UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q/A

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.

Yesþ Noo

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

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 April 30, 2010: 61,230,969

 

 

EXPLANATORY NOTE

Cooper Tire & Rubber Company (the “Company”) is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q (“Form 10-Q/A”) for the period ended March 31, 2010, which was filed with the Securities and Exchange Commission (SEC) on May 5, 2010 (the “Original Filing”). The Company is filing this Form 10-Q/A to reflect restatements of its condensed consolidated balance sheets at March 31, 2010 and December 31, 2009, and its condensed consolidated statements of operations for the three month periods ended March 31, 2010 and March 31, 2009, and the related notes thereto, as a result of a review of the Company’s accounting of noncontrolling shareholders’ interests.

Historically, the Company classified the Cooper Chengshan noncontrolling shareholders’ interest as permanent equity. After consideration of the applicable financial accounting guidance and evaluation of the related agreements, management determined that noncontrolling shareholders’ interest in Cooper Chengshan should be classified as a redeemable noncontrolling shareholder interest in mezzanine equity on the balance sheet. Pursuant to the agreements related to Cooper Chengshan, the owners of the noncontrolling shareholders’ interest in Cooper Chengshan had the right to sell and, if exercised, the Company had the obligation to purchase, the remaining 49 percent noncontrolling shareholders’ interest share at a minimum price of $62.7 million. This put option was previously disclosed in the footnotes to the financial statements, with a term beginning January 1, 2009 and continuing through December 31, 2011. The restatement also relates, in part to the Company’s accounting for foreign currency translation adjustments. In accordance with applicable financial accounting guidance, a portion of the currency translation adjustment recorded in comprehensive income (loss) and cumulative other comprehensive loss should have been allocated to the noncontrolling shareholders’ interests in consolidated subsidiaries which include Cooper Chengshan, Cooper Kenda and Cooper de Mexico. For a more detailed description of the restatement, see Note 1 in the Notes to the Consolidated Financial Statements.

This Form 10-Q/A amends and restates Item 1 of Part I, “Financial Statements”, Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 4 of Part I, “Controls and Procedures,” and Item 1A of Part II, “Risk Factors” of the Original Filing, in each case, solely as a result of, and to reflect, the restatement. Pursuant to the rules of the SEC, Item 6 of Part II of the Original Filing has been amended to contain the currently-dated certifications from the Company’s principal executive officer and principal financial officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications of the Company’s principal executive officer and principal financial officer are attached to this Form 10-Q/A as Exhibits 31.1, 31.2 and 32.

Except for the foregoing amended information, this Form 10-Q/A continues to describe conditions as of the date of the Original Filing, and the Company has not updated the disclosures contained herein to reflect events that have occurred subsequent to that date. Other events occurring after the date of the Original Filing or other information necessary to reflect subsequent events have been disclosed in reports filed with the SEC subsequent to the Original Filing.

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,				March 31,
		2009				2010
		(Note 1)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	426,981			$	337,500
Accounts receivable, less allowances of $10,928 in 2009 and $11,161 in 2010			367,023				458,968
Inventories at lower of cost or market:
Finished goods			188,323				210,865
Work in process			22,090				28,536
Raw materials and supplies			88,022				121,548
			298,435				360,949
Other current assets			39,392				39,165
Total current assets			1,131,831				1,196,582
Property, plant and equipment:
Land and land improvements			33,321				33,330
Buildings			320,021				317,869
Machinery and equipment			1,587,306				1,583,168
Molds, cores and rings			246,395				246,871
			2,187,043				2,181,238
Less accumulated depreciation and amortization			1,336,072				1,347,601
Net property, plant and equipment			850,971				833,637
Intangibles, net of accumulated amortization of $23,165 in 2009 and $23,492 in 2010			18,546				18,219
Restricted cash			2,219				2,172
Other assets			96,773				92,282
		$	2,100,340			$	2,142,892
LIABILITIES AND EQUITY
Current liabilities:
Notes payable		$	156,719			$	145,088
Accounts payable			300,448				352,029
Accrued liabilities			158,643				155,292
Income taxes			3,955				5,318
Liabilities of discontinued operations			1,061				1,052
Current portion of long term debt			15,515				4,995
Total current liabilities			636,341				663,774
Long-term debt			330,971				327,441
Postretirement benefits other than pensions			244,905				246,624
Pension benefits			272,050				265,963
Other long-term liabilities			145,978				174,072
Long-term liabilities related to the sale of automotive operations			6,043				5,888
Redeemable noncontrollng shareholders’ interests			83,528 1				55,041 1
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 2009 and in 2010			87,850				87,850
Capital in excess of par value			70,645				56,338
Retained earnings			1,133,133				1,137,764
Cumulative other comprehensive loss			(470,272)	1			(456,816)	1
			821,356	1			825,136	1
Less: common shares in treasury at cost (27,327,646 in 2009 and 26,635,823 in 2010)			(490,548	)			(476,503	)
Total parent stockholders’ equity			330,808	1			348,633	1
Noncontrolling shareholders’ interests in consolidated subsidiaries			49,716	1			55,456	1
Total equity			380,524	1			404,089	1
		$	2,100,340			$	2,142,892

See accompanying notes.

COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2009 AND 2010
(UNAUDITED)
(Dollar amounts in thousands except per-share amounts)

		2009				2010
Net sales		$	571,408			$	754,443
Cost of products sold			521,139				669,271
Gross profit			50,269				85,172
Selling, general and administrative			45,106				44,605
Restructuring			14,352				7,612
Settlement of retiree medical case			7,050				—
Operating profit (loss)			(16,239	)			32,955
Interest expense			12,655				8,730
Interest income			(1,375	)			(1,213	)
Other income			(823	)			(237	)
Income (loss) from continuing operations before income taxes			(26,696	)			25,675
Income tax expense (benefit)			(3,773	)			7,743
Income (loss) from continuing operations			(22,923	)			17,932
Income (loss) from discontinued operations, net of income taxes			(364	)			(760	)
Net income (loss)			(23,287	)			17,172
Net income (loss) attributable to noncontrolling shareholders’ interests			(2,020	)			5,596
Net income (loss) attributable to Cooper Tire & Rubber Company		$	(21,267	)		$	11,576
Basic earnings per share:
Income (loss) from continuing operations attributable to Cooper Tire & Rubber Company		$	(0.37)	1		$	0.20
Income (loss) from discontinued operations			(0.01	)			(0.01	)
Net income (loss) available to Cooper Tire & Rubber Company commom stockholders		$	(0.38)	1		$	0.19
Diluted earnings per share:
Income (loss) from continuing operations attributable to Cooper Tire & Rubber Company		$	(0.37)	1		$	0.20
Income (loss) from discontinued operations			(0.01	)			(0.01	)
Net income (loss) available to Cooper Tire & Rubber Company commom stockholders		$	(0.38)	1		$	0.19
Dividends per share		$	0.105			$	0.105

See accompanying notes.

COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2009 AND 2010
(UNAUDITED)
(Dollar amounts in thousands)

		2009				2010
Operating activities:
Net income (loss)		$	(23,287	)		$	17,172
Adjustments to reconcile net income (loss) to net cash provided by (used in) continuing operations:
Loss from discontinued operations, net of income taxes			364				760
Depreciation			30,551				29,859
Amortization			566				501
Deferred income taxes			(66	)			(154	)
Stock based compensation			838				1,087
Change in LIFO inventory reserve			(87,559	)			15,021
Amortization of unrecognized postretirement benefits			7,410				8,282
Loss (gain) on sale of assets			(46	)			211
Changes in operating assets and liabilities of continuing operations:
Accounts receivable			(36,396	)			(107,397	)
Inventories			105,610				(80,030	)
Other current assets			1,855				2,880
Accounts payable			14,027				52,914
Accrued liabilities			14,923				8,496
Other items			4,471				21,062
Net cash provided by (used in) continuing operations			33,261				(29,336	)
Net cash used in discontinued operations			(613	)			(924	)
Net cash provided by (used in) operating activities			32,648				(30,260	)
Investing activities:
Additions to property, plant and equipment			(16,917	)			(15,464	)
Investments in unconsolidated subsidiary			(86	)			—
Proceeds from the sale of assets			208				80
Net cash used in investing activities			(16,795	)			(15,384	)
Financing activities:
Issuance of (payments on) short-term debt			(17,310	)			(14,466	)
Payments on long-term debt			(4,380	)			(10,600	)
Contributions by noncontrolling shareholder			—				5,250
Acquisition of noncontrolling shareholder interest			—				(17,920	)
Payment of dividends			(6,190	)			(6,416	)
Issuance of common shares and excess tax benefits on options			—				2,167
Net cash used in financing activities			(27,880	)			(41,985	)
Effects of exchange rate changes on cash of continuing operations			(2,952	)			(1,852	)
Changes in cash and cash equivalents			(14,979	)			(89,481	)
Cash and cash equivalents at beginning of year			247,672				426,981
Cash and cash equivalents at end of period		$	232,693			$	337,500

See accompanying notes.

COOPER TIRE & RUBBER COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per-share amounts)

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 passenger replacement tires are generally strongest during the third and fourth quarters of the year. Winter tires are sold principally during the months of June through November. Operating results for the three-month period ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ended December 31, 2010.

		On August 4, 2010, the Company filed an amendment to its Annual Report on Form 10-K (“Form 10-K/A”) for the fiscal year ended December 31, 2009, which was filed with the Securities and Exchange Commission (SEC) on March 2, 2010 (the “Original Filing”). The Company filed this Form 10-K/A to reflect restatements of its Consolidated Balance Sheets at December 31, 2009 and December 31, 2008, and its consolidated Statements of Operations and Equity for the fiscal years ended December 31, 2009, December 31, 2008 and December 31, 2007, and the related notes thereto, as a result of a review of the Company’s accounting for its noncontrolling shareholders’ interests. The balance sheet at December 31, 2009 included herein has been derived from the restated audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
		The restatement relates, in part, to the Company’s classification of the noncontrolling shareholders’ interests in Cooper Chengshan. Historically, the Company classified the Cooper Chengshan noncontrolling shareholders’ interests as permanent equity. After consideration of the applicable financial accounting guidance and evaluation of the related agreements, classification of the noncontrolling interest as redeemable noncontrolling shareholders’ interest within mezzanine equity was deemed appropriate. Further, the restatement reflects the reclassification of a portion of the currency translation adjustment recorded in the Company’s comprehensive income (loss) which should have been allocated to comprehensive income attributable to noncontrolling shareholders’ interest in consolidated subsidiaries.
		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 remaining 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 to be the greater of either a fixed amount or a specific formulaic amount 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. Prior to exercisability of the put option on January 1, 2009, the noncontrolling shareholders’ interest has been recorded at the greater of 1) the carrying amount or 2) the cumulative amount required to accrete the initial carrying amount to the redemption value using the effective interest method which resulted in accretion of $1,110 during the quarter ended March 31, 2009 with an offset to Retained earnings. According to authoritative accounting guidance, the Redeemable noncontrolling shareholders’ interests are classified outside of permanent equity, mezzanine equity, on the Company’s Condensed Consolidated Balance Sheets.

According to authoritative accounting guidance for redeemable noncontrolling shareholders’ interests, to the extent the noncontrolling shareholders have a contractual right to receive an amount upon exercise of a put option that is other than fair value, and such amount is greater than carrying value, then the noncontrolling shareholder has, in substance, received a dividend distribution that is different than other common stockholders. Therefore accretion adjustments to the carrying value of noncontrolling shareholders’ interests to reflect the put option amount should also be reflected in the computation of earnings per share available to the Company’s common stockholders. The tables below present the impact of these adjustments on the Company’s earnings per share, selected components of the Condensed Consolidated Balance Sheets and the Company’s comprehensive income (loss):

		Three months ended March 31, 2009
		As Originally
		Reported				Restated
Basic earnings per share:
Loss from continuing operations available to Cooper Tire & Rubber Company common stockholders		$	(0.35	)		$	(0.37	)
Loss from discontinued operations			(0.01	)			(0.01	)
Net loss available to Cooper Tire & Rubber Company common stockholders		$	(0.36	)		$	(0.38	)
Diluted earnings per share:
Loss from continuing operations available to Cooper Tire & Rubber Company common stockholders		$	(0.35	)		$	(0.37	)
Loss from discontinued operations			(0.01	)			(0.01	)
Net loss available to Cooper Tire & Rubber Company common stockholders		$	(0.36	)		$	(0.38	)

		As of December 31, 2009								As of March 31, 2010
		As Originally								As Originally
		Reported				Restated				Reported				Restated
Redeemable noncontrolling shareholders’ interest			—				83,528				—				55,041
Cumulative other comprehensive loss			(455,750	)			(470,272	)			(444,946	)			(456,816	)
Total parent stockholders’ equity			345,330				330,808				360,503				348,633
Noncontrolling shareholders’ interests in consolidated subsidiaries			118,722				49,716				98,627				55,456
Total stockholders’ equity			464,052				380,524				459,130				404,089

