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, 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 October 31, 1997: 78,758,908
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,
1997 December 31,
(Unaudited) 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 15,091 $ 19,459
Accounts receivable, less allowances
of $6,053 ($3,700 in 1996) 345,019 267,149
Inventories at lower of cost (last-in,
first-out) or market:
Finished goods 139,334 87,105
Work in process 20,623 13,419
Raw materials and supplies 30,391 41,094
---------- ----------
190,348 141,618
Prepaid expenses and deferred income taxes 16,838 15,399
---------- ----------
Total current assets 567,296 443,625
Property, plant and equipment - net 846,659 792,419
Other assets 80,842 36,965
---------- ----------
$ 1,494,797 $ 1,273,009
LIABILITIES AND STOCKHOLDERS' EQUITY ========== ==========
Current liabilities:
Notes payable $ 20,487 $ 32,000
Accounts payable 85,521 81,571
Accrued liabilities 102,824 65,727
Income taxes 8,049 3,116
Current portion of debt 4,861 5,081
---------- ----------
Total current liabilities 221,742 187,495
Long-term debt 223,839 69,489
Postretirement benefits other than pensions 143,602 139,070
Other long-term liabilities 40,985 37,575
Deferred income taxes 63,391 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; 83,745,518 shares issued
(83,672,372 in 1996) 83,746 83,672
Capital in excess of par value 2,783 2,027
Retained earnings 822,122 754,481
Cumulative currency translation adjustment 272 -
Minimum pension liability (7,434) (7,434)
---------- ----------
901,489 832,746
Less: Common shares in treasury at cost
(5,000,000 in 1997; 2,305,500 in 1996) (100,251) (46,134)
---------- ----------
Total stockholders' equity 801,238 786,612
---------- ----------
$ 1,494,797 $ 1,273,009
<FN> ========== ==========
See accompanying notes.
2
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1997 1996
-------- --------
Revenues:
Net sales $480,572 $423,172
Other income 394 189
------- -------
480,966 423,361
Costs and expenses:
Cost of products sold 400,477 359,077
Selling, general and administrative 26,971 20,731
Interest 4,624 580
------- -------
432,072 380,388
------- -------
Income before income taxes 48,894 42,973
Provision for income taxes 17,770 16,060
------- -------
Net income $ 31,124 $ 26,913
======= =======
Net income per share $.40 $.32
=== ===
Weighted average number of
shares outstanding (000's) 78,738 83,576
====== ======
Dividends per share $.085 $.075
==== ====
<FN>
See accompanying notes.
3
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1997 1996
-------- --------
Revenues:
Net sales $1,324,097 $1,203,068
Other income 852 711
--------- ---------
1,324,949 1,203,779
Costs and expenses:
Cost of products sold 1,095,998 1,021,976
Selling, general and administrative 78,055 60,600
Interest 11,276 589
--------- ---------
1,185,329 1,083,165
--------- ---------
Income before income taxes 139,620 120,614
Provision for income taxes 51,840 45,430
--------- ---------
Net income $ 87,780 $ 75,184
========= =========
Net income per share $1.11 $.90
==== ===
Weighted average number of
shares outstanding (000's) 79,250 83,638
====== ======
Dividends per share $.255 $.225
==== ====
<FN>
See accompanying notes.
4
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1997 1996
-------- --------
Operating activities:
Net income $ 87,780 $ 75,184
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 68,470 56,352
Deferred income taxes 4,368 9,043
Changes in operating assets
and liabilities:
Accounts receivable (39,828) (61,582)
Inventories and prepaid expenses (19,148) 3,489
Accounts payable and
accrued liabilities 14,886 24,058
Postretirement benefits
other than pensions 5,482 5,568
Other (14,118) (8,298)
------- -------
Net cash provided by
operating activities 107,892 103,814
Investing activities:
Acquisition of business, net of cash acquired (94,593) -
Property, plant and equipment (72,529) (159,675)
Other (291) 157
------- -------
Net cash used in investing
activities (167,413) (159,518)
Financing activities:
Issuance of debt 360,000 116,000
Payment on debt (231,776) (46,366)
Purchase of treasury stock (54,117) (11,215)
Payment of dividends (20,140) (18,826)
Issuance of common stock 829 105
------- -------
Net cash provided by
financing activities 54,796 39,698
Effect of exchange rate changes
on cash and cash equivalents 357 -
------- -------
Changes in cash and cash equivalents (4,368) (16,006)
Cash and cash equivalents at
beginning of year 19,459 23,187
------- -------
Cash and cash equivalents at
end of period $ 15,091 $ 7,181
======= =======
Cash payments for interest $ 11,143 $ 3,879
======= =======
Cash payments for income taxes $ 46,378 $ 45,138
======= =======
<FN>
See accompanying notes.
