##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 OR
 o
    
    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
  DELAWARE
(State or other jurisdiction of 
incorporation or organization)
    
    34-4297750
(I.R.S. employer
identification no.)
 
 
  þ o
  o o
  Large
accelerated
filer oAccelerated
filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o  o þ




---



TABLE OF CONTENTS  Part I. FINANCIAL INFORMATIONItem 1. FINANCIAL STATEMENTSItem 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSItem 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKItem 4. CONTROLS AND PROCEDURESPart II. OTHER INFORMATIONItem 1. LEGAL PROCEEDINGSItem 1A. RISK FACTORSItem 6. EXHIBITSSIGNATURESEX-31.1EX-31.2EX-32    Table of Contents  
  
  
 December 31,2008
    
    
    June 30,(Note 1)
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    247,672
    
    
    $
    302,459Accounts receivable, less allowances
of $10,680 in 2008 and $11,333 in 2009
    
    
    318,109
    
    
    
    367,337Inventories at lower of cost or market:Finished goods
    
    
    247,187
    
    
    
    271,419Work in process
    
    
    28,234
    
    
    
    25,756Raw materials and supplies
    
    
    144,691
    
    
    
    79,905420,112
    
    
    
    377,080Other current assets
    
    
    58,290
    
    
    
    65,008Total current assets
    
    
    1,044,183
    
    
    
    1,111,884Property, plant and equipment:Land and land improvements
    
    
    33,731
    
    
    
    33,716Buildings
    
    
    319,025
    
    
    
    323,995Machinery and equipment
    
    
    1,627,896
    
    
    
    1,655,188Molds, cores and rings
    
    
    273,641
    
    
    
    244,3342,254,293
    
    
    
    2,257,233Less accumulated depreciation and amortization
    
    
    1,353,019
    
    
    
    1,370,684Net property, plant and equipment
    
    
    901,274
    
    
    
    886,549Intangibles, net of accumulated amortization of $24,096
in 2008 and $22,490 in 2009
    
    
    19,902
    
    
    
    19,221Restricted cash
    
    
    2,432
    
    
    
    2,310Other assets
    
    
    75,105
    
    
    
    65,985$
    2,042,896
    
    
    $
    2,085,949LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Notes payable
    
    $
    184,774
    
    
    $
    161,083Accounts payable
    
    
    248,637
    
    
    
    276,015Accrued liabilities
    
    
    123,771
    
    
    
    173,520Income taxes
    
    
    1,409
    
    
    
    2,342Liabilities of discontinued operations
    
    
    1,182
    
    
    
    35,568Current portion of long term debt
    
    
    147,761
    
    
    
    118,841Total current liabilities
    
    
    707,534
    
    
    
    767,369Long-term debt
    
    
    325,749
    
    
    
    325,469Postretirement benefits other than pensions
    
    
    236,025
    
    
    
    246,170Pension benefits
    
    
    268,773
    
    
    
    263,940Other long-term liabilities
    
    
    115,803
    
    
    
    123,583Long-term liabilities related to the sale of automotive operations
    
    
    8,046
    
    
    
    9,905Stockholders equity:Preferred stock, $1 par value; 5,000,000 shares
authorized; none issued
    
    
    
    
    
    
    Common stock, $1 par value; 300,000,000 shares
authorized; 86,322,514 shares issued in 2008 and in 2009
    
    
    86,323
    
    
    
    86,323Capital in excess of par value
    
    
    43,764
    
    
    
    45,407Retained earnings
    
    
    1,106,344
    
    
    
    1,059,691Cumulative other comprehensive loss
    
    
    (450,079
    )
    
    
    (442,217
    )786,352
    
    
    
    749,204Less: common shares in treasury at cost
(27,411,564 in 2008 and 27,357,908 in 2009)
    
    
    (492,236
    )
    
    
    (491,159
    )Total parent stockholders equity
    
    
    294,116
    
    
    
    258,045Noncontrolling shareholders interests in consolidated
subsidiaries
    
    
    86,850
    
    
    
    91,468Total stockholders equity
    
    
    380,966
    
    
    
    349,513$
    2,042,896
    
    
    $
    2,085,949
  2




---



##### Table of Contents



2008
    
    
    2009Net sales
    
    $
    772,907
    
    
    $
    631,729Cost of products sold
    
    
    743,078
    
    
    
    531,269Gross profit
    
    
    29,829
    
    
    
    100,460Selling, general and administrative
    
    
    45,246
    
    
    
    50,278Restructuring
    
    
    
    
    
    
    8,709Operating profit (loss)
    
    
    (15,417
    )
    
    
    41,473Interest expense
    
    
    (12,742
    )
    
    
    (12,097
    )Interest income
    
    
    3,669
    
    
    
    1,105Other  net
    
    
    2,201
    
    
    
    1,249Income (loss) from continuing operations
before income taxes
    
    
    (22,289
    )
    
    
    31,730Income tax expense (benefit)
    
    
    (677
    )
    
    
    967Income (loss) from continuing operations
    
    
    (21,612
    )
    
    
    30,763Loss from discontinued operations, net of income taxes
    
    
    (131
    )
    
    
    (37,085
    )Net (loss)
    
    
    (21,743
    )
    
    
    (6,322
    )Net income attributable to
noncontrolling shareholders interests
    
    
    488
    
    
    
    6,638Net income (loss) attributable to Cooper Tire &
Rubber Company
    
    $
    (22,231
    )
    
    $
    (12,960
    )Basic earnings per share:Income (loss) from continuing operations
attributable to Cooper Tire & Rubber Company
    
    $
    (0.38
    )
    
    $
    0.41Income (loss) from discontinued operations
    
    
    
    
    
    
    (0.63
    )Net income (loss) attributable to Cooper Tire &
Rubber Company
    
    $
    (0.38
    )
    
    $
    (0.22
    )Diluted earnings per share:Income (loss) from continuing operations
attributable to Cooper Tire & Rubber Company
    
    $
    (0.38
    )
    
    $
    0.40Income (loss) from discontinued operations
    
    
    
    
    
    
    (0.62
    )Net income (loss) attributable to Cooper Tire &
Rubber Company
    
    $
    (0.38
    )
    
    $
    (0.22
    )Weighted average number of shares outstanding (000s):Basic
    
    
    58,897
    
    
    
    58,958Diluted
    
    
    58,897
    
    
    
    59,803Dividends per share
    
    $
    0.105
    
    
    $
    0.105
  3




---



##### Table of Contents



2008
    
    
    2009Net sales
    
    $
    1,452,228
    
    
    $
    1,203,137Cost of products sold
    
    
    1,366,161
    
    
    
    1,052,408Gross profit
    
    
    86,067
    
    
    
    150,729Selling, general and administrative
    
    
    91,930
    
    
    
    95,384Restructuring
    
    
    
    
    
    
    23,061Settlement of retiree medical case
    
    
    
    
    
    
    7,050Operating profit (loss)
    
    
    (5,863
    )
    
    
    25,234Interest expense
    
    
    (24,220
    )
    
    
    (24,752
    )Interest income
    
    
    7,392
    
    
    
    2,480Debt extinguishment expense
    
    
    (583
    )
    
    
    Dividend from unconsolidated subsidiary
    
    
    1,943
    
    
    
    Other  net
    
    
    3,518
    
    
    
    2,072Income (loss) from continuing operations
before income taxes
    
    
    (17,813
    )
    
    
    5,034Income tax expense (benefit)
    
    
    371
    
    
    
    (2,806
    )Income (loss) from continuing operations
    
    
    (18,184
    )
    
    
    7,840Income (loss) from discontinued operations, net of income taxes
    
    
    213
    
    
    
    (37,449
    )Net income (loss)
    
    
    (17,971
    )
    
    
    (29,609
    )Net income (loss) attributable to
noncontrolling shareholders interests
    
    
    2,574
    
    
    
    4,618Net income (loss) attributable to Cooper Tire & Rubber Company
    
    $
    (20,545
    )
    
    $
    (34,227
    )Basic earnings per share:Income (loss) from continuing operations
attributable to Cooper Tire & Rubber Company
    
    $
    (0.35
    )
    
    $
    0.05Income (loss) from discontinued operations
    
    
    
