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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, 2010
 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 o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
  o þ




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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 1A. RISK FACTORSItem 6. EXHIBITSSIGNATURESEX-31.1EX-31.2EX-32    Table of Contents  
  
  
 December 31,
    
    
    June 30,2009
    
    
    2010(Note 1)
    
    
    (Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    426,981
    
    
    $
    379,082Accounts receivable, less allowances of $10,928 in 2009 and $11,089
in 2010
    
    
    367,023
    
    
    
    459,177Inventories at lower of cost or market:Finished goods
    
    
    188,323
    
    
    
    238,820Work in process
    
    
    22,090
    
    
    
    27,282Raw materials and supplies
    
    
    88,022
    
    
    
    121,248298,435
    
    
    
    387,350Other current assets
    
    
    39,392
    
    
    
    51,761Total current assets
    
    
    1,131,831
    
    
    
    1,277,370Property, plant and equipment:Land and land improvements
    
    
    33,321
    
    
    
    33,385Buildings
    
    
    320,021
    
    
    
    319,287Machinery and equipment
    
    
    1,587,306
    
    
    
    1,604,161Molds, cores and rings
    
    
    246,395
    
    
    
    250,6702,187,043
    
    
    
    2,207,503Less accumulated depreciation and amortization
    
    
    1,336,072
    
    
    
    1,371,821Net property, plant and equipment
    
    
    850,971
    
    
    
    835,682Intangibles, net of accumulated amortization of $23,165
in 2009 and $23,813 in 2010
    
    
    18,546
    
    
    
    17,898Restricted cash
    
    
    2,219
    
    
    
    2,261Other assets
    
    
    96,773
    
    
    
    93,291Total assets (1)
    
    $
    2,100,340
    
    
    $
    2,226,502LIABILITIES AND EQUITYCurrent liabilities:Notes payable
    
    $
    156,719
    
    
    $
    155,891Accounts payable
    
    
    300,448
    
    
    
    388,023Accrued liabilities
    
    
    158,643
    
    
    
    139,875Income taxes
    
    
    3,955
    
    
    
    4,725Liabilities of discontinued operations
    
    
    1,061
    
    
    
    Current portion of long term debt
    
    
    15,515
    
    
    
    5,019Total current liabilities
    
    
    636,341
    
    
    
    693,533Long-term debt
    
    
    330,971
    
    
    
    326,853Postretirement benefits other than pensions
    
    
    244,905
    
    
    
    238,533Pension benefits
    
    
    272,050
    
    
    
    259,469Other long-term liabilities
    
    
    145,978
    
    
    
    177,913Long-term liabilities related to the sale of automotive operations
    
    
    6,043
    
    
    
    Redeemable noncontrolling shareholders interests
    
    
    83,528
    
    
    
    60,344Equity: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 issued in 2009 and in 2010
    
    
    87,850
    
    
    
    87,850Capital in excess of par value
    
    
    70,645
    
    
    
    57,567Retained earnings
    
    
    1,133,133
    
    
    
    1,175,334Cumulative other comprehensive loss
    
    
    (470,272
    )
    
    
    (434,400
    )821,356
    
    
    
    886,351Less: common shares in treasury at cost
(27,327,646 in 2009 and 26,491,869 in 2010)
    
    
    (490,548
    )
    
    
    (473,561
    )Total parent stockholders equity
    
    
    330,808
    
    
    
    412,790Noncontrolling shareholders interests in consolidated subsidiaries
    
    
    49,716
    
    
    
    57,067Total equity
    
    
    380,524
    
    
    
    469,857Total liabilities and equity(1)
    
    $
    2,100,340
    
    
    $
    2,226,502
 
 (1)
    
    Assets of consolidated variable interest entities (VIEs) were $204,995 and $206,614 at
December 31, 2009 and March 31, 2010, respectively. The assets (principally Property, plant
and equipment) of the VIEs can only be used to settle oblitgations of those VIEs. Liabilities
(principally Notes payable) of consolidated VIEs were $105,806 and $92,421 at December 31, 2009
and March 31, 2010, respectively and represent claims against the specific assets of the VIEs.  2




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##### Table of Contents



2009
    
    
    2010Net sales
    
    $
    631,729
    
    
    $
    803,959Cost of products sold
    
    
    531,269
    
    
    
    708,577Gross profit
    
    
    100,460
    
    
    
    95,382Selling, general and administrative
    
    
    50,278
    
    
    
    54,274Restructuring
    
    
    8,709
    
    
    
    7,426Operating profit
    
    
    41,473
    
    
    
    33,682Interest expense
    
    
    12,097
    
    
    
    9,149Interest income
    
    
    (1,105
    )
    
    
    (771
    )Other income
    
    
    (1,249
    )
    
    
    (988
    )Income from continuing operations
before income taxes
    
    
    31,730
    
    
    
    26,292Income tax expense
    
    
    967
    
    
    
    1,247Income from continuing operations
    
    
    30,763
    
    
    
    25,045Income (loss) from discontinued operations, net of income taxes
    
    
    (37,085
    )
    
    
    25,126Net income (loss)
    
    
    (6,322
    )
    
    
    50,171Net income attributable to noncontrolling shareholders interests
    
    
    6,638
    
    
    
    6,094Net income (loss) attributable to Cooper Tire & Rubber Company
    
    $
    (12,960
    )
    
    $
    44,077Basic earnings per share:Income from continuing operations available to
Cooper Tire & Rubber Company common stockholders
    
    $
    0.52

1
    
    $
    0.31Income (loss) from discontinued operations
    
    
    (0.63
    )
    
    
    0.41Net income (loss) available to
Cooper Tire & Rubber Company common stockholders
    
    $
    (0.11)
1
    
    $
    0.72Diluted earnings per share:Income from continuing operations available to
Cooper Tire & Rubber Company common stockholders
    
    $
    0.51
1
    
    $
    0.30Income (loss) from discontinued operations
    
    
    (0.62
    )
    
    
    0.40Net income (loss) available to
Cooper Tire & Rubber Company common stockholders
    
    $
    (0.11)
1
    
    $
    0.70Dividends per share
    
    $
    0.105
    
    
    $
    0.105
 
 1

    
    Amounts have been restated , see Footnote 1 for additional information.  3




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2009
    
    
    2010Net sales
    
    $
    1,203,137
    
    
    $
    1,558,402Cost of products sold
    
    
    1,052,408
    
    
    
    1,377,848Gross profit
    
    
    150,729
    
    
    
    180,554Selling, general and administrative
    
    
    95,384
    
    
    
    98,879Restructuring
    
    
    23,061
    
    
    
    15,038Settlement of retiree medical case
    
    
    7,050
    
    
    
    Operating profit
    
    
    25,234
    
    
    
    66,637Interest expense
    
    
    24,752
    
    
    
    17,879Interest income
    
    
    (2,480
    )
    
    
    (1,984
    )Other income
    
    
    (2,072
    )
    
    
    (1,225
    )Income from continuing operations
before income taxes
    
    
    5,034
    
    
    
    51,967Income tax expense (benefit)
    
    
    (2,806
    )
    
    
    8,990Income from continuing operations
    
    
    7,840
    
    
    
    42,977Income (loss) from discontinued operations, net of income taxes
    
    
    (37,449
    )
    
    
    24,366Net income (loss)
    
    
    (29,609
    )
    
    
    67,343Net income attributable to noncontrolling shareholders interests
    
    
    4,618
    
    
    
    11,690Net income (loss) attributable to Cooper Tire & Rubber Company
    
    $
    (34,227
    )
    
    $
    55,653Basic earnings per share:Income from continuing operations available to
Cooper Tire & Rubber Company common stockholders
    
    $
    0.15
1
    
    $
    0.51Income (loss) from discontinued operations
    
    
    (0.64
    )
    
    
    0.40Net income (loss) available to
Cooper Tire & Rubber Company common stockholders
    
    $
    (0.49)
1
    
    $
    0.91Diluted earnings per share:Income from continuing operations available to
Cooper Tire & Rubber Company common stockholders
    
    $
    0.14
1
    
    $
    0.50Income (loss) from discontinued operations
    
    
    (0.63
    )
    
    
    0.39Net income (loss) available to
Cooper Tire & Rubber Company common stockholders
    
