-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BEraWgE1XmKfR7aEDMeQ+HF/as0/XsmLQjth5u8c6Ckx8qEI4qrVnKOUUX6eYrwf cOmqnCxTF4rv7dxX4OCfRA== 0000024491-98-000018.txt : 19981116 0000024491-98-000018.hdr.sgml : 19981116 ACCESSION NUMBER: 0000024491-98-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COOPER TIRE & RUBBER CO CENTRAL INDEX KEY: 0000024491 STANDARD INDUSTRIAL CLASSIFICATION: TIRES AND INNER TUBES [3011] IRS NUMBER: 344297750 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04329 FILM NUMBER: 98746791 BUSINESS ADDRESS: STREET 1: LIMA & WESTERN AVENUES CITY: FINDLAY STATE: OH ZIP: 45840 BUSINESS PHONE: 4194231321 10-Q 1 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, 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 October 30, 1998: 75,791,458 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, 1998 December 31, (Unaudited) 1997 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 22,822 $ 52,910 Accounts receivable, less allowances of $5,887 ($4,791 in 1997) 337,682 292,416 Inventories at lower of cost (last-in, first-out) or market: Finished goods 140,094 130,339 Work in process 21,816 22,650 Raw materials and supplies 29,168 38,695 --------- --------- 191,078 191,684 Prepaid expenses and deferred income taxes 21,396 17,602 --------- --------- Total current assets 572,978 554,612 Property, plant and equipment - net 874,905 860,448 Intangibles and other assets 87,321 80,896 --------- --------- $1,535,204 $1,495,956 LIABILITIES AND STOCKHOLDERS' EQUITY ========= ========= Current liabilities: Notes payable $ 12,201 $ 10,820 Accounts payable 99,502 100,135 Accrued liabilities 104,975 82,446 Income taxes 83 6,477 Current portion of debt 279 453 --------- --------- Total current liabilities 217,040 200,331 Long-term debt 205,209 205,525 Postretirement benefits other than pensions 150,499 144,566 Other long-term liabilities 38,521 38,351 Deferred income taxes 77,250 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; 83,779,658 shares issued (83,760,308 in 1997) 83,780 83,760 Capital in excess of par value 3,283 3,101 Retained earnings 915,855 849,270 Cumulative currency translation adjustment 3,721 2,448 Minimum pension liability (4,753) (4,753) --------- --------- 1,001,886 933,826 Less: 7,986,900 common shares in treasury at cost (5,000,000 in 1997) (155,201) (100,251) --------- --------- Total stockholders' equity 846,685 833,575 --------- --------- $1,535,204 $1,495,956 ========= ========= See accompanying notes.
2 COOPER TIRE & RUBBER COMPANY CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) (Dollar amounts in thousands; per-share amounts in dollars)
1998 1997 -------- -------- Revenues: Net sales $480,616 $480,572 Other income 522 394 ------- ------- 481,138 480,966 Costs and expenses: Cost of products sold 400,670 400,477 Selling, general and administrative 30,631 26,971 Interest 3,745 4,624 ------- ------- 435,046 432,072 ------- ------- Income before income taxes 46,092 48,894 Provision for income taxes 16,063 17,770 ------- ------- Net income 30,029 31,124 Other comprehensive income: Currency translation adjustment 1,946 (1,308) ------- ------- Comprehensive income $ 31,975 $ 29,816 ======= ======= Basic and diluted earnings per share $.39 $.40 === === Weighted average number of shares outstanding (000's) 77,103 78,833 ====== ====== Dividends per share $.095 $.085 ==== ==== See accompanying notes.
3 COOPER TIRE & RUBBER COMPANY CONSOLIDATED STATEMENTS OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) (Dollar amounts in thousands; per-share amounts in dollars)
1998 1997 -------- -------- Revenues: Net sales $1,379,914 $1,324,097 Other income 1,771 852 --------- --------- 1,381,685 1,324,949 Costs and expenses: Cost of products sold 1,142,607 1,095,998 Selling, general and administrative 87,595 78,055 Interest 11,358 11,276 --------- --------- 1,241,560 1,185,329 --------- --------- Income before income taxes 140,125 139,620 Provision for income taxes 51,235 51,840 --------- --------- Net income 88,890 87,780 Other comprehensive income: Currency translation adjustment 1,273 272 --------- --------- Comprehensive income $ 90,163 $ 88,052 ========= ========= Basic and diluted earnings per share $1.14 $1.11 ==== ==== Weighted average number of shares outstanding (000's) 78,267 79,336 ====== ====== Dividends per share $0.285 $0.255 ===== ===== See accompanying notes.
