SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 27, 1999
Cooper Tire & Rubber Company
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-4329 34-4297750
- ---------------- ------------------- ---------------------
(State or other (Commission File (IRS Employer Number)
jurisdiction of Identification No.)
incorporation)
Lima & Western Avenues, Findlay, Ohio 45840
---------------------------------------------
(Address of principal executive offices)
(419) 423-1321
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(Registrant's telephone number, including area code)
The Exhibit Index is located at page 8.
1
Item 2. Acquisition of Assets
On October 27, 1999 Cooper Tire & Rubber Company ("Cooper"), a
Delaware corporation, completed its previously announced acquisition of The
Standard Products Company ("Standard"), an Ohio corporation, following approval
by Standard's shareholders at a meeting of Standard's shareholders held on
October 26, 1999. Pursuant to the terms of an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of July 27, 1999, by and among Cooper, Standard
and CTB Acquisition Company ("CTB"), an Ohio corporation and wholly owned
subsidiary of Cooper, CTB merged with and into Standard. Each share of
Standard common stock was converted into the right to receive $36.50 in cash.
Payment to Standard's shareholders has been funded through borrowings under
Cooper's credit facilities. The merger consideration and other terms of the
Merger Agreement were determined through arm's length negotiations between
Cooper and Standard.
The Company's press release issued October 27, 1999 is hereby
incorporated by reference and included as Exhibit 99 of this report on Form 8-
K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired. Standard's Annual Report
on Form 10-K for the fiscal year ended June 30, 1999 is incorporated
by reference.
(b) Pro Forma Financial Information.
Certain of the Pro Forma Financial Information required to be
filed pursuant to Item 7(b) of Form 8-K was not available at the time
of filing of this Current Report on Form 8-K and will be filed on a
Form 8-K/A as soon as practicable, but in no event later than 60 days
after the date this Form 8-K is required to be filed. Limited Pro
Forma Financial Information is presented in this Form 8-K.
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The unaudited pro forma condensed statements of income for the 12
months ended December 31, 1998 have been prepared by combining the
consolidated statement of income of Cooper for its fiscal year ended
December 31, 1998 with the consolidated statement of income of
Standard for the 12 months ended December 31, 1998. The unaudited pro
forma condensed statements of income for the nine months ended
September 30, 1999 have been prepared by combining the consolidated
statements of income of Cooper and Standard for the nine months ended
September 30, 1999. These combined results were adjusted to give
effect to the merger as if it had occurred on January 1, 1998 and
January 1, 1999 and include adjustments for amortization of goodwill
and interest expense. Income taxes are provided for at an incremental
rate of 40% for interest expense adjustments.
The unaudited pro forma condensed balance sheet at September 30,
1999 has been prepared by combining the consolidated balance sheets as
of September 30, 1999 of Cooper and Standard, which have been adjusted
to give effect to the merger as if it had occurred on September 30,
1999 and include adjustments for purchase accounting and borrowings by
Cooper to finance the acquisition.
Cooper intends to finance the acquisition on a long-term basis
using fixed rate debt. At the closing date, Cooper financed the
acquisition with borrowings under its existing long-term and short-
term credit facilities. Cooper's current interest rates approximate
8.0% for long-term borrowings and approximate 5.7% for short-term
borrowings. For the unaudited pro forma condensed financial
statements presented herein, $150 million of the financing has been
classified as long term, as this is the maximum amount that can be
borrowed under existing long-term arrangements.
2
The merger of Cooper and Standard will be accounted for as a
purchase transaction. Cooper will have a valuation performed on
certain of Standard's tangible assets (principally property, plant and
equipment) and identifiable intangible assets to establish their fair
values. In the meantime, Cooper has valued Standard's property, plant
and equipment at Standard's historical cost. The excess of cost over
the values preliminarily assigned to the net assets acquired, which
has been classified as goodwill in the accompanying pro forma balance
sheet, will be allocated to tangible and identified intangible assets
and to goodwill. The assumed estimated useful lives of these assets
is thirty years.
