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 June 30, 1997
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 July 31, 1997: 78,731,668
1
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE> COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands; per-share amounts in dollars)
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited) (Note 1)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 20,030 $ 19,459
Accounts receivable, less allowances
of $5,573 ($3,700 in 1996) 351,066 267,149
Inventories at lower of cost (last-in,
first-out) or market:
Finished goods 155,948 87,105
Work in process 18,100 13,419
Raw materials and supplies 31,405 41,094
--------- ---------
205,453 141,618
Prepaid expenses and deferred income taxes 17,175 15,399
--------- ---------
Total current assets 593,724 443,625
Property, plant and equipment - net 849,792 792,419
Other assets 72,170 36,965
--------- ---------
$1,515,686 $1,273,009
LIABILITIES AND STOCKHOLDERS' EQUITY ========= =========
Current liabilities:
Notes payable $ 78,472 $ 32,000
Accounts payable 87,034 81,571
Accrued liabilities 93,603 65,727
Income taxes 3,950 3,116
Current portion of debt 4,997 5,081
--------- ---------
Total current liabilities 268,056 187,495
Long-term debt 223,857 69,489
Postretirement benefits other than pensions 142,053 139,070
Other long-term liabilities 40,331 37,575
Deferred income taxes 63,542 52,768
Stockholders' equity:
Preferred stock, $1 par value; 5,000,000 shares
authorized; none issued - -
Common stock, $1 par value; 300,000,000 shares
authorized; 83,730,468 shares issued
(83,672,372 in 1996) 83,730 83,672
Capital in excess of par value 2,542 2,027
Retained earnings 797,680 754,481
Cumulative currency translation adjustment 1,580 -
Minimum pension liability (7,434) (7,434)
--------- ---------
878,098 832,746
Less: Common shares in treasury at cost
(5,000,000 in 1997; 2,305,500 in 1996) (100,251) (46,134)
--------- ---------
Total stockholders' equity 777,847 786,612
--------- ---------
$1,515,686 $1,273,009
<FN> ========= =========
See accompanying notes.
</TABLE>
<PAGE> 2
<TABLE>
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revenues:
Net sales $463,993 $398,858
Other income 204 246
------- -------
464,197 399,104
Costs and expenses:
Cost of products sold 380,910 338,566
Selling, general and administrative 29,272 20,021
Interest 4,961 5
Foreign currency gains (1,302) -
------- -------
413,841 358,592
------- -------
Income before income taxes 50,356 40,512
Provision for income taxes 18,850 15,350
------- -------
Net income $ 31,506 $ 25,162
======= =======
Net income per share $.40 $.30
=== ===
Weighted average number of
shares outstanding (000's) 78,712 83,672
====== ======
Dividends per share $.085 $.075
==== ====
<FN>
See accompanying notes.
</TABLE>
3
<PAGE>
<TABLE>
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revenues:
Net sales $843,525 $779,896
Other income 458 522
------- -------
843,983 780,418
Costs and expenses:
Cost of products sold 696,823 662,899
Selling, general and administrative 51,084 39,869
Interest 6,652 9
Foreign currency gains (1,302) -
------- -------
753,257 702,777
------- -------
Income before income taxes 90,726 77,641
Provision for income taxes 34,070 29,370
------- -------
Net income $ 56,656 $ 48,271
======= =======
Net income per share $.71 $.58
=== ===
Weighted average number of
shares outstanding (000's) 79,506 83,669
====== ======
Dividends per share $.17 $.15
==== ====
<FN>
See accompanying notes.
</TABLE>
4
<PAGE>
<TABLE>
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
(Dollar amounts in thousands; per-share amounts in dollars)
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Operating activities:
Net income $ 56,656 $ 48,271
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 44,532 36,256
Deferred income taxes 4,823 6,267
Foreign currency gains (1,426) -
Changes in operating assets
and liabilities:
Accounts receivable (44,515) (37,097)
Inventories and prepaid expenses (33,612) (19,980)
Accounts payable and
accrued liabilities 6,190 3,370
Postretirement benefits
other than pensions 3,583 4,110
Other (10,409) (7,914)
------- -------
Net cash provided by
operating activities 25,822 33,283
Investing activities:
Acquisition of business,
net of cash acquired (94,593) -
Property, plant and equipment (49,927) (119,032)
Other 10 133
------- -------
Net cash used in investing
activities (144,510) (118,899)
Financing activities:
Issuance of debt 360,000 104,000
Payment on debt (174,124) (16,239)
Purchase of treasury shares (54,117) -
Payment of dividends (13,457) (12,550)
Issuance of common stock 573 105
------- -------
Net cash provided by
financing activities 118,875 75,316
Effect of exchange rate changes on cash
and cash equivalents 384 -
------- -------
Changes in cash and cash equivalents 571 (10,300)
Cash and cash equivalents at
beginning of year 19,459 23,187
------- -------
Cash and cash equivalents at end of period $ 20,030 $ 12,887
======= =======
Cash payments for interest $ 3,328 $ 2,913
======= =======
Cash payments for income taxes $ 32,251 $ 33,973
======= =======
<FN>
See accompanying notes.
