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, 1997
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, 1997: 78,678,772
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)
March 31,
1997 December 31,
(Unaudited) 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 33,934 $ 19,459
Accounts receivable, less allowances
of $5,447 ($3,700 in 1996) 303,085 267,149
Inventories at lower of cost (last-in,
first-out) or market:
Finished goods 139,496 87,105
Work in process 17,985 13,419
Raw materials and supplies 31,410 41,094
--------- ---------
188,891 141,618
Prepaid expenses and deferred income taxes 17,926 15,399
--------- ---------
Total current assets 543,836 443,625
Property, plant and equipment - net 847,225 792,419
Other assets 69,803 36,965
--------- ---------
$1,460,864 $1,273,009
LIABILITIES AND STOCKHOLDERS' EQUITY ========= =========
Current liabilities:
Notes payable $ 55,179 $ 32,000
Accounts payable 100,444 81,571
Accrued liabilities 67,065 65,727
Income taxes 15,846 3,116
Current portion of debt 5,129 5,081
--------- ---------
Total current liabilities 243,663 187,495
Long-term debt 223,305 69,489
Postretirement benefits other than pensions 141,191 139,070
Other long-term liabilities 40,923 37,575
Deferred income taxes 60,828 52,768
Stockholders' equity:
Preferred stock, $1 par value; 5,000,000 shares
authorized; none issued - -
Common stock, $1 par value; 300,000,000 shares
authorized; 83,677,972 shares issued
(83,672,372 in 1996) 83,678 83,672
Capital in excess of par value 2,095 2,027
Retained earnings 772,866 754,481
Minimum pension liability (7,434) (7,434)
--------- ---------
851,205 832,746
Less: Common shares in treasury at cost
(5,000,000 in 1997; 2,305,500 in 1996) (100,251) (46,134)
--------- ---------
Total stockholders' equity 750,954 786,612
--------- ---------
$1,460,864 $1,273,009
<FN> ========= =========
See accompanying notes.
2
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1997 1996
-------- --------
Revenues:
Net sales $379,532 $381,038
Other income 254 276
------- -------
379,786 381,314
Costs and expenses:
Cost of products sold 315,913 324,333
Selling, general and administrative 21,812 19,848
Interest 1,691 4
------- -------
339,416 344,185
------- -------
Income before income taxes 40,370 37,129
Provision for income taxes 15,220 14,020
------- -------
Net income $ 25,150 $ 23,109
======= =======
Net income per share $.31 $.28
=== ===
Weighted average number of
shares outstanding (000's) 80,301 83,666
====== ======
Dividends per share $.085 $.075
==== ====
<FN>
See accompanying notes.
3
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1997 1996
-------- --------
Operating activities:
Net income $ 25,150 $ 23,109
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 21,298 17,801
Deferred income taxes 3,470 2,375
Changes in operating assets
and liabilities:
Accounts receivable 1,770 (21,481)
Inventories and prepaid expenses (19,019) (22,641)
Accounts payable and
accrued liabilities (5,722) 4,464
Postretirement benefits
other than pensions 2,321 2,214
Other 3,889 3,467
------- -------
Net cash provided by
operating activities 33,157 9,308
Investing activities:
Acquisition of business, net
of cash acquired (94,593) -
Property, plant and equipment (26,220) (65,642)
Other 75 (133)
------- -------
Net cash used in investing
activities (120,738) (65,775)
Financing activities:
Issuance of debt 333,000 45,000
Payment on debt (170,136) (118)
Purchase of treasury shares (54,117) -
Payment of dividends (6,765) (6,275)
Issuance of common stock 74 93
------- -------
Net cash provided by
financing activities 102,056 38,700
------- -------
Changes in cash and cash equivalents 14,475 (17,767)
Cash and cash equivalents at
beginning of year 19,459 23,187
------- -------
Cash and cash equivalents at
end of period $ 33,934 $ 5,420
======= =======
Cash payments for interest $ 1,158 $ 405
======= =======
Cash payments for income taxes $ 2,858 $ 10,805
======= =======
<FN>
See accompanying notes.
