Company Quick10K Filing
Cooper Tire & Rubber
Price24.75 EPS1
Shares50 P/E27
MCap1,247 P/FCF-86
Net Debt154 EBIT98
TEV1,401 TEV/EBIT14
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-02-24
10-Q 2019-09-30 Filed 2019-10-28
10-Q 2019-06-30 Filed 2019-07-29
10-Q 2019-03-31 Filed 2019-04-29
10-K 2018-12-31 Filed 2019-02-19
10-Q 2018-09-30 Filed 2018-10-29
10-Q 2018-06-30 Filed 2018-08-06
10-Q 2018-03-31 Filed 2018-04-30
10-K 2017-12-31 Filed 2018-02-20
10-Q 2017-09-30 Filed 2017-10-30
10-Q 2017-06-30 Filed 2017-08-04
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-17
10-Q 2016-09-30 Filed 2016-10-31
10-Q 2016-06-30 Filed 2016-08-04
10-Q 2016-03-31 Filed 2016-04-29
10-K 2015-12-31 Filed 2016-02-23
10-Q 2015-09-30 Filed 2015-11-02
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-01
10-K 2014-12-31 Filed 2015-02-23
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-02
10-K 2013-12-31 Filed 2014-03-14
10-Q 2013-09-30 Filed 2014-02-28
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-02-25
10-Q 2012-09-30 Filed 2012-11-02
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-02
10-K 2011-12-31 Filed 2012-02-27
10-Q 2011-09-30 Filed 2011-10-31
10-Q 2011-06-30 Filed 2011-08-04
10-Q 2011-03-31 Filed 2011-04-26
10-K 2010-12-31 Filed 2011-02-25
10-Q 2010-09-30 Filed 2010-11-01
10-Q 2010-06-30 Filed 2010-08-05
10-Q 2010-03-31 Filed 2010-05-05
10-K 2009-12-31 Filed 2010-03-02
8-K 2020-05-08
8-K 2020-05-07
8-K 2020-03-21
8-K 2020-02-24
8-K 2020-02-20
8-K 2019-12-03
8-K 2019-11-05
8-K 2019-10-28
8-K 2019-06-30
8-K 2019-06-28
8-K 2019-05-03
8-K 2019-03-31
8-K 2019-02-19
8-K 2019-02-06
8-K 2019-01-30
8-K 2019-01-18
8-K 2018-12-12
8-K 2018-11-15
8-K 2018-10-26
8-K 2018-10-10
8-K 2018-08-06
8-K 2018-05-04
8-K 2018-04-30
8-K 2018-04-09
8-K 2018-02-20
8-K 2018-02-15

CTB 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1. Basis of Presentation and Consolidation
Note 2. Covid - 19
Note 3. Current Expected Credit Losses
Note 4. Restructuring
Note 5. Revenue From Contracts with Customers
Note 6. Inventories
Note 7. Income Taxes
Note 8. Debt
Note 9. Fair Value Measurements
Note 10. Pensions and Postretirement Benefits Other Than Pensions
Note 11. Stockholders' Equity
Note 12. Changes in Accumulated Other Comprehensive Income (Loss) By Component
Note 13. Comprehensive (Loss) Income Attributable To Noncontrolling Shareholders' Interests
Note 14. Contingent Liabilities
Note 15. Business Segments
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Issuer Purchases of Equity Securities
Item 6. Exhibits
EX-31.1 a2020033110qexhibit311.htm
EX-31.2 a2020033110qexhibit312.htm
EX-32 a2020033110qexhibit32.htm

Cooper Tire & Rubber Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
3.02.41.81.20.60.02012201420172020
Assets, Equity
1.10.90.60.40.1-0.12012201420172020
Rev, G Profit, Net Income
0.30.20.10.0-0.1-0.22012201420172020
Ops, Inv, Fin

Document
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number 001-04329
COOPER TIRE & RUBBER COMPANY
(Exact name of registrant as specified in its charter)
Delaware
 
34-4297750
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
701 Lima Avenue, Findlay, Ohio 45840
(Address of principal executive offices)
(Zip code)
(419) 423-1321
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1 par value per share
CTB
New York Stock Exchange
(Title of Each Class)
(Trading Symbol)
(Name of Each Exchange on which Registered)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer
  
Accelerated filer

Non-Accelerated Filer

 (Do not check if a smaller reporting company)
Smaller Reporting Company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of shares outstanding of the registrant’s common stock as of May 6, 2020 was 50,282,390.




Part I.
FINANCIAL INFORMATION
Item 1.
FINANCIAL STATEMENTS
COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Dollar amounts in thousands except per share amounts)
 
 
 
 
 
Three Months Ended March 31,
 
2020
 
2019
Net sales
$
531,694

 
$
619,163

Cost of products sold
475,781

 
530,904

Gross profit
55,913

 
88,259

Selling, general and administrative expense
51,211

 
56,855

Restructuring expense
10,930

 
4,973

Operating (loss) profit
(6,228
)
 
26,431

Interest expense
(5,007
)
 
(8,314
)
Interest income
1,696

 
3,380

Other pension and postretirement benefit expense
(4,210
)
 
(9,362
)
Other non-operating income
1,773

 
1,380

(Loss) Income before income taxes
(11,976
)
 
13,515

Income tax (benefit) provision
(659
)
 
6,337

Net (loss) income
(11,317
)
 
7,178

Net income attributable to noncontrolling shareholders' interests
274

 
199

Net (loss) income attributable to Cooper Tire & Rubber Company
$
(11,591
)
 
$
6,979

 
 
 
 
(Loss) Earnings per share:
 
 
 
Basic
$
(0.23
)
 
$
0.14

Diluted
(0.23
)
 
0.14

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.




COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
(Dollar amounts in thousands except per share amounts)
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Net (loss) income
 
$
(11,317
)
 
$
7,178

Other comprehensive (loss) income:
 
 
 
 
Cumulative currency translation adjustments
 
(37,794
)
 
9,307

Currency loss charged to equity as part of acquisition of noncontrolling shareholder interest
 
(11,748
)
 

Financial instruments:
 
 
 
 
Change in the fair value of derivatives
 
(4,111
)
 
(1,121
)
Income tax benefit on derivative instruments
 
1,037

 
333

Financial instruments, net of tax
 
(3,074
)
 
(788
)
Postretirement benefit plans:
 
 
 
 
Amortization of actuarial loss
 
8,149

 
9,233

Amortization of prior service cost (credit)
 
236

 
(102
)
Actuarial loss
 
(31,490
)
 

Income tax provision on postretirement benefit plans
 
6,039

 
(2,041
)
Foreign currency translation effect
 
4,708

 
(1,460
)
Postretirement benefit plans, net of tax
 
(12,358
)
 
5,630

Other comprehensive (loss) income
 
(64,974
)
 
14,149

Comprehensive (loss) income
 
(76,291
)
 
21,327

Less: Comprehensive (loss) income attributable to noncontrolling shareholders' interests
 
(270
)
 
1,178

Comprehensive (loss) income attributable to Cooper Tire & Rubber Company
 
$
(76,021
)
 
$
20,149

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

-3-


COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except per share amounts)
 
 
(Unaudited)
 
 
 
 
March 31, 2020
 
December 31, 2019
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
433,362

 
$
391,332

Notes receivable
 
13,676

 
535

Accounts receivable, less allowances of $10,449 at 2020 and $8,109 at 2019
 
509,280

 
544,257

Inventories:
 
 
 
 
Finished goods
 
356,544

 
326,839

Work in process
 
24,937

 
28,250

Raw materials and supplies
 
120,123

 
109,132

Total inventories
 
501,604

 
464,221

Other current assets
 
46,224

 
52,635

Total current assets
 
1,504,146

 
1,452,980

Property, plant and equipment:
 
 
 
 
Land and land improvements
 
51,183

 
53,516

Buildings
 
345,257

 
344,142

Machinery and equipment
 
2,014,913

 
2,042,578

Molds, cores and rings
 
262,913

 
262,444

Total property, plant and equipment
 
2,674,266

 
2,702,680

Less: Accumulated depreciation
 
1,652,114

 
1,655,438

Property, plant and equipment, net
 
1,022,152

 
1,047,242

Operating lease right-of-use assets, net of accumulated amortization of $32,293 at 2020 and $26,121 at 2019
 
86,878

 
80,752

Goodwill
 
18,851

 
18,851

Intangibles, net of accumulated amortization of $128,403 at 2020 and $123,735 at 2019
 
108,181

 
111,356

Deferred income tax assets
 
33,162

 
29,336

Investment in joint venture
 
48,472

 
48,912

Other assets
 
10,875

 
12,909

Total assets
 
$
2,832,717

 
$
2,802,338

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


-4-


COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except per share amounts)
 
 
(Unaudited)
 
 
(Continued)
 
March 31, 2020
 
December 31, 2019
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Short-term borrowings
 
$
277,844

 
$
12,296

Accounts payable
 
230,675

 
276,732

Accrued liabilities
 
208,767

 
302,477

Income taxes payable
 
2,485

 
2,304

Current portion of long-term debt and finance leases
 
15,477

 
10,265

Total current liabilities
 
735,248

 
604,074

Long-term debt and finance leases
 
301,920

 
309,148

Noncurrent operating leases
 
61,249

 
55,371

Postretirement benefits other than pensions
 
227,249

 
227,216

Pension benefits
 
146,095

 
126,707

Other long-term liabilities
 
165,102

 
149,065

Deferred income tax liabilities
 
114

 
3,024

Equity:
 
 
 
 
Preferred stock, $1 par value; 5,000,000 shares authorized; none issued
 

 

Common stock, $1 par value; 300,000,000 shares authorized; 87,850,292 shares issued at 2020 and 2019
 
87,850

 
87,850

Capital in excess of par value
 
15,226

 
22,175

Retained earnings
 
2,508,052

 
2,524,963

Accumulated other comprehensive loss
 
(512,010
)
 
(447,580
)
Parent stockholders' equity before treasury stock
 
2,099,118

 
2,187,408

Less: Common shares in treasury at cost (37,567,907 at 2020 and 37,647,058 at 2019)
 
(921,406
)
 
(922,783
)
Total parent stockholders' equity
 
1,177,712

 
1,264,625

Noncontrolling shareholders' interests in consolidated subsidiaries
 
18,028

 
63,108

Total equity
 
1,195,740

 
1,327,733

Total liabilities and equity
 
$
2,832,717

 
$
2,802,338

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


-5-


COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollar amounts in thousands)
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Operating activities:
 
 
 
 
Net (loss) income
 
$
(11,317
)
 
$
7,178

Adjustments to reconcile net income (loss) to net cash used in operations:
 
 
 
 
Depreciation and amortization
 
37,807

 
37,298

Stock-based compensation
 
390

 
869

Change in LIFO inventory reserve
 
(8,563
)
 
(168
)
Amortization of unrecognized postretirement benefits
 
8,385

 
9,131

Changes in operating assets and liabilities:
 
 
 
 
Accounts and notes receivable
 
11,772

 
2,278

Inventories
 
(41,123
)
 
(81,354
)
Other current assets
 
(7,848
)
 
(2,170
)
Accounts payable
 
(20,422
)
 
2,740

Accrued liabilities
 
(91,414
)
 
(63,228
)
Other items
 
7,964

 
(8,986
)
Net cash used in operating activities
 
(114,369
)
 
(96,412
)
Investing activities:
 
 
 
 
Additions to property, plant and equipment and capitalized software
 
(54,827
)
 
(59,867
)
Proceeds from the sale of assets
 
65

 
38

Net cash used in investing activities
 
(54,762
)
 
