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 June 30, 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 July 31, 1996: 83,672,272
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)
June 30,
1996 December 31,
(Unaudited) 1995
------------- ------------
ASSETS
Current assets:
Cash, including short-term investments of
$70 ($14,000 in 1995) $ 12,887 $ 23,187
Accounts receivable, less allowances
of $4,223 ($3,600 in 1995) 294,146 257,049
Inventories at lower of cost (last-in,
first-out) or market:
Finished goods 107,851 88,470
Work in process 13,089 13,154
Raw materials and supplies 33,432 36,340
---------- ----------
154,372 137,964
Prepaid expenses and deferred income taxes 15,956 12,384
---------- ----------
Total current assets 477,361 430,584
Property, plant and equipment - net 761,562 678,876
Other assets 32,800 34,241
---------- ----------
$ 1,271,723 $ 1,143,701
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 66,731 $ 78,823
Accrued liabilities 79,138 63,676
Income taxes 19 10,834
Current portion of debt 93,057 5,035
---------- ----------
Total current liabilities 238,945 158,368
Long-term debt 28,313 28,574
Postretirement benefits other than pensions 136,922 132,963
Other long-term liabilities 38,623 38,341
Deferred income taxes 44,295 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; 83,672,272 shares outstanding
(83,661,972 in 1995) 83,672 83,662
Capital in excess of par value 2,026 1,931
Retained earnings 708,094 672,373
Minimum pension liability (9,167) (9,167)
---------- ----------
Total stockholders' equity 784,625 748,799
---------- ----------
$ 1,271,723 $ 1,143,701
========== ==========
<FN>
See accompanying notes.
2
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1996 1995
-------- --------
Revenues:
Net sales $398,858 $371,366
Other income 246 1,164
------- -------
399,104 372,530
Costs and expenses:
Cost of products sold 338,566 313,790
Selling, general and administrative 20,021 18,745
Interest 5 304
------- -------
358,592 332,839
------- -------
Income before income taxes 40,512 39,691
Provision for income taxes 15,350 15,030
------- -------
Net income $ 25,162 $ 24,661
======= =======
Net income per share $.30 $.29
=== ===
Weighted average number of
shares outstanding (000's) 83,672 83,643
====== ======
Dividends per share $.075 $.060
==== ====
<FN>
See accompanying notes.
3
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1996 1995
-------- --------
Revenues:
Net sales $779,896 $736,719
Other income 522 2,677
------- -------
780,418 739,396
Costs and expenses:
Cost of products sold 662,899 617,721
Selling, general and administrative 39,869 36,983
Interest 9 874
------- -------
702,777 655,578
------- -------
Income before income taxes 77,641 83,818
Provision for income taxes 29,370 31,940
------- -------
Net income $ 48,271 $ 51,878
======= =======
Net income per share $.58 $.62
=== ===
Weighted average number of
shares outstanding (000's) 83,669 83,641
====== ======
Dividends per share $.15 $.12
=== ===
<FN>
See accompanying notes.
4
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1996 1995
-------- --------
Operating activities:
Net income $ 48,271 $ 51,878
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 36,256 31,957
Deferred income taxes 6,267 2,879
Changes in operating assets
and liabilities:
Accounts receivable (37,097) (45,718)
Inventories and prepaid expenses (19,980) (20,270)
Accounts payable and
accrued liabilities 3,370 9,078
Postretirement benefits
other than pensions 4,110 2,889
Other (7,914) (4,884)
------- ------
Net cash provided by
operating activities 33,283 27,809
Investing activities:
Property, plant and equipment (119,032) (69,505)
Other 133 1,015
------- ------
Net cash used in investing
activities (118,899) (68,490)
Financing activities:
Issuance of debt 104,000 -
Payment on debt (16,239) (341)
Issuance of common stock 105 142
Payment of dividends (12,550) (10,038)
------- ------
Net cash provided by (used in)
financing activities 75,316 (10,237)
------- ------
Changes in cash and short-term investments (10,300) (50,918)
Cash and short-term investments at
beginning of year 23,187 103,285
------- -------
Cash and short-term investments at
end of period $ 12,887 $ 52,367
======= =======
Cash payments for interest $ 2,913 $ 1,745
======= =======
Cash payments for income taxes $ 33,973 $ 34,131
======= =======
<FN>
See accompanying notes.
5
COOPER TIRE & RUBBER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements at June 30, 1996 and for the
three-month and six-month periods ended June 30, 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 and six-month periods
ended June 30, 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.
6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Net sales increased 7.4% for the second quarter of 1996 and 5.9% for the
first six months of 1996 when compared to the corresponding periods of
1995. Sales of both tires and engineered products were higher than for the
three-month and six-month periods one year ago. Other income was lower in
the second quarter and for the six months of 1996 as compared to the
corresponding 1995 periods due to lower amounts of interest income.
Cost of products sold, as a percent of net sales, was higher in both the
second quarter and six-month periods of 1996 as compared with the
corresponding periods of 1995. Margin deterioration resulted from lower
operating levels compared to one year ago, continued intense competition in
the replacement tire market and the costs associated with new facilities.
