Cooper Tire & Rubber Company Reports Second Quarter 2016 Results

Cooper Tire & Rubber Company (NYSE: CTB) today reported second quarter
2016 net income of $71 million, or diluted earnings per share of $1.27,
compared with $60 million, or $1.03 per share, last year.

Second Quarter Highlights:

• Unit volume increased 0.9 percent year-over-year
• Net sales decreased 1.5 percent to $740 million
• Operating profit increased by 10.5 percent year-over-year to $110
  million, or 14.8 percent of net sales; a record for the period
• Diluted earnings per share of $1.27 compared with $1.03 per share a
  year ago
• Repurchased $29.3 million of stock during the quarter

“Cooper closed the first half of 2016 with another outstanding quarter,”
said Chairman, Chief Executive Officer and President Roy Armes. “We
achieved record-setting second quarter operating margin, building upon
the strong results we delivered in the first quarter. The Americas
segment posted another terrific quarter, generating operating margin of
more than 17 percent. Our International segment performed better than
expected, moving from a loss to delivering an operating profit for the
period. Cooper continues to execute on our strategy to deliver
shareholder value, including returning cash to shareholders through our
quarterly dividend and share repurchases, which totaled more than $29
million during the second quarter,” Armes added. “As my retirement will
be effective Aug. 31, this is the final quarter I will report on behalf
of Cooper. It has been my honor to lead such a talented and committed
team in transforming the Cooper business model to deliver outstanding
results quarter after quarter, positioning the company for long-term
success.”

Consolidated Results:

Consolidated Second Quarter Results:

• Second quarter net sales were $740 million, a decrease of 1.5 percent
  compared with $752 million in the second quarter of 2015. Second
  quarter results include $7 million of higher unit volume, with
  increases in the International segment partially offset by decreases
  in the Americas segment. The unit volume increase was more than offset
  by $11 million of negative currency impact and $8 million of
  unfavorable price and mix, primarily due to net price reductions
  related to lower raw material costs.
• Second quarter 2016 operating profit was $110 million compared with
  $99 million for the same period last year. Operating profit increased
  as a result of $23 million of favorable raw material costs, net of
  price and mix, $2 million of higher unit volume, and $1 million of
  lower other costs. These benefits were partially offset by $10 million
  of unfavorable SG&A expense and $5 million of higher manufacturing
  costs.

• Second quarter SG&A expense was $70 million, which compares with $60
  million in the second quarter of 2015. SG&A expense for the quarter
  increased to 9.4 percent of net sales, from 8.0 percent of net sales
  in the second quarter of 2015. The increase in SG&A was primarily the
  result of increases in brand and marketing program expense, estimated
  incentive compensation, and higher mark-to-market costs of stock-based
  liabilities.
• Higher manufacturing costs were concentrated in the Americas segment
  and were primarily related to the greater complexity of manufacturing
  more higher value, higher margin tires.
• The effective tax rate for the second quarter was 32.7 percent,
  compared with 36.5 percent last year. The reduction in the tax rate
  was primarily due to improved results in international locations that
  have lower tax rates, along with the release of certain tax
  contingencies due to statute lapses. The tax rate is based on
  forecasted annual earnings and tax rates for the various jurisdictions
  in which the company operates.
• At quarter end, Cooper had $412 million in cash and cash equivalents,
  compared with $408 million at June 30, 2015. Capital expenditures in
  the second quarter were $49 million compared with $41 million in the
  same period last year.
• In February 2016, the company announced an extended and increased $200
  million share repurchase program. During the second quarter, 894,265
  shares were repurchased for $29.3 million at an average price of
  $32.77 per share. Purchases have continued in the third quarter under
  this authorization with an additional 373,188 shares purchased at an
  average cost of $30.61 per share for $11.4 million through Aug. 3,
  2016. The remaining repurchase authorization is $152 million and
  expires on Dec. 31, 2017. Since share repurchases began in August
  2014, the company has repurchased a total of 11 million shares at an
  average price of $33.85 per share.

Americas Tire Operations:

Second quarter net sales in the Americas segment declined 2.7 percent as
a result of $12 million of lower unit volume, $5 million of negative
foreign currency impact and $1 million of unfavorable price and mix.
Segment unit shipments decreased 1.8 percent compared with the same
period last year, with an increase in unit volume in Latin America that
was more than offset by decreased unit volume in North America. Cooper's
total light vehicle tire shipments in the United States decreased 3.4
percent during the quarter due primarily to a decline in private label
shipments. The Rubber Manufacturers Association (RMA) reported that its
member shipments in the United States were down 3.5 percent. Total
industry shipments (including an estimate for non-RMA members) decreased
3.9 percent for the period. Cooper’s commercial truck tire shipments for
the United States were up 23.7 percent during the second quarter,
outperforming both the industry and the RMA.