		Three months ended March 31, 2009								Three months ended March 31, 2010
		As Originally								As Originally
		Reported				Restated				Reported				Restated
Net income (loss) attributable to Cooper Tire & Rubber Company		$	(21,267	)		$	(21,267	)		$	11,576			$	11,576
Other comprehensive income (loss):
Currency translation adjustments			(2,982	)			(3,083	)			(7,224	)			(4,572	)
Unrealized net gains (losses) on derivative instruments and marketable securities, net of tax			3,367				3,367				1,362				1,362
Unrecognized postretirement benefit plans, net of tax			354				354				16,666				16,666
Comprehensive income (loss) attributable to Cooper Tire & Rubber Company			(20,528	)			(20,629	)			22,380				25,032
Net income attributable to noncontrolling shareholders’ interests			(2,020	)			(2,020	)			5,596				5,596
Other comprehensive income (loss):
Currency translation adjustments			—				101				—				(2,652	)
Comprehensive income attributable to noncontrolling shareholders’ interests			(2,020	)			(1,919	)			5,596				2,944
Total comprehensive income (loss)		$	(22,548	)		$	(22,548	)		$	27,976			$	27,976

		The consolidated financial statements include the accounts of the Company, its majority-owned (based on voting interests) subsidiaries and variable-interest entities for which the Company is the primary beneficiary. Acquired businesses are included in the consolidated financial statements from the dates of acquisition. The Company consolidates certain joint ventures in which it has a variable interest based on power to direct the activities and significant participation in expected returns of the joint venture. On January 1, 2010, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 167, “Amendments to FASB Interpretation No. 46(R)”. The requirements of SFAS No. 167 have been incorporated into Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation”. SFAS No. 167 changes the consolidation guidance for variable interest entities and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements. All intercompany accounts and transactions have been eliminated.
		The equity method of accounting is followed for investments in 20 percent to 50 percent owned companies that are not otherwise consolidated based on variable interests. The Company’s investment in the Mexican tire manufacturing facility represents an approximate 38 percent ownership interest.
		The cost method is followed in those situations where the Company’s ownership is less than 20 percent and the Company does not have the ability to exercise significant influence over the affiliate.
		The Company 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 has determined it is the primary beneficiary of this joint venture because of the operational control and the fact it currently receives all of the tires produced by this manufacturing operation.

		The Company has also entered into a joint venture with Nemet International to market and distribute Cooper, Pneustone and associated brand tires in Mexico. The Company has determined it has the power to control the purchasing and marketing of tires for this joint venture. The Company has also provided additional financial support to this joint venture in order to allow it to finance its business activities. The joint venture partner has not provided such additional support. The Company has determined it is the primary beneficiary of this joint venture due to its ability to control the primary economic activity and to the subordinated financial support it has provided to the entity which would require the Company to absorb more than 50% of expected losses.
		Since the Company has determined that each of these entities is a Variable Interest Entity (VIE) and it is the primary beneficiary, it has included their assets, liabilities and operating results in its consolidated financial statements. The Company has recorded the interest related to the joint venture partners’ ownership in noncontrolling shareholders’ interests in consolidated subsidiaries. The following table summarizes the balance sheets of these variable interest entities at December 31, 2009 and March 31, 2010:

		December 31,				March 31,
		2009				2010
Assets
Cash and cash equivalents		$	23,998			$	13,196
Accounts receivable			9,359				12,465
Inventories			16,472				20,495
Prepaid expenses			2,688				3,617
Total current assets			52,517				49,773
Net property, plant and equipment			139,705				135,473
Intangibles and other assets			12,773				10,585
Total assets		$	204,995			$	195,831
Liabilities and stockholders’ equity
Notes payable		$	87,016			$	76,379
Accounts payable			7,147				10,250
Accrued liabilities			1,118				(1,767	)
Current portion of long-term debt			10,525				—
Current liabilities			105,806				84,862
Stockholders’ equity			99,189				110,969
Total liabilities and stockholders’ equity		$	204,995			$	195,831

2.

Net income (loss) per share is computed on the basis of the weighted average number of common shares outstanding each year. Diluted earnings (loss) 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 (loss) per share:

		Three months ended March 31,
		Restated
		2009				2010
Numerator
Income (loss) from continuing operations attributable to Cooper Tire & Rubber Company		$	(20,903	)		$	12,336
Accretion of redeemable noncontrolling shareholders’ interest			(1,110	)			—
Numerator for basic and diluted earnings (loss) per share — income (loss) from continuing operations available to common stockholders		$	(22,013	)		$	12,336
Denominator
Denominator for basic earnings (loss) per share - weighted average shares outstanding			58,941				60,614
Effect of dilutive securities — stock options and other stock units			—				1,680
Denominator for diluted earnings per share - adjusted weighted average share outstanding			58,941				62,294
Basic earnings (loss) per share:
Income (loss) from continuing operations available to Cooper Tire & Rubber Company common stockholders		$	(0.37	)		$	0.20
Loss from discontinued operations, net of income taxes			(0.01	)			(0.01	)
Net income (loss) available to Cooper Tire & Rubber Company common stockholders		$	(0.38	)		$	0.19
Diluted earnings (loss) per share:
Income (loss) from continuing operations available to Cooper Tire & Rubber Company common stockholders		$	(0.37	)		$	0.20
Loss from discontinued operations, net of income taxes			(0.01	)			(0.01	)
Net income (loss) available to Cooper Tire & Rubber Company common stockholders		$	(0.38	)		$	0.19

3.

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, 2009 and March 31, 2010 was $207,600 and $187,400, 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 $(2,160) and $(939) as of December 31, 2009 and March 31, 2010, respectively) are recorded as a separate component of stockholders’ equity in the accompanying consolidated balance sheets and reclassified into earnings as the hedged transaction affects net sales.
		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 Statement of Financial Position:

(assets)/liabilities		December 31, 2009								March 31, 2010
Derivatives designated as hedging instruments		Accrued liabilities				$	2,158			Accrued liabilities				$	1,024
Derivatives not designated as hedging instruments		Accrued liabilities				$	(78	)		Accrued liabilities				$	412

The following table presents the location and amount of gains and losses on derivative instruments in the consolidated statement of operations:

Amount of (Gain) Loss

Amount of Gain (Loss)

Reclassified

Amount of Gain (Loss)

Recognized in

from Cumulative

Recognized in

Other Comprehensive

Other Comprehensive

Other - net

Income on Derivatives

Loss into Net Sales

on Derivatives

(Effective Portion)

(Effective Portion)

(Ineffective Portion)

Derivatives

Designated as

Three Months

Three Months

Three Months

Three Months

Three Months

Three Months

Cash Flow

Ended

Ended

Ended

Ended

Ended

Ended

Hedges

March 31, 2009

March 31, 2010

March 31, 2009

March 31, 2010

March 31, 2009

March 31, 2010

Foreign exchange contracts

$

3,647

$

2,550

$

769

$

(1,329

)

$

(78

)

$

(29

)

