##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 Commission File No. 1-4329
 
 COOPER TIRE & RUBBER COMPANY
  DELAWARE
(State or other jurisdiction of 
incorporation or organization)
    
    34-4297750
(I.R.S. employer
identification no.)
 
 
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  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 1. LEGAL PROCEEDINGSItem 1A RISK FACTORSItem 6 EXHIBITSSIGNATURESEX-31.1EX-31.2EX-32    Table of Contents  
  
  
 December 31,
    
    
    September 30,2008
    
    
    2009(Note 1)
    
    
    (Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    247,672
    
    
    $
    409,543Accounts receivable, less allowances
of $10,680 in 2008 and $11,329 in 2009
    
    
    318,109
    
    
    
    431,354Inventories at lower of cost or market:Finished goods
    
    
    247,187
    
    
    
    205,553Work in process
    
    
    28,234
    
    
    
    26,305Raw materials and supplies
    
    
    144,691
    
    
    
    79,110420,112
    
    
    
    310,968Other current assets
    
    
    58,290
    
    
    
    44,877Total current assets
    
    
    1,044,183
    
    
    
    1,196,742Property, plant and equipment:Land and land improvements
    
    
    33,731
    
    
    
    33,716Buildings
    
    
    319,025
    
    
    
    324,498Machinery and equipment
    
    
    1,627,896
    
    
    
    1,658,749Molds, cores and rings
    
    
    273,641
    
    
    
    244,1002,254,293
    
    
    
    2,261,063Less accumulated depreciation and amortization
    
    
    1,353,019
    
    
    
    1,383,822Net property, plant and equipment
    
    
    901,274
    
    
    
    877,241Goodwill
    
    
    
    
    
    
    Intangibles, net of accumulated amortization of $24,096
in 2008 and $22,827 in 2009
    
    
    19,902
    
    
    
    18,884Restricted cash
    
    
    2,432
    
    
    
    2,270Other assets
    
    
    75,105
    
    
    
    66,297$
    2,042,896
    
    
    $
    2,161,434LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Notes payable
    
    $
    184,774
    
    
    $
    143,612Accounts payable
    
    
    248,637
    
    
    
    302,602Accrued liabilities
    
    
    123,771
    
    
    
    188,434Income taxes
    
    
    1,409
    
    
    
    3,051Liabilities related to the sale of automotive operations
    
    
    1,182
    
    
    
    35,517Current portion of long-term debt
    
    
    147,761
    
    
    
    107,481Total current liabilities
    
    
    707,534
    
    
    
    780,697Long-term debt
    
    
    325,749
    
    
    
    329,943Postretirement benefits other than pensions
    
    
    236,025
    
    
    
    247,577Pension benefits
    
    
    268,773
    
    
    
    222,289Other long-term liabilities
    
    
    115,803
    
    
    
    138,674Long-term liabilities related to the sale of automotive operations
    
    
    8,046
    
    
    
    9,008Stockholders equity:Preferred stock, $1 par value; 5,000,000 shares
authorized; none issued
    
    
    
    
    
    
    Common stock, $1 par value; 300,000,000 shares authorized;
86,322,514 shares issued in 2008 and 87,850,292 in 2009
    
    
    86,323
    
    
    
    87,850Capital in excess of par value
    
    
    43,764
    
    
    
    67,262Retained earnings
    
    
    1,106,344
    
    
    
    1,100,330Cumulative other comprehensive loss
    
    
    (450,079
    )
    
    
    (433,277
    )786,352
    
    
    
    822,165Less: 27,411,564 common shares in treasury
in 2008 and 27,352,571 in 2009, at cost
    
    
    (492,236
    )
    
    
    (491,051
    )Total parent stockholders equity
    
    
    294,116
    
    
    
    331,114Noncontrolling shareholders interests in consolidated subsidiaries
    
    
    86,850
    
    
    
    102,132Total stockholders equity
    
    
    380,966
    
    
    
    433,246$
    2,042,896
    
    
    $
    2,161,434
  2




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##### Table of Contents



2008
    
    
    2009Net sales
    
    $
    793,751
    
    
    $
    802,794Cost of products sold
    
    
    793,888
    
    
    
    662,277Gross profit (loss)
    
    
    (137
    )
    
    
    140,517Selling, general and administrative
    
    
    46,878
    
    
    
    56,444Restructuring
    
    
    
    
    
    
    13,385Operating profit (loss)
    
    
    (47,015
    )
    
    
    70,688Interest expense
    
    
    (12,821
    )
    
    
    (11,440
    )Interest income
    
    
    3,902
    
    
    
    2,259Debt extinguishment
    
    
    (10
    )
    
    
    -Other  net
    
    
    (1,244
    )
    
    
    (1,047
    )Income (loss) from continuing operations before income taxes
    
    
    (57,188
    )
    
    
    60,460Income tax benefit (expense)
    
    
    2,318
    
    
    
    (2,628
    )Income (loss) from continuing operations
    
    
    (54,870
    )
    
    
    57,832Loss from discontinued operations, net of income taxes
    
    
    (133
    )
    
    
    (337
    )Net income (loss)
    
    
    (55,003
    )
    
    
    57,495Net income attributable to
noncontrolling shareholders interests
    
    
    378
    
    
    
    10,664Net income (loss) attributable to Cooper Tire & Rubber Company
    
    $
    (55,381
    )
    
    $
    46,831Basic earnings (loss) per share:Income (loss) from continuing operations
attributable to Cooper Tire & Rubber Company
    
    $
    (0.94
    )
    
    $
    0.79Loss from discontinued operations
    
    
    (0.00
    )
    
    
    (0.01
    )Net income (loss) attributable to Cooper Tire & Rubber Company
    
    $
    (0.94
    )
    
    $
    0.79
    *Diluted earnings (loss) per share:Income (loss) from continuing operations
attributable to Cooper Tire & Rubber Company
    
    $
    (0.94
    )
    
    $
    0.77Loss from discontinued operations
    
    
    (0.00
    )
    
    
    (0.01
    )Net income (loss) attributable to Cooper Tire & Rubber Company
    
    $
    (0.94
    )
    
    $
    0.77
    *Weighted average number of shares outstanding (000s):Basic
    
    
    58,903
    
    
    
    59,331Diluted
    
    
    58,903
    
    
    
    61,050Dividends per share
    
    $
    0.105
    
    
    $
    0.105
 
 *
    
    Amounts do not add due to rounding  3




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2008
    
    
    2009Net sales
    
    $
    2,245,979
    
    
    $
    2,005,931Cost of products sold
    
    
    2,160,049
    
    
    
    1,714,685Gross profit
    
    
    85,930
    
    
    
    291,246Selling, general and administrative
    
    
    138,808
    
    
    
    151,828Restructuring
    
    
    
    
    
    
    36,446Settlement of retiree medical case
    
    
    
    
    
    
    7,050Operating profit (loss)
    
    
    (52,878
    )
    
    
    95,922Interest expense
    
    
    (37,041
    )
    
    
    (36,192
    )Interest income
    
    
    11,294
    
    
    
    4,739Debt extinguishment
    
    
    (593
    )
    
    
    Dividend from unconsolidated subsidiary
    
    
    1,943
    
    
    
    Other  net
    
    
    2,274
    
    
    
    1,025Income (loss) from continuing operations before income taxes
    
    
    (75,001
    )
    
    
    65,494Income tax benefit
    
    
    1,947
    
    
    
    178Income (loss) from continuing operations
    
    
    (73,054
    )
    