    $
    (0.48)
1, 2
    
    $
    0.89Dividends per share
    
    $
    0.210
    
    
    $
    0.210
 
 1

    
    Amounts have been restated, see Footnote 1 for additional information.2
    
    Amounts do not add due to rounding.  4




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2009
    
    
    2010Operating activities:Net income (loss)
    
    $
    (29,609
    )
    
    $
    67,343Adjustments to reconcile net income (loss) to net cash
provided by (used in) continuing operations:Loss (income) from discontinued operations, net of income taxes
    
    
    37,449
    
    
    
    (24,366
    )Depreciation
    
    
    61,346
    
    
    
    58,991Amortization
    
    
    1,113
    
    
    
    997Deferred income taxes
    
    
    (1,894
    )
    
    
    (551
    )Stock based compensation
    
    
    2,334
    
    
    
    3,532Change in LIFO inventory reserve
    
    
    (115,753
    )
    
    
    46,627Amortization of unrecognized postretirement benefits
    
    
    14,342
    
    
    
    16,505Loss (gain) on sale of assets
    
    
    (94
    )
    
    
    209Changes in operating assets and liabilities of
continuing operations:Accounts receivable
    
    
    (42,937
    )
    
    
    (108,959
    )Inventories
    
    
    163,959
    
    
    
    (137,258
    )Other current assets
    
    
    (7,727
    )
    
    
    (3,662
    )Accounts payable
    
    
    25,195
    
    
    
    87,683Accrued liabilities
    
    
    47,180
    
    
    
    (1,919
    )Other items
    
    
    10,083
    
    
    
    24,081Net cash provided by continuing operations
    
    
    164,987
    
    
    
    29,253Net cash provided by (used in) discontinued operations
    
    
    (1,204
    )
    
    
    17,262Net cash provided by operating activities
    
    
    163,783
    
    
    
    46,515Investing activities:Property, plant and equipment
    
    
    (42,306
    )
    
    
    (45,048
    )Investments in unconsolidated subsidiary
    
    
    (86
    )
    
    
    Proceeds from the sale of assets
    
    
    758
    
    
    
    292Net cash used in investing activities
    
    
    (41,634
    )
    
    
    (44,756
    )Financing activities:Issuance of (payments on) short-term debt
    
    
    (20,862
    )
    
    
    (4,776
    )Payments on long-term debt
    
    
    (29,200
    )
    
    
    (10,600
    )Contributions of joint venture partner
    
    
    
    
    
    
    5,250Acquisition of noncontrolling shareholder interest
    
    
    
    
    
    
    (17,920
    )Payment of dividends to noncontrolling shareholders
    
    
    
    
    
    
    (11,637
    )Payment of dividends
    
    
    (12,381
    )
    
    
    (12,856
    )Issuance of common shares and excess
tax benefits on options
    
    
    13
    
    
    
    3,640Net cash used in financing activities
    
    
    (62,430
    )
    
    
    (48,899
    )Effects of exchange rate changes on cash of
continuing operations
    
    
    (4,932
    )
    
    
    (759
    )Changes in cash and cash equivalents
    
    
    54,787
    
    
    
    (47,899
    )Cash and cash equivalents at beginning of year
    
    
    247,672
    
    
    
    426,981Cash and cash equivalents at end of period
    
    $
    302,459
    
    
    $
    379,082
  5




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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, 2010, are not necessarily indicative of the results that
may be expected for the year ended December 31, 2010.On August 5, 2010, the Company filed an amendment to its Annual Report on Form 10-K (Form
10-K/A) for the fiscal year ended December 31, 2009, which was filed with the Securities and
Exchange Commission (SEC) on March 2, 2010 (the Original Filing). The Company filed this Form
10-K/A to reflect restatements of its consolidated balance sheets at December 31, 2009 and
December 31, 2008, and its consolidated statements of operations and equity for the fiscal years
ended December 31, 2009, December 31, 2008 and December 31, 2007, and the related notes thereto,
as a result of a review of the Companys accounting for its noncontrolling shareholders
interests. The balance sheet at December 31, 2009 included herein has been derived from the
audited restated 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.The restatement relates, in part, to the Companys classification of the noncontrolling
shareholders interests in Cooper Chengshan. Historically, the Company classified the Cooper
Chengshan noncontrolling shareholders interests as permanent equity. After consideration of the
applicable financial accounting guidance and evaluation of the related agreements,
classification of the noncontrolling interest as redeemable noncontrolling shareholders
interest within mezzanine equity was deemed appropriate. Further, the restatement reflects the
reclassification of a portion of the currency translation adjustment recorded in the Companys
comprehensive income (loss) which should have been allocated to comprehensive income
attributable to noncontrolling shareholders interest in consolidated subsidiaries. The
reclassification of the currency translation adjustment also impacted the related equity
accounts.In connection with the investment in Cooper Chengshan, beginning January 1, 2009 and continuing
through December 31, 2011, the noncontrolling shareholders have the option, which is embedded in
the noncontrolling interest, to require the Company to purchase the remaining 49 percent
noncontrolling share at the greater of a minimum price of $62,700 or a formula price that varies
based on operating results of the entity. The combination of a noncontrolling interest and a
put option resulted in a redeemable noncontrolling shareholder interest. The put option is not
separated from the shares as an embedded derivative because the
underlying shares are not readily convertible into cash.The noncontrolling interest is redeemable at other than fair value as the put value is
determined based on a specified formula as described above. The Company records the
noncontrolling shareholders interests in Cooper Chengshan at the greater of 1) the initial
carrying amount, increased or decreased for the noncontrolling shareholders share of net income
or loss and its share of other comprehensive income or loss and dividends (carrying amount) or
2) the value of the put option which is determined based on the greater of the minimum amount or
the formula derived amount. Prior to exercisability of the put option on January 1, 2009, the
noncontrolling shareholders interest has been recorded at the greater of 1) the carrying amount
or 2) the cumulative amount required to accrete the initial carrying amount to the redemption
value using the effective interest method which resulted in the reversal of accretion of $6,504
and $5,394 during the quarter and six month period ended June 30, 2010, respectively, with an
offset to Retained earnings. According to
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authoritative accounting guidance, the redeemable noncontrolling shareholders interests are
classified outside of permanent equity, as a mezzanine item, on the Companys Consolidated
Balance Sheets.
 According to authoritative accounting guidance for redeemable noncontrolling shareholders
interests, to the extent the noncontrolling shareholders have a contractual right to receive an
amount upon exercise of a put option that is other than fair value, and such amount is greater
than carrying value, then the noncontrolling shareholder has, in substance, received a dividend
distribution that is different than other common stockholders. Therefore accretion adjustments
to the carrying value of noncontrolling shareholders interests to reflect the put option amount
should also be reflected in the computation of earnings per share available to the Companys
common stockholders. The tables below present the impact of these adjustments on the Companys
earnings per share, selected components of the Condensed Consolidated Balance Sheets and the
Companys comprehensive income (loss):
 Three months ended June 30, 2009
    
    
    Six months ended June 30, 2009As Originally
    
    
    
    
    
    
    As OriginallyReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedBasic earnings per share:Income from continuing operations available to
Cooper Tire & Rubber Company common stockholders
    
    $
    0.41
    
    
    $
    0.52
    
    
    $
    0.05
    
    
    $
    0.15Loss from discontinued operations
    
    
    (0.63
    )
    
    
    (0.63
    )
    
    
    (0.64
    )
    
    
    (0.64
    )Net loss available to
Cooper Tire & Rubber Company common stockholders
    
    $
    (0.22
    )
    
    $
    (0.11
    )
    
    $
    (0.58)
    *
    
    $
    (0.49
    )Diluted earnings per share:Income from continuing operations available to
Cooper Tire & Rubber Company common stockholders
    
    $
    0.40
    
    
    $
    0.51
    
    
    $
    0.05
    
    
    $
    0.14Loss from discontinued operations
    
    
    (0.62
    )
    
    
    (0.62
    )
    
    
    (0.63
    )
    
    
    (0.63
    )Net loss available to
Cooper Tire & Rubber Company common stockholders
    
    $
    (0.22
    )
    
    $
    (0.11
    )
    
    $
    (0.57)
    *
    
    $
    (0.48)
    *
 
 *
    
    Amounts do not add due to rounding Three months ended June 30, 2009
    
    
    Six months ended June 30, 2009As Originally
    
    
    