    
    
    
    (0.64
    )Net income (loss) attributable to Cooper Tire & Rubber Company
    
    $
    (0.35
    )
    
    $
    (0.58
    )*Diluted earnings per share:Income (loss) from continuing operations
attributable to Cooper Tire & Rubber Company
    
    $
    (0.35
    )
    
    $
    0.05Income (loss) from discontinued operations
    
    
    
    
    
    
    (0.63
    )Net income (loss) attributable to Cooper Tire & Rubber Company
    
    $
    (0.35
    )
    
    $
    (0.57
    )*Weighted average number of shares outstanding (000s):Basic
    
    
    59,191
    
    
    
    58,950Diluted
    
    
    59,191
    
    
    
    59,610Dividends per share
    
    $
    0.210
    
    
    $
    0.210
 
 *
    
    Amounts do not add due to rounding  4




---



##### Table of Contents



2008
    
    
    2009Operating activities:Net income (loss)
    
    $
    (17,971
    )
    
    $
    (29,609
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) continuing operations:Loss
(income) from discontinued operations, net of income taxes
    
    
    (213
    )
    
    
    37,449Depreciation
    
    
    69,155
    
    
    
    61,346Amortization
    
    
    2,508
    
    
    
    1,113Deferred income taxes
    
    
    990
    
    
    
    (1,894
    )Stock based compensation
    
    
    2,645
    
    
    
    2,334Change in LIFO inventory reserve
    
    
    42,520
    
    
    
    (115,753
    )Amortization of unrecognized postretirement benefits
    
    
    6,538
    
    
    
    14,342Loss (gain) on sale of assets
    
    
    564
    
    
    
    (94
    )Debt extinguishment costs
    
    
    583
    
    
    
    Changes in operating assets and liabilities of
continuing operations:Accounts receivable
    
    
    (45,444
    )
    
    
    (42,937
    )Inventories
    
    
    (173,143
    )
    
    
    163,959Other current assets
    
    
    (14,314
    )
    
    
    (7,727
    )Accounts payable
    
    
    26,925
    
    
    
    25,195Accrued liabilities
    
    
    (501
    )
    
    
    47,180Other items
    
    
    (941
    )
    
    
    10,083Net cash provided by (used in) continuing operations
    
    
    (100,099
    )
    
    
    164,987Net cash used in discontinued operations
    
    
    (525
    )
    
    
    (1,204
    )Net cash provided by (used in) operating activities
    
    
    (100,624
    )
    
    
    163,783Investing activities:Property, plant and equipment
    
    
    (65,512
    )
    
    
    (42,306
    )Proceeds from the sale of available-for-sale debt securities
    
    
    49,765
    
    
    
    Investments in unconsolidated subsidiary
    
    
    
    
    
    
    (86
    )Acquisition of business, net of cash acquired
    
    
    (5,956
    )
    
    
    Proceeds from the sale of assets
    
    
    317
    
    
    
    758Net cash used in investing activities
    
    
    (21,386
    )
    
    
    (41,634
    )Financing activities:Issuance of (payments on) short-term debt
    
    
    67,725
    
    
    
    (20,862
    )Payments on long-term debt
    
    
    (14,000
    )
    
    
    (29,200
    )Premium paid on debt repurchases
    
    
    (543
    )
    
    
    Contributions of joint venture partner
    
    
    4,250
    
    
    
    Purchase of treasury shares
    
    
    (13,853
    )
    
    
    Payment of dividends
    
    
    (12,402
    )
    
    
    (12,381
    )Issuance of common shares and excess
tax benefits on options
    
    
    297
    
    
    
    13Net cash provided by (used in) financing activities
    
    
    31,474
    
    
    
    (62,430
    )Effects of exchange rate changes on cash of
continuing operations
    
    
    (3,095
    )
    
    
    (4,932
    )Changes in cash and cash equivalents
    
    
    (93,631
    )
    
    
    54,787Cash and cash equivalents at beginning of year
    
    
    345,947
    
    
    
    247,672Cash and cash equivalents at end of period
    
    $
    252,316
    
    
    $
    302,459
  5




---



##### Table of Contents



1.
    
    The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. There is a year-round demand for the
Companys passenger and truck replacement tires, but sales of passenger replacement tires are
generally strongest during the third and fourth quarters of the year. Winter tires are sold
principally during the months of June through November. Operating results for the three-month
and six-month periods ended June 30, 2009 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2009.The balance sheet at December 31, 2008 has been derived from the audited financial statements at
that date but does not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial statements.For further information, refer to the consolidated financial statements and footnotes thereto
included in the Companys Annual Report on Form 10-K for the year ended December 31, 2008.Principles of consolidation  The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries. Acquired businesses are included in the
consolidated financial statements from the dates of acquisition. All intercompany accounts and
transactions have been eliminated.The equity method of accounting is followed for investments in 20 percent to 50 percent owned
companies. The Companys investment in the Mexican tire manufacturing facility represents an
approximate 38 percent interest ownership interest.The cost method is followed in those situations where the Companys ownership is less than 20
percent and the Company does not have the ability to exercise significant influence over the
affiliate.The Company has entered into a joint venture with Kenda Tire Company to construct and operate a
tire manufacturing facility in China which was completed and began production in 2007. Until
May 2012, all of the tires produced by this joint venture are required to be exported and sold
by Cooper Tire & Rubber Company and its affiliates. The Company has also entered into a joint
venture with Nemet International to market and distribute Cooper, Pneustone and associated brand
tires in Mexico. At December 31, 2008, the Company has subordinated debt to the joint venture.
The Company has determined that each of these entities is a Variable Interest Entity (VIE) and
it is the primary beneficiary. As such, the Company has included their assets, liabilities and
operating results in its consolidated financial statements. The Company has recorded the
interest related to the joint venture partners ownership in noncontrolling shareholders
interests in consolidated subsidiaries. The following table summarizes the balance sheets of
these variable interest entities at December 31:
 6




---



##### Table of Contents



December 31,
    
    
    June 30,2008
    
    
    2009AssetsCash and cash equivalents
    
    $
    4,911
    
    
    $
    13,191Accounts receivable
    
    
    11,607
    
    
    
    10,088Inventories
    
    
    28,080
    
    
    
    17,892Prepaid expenses
    
    
    3,221
    
    
    
    2,370Total current assets
    
    
    47,819
    
    
    
    43,541Net property, plant and equipment
    
    
    134,639
    
    
    
    141,109Intangibles and other assets
    
    
    14,247
    
    
    
    11,306Total assets
    
    $
    196,705
    
    
    $
    195,956Liabilities and stockholders equityNotes payable
    
    $
    69,430
    
    
    $
    74,371Accounts payable
    
    
    8,478
    
    
    
    4,994Accrued liabilities
    
    
    120
    
    
    
    (81
    )Current portion of long-term debt
    
    
    11,428
    
    
    
    21,928Current liabilities
    
    
    89,456
    
    
    
    101,212Long-term debt
    
    
    10,500
    
    
    
    Stockholders equity
    
    
    96,749
    
    
    
    94,744Total liabilities and stockholders equity
    
    $
    196,705
    
    
    $
    195,956
 On January 1, 2009, the Company adopted Statement of Financial Accounting Standards (SFAS) No
160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No.
51. SFAS No. 160 changes the reporting of noncontrolling interests in the consolidated
statement of operations and the consolidated balance sheet. Certain amounts for the prior year
have been reclassified to conform to 2009 presentations. On the Consolidated Statements of
Operations, the 2009 caption Net income (loss) attributable to Cooper Tire & Rubber Company is
comparable to the caption Net income (loss) used in prior years.In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position on
FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS
107-1 and APB 28-1). This FSP requires that the fair value disclosures required by SFAS No. 107
Disclosures about Fair Value of Financial Instruments be included for interim reporting
periods. The Company adopted this new accounting standard on June 30, 2009. See Note 2 for
additional information.On June 30, 2009, the Company adopted SFAS No. 165, Subsequent Events. This SFAS defines two
types of subsequent events  recognized subsequent events and non-recognized subsequent events
and requires the Company to indicate the date through which it evaluates subsequent events.
The Company has evaluated subsequent events for recognition or disclosure through the time it
filed this Form 10-Q with the Securities and Exchange Commission on August 6, 2009.
 2.
    