    
    65,672Income (loss) from discontinued operations, net of income taxes
    
    
    80
    
    
    
    (37,786
    )Net income (loss)
    
    
    (72,974
    )
    
    
    27,886Net income attrubutable to
noncontrolling shareholders interests
    
    
    2,952
    
    
    
    15,282Net income (loss) attributable to Cooper Tire & Rubber Company
    
    $
    (75,926
    )
    
    $
    12,604Basic earnings (loss) per share:Income (loss) from continuing operations
attributable to Cooper Tire & Rubber Company
    
    $
    (1.29
    )
    
    $
    0.85Income (loss) from discontinued operations
    
    
    0.00
    
    
    
    (0.64
    )Net income (loss) attributable to Cooper Tire & Rubber Company
    
    $
    (1.28
    )*
    
    $
    0.21Diluted earnings (loss) per share:Income (loss) from continuing operations
attributable to Cooper Tire & Rubber Company
    
    $
    (1.29
    )
    
    $
    0.84Income (loss) from discontinued operations
    
    
    0.00
    
    
    
    (0.63
    )Net income (loss) attributable to Cooper Tire & Rubber Company
    
    $
    (1.28
    )*
    
    $
    0.21Weighted average number of shares outstanding (000s):Basic
    
    
    59,094
    
    
    
    59,078Diluted
    
    
    59,094
    
    
    
    60,095Dividends per share
    
    $
    0.315
    
    
    $
    0.315
 
 *
    
    Amounts do not add due to rounding  4




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2008
    
    
    2009Operating activities:Net income (loss)
    
    $
    (72,974
    )
    
    $
    27,886Adjustments to reconcile net income (loss) to
net cash provided by (used in) continuing operations:Loss (income) from discontinued operations, net of income taxes
    
    
    (80
    )
    
    
    37,786Depreciation
    
    
    103,887
    
    
    
    90,968Amortization
    
    
    3,635
    
    
    
    1,645Deferred income taxes
    
    
    2,066
    
    
    
    (1,524
    )Stock based compensation
    
    
    3,407
    
    
    
    3,752Change in LIFO inventory reserve
    
    
    97,811
    
    
    
    (117,874
    )Amortization of unrecognized postretirement benefits
    
    
    9,692
    
    
    
    25,843Loss (gain) on sale of assets
    
    
    2,039
    
    
    
    248Debt extinguishment costs
    
    
    593
    
    
    
    Changes in
operating assets and liabilities of continuing operations:Accounts receivable
    
    
    (56,691
    )
    
    
    (108,170
    )Inventories
    
    
    (293,367
    )
    
    
    230,999Other current assets
    
    
    (19,728
    )
    
    
    12,539Accounts payable
    
    
    61,416
    
    
    
    52,079Accrued liabilities
    
    
    13,554
    
    
    
    60,042Other items
    
    
    (10,559
    )
    
    
    9,734Net cash provided by (used in) continuing operations
    
    
    (155,299
    )
    
    
    325,953Net cash used in discontinued operations
    
    
    (1,274
    )
    
    
    (2,489
    )Net cash provided by (used in) operating activities
    
    
    (156,573
    )
    
    
    323,464Investing activities:Property, plant and equipment
    
    
    (100,592
    )
    
    
    (63,978
    )Proceeds from sale of Kumho investment
    
    
    106,950
    
    
    
    Proceeds from sale of available-for-sale debt securities
    
    
    49,765
    
    
    
    Investments in unconsolidated subsidiary
    
    
    (25,528
    )
    
    
    (659
    )Acquisition of business, deferred payment
    
    
    (5,956
    )
    
    
    Proceeds from the sale of assets
    
    
    6,272
    
    
    
    1,159Net cash provided by (used in) investing activities
    
    
    30,911
    
    
    
    (63,478
    )Financing activities:Issuance of (payments on) short-term debt
    
    
    86,846
    
    
    
    (39,607
    )Payments on long-term debt
    
    
    (14,300
    )
    
    
    (36,086
    )Premium paid on debt repurchases
    
    
    (552
    )
    
    
    Contributions of joint venture partner
    
    
    4,250
    
    
    
    Purchase of treasury shares
    
    
    (13,853
    )
    
    
    Payment of dividends
    
    
    (18,588
    )
    
    
    (18,573
    )Issuance of common shares and excess tax benefits on option exercises
    
    
    297
    
    
    
    84Net cash provided by (used in) financing activities
    
    
    44,100
    
    
    
    (94,182
    )Effects of exchange rate changes on cash of
continuing operations
    
    
    (350
    )
    
    
    (3,933
    )Changes in cash and cash equivalents
    
    
    (81,912
    )
    
    
    161,871Cash and cash equivalents at beginning of year
    
    
    345,947
    
    
    
    247,672Cash and cash equivalents at end of period
    
    $
    264,035
    
    
    $
    409,543
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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 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
nine-month periods ended September 30, 2009 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2009.The balance sheet at December 31, 2008 has been derived from the audited financial statements at
that date but does not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial statements.For further information, refer to the consolidated financial statements and footnotes thereto
included in the Companys Annual Report on Form 10-K for the year ended December 31, 2008, as
updated by the Companys current report on Form 8-K filed August 7, 2009.Principles of consolidation  The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries. Acquired businesses are included in the
consolidated financial statements from the dates of acquisition. All intercompany accounts and
transactions have been eliminated.The equity method of accounting is followed for investments in 20 percent to 50 percent owned
companies. The Companys investment in the Mexican tire manufacturing facility represents an
approximate 38 percent ownership interest.The cost method is followed in those situations where the Companys ownership is less than 20
percent and the Company does not have the ability to exercise significant influence over the
affiliate.The Company has entered into a joint venture with Kenda Tire Company to construct and operate a
tire manufacturing facility in China which was completed and began production in 2007. Under
the current agreement, until May 2012, all of the tires produced by this joint venture are
required to be exported and sold by Cooper Tire & Rubber Company and its affiliates. The
Company has also entered into a joint venture with Nemet International to market and distribute
Cooper, Pneustone and associated brand tires in Mexico. At December 31, 2008, the Company has
subordinated debt to the joint venture. The Company has determined that each of these entities
is a Variable Interest Entity (VIE) and it is the primary beneficiary. As such, the Company
has included their assets, liabilities and operating results in its consolidated financial
statements. The Company has recorded the interest related to the joint venture partners
ownership in noncontrolling shareholders interests in consolidated subsidiaries. The following
table summarizes the balance sheets of these variable interest entities at December 31:
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December 31,
    
    
    September 30,2008
    
    
    2009AssetsCash and cash equivalents
    
    $
    4,911
    
    
    $
    11,465Accounts receivable
    
    
    11,607
    
    
    
    10,324Inventories
    
    
    28,080
    
    
    
    20,199Prepaid expenses
    
    
    3,221
    
    
    
    5,087Total current assets
    
    
    47,819
    
    
    
    47,075Net property, plant and equipment
    
    
    134,639
    
    
    
    141,349Intangibles and other assets
    
    
    14,247
    
    
    
    11,767Total assets
    
    $
    196,705
    
    
    $
    200,191Liabilities and stockholders equityNotes payable
    
    $
    69,430
    
    
    $
    78,841Accounts payable
    
    
    8,478
    
    
    
    13,607Accrued liabilities
    
    
    120
    
    
    
    466Current portion of long-term debt
    
    
    11,428
    
    
    
    10,520Current liabilities
    
    
    89,456
    
    
    
    103,434Long-term debt
    
    
    10,500
    
    
    
    Stockholders equity
    
    
    96,749
    
    
    
    96,757Total liabilities and stockholders equity
    
    $
    196,705
    
    
    $
    200,191
 On January 1, 2009, the Company adopted the guidance of ASC 810-10 (SFAS No. 160) related
to the reporting of noncontrolling interests in the consolidated statement of operations and the
consolidated balance sheet. Certain amounts for the prior year have been reclassified to
conform to 2009 presentations. On the Consolidated Statements of Operations, the 2009 caption
Net income (loss) attributable to Cooper Tire & Rubber Company is comparable to the caption
Net income (loss) used in prior years.The Company has evaluated subsequent events for recognition or disclosure through the time it
filed this Form 10-Q with the Securities and Exchange Commission on November 2, 2009.2.
    