    
    
    
    As OriginallyReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedNet loss attributable to
Cooper Tire & Rubber Company
    
    $
    (12,960
    )
    
    $
    (12,960
    )
    
    $
    (34,227
    )
    
    $
    (34,227
    )Other comprehensive income (loss):Currency translation adjustments
    
    
    13,957
    
    
    
    14,244
    
    
    
    10,975
    
    
    
    11,161Unrealized net gains (losses) on
derivative
instruments and marketable securities,
net of tax
    
    
    (7,980
    )
    
    
    (7,980
    )
    
    
    (4,613
    )
    
    
    (4,613
    )Unrecognized postretirement benefit
plans,
net of tax
    
    
    1,146
    
    
    
    1,146
    
    
    
    1,500
    
    
    
    1,500Comprehensive
loss attributable to
Cooper Tire & Rubber Company
    
    
    (5,837
    )
    
    
    (5,550
    )
    
    
    (26,365
    )
    
    
    (26,179
    )Net income attributable to
noncontrolling shareholders interests
    
    
    6,638
    
    
    
    6,638
    
    
    
    4,618
    
    
    
    4,618Other comprehensive income (loss):Currency translation adjustments
    
    
    
    
    
    
    (287
    )
    
    
    
    
    
    
    (186
    )Comprehensive income attributable to
noncontrolling shareholders interests
    
    
    6,638
    
    
    
    6,351
    
    
    
    4,618
    
    
    
    4,432Total comprehensive income (loss)
    
    $
    801
    
    
    $
    801
    
    
    $
    (21,747
    )
    
    $
    (21,747
    )
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The consolidated financial statements include the accounts of the Company, its majority-owned
(based on voting interests) subsidiaries and variable-interest entities for which the Company is
the primary beneficiary. Acquired businesses are included in the consolidated financial
statements from the dates of acquisition. The Company consolidates certain joint ventures in
which it has a variable interest based on power to direct the activities and significant
participation in expected returns of the joint venture. On January 1, 2010, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 167, Amendments to FASB Interpretation
No. 46(R). The requirements of SFAS No. 167 have been incorporated into Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) 810, Consolidation. SFAS
No. 167 changes the consolidation guidance for variable interest entities and the adoption of
this standard did not have a material impact on the Companys consolidated financial statements.
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 that are not otherwise consolidated based on variable interests. The Companys
investment in the Mexican tire manufacturing facility represents an approximate 38 percent
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 entered into a joint venture with Kenda Tire Company to construct and operate a tire
manufacturing facility in the Peoples Republic of China (PRC) which began production in 2007.
Until May 2012, all of the tires produced by this joint venture are required to be exported and
sold to Cooper Tire & Rubber Company and its affiliates at a
price that provides an acceptable return to the joint venture. Due to this requirement, the Company
has the power to direct the manufacturing operations of the joint venture to produce the types
of tires required by the Company to meet its global demands. The Company has determined it is
the primary beneficiary of this joint venture because of the operational control and the fact it
currently receives all of the tires produced by this manufacturing operation.The Company has also entered into a joint venture with Nemet International to market and
distribute Cooper, Pneustone and associated brand tires in Mexico. The Company has determined
it has the power to control the purchasing and marketing of tires for this joint venture. The
Company has also provided additional financial support to this joint venture in order to allow
it to finance its business activities. The joint venture partner has not provided such
additional support. The Company has determined it is the primary beneficiary of this joint
venture due to its ability to control the primary economic activity.Since the Company has determined that each of these entities is a Variable Interest Entity
(VIE) and it is the primary beneficiary, it has included their assets, liabilities and
operating results in its consolidated financial statements. Assets recognized s a result of
consolidating these VIEs do not represent additional assets that could be used to satisfy
claims against the Companys general assets. Conversely, liabilities recognized as a result
of consolidating these VIEs do not represent additional claims against the Companys general
assets, rather, they represent claims against the specific assets of the consolidated VIEs.
The Company has recorded the interest related to the joint venture partners ownership in
noncontrolling shareholders interests in consolidated subsidiaries.
 8




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The following table summarizes the balance sheets of these variable interest entities at
December 31, 2009 and June 30, 2010:
 December 31,
    
    
    June 30,2009
    
    
    2010AssetsCash and cash equivalents
    
    $
    23,998
    
    
    $
    13,893Accounts receivable
    
    
    9,359
    
    
    
    12,414Inventories
    
    
    16,472
    
    
    
    27,236Prepaid expenses
    
    
    2,688
    
    
    
    6,869Total current assets
    
    
    52,517
    
    
    
    60,412Net property, plant and equipment
    
    
    139,705
    
    
    
    134,084Intangibles and other assets
    
    
    12,773
    
    
    
    12,118Total assets
    
    $
    204,995
    
    
    $
    206,614Liabilities and stockholders equityNotes payable
    
    $
    87,016
    
    
    $
    83,366Accounts payable
    
    
    7,147
    
    
    
    9,485Accrued liabilities
    
    
    1,118
    
    
    
    (430
    )Current portion of long-term debt
    
    
    10,525
    
    
    
    Current liabilities
    
    
    105,806
    
    
    
    92,421Stockholders equity
    
    
    99,189
    
    
    
    114,193Total liabilities and stockholders equity
    
    $
    204,995
    
    
    $
    206,614
 Accounting PronouncementsIn January 2010, the Financial Accounting Standards Board (FASB) issued
guidance to amend the disclosure requirements related to recurring and
nonrecurring fair value measurements. The guidance requires disclosure of
transfers of assets and liabilities between Level 1 and Level 2 of the fair
value measurement hierarchy, including the reasons and the timing of the
transfers and information on purchases, sales, issuances, and settlements on a
gross basis in the reconciliation of the assets and liabilities measured under
Level 3 of the fair value measurement hierarchy. The Company has adopted this
guidance as of January 1, 2010 and it did not have a material impact on the
Companys consolidated financial statements.In June 2009, the FASB issued accounting guidance on accounting for transfers
of financial assets. This guidance amends previous guidance by including: the
elimination of the qualifying special-purpose entity (QSPE) concept; a new
participating interest definition that must be met for transfers of portions of
financial assets to be eligible for sale accounting; clarifications and changes
to the derecognition criteria for a transfer to be accounted for as a sale; and
a change to the amount of recognized gain or loss on a transfer of financial
assets accounted for as a sale when beneficial interests are received by the
transferor. Additionally, the guidance requires extensive new disclosures
regarding an entitys involvement in a transfer of financial assets. Finally,
existing QSPEs (prior to the effective date of this guidance) must be evaluated
for consolidation by reporting entities in accordance with the applicable
consolidation guidance upon the elimination of this concept. The Company
adopted this new guidance effective January 1, 2010 and it did not have an
impact on the Companys consolidated financial statements.In February 2010, the FASB amended its guidance on the accounting for and disclosure of
events that occur after the balance sheet date but before financial statements are issued or
available to be issued, otherwise known as subsequent events. Specifically, these changes
clarify that an entity that is required to file or furnish its financial statements with the
Securities and Exchange Commission is not required to disclose the date through which subsequent
events have been evaluated. Other than the elimination of disclosing the date through which
management has performed its evaluation for subsequent events, the adoption of these changes had
no impact on the Companys consolidated financial statements.
 9




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##### Table of Contents



2.
    