(59,829
)
Financing activities:
 
 
 
 
Issuances of short-term debt
 
273,587

 
6,608

Repayment of short-term debt
 
(4,308
)
 

Repayment of long-term debt and finance lease obligations
 
(2,594
)
 
(797
)
Acquisition of noncontrolling shareholder interest
 
(62,272
)
 

Payments of employee taxes withheld from share-based awards
 
(910
)
 
(1,158
)
Payment of dividends to Cooper Tire & Rubber Company stockholders
 
(5,277
)
 
(5,262
)
Issuance of common shares related to stock-based compensation
 
177

 

Net cash provided by (used in) financing activities
 
198,403

 
(609
)
Effects of exchange rate changes on cash
 
(875
)
 
(1,058
)
Net change in cash, cash equivalents and restricted cash
 
28,397

 
(157,908
)
Cash, cash equivalents and restricted cash at beginning of period
 
413,125

 
378,246

Cash, cash equivalents and restricted cash at end of period
 
$
441,522

 
$
220,338

 
 
 
 
 
Cash and cash equivalents
 
$
433,362

 
$
212,331

Restricted cash included in Other current assets
 
6,669

 
6,410

Restricted cash included in Other assets
 
1,491

 
1,597

Total cash, cash equivalents and restricted cash
 
$
441,522

 
$
220,338

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

-6-


COOPER TIRE & RUBBER COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)

Note 1.
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) 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, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.
There is typically a year-round demand for the Company's products, however, passenger car and light truck ("light vehicle") replacement tire sales are generally strongest during the third and fourth quarters of the year. Winter tires are sold principally during the months of May through November. Operating results for the three month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020.
The Company consolidates into its financial statements the accounts of the Company, all wholly-owned subsidiaries, and any partially-owned subsidiary that the Company has the ability to control. Control generally equates to ownership percentage, whereby investments that are more than 50 percent owned are consolidated, investments in affiliates of 50 percent or less but greater than 20 percent are accounted for using the equity method. The Company does not consolidate any entity for which it has a variable interest based solely on power to direct the activities and significant participation in the entity’s expected results that would not otherwise be consolidated based on control through voting interests. Further, the Company’s joint ventures are businesses established and maintained in connection with the Company’s operating strategy. All intercompany transactions and balances have been eliminated.
On April 5, 2019, Cooper Tire & Rubber Company Vietnam Holding, LLC ("Cooper Vietnam"), a wholly owned subsidiary of the Company, and Sailun (Vietnam) Co., Ltd. ("Sailun Vietnam") established a joint venture in Vietnam, ACTR Company Limited ("ACTR"), which will produce and sell truck and bus radial ("TBR") tires. The Company’s investment in the joint venture represents a 35 percent ownership interest and is accounted for under the equity method. The Company invested $49,001 into the joint venture in 2019. The new joint venture is expected to begin commercially producing tires in 2020.
Earnings per common shareNet income per share is computed on the basis of the weighted average number of common shares outstanding each period. When applicable, diluted earnings per share includes the dilutive effect of stock options and other stock units. The following table sets forth the computation of basic and diluted earnings per share:
 
 
 
 
 
(Number of shares and dollar amounts in thousands except per share amounts)
 
Three Months Ended March 31,
 
 
2020
 
2019
Numerator
 
 
 
 
Numerator for basic and diluted earnings per share - income from continuing operations available to common stockholders
 
$
(11,591
)
 
$
6,979

Denominator
 
 
 
 
Denominator for basic earnings per share - weighted average shares outstanding
 
50,236

 
50,100

Effect of dilutive securities - stock options and other stock units
 

 
278

Denominator for diluted earnings per share - adjusted weighted average shares outstanding
 
50,236

 
50,378

(Loss) Earnings per share:
 
 
 
 
Basic
 
$
(0.23
)
 
$
0.14

Diluted
 
(0.23
)
 
0.14

Anti-dilutive shares excluded from computation of diluted loss per share
 
294

 


Anti-dilutive shares are excluded from the computation of earnings per share at March 31, 2020, as the inclusion of such items would decrease loss per share. All stock options and other stock units outstanding were included in the computation of diluted earnings per share at March 31, 2019.


