x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
|
DELAWARE
|
|
34-4297750
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. employer
identification no.)
|
Large accelerated filer
|
x
|
Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
¨
|
Emerging growth company
|
¨
|
|
|
Item 1.
|
FINANCIAL STATEMENTS
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Net sales
|
$
|
643,025
|
|
|
$
|
649,775
|
|
Cost of products sold
|
533,107
|
|
|
499,346
|
|
||
Gross profit
|
109,918
|
|
|
150,429
|
|
||
Selling, general and administrative expense
|
61,248
|
|
|
59,325
|
|
||
Operating profit
|
48,670
|
|
|
91,104
|
|
||
Interest expense
|
(7,827
|
)
|
|
(6,636
|
)
|
||
Interest income
|
1,802
|
|
|
940
|
|
||
Other non-operating (expense) income
|
(235
|
)
|
|
1,462
|
|
||
Income before income taxes
|
42,410
|
|
|
86,870
|
|
||
Provision for income taxes
|
13,029
|
|
|
28,098
|
|
||
Net income
|
29,381
|
|
|
58,772
|
|
||
Net loss attributable to noncontrolling shareholders' interests
|
(1,180
|
)
|
|
(233
|
)
|
||
Net income attributable to Cooper Tire & Rubber Company
|
$
|
30,561
|
|
|
$
|
59,005
|
|
Basic earnings per share:
|
|
|
|
||||
Net income attributable to Cooper Tire & Rubber Company common stockholders
|
$
|
0.58
|
|
|
$
|
1.06
|
|
Diluted earnings per share:
|
|
|
|
||||
Net income attributable to Cooper Tire & Rubber Company common stockholders
|
$
|
0.57
|
|
|
$
|
1.05
|
|
Dividends per share
|
$
|
0.105
|
|
|
$
|
0.105
|
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Net income
|
$
|
29,381
|
|
|
$
|
58,772
|
|
Other comprehensive income
|
|
|
|
||||
Foreign currency translation adjustments
|
15,388
|
|
|
(2,952
|
)
|
||
Financial instruments
|
|
|
|
||||
Change in the fair value of derivatives
|
(399
|
)
|
|
(5,456
|
)
|
||
Income tax benefit on derivative instruments
|
153
|
|
|
2,073
|
|
||
Financial instruments, net of tax
|
(246
|
)
|
|
(3,383
|
)
|
||
Postretirement benefit plans
|
|
|
|
||||
Amortization of actuarial loss
|
10,591
|
|
|
10,932
|
|
||
Amortization of prior service credit
|
(141
|
)
|
|
(141
|
)
|
||
Income tax provision on postretirement benefit plans
|
(3,719
|
)
|
|
(3,853
|
)
|
||
Foreign currency translation effect
|
(865
|
)
|
|
2,029
|
|
||
Postretirement benefit plans, net of tax
|
5,866
|
|
|
8,967
|
|
||
Other comprehensive income
|
21,008
|
|
|
2,632
|
|
||
Comprehensive income
|
50,389
|
|
|
61,404
|
|
||
Less: comprehensive income (loss) attributable to noncontrolling shareholders' interests
|
1,691
|
|
|
(431
|
)
|
||
Comprehensive income attributable to Cooper Tire & Rubber Company
|
$
|
48,698
|
|
|
$
|
61,835
|
|
|
March 31,
2017 (Unaudited) |
|
December 31,
2016 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
365,046
|
|
|
$
|
504,423
|
|
Notes receivable
|
14,593
|
|
|
7,485
|
|
||
Accounts receivable, less allowances of $6,576 at 2017 and $7,290 at 2016
|
428,069
|
|
|
409,913
|
|
||
Inventories:
|
|
|
|
||||
Finished goods
|
415,002
|
|
|
338,887
|
|
||
Work in process
|
31,531
|
|
|
29,922
|
|
||
Raw materials and supplies
|
119,287
|
|
|
101,342
|
|
||
|
565,820
|
|
|
470,151
|
|
||
Other current assets
|
30,868
|
|
|
28,546
|
|
||
Total current assets
|
1,404,396
|
|
|
1,420,518
|
|
||
Property, plant and equipment:
|
|
|
|
||||
Land and land improvements
|
49,004
|
|
|
47,767
|
|
||
Buildings
|
300,763
|
|
|
282,960
|
|
||
Machinery and equipment
|
1,762,704
|
|
|
1,742,449
|
|
||
Molds, cores and rings
|
224,706
|
|
|
224,662
|
|
||
|
2,337,177
|
|
|
2,297,838
|
|
||
Less: accumulated depreciation
|
1,460,378
|
|
|
1,433,611
|
|
||
Net property, plant and equipment
|
876,799
|
|
|
864,227
|
|
||
Goodwill
|
53,154
|
|
|
52,705
|
|
||
