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, 1998
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, 1998: 78,769,408
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,
1998 December 31,
(Unaudited) 1997
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 32,875 $ 52,910
Accounts receivable, less allowances
of $5,180 ($4,791 in 1997) 307,780 292,416
Inventories at lower of cost (last-in,
first-out) or market:
Finished goods 154,206 130,339
Work in process 23,136 22,650
Raw materials and supplies 28,760 38,695
--------- ---------
206,102 191,684
Prepaid expenses and deferred income taxes 17,923 17,602
--------- ---------
Total current assets 564,680 554,612
Property, plant and equipment - net 863,937 860,448
Intangibles and other assets 81,440 80,896
--------- ---------
$1,510,057 $1,495,956
LIABILITIES AND STOCKHOLDERS' EQUITY ========= =========
Current liabilities:
Notes payable $ 11,538 $ 10,820
Accounts payable 89,308 100,135
Accrued liabilities 77,025 82,446
Income taxes 12,016 6,477
Current portion of debt 279 453
--------- ---------
Total current liabilities 190,166 200,331
Long-term debt 205,423 205,525
Postretirement benefits other than pensions 146,709 144,566
Other long-term liabilities 38,452 38,351
Deferred income taxes 76,446 73,608
Stockholders' equity:
Preferred stock, $1 par value; 5,000,000 shares
authorized; none issued - -
Common stock, $1 par value; 300,000,000 shares
authorized; 83,762,608 shares issued
(83,760,308 in 1997) 83,763 83,760
Capital in excess of par value 3,125 3,101
Retained earnings 868,313 849,270
Cumulative currency translation adjustment 2,664 2,448
Minimum pension liability (4,753) (4,753)
--------- ---------
953,112 933,826
Less: 5,000,000 common shares in
treasury at cost (100,251) (100,251)
--------- ---------
Total stockholders' equity 852,861 833,575
--------- ---------
$1,510,057 $1,495,956
<FN> ========= =========
See accompanying notes.
2
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
1998 1997
-------- --------
Revenues:
Net sales $437,558 $379,532
Other income 578 254
------- -------
438,136 379,786
Costs and expenses:
Cost of products sold 363,470 315,913
Selling, general and administrative 28,512 21,812
Interest 3,849 1,691
------- -------
395,831 339,416
------- -------
Income before income taxes 42,305 40,370
Provision for income taxes 15,780 15,220
------- -------
Net income 26,525 25,150
Other comprehensive income:
Currency translation adjustment 216 -
------ ------
Comprehensive income $26,741 $25,150
====== ======
Basic and diluted earnings per share $.34 $.31
=== ===
Weighted average number of
shares outstanding (000's) 78,762 80,301
====== ======
Dividends per share $.095 $.085
==== ====
<FN>
See accompanying notes.
3
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
(Dollar amounts in thousands)
1998 1997
-------- --------
Operating activities:
Net income $26,525 $ 25,150
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 24,259 21,298
Deferred income taxes 3,581 3,470
Changes in operating assets
and liabilities:
Accounts receivable (14,558) 1,770
Inventories and prepaid expenses (14,466) (19,019)
Accounts payable and
accrued liabilities (16,408) (5,722)
Postretirement benefits
other than pensions 1,919 2,321
Other 3,141 3,889
------ -------
Net cash provided by
operating activities 13,993 33,157
Investing activities:
Property, plant and equipment (27,382) (26,220)
Acquisition of business, net
of cash acquired - (94,593)
Other 160 75
------ -------
Net cash used in investing
activities (27,222) (120,738)
Financing activities:
Issuance of debt 900 333,000
Payment on debt (346) (170,136)
Purchase of treasury shares - (54,117)
Payment of dividends (7,482) (6,765)
Issuance of common shares 27 74
------ -------
Net cash provided by (used in)
financing activities (6,901) 102,056
Effects of exchange rate changes on cash 95 -
------ -------
Changes in cash and cash equivalents (20,035) 14,475
Cash and cash equivalents at
beginning of year 52,910 19,459
------ -------
Cash and cash equivalents at
end of period $32,875 $ 33,934
====== =======
Cash payments for interest $ 8,185 $ 1,158
====== =======
Cash payments for income taxes $ 7,402 $ 2,858
====== =======
<FN>
See accompanying notes.
4
COOPER TIRE & RUBBER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements at March 31, 1998 and for the
three-month periods ended March 31, 1998 and 1997 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, 1997.
2. The results of operations for the three-month period ended March 31,1998
are not necessarily indicative of those to be expected for the year ending
December 31, 1998.
3. During the first quarter of 1998 the Company adopted Statement of
Financial Standards (SFAS) No. 130, "Reporting Comprehensive Income."
The Standard requires disclosure of total comprehensive income in the
financial statements. The Company's components of comprehensive income
have historically been for the impact of pension accounting and foreign
currency.
4. In June, 1997 the Financial Accounting Standards Board (FASB) issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which changed the method for determining and reporting
business segment information. The FASB's approach to determine business
segments will cause the Company to report certain financial information at
segment levels. This Standard is required to be adopted for year-end
reporting in 1998, with interim reporting commencing in 1999.
The FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," in February, 1998. This Standard is
effective in 1998 and requires disclosure of additional information
currently available to the Company.
5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Net sales for the first quarter of 1998 increased 15.3% when compared to the
first quarter of 1997. The Company's acquisition of Avon Tyres Limited of
Melksham, England, now known as Cooper-Avon Tyres Limited (Cooper-Avon), was
completed late in the first quarter of 1997 and contributed to the increase.
In addition, gains were achieved in both engineered products and domestic tire
shipments. Other income was higher as compared to the 1997 period due to
higher amounts of interest income.
Cost of products sold, as a percent of net sales, decreased slightly in the
first quarter of 1998 as compared with the first quarter of 1997. Decreases
in raw material costs and improvements in product mix continued to be
partially offset by price concessions. Cooper-Avon operations did not
contribute to the margin improvement due to recognition of a charge for staff
reductions and price deterioration which resulted from a softening of
replacement tire sales in Europe and the strength of the British pound
relative to other European currencies.
Selling, general and administrative expenses, as a percent of net sales, were
higher at 6.5% compared to 5.8% in 1997 due primarily to the inclusion of
Cooper-Avon. Interest expense was higher than for the first quarter of 1997
reflecting higher borrowing levels.
Income before income taxes for the quarter increased 4.8% from the quarter one
year ago. The 1998 quarter benefited from reductions in raw material costs
and richer product mix which were partially offset by a continuation of
intense price competition in the replacement tire market.
Working capital of $375 million is up $20 million since year-end and up $75
million from March 31, 1997. The current ratio of 3.0 is up from both 2.2 at
March 31, 1997 and 2.8 at December 31, 1997. Long-term debt, as a percent of
total capitalization, is 19.4% compared to 22.9% one year ago. The financial
position of the Company at March 31, 1998 continues to be excellent.
The cash flows generated by operating activities of $14 million during the
first three months of 1998 are lower than the $33 million for the three-month
period one year ago due to increases in working capital. Investments in
property, plant and equipment of $27 million are comparable to last year's
quarter. In 1997, investing activities reflect the acquisition of Cooper-Avon
and financing activities reflect the issuance of $200 million of long-term
public debt and the repurchase of the Company's common stock. 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.
(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 II. Item 6(a).
(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 4, 1998
-----------
(Date)
9