-7-


Tariffs - The Company is subject to tariffs on the import of tires, raw materials and tire-manufacturing equipment in certain of the jurisdictions in which it operates. Tariff costs are included within inventory as they pertain to tires and raw materials, while tariffs on tire-manufacturing equipment are included as part of the cost of fixed assets. Material components of the Company's tariff costs include:
Passenger Car and Light Truck Tire Tariffs - Antidumping and countervailing duty investigations into certain passenger car and light truck tires imported from the PRC into the United States were initiated on July 14, 2014. The determinations announced in both investigations were affirmative and resulted in the imposition of significant additional duties from each. The rates are subject to review annually and a material change in the new rates could have a significant impact on the Company's results.
Truck and Bus Tire Tariffs – Antidumping and countervailing duty investigations into certain TBR tires imported from the PRC into the U.S. were initiated on January 29, 2016. On February 22, 2017, the International Trade Commission ("ITC") made a final determination that the U.S. market had not suffered material injury because of imports of TBR tires from the PRC. However, on November 1, 2018, the Court of International ("CIT") remanded the case back to the ITC for reconsideration.  On January 30, 2019, the ITC reversed its earlier decision and made an affirmative determination of material injury. On February 15, 2019, the determination was published in the Federal Register and countervailing duties of 42.16 percent were imposed on the Company's TBR tire imports into the U.S. from China. The ITC’s re-determination, along with comments from the parties regarding the re-determination, were filed with the CIT. The CIT affirmed the ITC re-determination on February 18, 2020. The rates are subject to review annually and a material change in the new rates could have a significant impact on the Company's results.
Section 301 Tariffs - Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, passenger, light truck and truck and bus tires, raw materials and tire-manufacturing equipment from the PRC imported into the U.S. became subject to additional 10 percent duties effective September 24, 2018. These tariffs increased to 25 percent effective May 10, 2019.
Duty Drawbacks - The enactment in December 2018 of the Modernized Drawback Final Rule under the Trade Enforcement and Trade Facilitation Act of 2015 expanded the Company's ability to recover Section 301 and Ad Valorem duties paid on goods imported into the US when such goods, or similar items, are subsequently exported.
Recent Accounting Pronouncements
Each change to U.S. GAAP is established by the Financial Accounting Standards Board (“FASB”) in the form of an accounting standards update (“ASU”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs.
Accounting Pronouncements – Recently adopted
Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820)," which removes, modifies and adds various disclosure requirements around the topic in order to clarify and improve the cost-benefit nature of disclosures. Such modifications to disclosures center around Level 3 fair value measurements and investments in entities that calculate net asset value. This standard is effective for interim and annual reporting periods beginning after December 15, 2019 and has been adopted by the Company effective January 1, 2020. The adoption of this standard did not materially impact the Company's condensed consolidated financial statements.
Internal-Use Software
In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)," which aligns the requirements for capitalizing implementation costs incurred in a service contract hosting arrangement with those of developing or obtaining internal-use software. This standard is effective for interim and annual reporting periods beginning after December 15, 2019 and has been adopted prospectively by the Company effective January 1, 2020. Capitalization of implementation costs incurred in a service contract hosting arrangement affects Intangibles, net of accumulated amortization, Cost of products sold, and Selling, general, and administrative expense within the condensed consolidated financial statements. The adoption of this standard did not materially impact the Company's condensed consolidated financial statements.


-8-


Accounting for Income Taxes
On December 18, 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," to, among other provisions, eliminate certain exceptions related to intra-period tax allocation and loss benefit limitations in interim periods, as well as certain rules pertaining to deferred taxes for equity method investees. This ASU also simplifies rules pertaining to franchise taxes and other taxes partially based on income, and changes the timing of when an entity recognizes effects of enacted tax law changes. This standard becomes effective in fiscal years beginning after December 15, 2020; however, the Company has chosen to early adopt in the period ended March 31, 2020. The adoption of this standard did not materially impact the Company's condensed consolidated financial statements.
Accounting Pronouncements – To be adopted
Defined Benefit Plans
In August 2018, the FASB issued ASU 2018-14, "Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20)," which removes, modifies and adds various disclosure requirements around the topic in order to clarify and improve the cost-benefit nature of disclosures. For example, disclosures around the effect of a one-percentage-point change in assumed health care costs will be removed and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period will be added. This standard is effective for fiscal years ending after December 15, 2020, and early adoption is permitted. These amendments must be applied on a retrospective basis for all periods presented. The Company is currently evaluating the impact the new standard will have on its condensed consolidated financial statements.
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)," which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating its contracts and the optional expedients provided by the new standard and the impact it will have on the condensed consolidated financial statements.

Note 2.
COVID-19
In March 2020, the World Health Organization categorized Coronavirus Disease 2019 (“COVID-19”) as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The Company’s priorities during the COVID-19 pandemic are protecting the health and safety of its employees, responsibilities to our broader communities, and commitments to our customers and other key stakeholders.
The Company’s condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse accounting impacts on the Company’s first quarter 2020 results of operations. Given the dynamic nature of the COVID-19 pandemic and related market conditions, the Company cannot reasonably estimate the period of time that these events will persist or the full extent of the impact they will have on the business. The Company continues to take actions designed to mitigate the adverse effects of this rapidly changing market environment.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a payment delay of employer payroll taxes during 2020 after the date of enactment. The Company's payment of employer payroll taxes after enactment otherwise due in 2020 will be delayed, with 50 percent due by December 31, 2021, and the remaining 50 percent by December 31, 2022. The Company continues to evaluate the potential applicability and related impact of the CARES Act. The CARES Act did not have a material impact on the Company’s condensed consolidated financial statements as of March 31, 2020.

Note 3.
Current Expected Credit Losses
In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments," which changes accounting requirements for the recognition of credit losses from an incurred or probable impairment methodology to a current

-9-


expected credit losses (CECL) methodology. This standard is effective for interim and annual reporting periods beginning after December 15, 2019 and was adopted effective January 1, 2020. Trade receivables (including the allowance for credit losses) is the only financial instrument in scope for ASU 2016-13 currently held by the Company.
In implementing the standard, the Company amended its policy to utilize an expected loss methodology based on credit risk in place of the incurred loss methodology based on aging. The Company's updated policy includes the regular review of its outstanding accounts receivable portfolio to assess risk and likelihood of credit loss. This review includes consideration of potential credit loss over the asset's contractual life, along with historical experience, current conditions and forecasts based on management's judgment. The Company also performs periodic credit evaluations of customers’ financial conditions in order to assess credit worthiness and maintain appropriate credit limits. Accounts receivable, net of the allowance for credit losses, are $509,280 and $544,257 as of March 31, 2020 and December 31, 2019, respectively. The Company recorded provisions for credit losses for receivables of $10,449 and $8,109 for the same periods. The adoption of this standard did not materially impact the Company's condensed consolidated financial statements.

