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

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

(Exact name of registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization)		34-4297750 (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)

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, and (2) has been subject to such filing requirements for the past 90 days.

Yes þ            No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes þ            No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer þ		Accelerated filero		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o           No þ

Number of shares of common stock of registrant outstanding
at July 31, 2011: 62,257,749

 

 

Part I. FINANCIAL INFORMATION

Item 1.		FINANCIAL STATEMENTS

COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except per-share amounts)

		December 31,				June 30,
		2010				2011
		(Note 1)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	413,359			$	137,688
Notes receivable			69,547				38,046
Accounts receivable, less allowances of $10,811 in 2010 and $12,083 in 2011			414,149				477,727
Inventories at lower of cost or market:
Finished goods			240,107				382,829
Work in process			26,735				50,842
Raw materials and supplies			119,985				208,800
			386,827				642,471
Other current assets			56,357				42,630
Total current assets			1,340,239				1,338,562
Property, plant and equipment:
Land and land improvements			34,355				34,400
Buildings			320,997				324,398
Machinery and equipment			1,636,700				1,763,605
Molds, cores and rings			232,153				233,949
			2,224,205				2,356,352
Less accumulated depreciation and amortization			1,371,763				1,396,678
Net property, plant and equipment			852,442				959,674
Goodwill			—				20,687
Intangibles, net of accumulated amortization of $24,455 in 2010 and $25,086 in 2011			17,256				16,626
Restricted cash			2,274				2,401
Other assets			93,326				70,872
Total assets		$	2,305,537			$	2,408,822
LIABILITIES AND EQUITY
Current liabilities:
Notes payable		$	146,947			$	136,170
Accounts payable			384,464				488,160
Accrued liabilities			152,364				185,023
Income taxes			4,601				4,905
Current portion of long term debt			5,885				21,458
Total current liabilities			694,261				835,716
Long-term debt			320,724				324,440
Postretirement benefits other than pensions			257,657				261,546
Pension benefits			258,321				234,436
Other long-term liabilities			180,082				174,648
Deferred income taxes			—				12,435
Redeemable noncontrolling shareholder interest			71,442				71,673
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 in 2010 and in 2011			87,850				87,850
Capital in excess of par value			61,444				—
Retained earnings			1,247,265				1,251,190
Cumulative other comprehensive loss			(468,063	)			(430,153	)
			928,496				908,887
Less: common shares in treasury at cost (26,205,336 in 2010 and 25,592,543 in 2011)			(467,707	)			(455,419	)
Total parent stockholders’ equity			460,789				453,468
Noncontrolling shareholders’ interests in consolidated subsidiaries			62,261				40,460
Total equity			523,050				493,928
Total liabilities and equity		$	2,305,537			$	2,408,822

See accompanying notes.

COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2010 AND 2011
(UNAUDITED)
(Dollar amounts in thousands except per-share amounts)

		2010				2011
Net sales		$	803,959			$	922,207
Cost of products sold			708,577				849,464
Gross profit			95,382				72,743
Selling, general and administrative			54,274				48,490
Restructuring			7,426				—
Operating profit			33,682				24,253
Interest expense			9,149				9,229
Interest income			(771	)			(901	)
Other income			(988	)			(143	)
Income from continuing operations before income taxes			26,292				16,068
Income tax expense			1,247				1,621
Income from continuing operations			25,045				14,447
Income from discontinued operations, net of income taxes			25,126				—
Net income			50,171				14,447
Net income attributable to noncontrolling shareholders’ interests			6,094				2,924
Net income attributable to Cooper Tire & Rubber Company		$	44,077			$	11,523
Basic earnings per share:
Income from continuing operations attributable to Cooper Tire & Rubber Company		$	0.31			$	0.19
Income from discontinued operations			0.41				—
Net income attributable to Cooper Tire & Rubber Company common stockholders		$	0.72			$	0.19
Diluted earnings per share:
Income from continuing operations attributable to Cooper Tire & Rubber Company		$	0.30			$	0.18
Income from discontinued operations			0.40				—
Net income attributable to Cooper Tire & Rubber Company common stockholders		$	0.70			$	0.18
Dividends per share		$	0.105			$	0.105

See accompanying notes.

COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2010 AND 2011
(UNAUDITED)
(Dollar amounts in thousands except per-share amounts)

		2010				2011
Net sales		$	1,558,402			$	1,828,169
Cost of products sold			1,377,848				1,670,298
Gross profit			180,554				157,871
Selling, general and administrative			98,879				101,435
Restructuring			15,038				—
Operating profit			66,637				56,436
Interest expense			17,879				18,650
Interest income			(1,984	)			(1,570	)
Other income			(1,225	)			(5,648	)
Income from continuing operations before income taxes			51,967				45,004
Income tax expense			8,990				12,080
Income from continuing operations			42,977				32,924
Income from discontinued operations, net of income taxes			24,366				—
Net income			67,343				32,924
Net income attributable to noncontrolling shareholders’ interests			11,690				5,727
Net income attributable to Cooper Tire & Rubber Company		$	55,653			$	27,197
Basic earnings per share:
Income from continuing operations attributable to Cooper Tire & Rubber Company		$	0.51			$	0.44
Income from discontinued operations			0.40				—
Net income attributable to Cooper Tire & Rubber Company common stockholders		$	0.91			$	0.44
Diluted earnings per share:
Income from continuing operations attributable to Cooper Tire & Rubber Company		$	0.50			$	0.43
Income from discontinued operations			0.39				—
Net income attributable to Cooper Tire & Rubber Company common stockholders		$	0.89			$	0.43
Dividends per share		$	0.210			$	0.210

See accompanying notes.

COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2010 AND 2011
(UNAUDITED)
(Dollar amounts in thousands)

		2010				2011
Operating activities:
Net income		$	67,343			$	32,924
Adjustments to reconcile net income to net cash provided by (used in) continuing operations:
Income from discontinued operations, net of income taxes			(24,366	)			—
Depreciation			58,991				62,228
Amortization			997				672
Deferred income taxes			(551	)			1,543
Stock based compensation			3,532				2,339
Change in LIFO inventory reserve			46,627				70,706
Amortization of unrecognized postretirement benefits			16,505				17,682
Loss on sale of assets			209				2,735
Changes in operating assets and liabilities of continuing operations:
Accounts and notes receivable			(108,959	)			(41,959	)
Inventories			(137,258	)			(306,206	)
Other current assets			(3,662	)			19,237
Accounts payable			87,683				93,210
Accrued liabilities			(1,919	)			31,630
Other items			24,081				(41,951	)
Net cash provided by (used in) continuing operations			29,253				(55,210	)
Net cash provided by discontinued operations			17,262				—
Net cash provided by (used in) operating activities			46,515				(55,210	)
Investing activities:
Property, plant and equipment			(45,048	)			(83,100	)
Acquisition of business, net of cash acquired			—				(17,380	)
Proceeds from the sale of assets			292				3,450
Net cash used in investing activities			(44,756	)			(97,030	)
Financing activities:
Payments on short-term debt			(4,776	)			(12,740	)
Issuance of long-term debt			—				20,085
Payments on long-term debt			(10,600	)			(600	)
Contributions by noncontrolling shareholder			5,250				—
Acquisition of noncontrolling shareholder interest			(17,920	)			(116,500	)
Payment of dividends to noncontrolling shareholders			(11,637	)			(5,731	)
Payment of dividends			(12,856	)			(13,048	)
Issuance of common shares and excess tax benefits on options			3,640				4,289
Net cash used in financing activities			(48,899	)			(124,245	)
Effects of exchange rate changes on cash of continuing operations			(759	)			814
Changes in cash and cash equivalents			(47,899	)			(275,671	)
Cash and cash equivalents at beginning of year			426,981				413,359
Cash and cash equivalents at end of period		$	379,082			$	137,688

See accompanying notes.

COOPER TIRE & RUBBER COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per-share amounts)

Organization, Consolidation and Summary of Principal Accounting Policies

1.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. There is a year-round demand for the Company’s passenger and truck replacement tires, but sales of light vehicle replacement tires are generally strongest during the third and fourth quarters of the year. Winter tires are sold principally during the months of June through November. Operating results for the three-month and six-month periods ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011.

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, and investments in affiliates of 20 percent or less are accounted for using the cost 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.

The Company’s investment in Corporacion de Occidente (“COOCSA”), a Mexican tire manufacturing entity, represented an approximate 38 percent ownership interest at December 31, 2010. On January 14, 2011, the Company invested $21,775 and acquired an additional 20 percent ownership share. The Company’s ownership share is now approximately 58 percent and because of the increase in voting rights, the results of the entity have been consolidated from the date of the transaction.

The Company had entered into a joint venture, Cooper de Mexico, to market and distribute Cooper, Pneustone and associated brand tires in Mexico. The Company had determined it had the power to control the purchasing and marketing of tires for this joint venture. The Company had also provided additional financial support to this joint venture in order to allow it to finance its business activities. The joint venture partner had not provided such additional support. The Company had determined it was the primary beneficiary of this joint venture due to its ability to control the primary economic activity and due to the subordinated financial support it had provided to the entity which would require the Company to absorb more than 50 percent of expected losses. On January 14, 2011, as a result of a $12,000 capital call, the Company achieved virtually 100 percent ownership in this Mexican marketing entity. The additional ownership was accounted for by reclassification of the negative balance of noncontrolling shareholder interest of $4,576 to Capital in excess of par value. This entity was previously consolidated in the Company’s financial results.

The Company entered into a joint venture with Kenda Tire Company to construct and operate a tire manufacturing facility in the People’s Republic of China (“PRC”) which began production in 2007. Until May 2012, all of the tires produced by this joint venture are required to be exported and sold by Cooper Tire & Rubber Company and its affiliates. Due to this requirement, the Company has the power to direct the manufacturing operations of the joint venture to produce the types of tires required by the Company to meet its global demands. The Company had determined it was the primary beneficiary of this joint venture because of the operational control and the fact it received all of the tires produced by this manufacturing operation. In March 2011, the Company increased its ownership in the affiliated Cooper Kenda Tire operations to 100 percent from 50 percent for cash consideration of $116,500. In accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation,” the excess of the $116,500 over the non-controlling shareholder interest was recorded as a decrease to Capital in excess of par value, limited by the amount of Capital in excess of par value at the transaction date and to Retained earnings to reflect the additional ownership. The entity has been renamed Cooper Kunshan Tire. This entity was previously consolidated in the Company’s financial results.

Since the Company had determined as of December 31, 2010 that both Cooper Kenda and Cooper de Mexico were Variable Interest Entities (“VIEs”) and it was the primary beneficiary, it had included their assets, liabilities and operating results in its consolidated financial statements. At December 31, 2010, the assets (principally Property, plant and equipment) of these VIEs, $204,535, could only be used to settle obligations of those VIEs. Similarly, liabilities (principally Notes payable) of consolidated VIEs, $80,414, at December 31, 2010 represented claims against the specific assets of the VIEs. Because of the increased ownership in these two entities, these restrictions are no longer applicable.

		Accounting Pronouncements
		In June 2011, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, “Presentation of Comprehensive Income”, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of equity. ASU 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011. Although the Company does not expect the adoption of ASU 2011-05 to have a material effect on its consolidated financial statements, it will change its financial statement presentation.