4
COOPER TIRE & RUBBER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements at March 31, 1997 and for the
three-month periods ended March 31, 1997 and 1996 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, 1996. The results of operations for the three-month period
ended March 31,1997 are not necessarily indicative of those to be expected
for the year ending December 31, 1997.
2. On March 14, 1997, the Company, through a wholly-owned United Kingdom
subsidiary, acquired the tire operations of Avon Rubber p.l.c. (Avon) of
the United Kingdom. This purchase includes the land and manufacturing
facility in Melksham, England; the shares of Avon Tyres Limited and the
shares of tire distribution companies in France, Germany and Switzerland;
and other minor assets. In a separate transaction the Company acquired
from Avon various trademarks and technology. The total purchase price for
the land, manufacturing facility, shares, trademarks and technology was
approximately $100 million.
In March 1997, the Company completed the repurchase of 5 million shares
of its stock authorized by the Board of Directors in July 1996. To
finance the acquisition and repurchase, the Company issued $200 million of
long-term public debt due in 2027 with an interest rate of 7.625%.
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 1997 decreased slightly when compared to
the first quarter of 1996. Sales of the Company's products were generally
strong during the 1997 quarter, but were adversely affected by continued
intense price competition in the replacement tire market and a realignment of
inventories by one of the Company's customers for tire products. Other income
was lower as compared to the 1996 period due to lower amounts of interest
income.
Cost of products sold, as a percent of net sales, was lower in the first
quarter of 1997 as compared with the first quarter of 1996. Production
efficiencies, improvements in product mix and moderation of raw material costs
contributed to this margin improvement. Selling, general and administrative
expenses, as a percent of net sales, were higher at 5.8% compared to 5.2% in
1996 due to new advertising programs and lower than anticipated sales.
Interest expense was higher than for the first quarter of 1996 reflecting
higher borrowing levels and lower amounts of capitalized interest.
Income before income taxes for the quarter increased 8.7% from the quarter one
year ago. The 1997 quarter benefitted from production efficiencies, improved
product mix and moderation of raw material costs which more than offset a
continuation of intense price competition in the replacement tire market.
The Company completed the acquisition of Avon Tyres Ltd. of Melksham, England
late in the quarter. The balance sheet reflects the assets and liabilities
acquired in that transaction. Net sales and earnings reported for the quarter
were not impacted by Avon's results. In March, the Company completed the
repurchase of 5 million shares of its stock authorized by the Board of
Directors in July 1996. To finance the acquisition and repurchase, the
Company issued $200 million of long-term public debt due in 2027 with an
interest rate of 7.625%.
Working capital of $300 million is up $44 million since year-end and up $52
million from March 31, 1996, primarily reflecting the acquisition. The
current ratio of 2.2 is unchanged from March 31, 1996 and is down slightly
from the 2.4 at December 31, 1996. Long term debt as a percent of total
capitalization increased to 22.9% at the end of the quarter compared to 3.6%
one year ago reflecting both the issuance of debt and repurchase of the
Company's stock. The financial position of the Company at March 31, 1997
continues to be strong.
The cash flows generated by operating activities of $33 million during the
first three months of 1997 are higher than $9 million for the three-month
period one year ago. Investing activities reflect the acquisition, net of
cash acquired, and lower expenditures for property, plant and equipment.
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 5, 1997 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/ E. B. White
-----------------
E. B. White
Corporate Controller
(Principal Accounting Officer)
May 5, 1997
-----------
(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, 1997, and the related
consolidated statements of income and cash flows for the three-month periods
ended March 31, 1997 and 1996. 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, 1996, 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 11, 1997, except for the Subsequent
Event, as to which the date is February 18, 1997, 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, 1996, 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, 1997
10
Part II
Exhibit (15)
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
report dated April 11, 1997, 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, 1997.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is 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
May 5, 1997
11