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Actionable news in CTB: COOPER TIRE & RUBBER CO.,

COOPER TIRE & RUBBER COMPANY

Three Months Ended
September 30,
Nine Months Ended
September 30,
2017201620172016
Net sales$733,843
$750,913
$2,097,621
$2,140,982
Cost of products sold569,116
597,961
1,692,137
1,657,932
Gross profit164,727
152,952
405,484
483,050
Selling, general and administrative expense63,350
63,262
180,605
192,339
Pension settlement charge
11,462

11,462
Operating profit101,377
78,228
224,879
279,249
Interest expense(7,591)(6,795)(23,629)(19,717)
Interest income1,776
1,018
5,333
2,907
Other non-operating (expense) income(978)1,785
(1,468)4,672
Income before income taxes94,584
74,236
205,115
267,111
Provision for income taxes31,924
23,757
67,250
86,509
Net income62,660
50,479
137,865
180,602
Net income attributable to noncontrolling shareholders' interests973
1,176
307
1,545
Net income attributable to Cooper Tire & Rubber Company$61,687
$49,303
$137,558
$179,057
Earnings per share:
Basic$1.19
$0.91
$2.62
$3.26
Diluted$1.18
$0.90
$2.59
$3.23
Cash dividends declared per share$0.105
$0.105
$0.315
$0.315
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017201620172016
Net income$62,660
$50,479
$137,865
$180,602
Other comprehensive income (loss)
Foreign currency translation adjustments8,675
(10,946)38,247
(36,137)
Financial instruments
Change in the fair value of derivatives(290)1,173
(3,367)(4,578)
Income tax benefit (provision) on derivative instruments95
(420)1,206
1,743
Financial instruments, net of tax(195)753
(2,161)(2,835)
Postretirement benefit plans
Amortization of actuarial loss10,665
10,820
31,887
32,690
Amortization of prior service credit(141)(141)(424)(424)
Actuarial loss
(26,494)
(26,494)
Pension settlement charge
11,462

11,462
Income tax (provision) benefit on postretirement benefit plans(3,731)6,314
(11,175)(1,366)
Foreign currency translation effect(2,437)2,513
(7,004)9,748
Postretirement benefit plans, net of tax4,356
4,474
13,284
25,616
Other comprehensive income (loss)12,836
(5,719)49,370
(13,356)
Comprehensive income75,496
44,760
187,235
167,246
Less: comprehensive income (loss) attributable to noncontrolling shareholders' interests1,467
(144)4,980
(1,571)
Comprehensive income attributable to Cooper Tire & Rubber Company$74,029
$44,904
$182,255
$168,817
September 30,
2017
(Unaudited)
December 31,
2016
ASSETS
Current assets:
Cash and cash equivalents$258,362
$504,423
Notes receivable15,213
7,485
Accounts receivable, less allowances of $7,496 at 2017 and $7,290 at 2016512,626
409,913
Inventories:
Finished goods415,983
338,887
Work in process32,926
29,922
Raw materials and supplies124,822
101,342
573,731
470,151
Other current assets54,028
28,546
Total current assets1,413,960
1,420,518
Property, plant and equipment:
Land and land improvements53,350
47,767
Buildings310,173
282,960
Machinery and equipment1,855,041
1,742,449
Molds, cores and rings234,056
224,662
2,452,620
2,297,838
Less: accumulated depreciation1,525,634
1,433,611
Net property, plant and equipment926,986
864,227
Goodwill56,361
52,705
Intangibles, net of accumulated amortization of $88,342 at 2017 and $77,321 at 2016135,776
140,751
Restricted cash1,376
1,327
Deferred income tax assets133,455
133,879
Other assets5,634
5,988
Total assets$2,673,548
$2,619,395
LIABILITIES AND EQUITY
Current liabilities:
Notes payable$36,056
$26,286
Accounts payable266,033
282,416
Accrued liabilities186,261
183,804
Income taxes payable38,897
5,887
Current portion of long-term debt1,464
2,421
Total current liabilities528,711
500,814
Long-term debt296,084
297,094
Postretirement benefits other than pensions247,551
247,227
Pension benefits252,701
285,852
Other long-term liabilities115,606
156,924
Deferred income tax liabilities670
1,248
Equity:
Preferred stock, $1 par value; 5,000,000 shares authorized; none issued

