Business Segments

9 Months Ended

Sep. 30, 2019

The Company has four segments under ASC 280, "Segments":


•	North America, composed of the Company’s operations in the United States and Canada;


•	Latin America, composed of the Company’s operations in Mexico, Central America and South America;


•	Europe; and


•	Asia.

North America and Latin America meet the criteria for aggregation in accordance with ASC 280, as they are similar in their production and distribution processes and exhibit similar economic characteristics. The aggregated North America and Latin America segments are presented as “Americas Tire Operations” in the segment disclosure. The Americas Tire Operations segment manufactures and markets passenger car and light truck tires, primarily for sale in the U.S. replacement market. The segment also has a joint venture manufacturing operation in Mexico, Corporacion de Occidente SA de CV ("COOCSA"), which supplies passenger car tires to the North American, Mexican, Central American and South American markets. The segment also markets and distributes racing, TBR and motorcycle tires. The racing and motorcycle tires are manufactured by the Company’s European Operations segment and by others. TBR tires are sourced from Qingdao Ge Rui Da Rubber Co., Ltd. ("GRT") and through off-take agreements with Prinx Chengshan (Shandong) Tire Company Ltd. ("PCT"), the Company's former joint venture, through mid-2021, and Sailun Vietnam, through December 31, 2020. On April 5, 2019, Cooper Vietnam, a wholly owned subsidiary of Cooper, and Sailun Vietnam established a joint venture in Vietnam, ACTR, which will produce and sell TBR tires. The new joint venture is expected to begin commercially producing tires in 2020. Major distribution channels and customers include independent tire dealers, wholesale distributors, regional and national retail tire chains, large retail chains that sell tires as well as other automotive products, mass merchandisers and digital channels. The segment does not currently sell its products directly to end users, except through three Company-owned retail stores. The segment sells a limited number of tires to OEMs.

Both the Europe and Asia segments have been determined to be individually immaterial, as they do not meet the quantitative requirements for segment disclosure under ASC 280. In accordance with ASC 280, information about operating segments that are not reportable shall be combined and disclosed in an all other category separate from other reconciling items. As a result, these two segments have been combined in the segment operating results discussion. The results of the combined Europe and Asia segments are presented as “International Tire Operations.” The European operations include manufacturing operations in the U.K. and Serbia. The U.K. entity manufactures and markets passenger car, light truck, motorcycle and racing tires and tire retread material for domestic and global markets. The Serbian entity manufactures passenger car and light truck tires primarily for the European markets and for export to the North American segment. The Asian operations are located in the PRC and Vietnam. Cooper Kunshan Tire manufactures passenger car and light truck tires both for the Chinese domestic market and for export to markets outside of the PRC. GRT, a joint venture manufacturing facility located in the PRC, serves as a global source of TBR tire production for the Company. The segment also procures certain TBR and passenger car tires under off-take agreements with PCT through mid-2021 and, in December 2017, the Company signed an off-take agreement with Sailun Vietnam, as a source of TBR tires through December 31, 2020. On April 5, 2019, Cooper Vietnam and Sailun Vietnam established a joint venture in Vietnam, ACTR, which will produce and sell TBR tires in addition to the off-take agreement. The new joint venture is expected to begin commercially producing tires in 2020. The segment sells a majority of its tires in the replacement market, with a portion also sold to OEMs.

On January 17, 2019, Cooper Tire Europe, a wholly owned subsidiary of the Company, committed to a plan to cease light vehicle tire production at its Melksham, U.K. facility. The phasing out of light vehicle tire production was substantially completed in the third quarter of 2019. Approximately 300 roles were eliminated at the site. Cooper Tire Europe will obtain light vehicle tires to meet customer needs from other production sites within the Company’s global production network. Approximately 400 roles will remain in Melksham to support the functions that continue there, including motorsports and motorcycle tire production, a materials business, Cooper Tire Europe headquarters, sales and marketing, and the Europe Technical Center.

The following table details segment financial information:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net sales:
Americas Tire
External customers	$	594,015		$	619,763		$	1,669,310		$	1,672,396
Intercompany	7,942			8,941			29,891			26,111
	601,957			628,704			1,699,201			1,698,507
International Tire
External customers	110,119			117,908			333,118			365,179
Intercompany	22,151			44,493			81,451			126,305
	132,270			162,401			414,569			491,484
Eliminations	(30,093		)	(53,434		)	(111,342		)	(152,416		)
Consolidated net sales	704,134			737,671			2,002,428			2,037,575
Operating profit (loss):
Americas Tire	67,941			87,353			153,544			159,068
International Tire	(4,831		)	5,994			(7,466		)	19,080
Unallocated corporate charges	(11,051		)	(12,518		)	(34,781		)	(38,188		)
Eliminations	710			372			(425		)	459
Consolidated operating profit	52,769			81,201			110,872			140,419

Interest expense	(7,476		)	(7,930		)	(23,599		)	(24,038		)
Interest income	1,507			2,399			6,887			6,702
Other pension and postretirement benefit expense	(9,562		)	(6,932		)	(28,212		)	(20,885		)
Other non-operating (expense) income	(509		)	2,922			(593		)	(129		)
Income before income taxes	$	36,729		$	71,660		$	65,355		$	102,069