    Net income (loss) per share is computed on the basis of the weighted average number of common shares outstanding each year. Diluted earnings (loss) per share from continuing operations
includes the dilutive effect of stock options and other stock units. The following table sets
forth the computation of basic and diluted earnings (loss) per share:
 Three months ended June 30
    
    
    Six months ended June 30Restated
    
    
    
    
    
    
    Restated2009
    
    
    2010
    
    
    2009
    
    
    2010NumeratorIncome
 from continuing operations attributable to Cooper Tire & Rubber
Company
    
    $
    24,125
    
    
    $
    18,951
    
    
    $
    3,222
    
    
    $
    31,287Accretion of redeemable noncontrolling
shareholders interest
    
    
    6,504
    
    
    
    
    
    
    
    5,394
    
    
    
    Numerator for basic and diluted earnings (loss) per
share  income (loss) from continuing operations
available to common stockholders
    
    $
    30,629
    
    
    $
    18,951
    
    
    $
    8,616
    
    
    $
    31,287DenominatorDenominator for basic earnings (loss) per share -
weighted average shares outstanding
    
    
    58,958
    
    
    
    61,292
    
    
    
    58,950
    
    
    
    61,104Effect of dilutive securities  stock options and
other stock units
    
    
    845
    
    
    
    1,317
    
    
    
    660
    
    
    
    1,349Denominator for diluted earnings per share -
adjusted weighted average shares outstanding
    
    
    59,803
    
    
    
    62,609
    
    
    
    59,610
    
    
    
    62,453Basic earnings (loss) per share:Income
 from continuing operations available to Cooper Tire & Rubber Company
common stockholders
    
    $
    0.52
    
    
    $
    0.31
    
    
    $
    0.15
    
    
    $
    0.51Income (loss) from discontinued operations,
net of income taxes
    
    
    (0.63
    )
    
    
    0.41
    
    
    
    (0.64
    )
    
    
    0.40Net income (loss) available to Cooper Tire & Rubber
Company common stockholders
    
    $
    (0.11
    )
    
    $
    0.72
    
    
    $
    (0.49
    )
    
    $
    0.91Diluted earnings (loss) per share:Income
 from continuing operations available to Cooper Tire & Rubber Company
common stockholders
    
    $
    0.51
    
    
    $
    0.30
    
    
    $
    0.14
    
    
    $
    0.50Income (loss) from discontinued operations,
net of income taxes
    
    
    (0.62
    )
    
    
    0.40
    
    
    
    (0.63
    )
    
    
    0.39Net income (loss) available to Cooper Tire & Rubber
Company common stockholders
    
    $
    (0.11
    )
    
    $
    0.70
    
    
    $
    (0.48)
    *
    
    $
    0.89
 
 *
    
    Amounts do not add due to rounding 3.
    
    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
derivative financial instruments include fair value and cash flow hedges of foreign currency
exposures. The change in values of the fair value foreign currency
hedges offset exchange rate fluctuations on the foreign currency-denominated intercompany loans
and obligations. The Company presently hedges exposures in the Euro, Canadian dollar, British
pound sterling, Swiss franc, Swedish krona, Norwegian krone, 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, 2009 and June 30, 2010 was
$207,600 and $176,400, respectively. The counterparties to each of these agreements are major
commercial banks.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 operations in
the period in which the exchange rates change and offset the foreign currency gains and losses
on the underlying exposure being hedged.
 10




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##### 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 such forward contracts (approximately $(2,160) and $3,838 as of December 31, 2009
and June 30, 2010, 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 net sales.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. 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 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.The following table presents the location and amounts of derivative instrument fair values in
the Statement of Financial Position:
 (assets)/liabilities
    
    December 31, 2009
    
    
    June 30, 2010Derivatives designated as hedging
instruments
    
    Accrued liabilities
    
    $
    2,158
    
    
    Accrued liabilities
    
    $
    (3,938
    )Derivatives not designated as hedging
instruments
    
    Accrued liabilities
    
    $
    (78
    )
    
    Accrued liabilities
    
    $
    (45
    )
 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) LossRecognized in Other
    
    
    Reclassified from
    
    
    Amount of Gain (Loss)Comprehensive Income on
    
    
    Other Comprehensive Income
    
    
    Recognized in Income onDerivative (Effective Portion)
    
    
    into Income (Effective Portion)
    
    
    Derivative (Ineffective Portion)Derivatives in
    
    Three
    
    
    Three
    
    
    Three
    
    
    Three
    
    
    Three
    
    
    ThreeCash Flow
    
    Months
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    MonthsHedging
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedRelationships
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010Foreign exchange contracts
    
    $
    (6,107
    )
    
    $
    5,013
    
    
    $
    862
    
    
    $
    (236
    )
    
    $
    (366
    )
    
    $
    (186
    )
 Six
    
    
    Six
    
    
    Six
    
    
    Six
    
    
    Six
    
    
    SixDerivatives in
    
    Months
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    MonthsCash Flow Hedging
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedRelationships
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010Foreign exchange contracts
    
    $
    (4,655
    )
    
    $
    7,563
    
    
    $
    (2,101
    )
    
    $
    (1,565
    )
    
    $
    (288
    )
    
    $
    (215
    )
 Amount of Gain (Loss) RecognizedLocation of
    
    
    in Income on DerivativesGain (Loss)
    
    
    Three
    
    
    Three
    
    
    Six
    
    
    SixDerivatives not
    
    Recognized
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    MonthsDesignated as
    
    in Income on
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedHedging Instruments
    
    Derivatives
    
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010Foreign exchange contracts
    
    Other income
    
    $
    (1,384
    )
    
    $
    457
    
    
    $
    (929
    )
    
    $
    (156
    )Interest rate swap contracts
    
    Other income
    
    
    (248
    )
    
    
    
    
    
    
    1,997
    
    
    
    $
    (1,632
    )
    
    $
    457
    
    
    $
    1,068
    
    
    $
    (156
    )
 11




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##### Table of Contents



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.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, 2010, and December 31, 2009:
 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, 2010
    
    $
    (3,983
    )
    
    $
    
    
    
    $
    (3,983
    )
    
    $
    December 31, 2009
    
    $
    2,080
    
    
    $
    
    
    
    $
    2,080
    
    
    $
    
 The land, building and certain manufacturing equipment located at Albany, Georgia are now
classified as assets held for sale at a fair value determined based on discussions with
interested third parties. See footnote 9 for additional details on the Albany restructuring
initiative.
 12




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##### Table of Contents



The carrying amounts and fair values of the Companys financial instruments are as follows:
 December 31, 2009
    
    June 30, 2010Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueCash and cash equivalents
    
    $
    426,981
    
    
    $
    426,981
    
    
    $
    379,082
    
    
    $
    379,082Notes payable
    
    
    (156,719
    )
    
    
    (156,719
    )
    
    
    (155,891
    )
    
    
    (155,891
    )Current portion of long-term debt
    
    
    (15,515
    )
    
    
    (15,515
    )
    
    
    (5,019
    )
    
    
    (5,019
    )Long-term debt
    
    
    (330,971
    )
    
    
    (309,371
    )
    
    
    (326,853
    )
    
    
    (308,753
    )Derivative financial instruments
    
    
    (2,080
    )
    
    
    (2,080
    )
    
    
    3,983
    
    
    
    3,983
 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.
 4.
    
    The following table details information on the Companys operating segments.
 Three months ended June 30
    
    
    Six months ended June 302009
    
    
    2010
    
    
    2009
    
    
    2010Revenues from external customers:North American Tire
    
    $
    427,333
    
    
    $
    574,968
    
    
    $
    866,650
    
    
    $
    1,106,685International Tire
    
    
    257,182
    
    
    
    312,156
    
    
    
    423,394
    
    
    
    605,713Eliminations
    
    
    (52,786
    )
    
    
    (83,165
    )
    
    
    (86,907
    )
    
    
    (153,996
    )Net sales
    
    $
    631,729
    
    
    $
    803,959
    
    
    $
    1,203,137
    
    
    $
    1,558,402Segment profit (loss):North American Tire
    
    $
    27,951
    
    
    $
    19,680
    
    
    $
    24,331
    
    
    $
    33,282International Tire
    
    
    19,204
    
    
    
    20,528
    
    
    
    16,383
    
    
    
    43,078Eliminations
    
    
    (786
    )
    
    
    42
    
    
    
    (1,059
    )
    
    
    (467
    )Unallocated corporate charges
    
    
    (4,896
    )
    
    
    (6,568
    )
    
    
    (14,421
    )
    
    
    (9,256
    )Operating profit
    
    
    41,473
    
    
    
    33,682
    
    
    
    25,234
    
    
    
    66,637Interest expense
    
    
    12,097
    
    
    
    9,149
    
    
    
    24,752
    
    
    
    17,879Interest income
    
    
    (1,105
    )
    
    
    (771
    )
    
    
    (2,480
    )
    
    
    (1,984
    )Other income
    
    
    (1,249
    )
    
    
    (988
    )
    
    
    (2,072
    )
    
    
    (1,225
    )Income from continuing operations
before income taxes
    
    $
    31,730
    
    
    $
    26,292
    
    
    $
    5,034
    
    
    $
    51,967
 5.
    