Common stock, $1 par value; 300,000,000 shares authorized; 87,850,292 shares issued87,850
87,850
Capital in excess of par value20,949
25,876
Retained earnings2,441,911
2,321,424
Accumulated other comprehensive loss(500,454)(545,151)
2,050,256
1,889,999
Less: common shares in treasury at cost(36,346,576 at 2017 and 34,850,512 at 2016)(876,951)(813,985)
Total parent stockholders’ equity1,173,305
1,076,014
Noncontrolling shareholders' interests in consolidated subsidiary58,920
54,222
Total equity1,232,225
1,130,236
Total liabilities and equity$2,673,548
$2,619,395
Nine Months Ended
September 30,
20172016
Operating activities:
Net income$137,865
$180,602
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization106,652
96,928
Stock-based compensation3,711
11,800
Change in LIFO inventory reserve(14,413)(3,426)
Amortization of unrecognized postretirement benefits31,463
32,266
Pension settlement charge
11,462
Changes in operating assets and liabilities:
Accounts and notes receivable(99,767)(67,940)
Inventories(75,628)(89,877)
Other current assets(25,121)(13,788)
Accounts payable(25,621)13,370
Accrued liabilities4,884
21,956
Other items(58,250)(13,725)
Net cash (used in) provided by operating activities(14,225)179,628
Investing activities:
Additions to property, plant and equipment and capitalized software(143,067)(126,921)
Proceeds from the sale of assets42
331
Net cash used in investing activities(143,025)(126,590)
Financing activities:
Net payments on short-term debt(6,393)(645)
Repayments of long-term debt(600)(600)
Repurchase of common stock(70,198)(82,486)
Payments of employee taxes withheld from shared-based awards(6,669)(2,948)
Payment of dividends to noncontrolling shareholder(282)(804)
Payment of dividends to Cooper Tire & Rubber Company stockholders(16,548)(17,242)
Issuance of common shares related to stock-based compensation4,091
3,533
Excess tax benefits on stock options
177
Net cash used in financing activities(96,599)(101,015)
Effects of exchange rate changes on cash7,788
(6,832)
Net change in cash and cash equivalents(246,061)(54,809)
Cash and cash equivalents at beginning of year504,423
505,157
Cash and cash equivalents at end of period$258,362
$450,348
As Originally
AssetsReportedAdjustmentsAs Adjusted
Cash$8,091
$
$8,091
Accounts receivable2,844

2,844
Notes receivable3,050

3,050
Inventory7,983

7,983
Other current assets981

981
Property, plant & equipment46,712
(1,321)45,391
Intangible assets7,412
16
7,428
Other long-term assets289

289
Goodwill33,861
2,024
35,885
Liabilities
Accounts payable(61,570)(719)(62,289)
Notes payable(10,122)
(10,122)
Accrued liabilities(2,866)
(2,866)
Long-term debt(3,383)
(3,383)
Other long-term liabilities(940)
(940)
32,342

32,342
Noncontrolling shareholder interest(18,323)
(18,323)
Cooper Tire & Rubber Company consideration$14,019
$
$14,019
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017201620172016
Numerator
Numerator for basic and diluted earnings per share - Net income attributable to common stockholders$61,687
$49,303
$137,558
$179,057
Denominator
Denominator for basic earnings per share - weighted average shares outstanding52,042
54,055
52,555
54,869
Effect of dilutive securities - stock options and other stock units393
625
491
590
Denominator for diluted earnings per share - adjusted weighted average shares outstanding52,435
54,680
53,046
55,459
Earnings per share:
Basic$1.19
$0.91
$2.62
$3.26
Diluted$1.18
$0.90
$2.59
$3.23
September 30, 2017December 31, 2016
Assets/(liabilities)
Designated as hedging instruments:
Gross amounts recognized$(3,207)$1,029
Gross amounts offset210