    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. Exchange rate fluctuations on the foreign currency-denominated intercompany loans
and obligations are offset by the change in values of the fair value foreign currency hedges.
The Company presently hedges exposures in the Euro, Canadian dollar, British pound sterling,
Swiss franc, Swedish kronar, Mexican peso and Chinese yuan generally for transactions expected
to occur within the next 12 months. The notional amount of these foreign currency derivative
instruments at December 31, 2008 and September 30, 2009 was $178,100 and $191,400,
respectively. The counterparties to each of these agreements are major commercial banks.
Management believes that the probability of losses related to credit risk on investments
classified as cash and cash equivalents is unlikely.The Company uses foreign currency forward contracts as hedges of the fair value of certain
non-U.S. dollar denominated asset and liability positions, primarily accounts receivable and
debt. Gains and losses resulting from the impact of currency exchange rate movements on these
forward contracts are recognized in the accompanying consolidated statements of income in the
period in which the exchange rates change and offset the foreign currency gains and losses on
the underlying exposure being hedged.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 $849 and $(4,529) as of December 31, 2008
and September 30, 2009, respectively) are
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recorded as a separate component of stockholders equity in the accompanying consolidated balance sheets and reclassified into earnings as the
hedged transaction affects earnings.The Company assesses hedge ineffectiveness quarterly using the hypothetical derivative
methodology. In doing so, the Company monitors the actual and forecasted foreign currency sales
and purchases versus the amounts hedged to identify any hedge ineffectiveness. 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 Consolidated Balance Sheet:
 (assets)/liabilities
    
    December 31, 2008
    
    
    September 30, 2009Derivatives designated as hedging
instruments
    
    Accrued liabilities
    
    $
    (1,058
    )
    
    Accrued liabilities
    
    $
    4,715Derivatives not designated as hedging
instruments
    
    Accrued liabilities
    
    $
    (194
    )
    
    Accrued liabilities
    
    $
    740
 The following table presents the location and amount of gains and losses on derivative
instruments in the consolidated statement of operations:
 Amount of Gain (Loss)
    
    
    Amount of Gain (Loss)Recognized in Other
    
    
    Reclassified from Cumulative
    
    
    Amount of Gain (Loss)Comprehensive Income on
    
    
    Other Comprehensive Loss
    
    
    Recognized in Other - net onDerivative (Effective Portion)
    
    
    into Net Sales (Effective Portion)
    
    
    Derivative (Ineffective Portion)Derivatives
    
    Three
    
    
    Nine
    
    
    Three
    
    
    Nine
    
    
    Three
    
    
    NineDesignated as
    
    Months
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    MonthsCash Flow
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedHedges
    
    Sept. 30, 2009
    
    
    Sept. 30, 2009
    
    
    Sept. 30, 2009
    
    
    Sept. 30, 2009
    
    
    Sept. 30, 2009
    
    
    Sept. 30, 2009Foreign exchange
contracts
    
    $
    (2,183
    )
    
    $
    (6,838
    )
    
    $
    641
    
    
    $
    (1,460
    )
    
    $
    (242
    )
    
    $
    (530
    )
 Amount of Gain (Loss) RecognizedLocation of
    
    
    in Income on DerivativesGain (Loss)
    
    
    Three
    
    
    NineDerivatives not
    
    Recognized
    
    
    Months
    
    
    MonthsDesignated as
    
    in Income on
    
    
    Ended
    
    
    EndedHedging Instruments
    
    Derivatives
    
    
    Sept. 30, 2009
    
    
    Sept. 30, 2009Foreign exchange contracts
    
    Other - net
    
    $
    129
    
    
    $
    (800
    )Interest swap contracts
    
    Interest expense
    
    $
    (142
    )
    
    $
    1,855$
    (13
    )
    
    $
    1,055
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For effective designated foreign exchange hedges, the Company reclassifies the gain (loss)
from Other Comprehensive Income into Net sales and the ineffective portion is recorded directly
into Other  net.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 September 30, 2009 and December 31, 2008:
 Quoted Prices
    
    
    SignificantTotal
    
    
    in Active Markets
    
    
    Other
    
    
    SignificantDerivative
    
    
    for Identical
    
    
    Observable
    
    
    Unobservable(Assets)
    
    
    Assets
    
    
    Inputs
    
    
    InputsDerivative Contracts
    
    Liabilities
    
    
    Level (1)
    
    
    Level (2)
    
    
    Level (3)September 30, 2009
    
    $
    5,455
    
    
    
    
    
    
    $
    5,455December 31, 2008
    
    $
    (1,252
    )
    
    
    
    
    
    $
    (1,252
    )
 The fair value of the Companys debt is computed using discounted cash flow analyses based
on the Companys estimated current incremental borrowing rates. The carrying amounts and fair
values of the Companys financial instruments are as follows:
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##### Table of Contents



December 31, 2008
    
    September 30, 2009Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueCash and cash equivalents
    
    $
    247,672
    
    
    $
    247,672
    
    
    $
    409,543
    
    
    $
    409,543Notes payable
    
    
    (184,774
    )
    
    
    (184,774
    )
    
    
    (143,612
    )
    
    
    (143,612
    )Current portion of long-term debt
    
    
    (147,761
    )
    
    
    (142,161
    )
    
    
    (107,481
    )
    
    
    (107,081
    )Long-term debt
    
    
    (325,749
    )
    
    
    (158,949
    )
    
    
    (329,943
    )
    
    
    (291,043
    )Derivative financial instruments
    
    
    1,252
    
    
    
    1,252
    
    
    
    (5,455
    )
    
    
    (5,455
    )
 3.
    