    At December 31, 2009, approximately 45 percent of the Companys inventories had been valued
under the LIFO method. At June 30, 2010, approximately 41 percent of the Companys
inventories are 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 $127,064 and $173,691 at
December 31, 2009 and June 30, 2010, respectively, from current cost which would be reported
under the first-in, first-out method.
 13




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##### Table of Contents



6.
    
    The Companys incentive compensation plans allow the Company to grant awards to key employees
in the form of stock options, stock awards, restricted stock units, stock appreciation rights,
performance units, dividend equivalents and other awards. Compensation related to these
awards is determined based on the fair value on the date of grant and is amortized to expense
over the vesting period. For restricted stock units and performance based units, the Company
recognizes compensation expense based on the earlier of the vesting date or the date when the
employee becomes eligible to retire. If awards can be settled in cash, these awards are
recorded as liabilities and marked to market.The following table discloses the amount of stock based compensation expense for the three and
six-month periods ended June 30, 2009 and 2010 relating to continuing operations:
  Three months ended June 30
    
    
    Six months ended June 302009
    
    
    2010
    
    
    2009
    
    
    2010Stock options
    
    $
    81
    
    
    $
    396
    
    
    $
    167
    
    
    $
    617Restricted stock units
    
    
    380
    
    
    
    477
    
    
    
    780
    
    
    
    644Performance based units
    
    
    1,035
    
    
    
    1,572
    
    
    
    1,387
    
    
    
    2,271Total stock based compensation
    
    $
    1,496
    
    
    $
    2,445
    
    
    $
    2,334
    
    
    $
    3,532
 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 2009 vested in February 2010. As
part of the 2008  2010 plan, the units earned in 2009 and any units earned in 2010 will vest at
December 31, 2010. No units were earned in 2008.In April 2009, executives participating in the 2009  2011 Long Term Incentive Plan were
granted stock options which vest one third each year from April 2010 through April 2012.Executives participating in the Companys Long-Term Incentive Plan for the plan year 2010 
2012, earn performance based units and cash. Any units and cash earned during 2010 will vest at
December 31, 2012. The executives also received stock options which will vest one third each
year from March 2011 through March 2013.The fair value of options granted was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions:
 2009
    
    2010Risk-free interest rate
    
    
    2.2
    %
    
    
    2.8
    %Dividend yield
    
    
    2.7
    %
    
    
    2.2
    %Expected volatility of the Companys common stock
    
    
    0.570
    
    
    
    0.604Expected life in years
    
    
    6.0
    
    
    
    6.0
 The weighted-average fair value of options granted in April of 2009 was $2.08, and of options
granted in March of 2010 was $9.01. The estimated fair value of options is amortized to expense
over the options vesting period.
 14




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##### Table of Contents



The following table provides details of the stock option activity for the six months ended June
30, 2010:
 Long-Term Incentive Plan Years2009 - 2011
    
    
    2010 - 2012January 1, 2010Outstanding
    
    
    1,037,000
    
    
    
    Exercisable
    
    
    59,000
    
    
    
    Granted
    
    
    
    
    
    
    303,120Exercised
    
    
    (144,500
    )
    
    
    June 30, 2010
    
    
    
    
    
    
    Outstanding
    
    
    892,500
    
    
    
    303,120Exercisable
    
    
    240,500
    
    
    
    
 The following table provides details of the restricted stock unit activity for the six months
ended June 30, 2010:
 Restricted stock units outstanding at January 1, 2010
    
    
    526,809Restricted stock units granted
    
    
    Accrued dividend equivalents
    
    
    2,981Restricted stock units settled
    
    
    (250,021
    )Restricted stock units cancelled
    
    
    (4,149
    )Restricted stock units outstanding at June 30, 2010
    
    
    275,620
 The following table provides details of the performance based units earned under the Companys
Long-Term Incentive Plans for the six months ended June 30, 2010:
 Long-Term Incentive Plan Years2007-2009
    
    
    2008-2010Performance-based units outstanding
at January 1, 2010
    
    
    559,951
    
    
    
    290,860Accrued dividend equivalents
    
    
    
    
    
    
    3,138Performance-based units settled
    
    
    (559,951
    )
    
    
    Performance-based units outstanding
at June 30, 2010
    
    
    0
    
    
    
    293,998
 The Companys restricted stock units and performance based units are not participating
securities. These units entitle the participant to convert the units into shares of Company
common stock upon vesting and in accordance with the distribution date indicated in the
agreements. Restricted stock units earn dividend equivalents from the time of the award until distribution is made in common shares. Performance
based units earn dividend equivalents from the time the units have been earned based upon
Company performance metrics until distribution is made in common shares. Dividend equivalents
are only earned subject to vesting of the underlying restricted stock units or performance based
units, accordingly, such units do not represent participating securities.
 15




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##### Table of Contents



7.
    
    The following tables disclose the amount of net periodic benefit costs for the three-month
and six-month periods ended June 30, 2009 and 2010 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 302009
    
    
    2010
    
    
    2009
    
    
    2010Components of net periodic
benefit cost:Service cost
    
    $
    3,139
    
    
    $
    1,640
    
    
    $
    6,526
    
    
    $
    3,307Interest cost
    
    
    14,607
    
    
    
    15,432
    
    
    
    29,225
    
    
    
    31,056Expected return on plan assets
    
    
    (13,892
    )
    
    
    (16,206
    )
    
    
    (27,579
    )
    
    
    (32,585
    )Amortization of prior service cost
    
    
    923
    
    
    
    (149
    )
    
    
    (533
    )
    
    
    (307
    )Recognized actuarial loss
    
    
    7,463
    
    
    
    8,372
    
    
    
    17,688
    
    
    
    16,812Spectrum plan freeze
    
    
    (10,133
    )
    
    
    
    
    
    
    (10,133
    )
    
    
    Albany curtailment gain
    
    
    (2,413
    )
    
    
    
    
    
    
    (3,713
    )
    
    
    Albany settlement loss
    
    
    900
    
    
    
    1,421
    
    
    
    900
    
    
    
    4,751Net periodic benefit cost
    
    $
    594
    
    
    $
    10,510
    
    
    $
    12,381
    
    
    $
    23,034
 Other Postretirement BenefitsThree months ended June 30
    
    
    Six months ended June 302009
    
    
    2010
    
    
    2009
    
    
    2010Components of net periodic
benefit cost:Service cost
    
    $
    1,047
    
    
    $
    791
    
    
    $
    1,900
    
    
    $
    1,581Interest cost
    
    
    3,694
    
    
    
    3,529
    
    
    
    7,400
    
    
    
    7,058Amortization of prior service cost
    
    
    (73
    )
    
    
    (136
    )
    
    
    (150
    )
    
    
    (272
    )Recognized actuarial loss
    
    
    132
    
    
    
    
    
    
    
    150
    
    
    
    Net periodic benefit cost
    
    $
    4,800
    
    
    $
    4,184
    
    
    $
    9,300
    
    
    $
    8,367
 During 2010, the Company expects to contribute between $35,000 and $40,000 to its domestic and
foreign pension plans. On May 11, 2010, the Company filed a Form S-3 which will permit the
Company to fund a portion of the expected domestic contributions in
the form of Company common
stock.
 In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education
Affordability Act of 2010 (the Act) was enacted. The primary focus of the Act is to
significantly reform health care in the U.S. The Act will reduce the tax deduction available to
the Company to the extent of receipt of Medicare Part D prescription drug subsidy; however, this
will not have a material impact on the Companys financial results. The Company is currently
evaluating other prospective effects of the Act.
 16




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##### Table of Contents



8.
    