4 COOPER TIRE & RUBBER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) (Dollar amounts in thousands)
1998 1997 -------- -------- Operating activities: Net income $ 88,890 $ 87,780 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 75,120 68,470 Deferred income taxes 698 4,368 Changes in operating assets and liabilities: Accounts receivable (43,972) (39,828) Inventories and prepaid expenses (2,637) (19,148) Accounts payable and accrued liabilities 21,631 14,886 Postretirement benefits other than pensions 5,258 5,482 Other (10,018) (14,118) ------- ------- Net cash provided by operating activities 134,970 107,892 Investing activities: Property, plant and equipment (88,756) (72,529) Acquisition of business, net of cash acquired - (94,593) Other 312 (291) ------- ------- Net cash used in investing activities (88,444) (167,413) Financing activities: Issuance of debt 27,746 360,000 Payment on debt (27,171) (231,776) Purchase of treasury shares (54,950) (54,117) Payment of dividends (22,304) (20,140) Issuance of common shares 202 829 ------- ------- Net cash provided by (used in) financing activities (76,477) 54,796 Effects of exchange rate changes on cash and cash equivalents (137) 357 ------- ------- Changes in cash and cash equivalents (30,088) (4,368) Cash and cash equivalents at beginning of year 52,910 19,459 ------- ------- Cash and cash equivalents at end of period $ 22,822 $ 15,091 ======= ======= Cash payments for interest $ 16,472 $ 11,143 ======= ======= Cash payments for income taxes $ 57,179 $ 46,378 ======= ======= See accompanying notes.
5 COOPER TIRE & RUBBER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated financial statements at September 30, 1998 and for the three-month and nine-month periods ended September 30, 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 and nine-month periods ended September 30, 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. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Net sales for the third quarter of 1998 were comparable to the third quarter of 1997 and were 4.2% higher for the first nine months of 1998 when compared to the corresponding 1997 period. 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 nine-month increase. Other income was higher in both the third quarter and nine months of 1998 as compared to the corresponding 1997 periods due to higher amounts of interest income. Cost of products sold, as a percent of net sales, for both the quarter and nine-month periods was comparable to the corresponding periods in 1997. Decreases in raw material costs and improvements in product mix continued to be offset by price concessions in the domestic and European tire replacement markets. Selling, general and administrative expenses were higher for both the three- month and nine-month periods compared to one year ago. As a percent of net sales, selling, general and administrative expenses were 6.4% and 5.6% for the 1998 and 1997 quarters and 6.4% and 5.9% for the nine months of 1998 and 1997, respectively. The quarter and nine-month increases reflect higher advertising costs. Interest expense for the quarter period reflects a reduction in debt levels from the 1997 comparable period. Income before income taxes for the quarter decreased 5.7% from one year ago and was comparable for the year-to-date. Both the quarter and nine-month periods benefited from reductions in raw material costs and richer product mix which were offset by the continuation of intense price competition. Cooper- Avon operations during the quarter and year-to-date periods showed improvement due to cost-savings initiatives. For the nine months, the effective tax rate of 36.6% was lower than the 37.1% in 1997 due to foreign tax planning resulting in lower U.S. taxes. The effective tax rate for the quarter of 34.9% was lower than the 36.3% one year ago due to the nine-month impact of this benefit. Working capital of $356 million is up slightly since year-end and up $10 million from September 30, 1997. The current ratio of 2.6 is comparable to September 30, 1997 but is down from the 2.8 at December 31, 1997. Long-term debt, as a percent of total capitalization, decreased to 19.5% at the end of the quarter compared to 21.8% one year ago. This decrease reflects both the retirement of debt in October 1997 and the repurchase of 3 million shares of the Company's common stock during the third quarter of 1998. The financial position of the Company at September 30, 1998 continues to be excellent. In March 1997, the Company completed the repurchase of 5 million shares of its stock authorized by the Board of Directors in July 1996. In May 1997, the Board of Directors authorized the repurchase of up to an additional 5 million shares of the Company's common stock. The Company acquired 3 million shares during the third quarter under that authorization and is evaluating repurchase of the additional 2 million shares remaining. The cash flows generated by operating activities of $135 million during the first nine months of 1998 are higher than the $108 million for the nine-month period one year ago due primarily to changes in inventories. Investments in property, plant and equipment of $89 million are up $16 million from last year's levels. In 1997, investing activities reflect the acquisition of Cooper-Avon. Financing activities in 1997 reflect the issuance of $200 million of long-term public debt and the repayment of commercial paper debt. 7 Funds used for stock repurchases approximated $55 million in both 1998 and 1997. The Company expects that available cash and existing lines of credit will be sufficient to meet normal operating requirements over the near term. The Company has developed and initiated its plans to address the possible exposures related to the impact of the Year 2000 on its systems and computer equipment, including those involved in its manufacturing operations. The Year 2000 issue is the result of computer programs being written in the past using two digits rather than four to define the applicable year. Computer equipment and systems that have date-sensitive chips or code may not be able to correctly recognize a two-digit year in dates beyond December 31, 1999. The potential failure