Exhibit (13)
To our Shareholders:
Welcome to the new look for Cooper Tire & Rubber Company!
As you know, for the past few years we have been undergoing a transformation
like no other in the history of our company. We are a performance tire
manufacturer, we are involved in racing, and we own legendary off-road tire
brand Mickey Thompson. We have completely changed our approach to commercial
tires, we are now making racing tires in North America as well as in Europe and
we will soon be making motorcycle tires in North America and Europe. We have
manufacturing, sales and distribution operations around the world. Plus, we are
now strictly a tire company.
The new logo that we launched in 2005 makes this transition and progress
visible to the world and will help us better communicate all that we are:
o Contemporary, smart, fast, fresh, high-tech, and innovative
o Competing and connecting in new markets and
arenas--performance tires, motorsports, young consumers, different
cultures
o A manufacturer and marketer of everyday tires for consumers around the
world
o And still known as reliable, friendly, consistent and dependable
This is a very exciting time for our company! We have made significant and
positive changes that are creating new and increasing opportunities for all of
us. Our new image and logo respects all the good things that Cooper has always
been, but affirms and emphasizes all that we are today.
Progress and Changes
In 2005, following the sale of our automotive components operations in December
of 2004, we were able to focus our energy, efforts and resources entirely on the
tire business. This focus has enabled us to improve every aspect of the company.
In North America, we completed the expansion of our manufacturing operations by
adding new, more efficient equipment to better meet the market demands for more
flexible operations and more high performance and large diameter tires. We
continued the introduction of new high performance products and we now have a
total suite of products that compares favorably with any of our major
competitors.
In Europe we have streamlined our manufacturing operations and increased our
focus on high performance and racing tires. Low-cost supply relationships with
Asian manufacturers provide the balance of the economy and broadline tires we
need to serve our customers. We also expanded our sales and distribution in
Europe with the opening of a new subsidiary operation in Spain and expanded
relationships with key distributors across the continent.
In Asia, we are in the process of building a new Chinese manufacturing facility
through our joint venture Cooper Kenda and construction is progressing.
Production of tires in this plant is scheduled to begin in the second half of
2006. In January, 2005, we announced the acquisition of 11 percent of Kumho, a
Korean tire manufacturer. In October we announced the acquisition of 51 percent
of Cooper Chengshan (Shandong) Passenger Tire Co. Ltd. and Cooper Chengshan
(Shandon) Tire Company, Ltd. This
acquisition, which was finalized in early 2006, gives us a significant presence
in the rapidly growing Chinese replacement tire market and provides tremendous
opportunity for future growth. Finally, we continue to benefit from our
relationships with Hangzhou Zhongce and Kenda as they supply us with various
passenger, light truck and commercial tires produced in China for sale in North
America and Europe.
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Recapitalization
During 2005 we made significant strides in recapitalizing the company. We
repurchased $190 million worth of our common stock during the year and $83
million in the fourth quarter of 2004, reducing the number of shares outstanding
by about 20 percent. We paid down $278 million of our debt, bringing our debt to
total capital ratio down to 34 percent. And we invested in our business, just as
we said we would. We made or announced acquisitions totaling $185 million in
cash consideration, invested more than $45 million to expand production capacity
for critical, high demand products in our North American plants and more than
$30 million in more efficient equipment, new tooling and molds, and new product
development.
So 2005 was a pivotal year for our company. We accomplished a great many things
that have expanded and improved our business. While we will continue to move
forward with our strategy and still have work to do, we are confident that our
efforts and accomplishments will generate increasing returns in 2006 and beyond.
Our goal and purpose as a company remains the same as always: increase the value
of our long-term shareholder's investment.
Thank you for your continued support.
Thomas A. Dattilo
Chairman, President and CEO
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BRANDS
Through the transformation of our Company, the Cooper brand has come to mean so
much more than ever before, and the world is taking notice. Today's Cooper is
contemporary, smart, fast and innovative - capable of connecting in consumer and
specialty markets around the world.
Cooper provides a full line of tires to meet the needs of virtually all
consumers from everyday motorists to the most demanding high performance,
off-road and motorsport enthusiasts. To those who know us, our products speak
for themselves.
National advertising and promotions, such as our affiliation with Collegiate
Athletics, have been key to our comprehensive strategy to raise brand awareness
and reach the broadest audience possible.
Targeted print ads address the specific interests of specialty market segments
and reflect the passion, style and energy of Cooper on an evolving culture.
Involvement in Motorsports programs affirms Cooper's technical capabilities and
has put the Cooper brand in the global spotlight as the exclusive tire of the A1
Grand Prix.
Cooper still means "Dealer Friendly". Beyond Cooper, our suite of associate
brands - including Mastercraft, Avon, Starfire and Dean along with Mickey
Thompson tires, and Oliver tread rubber products - enables each of our customers
to provide a full range of products for consumers, fleets and specialty markets
with a measure of brand and territorial exclusivity. Through careful
distribution and brand management, Cooper brings value to all our customers and
their businesses and maximizes Cooper brand equity in the marketplace.
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PRODUCTS
Passenger Car
Recent introductions and expansions of our performance tire lines complement one
of the most comprehensive line-ups of passenger car tires in the industry.
Innovative new sizes, styles and technology provide a winning combination of
style, performance and value for just about anyone, no matter what they drive.