    On January 1, 2009, the Company adopted the provisions of SFAS No. 161.Derivative financial instruments are utilized by the Company to reduce foreign currency exchange risks. The Company has
established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial
instrument activities. The Company does not enter into financial instruments for trading or speculative purposes.The Company uses foreign currency forward contracts as hedges of the fair value of certain non-U.S. dollar denominated
asset and liability positions, primarily accounts receivable and debt. Gains and losses resulting from the impact of
currency exchange rate movements on these forward contracts are recognized in the accompanying consolidated statements of
income in the period in which the exchange rates change and offset the foreign currency gains and losses on the underlying
exposure being hedged.
 7




---



##### Table of Contents



Foreign currency forward contracts are also used to hedge variable cash flows associated with forecasted sales and
purchases denominated in currencies that are not the functional currency of certain entities. The forward contracts have
maturities of less than twelve months pursuant to the Companys policies and hedging practices. These forward contracts
meet the criteria for and have been designated as cash flow hedges. Accordingly, the effective portion of the change in
fair value of unrealized gains and losses on such forward contracts (approximately $3,272 and $(1,840) as of December 31,
2008 and June 30, 2009, respectively) are recorded as a separate component of stockholders equity in the accompanying
consolidated balance sheets and reclassified into earnings as the hedged transaction affects earnings.The Company assesses hedge ineffectiveness quarterly using the hypothetical derivative methodology. In doing so, the
Company monitors the actual and forecasted foreign currency sales and purchases versus the amounts hedged to identify any
hedge ineffectiveness. The Company also performs regression analysis comparing the change in value of the hedging
contracts versus the underlying foreign currency sales and purchases, which confirms a high correlation and hedge
effectiveness. Any hedge ineffectiveness is recorded as an adjustment in the accompanying consolidated financial
statements of operations in the period in which the ineffectiveness occurs.The following table presents the location and amounts of derivative instrument fair values in the Statement of Financial
Position:
 December 31, 2008
    
    June 30, 2009(assets)/liabilitiesDerivatives designated as hedging
instruments under SFAS No. 133Foreign exchange contracts
    
    Accrued liabilities
    
    $
    (1,058
    )
    
    Accrued liabilities
    
    $
    1,649Derivatives not designated as hedging
instruments under SFAS No. 133Foreign exchange contracts
    
    Accrued liabilities
    
    $
    (194
    )
    
    Accrued liabilities
    
    $
    869
 The following table presents the location and amount of gains and losses on derivative
instruments in the consolidated statement of operations:
 Amount of Gain (Loss)
    
    Amount of Gain (Loss)Recognized in Other
    
    Reclassified from
    
    Amount of Gain (Loss)Comprehensive Income on
    
    Other Comprehensive Income
    
    Recognized in Income onDerivatives in
    
    Derivative (Effective Portion)
    
    into Income (Effective Portion)
    
    Derivative (Ineffective Portion)SFAS No. 133
    
    Three
    
    Six
    
    Three
    
    Six
    
    Three
    
    SixCash Flow
    
    Months
    
    Months
    
    Months
    
    Months
    
    Months
    
    MonthsHedging
    
    Ended
    
    Ended
    
    Ended
    
    Ended
    
    Ended
    
    EndedRelationships
    
    June 30, 2009
    
    June 30, 2009
    
    June 30, 2009
    
    June 30, 2009
    
    June 30, 2009
    
    June 30, 2009Foreign exchange contracts
    
    $
    (6,107
    )
    
    $
    (4,655
    )
    
    $
    862
    
    
    $
    (2,101
    )
    
    $
    (366
    )
    
    $
    (288
    )
 8




---



##### Table of Contents



Amount of Gain (Loss) RecognizedLocation of
    
    
    in Income on DerivativesDerivatives not
    
    Gain (Loss)
    
    
    Three
    
    
    SixDesignated as
    
    Recognized
    
    
    Months
    
    
    MonthsHedging Instruments
    
    in Income on
    
    
    Ended
    
    
    EndedUnder SFAS No. 133
    
    Derivatives
    
    
    June 30, 2009
    
    
    June 30, 2009Foreign exchange contracts
    
    Other  net
    
    $
    (1,384
    )
    
    $
    (929
    )Interest rate swap contracts
    
    Other  net
    
    
    (248
    )
    
    
    1,997$
    (1,632
    )
    
    $
    1,068
 For effective designated foreign exchange hedges, the Company reclassifies the gain (loss) from
Other Comprehensive Income into Net sales and the ineffective portion is recorded directly into
Other - net.In accordance with SFAS No. 157, the Company has categorized its financial instruments, based on
the priority of the inputs to the valuation technique, into the three-level fair value
hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active
markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable
inputs (Level 3). If the inputs used to measure the financial instruments fall within the
different levels of the hierarchy, the categorization is based on the lowest level input that is
significant to the fair value measurement of the instrument.Financial assets and liabilities recorded on the Consolidated Balance Sheet are categorized
based on the inputs to the valuation techniques as follows:Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices
for identical assets or liabilities in an active market that the Company has the ability to
access.Level 2. Financial assets and liabilities whose values are based on quoted prices in markets
that are not active or model inputs that are observable either directly or indirectly for
substantially the full term of the asset or liability. Level 2 inputs include the following:
 a.
    
    Quoted prices for similar assets or liabilities in active markets;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; andd.
    
    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.
 Level 3. Financial assets and liabilities whose values are based on prices or valuation
techniques that require inputs that are both unobservable and significant to the overall fair
value measurement. These inputs reflect managements own assumptions about the assumptions a
market participant would use in pricing the asset or liability.
 9




---



##### Table of Contents



The following table presents the Companys fair value hierarchy for those assets and liabilities
measured at fair value on a recurring basis as of June 30, 2009 and December 31, 2008:
 Quoted Prices
    
    SignificantTotal
    
    in Active Markets
    
    Other
    
    SignificantDerivative
    
    for Identical
    
    Observable
    
    Unobservable(Assets)
    
    Assets
    
    Inputs
    
    InputsForeign Exchange Contracts
    
    Liabilities
    
    Level (1)
    
    Level (2)
    
    Level (3)June 30, 2009
    
    $
    2,518
    
    
    
    
    
    
    $
    2,518December 31, 2008
    
    $
    (1,252
    )
    
    
    
    
    
    $
    (1,252
    )
 The fair value of the Companys debt is computed using discounted cash flow analyses based on
the Companys estimated current incremental borrowing rates. The carrying amounts and fair
values of the Companys financial instruments are as follows:
 December 31, 2008
    
    
    June 30, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueCash and cash equivalents
    
    $
    247,672
    
    
    $
    247,672
    
    
    $
    302,459
    
    
    $
    302,459Notes payable
    
    
    (184,774
    )
    
    
    (184,774
    )
    
    
    (161,083
    )
    
    
    (161,083
    )Current portion of long-term debt
    
    
    (147,761
    )
    
    
    (142,161
    )
    
    
    (118,841
    )
    
    
    (118,841
    )Long-term debt
    
    
    (325,749
    )
    
    
    (158,949
    )
    
    
    (325,469
    )
    
    
    (234,400
    )Derivative financial instruments
    
    
    (1,252
    )
    
    
    (1,252
    )
    
    
    (2,518
    )
    
    
    (2,518
    )
 The derivative financial instruments include fair value and cash flow hedges of foreign currency
exposures. Exchange rate fluctuations on the foreign currency-denominated intercompany loans
and obligations are offset by the change in values of the fair value foreign currency hedges.
The Company presently hedges exposures in the Euro, Canadian dollar, British pound sterling,
Swiss franc, Swedish kronar, Mexican peso and Chinese yuan generally for transactions expected
to occur within the next 12 months. The notional amount of these foreign currency derivative
instruments at December 31, 2008 and June 30, 2009 was $178,100 and $181,500, respectively. The
counterparties to each of these agreements are major commercial banks. Management believes that
the probability of losses related to credit risk on investments classified as cash and cash
equivalents and short-term investments is unlikely.
 10




---



##### Table of Contents



3.
    