    The following table reconciles the beginning and end of the period equity accounts
attributable to Cooper Tire & Rubber Company and to the noncontrolling shareholder interests.
 NoncontrollingTotal
    
    Shareholders
    
    
    
    
    
    RedeemableParent
    
    Interests in
    
    Total
    
    NoncontrollingStockholders
    
    Consolidated
    
    Stockholders
    
    ShareholdersEquity
    
    Subsidiaries
    
    Equity
    
    InterestsBalance at December 31, 2009
    
    $
    330,808
    
    
    $
    49,716
    
    
    $
    380,524
    
    
    $
    83,528Net income
    
    
    55,653
    
    
    
    1,818
    
    
    
    57,471
    
    
    
    9,872Other comprehensive income
(loss)
    
    
    35,872
    
    
    
    283
    
    
    
    36,155
    
    
    
    (2,115
    )Dividends payable to
noncontrolling shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,637
    )Contribution of
noncontrolling shareholder
    
    
    
    
    
    
    5,250
    
    
    
    5,250
    
    
    
    Acquisition of noncontrolling
shareholder interest
    
    
    1,384
    
    
    
    
    
    
    
    1,384
    
    
    
    (19,304
    )Stock compensation plans,
including
tax benefit of $214
    
    
    1,929
    
    
    
    
    
    
    
    1,929
    
    
    
    Cash dividends  $.21 per share
    
    
    (12,856
    )
    
    
    
    
    
    
    (12,856
    )
    
    
    Balance at June 30, 2010
    
    $
    412,790
    
    
    $
    57,067
    
    
    $
    469,857
    
    
    $
    60,344
 The following table provides the details of the Companys comprehensive income (loss).
Comprehensive income (loss) includes net income (loss) and components of other comprehensive
income (loss), such as foreign currency translation adjustments, unrealized gains or losses on
certain marketable securities and derivative instruments and unrecognized postretirement benefit
plans.The Companys comprehensive income (loss) is as follows:
 Three months ended June 30
    
    
    Six months ended June 302009
    
    
    2010
    
    
    2009
    
    
    2010Net income (loss) attributable to
Cooper Tire & Rubber Company
    
    $
    (12,960
    )
    
    $
    44,077
    
    
    $
    (34,227
    )
    
    $
    55,653Other comprehensive income (loss):Currency translation adjustments
    
    
    14,244
    1
    
    
    (584
    )
    
    
    10,789
    1
    
    
    (5,156
    )Unrealized net gains (losses) on derivative
instruments and marketable securities,
net of tax
    
    
    (7,980
    )
    
    
    4,031
    
    
    
    (4,613
    )
    
    
    5,393Unrecognized postretirement benefit plans,
net of tax
    
    
    1,146
    
    
    
    18,969
    
    
    
    1,500
    
    
    
    35,635Comprehensive income (loss) attributable to
Cooper Tire & Rubber Company
    
    
    (5,550)
    1
    
    
    66,493
    
    
    
    (26,551)
    1
    
    
    91,525Net income attributable to
noncontrolling shareholders interests
    
    
    6,638
    
    
    
    6,094
    
    
    
    4,618
    
    
    
    11,690Other comprehensive income (loss):Currency translation adjustments
    
    
    (287)
    1
    
    
    820
    
    
    
    186
    1
    
    
    (1,832
    )Comprehensive income attributable to
noncontrolling shareholders interests
    
    
    6,351
    1
    
    
    6,914
    
    
    
    4,804
    1
    
    
    9,858Total comprehensive income (loss)
    
    $
    801
    
    
    $
    73,407
    
    
    $
    (21,747
    )
    
    $
    101,383
 
 1
    
    Amounts have been restated, see Footnote 1 for additonal information. 17




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##### Table of Contents



9.
    
    The table below details the Companys restructuring expenses for the periods indicated:
 Three months ended June 30
    
    
    Six months ended June 302009
    
    
    2010
    
    
    2009
    
    
    2010Albany plant closureAsset writedowns
    
    $
    
    
    
    $
    1,000
    
    
    $
    
    
    
    $
    1,000Equipment relocated and other costs
    
    
    6,169
    
    
    
    4,227
    
    
    
    11,021
    
    
    
    8,509Employee related costs
    
    
    1,842
    
    
    
    1,421
    
    
    
    11,296
    
    
    
    4,7518,011
    
    
    
    6,648
    
    
    
    22,317
    
    
    
    14,260Distribution centerEmployee related costs
    
    
    294
    
    
    
    
    
    
    
    340
    
    
    
    Europe headcount reductionEmployee related costs
    
    
    404
    
    
    
    778
    
    
    
    404
    
    
    
    778Total restructuring costs
    
    $
    8,709
    
    
    $
    7,426
    
    
    $
    23,061
    
    
    $
    15,038
 During the second quarter of 2010, the Company recorded restructuring expenses associated with
the two initiatives described below.Albany manufacturing facility closureThe Company recorded $6,648 of restructuring expense associated with the planned closure of its
Albany, Georgia manufacturing facility. This initiative, announced December 17, 2008, resulted
in a workforce reduction of approximately 1,330 people with an estimated cost between $140,000
and $145,000 for restructuring expense and asset impairment. This initiative is expected to be
completed by September 30, 2010.During the second quarter, the Company reduced the fair value of the land, building and certain
manufacturing equipment at the Albany, Georgia location based on discussions with parties
interested in purchasing the facility.During the first six months of 2010, the Company has recorded $14,260 of restructuring expense
related to the Albany closure and through June 30, 2010, the Company has recorded a total of
$136,949 of restructuring expense for this initiative.At January 1, 2010, the accrued severance balance was $848 and the Company made $678 of
severance payments during the first six months of 2010 resulting in an accrued severance balance
at June 30, 2010, of $170.European headcount reductionIn Cooper Europe, a workforce reduction program was implemented during the second quarter of
2010. This initiative is expected to impact 67 employees with a total cost of approximately
$930. This initiative is expected to be completed during the third quarter of 2010. Employee
severance of $778 was accrued during the second quarter and no payments have been made resulting
in an accrued severance balance of $778 at June 30, 2010.
 18




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##### Table of Contents



10.
    
    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:
 2009
    
    
    2010Reserve at January 1
    
    $
    18,244
    
    
    $
    23,814Additions
    
    
    7,021
    
    
    
    9,813Payments
    
    
    (7,546
    )
    
    
    (9,370
    )Reserve at June 30
    
    $
    17,719
    
    
    $
    24,257
 11.
    
    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.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.
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##### Table of Contents



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 2010, the Company increased its products liability reserve by
$13,256. The addition of another quarter of self-insured incidents accounted for $9,890 of this
increase. Amounts on existing reserves increased by $3,366.During the first six months of 2010, the Company increased its products liability reserve by
$50,077. The addition of another six months of self-insured incidents
accounted for $19,780 of
this increase. The Company revised its estimates of future settlements for unasserted and
premature claims, which increased the reserve by $1,065. Finally, amounts on existing reserves
increased by $29,232. Of this amount, $21,800 was the result of the Company increasing its
self-insured portion of a jury verdict in one case during the first quarter. The Company
considered the impact of this case when evaluating the assumptions used in establishing reserve
balances and did not adjust its assumptions based solely on this case.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.The Company paid $12,079 during the second quarter of 2010 to resolve cases and claims and has
paid $16,860 through the first six months of 2010. The Companys products liability reserve
balance at December 31, 2009 totaled $151,421 (current portion of $30,805) and the balance at
June 30, 2010, totaled $184,638 (current portion of $31,893).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.
 20




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##### Table of Contents



For the three-month periods ended June 30, 2009 and 2010, products liability expenses totaled
$20,352 and $15,120, respectively, and include recoveries of legal fees of $515 and $5,569 in
the periods ended June 30, 2009 and 2010, respectively. For the six-month periods ended June
30, 2009 and 2010, products liability expenses totaled $40,920 and $59,718, respectively, and
include recoveries of legal fees of $1,941 and $5,575 in the periods ended June 30, 2009 and
2010, respectively. Policies applicable to claims occurring on April 1, 2003 and thereafter do
not provide for recovery of legal fees.12.
    
