Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - COOPER TIRE & RUBBER CO | d667842d8k.htm |
| EX-99.1 - EX-99.1 - COOPER TIRE & RUBBER CO | d667842dex991.htm |
 Cooper
Tire, Chengshan Group and CCT Labor Union Reach Agreement
Establishing Path Forward for CCT
Joint Venture
January 31, 2014
1
Exhibit 99.2 |
 Safe
Harbor This presentation contains strategic goals and other
forward- looking statements related to future financial results and
business operations for Cooper Tire & Rubber Company.
Actual results may differ materially from the goals and from current
management forecasts and projections as a result of factors over
which the Company may have limited or no control. Information
on certain of these risk factors and additional information on
forward-looking statements are included in the Company’s reports
on file with the Securities and Exchange Commission and are set
forth at the end of this presentation.
Note
This
presentation
provides
an
overview
of
certain
details
of
the
agreement between Cooper Tire, Chengshan Group and the CCT
Union announced today, January 31, 2014. For additional details,
please refer to the Form 8-K filed by Cooper Tire & Rubber
Company today, January 31, 2014.
2 |
 China to
remain a core growth market for Cooper
China tire market expected to grow by 60% over next five years and be
largest market globally *
Cooper has an established and growing market position in China
–
Participate in Passenger Car Radial (PCR) tire market and in Truck and Bus Radial
(TBR) tire market
–
PCR served by both Cooper and Cooper Chengshan Tire (CCT) brands; TBR served by
CCT brands in China
–
Largely replacement focused, with growing Original Equipment (OE)
partnerships –
Cooper distribution (focused on Cooper brand tires) has more than 5,000 points of
sale in China, up 72% from 2012
Cooper has proven manufacturing capabilities in China
–
Cooper owns 100% of Cooper Kunshan Tire (CKT) PCR operations with a current
capacity of 5M tires annually
•
Production shifting from export to domestic sales, with additional sourcing
shifting to CKT in 2014 •
Option to increase capacity to 8M tires using existing buildings, and can double
that to 16M at the current site which was designed to integrate another
building –
Cooper owns 65% of CCT Joint Venture (JV) with Chengshan Group
•
PCR and TBR manufacturing. Annual capacity of 10M tires
•
Cooper provides technical and design capabilities
•
Global TBR lines under Cooper’s Roadmaster brand receiving strong reception
in the U.S. * 2013 LMC Data
3 |
 Path
forward for the CCT JV has been defined Cooper
options*
Execute put option:
Sell 35% stake to Cooper
Chengshan
options*
Do not execute either option
Execute call option:
Buy Chengshan's 35% stake
Chengshan
full ownership
of CCT
Cooper full
ownership of
CCT
Execute call option:
