UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND 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 (I.R.S. employer
incorporation or organization) identification no.)
Lima and Western Avenues, Findlay, Ohio 45840
(Address of principal executive offices)
(Zip code)
(419) 423-1321
(Registrant's telephone number, including area code)
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 (X) No ( )
Number of shares of common stock of registrant outstanding
at April 30, 1996: 83,671,272
1
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands; per-share amounts in dollars)
March 31,
1996 December 31,
(Unaudited) 1995
------------- ------------
ASSETS
Current assets:
Cash, including short-term investments of
$2,100 ($14,000 in 1995) $ 5,420 $ 23,187
Accounts receivable, less allowances
of $3,922 ($3,600 in 1995) 278,530 257,049
Inventories at lower of cost (last-in,
first-out) or market:
Finished goods 107,150 88,470
Work in process 13,543 13,154
Raw materials and supplies 38,117 36,340
---------- ----------
158,810 137,964
Prepaid expenses and deferred income taxes 14,179 12,384
---------- ----------
Total current assets 456,939 430,584
Property, plant and equipment - net 726,627 678,876
Other assets 33,076 34,241
---------- ----------
$ 1,216,642 $ 1,143,701
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 84,171 $ 78,823
Accrued liabilities 62,792 63,676
Income taxes 11,673 10,834
Current portion of debt 50,046 5,035
---------- ----------
Total current liabilities 208,682 158,368
Long-term debt 28,445 28,574
Postretirement benefits other than pensions 135,101 132,963
Other long-term liabilities 38,429 38,341
Deferred income taxes 40,259 36,656
Stockholders' equity:
Preferred stock, $1 par value; 5,000,000 shares
authorized; none issued - -
Common stock, $1 par value; 300,000,000 shares
authorized; 83,671,272 shares outstanding
(83,661,972 in 1995) 83,671 83,662
Capital in excess of par value 2,015 1,931
Retained earnings 689,207 672,373
Minimum pension liability (9,167) (9,167)
---------- ----------
Total stockholders' equity 765,726 748,799
---------- ----------
$ 1,216,642 $ 1,143,701
========== ==========
<FN>
See accompanying notes.
2
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1996 1995
-------- --------
Revenues:
Net sales $381,038 $365,353
Other income 276 1,513
------- -------
381,314 366,866
Costs and expenses:
Cost of products sold 324,333 303,931
Selling, general and administrative 19,848 18,238
Interest 4 570
------- -------
344,185 322,739
------- -------
Income before income taxes 37,129 44,127
Provision for income taxes 14,020 16,910
------- -------
Net income $ 23,109 $ 27,217
======= =======
Net income per share $.28 $.33
=== ===
Weighted average number of
shares outstanding (000's) 83,666 83,638
====== ======
Dividends per share $.075 $.060
==== ====
<FN>
See accompanying notes.
3
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1996 1995
-------- --------
Operating activities:
Net income $ 23,109 $ 27,217
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 17,801 15,804
Deferred income taxes 2,375 2,047
Changes in operating assets
and liabilities:
Accounts receivable (21,481) (7,268)
Inventories and prepaid expenses (22,641) (4,992)
Accounts payable and
accrued liabilities 4,464 (2,948)
Postretirement benefits
other than pensions 2,214 1,514
Other 3,467 10,827
------- -------
Net cash provided by
operating activities 9,308 42,201
Investing activities:
Property, plant and equipment (65,642) (29,892)
Other (133) 168
------- -------
Net cash used in investing
activities (65,775) (29,724)
Financing activities:
Issuance of debt 45,000 -
Payment on debt (118) (198)
Issuance of common stock 93 88
Payment of dividends (6,275) (5,019)
------- -------
Net cash provided by (used in)
financing activities 38,700 (5,129)
------- -------
Changes in cash and short-term investments (17,767) 7,348
Cash and short-term investments at
beginning of year 23,187 103,285
------- -------
Cash and short-term investments at
end of period $ 5,420 $110,633
======= =======
Cash payments for interest $ 405 $ 1,600
======= =======
Cash payments for income taxes $ 10,805 $ 4,404
======= =======
<FN>
See accompanying notes.
4
COOPER TIRE & RUBBER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements at March 31, 1996 and for the
three-month periods ended March 31, 1996 and 1995 are unaudited and
include all adjustments, consisting only of normal recurring accruals,
which the Company considers necessary for a fair presentation of
financial position and operating results. The unaudited consolidated
financial statements have been prepared in accordance with Article 10
of Regulation S-X and, therefore, do not contain all information and
footnotes normally contained in annual financial statements;
accordingly, they should be read in conjunction with the Financial
Statements and notes thereto appearing in the Annual Report on Form
10-K of the Company for the year ended December 31, 1995.