    For the quarter ended  June 30, 2010, the Company recorded an income tax expense for
continuing operations of $1,247 as compared to $967 for the comparable period in 2009. The
provision includes a tax benefit for discrete items of $5,059 relating primarily to return to
provision changes in estimates for the 2009 U.S. tax return principally resulting from
additional pension funding for the 2009 plan year. The effective tax rate for the quarter and
six month period ended June 30, 2010, for continuing operations is 24.0 and 21.4 percent,
respectively, exclusive of discrete items, using the applicable effective tax rate determined
using forecasted multi-jurisdictional annual effective tax rates. For comparable periods in
2009, the effective tax rate for continuing operations, exclusive of discrete items, was -0.4
percent and -88.42 percent, respectively, using forecasted jurisdictional annual effective tax
rates.The $280 increase in tax expense for the quarter relates primarily to the impact from decreased
earnings at the U.S. statutory rate of $(1,905); the impact from changes to the U.S. valuation
allowances of $7,329; differences in the effective tax rates of international operations of
$1,013; and changes in discrete items of $(6,157).For the six month period ended June 30, 2010, the Company recorded income tax expense for
continuing operations of $8,990 compared to a tax benefit of $2,806 recorded for the six month
period ended June 30, 2009. The $11,796 increase in tax expense relates primarily to the impact
from increased earnings at the U.S. statutory rate of $16,426; the impact from changes to the
U.S. valuation allowances of $2,902; differences in the effective tax rates of international
operations of $(3,730); and changes in discrete items of $(3,802).The Company maintains a valuation allowance pursuant to ASC 740, Accounting for Income Taxes,
on its net U.S. deferred tax asset position. The valuation allowance will be maintained as
long as it is more likely than not that some portion of the deferred tax asset may 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 relate 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 $176,243 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 $2,392
for deferred tax assets associated with losses in foreign jurisdictions.The Company maintains an ASC 740-10, Accounting for Uncertainty in Income Taxes liability for
unrecognized tax benefits for permanent and temporary book/tax differences for continuing
operations. At June 30, 2010, the Companys liability, exclusive of interest, totals
approximately $7,467. The Company accrued approximately $20 of interest expense for the quarter
which has been recorded as a discrete item in the tax provision.At June 30, 2010, the Company has a receivable for approximately $27,425 of primarily U.S. cash
tax refunds, including interest. It is anticipated that approximately $14 million of these
receivables will be collected in 2010.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., (CSA) and its Canadian affiliate.
In 2009 the governments settled the APA between the governments and the taxpayers for periods
2000-2007. On August 19, 2009, the Company filed an action in the United States Bankruptcy Court, District of Delaware, in response
to the
 21




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##### Table of Contents



Bankruptcy petition filed by Cooper-Standard Holdings Inc. on August 3, 2009. The action
related to the tax refunds owed to the Company pursuant to the September 16, 2004 sale agreement
of CSA for pre-disposition periods ending December 23, 2004. On March 17, 2010, the Company
entered into a settlement agreement with Cooper Standard Holdings, Inc., et al. to resolve the
subject proceedings. The approved settlement agreement was docketed by the Court on April 15
and became final and non-appealable on April 29, 2010. Pursuant to the settlement agreement,
CSA paid the Company approximately $17,639. In addition CSA provided a letter of credit to be
issued for the benefit of the Company in the initial amount of $7,000 in connection with the
Companys guaranty of a lease for certain property in Surgoinsville, Tennessee. The letter of
credit will be payable to the Company for amounts that the Company is called upon to pay in
connection with the Companys guaranty. The settlement agreement also provides for mutual
releases with only certain limited obligations under the 2004 sale agreement to remain in force.
Based upon the settlement, the Company released liabilities recorded on its books relating to
the disposition of CSA in the amount of $7,400 through Discontinued Operations net of the tax
impact.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 2000.13.
    
    On February 2, 2010, 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 approving the
settlement agreement negotiated by the parties in April 2009, in its entirety, as being fair,
reasonable and adequate and dismissed, with prejudice, the case and a related lawsuit,
Johnson, et al v. Cooper Tire & Rubber Company. The settlement agreement provides for 1) a
cash payment of $7,050 to the Plaintiffs for reimbursement of costs; 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.A group of the Companys union retirees and surviving spouses filed the Cates lawsuit on behalf
of a purported class claiming that the Company was not entitled to impose any contribution
requirement for the cost of their health care coverage pursuant to a series of letter
agreements entered into by the Company and the United Steelworkers and that Plaintiffs were
promised lifetime benefits, at no cost, after retirement. As a result of settlement
discussions, the related Johnson case was filed with the Court on behalf of a different,
smaller group of hourly union-represented retirees.The Company has amended its retiree medical plan to reflect the changed method of providing
future health care to specified current retiree groups. As a consequence of the settlement
agreement, the Company recorded $7,050 of expense during the first quarter of 2009 relating to
the specified payments. Also during the first quarter of 2009, the actuarial value of costs
related to the plan amendment was estimated to be approximately $7,700 which was reflected as an
increase in the accrual for Other Post-employment Benefits with an offset to the Cumulative
Other Comprehensive Loss component of Shareholders Equity. The Company has finalized the
impact of the amendment on its accrual for Other Post-employment Benefits and has recorded the
impact during the second quarter of 2010. As a result of plan design changes, lower per capita
health care costs experienced compared to the costs assumed in early 2009 and other assumption
updates, the Company has recorded a reduction of $9,700 to the accrual for Other Post-employment
Benefits with an offset to the Cumulative Other Comprehensive Loss component of Shareholders
Equity as a change in actuarial assumptions.14.
    
    In connection with the investment in Cooper Chengshan, beginning January 1, 2009 and
continuing through December 31, 2011, the noncontrolling shareholders have the option, which
is embedded in the noncontrolling interest, to require the Company to purchase the remaining
49 percent noncontrolling share at the greater of a minimum price of $62,700 or a formula
price that varies based on operating results of the entity. The combination of a
noncontrolling interest and a put option resulted in a redeemable noncontrolling shareholder
interest. The put option is not separated from the shares as an embedded derivative because
the underlying shares are not readily convertible into cash.
 22




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##### Table of Contents



The noncontrolling interest is redeemable at other than fair value as the put value is
determined based on a specified formula as described above. The Company records the
noncontrolling shareholders interests in Cooper Chengshan at the greater of 1) the initial
carrying amount, increased or decreased for the noncontrolling shareholders share of net income
or loss and its share of other comprehensive income or loss and dividends (carrying amount) or
2) the value of the put option which is determined based on the greater of the minimum amount or
the formula derived amount. Prior to exercisability of the put option on January 1, 2009, the
noncontrolling shareholders interest has been recorded at the greater of 1) the carrying amount
or 2) the cumulative amount required to accrete the initial carrying amount to the redemption
value using the effective interest method which resulted in the reversal of accretion of $6,504
and $5,394 during the quarter and six month period ended
June 30, 2009, respectively, with an
offset to Retained earnings. According to authoritative accounting guidance, the redeemable
noncontrolling shareholders interests are classified outside of permanent equity, as a
mezzanine item, on the Companys Condensed Consolidated Balance Sheets.According to authoritative accounting guidance for redeemable noncontrolling shareholders
interests, to the extent the noncontrolling shareholders have a contractual right to receive an
amount upon exercise of a put option that is other than fair value, and such amount is greater
than carrying value, then the noncontrolling shareholder has, in substance, received a dividend
distribution that is different than other common stockholders. Therefore accretion adjustments
to the carrying value of noncontrolling shareholders interests to reflect the put option amount
should also be reflected in the computation of earnings per share available to Cooper Tire &
Rubber Company common stockholders. During 2009, the Company recorded adjustments to the
redeemable noncontrolling shareholders interests which are
shown in footnote 2.In 2009, the Company was notified by a noncontrolling shareholder that it had exercised its put
option and after governmental approval, the Company purchased the 14 percent share for $17,920
on March 31, 2010. The remaining noncontrolling shareholder has the right to sell its 35
percent share to the Company at a minimum price of $44,780. At June 30, 2010, the formula price
of $45,417 exceeds the minimum price, however, the carrying value exceeds the formula price and
the carrying value is the amount shown on the Companys Consolidated Balance Sheets.
 