    The following table details information on the Companys operating segments.
 Three months ended September 30
    
    
    Nine months ended September 302008
    
    
    2009
    
    
    2008
    
    
    2009Revenues:North American Tire
    
    $
    586,188
    
    
    $
    573,886
    
    
    $
    1,631,373
    
    
    $
    1,440,536International Tire
    
    
    284,684
    
    
    
    296,841
    
    
    
    799,431
    
    
    
    720,235Eliminations
    
    
    (77,121
    )
    
    
    (67,933
    )
    
    
    (184,825
    )
    
    
    (154,840
    )Net sales
    
    $
    793,751
    
    
    $
    802,794
    
    
    $
    2,245,979
    
    
    $
    2,005,931Segment profit (loss):North American Tire
    
    $
    (51,165
    )
    
    $
    47,618
    
    
    $
    (64,927
    )
    
    $
    71,949International Tire
    
    
    7,231
    
    
    
    29,902
    
    
    
    20,085
    
    
    
    46,285Eliminations
    
    
    396
    
    
    
    (520
    )
    
    
    113
    
    
    
    (1,579
    )Unallocated corporate charges
    
    
    (3,477
    )
    
    
    (6,312
    )
    
    
    (8,149
    )
    
    
    (20,733
    )Operating profit (loss)
    
    
    (47,015
    )
    
    
    70,688
    
    
    
    (52,878
    )
    
    
    95,922Interest expense
    
    
    (12,821
    )
    
    
    (11,440
    )
    
    
    (37,041
    )
    
    
    (36,192
    )Interest income
    
    
    3,902
    
    
    
    2,259
    
    
    
    11,294
    
    
    
    4,739Debt extinguishment
    
    
    (10
    )
    
    
    
    
    
    
    (593
    )
    
    
    Dividend from unconsolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    1,943
    
    
    
    Other  net
    
    
    (1,244
    )
    
    
    (1,047
    )
    
    
    2,274
    
    
    
    1,025Income
(loss) from continuing operations before income taxes and
noncontrolling shareholders interests
    
    $
    (57,188
    )
    
    $
    60,460
    
    
    $
    (75,001
    )
    
    $
    65,494
 4.
    
    At December 31, 2008, approximately 33 percent of the Companys inventories had been valued
under the LIFO method. With the decrease in inventory and lower raw material costs in the
Companys operations in China, approximately 58 percent of the Companys inventories at
September 30, 2009 have been valued under the LIFO method. The remaining inventories have
been valued under the FIFO method or average cost method. All inventories are stated at the
lower of cost or market.Under the LIFO method, inventories have been reduced by approximately $221,854 and $103,980 at
December 31, 2008 and September 30, 2009, respectively, from current cost which would be
reported under the first-in, first-out method.5.
    
    The following table discloses the amount of stock based compensation expense for the
three-month and nine-month periods ended September 30, 2008 and 2009 relating to continuing
operations:
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Stock Based CompensationThree months ended September 30
    
    
    Nine months ended September 302008
    
    
    2009
    
    
    2008
    
    
    2009Stock options
    
    $
    86
    
    
    $
    287
    
    
    $
    265
    
    
    $
    657Restricted stock units
    
    
    447
    
    
    
    434
    
    
    
    1,533
    
    
    
    1,214Performance based units
    
    
    228
    
    
    
    697
    
    
    
    1,609
    
    
    
    1,881Total stock based
compensation
    
    $
    761
    
    
    $
    1,418
    
    
    $
    3,407
    
    
    $
    3,752
 Executives participating in the Companys Long-Term Incentive Plan for the plan year 2007 
2009 and 2008  2010, earn performance based units based on the Companys financial
performance. As part of the 2007  2009 plan, the units earned in 2007 and any units earned in
2009 will vest in February 2010. As part of the 2008  2010 plan, any units earned in 2009 or
2010 will vest in February 2011. No units were earned in 2008 for either plan.In April 2009, executives participating in the 2009  2011 Long-Term Incentive Plan were
granted 1,153,000 stock options which will vest one third each year through April 2012. The
fair value of these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions:
 2009Risk-free interest rate
    
    
    2.2
    %Dividend yield
    
    
    2.7
    %Expected volatility of the
Companys common stock
    
    
    0.570Expected life in years
    
    
    6.0
 The weighted-average fair value of options granted in April of 2009 was $2.08. The estimated
fair value of options is amortized to expense over the options vesting period.The following table provides details of the restricted stock unit activity for the nine months
ended September 30, 2009:
 Restricted stock units outstanding at January 1, 2009
    
    
    403,637Restricted stock units granted
    
    
    42,473Accrued dividend equivalents
    
    
    16,147Restricted stock units settled
    
    
    (40,564
    )Restricted stock units cancelled
    
    
    (3,729
    )Restricted stock units outstanding at September 30, 2009
    
    
    417,964
 6.
    
    The following tables disclose the amount of net periodic benefit costs for the three-month
and nine-month periods ended September 30, 2008 and 2009 for the Companys defined benefit
plans and other postretirement benefits relating to continuing operations:
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##### Table of Contents



Pension BenefitsThree months ended September 30
    
    
    Nine months ended September 302008
    
    
    2009
    
    
    2008
    
    
    2009Components of net periodicbenefit cost:Service cost
    
    $
    5,293
    
    
    $
    806
    
    
    $
    16,344
    
    
    $
    7,332Interest cost
    
    
    15,053
    
    
    
    14,378
    
    
    
    47,601
    
    
    
    43,603Expected return on plan assets
    
    
    (19,156
    )
    
    
    (14,095
    )
    
    
    (60,183
    )
    
    
    (41,674
    )Amortization of prior service cost
    
    
    104
    
    
    
    (270
    )
    
    
    356
    
    
    
    (803
    )Recognized actuarial loss
    
    
    2,828
    
    
    
    12,002
    
    
    
    8,670
    
    
    
    26,877Net periodic benefit cost
    
    $
    4,122
    
    
    $
    12,821
    
    
    $
    12,788
    
    
    $
    35,335
 Other Postretirement BenefitsThree months ended September 30
    
    
    Nine months ended September 302008
    
    
    2009
    
    
    2008
    
    
    2009Components of net periodicbenefit cost:Service cost
    
    $
    1,244
    
    
    $
    828
    
    
    $
    3,731
    
    
    $
    2,728Interest cost
    
    
    3,871
    
    
    
    3,501
    
    
    
    11,617
    
    
    
    10,901Amortization of prior service cost
    
    
    (77
    )
    
    
    (80
    )
    
    
    (231
    )
    
    
    (230
    )Recognized actuarial loss (gain)
    
    
    300
    
    
    
    (150
    )
    
    
    898
    
    
    
    Net periodic benefit cost
    
    $
    5,338
    
    
    $
    4,099
    
    
    $
    16,015
    
    
    $
    13,399
 Recognized actuarial loss of pension costs in 2009 has been increased by $1,102 and $3,915 for
the nine and three-month periods, respectively, due to recognition of settlement losses
partially offset by curtailment gains attributable to the Albany, Georgia plant closure which
have been recorded within restructuring expense.
 On April 9, 2009, the Company announced pension benefits in the Spectrum (salaried employees)
Plan would be frozen effective July 1, 2009. The impact of the pension freeze is estimated to
be a reduction in pension expense for 2009 of $7,800, of which $3,900 has been recognized in the
third quarter. In the second quarter, the Company recognized a pension curtailment gain of
$10,100 related to the announced Spectrum Plan benefit freeze which was credited to cost of good
sold ($8,000) and corporate selling, general and administrative expenses ($2,100) and is not
reflected in the above table. Also effective July 1, 2009, the Company has instituted an
enhanced matching feature in the Spectrum 401(K) plan at an estimated cost for 2009 of $2,800,
of which $1,200 was recorded in the third quarter.In the third quarter of 2009, the Company contributed $22,000 of its common stock to its
domestic retirement trust and thereby completed its minimum domestic plan funding requirements
for 2009.During 2009, the Company plans global pension funding of between $50,000 and $55,000 of which
$43,000 relates to its domestic plans where the funding requirements were completed as of
September 30, 2009.
 7.
    