						Amount of Gain (Loss)
		Location of				Recognized in Income
		Gain (Loss)				on Derivatives
Derivatives not		Recognized				Three Months Ended
Designated as		in Income on				March 31,
Hedging Instruments		Derivatives				2009				2010
Foreign exchange contracts		Other income				$	454			$	(613	)
Interest swap contracts		Other income					2,245				—
						$	2,699			$	(613	)

		The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into the three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within the different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
		Financial assets and liabilities recorded on the Consolidated Balance Sheet are categorized based on the inputs to the valuation techniques as follows:
		Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.
		Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

	a.		Quoted prices for similar assets or liabilities in active markets;
	b.		Quoted prices for identical or similar assets or liabilities in non-active markets;
	c.		Pricing models whose inputs are observable for substantially the full term of the asset or liability; 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 March 31, 2010:

Fair Value Measurements Using

Quoted Prices

in Active

Significant

Total

Markets

Other

Significant

Derivative

for Identical

Observable

Unobservable

(Assets)

Assets

Inputs

Inputs

Foreign Exchange Contracts

Liabilities

Level (1)

Level (2)

Level (3)

March 31, 2010

$

1,436

—

$

1,436

—

December 31, 2009

$

2,080

—

$

2,080

—

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

		December 31, 2009								March 31, 2010
		Carrying				Fair				Carrying				Fair
		Amount				Value				Amount				Value
Cash and cash equivalents		$	426,981			$	426,981			$	337,500			$	337,500
Notes payable			(156,719	)			(156,719	)			(145,088	)			(145,088	)
Current portion of long-term debt			(15,515	)			(15,515	)			(4,995	)			(4,995	)
Long-term debt			(330,971	)			(309,371	)			(327,441	)			(303,441	)
Derivative financial instruments			(2,080	)			(2,080	)			(1,436	)			(1,436	)

		The fair value of the Company’s debt is computed using discounted cash flow analyses based on the Company’s estimated current incremental borrowing rates.
4.		The following table details information on the Company’s operating segments.

		Three months ended March 31
		2009				2010
Revenues from external customers:
North American Tire		$	439,317			$	531,717
International Tire			166,212				293,557
Eliminations			(34,121	)			(70,831	)
Net sales		$	571,408			$	754,443
Segment profit (loss):
North American Tire		$	(3,620	)		$	13,602
International Tire			(2,821	)			22,550
Eliminations			(274	)			(509	)
Unallocated corporate charges			(9,524	)			(2,688	)
Operating profit (loss)			(16,239	)			32,955
Interest expense			12,655				8,730
Interest income			(1,375	)			(1,213	)
Other income			(823	)			(237	)
Income (loss) from continuing operations before income taxes		$	(26,696	)		$	25,675

5.

At December 31, 2009, approximately 45 percent of the Company’s inventories had been valued under the LIFO method. At March 31, 2010, approximately 44 percent of the Company’s inventories are valued under the LIFO method. The remaining inventories have been valued under the FIFO method or average cost method. All inventories are stated at the lower of cost or market.

		Under the LIFO method, inventories have been reduced by approximately $127,064 and $142,085 at December 31, 2009 and March 31, 2010, respectively, from current cost which would be reported under the first-in, first-out method.

6.

The following table discloses the amount of stock based compensation expense for the three-month period ended March 31, 2009 and 2010:

		Three months ended March 31
		2009				2010
Stock options		$	86			$	221
Restricted stock units			400				167
Performance based units			352				699
Total stock based compensation		$	838			$	1,087

		Executives participating in the Company’s Long-Term Incentive Plan for the plan year 2007 — 2009 and 2008 — 2010, earn performance based units based on the Company’s financial performance. As part of the 2007 — 2009 plan, the units earned in 2007 and 2009 vested in February 2010. As part of the 2008 — 2010 plan, the units earned in 2009 and any units earned in 2010 will vest at December 31, 2010. No units were earned in 2008.
		In April 2009, executives participating in the 2009 — 2011 Long —Term Incentive Plan were granted stock options which vest one third each year from April 2010 through April 2012.
		Executives participating in the Company’s Long-Term Incentive Plan for the plan year 2010 — 2012, earn performance based units and cash. Any units and cash earned during 2010 will vest at December 31, 2012. The executives also received stock options which will vest one third each year from March 2011 through March 2013. The following table provides details of the stock option activity for the three months ended March 31, 2010:

		Long-Term Incentive Plan Years
		2009 - 2011				2010 - 2012
January 1, 2010
Outstanding			1,037,000				—
Exercisable			59,000				—
Granted			—				303,120
Exercised			(35,000	)			—
March 31, 2010			—				—
Outstanding			1,002,000				303,120
Exercisable			24,000				—

The following table provides details of the restricted stock unit activity for the three months ended March 31, 2010:

Restricted stock units outstanding at January 1, 2010			526,809
Restricted stock units granted			—
Accrued dividend equivalents			1,506
Restricted stock units settled			(248,818	)
Restricted stock units cancelled			(4,149	)
Restricted stock units outstanding at March 31, 2010			275,348

The following table provides details of the performance based units earned under the Company’s Long-Term Incentive Plans for the three months ended March 31, 2010:

		Long-Term Incentive Plan Years
		2007-2009				2008-2010
Performance-based units outstanding at January 1, 2010			559,951				290,860
Accrued dividend equivalents			—				1,578
Performance-based units settled			(559,951	)			—
Performance-based units outstanding at March 31, 2010			0				292,438

7.

The following table discloses the amount of net periodic benefit costs for the three months ended March 31, 2009 and 2010 for the Company’s defined benefit plans and other postretirement benefits relating to continuing operations:

										Other
		Pension Benefits								Postretirement Benefits
		2009				2010				2009				2010
Components of net periodic benefit cost:
Service cost		$	3,387			$	1,667			$	853			$	790
Interest cost			14,618				15,624				3,706				3,529
Expected return on plan assets			(13,687	)			(16,379	)			—				—
Amortization of prior service cost			(1,456	)			(158	)			(77	)			(136	)
Recognized actuarial loss			8,925				8,440				18				—
Albany settlement loss			—				3,330				—				—
Net periodic benefit cost		$	11,787			$	12,524			$	4,500			$	4,183

During 2010, the Company expects to contribute between $35,000 and $40,000 to its domestic and foreign pension plans.

In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Act of 2010 (the Act) was enacted. The primary focus of the Act is to significantly reform health care in the U.S. The Act will reduce the tax deduction available to the Company to the extent of receipt of Medicare Part D prescription drug subsidy; however, this will not have a material impact on the Company’s financial results. The Company is currently evaluating other prospective effects of the Act.

8.

