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 September 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 October 31, 1996: 82,272,772
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)
September 30,
1996 December 31,
(Unaudited) 1995
------------ ------------
ASSETS
Current assets:
Cash, including short-term investments of
$14,000 in 1995 $ 7,181 $ 23,187
Accounts receivable, less allowances
of $4,523 ($3,600 in 1995) 318,631 257,049
Inventories at lower of cost (last-in,
first-out) or market:
Finished goods 87,392 88,470
Work in process 13,985 13,154
Raw materials and supplies 29,488 36,340
---------- ----------
130,865 137,964
Prepaid expenses and deferred income taxes 15,994 12,384
---------- ----------
Total current assets 472,671 430,584
Property, plant and equipment - net 782,109 678,876
Other assets 36,052 34,241
---------- ----------
$ 1,290,832 $ 1,143,701
LIABILITIES AND STOCKHOLDERS' EQUITY ========== ==========
Current liabilities:
Accounts payable $ 77,591 $ 78,823
Accrued liabilities 88,966 63,676
Income taxes 2,137 10,834
Current portion of debt 63,069 5,035
---------- ----------
Total current liabilities 231,763 158,368
Long-term debt 40,174 28,574
Postretirement benefits other than pensions 137,906 132,963
Other long-term liabilities 38,985 38,341
Deferred income taxes 47,957 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 issued
(83,661,972 in 1995) 83,672 83,662
Capital in excess of par value 2,026 1,931
Retained earnings 728,731 672,373
Minimum pension liability (9,167) (9,167)
---------- ----------
805,262 748,799
Less: Common stock shares in treasury at
cost (560,700 in 1996) (11,215) -
---------- ----------
Total stockholders' equity 794,047 748,799
---------- ----------
$ 1,290,832 $ 1,143,701
<FN> ========== ==========
See accompanying notes.
2
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1996 1995
-------- --------
Revenues:
Net sales $423,172 $375,004
Other income 189 708
------- -------
423,361 375,712
Costs and expenses:
Cost of products sold 359,077 313,499
Selling, general and administrative 20,731 19,041
Interest 580 (66)
------- -------
380,388 332,474
------- -------
Income before income taxes 42,973 43,238
Provision for income taxes 16,060 16,190
------- -------
Net income $ 26,913 $ 27,048
======= =======
Net income per share $.32 $.32
=== ===
Weighted average number of
shares outstanding (000's) 83,576 83,648
====== ======
Dividends per share $.075 $.075
==== ====
<FN>
See accompanying notes.
3
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1996 1995
-------- --------
Revenues:
Net sales $1,203,068 $1,111,723
Other income 711 3,385
--------- ---------
1,203,779 1,115,108
Costs and expenses:
Cost of products sold 1,021,976 931,220
Selling, general and administrative 60,600 56,024
Interest 589 808
--------- ---------
1,083,165 988,052
--------- ---------
Income before income taxes 120,614 127,056
Provision for income taxes 45,430 48,130
--------- ---------
Net income $ 75,184 $ 78,926
========= =========
Net income per share $.90 $.94
=== ===
Weighted average number of
shares outstanding (000's) 83,638 83,643
====== ======
Dividends per share $.225 $.195
==== ====
<FN>
See accompanying notes.
4
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1996 1995
-------- --------
Operating activities:
Net income $ 75,184 $ 78,926
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 56,352 47,712
Deferred income taxes 9,043 5,919
Changes in operating assets
and liabilities:
Accounts receivable (61,582) (61,071)
Inventories and prepaid expenses 3,489 (22,295)
Accounts payable and
accrued liabilities 24,058 18,324
Postretirement benefits
other than pensions 5,568 4,602
Other (8,298) (2,433)
------- -------
Net cash provided by
operating activities 103,814 69,684
Investing activities:
Property, plant and equipment (159,675) (127,560)
Other 157 523
------- -------
Net cash used in investing
activities (159,518) (127,037)
Financing activities:
Issuance of debt 116,000 -
Payment on debt (46,366) (455)
Payment of dividends (18,826) (16,311)
Purchase of treasury stock (11,215) -
Issuance of common stock 105 196
------- -------
Net cash provided by (used in)
financing activities 39,698 (16,570)
------- -------
Changes in cash and short-term investments (16,006) (73,923)
Cash and short-term investments at
beginning of year 23,187 103,285
------- -------
Cash and short-term investments at
end of period $ 7,181 $ 29,362
======= =======
Cash payments for interest $ 3,879 $ 1,919
======= =======
Cash payments for income taxes $ 45,138 $ 42,733
======= =======
<FN>
See accompanying notes.
5
COOPER TIRE & RUBBER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements at September 30, 1996 and for the
three-month and nine-month periods ended September 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 nine-month periods
ended September 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 12.8% for the third quarter of 1996 and 8.2% for the first
nine months of 1996 when compared to the corresponding periods in 1995. Sales
of both tires and engineered products were higher than for the three-month and
nine-month periods one year ago. Other income was lower in the third quarter
and for the nine 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 third
quarter and nine-month periods of 1996 as compared with the corresponding
periods of 1995. Margin deterioration resulted from continued intense
competition in the replacement tire market and costs associated with
manufacturing program implementations and new facilities. The favorable
impact of lower raw material costs and improved product mix partially offset
these conditions. For the year-to-date, lower plant operating levels also
contributed to the deterioration.
Selling, general and administrative expenses were higher for both the
three-month and nine-month periods of 1996 compared to one year ago. As a
percent of net sales, however, selling, general and administrative expenses
were 4.9% for the quarter in 1996 compared to 5.1% in 1995 and 5.0% for both
the 1996 and 1995 nine-month periods.
Interest expense during the quarter and nine-month periods of 1996 reflects
increased amounts of interest expense related to higher debt levels. Higher
amounts of capitalized interest partially offset this increase in expense
during the quarter, and for the nine-month period more than offset this
increase.
Income before income taxes for the quarter decreased slightly from one year
ago, and for the nine-month period decreased 5.1%. The quarter and nine
months of 1996 were adversely impacted by costs related to manufacturing
program implementations and new facilities and the inability to achieve a
price increase on tires in the current market environment. The nine-month
results reflect lower plant operating levels.
Working capital of $241 million is down $31 million since year end and down
$54 million from September 30, 1995. The current ratio of 2.0 is down from
2.7 at both December 31, 1995 and September 30, 1995 reflecting decreases in
cash and the assumption of $58 million of short-term debt. The financial
position of the Company at September 30, 1996 continues to be strong.
The cash flows generated by operating activities during the first nine months
of 1996 are higher than for the nine-month period one year ago primarily as a
result of a modest decrease in inventories at September 30, 1996 compared to
an increase one year earlier. Capital expenditures increased significantly in
1996 from 1995 reflecting higher levels of cost reduction projects and several
capacity expansion projects.
In July, the Board of Directors authorized the repurchase of up to 5 million
shares of the Company's common stock. The Company acquired 560,700 shares for
$11 million, or approximately $20 per share, through September and intends,
given certain market conditions, to repurchase additional shares.
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 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.
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
October 11, 1996 regarding unaudited interim consolidated financial
information.
(27) Financial Data Shedule
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)
November 11, 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 September 30, 1996, and the related
consolidated statements of income for the three-month and nine-month periods
ended September 30, 1996 and 1995 and the consolidated statements of cash
flows for the nine-month periods ended September 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 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
October 11, 1996
11
Part II
Exhibit (15)
November 11, 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, July 12, 1996, and
October 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 quarters ended March 31, 1996, June 30, 1996 and September 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