Buy Cooper's 65% stake
JV continues
under current
ownership
arrangement
45 days from option
commencement date
46 –
90 days from option
commencement date
Do not execute option
Outcomes
Fair market
valuation
completed by
independent firm
Targeted to be
completed 60
days after firm
selection or
Cooper's 2013
financial filings**
Option price
will be based on
the greater of
$435M or
the value
of CCT as
determined by
independent
valuation firm
Valuation
period
Option commencement date at
completion of valuation
Option period with target completion dates
4
**Agreement allows for 90 additional days to complete.
3
2
1
*The options are conditioned on Cooper reporting its financial results within the timeframe
described in the Form 8-K filed January 31, 2014. |
 Scenario
1: Chengshan takes full ownership
of CCT
•
Cooper supply secured through CCT offtake rights for at least three
years
•
Cooper does not participate in sales through CCT distribution,
focuses on continuing to grow PCR sales through Cooper channels,
while continuing to shift PCR production to (and growing) CKT
•
Cooper continues to participate TBR through offtake rights
•
Cooper sells its 65% stake in the CCT joint venture
•
Cooper receives $283M or more for its stake based on independent
valuation
•
Continue to expand CKT operations to support domestic China
sales
•
Leverage cash injection to accelerate pursuit of new TBR sourcing
options and invest in distribution growth in China
•
Continue to evaluate new sources of supply for growing China
market including possible acquisition opportunities
5
Outcome
Short-term
Impact
Long-term China
strategy |
 Scenario
2: Cooper takes full ownership
of CCT
•
Solidifies global TBR supply and China TBR distribution
•
Cooper's balance sheet is well positioned to finance purchase of
Chengshan's share of CCT
•
Production and distribution at CKT to continue and grow
•
Continue to expand CKT operations to support domestic China
sales
•
Use as a catalyst to accelerate Cooper's China growth plans
•
Accelerate development of global TBR business
•
Continue to evaluate new sources of supply for growing China
market including possible acquisition opportunities
•
Cooper owns 100% of CCT
•
Cooper pays $152M or more to acquire Chengshan's stake based
on independent valuation
6
Outcome
Short-term
Impact
Long-term China
strategy |
 Planned
communications Agreement Announced
Q3 2013 Results
Q4 & FY 2013
Results
Investor Event
7
Today
Early March
Mid to Late March
April/May |
 Risks
8
This presentation contains forward-looking statements within the meaning of the federal
securities laws. Forward-looking statements are not based on historical facts but
instead reflect Cooper’s expectations, estimates or projections concerning future results or events. These statements generally can be
identified by the use of forward-looking words or phrases such as “believe,”
“expect,” “anticipate,” “project,” “may,” “could,” “intend,” “intent,” “belief,”
“estimate,” “plan,” “likely,” “will,”
“should” or similar words or phrases. These statements are not guarantees of performance and are inherently subject to
known and unknown risks, uncertainties and assumptions that are difficult to predict and could
cause our actual results, performance or achievements to differ materially from those
expressed or indicated by those statements. We cannot assure you that any of our expectations, estimates or projections will be
achieved.
The forward-looking statements included in this presentation are only made as of the date
of this presentation and we disclaim any obligation to publicly update any
forward-looking statement to reflect subsequent events or circumstances.
Numerous factors could cause our actual results and events to differ materially from those
expressed or implied by forward-looking statements, including, without limitation:
volatility in raw material and energy prices, including those of rubber, steel, petroleum based products and natural gas and the
unavailability of such raw materials or energy sources; the failure of Cooper’s suppliers
to timely deliver products in accordance with contract specifications; changes in
economic and business conditions in the world; failure to implement information technologies or related systems, including failure by Cooper to
successfully implement an ERP system; increased competitive activity including actions by
larger competitors or lower-cost producers; the failure to achieve expected sales
levels; changes in Cooper’s customer relationships, including loss of particular business for competitive or other reasons; litigation brought
against Cooper, including products liability claims, which could result in material damages
against Cooper; changes to tariffs or the imposition of new tariffs or trade
restrictions; changes in pension expense and/or funding resulting from investment performance of Cooper’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 Cooper’s credit ratings, which could increase borrowing costs and/or
hamper access to the credit markets; 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 Cooper or at one or more of its large customers or suppliers; failure to attract or
retain key personnel; consolidation among competitors or customers; inaccurate assumptions
used in developing Cooper’s strategic plan or operating plans or the inability or
failure to successfully implement such plans; failure to successfully integrate acquisitions into operations or their related financings may
impact liquidity and capital resources; the impact of labor disruptions and changes in
Cooper’s relationship with, or ownership interests in, joint-venture partners;
the ability to sustain operations at the Cooper Chengshan (Shandong) Tire Company Ltd. joint venture (“CCT”), including obtaining financial and
other operational data of CCT; the inability to obtain and maintain price increases to offset
higher production or material costs; inability to adequately protect Cooper’s
intellectual property rights; inability to use deferred tax assets; the ultimate outcome of legal actions brought by Cooper against wholly-
owned subsidiaries of Apollo Tyres Ltd.; and other factors that are set forth in
management’s discussion and analysis of Cooper’s most recently filed reports
with the SEC. This list of factors is illustrative, but by no means exhaustive. All
forward-looking statements should be evaluated with the understanding of their
inherent uncertainty. |