Acquisition

2.		On January 14, 2011, the Company invested $21,775 and acquired an additional 20 percent ownership in COOCSA, a Mexican tire manufacturing entity in which it had previously been an equity investor. The Company’s ownership share is now approximately 58 percent and because of the increase in voting rights, the results of the entity and 100 percent of its assets and liabilities will be consolidated from the date of this transaction. The Company made this additional investment as part of its strategic plan to build a sustainable, competitive cost position.
		The COOCSA acquisition is being accounted for as a purchase transaction. The total consideration (including the $21,775 paid and the fair value of the original 38 percent ownership interest) has preliminarily been allocated to the assets acquired, liabilities assumed and noncontrolling shareholder interest based on their respective fair values at January 14, 2011. This initial purchase price allocation may be adjusted within one year of the purchase date for changes in estimates of the fair value of assets acquired and liabilities assumed. Adjustments to this preliminary allocation will be made when the asset valuations have been completed. In the second quarter, changes in the valuation of property, plant and equipment and certain accrued liabilities were recorded, with a corresponding adjustment to goodwill. The Company expects the valuation process to be completed no later than December 31, 2011. The excess purchase price over the estimated fair value of the net assets acquired is allocated to goodwill. Goodwill consists of anticipated growth opportunities for COOCSA and is recorded in the North American Tire Operations segment. Goodwill is not deductible for federal income tax purposes. The operating results of COOCSA have been included in the consolidated financial statements of the Company since the date of acquisition.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed on January 14, 2011, translated into U.S. dollars at the exchange rate on that date.

Assets
Cash		$	4,395
Inventory			14,105
Other current assets			3,400
Property, plant & equipment			84,069
Goodwill			20,687
Liabilities
Payable to Cooper Tire & Rubber Company			(4,185	)
Accounts payable			(4,990	)
Accrued liabilities			(2,661	)
Deferred income taxes			(9,643	)
Notes payable to Cooper Tire & Rubber Company			(11,269	)
			93,908
Noncontrolling shareholder interest			(37,853	)
Cooper Tire & Rubber Company consideration		$	56,055

		The Company has determined that the nonrecurring fair value measurements related to each of these assets and liabilities rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets and settlement of liabilities, as observable inputs are not available and, as such, reside within Level 3 of the fair value hierarchy as defined in Footnote 4. The Company utilized a third party to assist in the fair value determination of certain components of the purchase price allocation, namely Property, plant and equipment. The valuation of Property, plant and equipment was developed using primarily the cost approach. The fair value of the Company’s investment was determined based upon internal and external inputs considering various relevant market transactions and discounted cash flow valuation methods, among other factors. The fair value of noncontrolling shareholder interest was valued using the same method used to value the investment.
		At December 31, 2010, the Company’s previously recorded investment in COOCSA was recorded as an Investment in unconsolidated subsidiary of $24,398 which was included in Other assets on its Consolidated Balance Sheets. The Company had also recorded a Cumulative currency loss of $4,893 associated with this investment which was included in Cumulative other comprehensive loss on the Consolidated Balance Sheets.
		In connection with its increased investment in COOCSA, the Company recorded a gain of $4,989 on its original investment, which represents the excess of the fair value of approximately $34,280 over the January 14, 2011 carrying value and previously unrecognized currency losses. The gain was recorded in Other income in the financial statements.
		The Cooper Tire & Rubber Company consideration from the table above of $56,055 represents the $21,775 additional investment made by the Company plus the fair value of the original investment of $34,280.
		The acquisition does not meet the thresholds for a significant acquisition and therefore no pro forma financial information is presented.

Earnings Per Share

3.

Net income per share is computed on the basis of the weighted average number of common shares outstanding each year. Diluted earnings per share from continuing operations includes the dilutive effect of stock options and other stock units. The following table sets forth the computation of basic and diluted earnings per share:

		Three months ended June 30								Six months ended June 30
		2010				2011				2010				2011
Numerator
Numerator for basic and diluted earnings per share — income from continuing operations available to common stockholders		$	18,951			$	11,523			$	31,287			$	27,197
Denominator
Denominator for basic earnings per share — weighted average shares outstanding			61,292				62,196				61,104				62,024
Effect of dilutive securities — stock options and other stock units			1,317				1,012				1,349				1,172
Denominator for diluted earnings per share — adjusted weighted average shares outstanding			62,609				63,208				62,453				63,196
Basic earnings per share:
Income from continuing operations		$	0.31			$	0.19			$	0.51			$	0.44
Income from discontinued operations, net of income taxes			0.41				—				0.40				—
Net income attributable to Cooper Tire & Rubber Company common stockholders		$	0.72			$	0.19			$	0.91			$	0.44
Diluted earnings per share:
Income from continuing operations		$	0.30			$	0.18			$	0.50			$	0.43
Income from discontinued operations, net of income taxes			0.40				—				0.39				—
Net income attributable to Cooper Tire & Rubber Company common stockholders		$	0.70			$	0.18			$	0.89			$	0.43

Options to purchase shares of the Company’s common stock not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares were 458 and 443 at June 30, 2011 and 2010, respectively.

Derivative Instruments and Hedging Activities Disclosure

4.		Derivative financial instruments are utilized by the Company to reduce foreign currency exchange risks. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. The Company does not enter into financial instruments for trading or speculative purposes. The derivative financial instruments include fair value and cash flow hedges of foreign currency exposures. The change in values of the fair value foreign currency hedges offset exchange rate fluctuations on the foreign currency-denominated intercompany loans and obligations. The Company presently hedges exposures in the Euro, Canadian dollar, British pound sterling, Swiss franc, Swedish krona, Norwegian krone, Mexican peso and Chinese yuan generally for transactions expected to occur within the next 12 months. The notional amount of these foreign currency derivative instruments at December 31, 2010 and June 30, 2011 was $234,600 and $244,115, respectively. The counterparties to each of these agreements are major commercial banks.
		The Company uses foreign currency forward contracts as hedges of the fair value of certain non-U.S. dollar denominated asset and liability positions, primarily accounts receivable and debt. Gains and losses resulting from the impact of currency exchange rate movements on these forward contracts are recognized in the accompanying Consolidated Statements of Operations in the period in which the exchange rates change and offset the foreign currency gains and losses on the underlying exposure being hedged.