    On an annual basis, disclosure of comprehensive income (loss) is incorporated into the
Statement of Shareholders Equity. This statement is not presented on a quarterly basis.
Comprehensive income includes net income and components of other comprehensive income, such as foreign currency
translation adjustments, unrealized gains or losses on certain marketable securities and
derivative instruments and minimum pension liability adjustments.
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The Companys comprehensive income (loss) is as follows:
 Three months ended September 30
    
    
    Nine months ended September 302008
    
    
    2009
    
    
    2008
    
    
    2009Net income
(loss) attributable to Cooper Tire & Rubber Company
    
    $
    (55,381
    )
    
    $
    46,831
    
    
    $
    (75,926
    )
    
    $
    12,604Other comprehensive income (loss):Currency translation adjustments
    
    
    (12,238
    )
    
    
    (2,013
    )
    
    
    2,935
    
    
    
    8,962Unrealized net gains (losses) on derivative instruments and marketable securities, net of tax
    
    
    6,203
    
    
    
    (2,273
    )
    
    
    4,203
    
    
    
    (6,886
    )Unrecognized postretirement benefit plans, net of tax
    
    
    6,384
    
    
    
    13,225
    
    
    
    12,477
    
    
    
    14,725Comprehensive income (loss) attributable to Cooper Tire & Rubber Company
    
    
    (55,032
    )
    
    
    55,770
    
    
    
    (56,311
    )
    
    
    29,405Net and
comprehensive income attributable to noncontrolling shareholders interests
    
    
    378
    
    
    
    10,664
    
    
    
    2,952
    
    
    
    15,282Total comprehensive income (loss)
    
    $
    (55,032
    )
    
    $
    55,770
    
    
    $
    (56,311
    )
    
    $
    29,405
 8.
    
    During the third quarter of 2009, the Company recorded restructuring expenses associated with
three initiatives described below.Albany manufacturing facility closureThe Albany manufacturing closure, announced December 17, 2008, is resulting in a workforce
reduction of approximately 1,400 people and charges of between $120,000 and $145,000 for
restructuring expense and asset impairment.The Company recorded $12,337 of net restructuring expense associated with this initiative during
the third quarter of 2009. The Company recorded $9,055 of equipment relocation and other costs
this period. The Company also recorded $5,741 of employee related costs. Included in employee
related costs are severance costs of $755 and $3,915 of settlement losses partially offset by
curtailment gains related to pension benefits. During the third quarter, the Company received
$2,459 in government grants partially offsetting these restructuring costs.During the first nine months of 2009, the Company has recorded $34,654 of net restructuring
expense related to the Albany closure. The Company has recorded $20,277 of equipment relocation
and other costs during the first nine months of 2009. The Company also recorded $17,037 of
employee related costs. Included in employee related costs are severance costs of $13,306 and
$1,102 of settlement losses partially offset by curtailment gains related to pension benefits.
The Company has received $2,660 in government grant receipts through the first nine months of
2009. Through September 30, 2009, the Company has recorded $113,298 of restructuring costs
associated with this initiative partially offset by $2,660 of government grant receipts.At December 31, 2008, the accrued severance balance was $429 and the severance costs recorded
during the first nine months of 2009 increased the balance to $13,735. During the first nine
months, the Company made $9,106 of severance payments resulting in an accrued severance balance
at September 30, 2009 of $4,629. The severance charges recorded represent the Companys best
estimate of future amounts to be paid and approximate fair value.Distribution center closuresDuring 2009, the Company also recorded restructuring expenses associated with the closure of two
distribution centers. The closure of the Dayton, New Jersey distribution center during 2008
impacted nine people at a total cost of $464, of which $46 was recorded in the first quarter of
2009.
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In June 2009, the Company announced the planned closure of its Moraine, Ohio
distribution center. This initiative is expected to cost between $1,900 and $2,300. This
amount includes personnel related costs of $1,100 and equipment related costs between $800 and
$1,200. This initiative is expected to be completed by the end of the fourth quarter 2009 and
will impact approximately 60 people. During the third quarter, the Company recorded $666 of
employee related costs and $381 of equipment related costs. For the nine months ended September
30, 2009, the Company has recorded $960 of employee related costs and $381 of equipment related
costs.The Company has recorded $900 of severance costs related to the closure of the Moraine
distribution center and has made severance payments totaling $278, leaving an accrual balance of
$622 at September 30, 2009. The severance charges recorded represent the Companys best estimate of future
amounts to be paid and approximate fair value.European headcount reductionIn Cooper Tire Europe, a restructuring program to reduce headcount to align with production
volume requirements was initiated during the second quarter of 2009. This initiative resulted
in the elimination of 45 positions and was completed early in the third quarter. The Company
recorded $405 of severance cost related to this initiative and all severance amounts have been
paid.
 9.
    
    The Company provides for the estimated cost of product warranties at the time revenue is
recognized based primarily on historical return rates, estimates of the eligible tire
population, and the value of tires to be replaced. The following table summarizes the
activity in the Companys product warranty liabilities for 2008 and 2009:
 2008
    
    
    2009Reserve at January 1
    
    $
    16,510
    
    
    $
    18,244Additions
    
    
    17,506
    
    
    
    14,757Payments
    
    
    (13,828
    )
    
    
    (11,949
    )Reserve at September 30
    
    $
    20,188
    
    
    $
    21,052
 10.
    
    The Company is a defendant in various products liability claims brought in numerous
jurisdictions in which individuals seek damages resulting from automobile accidents allegedly
caused by defective tires manufactured by the Company. Each of the products liability claims
faced by the Company generally involve different types of tires, models and lines, different
circumstances surrounding the accident such as different applications, vehicles, speeds, road
conditions, weather conditions, driver error, tire repair and maintenance practices, service
life conditions, as well as different jurisdictions and different injuries. In addition, in
many of the Companys products liability lawsuits the plaintiff alleges that his or her harm
was caused by one or more co-defendants who acted independently of the Company. Accordingly,
both the claims asserted and the resolutions of those claims have an enormous amount of
variability. The aggregate amount of damages asserted at any point in time is not
determinable since often times when claims are filed, the plaintiffs do not specify the amount
of damages. Even when there is an amount alleged, at times the amount is wildly inflated and
has no rational basis.The fact that the Company is a defendant in products liability lawsuits is not surprising given
the current litigation climate which is largely confined to the United States. However, the
fact that the Company is subject to claims does not indicate that there is a quality issue with
the Companys tires. The Company sells approximately 30 to 35 million passenger, light truck,
SUV, high performance, ultra high performance and
radial medium truck tires per year in North America. The Company estimates that approximately
300 million Cooper-produced tires  made up of thousands of different specifications  are
still on the road in North America. While tire disablements do occur, it is the Companys and
the tire industrys experience that the vast majority of tire failures relate to service-related
conditions which are entirely out of the
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##### Table of Contents



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.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 third quarter of 2009, the Company increased its products liability reserve by
$14,766. The addition of another quarter of self-insured incidents accounted for $9,578 of this
increase and amounts on existing reserves increased by $5,188.During the first nine months of 2009, the Company increased its products liability reserve by
$43,545. The addition of another nine months of self-insured incidents accounted for $28,566 of
this increase. The Company revised its estimates of future settlements for unasserted and
premature claims, which increased the reserve by $1,788. Finally, amounts on existing reserves
increased by $13,191.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
 15




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##### Table of Contents



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 $4,260 during the third quarter of 2009 to resolve cases and claims and has
paid $21,320 through the first nine months of 2009. The Companys products liability reserve
balance at December 31, 2008 totaled $123,632 (current portion of $28,737) and the balance at
September 30, 2009 totaled $145,857 (current portion of $30,737).
 The products liability expense reported by the Company includes amortization of insurance
premium costs, adjustments to settlement reserves and legal costs incurred in defending claims
against the Company offset by recoveries of legal fees. Legal costs are expensed as incurred
and products liability insurance premiums are amortized over coverage periods. The Company is
entitled to reimbursement, under certain insurance contracts in place for periods ending prior
to April 1, 2003, of legal fees expensed in prior periods based on events occurring in those
periods. The Company records the reimbursements under such policies in the period the
conditions for reimbursement are met.For the three-month periods ended September 30, 2008 and 2009, products liability expenses
totaled $14,934 and $20,968, respectively, and include recoveries of legal fees of $735 and $427
in the periods ended September 30, 2008 and 2009, respectively. For the nine-month periods
ended September 30, 2008 and 2009, products liability expenses totaled $60,759 and $61,888,
respectively, and include recoveries of legal fees of $4,903 and $2,368 in the periods ended
September 30, 2008 and 2009, respectively. Policies applicable to claims occurring on April 1,
2003 and thereafter do not provide for recovery of legal fees.11.
    