Net amounts$(2,997)$1,029
Not designated as hedging instruments:
Gross amounts recognized(120)109
Gross amounts offset225
(76)
Net amounts$105
$33
Net amounts presented:
Accrued current liabilities$(2,083)$
Other long-term liabilities$(809)$
Other current assets$
$1,062
Three Months Ended
September 30,
Nine Months Ended
September 30,
Derivatives Designated as Cash Flow Hedges2017201620172016
Amount of (Loss) Gain Recognized in Other Comprehensive Income on Derivatives (Effective Portion)$(3,010)$599
$(5,734)$(3,757)
Amount of (Loss) Gain Reclassified from Cumulative Other Comprehensive Loss into Income (Effective Portion)(2,720)(574)(2,367)821
Location of (Loss) Gain Recognized in Income on DerivativesAmount of (Loss) Gain
Recognized in Income on Derivatives
Three Months EndedNine Months Ended
September 30,September 30,
Derivatives not Designated as Hedging Instruments2017201620172016
Foreign exchange contractsOther non-operating (expense) income$(1,448)$330
$(2,853)$645
b.Quoted prices for identical or similar assets or liabilities in non-active markets;
c.Pricing models whose inputs are observable for substantially the full term of the asset or liability; and
d.Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.
September 30, 2017
Total
Assets
(Liabilities)
Quoted Pricesin Active Marketsfor IdenticalAssetsLevel (1)SignificantOtherObservableInputsLevel (2)SignificantUnobservableInputsLevel (3)
Foreign Currency Derivative Instruments$(2,892)$
$(2,892)$
Stock-based Liabilities$(17,334)$(17,334)$
$
December 31, 2016
TotalAssets(Liabilities)Quoted Pricesin Active Marketsfor IdenticalAssetsLevel (1)SignificantOtherObservableInputsLevel (2)SignificantUnobservableInputsLevel (3)
Foreign Currency Derivative Instruments$1,062
$
$1,062
$
Stock-based Liabilities$(20,336)$(20,336)$
$
Pension Benefits - Domestic
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017201620172016
Components of net periodic benefit cost:
Service cost$2,465
$2,403
$7,395
$7,210
Interest cost9,813
10,617
29,439
31,850
Expected return on plan assets(13,515)(13,391)(40,544)(40,175)
Amortization of actuarial loss9,281
9,576
27,842
28,729
Pension settlement charge$
$11,462
$
$11,462
Net periodic benefit cost$8,044
$20,667
$24,132
$39,076
Pension Benefits - International
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017201620172016
Components of net periodic benefit cost:
Service cost$
$2
$
$7
Interest cost2,927
3,417
8,557
10,877
Expected return on plan assets(2,860)(2,744)(8,362)(8,736)
Amortization of actuarial loss1,384
1,244
4,045
3,961
Net periodic benefit cost$1,451
$1,919
$4,240
$6,109
Other Postretirement Benefits
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017201620172016
Components of net periodic benefit cost:
Service cost$501
$537
$1,502
$1,611
Interest cost2,515
2,705
7,547
8,115
Amortization of prior service credit(141)(141)(424)(424)
Net periodic benefit cost$2,875
$3,101
$8,625
$9,302
20172016
Reserve at beginning of year$10,634
$12,339
Additions6,285
6,831
Payments(6,538)(7,486)
Reserve at September 30$10,381
$11,684
Total Equity
Total Parent Stockholders’ EquityNoncontrolling Shareholders’ Interests in Consolidated SubsidiaryTotal Stockholders’ Equity
Balance at December 31, 2016$1,076,014
$54,222
$1,130,236
Net income137,558
307
137,865
Other comprehensive income44,697
4,673
49,370
Share repurchase program(70,198)
(70,198)
Stock compensation plans1,782