		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 $(3,263) and $(6,284) as of December 31, 2010 and June 30, 2011, respectively) are recorded as a separate component of stockholders’ equity in the accompanying Consolidated Balance Sheets and reclassified into earnings as the hedged transactions occur.
		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 Condensed Consolidated Balance Sheets:

(assets)/liabilities		December 31, 2010								June 30, 2011
Derivatives designated as hedging instruments		Accrued liabilities				$	3,413			Accrued liabilities				$	6,532
Derivatives not designated as hedging instruments		Accrued liabilities				$	564			Accrued liabilities				$	451

The following table presents the location and amount of gains and losses on derivative instruments in the Condensed Consolidated Statements of Operations:

Amount of Gain (Loss)

Amount of (Loss) Gain

Recognized in Other

Reclassified from

Amount of Gain (Loss)

Comprehensive Income on

Other Comprehensive Income

Recognized in Income on

Derivative (Effective Portion)

into Income (Effective Portion)

Derivative (Ineffective Portion)

Three

Three

Three

Three

Three

Three

Derivatives

Months

Months

Months

Months

Months

Months

Designated as

Ended

Ended

Ended

Ended

Ended

Ended

Cash Flow Hedges

June 30, 2010

June 30, 2011

June 30, 2010

June 30, 2011

June 30, 2010

June 30, 2011

Foreign exchange contracts

$

5,013

$

(434

)

$

236

$

(566

)

$

(186

)

$

24

Six

Six

Six

Six

Six

Six

Derivatives

Months

Months

Months

Months

Months

Months

Designated as

Ended

Ended

Ended

Ended

Ended

Ended

Cash Flow Hedges

June 30, 2010

June 30, 2011

June 30, 2010

June 30, 2011

June 30, 2010

June 30, 2011

Foreign exchange contracts

$

7,563

$

(4,905

)

$

1,565

$

(1,884

)

$

(215

)

$

(90

)

Amount of Gain (Loss) Recognized

Location of

in Income on Derivatives

Gain (Loss)

Three

Three

Six

Six

Derivatives not

Recognized

Months

Months

Months

Months

Designated as

in Income on

Ended

Ended

Ended

Ended

Hedging Instruments

Derivatives

June 30, 2010

June 30, 2011

June 30, 2010

June 30, 2011

Foreign exchange contracts

Other income

$

457

$

(22

)

$

(156

)

$

107

		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 following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2011, and December 31, 2010:

						Quoted Prices				Significant
		Total				in Active Markets				Other				Significant
		Derivative				for Identical				Observable				Unobservable
		(Assets)				Assets				Inputs				Inputs
Foreign Exchange Contracts		Liabilities				Level (1)				Level (2)				Level (3)
June 30, 2011		$	6,983			$	—			$	6,983			$	—
December 31, 2010		$	3,977			$	—			$	3,977			$	—

		The land, building and certain manufacturing equipment located at Albany, Georgia are classified as “assets held for sale” at the lower of estimated fair value less costs to sell determined based on a signed Real Estate Purchase Agreement or carrying value. The carrying value of these assets is $8,155 at June 30, 2011.
		The Company has notes, secured by government-controlled banks, from certain of its customers in the PRC to settle trade accounts receivable which generally have maturities of six months or less. The fair value of the Company’s debt is based upon prices of similar instruments in the market place.

The carrying amounts and fair values of the Company’s financial instruments are as follows:

		December 31, 2010								June 30, 2011
		Carrying				Fair				Carrying				Fair
		Amount				Value				Amount				Value
Cash and cash equivalents		$	413,359			$	413,359			$	137,688			$	137,688
Notes receivable			69,547				69,547				38,046				38,046
Notes payable			(146,947	)			(146,947	)			(136,170	)			(136,170	)
Current portion of long-term debt			(5,885	)			(5,885	)			(21,458	)			(21,458	)
Long-term debt			(320,724	)			(322,124	)			(324,440	)			(327,640	)
Derivative financial instruments			(3,977	)			(3,977	)			(6,983	)			(6,983	)

Segment Reporting Information

5.

The following table details information on the Company’s operating segments.

		Three months ended June 30								Six months ended June 30
		2010				2011				2010				2011
Revenues from customers:
North American Tire		$	574,968			$	666,816			$	1,106,685			$	1,314,760
International Tire			312,156				395,620				605,713				759,042
Eliminations			(83,165	)			(140,229	)			(153,996	)			(245,633	)
Net sales		$	803,959			$	922,207			$	1,558,402			$	1,828,169
Segment profit (loss):
North American Tire		$	19,680			$	3,675			$	33,282			$	25,204
International Tire			20,528				23,300				43,078				43,372
Eliminations			42				(990	)			(467	)			(2,733	)
Unallocated corporate charges			(6,568	)			(1,732	)			(9,256	)			(9,407	)
Operating profit			33,682				24,253				66,637				56,436
Interest expense			9,149				9,229				17,879				18,650
Interest income			(771	)			(901	)			(1,984	)			(1,570	)
Other income			(988	)			(143	)			(1,225	)			(5,648	)
Income from continuing operations before income taxes		$	26,292			$	16,068			$	51,967			$	45,004

Inventory Disclosure

6.		At December 31, 2010, approximately 37 percent of the Company’s inventories had been valued under the last-in, first-out (“LIFO”) method. At June 30, 2011, approximately 42 percent of the Company’s inventories are valued under the LIFO method. The remaining inventories have been valued under the first-in, first-out (“ 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 $191,180 and $261,886 at December 31, 2010 and June 30, 2011, respectively, from current cost which would be reported under the FIFO method.