2. The results of operations for the three-month period ended March 31,
1996 are not necessarily indicative of those to be expected for the
year ending December 31, 1996.
REVIEW BY INDEPENDENT AUDITORS
The consolidated financial statements included in this filing on Form 10-Q
have been reviewed by the Company's independent auditors, Ernst & Young
LLP, and their report thereon is attached hereto as Part I - Exhibit 1.
All material adjustments or additional disclosures proposed by the
Company's independent auditors have been reflected in the data presented.
5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Net sales for the first quarter of 1996 increased 4.3% when compared to the
first quarter of 1995. Sales of both tires and engineered rubber products
were higher than for the three-month period one year ago. Other income was
lower as compared to the 1995 period due to lower amounts of interest
income.
Cost of products sold, as a percent of net sales, was higher in the first
quarter of 1996 as compared with the first quarter of 1995. Intense price
competition in the replacement tire market and increased raw material costs
contributed to margin deterioration. Selling, general and administrative
expenses, as a percent of net sales, were higher at 5.2% compared to 5.0% in
1995 due in part to the timing of advertising programs. Interest expense
was lower than for the first quarter of 1995 reflecting higher amounts of
capitalized interest.
Income before income taxes decreased 15.9% from the quarter one year ago.
The quarter was adversely impacted by continued high raw material costs and
the inability to achieve a price increase on tires in the current market
environment.
Working capital of $248.3 million is down $24 million since year end and
down $67 million from March 31, 1995 reflecting decreases in cash and the
assumption of $45 million of short-term debt. The current ratio of 2.2 is
down from 2.7 at December 31, 1995 and 3.0 at March 31, 1995. The
financial position of the Company at March 31, 1996 continues to be very
strong.
The cash flows generated by operating activities during the first three
months of 1996 are lower than for the three-month period one year ago
primarily as a result of increases in accounts receivable and finished
goods inventories at March 31, 1996. Accounts receivable reflects
increased sales and the timing of receipts. Finished goods inventories are
well managed and were increased to meet the expected requirements of new
and existing customers. Capital expenditures increased significantly in
1996 from 1995 reflecting higher levels of cost reduction projects and
several capacity expansion projects. The Company expects that available
cash and existing lines of credit will be sufficient to meet normal
operating requirements over the near term.
6
Part II. OTHER INFORMATION
Item 6(a). Exhibits.
(15) Letter regarding unaudited interim consolidated financial
information
(27) Financial Data Schedule
Item 6(b). Reports on Form 8-K.
No Form 8-K has been filed.
7
INDEX TO EXHIBITS
DESCRIPTION
Part I. Exhibit 1.
Independent Accountants' Review Report.
Part II. Item 6(a).
(15) Letter from Ernst & Young LLP, independent accountants, dated
May 3, 1996 regarding unaudited interim consolidated financial
information.
(27) Financial Data Schedule.
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
COOPER TIRE & RUBBER COMPANY
/S/ J. Alec Reinhardt
---------------------
J. Alec Reinhardt
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
/S/ J. A. Faisant
-----------------
J. A. Faisant
Vice President and
Corporate Controller
(Principal Accounting Officer)
May 3, 1996
-----------
(Date)
9
Part I
Exhibit 1
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
Cooper Tire & Rubber Company
We have reviewed the accompanying condensed consolidated balance sheet of
Cooper Tire & Rubber Company as of March 31, 1996, and the related
consolidated statements of income and cash flows for the three-month
periods ended March 31, 1996 and 1995. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data, and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, which will be performed for the full year with the objective of
expressing an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Cooper Tire & Rubber Company
as of December 31, 1995, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended (not presented
herein) and in our report dated February 13, 1996, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1995, is fairly stated, in
all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/S/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Toledo, Ohio
April 11, 1996
10
Part II
Exhibit (15)
May 3, 1996
Securities and Exchange Commission
Washington, D.C. 20549
We are aware of the incorporation by reference in the Registration
Statements (Form S-3 No. 33-44159 and Form S-8 Nos. 2-58577, 2-77400,
33-5483, 33-35071, 33-47979, 33-47980, 33-47981, 33-47982, 33-52499 and
33-52505) of Cooper Tire & Rubber Company for the registration of its
common stock of our report dated April 11, 1996 relating to the
unaudited interim consolidated financial statements of Cooper Tire &
Rubber Company which are included in its Form 10-Q for the quarter ended
March 31, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a
part of the registration statement prepared or certified by accountants
within the meaning of Section 7 or 11 of the Securities Act of 1933.
Very truly yours,
/S/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Toledo, Ohio
11