Cooper Tire & Rubber Company Reports Third Quarter 2013 Results

  Cooper Tire & Rubber Company Reports Third Quarter 2013 Results

  *Unusual items related to the terminated merger agreement with Apollo
    Tyres, including issues at the Cooper Chengshan (Shandong) Tire Company
    Ltd. (CCT) joint venture, negatively impacted third quarter performance
  *Despite the negative impact of unusual items, Cooper will report positive
    operating profit and net income attributable to the company for the fourth
    quarter and second half of 2013
  *Cooper to report 2013 year-end cash and cash equivalents approaching $400
    million

Business Wire

FINDLAY, Ohio -- February 28, 2014

Cooper Tire & Rubber Company (NYSE: CTB)  today reported results for the third
quarter of 2013. Net sales were $832 million, a decrease of $263 million
compared with the same period in 2012. Operating profit for the third quarter
was $28 million, which is $102 million lower than the same period in 2012 and
3.4% of net sales. The company reported a net loss attributable to Cooper Tire
& Rubber Company of $168,000 in the third quarter. This compares with a net
profit of $74 million, or $1.17 per share, for the same period in 2012. For
the first nine months of 2013, operating profit was $194 million compared with
$273 million for the same period in 2012.

“With the merger agreement terminated and operations returning to normal at
CCT, we are resuming financial reporting and moving our business forward,”
said Cooper Chairman, Chief Executive Officer and President Roy Armes. “As
expected, issues surrounding the merger had a significant negative impact on
our third quarter results, and we anticipate some carry over of these negative
impacts to a lesser degree in the near term,” he said. “Still, our business
model remains resilient and we will report positive operating profit and net
income for the fourth quarter and second half of 2013. We will also end the
year with a strong balance sheet, which is important as we continue to invest
in our business and focus on delivering value to stockholders.”

Third quarter operating profit was impacted by a number of unusual items
including actions at the CCT joint venture in Rongcheng, China that took place
in response to the merger agreement. On July 13, 2013, workers at CCT began a
temporary work stoppage. When they returned to work on August 17, 2013,
workers resumed production but excluded Cooper brand products. These actions
reduced operating profit during the third quarter by $29 million, including
$22 million from lower volume and $7 million from manufacturing
inefficiencies. Cooper also incurred $5 million of expenses associated with
the merger during the third quarter.

In addition to these unusual items, the company’s third quarter 2013 operating
profit included $36 million from lower raw materials costs, which was more
than offset by unfavorable pricing and mix of $76 million. Lower unit volumes
resulting from shipping inefficiencies related to continued ERP system
deployments, as well as increased competition that impacted private label and
lower price point tire volumes in North America, decreased profit by $22
million. In total, manufacturing costs were $11 million unfavorable, driven by
$13 million of costs associated with production curtailments in North America
caused by the lower volumes. All other costs were $5 million lower compared
with the third quarter of 2012.

The $168,000 net loss in the third quarter included the impact of an 84% tax
rate. This unusually high rate was caused by $8 million of discrete items in
the quarter. In comparison, the full year tax rate is expected to be between
36% and 40%.

Results for First Nine Months of 2013

For the first nine months of 2013, operating profit was $194 million compared
with $273 million for the same period in 2012. Results for the first nine
months of 2012 included several one-time items: incremental costs of $29
million related to labor issues at the company’s Findlay facility, a U.K.
pension curtailment gain of $7 million, and $5 million in start-up costs at
the company’s Serbia facility, which, in combination, resulted in a net
negative impact of $27 million. Results for the first nine months of 2013
include $29 million of unfavorable impacts related to the labor issues at CCT
described above and $9 million of incremental costs related to the announced
merger agreement with Apollo.