Intangibles, net of accumulated amortization of $79,862 at 2017 and $77,321 at 2016
|
139,739
|
|
|
140,751
|
|
||
Restricted cash
|
1,068
|
|
|
1,327
|
|
||
Deferred income tax assets
|
130,842
|
|
|
133,879
|
|
||
Other assets
|
6,778
|
|
|
5,988
|
|
||
Total assets
|
$
|
2,612,776
|
|
|
$
|
2,619,395
|
|
|
|
|
|
||||
LIABILITIES AND EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Notes payable
|
$
|
14,581
|
|
|
$
|
26,286
|
|
Accounts payable
|
272,475
|
|
|
282,416
|
|
||
Accrued liabilities
|
187,141
|
|
|
183,804
|
|
||
Income taxes payable
|
17,342
|
|
|
5,887
|
|
||
Current portion of long-term debt
|
1,370
|
|
|
2,421
|
|
||
Total current liabilities
|
492,909
|
|
|
500,814
|
|
||
Long-term debt
|
296,516
|
|
|
297,094
|
|
||
Postretirement benefits other than pensions
|
247,305
|
|
|
247,227
|
|
||
Pension benefits
|
283,620
|
|
|
285,852
|
|
||
Other long-term liabilities
|
135,396
|
|
|
156,924
|
|
||
Deferred income tax liabilities
|
967
|
|
|
1,248
|
|
||
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
|
87,850
|
|
|
87,850
|
|
||
Capital in excess of par value
|
18,657
|
|
|
25,876
|
|
||
Retained earnings
|
2,345,928
|
|
|
2,321,424
|
|
||
Accumulated other comprehensive loss
|
(527,014
|
)
|
|
(545,151
|
)
|
||
|
1,925,421
|
|
|
1,889,999
|
|
||
Less: common shares in treasury at cost
(34,920,055 at 2017 and 34,850,512 at 2016)
|
(825,271
|
)
|
|
(813,985
|
)
|
||
Total parent stockholders’ equity
|
1,100,150
|
|
|
1,076,014
|
|
||
Noncontrolling shareholders' interests in consolidated subsidiary
|
55,913
|
|
|
54,222
|
|
||
Total equity
|
1,156,063
|
|
|
1,130,236
|
|
||
Total liabilities and equity
|
$
|
2,612,776
|
|
|
$
|
2,619,395
|
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Operating activities:
|
|
|
|
||||
Net income
|
$
|
29,381
|
|
|
$
|
58,772
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
34,749
|
|
|
31,792
|
|
||
Stock-based compensation
|
1,283
|
|
|
4,752
|
|
||
Change in LIFO inventory reserve
|
14,438
|
|
|
(29,899
|
)
|
||
Amortization of unrecognized postretirement benefits
|
10,450
|
|
|
10,791
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts and notes receivable
|
(22,047
|
)
|
|
(44,148
|
)
|
||
Inventories
|
(104,851
|
)
|
|
(32,536
|
)
|
||
Other current assets
|
(2,069
|
)
|
|
(274
|
)
|
||
Accounts payable
|
(6,342
|
)
|
|
(8,369
|
)
|
||
Accrued liabilities
|
8,807
|
|
|
(9,635
|
)
|
||
Other items
|
(17,730
|
)
|
|
22,465
|
|
||
Net cash (used in) provided by operating activities
|
(53,931
|
)
|
|
3,711
|
|
||
Investing activities:
|
|
|
|
||||
Additions to property, plant and equipment and capitalized software
|
(44,602
|
)
|
|
(36,166
|
)
|
||
Proceeds from the sale of assets
|
11
|
|
|
20
|
|
||
Net cash used in investing activities
|
(44,591
|
)
|
|
(36,146
|
)
|
||
Financing activities:
|
|
|
|
||||
Net payments on short-term debt
|
(16,608
|
)
|
|
(7,586
|
)
|
||
Repayments of long-term debt
|
(792
|
)
|
|
(600
|
)
|
||
Repurchase of common stock
|
(17,799
|
)
|
|
(24,826
|
)
|
||
Payments of employee taxes withheld from shared-based awards
|
(6,429
|
)
|
|
(2,070
|
)
|
||
Payment of dividends to Cooper Tire & Rubber Company stockholders
|
(5,543
|
)
|
|
(5,817
|
)
|
||
Issuance of common shares related to stock-based compensation
|
3,596
|
|
|
3,330
|
|
||
Excess tax benefits on stock options
|
—
|
|
|
139
|
|
||
Net cash used in financing activities
|
(43,575
|
)
|
|
(37,430
|
)
|
||
Effects of exchange rate changes on cash
|
2,720
|
|
|
(1,296
|
)
|
||
Net change in cash and cash equivalents
|
(139,377
|
)
|
|
(71,161
|
)
|
||
Cash and cash equivalents at beginning of year
|
504,423
|
|
|
505,157
|
|
||
Cash and cash equivalents at end of period
|
$
|
365,046
|
|
|
$
|
433,996
|
|
1.