1,782
Cash dividends - $0.315 per share(16,548)
(16,548)
Dividend paid to noncontrolling shareholder$
$(282)$(282)
Balance at September 30, 2017$1,173,305
$58,920
$1,232,225
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017201620172016
Stock options$
$26
$14
$484
Restricted stock units768
1,348
2,550
5,117
Performance stock units368
727
1,147
6,199
Total stock-based compensation$1,136
$2,101
$3,711
$11,800
Number of Shares
Outstanding at December 31, 2016495,704
Exercised(208,268)
Expired
Canceled
Outstanding at September 30, 2017287,436
Exercisable287,436
Number of Restricted Stock Units
Nonvested at December 31, 2016240,574
Granted102,707
Vested(135,799)
Canceled(7,829)
Accrued dividend equivalents1,857
Nonvested at September 30, 2017201,510
Number of Performance Stock Units
Performance stock units outstanding at December 31, 2016163,967
Granted64,208
Canceled(6,807)
Accrued dividend equivalents1,437
Performance stock units outstanding at September 30, 2017222,805
Cumulative Translation AdjustmentDerivative InstrumentsPost-retirement BenefitsTotal
Beginning balance, June 30, 2017(50,022)1
(462,775)(512,796)
Other comprehensive income (loss) before reclassifications8,181
(3,010)
5,171
Foreign currency translation effect

(2,437)(2,437)
Income tax effect
985

985
Amount reclassified from accumulated other comprehensive income (loss)
Cash flow hedges
2,720

2,720
Amortization of prior service credit

(141)(141)
Amortization of actuarial losses

10,665
10,665
Pension settlement charge



Income tax effect
(890)(3,731)(4,621)
Other comprehensive income (loss)8,181
(195)4,356
12,342
Ending balance, September 30, 2017(41,841)(194)(458,419)(500,454)
Cumulative Translation AdjustmentDerivative InstrumentsPost-retirement BenefitsTotal
Beginning balance, June 30, 2016(45,429)(134)(470,045)(515,608)
Other comprehensive (loss) income before reclassifications(9,626)599
(26,494)(35,521)
Foreign currency translation effect

2,513
2,513
Income tax effect
(211)10,134
9,923
Amount reclassified from accumulated other comprehensive income (loss)
Cash flow hedges
574

574
Amortization of prior service credit

(141)(141)
Amortization of actuarial losses

10,820
10,820
Pension settlement charge

11,462
11,462
Income tax effect
(209)(3,820)(4,029)
Other comprehensive (loss) income(9,626)753
4,474
(4,399)
Ending balance, September 30, 2016(55,055)619
(465,571)(520,007)
Cumulative
Translation
Adjustment
Derivative
Instruments
Post-
retirement
Benefits
Total
Beginning balance, December 31, 2016(75,415)1,967
(471,703)(545,151)
Other comprehensive (loss) income before reclassifications33,574
(5,734)
27,840
Foreign currency translation effect

(7,004)(7,004)
Income tax effect
1,893

1,893
Amount reclassified from accumulated other comprehensive income (loss)
Cash flow hedges
2,367

2,367
Amortization of prior service credit

(424)(424)
Amortization of actuarial losses

31,887
31,887
Pension settlement charge



Income tax effect
(687)(11,175)(11,862)
Other comprehensive (loss) income33,574
(2,161)13,284
44,697
Ending balance, September 30, 2017(41,841)(194)(458,419)(500,454)
Cumulative
Translation
Adjustment
Derivative
Instruments
Post-
retirement
Benefits
Total
Beginning balance, December 31, 2015(22,034)3,454
(491,187)(509,767)
Other comprehensive (loss) income before reclassifications(33,021)(3,757)(26,494)(63,272)
Foreign currency translation effect

