SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A - #1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 27, 1999
Cooper Tire & Rubber Company
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(Exact name of registrant as specified in its charter)
Delaware 1-4329 34-4297750
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(State or other (Commission File (IRS Employer Number)
jurisdiction of Identification No.)
incorporation)
Lima & Western Avenues, Findlay, Ohio 45840
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(Address of principal executive offices)
(419) 423-1321
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(Registrant's telephone number, including area code)
The Exhibit Index is located at page 8.
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Item 2. Acquisition of Assets
On October 27, 1999 Cooper Tire & Rubber Company ("Cooper"), a
Delaware corporation, completed its previously announced acquisition of The
Standard Products Company ("Standard"), an Ohio corporation, following approval
by Standard's shareholders at a meeting of Standard's shareholders held on
October 26, 1999. Pursuant to the terms of an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of July 27, 1999, by and among Cooper, Standard
and CTB Acquisition Company ("CTB"), an Ohio corporation and wholly owned
subsidiary of Cooper, CTB merged with and into Standard. Each share of
Standard common stock was converted into the right to receive $36.50 in cash.
Payment to Standard's shareholders and the retirement of certain Standard debt
was funded through borrowings under Cooper's credit facilities. At the closing
date, Cooper financed the acquisition with borrowings under its existing long-
term and short-term credit facilities. On December 13, 1999 the Company issued
long-term public debt to retire those credit facility borrowings. The notes
require semiannual interest payments and have interest rates and maturity dates
as follows:
Interest
Amount Rate Maturity
$225,000,000 7.25% 12/16/2002
350,000,000 7.75% 12/15/2009
225,000,000 8.00% 12/15/2019
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$800,000,000
The Company's press release issued October 27, 1999 is hereby
incorporated by reference as filed on its Form 8-K dated November 5, 1999.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired. Standard's Annual Report
on Form 10-K for the fiscal year ended June 30, 1999 is incorporated
by reference.
(b) Pro Forma Financial Information.
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma condensed statement of income
for the 12 months ended December 31, 1998 has been prepared by
combining the consolidated statement of income of Cooper for its
fiscal year ended December 31, 1998 with the consolidated statement of
income of Standard for the 12 months ended December 31, 1998. The
unaudited pro forma condensed statement of income for the nine months
ended September 30, 1999 has been prepared by combining the
consolidated statements of income of Cooper and Standard for the nine
months ended September 30, 1999. These combined results were adjusted
to give effect to the merger as if it had occurred on January 1, 1998
and January 1, 1999, respectively, and include adjustments for
amortization of goodwill, interest expense, and the tax effect of the
interest expense adjustment.
The unaudited pro forma condensed balance sheet at September 30,
1999 has been prepared by combining the consolidated balance sheets as
of September 30, 1999 of Cooper and Standard, which have been adjusted
to give effect to the merger as if it had occurred on September 30,
1999 and include estimated adjustments for purchase accounting and
borrowings by Cooper to finance the acquisition. The pro forma
financial statements include preliminary estimates and assumptions
which Cooper's management believes are reasonable.
2
The merger of Cooper and Standard will be accounted for as a
purchase transaction. The assets acquired and liabilities assumed of
Standard are recorded at estimated fair values as determined by
Cooper's management based on information currently available and on
current tentative assumptions as to the future operations of Standard.
Cooper will have a valuation performed on certain of Standard's
tangible assets (principally property, plant and equipment) and
identifiable intangible assets to establish their fair values. In the
meantime, Cooper has recorded Standard's property, plant and equipment
at Standard's historical cost. The excess of cost over the values
preliminarily assigned to the net assets acquired, which has been
classified as goodwill in the accompanying pro forma balance sheet,
will be allocated to tangible and identified intangible assets and to
goodwill. The assumed estimated useful lives of these assets are
thirty years. Cooper will also be reviewing and determining the fair
values of the other assets acquired and liabilities assumed.
Cooper plans to achieve cost savings and synergies through the
integration of the operations of Standard with those of Cooper. The
unaudited pro forma condensed financial statements set forth herein do
not reflect these anticipated amounts. Cooper has put into place a
number of integration teams which are charged with formalizing the
integration plans and restructuring opportunities for each of the
business units. As it is Cooper's intent to minimize disruption of
the ongoing businesses and the external parties with whom they
regularly interface, Cooper will seek to obtain a sound understanding
of the major issues before proceeding with definitive action.
Accordingly, at this time, integration plans cannot yet be discussed
with a great deal of specificity.
In general terms, Cooper will be focusing on the following areas
of integration: 1) elimination of redundant administrative overhead
and support activities, including the consolidation of administrative
functions currently performed at Standard's world headquarters in
Dearborn, Michigan and Cooper's Engineered Products headquarters in
Auburn, Indiana, 2) consolidation of purchasing activities, 3)
potential rationalization of the Company's facilities with the goal of
achieving optimum operating efficiencies, and 4) rationalization
and/or restructuring of the manufacturing, sales, information
technology and research and development organizations to eliminate
redundancies in these activities. Management continues to evaluate
the strategic fit of certain of the acquired operations with its
long-term vision for the Company, known as "Cooper 21."