of systems and equipment around the world due to this logic on January 1, 2000 is possible. The Company's key financial information and operational systems have been assessed and detailed plans have been implemented to address modifications required by December 31, 1999. The Company is on schedule with these plans, with more than 80% of its originally non-compliant systems and equipment now compliant, and expects remaining modifications to be completed and tested by September 1999. The Company will continue to monitor the need for contingency planning in the event it determines the remaining systems and equipment cannot be modified as expected. The financial impact of making the required changes is comprised primarily of internal costs and estimated to be less than $3 million. These internal costs and other non-capital costs incurred to upgrade and replace systems have been expensed as incurred since 1997. The Company is communicating with its significant suppliers and customers to ensure they have appropriate plans to resolve Year 2000 issues where failure of their systems could adversely affect the Company's operations. Contingency plans are being developed to address potential failures by these third parties. Certain electronic communication systems of the Company's trading partners have been tested and are compliant and the Company believes minimal risk exists for their failure on January 1, 2000. The "most likely worst case scenario" for Year 2000 issues is the failure of the systems and equipment of other parties throughout the world which could result in the unavailability of global communications, financial resources, transportation, critical raw materials, energy, sales and other vital commercial systems. The Company's ability to maintain its operations on domestic and international levels could be disrupted by these failures until corrected. In the event the Company is unable to modify its remaining non- compliant systems and equipment, based upon currently available information, management believes no material adverse impact on its operations would result. The Company does not anticipate adoption of the "euro" by the members of the European Union will have a material impact on the results of its operations, financial position or liquidity. Certain information set forth herein may constitute forward-looking statements regarding events and trends which may affect the Company's future operating results and financial position. Actual results may differ materially as a result of factors over which the Company has no control. These risk factors and additional information are included in the Company's reports on file with the Securities and Exchange Commission. 8 Part II. OTHER INFORMATION Item 6(a). Exhibits. (27) Financial Data Schedule (99) Press release dated November 11, 1998 regarding retirement of executive vice president and chief financial officer J. Alec Reinhardt Item 6(b). Reports on Form 8-K. No Form 8-K has been filed. 9 INDEX TO EXHIBITS DESCRIPTION Part II. Item 6(a). (27) Financial Data Schedule (99) Press release dated November 11, 1998 regarding retirement of executive vice president and chief financial officer J. Alec Reinhardt 10 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 13, 1998 - ----------------- (Date) 11 Part II Exhibit (99) COOPER TIRE & RUBBER COMPANY NEWS RELEASE Public Relations Findlay, Ohio 45840 Phone: (419) 423-1321 - ------------------------------------------------------------------------------ COMPANY CONTACT: Patricia J. Brown FOR IMMEDIATE RELEASE (419) 424-4370 NOVEMBER 11, 1998 COOPER ANNOUNCES RETIREMENT OF EXECUTIVE VICE PRESIDENT ------------------------------------------------------- AND CHIEF FINANCIAL OFFICER J. ALEC REINHARDT --------------------------------------------- FINDLAY, OHIO, November 11, 1998-COOPER TIRE & RUBBER COMPANY (NYSE:CTB) today announced that J. Alec Reinhardt, executive vice president, chief financial officer and director, has indicated his intention to take early retirement effective in February, 1999. Patrick W. Rooney, chairman and chief executive officer, said the company is reviewing internal and external candidates and expects to fill the position in time to effect a smooth transition of duties. Rooney commented, "Alec Reinhardt has been a key leader at Cooper for more than two decades. He has done an outstanding job and has made a valuable contribution throughout his career with the company. Even though we have accepted his retirement request, we are sorry to see him leave. We wish him well as he begins a new stage in life, but will certainly miss his knowledge, leadership and guidance." Reinhardt, 56, joined the company in 1976 serving as general counsel through 1983 and as chief financial officer and a director since 1983. In addition, he was elected executive vice president of the company in 1991. In that capacity his responsibilities have included oversight of the Cooper engineered products operations and the treasury, accounting, personnel, purchasing and information systems functions. Reinhardt, who is the longest serving current member of Cooper's board of directors stated that he takes immense pride in having participated in the seven-fold growth of Cooper during his tenure and the company's rise to national and international prominence. Reinhardt is a graduate of the University of Cincinnati with a B.S.E.E. degree and has earned M.B.A. and J.D. degrees from the Ohio State University. He is a trustee of the Blanchard Valley Health Association and a director of the Fifth Third Bank of Northwestern Ohio, N.A. Founded in 1914, Cooper Tire & Rubber Company is a leading manufacturer of tires and engineered rubber products. For more information on the company, visit the company's web site at www.coopertire.com. 12 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S BALANCE SHEET AND STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1998 JAN-1-1998 SEP-30-1998 22,047 775 343,569 5,887 191,078 572,978 1,487,953 613,048 1,535,204 217,040 205,209 0 0 75,793 770,892 1,535,204 1,379,914 1,381,685 1,142,607 1,142,607 86,285 1,310 11,358 140,125 51,235 88,890 0 0 0 88,890 1.14 1.14
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