9,748
9,748
Income tax effect
1,448
10,134
11,582
Amount reclassified from accumulated other comprehensive income (loss)
Cash flow hedges
(821)
(821)
Amortization of prior service credit

(424)(424)
Amortization of actuarial losses

32,690
32,690
Pension settlement charge

11,462
11,462
Income tax effect
295
(11,500)(11,205)
Other comprehensive (loss) income(33,021)(2,835)25,616
(10,240)
Ending balance, September 30, 2016(55,055)619
(465,571)(520,007)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017201620172016
Net income attributable to noncontrolling shareholders' interests$973
$1,176
$307
$1,545
Other comprehensive income (loss):
Currency translation adjustments494
(1,320)4,673
(3,116)
Comprehensive income (loss) attributable to noncontrolling shareholders' interests$1,467
$(144)$4,980
$(1,571)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017201620172016
Net sales
Americas Tire
External customers$615,261
$658,727
$1,742,863
$1,866,926
Intercompany10,162
13,914
29,275
39,773
625,423
672,641
1,772,138
1,906,699
International Tire
External customers118,582
92,186
354,758
274,056
Intercompany44,763
20,603
101,922
65,637
163,345
112,789
456,680
339,693
Eliminations(54,925)(34,517)(131,197)(105,410)
Consolidated net sales$733,843
$750,913
$2,097,621
$2,140,982
Operating profit (loss):
Americas Tire$117,465
$101,522
$263,951
$323,667
International Tire591
3,265
3,518
4,645
Unallocated corporate charges(15,792)(26,442)(41,177)(48,191)
Eliminations(887)(117)(1,413)(872)
Operating profit101,377
78,228
224,879
279,249
Interest expense(7,591)(6,795)(23,629)(19,717)
Interest income1,776
1,018
5,333
2,907
Other non-operating (expense) income(978)1,785
(1,468)4,672
Income before income taxes$94,584
$74,236
$205,115
$267,111
(Dollar amounts in thousands except per share amounts)Three Months Ended September 30,Nine Months Ended September 30,
2017% Change20162017% Change2016
Net sales
Americas Tire
External customers$615,261
(6.6)$658,727
$1,742,863
(6.6)$1,866,926
Intercompany10,162
(27.0)13,914
29,275
(26.4)39,773
625,423
(7.0)672,641
1,772,138
(7.1)1,906,699
International Tire
External customers118,582
28.6
92,186
354,758
29.4
274,056
Intercompany44,763
117.3
20,603
101,922
55.3
65,637
163,345
44.8
112,789
456,680
34.4
339,693
Eliminations(54,925)(59.1)(34,517)(131,197)(24.5)(105,410)
Consolidated net sales$733,843
(2.3)$750,913
$2,097,621
(2.0)$2,140,982
Operating profit (loss):
Americas Tire$117,465
15.7
$101,522
$263,951
(18.4)$323,667
International Tire591
(81.9)3,265
3,518
(24.3)4,645
Unallocated corporate charges(15,792)40.3
(26,442)(41,177)14.6
(48,191)
Eliminations(887)n/m
(117)(1,413)(62.0)(872)
Operating profit101,377
29.6
78,228
224,879
(19.5)279,249
Interest expense(7,591)11.7
(6,795)(23,629)(19.8)(19,717)
Interest income1,776
74.5
1,018
5,333
83.5
2,907
Other non-operating (expense) income(978)n/m
1,785
(1,468)n/m
4,672
Income before income taxes94,584
27.4
74,236
205,115
(23.2)267,111
Provision for income taxes31,924
34.4
23,757
67,250
(22.3)86,509
Net income62,660
24.1
50,479
137,865
(23.7)180,602
Net income attributable to noncontrolling shareholders' interests973
(17.3)1,176
307
(80.1)1,545
Net income attributable to Cooper Tire & Rubber Company$61,687
25.1
$49,303
$137,558
(23.2)$179,057
Earnings per share:
Basic$1.19
30.8
$0.91
$2.62
(19.6)$3.26
Diluted$1.18
31.1
$0.90
$2.59
(19.8)$3.23
(Dollar amounts in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2017Change20162017Change2016
Net sales$625,423
(7.0)%$672,641
$1,772,138
(7.1)%$1,906,699
Operating profit$117,465
15.7 %$101,522
$263,951
(18.4)%$323,667
Operating margin18.8%2.7 points
15.1%14.9%-2.5 points
17.0%
Total unit sales change(7.5)%(6.4)%
United States replacement market unit shipment changes:
Total light vehicle tires
Segment(10.4)%(10.5)%
USTMA members(1.7)%(0.9)%
Total Industry(1.4)%(0.7)%