Second quarter operating profit was $116 million, or 17.7 percent of net
sales, compared with $109 million, or 16.1 percent of net sales, in the
second quarter of 2015. The higher operating profit primarily reflected
$23 million of favorable raw material costs, net of price and mix, which
was partially offset by $7 million of unfavorable SG&A costs, $6 million
of unfavorable manufacturing costs, and $3 million due to lower unit
volume.

International Tire Operations:

Second quarter net sales in the International segment declined 0.9
percent as a result of $5 million of negative foreign currency impact
and $1 million of unfavorable price and mix, which was partially offset
by $5 million from higher unit volume. International segment unit volume
was up 2.5 percent driven by increased sales in the domestic China
market for original equipment and replacement tires.

The second quarter operating profit was $3 million compared with an
operating loss of $4 million in the second quarter of 2015. The
improvement was driven by $6 million of favorable raw material costs,
net of price and mix, and $1 million of favorable SG&A expense.

The company continues to make progress on its planned acquisition of a
majority interest in GRT, a joint venture in China to produce truck and
bus radial tires for global markets. The transaction is expected to
close by the end of this year pending certain permits and approvals by
the Chinese government.

Outlook

Second quarter raw material costs increased 3 percent from the first
quarter of 2016, in line with the company’s expectations. The company’s
internal raw material index increased from 131.5 in the first quarter to
135.5 in the second quarter. Cooper anticipates third quarter raw
material costs will be up modestly from the second quarter.

Management expectations for the full year 2016 are as follows:

• Unit volume growth is expected in each of the company’s segments in
  the second half.
• Total company operating margin, excluding the impact of acquisitions
  and non-cash pension settlement charges, is expected to be modestly
  above 2015 levels. This projection includes an estimate for the impact
  of the pending truck and bus radial tire tariffs, which was not
  included in Cooper’s previous margin outlook.
• The International segment, excluding the impact of acquisitions, is
  expected to perform better than originally anticipated for the full
  year 2016. Management now expects the segment to deliver a small
  profit for the full year 2016.
• The company expects a non-cash pension settlement charge of $14
  million to $18 million in the third quarter of 2016 related to
  optional lump-sum payments of benefits offered to certain former
  employees. This option was offered to reduce the size and potential
  future volatility of Cooper’s domestic defined benefit pension plan
  obligations.
• Effective tax rate for full year 2016 is expected to be in a range of
  33 percent to 35 percent.
• Capital expenditures, excluding the impact of acquisitions, are
  expected to range from $210 million to $240 million for the year.

“The Cooper business model continues to provide a solid foundation for
growth,” Armes said. “Looking ahead, while we expect that the benefit of
lower raw material costs will moderate, and global markets will become
more competitive in the back half of this year, we look forward to a
strong second half and full year 2016. We are encouraged by the
performance of our International segment, which continues to deliver
volume growth and is expected to be profitable for the full year 2016.
Overall, our strong first half performance makes us even more optimistic
that our full year 2016 margins will be higher than where we ended 2015.
I leave Cooper highly optimistic about the future with a great strategic
plan in place that Brad Hughes, who takes the helm as President and CEO
on Sept. 1, was instrumental in developing. I have no doubt that Brad
will lead with great energy, expertise, and a commitment to the
long-term success of all Cooper stakeholders,” Armes concluded.

Second Quarter 2016 Conference Call Today at 10 a.m. Eastern

Management will discuss the financial and operating results for the
second quarter of 2016, as well as the company’s business outlook, on a
conference call for analysts and investors today at 10 a.m. EDT. The
call may be accessed on the investor relations page of the company’s
website at http://coopertire.com/Investors.aspx
or at http://services.choruscall.com/links/ctb160804.html.
Following the conference call, the webcast will be archived and
available for 90 days at these websites.

A summary slide presentation of information related to the quarter is
posted on the company's website at http://investors.coopertire.com/Quarterly-Results.