5
COOPER TIRE & RUBBER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements at September 30, 1997 and for the
three-month and nine-month periods ended September 30, 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.
2. The results of operations for the three-month and nine-month periods
ended September 30, 1997 are not necessarily indicative of those to be
expected for the year ending December 31, 1997.
3. In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," which changes the method currently used to compute earnings per
share and requires restatement of all prior periods. The effect of
adopting this Standard is not expected to have a significant effect on the
Company's reported net income per share. In June, 1997, the FASB issued
SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
which require the disclosure of total comprehensive income and changed the
method for determining and reporting business segment information. The
Company's components of comprehensive income have historically been for
the impact of pension accounting and foreign currency. The FASB's
approach to determine business segments will cause the Company to report
certain financial information at segment levels. These Standards are
required to be adopted for fiscal years beginning after December 31, 1997.
6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Net sales increased 13.6% for the third quarter and 10.1% for the first nine
months of 1997 when compared to the corresponding periods of 1996. Sales of
both tires and engineered products were higher than for the three-month and
nine-month periods one year ago. The Company's acquisition of Avon Tyres
Limited of Melksham, England, now known as Cooper-Avon Tyres Limited, was
completed late in the first quarter of 1997 and contributed to the increases.
Other income was higher in both the third quarter and nine months of 1997 as
compared to the corresponding 1996 periods due to higher amounts of cash
invested.
Cost of products sold, as a percent of net sales, was lower in both the
quarter and nine-month periods of 1997 as compared with the corresponding
periods in 1996. This margin improvement resulted primarily from more
favorable plant operating levels and efficiencies and a more favorable product
mix. Decreases in raw material costs were offset by price concessions.
Cooper-Avon's margins were negatively impacted by reductions in tire pricing
required to meet competitive market conditions in Europe.
Selling, general and administrative expenses were higher for both the three-
month and nine-month periods of 1997 compared to one year ago. These
increases reflect expanded advertising programs and the inclusion of Cooper-
Avon expenses. As a percent of net sales, selling, general and administrative
expenses were 5.6% and 4.9% for the 1997 and 1996 quarters and 5.9% and 5.0%
for the nine months of 1997 and 1996, respectively.
Interest expense was higher than for the corresponding periods of 1996
reflecting higher borrowing levels and lower amounts of capitalized interest.
Income before income taxes for the quarter increased 13.8% from one year ago
and for the year-to-date increased 15.8%. The 1997 periods reflect
improvements in production efficiencies with reductions in raw material costs
offset by a continuation of intense price competition in the replacement tire
market.
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 of Avon Tyres Limited and initial stock repurchase, the Company
issued $200 million of long-term public debt due in 2027 with an interest rate
of 7.625%. In May, The Board of Directors authorized the repurchase of up to
an additional 5 million shares of the Company's common stock. The Company
intends, given certain market conditions, to repurchase additional shares but
has not yet acquired any portion of the shares approved in May.
The financial position of the Company at September 30, 1997 continues to be
strong. Working capital of $346 million is up $90 million since year-end and
up $105 million from September 30, 1996, reflecting the acquisition and lower
commercial paper borrowings. The current ratio of 2.6 is up from 2.0 at
September 30, 1996 and 2.4 at December 31, 1996. Long-term debt as a percent
of total capitalization increased to 21.8% at the end of the quarter compared
to 4.8% one year ago reflecting both the issuance of debt and repurchase of
the Company's stock. On October 2, the Company retired the $18 million
balance of 9% senior notes due in 2001.
The cash flows generated by operating activities during the first nine months
of 1997 are higher than for the nine-month period one year ago primarily due
to improved operating results. 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.
7
Part II. OTHER INFORMATION
Item 6(a). Exhibits.
(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 II. Item 6(a).
(27) Financial Data Schedule
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/ E. B. White
-----------------
E. B. White
Corporate Controller
(Principal Accounting Officer)
November 7, 1997
-----------------
(Date)
10