(Dollar amounts in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2017Change20162017Change2016
Net sales$163,345
44.8 %$112,789
$456,680
34.4 %$339,693
Operating profit$591
(81.9)%$3,265
$3,518
(24.3)%$4,645
Operating margin0.4%-2.5 points
2.9%0.8%-0.6 points
1.4%
Total unit sales change31.3 %24.0 %
Parent company
8% unsecured notes due December 2019$173,578
7.625% unsecured notes due March 2027116,880
Capitalized leases and other7,853
298,311
Less: unamortized debt issuance costs763
297,548
Less: current maturities1,464
$296,084
changes to tariffs or trade agreements, or the imposition of new tariffs or trade restrictions, including changes related to tariffs on tires imported into the U.S. from China, as well as tariffs imposed on raw materials which the company uses;
changes in economic and business conditions in the world, including changes related to the United Kingdom's decision to withdraw from the European Union;
increased competitive activity including actions by larger competitors or lower-cost producers;
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 product liability claims, which could result in commitment of significant resources and time to defend and possible material damages against the Company or other unfavorable outcomes;
changes in pension expense and/or funding resulting from the company’s pension strategy, investment performance of the company’s pension plan assets and changes in discount rate or expected return on plan assets assumptions, or changes to related accounting regulations;
government regulatory and legislative initiatives including environmental, healthcare, and tax matters;
volatility in the capital and financial markets or changes to the credit markets and/or access to those markets;
a variety of factors, including market conditions, may affect the actual amount expended on stock repurchases; the company’s ability to consummate stock repurchases; changes in the company’s results of operations or financial conditions or strategic priorities may lead to a modification, suspension or cancellation of stock repurchases, which may occur at any time;
failure to implement information technologies or related systems, including failure by the Company to successfully implement ERP systems;
the failure to develop technologies, processes or products needed to support consumer demand;
changes in the company’s relationship with its joint-venture partners or suppliers, including any changes with respect to its former PCT joint venture’s production of Cooper-branded products;
Period (1)Total
Number of
Shares
Purchased
Average
Price
Paid per
Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
or Programs
Maximum Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans or
Programs
July 1, 2017 through July 31, 2017208,976
$36.92
208,976
$267,823
August 1, 2017 through August 31, 2017125,894
$35.63
125,894
$263,341
September 1, 2017 through September 30, 2017567,624
$34.23
567,624
$243,928
Total902,494
902,494
(1)On February 16, 2017, the Board of Directors increased the amount under and expanded the duration of the Company's existing share repurchase program (as amended, the "2017 Repurchase Program"). The 2017 Repurchase Program allows the Company to repurchase up to $300,000, excluding commissions, of the Company’s common stock through December 31, 2019. The approximately $95,634 remaining authorization under the Company's existing share repurchase program as of February 16, 2017 is included in the $300,000 maximum amount authorized by the 2017 Repurchase Program. No other changes were made. The 2017 Repurchase Program does not obligate the Company to acquire any specific number of shares and can be suspended or discontinued at any time without notice. Under the 2017 Repurchase Program, shares can be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

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