Forward-Looking Statements

This release contains what the company believes are “forward-looking
statements,” as that term is defined under the Private Securities
Litigation Reform Act of 1995, regarding projections, expectations or
matters that the company anticipates may happen with respect to the
future performance of the industries in which the company operates, the
economies of the United States and other countries, or the performance
of the company itself, which involve uncertainty and risk.

Such “forward-looking statements” are generally, though not always,
preceded by words such as “anticipates,” “expects,” “will,” “should,”
“believes,” “projects,” “intends,” “plans,” “estimates,” and similar
terms that connote a view to the future and are not merely recitations
of historical fact. Such statements are made solely on the basis of the
company’s current views and perceptions of future events, and there can
be no assurance that such statements will prove to be true.

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

• volatility in raw material and energy prices, including those of
  rubber, steel, petroleum based products and natural gas or the
  unavailability of such raw materials or energy sources;
• the failure of the company’s suppliers to timely deliver products in
  accordance with contract specifications;
• changes to tariffs or the imposition of new tariffs or trade
  restrictions, including changes related to the anti-dumping and
  countervailing duties for passenger car and light truck tires imported
  into the United States from China; and any duties from the ongoing
  investigation into truck and bus tires imported into the United States
  from China
• changes in economic and business conditions in the world, including
  changes related to the United Kingdom’s referendum on withdrawal from
  the European Union
• increased competitive activity including actions by larger competitors
  or lower-cost producers;
• the failure to achieve expected sales levels;
• changes in the company’s customer relationships, including loss of
  particular business for competitive or other reasons;
• the ultimate outcome of litigation brought against the company,
  including stockholders lawsuits relating to the terminated Apollo
  merger as well as product liability claims, in each case which could
  result in commitment of significant resources and time to defend and
  possible material damages against the company or other unfavorable
  outcomes;
• a disruption in, or failure of, the company’s information technology
  systems, including those related to cyber security, could adversely
  affect the company’s business operations and financial performance;
• changes in pension expense and/or funding resulting from the company’s
  pension strategy, investment performance of the company’s pension plan
  assets and changes in discount rate, salary increase rate, and
  expected return on plan assets assumptions, or changes to related
  accounting regulations;
• government regulatory and legislative initiatives including
  environmental and healthcare matters;
• volatility in the capital and financial markets or changes to the
  credit markets and/or access to those markets;
• changes in interest or foreign exchange rates;
• an adverse change in the company’s credit ratings, which could
  increase borrowing costs and/or hamper access to the credit markets;

• failure to implement information technologies or related systems,
  including failure by the company to successfully implement an ERP
  system;
• the risks associated with doing business outside of the United States;
• the failure to develop technologies, processes or products needed to
  support consumer demand;
• technology advancements;
• the inability to recover the costs to develop and test new products or
  processes;
• the impact of labor problems, including labor disruptions at the
  company, its joint venture, or at one or more of its large customers
  or suppliers;
• failure to attract or retain key personnel;
• consolidation among the company’s competitors or customers;
• inaccurate assumptions used in developing the company’s strategic plan
  or operating plans or the inability or failure to successfully
  implement such plans;
• any unforeseen circumstances that arise that cause the Board of
  Directors to alter its succession plans for the leadership of the
  company;
• risks relating to acquisitions, such as the proposed acquisition of a
  majority interest in China based Qingdao Ge Rui Da Rubber Co., Ltd.,
  including the failure to successfully complete acquisitions or
  integrate them into operations or their related financings may impact
  liquidity and capital resources;
• changes in the company’s relationship with its joint-venture partner
  or suppliers, including any changes with respect to the production of
  Cooper-branded products by CCT, the company’s former joint venture in
  China;
• the ability to find alternative sources for products supplied by CCT;
• the inability to obtain and maintain price increases to offset higher
  production or material costs;
• inability to adequately protect the company’s intellectual property
  rights; and
• inability to use deferred tax assets.

It is not possible to foresee or identify all such factors. Any
forward-looking statement in this release are based on certain
assumptions and analyses made by the company in light of its experience
and perception of historical trends, current conditions, expected future
developments and other factors it believes are appropriate in the
circumstances. Prospective investors are cautioned that any such
statements are not a guarantee of future performance and actual results
or developments may differ materially from those projected.

The company makes no commitment to update any forward-looking statement
included herein or to disclose any facts, events or circumstances that
may affect the accuracy of any forward-looking statement. Further
information covering issues that could materially affect financial
performance is contained in the company's periodic filings with the U.
S. Securities and Exchange Commission (“SEC”).

About Cooper Tire & Rubber Company

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

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