Excluding these non-recurring and unusual items from both periods, operating
profit was $68 million lower for the first nine months of 2013 than for the
same period in 2012. Results include lower material costs of $246 million,
which were more than offset by unfavorable pricing and mix of $200 million and
lower unit volumes of $73 million. Manufacturing costs were $30 million
unfavorable, including $23 million of costs associated with 2013 production
curtailments in North America related to reduced volumes. Lower products
liability costs of $13 million were offset by higher selling, general and
administrative costs of $13 million and other higher costs of $11 million
related to carrying higher inventories, as well as shipping inefficiencies,
which resulted largely from the short-term effects of ERP system deployments.

Cooper ended the third quarter with $310 million in cash and cash equivalents,
a decrease of $42 million from December 31, 2012, and an increase of $66
million from second quarter 2013.

A summary presentation of information related to the quarter, including
segment details, is posted on the company's website at
http://coopertire.com/Investors/Financials/Quarterly-Summary.aspx.

Outlook for Q4 and Full-Year 2013

As noted earlier, the company will report positive operating profit and net
income attributable to Cooper Tire & Rubber Company for the fourth quarter and
second half of 2013 despite negative effects that occurred in the third
quarter related to the Apollo merger agreement as well as increased
competition that reduced the company’s private label and lower price point
tire volumes in North America. These negative impacts are expected to carry
over into results for the fourth quarter of 2013 and beyond, but to a lesser
degree. Cooper will report 2013 year-end cash and cash equivalents approaching
$400 million.

Third quarter raw material prices were down by approximately 8.1% from the
third quarter of 2012. Management expects to report that fourth quarter 2013
raw material prices will decline approximately 1.3% sequentially compared to
the third quarter. The long-term raw material outlook is for prices to
generally trend higher with periods of volatility.

As Cooper continues to invest in its business, capital expenditures for 2013
will be between $180 million and $190 million.

As noted earlier, Cooper’s tax rate for 2013 is expected to be between 36% and
40%.

“We remain confident that Cooper will successfully move past the negative
near-term impacts we have described today. Our business model has demonstrated
its resilience and we continue to execute the solid strategic plan that
positions Cooper well for future growth,” Armes said. “Cooper has a strong
global network of manufacturing facilities and distribution sites, a skilled
workforce, outstanding product development and technical capabilities, as well
as a loyal customer base. These assets and others will continue to be the
basis for our success over the long term,” he concluded.

Fourth Quarter and Full-Year 2013 Results to be Released in Mid-March 2014

Cooper plans to issue fourth quarter and full-year 2013 financial results in
mid-March. The specific date for the earnings release and conference call will
be announced by the company in the near future. With that earnings report,
Cooper will provide customary comments regarding the outlook for 2014 and
resume regular earnings conference calls with question and answer sessions.

No conference call will be held in conjunction with today’s third quarter 2013
results per the company’s prior disclosure.

Forward Looking Statements

This release contains what the Company believes are “forward-looking
statements,” as that term is defined under the Private Securities Litigation
Reform Act of 1995, regarding projections, expectations or matters that the
Company anticipates may happen with respect to the future performance of the
industries in which the Company operates, the economies of the United States
and other countries, or the performance of the Company itself, which involve
uncertainty and risk. Such “forward-looking statements” are generally, though
not always, preceded by words such as “anticipates,” “expects,” “will,”
“should, ” “believes,” “projects,” “intends,” “plans,” “estimates,” and
similar terms that connote a view to the future and are not merely recitations
of historical fact. Such statements are made solely on the basis of the
Company’s current views and perceptions of future events, and there can be no
assurance that such statements will prove to be true.