Disclosure of Incentive Compensation Plan

7.

The Company’s incentive compensation plans allow the Company to grant awards to key employees in the form of stock options, stock awards, restricted stock units, stock appreciation rights, performance units, dividend equivalents and other awards. Compensation related to these awards is determined based on the fair value on the date of grant and is amortized to expense over the vesting period. For restricted stock units and performance stock units, the Company recognizes compensation expense based on the earlier of the vesting date or the date when the employee becomes eligible to retire. If awards can be settled in cash, these awards are recorded as liabilities and marked to market.

The following table discloses the amount of stock based compensation expense for the three and six-month periods ended June 30, 2010 and 2011:

		Three months ended June 30								Six months ended June 30
		2010				2011				2010				2011
Stock options		$	396			$	727			$	617			$	1,220
Restricted stock units			477				316				644				598
Performance stock units			1,572				317				2,271				521
Total stock based compensation		$	2,445			$	1,360			$	3,532			$	2,339

		Stock Options
		In April 2009, executives participating in the 2009 — 2011 Long-Term Incentive Plan were granted 1,155,000 stock options which will vest one third each year through April 2012. This plan does not contain any performance based criteria. In March 2010, executives participating in the 2010 — 2012 Long-Term Incentive Plan were granted 303,120 stock options which will vest one third each year through March 2013. During 2011, executives participating in the 2011 — 2013 Long-Term Incentive Plan were granted 311,670 stock options which will vest one third each year through 2014. 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:

		2010				2011
Risk-free interest rate			2.8	%			2.7	%
Dividend yield			2.2	%			1.8	%
Expected volatility of the Company’s common stock			0.604				0.615
Expected life in years			6.0				6.0

		The weighted average fair value of options granted in 2010 and 2011 was $9.01 and $11.57, respectively.
		The following table provides details of the stock option activity for the six months ended June 30, 2011:

		Long-Term Incentive Plan Years
		2009 - 2011				2010 - 2012				2011 - 2013
January 1, 2011
Outstanding			816,500				303,120				—
Exercisable			164,500				—				—
Granted							—				311,670
Cancelled			(2,000	)			(13,000	)			—
Exercised			(110,500	)			(10,034	)			—
June 30, 2011
Outstanding			704,000				280,086				311,670
Exercisable			410,000				91,008				—

		Restricted Stock Units
		Under the Company’s various Incentive Compensation Plans, restricted stock units may be granted to officers and other key employees. Compensation related to the restricted stock units is determined based on the fair value of the Company’s stock on the date of grant and is amortized to expense over the vesting period. The restricted stock units granted in 2011 have vesting periods ranging from three to four years.
		The following table provides details of the restricted stock unit activity for the six months ended June 30:

		2010				2011
Restricted stock units outstanding at January 1			526,809				242,273
Restricted stock units granted			—				100,400
Accrued dividend equivalents			2,981				2,962
Restricted stock units settled			(250,021	)			(23,491	)
Restricted stock units cancelled			(4,149	)			(1,638	)
Restricted stock units outstanding at June 30			275,620				320,506

		Performance Stock Units (PSUs)
		Executives participating in the Company’s Long-Term Incentive Plan for the plan year 2007 — 2009 and 2008 — 2010, earn performance stock units based on the Company’s financial performance. As part of the 2007 — 2009 plan, the units earned in 2007 and 2009 vested in February 2010. As part of the 2008 — 2010 plan, the units earned in 2009 and 2010 vested at December 31, 2010. No units were earned in 2008.
		Executives participating in the Company’s Long-Term Incentive Plan for the plan year 2010 — 2012, earn performance stock units and cash. Units and cash earned during 2010 and any units and cash earned during 2011 will vest at December 31, 2012.
		Executives participating in the Company’s Long-Term Incentive Plan for the plan year 2011 — 2013, earn performance stock units and cash. Any units and cash earned during 2011 will vest at December 31, 2013.
		The following table provides details of the performance stock units earned under the Company’s Long-Term Incentive Plans for the six months ended June 30:

		Long-Term Incentive Plan Years
		2007-2009				2008-2010
Performance stock units outstanding at January 1, 2010			559,951				290,860
Accrued dividend equivalents			—				3,138
Performance stock units settled			(559,951	)			—
Performance stock units outstanding at June 30, 2010			—				293,998
			2008-2010				2010-2012
Performance stock units outstanding at January 1, 2011			480,858				60,082
Accrued dividend equivalents			—				602
Performance stock units settled			(480,858	)			—
Performance stock units outstanding at June 30, 2011			—				60,684

The Company’s restricted stock units and performance stock units are not participating securities. These units will be converted into shares of Company common stock in accordance with the distribution date indicated in the agreements. Restricted stock units earn dividend equivalents from the time of the award until distribution is made in common shares. Performance stock units earn dividend equivalents from the time the units have been earned based upon Company performance metrics until distribution is made in common shares. Dividend equivalents are only earned subject to vesting of the underlying restricted stock units or performance stock units, accordingly, such units do not represent participating securities.

Defined Benefit Plans And Other Postretirement Benefits Disclosure

8.