    The following table details information on the Companys operating segments.
 Three months ended June 30
    
    
    Six months ended June 302008
    
    
    2009
    
    
    2008
    
    
    2009Revenues from external customers:North American Tire
    
    $
    547,513
    
    
    $
    427,333
    
    
    $
    1,045,185
    
    
    $
    866,650International Tire
    
    
    282,966
    
    
    
    257,182
    
    
    
    514,746
    
    
    
    423,394Eliminations
    
    
    (57,572
    )
    
    
    (52,786
    )
    
    
    (107,703
    )
    
    
    (86,907
    )Net sales
    
    $
    772,907
    
    
    $
    631,729
    
    
    $
    1,452,228
    
    
    $
    1,203,137Segment profit (loss):North American Tire
    
    $
    (21,906
    )
    
    $
    27,951
    
    
    $
    (13,762
    )
    
    $
    24,331International Tire
    
    
    5,944
    
    
    
    19,204
    
    
    
    12,853
    
    
    
    16,383Eliminations
    
    
    987
    
    
    
    (786
    )
    
    
    (282
    )
    
    
    (1,059
    )Unallocated corporate charges
    
    
    (442
    )
    
    
    (4,896
    )
    
    
    (4,672
    )
    
    
    (14,421
    )Operating profit (loss)
    
    
    (15,417
    )
    
    
    41,473
    
    
    
    (5,863
    )
    
    
    25,234Interest expense
    
    
    (12,742
    )
    
    
    (12,097
    )
    
    
    (24,220
    )
    
    
    (24,752
    )Interest income
    
    
    3,669
    
    
    
    1,105
    
    
    
    7,392
    
    
    
    2,480Debt extinguishment
    
    
    
    
    
    
    
    
    
    
    (583
    )
    
    
    Dividend from unconsolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    1,943
    
    
    
    Other  net
    
    
    2,201
    
    
    
    1,249
    
    
    
    3,518
    
    
    
    2,072Income
(loss) from continuing operations before income taxes
    
    $
    (22,289
    )
    
    $
    31,730
    
    
    $
    (17,813
    )
    
    $
    5,034
 4.
    
    At December 31, 2008, approximately 33 percent of the Companys inventories had been valued
under the LIFO method. With the decrease in inventory and lower raw material costs in the
Companys operations in China, approximately 62 percent of the Companys inventories at June
30, 2009 have been valued under the LIFO method. The remaining inventories have been valued
under the FIFO method or average cost method. All inventories are stated at the lower of cost
or market.
 Under the LIFO method, inventories have been reduced by approximately $221,854 and $106,101 at
December 31, 2008 and June 30, 2009, respectively, from current cost which would be reported
under the first-in, first-out method. Under the LIFO inventory method, the latest costs are
charged to cost of good sold. During the first six months of 2009, lower raw material costs
reduced the Companys LIFO reserve.
 5.
    
    The following table discloses the amount of stock based compensation expense for the
three-month period ended June 30, 2008 and 2009 relating to continuing operations:
 Stock Based CompensationThree months ended June 30
    
    
    Six months ended June 302008
    
    
    2009
    
    
    2008
    
    
    2009Stock options
    
    $
    87
    
    
    $
    81
    
    
    $
    178
    
    
    $
    167Restricted stock units
    
    
    471
    
    
    
    380
    
    
    
    1,086
    
    
    
    780Performance based units
    
    
    (183
    )
    
    
    1,035
    
    
    
    1,381
    
    
    
    1,387Total stock based compensation
    
    $
    375
    
    
    $
    1,496
    
    
    $
    2,645
    
    
    $
    2,334
 11




---



##### Table of Contents



Restricted stock units outstanding at January 1, 2009
    
    
    403,637Restricted stock units granted
    
    
    9,000Accrued dividend equivalents
    
    
    13,550Restricted stock units settled
    
    
    (39,852
    )Restricted stock units cancelled
    
    
    (1,527
    )Restricted stock units outstanding at June 30, 2009
    
    
    384,808
 Executives participating in the Companys Long-Term Incentive Plan for the plan year 2007 
2009 and 2008  2010, earn performance based units based on the Companys financial
performance. As part of the 2007  2009 plan, the units earned in 2007 and any units earned in
2009 will vest in February 2010. As part of the 2008  2010 plan, any units earned in 2009 or
2010 will vest in February 2011. No units were earned in 2008 for either plan.In April 2009, executives participating in the 2009  2011 Long-Term Incentive Plan were
granted 1,153,000 stock options which will vest one third each year through April 2012. This
plan does not contain any performance based criteria. The fair value of these options was
estimated at the date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions:
 2009Risk-free interest rate
    
    
    2.2
    %Dividend yield
    
    
    2.7
    %Expected volatility of the
Companys common stock
    
    
    0.570Expected life in years
    
    
    6.0
 The weighted-average fair value of options granted in April of 2009 was $2.08. The estimated
fair value of options is amortized to expense over the options vesting period.
 12




---



##### Table of Contents



6.
    
    The following tables disclose the amount of net periodic benefit costs for the three-month
and six-month periods ended June 30, 2008 and 2009 for the Companys defined benefit plans and
other postretirement benefits relating to continuing operations:
 Pension BenefitsThree months ended June 30
    
    
    Six months ended June 302008
    
    
    2009
    
    
    2008
    
    
    2009Components of net periodic
benefit cost:Service cost
    
    $
    5,527
    
    
    $
    3,139
    
    
    $
    11,051
    
    
    $
    6,526Interest cost
    
    
    16,279
    
    
    
    14,607
    
    
    
    32,548
    
    
    
    29,225Expected return on plan assets
    
    
    (20,519
    )
    
    
    (13,892
    )
    
    
    (41,027
    )
    
    
    (27,579
    )Amortization of prior service cost
    
    
    126
    
    
    
    923
    
    
    
    252
    
    
    
    (533
    )Recognized actuarial loss
    
    
    2,921
    
    
    
    5,950
    
    
    
    5,842
    
    
    
    14,875Net periodic benefit cost
    
    $
    4,334
    
    
    $
    10,727
    
    
    $
    8,666
    
    
    $
    22,514
 Other Postretirement BenefitsThree months ended June 30
    
    
    Six months ended June 302008
    
    
    2009
    
    
    2008
    
    
    2009Components of net periodic
benefit cost:Service cost
    
    $
    1,243
    
    
    $
    1,047
    
    
    $
    2,487
    
    
    $
    1,900Interest cost
    
    
    3,873
    
    
    
    3,694
    
    
    
    7,746
    
    
    
    7,400Amortization of prior service cost
    
    
    (77
    )
    
    
    (73
    )
    
    
    (154
    )
    
    
    (150
    )Recognized actuarial loss
    
    
    299
    
    
    
    132
    
    
    
    598
    
    
    
    150Net periodic benefit cost
    
    $
    5,338
    
    
    $
    4,800
    
    
    $
    10,677
    
    
    $
    9,300
 Recognized actuarial loss of pension costs in 2009 has been reduced by $2,813 and $1,513 for the
six and three-month periods, respectively, due to recognition of curtailment gains partially
offset by settlement losses attributable to the Albany, Georgia plant closure which have been
recorded within restructuring expense.On April 9, 2009, the Company announced pension benefits in the Spectrum (salaried employees)
Plan would be frozen effective July 1, 2009. The impact of the pension freeze is estimated to
be a reduction in pension expense for 2009 of $7,800 which will be reflected in the Companys
financial statements in future quarters. In the second quarter, the Company recognized a
pension curtailment gain of $10,100 related to the announced Spectrum Plan benefit freeze which
was credited to cost of good sold ($8,000) and corporate selling, general and administrative
expenses ($2,100) and is not reflected in the above table. Also effective July 1, 2009, the
Company has instituted an enhanced matching feature in the Spectrum 401(K) plan at an estimated
cost for 2009 of $2,800 which will also be reflected in future quarters.During 2009, the Company has minimum global pension funding requirements of between $35,000 and
$40,000.7.
    
