
296,703

Less: unamortized debt issuance costs
 
1,286

 
659

 
 
294,235

 
296,044

Less: current maturities
 
173,578

 
174,760

 
 
$
120,657

 
$
121,284


In addition, at September 30, 2019 and December 31, 2018, the Company had short-term notes payable of $16,188 and $15,288, respectively, due within twelve months, consisting of funds borrowed by the Company’s operations in the PRC. The weighted average interest rate of the short-term notes payable at September 30, 2019 and December 31, 2018 was 4.72 percent and 4.82 percent, respectively.
Note 7.
Fair Value Measurements
Derivative financial instruments are utilized by the Company to reduce foreign currency exchange risks. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. The Company does not enter into financial instruments for trading or speculative purposes. The derivative financial instruments include non-designated and cash flow hedges of foreign currency exposures. The change in values of the non-designated foreign currency hedges offset the exchange rate fluctuations related to assets and liabilities recorded on the condensed consolidated balance sheets. The cash flow hedges offset exchange rate fluctuations on the foreign currency-denominated intercompany loans and forecasted cash flows. The Company presently hedges exposures in various currencies generally for transactions expected to occur within the next 12 months. Additionally, the Company utilizes cash flow hedges that hedge already recognized intercompany loans with maturities of up to three years. The notional amount of these foreign currency derivative instruments at September 30, 2019 and December 31, 2018 was $185,097 and $129,542, respectively. The counterparties to each of these agreements are major commercial banks.
The Company uses non-designated foreign currency forward contracts to hedge its net foreign currency monetary assets and liabilities primarily resulting from non-functional currency denominated receivables and payables of certain U.S. and foreign entities.
Foreign currency forward contracts are also used to hedge variable cash flows associated with forecasted sales and purchases denominated in currencies that are not the functional currency of certain entities. The forward contracts have maturities of less than twelve months pursuant to the Company’s policies and hedging practices. These forward contracts meet the criteria for and have been designated as cash flow hedges. Accordingly, the effective portion of the change in fair value of such forward contracts ($(3,196) and $713 as of September 30, 2019 and December 31, 2018, respectively) are recorded as a separate component of stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets and reclassified into earnings as the hedged transactions occur.
The Company utilizes cross-currency interest rate swaps to hedge the principal and interest repayment of some intercompany loans. These contracts have maturities of up to three years and meet the criteria for and have been designated as cash flow hedges. Spot to spot changes are recorded in income and all other effective changes are recorded as a separate component of stockholders' equity.
The Company assesses hedge effectiveness prospectively and retrospectively, based on regression of the change in foreign currency exchange rates. Time value of money is included in effectiveness testing.

-15-


On July 11, 2019, in order to hedge its upcoming Term Loan A variable rate debt, with an interest rate indexed to LIBOR plus 150 basis points, the Company entered into forward-starting interest rate swaps with effective dates of December 2, 2019 and termination dates of June 27, 2024. The initial notional amount of these swaps is $200,000 and will decrease quarterly by varying amounts over the life of the swaps. The interest rate swaps effectively fix the variable interest rate component on the notional amount of this swap at 1.720%. The swaps qualify for hedge accounting and, therefore, changes in the fair value of the swaps have been recorded in accumulated other comprehensive loss.
The derivative instruments are subject to master netting arrangements with the counterparties to the contracts. The following table presents the location and amounts of derivative instrument fair values in the Condensed Consolidated Balance Sheets:
Assets/(liabilities)
 
September 30, 2019
 
December 31, 2018
Designated as hedging instruments:
 
 
 
 
     Gross amounts recognized
 
$
(3,673
)
 
$
(1,524
)
     Gross amounts offset
 
477

 
2,237

     Net amounts
 
(3,196
)
 
713

Not designated as hedging instruments:
 
 
 
 
     Gross amounts recognized
 
$
(177
)
 
$
(544
)
     Gross amounts offset
 
269

 
201

     Net amounts
 
92

 
(343
)
Net amounts presented:
 