The following tables disclose the amount of net periodic benefit costs for the Company’s defined benefit plans and other postretirement benefits relating to continuing operations:

						Pension Benefits - Domestic
		Three months ended June 30								Six months ended June 30
		2010				2011				2010				2011
Components of net periodic benefit cost:
Service cost		$	1,079			$	1,925			$	2,158			$	3,850
Interest cost			11,349				11,250				22,697				22,500
Expected return on plan assets			(12,527	)			(12,527	)			(25,054	)			(25,053	)
Amortization of actuarial loss			6,943				7,575				13,886				15,150
Recognized actuarial loss			1,421				—				4,751				—
Net periodic benefit cost		$	8,265			$	8,223			$	18,438			$	16,447

						Pension Benefits - International
		Three months ended June 30								Six months ended June 30
		2010				2011				2010				2011
Components of net periodic benefit cost:
Service cost		$	561			$	634			$	1,149			$	1,258
Interest cost			4,083				4,579				8,359				9,077
Expected return on plan assets			(3,679	)			(4,232	)			(7,531	)			(8,390	)
Amortization of prior service cost			(149	)			(189	)			(307	)			(377	)
Amortization of actuarial loss			1,429				1,467				2,926				2,909
Net periodic benefit cost		$	2,245			$	2,259			$	4,596			$	4,477

						Other Postretirement Benefits
		Three months ended June 30								Six months ended June 30
		2010				2011				2010				2011
Components of net periodic benefit cost:
Service cost		$	791			$	776			$	1,581			$	1,552
Interest cost			3,529				3,461				7,058				6,923
Amortization of prior service cost			(136	)			(172	)			(272	)			(344	)
Amortization of actuarial loss			—				316				—				631
Net periodic benefit cost		$	4,184			$	4,381			$	8,367			$	8,762

During 2011, the Company expects to contribute approximately $40,000 to its domestic and foreign pension plans.

Shareholders Equity

9.

The following table reconciles the beginning and end of the period equity accounts attributable to Cooper Tire & Rubber Company and to the noncontrolling shareholders’ interests:

						Noncontrolling
		Total				Shareholders'								Redeemable
		Parent				Interests in				Total				Noncontrolling
		Stockholders’				Consolidated				Stockholders’				Shareholders’
		Equity				Subsidiaries				Equity				Interests
Balance at December 31, 2010		$	460,789			$	62,261			$	523,050			$	71,442
Net income			27,197				1,341				28,538				4,386
Other comprehensive income			30,255				1,266				31,521				1,576
Dividends payable to noncontrolling shareholders			—				—				—				(5,731	)
Acquisition of business			—				37,853				37,853				—
Acquisition of noncontrolling shareholder interest			(54,239	)			(62,261	)			(116,500	)			—
Stock compensation plans, including tax benefit of $322			2,514				—				2,514				—
Cash dividends — $.210 per share			(13,048	)			—				(13,048	)			—
Balance at June 30, 2011		$	453,468			$	40,460			$	493,928			$	71,673

The following table provides the details of the Company’s comprehensive income (loss). Comprehensive income (loss) includes net income (loss) and components of other comprehensive income (loss), such as foreign currency translation adjustments, unrealized gains or losses on certain marketable securities and derivative instruments and unrecognized postretirement benefit plans.

The Company’s comprehensive income (loss) is as follows:

		Three months ended June 30								Six months ended June 30
		2010				2011				2010				2011
Net income attributable to Cooper Tire & Rubber Company		$	44,077			$	11,523			$	55,653			$	27,197
Other comprehensive income (loss):
Currency translation adjustments			(584	)			5,153				(5,156	)			17,887
Unrealized net gains (losses) on derivative instruments and marketable securities, net of tax effect			4,031				333				5,393				(2,479	)
Unrecognized postretirement benefit plans, net of tax effect			18,969				8,598				35,635				14,847
Comprehensive income attributable to Cooper Tire & Rubber Company			66,493				25,607				91,525				57,452
Net income attributable to noncontrolling shareholders’ interests			6,094				2,924				11,690				5,727
Other comprehensive income (loss):
Currency translation adjustments			820				1,213				(1,832	)			2,842
Comprehensive income attributable to noncontrolling shareholders’ interests			6,914				4,137				9,858				8,569
Total comprehensive income		$	73,407			$	29,744			$	101,383			$	66,021

Product Warranty Liabilities

10.

The Company provides for the estimated cost of product warranties at the time revenue is recognized based primarily on historical return rates, estimates of the eligible tire population and the value of tires to be replaced. The following table summarizes the activity in the Company’s product warranty liabilities:

		2010				2011
Reserve at January 1		$	23,814			$	24,924
Additions			9,813				19,213
Payments			(9,370	)			(13,648	)
Reserve at June 30		$	24,257			$	30,489

The increase in the warranty provision is due primarily to increased truck and bus tire sales in the PRC and the increased prices of tires used to compute the warranty provision.

Commitments and Contingencies Disclosure

11.

The Company is a defendant in various products liability claims brought in numerous jurisdictions in which individuals seek damages resulting from automobile accidents allegedly caused by defective tires manufactured by the Company. Each of the products liability claims faced by the Company generally involve different types of tires, models and lines, different circumstances surrounding the accident such as different applications, vehicles, speeds, road conditions, weather conditions, driver error, tire repair and maintenance practices, service life conditions, as well as different jurisdictions and different injuries. In addition, in many of the Company’s products liability lawsuits the plaintiff alleges that his or her harm was caused by one or more co-defendants who acted independently of the Company. Accordingly, both the claims asserted and the resolutions of those claims have an enormous amount of variability. The aggregate amount of damages asserted at any point in time is not determinable since often times when claims are filed, the plaintiffs do not specify the amount of damages. Even when there is an amount alleged, at times the amount is wildly inflated and has no rational basis.

The fact that the Company is a defendant in products liability lawsuits is not surprising given the current litigation climate which is largely confined to the United States. However, the fact that the Company is subject to claims does not indicate that there is a quality issue with the Company’s tires. The Company sells approximately 30 to 35 million passenger, light truck, SUV, high performance, ultra high performance and radial medium truck tires per year in North America. The Company estimates that approximately 300 million Cooper-produced tires — made up of thousands of different specifications — are still on the road in North America. While tire disablements do occur, it is the Company’s and the tire industry’s experience that the vast majority of tire failures relate to service-related conditions which are entirely out of the Company’s control — such as failure to maintain proper tire pressure, improper maintenance, road hazard and excessive speed.