    On an annual basis, disclosure of comprehensive income is incorporated into the Statement of
Shareholders Equity. This statement is not presented on a quarterly basis. Comprehensive
income includes net income and components of other comprehensive income, such as foreign currency translation adjustments,
unrealized gains or losses on certain marketable securities and derivative instruments and
unrecognized postretirement benefits plans.
 13




---



##### Table of Contents



The Companys comprehensive income (loss) is as follows:
 Three months ended June 30
    
    
    Six months ended June 302008
    
    
    2009
    
    
    2008
    
    
    2009Net loss attributable to
Cooper Tire & Rubber Company
    
    $
    (22,231
    )
    
    $
    (12,960
    )
    
    $
    (20,545
    )
    
    $
    (34,227
    )Other comprehensive income (loss):Currency translation adjustments
    
    
    4,237
    
    
    
    13,957
    
    
    
    15,173
    
    
    
    10,975Unrealized net gains (losses) on derivative
instruments and marketable securities,
net of tax
    
    
    3,351
    
    
    
    (7,980
    )
    
    
    (2,000
    )
    
    
    (4,613
    )Unrecognized postretirement benefit plans,
net of tax
    
    
    3,104
    
    
    
    1,146
    
    
    
    6,093
    
    
    
    1,500Comprehensive loss attributable to
Cooper Tire & Rubber Company
    
    
    (11,539
    )
    
    
    (5,837
    )
    
    
    (1,279
    )
    
    
    (26,365
    )Net and comprehensive income (loss) attributable
to noncontrolling shareholders interests
    
    
    488
    
    
    
    6,638
    
    
    
    2,574
    
    
    
    4,618Total comprehensive income (loss)
    
    $
    (11,051
    )
    
    $
    801
    
    
    $
    1,295
    
    
    $
    (21,747
    )
 8.
    
    During the second quarter of 2009, the Company recorded restructuring expenses associated
with three initiatives described below.
 Albany manufacturing facility closure
 The Company recorded $8,011 of restructuring expense associated with the planned closure of its
Albany, Georgia manufacturing facility. This initiative, announced December 17, 2008, will
result in a workforce reduction of approximately 1,400 people and charges of between $120,000
and $145,000 for restructuring expense and asset impairment.The Company recorded $6,169 of equipment relocation and other costs during the second quarter of
2009. The Company also recorded $1,842 of employee related costs. Included in employee related
costs are severance costs of $1,844 partially offset by the amortization of prior service
credits related to pension benefits.During the first six months of 2009, the Company has recorded $22,317 of restructuring expense
related to the Albany closure. The Company has recorded $11,021 of equipment relocation and
other costs during the first six months of 2009. The Company also recorded $11,296 of employee related costs.
Included in employee related costs are severance costs of $12,551 partially offset by the
amortization of prior service credit related to pension benefits. Through June 30, 2009, the
Company has recorded $98,301 of restructuring costs associated with this initiative.At January 1, 2009, the accrued severance balance was $429 and the severance costs recorded
during the first six months of 2009 increased the balance to $12,980. During the first six
months, the Company made $4,314 of severance payments resulting in an accrued severance balance
at June 30, 2009 of $8,666.
 Distribution center closures
 During 2009, the Company also recorded restructuring expenses associated with the closure of two
distribution centers. The closure of the Dayton, New Jersey distribution center impacted nine
people and had a total cost of $464, which was recorded in the first quarter.
 14




---



##### Table of Contents



In June 2009, the Company announced the planned closure of its Moraine, Ohio distribution
center. This initiative is expected to cost between $1,900 and $2,300. This amount includes
personnel related costs of $1,100 and equipment related costs between $800 and $1,200. This
initiative is expected to be completed by the end of the fourth quarter 2009 and will impact
approximately 60 people. During the second quarter, the Company recorded $294 of severance
costs associated with the Moraine closure and did not make any severance payments.
 European headcount reduction
 In Cooper Europe, a restructuring program to reduce headcount to align with production volume
requirements was initiated during the second quarter of 2009. This initiative will result in
the elimination of approximately 47 positions and is expected to be completed early in the third
quarter. The Company recorded $404 of severance cost related to this initiative during the
quarter and the balance in the accrual account at June 30, 2009 is $76.9.
    
    The Company provides for the estimated cost of product warranties at the time revenue is
recognized based primarily on historical return rates, estimates of the eligible tire
population and the value of tires to be replaced. The following table summarizes the activity
in the Companys product warranty liabilities:
 2008
    
    
    2009Reserve at January 1
    
    $
    16,510
    
    
    $
    18,244Additions
    
    
    10,764
    
    
    
    7,021Payments
    
    
    (8,707
    )
    
    
    (7,546
    )Reserve at June 30
    
    $
    18,567
    
    
    $
    17,719
 10.
    
    The Company is a defendant in various products liability claims brought in numerous
jurisdictions in which individuals seek damages resulting from automobile accidents allegedly
caused by defective tires manufactured by the Company. Each of the products liability claims
faced by the Company generally involve different types of tires, models and lines, different
circumstances surrounding the accident such as different applications, vehicles, speeds, road conditions, weather conditions, driver error, tire repair
and maintenance practices, service life conditions, as well as different jurisdictions and
different injuries. In addition, in many of the Companys products liability lawsuits the
plaintiff alleges that his or her harm was caused by one or more co-defendants who acted
independently of the Company. Accordingly, both the claims asserted and the resolutions of
those claims have an enormous amount of variability. The aggregate amount of damages asserted
at any point in time is not determinable since often times when claims are filed, the plaintiffs
do not specify the amount of damages. Even when there is an amount alleged, at times the amount
is wildly inflated and has no rational basis.The fact that the Company is a defendant in products liability lawsuits is not surprising given
the current litigation climate which is largely confined to the United States. However, the
fact that the Company is subject to claims does not indicate that there is a quality issue with
the Companys tires. The Company sells approximately 30 to 35 million passenger, light truck,
SUV, high performance, ultra high performance and radial medium truck tires per year in North
America. The Company estimates that approximately 300 million Cooper-produced tires  made up
of thousands of different specifications  are still on the road in North America. While tire
disablements do occur, it is the Companys and the tire industrys experience that the vast
majority of tire failures relate to service-related conditions which are entirely out of the
Companys control  such as failure to maintain proper tire pressure, improper maintenance,
road hazard and excessive speed.
 15




---



##### Table of Contents



The Companys exposure for each claim occurring prior to April 1, 2003 is limited by the
coverage provided by its excess liability insurance program. The program for that period
includes a relatively low per claim retention and a policy year aggregate retention limit on
claims arising from occurrences which took place during a particular policy year. Effective
April 1, 2003, the Company established a new excess liability insurance program. The new
program covers the Companys products liability claims occurring on or after April 1, 2003 and
is occurrence-based insurance coverage which includes an increased per claim retention limit,
increased policy limits and the establishment of a captive insurance company.The Company accrues costs for products liability at the time a loss is probable and the amount
of loss can be estimated. The Company believes the probability of loss can be established and
the amount of loss can be estimated only after certain minimum information is available,
including verification that Company-produced products were involved in the incident giving rise
to the claim, the condition of the product purported to be involved in the claim, the nature of
the incident giving rise to the claim and the extent of the purported injury or damages. In
cases where such information is known, each products liability claim is evaluated based on its
specific facts and circumstances. A judgment is then made to determine the requirement for
establishment or revision of an accrual for any potential liability. The liability often cannot
be determined with precision until the claim is resolved.Pursuant to applicable accounting rules, the Company accrues the minimum liability for each
known claim when the estimated outcome is a range of possible loss and no one amount within that
range is more likely than another. The Company uses a range of settlements because an average
settlement cost would not be meaningful since the products liability claims faced by the Company
are unique and widely variable. The cases involve different types of tires, models and lines,
different circumstances surrounding the accident such as different applications, vehicles,
speeds, road conditions, weather conditions, driver error, tire repair and maintenance
practices, service life conditions, as well as different jurisdictions and different injuries.
In addition, in many of the Companys products liability lawsuits the plaintiff alleges that his
or her harm was caused by one or more co-defendants who acted independently of the Company.
Accordingly, the claims asserted and the resolutions of those claims have an enormous amount of
variability. The costs have ranged from zero dollars to $12 million in one case with no
average that is meaningful. No specific accrual is made for individual unasserted claims or
for premature claims, asserted claims where the minimum information needed to evaluate the
probability of a liability is not yet known. However, an accrual for such claims based, in
part, on managements expectations for future litigation activity and the settled claims history
is maintained. Because of the speculative nature of litigation in the United States, the
Company does not believe a meaningful aggregate range of potential loss for asserted and
unasserted claims can be determined. The Companys experience has demonstrated that its
estimates have been reasonably accurate and, on average, cases are settled at amounts close to
the reserves established. However, it is possible an individual claim from time to time may
result in an aberration from the norm and could have a material impact.The Company determines its reserves using the number of incidents expected during a year.
During the second quarter of 2009, the Company increased its products liability reserve by
$14,101. The addition of another quarter of self-insured incidents accounted for $9,578 of this
increase. The Company revised its estimates of future settlements for unasserted and premature
claims, which increased the reserve by $1,788. Finally, amounts on existing reserves increased
by $2,735.During the first six months of 2009, the Company increased its products liability reserve by
$28,779. The addition of another six months of self-insured incidents accounted for $18,988 of
this increase. The Company revised its estimates of future settlements for unasserted and
premature claims, which increased the reserve by $1,788. Finally, amounts on existing reserves
increased by $8,003.The time frame for the payment of a products liability claim is too variable to be meaningful.
From the time a claim is filed to its ultimate disposition depends on the unique nature of the
case, how it is resolved  claim dismissed, negotiated settlement, trial verdict and appeals
process  and is highly dependent on jurisdiction, specific facts, the plaintiffs attorney,
the courts docket and other factors. Given that some claims may be resolved in weeks and others may take five years or more, it is impossible to predict with any
reasonable reliability the time frame over which the accrued amounts may be paid.
 16