Cooper expects to achieve cost savings and synergies through the
integration of the operations of Standard with those of Cooper. The
unaudited pro forma condensed financial statements set forth herein do
not reflect any of these anticipated cost savings and synergies.
The unaudited pro forma condensed financial statements do not
necessarily reflect the actual results of operations or financial
position of Cooper which would have resulted had the merger occurred
on January 1, 1998 and January 1, 1999. The pro forma information is
not necessarily indicative of future results of operations for the
combined companies. The unaudited pro forma condensed financial
statements should be read in conjunction with the historical
consolidated financial statements and related notes of Cooper and
Standard incorporated into this document by reference.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Nine months ended
September 30, 1999
--------------------- Pro Forma Pro Forma
Cooper Standard Adjustments Combined
---------- ---------- ----------- ----------
(In thousands except per share amounts)
Revenues:
Net sales $1,495,122 $ 840,132 $2,335,254
Other income 1,525 2,767 4,292
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1,496,647 842,899 2,339,546
Costs and expenses:
Cost of products sold 1,222,304 720,171 $ 9,040 (A) 1,951,515
Selling, general and
administrative 100,044 63,899 163,943
Nonrecurring charge 23,512 23,512
Interest 11,209 11,271 28,951 (B) 51,431
--------- --------- ------- ---------
1,333,557 818,853 37,991 2,190,401
--------- --------- ------- ---------
Income before income
taxes 163,090 24,046 (37,991) 149,145
Provision for income
taxes 59,143 10,092 (11,580)(C) 57,655
--------- --------- ------- ---------
Net income $ 103,947 $ 13,954 $(26,411) $ 91,490
========= ========= ======= =========
Average common shares
outstanding - diluted 75,895 75,895
Net income per share -
diluted $1.37 $1.21
Ratio of earnings to
fixed charges (G) 11.2x 3.5x
3
Twelve months ended
December 31, 1998
--------------------- Pro Forma Pro Forma
Cooper Standard Adjustments Combined
---------- ---------- ----------- ----------
(In thousands except per share amounts)
Revenues:
Net sales $1,876,125 $1,080,645 $2,956,770
Other income 3,635 1,975 5,610
--------- --------- ---------
1,879,760 1,082,620 2,962,380
Costs and expenses:
Cost of products sold 1,545,489 933,640 $ 12,500 (A) 2,491,629
Selling, general and
administrative 120,830 78,952 199,782
Interest 15,224 12,792 38,602 (B) 66,618
--------- --------- ------- ---------
1,681,543 1,025,384 51,102 2,758,029
--------- --------- ------- ---------
Income before income
taxes 198,217 57,236 (51,102) 204,351
Provision for income
taxes 71,250 20,076 (15,441)(C) 75,885
--------- --------- ------- ---------
Net income $ 126,967 $ 37,160 $(35,661) $ 128,466
========= ========= ======= =========
Average common shares
outstanding - diluted 77,656 77,656
Net income per share -
diluted $1.64 $1.65
Ratio of earnings to
fixed charges (G) 10.0x 3.6x
4
As of
September 30, 1999
-------------------- Pro Forma Pro Forma
Cooper Standard Adjustments Combined
---------- -------- ----------- ----------
(In thousands)
Current assets:
Cash and cash
equivalents $ 40,302 $ 21,057 $ 61,359
Accounts receivable 412,548 167,196 $ 50,000 (E) 629,744
Inventories 167,811 56,770 12,964 (D1) 237,545
Prepaid expenses and
deferred income taxes 23,349 37,675 (2,119)(D2) 58,905
--------- ------- ------- ---------
Total current assets 644,010 282,698 60,845 987,553
Property, plant and
equipment 908,597 325,289 1,233,886
Goodwill - 70,834 (70,834)(D3)
430,878 (D9) 430,878
Intangibles and other
assets 100,190 55,100 (1,281)(D2) 154,009