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

						Noncontrolling
		Total				Shareholders’								Redeemable
		Parent				Interests in				Total				Noncontrolling
		Stockholders’				Consolidated				Stockholders’				Shareholders’
		Equity				Subsidiaries				Equity				Interests
Balance at December 31, 2009 (1)		$	330,808			$	49,716			$	380,524			$	83,528
Net income			11,576				685				12,261				4,911
Other comprehensive income (1)			13,456				(195	)			13,261				(2,457	)
Dividends payable to noncontrolling shareholders			—				—				—				(11,637	)
Contribution of noncontrolling shareholder			—				5,250				5,250				—
Acquisition of noncontrolling shareholder interest			1,384				—				1,384				(19,304	)
Stock compensation plans, including tax charge of $392			(2,175	)			—				(2,175	)			—
Cash dividends — $.105 per share			(6,416	)			—				(6,416	)			—
Balance at March 31, 2010 (1)		$	348,633			$	55,456			$	404,089			$	55,041

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

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

		Three months ended March 31
		2009				2010
Net income (loss) attributable to Cooper Tire & Rubber Company		$	(21,267	)		$	11,576
Other comprehensive income (loss):
Currency translation adjustments (1)			(3,083	)			(4,572	)
Unrealized net gains on derivative instruments and marketable securities, net of tax effect			3,367				1,362
Unrecognized postretirement benefit plans, net of tax effect			354				16,666
Comprehensive income (loss) attributable to Cooper Tire & Rubber Company (1)			(20,629	)			25,032
Net income (loss) attributable to noncontrolling shareholders’ interests			(2,020	)			5,596
Other comprehensive income (loss):
Currency translation adjustments (1)			101				(2,652	)
Comprehensive income (loss) attributable to noncontrolling shareholders’ interests (1)			(1,919	)			2,944
Total comprehensive income (loss)		$	(22,548	)		$	27,976

9.

During the first quarter of 2010, the Company recorded restructuring expenses associated with the closure of its Albany, Georgia manufacturing facility. This initiative, announced December 17, 2008, resulted in a workforce reduction of approximately 1,330 people with an estimated cost between $140,000 and $145,000 for restructuring expense and asset impairment.

		The Company recorded $4,282 of equipment relocation and other costs during the first quarter of 2010. The Company also recorded $3,330 of employee related costs representing pension settlement losses. Through March 31, 2010, the Company has recorded $130,301 of restructuring costs associated with this initiative.
		At January 1, 2010, the accrued severance balance was $848 and the Company made $600 of severance payments resulting in an accrued severance balance at March 31, 2010 of $248.
		During the first quarter of 2009, the Company recorded $4,852 of equipment relocation and other costs related to the Albany closure. The Company also recorded $9,454 of employee related costs. Included in employee related costs are severance costs of $10,707 partially offset by the amortization of prior service cost related to pension benefits. The Company also recorded $46 of restructuring expenses associated with the closure of the Dayton, New Jersey distribution center.

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:

		2009				2010
Reserve at January 1		$	18,244			$	23,814
Additions			2,423				4,223
Payments			(3,084	)			(3,902	)
Reserve at March 31		$	17,583			$	24,135

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 35 to 40 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 occurring prior to April 1, 2003 is limited by the coverage provided by its excess liability insurance program. The program for that period includes a relatively low per claim retention and a policy year aggregate retention limit on claims arising from occurrences which took place during a particular policy year. Effective April 1, 2003, the Company established a new excess liability insurance program. The new program covers the Company’s products liability claims occurring on or after April 1, 2003 and is occurrence-based insurance coverage which includes an increased per claim retention limit, increased policy limits and the establishment of a captive insurance company.
		The Company accrues costs for products liability at the time a loss is probable and the amount of loss can be estimated. The Company believes the probability of loss can be established and the amount of loss can be estimated only after certain minimum information is available, including verification that Company-produced products were involved in the incident giving rise to the claim, the condition of the product purported to be involved in the claim, the nature of the incident giving rise to the claim and the extent of the purported injury or damages. In cases where such information is known, each products liability claim is evaluated based on its specific facts and circumstances. A judgment is then made to determine the requirement for establishment or revision of an accrual for any potential liability. The liability often cannot be determined with precision until the claim is resolved.
		Pursuant to applicable accounting rules, the Company accrues the minimum liability for each known claim when the estimated outcome is a range of possible loss and no one amount within that range is more likely than another. The Company uses a range of settlements because an average settlement cost would not be meaningful since the products liability claims faced by the Company are unique and widely variable. The cases involve different types of tires, models and lines, different circumstances surrounding the accident such as different applications, vehicles, speeds, road conditions, weather conditions, driver error, tire repair and maintenance practices, service life conditions, as well as different jurisdictions and different injuries. In addition, in many of the Company’s products liability lawsuits the plaintiff alleges that his or her harm was caused by one or more co-defendants who acted independently of the Company. Accordingly, the claims asserted and the resolutions of those claims have an enormous amount of variability. The costs have ranged from zero dollars to $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 settled at amounts close to the reserves established. However, it is possible an individual claim from time to time may result in an aberration from the norm and could have a material impact.
		The Company determines its reserves using the number of incidents expected during a year. During the first quarter of 2010, the Company increased its products liability reserve by $36,821. The addition of another quarter of self-insured incidents accounted for $9,890 of this increase. The Company revised its estimates of future settlements for unasserted and premature claims increasing the reserve by $1,065. Finally, changes in the amount of reserves for cases where sufficient information is known to estimate a liability increased by $25,866. Of this amount, $21,800 was the result of the Company increasing its self-insured portion of a jury verdict in one case during the first quarter. The Company considered the impact of this case when evaluating the assumptions used in establishing reserve balances and did not adjust its assumptions based solely on this case.
		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 $4,781 during the first quarter of 2010 to resolve cases and claims. The Company’s products liability reserve balance at December 31, 2009 totaled $151,421 (current portion of $30,805) and the balance at March 31, 2010 totaled $183,461 (current portion of $31,621).
		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. Products liability expense totaled $20,568 and $44,598 for the periods ended March 31, 2009 and 2010, respectively.

12.		For the quarter ended March 31, 2010, the Company recorded an income tax expense for continuing operations of $7,743 including discrete items. The effective tax rate for the three-month period ended March 31, 2010, for continuing operations is 18.9 percent, exclusive of discrete items, using the applicable effective tax rate determined using the forecasted multi-jurisdictional annual effective tax rates. For comparable periods in 2009, the effective tax rate for continuing operations, exclusive of discrete items, was 16.2 percent using forecasted jurisdictional annual effective tax rates. The change in the tax rate, exclusive of discrete items, relates primarily to the reversal of a valuation allowances relating to the anticipated usage of various tax attribute carryforwards including tax credit and net operating loss carryforwards plus the impact of the mix of earnings or loss by jurisdiction as compared to 2009.