---



##### Table of Contents



The Company paid $10,747 during the second quarter of 2009 to resolve cases and claims and has
paid $17,060 through the first six months of 2009. The Companys products liability reserve
balance at December 31, 2008 totaled $123,632 (current portion of $28,737) and the balance at
June 30, 2009 totaled $135,350 (current portion of $30,737).The products liability expense reported by the Company includes amortization of insurance
premium costs, adjustments to settlement reserves and legal costs incurred in defending claims
against the Company offset by recoveries of legal fees. Legal costs are expensed as incurred
and products liability insurance premiums are amortized over coverage periods. The Company is
entitled to reimbursement, under certain insurance contracts in place for periods ending prior
to April 1, 2003, of legal fees expensed in prior periods based on events occurring in those
periods. The Company records the reimbursements under such policies in the period the
conditions for reimbursement are met.For the three-month periods ended June 30, 2008 and 2009, products liability expenses totaled
$17,979 and $20,352, respectively, and include recoveries of legal fees of $0 and $515 in the
periods ended June 30, 2008 and 2009, respectively. For the six-month periods ended June 30,
2008 and 2009, products liability expenses totaled $45,825 and $40,920, respectively, and
include recoveries of legal fees of $4,168 and $1,941 in the periods ended June 30, 2008 and
2009, respectively. Policies applicable to claims occurring on April 1, 2003 and thereafter do
not provide for recovery of legal fees.11.
    
    For the quarter ended June 30, 2009, the Company recorded an income tax expense for
continuing operations of $967 which includes tax expense for discrete items of $1,098 relating
primarily to return to provision changes in estimates for the 2008 U.S. tax return. The
effective tax rate for the quarter and six month period ended June 30, 2009 for continuing
operations is -0.4 percent and -88.4 percent, respectively, exclusive of discrete items, using
forecasted jurisdictional annual effective rates. For comparable periods in 2008, the
effective tax rate for continuing operations, exclusive of discrete items, was 3.5 percent and
1.4 percent, respectively, using an aggregate worldwide forecasted rate. The change in the
tax rate, exclusive of discrete items, relates primarily to the improvement in earnings, a
specified liability loss carry back, and the mix of earnings or loss by jurisdiction as
compared to 2008.The Company maintains a valuation allowance pursuant to SFAS No. 109, Accounting for Income
Taxes, on its net U.S. and certain non-U.S. deferred tax asset positions. The valuation
allowance will be maintained as long as it is more likely than not that some portion of the
deferred tax assets will not be realized. Deferred tax assets and liabilities are determined
separately for each taxing jurisdiction in which the Company conducts its operations or
otherwise generates taxable income or losses. In the U.S., the Company has recorded significant
deferred tax assets, the largest of which relates to products liability, pension and other
postretirement benefit obligations. These deferred tax assets are partially offset by deferred
tax liabilities, the most significant of which relates to accelerated depreciation. Based upon
this assessment, the Company maintains a $225,520 valuation allowance for the portion of U.S.
deferred tax assets exceeding its U.S. deferred tax liabilities. In addition, the Company has
recorded valuation allowances of $7,749 for deferred tax assets associated with losses in
foreign jurisdictions.The Company maintains a FIN No. 48, Accounting for Uncertainty in Income Taxes liability for
unrecognized tax benefits for permanent and temporary book/tax differences for continuing
operations. At June 30, 2009, the Companys liability, exclusive of interest, totals
approximately $10,827. The Company accrued net interest income for the quarter and six month
period ended June 30, 2009, in the amount of $387 and $509 respectively, which has been
recorded as a discrete item in its tax provision. This includes interest income on anticipated
U.S. income tax refunds.At June 30, 2009, the Company has approximately $48,000 of U.S. cash tax refunds receivable.
The majority of these receivables are expected to be collected during 2009.
 17




---



##### Table of Contents



In 2003 the Company initiated bilateral Advance Pricing Agreement (APA) negotiations with the
Canadian and U.S. governments to change its intercompany transfer pricing process between a
formerly owned subsidiary, Cooper-Standard Automotive, Inc., and its Canadian affiliate. In the
second quarter, the governments executed mutual agreement letters under the tax treaty to
settle the APA for periods 2000-2004. Under terms of the 2004 sale agreement for the
subsidiary, the Company is responsible for all tax obligations related to its period of
ownership and is entitled to receive all tax refunds for those periods. The resulting cash
impact to the Company of the above settlement would consist of two parts, a refund of taxes paid
in Canada of approximately $69,000 and a tax obligation in the U.S. of approximately $35,000.
The net impact of these two payments would be a gain of about $34,000, net of previously
recognized amounts. The U.S. tax obligation has been revised by terms of the settlement and the
former subsidiary is obligated under the terms of the sale agreement to remit the refund to the
Company promptly upon receipt. Consequently, the Company recorded a net charge of $35,000 to
discontinued operations for its estimated U.S. tax obligation relating to the settlement.
During the week of July 26, 2009, the Company was advised that the Canadian affiliate received a
substantial portion of the anticipated refund. However, the funds were not remitted to the
Company promptly as required under the agreement. On August 3, 2009, Cooper-Standard Holdings
Inc., the company that acquired the former subsidiary, filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. Based upon these facts, the
Company does not believe the criteria for recognition of the refund receivable has been met and
will not record a receivable until the certainty of realization is assured. The Company will
pursue all options to recover the tax refunds owed to it under the sales agreement.The Company and its subsidiaries are subject to income taxes in the U.S. federal jurisdiction
and various state and foreign jurisdictions. With few exceptions, the Company is no longer
subject to U.S. federal, state and foreign tax examinations by tax authorities for years prior
to 2000.12.
    