|
Basis of Presentation and Consolidation
|
2.
|
GRT Acquisition
|
|
|
December 1, 2016
|
||
Assets
|
|
|
||
Cash
|
|
$
|
8,091
|
|
Accounts receivable
|
|
2,844
|
|
|
Notes receivable
|
|
3,050
|
|
|
Inventory
|
|
7,983
|
|
|
Other current assets
|
|
981
|
|
|
Property, plant & equipment
|
|
46,712
|
|
|
Intangible assets
|
|
7,412
|
|
|
Other long-term assets
|
|
289
|
|
|
Goodwill
|
|
33,861
|
|
|
|
|
|
||
Liabilities
|
|
|
||
Accounts payable
|
|
(61,570
|
)
|
|
Notes payable
|
|
(10,122
|
)
|
|
Accrued liabilities
|
|
(2,866
|
)
|
|
Long-term debt
|
|
(3,383
|
)
|
|
Other long-term liabilities
|
|
(940
|
)
|
|
|
|
32,342
|
|
|
Noncontrolling shareholder interest
|
|
(18,323
|
)
|
|
|
|
|
||
Cooper Tire & Rubber Company consideration
|
|
$
|
14,019
|
|
3.
|
Earnings Per Share
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Numerator
|
|
|
|
||||
Numerator for basic and diluted earnings per share - Net income attributable to Cooper Tire & Rubber Company common stockholders
|
$
|
30,561
|
|
|
$
|
59,005
|
|
Denominator
|
|
|
|
||||
Denominator for basic earnings per share - weighted average shares outstanding
|
52,835
|
|
|
55,535
|
|
||
Effect of dilutive securities - stock options and other stock units
|
587
|
|
|
597
|
|
||
Denominator for diluted earnings per share - adjusted weighted average shares outstanding
|
53,422
|
|
|
56,132
|
|
||
Basic earnings per share:
|
|
|
|
||||
Net income attributable to Cooper Tire & Rubber Company common stockholders
|
$
|
0.58
|
|
|
$
|
1.06
|
|
Diluted earnings per share:
|
|
|
|
||||
Net income attributable to Cooper Tire & Rubber Company common stockholders
|
$
|
0.57
|
|
|
$
|
1.05
|
|
4.
|
Inventories
|
5.
|
Fair Value Measurements
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
Assets/(liabilities)
|
|
|
|
||||
Designated as hedging instruments:
|
|
|
|
||||
Gross amounts recognized
|
$
|
681
|
|
|
$
|
1,029
|
|
Gross amounts offset
|
(51
|
)
|
|
—
|
|
||
Net amounts
|
$
|
630
|
|
|
$
|
1,029
|
|
Not designated as hedging instruments:
|
|
|
|
||||
Gross amounts recognized
|
37
|
|
|
109
|
|
||
Gross amounts offset
|
(154
|
)
|
|
(76
|
)
|
||
Net amounts
|
$
|
(117
|
)
|
|
$
|
33
|
|
Net amounts presented:
|
|
|
|
||||
Other current assets
|
$
|
513
|
|
|
$
|
1,062
|
|
|
Three Months Ended
March 31, |
||||||
Derivatives Designated as Cash Flow Hedges
|
2017
|
|
2016
|
||||
Amount of Loss Recognized in Other Comprehensive Income on Derivatives (Effective Portion)
|
$
|
(389
|
)
|
|
$
|
(4,044
|
)
|
Amount of Gain Reclassified from Cumulative Other Comprehensive Loss into Income (Effective Portion)
|
10
|
|
|
1,412
|
|
|
Location of Gain (Loss) Recognized in Income on Derivatives
|
|
Amount of Loss
|
||||||
|
Recognized in Income on Derivatives
|
||||||||
|
Three Months Ended
|
||||||||
|
March 31,
|
||||||||
Derivatives not Designated as Hedging Instruments
|
2017
|
|
2016
|
||||||
Foreign exchange contracts
|
Other non-operating (expense) income
|
|
$
|
(646
|
)
|
|
$
|
(900
|
)
|
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.