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  23




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##### Table of Contents



Consolidated Results of Operations
 Three months ended June 30
    
    
    Six months ended June 30(Dollar amounts in millions except per share amounts)
    
    2009
    
    
    Change
    
    2010
    
    
    2009
    
    
    Change
    
    2010Revenues:North American Tire
    
    $
    427.3
    
    
    34.6%
    
    $
    575.0
    
    
    $
    866.7
    
    
    27.7%
    
    $
    1,106.7International Tire
    
    
    257.2
    
    
    21.4%
    
    
    312.2
    
    
    
    423.4
    
    
    43.1%
    
    
    605.7Eliminations
    
    
    (52.8
    )
    
    57.6%
    
    
    (83.2
    )
    
    
    (87.0
    )
    
    77.0%
    
    
    (154.0
    )Net sales
    
    $
    631.7
    
    
    27.3%
    
    $
    804.0
    
    
    $
    1,203.1
    
    
    29.5%
    
    $
    1,558.4Segment profitNorth American Tire
    
    $
    28.0
    
    
    -29.6%
    
    $
    19.7
    
    
    $
    24.3
    
    
    37.0%
    
    $
    33.3International Tire
    
    
    19.2
    
    
    6.8%
    
    
    20.5
    
    
    
    16.4
    
    
    162.8%
    
    
    43.1Eliminations
    
    
    (0.8
    )
    
    n/m
    
    
    0.1
    
    
    
    (1.1
    )
    
    -54.5%
    
    
    (0.5
    )Unallocated corporate charges
    
    
    (4.9
    )
    
    34.7%
    
    
    (6.6
    )
    
    
    (14.4
    )
    
    -36.1%
    
    
    (9.2
    )Operating profit
    
    
    41.5
    
    
    -18.8%
    
    
    33.7
    
    
    
    25.2
    
    
    164.7%
    
    
    66.7Interest expense
    
    
    12.1
    
    
    -24.0%
    
    
    9.2
    
    
    
    24.8
    
    
    -27.8%
    
    
    17.9Interest income
    
    
    (1.1
    )
    
    -27.3%
    
    
    (0.8
    )
    
    
    (2.5
    )
    
    -20.0%
    
    
    (2.0
    )Other income
    
    
    (1.2
    )
    
    -16.7%
    
    
    (1.0
    )
    
    
    (2.1
    )
    
    -42.9%
    
    
    (1.2
    )Income from continuing operations
before income taxes
    
    
    31.7
    
    
    
    
    
    26.3
    
    
    
    5.0
    
    
    
    
    
    52.0Income tax expense (benefit)
    
    
    0.9
    
    
    
    
    
    1.2
    
    
    
    (2.8
    )
    
    
    
    
    9.0Income from continuing operations
    
    
    30.8
    
    
    
    
    
    25.1
    
    
    
    7.8
    
    
    
    
    
    43.0Noncontrolling shareholders interests
    
    
    (6.6
    )
    
    
    
    
    (6.1
    )
    
    
    (4.6
    )
    
    
    
    
    (11.7
    )Income from continuing operations
attributable to Cooper Tire & Rubber Company
    
    $
    24.2
    
    
    
    
    $
    19.0
    
    
    $
    3.2
    
    
    
    
    $
    31.3Basic earnings per share
    
    $
    0.52
1
    
    
    
    $
    0.31
    
    
    $
    0.15
1
    
    
    
    $
    0.51Diluted earnings per share
    
    $
    0.51
1
    
    
    
    $
    0.30
    
    
    $
    0.14
1
    
    
    
    $
    0.50
 
 1
    
    Amount have been restated, see Footnote 1 for additional information.    24




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Cates
 25




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26




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North American Tire Operations Segment
 Three months ended June 30
    
    Six months ended June 302009
    
    Change
    
    2010
    
    2009
    
    Change
    
    2010(Dollar amounts in millions)Net sales
    
    $
    427.3
    
    
    
    34.6
    %
    
    $
    575.0
    
    
    $
    866.7
    
    
    
    27.7
    %
    
    $
    1,106.7Operating profit
    
    $
    28.0
    
    
    
    -29.6
    %
    
    $
    19.7
    
    
    $
    24.3
    
    
    
    37.0
    %
    
    $
    33.3United States unit shipments changes:Passenger tiresSegment
    
    
    
    
    
    
    23.9
    %
    
    
    
    
    
    
    
    
    
    
    21.9
    %RMA members
    
    
    
    
    
    
    9.4
    %
    
    
    
    
    
    
    
    
    
    
    9.5
    %Total Industry
    
    
    
    
    
    
    7.6
    %
    
    
    
    
    
    
    
    
    
    
    10.2
    %Light truck tiresSegment
    
    
    
    
    
    
    27.7
    %
    
    
    
    
    
    
    
    
    
    
    20.9
    %RMA members
    
    
    
    
    
    
    8.4
    %
    
    
    
    
    
    
    
    
    
    
    9.9
    %Total Industry
    
    
    
    
    
    
    5.4
    %
    
    
    
    
    
    
    
    
    
    
    9.1
    %Total light vehicle tiresSegment
    
    
    
    
    
    
    24.5
    %
    
    
    
    
    
    
    
    
    
    
    21.8
    %RMA members
    
    
    
    
    
    
    9.3
    %
    
    
    
    
    
    
    
    
    
    
    9.5
    %Total Industry
    
    
    
    
    
    
    7.3
    %
    
    
    
    
    
    
    
    
    
    
    10.0
    %Total segment unit sales change
    
    
    
    
    
    
    20.1
    %
    
    
    
    
    
    
    
    
    
    
    19.7
    %
 Overview
  Sales
  27




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Operating Profit
    International Tire Operations Segment
 Three months ended June 30
    
    
    Six months ended June 302009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010(Dollar amounts in millions)Net sales
    
    $
    257.2
    
    
    
    21.4
    %
    
    $
    312.2
    
    
    $
    423.4
    
    
    
    43.1
    %
    
    $
    605.7Operating profit
    
    $
    19.2
    
    
    
    6.8
    %
    
    $
    20.5
    
    
    $
    16.4
    
    
    
    162.8
    %
    
    $
    43.1Unit sales change
    
    
    
    
    
    
    13.3
    %
    
    
    
    
    
    
    
    
    
    
    33.8
    %
 Overview
  28




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Sales
   Operating Profit
   Outlook for Company
     29




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Liquidity and Capital Resources
 Generation and uses of cash 
     Available credit facilities 
  Available cash and contractual commitments 
 30




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Parent company8% unsecured notes due December 2019
    
    
    173.67.625% unsecured notes due March 2027
    
    
    116.9Capitalized leases and other
    
    
    10.5301.0Consolidated Subsidiaries5.4% unsecured notes due in 2010
    
    
    4.45.13% unsecured notes due in 2011
    
    
    6.64.86% to 5.13% unsecured notes due in 2012
    
    
    19.930.9Total debt
    
    
    331.9Less current maturities
    
    
    5.0$
    326.9
  Credit agency ratings 
 Contingencies
 Litigation
   31




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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 or 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;
    
    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;
    
    inability to adequately protect the Companys intellectual property rights;
    
    failure to successfully integrate acquisitions into operations or their related financings
may impact liquidity and capital resources;
    
    inability to use deferred tax assets;
 32




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
    
    recent changes to tariffs on certain tires imported into the United States from the PRC
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
    33




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art II. OTHER INFORMATION
 Item 1. LEGAL PROCEEDINGS
  Cates, et al Johnson, et al
 
 Item 1A. RISK FACTORS
  The Company is facing heightened risks due to the current business environment.
    Inadequate supply of key raw materials and pricing volatility for raw materials could result in
increased costs and may affect the Companys profitability.
   34




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If the price of natural gas or other energy sources increases, the Companys operating expenses
could increase significantly.
   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.
  35




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The Companys results could be impacted by the tariffs recently imposed by the United States
government on tires imported from the PRC.
  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.
   The Company is facing unknown risks relating to enactment of healthcare legislation .
 Patient Protection and Affordable Care Act Healthcare and Education Reconciliation Act
 Compliance with regulatory initiatives could increase the cost of operating the Companys business.
    36




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Any interruption in the Companys skilled workforce could impair its operations and harm its
earnings and results of operations.
  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 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 be
negatively impacted.
     37




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The Company may not be able to protect its intellectual property rights adequately.
  The Company may not be successful in executing and 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.
  The Company is required to comply with environmental laws and regulations that could cause it to
incur significant costs.
  38




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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.
 Accounting for Income Taxes
 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.
  There are risks associated with the Companys global strategy of using joint ventures and partially
owned subsidiaries.
  39




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The Company may fail to maintain an effective system of internal control over financial reporting
and it may not be able to accurately report its financial results, and current and potential
stockholders may lose confidence in its financial reporting.
    
 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
 40




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COOPER TIRE & RUBBER COMPANY/s/ B. E. HughesB. E. HughesVice President and Chief
Financial Officer
(Principal Financial Officer)/s/ R. W. HuberR. W. HuberDirector of External Reporting
(Principal Accounting Officer) August 5, 2010
 41