    The Company and the United Steelworkers entered into a series of letter agreements beginning
in 1991 establishing maximum annual amounts that the Company would contribute for funding the
cost of health care coverage for certain union retirees who retired after specific dates.
Prior to January 1, 2004, the maximum annual amounts had never been implemented. On January
1, 2004, however, the Company implemented the existing letter agreements according to its
terms and began requiring these retirees and surviving spouses to make contributions for the
cost of their health care coverage.On April 18, 2006, a group of the Companys union retirees and surviving spouses filed a lawsuit
in the U.S. District Court for the Northern District of Ohio on behalf of a purported class
claiming that the Company was not entitled to impose anycontribution requirement pursuant to
the letter agreements and that Plaintiffs were promised lifetime benefits, at no cost, after
retirement under the terms of the union-Cooper negotiated Pension and Insurance Agreements in
effect at the time that they retired.On May 13, 2008, in the case of Cates, et al v. Cooper Tire & Rubber Company, the United States
District Court for the Northern District of Ohio entered an order holding that a series of
pension and insurance agreements negotiated by the Company and its various union locals over the
years conferred vested lifetime health care benefits upon certain Company hourly retirees. The
court further held that these benefits were not subject to the caps on the Companys annual
contributions for retiree health care benefits that the Company had negotiated with the union
locals. Subsequent to that order, the court granted the plaintiffs motion for class
certification. The Company has initiated the process of pursuing an appeal of the order to the
Sixth Circuit of Appeals, while simultaneously reviewing other means of satisfactorily resolving
the case through settlement discussions. As a result of the settlement discussions and in an
attempt to resolve the claims relating to health care benefits for all of the Companys hourly
union-represented retirees, a related lawsuit, Johnson, et al v. Cooper Tire & Rubber Company,
was filed on February 3, 2009, with the court on behalf of a different, smaller group of hourly
union-represented retirees. The second case has been stayed pending the parties settlement
discussions.
 18




---



##### Table of Contents



In April, 2009, the parties negotiated a tentative agreement intended to resolve all related
claims for these matters. The tentative agreement, which is subject to various approvals,
provides for 1) specified payments to the plaintiffs and attorney fees and 2) modification to
the Companys approach and costs of providing future health care to specified current retiree
groups which will result in an amendment to the Companys retiree medical plan.While the tentative agreement could be modified before it becomes effective and the related
cases are concluded, the Company believes it is probable that the related costs of resolving
these cases will be close to the amounts in the tentative agreement and, accordingly, has
recorded $7.1 million of expense during the first quarter relating to the specified payments and
attorney fees. The estimated present value of costs related to the plan amendment is expected to
be approximately $7.7 million which has been reflected as an increase in the accrual for Other
Post-employment Benefits with an offset to the Accumulated Other Comprehensive Income component
of Shareholders Equity and will be amortized as a charge to operations over the remaining life
expectancy of the affected plan participants beginning with the effective date of the changes.13.
    
    On July 3, 2009, the Company received notification from its noncontrolling shareholder in the
Cooper Chengshan entity of its intention to exercise a portion of its
put option after it receives related governmental approvals and
satisfies other conditions. If the put option is exercised, the  Company
has the obligation to purchase the 14 percent share for $17,920.14.
    
    Certain operating leases related to property and equipment used in the operations of
Cooper-Standard Automotive were guaranteed by the Company. These guarantees require the Company, in
the event Cooper-Standard Automotive fails to honor its commitments, to satisfy the terms of the
lease agreements. As part of the sale of the automotive segment, the Company is seeking releases of
those guarantees, but to date has been unable to secure releases from certain lessors. The most
significant of those leases is for a U. S. manufacturing facility with a remaining term of seven
years and total remaining payments of approximately $8,700. Other
leases cover two facilities in the
United Kingdom. These leases have remaining terms of four
years and remaining payments of approximately $2,600. The Company does not believe it is presently probable that it will be
called upon

to make these payments. Accordingly, no accrual for these guarantees has been recorded. If
information becomes known to the Company at a later date which indicates its performance under
these guarantees is probable, accruals for the obligations will be required.
 
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  19




---



##### Table of Contents



Consolidated Results of Operations
  Three months ended June 30
    
    
    Six months ended June 302008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change
    
    
    2009Revenues:North American Tire
    
    $
    547.5
    
    
    
    -22.0
    %
    
    $
    427.3
    
    
    $
    1,045.2
    
    
    
    -17.1
    %
    
    $
    866.7International Tire
    
    
    282.9
    
    
    
    -9.1
    %
    
    
    257.2
    
    
    
    514.7
    
    
    
    -17.7
    %
    
    
    423.4Eliminations
    
    
    (57.5
    )
    
    
    -8.2
    %
    
    
    (52.8
    )
    
    
    (107.7
    )
    
    
    -19.2
    %
    
    
    (87.0
    )Net sales
    
    $
    772.9
    
    
    
    -18.3
    %
    
    $
    631.7
    
    
    $
    1,452.2
    
    
    
    -17.2
    %
    
    $
    1,203.1Segment profit (loss):North American Tire
    
    $
    (21.9
    )
    
    
    n/m
    
    
    $
    28.0
    
    
    $
    (13.8
    )
    
    
    n/m
    
    
    $
    24.3International Tire
    
    
    5.9
    
    
    
    n/m
    
    
    
    19.2
    
    
    
    12.9
    
    
    
    27.1
    %
    
    
    16.4Eliminations
    
    
    1.0
    
    
    
    n/m
    
    
    
    (0.8
    )
    
    
    (0.3
    )
    
    
    n/m
    
    
    
    (1.1
    )Unallocated corporate charges
    
    
    (0.4
    )
    
    
    n/m
    
    
    
    (4.9
    )
    
    
    (4.7
    )
    
    
    n/m
    
    
    
    (14.4
    )Operating profit (loss)
    
    
    (15.4
    )
    
    
    n/m
    
    
    
    41.5
    
    
    
    (5.9
    )
    
    
    n/m
    
    
    
    25.2Interest expense
    
    
    (12.7
    )
    
    
    -4.7
    %
    
    
    (12.1
    )
    
    
    (24.2
    )
    
    
    2.5
    %
    
    
    (24.8
    )Interest income
    
    
    3.6
    
    
    
    -69.4
    %
    
    
    1.1
    
    
    
    7.4
    
    
    
    -66.2
    %
    
    
    2.5Debt extinguishment expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.6
    )
    
    
    -100.0
    %
    
    
    Dividend from unconsolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    -100.0
    %
    
    
    Other  net
    
    
    2.2
    
    
    
    -45.5
    %
    
    
    1.2
    
    
    
    3.6
    
    
    
    -41.7
    %
    
    
    2.1Income (loss) from continuing operations
before income taxes
    
    
    (22.3
    )
    
    
    
    
    
    
    31.7
    
    
    
    (17.8
    )
    
    
    
    
    
    
    5.0Income tax expense (benefit)
    
    
    (0.7
    )
    
    
    
    
    
    
    0.9
    
    
    
    0.4
    
    
    
    
    
    
    
    (2.8
    )Income (loss) from continuing operations
    
    
    (21.6
    )
    
    
    
    
    
    
    30.8
    
    
    
    (18.2
    )
    
    
    
    
    
    
    7.8Income (loss) from discontinued operations,
net of income taxes
    
    
    (0.1
    )
    
    
    
    
    
    
    (37.1
    )
    
    
    0.2
    
    
    
    
    
    
    
    (37.4
    )Noncontrolling shareholders interests
    
    
    (0.5
    )
    
    
    
    
    
    
    (6.6
    )
    
    
    (2.6
    )
    
    
    
    
    
    
    (4.6
    )Income (loss) from continuing operations
attributable to Cooper Tire & Rubber Company
    
    $
    (22.2
    )
    
    
    
    
    
    $
    (12.9
    )
    
    $
    (20.6
    )
    
    
    
    
    
    $
    (34.2
    )Basic earnings (loss) per share
    
    $
    (0.38
    )
    
    
    
    
    
    $
    (0.22
    )
    
    $
    (0.35
    )
    
    
    
    
    
    $
    (0.58
    )Diluted earnings (loss) per share
    
    $
    (0.38
    )
    
    
    
    
    
    $
    (0.22
    )
    
    $
    (0.35
    )
    
    
    
    
    
    $
    (0.57
    )
   20




---



##### Table of Contents



Cates
   21




---



##### Table of Contents



22




---



##### Table of Contents



North American Tire Operations Segment
 Three months ended June 30
    
    Six months ended June 30(Dollar amounts in millions)
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change
    
    2009Net sales
    
    $
    547.5
    
    
    
    -22.0
    %
    
    $
    427.3
    
    
    $
    1,045.2
    
    
    
    -17.1
    %
    
    $
    866.7Operating profit (loss)
    
    $
    (21.9
    )
    
    
    n/m
    
    
    $
    28.0
    
    
    $
    (13.8
    )
    
    
    n/m
    
    
    $
    24.3United States unit shipments changes:Passenger tiresSegment United
States shipments
    
    
    
    
    