Note 4.
Restructuring
Corporacion de Occidente SA de CV
On January 24, 2020, the Company acquired the remaining 41.57 percent noncontrolling ownership interest in Corporacion de Occidente SA de CV ("COOCSA"), making COOCSA a wholly-owned subsidiary in the Americas Segment. In this transaction, the Company acquired the remaining outstanding voting common stock of COOCSA for a total cash price of $54,500. In addition, subsequent to the acquisition, payments of $15,984 were made to members of the prior joint venture workforce in connection with services rendered.
In accordance with ASC 810, "Consolidation", the excess of the purchase price over the non-controlling shareholder interest was recorded as a decrease to Capital in excess of par value to reflect the additional ownership. Payments to members of the joint venture workforce in connection with services rendered included $7,772 paid to members that were also shareholders of the non-controlling interest. This amount was also treated as part of the overall purchase price under ASC 810.
In addition to the payments made to the joint venture workforce for services rendered, the Company also incurred $2,712 of other costs associated with the transaction. For the quarter ended March 31, 2020, the Company incurred restructuring expense of $10,930 comprised of:
 
Three Months Ended March 31, 2020
Joint venture workforce services rendered
$
8,218

Professional and other costs
2,712

Total restructuring expense
$
10,930


At March 31, 2020, the Company's accrued restructuring balance is $300, composed of accrued professional and other costs. The Company does not anticipate further restructuring costs related to this transaction in 2020.
Cooper Tire Europe
On January 17, 2019, Cooper Tire Europe, a wholly owned subsidiary of the Company, committed to a plan to cease light vehicle tire production at its Melksham, U.K. facility, which is included in the International Segment. The phasing out of light vehicle tire production was substantially completed in the third quarter of 2019. Approximately 300 roles were eliminated at the site. Cooper Tire Europe now obtains light vehicle tires to meet customer needs from other production sites within the Company’s global production network. Approximately 400 roles remain in Melksham to support the functions that continue there, including motorsports and motorcycle tire production, a materials business, Cooper Tire Europe headquarters, sales and marketing, and the Europe Technical Center. Costs related to the decision to cease light vehicle tire production at the Melksham, U.K. facility were $4,973 for the quarter ended March 31, 2019 and $8,315 for the full year ended December 31, 2019. In connection with this business realignment, a one-time payment from the U.S. to Serbia was made during the fourth quarter of 2019 in order to allow the Serbian operations to improve their financial standing and serve as a reliable and fully operational contract manufacturer for the U.S.
 
Three Months Ended March 31, 2019
Melksham employee severance costs
$
4,163

Asset write-downs & other costs
810

Total restructuring expense
$
4,973



-10-



Note 5.
Revenue from Contracts with Customers
Accounting policy
Revenue is measured based on the consideration specified in a contract with a customer and excludes any sales incentives or rebates. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. This occurs with shipment or delivery, depending on the underlying terms with the customer. The transaction price will include estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. At the time of sale, the Company estimates provisions for different forms of variable consideration (discounts and rebates) based on historical experience, current conditions and contractual obligations, as applicable. Payment terms with customers vary by region and customer, but are generally 30-90 days. The Company does not have significant financing components or significant payment terms. Incidental items that are immaterial in the context of the contract are expensed as incurred.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
Shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as a fulfillment cost and not as a separate performance obligation. Therefore, such items are accrued upon recognition of revenue.
Nature of goods and services
The following is a description of principal activities, separated by reportable segments, from which the Company generates its revenue. See Note 15 - Business Segments for additional details on the Company's reportable segments.
The Company’s reportable segments have the following revenue characteristics:
Americas Tire Operations - The Americas Tire Operations segment manufactures and markets passenger car and light truck tires. The segment also markets and distributes racing, motorcycle and TBR tires.
International Tire Operations - The International Tire Operations segment manufactures and markets passenger car, light truck, motorcycle, racing and TBR tires and tire retread material for global markets.
Disaggregation of revenue
In the following tables, revenue is disaggregated by major market channel for the three months ended March 31, 2020 and 2019, respectively:
 
Three Months Ended March 31, 2020
 
Americas
 
International
 
Eliminations
 
Total
Light Vehicle (1)
$
404,636

 
$
71,082

 
$
(10,714
)
 
$
465,004

Truck and bus radial
41,004

 
17,309

 
(17,034
)
 
41,279

Other (2)
11,415

 
13,996

 

 
25,411

Net sales
$
457,055

 
$
102,387

 
$
(27,748
)
 
$
531,694

 
Three Months Ended March 31, 2019
 
Americas
 
International
 
Eliminations
 
Total
Light Vehicle (1)
$
454,014

 
$
105,320

 
$
(19,322
)
 
$
540,012

Truck and bus radial
50,086

 
23,696

 
(20,236
)
 
53,546

Other (2)
10,836

 
14,769

 

 
25,605

Net sales
$
514,936

 
$
143,785

 
$
(39,558
)
 
$
619,163

(1) 
Light vehicle includes passenger car and light truck tires
(2) 
Other includes motorcycle and racing tires, wheels, tire retread material, and other items
Contract balances
Contract liabilities relate to customer payments received in advance of shipment. As the Company does not generally have rights to consideration for work completed but not billed at the reporting date, the Company does not have any contract assets. Accounts receivable are not considered contract assets under the revenue standard as contract assets are conditioned upon the

-11-


Company's future satisfaction of a performance obligation. Accounts receivable, in contrast, are unconditional rights to consideration.
Significant changes in the contract liabilities balance during the three months ended March 31, 2020 are as follows:
 
Contract Liabilities
Contract liabilities at beginning of year
$
1,080

Increases to deferred revenue for cash received in advance from customers
1,813

Decreases due to recognition of deferred revenue
(1,440
)
Contract liabilities at March 31, 2020
$
1,454


Transaction price allocated to remaining performance obligations
For the three months ended March 31, 2020 and 2019, revenue recognized from performance obligations related to prior periods is not material.
Revenue expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, contracts where revenue is recognized as invoiced and contracts with variable consideration related to undelivered performance obligations, is not material.
The Company applies the practical expedient in ASC 606 "Revenue from Contracts with Customers" and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