		The Company maintains a valuation allowance pursuant to ASC 740 “Accounting for Income Taxes,” on its net U.S. deferred tax asset position. The valuation allowance will be maintained as long as it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are determined separately for each taxing jurisdiction in which the Company conducts its operations or otherwise generates taxable income or losses. In the U.S., the Company has recorded significant deferred tax assets, the largest of which relates 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 $145,244 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 $2,475 for deferred tax assets associated with losses in foreign jurisdictions.
		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 March 31, 2010, the Company’s liability, exclusive of interest, totals approximately $7,461. The Company accrued approximately $19 of interest expense for the quarter which has been recorded as a discrete item in its tax provision.
		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. In 2009 the governments settled the APA between the governments and the taxpayers for periods 2000-2007. On August 19, 2009, the Company filed an action in the United States Bankruptcy Court, District of Delaware, in response to the Bankruptcy petition filed by Cooper Standard Holdings Inc. on August 3, 2009. The action related 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 with Cooper Standard Holdings, Inc., et al. to resolve the subject proceedings. The approved settlement agreement was docketed by the Court on April 15, 2010 and became final and non-appealable on April 29, 2010. Pursuant to the settlement agreement, CSA paid the Company approximately $17,600. Also, CSA must provide a release of the Company from all liability in connection with the Company’s guaranty of a lease for certain property in Surgoinsville, Tennessee, or alternatively, cause a letter of credit to be issued for the benefit of the Company in the initial amount of $7,000. The letter of

		credit will be payable to the Company for amounts that the Company is called upon to pay in connection with the Company’s guaranty. The settlement agreement also provides that the Company has no obligation for any payments made under a pension plan covering certain employees of a former subsidiary. When all conditions have been satisfied, the parties have agreed to certain mutual releases with only certain limited obligations under the 2004 sale agreement to remain in force. Based upon the settlement, the Company recognized the cash received and released additional liabilities recorded on its books relating to the disposition of CSA as income from discontinued operations during the second quarter of 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 2000.

13.		On February 2, 2010 in the case of Cates, et al v. Cooper Tire & Rubber Company, the United States District Court for the Northern District of Ohio entered an order approving the settlement agreement negotiated by the parties in April 2009, in its entirety, as being fair, reasonable and adequate and dismissed, with prejudice, the case and a related lawsuit, Johnson, et al v. Cooper Tire & Rubber Company. The settlement agreement provides for 1) a cash payment of $7,050 to the Plaintiffs for reimbursement of costs; and 2) modification to the Company’s approach and costs of providing future health care to specified current retiree groups which will result in an amendment to the Company’s retiree medical plan.

		A group of the Company’s union retirees and surviving spouses filed the Cates lawsuit on behalf of a purported class claiming that the Company was not entitled to impose any contribution requirement for the cost of their health care coverage pursuant to a series of letter agreements entered into by the Company and the United Steelworkers and that Plaintiffs were promised lifetime benefits, at no cost, after retirement. As a result of settlement discussions, the related Johnson case was filed with the Court on behalf of a different, smaller group of hourly union-represented retirees.
		The Company is making plans to implement the settlement agreement. As a consequence of the settlement agreement, the Company recorded $7,050 of expense during the first quarter of 2009 relating to the specified payments. Also during the first quarter of 2009, the actuarial value of costs related to the plan amendment was estimated to be approximately $7,700 which has been reflected as an increase in the accrual for Other Post-employment Benefits with an offset to the Accumulated Other Comprehensive Income component of Shareholders’ Equity. The Company is currently in the process of finalizing the impact of the amendment on its accrual for Other Post-employment Benefits and will record the impact when the settlement agreement is implemented.

14.		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 remaining 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. Prior to exercisability of the put option on January 1, 2009, the noncontrolling shareholders’ interest has been recorded at the greater of 1) the carrying amount or 2) the cumulative amount required to accrete the initial carrying amount to the redemption value using the effective interest method which resulted in accretion of $1,110 during the quarter ended March 31, 2009 with an offset to Retained earnings. 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.
		According to authoritative accounting guidance for redeemable noncontrolling shareholders’ interests, to the extent the noncontrolling shareholders have a contractual right to receive an amount upon exercise of a put option that is other than fair value, and such amount is greater than carrying value, then the noncontrolling shareholder has, in substance, received a dividend distribution that is different than other common stockholders. Therefore accretion adjustments to the carrying value of noncontrolling shareholders’ interests to reflect the put option amount should also be reflected in the computation of earnings per share available to Cooper Tire & Rubber Company common stockholders. During 2009, the Company recorded adjustments to the redeemable noncontrolling shareholders’ interests which are shown on the Condensed Consolidated Statements of Operations.
		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 March 31, 2010, the formula price of $45,417 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.

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 operations of the Company, a discussion of the past results and future outlook of each of the Company’s segments, and information concerning both the liquidity and capital resources of the Company. An important qualification regarding the “forward-looking statements” made in this discussion is then presented.

Consolidated Results of Operations

(Dollar amounts in millions except per share amounts)

		Three months ended March 31
		2009				Change				2010
Revenues:
North American Tire		$	439.3				21.0	%		$	531.7
International Tire			166.2				76.7	%			293.6
Eliminations			(34.1	)			107.9	%			(70.9	)
Net sales		$	571.4				32.0	%		$	754.4
Segment profit (loss):
North American Tire		$	(3.6	)			n/m			$	13.6
International Tire			(2.8	)			n/m				22.6
Unallocated corporate charges			(9.5	)			-71.6	%			(2.7	)
Eliminations			(0.3	)			66.7	%			(0.5	)
Operating profit (loss)			(16.2	)			n/m				33.0
Interest expense			12.7				-31.5	%			8.7
Interest income			(1.4	)			-14.3	%			(1.2	)
Other income			(0.8	)			-75.0	%			(0.2	)
Income (loss) from continuing operations before income taxes			(26.7	)			n/m				25.7
Income tax expense (benefit)			(3.8	)			n/m				7.7
Income (loss) from continuing operations			(22.9	)			n/m				18.0
Income (loss) from discontinued operations, net of income taxes			(0.4	)			n/m				(0.8	)
Noncontrolling shareholders’ interests			(2.0	)			n/m				5.6
Net income (loss) attributable to Cooper Tire & Rubber Company		$	(21.3	)			n/m			$	11.6
Basic earnings per share attributable to Cooper Tire & Rubber Company		$	(0.38	) 1						$	0.19
Diluted earnings per share attributable to Cooper Tire & Rubber Company		$	(0.38	) 1						$	0.19

Consolidated net sales for the three-month period ended March 31, 2010 were $183.0 million higher than the comparable period one year ago. The increase in net sales for the first quarter of 2010 compared with the first quarter of 2009 was attributable to higher unit volumes in both the North American Tire Operations and International Tire Operations segments. Additional favorable impacts from foreign currency were partially offset by reduced pricing and mix in the International Tire Operations segment.