    For the quarter ended September 30, 2009, the Company recorded an income tax expense for
continuing operations of $2,628 which includes a tax benefit for discrete items of $1,212
relating primarily to the release of reserves resulting from the expiration of statutes of
limitations during the quarter. The effective tax rate for the quarter and nine month period
ended September 30, 2009 for continuing operations is 6.4 percent and -0.9 percent,
respectively, exclusive of discrete items, using forecasted jurisdictional annual effective
rates. For comparable periods in 2008, the effective tax rate for continuing operations,
exclusive of discrete items, was -1.5 percent and -0.8 percent, respectively, using a
forecasted jurisdictional annual effective tax rates. The change in the effective tax rate,
exclusive of discrete items, relates primarily to the improvement in earnings, a specified
liability loss carry back, and the mix of earnings or loss by jurisdiction as compared to
2008.The Company maintains a valuation allowance on its net U.S. and certain non-U.S. deferred tax
asset positions. The valuation allowance will be maintained as long as it is more likely than
not that some portion of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are determined separately for each taxing jurisdiction in which the Company conducts
its operations or otherwise generates taxable income or losses. In the U.S., the Company has
recorded significant deferred tax assets, the largest of which 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 $221,607 valuation allowance
for the portion of U.S. deferred tax assets exceeding its U.S. deferred tax liabilities. In
addition, the Company has recorded valuation allowances of $7,992 for deferred tax assets
associated with losses in foreign jurisdictions.The Company maintains a liability for unrecognized tax benefits for permanent and temporary
book/tax differences for continuing operations. At September 30, 2009, the Companys liability,
exclusive of interest, totals approximately $9,684. The Company accrued a net interest benefit
for the quarter of $169 and net interest expense of $204 for the nine month period for uncertain tax positions. These
have been recorded as discrete items in its tax provision.At September 30, 2009, the Company has approximately $23,374 of primarily U.S. cash tax refunds
receivable. It is anticipated that these receivables will be collected after 2009.
 16




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##### Table of Contents



In 2003 the Company initiated bilateral Advance Pricing Agreement (APA) negotiations with
the Canadian and U.S. governments to change its intercompany transfer pricing process between a
formerly owned subsidiary, Cooper-Standard Automotive, Inc., and its Canadian affiliate. In
2009 the governments executed mutual agreement letters to settle the APA for periods
2000-2007. Under terms of the 2004 sale agreement for the subsidiary, the Company is
responsible for all tax obligations and is entitled to receive all tax refunds for periods
relating to its period of ownership ending December 23, 2004. The resulting cash impact to the
Company of the above settlement consists of a refund of taxes paid in Canada, net of various
offsets, of approximately $69,000 and a tax obligation in the U.S. of approximately $35,000.
The net impact would be a gain of approximately $34,000. The Companys U.S. tax obligation has
been revised to incorporate the terms of the settlement. Under the terms of the sale agreement,
the Company is entitled to the prompt remittance of all refunds of taxes imposed on the former
Canadian affiliate relating to a pre-closing tax period. In the second quarter of 2009, the
Company recorded a net charge of $35,000 to discontinued operations for the estimated U.S. tax
obligation relating to the settlement. On July 27, 2009, the Canadian affiliate received a
substantial portion of the anticipated refund. However, the refund was not remitted to the
Company and on August 3, 2009, Cooper-Standard Holdings Inc., the company that acquired the
former subsidiary, and its U.S. affiliates filed voluntary petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code and the Canadian affiliate filed for bankruptcy
protection in Canada on August 4, 2009. The Company is pursuing all options to recover the tax refunds to which it is entitled
under the sale agreement and has filed adversary proceedings in the Delaware Bankruptcy Court
against Cooper-Standard Holdings Inc., Cooper-Standard Automotive Inc., and its Canadian
affiliate. Based upon these facts, the Company does not believe
the criteria for recognition of the receivable of the taxes paid during the Companys ownership
has been met and will not record a receivable until the certainty of realization is
assured.The Company and its subsidiaries are subject to income taxes in the U.S. federal jurisdiction
and various state and foreign jurisdictions. With few exceptions, the Company is no longer
subject to U.S. federal, state and foreign tax examinations by tax authorities for years prior
to 2000.12.
    
    The Company and the United Steelworkers entered into a series of letter agreements beginning
in 1991 establishing maximum annual amounts that the Company would contribute for funding the
cost of health care coverage for certain union retirees who retired after specific dates.
Prior to January 1, 2004, the maximum annual amounts had never been implemented. On January
1, 2004, however, the Company implemented the existing letter agreements according to its
terms and began requiring these retirees and surviving spouses to make contributions for the
cost of their health care coverage.On April 18, 2006, a group of the Companys union retirees and surviving spouses filed a lawsuit
in the U.S. District Court for the Northern District of Ohio on behalf of a purported class
claiming that the Company was not entitled to impose anycontribution requirement pursuant to
the letter agreements and that Plaintiffs were promised lifetime benefits, at no cost, after
retirement under the terms of the union-Company negotiated Pension and Insurance Agreements in
effect at the time that they retired.On May 13, 2008, in the case of Cates, et al v. Cooper Tire & Rubber Company, the United States
District Court for the Northern District of Ohio entered an order holding that a series of
pension and insurance agreements negotiated by the Company and its various union locals over the
years conferred vested lifetime health care benefits upon certain Company hourly retirees. The
Court further held that these benefits were not subject to the caps on the Companys annual
contributions for retiree health care benefits that the Company had negotiated with the union
locals. Subsequent to that order, the Court granted the Plaintiffs motion for class
certification. The Company initiated the process of pursuing an appeal of the order to the
Sixth Circuit Court of Appeals, while simultaneously reviewing other means of satisfactorily
resolving the case through settlement discussions. As a result of the settlement discussions
and in an attempt to resolve the claims relating to health care benefits for the Companys
hourly union-represented retirees, a related lawsuit, Johnson, et al v. Cooper Tire & Rubber
Company, was filed on February 3, 2009, with the Court on
behalf of a different, smaller group of hourly union-represented retirees. The second case was
stayed pending the parties settlement discussions.
 17




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In April, 2009, the parties negotiated a tentative agreement intended to resolve all related
claims for these matters. Pursuant to the Courts order, the parties submitted a proposed
settlement agreement for approval. The proposed settlement agreement, which is subject to Court
approvals, provides for 1) a cash payment of $7.05 million 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.Notices of the proposed settlement agreement were sent to class members on October 13, 2009.
Objections by class members to the proposed settlement agreement must be filed with the Court no
later than December 10, 2009. The Court will hold a Fairness Hearing, set for February 2, 2010
to consider whether the settlement is fair, reasonable and adequate.While the proposed settlement agreement could be modified before it becomes effective and the
related cases are concluded, the Company believes it is probable that the related costs of
resolving these cases will be close to the amounts in the proposed settlement agreement and,
accordingly, has recorded $7.05 million of expense during the first quarter relating to the
specified payments. The estimated present value of costs related to the plan amendment is
expected to be approximately $7.7 million which has been reflected as an increase in the accrual
for Other Post-employment Benefits with an offset to the Accumulated Other Comprehensive Income
component of Shareholders Equity and will be amortized as a charge to operations over the
remaining life expectancy of the affected plan participants beginning with the effective date of
the changes.13.
    