Note 6.
Inventories
Inventory costs are determined using the last-in, last-out ("LIFO") method for substantially all U.S. inventories. The current cost of the U.S. inventories under the FIFO method was $411,466 and $365,585 at March 31, 2020 and December 31, 2019, respectively. These FIFO values have been reduced by approximately $79,053 and $87,616 at March 31, 2020 and December 31, 2019, respectively, to arrive at the LIFO value reported on the Condensed Consolidated Balance Sheets. The remaining inventories have been valued under the FIFO method. All LIFO inventories are valued at the lower of cost or market. All other inventories are stated at the lower of cost or net realizable value.
Note 7.
Income taxes
For the three month period ended March 31, 2020, the Company recorded income tax benefit of $659 (effective tax rate of negative 5.5 percent) compared to an income tax provision of $6,337 (effective tax rate of 46.9 percent) for the same period in 2019. The 2020 and 2019 three month period (benefit) provision for income tax is calculated using a forecasted multi-jurisdictional annual effective tax rate to determine a blended annual effective tax rate. The Company is subject to the U.S. federal statutory rate of 21 percent. The effective tax rate for the three month period ended March 31, 2020 was influenced by $4,361 of additional unrecognized tax benefit related to the tax deductibility of certain business expenses incurred during the quarter, the projected mix of earnings in international jurisdictions with differing tax rates and jurisdictions where valuation allowances are recorded. The effective tax rate for the three month period ended March 31, 2019 includes net discrete tax expense of $2,417 recorded during the quarter, which primarily consist of additional 2017 transition tax and unrecognized tax benefits as a result of final U.S. federal tax guidance issued during the quarter pertaining to the one-time mandatory deemed repatriation under the 2017 Tax Act.
The Company continues to maintain valuation allowances pursuant to ASC 740, “Accounting for Income Taxes,” against portions of its U.S. and non-U.S. deferred tax assets at March 31, 2020 as it cannot assure the future realization of the associated tax benefits prior to their reversal or expiration. In the U.S., the Company has offset its net operating loss carryforward deferred tax asset by a valuation allowance of $1,378. In addition, the Company has recorded valuation allowances of $24,467 related to non-U.S. net operating losses and other deferred tax assets for a total valuation allowance of $25,845. In conjunction with the Company’s ongoing review of its actual results and anticipated future earnings, the Company will continue to reassess the possibility of releasing all or part of the valuation allowances currently in place when the associated deferred tax assets are deemed to be realizable. If the evidence suggests that deferred tax assets for these operations will more likely than not be able to be realized in the future, release of a portion or all of the valuation allowance in place for these entities could occur. Such release could materially impact the Company's effective tax rate in the period in which the release occurs.
The Company maintains an ASC 740-10, “Accounting for Uncertainty in Income Taxes,” liability for unrecognized tax benefits. At March 31, 2020, the Company’s liability, exclusive of penalty and interest, totals approximately $14,532. The Company accrued $4,361 of additional unrecognized tax benefit related to the tax deductibility of certain business expenses

-12-


incurred and an immaterial amount of interest expense during the three month period ended March 31, 2020. Based upon the outcome of tax examinations, judicial proceedings, or expiration of statutes of limitations, it is possible that the ultimate resolution of the Company's unrecognized tax benefits may result in a payment that is materially different from the current estimate of the tax liabilities.
The Company operates in multiple jurisdictions throughout the world. The Company has effectively settled U.S. federal tax examinations for tax years before 2016 and state and local examinations for tax years before 2012, with limited exceptions. Furthermore, the Company’s non-U.S. subsidiaries are generally no longer subject to income tax examinations in major foreign taxing jurisdictions for tax years prior to 2014. Certain of the Company's state income tax returns in various jurisdictions are currently under examination and it is possible that these examinations will conclude within the next twelve months. However, it is not possible to estimate net increases or decreases in the Company’s unrecognized tax benefits related to these exams during the next twelve months.

Note 8.
Debt
On June 27, 2019, the Company amended its revolving credit facility ("Credit Facility") with a consortium of several banks that provides up to $700,000 and is set to expire in June 2024. Of this amended borrowing capacity, $200,000 was allocated to a Delayed Draw Term Loan A ("Term Loan A"), while the remaining $500,000 was allocated to the Credit Facility. The Term Loan A funds were drawn in December 2019 and used primarily to pay for the unsecured notes which matured at that time. The Credit Facility also includes a $110,000 letter of credit sub-facility. The Company may elect, with lender consent, to increase the commitments under the Credit Facility or incur one or more tranches of term loans in an aggregate amount of up to $300,000 (or an unlimited increase if the Proforma Secured Net Leverage Ratio is less than 1.75x). The Company may elect to add certain foreign subsidiaries as additional borrowers under the Credit Facility, subject to the satisfaction of certain conditions.
On July 11, 2019, the Company entered into forward-starting interest rate swaps to effectively hedge the cash flow exposure associated with the Company's Term Loan A variable-rate borrowings. See Note 9 - Fair Value Measurement for further information.
The Company has an accounts receivable securitization facility that provides up to $150,000 based on available collateral and expires in February 2021. Pursuant to the terms of the facility, the Company is permitted to sell certain of its domestic trade receivables on a continuous basis to its wholly-owned, bankruptcy-remote subsidiary, Cooper Receivables LLC (“CRLLC”). In turn, CRLLC may sell an undivided ownership interest in the purchased trade receivables, without recourse, to a PNC Bank administered, asset-backed commercial paper conduit. The accounts receivable securitization facility has no significant financial covenants until available credit is less than specified amounts.
At March 31, 2020, $250,000 of the available Credit Facility and $20,000 of the accounts receivable securitization facility were drawn to provide funds for working capital and general corporate purposes. The Company had no borrowings under the revolving credit facility or the accounts receivable securitization facility at December 31, 2019. Amounts used to secure letters of credit totaled $21,490 at March 31, 2020 and $21,651 at December 31, 2019. The Company’s additional borrowing capacity, net of borrowings and amounts used to back letters of credit, and based on eligible collateral through use of its credit facility with its bank group and its accounts receivable securitization facility at March 31, 2020, was $308,310.
The Company’s consolidated operations in Asia have renewable unsecured credit lines that provide up to $46,238 of borrowings and do not contain financial covenants. The additional borrowing capacity on the Asian credit lines, based on eligible collateral and the short-term notes payable, totaled $38,394 at March 31, 2020.