The Company’s exposure for each claim for incidents 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 for incidents 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 losses because an average cost would not be meaningful since the products liability claims faced by the Company are unique and widely variable, and accordingly, the resolutions of those claims have an enormous amount of variability. The costs have ranged from zero dollars to $33,000 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 resolved for amounts close to the reserves established. However, it is possible an individual claim from time to time may result in an aberration from the norm and could have a material impact.

The Company determines its reserves using the number of incidents expected during a year. During the second quarter of 2011, the Company increased its products liability reserve by $20,475. The addition of another quarter of self-insured incidents accounted for $10,321 of this increase. The Company revised its estimate of future settlements for unasserted and premature claims increasing the reserve by $1,660. Finally, changes in the amount of reserves for cases where sufficient information is known to estimate a liability increased by $8,494.

During the first six months of 2011, the Company increased its products liability reserve by $38,125. The addition of another six months of self-insured incidents accounted for $20,470 of this increase. The Company revised its estimates of future settlements for unasserted and premature claims, which increased the reserve by $3,440. Finally, changes in the amount of reserves for cases where sufficient information is known to estimate a liability increased by $14,215.

The time frame for the payment of a products liability claim is too variable to be meaningful. From the time a claim is filed to its ultimate disposition depends on the unique nature of the case, how it is resolved — claim dismissed, negotiated settlement, trial verdict and appeals process — and is highly dependent on jurisdiction, specific facts, the plaintiff’s attorney, the court’s docket and other factors. Given that some claims may be resolved in weeks and others may take five years or more, it is impossible to predict with any reasonable reliability the time frame over which the accrued amounts may be paid.

The Company paid $9,295 during the second quarter of 2011 to resolve cases and claims and has paid $24,370 through the first six months of 2011. The Company’s products liability reserve balance at December 31, 2010 totaled $191,033 (current portion of $41,892) and the balance at June 30, 2011 totaled $204,788 (current portion of $60,358).

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 June 30, 2010 and 2011, products liability expenses totaled $15,120 and $27,097, respectively, and include recoveries of legal fees of $5,569 and $3 in these periods. For the six-month periods ended June 30, 2010 and 2011, products liability expenses totaled $59,718 and $52,514, respectively, and include recoveries of legal fees of $5,575 and $37 in these periods. Policies applicable to claims occurring on April 1, 2003 and thereafter do not provide for recovery of legal fees.

Income Tax Related Disclosure

12.

For the quarter ended June 30, 2011, the Company recorded an income tax expense for continuing operations of $1,621 compared to $1,247 for the comparable period in 2010. The provision includes a tax benefit for discrete items of $1,233 relating primarily to the favorable impact on deferred tax assets from a non-U.S. tax rate adjustment of $795 and other deferred tax asset adjustments and valuation allowance impacts of $438. For the six-month period ended June 30, 2011, the Company recorded income tax expense for continuing operations of $12,080 as compared to $8,990 for the comparable period in 2010. The provision includes a tax expense for discrete items of $1,434 relating primarily to increased deferred taxes resulting from consolidation of the increased investment in Mexico ($1,691) and other deferred tax asset adjustments and valuation allowance impacts of $257.

The effective tax rate for the three month and six month periods ended June 30, 2011, for continuing operations is 17.8 percent and 23.7 percent, respectively, exclusive of discrete items, using the applicable effective tax rate determined using forecasted multi-jurisdictional annual effective tax rates. For comparable periods in 2010, the effective tax rate for continuing operations, exclusive of discrete items, was 24.0 percent and 21.4 percent, respectively.

The $374 increase in tax expense for the quarter relates primarily to the impact from decreased earnings at the U.S. statutory rate of $(3,575); the impact from changes to the U.S. valuation allowances of $1,414; differences in the effective tax rates of international operations and the impact of the changes in the mix of earnings or loss by jurisdiction of $(1,291); and changes in discrete items of $3,826.

The $3,090 increase in tax expense for the six-month period relates primarily to the impact from decreased earnings at the U.S. statutory rate of $(2,434); the impact from changes to the U.S. valuation allowances of $1,631; differences in the effective tax rates of international operations and the impact of the changes in the mix of earnings or loss by jurisdiction of $302; and changes in discrete items of $3,591.

The Company maintains a valuation allowance on its net U.S. deferred tax asset position. A valuation allowance is required pursuant to ASC 740, “Accounting for Income Taxes,” when, based upon an assessment which is largely dependent upon objectively verifiable evidence including recent operating loss history, expected reversal of existing deferred tax liabilities and tax loss carry back capacity, it is more likely than not that some portion of the deferred tax assets will not be realized. The valuation allowance will be maintained as long as it is more likely than not that some portion of the deferred tax asset may not be realized. Deferred tax assets and liabilities are determined separately for each taxing jurisdiction in which the Company conducts its operations or otherwise generates taxable income or losses. In the U.S., the Company has recorded significant deferred tax assets, the largest of which relate to products liability, pension and other postretirement benefit obligations. These deferred tax assets are partially offset by deferred tax liabilities, the most significant of which relates to accelerated depreciation. Based upon this assessment, the Company maintains a $170,589 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 $7,013 for deferred tax assets associated with the portion of non-U.S. deferred tax assets exceeding the non-U.S. deferred tax liabilities for a total valuation allowance of $177,602.

In conjunction with the Company’s ongoing review of its actual results and anticipated future earnings, the Company reassesses the possibility of releasing the valuation allowance currently in place on its U.S. deferred tax assets. Based upon this assessment, the release of a significant portion the valuation allowance will likely occur during 2011. The required accounting for the release will involve significant tax amounts and it will impact earnings in the quarter in which it is deemed appropriate to release the reserve.