During the quarter, the favorable impact of lower raw material costs and
richer product mix partially offset these conditions. For the
year-to-date, richer product mix contributed to offset the deterioration.
Selling, general and administrative expenses were higher for both
three-month and six-month periods of 1996 compared to one year ago. As a
percent of net sales, however, selling, general and administrative expenses
were 5.0% for both the 1996 and 1995 quarters and 5.1% for the six months
of 1996 compared to 5.0% in 1995.
Interest expense was lower than for the corresponding 1995 periods
reflecting higher amounts of interest expense associated with the
assumption of short-term borrowings which were offset by capitalized
interest.
Income before income taxes for the quarter increased slightly from one year
ago, but for the year-to-date decreased 7.4%. The quarter and six months
of 1996 were adversely impacted by lower operating levels compared to one
year ago, costs associated with new facilities, and the inability to
achieve a price increase on tires in the current market environment.
Working capital of $238 million is down $34 million since year end and down
$76 million from June 30, 1995 reflecting decreases in cash and the
assumption of $88 million of short-term debt. The current ratio of 2.0 is
down from 2.7 at December 31, 1995 and 3.0 at June 30, 1995. The financial
position of the Company at June 30, 1996 continues to be strong.
The cash flows generated by operating activities during the first six
months of 1996 are higher than for the six-month period one year ago
primarily as a result of a more modest increase in accounts receivable at
June 30, 1996. Accounts receivable reflects increased sales and the timing
of receipts. 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.
7
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Stockholders was held on
May 7, 1996.
(b) All of the nominees for directors, as listed below under (c) and on
pages 2 through 4 of the Company's Proxy Statement dated March 26, 1996,
were elected. The following directors have terms of office which
continued after the meeting:
Arthur H. Aronson Allan H. Meltzer
Delmont A. Davis J. Alec Reinhardt
Ivan W. Gorr Patrick W. Rooney
(c) A description of each matter voted upon at that meeting, the
election of directors and the proposal to approve and adopt a stock
option plan, is contained on pages 2 through 4, 10 through 12 and 22
through 26 of the Company's Proxy Statement dated March 26, 1996, which
pages are incorporated herein by reference.
The number of votes cast by common stock holders with respect to each
matter is as follows:
Election of directors
Term Affirmative Withheld Broker
Expiration Votes Votes Abstentions Non-votes
---------- ----------- -------- ----------- ---------
Edsel D. Dunford 1999 74,591,816 600,709 0 0
John Fahl 1999 74,625,543 566,982 0 0
Deborah M. Fretz 1999 74,126,280 1,066,245 0 0
Dennis J. Gormley 1999 74,592,840 599,685 0 0
Affirmative Negative Broker
Votes Votes Abstentions Non-votes
----------- --------- ----------- ---------
Proposal to approve and
adopt a stock option plan 71,783,840 1,852,446 1,556,239 0
Item 6(a). Exhibits.
(15) Letter regarding unaudited interim consolidated financial
information
(27) Financial Data Schedule
(99) Press release regarding purchase of Company common stock
Item 6(b). Reports on Form 8-K.
No form 8-K has been filed.
8
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
August 9, 1996 regarding unaudited interim consolidated financial
information.
(27) Financial Data Shedule
(99) Press release dated July 22, 1996 regarding purchase of Company
common stock.
9
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)
August 9, 1996
--------------
(Date)
10
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 June 30, 1996, and the related
consolidated statements of income and cash flows for the three-month and
six-month periods ended June 30, 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
July 12, 1996
11
Part II
Exhibit (15)
August 9, 1996
Board of Directors
Cooper Tire & Rubber Company
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,
33-52505 and 333-09619) of Cooper Tire & Rubber Company for the
registration of its common stock of our reports dated April 11, 1996 and
July 12, 1996 relating to the unaudited interim consolidated financial
statements of Cooper Tire & Rubber Company which are included in its
Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a
part of the registration statements 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
12
Part II
Exhibit (99)
<LOGO> COOPER TIRE & RUBBER COMPANY NEWS RELEASE
Public Relations Findlay, Ohio 45840 Phone: (419) 423-1321
- -----------------------------------------------------------------------
COMPANY CONTACT: J. ALEC REINHARDT FOR IMMEDIATE RELEASE
July 22, 1996
COOPER TIRE BOARD AUTHORIZES PURCHASE
-------------------------------------
OF UP TO FIVE MILLION SHARES OF ITS COMMON STOCK
------------------------------------------------
FINDLAY, OHIO -- Cooper Tire & Rubber Company today announced its board
of directors has authorized the purchase of up to five million shares of
its common stock from time to time in the open market or otherwise. The
company currently has 83,672,472 common shares outstanding.
The board of directors did not establish a timetable for the purchase
program. These purchases shall occur at such times as the company may
elect. The shares purchased will be used for general corporate purposes.
In announcing the stock purchase program, Cooper Tire chairman Patrick W.
Rooney stated, "The current stock price, we believe, undervalues the
company and presents the company an opportunity to reduce the number of
outstanding shares. The purchases will be made with normal cash flows from
operations and debt. The repurchase should not impinge on our planned
capital investments in strategic plant and equipment."
13