As a result of the acquisition of Standard, Cooper will incur
costs to 1) exit and consolidate activities at Standard and Cooper
locations, 2) involuntarily terminate employees and relocate
continuing employees of Standard and Cooper and 3) integrate operating
locations and other activities of Standard and Cooper (integration
costs). Generally accepted accounting principles require that the
Standard integration costs be reflected as assumed liabilities in the
allocation of purchase price of Standard to the net assets of Standard
acquired. These liabilities will be recorded under purchase
accounting as integration plans and related cost estimates are
finalized. These same accounting rules require that Cooper
integration costs be recorded as expense as incurred subsequent to the
acquisition date.
The allocation of the purchase price to the acquired
assets and liabilities of Standard is subject to revision as a result
of the final determination of appraised and other fair values.
3
The unaudited pro forma condensed financial statements do not
necessarily reflect the actual results of operations or financial
position of Cooper which would have resulted had the merger occurred
at an earlier date. The pro forma information is not necessarily
indicative of future results of operations for the combined companies.
The unaudited pro forma condensed financial statements should be read
in conjunction with the historical consolidated financial statements
and related notes of Cooper and Standard incorporated into this
document by reference.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
Nine months ended
September 30, 1999
--------------------- Pro Forma Pro Forma
Cooper Standard Adjustments Combined
---------- ---------- ----------- ----------
(In thousands except per share amounts)
Revenues:
Net sales $1,495,122 $ 840,132 $2,335,254
Other income 1,525 2,767 4,292
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1,496,647 842,899 2,339,546
Costs and expenses:
Cost of products sold 1,222,304 720,171 $ 8,968 (A) 1,951,443
Selling, general and
administrative 100,044 63,899 163,943
Nonrecurring charge 23,512 23,512
Interest 11,209 11,271 40,522 (B) 63,002
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1,333,557 818,853 49,490 2,201,900
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Income before income
taxes 163,090 24,046 (49,490) 137,646
Provision for income
taxes 59,143 10,092 (16,209)(C) 53,026
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Net income $ 103,947 $ 13,954 $(33,281) $ 84,620
========= ========= ======= =========
Average common shares
outstanding - diluted 75,895 75,895
Net income per share -
diluted $1.37 $1.11
Ratio of earnings to
fixed charges (G) 11.2x 2.9x
4
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
Twelve months ended
December 31, 1998
--------------------- Pro Forma Pro Forma
Cooper Standard Adjustments Combined
---------- ---------- ----------- ----------
(In thousands except per share amounts)
Revenues:
Net sales $1,876,125 $1,080,645 $2,956,770
Other income 3,635 1,975 5,610
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1,879,760 1,082,620 2,962,380
Costs and expenses:
Cost of products sold 1,545,489 933,640 $ 12,403 (A) 2,491,532
Selling, general and
administrative 120,830 78,952 199,782
Interest 15,224 12,792 54,030 (B) 82,046
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1,681,543 1,025,384 66,433 2,773,360
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Income before income
taxes 198,217 57,236 (66,433) 189,020
Provision for income
taxes 71,250 20,076 (21,612)(C) 69,714
--------- --------- ------- ---------
Net income $ 126,967 $ 37,160 $(44,821) $ 119,306
========= ========= ======= =========
Average common shares
outstanding - diluted 77,656 77,656
Net income per share -
diluted $1.64 $1.54
Ratio of earnings to
fixed charges (G) 10.0x 3.0x
5
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
As of
September 30, 1999
-------------------- Pro Forma Pro Forma
Cooper Standard Adjustments Combined
---------- -------- ----------- ----------
(In thousands)
Current assets:
Cash and cash
equivalents $ 40,302 $ 21,057 $ 6,200 (F) $ 67,559
Accounts receivable 412,548 167,196 50,000 (E) 629,744
Inventories 167,811 56,770 12,964 (D1) 237,545
Prepaid expenses and
deferred income taxes 23,349 37,675 (2,119)(D2) 58,905
--------- ------- ------- ---------
Total current assets 644,010 282,698 67,045 993,753
Property, plant and
equipment 908,597 325,289 1,233,886
Goodwill - 70,834 (70,834)(D3)
427,978 (D9) 427,978
Intangibles and other
assets 100,190 55,100 (1,281)(D2) 154,009
--------- ------- ------- ---------
Total assets $1,652,797 $733,921 $422,908 $2,809,626
========= ======= ======= =========
Current liabilities:
Short-term debt and
current portion of
long-term debt $ 11,501 $ 22,077 $ 14,600 (D5)
(19,600)(F)
5,000 (D6) $ 33,578
Accounts payable and
accrued liabilities 205,423 202,032 407,455
--------- ------- ------- ---------
Total current
liabilities 216,924 224,109 - 441,033
Long-term debt 205,119 184,230 800,000 (F)
50,000 (E)
(180,000)(F) 1,059,349
Postretirement benefits
other than pensions 155,985 24,750 119 (D4) 180,854
Other long-term
liabilities 50,287 23,194 8,453 (D2) 81,934
Deferred income taxes 76,977 27,417 (5,443)(D7) 98,951
Stockholders' equity:
CTB stockholders' equity 947,505 - - 947,505
SPD stockholders' equity - 250,221 (250,221)(D8) -
--------- ------- ------- ---------
947,505 250,221 (250,221) 947,505
--------- ------- ------- ---------
Total liabilities
and stockholders'
equity $1,652,797 $733,921 $422,908 $2,809,626
========= ======= ======= =========
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NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(A) To amortize over 30 years the excess of the purchase price over the fair
value of net assets acquired, net of goodwill amortization previously
recorded by Standard.