 
 
 
     Other current assets
 
$
(257
)
 
$
1,750

     Other long-term liabilities
 
$
(2,847
)
 
$
(1,380
)

The following table presents the location and amount of gains and losses on derivative instruments designated as cash flow hedges in the Condensed Consolidated Statements of Income.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Amount of (Loss) Gain Recognized in Other Comprehensive Income on Derivatives
 
$
(1,164
)
 
$
45

 
$
(2,714
)
 
$
2,753

Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
 
 
 
 
 
Net sales
 
$
143

 
$
1,089

 
$
998

 
$
871

Interest expense
 
(30
)
 
(32
)
 
(94
)
 
(103
)
Other non-operating income
 
775

 
735

 
775

 
1,122

 
 
$
888

 
$
1,792

 
$
1,679

 
$
1,890

The following table presents the location and amount of gains and losses on foreign exchange contract derivatives not designated as hedging instruments in the Condensed Consolidated Statements of Income.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Other non-operating expense
 
$
2,120

 
$
741

 
$
1,490

 
$
784


The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into the three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within the different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
Financial assets and liabilities recorded on the Condensed Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.

-16-


Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following.
a.Quoted prices for similar assets or liabilities in active markets;
b.Quoted prices for identical or similar assets or liabilities in non-active markets;
c.Pricing models whose inputs are observable for substantially the full term of the asset or liability; and
d.
Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.
Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
The valuation of foreign currency derivative instruments was determined using widely accepted valuation techniques. This analysis reflected the contractual terms of the derivatives, including the period to maturity, and used observable market-based inputs, including forward points. The Company incorporated credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as current credit ratings, to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2019 and December 31, 2018, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuations in their entirety were to be classified in Level 2 of the fair value hierarchy.
The valuation of stock-based liabilities was determined using the Company's stock price, and as a result, these liabilities are classified in Level 1 of the fair value hierarchy.
The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018:
 
 
September 30, 2019
 
 
Total
Assets
(Liabilities)
 
Quoted Prices
in Active Markets
for Identical
Assets
Level (1)
 
Significant
Other
Observable
Inputs
Level (2)
 
Significant
Unobservable
Inputs
Level (3)
Foreign Currency Derivative
 
$
(444
)
 
$

 
$
(444
)
 
$

Interest Rate Swaps
 
(2,660
)
 

 
(2,660
)
 

Stock-based Liabilities
 
$
(13,570
)
 
$
(13,570
)
 
$

 
$

 
 
 
December 31, 2018
 
 
 
Total
Assets
(Liabilities)
 
Quoted Prices
in Active Markets
for Identical
Assets
Level (1)
 
Significant
Other
Observable
Inputs
Level (2)
 
Significant
Unobservable
Inputs
Level (3)
 
 
 
Foreign Currency Derivative
 
$
370

 
$

 
$
370

 
$

 
Stock-based Liabilities
 
(14,644
)
 
(14,644
)
 

 


The fair market value of Cash and cash equivalents, Notes receivable, Restricted cash included in Other current assets, Restricted cash included in Other assets, Notes payable and Current portion of long-term debt and finance leases at September 30, 2019 and December 31, 2018 are equal to their corresponding carrying values as reported on the Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, respectively.  Each of these classes of assets and liabilities is classified within Level 1 of the fair value hierarchy.
The fair market value of Long-term debt and finance leases is $138,172 and $137,343 at September 30, 2019 and December 31, 2018, respectively, and is classified within Level 1 of the fair value hierarchy.  The carrying value of Long-term debt is $120,657 and $121,284 as reported on the Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, respectively.

-17-


Note 8.
Pensions and Postretirement Benefits Other than Pensions
The following tables disclose the amount of net periodic benefit costs for the three and nine months ended September 30, 2019 and 2018, respectively, for the Company’s defined benefit plans and other postretirement benefits:
 
 
Pension Benefits - Domestic
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019