--------- ------- ------- ---------
Total assets $1,652,797 $733,921 $419,608 $2,806,326
========= ======= ======= =========
Current liabilities:
Short-term debt and
current portion of
long-term debt $ 11,501 $ 22,077 $ 14,600 (D5)
497,100 (E)
5,000 (D6)
130,000 (F) $ 680,278
Accounts payable and
accrued liabilities 205,423 202,032 407,455
--------- ------- ------- ---------
Total current
liabilities 216,924 224,109 646,700 1,087,733
Long-term debt 205,119 184,230 150,000 (E)
(130,000)(F) 409,349
Postretirement benefits
other than pensions 155,985 24,750 119 (D4) 180,854
Other long-term
liabilities 50,287 23,194 8,453 (D2) 81,934
Deferred income taxes 76,977 27,417 (5,443)(D7) 98,951
Stockholders' equity:
CTB stockholders' equity 947,505 - - 947,505
SPD stockholders' equity - 250,221 (250,221)(D8) -
--------- ------- ------- ---------
947,505 250,221 (250,221) 947,505
--------- ------- ------- ---------
Total liabilities
and stockholders'
equity $1,652,797 $733,921 $419,608 $2,806,326
========= ======= ======= =========
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NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(A) To amortize over 30 years the excess of the purchase price over the fair
value of net assets required, net of goodwill amortization previously
recorded by Standard.
(B) To adjust interest expense to reflect the borrowings described in the
"Unaudited Pro Forma Condensed Financial Information" at current interest
rates for short-term (5.7%) and long-term (8.0%) debt.
(C) To provide for income taxes at an incremental tax rate of 40% for interest
expense adjustments.
(D) To allocate on a preliminary basis the purchase price for Standard as
follows (in thousands):
D1 Adjust acquired inventories to estimated fair value $ 12,964
D2 Adjust pension liability to reflect the excess of the
benefit obligations over the fair value of plan assets (11,853)
D3 Eliminate the goodwill related to Standard's acquisitions
of businesses in prior years (70,834)
D4 Adjust liability for postretirement benefits to estimated
benefit obligation (119)
D5 Record additional debt to be incurred by Standard relating
to its stock options and restricted shares (14,600)
D6 Record additional debt to be incurred for estimated
transaction expenses (5,000)
D7 Record income taxes for adjustments D1, D2, D4 and D5
assuming a 40% incremental tax rate 5,443
D8 Eliminate shareholders' equity of Standard 250,221
D9 Record preliminary estimate of the excess of the purchase
price over the fair value of the net assets acquired 430,878
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$597,100
========
The estimated aggregate purchase price is derived as follows:
Acquisition of Standard outstanding common shares at
$36.50 per share $584,400
Estimated transaction costs 5,800
Costs related to change of control agreements and employment
contracts 6,900
-------
$597,100
========
(E) To record the debt incurred to finance the acquisition and reflect the
termination of Standard's accounts receivable factoring program.
(F) To reclassify borrowings under Standard's credit agreement from long-
term debt to short-term debt.
(G) Earnings used to calculate the ratio of earnings to fixed charges consist
of pro forma consolidated income before income taxes, adjusted for the
portion of fixed charges deducted from such earnings. Fixed charges
consist of interest on all indebtedness (including capital lease
obligations), amortization of debt expense, capitalized interest, and the
portion of interest expense on operating leases deemed representative of
the interest factor.
Cooper also incorporates by reference its Annual Report on Form 10-K
for the fiscal year ended December 31, 1998.