The Company maintains an ASC 740-10, “Accounting for Uncertainty in Income Taxes” liability for unrecognized tax benefits for permanent and temporary book/tax differences for continuing operations. At June 30, 2011, the Company’s liability, exclusive of interest, totals $9,123. The Company accrued $20 and $35 of interest expense for the three and six-month periods ending June 30, 2011 which has been recorded as a discrete item in its tax provision.

At June 30, 2011, the Company has a receivable for $25,078 of cash tax refunds, including interest. It is anticipated that the Company will collect or apply $11,028 of these receivables in 2011 with the balance to be collected upon the completion of the IRS audit currently in process.

In 2003 the Company initiated bilateral Advance Pricing Agreement (“APA”) negotiations with the Canadian and U.S. governments to change its intercompany transfer pricing process between a formerly owned subsidiary, Cooper-Standard Automotive, Inc., (“CSA”) and its Canadian affiliate. The governments settled the APA in 2009 and on August 3, 2009, Cooper-Standard Holdings Inc. filed a Bankruptcy petition. On August 19, 2009, the Company filed an action in the United States Bankruptcy Court, District of Delaware, in response to the tax refunds owed to the Company pursuant to the September 16, 2004 sale agreement of CSA for pre-disposition periods ending December 23, 2004. On March 17, 2010, the Company entered into a settlement agreement to resolve the subject proceedings, which became non- appealable on April 29, 2010. Pursuant to the settlement agreement, CSA paid the Company approximately $17,639, in addition to the resolution of other contingent liabilities between the parties. Based upon the settlement, the Company released liabilities recorded on its books relating to the disposition of CSA in the amount of $7,400 through Discontinued Operations, net of the tax impact, in the quarter ended June 30, 2010.

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 2005.

Noncontrolling Interest Disclosure

13.

In connection with the investment in Cooper Chengshan, beginning January 1, 2009 and continuing through December 31, 2011, the noncontrolling shareholders have the option, which is embedded in the noncontrolling interest, to require the Company to purchase the original 49 percent noncontrolling share at the greater of a minimum price of $62,700 or a formula price that varies based on operating results of the entity. The combination of a noncontrolling interest and a put option resulted in a redeemable noncontrolling shareholder interest. The put option is not separated from the shares as an embedded derivative because the underlying shares are not readily convertible into cash.

The noncontrolling interest is redeemable at other than fair value as the put value is determined based on a specified formula as described above. The Company records the noncontrolling shareholders’ interests in Cooper Chengshan at the greater of 1) the initial carrying amount, increased or decreased for the noncontrolling shareholders’ share of net income or loss and its share of other comprehensive income or loss and dividends (“carrying amount”) or 2) the value of the put option which is determined based on the greater of the minimum amount or the formula derived amount. According to authoritative accounting guidance, the Redeemable noncontrolling shareholders’ interests are classified outside of permanent equity, as a mezzanine item, on the Company’s Condensed Consolidated Balance Sheets.

In 2009, the Company was notified by a noncontrolling shareholder that it had exercised its put option and after governmental approval, the Company purchased the 14 percent share for $17,920 on March 31, 2010. The remaining noncontrolling shareholder has the right to sell its 35 percent share to the Company at a minimum price of $44,780. At June 30, 2011, the formula price exceeds the minimum price, however, the carrying value exceeds the formula price and the carrying value is the amount shown on the Company’s Condensed Consolidated Balance Sheets.

If the put option is not exercised and expires on December 31, 2011, the amount of Redeemable noncontrolling shareholder interest will be reclassified into equity and included as part of Noncontrolling shareholders’ interests in consolidated subsidiaries.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) presents information related to the consolidated results of the operations of the Company, a discussion of past results for both of the Company’s segments, future outlook for the Company and information concerning both the liquidity and capital resources of the Company. The Company’s future results may differ materially from those indicated herein, for reasons including those indicated under the forward-looking statements heading below.

Consolidated Results of Operations

		Three months ended June 30												Six months ended June 30
(Dollar amounts in millions except per share amounts)		2010				Change				2011				2010				Change				2011
Revenues:
North American Tire		$	575.0				16.0	%		$	666.8			$	1,106.7				18.8	%		$	1,314.8
International Tire			312.2				26.7	%			395.6				605.7				25.3	%			759.0
Eliminations			(83.2	)			68.5	%			(140.2	)			(154.0	)			59.5	%			(245.6	)
Net sales		$	804.0				14.7	%		$	922.2			$	1,558.4				17.3	%		$	1,828.2
Segment profit (loss)
North American Tire		$	19.7				-81.7	%		$	3.6			$	33.3				-24.3	%		$	25.2
International Tire			20.5				13.7	%			23.3				43.1				0.7	%			43.4
Eliminations			0.1				n/m				(1.0	)			(0.5	)			n/m				(2.7	)
Unallocated corporate charges			(6.6	)			-74.2	%			(1.7	)			(9.2	)			2.2	%			(9.4	)
Operating profit			33.7				-28.2	%			24.2				66.7				-15.3	%			56.5
Interest expense			9.2				0.0	%			9.2				17.9				4.5	%			18.7
Interest income			(0.8	)			12.5	%			(0.9	)			(2.0	)			-20.0	%			(1.6	)
Other income			(1.0	)			-90.0	%			(0.1	)			(1.2	)			366.7	%			(5.6	)
Income from continuing operations before income taxes			26.3								16.0				52.0								45.0
Income tax expense			1.2								1.6				9.0								12.1
Income from continuing operations			25.1								14.4				43.0								32.9
Income from discontinued operations, net of income taxes			25.0								—				24.4								-
Noncontrolling shareholders’ interests			(6.1	)							(2.9	)			(11.7	)							(5.7	)
Net income attributable to Cooper Tire & Rubber Company		$	44.0							$	11.5			$	55.7							$	27.2
Basic earnings per share		$	0.72							$	0.19			$	0.91							$	0.44
Diluted earnings per share		$	0.70							$	0.18			$	0.89							$	0.43