|
|
March 31, 2017
|
||||||||||||||
|
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 Exchange Contracts
|
$
|
513
|
|
|
$
|
—
|
|
|
$
|
513
|
|
|
$
|
—
|
|
Stock-based Liabilities
|
$
|
(21,125
|
)
|
|
$
|
(21,125
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
December 31, 2016
|
||||||||||||||
|
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 Exchange Contracts
|
$
|
1,062
|
|
|
$
|
—
|
|
|
$
|
1,062
|
|
|
$
|
—
|
|
Stock-based Liabilities
|
$
|
(20,336
|
)
|
|
$
|
(20,336
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
6.
|
Income Taxes
|
7.
|
Pensions and Postretirement Benefits Other than Pensions
|
|
Pension Benefits - Domestic
|
||||||
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Components of net periodic benefit cost:
|
|
|
|
||||
Service cost
|
$
|
2,465
|
|
|
$
|
2,403
|
|
Interest cost
|
9,813
|
|
|
10,617
|
|
||
Expected return on plan assets
|
(13,515
|
)
|
|
(13,391
|
)
|
||
Amortization of actuarial loss
|
9,281
|
|
|
9,576
|
|
||
Net periodic benefit cost
|
$
|
8,044
|
|
|
$
|
9,205
|
|
|
Pension Benefits - International
|
||||||
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Components of net periodic benefit cost:
|
|
|
|
||||
Service cost
|
$
|
—
|
|
|
$
|
2
|
|
Interest cost
|
2,770
|
|
|
3,724
|
|
||
Expected return on plan assets
|
(2,707
|
)
|
|
(2,991
|
)
|
||
Amortization of actuarial loss
|
1,310
|
|
|
1,356
|
|
||
Net periodic benefit cost
|
$
|
1,373
|
|
|
$
|
2,091
|
|
|
Other Postretirement Benefits
|
||||||
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Components of net periodic benefit cost:
|
|
|
|
||||
Service cost
|
$
|
501
|
|
|
$
|
537
|
|
Interest cost
|
2,515
|
|
|
2,705
|
|
||
Amortization of prior service credit
|
(141
|
)
|
|
(141
|
)
|
||
Net periodic benefit cost
|
$
|
2,875
|
|
|
$
|
3,101
|
|
8.
|
Product Warranty Liabilities
|
|
2017
|
|
2016
|
||||
Reserve at beginning of year
|
$
|
10,634
|
|
|
$
|
12,339
|
|
Additions
|
2,324
|
|
|
2,709
|
|
||
Payments
|
(2,030
|
)
|
|
(2,683
|
)
|
||
Reserve at March 31
|
$
|
10,928
|
|
|
$
|
12,365
|
|
9.
|
Stockholders’ Equity
|
|
Total Equity
|
||||||||||
|
Total Parent Stockholders’ Equity
|
|
Noncontrolling Shareholders' Interests in Consolidated Subsidiary
|
|
Total Stockholders’ Equity
|
||||||
Balance at December 31, 2016
|
$
|
1,076,014
|
|
|
$
|
54,222
|
|
|
$
|
1,130,236
|
|
Net income (loss)
|
30,561
|
|
|
(1,180
|
)
|
|
29,381
|
|
|||
Other comprehensive income
|
18,137
|
|
|
2,871
|
|
|
21,008
|
|
|||
Share repurchase program
|
(17,799
|
)
|
|
—
|
|
|
(17,799
|
)
|
|||
Stock compensation plans
|
(1,220
|
)
|
|
—
|
|
|
(1,220
|
)
|
|||
Cash dividends - $0.105 per share
|
(5,543
|
)
|
|
—
|
|
|
(5,543
|
)
|
|||
Balance at March 31, 2017
|
$
|
1,100,150
|
|
|
$
|
55,913
|
|
|
$
|
1,156,063
|
|
10.
|
Share Repurchase Programs
|
11.
|
Stock-Based Compensation
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Stock options
|
$
|
14
|
|
|
$
|
431
|
|
Restricted stock units
|
700
|
|
|
1,823
|
|
||
Performance stock units
|
569
|
|
|
2,498
|
|
||
Total stock-based compensation
|
$
|
1,283
|
|
|
$
|
4,752
|
|
|
Number of Shares
|
|
Outstanding at December 31, 2016
|
495,704
|
|
Exercised
|
(175,779
|
)
|
Expired
|
—
|
|
Canceled
|
—
|
|
Outstanding at March 31, 2017
|
319,925
|
|
Exercisable
|
319,925
|
|
|
Number of Restricted Stock Units
|
|
Nonvested at December 31, 2016
|
240,574
|
|
Granted
|
94,207
|
|
Vested
|
(117,198
|
)
|
Canceled
|
(1,218
|
)
|
Accrued dividend equivalents
|
573
|
|
Nonvested at March 31, 2017
|
216,938
|
|
|
Number of Performance Stock Units
|
|
Performance stock units outstanding at December 31, 2016
|
163,967
|
|
Granted
|
64,208
|
|
Canceled
|
(1,745
|
)
|
Accrued dividend equivalents
|
433
|
|
Performance stock units outstanding at March 31, 2017
|
226,863
|
|
12.