</TABLE>
<PAGE> 5
COOPER TIRE & RUBBER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements at June 30, 1997 and for the
three-month and six-month periods ended June 30, 1997 and 1996 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, 1996.
2. The results of operations for the three-month and six-month periods ended
June 30, 1997 are not necessarily indicative of those to be expected for
the year ending December 31, 1997.
3. In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," which changes the method currently used to compute earnings per
share and requires restatement of all prior periods. The effect of
adopting this Standard is not expected to have a significant effect on the
Company's reported net income per share. In June, 1997, the FASB issued
SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
which require the disclosure of total comprehensive income and change the
method for determining and reporting business segment information. The
Company's components of comprehensive income have historically been for
the impact of pension accounting and foreign currency. The FASB's
approach to determine business segments will cause the Company to report
certain financial information at segment levels. These Standards are
required to be adopted for fiscal years beginning after December 31, 1997.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Net sales increased 16.3% for the second quarter and 8.2% for the first six
months of 1997 when compared to the corresponding periods of 1996. Sales of
both tires and engineered products were higher than for the three-month and
six-month periods one year ago. The Company's acquisition of Avon Tyres
Limited of Melksham, England, now known as Cooper-Avon Tyres Limited, was
completed late in the first quarter of 1997 and contributed to the increases.
Other income was lower in both the second quarter and six months of 1997 as
compared to the corresponding 1996 periods due to lower amounts of interest
income.
Cost of products sold, as a percent of net sales, was lower in both the
quarter and six-month periods of 1997 as compared with the corresponding
periods in 1996. This margin improvement resulted primarily from more
favorable plant operating levels and efficiencies. Cooper-Avon's margins also
contributed to the improvement. Decreases in raw material costs were offset
by price concessions.
Selling, general and administrative expenses were higher for both the
three-month and six-month periods of 1997 compared to one year ago. These
increases reflect expanded advertising programs and the inclusion of
Cooper-Avon expenses. As a percent of net sales, selling, general and
administrative expenses were 6.3% and 5.0% for the 1997 and 1996 quarters and
6.1% and 5.1% for the six months of 1997 and 1996, respectively.
Interest expense was higher than for the corresponding periods of 1996
reflecting higher borrowing levels and lower amounts of capitalized interest.
Foreign currency gains contributed $1.3 million to income before income taxes.
These gains result primarily from the favorable relationship during the
quarter between the British pound sterling and the United States dollar.
Income before income taxes for the quarter increased 24.3% from one year ago
and 16.9% for the year-to-date. The 1997 periods reflect improvements in
production efficiencies with reductions in raw material costs offset by a
continuation of intense price competition in the replacement tire market.
In March, the Company completed the repurchase of 5 million shares of its
stock authorized by the Board of Directors in July 1996. To finance the
acquisition of Avon Tyres Limited and initial stock repurchase, the Company
issued $200 million of long-term public debt due in 2027 with an interest rate
of 7.625%. In May, the Board of Directors authorized the repurchase of up to
an additional 5 million shares of the Company's common stock. The Company
intends, given certain market conditions, to repurchase additional shares but
has not yet acquired any portion of the shares approved in May.
Working capital of $326 million is up $70 million since year-end and up $87
million from June 30, 1996, primarily reflecting the acquisition. The current
ratio of 2.2 is up from 2.0 at June 30, 1996 and is down slightly from the 2.4
at December 31, 1996. Long term debt as a percent of total capitalization
increased to 22.3% at the end of the quarter compared to 3.5% one year ago
reflecting both the issuance of debt and repurchase of the Company's stock.