    
    -16.3
    %
    
    
    
    
    
    
    
    
    
    
    -19.7
    %RMA members
    
    
    
    
    
    
    -10.7
    %
    
    
    
    
    
    
    
    
    
    
    -11.9
    %Total Industry
    
    
    
    
    
    
    -12.0
    %
    
    
    
    
    
    
    
    
    
    
    -12.5
    %Light truck tiresSegment United
States shipments
    
    
    
    
    
    
    -34.5
    %
    
    
    
    
    
    
    
    
    
    
    -30.7
    %RMA members
    
    
    
    
    
    
    -14.0
    %
    
    
    
    
    
    
    
    
    
    
    -17.9
    %Total Industry
    
    
    
    
    
    
    -17.1
    %
    
    
    
    
    
    
    
    
    
    
    -20.2
    %Total light vehicle tiresSegment United
States shipments
    
    
    
    
    
    
    -19.9
    %
    
    
    
    
    
    
    
    
    
    
    -21.8
    %RMA members
    
    
    
    
    
    
    -11.1
    %
    
    
    
    
    
    
    
    
    
    
    -12.7
    %Total Industry
    
    
    
    
    
    
    -12.6
    %
    
    
    
    
    
    
    
    
    
    
    -13.5
    %Total segment unit sales change
    
    
    
    
    
    
    -18.7
    %
    
    
    
    
    
    
    
    
    
    
    -19.1
    %
 Overview
  Sales
   23




---



##### Table of Contents



Operating Profit
  
  Segment Outlook
   24




---



##### Table of Contents



International Tire Operations Segment
 Three months ended June 30
    
    Six months ended June 30(Dollar amounts in millions)
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change
    
    2009Net sales
    
    $
    282.9
    
    
    
    -9.1
    %
    
    $
    257.2
    
    
    $
    514.7
    
    
    
    -17.7
    %
    
    $
    423.4Operating profit
    
    $
    5.9
    
    
    
    n/m
    
    
    $
    19.2
    
    
    $
    12.9
    
    
    
    27.1
    %
    
    $
    16.4Unit sales change
    
    
    
    
    
    
    28.1
    %
    
    
    
    
    
    
    
    
    
    
    23.8
    %
 Overview
  Sales
  25




---



##### Table of Contents



Operating Profit
 (-$1.7 million)
  Segment Outlook
     Outlook for Company
  26




---



##### Table of Contents



Liquidity and Capital Resources
 Generation and uses of cash 
      Available credit facilities 
  27




---



##### Table of Contents



Available cash and contractual commitments 
   Parent company7.75% unsecured notes due December 2009
    
    $
    96.98% unsecured notes due December 2019
    
    
    173.67.625% unsecured notes due March 2027
    
    
    116.9Capitalized leases and other
    
    
    5.1392.5Consolidated Subsidiaries3.693% to 5.58% unsecured notes due in 2009
    
    
    11.43.718% to 7.47% unsecured notes due in 2010
    
    
    14.95.4% to 7.56% unsecured notes due in 2011
    
    
    9.55.4% unsecured notes due in 2012
    
    
    16.051.8Total debt
    
    
    444.3Less current maturities
    
    
    118.8$
    325.5
 Contingencies
 Guarantees
  Litigation
   28




---



##### Table of Contents



Forward-Looking Statements
  
    
    changes in economic and business conditions in the world;
    
    the failure to achieve expected sales levels;
    
    consolidation among the Companys competitors and customers;
    
    technology advancements;
    
    the failure of the Companys suppliers to timely deliver products in accordance with
contract specifications;
    
    changes in interest and foreign exchange rates;
    
    changes in the Companys customer relationships, including loss of particular business for
competitive or other reasons;
    
    the impact of reductions in the insurance program covering the principal risks to the
Company, and other unanticipated events and conditions;
    
    volatility in raw material and energy prices, including those of steel, petroleum-based
products and natural gas and the unavailability of such raw materials or energy sources;
    
    the inability to obtain and maintain price increases to offset higher production or
material costs;
    
    increased competitive activity including actions by larger competitors or low-cost
producers;
    
    the inability to recover the costs to develop and test new products and processes;
    
    the risks associated with doing business outside of the United States;
    
    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 initiatives, including regulations under the TREAD Act;
    
    the impact of labor problems, including a strike brought against the Company or against one
or more of its large customers or suppliers;
    
    litigation brought against the Company including products liability;
    
    an adverse change in the Companys credit ratings, which could increase its borrowing costs
and/or hamper its access to the credit markets;
    
    changes to the credit markets and/or access to those markets;
    
    inaccurate assumptions used in developing the Companys strategic plan or the inability or
failure to successfully implement the Companys strategic plan including closure of the
Albany, Georgia facility;
    
    inability to adequately protect the Companys intellectual property rights;
 29




---



##### Table of Contents




    
    failure to successfully integrate acquisitions into operations or their related financings
may impact liquidity and capital resources;
    
    inability to use deferred tax assets
    
    recently proposed changes on tariffs for certain tires imported into the United States from
China, and;
    
    changes in the Companys relationship with joint venture partners.
    
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
   
 Part II. OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  Cates, et al Johnson, et al
 30




---



##### Table of Contents



Item 1A. RISK FACTORS
  The Company is facing heightened risks due to the current business environment.
    Pricing volatility for raw materials could result in increased costs and may affect the Companys
profitability.
   If the price of natural gas or other energy sources increases, the Companys operating expenses
could increase significantly.
   31




---



##### Table of Contents



The Companys industry is highly competitive, and it may not be able to compete effectively with
low-cost producers and larger competitors.
  The Company may be unable to recover new product and process development and testing costs, which
could increase the cost of operating its business.
  The Company conducts its manufacturing, sales and distribution operations on a worldwide basis and
is subject to risks associated with doing business outside the United States.
  The Companys results could be impacted by the recently filed petition requesting the United States
government take action against tires imported from China.
  32




---



##### Table of Contents



The Companys expenditures for pension and other postretirement obligations could be materially
higher than it has predicted if its underlying assumptions prove to be incorrect.
        any
 Cates, et al v. Cooper Tire & Rubber Company
 33




---



##### Table of Contents



Johnson, et al v. Cooper Tire & Rubber Company
     Compliance with the TREAD Act and similar regulatory initiatives could increase the cost of
operating the Companys business.
    Any interruption in the Companys skilled workforce could impair its operations and harm its
earnings and results of operations .
  34




---



##### Table of Contents



The Company has a risk of exposure to products liability claims which, if successful, could have a
negative impact on its financial position, cash flows and results of operations.
    The Company has a risk due to the volatility of the capital and financial markets.
    If assumptions used in developing the Companys strategic plan are inaccurate or the Company is
unable to execute its strategic plan effectively, its profitability and financial position could
decline.
  
 35




---



##### Table of Contents



The Company may not be able to protect its intellectual property rights adequately.
  The Company may not be successful in integrating acquisitions into its operations, which could harm
its results of operations and financial condition.
  
    
    the possible inability to integrate an acquired business into its operations;
    
    increased intangible asset amortization;
    
    diversion of managements attention;
    
    loss of key management personnel;
    
    unanticipated problems or liabilities; and
    
    increased labor and regulatory compliance costs of acquired businesses.
  Acquisitions and their related financings may adversely affect the Companys liquidity and capital
resources.
  36




---



##### Table of Contents



The Company is required to comply with environmental laws and regulations that cause it to incur
significant costs.
  A portion of the Companys business is seasonal, which may affect its period-to-period results .
  The realizability of deferred tax assets may affect the Companys profitability and cash flows.
  The impact of new accounting standards on determining pension and other postretirement benefit
plans expense may have a negative impact on the Companys results of operations.
   37




---



##### Table of Contents



There are risks associated with the Companys global strategy of using joint ventures and partially
owned subsidiaries.
     
 Item 6. EXHIBITS
  (31.1)
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(31.2)
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(32)
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 38




---



##### Table of Contents



COOPER TIRE & RUBBER COMPANY/s/ P. G. WeaverP. G. WeaverVice President and Chief
Financial Officer
(Principal Financial Officer)/s/ R. W. HuberR. W. HuberDirector of External Reporting
(Principal Accounting Officer) 
 39