It is possible that actual results may differ materially from those
projections or expectations due to a variety of factors, including but not
limited to:

  *volatility in raw material and energy prices, including those of rubber,
    steel, petroleum based products and natural gas and the unavailability of
    such raw materials or energy sources;
  *the failure of the Company’s suppliers to timely deliver products in
    accordance with contract specifications;
  *changes in economic and business conditions in the world;
  *failure to implement information technologies or related systems,
    including failure by the Company to successfully implement an ERP system;
  *increased competitive activity including actions by larger competitors or
    lower-cost producers;
  *the failure to achieve expected sales levels;
  *changes in the Company’s customer relationships, including loss of
    particular business for competitive or other reasons;
  *the ultimate outcome of litigation brought against the Company, including
    stockholders lawsuits relating to the Apollo merger as well as products
    liability claims, in each case which could result in commitment of
    significant resources and time to defend and possible material damages
    against the Company;
  *changes to tariffs or the imposition of new tariffs or trade restrictions;
  *changes in pension expense and/or funding resulting from investment
    performance of the Company’s pension plan assets and changes in discount
    rate, salary increase rate, and expected return on plan assets
    assumptions, or changes to related accounting regulations;
  *government regulatory and legislative initiatives including environmental
    and healthcare matters;
  *volatility in the capital and financial markets or changes to the credit
    markets and/or access to those markets;
  *changes in interest or foreign exchange rates;
  *an adverse change in the Company’s credit ratings, which could increase
    borrowing costs and/or hamper access to the credit markets;
  *the risks associated with doing business outside of the United States;
  *the failure to develop technologies, processes or products needed to
    support consumer demand;
  *technology advancements; the inability to recover the costs to develop and
    test new products or processes;
  *the impact of labor problems, including labor disruptions at the Company,
    its joint ventures, including CCT, or at one or more of its large
    customers or suppliers;
  *failure to attract or retain key personnel;
  *consolidation among the Company’s competitors or customers;
  *inaccurate assumptions used in developing the Company’s strategic plan or
    operating plans or the inability or failure to successfully implement such
    plans;
  *failure to successfully integrate acquisitions into operations or their
    related financings may impact liquidity and capital resources;
  *the ability to sustain operations at CCT, including obtaining financial
    and other operational data of CCT;
  *changes in the Company’s relationship with its joint-venture partners, or
    changes in the ownership structure of its joint ventures, including
    changes resulting from the previously announced agreement between the
    Company and the CCT joint-venture partner;
  *the inability to obtain and maintain price increases to offset higher
    production or material costs;
  *inability to adequately protect the Company’s intellectual property
    rights;
  *inability to use deferred tax assets; and
  *the ultimate outcome of legal actions brought by the Company against
    wholly-owned subsidiaries of Apollo Tyres Ltd.

It is not possible to foresee or identify all such factors. Any
forward-looking statements in this release are based on certain assumptions
and analyses 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.

Further information covering issues that could materially affect financial
performance is contained in the Company's periodic filings with the U. S.
Securities and Exchange Commission (“SEC”).

About Cooper Tire & Rubber Company

Cooper Tire & Rubber Company (NYSE: CTB)  is the parent company of a global
family of companies that specialize in the design, manufacture, marketing, and
sales of passenger car and light truck tires. Cooper has joint ventures,
affiliates and subsidiaries that also specialize in medium truck, motorcycle
and racing tires. Cooper's headquartersis in Findlay, Ohio, with
manufacturing, sales, distribution, technical and design facilities within its
family of companies located in 11 countries around the world. For more
information on Cooper, visit www.coopertire.com, www.facebook.com/coopertire
or www.twitter.com/coopertire.

Cooper Tire & Rubber Company
Consolidated Statements of Operations
(Unaudited)
                                                                
(Dollar amounts in thousands except per share amounts)
                                                                         
                   Quarter Ended                       Nine Months Ended
                   September 30                        September 30
                   2012              2013              2012              2013
                                                                         
                                                                         
Net sales          $ 1,095,626       $ 832,419         $ 3,138,366       $ 2,578,226
Cost of             897,468         735,015         2,675,875       2,172,744 
products sold
Gross profit         198,158           97,404            462,491           405,482
                                                                         
Selling,
general and         68,555          69,496          189,764         211,744   
administrative
Operating            129,603           27,908            272,727           193,738
profit
                                                                         