(B) To adjust interest expense to reflect the borrowings described in the
"Unaudited Pro Forma Condensed Financial Information."
(C) To provide for income taxes at an incremental tax rate of 40% for interest
expense adjustments.
(D) To allocate on a preliminary basis the purchase price for Standard as
follows (in thousands):
D1 Adjust acquired inventories to estimated fair value $ 12,964
D2 Adjust pension liability to reflect the excess of the
benefit obligations over the fair value of plan assets (11,853)
D3 Eliminate the goodwill related to Standard's acquisitions
of businesses in prior years (70,834)
D4 Adjust liability for postretirement benefits to estimated
benefit obligation (119)
D5 Record additional debt to be incurred by Standard relating
to its stock options and restricted shares (14,600)
D6 Record additional debt to be incurred for estimated
transaction expenses (5,000)
D7 Record income taxes for adjustments D1, D2, D4 and D5
assuming a 40% incremental tax rate 5,443
D8 Eliminate shareholders' equity of Standard 250,221
D9 Record preliminary estimate of the excess of the purchase
price over the fair value of the net assets acquired 427,978
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$594,200
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The estimated aggregate purchase price is derived as follows:
Acquisition of Standard outstanding common shares at
$36.50 per share $584,400
Estimated transaction costs 2,600
Costs related to change of control agreements and employment
contracts 7,200
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$594,200
========
(E) To reflect the termination of Standard's accounts receivable factoring
program and the debt resulting from the termination.
(F) To record the debt incurred to finance the acquisition and reflect
the retirement of Standard's borrowings under its credit agreement.
(G) Earnings used to calculate the ratio of earnings to fixed charges consist
of pro forma consolidated income before income taxes, adjusted for the
portion of fixed charges deducted from such earnings. Fixed charges
consist of interest on all indebtedness (including capital lease
obligations), amortization of debt expense, capitalized interest, and the
portion of interest expense on operating leases deemed representative of
the interest factor.
7
(c) Exhibits. The following exhibits are filed herewith:
(2) Agreement and Plan of Merger, dated as of July 27,1999, by and
among Cooper, Standard and CTB (Incorporated by reference to
Appendix A to the proxy statement-prospectus included in Cooper's
Registration Statement on Form S-4 (File No. 333-86559) filed on
September 3, 1999)
(23) Consent of Arthur Andersen LLP
(99) Cooper's press release, issued October 27, 1999, announcing the
completion of the acquisition of Standard included in Cooper's
Form 8-K dated November 5, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Cooper has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COOPER TIRE & RUBBER COMPANY
Date: January 10, 2000 By: /S/ Eileen B. White
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Corporate Controller
(Principal Accounting Officer)
8
EXHIBIT INDEX
EXHIBIT DESCRIPTION
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(2) Agreement and Plan of Merger, dated as of July 27,1999, by and among
Cooper, Standard and CTB (Incorporated by reference to Appendix A to
the proxy statement-prospectus included in Cooper's Registration
Statement on Form S-4 (File No. 333-86559) filed on September 3,
1999)
(23) Consent of Arthur Andersen LLP
(99) Cooper's press release, issued October 27, 1999, announcing the
completion of the acquisition of Standard included in Cooper's
Form 8-K dated November 5, 1999
9
Exhibit (23)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 8-K/A of our report dated July 22, 1999 and August 23,
1999, included in The Standard Products Company's Form 10-K for the year ended
June 30, 1999. It should be noted that we have not audited any financial
statements of the company subsequent to June 30, 1999 or performed any audit
procedures subsequent to the date of our report.
/S/ Arthur Andersen LLP
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ARTHUR ANDERSEN LLP
Detroit, Michigan
January 10, 2000
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