The Cooper Lifeliner products provide passenger car drivers with quality and
value while the top of the line Lifeliner Touring SLE adds an extra measure of
handling and performance in a range of speed ratings.
Cooper's Zeon line of performance and ultra-high performance tires brings out
the best in handling, performance and style on today's most powerful and sporty
rides.
SUV
Cooper's Discoverer line of tires for SUVs has been a leader in the industry -
on the road and off - for years. Our reputation has been well earned and proven
time and time again. Recent innovations include expanded sizes, more tread
patterns for varying applications, improved traction and quieter ride.
Light Truck
Cooper offers the most comprehensive line-up of light truck tires in the
industry. Durability, performance and value are the hallmarks of Cooper
Discoverer Tires. But all work and no play makes for...well, all work and no
play! So we have introduced the Zeon Sport Truck tires to provide style and
speed to those who see their trucks as much more than a work tool.
Cooper manufactures nearly 1 out of every 4 light truck tires sold in North
America today. This includes the Cooper brand, such as the Cooper Discoverer
line, our associated brands like Mastercraft, Starfire and Dean, and the private
brand tires we produce exclusively for certain customers.
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Racing
When teams from around the world compete in the A1 Grand Prix racing series,
every car will be driving on Cooper Tires. And while these road-hugging
high-speed slicks may not be available to the public, the technology that went
into them can be found in every tire we sell.
With the Cooper and Avon brands, we continue to supply competition tires to more
than 100 championships around the world.
Other motor sports circuits and events we are involved with include European
Formula 3000, Global Formula Ford Series, US Drift, Formula Drift Series, SCCA
Cooper Tire Championship Series, Bob Land Off-Road Racing Team
Drag Racing
Mickey Thompson Performance Tires & Wheels, a performance and motorsport
division of Cooper Tire, designs, develops, and markets some of the hottest and
fastest racing and high performance tires for drag racing cars and motorcycles.
The Mickey Thompson legend and Cooper racing tire technology have combined to
deliver head-turning, eye-popping, record-setting results.
Motorcycle
Cooper's motorcycle tire history began in Europe. Cooper Tires Europe, began
producing motorcycle tires in 1957 and has had a long record of championships.
The success on the highways and autobahns of Europe has carried over to North
American streets and drag strips with Avon and Mickey Thompson brands.
Production of motorcycle tires continues in our Melksham, England facility and
will expand in 2006 into our Athens, GA facility, which was recently converted
from producing commercial retread products.
Specialty and Off-Road Tires
Cooper also designs, develops and produces a wide variety of specialty and
performance products for modified street cars, off-road race vehicles, modified
pick-up trucks and sport utility vehicles. Where ever and how ever you fulfill
your need for speed, Cooper can take you there.
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TECHNOLOGY
At Cooper, we employ innovative and advanced technology to give us a competitive
edge in design, development and performance.
Our proprietary Vt2ech modeling tools employ state-of-the-art computer-aided
engineering to create virtual tire models and prototypes that can predict tire
performance, speed up new product development and improve the design of existing
products.
The Cooper Tire & Vehicle Test Center is a world class test facility where
professional drivers, including Cooper's performance tire consultant, Johnny
Unser, and specialized engineers combine efforts to evaluate and refine new
Cooper product designs to ensure that your tires deliver maximum performance in
all conditions, on or off the road.
Our Tall Timbers Mold Facility combines the latest computer design technology
with a modern, automated production facility to produce thousands of new tire
molds each year. In 2005 this facility was expanded to add capacity, tools and
technology to engrave steel molds in support of our increased focus on segmented
molds and high-end products.
Cooper's materials and testing laboratories are ISO 17025 certified, which is
what you should expect from a company with a focus on consistent, superior
product design, quality and performance.
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GLOBAL REACH
Cooper is a global competitor in the replacement tire industry. With
manufacturing facilities on three continents, sales and distribution networks
around the world, and products that meet and exceed the demands of the world's
most dynamic markets, we have solid opportunities for growth today and well into
the future.
In the North American market, we are benefiting from improving brand
recognition, one of the industry's most effective distribution networks, and a
tremendous customer base. We have grown our market share to about 16 percent of
the North American light vehicle replacement tire market to date. New products
are driving increased sales and creating additional opportunity and growth
potential in this key market.
In 2005 we expanded our European Operations through the addition of a new sales,
marketing and distribution subsidiary in Spain. This new operation complements
the production and distribution operations in our European headquarters in the
UK and the existing distribution subsidiaries in France, Germany, Italy and
Switzerland. Production in Europe is concentrated on premium, high performance
and racing tire products and entry level products are outsourced to maximize
profitability.
The recent acquisition of Cooper Chengshan (Shandong) Passenger Tire Co. Ltd.
and Cooper Chengshan (Shandong) Tire Company, Ltd. will add profitable sales to
Cooper in 2006, mostly within the rapidly expanding Chinese market. Through an
additional joint venture plant now under construction and supply agreements in
China, Cooper is developing tires for export to Europe and North America.
This is an exciting time of global expansion for Cooper. We accomplished much in
2005 and we continue to study further opportunities in rapidly developing
regions of the world. More change is a certainty. But the one constant for
Cooper is that wherever we are in the world, our focus will be on serving our
customers and growing our business in order to generate increasing returns for
our shareholders.
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