|
Changes in Accumulated Other Comprehensive Loss by Component
|
|
Cumulative Translation Adjustment
|
|
Derivative Instruments
|
|
Post-retirement Benefits
|
|
Total
|
||||
Beginning balance, December 31, 2016
|
(75,415
|
)
|
|
1,967
|
|
|
(471,703
|
)
|
|
(545,151
|
)
|
Other comprehensive income (loss) before reclassifications
|
12,517
|
|
|
(389
|
)
|
|
—
|
|
|
12,128
|
|
Foreign currency translation effect
|
—
|
|
|
—
|
|
|
(865
|
)
|
|
(865
|
)
|
Income tax effect
|
—
|
|
|
149
|
|
|
—
|
|
|
149
|
|
Amount reclassified from accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
|
||||
Cash flow hedges
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
Amortization of prior service credit
|
—
|
|
|
—
|
|
|
(141
|
)
|
|
(141
|
)
|
Amortization of actuarial losses
|
—
|
|
|
—
|
|
|
10,591
|
|
|
10,591
|
|
Income tax effect
|
—
|
|
|
4
|
|
|
(3,719
|
)
|
|
(3,715
|
)
|
Other comprehensive income (loss)
|
12,517
|
|
|
(246
|
)
|
|
5,866
|
|
|
18,137
|
|
Ending balance, March 31, 2017
|
(62,898
|
)
|
|
1,721
|
|
|
(465,837
|
)
|
|
(527,014
|
)
|
|
Cumulative Translation Adjustment
|
|
Derivative Instruments
|
|
Post-retirement Benefits
|
|
Total
|
||||
Beginning balance, December 31, 2015
|
(22,034
|
)
|
|
3,454
|
|
|
(491,187
|
)
|
|
(509,767
|
)
|
Other comprehensive (loss) income before reclassifications
|
(2,754
|
)
|
|
(4,044
|
)
|
|
—
|
|
|
(6,798
|
)
|
Foreign currency translation effect
|
—
|
|
|
—
|
|
|
2,029
|
|
|
2,029
|
|
Income tax effect
|
—
|
|
|
1,557
|
|
|
—
|
|
|
1,557
|
|
Amount reclassified from accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
|
||||
Cash flow hedges
|
—
|
|
|
(1,412
|
)
|
|
—
|
|
|
(1,412
|
)
|
Amortization of prior service credit
|
—
|
|
|
—
|
|
|
(141
|
)
|
|
(141
|
)
|
Amortization of actuarial losses
|
—
|
|
|
—
|
|
|
10,932
|
|
|
10,932
|
|
Income tax effect
|
—
|
|
|
516
|
|
|
(3,853
|
)
|
|
(3,337
|
)
|
Other comprehensive (loss) income
|
(2,754
|
)
|
|
(3,383
|
)
|
|
8,967
|
|
|
2,830
|
|
Ending balance, March 31, 2016
|
(24,788
|
)
|
|
71
|
|
|
(482,220
|
)
|
|
(506,937
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.
|
Comprehensive Income (Loss) Attributable to Noncontrolling Shareholders' Interests
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Net loss attributable to noncontrolling shareholders' interests
|
$
|
(1,180
|
)
|
|
$
|
(233
|
)
|
Other comprehensive income (loss):
|
|
|
|
||||
Currency translation adjustments
|
2,871
|
|
|
(198
|
)
|
||
Comprehensive income (loss) attributable to noncontrolling shareholders' interests
|
$
|
1,691
|
|
|
$
|
(431
|
)
|
14.
|
Contingent Liabilities
|
15.
|
Business Segments
|
•
|
North America, composed of the Company’s operations in the United States and Canada;
|
•
|
Latin America, composed of the Company’s operations in Mexico, Central America and South America;
|
•
|
Europe; and
|
•
|
Asia.