Interest             7,115             6,684             23,973            21,016
expense
Interest             542               270               1,914             707
income
Other income        (315      )      (348      )      333             (587      )
(expense)
Income before        122,715           21,146            251,001           172,842
income taxes
                                                                         
Income tax          40,004          17,845          81,650          65,104    
expense
                                                                         
Net income           82,711            3,301             169,351           107,738
                                                                         
Net income
attributable
to                  8,598           3,469           21,924          16,340    
noncontrolling
shareholders'
interests
                                                                         
Net income
(loss)
attributable       $ 74,113          ($168     )     $ 147,427        $ 91,398    
to Cooper Tire
& Rubber
Company
                                                                         
Basic earnings
per share:
                                                                         
Net income
attributable
to Cooper Tire     $ 1.18            $ 0.00            $ 2.36            $ 1.44
& Rubber
Company common
stockholders
                                                                         
Diluted
earnings per
share:
                                                                         
Net income
attributable
to Cooper Tire     $ 1.17            $ 0.00            $ 2.34            $ 1.42
& Rubber
Company common
stockholders
                                                                         
Weighted
average shares
outstanding
(000s):
Basic                62,561            63,365            62,405            63,311
Diluted              63,274            63,365            63,042            64,278
Depreciation
and                $ 32,083          $ 33,712          $ 96,194          $ 99,222
amortization
Capital            $ 45,608          $ 42,335          $ 123,477         $ 135,412
expenditures
                                                                         
                                                                         
Segment
information
Net sales
North American     $ 816,257         $ 633,045         $ 2,284,563       $ 1,858,504
Tire
International        411,256           264,450           1,234,353         958,751
Tire
Eliminations         (131,887  )       (65,076   )       (380,550  )       (239,029  )
                                                                         
Segment profit
(loss)
North American     $ 104,830         $ 38,762          $ 192,717         $ 169,381
Tire
International        35,506            3,083             111,381           62,322
Tire
Eliminations         (3,163    )       1,736             (7,009    )       2,900
Unallocated
corporate            (7,570    )       (15,673   )       (24,362   )       (40,865   )
charges
                                                                         
                                                                         
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                                                                         
                   September 30
                   2012              2013
                                                                         
Assets
Cash and cash      $ 271,512         $ 309,805
equivalents
Notes                51,130            68,996
receivable
Accounts             504,013           440,997
receivable
Inventories          585,958           587,390
Other current       66,201          86,861    
assets
Total current        1,478,814         1,494,049
assets
                                                                         
Net property,
plant and            902,891           958,967
equipment
Goodwill             18,851            18,851
Restricted           9,388             2,653
cash
Deferred
income tax           196,078           200,284
assets
Intangibles
and other           161,737         178,164   
assets
                   $ 2,767,759      $ 2,852,968 
                                                                         
                                                                         
Liabilities
and Equity
Current
liabilities:
Notes payable      $ 47,688          $ 26,526
Trade payables
and accrued          651,763           577,639
liabilities
Income taxes         20,943            13,488
Current
portion of          2,336           17,917    
long-term debt
Total current        722,730           635,570
liabilities
                                                                         
Long-term debt       336,631           326,414
Postretirement
benefits other       299,344           294,798
than pensions
Pension              335,766           401,351
benefits
Other
long-term            187,435           159,886
liabilities
Deferred             8,252             7,477
income taxes
Equity              877,601         1,027,472 
                   $ 2,767,759      $ 2,852,968 
                                                                         
                                                                         
These interim statements are subject to year-end adjustments.
Certain amounts from 2012 have been reclassed to conform to 2013 presentation.

Contact:

Cooper Tire & Rubber Company
Investor Contact:
419-424-4165
investorrelations@coopertire.com
or
Media Contact:
Anne Roman, 419-429-7189
alroman@coopertire.com
 
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