The financial position of the Company at June 30, 1997 continues to be strong.
The cash flows generated by operating activities during the first six months
of 1997 are lower than for the six-month period one year ago primarily due to
increases in accounts receivable and inventories. Investing activities
reflect the acquisition, net of cash acquired, and lower expenditures for
property, plant and equipment.
The Company expects that available cash and existing lines of credit will be
sufficient to meet normal operating requirements over the near term.
<PAGE> 7
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Stockholders was held on May 6, 1997.
(b) All of the nominees for directors, as listed below under (c) and on
page 2 of the Company's Proxy Statement dated March 25, 1997, were
elected. The following directors have terms of office which continued
after the meeting:
Arthur H. Aronson Dennis J. Gormley
Edsel D. Dunford Allan H. Meltzer
John Fahl J. Alec Reinhardt
Deborah M. Fretz
(c) A description of the matter voted upon at that meeting, the election
of directors, is contained on pages 1 and 2 of the Company's Proxy
Statement dated March 25, 1997, which pages are incorporated herein
by reference.
The number of votes cast by common stock holders with respect to each
matter is as follows:
Election of directors
Term Affirmative Withheld Broker
Expiration Votes Votes Abstentions Non-votes
---------- ----------- -------- ----------- ---------
John F. Meier 2000 69,204,453 1,782,362 0 0
Patrick W. Rooney 2000 69,073,041 1,913,774 0 0
John H. Shuey 2000 69,193,490 1,793,325 0 0
Item 6(a). Exhibits.
(27) Financial Data Schedule
(99) Press release regarding purchase of Company common stock
Item 6(b). Reports on Form 8-K.
No Form 8-K has been filed.
8
<PAGE>
INDEX TO EXHIBITS
DESCRIPTION
Part II. Item 6(a).
(27) Financial Data Schedule
(99) Press release dated May 6, 1997 regarding purchase of Company common
stock.
9
<PAGE>
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)
August 12, 1997
---------------
(Date)
10
<PAGE>
Part II
Exhibit (99)
<LOGO> COOPER TIRE & RUBBER COMPANY NEWS RELEASE
Public Relations Findlay, Ohio 45840 Phone: (419) 423-1321
- ------------------------------------------------------------------------------
COMPANY CONTACT: J. ALEC REINHARDT FOR IMMEDIATE RELEASE
May 6, 1997
REGULAR DIVIDEND DECLARED, STOCK PURCHASE AUTHORIZED
----------------------------------------------------
FINDLAY, OHIO -- The board of directors of Cooper Tire & Rubber Company
declared a regular quarterly dividend of 8.5 cents per share on common stock,
payable June 30, 1997 to stockholders of record June 3, 1997.
In other action, the board authorized the purchase of up to five million
shares of its common stock from time to time in the open market or otherwise.
The company currently has 78,678,772 common shares outstanding.
The board of directors did not establish a timetable for the purchase program.
These purchases shall occur at such times as the company may elect. The
shares purchased will be used for general corporate purposes.
In announcing the stock purchase program, Cooper Tire chairman Patrick W.
Rooney stated, "The current stock price, we believe, undervalues the company
and presents the company an opportunity to reduce the number of outstanding
shares. The purchases will be made with normal cash flows from operations and
debt. The repurchase should not impinge on our planned capital investments in
strategic plant and equipment."
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AND STATEMENT OF INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<CASH> 20,030
<SECURITIES> 0
<RECEIVABLES> 356,639
<ALLOWANCES> 5,573
<INVENTORY> 205,453
<CURRENT-ASSETS> 593,724
<PP&E> 1,342,311
<DEPRECIATION> 492,519
<TOTAL-ASSETS> 1,515,686
<CURRENT-LIABILITIES> 268,056
<BONDS> 223,857
0
0
<COMMON> 78,730
<OTHER-SE> 699,117
<TOTAL-LIABILITY-AND-EQUITY> 1,515,686
<SALES> 843,525
<TOTAL-REVENUES> 843,983
<CGS> 696,823
<TOTAL-COSTS> 696,823
<OTHER-EXPENSES> 49,182
<LOSS-PROVISION> 600
<INTEREST-EXPENSE> 6,652
<INCOME-PRETAX> 90,726
<INCOME-TAX> 34,070
<INCOME-CONTINUING> 56,656
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,656
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
</TABLE>