    On July 3, 2009, the Company received notification from its noncontrolling shareholder in the
Cooper Chengshan entity of its intention to exercise a portion of its put option after it
receives related governmental approvals and satisfies other conditions. If the put option is
exercised, the Company has the obligation to purchase the 14 percent share for $17,920.14.
    
    Certain operating leases related to property and equipment used in the operations of
Cooper-Standard Automotive were guaranteed by the Company. These guarantees require the
Company, in the event Cooper-Standard Automotive fails to honor its commitments, to satisfy
the terms of the lease agreements. As part of the sale of the automotive segment, the Company
is seeking releases of those guarantees, but to date has been unable to secure releases from
certain lessors. The most significant of those leases is for a U.S. manufacturing facility
with a remaining term of seven years and total remaining payments of approximately $8,700.
Other leases cover two facilities in the United Kingdom. These leases have remaining terms of
four years and remaining payments of approximately $2,600.During the third quarter, Cooper-Standard Holdings Inc., the company that acquired
Cooper-Standard Automotive, and its United States and Canadian affiliates filed for bankruptcy
protection. The Company does not believe it is presently probable that it will be called upon
to make payments on any of the leases. Accordingly, no accrual for these guarantees has been
recorded. If information becomes known to the Company at a later date which indicates its
future performance under these guarantees is probable, accruals for the obligations will be
required.
 
 Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  18




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##### Table of Contents



Consolidated Results of Operations
 (Dollar amounts in millions except per share amounts)


    
    Three months ended September 30
    
    
    Nine months ended September 302008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change
    
    
    2009Revenues:North American Tire
    
    $
    586.2
    
    
    
    -2.1
    %
    
    $
    573.9
    
    
    $
    1,631.4
    
    
    
    -11.7
    %
    
    $
    1,440.6International Tire
    
    
    284.7
    
    
    
    4.3
    %
    
    
    296.8
    
    
    
    799.4
    
    
    
    -9.9
    %
    
    
    720.2Eliminations
    
    
    (77.1
    )
    
    
    -11.9
    %
    
    
    (67.9
    )
    
    
    (184.8
    )
    
    
    -16.2
    %
    
    
    (154.9
    )Net sales
    
    $
    793.8
    
    
    
    1.1
    %
    
    $
    802.8
    
    
    $
    2,246.0
    
    
    
    -10.7
    %
    
    $
    2,005.9Segment profit (loss):North American Tire
    
    $
    (51.1
    )
    
    
    n/m
    
    
    $
    47.6
    
    
    $
    (64.9
    )
    
    
    n/m
    
    
    $
    71.9International Tire
    
    
    7.2
    
    
    
    n/m
    
    
    
    29.9
    
    
    
    20.1
    
    
    
    n/m
    
    
    
    46.3Eliminations
    
    
    0.4
    
    
    
    n/m
    
    
    
    (0.5
    )
    
    
    0.1
    
    
    
    n/m
    
    
    
    (1.6
    )Unallocated corporate charges
    
    
    (3.5
    )
    
    
    80.0
    %
    
    
    (6.3
    )
    
    
    (8.2
    )
    
    
    n/m
    
    
    
    (20.7
    )Operating profit (loss)
    
    
    (47.0
    )
    
    
    n/m
    
    
    
    70.7
    
    
    
    (52.9
    )
    
    
    n/m
    
    
    
    95.9Interest expense
    
    
    (12.8
    )
    
    
    -10.9
    %
    
    
    (11.4
    )
    
    
    (37.0
    )
    
    
    -2.2
    %
    
    
    (36.2
    )Debt extinguishment costs
    
    
    
    
    
    
    n/m
    
    
    
    
    
    
    
    (0.6
    )
    
    
    n/m
    
    
    
    Interest income
    
    
    3.9
    
    
    
    -43.6
    %
    
    
    2.2
    
    
    
    11.3
    
    
    
    -57.5
    %
    
    
    4.8Dividend from unconsolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    n/m
    
    
    
    Other  net
    
    
    (1.2
    )
    
    
    -8.3
    %
    
    
    (1.1
    )
    
    
    2.3
    
    
    
    -56.5
    %
    
    
    1.0Income (loss) from continuing operations
before income taxes
    
    
    (57.1
    )
    
    
    
    
    
    
    60.4
    
    
    
    (75.0
    )
    
    
    
    
    
    
    65.5Income tax benefit (expense)
    
    
    2.3
    
    
    
    
    
    
    
    (2.6
    )
    
    
    1.9
    
    
    
    
    
    
    
    0.2Income (loss) from continuing operations
    
    
    (54.8
    )
    
    
    
    
    
    
    57.8
    
    
    
    (73.1
    )
    
    
    
    
    
    
    65.7Income (loss) from discontinued operations,
net of income taxes
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.3
    )
    
    
    0.1
    
    
    
    
    
    
    
    (37.8
    )Noncontrolling shareholders interests
    
    
    (0.4
    )
    
    
    
    
    
    
    (10.7
    )
    
    
    (2.9
    )
    
    
    
    
    
    
    (15.3
    )Net income (loss)
attributable to Cooper Tire & Rubber Company
    
    $
    (55.4
    )
    
    
    
    
    
    $
    46.8
    
    
    $
    (75.9
    )
    
    
    
    
    
    $
    12.6Basic earnings (loss) per share
    
    $
    (0.94
    )
    
    
    
    
    
    $
    0.79
    
    
    $
    (1.29
    )
    
    
    
    
    
    $
    0.85Diluted earnings (loss) per share
    
    $
    (0.94
    )
    
    
    
    
    
    $
    0.77
    
    
    $
    (1.29
    )
    
    
    
    
    
    $
    0.84
     19




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Cates
    20




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North American Tire Operations Segment
 Three months ended September 30
    
    Nine months ended September 30(Dollar amounts in millions)
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change
    
    2009Sales
    
    $
    586.2
    
    
    
    -2.1
    %
    
    $
    573.9
    
    
    $
    1,631.4
    
    
    
    -11.7
    %
    
    $
    1,440.6Operating profit (loss)
    
    $
    (51.1
    )
    
    
    n/m
    
    
    $
    47.6
    
    
    $
    (64.9
    )
    
    
    n/m
    
    
    $
    71.9United States unit shipments changes:Passenger tiresSegment
    
    
    
    
    
    
    1.6
    %
    
    
    
    
    
    
    
    
    
    
    -12.5
    %RMA members
    
    
    
    
    
    
    0.6
    %
    
    
    
    
    
    
    
    
    
    
    -7.7
    %Total Industry
    
    
    
    
    
    
    3.2
    %
    
    
    
    
    
    
    
    
    
    
    -7.3
    %Light truck tiresSegment
    
    
    
    
    