Operating profit in the first quarter of 2010 increased by $49.2 million from the first quarter of 2009. The favorable impacts of higher sales volumes, improved pricing and mix, lower production curtailments costs, decreased restructuring expenses and improved manufacturing operations all contributed to the improvement from 2009. These improvements were partially offset by higher raw material costs and increased products liability charges in the North American Tire Operations segment.

The principal raw materials for the Company include natural rubber, synthetic rubber, carbon black, chemicals and steel reinforcement components. Approximately 65 percent of the Company’s raw materials are petroleum-based. The increases in the cost of natural rubber and petroleum-based materials were the most significant drivers of higher raw material costs during the first quarter of 2010, which were up $40.5 million from the first quarter of 2009.

The Company strives to assure raw material supply and to obtain the most favorable pricing. For natural rubber and natural gas, procurement is managed through a combination of buying forward of production requirements and utilizing the spot market. For other principal materials, procurement arrangements include supply agreements that may contain formula-based pricing based on commodity indices, multi-year agreements or spot purchase contracts. While these arrangements typically provide quantities necessary to satisfy normal manufacturing demands, the pricing volatility in these commodities contributes to the difficulty in managing the costs of raw materials.

Products liability costs totaled $20.6 million and $44.6 million in the first quarter of 2009 and 2010, respectively. The majority of the increase is due to the Company recording an additional $21.8 million for its self-insured portion of a jury verdict in one case during the quarter. Additional information related to the Company’s accounting for products liability costs appears in the Notes to Condensed Consolidated Financial Statements.

Selling, general and administrative expenses were $44.6 million in the first quarter of 2010 (5.9 percent of net sales) and $45.1 million in the first quarter of 2009 (7.9 percent of net sales). The decrease in selling, general and administrative expenses was due primarily to reduced advertising and promotion costs.

During the first quarter of 2010, the Company recorded $7.6 million in restructuring costs related to the planned closure of its Albany, Georgia manufacturing facility. Additional information related to this restructuring initiative appears in the Notes to Condensed Consolidated Financial Statements.

As discussed in the Notes to Condensed Consolidated Financial Statements, the Company recorded a $7.1 million charge during the first quarter of 2009 related to the agreement reached in the Cates retiree medical legal case which is reflected as Unallocated corporate charges in 2009.

Interest expense decreased $3.9 million in the first quarter of 2010 from the first quarter of 2009 due to lower debt levels in both the parent Company and its subsidiaries. The Company repaid $96.9 million of its parent company Senior Notes in December 2009.

Other expense (income) decreased by $.6 million in the first quarter of 2010 compared to 2009. The Company recorded losses from an unconsolidated subsidiary of $.8 million in 2009 but recorded $.7 million in earnings in the first quarter of 2010. Proceeds from the settlement of a lawsuit of $1.8 million were recorded in 2009.

For the quarter ended March 31, 2010, the Company recorded an income tax expense for continuing operations of $7.7 million, which includes a tax expense for discrete items of $2.9 million relating primarily to adjustments to U.S. and Non-U.S. deferred tax assets plus the increased state tax impact from the recent settlement of IRS audits for prior periods. The effective tax rate for the quarter for continuing operations is 18.9 percent, exclusive of discrete items, using the applicable effective tax rate determined using the forecasted multi-jurisdictional annual effective tax rates. For comparable periods in 2009, the effective tax rate for continuing operations, exclusive of discrete items, was 16.2 percent using forecasted jurisdictional annual effective tax rates. The change in the tax rate, exclusive of discrete items, relates primarily to the reversal of a valuation allowances relating to the anticipated usage of various tax attribute carryforwards including tax credit and net operating loss carryforwards plus the impact of the mix of earnings or loss by jurisdiction as compared to 2009.

The Company maintains a valuation allowance pursuant to ASC 740 “Accounting for Income Taxes,” on its net U.S. deferred tax asset position. The valuation allowance will be maintained as long as it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are determined separately for each taxing jurisdiction in which the Company conducts its operations or otherwise generates taxable income or losses. In the U.S., the Company has recorded significant deferred tax assets, the largest of which relates 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 $145.2 million 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 $2.5 million for deferred tax assets associated with losses in foreign jurisdictions.

North American Tire Operations Segment

		Three months ended March 31
(Dollar amounts in millions)		2009				Change				2010
Sales		$	439.3				21.0	%		$	531.7
Operating profit (loss)		$	(3.6	)			n/m			$	13.6
United States unit shipments changes:
Passenger tires
Segment							19.8	%
RMA members							9.6	%
Total Industry							12.6	%
Light truck tires
Segment							14.6	%
RMA members							11.5	%
Total Industry							17.8	%
Total light vehicle tires
Segment							18.9	%
RMA members							9.8	%
Total Industry							13.2	%
Total segment unit sales change							19.2	%

Overview

The North American Tire Operations segment manufactures and markets passenger car and light truck tires, primarily for sale in the United States replacement market. Major distribution channels and customers include independent tire dealers, wholesale distributors, regional and national retail tire chains, and large retail chains that sell tires as well as other automotive products. The segment does not sell its products directly to end users, except through three Company-owned retail stores, and does not manufacture tires for sale to the automobile original equipment manufacturers (“OEMs”).

Sales

Sales of the North American Tire Operations segment increased $92.4 million, or 21.0 percent, in the first quarter of 2010 from levels in 2009. The increase in sales was a result of higher unit volume ($87.9 million) and improved pricing and mix ($4.5 million). In the United States, the segment’s unit sales of total light vehicle tires increased 18.9 percent in the first quarter of 2010 compared to the first quarter of 2009. This increase exceeded the 9.8 percent increase in total light vehicle shipments experienced by all members of the Rubber Manufacturers Association (“RMA”), and was also higher than the 13.2 percent increase in total light vehicle shipments for the total industry (which includes an estimate for non-RMA members). Nearly all product segments outpaced the industry in the U.S. market. Shipments to house brands and private brand distributors were strong.

Operating Profit

North American Tire segment operating profit increased $17.2 million in the first quarter of 2010 from the first quarter of 2009. The increase in operating profit was due to higher unit volumes ($21.5 million), reduced production curtailment costs ($19.2 million), improved manufacturing operations ($10.5 million), favorable pricing net of mix ($8.2 million), lower restructuring costs ($6.7 million) and decreased selling, general and administrative expenses ($2.8 million). These improvements were partially offset by higher raw material costs (-$29.2 million) and increased products liability charges (-$24.0 million) as compared to the first quarter of 2009. Details of the methodology used to calculate the products liability reserve are discussed in the Notes to Consolidated Financial Statements.