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Net sales
|
|
|
|
||||
Americas Tire
|
|
|
|
||||
External customers
|
$
|
522,369
|
|
|
$
|
567,163
|
|
Intercompany
|
8,991
|
|
|
12,175
|
|
||
|
531,360
|
|
|
579,338
|
|
||
International Tire
|
|
|
|
||||
External customers
|
120,656
|
|
|
82,612
|
|
||
Intercompany
|
21,308
|
|
|
20,614
|
|
||
|
141,964
|
|
|
103,226
|
|
||
Eliminations
|
(30,299
|
)
|
|
(32,789
|
)
|
||
Consolidated net sales
|
$
|
643,025
|
|
|
$
|
649,775
|
|
Operating profit (loss):
|
|
|
|
||||
Americas Tire
|
$
|
63,193
|
|
|
$
|
106,052
|
|
International Tire
|
1,653
|
|
|
(1,772
|
)
|
||
Unallocated corporate charges
|
(15,824
|
)
|
|
(13,019
|
)
|
||
Eliminations
|
(352
|
)
|
|
(157
|
)
|
||
Operating profit
|
48,670
|
|
|
91,104
|
|
||
Interest expense
|
(7,827
|
)
|
|
(6,636
|
)
|
||
Interest income
|
1,802
|
|
|
940
|
|
||
Other non-operating (expense) income
|
(235
|
)
|
|
1,462
|
|
||
Income before income taxes
|
$
|
42,410
|
|
|
$
|
86,870
|
|
Item 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended March 31,
|
|||||||||
(Dollar amounts in thousands except per share amounts)
|
2017
|
|
% Change
|
|
2016
|
|||||
Net sales
|
|
|
|
|
|
|||||
Americas Tire
|
|
|
|
|
|
|||||
External customers
|
$
|
522,369
|
|
|
(7.9
|
)
|
|
$
|
567,163
|
|
Intercompany
|
8,991
|
|
|
(26.2
|
)
|
|
12,175
|
|
||
|
531,360
|
|
|
(8.3
|
)
|
|
579,338
|
|
||
International Tire
|
|
|
|
|
|
|||||
External customers
|
120,656
|
|
|
46.1
|
|
|
82,612
|
|
||
Intercompany
|
21,308
|
|
|
3.4
|
|
|
20,614
|
|
||
|
141,964
|
|
|
37.5
|
|
|
103,226
|
|
||
Eliminations
|
(30,299
|
)
|
|
7.6
|
|
|
(32,789
|
)
|
||
Consolidated net sales
|
$
|
643,025
|
|
|
(1.0
|
)
|
|
$
|
649,775
|
|
Operating profit (loss):
|
|
|
|
|
|
|||||
Americas Tire
|
$
|
63,193
|
|
|
(40.4
|
)
|
|
$
|
106,052
|
|
International Tire
|
1,653
|
|
|
193.3
|
|
|
(1,772
|
)
|
||
Unallocated corporate charges
|
(15,824
|
)
|
|
(21.5
|
)
|
|
(13,019
|
)
|
||
Eliminations
|
(352
|
)
|
|
n/m
|
|
|
(157
|
)
|
||
Operating profit
|
48,670
|
|
|
(46.6
|
)
|
|
91,104
|
|
||
Interest expense
|
(7,827
|
)
|
|
17.9
|
|
|
(6,636
|
)
|
||
Interest income
|
1,802
|
|
|
91.7
|
|
|
940
|
|
||
Other non-operating (expense) income
|
(235
|
)
|
|
(116.1
|
)
|
|
1,462
|
|
||
Income before income taxes
|
42,410
|
|
|
(51.2
|
)
|
|
86,870
|
|
||
Provision for income taxes
|
13,029
|
|
|
(53.6
|
)
|
|
28,098
|
|
||
Net income
|
29,381
|
|
|
(50.0
|
)
|
|
58,772
|
|
||
Net loss attributable to noncontrolling shareholders' interests
|
(1,180
|
)
|
|
406.4
|
|
|
(233
|
)
|
||
Net income attributable to Cooper Tire & Rubber Company
|
$
|
30,561
|
|
|
(48.2
|
)
|
|
$
|
59,005
|
|
Basic earnings per share:
|
$
|
0.58
|
|
|
(45.3
|
)
|
|
$
|
1.06
|
|
Diluted earnings per share:
|
$
|
0.57
|
|
|
(45.6
|
)
|
|
$
|
1.05
|
|
•
|
North America, composed of the Company’s operations in the United States and Canada;
|
•
|
Latin America, composed of the Company’s operations in Mexico, Central America and South America;
|
•
|
Europe; and
|
•
|
Asia.