-13-


The following is a summary of the Company's debt and finance leases as of March 31, 2020 and December 31, 2019.
 
 
 
Principal Balance
Weighted Average Interest Rate
 
Principal Balance
Weighted Average Interest Rate
 
 
 
Current
Long-Term
 
Current
Long-Term
 
Maturity Date
 
March 31, 2020
 
December 31, 2019
Secured revolver
June, 2024
 
$
250,000

$

3.083%
 
$

$

n/a
AR securitization
February, 2021
 
20,000


1.918%
 


n/a
Asia short term notes
Various maturities
 
7,844


4.656%
 
12,296


4.701%
 
 
 
277,844


 
 
12,296

$

 
 
 
 
 
 
 
 
 
 
 
Term loan A
June, 2024
 
10,000

185,000

2.615%
 
10,000

187,500

3.300%
Unsecured notes
March, 2027
 

116,880

7.625%
 

116,880

7.625%
Finance leases and other
Various maturities
 
5,477

1,213

5.431%
 
265

5,998

2.613%
 
 
 
15,477

303,093

 
 
10,265

310,378

 
Less, Unamortized debt issuance costs
 
 

1,173

 
 

1,230

 
 
 
 
$
293,321

$
301,920

 
 
$
22,561

$
309,148

 
 
 
Additional Credit Capacity
Secured revolver
 
$
250,000

AR securitization
 
130,000

Asia short term notes
 
38,394

 
 
418,394

Less, amounts used to secure letters of credit and other unavailable funds
 
71,690

 
 
$
346,704


The Company’s revolving credit facilities contain restrictive covenants which limit or preclude certain actions based upon the measurement of certain financial covenant metrics. However, the covenants are structured such that the Company expects to have sufficient flexibility to conduct its operations. The Company was in compliance with all of its debt covenants as of March 31, 2020.

Note 9.
Fair Value Measurements
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 non-designated and cash flow hedges of foreign currency exposures. The change in values of the non-designated foreign currency hedges offset the exchange rate fluctuations related to assets and liabilities recorded on the Condensed Consolidated Balance Sheets. The cash flow hedges offset exchange rate fluctuations on the foreign currency-denominated intercompany loans and forecasted cash flows. The Company presently hedges exposures in various currencies, generally for transactions expected to occur within the next 12 months. Additionally, the Company utilizes cash flow hedges that hedge already recognized intercompany loans with maturities of up to two years. The notional amount of these foreign currency derivative instruments at March 31, 2020 and December 31, 2019 was $154,165 and $167,915, respectively. The counterparties to each of these agreements are major commercial banks.
The Company uses non-designated foreign currency forward contracts to hedge its net foreign currency monetary assets and liabilities primarily resulting from non-functional currency denominated receivables and payables of certain U.S. and foreign entities.
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

-14-


contracts of $3,014 and $(1,033) as of March 31, 2020 and December 31, 2019, respectively, are recorded as a separate component of stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets and reclassified into earnings as the hedged transactions occur.
The Company utilizes cross-currency interest rate swaps to hedge the principal and interest repayment of some intercompany loans. The Company also utilizes designated foreign currency forward contracts to hedge the principal amounts of certain intercompany loans.  The fair value of these contracts is $(698) and $(994) at March 31, 2020 and December 31, 2019, respectively.  These contracts have maturities of up to two years and meet the criteria for and have been designated as cash flow hedges. Spot to spot changes are recorded in income and all other effective changes are recorded as a separate component of stockholders' equity. The Company assesses hedge effectiveness prospectively and retrospectively, based on regression of the change in foreign currency exchange rates. Time value of money is included in effectiveness testing.
On July 11, 2019, in order to hedge its Term Loan A variable rate debt, with an interest rate indexed to LIBOR plus 150 basis points, the Company entered into forward-starting interest rate swaps with effective dates of December 2, 2019 and termination dates of June 27, 2024. The initial notional amount of these swaps is $200,000 and decreases quarterly by varying amounts over the life of the swaps, in accordance with the Term Loan A repayment schedule. The net quarterly payments made for the period ended as of March 31, 2020 were immaterial. The interest rate swaps effectively fix the variable interest rate component on the notional amount of these swaps at 1.720%. The swaps qualify for hedge accounting and, therefore, changes in the fair value of the swaps have been recorded in accumulated other comprehensive income in the amount of $(9,211) and $(1,032) at March 31, 2020 and December 31, 2019. The Company assesses hedge effectiveness prospectively and retrospectively, based on regression of the period to period change in swap and hedged item values.
The derivative instruments are subject to master netting arrangements with the counterparties to the contracts. The following table presents the location and amounts of derivative instrument fair values in the Condensed Consolidated Balance Sheets:
Assets/(liabilities)
 
March 31, 2020
 
December 31, 2019
Designated as hedging instruments:
 
 
 
 
     Gross amounts recognized
 
$
(10,135
)
 
$
(3,208
)
     Gross amounts offset
 
3,240

 
149

     Net amounts
 
$
(6,895
)
 
$
(3,059
)
Not designated as hedging instruments:
 
 
 
 
     Gross amounts recognized
 
$
(645
)
 
$
(1,118
)
     Gross amounts offset
 
65

 
76

     Net amounts
 
$
(580
)
 
$
(1,042
)
Net amounts presented:
 
 
 
 
     Accrued liabilities
 
$
(302
)
 
$
(2,420
)
     Other long-term liabilities
 
(7,173
)
 
(1,681
)

The following table presents the location and amount of gains and losses on derivative instruments designated as cash flow hedges in the Condensed Consolidated Statements of Operations:
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Amount of Loss Recognized in Other Comprehensive Income on Derivatives
 
$
(3,601
)
 
$
(1,183
)
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
 
Net sales
 
$
180

 
$
399

Interest expense
 
(30
)
 
(32
)
Other non-operating income
 
360

 
(429
)
 
 
$
510

 
$
(62
)

-15-


The following table presents the location and amount of losses on foreign exchange contract derivatives not designated as hedging instruments in the Condensed Consolidated Statements of Operations.
 