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(c) Exhibits. The following exhibits are filed herewith:
(2) Agreement and Plan of Merger, dated as of July 27,1999, by and
among Cooper, Standard and CTB (Incorporated by reference to
Appendix A to the proxy statement-prospectus included in Cooper's
Registration Statement on Form S-4 (File No. 333-86559) filed on
September 3, 1999)
(23) Consent of Arthur Andersen LLP
(99) Cooper's press release, issued October 27, 1999, announcing the
completion of the acquisition of Standard
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Cooper has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COOPER TIRE & RUBBER COMPANY
Date: November 5, 1999 By: /S/ Eileen B. White
-----------------------------
Corporate Controller
(Principal Accounting Officer)
7
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
(2) Agreement and Plan of Merger, dated as of July 27,1999, by and among
Cooper, Standard and CTB (Incorporated by reference to Appendix A to
the proxy statement-prospectus included in Cooper's Registration
Statement on Form S-4 (File No. 333-86559) filed on September 3,
1999)
(23) Consent of Arthur Andersen LLP
(99) Cooper's press release, issued October 27, 1999, announcing the
completion of the acquisition of Standard
8
Exhibit (23)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 8-K of our report dated July 22, 1999 and August 23,
1999, included in The Standard Products Company's Form 10-K for the year ended
June 30, 1999. It should be noted that we have not audited any financial
statements of the company subsequent to June 30, 1999 or performed any audit
procedures subsequent to the date of our report.
/S/ Arthur Andersen LLP
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ARTHUR ANDERSEN LLP
Detroit, Michigan
November 4, 1999
9
Exhibit (99)
COMPANY CONTACT: PHILIP G. WEAVER FOR IMMEDIATE RELEASE
(419) 424-4320 OCTOBER 27, 1999
COOPER TIRE & RUBBER COMPANY
COMPLETES ACQUISITION OF THE STANDARD PRODUCTS COMPANY
FINDLAY, OHIO, OCTOBER 27, 1999 - COOPER TIRE & RUBBER COMPANY (NYSE:CTB)
officials today completed the acquisition of The Standard Products Company
(NYSE:SPD) following approval yesterday by The Standard Products Company
shareholders. Each common share of Standard was converted into the right to
receive $36.50 in cash.
On July 27, Cooper announced that a definitive merger agreement had been
reached to acquire The Standard Products Company. The combination makes Cooper
North America's largest manufacturer of automotive sealing systems, a core
product in its automotive group, and will also significantly expand the
company's global presence, a key element in its strategic growth plan. On a
combined basis, the company expects to generate approximately $3.2 billion in
annual revenues in its first full year of operation, of which approximately
half will come from tire operations and half from automotive products.
Company Description
Cooper Tire & Rubber Company is headquartered in Findlay, Ohio and specializes
in the manufacture and marketing of rubber and plastic products for consumers.
Products for Cooper's tire group include automobile and truck tires, inner
tubes, tread rubber and equipment for the replacement market. In the
automotive group, Cooper is an original equipment supplier of sealing, trim,
vibration control and hose systems for the automotive industry in North
America, Europe and South America. Other products for this group include rubber
and plastic sealing components for the refrigeration industry in North America.
Cooper has more than 20,000 employees and 50 manufacturing facilities in nine
countries. For more information, visit the company's web site at:
www.coopertire.com.
Forward-Looking Statement
This report contains forward-looking statements regarding expectations for
future financial performance which involve uncertainty and risk. It is
possible the company's future financial performance may differ from
expectations due to a variety of factors including, but not limited to: changes
in economic and business conditions in the world, increased competitive
activity, achieving sales levels to fulfill revenue expectations, consolidation
among its competitors and customers, technology advancements, unexpected costs
and charges, fluctuations in raw material and energy prices, changes in
interest and foreign exchange rates, regulatory and other approvals, the
cyclical nature of the automotive industry, risks associated with integrating
the operations of The Standard Products Company and the failure to achieve
synergies or savings anticipated in the merger, and other unanticipated events
and conditions.
It is not possible to foresee or identify all such factors. Any forward-
looking statements in this report are based on certain assumptions and analysis
made by the company in light of its experience and perception of historical
trends, current conditions, expected future developments and other factors it
believes are appropriate in the circumstances. Prospective investors are
cautioned that any such statements are not a guarantee of future performance
and actual results or developments may differ materially from those projected.
The company makes no commitment to update any forward-looking statement
included herein, or to disclose any facts, events or circumstances that may
affect the accuracy of any forward-looking statement.
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