|
|
Three Months Ended March 31,
|
|||||||||
|
2017
|
|
Change
|
|
2016
|
|||||
(Dollar amounts in thousands)
|
|
|
|
|
|
|||||
Net sales
|
$
|
531,360
|
|
|
(8.3
|
)%
|
|
$
|
579,338
|
|
Operating profit
|
$
|
63,193
|
|
|
(40.4
|
)%
|
|
$
|
106,052
|
|
Operating margin
|
11.9
|
%
|
|
6.4 points
|
|
|
18.3
|
%
|
||
Total unit sales change
|
|
|
(7.4
|
)%
|
|
|
||||
United States replacement market unit shipment changes:
|
|
|
|
|
|
|||||
Total light vehicle tires
|
|
|
|
|
|
|||||
Segment
|
|
|
(11.3
|
)%
|
|
|
||||
RMA members
|
|
|
1.4
|
%
|
|
|
||||
Total Industry
|
|
|
1.1
|
%
|
|
|
|
Three Months Ended March 31,
|
|||||||||
|
2017
|
|
Change
|
|
2016
|
|||||
(Dollar amounts in thousands)
|
|
|
|
|
|
|||||
Net sales
|
$
|
141,964
|
|
|
37.5
|
%
|
|
$
|
103,226
|
|
Operating profit
|
$
|
1,653
|
|
|
—
|
%
|
|
$
|
(1,772
|
)
|
Operating margin
|
1.2
|
%
|
|
2.9 points
|
|
|
(1.7
|
)%
|
||
Total unit sales change
|
|
|
31.4
|
%
|
|
|
Parent company
|
|
||
8% unsecured notes due December 2019
|
$
|
173,578
|
|
7.625% unsecured notes due March 2027
|
116,880
|
|
|
Capitalized leases and other
|
8,233
|
|
|
|
298,691
|
|
|
Less: unamortized debt issuance costs
|
805
|
|
|
|
297,886
|
|
|
Less: current maturities
|
1,370
|
|
|
|
$
|
296,516
|
|
•
|
volatility in raw material and energy prices, including those of rubber, steel, petroleum-based products and natural gas or the unavailability of such raw materials or energy sources;
|
•
|
the failure of the Company’s suppliers to timely deliver products or services in accordance with contract specifications;
|
•
|
changes to tariffs or the imposition of new tariffs or trade restrictions, including changes related to tariffs on tires imported into the U.S. from China, as well as tariffs imposed on raw materials which the Company uses;
|
•
|
changes in economic and business conditions in the world, including changes related to the U.K.'s decision to withdraw from the European Union;
|
•
|
increased competitive activity including actions by larger competitors or lower-cost producers;
|
•
|
the failure to achieve expected sales levels;
|
•
|
changes in the Company’s customer relationships, including loss of particular business for competitive or other reasons;
|
•
|
the ultimate outcome of litigation brought against the Company, including product liability claims, which could result in commitment of significant resources and time to defend and possible material damages against the Company or other unfavorable outcomes;
|
•
|
a disruption in, or failure of, the Company’s information technology systems, including those related to cyber security, could adversely affect the Company’s business operations and financial performance;
|
•
|
changes in pension expense and/or funding resulting from the Company’s pension strategy, investment performance of the Company’s pension plan assets and changes in discount rate, salary increase rate, and expected return on plan assets assumptions, or changes to related accounting regulations;
|
•
|
government regulatory and legislative initiatives including environmental, healthcare, and tax matters;
|
•
|
volatility in the capital and financial markets or changes to the credit markets and/or access to those markets;
|
•
|
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
|
•
|
changes in interest or foreign exchange rates;
|
•
|
an adverse change in the Company’s credit ratings, which could increase borrowing costs and/or hamper access to the credit markets;
|
•
|
failure to implement information technologies or related systems, including failure by the Company to successfully implement an ERP system;
|
•
|
the risks associated with doing business outside of the U.S.;
|
•
|
the failure to develop technologies, processes or products needed to support consumer demand;
|
•
|
technology advancements;
|
•
|
the inability to recover the costs to develop and test new products or processes;
|
•
|
the impact of labor problems, including labor disruptions at the Company, its joint ventures, or at one or more of its large customers or suppliers;
|
•
|
failure to attract or retain key personnel;
|
•
|
consolidation among the Company’s competitors or customers;
|
•
|
inaccurate assumptions used in developing the Company’s strategic plan or operating plans or the inability or failure to successfully implement such plans;
|
•
|
risks relating to acquisitions including the failure to successfully integrate them into operations or their related financings may impact liquidity and capital resources;
|
•
|
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 Cooper-branded products;
|
•
|
the ability to find alternative sources for products supplied by PCT;
|
•
|
the inability to obtain and maintain price increases to offset higher production or material costs;
|
•
|
inability to adequately protect the Company’s intellectual property rights; and
|
•
|
inability to use deferred tax assets.