 
Three Months Ended March 31,
 
2020
 
2019
Other non-operating income (expense)
 
$
6,248

 
$
(1,006
)

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 Condensed Consolidated Balance Sheets 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; and
d.
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 valuation of foreign currency derivative instruments was determined using widely accepted valuation techniques. This analysis reflected the contractual terms of the derivatives, including the period to maturity, and used observable market-based inputs, including forward points. The Company incorporated credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as current credit ratings, to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2020 and December 31, 2019, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuations in their entirety were to be classified in Level 2 of the fair value hierarchy.
The valuation of stock-based liabilities was determined using the Company's stock price, and as a result, these liabilities are classified in Level 1 of the fair value hierarchy. 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 March 31, 2020 and December 31, 2019:
 
 
 
 
 
 
 
 
 
 
 
March 31, 2020
 
 
Total
Assets
(Liabilities)
 
Quoted Prices
in Active Markets
for Identical
Assets
Level (1)
 
Significant
Other
Observable
Inputs
Level (2)
 
Significant
Unobservable
Inputs
Level (3)
Foreign Currency Derivative
 
$
1,736

 
$

 
$
1,736

 
$

Interest Rate Swaps
 
(9,211
)
 

 
(9,211
)
 

Stock-based Liabilities
 
(9,600
)
 
(9,600
)
 

 


-16-


 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
Total
Liabilities
 
Quoted Prices
in Active Markets
for Identical
Assets
Level (1)
 
Significant
Other
Observable
Inputs
Level (2)
 
Significant
Unobservable
Inputs
Level (3)
 
 
 
Foreign Currency Derivative
 
$
(3,069
)
 
$

 
$
(3,069
)
 
$

 
Interest Rate Swaps
 
(1,032
)
 

 
(1,032
)
 

 
Stock-based Liabilities
 
(14,971
)
 
(14,971
)
 

 


The fair value of Cash and cash equivalents, Notes receivable, restricted cash included in Other current assets, Short-term borrowings and Current portion of long-term debt and finance leases at March 31, 2020 and December 31, 2019 are equal to their corresponding carrying values as reported on the Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, respectively.  Each of these classes of assets and liabilities is classified within Level 1 of the fair value hierarchy.
The fair value of Long-term debt and finance leases is $307,547 and $292,719 at March 31, 2020 and December 31, 2019, respectively, and is classified within Level 1 of the fair value hierarchy.  The carrying value of Long-term debt is $301,920 and $309,148 as reported on the Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, respectively.

Note 10.
Pensions and Postretirement Benefits Other than Pensions
The following tables disclose the amount of net periodic benefit costs for the three months ended March 31, 2020 and 2019, respectively, for the Company’s defined benefit plans and other postretirement benefits:
 
Pension Benefits - Domestic
 
Three Months Ended March 31,
 
2020
 
2019
Components of net periodic benefit cost:
 
 
 
Service cost
$
2,497

 
$
2,244

Interest cost
8,308

 
9,875

Expected return on plan assets
(14,194
)
 
(11,990
)
Amortization of actuarial loss
7,221

 
8,284

Amortization of prior service cost
192

 

Net periodic benefit cost
$
4,024

 
$
8,413


 
Pension Benefits - International
 
Three Months Ended March 31,
 
2020
 
2019
Components of net periodic benefit cost:
 
 
 
Interest cost
$
2,099

 
$
2,821

Expected return on plan assets
(2,218
)
 
(2,947
)
Amortization of actuarial loss
1,034

 
949

Amortization of prior service cost
66

 

Net periodic benefit cost
$
981

 
$
823


-17-


 
 
Other Post Retirement Benefits
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Components of net periodic benefit cost:
 
 
 
 
Service cost
 
$
360

 
$
393

Interest cost
 
1,830

 
2,472

Amortization of actuarial gain
 
(106
)
 
(102
)
Amortization of prior service credit
 
(22
)
 

Net periodic benefit cost
 
$
2,062

 
$
2,763


At March 31, 2020, an amendment to a domestic pension plan resulted in a retroactive increase in benefit levels for plan participants and has been accounted for as a prior service cost deferred in Other comprehensive loss, to be amortized as a component of net periodic benefit cost in future periods. The domestic pension plan projected benefit obligation increased $2,582 as a result of the amendment as of March 31, 2020.


-18-


Note 11.
Stockholders’ Equity
The following tables provide a quarterly reconciliation of the equity accounts attributable to Cooper Tire & Rubber Company and to the noncontrolling shareholders' interests for the year to date as of March 31, 2020 and 2019:
 
Common Stock $1 Par Value
Capital in Excess of Par Value
Retained Earnings
Cumulative Other Comprehensive Loss
Common Shares in Treasury
Total Parent Stockholders’ Equity
 
Noncontrolling Shareholders’ Interests in Consolidated Subsidiary
 
Total Stockholders’ Equity
Balance at December 31, 2019
$
87,850

$
22,175

$
2,524,963

$
(447,580
)
$
(922,783
)
$
1,264,625

 
$
63,108

 
$
1,327,733

Net (loss) income


(11,591
)


(11,591
)
 
274

 
(11,317
)
Other comprehensive loss, excluding currency loss charged to equity as part of acquisition of noncontrolling shareholder interest



(52,682
)

(52,682
)
 
(544
)
 
(53,226
)
Stock compensation plans

(1,235
)
(43
)

1,377

99

 

 
99

Cash dividends - 0.105 per share