International Tire Operations Segment

		Three months ended March 31
(Dollar amounts in millions)		2009				Change				2010
Sales		$	166.2				76.7	%		$	293.6
Operating profit (loss)		$	(2.8	)			n/m			$	22.6
Unit sales change							64.6	%

Overview

The International Tire Operations segment manufactures and markets passenger car, light truck and motorcycle tires for the international replacement market, as well as racing tires and tire retread materials, in Europe, Russia and other markets. The segment’s Cooper Chengshan joint venture manufactures and markets passenger car and light truck radial tires as well as radial and bias medium truck tires in the international market. The segment’s Cooper Kenda joint venture manufactures tires to be exported to markets outside of the PRC. Under the current agreement, until May 2012, all of the tires produced by this joint venture will be exported and sold to Cooper Tire & Rubber Company.

Sales

Sales of the International Tire Operations segment increased $127.3 million, or 76.6 percent, in the first quarter of 2010 compared with the first quarter of 2009. The segment recognized higher unit volumes ($126.0 million) in 2010 when compared with 2009, primarily from the Company’s joint venture operations in Asia. The foreign currency impact of a weaker United States dollar in relation to the British pound also increased sales $8.5 million in the first quarter of 2010. The impact of less favorable pricing and mix (-$7.2 million) partially offset the improvements from volume and currency.

Operating Profit

Operating profit for the segment in the first quarter of 2010 was $25.4 million higher than in the same period of 2009. The increase in operating profit was due to higher unit volumes ($19.8 million), favorable pricing net of mix ($9.3 million), improved manufacturing operations ($3.6 million), favorable foreign currency impact ($2.9 million) and a reduction in production curtailment costs ($2.5 million). These increases were partially offset by higher raw material costs (-$11.3 million) and increased selling, general and administrative expenses (-$2.2 million).

Outlook for Company

The Company expects demand and growth rates in 2010 will vary by region as developing markets, including the PRC, present more robust opportunities for improvement. Mature tire markets are expected to grow at near historical growth rates of two to three percent. While the Company believes pent up demand for tires exists, it does not believe a surge in demand for tires will occur unless consumer confidence recovers more fully.

The heightened demand, in combination with relatively low levels of inventory, means the Company expects to operate its manufacturing facilities at very high utilization rates in 2010. This is partially the result of successful efforts to optimize production capacity in recent years. The Company also intends to invest in increased inventory levels; the ability to increase these quantities will be a function of both the strength of sales and the Company’s ability to manufacture sufficient units above demand levels.

As success for the Company continues to build through improved competitiveness there will be additional focus shifted to the imperative of profitable growth. This is designed to leverage the Company’s position and prepare for future growth opportunities. These actions will include the launch of new products to meet market demands, growth in sales channels where the Company is under-represented and progress in emerging markets. The Company expects this will position it for growth at or above industry rates.

Raw material prices have proven very difficult to accurately predict as commodity markets remain volatile. The Company expects prices for commodities to be higher in 2010 than in 2009. The Company announced a price increase in North America of up to 7.5 percent effective June 1, 2010. The Company expects its effective tax rate for 2010 will most likely be between 17 percent and 27 percent.

In 2010, the Company will continue to focus on building a strong foundation to take advantage of future market opportunities. This will require the Company to continue investing in opportunities that will make it more cost competitive including automation, efficiently adding capacity, LEAN-Six Sigma and manufacturing located in lower cost countries. Additionally, in 2010 the Company will continue preparations and begin investments for the implementation of a global ERP system that will enhance organizational capabilities.

The Company remains committed to its Strategic Plan. The plan calls for the Company to improve its cost structure, pursue profitable top line growth and improve organizational capabilities. Successful implementation of the three imperatives detailed in the Strategic Plan and improvement in market or industry conditions can drive improved operating results, which may also be subjected to uncontrollable factors including: consumer confidence, gasoline prices, raw material cost volatility, intense competition, government intervention and currency fluctuations. The Company’s focus remains on prudent management of critical resources to drive shareholder value. The Company’s outlook remains cautiously optimistic. The successes it achieves combined with improved global industry conditions can result in an even stronger Company with a more consistent level of profitability.

Liquidity and Capital Resources

Generation and uses of cash — Net cash used in operating activities of continuing operations was $29 million in the first three months of 2010 compared to net cash provided by operating activities in 2009 of $33 million. Net income contributed $40 million more cash in 2010. Accounts payable levels increased at March 31, 2010 as raw material purchases returned to more normal levels from the low 2009 levels that resulted from the economic downturn during the fourth quarter of 2008. Increases in accounts receivable due to improved sales and higher inventory levels from the low levels at December 31, 2009 were the primary reasons for the consumption of cash in the first quarter of 2010.

Net cash used in investing activities during the first quarters of 2009 and 2010 reflect capital expenditures of $17 million and $15 million, respectively.

During the first quarters of 2009 and 2010, the Company repaid $22 million and $25 million of debt, respectively. In 2010, the Company’s Cooper Kenda joint venture received $5 million of capital contributions from its joint venture partner. Also in the first quarter of 2010, the Company paid $18 million to purchase an additional 14 percent interest in its Cooper Chengshan joint venture increasing its ownership share to 65 percent.

Dividends paid on the Company’s common shares in the first quarter of 2009 and 2010 were $6 million.

Available credit facilities — Domestically, the Company has a revolving credit facility with a consortium of six banks that provides up to $200 million based on available collateral and expires November 9, 2012. The Company also has an accounts receivable securitization facility with a $125 million limit with a September 2010 maturity. These credit facilities remain undrawn and have no significant financial covenants until available credit is less than specified amounts.

The Company’s consolidated joint ventures in Asia have annual renewable unsecured credit lines that provide up to $200 million of borrowings and do not contain financial covenants.

Available cash and contractual commitments — At March 31, 2010, the Company had cash and cash equivalents of $338 million. The Company’s additional borrowing capacity based on eligible collateral through use of its credit facility with its bank group and its accounts receivable securitization facility at March 31, 2010 was $203 million. The additional borrowing capacity on the Asian credit lines totaled $126 million.

The Company expects capital expenditures for 2010 to be in the $120 to $130 million range of which approximately $36 million will be in consolidated entities where the Company’s ownership is at or near 50 percent.

The following table summarizes long-term debt at March 31, 2010:

Parent company
8% unsecured notes due December 2019		$	173.6
7.625% unsecured notes due March 2027			116.9
Capitalized leases and other			10.5
			301.0
Subsidiaries
5.4% unsecured notes due in 2010			4.4
5.13% unsecured notes due in 2011			6.6
4.86% to 5.13% unsecured notes due in 2012			20.4
			31.4
Less current maturities			5.0
		$	327.4