|
Item 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Item 4.
|
CONTROLS AND PROCEDURES
|
Part II.
|
OTHER INFORMATION
|
Item 1.
|
LEGAL PROCEEDINGS
|
Item 1A.
|
RISK FACTORS
|
•
|
the possible inability to integrate an acquired business into its operations;
|
•
|
diversion of management’s attention;
|
•
|
loss of key management personnel;
|
•
|
unanticipated problems or liabilities; and
|
•
|
increased labor and regulatory compliance costs of acquired businesses.
|
Item 2.
|
ISSUER PURCHASES OF EQUITY SECURITIES
|
Period
(1)(2)
|
|
Total
Number of
Shares
Purchased
|
|
Average
Price
Paid per
Share
|
|
Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
or Programs
|
|
Maximum Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans or
Programs
|
||||||
January 1, 2017 through January 31, 2017
|
|
214,707
|
|
|
$
|
37.09
|
|
|
214,707
|
|
|
$
|
101,744
|
|
February 1, 2017 through February 28, 2017
|
|
203,422
|
|
|
$
|
37.01
|
|
|
203,422
|
|
|
$
|
298,588
|
|
March 1, 2017 through March 31, 2017
|
|
54,838
|
|
|
$
|
42.06
|
|
|
54,838
|
|
|
$
|
296,284
|
|
Total
|
|
472,967
|
|
|
|
|
472,967
|
|
|
|
(1)
|
On February 20, 2015, the Board of Directors authorized a program to repurchase up to $200,000, excluding commissions, of the Company’s common stock through December 31, 2016 (the “2015 Repurchase Program”). On February 19, 2016, the Board of Directors increased the amount under and expanded the duration of the 2015 Repurchase Program (as amended, the “2016 Repurchase Program”). The 2016 Repurchase Program amended and superseded the 2015 Repurchase Program and allowed the Company to repurchase up to $200,000, excluding commissions, of the Company’s common stock from February 22, 2016 through December 31, 2017. The approximately $73,654 remaining under the 2015 Repurchase Program as of February 19, 2016 was included in the $200,000 maximum amount authorized by the 2016 Repurchase Program. No other changes were made. The 2016 Repurchase Program did not obligate the Company to acquire any specific number of shares and could have been suspended or discontinued at any time without notice. Under the 2016 Repurchase Program, shares could have been repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
|
(2)
|
On February 16, 2017, the Board of Directors increased the amount under and expanded the duration of the 2016 Repurchase Program (as amended, the "2017 Repurchase Program"). The 2017 Repurchase Program amended and superseded the 2016 Repurchase Program and allows the Company to repurchase up to $300,000, excluding commissions, of the Company’s common stock through December 31, 2019. The approximately
$95,634
remaining authorization under the 2016 Repurchase Program as of February 16, 2017 is included in the $300,000 maximum amount authorized by the 2017 Repurchase Program. No other changes were made. The 2017 Repurchase Program does not obligate the Company to acquire any specific number of shares and can be suspended or discontinued at any time without notice. Under the 2017 Repurchase Program, shares can be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
|
Item 6.
|
EXHIBITS
|
(10)
|
Ninth Amendment to Amended and Restated Receivables Purchase Agreement, dated as of February 8, 2017, among the Company, Cooper Receivables LLC and PNC Bank, National Association
|
(31.1)
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
(31.2)
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
(32)
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
(101.INS)
|
XBRL Instance Document
|
(101.SCH)
|
XBRL Taxonomy Extension Schema Document
|
(101.DEF)
|
XBRL Taxonomy Extension Definition Linkbase Document
|
(101.CAL)
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
(101.LAB)
|
XBRL Taxonomy Extension Label Linkbase Document
|
(101.PRE)
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
COOPER TIRE & RUBBER COMPANY
|
|
/s/ Ginger M. Jones
|
Ginger M. Jones
|
Senior Vice President and Chief Financial Officer
|
(Principal Financial Officer)
|
|
/s/ Mark A. Young
|
Mark A. Young
|
Director of External Reporting
|
(Principal Accounting Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Cooper Tire & Rubber Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Bradley E. Hughes
|
Bradley E. Hughes, President,
|
Chief Executive Officer and Director
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Cooper Tire & Rubber Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Ginger M. Jones
|
Ginger M. Jones, Senior Vice President and
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
|
/s/ Bradley E. Hughes
|
|
Name:
|
Bradley E. Hughes
|
Title:
|
Chief Executive Officer
|
|
|
/s/ Ginger M. Jones
|
|
Name:
|
Ginger M. Jones
|
Title:
|
Chief Financial Officer
|