    
    4.2
    %
    
    
    
    
    
    
    
    
    
    
    -19.6
    %RMA members
    
    
    
    
    
    
    3.8
    %
    
    
    
    
    
    
    
    
    
    
    -10.9
    %Total Industry
    
    
    
    
    
    
    4.5
    %
    
    
    
    
    
    
    
    
    
    
    -12.4
    %Total light vehicle tiresSegment
    
    
    
    
    
    
    2.0
    %
    
    
    
    
    
    
    
    
    
    
    -13.8
    %RMA members
    
    
    
    
    
    
    1.0
    %
    
    
    
    
    
    
    
    
    
    
    -8.1
    %Total Industry
    
    
    
    
    
    
    3.3
    %
    
    
    
    
    
    
    
    
    
    
    -7.9
    %Total segment unit sales changes
    
    
    
    
    
    
    0.8
    %
    
    
    
    
    
    
    
    
    
    
    -12.0
    %
 21




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Overview
  Sales
   Operating Profit
   22




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##### Table of Contents



Segment Outlook
     International Tire Operations Segment
 Three months ended September 30
    
    Nine months ended September 30(Dollar amounts in millions)
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change
    
    2009Sales
    
    $
    284.7
    
    
    
    4.3
    %
    
    $
    296.8
    
    
    $
    799.4
    
    
    
    -9.9
    %
    
    $
    720.2Operating profit
    
    $
    7.2
    
    
    
    315.3
    %
    
    $
    29.9
    
    
    $
    20.1
    
    
    
    130.3
    %
    
    $
    46.3Unit sales change
    
    
    
    
    
    
    15.0
    %
    
    
    
    
    
    
    
    
    
    
    -3.5
    %
 23




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Overview
  Sales
   Operating Profit
   Segment Outlook
   24




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Outlook for Company
       Liquidity and Capital Resources
 Generation and uses of cash 
 25




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Available credit facilities 
  Available cash and contractual commitments 
   26




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##### Table of Contents



Parent company7.75% unsecured notes due December 2009
    
    $
    96.98% unsecured notes due December 2019
    
    
    173.67.625% unsecured notes due March 2027
    
    
    116.9Capitalized leases and other
    
    
    5.1392.5Subsidiaries3.72% to 6.80% unsecured notes due in 2010
    
    
    14.95.13% to 5.40% unsecured notes due in 2011
    
    
    9.54.86% to 5.40% unsecured notes due in 2012
    
    
    20.544.9Total long-term debt
    
    
    437.4Less current maturities
    
    
    (107.5
    )$
    329.9
 Contingencies
 Guarantees
   Litigation
  27




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##### Table of Contents



Forward-Looking Statements
  
    
    changes in economic and business conditions in the world;
    
    the failure to achieve expected sales levels;
    
    consolidation among the Companys competitors and customers;
    
    technology advancements;
    
    the failure of the Companys suppliers to timely deliver products in accordance with
contract specifications;
    
    changes in interest and foreign exchange rates;
    
    changes in the Companys customer relationships, including loss of particular business for
competitive or other reasons;
    
    the impact of reductions in the insurance program covering the principal risks to the
Company, and other unanticipated events and conditions;
    
    volatility in raw material and energy prices, including those of steel, petroleum-based
products and natural gas and the unavailability of such raw materials or energy sources;
    
    the inability to obtain and maintain price increases to offset higher production or
material costs;
    
    increased competitive activity including actions by larger competitors or low-cost
producers;
    
    the inability to recover the costs to develop and test new products and processes;
    
    the risks associated with doing business outside of the United States;
    
    changes in pension expense and/or funding resulting from investment performance of the
Companys pension plan assets and changes in discount rate, salary increase rate, and expected
return on plan assets assumptions, or changes to related accounting regulations;
    
    government regulatory initiatives, including regulations under the TREAD Act;
    
    the impact of labor problems, including a strike brought against the Company or against one
or more of its large customers or suppliers;
    
    litigation brought against the Company including products liability;
    
    an adverse change in the Companys credit ratings, which could increase its borrowing costs
and/or hamper its access to the credit markets;
    
    changes to the credit markets and/or access to those markets;
 28




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##### Table of Contents




    
    inaccurate assumptions used in developing the Companys strategic plan or the inability or
failure to successfully implement the Companys strategic plan including closure of the
Albany, Georgia facility;
    
    inability to adequately protect the Companys intellectual property rights;
    
    failure to successfully integrate acquisitions into operations or their related financings
may impact liquidity and capital resources;
    
    inability to use deferred tax assets;
    
    recent changes of tariffs for certain tires imported into the United States from China,
and;
    
    changes in the Companys relationship with joint venture partners.
    
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
   
 Part II. OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  Cates, et al Johnson, et al
 29




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##### Table of Contents



Item 1A. RISK FACTORS
  The Company is facing heightened risks due to the current business environment.
    Pricing volatility for raw materials could result in increased costs and may affect the Companys
profitability.
   If the price of natural gas or other energy sources increases, the Companys operating expenses
could increase significantly.
   30




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##### Table of Contents



The Companys industry is highly competitive, and it may not be able to compete effectively with
low-cost producers and larger competitors.
  The Company may be unable to recover new product and process development and testing costs, which
could increase the cost of operating its business.
  The Company conducts its manufacturing, sales and distribution operations on a worldwide basis and
is subject to risks associated with doing business outside the United States.
  The Companys results could be impacted by the tariffs recently imposed by the United States
government on tires imported from China.
 th
 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.
  31




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##### Table of Contents



any
 Cates, et al v. Cooper Tire & Rubber Company Johnson, et al v. Cooper Tire & Rubber Company
   32




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##### Table of Contents



Compliance with the TREAD Act and similar regulatory initiatives could increase the cost of
operating the Companys business.
    Any interruption in the Companys skilled workforce could impair its operations and harm its
earnings and results of operations .
  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.
  33




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##### Table of Contents



The Company has a risk due to the volatility of the capital and financial markets.
    If assumptions used in developing the Companys strategic plan are inaccurate or the Company is
unable to execute its strategic plan effectively, its profitability and financial position could
decline.
  
   The Company may not be able to protect its intellectual property rights adequately.
  34




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##### Table of Contents



The Company may not be successful in integrating acquisitions into its operations, which could harm
its results of operations and financial condition.
  
    
    the possible inability to integrate an acquired business into its operations;
    
    increased intangible asset amortization;
    
    diversion of managements attention;
    
    loss of key management personnel;
    
    unanticipated problems or liabilities; and
    
    increased labor and regulatory compliance costs of acquired businesses.
  Acquisitions and their related financings may adversely affect the Companys liquidity and capital
resources.
  The Company is required to comply with environmental laws and regulations that cause it to incur
significant costs.
  35




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##### Table of Contents



A portion of the Companys business is seasonal, which may affect its period-to-period results .
  The realizability of deferred tax assets may affect the Companys profitability and cash flows.
  The impact of new accounting standards on determining pension and other postretirement benefit
plans expense may have a negative impact on the Companys results of operations.
  There are risks associated with the Companys global strategy of using joint ventures and partially
owned subsidiaries.
  36




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##### Table of Contents



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
 37




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##### Table of Contents



COOPER TIRE & RUBBER COMPANY/s/ P. G. WeaverP. G. WeaverVice President and Chief Financial Officer
(Principal Financial Officer)/s/ R. W. HuberR. W. HuberDirector of External Reporting
(Principal Accounting Officer) November 2,
2009
 38